2011 (3) TMI 1595

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....n after its consumption. d) Quality-wise cost of items of closing stock was not given. e) No proper justification was given by the assessee in respect of declaring the value of stock to the bank at `1052.86 lakhs against stock of `978.14 lakhs declared in the balance sheet as on31.03.2003." 2. In the assessment order, it is mentioned that the assessee is engaged in the business of manufacturing and selling sports items. The return was filed on 31.10.2003 declaring total income of Rs. 1,93,59,560/-. In the course of scrutiny of the case, it was found that the stock declared to the bank in connection with availing of credit facilities was higher than the stock declared in the accounts. The difference is on 31.03.2003 were found to be as under:-   As per Bank As per books Difference Finished Goods 3,16,30,000 2,92,56,430 23,73,570 Work in Progress (or semi finished) 89,45,000 85,81,305 3,63,695 Raw materials 6,31,29,000 5,89,28,040 42,00,000 Packing material 15,82,000 10,47,827 5,34,173   10,52,86,000 97,81,362 74,72,398 2.1 In view of the discrepancies, the assessee was required to substanti....

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....nts suffer from the following serious defects:- i) Cost of production that could have been made basis for valuation of stock, which has not been given. In the manufacturing account the assessee company has also debited an amount of Rs. 4,28,15,658/- before working out the gross profit of Rs. 6,98,43,504/- for wages EPF contribution. PF contribution, bonus exgratia, factory power, machinery hire etc. Apart from conscription of imported cane for Rs. 92,40,795/- mainly used in production of cricket bats, huge quantity of leather & cloth. Proportionate cost was required to be added in the valuation of closing stock of finished goods. ii) Mathematical basis of valuation of items of work in progress has not given although according to the Co. had stock register for each item of raw material taken to production & received after production. iii) The working given for valuation of stock of English Kashmir bats is on the basis of three sale bills of lower rate of the two items whereas the sale price taken from sale bills as discussed above are on higher side. The valuation was required to be done taking into quality wise production of each item. iv) The valuation of packing ma....

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....e invoices of the month of April following the previous year; ii) Raw materials and packing materials as per purchase bills; & iii) Semi-finished goods by adding estimated expenditure to the cost of the goods. 3.1 It was further submitted that very method has been employed in this year and the stock as per ledger has been quantified and valued thereafter as above. It was also submitted that the Assessing Officer has not pointed out towards any discrepancy in the books of account. Therefore, no addition should have been made by rejecting the books on account of difference between estimated stock furnished to the bank and actual stock as per books valued on the basis of method regularly implied by the assessee. The learned CIT(A) considered the facts of the case and submissions made before him. He came to the conclusion that the stock has been valued by the assessee on the basis of the method regularly employed for its valuation. No other discrepancy has been pointed out by the Assessing Officer. The gross profit ratio declared by the assessee is in line with the ratio of earlier years. Therefore, he deleted the addition. His findings are contained in paragraph 4, which is r....

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....foresaid was not discussed at all. Therefore, it was argued that either the order of the Assessing Officer may be restored or the matter may be referred to the learned CIT(A) for reconsideration of the matter. 4.1 In reply, the learned counsel for the assessee furnished the details of gross profit ratio for various years from assessment years 1994-95 to 2008-09 and the acceptance or otherwise thereof in assessment proceedings or appeals. It was his case that the stock statement has to be furnished to the bank soon after the close of the year on 31st March. This statement is furnished on an estimated basis as the books are not ready for preparing final statement by that time. Subsequently, the stock is valued on an exact basis following the regular method of accounting. Therefore, there is bound to be some difference between the two statements of the stock. This, however, does not mean that the book results are not acceptable. The assessee has been maintaining regular books of account and has been the valuing stock on a regular method. The Assessing Officer has not pointed out towards any discrepancy in the maintenance of the books of account. In view thereof, the books of accoun....