exaggerates the profit and consequence

This query is : Resolved

Amit (Querist)
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31 July 2007 If one exaggerates his profit by appreciating the closing stock value, Does it amount to any contravention of Income Tax Act and if the case would come under scrutiny, what is the maximum consequence of it ?
Whether any justification can be given.

ravi kanth

ravi kanth (Expert)
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31 July 2007 There is no loss to the department as such.. if it comes for scrutiny and if he wants to value it in proper way.. he can assess and give a refund u/s 143(3).
Since there is no loss to the government i think there will not be any consequence against the Assessee.

CA Mani

CA Mani (Expert)
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01 August 2007 Yes, Ravi is right.

But one thing If you strictly read the provisions, Over valuation is also a contravention, even though it is generating more revenue to dept.

But, If A.O scrutinises in such a way that there is some fraud involved.(Bcoz window dressing amounts to fraud and it's needed to be avoided as per AAS4)

So, If you read the provisions carefully, I think, there is some scope for penalzing.

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Late CA Sampat Jain

Late CA Sampat Jain (Expert)
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01 August 2007 Exaggeration of closing stock in one year means overvalution of opening stock in next year .To that extent there is concealment of income in the next year .Penalty for concealment may come in the next year .

CA Mani

CA Mani (Expert)
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02 August 2007 Yes, I too agree with Mr.Sampat