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TMI Blog2012 (11) TMI 625X X X X Extracts X X X X X X X X Extracts X X X X ..... of revaluation of closing stock. 4. The ld. CIT(A) has erred in deleting the addition of Rs . 76,000/ -made u/s 40A(3) of the Act . " 2. This appeal was originally disposed off by the order of the Tribunal dated 26.8.2011 through which Revenue's appeal was dismissed in limine as the tax effect was found to be less than Rs.2.00 lakhs. Later on the Revenue moved a Misc. Application that tax effect is more than Rs. 2.00 lakhs because in Ground No. 2 the amount mentioned at Rs. 80,000/ - should have been read as Rs. 3,80,000/ - . The Tribunal vide order in Misc. Application No. 65/Chd/2011 dated 9.5.2012 recalled the earlier order and directed the Revenue to file revised grounds which are as under : - "That the ld. ACIT has failed to appreci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind that survey was conducted in the premises of the assessee in which certain documents were found and ultimately the assessee surrendered a sum of Rs.4.00 lakhs as gross profit outside the books. During assessment proceedings the Assessing Officer noticed that comparative study of accounts of the assessee for Financial Year 2005-06 and Financial Year 2006- 07 reveal that labour charges shown by the assessee has gone down. Labour charges during Financial Year 2006-07 relating to Assessment Year 2007-08 on sale of gold of Rs. 45,28,132/ - had been shown at Rs. 2,59,625/ - which comes to 5.73% of the gold sale whereas in the earlier year on the gold sale of Rs. 22,13,862/ - , labour charges were shown at Rs . 2,42,425/ - which was about 10.9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uying readymade jewellery from Delhi and other markets and selling the same and no separate labour charges are being charged. In fact labour charges represents only charges on account of minor repair which varies from year to year . 7. We have heard the rival submissions carefully and find that no evidence was produced before the Assessing Officer to show that the assessee was selling readymade jewellery. Even before us no evidence has been produced to show that the assessee was selling only 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. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs.11,41,316/- but when he took this figure to the profit and loss account, he increased the Gross profit by 3,80,000/ - and showed it as Rs. 15,21,316/-. Same treatment was given to Gross profit relating to silver. Without taking this fact into account, the Assessing Officer increased the closing stock by Rs. 3,80,000/- which would result in nothing but taxing the same income twice. If the Assessing Officer's version is accepted and applied, the recasted Trading account will be as under: Particulars Quantity Amount (Rs.) Particulars Quantity Amount (Rs.) To opening stock 4504.134 2342149.68 By sales outside the books. By sales in the books 1708407.99 2819724.38 To purchase 2243.020 1784031 5084.004 452 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Accordingly closing stock was valued at Rs. 795/ - per gm. 14. Before the ld. CIT(A) , it was submitted that the assessee had valued closing stock at Rs. 700 per gm which was average rate. The opening stock was valued at Rs. 520 per gm and the assessee had purchased 2243.02 gms at Rs. 795 per gm and therefore, closing stock was valued at this rate. Since the rate of gold fluctuates on daily basis, therefore, valuation on average rate was correct. 15. The ld. CIT(A) found force in these submissions and deleted the addition. 16. Before us, the ld. DR for the revenue submitted that stock can be valued at cost of market value whichever is lower and therefore, the asses see was bound to value the stock on this method. 17. On the other hand, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut 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. The Assessing Officer was of the view that this amount must have been spent in cash exceeding Rs . 20,000/-, therefore, Section 40A(3) was invoked and 20% of gold purchased amounting to Rs. 3,80,000/ - was added to the income of the assessee. 20. Before the ld. CIT(A) it was submitted as under : - "The Assessing Officer has made this addition on a novel method of treating the amount of gross profit surrendered on sales outside books of unaccounted purchased in cash and thereby applying the provisions of section 40A(3). The Assessing Officer has to conduct assessment procee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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