TaxTMI 
TaxTMI 
2021 (2) TMI 542
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....1)(c). First, we take up quantum appeal which contest the order of Ld. Commissioner of Income-Tax (Appeals)-24, Mumbai, [in short referred to as 'CIT(A)'], Appeal No.CIT(A)-24/13(1)(2)/363/Rest/06-07 dated 22/02/2011 on following precise grounds of appeal filed on 27/02/2017: - 1. The Commissioner of Income Tax (Appeals)-24, Mumbai erred in confirming the action of the Income Tax Officer, Ward-13(1)(2), Mumbai in rejecting the books of accounts and estimating gross profit of the appellant. 1.2 While doing so, the AO erred in-(i)basing his action only on surmises, suspicion and conjectures (ii)taking into account irrelevant and extraneous considerations; and (iii) ignoring relevant material and considerations as submitted by the Appellan....
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.... of accounts were duly audited u/s 44AB. The closing stock was valued at lower of cost price or market price. The quantitative details of closing stock would reveal that the assessee had closing stock of 304 pieces of frames / sunglasses and 100500 pieces of lenses pairs besides 9078 pieces of cases. There was no fresh purchase of lenses and cases during the year. The opening stock of frames was 5859 pieces, cases 12829 pieces and lenses 151784 pairs. The assessee reflected Gross Profit Rate of 6.42% whereas Net Profit Rate was 7.56%. 3.3 The assessee and its associated concern namely M/s Sunrise Optics was subjected to survey action u/s 133A on 17/01/2002 wherein combined closing stock was valued at Rs. 42.43 Lacs. The combined cash of Rs....
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....ee as to why the market value be not adopted to value the closing stock. The assessee defended by submitting that rough lenses were imported in FY 1997-98 in two shipments. The cost of 141945 pairs of imported lenses was Rs. 17/- per pair. After import, only 3840 pair could be sold since the color of lenses went out of fashion. Since assessee held large stock of rough lenses, it reduced the prices and was able to sell 51734 more pairs during the year. The remaining 100500 pairs lying in stock were valued at Rs. 5/- per pair, being approx. market value likely to be fetched. There was no purchase of fresh lenses during the year. The aforesaid facts led to decrease in overall Gross Profits to 6.42%. However, rejecting the same, Ld. AO added t....
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....ey). The GP rate of 42.36% as shown by assessee in provisional trading account on the date of survey was applied to post-survey period sales. In other words, the books were rejected u/s 145 and GP rate of 42.36% was applied for whole of the year which was further increased by amount of TDS debited in Profit & Loss Account. Finally, the income was determined at Rs. 27.87 Lacs in an assessment framed u/s 143(3) r.w.s. 263 on 26/12/2006. This order was rectified u/s 154 on 26/05/2008 to rectify the figures of profits shown in the provisional trading account. The said rectification re-determined the total income at Rs. 31.84 Lacs. Upon further appeal, Ld. CIT(A) dismissed the appeal vide order dated 06/08/2007 by observing that since Ld. CIT h....
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....ught to the notice of Ld. CIT(A) by the assessee during set-aside appellate proceedings pursuant to the directions of Tribunal in ITA No. 6770/Mum/2007 order dated 30/03/2009 in the matter of assessment framed u/s 143(3) r.w.s. 263 as elaborated in preceding para 3.7. However, Ld. CIT(A) observed that by withdrawing the appeal challenging jurisdiction u/s 263 before Tribunal, the assessee accepted the directions given by Ld. CIT-13 in order passed u/s 263 on 27/03/2006 and therefore, the plea that the valuation of closing stock was to be done as per the order of Tribunal dated 26/06/2008 could not be accepted. The other pleas raised by the assessee were also dismissed and the action of Ld. AO in re-determining the income was upheld. Aggriev....
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....6191/Mum/2005 order dated 26/06/2008 wherein the addition of Rs. 12 Lacs was deleted. In other words, the matter of valuation of closing stock of Lenses has already attained finality. 5. Proceeding further, the assessee was maintaining proper books and furnished the requisite details, vouchers, bills, purchase and sales register as called for by Ld. AO during the course of assessment proceedings. However, no specific defects have been pointed out by Ld. AO in the documents furnished by the assessee before rejecting the books of accounts. Rather the assessee was successful in explaining that fall in Gross profit was mainly on account of old stock of lenses for which there was no fresh purchases during the year. There was only disposal of th....