TMI Blog2014 (5) TMI 267X X X X Extracts X X X X X X X X Extracts X X X X ..... . 40 lacs made by the AO which also included the under valuation on account of non-inclusion of making charges which was surrendered and accepted by the assessee during the course of assessment proceedings - the addition can be sustained only with respect to the under valuation for making charges amounting to Rs. 3,31,266/- which was accepted by Assessee out of the total addition of Rs. 40 lacs which was deleted by CIT(A) – Decided partly in favour of Revenue. - I.T. A. No. 727 & 1103/AHD/2010 - - - Dated:- 29-4-2014 - Shri G. C. Gupta And Shri Anil Chaturvedi, A.M.,JJ. For the Appellant : Shri P. L. Kureel, Sr. D.R. For the Respondent : Shri M. K. Patel ORDER Per Shri Anil Chaturvedi,A.M. 1. These two appeals are filed by the Revenue against the order of CIT(A)-I, Baroda dated 09.01.2009 07.12.2009 for A.Ys. 2006-07 2007-08 respectively. 2. The relevant facts as culled out from the material on record are as under. We proceed with the facts for A.Y. 06-07 (ITA No. 727/AHD/2010). 3. Assessee is a company engaged in the business of manufacturing and trading in gold and silver ornaments and articles. Assessee electronically filed its return of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e revised working after consideration of making charges and accordingly the under valuation worked out at Rs. 3,31, 266/- was surrendered by Assessee. A.O also noticed that Assessee had shown silver stock but the Weighted Average Stock was not available. He therefore to cover the other defects including the amount of Rs. 3,31,266/- being the making charges, estimated the total value of under stated closing stock at Rs. 40 lacs and added the same to the income. Aggrieved by the order of A.O, Assessee carried the matter before CIT(A). CIT(A) after considering the submissions of the Assessee deleted the addition by holding as under:- 5. I have considered the submissions of the Id. AR and the facts of the case. Section 145A deals with valuation of closing stock. For ease of reference the section is reproduced below:- Notwithstanding anything to the contrary contained in section 145, the valuation of purchase and sale of goods and inventory for the purposes of determining the income chargeable under the head profits and gains of business or profession shall be a) In accordance with the method of accounting regularly employed by the assessee; and b) Further adjusted to inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... weighted average rate computed after considering all periodical transactions. Having rejected the assessee's rate for valuation purposes, it is then incumbent upon the AO to work out the correct weighted average cost for each item of inventory separately, i.e. 22 ct new jewellery, 22 ct. old jewellery and 24 ct new jewellery, 24 ct old jewellery, etc. This has clearly not been done. Moreover the basis for arriving at the ad-hoc addition of Rs. 7,50,642/- in respect of other stock of ornaments and silver is not known. It is also worth noting that the assessee's method of valuation has been consistently followed and accepted in the past. In view of the foregoing, I am of the opinion that the AO was not justified in disturbing the method of valuation adopted by the assessee without bringing on record sufficient material to show how the said method was defective or incapable of providing a proper computation of income. Accordingly, the addition to the value of closing stock ofRs. 40,00,0007- is directed to be deleted. 6. Aggrieved by the order of CIT(A), the Revenue is now in appeal before us. 7. Before us, the ld. D.R. supported the order of A.O. He further submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Accountant of India. He has further noted that A.O while making the addition has not spelt out the basis for arriving at adhoc addition in respect of other stock of ornaments and silver which he ought to have done. We further find that in the case of DCIT vs. Chimanlal H. Soni ITA No. 1663/AHD/2009 order dated 31.05.2012 on similar facts, the issue was decided by the co-ordinate Bench of Tribunal in favour of the Assessee by holding as under:- 8. We have heard the rival contentions, perused the material on records. It is an undisputed fact that the assessee has valued the stock at -weighted average cost in the current year and the same method was followed by assessee in earlier years and it was accepted by the Department while finalizing the assessment u/s. 143(3). The assessee has also adopted the same method for arriving at the cost of goods sold . The method of valuation is also in consonance with the IT. Act and the Accounting Standards prescribed by ICAI. It is also an undisputed fact that the similar valuation method of stock has been accepted by the Department in case o f C .H. Jewellers (P ) Ltd., its sister concern. The Ld. CIT (A) has given a finding that weighted av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cepted by the assessee during the course of assessment proceedings. In view of the aforesaid facts we are of the view that in the present case, the addition can be sustained only with respect to the under valuation for making charges amounting to Rs. 3,31,266/- which was accepted by Assessee out of the total addition of Rs. 40 lacs which was deleted by CIT(A). We thus direct accordingly. Thus this ground of Revenue is partly allowed. 10. In the result, the appeal of the Revenue is partly allowed. ITA No. 1103/AHD/2010 for A.Y. 2007-08 11. Before us both the parties submitted that the facts of the case in assessment year 07-08 are identical to that of A.Y. 06-07 in ITA NO. 727/AHD/2010 except that in A.Y. 06-07, there was an agreed addition on account of under valuation on account of labour charges amounting to Rs. 3,31,266/-. Other than that, there are no changes in the facts of the case. It was therefore submitted that the submissions made by them while arguing the case for A.Y. 06-07 would be equally applicable to the year under appeal. 12. We have heard the rival submissions and perused the material on record. We find that both the parties have admitted before us tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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