2013 (9) TMI 1066 - AT - Income Tax

Addition on account of valuation of closing stock - rejection of books of account - CIT(A) deleted the addition - Held that - On the basis of the doctrine of consistency in relation to method of valuation of inventory as also the decision of the jurisdictional High Court in assessee s own case, she recorded findings in favour of the assessee. Having regard to the fact-situation of the case, decision of the Hon ble jurisdictional High Court, relied upon by the ld. CIT(A), and the relevance of consistency principle in the matter, we do not find any infirmity, in the findings of the CIT(A), and hence, the same are upheld. Addition to credit n capital account - Held that - The assessee has filed the confirmation of M/s Good Faith Cement Pvt. Ltd. at page 12 of the Paper Book alongwith the copy of the cheque issued by the said authority and the bank statement in which such cheque had been deposited. The explanation of the assessee was not accepted as the letter issued by the Assessing Officer under section 133 (6) of the Act was received back undelivered. In the totality of the facts and circumstances of the case and following the principle of natural justice, we deem it fit to restore this issue back to the file of Assessing Officer to redecide the same denovo after affording reasonable opportunity of hearing to the assessee. The assessee has to discharge the onus cast upon him and furnish the requisite information before the Assessing Officer.

Summary

Issues:
1. Reopening of assessment under section 147
2. Validity of adjustments for deductions under section 80HHC
3. Deletion of addition of closing stock valuation
4. Addition of Rs. 1,50,000 in the capital account

Reopening of Assessment under Section 147:
The revenue appealed against the CIT(Appeals) order quashing the assessment, arguing that the notice under section 148 was valid. The CIT(Appeals) held that there was no failure to disclose material facts. The tribunal consolidated the appeal with the cross objections. The revenue challenged the rejection of the assessment and adjustments for deductions under section 80HHC.

Deletion of Addition of Closing Stock Valuation:
The main issue was the rejection of the books of account by the Assessing Officer and the valuation of closing stock of gold ornaments. The Assessing Officer computed the value of closing stock using the average price method, while the assessee followed the LIFO method. The CIT(Appeals) deleted the addition, citing consistency with the method followed in previous years. The tribunal upheld the deletion based on the consistent method of valuation.

Addition of Rs. 1,50,000 in the Capital Account:
The Assessing Officer added Rs. 1,50,000 to the capital account due to a credit received, which the assessee explained as a cheque from a company. The Assessing Officer rejected the explanation, leading to the addition. The CIT(Appeals) upheld the addition. The tribunal found that the assessee provided evidence supporting the explanation. Due to the undelivered notice under section 133(6) and the principle of natural justice, the tribunal remanded the issue back to the Assessing Officer for reevaluation.

In conclusion, the tribunal dismissed the revenue's appeal regarding the closing stock valuation and allowed the assessee's cross objection for the addition in the capital account to be reevaluated. The judgment highlighted the importance of consistency in valuation methods and the need for proper opportunities for the assessee to present evidence.