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TMI Blog2012 (11) TMI 625X X X X Extracts X X X X X X X X Extracts X X X X ..... in books. In favour of assessee Valuation of closing stock – FIFO or weighted average method – Held that:- Since the AO has adopted FIFO method whereas the claim before the ld. CIT(A) was that stock has been valued at average rate when it is not clear whether weighted average was taken or not and therefore, we set aside the order of ld. CIT(A) and remit the matter back to the file of AO with a direction to value the closing stock on weighted average after verification of the same. Remand back to AO Disallowance u/s 40A(3) – Expense incurred in cash more than Rs. 20,000/- - AO argued that out of surrendered income of Rs. 4.00 lakhs, a sum of Rs. 3,80,000/- was shown as gold purchase out of books and Rs.20,000/ - as silver purchased out of books - AO was of the view that this amount must have been spent in cash exceeding Rs . 20,000 - Held that:- The assessee had surrendered a sum of Rs. 3,80,000/ - which was shown as purchases of gold outside the books and this amount was shown as purchases because of the surrender. There is no evidence before the Revenue that this amount was spent in payment of cash exceeding Rs. 20,000/-. Therefore, there is no justification in the addition. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brining it within preview of section 40A(3) . The additions have been made just for addition sake and without any basic, the order of the Assessing Officer is void ab-initio as the assessment has been completed on the appellant who is dad and not on his legal heir despite having prior knowledge about this fact. It is therefore, prayed that eh additions made may kindly be deleted or such other relief be granted as is deemed fit. 3. Ground No. 1 After hearing both the parties we find that survey was conducted in the premises of the assessee in which certain documents were found and ultimately the assessee surrendered a sum of Rs.4.00 lakhs as gross profit outside the books. During assessment proceedings the Assessing Officer noticed that comparative study of accounts of the assessee for Financial Year 2005-06 and Financial Year 2006- 07 reveal that labour charges shown by the assessee has gone down. Labour charges during Financial Year 2006-07 relating to Assessment Year 2007-08 on sale of gold of Rs. 45,28,132/ - had been shown at Rs. 2,59,625/ - which comes to 5.73% of the gold sale whereas in the earlier year on the gold sale of Rs. 22,13,862/ - , labour charges were sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 8. Ground No. 2 After hearing both the parties we find that during assessment proceedings the Assessing Officer observed that the assessee had surrendered a sum of Rs. 4.00 lakhs during survey out of which Rs. 3,80,000/ - was on gold account . However , the perusal of gold account shows that a sum of Rs. 3,80,000/ - has been taken in account by adopting the same as purchase of gold but the same has not been added to the closing stock and accordingly a sum of Rs. 3,80,000/- was added to the income of the assessee. 9. On appeal it was submitted before the ld. CIT(A) that out of the surrendered amount of Rs. 4.00 lakhs Rs. 3,80,000/- was on account of gold sales outside the book s. It was submitted that sales have already been incorporated in the books, therefore, by again adding a sum of Rs. 3,80,000/ - double addition has been made. The ld. CIT(A) agreed with the submissions and deleted the addition. 10. Before us , the ld. DR for the revenue relied on the order of the Assessing Officer. On the other hand, the ld. counsel of the assessee strongly supported the impugned order. 11. After hearing both the parties we find that the ld. CIT(A) has decided this issue vide para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om local parties, therefore, the Assessing Officer was of the view that the assessee must be selling goods immediately after purchase because only local purchases are being made therefore, valuation of closing stock by FIFO method should have been adopted. Accordingly closing stock was valued at Rs. 795/ - per gm. 14. Before the ld. CIT(A) , it was submitted that the assessee had valued closing stock at Rs. 700 per gm which was average rate. The opening stock was valued at Rs. 520 per gm and the assessee had purchased 2243.02 gms at Rs. 795 per gm and therefore, closing stock was valued at this rate. Since the rate of gold fluctuates on daily basis, therefore, valuation on average rate was correct. 15. The ld. CIT(A) found force in these submissions and deleted the addition. 16. Before us, the ld. DR for the revenue submitted that stock can be valued at cost of market value whichever is lower and therefore, the asses see was bound to value the stock on this method. 17. On the other hand, the ld. counsel of the assessee submitted that the assessee has already adopted average rate which was equivalent to the purchase rate and therefore, valuation was correct. 18. After he ..... X X X X Extracts X X X X X X X X Extracts X X X X
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