TaxTMI 
TaxTMI 
2016 (7) TMI 376
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.... and other precious and semi precious stones. The assessee purchases Gold and stones, manufactures jewellery from such gold, also dismantles jewellery already manufactured and manufactures fresh jewellery out of the same since designs goes out of market within very short time. From the Tax Audit Report it was noted that the Value of Closing Stock has been taken as under: (i) Stock in Trade Rs.125,255,449/- (ii) Packing Materials Rs. 43,610/- It was further noted that, as mentioned by the Tax Auditor, the above value is taken by the Auditor as Valued and Certified by the partner. As per the Tax Audit Report, Raw material was valued at cost or market price whichever is lower while the finished Goods was valued at estimated cost or market price whichever is lower. It was noted that the position of various stock of Raw materials and finished goods are reported in Schedule- IV of the Tax Audit Report. From the above position, it was appreciated that the above Stock in trade includes Closing stock of 13,775.925 of Raw materials covered under "Gold" which is reported to have been valued at Cost or Market price whichever is lower and Finished Closing stock of 97800.325....
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....tely sold out or remained in the closing stock at the end of the year. In other words, the Learned AO observed that there was no item wise break up maintained in the said register. Accordingly, he raised a query as to how it can be explained that the Stock of Gold is representing the Gold purchased in FY 2006-07 or FY 2007-08 when no other register is maintained in respect of movement of stock and no sufficient item wise details are available or maintained so as to trace it in sale or in stock. 3.3. The Learned AO observed that in the facts and circumstances of the case, the appropriate method for valuation of Gold is Last in First Out (LIFO) method. The assessee had valued its closing stock following LIFO method only. The Learned AO valued the closing stock of Gold of 73752.660 grams at the average purchase rate of Rs. 1288.41986 per gram and arrived at the closing stock of Gold at Rs. 10,56,09,063/- after adding the making charges of Rs. 1,05,84,671/-. The Learned AO accordingly made an addition of Rs. 4,29,28,298/- towards valuation of closing stock as on 31.3.2009 in the assessment. 4. Before the Learned CITA, the assessee explained that the addition was made by the Learn....
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....cognized LIFO method consistently followed by the assessee and accepted by the department. It was also submitted that LIFO method is a recognized method for the purpose of valuation of closing stock. The assessee also placed reliance on the co-ordinate bench decision of Hyderabad Tribunal in the case of Ramesh Chandra Jewellers vs ITO in ITA No. 65/Hyd/06, wherein identical issue was considered by the tribunal. The Tribunal in this decision held that LIFO method consistently followed by the assessee was based on accepted principle of accounting and no defect was pointed out by the department in the books of accounts, the LIFO system should have been accepted. The assessee also placed reliance on the decision of the Hon'ble Madhyapradesh High Court in the case of CIT vs J.P.Patel reported in 263 ITR 421 (MP), wherein it was held that LIFO method is well recognized method and once a recognized method has been taken recourse to and method has been adopted, there is no reason to discard the same. It was argued that the gold available from earlier years as per LIFO method was continuing from year to year and has duly been accepted in all the earlier years. Reliance was also placed on th....
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....cular item was sold out or remained as Closing Stock at the end of the year. There was no such register was maintained which represents the gold purchase in the F.Yr. 2006-07 & 2007-08. In absence of proper and complete record the A.O. was justified in making assessment on the basis of available material and making addition to the valuation of Closing Stock as per views of Amba Rice Mills Vs CIT (2010) 325 ITR 33 (PUNJ. & HAR). 3. For that the Ld. CIT(A) erred in deleting the addition in the valuation of Closing Stock when the assessee valued the Closing Stock of F.Yr. 2008-09 in the value of F.Yr. 2006- 07 & 2007-08." 6. The Learned DR reiterated the facts stated by the Learned AO in the assessment order. In response to this, the Learned AR reiterated the submissions made before the lower authorities and the findings given by the Learned CITA. In addition he placed reliance on the decision of the Cochin Tribunal in the case of ITO vs Sree Padmanabha Jewellery Mart reported in (1986) 19 ITD 816 (Cochin Trib.) in support of his contentions. 7. We have heard the rival submissions and perused the materials available on record. The facts elaborately stated in the arguments adv....
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.... all purchases made by the firm in the year of account." 7.1. In the instant case, the assessee had furnished the closing stock valuation workings as on 31.3.2006, 31.3.2007, 31.3.2008 and 31.3.2009 before the revenue. On going through the said workings, we are fully convinced with the method of accounting regularly employed by the assessee for valuation of closing stock of Gold and other jewellery. The value of closing stock of gold as worked out by the assessee are given below :- For 31.3.2006 Grams Rate Value Value of closing stock of FY 2004-05 25234.070 621.00 15670357 Value of Balance stock 31645.550 650.28 20578468 56879.620 36248825 For 31.3.2007 Grams Rate Value Value of closing stock of FY 2005-06 56879.620 637.29 36248825 Value of Balance stock 12220.260 917.50 11212089 69099.880 47460914 For 31.3.2008 Grams Rate Value Value of closing stock of FY 2006-07 69099.880 686.85 47460914 Value of Balance stock 6389.830 1005.59 6425549.15 75489.710 53886463.15 ....
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....addition being made by the Assessing Officer where the valuation of closing stock has been changed vis-a-vis its value and not because of any difference in the quantity of stock. The assessee was consistently following a particular method of accounting which is being accepted from year to year and in the absence of any contrary findings by the Assessing Officer, there is no merit in not adopting the method of valuation of stock being consistently followed by the assessee. Further we find support from the ratio laid down by the Hon'ble Supreme Court in Chainrup Sampat Ram Vs. CIT 24 ITR 481 (SC) (supra) wherein it has been held that the value of stock cannot be appreciated higher than the cost because the closing stock is not the source of profit for the assessee. It has also been held by the Hon'ble Supreme Court that the closing stock is to be valued either at cost or market value, whichever is low. In the facts and circumstances of the present case, we are in conformity with the order of CIT(A) and uphold the same. There is no merit ill adopting the weighted average cost method for valuation of inventory of stock in the circumstances of the case. We confirm the deletion of ad....