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2012 (11) TMI 625 - ITAT CHANDIGARHAddition on account of labour charge – Labour charges on gold jewellery – Assessee shown labour charges @ 5.73% of the gold sale, whereas in earlier year it was 10.9% - Held that:- As no evidence was produced to show about selling readymade jewellery. It is common knowledge that whenever jewellery item is bought from a jeweler, separate making charges are charged. At the same time it is not necessary that in every year the labour charges proportion would remain same. Restrict the addition on account of labour charges to Rs.1.00 lakh. Partly allowed in favour of assessee Addition on account of revaluation of closing stock of gold - Sum of Rs. 3,80,000/- has been taken in account by adopting the same as purchase of gold but the same has not been added to the closing stock and accordingly a sum of Rs. 3,80,000/- was added to the income of the assessee – Held that:- As concluding from the facts that the assessee has already reflected undisclosed sales. The gross profit comes to Rs. 11,41,316/- but the same was done as Rs. 15,21,316/ - in P&L account. This amount has been reflected in books. In favour of assessee Valuation of closing stock – FIFO or weighted average method – Held that:- Since the AO has adopted FIFO method whereas the claim before the ld. CIT(A) was that stock has been valued at average rate when it is not clear whether weighted average was taken or not and therefore, we set aside the order of ld. CIT(A) and remit the matter back to the file of AO with a direction to value the closing stock on weighted average after verification of the same. Remand back to AO Disallowance u/s 40A(3) – Expense incurred in cash more than Rs. 20,000/- - AO argued that out of surrendered income of Rs. 4.00 lakhs, a sum of Rs. 3,80,000/- was shown as gold purchase out of books and Rs.20,000/ - as silver purchased out of books - AO was of the view that this amount must have been spent in cash exceeding Rs . 20,000 - Held that:- The assessee had surrendered a sum of Rs. 3,80,000/ - which was shown as purchases of gold outside the books and this amount was shown as purchases because of the surrender. There is no evidence before the Revenue that this amount was spent in payment of cash exceeding Rs. 20,000/-. Therefore, there is no justification in the addition. In favour of assessee
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