TaxTMI 
TaxTMI 
2018 (1) TMI 85
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....leged decline in gross profit/net profit and that too after applying the provisions of section 145 of the Act without any basis, material or evidence and impugned addition has been made by recording incorrect facts and findings and without giving adequate opportunity of hearing and without considering the evidences and submissions of the assessee and without following the principles of natural justice. 3. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in rejecting the books of accounts u/s 145 and making addition of Rs.1,56,06,861/- on account of alleged decline in gross profit/net profit is bad in law and against the facts and circumstances of the case. 4. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in not allowing the deduction u/s 80IC as claimed by the appellant and also in respect of addition made (without prejudice). 5. Without prejudice to the above ground and having regard to the facts and circumstances of the case. Ld CTT/At has erred in law and on facts in confirming the action of the ld AO in not allowing the ded....
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....). Therefore, his argument was that if ground no. 2 and 3 assessee succeeds the ground No. 4 becomes redundant and if assessee fails on those grounds then ground No. 4 is covered in favour of the assessee by the circular of CBDT. With respect to ground No. 2 and 3 he submitted that the assessee is engaged in the business of manufacturing of the foods products and valuation has been done of the finished products on the basis of unit costing of each of the product. He referred to page No. 95 to show that in valuation of the finished goods the quantum of raw material, packing, over heads are considered and even then, there is no difference in finished goods valuation. He further referred to his submission dated 15.07.2014 placed at page No. 103 to 125 of the paper book to support his contention. He further stated that complete valuation details are available with the Assessing Officer. He also referred to the tax audit report to show that complete quantitative details are maintained by the assessee and the auditor has certified that inventories are valued at lower of cost or net realizable value whichever is less and includes all the cost incurred to bring them to their present locati....
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.... profit can be made or not. It is necessary to go through the auditor's report issued u/s 227(4A) of the Companies Act as required under companies auditor's report order, 2003 to ascertain the correctness of accounts:-is required to be examined which is as under:- "As explained in note 2(h) of the Schedule 15 of the financial statements, the company adopts the retail method for determining the value of its manufactured finished goods, whereby, the cost of the inventory is determined by reducing from the sale value of the inventory a percentage of gross margin considered appropriate by the management. As per Accounting Standard 2 valuation of inventory, retail method can be used as a valuation technique only when it approximates the actual cost of production for the goods manufactures by the company. However, in absence of adequate product wise cost records having been made available to us, we are unable to comment on the appropriateness of the usage of the retail method for valuation of manufactured finished goods by the company. As a result, we are unable to comment o the accuracy of valuation of inventories of manufactured finished gods as at year end and at the end of the prev....
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....r the goods produced. The another method which is called the retail method based on which from the selling price of the goods the gross margin of the product is reduced which is obviously the actual cost of the goods produced by the assessee. In case if there is a net loss then such finished goods are valued at selling price as the cost price is higher than the sale price. The auditor has also stated that such method can be used as a valuation technique when the actual cost of the product is not feasible to be ascertained. According to the para no. 21 of the Accounting Standard where the techniques for measurement of cost is mentioned that technique for the measurement of cost of the inventories such as the standard cost method or retail method may be used for convenience if the results approximates the cost. In para No. 22 it is stated that retail method is often used in retail industry where, large numbers of rapidly changing items with similar margins for which it is im-practicable to use other costing methods. In such circumstances the cost of the inventory is determined by reducing the sales value of the inventory by the appropriate percentage of the gross margin. An average p....
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....ent Year 2011-12:- "1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in rejecting the books of accounts of assessee u/s 145 of Income Tax Act, 1961. 2. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making addition of Rs.2,02,27,358/- on account of alleged decline in gross profit/net profit and that too after applying the provisions of section 145 of the Act without any basis, material or evidence and impugned addition has been made by recording incorrect facts and findings and without giving adequate opportunity of hearing and without considering the evidences and submissions of the assessee and without following the principles of natural justice. 3. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in rejecting the books of accounts u/s 145 and making addition of Rs.2,02,27,358/- on account of alleged decline in gross profit/net profit is bad in law and against the facts and circumstances of the case. 4. That having regard to the f....