TMI Blog2019 (9) TMI 456X X X X Extracts X X X X X X X X Extracts X X X X ..... ket value. This would enable the assessee to keep accumulating the old jewellery and enable the assessee not to pay tax on appreciated value of the gold , which is permissible under law. Having regard to the ratio decision in the case of United Commercial Bank [ 1999 (9) TMI 4 - SUPREME COURT] AO is bound to accept this method of accounting preferred by the assessee and he cannot impose another method on the assessee, in the absence of any defects in the method of accounting followed by the assessee. Addition made by the Assessing Officer cannot be sustained in the eyes of law, viewed from any angle - Decided in favour of assessee - I.T.A. No.1030/CHNY/2018. - - - Dated:- 21-8-2019 - Shri Inturi Rama Rao, Accountant Member And Shri Duvvuru RL Reddy, Judicial Member For the Appellant : Sheri. R. Clement Ramesh Kumar, IRS, Addl. CIT. For the Respondent : Shri. D. Anand, Advocate ORDER PER INTURI RAMA RAO, ACCOUNTANT MEMBER This is an appeal filed by the Revenue directed against the order of the Commissioner of Income Tax (Appeals)-8, Chennai ( CIT(A) for short) dated 05.01. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by evidence. 2.7 The order of the ld CIT(A) has been vitiated by the erroneous belief that 7.2cr variation in GP is attributed on a turnover of 31CR, whereas the actual turnover is 353.23 Cr. The order of the Ld CIT(A) has lost its orientation and is prejudiced by a mistaken notion about the value of GP in relation to the turnover. The order of the Ld CIT(A) as such is erroneous and is inherently biased due to the mistaken notion on the assessee s turnover and GP. 2.8 The ld.CIT(A) erred in holding that the department cannot make unsubstantiated additions when the Act provides sufficient procedures and tools to unearth evidences and bring concealed incomes for taxation. 2.9 The ld. CIT(A) failed to note that valuation of stock is an integral part of the assessment. Anomalies in valuation have to be explained, and there is no need to for the AD to produce clinching evidence against the assessee to complete an assessment in every case, where closing stock valuation is suspect or questionable. 2.10 The ld.CIT(A) erred in holding that the books and book results have been accepted for all the other years as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer with direction to redo the assessment after giving proper opportunity of being heard to the assessee. Pursuant to the order of the ld. PCIT, the Assessing Officer passed the assessment order vide order dated 30.03.2016 passed u/s.143(3) r.w.s. 264 of the Act at total income of J7,76,85,214/-. 4. While doing so, the Assessing Officer made addition on gross profit of J7,20,59,374/- by alleging that Respondent -assessee had resorted to suppression of the value of the closing stock. The Assessing Officer had come to the conclusion that Respondent-assessee had resorted to suppression of the valuation of the closing stock by observing that assessee had not bifurcated the weight of the stones and enamel which are embedded in the gold jewellery and therefore held that no rebate is required to be given in the weight of stones and enamel embedded in the gold jewellery. Similarly, the Assessing Officer also rejected the plea for reduction of valuation of gold jewellery in accordance with purity of the gold by observing that assessee has been selling the entire ornaments of gold at the prevailing rate of gold. After making the above observations, the Assessing Officer ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he rival submissions and perused the material on record. The issue in the present appeal revolves around addition on account of alleged suppression of value of closing stock. On perusal of the assessment order, it is clear that Assessing Officer arrived at the estimated value of the closing stock on the ground that value of closing stock shown by the assessee is at J1,150/- per gram which is very low. The assessment order also shows that assessee had filed detailed explanation as to how he arrived at the value of closing stock at J1,150/- per gram as set out by the Assessing Officer vide page 11 12 of the assessment order. The Assessing Officer simply rejected the explanation by holding that weighted average cost method is the best method available reflecting true profits in the business of jewellery. Accordingly, he computed the valuation of the closing stock by adopting weighted average cost method on the quantity of closing stock of 120046.646 grams in the process of which the Assessing Officer estimated closing stock at the end of every calendar month and thereby estimated the gross profit and finally arrived the difference of higher gross profit of J5,71,91,937/- in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adopt any of the following method. (i) LIFO (ii) FIFO and (iii) Weighted average cost method. It is normal practice in the business of trading in jewellery to follow LIFO method wherein last bought items were sold first, which results in the value of goods lying closing the stock was shown much less than the prevailing market value. This would enable the assessee to keep accumulating the old jewellery and enable the assessee not to pay tax on appreciated value of the gold , which is permissible under law. Having regard to the ratio decision laid down by Hon'ble Supreme Court in the case of United Commercial Bank (supra), the Assessing Officer is bound to accept this method of accounting preferred by the assessee and he cannot impose another method on the assessee, in the absence of any defects in the method of accounting followed by the assessee. Therefore the addition made by the Assessing Officer cannot be sustained in the eyes of law, viewed from any angle. Thus, we do not find any reason to interfere with the order of the ld. CIT(A). 10. In the result, the appeal of the Revenue stands dismissed. Order pronounced on 21st da ..... X X X X Extracts X X X X X X X X Extracts X X X X
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