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TMI Blog2017 (5) TMI 1838X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the Assessing Officer during the assessment proceedings. 3. Whether on the facts and circumstances of the case, Ld. CIT(A) is correct in not appreciating the reasons for the rejection of trading results of the assessee. 4. The Appellant craves leave to add or amend the grounds of appeal on or before is heard and disposed off. 5. It is prayed that the order of the Commissioner of Income Tax (Appeals), be set-aside and that of the Assessing Officer be restored on merits." 3. The brief facts of the case as reflects from the assessment order are as under: The return in this case was E-filed on 29th September, 2011 as it declaring an Income of Rs.32,00,130/-, and the case was selected for scrutiny under CASS and statutory notices u/s 143(2) and 142(1) were issued along with questionnaire. During the course of examination of the case it was noticed that during the year, there has been a drastic fall inn the G.P. rate declared by the assessee from 14.30% in the last year 2005 were in this year. It was observed by the Assessing Officer that it appears the sanctions imposed against Iran were the sole cause of the lower G.P. of the assessee, despite the fact that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounts and cash in hand as per alleged balance sheets is as under:- Name of partner Cash Introduced Opening C.I.H. Closing C.I.H. Satish Kumar Rs. 2,00,000 Rs. 1,95,891 Rs. 1,09,422 Vinod Kumar Rs. 1,00,000 Rs. 1,22,213 Rs. 27,393 The above chart is only indicative of the state of affairs of the assessee though no separate addition for the above is being made. In view of the above facts of the case, it is apparent that the trading results of the assessee are not fully reliable although some credit has been given for the various explanations put forth by the assessee. However considering the various discrepancies noticed in this case the G.P. rate of 9.53% shown in the return is not acceptable and an addition of 2% is being made to the same which works out to Rs. 82,21,420/-. This reflects the concealed income of the assessee which was not reflected in the return by making various manipulations as discussed above. Therefore, I am satisfied that the assessee has concealed his particulars of income to the above extent and hence penalty u/s 271(1)( c) is also being initiated. Accordingly the income of the assessee is being computed as under:- Returned Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is apparent that the trading results of the assessee are not fully reliable although some credit has been given for the various explanations put forth by the assessee. Further Ld. DR relied upon the judgment passed by the jurisdictional High Court in the case of Harish Ahuja Vs. Commissioner of Income Tax citation 2015 (93) CCH 0239 PHHC and submitted that the jurisdictional High Court has clearly held that in the absence of stock register, the rejection of books of accounts is correct and justified. 7. On the other hand, the Ld. AR controverted the contention of the Ld. DR and argued that all purchases and sales are fully vouched and daily stock tallies were maintained for all the qualities of Paddy & Rice i.e. PARMAL, SHARBATI, NO. 1121 AND BASMATI. The statements showing day to day detail of purchase of Quality-wise Paddy and day to day statements showing production of rice etc. were duly filed by the Assessing Officer along with the yearly stock tallies of all the qualities. The contention of the DR is not correct that no stock registers have been maintained. The Ld. AR further argued that the assessee had demonstrated reasons for fall in the G.P. rate in correct manner as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) noted in the order that the marginal increase in labour charges was attributable to change packing sought by the client and the machinery repairs were on account of major overall necessitated to maintain and supply the export quality of rice and the machinery repairs expenses were fully vouched and no defect has been pointed out. Further the capital introduced by the partners is also explained and the partners are repeatedly assessed and in their personal cases, the investment made by them is accepted and even otherwise closing stock has been taken at average rate which is an accepted principle of valuation of closing stock. The Ld. AR also filed assessment order pertaining to A.Y. 2010-11 in support of Assessee case. Further the Ld. AR also relied the cases decided by Delhi bench in ITA No.2089/Del/2005 and by ITAT Bench, Mumbai in ITA No.4125/Mum/2012 and judgment passed by the Bombay High Court in ITA No.297/2014 titled as CIT, 25 Vs. Uday. M. Ghare and emphasized that crux of the aforesaid judgments is that the valuation stock at average costs basis is reasonable and justified and the average costs method is one of the accepted methods for valuation of closing stock. 8. All ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment order but proceeded to reject the trading result without pointing out any defect in the books of accounts maintained by the assessee and even otherwise the assessment has been framed u/s 143(3) but not u/s 144 therefore, the contentions of the Ld. DR don't have force for taking contrary view. With regard to the contentions of the Ld. DR that in the absence of stock register, the rejection of books of account is correct in accordance with the judgments passed by the jurisdictional High Court in the case of Harish Ahuja Vs. CIT, in ITA No.196/2015 (2015) 93 CCH 0239 PHHC. In the instant case, the assessee has maintained proper books of accounts in which no defects have been found by the Assessing Officer. Even otherwise the accounting results as per profit/loss account and trading account prepared by the assessee does not deserve rejection unless and until some defects pointed in the books of account. Therefore, it is not the case here that in absence of stock register, the books of account as liable to be rejected, specifically, in the assessment of the previous years, the Department accepted the same trading result of gross profit ratio even otherwise the G.P ratio of A.Y.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as compared to loss year and the same is also evident from the comparison of costs of sale Vs. sale price chart and the Assessee also seeing the heavy rate of paddy during the crop season of F.Y. 2010-11 and restriction on Iran, most of the exporters including the assessee reduced their business which affected the shelling rate adversely and on the other hand increase in the rate of buyer, fuel, labour and consumable which affected the net profit from shelling also. On the aforesaid observation, we do not find any reasons to interfere with the order passed by the Ld. CIT(A) and in our considered view, the appeal filed by the Revenue/Department is liable to be dismissed, specially in view of the fact that the Assessing Officer proceeded to reject the trading result without pointing out any defects in the books of accounts maintained by the assessee because the assessment has framed u/s 143(3) and secondly the average cost method which is reasonable and justified and followed by the assessee from year after year and recognized as one of the accepted methods for valuation of closing stock by various Co-ordination Benches as well as High Courts. 9. In the result, the appeal filed b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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