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TMI Blog2022 (12) TMI 1116X X X X Extracts X X X X X X X X Extracts X X X X ..... the following grounds:- "1. On the fact and circumstances of the case the Ld. CIT(A) erred in holding that the books of account of the assessee were not required to be rejected on the ground that the same were not complete without appreciating the fact that there was a specific mistake in the books of account in the shape of excess of Rs. 1,88,77,595/- duly admitted by the assessee which itself establish that books of account of the assessee were not complete. 2. On the fact and circumstances of the case the Ld. CIT(A) erred in deleting the addition on the ground that the addition on account of GP tantamount to double addition due to determination of WIP on account of sale value without appreciating the fact that there was no double add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtners of the assessee, was recorded under section 131 of the Act. The aforesaid partner of the assessee admitted to the difference of Rs. 3,15,32,000, in the work in progress (WIP) as unaccounted investment in stock of WIP of cranes. It was also admitted that the difference arising on the valuation of raw materials of Rs. 1,88,77,595, on the physical inventory of the stock during the survey, is unaccounted investment in stock of raw materials. The assessee also considered Rs. 3,59,68,280, as stock which was not yet been entered in the profit and loss account at the time of survey and declared a net profit of Rs 10,13,72,648 (i.e. Rs. 11,20,72,648 - Rs. 1,00,00,000). Accordingly, the assessee considered unaccounted stock in the final accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be added. 7. We have considered the rival submissions and perused the material available on record. The AO recomputed the gross profit and net profit of the assessee, for the year under consideration, after reducing the amount disclosed during the survey as under: Particulars Amount (in Rs.) Sales 47,97,42,348 Gross profit including disclosure 13,13,61,862 Less: disclosure 5,04,09,595 Gross profit of regular income 8,09,52,267 G.P.% of regular income 16.86% 8. The AO on the basis of the difference of gross profit @4.37% as compared to earlier year (i.e. 21.23% for AY 2012-13 - 16.86% for AY 2013-14) made the addition of Rs. 2,09,54,740. It is the plea of the assessee that the unaccounted investment in stock of WIP of cranes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 75% 50,25,000 Dubai Manufacturing Co. - Job 806A 44,10,000 50% 22,10,000 Apex Industries - Job 808 31,27,000 50% 15,63,500 Sub-Total 5,03,00,000 B. Work in Progress _ Mahape Bhimeshwari - Job 722C 41,00,000 80% 32,80,000 MSM - Job 756F 28,00,000 70% 19,60,000 A"IA - Job 800 22,00,000 80% 17,60,000 Sub-Total 70,00,000 Grand Total 5,73,00,000 Q.10 It is noticed frees your reply to Q.6 above that you have valued your WIP at much lower at 257,68,000 thereby indicating that the % of Completion in respect of above cranes as mentioned to Reply to Q.7 is much higher as indicated ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order passed by the AO carefully. In the course of survey and subsequent assessment proceeding, valuation of closing stock was different to arrive at a disclosure of income. However, the recognized method of valuation is cost or market rate whichever is lower. The Supreme Court in the case Sanjeev Woolen Mills v. C.I.T. 279 ITR 434 (SC) held that: "On no principle can one justify the valuation of Closing Stock at a Market rate higher than cost. Permissibility of valuation of the Stock at Market Value would be only if the market value of the Stock is lower than the cost of the Stock." "Choice of the method of accounting lies with the assessee but the ass Assessee would be required to show that he has followed the chosen method regular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sales Registers and Stock Registers were impounded by the A.O. The A.O.'s statement that these registers are not maintained appears to be wrong. The Sales tax / VAT Assessment order is produced int eh paper book at Page 145 to 148 for the above period. The Dy. Commissioner of Sales Tax who carried out the assessment states that "The assessee produced books of accounts closed and adjusted." (at p. 147 of the paper book). In view of the above said facts, I am of the opinion that the rejection of Bank results are unwarranted and the estimation additional gross profits are also uncalled for. Hence, the addition of Rs.2,09,64,740/- results in adding gross profit twice a component which has already been included int eh sale value of the work in p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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