2016 (5) TMI 1579

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....gs, 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/- being the difference in valuation of closing stoc....

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....ry 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 sale bills were issued without names & addresses of the buyer....

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.... 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 was consistently followed by the appellant over a number of years. He, therefore, deleted the ad....

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.... 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 consistently followed. Secondly, the reason for variance of net profit vis a vis the case of M/s Madan Lal is duly explained by....