TaxTMI 
TaxTMI 
2017 (6) TMI 1270
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....s appeal) "(1) On the facts and in the circumstances of the case and as per law ld. CIT(A) erred in restricting the valuation of closing stock to Rs. 13,72,363/- instead of Rs. 48,00,000/- calculated by the AO. (2) On the facts and in the circumstances of the case and as per law ld. CIT(A) erred in not considering the calculation made by the AO for valuation of closing stock. (3) On the facts and in the circumstances of the case and as per law ld. CIT(A) erred in allowing fresh evidence during the appeal proceedings in violation of Rule 46A". ITA No. 933/KOL/2014 (assessee's appeal) "(1) That the ld. CIT(A) was not justified in confirming the addition of Rs. 13,72,363/- alleging to be difference in closing stock. (2) That the addition has been made without appreciating the facts in their entirety and in their true perspective ignoring the evidences produced and, therefore, the same is wholly unwarranted, arbitrary and untenable both in law and on facts". 3. The assessee in the present case is a Company, which is engaged in the business of manufacturing and trading of chemical items. The return of income for the year under con....
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....id not come out well and as per specification desired except for a very little quantity. The quantity which could be produced as per specification were sold immediately while the off-grade stock were either blending with other products or sold over a very long period. It almost took 6 months to liquidate the stock. GR 2629 The closing stock as on 31.03.09 of 215371 kg is off grade quality and hence valued at approx 36/kg. Out of 215371 kg approx 32000 kg was blending with other products and 189340 kgs was sold between 01.04.09 to 31.12.09 at an average price of 41. 95/kg. GR2633 The closing stock as on 31.03.09 of 59832 kg is off grade quality and hence valued at approx 35/kg. Out of 59832 Kg. approx 14865 kg was blending with other products and 33238 kg was sold between 01.04.09 to 31.12.09 at an average price of Rs. 45.115/ kg. Some of the stock had to be reprocessed over the period to be sold.GR 2424. The closing stock as on 31.03.09 of 59832 kg is off grade quality and hence valued at approx 35/kg. Out of 59832 kg approx 14865 kg was blending with other products and 33238 kg was sold between 01.04.09 to 31.12.09 at an....
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....ing principle used to arrive at the GP. In the instant case, it was observed by the AO that the G.P ratio disclosed at 12.09%. Therefore, according to him, to arrive at the value of closing stock average rate of sale furnished should be deducted with the G.P ratio disclosed by the appellant. On calculation as appearing in the chart difference in the value of closing stock by considering the average rate of sale derived at Rs. 56,96,795/- which includes element of gross profit therein. To calculate the actual cost price of goods sold, element of gross profit is to be deducted from the difference. Hence, considering the G.P ratio of 12% difference in value closing of the aforesaid items comes to Rs. 50,13,179/- (Rs.56,96,795/- - Rs. 6,83,615/-). However, considering the expenses of carriage inward say 4% which carries approximately Rs. 2,00,000/-, the difference in the value of closing stock of the items worked out to Rs. 48,00,000/- approx. Hence, the AO has not accepted the explanation of the assesseee that the lower value of the said items was taken on the ground that the said items were of poor quality has no legs to stand since it is a general explanation with no supporting docu....
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.... the valuation done by the AO and the valuation if done on the actual average selling rate. In support of this contention, the appellant furnished the under mentioned Table: Item Qty as on 31.3.2009 Rate adopted by AO Valuation Actual average selling price Valuation Difference GR 2633 59832 54 3230928 44 2632608 598320 GR 2629 215371 56 12060776 41 8830211 3220565 GR 2428 8533 52 443716 40 341320 102396 Garasol 150 50330 47.21 2376079.3 41 2063530 312549.3 Garasol 110 23029 40.5 932674.5 37 852073 80601.5 19044174 14719742 4324431.8 It is further contended by drawing my attention to the contents of the above Table that even going by the AO's valuation principle, the addition should have been for only Rs. 13,72,363 (Rs.56,96,95 less Rs. 43,24,431) and not Rs. 56,96,795 as determined by the AO. However, the appellant reiterated that the valuation principle should be market price or cost price whichever is lower as per the generally acceptable accounting policy and practice. The appel....
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....ermined by the AO. The finding of the AO that during the subsequent year the appellant had sold goods at a higher rate which was objected by the appellant, apparently found to be incorrect as evidenced from the supporting documents furnished by the appellant that the average selling price of GR 2629 for the period of 1.4.09 to 31.12.09 was Rs. 42 per kg minus G.P.12% = Rs. 37/Kg. However, I do not find any merit in the argument of the appellant that the basis of computation made by the AO based on selling price is not as per accounting standards since the appellant has valued the goods on the principle of cost price or market price; whichever is lower. In the light of the above discussion and finding and perusing the entire facts of the case, the addition made by the on account of value of closing stock is restricted to Rs. 13.72,363/- as against Rs. 48,00,000/- made by the AO. Thus, this ground of appeal is partly allowed". Aggrieved by the order of the ld. CIT(Appeals), the Revenue and assessee both are in appeals before the Tribunal. 7. We have heard the arguments of both the sides and also perused the relevant material available on record. It is observed that the....