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TMI Blog2018 (3) TMI 895X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of total income and have accordingly paid tax on the same - Held that:- The second proviso to section 40(a)(ia) of the Act provides that in such cases no disallowance can be made u/s 40(a)(ia) of the Act. The courts have held that this proviso is retrospective in nature. Thus we set aside this issue to the file of the AO for verification and denovo adjudication of this issue of disallowance u/s 40(a)(ia) of the Act in accordance with law. - Decided in favour of assessee for statistical prposes. - ITA.No.267/Kol/2017 - - - Dated:- 16-3-2018 - Shri J.Sudhakar Reddy, AM And Shri S.S.Viswanethra Ravi, JM For The Appellant : Shri S..K.Tulsiyan, Advocate For The Respondent : Shri S. Dasgupta, Addl. CIT (DR) ORDER PER J.SUDHAKAR REDDY, AM: This is an appeal by the Assessee directed against the order of the Commissioner of Income Tax-(A)-7, Kolkata relating to A.Y.2013-14. 2. The assessee is a partnership firm engaged in the business of manufacturing and retail trading in gold ornaments. It filed its return of income for A.Y.2013-14 on 31.08.2013 declaring total income of ₹ 17,89,270/-. The AO completed the assessment u/s 143(3) of the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is a accepted and recognised method of valuation of stock. (b) there is no dispute that this method of valuation of stock is being followed by the assessee year after year and the revenue had been accepting the same. Hence the regular system of accounting being followed by the assessee cannot be disturbed unless there is a finding that there are defects in, the books of accounts or the stock register maintained by the assessee. There is no such finding. (c) there is no finding by the AO that, the stock registers containing purchase and sales details, maintained by the assessee, are not reliable. In fact the quantitative details maintained in the stock registers have been accepted by the AO and the addition has been made only by changing the method of valuation of closing stock and not due to any quantitative variations. (d) reliance is placed on the provision of section 145A of the Act wherein it is specifically mandated that inventories shall be valued in accordance with the method of accounting regularly employed by the assessee and that this section over rides Sec.145 of the Act. (e) for the proposition argued above reliance is placed on the following case laws :- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e major part of old stock and yet claimed value of old stock, on the presumption that old stock is still lying in the shop. 7. In reply the ld. Counsel for the assesse submitted that the principles of stock valuation are well settled and if the revenue choses to disturb the valuation of closing stock then the opening stock should also be re-valued with on the very same principles as those applied to the closing stock. 8. Heard the rival submissions. On careful consideration of the facts and circumstances of the case and perusal of the papers on record and the orders of the authorities below as well as case laws cited we hold as follows :- 8.1. The undisputed facts that emerge from the record is that the assessee has been following LAST IN FIRST OUT (LIFO) method of valuation of closing stock from the year of its inception. The arguments of the assessee before the revenue authorities is that, old gold ornaments which are to be in display have become out of fashion and hence are slow moving and that the customers are regularly in search of new designs and hence fresh inventories manufactured to the taste and directions of the customers are sold fast and not old inventories. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tuation,' (6) Under section 145 of the Act, in a case where accounts are correct and complete but the method employed is such that in the opinion of the Income-tax Officer, the income cannot be properly deduced there from, the computation shall be made in such manner and on such basis as the Income-tax Officer may determine:.... ( Emphasis supplied ) b) in the case of CIT vs. British Paints 188 ITR 44 (SC) it is held as follows :- ......... The question to be determined by the Assessing Officer in exercise of his power under section 145 is whether or not income can properly be deduced from the accounts maintained by the assessee, even if the accounts are correct and complete to the satisfaction of the Officer and the income has been computed in accordance with the method regularly employed by' the assessee...... c) in the case of CIT vs. J.P.Patel 263 ITR 421 (MP) it is held as follows :- that it had not been disputed that in valuing stock the assessee had adopted the last in first out method which is a recognised method. Once a recognised method has been taken recourse to and the value of closing stock had been computed on the basis of average, no q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osing stock of the assessee is valued. Thus, by not valuing the opening stock of the assessee by employing weighted average stock method, the revenue authorities, committed a mistake. Hence on this ground also the addition is bad in law. 8.9. Moreover, the AO committed the calculation mistake. The assessee brought this calculation mistake to the notice of the ld. CIT(A). The ld. CIT(A) has not acted on the same. The allegation of the ld. AO that the assessee has valued the closing stock at ₹ 1294.69 per gram is wrong. The assessee has valued the closing stock at ₹ 2491.96 per gram. The calculation is extracted below :- Quantitative details Valuation of Stock as on 31.03.2013 Average rate of production unit per gm. Rs.16,31,27,839.00/54615.210 gm = Rs.2986.85 per gm. Cost of production 54615.210 gm Purchase ornaments 22Ct. 259.480 gm Purchase Gold Bar 99.50 20.000 gm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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