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TMI Blog2016 (3) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... and dismiss these grounds of revenue’s appeal. - ITA No.6127/Del./2012, CO No.206/Del/2014 - - - Dated:- 2-2-2016 - SHRI J.S. REDDY, ACCOUNTANT MEMBER AND SHRI A.T. VARKEY, JUDICIAL MEMBER For The Assessee : Shri J.S. Pannu S.B. Mehta, Advocates For The Revenue : Shri Manoj K. Chopra, Senior DR ORDER PER A.T. VARKEY, JUDICIAL MEMBER : The appeal filed by the revenue and the cross objection filed by the assessee are directed against the order of the CIT (Appeals)-XXVII, New Delhi dated 18.09.2012 for the assessment year 2009-10. 2. The revenue has taken the following grounds of appeal which read as under :- 1. On the facts and in the circumstances of the case, the order of Ld. CIT(A) is bad in law and no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... closing stock in his P L account, which are against the observation/recalculation of closing stock at ₹ 1,63,14,265/- against declared value of closing stock by the assessee at ₹ 2,04,85,000/- and against the observation of the AO for applying net profit @ 6% against @ 5.35% shown by the assessee. 7. The AO observed that the assessee had shown net profit of ₹ 10,80,890/- on sale of ₹ 2,02,02,000/- giving a net profit rate of 5.35%. The AO applied the net profit rate of 6% and worked out the value of closing stock at ₹ 1,63,14,265/- as against declared value of closing stock by the assessee at ₹ 2,04,85,000/-. Therefore, the AO treated the difference of ₹ 41,70,735/- as inflated closing stock and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it margin of 6% as against 5.35% shown by the appellant. No reasons have been given by the A.O. for adopting the net profit rate of 6%. Further, while working out the value of closing stock the A.O. has taken into account only the construction expenses and all the other expenses have been ignored, whereas the appellant had filed a consolidated Trading and P L A/c i.e. on the credit side the appellant had included sales, interest income, renovation income and closing stock and on the debit side the appellant had included opening stock, construction expenses, other profit and loss expenses and the net profit. The value of the closing stock had been shown by the appellant at ₹ 2,04,85,000/- on the basis of this consolidated Trading P L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alculations adopted by the A.O. for arriving at the value of the closing stock are arbitrary and not based on any accounting principles. Moreover, the appellant has shown closing stock at ₹ 2,04,85,000/- whereas the AO worked out the same at ₹ 1,63,14,265/- i.e. the appellant had shown higher closing stock. The difference of the two figures cannot be treated as suppressed sales as the difference had already got accounted in the P L account. Even if there were some suppressed sales, then also net profit rate of 5.35% (taken at 6% by the AO) would have been applicable to them for working out the taxable profits and not 94% as applied by the AO (which according to the AO's own working is the cost of sales). Therefore, the addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perused the material. We find that the assessee had shown net profit rate of 5.35%. However, AO adopted net profit rate of 6%. No reason has been given by the AO to adopt this figure. And AO while working out the closing stock had ignored all other expenses debited by the assessee in P L account and only included the construction expenses. The AO erred in adopting net profit rate at 6% without valid reasons and exclusion of other expenses as pointed out to value the closing stock, makes the order of the AO erroneous and not sustainable. We concur with the finding and reason given by the ld. CIT (A) to delete the said addition of ₹ 39,20,490/-, so we uphold the order of the CIT (A) and dismiss these grounds of revenue s appeal. 12. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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