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2017 (12) TMI 1692 - ITAT DELHIRejection of books of accounts - Addition invocation of provisions of section 145(3) - HELD THAT:- Looking at the accounting standard for inventory valuation we do not find any infirmity in the method of techniques of measurement of cost as well as cost formula used by the assessee. The assessee in fact has followed the accounting standard only. We find that provision of section 145(3) are incorrectly invoked by the AO and confirmed by the ld CIT(A) because the valuation method is correct and therefore, it does not impact the correctness or completeness of the account of the assessee. In fact it makes the accounts of the assessee complete and correct. AO has applied the past year’s gross profit ratio in that year also the valuation of the inventory was on similar basis therefore, if opinion of the AO is accepted then it cannot be said that accounts of previous year were correct and complete. The method of valuation of inventory followed by the assessee is year to year same. The assessee has maintained complete quantitative details also. No defects have been pointed out by the AO in the books of account other than what is stated by the Auditor. To invoke provisions of section 145(3) of the Act it is necessary that accounts of the assessee suffers from latent, patent and glaring errors. In the present case, we do not find any such finding by the AO. Further, the assessee has given detailed reason for the down fall in the gross profit also. Further, the details of valuation of closing stock of the manufactured goods as per retail method were also filed before the lower authorities and no infirmity was found in the same. In view of this, we do not find any reason to sustain the orders passed by the lower authorities with respect to the invocation of provisions of section 145(3) of the Act and consequently, making the addition to the total income of assessee - Decided in favour of assessee.
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