TaxTMI 
TaxTMI 
2013 (12) TMI 1680
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....the Hon'ble Gujarat High Court in the case of Kwality Steel Vs CIT [191 CTR(Guj) 94 : (2004) 271 ITR 40 (Guj) ] 2) On the facts and in the circumstances of the case and in law, the Ld. CIT(A), Valsad has erred in allowing the disallowances in respect telephone expenses and vehicle expenses of Rs. 10,000/- & Rs. 3,000/- resp. which was rightly disallowed proportionately by the AO on account of non-maintaining of log-book or personal book for personal use of the telephone and vehicle by the assessee and his family." 2. The first ground is against deleting the addition of Rs. 34,02,404/- in respect of undervaluation of closing stock. The A.O. observed that the assessee is engaged in the business of sale of gold ornaments which made at his workshop. The assessee also made ornaments on a labour job basis. The assessee had shown closing stock of Rs. 50,01,037/-. The assessee did not maintain quantitative stock register but closing stock statement was produced before the A.O. at the time of assessment proceeding. The only quantity was mentioned without any value. Total gold of 9244.71 gram had been shown at closing stock and the value of the same had taken at Rs. 5....
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....mpleteness and incorrectness of the accounts. Generally, gold jewellery valued on the basis of 18, 22 and 24 carat on the basis of purity of gold. Similarly the assessee had debited salary/wages of Rs. 1,20,000/- to p&l account and labour income had been credited at Rs. 31,30,008/-. The monthwise sale and purchase alongwith quantity and value has been reproduced and concluded that there was no bifurcation of ready ornaments and raw- material. It is also not clear from the accounts that whether the appellant followed LIFO or FIFO method for sale of gold ornaments. Therefore, he rejected the book result u/s.145(3) of the IT Act. He further relied upon in case of Hon'ble Gujarat High Court decision in case of Kwality Steel Vs CIT [191 CTR(Guj) 94 : (2004) 271 ITR 40 (Guj) ], wherein it was held that closing stock has to be valued at cost or market price, whichever is low. The ld. A.O. calculated the closing stock @ Rs. 909/- per gram. Thus, the A.O. made addition of Rs. 34,02,404/- on account of under valuation of closing stock. 3. Being aggrieved by the order of the A.O., the assessee carried the matter before the CIT(A) who had allowed the assessee's appeal by observing as under:....
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.... disturb this unless there is a serious discrepancy in the valuation of stock. It is also not appropriate to adopt the rate by verifying a small sample of purchase bills for the month of March. Moreover, the AO had not adopted same method for the opening stock as a result of which the G.P. rate has shoot up to 288.67% of the total turnover of the appellant. Factually, such unreasonable additions do not stand in the eyes of the law. Therefore, I direct the AO to delete the addition made in this ground of appeal. Thus, this ground of appeal is allowed." 4. Now the Revenue is before us. Ld. Sr. D.R. vehemently relied upon the order of the A.O. and argued that the assessee is having closing stock more than 9 kg and has shown total sale of Rs. 14,12,210/- against the purchase of Rs. 9,37,685/-. The assessee had shown income of Rs. 1,45,570/- which includes labour receipts also and shown in net profit @ 10.51%. It was argued that when a party is having stock as per valuation at more than Rs. 50 lacs. It generally rotated in form of sales 4 and 5 times in the year. It shows that the assessee had not been disclosing correct sale of gold ornaments. He further argued that whether th....
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....ence of any defect or discrepancy.On the contrary, all the purchases, sales and Opening Stock are supported by the Sales Tax records and the method for valuation of stock has also been accepted by the Sales Tax authorities (CIT Vs. Ananda Metal Corporation (2005) 273 ITR Page 262 (Mad)). * There is no material or evidence on the records of the AO in support of his allegation that the assessee has earned more profit on the stock of goods. * The AO has completely failed to understand that the assessee has rightly followed the generally accepted principles for valuation of Closing Stock i.e. at the lower of cost or market value. The AO has failed to understand that the expression "cost" includes the Weighted Average Cost which is scientific and rational as compared to that of LIFO method. * Judgments relied upon: (1) Pankaj Diamond Vs. ACIT (2010) 5 TTR (Trib.) 469 (Ahd.) (2) CIT Vs. Moonlight Builders and Developers (2008) 307 ITR 197 (Del.) * Rule of consistency- Method consistently followed: (3) CIT Vs. Santram Mangatram (2005) 275 ITR 312 (P&H) (3) Caprihans India Ltd. Vs. Prakashchandra O....