Supreme Carpets, Jaipur vs Assessee

M/s Supreme Carpets cuke The D.C.I.T. 534, Mahaveer Nagar, Jaipur. Vs. Central Circle-3, Jaipur.

LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ABCFS 4973 R vihykFkhZ@Appellant izR;FkhZ@Respondent

fu/kZkfjrh dh vksj ls@ Assessee by : Shri S.L. Poddar (Advocate) jktLo dh vksjr ls@ Revenue by: Shri Rajesh Ojha (JCIT)

lquokbZ dh rkjh[k@ Date of Hearing : 28/01/2015 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 29/01/2015

vkns'k@ ORDER

PER: R.P. TOLANI, J.M.

This is an appeal filed by the assessee against the order dated

03/06/2014 by the learned CIT(A)-Central, Jaipur for A.Y. 2009-10. The

sole ground of appeal is as under:-

"Under the facts and circumstances of the case the learned CIT(A) has erred in sustaining the addition on account of

2 ITA 509/JP/2014_ M/s Supreme Carpets Vs. DCIT

excess stock of Rs. 2,30,780/- without considering the submission of the assessee."

2. Learned counsel for the assessee contends that there was no

activity of sale in respect of raw material utilized by the assessee for its

carpet manufacturing activity, consequently stock of such raw material

on the date of survey i.e. 27/08/2008 was quantity wise same to

opening stock as on 1/4/2008. The survey team wrongly valued it on

market value and not on OB value, which is against the settled

principles of method of stock valuation and accountancy. The assessee's

bonafides is proved by the fact that immediately thereafter on

30/09/2010, a letter was written in this behalf to ADIT for reverification

of the stock. The assessee filed its return of income accordingly, on the

opening value as there was no manufacturing activity or sales in this

behalf. The learned Assessing Officer, however, arbitrarily adopted the

higher stock valuation figure and made the addition, which was

confirmed by the learned CIT(A).

2.1 Learned counsel for the assessee reiterated the facts and referred

to page Nos. 7 and 8 being the trading accounts for preceding and

current year, which demonstrates that the opening and closing stock of 3 ITA 509/JP/2014_ M/s Supreme Carpets Vs. DCIT

raw material remained the same. The assessee's representation about

the inconsistency in the valuation of stock in this behalf has not been

adverted to at all, therefore, there is no justification in the addition. It is

further pleaded that the assessee has not taken any benefit of increase

value of closing stock in subsequent year.

3. The learned Sr.DR supported the order of the lower authorities.

4. I have heard the rival contentions of both the parties and perused

the material available on the record. From the trading account

submitted by the assessee, it emerges that there was no activity of

manufacturing or selling or the carpets. It is standard accounting

practice that the value of closing stock shall be adopted at the cost or

the market value, whichever is lower. Under these circumstances,

merely because, a survey conducted, these well settled accounting

principles, cannot be given a go bye.

4.1 Immediately after the survey, the assessee filed a letter

explaining the position in this behalf, which is not adverted by

authorities below. The increase in closing stock of one year will have

automatic effect of increasing the value of opening stock of subsequent

year thus this addition at the most has limited effect of proponing or 4 ITA 509/JP/2014_ M/s Supreme Carpets Vs. DCIT

postponing the accessibility and in substance a revenue neutral

exercise. In the entirety of facts and circumstances of the case, the

addition on account of increase of stock value is not sustainable, which

is deleted. However, if the assessee has been given any subsequent

benefit in that case that may be withdrawn.

5. In the result, the assessee's appeal is allowed.

Order pronounced in the open court on 29/01/2015.

Sd/-

¼vkj-ih-rksykuh½ (R.P.Tolani) U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 29th January, 2015

*Ranjan

vkns'k dh izfrfyfi vxzsf'kr@Copy of the order forwarded to:

1. vihykFkhZ@The Appellant- M/s Supreme Carpets, Jaipur.

2. izR;FkhZ@ The Respondent- The D.C.I.T., Central Circle-3, Jaipur.

3. vk;dj vk;qDr@ CIT(A)-Central, Jaipur

4. vk;dj vk;qDr@ CIT, Jaipur

5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur

6. xkMZ QkbZy@ Guard File (ITA No. 509/JP/2014) vkns'kkuqlkj@ By order,

lgk;d iathdkj@Asst. Registrar