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TMI Blog2016 (2) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... tiated and the bonafide of the case is thus not proved. Hence, the penalty levied on enhanced value of closing stock to extent of ₹ 1,61,400/- is confirmed.- Decided against assessee Regarding valuation of old marble slabs and old tiles at 25% of the average rate instead of 50% of the average cost - Held that:- it is clear that the submission of the assessee regarding the method of valuation s well as estimation of 50% of the closing stock of inferior quality has been duly accepted and confirmed by the Coordinate Bench. As far as matter of valuing the stock of inferior quality is concerned the assessee has valued the stock at 2% of the average cost confirm4d by the Coordinate Bench. Hence it would be relevant to note that the Coordinate Bench has accepted the submission and explanation of the assessee that the said inferior stock has been sold during the subsequent financial year at a lower price which is evident from sale bills of the subsequent period. But the opinion the Coordinate Bench, even though the said sale value is supported by the sale bills of the subsequent period but the same appears to be a lower side. Based on that, the coordinate Bench confirmed the valua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50% of average rate instead of 25% of average arte taken by assessee ₹ 1.13,434/- 3. Valuation of old tile at 50% of average rate instead of 25% of average rate taken by assessee. Rs.2,39,865/- 2.3 In penalty proceedings, AO observed that assessee has undervalued the closing stock top deflate its profits and evade tax and to this extent he has suppressed its income. He therefore, imposed penalty of ₹ 1,73,437/- u/s 271(1)(c) of the Act computed at 100% of the sustained additions of ₹ 5,15,259/-. 2.4 Being aggrieved the assessee carried the matter before he ld. CIT(A) who has confirmed the levy of penalty. The relevant findings is at para 5 of her order which reads as under: After going through rival submissions it is seen that the closing stock valuation declared by the appellant was found by the highest fact finding body to be undervalued by ₹ 5,15,259/- and it is not a case of simple estimation, the appellant furnished inaccurate particulars consciously, as valuing the stock at 25% of the weighted average rate was not anything accidental but conscious/deliberat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income should be drawn on account of undervaluation of closing stock. Further in support of its contention, the ld. AR has placed reliance is placed on the following judgements and drawn specific attention to decision of Hon ble Himachal Pradesh High Court: 1. CIT vs. H.P. State a Forest Corpoation Ltd. 340 ITR 204 (HP) (HC) 2. DCIT vs. Kalpaka Bazar 46 ITD 221 (Coc.)( Trib.) 3. Durga Traders vs. ITO 90 TTJ 767 (Chd.)(Trib.) 4. Varun Enterprises vs. ACIT 47 TTJ 461 (Del.)(Trib.) 5. Godhwani Brothers vs. ACIT 48 TTJ 403 (Del.)(Trib.) 2.6 The ld. DR relied on the order of the lower authorities. 2.7 We have heard the rival contentions and perused the material available on record. Firstly regarding calculation mistake in valuation of marble slabs, it is noted that average rate was taken at ₹ 488 q.mtr. instead of ₹ 682/- per sq. The assessee has submitted details of working of the valuation showing the quantity and value part of the audited financial statement which has also been reproduced at para 3 of page 2 of the assessment order. The assessee has submitted that the value of ₹ 682/- sq.mtr is computed by the assessee himself and is appear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee. The assessee thus justified the valuation of closing stock made by it and prayed for deletion of the addition confirmed by CIT(A). 2.9 The Coordinate Bench, after considering the submission of the assessee has given its following findings which are contained at para 7 of its order which reads as under: Having considered the facts of the case and the arguments advances by both the parties, we agree with the contention of the ld. AR that FIFO method of valuation can be followed when items purchased /manufactured are identical to the items in the stock. Since this is not possible in this time of business, the only method of valuation is to take the average rate of the goods manufactured to value the closing tock. Secondly choice of method of valuation is of the assessee which is to be following consistently and since it is the first year of the company and the method of valuation have been disclosed in the notes to accounts, there is no justification to disturb the method of valuation followed by the assessee. The stock taken over from Singhal Granites is therefore rightly considered by the assessee in working out the average rate of the stock . It is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts which have been duly disclosed. It is therefore not a matter which calls for levy of penalty under the provisions of section 271(1)(c) of the Act. 2.11 Further during the course of hearing the ld. AR has given a statement that the assessee has not take any advantage of said valuation adopted by the ld. AO in the subsequent period while valuing the opening stock. 2.12 Further the ld. AR has brought to the notice of the Bench decision of Hon ble Himachal Pradesh High Court in the case of H.P. State Forest Corporation (340 ITR 204) regarding non-levy of penalty in respect of disputed valuation of closing stock which squarely applies in the instant case. The relevant finding of the Hon ble High Court contained at para 21 22 of its order which reads as under: We are of the considered view that the latest judgement of the apex court in Reliance Petro Products case (supra) squarely covers the present case also. The Apex Court in this judgement has clearly held that the word inaccurate as used in the Act would mean something which is not accurate, not exact or not correct. Something which is untrue is inaccurate. The same facts can be given two interpretations. If the int ..... X X X X Extracts X X X X X X X X Extracts X X X X
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