TaxTMI 
TaxTMI 
2020 (7) TMI 618
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.... on facts and in law in confirming the disallowance of Rs. 2,974/- u/s 14A read with Rule 8D." 2. During the course of hearing, the ld AR submitted that the assessee company is engaged in manufacturing, trading and export of marble tiles & slabs. It valued its stock at cost or net realizable value estimated on the basis of quality/defects of stock, whichever is lower. During the year, out of closing stock of 6013.682 MT of marble block, it considered 50% of the stock as defective and valued it at 55% of the cost. All other stock was valued at actual cost. Accordingly, out of 6013.682 MT of marble block, 3006.841 MT was valued at cost of Rs. 3567.62 per MT i.e. at Rs. 1,07,27,284/- and the remaining 3006.841 MT was valued at Rs. 1962.19 MT....
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....ustify the valuation of 50% of its stock at 55% of its value. There is absolutely no evidence to show that 50% of stock of assessee was defective. Also there is no justification for valuing such stock at 55% of its value. Accordingly, he confirmed the addition made by the AO. However, he directed the AO to adjust both the opening stock as well as closing stock of subsequent assessment year. 5. In light of above factual matrix, the ld. AR submitted that during the year only stock of marble block is considered defective and valued at net realizable value. The method of valuation of the marble block as referred in Note 1 to the accounts is as under:- "Stock of marble block is valued at direct cost (net off VAT and CENVAT credit available) o....
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....on by not accepting the claim of defective stock and reduction in its value. The Ld. CIT(A) after relying on the decision of ITAT in assessee's own case for AY 2005-06 deleted the addition made by the AO. The order of Ld. CIT(A) was upheld by Hon'ble ITAT. 8. It was further submitted that in AY 2013-14, the AO again made the addition by not accepting the claim of defective stock in its valuation at the reduced rate and thus made an addition of Rs. 41,84,495/-. The Ld. CIT(A) deleted the addition made by the AO. Against this order, the Department preferred an appeal before the ITAT who vide order dated 09-08-2017 set aside this issue to the CIT(A) to examine the matter afresh. The set aside proceeding are still pending before the Ld. CIT(A....
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....arble block has been sold at a lower rate ranging from Rs. 250/- per MT to Rs. 1,500/- per MT whereas good quality marble block has been sold at a range of Rs. 10,000/- per MT to Rs. 26,586/- per MT. This itself shows that certain marble blocks remained defective in the closing stock having a lower realizable value. Thus, assessee has correctly valued the closing stock of marble block as per the accounting policy consistently followed by it and therefore, addition of Rs. 48,27,278/- made by the AO and confirmed by Ld. CIT(A) is uncalled for. 11. It was further submitted that the Ld. CIT(A) has directed the AO to increase the value of opening stock in the subsequent year but his direction to give effect only if the assessee accepts the orde....
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....nd no differentiation or marking was given in the stock register. Therefore, we find that the AO has carried out the necessary verification of stock register and such a finding of the AO has not been rebutted before us and thus attains finality. Further, how the assessee has arrived at net realizable value @ 55% of cost is not clear. The ld AR has referred to range of value at which marble blocks were sold during the year and in the subsequent financial year 2015-16, however, what is the percentage of realization or at what profit/loss margins, the blocks were sold has not been specified. In light of the same, we are of considered view that the assessee has failed to justify the quantum of defective stock of marble blocks and its realizable....