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TMI Blog2013 (8) TMI 666X X X X Extracts X X X X X X X X Extracts X X X X ..... he observation of ITAT. – No infirmity in the order of CIT(A) – Decided against the Revenue. - I.T.A. No.2223 & 3794/Del/2011 & 2005 - - - Dated:- 12-7-2013 - Shri R. P. Tolani And Shri T. S. Kapoor,JJ. For the Appellant : Shri Sameer Sharma, SR DR , Shri Bhim Singh, Sr. DR For the Respondent : Shri Anil Sharma, Advocate ORDER Per TS Kapoor, AM:- These are two appeals filed by the revenue against the order of Ld CIT(A) dated 28.2.2011 and dated 12.8.2005 respectively. These appeals were heard together and therefore for the sake of convenience a common order is being passed for both the years. In the year 1996- 97 the revenue has taken a sole ground against Ld CIT(A)'s order by which he deleted the addition of Rs.10,11,4771/- on account of under valuation of stock whereas in assessment year 2001-02, the revenue has taken six effective grounds which are as under:- 1. The Ld CIT(A) erred in law and facts in deleting addition of Rs.10,00,000/- made in the trading account by the Assessing Officer disregarding various defects pointed out by the Assessing Officer. 2. The Ld CIT(A) erred in law and facts in deleting addition of Rs.8,19,760/- on account of special i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that many of the items which were shown in the stock valuation as on 31.3.1996 pertaining to the purchase period from April, 1993 to September, 1993 were not verifiable from total closing stock as on 31.3.1995. However, the age-wise detail of closing stock as on 31.3.1996 as directed by the ITAT was not furnished to the Assessing Officer and therefore the Assessing Officer again made the addition on the basis of GP ratio and arrived at valuation of stock and made addition of difference between stock declared by the assessee and as calculated by him in the original assessment proceedings. On appeal to the Ld CIT(A), he deleted the entire addition against which revenue again went into appeal before Tribunal and Tribunal set aside the appeal to Ld CIT(A) for re- adjudication vide order dated 24.4.2009. The Ld CIT(A) on the basis of submissions and on the basis of Tribunal's order restricted the addition to Rs.15,42,378/- by holding as under:- "I further find that the appellant is showing the closing stock at cost price of Rs.1,29,28,299.22. The Assessing Officer has revalued the stock on the basis of estimated gross profit. While doing so, the Assessing Officer had not pointed out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e quantitative stock value, I find that the Assessing Officer was not justified in calculating the same by applying estiumate gross profit. Hence the stock valuation on the basis of GP rate is directed to be deleted. As a result of the discussion above, the stock valuationis to be taken at cost price i.e. aty Rs.12,928,299/- against the valuation at Rs.11,385,920/-. Accordingly the addition of Rs.15,42,378/- is upheld." 3. Aggrieved the revenue is in appeal before us. 4. At the outset, the Ld DR submitted that despite computerized system of accounting maintained by the assessee in respect of its stock, the assessee did not produce quantitative details and also did not produce age-wise details of stock as directed by the ITAT and ld CIT(A) in disregard of directions of ITAT reduced the addition and in view of this it was argued that Ld CIT(A)'s order be set aside and that of Assessing Officer be upheld. 5. The Ld AR, on the other hand, submitted that in the same order, the Hon'ble ITAT had made a finding of fact that the valuation of stock cannot exceed Rs.1,29,28,299/- and Ld CIT(A) has taken this amount of closing stock for arriving at the amount of addition upheld by him. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er while making the first addition of Rs.10 lakhs has held that in the absence of opening and closing stock and in view of the fact that such purchases were made from sister concern and quantitative records were not maintained, therefore, made the addition of Rs.10 lakhs. 10. The Ld CIT(A) deleted the addition by relying upon the Tribunal's order in the case of assessee itself wherein the Ld CIT(A)'s order deleting the addition under similar circumstances was upheld. The Ld CIT(A) also held that GP rate was better than the earlier year and system of purchase of goods from sister concern was prevalent since inception and all accounts of the assessee were computerized and all purchases were given a unique code. Thus opening and closing stock was verifiable. Before us it was argued that in assessment year 1996-97 to 2000-01 the Hon'ble Tribunal had restored the matter to the Assessing Officer and after setting aside the Ld Assessing Officer had accepted the results declared by the assessee and since facts remain same, the addition was rightly deleted by the Ld CIT(A). 11. The Ld DR, on the other hand, relied upon the order of Assessing Officer. 12. We have heard the rival partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argued that no rent was paid for premises and franchise charges included element of rent also and similar expenses were allowed in earlier years and addition made in assessment year 1998-99 was deleted by ld CIT(A) and Department did not file any further appeal. 18. The Ld DR relied upon the order of Assessing Officer and further argued that there was no clause in the agreement for payment of franchise charges and therefore it was rightly disallowed by Assessing Officer. 19. We have heard the rival submissions of both the parties and have gone through the material available on record. We find that similar expenses were being allowed to the assessee and such payment in the form of franchise charges were being paid in lieu of rent of premises and staff provided by the payee. The Assessing Officer had made the addition on the basis of clause (2) of the agreement dated 1.4.1998 that since the amount for trade name was already paid and no further payment was required to be made whereas in our opinion, the two clauses i.e. clause 2 clause 10 are separate clauses and deal with different payments. Clause (2) deals with trade name license whereas clause (10) relates to royalty for sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g that there was no need for making any alteration, dry-cleaning etc. as goods should have been returned from whom it was purchased specifically in view of the fact that goods were purchased from sister concern. The Ld CIT(A) deleted the addition by holding that expenditure incurred was genuine and the same was incurred on numerous occasions in the regular conduct of business. Before us it was argued that assessee's nature of business necessitated alteration in various garments as per specific sizes of persons who purchased them. It was further contended that entire expenditure was supported by payments and receipts. It was further argued that some garments required cleaning with the passage of time, therefore expenditure was necessary business expenditure. 25. The Ld DR relied upon the order of Assessing Officer. 26. We have heard the rival submissions of both the parties and have gone through the material available on record. We find that in this type of business the necessary alteration and adjustment as per particular requirement of person purchasing ready made garments are needed. Such expenditure is inherent in such type of business and moreover the expenditure was suppor ..... 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