TaxTMI 
TaxTMI 
2016 (5) TMI 1579
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....er. During the course of assessment proceedings, the Assessing Officer rejected the books of account under section 145(3) of the Act. The detailed reasoning for rejecting the books of account are contained in the assessment order. Detailed reply on the objections raised by the Assessing Officer were filed by the assessee during the course of assessment proceedings. However, the Assessing Officer did not accept the same, mainly because item-wise inventory of opening and closing stock was not maintained. The Assessing Officer contended that under said circumstances, FIFO method is to be adopted in place of average rate adopted by the assessee. After rejecting the books of account, the Assessing Officer made an addition of Rs. 12,35,287/- bein....
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....ervaluation of closing stock of gold and diamond jewellery and Rs. 3,37,2697- for low G.P. for undervaluation of closing stock of stones studded in diamond jewellery, ignoring the fact that no quantitative and qualitative details of opening stock as well as closing stock was maintained or produced by the assessee. 2. In the facts and circumstances of the case, Ld. CIT(A) has erred in not sustaining the action of the AO regarding rejection of books of account u/s 145(3) of the Income Tax Act, 1961, ignoring the fact that the value of opening and closing stock is not verifiable in the absence of item-wise breakup of opening and closing stock and the assessee had also failed to maintain the item-wise inventory of goods and most of the....
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.... books of account and made the addition. 6. The learned counsel for the assessee placed before us a copy of the order of the I.T.A.T., Chandigarh Bench in the case of Jagdish Chand (supra) stating that the facts of the present case are identical to the facts of that case. Therefore, the learned CIT (Appeals) was right in deleting the addition. After perusing the order of the learned CIT (Appeals), we see that relevant findings are recorded at pages 4.5 and 4.6 of his order, which read as under : "4.5 I have considered the submissions. In the case of ACIT vs. Jagdish Chand 90 TTJ (Chd) 943, the appellant was jeweller. The Id. CIT(A) held that the valuation worked out on the basis of average of opening stock and purchases....
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....reby confirmed. " In this connection, reliance may be made on the decision of ITAT Ahmedabad in the case of Income Tax Officer vs Chokshi Hirachand & Bros. (37 TTJ, 415) wherein it has been held that "when the valuation of closing stock according to the accounting system consistently followed was accepted by the revenue in earlier as well as subsequent assessment year, ITO was not justified in making additions by adopting a different method for assessment year in question." Similar view is taken as in the other cases e.g. in the case of Shantilal Nagardas & Co. (ITA No.3362/Ahd/2009) I.T.A.T. B-Bench Ahmadabad. 4.6 Therefore, in this case firstly, it is contended that same method of accounting is being consistentl....
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....arket and customer preference in the type of business of the appellant. Therefore in view of nature of business and trading of items as per customers preference does not leave any possibility of FIFO to be applied in the manner suggested by the A.O Hence, the very presumption of the A.O is not in terms of business reality of appellant's trade. Therefore, relying on the facts of the case, consistency of method of valuations and judicial decision the rejection of Books of account and the valuation of jewellery by the A.O. is held as not correct and the addition made by the AO is unsustainable in law and on facts. Therefore, ground no.1 to 4 and is allowed 5. Ground no. 5 and 6(ii) are consequential in nature and A.O. is ....