TaxTMI 
TaxTMI 
TaxTMI 
2020 (3) TMI 172
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....und during the course of survey. (4) Under the facts and circumstances of the case the ld. CIT(A) has erred in confirming the addition of Rs. 12,66,540/- on account of unverifiable purchases.'' 2.1 The Ground No. 1 to 3 of the assessee are regarding the addition made by the AO on account of excess stock found as per valuation made by the Departmental Valuer at the time of survey. 2.2 The assessee is a Private Limited Company and engaged in the business of gold/kundan meena jewellery. There was a survey u/s 133A of the Act on 25-11-2014 at the business premises of the assessee. During the course of survey, the stock of the assessee was valued by the Departmental approved valuer Shri Vijendra Kumar Kankariya. The Departmental approved Valuer has valued the stock as on the date of survey at Rs. 2,73,01,637/-. The assessee thereafter filed its return of income on 30-09-2015 for the year under consideration declaring total income at Rs. 14,77,100/-.During the scrutiny assessment, the AO has made the addition of Rs. 1,17,80,068/- on account of excess stock based on the valuation of the stock at the time of survey. The AO also treated the purchases to the extent of Rs. 12,66,540/- as....
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....IT(A) have even not considered the valuation report filed by the assessee for examination or correctness of the valuation. Thus the valuation report filed by the assessee of the Registered Valuer was rejected out-rightly without pointing out any defect or error in the valuation. The ld.AR of the assessee thus submitted that as per the valuation done by the Registered Valuer, there is no variation in the value of the stock found as per the books of account as on the date of survey. If the valuation done by the Registered Valuer is taken into consideration then the difference between the book position and physical position of the stock is only Rs. 2,21,801/- which is very negligible due to element of estimate in gold valuation. The ld.AR of the assessee further submitted that the Departmental Approved Valuer has taken the rate of the jewellery as per sale bills which were found during the survey of jewellery sold by the assessee in the Exhibition in Mumbai. The said sale bills were having high rate due to the reason that it was sold in the Exhibition and high price was charged by the Manager of the Exhibition which is also the part of the sale bills. Thus if the valuation of the stoc....
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....purchase bills should have been removed from the excess stock and not merely the cost of purchase stock as shown in the purchase bills for which the AO has granted the credit. Therefore, the valuation difference representing the quantity of stock which is found as per the purchase bills as well as quantity found recorded in the books of account cannot be treated as excess stock. We further note that the valuer has valued the stock by applying current market rate or the rate as found recorded in the sale bills instead of cost price of the stock which is the prescribed and appropriate method as per accounting standard. The stock is required to be valued at the cost or realization whichever is less. Therefore, the stock cannot be valued more than the cost price in any case. The assessee vide letter dated 16-12-2014 has specifically highlighted the defects and discrepancies in the valuation determined by the Departmental Approved Valuer. Neither the Investigation Wing nor the AO in the assessment proceeding have even made an attempt to examine and verify the correctness of the fats as highlighted by the assessee. The AO has made addition based on the valuation whereas the assessee to ....
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....ing stock of the assessee and to that extent no addition can be made on account of higher valuation as the undervaluation, if any would not affect the income of the assessee being part of both sides of profit and loss account. Hence, the addition made by the AO and sustained by the ld. CIT(A) is deleted. 3.1 The Ground No. 4 of the assessee is regarding certain purchases treated by the AO as unverifiable purchases though no separate addition was made by the AO being part of the amount of excess stock. 3.2 During the course of assessment proceeding, the AO asked the assessee to produce three parties/ suppliers for verification with their books of account/ bank statements namely M/s. M.J. Enterprises, M/s. Prince Jewellers and M/s. V.R. Enterprises for the total purchases of Rs. 12,66,540/-. The assessee produced the confirmation of these parties, their bills and proof of payments through cheques. The AO did not accept the documentary evidence produced by the assessee on the ground that the assessee has failed to produce these parties for verification and consequently treated the purchases to the tune of Rs. 12,66,540/- as unverifiable purchases. The assessee challenged the action ....