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Issues Involved:
1. Addition of Rs. 18,492. 2. Addition of Rs. 1,92,087 towards suppression in the value of closing stock. Issue-Wise Detailed Analysis: 1. Addition of Rs. 18,492: The first ground of appeal concerning the addition of Rs. 18,492 was not pressed by the assessee and was hence dismissed. 2. Addition of Rs. 1,92,087 towards suppression in the value of closing stock: The primary contention revolved around the addition of Rs. 1,92,087 due to alleged suppression in the value of closing stock. Initially, the assessee did not include the closing stock of goods on consignment in the original return. Upon receiving a letter dated 10th Jan., 1989, the assessee acknowledged inadvertent omissions and filed a revised return, separating the cost of oil from the total manufacturing cost based on the price of oil purchased from others. The revised return aimed to correct the valuation of the stock of oil and cake. The Income Tax Officer (ITO) scrutinized the accounts and noted advances received for goods sent on consignment: Rs. 5,45,480 for groundnut oil and Rs. 10,17,882 for groundnut cake, totaling Rs. 15,63,362. The ITO considered these advances as the value of the closing stock with the consignees. Since the assessee admitted only Rs. 13,71,271 towards the value of such stocks, the ITO added Rs. 1,92,087 as suppression in the value of closing stock. On appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] upheld the ITO's addition, asserting that the value of the closing stock should not be less than the advances received. The assessee's counsel argued that in previous years, the stock of cake was valued on an ad hoc basis at Rs. 2 per kg, which was accepted. For the current year, a more scientific method was employed, where the purchase rate of oil was applied to the total quantity produced, and the remaining cost was attributed to the cake. The ITO, however, relied on the advances received from consignees as the true value of the closing stock, which the assessee contended was incorrect. The advances were merely to be adjusted against consignment sales and related expenses, and the consignees' accounts were personal accounts, not property accounts. The Senior Departmental Representative defended the ITO's stance, suggesting that prudent consignees would not advance amounts exceeding the cost of consignments. Upon reviewing the arguments and records, the tribunal set aside the CIT(A)'s order. It acknowledged that the assessee's method of valuing the stock was reasonable, given the lack of separate cost accounts for oil and cake. The tribunal noted that the ITO failed to demonstrate that the advances represented the cost or market value of the goods. The tribunal observed that advances were made on an ad hoc basis, not necessarily reflecting the cost of the goods consigned. Examples from the consignees' accounts showed varying advance amounts for similar consignments, further indicating the ad hoc nature of these advances. The tribunal concluded that valuing the stock based on advances was erroneous. It upheld the assessee's method of valuing the stock of cake at Rs. 2.47 per kg and oil at Rs. 21.20 per kg, but remanded the issue to the ITO for verification of the figures and computations. Conclusion: The appeal was partly allowed. The tribunal upheld the assessee's valuation method but required verification of the figures by the ITO.
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