9911796707
|
Home
Issues Involved:
1. Addition of Rs. 8,07,547 representing the value of 3217.320 gms. of jewellery. 2. Addition of Rs. 1,30,215 on account of undervaluation of closing stock. Issue-wise Detailed Analysis: 1. Addition of Rs. 8,07,547 Representing the Value of 3217.320 gms. of Jewellery: The appeal challenges the addition of Rs. 8,07,547, representing the value of 3217.320 gms. of jewellery, made by the Income-tax Officer (ITO) and upheld by the Commissioner of Income-tax (Appeals) [CIT(A)]. The appellant, a partnership firm engaged in the jewellery business, was required under the Gold (Control) Act, 1968 (G.C. Act) to maintain specific registers (G.S. 11 and G.S. 12) for accounting gold transactions. The ITO interpreted that the entries in Register No. G.S. 11 should only include gold and jewellery owned by the dealer and not items received for repair or remodelling. Consequently, the ITO concluded that the jewellery recorded in G.S. 11 was solely owned by the firm and thus should be reflected in the closing stock. This led to the addition of 3217.320 gms. of gold jewellery to the closing stock, which was contested by the assessee. The assessee claimed that the jewellery belonged to four individuals and was received for polishing, repairs, or remodelling. Affidavits and supporting vouchers were provided to substantiate this claim. The ITO and CIT(A) rejected the assessee's claim, relying heavily on the statement of Shri Sukhdev Raj Jain, a partner in the firm, who confirmed the receipt of jewellery for remodelling and denied any sale of these items. The Tribunal found that the ITO's addition was based on a misinterpretation of the G.C. Act and G.C. Rules, which required dealers to enter all received jewellery, regardless of ownership. The Tribunal noted that the jewellery was accounted for in the personal assessments of the individuals who provided it, and no sale transactions were evident. Therefore, the Tribunal concluded that the addition of Rs. 8,07,547 was unjustified and deleted it. 2. Addition of Rs. 1,30,215 on Account of Undervaluation of Closing Stock: The second issue pertains to the addition of Rs. 1,30,215 for the alleged undervaluation of closing stock. The ITO inferred that the average purchase rate of Rs. 251 per gm. should apply to the closing stock, whereas the assessee valued it at lower rates based on historical cost. The Tribunal reviewed the pattern of stock valuation from previous years, noting that the assessee consistently valued the stock at cost, with rates varying based on the purchase year. The Tribunal referred to its own decisions in similar cases, emphasizing that a consistent method of accounting should not be discarded by the authorities. The Tribunal rejected the Revenue's reliance on an Allahabad Bench decision, which suggested that closing stock should be valued based on the assumption that it comprises the latest purchases. The Tribunal upheld the assessee's method of valuing old stock at historical cost, finding no infirmity in the approach. Conclusion: The Tribunal allowed the appeal, deleting both additions. The addition of Rs. 8,07,547 was found to be based on a misinterpretation of the G.C. Act, and the addition of Rs. 1,30,215 was rejected due to the consistent and reasonable method of stock valuation employed by the assessee.
|
