TMI Blog2019 (3) TMI 1597X X X X Extracts X X X X X X X X Extracts X X X X ..... d and non-verification of the debtors by itself is no ground to apply higher profit rate because both situation work differently in I.T. Act. The replies filed by the assessee in detail show that details of the debtors were also provided to AO - assessee has agreed to produce books of account before AO, we set aside the orders of the authorities below and restore this issue to the file of AO with direction - Appeal of assessee is allowed for statistical purposes. Addition on account of valuation of stock - assessee has been following weighted average method consistently for the last so many year - AO applied FIFO method - HELD THAT:- The assessee rightly contended that in assessment year the export market of iron ore fines was in a bad shape. The assessee, therefore, rightly contended that Foreign buyers have insisted for best quality of iron ore fines and the stock of the assessee was not matching with the standards of the Foreign Buyers, therefore, the assessee could not sell the iron ore fines in domestic market and due to dust etc., the quantity of iron ore fine have deteriorated further. The explanation of assessee is supported by the fact that there is fall in export of ir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Mayurbhans District of Orissa. The assessee has also exported iron ores during the year. The assessee has had the turnover of soap stone minor during the year. During the year, the turnover of the assessee company was ₹ 433.97 crores as compared to ₹ 403 crores in the last assessment year. The export sales stood at ₹ 21.20 crores as compared to ₹ 121.69 crores in the last assessment year. During the year, the assessee company has issued additional share capital. 4.1. During the earlier assessment year 2008-2009, there was an addition on account of valuation of closing stock by taking the value of stock of raw material and finished goods as per FIFO method, as the Assessee was following A weighted average method and not valuation as per FIFO method. The addition on account of the above in the last assessment year was of ₹ 1,69,57,108/-. The assessee was asked to submit the details of the same. The assessee submitted that as per the FIFO method, the closing stock comes to ₹ 25,66,78,992/- whereas as per the closing stock adopted by the assessee was ₹ 25,90,64,357/-. Thus, as per FIFO method, the closing stock will be less by a fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, noted that the assessee has merely made a statement without any justification or bonafide evidence and that assessee has also not submitted any valuation report. It was further noted that no documentary evidences in this regard has been filed to show value of the stock at NIL, therefore, explanation of assessee was not accepted and assessing officer applied average rate of ₹ 725/- per metric ton against the total quantity of 1,00,010 metric ton and made addition of ₹ 7,25,07,250/- on account of under reporting of valuation of closing stock. The assessing officer, however, given benefit of addition made to the closing stock in earlier year as well as excess value declared by assessee at ₹ 1,93,42,473/- and made net addition to the closing stock at ₹ 5,31,64,777/- on account of under valuation of closing stock. 4.3. The assessing officer further noted that during the assessment year under appeal, assessee has sizable investment which yields exempt income to the assessee. The investments at the end of the year in shares stand at ₹ 19.06 crores. The same was the position of investments as on 1st April 2008. The assessee has incurred financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the books of account on time. The Learned CIT(A) noted that assessee did not move any application under Rule 46A for examination of its books of account, therefore, rejection of the books of account was upheld and appeal of assessee has been dismissed. 6. On Ground No.4, assessee challenged the addition of ₹ 13,01,09,000/- on account of estimation of income. 7. Learned Counsel for the Assessee referred to page 73 of the paper book, which is, reply filed before assessing officer along with complete details. PB 86 is also another reply supported by the documents. PB 92 is also reconciliation of AIR information with the books of account and to explain the money, which assessee has to receive. Learned Counsel for the Assessee submitted that the assessing officer did not reject the books of account of assessee, therefore, finding of Learned CIT(A) is incorrect and that no addition could be made on account of non verification of the debtors. He has submitted that assessee wanted to produce books of account before Learned CIT(A), but, on mere technical reasons that no application under Rule 46A have been filed, books of account have not been examined by the Le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... livered on time. Therefore, it was a reason for non production of the books of account before the assessing officer. Learned Counsel for the Assessee further submitted that assessee produced books of account before Learned CIT(A), but, in absence of application under Rule 46A same was rejected. Learned Counsel for the Assessee has given undertaken before us to produce the books of account before assessing officer for fresh examination. The assessing officer in the assessment order has specifically noted that turnover of the assessee in the assessment year under appeal is higher as compared to earlier year, but, there is a substantial decrease in the export sales in assessment year under appeal, as against exports made in proceeding assessment year. These were the relevant factors which should have been considered by the assessing officer while applying higher profit rate against the assessee because the assessee claimed that there was a fall in export because the assessee s stock was not matching with the standards of the Foreign Buyers and that domestic sales have increased. Therefore, there would not have been any reason for the assessee to suppress the profit. Since the books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on record. He has referred to PB 93 and PB 100 which are the explanation filed before assessing officer for adopting NIL value of export iron ore fines. He has submitted that assessee is willing to produce books of account and other details before assessing officer as have been submitted on Ground No.4 above. 12. The Learned Departmental Representative, on the other hand, submitted that in the assessment year under appeal the dispute is not of FIFO method or weighted average method for valuation of the closing stock, but, the valuation of the closing stock taken at NIL of 1,00,010 quantity of metric tons, for which, no evidence have been furnished. 13. We have considered the rival submissions. It is not in dispute that there is a fall in export sales in assessment year under appeal substantially as compared to the preceding assessment year. The assessee rightly contended that in assessment year the export market of iron ore fines was in a bad shape. The assessee, therefore, rightly contended that Foreign buyers have insisted for best quality of iron ore fines and the stock of the assessee was not matching with the standards of the Foreign Buyers, therefore, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been made in assessment year under appeal and that assessee has sufficient funds to make investment, therefore, the addition is wholly unjustified. He has also submitted that assessing officer did not prove any nexus of income from reserve or share capital of the assessee-company. No satisfaction have been recorded by the assessing officer as to how the disallowance made by the assessee was not proper, therefore, section 14A could not be invoked against the assessee. 16. On the other hand, Learned Departmental ReprITA.No.6601/Del./2014esentative relied upon orders of the authorities below. 17. We have considered the rival submissions. The assessing officer noted in the assessment order that assessee has made sizeable investments, which yields exempt income to assessee and the investment at the end of year in shares stands at ₹ 19.06 crores. The assessing officer also noted that same was the position of investment as on 1st April 2008. This would support the explanation of assessee that no new investment have been made in assessment year under appeal and same were old investments. It is not in dispute that assessee has own sufficient funds to make investmen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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