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TMI Blog2017 (2) TMI 164X X X X Extracts X X X X X X X X Extracts X X X X ..... 031/- being the undervaluation of stock. The appellant prays that the above disallowance be deleted. Ground No. 2 : On the facts and circumstances of the case the Hon'ble CIT (A) erred in not 'quoting under which section of the Income Tax Act, 1961 said amount is disallowed. Ground No. 3 : Without Prejudice to above, on the facts and circumstances of the case the Hon'ble CIT (A) erred in disallowing Rs. 38,87,031/ - and erred to understand the concept of AS 2, Valuation of Inventories under FIFO basis of Accounting. Ground No. 4 : On the facts and circumstances of the case the Hon'ble CIT (A) erred in initiating penalty proceedings u/ s 271(1)(c) of the Income Tax Act, 1961." 3. The brief facts of the case are that the assessment u/s 143(3) of the Act was completed in the case of the assessee on 27th November, 2011 , which was reopened u/s 147 of the Act and notice u/s 148 of the Act was issued on 19th March, 2012 wherein the reasons for re-opening are recorded as under:- ""For the A.Y. 2007-08, assessee had filed its return of income declaring total income of Rs. 13,07,685/- which was assessed u/s 143(3) at Rs. 14,09,174/. The assessee had credited Rs. 1,31 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, there is no undervaluation of stock." The A.O. rejected the contentions of the assessee and observed that in the tax audit report the assessee had credited Rs. 1,31,36,283/- as closing stock in the P&L account which is undervalued by Rs. 38,87,031/- as in the opinion of the A.O. the opening stock and purchases were made at the rate of Rs. 160.44 and Rs. 149.78 per meters respectively , as against which the assessee had offered closing stock at Rs. 119.69 per meter, vide assessment order dated 22-03-2013 passed by the AO u/s 143(3) r.w.s. 147 of the Act. 4. Aggrieved by the assessment order dated 22-03-2013 passed by the A.O. u/s 143(3) r.w.s. 147 of the Act, the assessee filed first appeal before the ld. CIT(A) who rejected the contentions of the assessee and dismissed the appeal. Before the ld. CIT(A) , the assessee contended that the assessee is trader in fabric and following the FIFO method of cost formulae for valuation of inventory but the A.O. did not accepted the submissions of the assessee and made an addition of Rs. 38,87,031/- being difference in the valuation of inventory. The assessee submitted following details to explain the method of accounting, mode of computat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. Counsel for the assessee submitted that the assessee is consistently following FIFO method of cost formulae for valuation of his stock/inventory. He submitted that complete details were submitted before the authorities below like summary of fabrics purchased and sold by giving quantitative rate and value, copy of purchase bills etc. The copy of tax audit report was also submitted before the authorities below. He submitted that in the case of relative of the assessee in ACIT v. Dinesh V. Bahirwani, the Mumbai Bench of this tribunal in ITA No. 7479/Mum/2014 for assessment year 2010-11 vide orders dated 18-10-2016 had accepted the contentions of the assessee of following FIFO method for valuation of inventory, by holding as under:- "4.3. We have carefully gone through the facts of the case and well reasoned findings recorded by the Ld. CIT(A). It is noted that the assessee has been following FIFO method for valuation of its stocks in all earlier and subsequent years and no addition has ever been made. The assessment order was passed u/s 143(3) for A.Y. 2009-10 accepting FIFO method of stock valuation. It is further noted that assessee had submitted copies of bills and other evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence in the valuation of the stock in the case of relative of the assessee viz. Dinesh V. Bahirwani(supra). 9. We have considered the rival contentions and also perused the material available on record including the afore-stated tribunal order. We have observed that the assessee is following FIFO method of accounting for the purpose of valuation of stock/inventory which is valued at cost, and the said method of accounting for valuation of inventory is consistently followed by the assessee and accepted by Revenue, which could not be controverted by authorities below as well by learned DR. This method for valuation of inventory is consistently followed by the assessee and regularly accepted by the Revenue and Revenue could not point out any deficiency in the method of accounting for valuation of inventory followed by the assessee and how the correct profit could not be computed by following the method adopted by the assessee in view of the mandate of provisions of Section 145/145A of the Act. We find that the assessee had submitted complete details showing summary of fabric purchased and sold specifically showing the quantity, rate and value of the opening stock, purchases and closi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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