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TMI Blog2021 (8) TMI 646X X X X Extracts X X X X X X X X Extracts X X X X ..... h the Ld. CIT(A) rightly deleted the impugned addition made by the A.O. We do not see any valid ground to interfere with the findings given by the Ld. CIT(A). - Decided against revenue. - ITA NO. 454/Chd/2019 - - - Dated:- 12-8-2021 - Shri. N.K.Saini, VP And Shri , R.L. Negi, JM For the Assessee : Shri Ashok Khanna, Addl. CIT For the Revenue : Shri Tejmohan Singh, Advocate ORDER PER N.K. SAINI, VICE PRESIDENT This is an appeal by the Department against the order dt. 30/01/2019 of Ld. CIT(A)-2, Chandigarh. 2. Following grounds have been raised in this appeal: (i) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has not erred in law as well as facts in allowing the appeal of the assessee without appreciating the facts of the case ? (ii) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A)has not erred in accepting assessee's version that difference in stocks was attributable to rate difference whereas the assessee in his statement recorded during the course of survey on 11.11.2013 himself admitted that inventory of stock is not maintained as a result of which he offe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O. noticed that a survey under section 133A of the Income Tax Act, 1961 (hereinafter referred to as Act ) was carried out on 11/11/2013 at the business premises of the assessee. During the course of survey discrepancy was found in the valuation of stock and the assessee surrendered an amount of ₹ 3,41,00,000/- over and above the normal income on account of undervaluation of stock. The A.O. asked the assessee to furnish the trading account before and after the survey. In response the assessee submitted as under: Trading account upto 11.11.2013 Particulars Amount(Rs.) Particulars Amount(Rs.) Opening Stock 109370975 Sales 142792433 Op. stock packing material 25000 Purchases 139248537 Labour charges 2390010 Closing stock packing material 25000 Carta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales on day to day basis, which is recognized method of calculation of gross profit. There is no retraction from surrender during survey. As there is no accountancy methods of adopting method of valuation of stock on current price as such the recognized method of valuation of stock, of adopting average purchase and sale price on day to day bases has been adopted. Further as the assessee had no difference in stock and has adopted constantly being followed and recognized method of valuation of stock, your good self is requested to not to make any addition on this ground. 3.2 The Assessee also furnished stock register and the cash book. The A.O. observed that the stock register did not show as to how valuation of stock had been arrived at and that the valuation of diamond, gold and jewellery depends on its purity and quality. He also observed that stock register did not contain quality-wise, item-wise, day-wise record of stock, therefore, it was not possible to verify the purchases and sales on a particular date and to evaluate the correctness of the value of the closing stock as shown by the assessee in its books of account. The A.O. observed that the defects were found in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the course of survey, the departmental valuer applied the market price to arrive at the valuation and not the regularly applied method adopted by the assessee. The opening stock as taken by the valuation officer was calculated on the regularly applied method i.e average cost but while computing the stock as on 11.11.2013, market price was applied by the valuer. It is pertinent to mention here that the quantitative details of stock as found on the date of search are not in dispute. The same has been taken by the assessee to arrive at the stock valued on average cost method which is the regularly applied method. There was no difference in the quantity as appearing in the books and as per actual physical verification. No excess/short stock has been found during the course of survey. The stock found matched with that found recorded in the books of account. It is only a difference in method of valuation which has led to lesser valuation. It was found at the time of preparation of the final accounts by the qualified Chartered accountants that the working of the valuation of stock was on two different parameters which are against the accepted accounting standards issued by ICAI. The asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge cost method. Further as per AS1 of the accounting standards as issued by the ICAI, it is accepted as a fundamental accounting assumption that accounting policies are consistent from one period to another. The same finds place at Page 312 of the compilation annexed with this submission. Similarly, as per AS2 which deals with valuation of inventories, it is mentioned that inventories should be valued at lower of cost and net realizable value. This is what has been the method of valuation as finds mention in the audit report for all the years. As such, it is prayed that the regularly followed method of accounting is to be adopted for valuation of stock. It may not be out of place to mention here that even in case the method adopted by the revenue is considered, the closing stock so adopted by the revenue shall become the opening stock for the subsequent year which would reduce the profits of the subsequent year. Thus, the entire exercise would be revenue neutral which is nothing but tinkering with the regularly accepted method of accounting. 4.2 The Ld. CIT(A) after considering the submissions of the assessee deleted the addition made by the A.O. by observing i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here rebutted this contention of the assessee. It is also seen that the assessee has not disputed the quantity of stock found at the time of survey for the purpose of valuation. There cannot be two methods adopted for purpose of valuation. The opening stock and closing stock have to be valued applying the same method. In the instant case, it is seen that the assessee has been following the same method throughout for the purpose of valuation of stock. Reliance had also been placed by the assessee's counsel on the decision of M/s Talwarsons Jewellers in ITA Nos. 1313 tol317/Chd./2012 and Shri Kuldeep Chand Jain of the Hon'ble Jurisdictional High Court copies of which were placed at page nos.255-272 in the Paper Book. The P H High Court in its decision in case of Sh. Kuldeep Chand Jain in ITA No. 165 of 2014(O M) in case of Shri Kuldeep Chand Jain incorporated the finding of the ITAT, Chandigarh Bench in its decision in case of above said assessee for A.Y. 2007-08, wherein ITAT held as follows: We have heard the rival contentions and perused the record. The assesse is engaged in the business of sale and purchase of jewellary. The assessee, in order to value its closi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 154 dated30.06.2010 vide which the difference in stock stand reduced from ₹ 32,08,977/- to seen that during the A.Y. 2003-04,2005-06 and 2006-07 assessment for which was completed u/s 143(3), the method of Valuation of closing stock has been accepted by the AO including by the AO who has passed the assessment order for the year under appeal. Therefore, the AO cannot reject the method of valuation of closing stock which is consistently' followed by the appellant and has also been accepted by the AO in the past. I agree with the appellant that rule of consistently has to be followed and observed. Further, it is seen that the Hon'ble Punjab Haryana High Court in appellant's own case CTT vs. Sant Ram Mangat Ram(195CTR345)observed as under :- lt is an admitted position that from the inception of its business, the assessee had continuously adopted the same method of valuation of the closing stock and no objection was raised by the Department in any of the previousyears.5 Rather, the competent authority accepted the method adopted by the assessee and accordingly, made assessment. This being the position, we do not find any valid ground to accept the argument of Shri Bi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the AO which by her order o f rectification u/s 154 stands reduced to ₹ 19,45,073/- on account o f difference in valuation o f closing stock is deleted. This ground o f appeal is allowed. The relevant extract of the judgement of ITAT, Chandigarh in case of Talwarsons Jewellers in ITA No. 1313 to 1317/CHD/2012, in which the decision of CIT(A) was confirmed the ITAT, is reproduced below: 52 We have heard the rival submissions carefully. The CIT(A) has decided the issue vide para 5.1 which is as under However the issue is the manner of valuation of the excess stock, as the quantitative details of the gold and diamond jewellery are not in dispute. It is the case of the AO that the excess stock determined was based of trading a/c drawn up on basis of details furnished by the assessee and that the closing stock inventoried by the departmental valuer was in the presence of the assessee who had no objection to the appointment of the government approved Valuer for valuation purpose. On the other hand, the assessee has contended that he had only accepted the appointment of the government approved Valuer. It transpires that the trading result of gold w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the value comes to ₹ 1,37,51,760/-. Thus the difference which had been added by the Ld AO of ₹ 2,08,35,789/- is therefore found to be arising due to difference on account of valuation only as assessee has valued his stock at cost while the valuer has valued at the market rate at the time of search. This excess stock value thereof, of ₹ 1,37,51,760/- is found to be corresponding to amount surrendered by the assessee on account of excess stock of gold. As regards the surrender on account of excess diamond of ₹ 4,37,56,1591- ,the same is not in dispute. Consequently the assessee deserves to succeed in this ground of appeal. We find that the Id. CIT(A) has correctly adjudicated the issue. If the physical quantity of the stock which were found during search is compared with the stock recorded then the assessee has already valued the excess stock on the value which was applied by the valuer. The ratio of the decisions in above said cases are clearly applicable to the facts of the appeal at hand. Following the said judgements of jurisdictional High Court 8B ITAT, it is held that since the surrender made was not on the basis of any excess stock, but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he arbitrary addition made by the A.O. followed the decision of the ITAT Chandigarh Bench in the case of M/s Talwarsons Jewellers Vs. ACIT in ITA Nos. 1313 to 1317/Chd/2012 ITA No. 81/Chd/2013 for the A.Y. 2004-05 to 2006- 07 and 2009-10 to 2010-11 vide order dt. 30/09/2013 and the judgment of the Hon'ble Jurisdictional High Court in the case of CIT, Panchkula Vs. Shri Kuldeep Chand Jain (HUF) in ITA No. 165 of 2014 order dt. 08/09/2015, therefore the impugned addition was rightly deleted by the Ld. CIT(A). 8. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case it is an admitted fact that during the course of survey on 11/11/2013 at the business premises of the assessee no difference was found in the quantity of the stock found physically and as recorded in the books of account. However difference was there in the valuation made by the registered valuer of the department who applied the market rate and worked out the total stock of the jewellery at ₹ 16,37,95,953/- whereas as per books of the account of the assessee on the said date the closing stock was at ₹ 12,97,32,305/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the Income-tax Officer may determine. 8. Following the aforesaid pronouncement, a Division Bench of this Court in Sant Ram Mangat Ram s case (supra) had held as follows: It is an admitted position that from the inception of its business, the assessee had continuously adopted the same method of valuation of the closing stock and no objection was raised by the Department in any of the previous years. Rather, the competent authority accepted the method adopted by the assessee and accordingly, made assessment. This being the position, we do not find any valid ground to accept the argument of Shri Bindal that the method adopted by the assessee for valuation of the stock was legally impermissible and on that account, the additions made by the Inspecting Assistant Commissioner should be restored. 9. Undisputedly, in the earlier years, the revenue had accepted the LIFO method for valuation of closing stock of the assessee. Learned counsel for the revenue could not demonstrate that the approach of the Tribunal was erroneous or perverse in any manner warranting interference by this Court. 8.2 In the instant case also the Revenue department undisputedly accept ..... X X X X Extracts X X X X X X X X Extracts X X X X
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