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2016 (2) TMI 162 - ITAT JAIPUR

2016 (2) TMI 162 - ITAT JAIPUR - TMI - Penalty u/s 271(1)(c) - enhanced value of closing stock - Held that:- The assessee has submitted that the value of ₹ 682/- sq.mtr is computed by the assessee himself and is appearing in the detail stock valuation and it is simply a calculation mistake on his part, wherein he had considered the value of ₹ 488/- sq.mtr instead of ₹ 682/ sq.mtr. The assessee has however not provided any explanation regarding the basis/criteria for working out .....

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not inspire confidence that it was simply calculation mistake. In light of that, the explanation of the assessee is not substantiated and the bonafide of the case is thus not proved. Hence, the penalty levied on enhanced value of closing stock to extent of ₹ 1,61,400/- is confirmed.- Decided against assessee

Regarding valuation of old marble slabs and old tiles at 25% of the average rate instead of 50% of the average cost - Held that:- it is clear that the submission of the ass .....

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during the subsequent financial year at a lower price which is evident from sale bills of the subsequent period. But the opinion the Coordinate Bench, even though the said sale value is supported by the sale bills of the subsequent period but the same appears to be a lower side. Based on that, the coordinate Bench confirmed the valuation of inferior stock at 50% of the average stock as against 25% average cost taken by the assessee. The findings of the Coordinate Bench thus have a direct bearin .....

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ich differs from that of the assessee on examination of same set of facts which have been duly disclosed. It is therefore not a matter which calls for levy of penalty under the provisions of section 271(1)(c) of the Act. - Decided in favour of assessee - ITA No. 702/JP/13 - Dated:- 6-1-2016 - SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YADAV, AM For The Assessee : Shri P.C. Parwal CA For The Revenue : Shri Raj Mehra (JCIT) ORDER PER SHRI VIKRAM SINGH YADAV, AM This is an appeal filed by the ass .....

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is assessed by the AO at income of ₹ 22,53,361/-u/s 143(3) of the Act. 2.2 The AO while completing the assessment, made an addition of ₹ 20,78,821/ on account of undervaluation of the closing stock. In appeal before the ld. CIT(A), the same was reduced to ₹ 5,15,259/- which is confirmed by Hon ble ITAT. The break up of addition of ₹ 5,15,259/- on account of undervaluation of stock is as under: 1. Calculation mistake in valuation of marble slab (avg. rate wrongly taken at .....

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penalty of ₹ 1,73,437/- u/s 271(1)(c) of the Act computed at 100% of the sustained additions of ₹ 5,15,259/-. 2.4 Being aggrieved the assessee carried the matter before he ld. CIT(A) who has confirmed the levy of penalty. The relevant findings is at para 5 of her order which reads as under: After going through rival submissions it is seen that the closing stock valuation declared by the appellant was found by the highest fact finding body to be undervalued by ₹ 5,15,259/- and .....

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indings of the Coordinate Bench in the quantum proceedings (reproduced in subsequent discussions) . He has also reiterated the submissions made, in the context of penalty proceedings, before the ld. CIT(A) which are contained at page 1-3 of the paper book which are reproduced as under: On merit, it may be noted that the addition on account of undervaluation of closing stock is on account of bonafide mistake in calculation/rate to be adopted for valuation of old stock. The detailed calculation of .....

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erefore, increase in the valuation of stock because of such mistake cannot be considered as concealment of income. B. Assessee has estimated 50% of the total stock s old stock with inferior quality and valued it at 25% of the weighted average cost. This is not accepted by the AO. However, ld. CIT(A)/Hon ble ITAT accepted that 50% of the total stock is to be considered as stock with inferior quality. However, they directed to value stock at 50% of the weighted average cost instead of 25% of the a .....

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. Thus this addition is tax neutral. Therefore, no presumption of concealment of income should be drawn on account of undervaluation of closing stock. Further in support of its contention, the ld. AR has placed reliance is placed on the following judgements and drawn specific attention to decision of Hon ble Himachal Pradesh High Court: 1. CIT vs. H.P. State a Forest Corpoation Ltd. 340 ITR 204 (HP) (HC) 2. DCIT vs. Kalpaka Bazar 46 ITD 221 (Coc.)( Trib.) 3. Durga Traders vs. ITO 90 TTJ 767 (Chd .....

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the quantity and value part of the audited financial statement which has also been reproduced at para 3 of page 2 of the assessment order. The assessee has submitted that the value of ₹ 682/- sq.mtr is computed by the assessee himself and is appearing in the detail stock valuation and it is simply a calculation mistake on his part, wherein he had considered the value of ₹ 488/- sq.mtr instead of ₹ 682/ sq.mtr. The assessee has however not provided any explanation regarding the .....

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planation of the appellant does not inspire confidence that it was simply calculation mistake. In light of that, the explanation of the assessee is not substantiated and the bonafide of the case is thus not proved. Hence, the penalty levied on enhanced value of closing stock to extent of ₹ 1,61,400/- is confirmed. 2.8 Regarding valuation of old marble slabs and old tiles at 25% of the average rate instead of 50% of the average cost, the assessee has submitted before the Coordinate Bench it .....

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vary with actuality but the same have no effect in the profit of the company in concept of going concern. The closing stock of the current year will be the opening stock of the following year, the lower or higher sale price of that stock automatically affects the profit of the following year. Hence the estimate of dead stock and valuation thereof is reasonable. The fact of sale of such dead stock at low price is evident from the sale bills from which it can be noted that weighted average sale r .....

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cts of the case and the arguments advances by both the parties, we agree with the contention of the ld. AR that FIFO method of valuation can be followed when items purchased /manufactured are identical to the items in the stock. Since this is not possible in this time of business, the only method of valuation is to take the average rate of the goods manufactured to value the closing tock. Secondly choice of method of valuation is of the assessee which is to be following consistently and since it .....

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ale invoice of the subsequent period filed by the assessee in the paper book. Therefore, we uphold the finding of the CIT(A) in considering 50% of the total stock as inferior quality. The assessee has valued the inferior stock at 25% of the average cost which though supported by few sale bills of the subsequent period but the same appears to be on lower side and therefore CIT(A) was correct in adopting the value of such tock at 50-% of the average rate. The finding s of CIT(A) is therefore uphel .....

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e it would be relevant to note that the Coordinate Bench has accepted the submission and explanation of the assessee that the said inferior stock has been sold during the subsequent financial year at a lower price which is evident from sale bills of the subsequent period. But the opinion the Coordinate Bench, even though the said sale value is supported by the sale bills of the subsequent period but the same appears to be a lower side. Based on that, the coordinate Bench confirmed the valuation .....

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does not have a basis for such valuation to stand. It is purely a matter of opinion and judgement where the ld. CIT(A) and Coordinate Bench has taken a view which differs from that of the assessee on examination of same set of facts which have been duly disclosed. It is therefore not a matter which calls for levy of penalty under the provisions of section 271(1)(c) of the Act. 2.11 Further during the course of hearing the ld. AR has given a statement that the assessee has not take any advantage .....

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er: We are of the considered view that the latest judgement of the apex court in Reliance Petro Products case (supra) squarely covers the present case also. The Apex Court in this judgement has clearly held that the word inaccurate as used in the Act would mean something which is not accurate, not exact or not correct. Something which is untrue is inaccurate. The same facts can be given two interpretations. If the interpretation given is plausible though not accepted b the assessing authority it .....

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nished for an act which is unjustified. The assessee in the present case has already been burdened with tax and interest on the amount added to his income. The moot question is whether the assessee should be made liable to pay penalty. The Apex Court in Reliance Petro Products case (supra) has clearly laid down that merely because the assessee makes a claim which is not sustainable in law, will not amount to furnishing inaccurate particulars regarding the income of the assessee. In the present c .....

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