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TMI Blog2013 (9) TMI 442X X X X Extracts X X X X X X X X Extracts X X X X ..... to be revalued on the same basis as adopted for closing stock." 2. The revenue has preferred the appeal in ITA No.1537/Ahd/2012 being aggrieved by the order of the learned CIT(A), Surat in appeal No. CAS-IV/386/10-11 dated 14-03-2012 for the assessment year 2003-04 passed u/s 250 read with section 154 of the Act on the following two surviving grounds, the other two grounds being general do not survive for adjudication:- "1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in directing the A. O. to allow deduction u/s. 80 HHC on the business profit of Rs.2,06,05,646/- assessed by the A. O. 2. On the facts and in the circumstances of the case and in Law, the CIT(A) has erred in allowing the appeal of the assessee filed against the rejection of application made u/s. 154 of the Act for rectifying the mistake of not having granted deduction u/s. 80 HHC of the Act, on the amount added to the business income." ITA No.1208/Ahd/2010 (Assessee's appeal for 2003-04) 3. Ground No.1:- "(4) In case the addition of Rs.1,06,09,194/- or any profit thereon comes to be upheld, the assessee ought to be allowed deduction under section 80 HHC in respect of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he closing stock valuation ought not to have been disturbed and in case it is upheld, the opening stock ought to be revalued on the same basis as adopted for closing stock." 6. The learned AR argued before us stating that when closing stock valuation is disturbed by following a scientific method acceptable to the revenue holding the valuation adopted by the assessee to be incorrect, in such eventuality, similar treatment should be extended for the valuation of the opening stock and the profits of the business should be accordingly re-computed. For the above said proposition, the learned AR cited number of decisions which are listed herein below for reference:- Sr. No. Citation/case laws Date of pronouncement 01 4 ITC 245 (SC) CIT Vs The Ahmedabad New Cotton Mills Co. Ltd. 04-11-1929 02 (1946) 14 ITR 110 (Mad) CIT Vs Shri Visweswardas Gokuldas 14-12-1944 03 (1991) 188 ITR 44 AT 48, 56 (SC) CIT Vs British Paints 13-12-1990 04 (1992) 107 CTR 34 (Cal) CIT Vs Bengal Jute Mills Co. Ltd. 05-02-1990 05 (1999) 60 TTJ 125 (Ahd) ACIT Vs Shree Krishna Salt Industries 04-09-1997 06 (2008) 14 DTR 206 (Mum) (T) Hawkins Cookers Ltd. Vs ITO 11-08-2008 07 (2008) 297 ITR 77 (D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with respect to addition of Rs.66,90,772/- is that the assessee engaged in the business of manufacturing, importing, exporting and processing of diamonds had declared the value of closing stock of polished diamonds at Rs.1,14,92,711/- for 942.98 carats of diamonds and Rs.1,51,131/- for 6396.58 carats of rough diamonds. The learned AO required the assessee to produce the stock register and manufacturing register for the diamonds and rough diamonds. It was revealed that the assessee did not maintaining quality wise and quantity wise details of polished diamonds which were manufactured or locally purchased. It was further observed that the closing stock value of polished diamonds was taken at an average actual cost. Various contentions were raised by the assessee to justify its stand. The learned AO rejected the claim of the assessee and worked out the value of polished diamonds at average cost of Rs.19282.90 per carat and made addition of Rs.66,90,772/-. This addition is confirmed by the learned CIT(A) and the Tribunal. It is apparent from the above fact that the assessee though engaged in a trade of high value precious stones, preferred not to maintain books of accounts accurately a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inent to mention here that this principle was not brought up before the Hon'ble Court while deciding the cases which were cited by the learned AR. The gist of the decisions which are more appropriate considering the facts and circumstances of the case before us, listed supra, are reproduced here in below for reference:- (a) Melmould Corporation Vs CIT, 202 ITR 789:- "Held, that the assessee could not be required to revalue the opening stock by excluding all overhead expenses when the assessee had been permitted to revise the method of valuing the closing stock for that year, as the assessee had decided to adopt this new method of valuation henceforth." (b) CIT Vs Dalmia Cement (Bharat) Ltd., 215 ITR 441(Del):- "Held, dismissing the application for reference, that the Tribunal had found that the change in the method of valuation of closing stock adopted by eh assessee was bona fide and the same method was followed by the assessee subsequently. On the basis of the aforesaid findings, the Tribunal came to the conclusion that a realistic method of valuation of closing stock of DBM dust in the present case would be to value the stock at nil. This was a finding of fact and no questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given case, the learned AO had rejected the valuation of closing stock of the assessee, and in a scientific method as far as possible based on the information furnished by the assessee, had worked out the value of closing stock and made additions thereon. The valuation of the opening stock is not in dispute because the valuation of the closing stock of the preceding year is accepted to be genuine by the assessee as well as by the revenue. Further, even if, there is any error, only at that point of time when such discrepancy which is not deliberate is unearthed, such error needs a correction because only at that point of time when such discrepancy is unearthed the resultant consequence of profit and loss crystallizes. Therefore, we dismiss this ground raised by the assessee. ITA No. No.1537/Ahd/2012 (Revenue's appeal for AY - 2003-04) 10. Ground No.1:- "1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in directing the A. O. to allow deduction u/s. 80 HHC on the business profit of Rs.2,06,05,646/- assessed by the A. O. 11. Since, we have decided ground No.1 of the assessee's appeal with respect to the same issue in favour of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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