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TMI Blog2021 (11) TMI 323X X X X Extracts X X X X X X X X Extracts X X X X ..... k as additional income of the year and surrendered to tax. Thus there is no retraction but what assessee firm did is simply to correct calculation mistake and accepted his statement u/s 132 (4) in toto. AO is wrong in not allowing gross profit margin @ 9.50% which was claimed as per last year G.P. rate. The assessee has not specifically asked for allowance of discount element but as a general trade practice referred to bargaining discounts being allowed which Ld. A.O. not accepted. As for reduction of G.P. margin from market value of stock the. A.O. has not stated any thing in assessment order which is allowable in law to assessee and in fact the authorized officers in search and A.O. in assessment themselves in various similar cases (Bhura Mal Raj Mal Surana P. Ltd., Bhuramal Raj Mal Surana (Mfg.). Chandra Kumar Surana A.Y. 2015-16 passed by same AO - appeals heard by ld. CIT(A)-iv, Jaipur has allowed deduction of margin of G.P. from valuation made by approved valuer. A.O. is therefore wrong and incorrect in law in not allowing the said deduction of said G.P. margin of 9.50% from valuation of stock done by valuer at market value on the date of search. The allowance of said G.P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at year end but accepted closing stock declared by the assessee which has been taken as op. stock in next year. In next year also no credit allowed for enhanced stock and even if it is done it will be revenue neutral exercise. CIT(A) has passed a well-reasoned order and no new facts or circumstances have been brought before us by the ld DR in order to controvert or rebut the factual findings so recorded by the ld. CIT(A), therefore, we see no reason to interfere into or deviate from the findings so recorded by the ld. CIT(A) qua this issue and we uphold the same. - Decided against revenue. - ITA No. 789/JP/2019 - - - Dated:- 1-11-2021 - Shri Sandeep Gosain, JM And Shri Vikram Singh Yadav, AM For the Revenue : Shri B.K. Gupta (PCIT-DR) For the Assessee : Shri S.R. Sharma, (CA) And Shri Rajnikant Bhatra (CA) ORDER PER: SANDEEP GOSAIN, J.M. This is the appeal filed by the Revenue against the order of the ld. CIT(A)-4, Jaipur dated 27/03/2019 for the A.Y. 2016-17 wherein following grounds have been raised by the Revenue. 1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was right in deleting of ₹ 2,12,54, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on 28-01-2016 i.e. as on the date of search at ₹ 22,37,26,899/, It is apparent from the said valuation report that the entire goods in stock was valued at market rate/selling rate on the date of search and not at the cost price to the assessee. The Govt. approved valuer/registered valuer while valuing jewellery/stock of jewellery always determines its market value and cost thereof never determined by them as it is unascertainable by them. Thus the market price taken by approved valuer is liable to be reduced by the gross profit margin of dealer embedded therein to arrive at cost of stock found in course of search. The authorized officer to determine value of stock as per books of accounts adopted G.P. rate method i.e. a trading account was drawn taking the amounts of opening stock, purchases and sales till the date of search and on the sales amount preceding year's G.P. rate was applied and the G.P. amount worked by said formula was put in debit side of the trading account and out of aggregate total of debit side i.e. value of opening stock, purchases and the G.P. calculated as per above method total sales amount was deducted and the resultant amount was taken as value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e recorded u/s 132 (4) is wrong to the above extent i.e. instead of correct excess stock of ₹ 2,83,49,362/- the wrongly calculated excess stock of ₹ 5,64,20,450/- by authorized officer in search was admitted as excess stock as additional income of the year and surrendered to tax. Thus there is no retraction but what assessee firm did is simply to correct calculation mistake and accepted his statement u/s 132 (4) in toto. The assessing officer is wrong in not allowing gross profit margin @ 9.50% which was claimed as per last year G.P. rate. The assessee has not specifically asked for allowance of discount element but as a general trade practice referred to bargaining discounts being allowed which Ld. A.O. not accepted. As for reduction of G.P. margin from market value of stock the Id. A.O. has not stated any thing in assessment order which is allowable in law to assessee and in fact the authorized officers in search and Ld. A.O. in assessment themselves in various similar cases (Bhura Mal Raj Mal Surana P. Ltd., Bhuramal Raj Mal Surana (Mfg.). Chandra Kumar Surana A.Y. 2015-16 passed by same A.O. - appeals heard by Id. CIT(A)-Iv, Jaipur) has allowed deduction of margin o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utral. Consequently, respectfully following the decision of Hon'ble Supreme Court in the case of CIT Vs. Excel Industries Ltd. (2013) 358 ITR 295, the addition being tax neutral and the assessee having not derived any benefit, the addition is deleted and in case of Paras Mal Jain vs ALIT (ITA No.916/JP/12 dated 17-10-2015 has held that Assuming an addition on account of closing stock is somehow made, the same is to be allowed to the assessee in the next year as opening stock which will reduce the profits of next year. This exercise is essentially revenue neutral between two years. The Hon'ble Supreme Court in the case of CIT vs. Excel India, 358 ITR 295 has held that addition in such revenue neutral exercise should not be made by the Department. Thus, on both the counts, there is no justification in retaining the addition which is deleted. It is, therefore, prayed that order of Ld. CIT(A) may kindly be upheld and addition of ₹ 2,12,54,055/- made in the income of appellant deserves to be deleted. 8. We have considered the rival contentions and carefully perused the material placed on record. From perusal of the record, we observed that the ld. CIT(A) h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of stock on date of search which is not included in return. 5.3 The AO in assessment order has not given any reason for not allowing the deduction of G.P. margin from the market value of stock on the date of search so as to arrive estimated cost of stock found in course of search to compare it with cost of stock on the date of search as per books of accounts of appellant. I find the contention of Ld. A/R as well founded and G.P. margin of appellant should have been allowed from market value of stock on the date of search valued by approved valuer and thereafter difference in stock found in course of search and stock as per books of accounts Should have been arrived as normally being done in search/survey proceedings. Therefore I allow the deduction of G.P. margin rightly claimed by appellant at 9.5% based on that margin of profit in appellant's case for last 2 - 3 years was 9.13% to 9.7% and on allowing G.P. margin of 9.5% from market value of stock found on the date of search valued by approved valuer there remains no difference in stock in excess to difference of value of stock surrendered and declared by appellant in its return filed. Therefore, addition made by A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o made by AO which is directed to be deleted. 9. We observed that the valuer while valuing the stock has taken market value of stock found on the date of search as the valuer could value only market value of stock and cannot value cost of stock. Thus valuation of closing stock found in course of search is at market value of stock as on date of search. As the stock found in course of search was valued at market value it should have been reduced by G.P. margin of assessee to arrive at cost of stock so as to compare it with the stock as per books which admittedly was at cost so as to arrive at difference of value of stock found in course of search. The Ld. A/R pointed out that the said mistake in calculation of stock as well as mistake in calculation of stock as per books of accounts were immediately on receipt of copies of statement recorded u/s 132(4) and copy of valuation report from DDIT was pointed out to DDIT(Inv.) by filing detailed letter giving correct calculations but he took no action thereon. The assessee thereafter while filing return for the year duly corrected itself both the mistakes i.e. corrected the cost of stock found on the day of search by reducing its G.P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as declared in books of accounts as opening stock for next year. In next year also no credit allowed enhanced stock and even if it is done it will be revenue natural exercise. The Coordinate Bench of ITAT, Jaipur in case of Manoj Kumar Johari (ITA No. 479/JP/13 383/JP/13 order dated 16-10-2015) has held that Apropos Ground No. 5 of the assessee, we find merit in the arguments of the Ld. Counsel for the assessee that increase in valuation of the closing stock is to be allowed in next year as increase in opening stock in next year i.e. 2010-11. It has not been disputed that the assessee has not claimed any benefit by increase in valuation of stock in subsequent year. Hence, the addition becomes revenue natural. Consequently, respectfully following the decision of Hon'ble Supreme Court in the case of CIT vs. Excel Industries Ltd. (2013) 358 ITR 295, the addition being tax natural and the assessee having not derived any benefit, the addition is deleted . In case of Paras Mal Jain vs. ACTT (ITA No. 916/JP/12 dated 17-10-2015 the Coordinate Bench has held that Assuming an addition on account of closing stock is somehow made, the same is to be allowed to the assessee in the next ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y-cum-valuation report prepared by the I.T. department's appointed valuer that for the valuation of gold/silver gems stones rate applied to calculate the total value of stock as on 28.1.2016 i.e. the prevailing market rate which is also a selling rate. It is verifiable from the audited statement of accounts that the method of valuation of closing stock as being regularly employed by the assessee firm is at estimated cost and every year the stock is carried forwarded/brought forwarded at such cost value. Thus the said market price arrived at by valuer also includes the margin of profit of the dealer. As submitted above that the margin of gross profit in assessee firm's case is about 9.13 to 9.7% and accordingly for determination the cost of the stock found as on the date of search a deduction of 9.50% being G.P. rate of earlier year(s) should be allowed from market value determined by valuer. After allowing the said deductions @ 9.50% the correct value of the stock works out as under: - Total value of closing stock of M/s Vikas Jewellers as per valuation report by the Regd. Valuer. 22,37,26,899/- Less: Gross Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 2,12,54,055/- of stock in trade as per books of accounts and as per valuation report of registered valuer as on the date of search i.e. 28-01-2016. The A.O. has not held that there was any difference in quantity of stock as per valuation report and as per hooks of accounts. There can be no addition simply on the basis of valuation unless excess quantity of stock is found. If such addition is somehow made on account of said valuation of stock and sustained in assessment than credit of same has to be allowed in year end while computing profit at year end which has not been allowed and as assessing officer accepted declared closing stock as on 31-3-2016 in books of accounts the addition of difference in value as on 28-01-2016 will got set off the assessee carried forward the closing stock of this year end as declared in books of accounts as on stock for next year. The A.O. neither allowed credit of difference while accepting closing stock at year end but accepted closing stock declared by the assessee which has been taken as op. stock in next year. In next year also no credit allowed for enhanced stock and even if it is done it will be revenue neutral exercise. Considering the tota ..... X X X X Extracts X X X X X X X X Extracts X X X X
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