2012 (8) TMI 120 - ITAT INDORE

Addition for non furnishing any basis of valuation of closing stock and estimation of work in progress - Held that:- As the assessee has not maintained day to day quantitative details of plots and other properties sold during the year under consideration and only on the basis of lay out plans of various schemes, inventory of unsold stock was prepared and the same was valued at cost price method - various registers produced contained only details of vacant plot and flat details, but basis of valuation of closing stock could not be worked out on the basis of these registers - as findings recorded by AO and CIT(A) in this regard has not been controverted by assessee by bringing any positive material on record the addition on account of valuation of closing stock and work in progress is hereby confirmed - against assessee.

Addition for the change in method of accounting - change of method of accounting from hybrid system to the mercantile system - Held that:- This change in method of accounting was bona fide which was consistently followed by the assessee in subsequent year that change in method of accounting was made for complying with the statutory requirement of Section 145(1)- that an Assessing Officer cannot base the computation of income solely on the basis of report of auditors - even after change in the method of accounting from hybrid to mercantile during the year under consideration, the assessee had shown positive gross profit in comparison to gross loss in the assessment year 2005-06 and 2004-05, thus nothing on record to suggest that assessee had changed method of accounting to show lower profit during the year as compared to earlier year - direction to delete the addition made on account of change in method of accounting and auditors’ report regarding reduction in net profit - in favour of assessee.

Disallowance for depreciation on assets - Held that:- the assessee has failed to produce any fixed assets registers, therefore, existence of various assets and utilization thereof in the relevant previous year was prior to assessment year 2003-04 was not verifiable - confirm the action of the Assessing Officer for decline of claim of depreciation - against assessee.