TaxTMI 
TaxTMI 
TaxTMI 
2016 (2) TMI 162
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....rmed by Hon'ble ITAT. The break up of addition of Rs. 5,15,259/- on account of undervaluation of stock is as under: 1. Calculation mistake in valuation of marble slab (avg. rate wrongly taken at Rs. 488 sq, mtr. instead of R. 682/- sq.mtr. Rs. 1,61,400/- 2. Valuation of old marble slab at 50% of average rate instead of 25% of average arte taken by assessee Rs. 1.13,434/- 3. Valuation of old tile at 50% of average rate instead of 25% of average rate taken by assessee. Rs.2,39,865/- 2.3 In penalty proceedings, AO observed that assessee has undervalued the closing stock top deflate its profits and evade tax and to this extent he has suppressed its income. He therefore, imposed penalty of Rs. 1,73,437/- u/s 271(1)(c) of the Act computed at 100% of the sustained additions of Rs. 5,15,259/-. 2.4 Being aggrieved the assessee carried the matter before he ld. CIT(A) who has confirmed the levy of penalty. The relevant findings is at para 5 of her order which reads as under: "After going through rival submissions it is seen that the closing stock valuation declared by the appellant was found by the highest fact finding body to be undervalued by Rs. 5,15,259/- and it is no....
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....has increased by that amount and the profit of the subsequent year has reduced by that amount. Thus this addition is tax neutral. Therefore, no presumption of concealment of income should be drawn on account of undervaluation of closing stock. Further in support of its contention, the ld. AR has placed reliance is placed on the following judgements and drawn specific attention to decision of Hon'ble Himachal Pradesh High Court: 1. CIT vs. H.P. State a Forest Corpoation Ltd. 340 ITR 204 (HP) (HC) 2. DCIT vs. Kalpaka Bazar 46 ITD 221 (Coc.)( Trib.) 3. Durga Traders vs. ITO 90 TTJ 767 (Chd.)(Trib.) 4. Varun Enterprises vs. ACIT 47 TTJ 461 (Del.)(Trib.) 5. Godhwani Brothers vs. ACIT 48 TTJ 403 (Del.)(Trib.) 2.6 The ld. DR relied on the order of the lower authorities. 2.7 We have heard the rival contentions and perused the material available on record. Firstly regarding calculation mistake in valuation of marble slabs, it is noted that average rate was taken at Rs. 488 q.mtr. instead of Rs. 682/- per sq. The assessee has submitted details of working of the valuation showing the quantity and value part of the audited financial statement which has also been reproduced at pa....
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....labs is Rs. 141.18/- per s.mtr. & Tiles is 121/- per sq. mtr. which is even lower than the rate at which such stock is valued by the assessee. The assessee thus justified the valuation of closing stock made by it and prayed for deletion of the addition confirmed by CIT(A). 2.9 The Coordinate Bench, after considering the submission of the assessee has given its following findings which are contained at para 7 of its order which reads as under: "Having considered the facts of the case and the arguments advances by both the parties, we agree with the contention of the ld. AR that FIFO method of valuation can be followed when items purchased /manufactured are identical to the items in the stock. Since this is not possible in this time of business, the only method of valuation is to take the average rate of the goods manufactured to value the closing tock. Secondly choice of method of valuation is of the assessee which is to be following consistently and since it is the first year of the company and the method of valuation have been disclosed in the notes to accounts, there is no justification to disturb the method of valuation followed by the assessee. The stock taken over from Sin....
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....d Coordinate Bench has taken a view which differs from that of the assessee on examination of same set of facts which have been duly disclosed. It is therefore not a matter which calls for levy of penalty under the provisions of section 271(1)(c) of the Act. 2.11 Further during the course of hearing the ld. AR has given a statement that the assessee has not take any advantage of said valuation adopted by the ld. AO in the subsequent period while valuing the opening stock. 2.12 Further the ld. AR has brought to the notice of the Bench decision of Hon'ble Himachal Pradesh High Court in the case of H.P. State Forest Corporation (340 ITR 204) regarding non-levy of penalty in respect of disputed valuation of closing stock which squarely applies in the instant case. The relevant finding of the Hon'ble High Court contained at para 21 & 22 of its order which reads as under: "We are of the considered view that the latest judgement of the apex court in Reliance Petro Products case (supra) squarely covers the present case also. The Apex Court in this judgement has clearly held that the word 'inaccurate' as used in the Act would mean something which is not accurate, not exact or not correc....