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TMI Blog2019 (10) TMI 663X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 to 4 are partly allowed. Whether if the closing stock is valued higher than shown by the assessee then Ld. CIT (A) ought to have given direction to the AO to adopt opening stock of subsequent year at the same figure as valued as on 31.03.2010 by the AO? - HELD THAT:- Since the closing stock is opening stock for next year. Therefore, as a corollary to increase in closing stock would lead to increase in opening stock of next year, therefore, the AO would take opening stock as on 1st April of next financial year as worked out on the basis of average rate as per our observation given herein above. Accordingly, this ground is allowed. Disallowance of salary payment in respect of person specified under section 40A(2)(b) - HELD THAT:- The Hon ble Gujarat High Court in the case GUJARAT GAS FINANCIAL SERVICES LIMITED. [ 2015 (7) TMI 743 - GUJARAT HIGH COURT] after considering the CBDT Circular 06.07.1968 held that where the payer and recipient are assessed at maximum marginal rate, then the payment may be treated as bonafide, hence, no disallowance under section 40A(2)(b) of the Act be made. In the light of above facts and circumstances, we are of the considered opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osing stock as opening stock for subsequent assessment year, which has been accepted by the Department. However, the AO has was of the view that the assessee has not adhered the policy of valuation of closing stock as declared in column 12(a) of audit report filed along with return of income, as the stock is neither valued at market value nor cost value. The AO ascertained market value as on 31.03.2010 from APMC, Kadi that were at ₹ 21.60 per kg. Whereas rate as per NCDEX were at ₹ 22.80 per kg., whereas the assessee has valued closing stock @ 9.49 per kg. With regard to cost, the AO noted that the rainy season has ended by September 2009, whereas last recorded sale bill was issued by the assessee @ 19.50 per kg. on 15.12.2009. Further, the assessee has purchased guar seeds @ 22.11 per kg. Therefore, the theory of goods become wet and lost quality is totally incorrect. Further, guar seeds were sold in April 2011 @19.53 per kg. In the light of these facts, the AO adopted cost price @19.15 per kg. presuming that goods purchased on 30.07.2009 @ 22.11 per kg. have been sold out and goods out of opening stock were remained in closing stock. In view of these facts and circums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mann.com 324 (Chandigarh-Trib) and Alfa Laval India Ltd. v. DCIT [2003] 133 Taxman 740 (Bombay)/ 266 ITR 418 (Bombay) in support of his claim. 6. Au contraire, the ld. Sr. D.R. supported the order of the lower authorities. The ld. Sr. D.R. submitted that the AO has applied LIFO method of valuation and has arrived at correct finding. The assessee has not been able to substantiate that goods were become wet or lower quality as same goods were sold in April next year on higher rate. 7. We have heard the rival submissions and perused the relevant material on record. We find that no correspondence has been adduced in support of water seeping or any claim of insurance to support that goods were deteriorated. However, it is also facts that goods were lying in godown from A.Y. 2005-06 to A.Y. 2009-10 as same quantity of goods were shown in balance sheet as on 31.03.2007. The AO adopted cost price @19.15 per kg. presuming that goods purchased on 30.07.2009 @ 22.11 per kg. have been sold out and goods out of opening stock were remained in closing stock. However, it may be noted that average price yielded from sale of goods is 17.65 per kg. because due to mixtu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lpaben Kiranbhai Patel, and Smt. Darshnaben Alpeshbhai Patel (wives of partners of the assessee firm). The AO examined and observed that the assessee has failed to adduce any evidence of the performance of work done by them. Accordingly, concluded that payments made at ₹ 11,60,000 to above two women is excessive. However, considering the increase in turnover by 62% from last year, these women might have been rendered some help to the assessee firm in respect of business activity. In view of this matter, the AO treated payment of ₹ 10,000 per month as reasonable to above person and accordingly, considered payment at ₹ 2,40,000 as reasonable and disallowed balance amount of ₹ 9,20,000 [ 11,60,000- 2,40,000] under the provisions of section 40A(2)(b) of the Act. 10. Being dissatisfied, the assessee preferred an appeal before the CIT (A). However, without any success. 11. Being, dissatisfied the assessee has filed this appeal before the Tribunal. The learned counsel for the assessee submitted that the Assessing Officer has failed to appreciate that the assessee has furnished detail of qualification and nature of service rendered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the person specified under section 40A (2) (b) of the Act are assessed at maximum marginal rate. Therefore, the issue is covered by the decision of Tribunal in the case of H.C. Sons v. ACIT Circle -12 Ahmedabad [I.T.A. No. 2713/Ahd/2013/A.Y. 2009-10 dated 25.01.2017] wherein following the ratio laid down by the Hon ble Gujarat High Court in the case of PWS Engineers Limited v. DCIT [Tax Appeal No. 209 of 2015 dated 06.06.2016] wherein their Lordship have inter-alia held as long as the amount paid by the assessee to specific persons are taxed in the hands of specific persons at the same rate , disallowance under section 40A(2)(b) will be meaningless inasmuch as permitting the Revenue to tax the same income again at the same rate in the hand of principal payer would amount to double taxation . Similarly the Hon ble Gujarat High Court in the case of Pr. CIT -2 v. Gujarat Financial Services Ltd. [Tax Appeal No. 428 431 of 2015 dated 07.07.2015] after considering the CBDT Circular 06.07.1968 held that where the payer and recipient are assessed at maximum marginal rate, then the payment may be treated as bonafide, hence, no disallowance under section 40A(2)(b) of the Act be made. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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