TaxTMI 
TaxTMI 
2018 (9) TMI 704
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....42/- as the said stock was valued at market price of Rs. 2,45,648/- being 20% of cost price. 3. That the appellant craves the right to add, amend, delete or substitute the ground of appeal at any time before the finalization of appeal proceedings." PRAYER: It is prayed that addition confirmed by the Ld.CIT(A) may kindly be deleted and necessary relief allowed. ITA No.5224/Del/16 A.Y. 2012-13 "1. That the order passed by Ld.CIT(A) to the extent of addition upheld is bad at law, wrong in facts and against the principles of natural justice. 2. That the Ld.CIT(A) has erred in not allowing the value of opening stock of Rs. 5,37,04,497/- for FY 2011-12 (Assessment Year 2012- 13) which was taken as closing stock, while making assessment for the AY-2011-12. It is fundamental principle automatically that the closing stock as assessed for the AY 2011-12, becomes the opening stock of next year. However, the ld.CIT(A) has not given the said treatment of stock on the ground that the appeal is treated as infructuous and consequently dismissed because the Income Tax Department as well as the Assessee have filed appeals against the original order pas....
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....ssee, Ld.AO invoked section 145 (3) of the Act, and rejected books of accounts of assessee and proceeded to complete assessment under section 144 of the Act. Ld.AO estimated total income of assessee at Rs. 3,29,92,340/-, by making following disallowances: Income as per return Rs. 64,72,317/- Add: i)Personal & unvouched expenses Rs. 4,89,587/- ii)Membership & Subscription as discussed Rs.52,700/- iii) Disallowance u/s 14A Rs.39,057/- iv) Disallowance u/s 36(1)(iii) Rs. 16,37,392/- Excess claim of rent Rs.6,30,000/- Under valuation of closing stock Rs.2,35,22,874/- Closing stock of packaging material Rs.48,417/- Value of scrap Rs. 1,00,000/- Rs. 2,65,20,027/- Total income Rs.3,29,92,344/- R/O Total Income Rs.3,29,92,340/- 2.2. Aggrieved by the order of Ld. AO, assessee preferred appeal before the Ld. CIT (A) who partly gave relief to assessee. 2.3. Aggrieved by the order of Ld. CIT (A) revenue as well as assessee are in appeal before us. 3. Assessment year 2011-12 ITA No. 3209/Del/2016 (Revenue's appeal) Ground No. 1 is general in nature and therefore do not require any adjudicatio....
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....ls in support of foreign travel expenses incurred by it. Further it is observed that foreign travel has been undertaken by Directors or other officials alone, and Ld.A.O. has not been able to establish any infirmity/discrepancy in evidences filed by assessee. 3.6. Ld.CIT(A) categorically observed that assessee provided Ledger account of telephone expenses which contained telephone numbers and mobile numbers of assessee, having installed, either at factory, or offices, or mobiles, used by directors/senior officers. Regarding local travel expenses, Ld.CIT (A) categorically observed that Ledger account does not indicate any personal expenditure. In respect of vehicle running expenditure and depreciation is concerned, it has been observed by Ld. CIT (A) that assessee itself has made suo moto disallowance amounting to Rs. 64,800/-, on account of perquisite value for use of vehicles for personal reasons in the computation of income. 3.7. Before us, Ld. DR has not been able to establish anything contrary to what has been observed by Ld.CIT (A). Further Ld.AR placed reliance upon assessment order for assessment year 2013-14 and 2014-15, wherein no disallowance has been made in respec....
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.... crores were received by way of advance to foreign customers, which has been verified by Ld.CIT (A) having regard to the fact that in subsequent year advances received during the year under consideration has been settled, as and when sales were made. Ld.CIT (A) while coming to such conclusion placed reliance upon details of advances received during assessment year 2011-12 and 2012-13 filed before the Ld.CIT (A). Thus in our considered opinion having regard to balance sheet of assessee for year under consideration, assessee had sufficient funds of its own, and therefore presumption by Ld.AO without any supportive documents/evidences is unacceptable. Ld.CIT (A) placed reliance upon decision of Hon'ble Supreme Court in the case of Hero Cycles Pvt.Ltd Vs.CIT, reported in (2015) 63 taxmann.com 308, wherein it has been held that; "13. In the process, the Court also agreed that the view taken by the Delhi High Court in CIT v. Dalmia Cement (P.) Ltd. [2002] 121 Taxman 706 wherein the High Court had held that once it is established that there is nexus between the expenditure and the purpose of business (which need not necessarily be the business of the assessee itself), the Revenue....
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....f accounts of assessee for year under consideration in the following manner: "9.5.1 In the submissions made on 16.02.2016 the details regarding the valuation of the slow moving items imparts which were actually valued @ 20% of cost (as explained in the letter dated 18.01.2016) was also furnished at pages 1 to 32 of the paper book. At page 1 was the summary of the slow moving items valued at Rs. 41,04,889/- and at page 2 was the summary of the dead/obsolete stock valued at 20% of the cost price. Pages 3 to 32 contained the item wise valuation of finished goods in pieces, raw material in meters, raw material in kgs and finished goods in sets. Perusal of these details shows that the appellant valued some of the slow moving finished goods @ 20% of the cost, which in its view, was the realizable value of the stocks which were valued at 20% and which are included in the slow moving stock appearing on the balance sheet date i.e. 31.03.2011 of Rs. 41,04,889/-. It is found from the said summary that the finished goods in pieces and sets and raw material in meters and kgs were valued at 20% of the cost and the net effect of such an exercise was that stocks at a cost price of Rs. 12,....
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.... by the managing director shows that the estimated selling price of these items was taken to be the 20% of the cost of such items. The AO has merely stated that the market price i.e. the present sale price of the products estimated @ 20% of the cost are much higher than the cost price as is evident from the stock statement submitted by the assessee. She has however, not pointed out a single case wherein the market price of the product is in fact higher than the cost price. Regarding the failure on the part of the appellant to disclose the impact on any change in accounting policy in the year in which such change is effected, since the appellant has not, in fact, changed any accounting policy, this contention on the part of the AO is also not justified. 9.5.3 The contention of the appellant is that adoption of the FIFO method by the AO by valuing the entire closing stock including the slow moving items, without any justification or show cause notice, amounts to changing the method of valuation regularly followed. This action on the part of the AO has been held to be unjustified by several High Courts such as the Madras High Court in the case of CIT vs. Anandha Metal Corpora....
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.... & obsolete items at cost price or market price whichever is lower. 5.6. Accordingly this ground raised by revenue stands dismissed. 6. In the result appeal filed by revenue stands dismissed. 7. ITA No. 2417/del/2016 (Assessee's appeal) Ground No. 1 and 3 are general in nature and therefore do not require any adjudication. 7.1. Ground No. 2 Only issue raised by assessee in this appeal is in respect of addition being upheld by Ld.CIT (A) being 80% of obsolete, defective, unusable and un saleable stock to the extent of Rs. 12,28,242/-. 7.2. Ld.AR submitted that obsolete, defective and rusted stock, which was not in saleable condition was valued at its market price as estimated by Management at 20% of its cost. He submitted that in support of valuation of obsolete and effective stock, a report was prepared by Management, was submitted to Ld.AO, which has been ignored by authorities below. Ld.AR submitted that Ld.AO made addition on entire closing stock, as per value worked out on FIFO method which has amounted to double addition based on different goods. 7.3. Ld.DR on the contrary placing reliance upon orders of Ld. CIT (A) submitted that valuation of slow-movi....