Sri Gattu Pedda Yadagiri,, Hyderabad vs Department Of Income Tax
- CitationITA.No.148/Hyd/2014
Ratio decidendi
The rule this decision rests on
The Assessing Officer cannot value closing stock of a business that keeps no books of account at market value so as to generate an addition on that basis, where stock valued at the lower of cost or market price shows no material variation from the physical stock. Such a valuation departs from the accepted principle of valuing stock at cost or market price, whichever is lower. Where the Assessing Officer has accepted the trading and profit and loss accounts for earlier years and nothing in the current year discloses a basis for disturbing them, an addition for excess stock cannot be sustained merely because it arises from a survey conducted in the middle of the year; the addition must rest on a proper computation of the stock position, not on an inflated valuation at market rates.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
This is a Revenue appeal against the order of Ld. CIT(A)-VI, Hyderabad dated 28.10.2013 contending that Ld. CIT(A) erred in deleting the addition made on the basis of the assessee contention.
2. Briefly stated, assessee is an individual carrying on business in gold and silver. A survey under section 133A was conducted on 15.10.2008 and as assessee has not maintained books of accounts, trading accounts were prepared and excess stock valuation was arrived at Rs.37,42,275. Even though assessee contended that the physical stock is tallying and in valuation of stock, officer considered the market value instead of cost price or market price whichever is lower, A.O. rejected the contentions and made the addition of the above amount.
3. Before Ld. CIT(A), assessee submitted that A.O. has accepted the constructed Trading and Profit and Loss 2 ITA.No.148/Hyd/2014 Mr. Gattu Pedda Yadagiri
statements for the earlier two years, but has not accepted for this year. It was further contended that valuation of stock on market price has given rise to the difference, whereas, there was only small quality of gold and silver in excess and its valuation was Rs.1,11,000.
4. Ld. CIT(A) has not only examined the contentions but also the statements furnished before the A.O. and came to the conclusion that adoption of market value of gold and silver is not correct and if valued on principles of accounting at cost or market price whichever is less, then there is no variation as worked out by A.O. He also examined the quantities and accepted assessee's contention of difference of Rs.1,11,000 and confirmed the same.
5. After considering the rival contentions and perusing the orders, we are of the opinion that A.O. has not made out a case for addition. In fact, in the survey itself A.O. adopted market values of stock which gave rise to variation. Moreover, the constructed trading and P & L Accounts in three years were not disturbed, so question of addition in middle of the year on the date of survey does not arise. Since Ld. CIT(A) examined the facts, we do not see any reason to disturb the same. There is no merit in Revenue contentions. Hence, the ground is rejected.
6. In the result, Revenue appeal is dismissed.
Order pronounced in the open Court on 13.02.2015.
Sd/- Sd/- (SAKTIJIT DEY) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, Dated 13th February, 2015
VBP/-
3 ITA.No.148/Hyd/2014 Mr. Gattu Pedda Yadagiri
Copy to
1. The Income Tax Officer, Ward-1, Near Railway Under Bridge, Hyderabad Road, Marriguda Post, Nalgonda 508 001.
2. Mr. Gattu Pedda Yadagiri, Prop. SLN Swamy Jewellers, New Prakasham Bazar, Nalgonda.
3. CIT(A)-VI, Hyderabad
4. CIT-VI, Hyderabad.
5. D.R. ITAT "B" Bench, Hyderabad.
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