9911796707
TMI Blog2003 (6) TMI 441X X X X Extracts X X X X X X X X Extracts X X X X ..... But if average rate of purchases of this year is applied even to above stock, then some addition automatically follows in the income of the assessee. It is not permissible and is contrary to the decision of Hon ble Supreme Court in the case of Chainrup Sampatram v. CIT [ 1953 (10) TMI 2 - SUPREME COURT] . The average cost of opening and purchases is also an accepted method of valuation at cost approved by the accounting standards issued by the Institute of Chartered Accountants. In the present case, it is further not contended by the revenue that similar method of accounting was following by the assessee in earlier years. For all the above reasons, we are of the view that the method of valuation adopted by the assessee was correct and addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 The average purchase rate in the above account works out to Rs. 2,350, Rs. 3,529, Rs. 5,834 and Rs. 641. Applying these rates to the closing stock the value and difference works out as under : Particulars Purchase Rate of Diff. closing stock Amount Ornaments Jarau 2350 2335 15 9566 Ornaments Plain 3529 3400 129 195240 Silver Utensils 5884 5700 184 16562 Diamonds 641 602 39 5043 Nagina 250 1.03 248.97 41946 268357" 3. The assessee impugned above addition in appeal before the learned Commissioner of Income-tax (Appeals), who, after considering submission of learned representative of the assessee deleted the addition with the following observations : "2. It was stated that the appellant has been following t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 481, it was contended that it is a misconception to think that any profit arises out of the valuation of the closing stock. It was further stated that valuation of unsold stock at the close of an accounting period is necessary part of the process of determining the trading results of that period and can in no sense be regarded as the source of such profit. Reliance was also placed on the case of CIT v. Shah Doshi & Co. [1982] 133 ITR 23 (Guj.). The learned Assessing Officer relied on his order. 3. On considering the facts of the case, I am inclined to accept the plea of the learned counsel. Cost worked out on the average of the value of opening stock and purchases is a method much in vogue in trading circles and on the facts of this case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vailable by the learned counsel for the assessee in the paper book. The main item in the closing stock is that of "plain ornaments of gold". In the above item, the position is as under : Opening stock10031gms. Purchases12951gms. Sale7847gms. Closing stock15,135gms. 6.1 It is clear from above that the assessee could not sell even the entire stock of gold ornaments lying with the assessee in the opening stock. A part of it was carried to the closing stock of the year under consideration. There is no justification for applying purchase rate to above stock, as the assessee could not be said to have earned any profit from the above carry forward stock. But if average rate of purchases of this year is applied even to above stock, then some a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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