Bachubhai Jivanbhai Soni, Ahmedabad vs Department Of Income Tax

IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH, AHMEDABAD BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI KUL BHARAT, JUDICIAL MEMBER आयकर अपील सं./ ./ ITA No. 2399/Ahd/2011 िनधा रण वष /Assessment Year: 2008-09 ACIT, Shri Bachubhai Jivanbhai Soni, Circle-10, 18, Dipawali Society, Ahmedabad Nr. Vishvakunj Cross Road, Narayannagar Road, Ahmedabad PAN : ACLPS 2933 B

अपीलाथ / अपीलाथ / (Appellant) ू यथ यथ / थ / (Respondent)

Revenue by : Shri M.K. Singh, Sr. DR.

Assessee(s) by : Shri P.M. Patel, AR

सुनवाई क# तार%ख/ / Dateof Hearing : 16/03/2015 घोषणा क# तार%ख / Date of Pronouncement: 19/03/2015

आदे श/O R D E R

PER G.D. AGRAWAL, VICE PRESIDENT:

This is an appeal filed by the Revenue and is directed against the order of the Ld. Commissioner of Income-tax(Appeals)-III, Ahmedabad dated 05.07.2011 pertaining to the Assessment Year 2008-09.

2. The only ground raised by the Revenue reads as under:-

The Ld. CIT(A) erred in law and on facts in deleting the addition of Rs.13,34,624/- on account of undervaluation of closing stock made by the AO.

3. The facts of the case are that the assessee derives income manufacturing and trading of jewellery. For the valuation of closing stock, the assessee is following Weighted Average Cost Method since past many years. This method was accepted in all the earlier years; however, during ITA No. 2399/Ahd/2011 ACIT vs. Shri Bachubhai Jivanbhai Soni For AY 2008-09 2

the year under consideration, the Assessing Officer rejected the assessee's method of accounting and valued the closing stock as per FIFO method, which resulted in the addition of Rs.13,34,624/-. On appeal, the ld. CIT(A) deleted the addition; hence this appeal by the Revenue.

4. We have heard both the parties and perused the material placed before us. After carefully considering the arguments of both the sides and orders of both the lower authorities, we do not find any infirmity in the order of the ld. CIT(A). The CIT(A) allowed the relief to the assessee with the following findings:-

"4. I have considered the submissions of the appellant. No defects in the books of accounts have been noticed by the AO. There was no defect found by the AO in the method of accounting adopted by the appellant for the last 15 years. During the last 15 years, the appellant has been following the weighted average cost method for the purpose of valuation of stock. This method is recognized method as per AS2. In fact, as per AS2, an assessee can adopt either FIFO method or weighted average cost method. In the past and during the year under consideration, the appellant has been following the weighted average cost method consistently. However, in the year under consideration, according to the AO, this method does not reflect the correct profits of the appellant, therefore, the AO adopted the FIFO method and made the addition of Rs. 13,34,624 on account of undervaluation of closing stock. If, there is no defect in the books of accounts of the appellant and there is no defect in the method of accounting of weighted average cost method followed by the appellant, then in my opinion, the AO cannot impose another method namely FIFO method on the appellant. For adopting FIFO method, there has to be a finding of the fact that the appellant has not accounted for all the expenses in the cost of the closing stock. If all the expenses have been duly accounted for, then the option of adopting either of the two methods namely FIFO method and weighted average method of cost is of the assessee and not of the AO. Merely because in one particular year, the FIFO method results into higher valuation of closing stock, therefore, this method should be adopted by the appellant, is not proper ground to reject the weighted average cost method consistently followed by the appellant for the last 15 years. Therefore, I have no hesitation in holding that the AO was not justified in valuing the closing stock by following the FIFO method as against the weighted average method being consistently followed by the appellant. On ITA No. 2399/Ahd/2011 ACIT vs. Shri Bachubhai Jivanbhai Soni For AY 2008-09 3

this ground alone, the addition of Rs.13,34,624/- made by the AO on account of undervaluation of closing stock is directed to be deleted."

5. The CIT(A) has clearly recorded the findings that the assessee is following the same method of accounting in the last 15 years. In all the 15 years, the same method was accepted by the Revenue. The method being followed by the assessee is one of the recognized methods as per AS2 and moreover, no defect was found by the Assessing Officer in the method of accounting followed by the assessee. Merely because by FIFO method the valuation of closing stock for the year under consideration was more would be no ground for rejecting the assessee's method of accounting and following another method of accounting. In view of above, we do not find any justification to interfere with the order of the CIT(A) and the same is sustained. Thus, the Revenue's appeal is dismissed.

6. In the result, the Revenue's appeal is dismissed.

Order pronounced in the Court on 19th March, 2015 at Ahmedabad.

Sd/- Sd/-

(KUL BHARAT) G.D. AGRAWAL JUDICIAL MEMBER VICE-PRESIDENT Ahmedabad; Dated 19/03/2015 Biju T., PS षत Copy आदे श क# ूितिल+प अमे+षत/ of the Order forwarded to : 1. अपीलाथ / The Appellant 2. ू यथ / The Respondent. 3. संबंिधत आयकर आयु- / Concerned CIT 4. आयकर आयु-(अपील) / The CIT(A)- III, Ahmedabad

5. +वभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद/ DR, ITAT, Ahmedabad

6. गाड फाईल / Guard file.

/ BY ORDER, आदे शानु सार

TRUE COPY

Dy./Asstt.Registrar) उप/सहायक पंजीकार ( उप/ अिधकरण, अहमदाबाद / आयकर अपीलीय अिधकरण, ITAT, Ahmedabad