Appeal dismissed as ITAT upholds deletion of unexplained investment in closing stock.

The ITAT upheld the CIT(A)'s decision to delete the addition of Rs. 33,18,94,091/- as unexplained investment in closing stock. The AO's addition was deemed unsupported by evidence, based on assumptions, and the Jilaba software data was considered unreliable for stock valuation. The CIT(A) found no defects in the audited books of accounts and emphasized that the AO cannot make additions without rejecting the books of account. The appeal by the Revenue was dismissed.

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Issues Involved:
1. Deletion of the addition of Rs. 33,18,94,091/- as unexplained investment in closing stock.
2. Empowerment of AO to make additions under Section 69 without rejecting books of account.
3. Validity of AO's findings regarding the Jilaba software's representation of purchase price.
4. Submission of a letter from Jilaba manufacturer clarifying stock value.
5. Basis of stock valuation by AO and its evidentiary support.
6. Admission of additional evidence by CIT(A) in violation of Rule 46A.
7. Rectification of inadvertent credit of Rs. 5,14,29,709/- for A.Y. 2015-16.
8. Reliance on ITAT order for A.Y. 2015-16 and pending appeal in Bombay High Court.
9. Adjudication of appeal pending decision of jurisdictional High Court.

Issue-wise Detailed Analysis:

1. Deletion of the addition of Rs. 33,18,94,091/- as unexplained investment in closing stock:
The Revenue appealed against the CIT(A)'s deletion of the addition made by the AO. The AO had added Rs. 33,18,94,091/- as unexplained investment in closing stock based on the Jilaba software data. The CIT(A) and ITAT found that the AO's addition was based on assumptions and not supported by discrepancies in the actual stock quantity. The ITAT upheld the CIT(A)'s decision, noting that the AO failed to point out any defects in the audited books of accounts or any unrecorded sales/purchases. The Jilaba software's data was deemed unreliable for stock valuation as it was primarily used for inventory management and sales facilitation, not for accurate purchase cost representation.

2. Empowerment of AO to make additions under Section 69 without rejecting books of account:
The CIT(A) held that the AO is not empowered to make additions under Section 69 without rejecting the books of account. This was supported by the fact that the AO did not find any defects in the assessee's books of accounts, which were duly audited and maintained in Tally ERP software. The ITAT concurred with this view, emphasizing that the AO cannot make additions based on assumptions without rejecting the books of account.

3. Validity of AO's findings regarding the Jilaba software's representation of purchase price:
The AO's findings that the Jilaba software's sale value column represented the purchase price were refuted by the assessee and the Jilaba software manufacturer. The CIT(A) and ITAT found that the sale value in the Jilaba software was not the purchase price but an approximate value subject to discounts and daily price changes. The AO's interpretation was deemed erroneous, and the addition based on this interpretation was deleted.

4. Submission of a letter from Jilaba manufacturer clarifying stock value:
The assessee submitted a letter from the Jilaba software manufacturer, clarifying that the value in the software was an approximate value based on gold rates and making charges at the time of tagging, not the purchase cost. This letter was considered by the CIT(A) and ITAT, supporting the deletion of the addition made by the AO.

5. Basis of stock valuation by AO and its evidentiary support:
The AO's stock valuation was based on the Jilaba software data, which was not reliable for accurate stock valuation. The CIT(A) and ITAT found that the AO did not provide any evidence of quantitative discrepancies in the stock or any unrecorded sales/purchases. The addition was based on assumptions and not supported by evidence, leading to its deletion.

6. Admission of additional evidence by CIT(A) in violation of Rule 46A:
The Revenue contended that the CIT(A) admitted additional evidence in violation of Rule 46A. However, the ITAT found that the CIT(A) had considered all relevant facts and evidence, including the letter from the Jilaba manufacturer, which was submitted during the assessment proceedings. There was no violation of Rule 46A.

7. Rectification of inadvertent credit of Rs. 5,14,29,709/- for A.Y. 2015-16:
The AO had given credit for an addition made in A.Y. 2015-16, which was already deleted by the ITAT. The CIT(A) and ITAT found that this credit was not justified as the addition had been deleted, and the AO's action was based on incorrect assumptions.

8. Reliance on ITAT order for A.Y. 2015-16 and pending appeal in Bombay High Court:
The Revenue argued that the CIT(A) should not have relied on the ITAT order for A.Y. 2015-16 as the Department had filed an appeal in the Bombay High Court. The ITAT found that the CIT(A)'s reliance on the ITAT order was justified as it was the prevailing decision, and the pending appeal did not affect its applicability.

9. Adjudication of appeal pending decision of jurisdictional High Court:
The Revenue contended that the CIT(A) should have kept the adjudication of the appeal in abeyance pending the decision of the jurisdictional High Court. The ITAT found that the CIT(A) was correct in proceeding with the appeal based on the existing ITAT order, and there was no need to keep the adjudication in abeyance.

Conclusion:
The ITAT upheld the CIT(A)'s order, deleting the addition of Rs. 33,18,94,091/- made by the AO as unexplained investment in closing stock. The AO's addition was based on incorrect assumptions and not supported by evidence. The books of accounts were duly audited, and no defects were found. The Jilaba software data was not reliable for stock valuation, and the addition was rightly deleted by the CIT(A). The appeal of the Revenue was dismissed.

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