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2014 (11) TMI 647 - AT - Income TaxAddition of valuation of closing stock – Held that:- The AO observed that as per the tax audit report filed by the assessee under clause 12(a), the basis for valuation of closing stock was "market price" - for the purposes of valuation of closing stock, the assessee is at liberty to choose a method of valuation of closing stock but the assessee is required to follow the chosen method regularly – revenue is bound by the assessee’s choice of the method regularly employed unless by this method the true income or profits cannot be arrived at - The assessee’s regular method should not be rejected as improper merely because it gives him the benefit in certain years because as per the AO the other method would have been more preferable - The method of accounting cannot be substituted by the AO merely because it is unsatisfactory. What is material for the purposes of section 145 of the Income Tax Act, 1961 is, the method should be such that the real income, profits and gains can be properly deduced - No material has been brought on record by the Revenue to show that the assessee has not adopted the average market rate of last month of the year for the purposes of valuation of closing stock of cotton, cotton seeds and oil consistently and regularly for the purposes of its account - the lower authorities were not justified in valuing the closing stock of the assessee on the basis of the sale bills at the fag-end of the year in place of the method adopted by the assessee of valuing its closing stock on the basis of average market price of the last month of the year – the order of the CIT(A) is set aside – Decided in favour of asseessee. Addition of 20% of gunny bags – Held that:- AO observed that the assessee has paid ₹ 24,13,728/- for ginning and pressing charges to Vishal Industries – CIT(A) rightly held that the AO has made an estimated disallowance of 25% of the expenses on the gunny bags and that the assessee contended that the no show cause notice was given by the AO before making the disallowance and hence restored the matter back to the file of the AO, directing him to verify the working regarding consumption of gunny bags furnished by the assessee in the written submissions and modify the assessment order accordingly – the order of the CIT(A) is upheld – Decided against assessee.
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