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TMI Blog2017 (12) TMI 1692X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO in the books of account other than what is stated by the Auditor. To invoke provisions of section 145(3) of the Act it is necessary that accounts of the assessee suffers from latent, patent and glaring errors. In the present case, we do not find any such finding by the AO. Further, the assessee has given detailed reason for the down fall in the gross profit also. Further, the details of valuation of closing stock of the manufactured goods as per retail method were also filed before the lower authorities and no infirmity was found in the same. In view of this, we do not find any reason to sustain the orders passed by the lower authorities with respect to the invocation of provisions of section 145(3) of the Act and consequently, making the addition to the total income of assessee - Decided in favour of assessee. - ITA No. 2291 & 2292/Del/2015 - - - Dated:- 29-12-2017 - SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER For the Appellant : Dr. Rakesh Gupta, Adv For the Respondent : Shri Subhash Verma, Sr. DR ORDER PER PRASHANT MAHARISHI, A. M. 1. These are the appeals filed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passing the impugned order by recording incorrect facts and findings and without providing opportunity of cross examination and without confronting the entire adverse material used against the assessee and without providing adequate opportunity of hearing. 7. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest u/s 234A, 234B, 234C and 234D of the Income Tax Act, 1961. 3. The appellant/ assessee is a company engaged in the business of manufacturing and sale of processed food products. It filed is return of income on 29.09.2010 for ₹ 35713770/-. During the course of assessment proceedings, the ld Assessing Officer on the basis of report of the Statutory Auditor noted that auditor is unable to comment on the accuracy of the valuation of the inventories of finished goods. He further noted that net profit ratio for the year is 10.72% compared to 15.19%, hence, issued show cause notice to the assessee. The assessee submitted that company maintains excise records and note made by the ld Statutory Auditor is only with respect to the valuation. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to maintain product wise costing and certain overheads are required to be absorbed and therefore, assessee is using the retail method. He submitted that the above method is permitted by the accounting standard 2 on valuation of inventory. He further submitted that valuation of semi finished stock is also made on the basis of technical evaluation. He submitted that this method is adopted by the assessee for last several years and also in subsequent years and accepted by the revenue. He further referred to the provisions of section 145(3) of the Act to state that there is no error in the accounts of the assessee to render it in correctness and its incompleteness. He further submitted that this method of valuation is regularly followed by the assessee and further it complied with the accounting standard. In view of this he submitted that provision of section 145(3) of the Act does not apply. He further stated that even otherwise the valuation of finished goods becomes the opening stock of the next year and the opening stock of the year is also required to be adjusted hence, it become tax neutral. He submitted that the ld CIT(A) has brushed aside all these arguments of the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods. We were also not made available the computation of consumption which could have been arrived on the basis of bill of materials of the finished goods produced during the year. In absence of the above mentioned details/ records, we are unable to comment on the accuracy of the amount of consumption of raw material and packing materials as reported, as it s resultant impact on the profits for the year. vii. The company is valuing its inventory of semi finished goods on the basis of technical evaluation of their costs. However, we have not been made available the computation of the value of such semi finished goods. In the absence of such computation we are unable to comment on the appropriateness of the valuation method followed, compliance with AS-2 (Valuation of inventory) and accuracy of value of these semi finished goods (work in progress) the impact of which is not quantifiable and . 7. On perusal of the auditor s report, it is apparent that the Company s inventory are valued at lower of cost or net reliable value and includes all cost incurred in bringing the goods to their present location and conditions. There is no dispute about the valuation of raw material a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision of section 145(3) of the Act are incorrectly invoked by the ld Assessing Officer and confirmed by the ld CIT(A) because the valuation method is correct and therefore, it does not impact the correctness or completeness of the account of the assessee. In fact it makes the accounts of the assessee complete and correct. Furthermore, the ld Assessing Officer has applied the past year s gross profit ratio in that year also the valuation of the inventory was on similar basis therefore, if opinion of the AO is accepted then it cannot be said that accounts of previous year were correct and complete. The method of valuation of inventory followed by the assessee is year to year same. Furthermore, the assessee has maintained complete quantitative details also. No defects have been pointed out by the AO in the books of account other than what is stated by the Auditor. To invoke provisions of section 145(3) of the Act it is necessary that accounts of the assessee suffers from latent, patent and glaring errors. In the present case, we do not find any such finding by the ld AO. Further, the assessee has given detailed reason for the down fall in the gross profit also. Further, the detai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut prejudice to the above ground and having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not allowing the deduction u/s 80IC on the amount of addition made in the impugned assessment order. 6. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in rejecting the books of accounts u/s 145 and making the impugned addition and framing the impugned assessment in violation of principles of natural justice in as much as passing the impugned order by recording incorrect facts and findings and without providing opportunity of cross examination and without confronting the entire adverse material used against the assessee and without providing adequate opportunity of hearing. 7. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest u/s 234A, 234B, 234C and 234D of the Income Tax Act, 1961. 11. Parties submitted before us that issue in this appeal is identical to the issues in appeal of the assessee for Assessment Year 2010 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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