2013 (7) TMI 1252

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....s of manufacturing and trading of jewellery through the proprietor concern, had declared sales of Rs. 15.97 crore, the opening stock of Rs. 2.54 crore and closing stock of Rs. 5.49 crore. The gross profit declared by the assessee was Rs. 1.79 crore. The AO asked the assessee to give the break up of all the items traded and their prices as shown in the opening stock, purchases, sales and closing stock. The AO noted from the details filed, that the assessee had valued the closing stock on the basis of average price of opening stock and purchase. The assessee explained that the method followed by the assessee was correct and should be accepted. AO however did not accept the explanation given. It was observed by him that the value of stones, go....

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....stock and purchase which had been consistently followed which was one of the recognized methods. The same method had been followed from assessment year 2006-07 to 2011-12. The assessee referred to the decision of Delhi bench of Tribunal in case of Ajanta Raj Proteings Ltd. Vs. DCIT (32 SOT 517) in which it has been held that once the assessee has chosen to adopt cost as the method of valuation and which had been regularly employed by the assessee, the assessee could not be permitted to change the method to some other basis. It was also submitted that the assessee had regularly followed the same method and had maintained quantitative details. The AO had not pointed out any defects in the books of accounts. Reference was also made to the judg....

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....ning period. The learned AR also submitted that the assessee was dealing in several items but the AO had changed the method only in respect of three items and the remaining was accepted. It was also submitted that the sale bill of ornaments only contained net rate and value and, therefore, details in respect of the purchases gone into manufacturing of jewellery was not available from the records. He referred to the sale bill dated 13.12.2007 and 15.2.2008 placed at pages 187 and 189 of the paper book to substantiate the claim. It was thus argued that average method which was accepted method was the most appropriate on the facts of the present case. He referred to the decision of Chandigarh Bench of Tribunal in case of ACIT Vs. Jagdish Chand....

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....hat Lifo method is required to be followed. He has therefore taken the entire opening stock as sold and the average cost has been computed only over the purchases. He has also rejected the accounting results and has proceeded to compute the profit in respect of opening stock and purchases separately which have resulted into substantial additions. In our view the approach adopted by the AO is not correct. The assessee has maintained proper books of accounts in which no defects have been pointed out by the AO either in the purchases or in the sales. The accounting results as per the profit/loss and trading account prepared by the assessee could not be rejected unless some defects are pointed out in the books of accounts. The AO has not accept....