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of <h1>Tribunal confirms correct stock valuation, rejects Revenue's appeal.</h1> <h3>Deputy Commissioner of Income Tax, Central Circle-2, Jaipur. Versus M/s Vikas Jewellers</h3> Deputy Commissioner of Income Tax, Central Circle-2, Jaipur. Versus M/s Vikas Jewellers - TMI Issues Involved:1. Deletion of Rs. 2,12,54,055/- on account of excess stock found during the search.2. Correctness of the valuation method used for stock during the search.3. Application of Gross Profit (G.P.) margin to the market value of stock.4. Revenue neutrality of stock valuation adjustments.Issue-wise Detailed Analysis:1. Deletion of Rs. 2,12,54,055/- on account of excess stock found during the search:The Revenue challenged the deletion of Rs. 2,12,54,055/- by the CIT(A), arguing that one partner admitted to excess stock of Rs. 5,64,20,450/- during the search. The Tribunal upheld the CIT(A)'s decision, noting that the valuation of the stock should consider the G.P. margin, which the Assessing Officer (A.O.) failed to do. The CIT(A) found that the correct excess stock was Rs. 2,83,49,362/- after applying the G.P. margin, which the assessee had already included in its return.2. Correctness of the valuation method used for stock during the search:The Tribunal observed that the valuer determined the stock's market value as of the search date, which included the dealer's profit margin. The A.O. did not adjust this market value to reflect the cost price, leading to an inflated excess stock value. The CIT(A) corrected this by applying a G.P. margin of 9.5%, aligning the valuation with the cost price method used in the assessee's books.3. Application of Gross Profit (G.P.) margin to the market value of stock:The Tribunal agreed with the CIT(A) that the market value should be reduced by the G.P. margin to determine the cost price. The A.O. failed to provide reasons for not allowing this deduction. The CIT(A) applied a G.P. margin of 9.5%, based on the assessee's historical G.P. rates, resulting in a corrected excess stock value of Rs. 2,83,49,362/-, which the assessee had already declared.4. Revenue neutrality of stock valuation adjustments:The Tribunal noted that even if the addition was made based on the stock valuation, it would be revenue-neutral. Any increase in closing stock value would be offset by an increase in opening stock value in the following year, as supported by precedents in cases like Manoj Kumar Johari and Paras Mal Jain. The CIT(A)'s decision was consistent with these principles, ensuring no unjustified tax burden.Conclusion:The Tribunal upheld the CIT(A)'s order, confirming that the correct excess stock value was Rs. 2,83,49,362/- after applying the G.P. margin. The A.O.'s addition of Rs. 2,12,54,055/- was deleted, as it was not supported by proper valuation adjustments and would result in revenue neutrality. The appeal by the Revenue was dismissed.
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