TMI Blog2021 (2) TMI 542X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. AO chose to make addition of ₹ 12 Lacs since the closing stock of lenses was valued at ₹ 5/- per pair as against cost of ₹ 17/- per pair. However, the aforesaid action has already been turned down by the Tribunal in assessee s appeal wherein the addition was deleted. In other words, the matter of valuation of closing stock of Lenses has already attained finality. Assessee was maintaining proper books and furnished the requisite details, vouchers, bills, purchase and sales register as called for by Ld. AO during the course of assessment proceeding - no specific defects have been pointed out by Ld. AO in the documents furnished by the assessee before rejecting the books of accounts. Rather the assessee was successful in explaining that fall in Gross profit was mainly on account of old stock of lenses for which there was no fresh purchases during the year. There was only disposal of the old stock and the balance closing stock was valued at lower of cost or market price, which action the Tribunal has already accepted. Therefore, the lower authorities, in our considered opinion, were not justified in rejecting the books of accounts in the second round of assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of addition already deleted by the Hon ble ITAT. 2. We have carefully heard the rival submissions and perused relevant material on record including documents placed in the paperbook. Our adjudication to the subject matter of appeal would be as given in succeeding paragraphs. 3.1 For appreciation of controversy, it would be necessary to refer to chronology of events. The assessee is stated to be a wholesaler dealer of spectacle frames, cases and lenses with customers spreading all over India. During year under consideration, the assessee was stated to be in the process of clearing its stock since it was being merged with another entity namely M/s Suvin optics which ultimately took place in subsequent years. 3.2 An assessment was framed u/s 143(3) on 27/12/2004 wherein returned income of ₹ 6.21 Lacs was assessed at ₹ 18.21 Lacs after certain additions on account of depreciation, disallowance out of closing stock etc. The assessee reflected sale of ₹ 78.33 Lacs and its books of accounts were duly audited u/s 44AB. The closing stock was valued at lower of cost price or market price. The quantitative details of closing stock would reveal that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could be sold since the color of lenses went out of fashion. Since assessee held large stock of rough lenses, it reduced the prices and was able to sell 51734 more pairs during the year. The remaining 100500 pairs lying in stock were valued at ₹ 5/- per pair, being approx. market value likely to be fetched. There was no purchase of fresh lenses during the year. The aforesaid facts led to decrease in overall Gross Profits to 6.42%. However, rejecting the same, Ld. AO added the differential amount of ₹ 12 Lacs to the income of the assessee and determined total income of ₹ 18.21 Lacs. The stand of Ld. AO was confirmed by learned first appellate authority vide order dated 25/08/2005. 3.6 In the meanwhile, Ld. Commissioner of Income Tax-13, invoking revisional jurisdiction u/s 263 vide order dated 27/03/2006, alleged that the profit loss account was drawn in such a way so as to nullify the declaration made during survey action since the assessee declared income of ₹ 6.21 Lacs only which include additional income of ₹ 20 Lacs declared during survey. Since Ld. AO failed to take note of the same during assessment proceedings, the assessment order was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition of ₹ 12 Lacs as made by Ld. AO on account of closing stock while framing assessment u/s 143(3) on 27/12/2004. The Tribunal, in para-7 of the order, held that the assessee was entitled to value its closing stock at market price which was lower than the cost. It was also observed that in other years, the sale of the material @₹ 5/- was accepted by the revenue. Further, the value of opening stock in subsequent year was also accepted. When the assessee followed regular method of valuation of closing stock, the addition of ₹ 12 Lacs deserve to be deleted. Accordingly, the appeal was allowed by deleting the addition of ₹ 12 Lacs. 3.9 This decision was brought to the notice of Ld. CIT(A) by the assessee during set-aside appellate proceedings pursuant to the directions of Tribunal in ITA No. 6770/Mum/2007 order dated 30/03/2009 in the matter of assessment framed u/s 143(3) r.w.s. 263 as elaborated in preceding para 3.7. However, Ld. CIT(A) observed that by withdrawing the appeal challenging jurisdiction u/s 263 before Tribunal, the assessee accepted the directions given by Ld. CIT-13 in order passed u/s 263 on 27/03/2006 and therefore, the plea that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was mainly on account of old stock of lenses for which there was no fresh purchases during the year. There was only disposal of the old stock and the balance closing stock was valued at lower of cost or market price, which action the Tribunal has already accepted. Therefore, the lower authorities, in our considered opinion, were not justified in rejecting the books of accounts in the second round of assessment proceedings. 6. The revenue has pointed out that the Gross Profit as estimated by Ld. AO in the case of M/s Sunrise Optics has been accepted by Tribunal in ITA No.3524/Mum/2011 order dated 03/04/2013. However, we find that the loss in the case of the present assessee is arising only due to lower valuation of closing stock of lenses which has been accepted by the Tribunal in assessee s own case and we see no reason to deviate from the same. 7. Therefore, on the facts and circumstances, we are inclined to hold that the rejection of books u/s 145 was not justified and the estimation of Profit as done by lower authorities could not be sustained. The Ld. AO is directed to accept the income declared by the assessee as per its computation of income. The appeal stand allowed in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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