Sh Pajkaj Kumar Jain, Jammu V. The Asstt .Commissioner of .Income-tax, Jammu

ITA 110/ASR/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57412 (ITAT-AMRITSAR)
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 22-03-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 04-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRIK CHAND
• Assessee Lawyers: S K BANSAL
• Keywords: Business income
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.110(ASR)/2011 ASSESSMENT YEAR:2005-06 PAN;ACHPJ6803F SH. PANKAJ KUMAR JAIN VS. THE DY. COMMR. OF INC OME-TAX, PROP. M/S. CH. SHANKER SHAH MUNI LAL, CIRCLE-2, J AMMU. JAIN BAZAR, JAMMU. (APPELLANT) (RESPONDENT) APPELLANT BY:SH. S.K. BANSAL, ADV. RESPONDENT BY: SH. AMRIK CHAND, DR DATE OF HEARING :22/03/2012 DATE OF PRONOUNCEMENT:28/03/2012 ORDER PERBENCH; THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER OF THE CIT(A), DATED 02.02.2007 RELATING TO ASSESSMENT YEAR 2006-07. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL: 1. THAT THE ORDER UNDER APPEAL IS AGAINST LAW & F ACTS OF THE CASE. 2. THAT THE LD. CIT(A) JAMMU HAS NOT BEEN JUSTIFIED IN NOT ACCEPTING THE CONTENTION OF THE APPELLANT THAT ON T HE FACTS AND CIRCUMSTANCES OF THE CASE THE CLOSING STOCK AS SHOW N BY THE APPELLANT WAS CORRECT ON FACTS AND VALUATION WAS RI GHTLY APPLIED TO IT AND THE SAME SHOULD HAVE BEEN ACCEPTED BY THE A.O. 2 3. THAT THE LD. CIT(A), JAMMU HAS ALSO ERRED IN SUS TAINING THE ADDITION OF RS.334826.36 ON THE ALLEGED UNDERVALUAT ION OF CLOSING STOCK WHEN THERE IS NO UNDERVALUATION OF CL OSING STOCK AS ON 31.03.2005. 4. ANY OTHER GROUND WHICH MAY BE URGED AND ALLOWED AT THE TIME OF HEARING. 3. THE BRIEF FACTS OF THE CASE AS PER ORDER OF THE CIT (A) IN PARA 3 TO 3(D) ARE AS UNDER: 3. BRIEF FACTS ARE THAT THE RETURN OF INCOME WAS F ILED ON 31.03.2006 DECLARING INCOME OF RS.17,62,180/- (NORMAL RS.4,5 8,995/- + LONG TERM CAPITAL GAIN RS.13,33,685/-). THE ASSESSEE IS A GOLD SMITH RETAILER IN JEWELLERY DEALING IN GOLD ORNAMENTS, DIAMOND ORN AMENTS AND SILVER UTENSILS. DURING THE COURSE OF ASSESSMENT THE A.O. HAD ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE AS UNDER: THE CLOSING STOCK OF GOLD ORNAMENTS HAS BEEN SHOWN AT RS.11,167,727 GRAMS WHICH HAS BEEN VALUED AT RS.57, 09,477/- AND IT HAS BEEN STAGED THAT SAME HAS BEEN VALUED AT COST WHICH WORKS OUT AT RS.511.25 PER GRAM WHEREAS THE COST PR ICE AS PER LAST YEAR PURCHASE BILL SHOWN BY YOU GIVES THE RAGE AT RS.511.25 INSTEAD OF RS.562/-.PLEASE EXPLAIN WHY RA TE AS PER YOUR COST PRICE MY NOT BE APPLIED TO VALUE THE CLOS ING STOCK. 3.A IN RESPONSE TO THE SAID QUERY, THE COUNSEL OF THE A SSESSEE VIDE HIS LETTER FILED ON 08.11.2007 HAS STATED AS UNDER : AS REGARDS VALUATION OF CLOSING STOCK IT IS SUBMITT ED THAT THE ASSESSEE HAS BEEN FOLLOWING LIFO (LAST IN FIRST OUT) METHOD OF ACCOUNTING REGULARLY. THE NATURE OF BUSINESS OF THE ASSESSEE BEING WEARING APPEARELS (GOLD JEWELLERY ORNAMENTS) LATEST TREND/FASHION ORNAMENTS ARE SOLD FIRST WHICH MEANS LAST PURCHASE IS SOLD FIRST AND THE STOCK THAT REMAINS W ITH THE ASSESSEE IS OUT OF OLD PURCHASE WHICH GOES OUT OF F ASHION. IN VIEW OF THIS, THE MOST APPROPRIATE METHOD OF VALUAT ION OF CLOSING STOCK IS THE LIFO. CLOSING STOCK OF GOLD OR NAMENTS OF 11,167.727 GRAMS WAS DETERMINED AS 5047.600 GRAMS O UT OF OPENING STOCK AND 6120.127 GRAMS OUT OF CURRENT YEA R PURCHASES. BY APPLYING AVERAGE RATE OF OPENING STOC K OF RS.438.52 PER GRAM TO OLD STOCK OF 5047.600 GRAMS A ND 3 AVERAGE RATE OF CURRENT YEAR PURCHASE OF RS.571.22 PER GRAM TO CURRENT YEAR STOCK OF 6120.127 GRAMS, VALUE OF CLOS ING STOCK HAS BEEN DETERMINED AT RS.5709477/-. IN VIEW OF ABO VE, IT IS SUBMITTED TO YOUR LD. SELF THAT VALUE OF CLOSING ST OCK HAS RIGHTLY BEEN DETERMINED AT RS.5709470/- AS PER REGULAR METH OD OF ACCOUNTING FOLLOWED BY THE ASSESSEE AND IT IS PRAYE D THAT THE SAME MAY KINDLY BE ACCEPTED. 3.B AFTER EXAMINING THE BOOKS OF ACCOUNTS AND EXPLANATION OF ASSESSEE, THE AO HAS INFERRED THAT SINCE NO IT GEM WISE INVENTORY WAS MAINTAINED BY THE ASSESSEE THE VALUATION OF OPENING AND CLOSING STOCK HAD CERTAIN DISCREPANCIES WHICH HE MENTIONED IN THE ASSESSMENT ORDER AS UNDER: AS PER DETAILS OF WORKING OF VALUATION OF CLOSING STOCK OF GOLD, IT IS OBSERVED, AS IS CLEAR FROM THE EXPLANATION FI LED BY THE ASSESSEE, THAT OUT OF THE OPENING STOCK OF 5953.143 GRAMS WHI CH WAS LYING WITH THE ASSESSEE ON 01.04.2004, 547.600 GRAMS; HAS BEEN INCLUDED IN THE CLOSING STOCK AS ON 31.03.2005 MEANING THEREBY THAT ONLY 905.543 GRAMS FROM THIS STOCK HAS BEEN SOLD DURING THE YEAR , WHICH IS PRACTICALLY NOT POSSIBLE. ITEM WISE INVENTORY OF TH E CLOSING STOCK HAS NOT BEEN MAINTAINED. THE STOCK REGISTER SHOWS THE E NTRIES OF DAILY RECEIPT OF STOCK WHETHER PURCHASED FROM CUSTOMERS O R DIRECTLY FROM WHOLESALE DEALERS. THUS, OUT OF TOTAL STOCK OF GOLD , STOCK OF RS.2359.463 GRAMS IS SHOWN TO HAVE BEEN ISSUED TO T HE LABOURERS FOR PREPARATION OF ORNAMENTS AND THE BALANCE GOLD WEIGH ING 8808.264 WAS LYING IN THE STOCK IT STATUS IS NOT KNOW I.E. W HETHER IT IS LYING IN THE SHAPER OF SOLID GOLD OR IN THE FORM OF ORNAMENTS. O UT OF THE TOTAL STOCK OF GOLD LYING WITH THE ASSESSEE WEIGHING 18325.152 GRAMS SALE OF 7157.425 IS SHOWN TO HAVE BEEN MADE DURING THE YEAR , LEAVING THE BALANCE STOCK OF 11167.727 GMS. THE GOLD BARS .999 FOUR PIECES HAVE ALSO BEEN CONVERTED INTO 22 CT. GOLD WEIGHING 4339. 985 GMS. WHICH MEANS THAT WHETHER STOCK IS PROCURED BY THE ASSESSE E BY WAY OF PURCHASE FROM THE WHOLE SALE DEALERS OR OLD GOLD PU RCHASED FROM THE INDIVIDUAL CUSTOMERS, IS CONVERTED IN TO GOLD ORNAM ENTS AND THEN PUT ON THE SALE WHICH IS CLEAR FROM THE FACT THAT DURIN G THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS INCURRED LABOR CHAR GES AT RS.1,03,018/-. ALL THESE FACTORS ESTABLISH THAT NO ITEM WISE STOCK REGISTER HAS BEEN MAINTAINED WHICH WOULD PROVIDE AN Y CLUE ABOUT THE ITEM WHICH HAS BEEN SOLD AND WHICH IS LEFT BEHIND. IN THE ABSENCE OF ANY SUCH EVIDENCE, THE THEORY OF THE ASSESSEE THAT ENTIRE OPENING STOCK LYING WITH HIM AS ON 1.4.2004 WAS STILL LYING WITH HIM EVEN AT THE 4 CLOSE OF THE YEAR, IS NOT PLAUSIBLE. IT IS CLEAR TH AT WHEN THE ASSESSEE WAS CONFRONTED ABOUT THE UNDER VALUATION OF CLOSING STOCK, HE CAME UP WITH THIS THEORY IN ORDER TO JUSTIFY HIS VALUATION. FURTHER, AS PER THE PROVISIONS OF SECTION 145A OF THE I.T.ACT, 1961, IT HAS BEEN PROVIDED THAT WHILE DETERMINING THE INCOME CHARGEABLE UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION, THE INVENTORY SHALL BE FURTHER ADJUSTED TO INCLUDE THE AMOUNT OF ANY TAX, DUTY CES S OR FEE ACTUALLY PAID OR INCURRED BY THE ASSESSEE TO BRING THE GOODS TO THE PLACE OF ITS LOCATION AND CONDITION AS ON THE DATE OF VALUATION. BUT WHILE WORKING OUT THE VALUATION OF STOCK AS BROUGHT OUT RECORD BY THE ASSESSEE, NO SUCH EXPENSES SEEMS TO HAVE BEEN ACCOUNTED FOR. IN ORDER TO DETERMINE THE CORRECT INCOME CHARGEABLE TO TAX AND ADOPT THE CORRECT METHOD FOR VALUATION OF STOCK, A SAMPLE OF DETAILS OF THE OLD GOLD ORNAMENTS PURCHASED BY THE ASSESSEE FROM T HE INDIVIDUAL CUSTOMERS WAS OBTAINED AS REFLECTED IN HIS PURCHASE BOOK FROM 22.01.2005. THE ENTRIES REVEAL THAT THE RATE OF 22 CR. GOLD AS PAID BY THE ASSESSEE TO SELLER VARIES FROM RS.502/- TO RS.5 55/- AND THE AVERAGE RATE IN RESPECT OF 2801.820 GMS. OF 22 CR. GOLD WOR KS OUT TO RS.541.74. DURING THE YEAR UNDER ASSESSMENT, THE AS SESSEE HAS PURCHASED NEW GOLD ORNAMENTS FROM DIFFERENT DEALERS NAMELY M/S. GIAN CHAND KAPOOR JEWELLERS, NEW DELHI ON 22.07.200 4 @ RS.563/- PLUS TAXES WHICH WORKS OUT TO RS.599/-. M/S. KAILAS H ENTERPRISES, JAIPUR GOLD BARS @ 630.80 (24 CT) M/S. GIAN CHAND KAPOOR JEWELLERS VIDE BILL DATED 30.11.2004 @ 602/- PLUS T AXES WHICH WORKS OUT TO RS.638/-, M/S. GIAN CHAND KAPOOR JEWELLERS, NEW DELI ON 4.1.2005 @ RS.565/- PLUS TAXES WHICH WORKS OUT TO R S.600/-. THUS, THE TOTAL PURCHASES WEIGHING 6821.235 GMS HAS BEEN PURC HASED AND THE AVERAGE RATE WORKS OUT TO RS.604/- PER GRAM. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSEE FILED MONTH WISE/ITEM WISE DETAILS OF PURCHASES MADE AS WELL AS THE SALES EFFECTED, THE DETAILS OF WHICH ARE REPRODUCED HEREUNDER: S.NO. MONTH PURCHASES IN RS. SALES IN RS. 1. APRIL,2004 1,32,220 5,52,968.91 2. MAY, 2004 1,46,226 3,61,661.72 3. JUNE,2004 1,44,601.05 1,99,113.52 THE ABOVE STATEMENT CLEARLY ESTABLISHES THE FACT TH AT IN THE MONTH OF APRIL,2004, THE ASSESSEE MADE ONLY FRESH PURCHASES OF 22 CR. GOLD 5 ORNAMENTS OF THE VALUE OF RS.1,32,220/- AND AT THE SAME TIME HE MADE TOTAL SALES OF RS.5,52,968.91, WHICH IS FAR MORE TH AN WHO HAS BEEN PURCHASED. THIS CLEARLY NEGATES THE EXPLANATION OF THE ASSESSEE THAT THE OPENING STOCK OF GOLD ORNAMENTS LYING WITH HIM WAS IN TACT EVEN UPTO THE CLOSE OF THE ACCOUNTING YEAR I.E. HIS EXPL ANATION THAT NO PART OF THE STOCK IN RESPECT OF OPENING STOCK WAS SOLD B Y HIM IS WRONG AND WITHOUT ANY BASIS. HAD IT BEEN SO THEN HIS PURCHASE S SHOULD HAVE BEEN MORE THAN SALES. ALL THESE FACTS CLEARLY ESTABLISH THE FACT THAT THE RATE OF GOLD WAS NEVER RS.438.52 DURING THE PERIOD RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION AND THE ASSESSEE HAVING FAILED TO EST ABLISH THAT THE ENTIRE OPENING STOCK LYING WITH HIM AS ON 01.04/200 4 WAS IN FACT EVEN AT THE CLOSE OF THE YEAR, I AM LEFT WITH NO ALTERNA TIVE BUT TO TREAT THE MAJORITY OF CLOSING STOCK AS CURRENT YEARS STOCK AF TER ALLOWING 25% MARGIN OF THE OLD STOCK ON ACCOUNT OF THE FACT THAT STOCKS TO THAT EXTENT WOULD BE LYING WITH THE ASSESSEE EVEN UP TO THE CLO SE OF THE ACCOUNTING YEAR AND ON THE 75% OF SUCH STOCK, THE A VERAGE RATE AS DETERMINED BY THE ASSESSEE IN RESPECT OF CURRENT YE AR STOCK I.E. RS.571.22 IS APPLIED AND THE VALUE OF THE CLOSING STOCK IS DETERMINED. 3.C THE AO ALSO MADE CERTAIN OTHER ADDITIONS WHICH ARE SUBJECT MATTER OF APPEAL AND WILL BE DISCUSSED IN COMING PA RAGRAPHS OF THIS ORDER. DURING THE APPELLATE PROCEEDINGS SH. SUBASH DUTT, ADVOCATE APPEARED AND FILED WRITTEN SUBMISSIONS BEFORE MY PR EDECESSOR WHO HAS REMANDED MATTER TO THE AO BY OBSERVING AS UNDER : THE RECORD HAS ALSO NOT BEEN SUBMITTED. THEREFORE, THE VARIOUS SUBMISSIONS MADE BY THE APPELLANT AGAINST Y OUR FINDINGS OF ADDITION OF DIFFERENCE OF RS.5,02,297/- COULD NOT B E ASCERTAINED. THE APPELLANT HAS STATED THAT IT HAS FOLLOWED LIFO METH OD OF ACCOUNTING FOR DETERMINATION OF VALUE OF CLOSING STOCK AND WHI CH HAS BEEN ACCEPTED BY THE DEPARTMENT SINCE INCEPTION. AS I DO NT HAVE THE BENEFIT OF VERIFYING THIS FACT FROM ASSESSMENT RECO RDS, I AM REMANDING THIS ISSUE TO YOU FOR STUDY OF THE RECORD, THE BOOK S OF ACCOUNTS OF THE ASSESSEE AND THEN FACTUAL FINDINGS AND REPORT WHETH ER THE CLAIM MADE BY THE APPELLANT IS CORRECT OR NOT. 6 SIMILARLY WITH REGARD TO ADDITION OF RS.9,696/- U/S 40A(3) THE APPELLANT STATES THAT IT WAS ALREADY MADE B THE APP ELLANT HIMSELF IN THE COMPUTATION OF INCOME. I AM HEREBY FORWARDING T HE SUBMISSIONS AND COPIES OF VARIOUS ACCOUNTS PRODUCED BY THE APPE LLANT BEFORE ME IN SUPPORT OF GROUNDS OF APPEAL. YOUR PARA WISE REP ORT IS REQUIRED WHICH MAY PLEASE BE SUBMITTED TO THIS OFFICE WITHIN FIFTEEN DAYS FROM THE RECEIPT OF THIS ORDER. 3.D IN RESPECT OF THE ADDITION MADE TO THE VALUATION OF CLOSING STOCK THE ASSESSING OFFICER HAS REPORTED AS UNDER: AS PER YOUR DIRECTIONS, THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE CALLED FOR AND CHECKED WITH REFERENCE TO THE V ALUATION OF CLOSING STOCK. THE STOCK REGISTER OF THE ASSESSEE WAS ALSO CHECKED. PERUSAL OF THE STOCK REGISTER REVEALS THAT NO ITEM WISE STOCK REGISTER HAS BEEN MAINTAINED WHICH WOULD PROV IDE CLUE ABOUT THE ITEMS WHICH HAD BEEN SOLD AND WHICH ARE LEFT BEHIND. IT IS PERTINENT TO MENTION THAT THE ASSESSEE HAS MA INTAINED THE STOCK REGISTER ON THE BASIS OF WEIGHT OF THE ORNAME NTS/GOLD. IN THE ABSENCE OF COMPLETE DETAILS OF ITEMS, IT IS NOT POSSIBLE TO DETERMINE WHETHER THE CLOSING STOCK SHOWN BY THE AS SESSEE RELATES TO THE OLD STOCK F CURRENT YEARS STOCK. TH US, THE ASSESSEES VERSION THAT HE IS FOLLOWING LIFO METHOD OF VALUATION OF HIS CLOSING STOCK IS NOT VERIFIABLE FR OM THE RECORDS MAINTAINED B THE ASSESSEE. 4. THE REPORT OF THE AO WAS SENT TO THE ASSESSE FOR COMMENTS AND THE ASSESSEE HAS SUBMITTED HIS REPLY, WHICH IS AVAILAB LE AT PARA 3(E) OF CIT(A)S ORDER. THE LD. CIT(A) AFTER CONSIDERING THE SUBMIS SIONS OF THE ASSESSEE, REMAND REPORT ETC. CONCLUDED THE MATTER VIDE PARA 3 (F), 3(G) AND 4 AS UNDER 3.F THE WRITTEN SUBMISSIONS OF THE ASSESSEE, REMAN D REPORT, ASSESSMENT ORDER, STOCK DETAILS FILED BY THE ASSESS EE ETC. ARE CAREFULLY CONSIDERED. IT IS SEEN THAT THIS IS THE 2 ND YEAR OF BUSINESS AND THE ASSESSMENT FOR THE ASSESSMENT YEAR 2003-04 WAS DONE UNDER SECTION 143(1)(A) SO THE STAND OF ASSESSEE THAT THIS METHOD WAS ACCEPTED BY THE DEPARTMENT IS NOT BASED ON FACTS. THE ISSUE OF VALUATION OF STOCK 7 HAS COME UP FOR THE FIRST TIME FOR EXAMINATION FOR THE ASSESSMENT YEAR 2005-06 I.E. THE YEAR UNDER CONSIDERATION. THE CONT ENTION OF THE ASSESSEE THAT FOR THE AY 2005-06 THE METHOD OF VAL UATION BY FOLLOWING LIFO METHOD WAS ACCEPTED IS ALSO NOT TRUE . THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2007-08 MADE ON A DAT E SUBSEQUENT TO THE ORDER OF ASSESSMENT YEAR 2005-06 IS ALSO FILED AND IT IS FOUND THAT THERE IS NO DISCUSSION ON THE ISSUE OF VALUATION OF THE STOCK FOR THE YEAR UNDER CONSIDERATION. FROM THE SUBMISSIONS MADE BY THE ASSESSEE IN RESPONSE TO THE REMAND REPORT IS QUITE CLEAR THA T NO ITEM WISE STOCK HAS BEEN MAINTAINED BY THE ASSESSEE, IN THE ASSESSM ENT YEAR 2004-05 THE CLOSING STOCK OF GOLD WAS VALUED AT AN AVERAGE RATE OF 438.52 PER GRAM FOR THE TOTAL STOCK OF 5953.14 GRAMS. IT CLEAR LY MEANS THAT IF WE GO BY THE ASSESSEE VERSION THAT THE STOCK WAS VALUE D AS PER LIFO METHOD, THE CLOSING STOCK IS SHOWN OUT OF EARLIER P URCHASES MADE DURING THE YEAR. IN THE ASSESSMENT YEAR 2005-06 AGA INST THE OPENING STOCK OF 5953.14 GRAMS THE CLOSING STOCK OUT OF SAM E IS SHOWN AT 5047.6 GRAMS VALUED AT RS.438.52. FURTHER STOCK OF 6,120.12 GM. VALUED AT RS.571.22 IS ALSO INCLUDED IN THE CLOSING STOCK. AS PER THE INFERENCE OF THE ASSESSING OFFICER IN PARA 3.5 TO A SSESSMENT ORDER THAT THE FACTS AS MENTIONED THEREIN REVEAL THAT THE SALE S IN THE MONTH OF APRIL, 2004 TO JUNE, 2004, HAVE EXCEEDED THE PURCHA SES MADE. FROM THE DETAILS GIVEN BY THE ASSESSEE THERE IS A SALES OUT OF OPENING STOCK IS RS.3,97,104/- DURING THE ENTIRE YEAR, WHEREAS IN TH E FIRST THREE MONTHS ONLY THE SALES WERE MADE FOR RS.5,52,968/- WHICH DO ES AGAINST THE CLAIM OF THE ASSESSEE AS TO STRICTLY FOLLOWING THE LIFO METHOD. IN THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE THE BASIS OF VALUATION IS GIVEN AS UNDER: ASSESSMENT YEAR 2005-06: 5047.600 GMS OF GOLD STOC K BEING THE MINIMUM STOCK ON 30.06.2004 HAS BEEN VALUED @ 4 38.52 PER GRAM AS OUT OF OPENING STOCK BROUGHT FORWARD FROM PRECED ING YEAR & THE BALANCE 6120.127 GMS. OF CLOSING STOCK. 3.G IT IS QUITE CLEAR FROM THE ABOVE THAT THE ASSES SEE HAS INSTEAD OF FOLLOWING THE CLOSING STOCK AT THE YEAR END, HAS VA LUED THE STOCK ON 30.06.2004 AND SHOWN IT IN THE CLOSING STOCK AS IT IS. THE A.O. IN VIEW OF THIS AND OTHER FACTS MENTIONED HAS REPRODUCED EA RLIER HAS HELD THAT THE MAJORITY OF THE STOCK BELONGS TO THE CURRENT YE AR PURCHASES, AND HE HAS APPLIED THE RAGE OF RS.571/- TO 75% OF THE STOC K. 4. AFTER CAREFULLY CONSIDERING ALL THE ASPECTS OF T HE CASE, I FIND THAT THOUGH THERE IS A CASE FOR DISTURBING THE VALU E OF STOCK AS PER 8 ABOVE DISCUSSION, YET TO TREAT 75% OF THE STOCK BEL ONGING TO THE CURRENT YEAR IS APPARENTLY TOO EXCESSIVE FOR THE FA CT THAT THE OLD STOCK AS WELL AS STOCK LEFT AFTER SALES OUT OF CURRENT P URCHASES STANDS ALMOST IN THE RATIO OF 50:50. IN VIEW OF THIS ONLY 50% OF THE STOCK IS TREATED TO BELONGING TO THIS YEAR AND THE VALUE OF SUCH STOCK WHICH IS TO BE ADDED IN THE VALUE OF CLOSING STOCK COMES TO TOTAL CLOSING STOCK AS ON 31.3.2005 11,167.727 GMS LESS 50% OF THE OPENING STOCK AS ON 1.4.2004 (5047.66) 2,523.8 GMS BALANCE STOCK 8,643.9 GMS COST OF 8643.9 GMS @ 571.22 RS.49,37,568.58 ADD : COST OF 2523.8 GMS @ 438.52 RS.11,06,736.78 TOTAL COST OF 11167.727 GMS. RS.60,44,305.36 LESS VALUE AS SHOWN BY THE ASSESSEE RS. 57,09, 477 DIFFERENCE RS. 3,34,826.36 THUS, THE ASSESSEE GETS RELIEF OF RS.1,67,469/- (5, 02,297 MINUS 3,34,826.36) 5. THE LD. COUNSEL FOR THE ASSESSEE, SH. S.K. BANSA L, ARGUED THAT THE ASSESSEE HAS MAINTAINED CASH BOOK, LEDGER, STOCK RE GISTER AND THE SAME WERE PRODUCED AND WERE CHECKED BY THE A.O. THE BOOKS OF ACCOUNT ARE AUDITED. THE ASSESSEE IS FOLLOWING THE LIFO METHOD OF VALUAT ION OF CLOSING STOCK FOR THE LAST MANY YEARS CONSISTENTLY, WHICH HAS BEEN AC CEPTED BY THE DEPARTMENT. THERE IS NO CHANGE IN METHOD OF ACCOUNT ING. THE AO HAS NOT REJECTED THE BOOKS OF ACCOUNT AND, THEREFORE, NO AD DITION CAN BE MADE. THE ASSESSEE HAS ALSO SUBMITTED THE STOCK TALLY IN WEIG HT AND ON THIS ACCOUNT ALSO NO ADDITION CAN BE MADE. 9 6. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE O RDERS OF THE AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE I S NOT MAINTAINING ITEM-WISE STOCK REGISTER. THE FINDINGS OF THE AO WERE NOT DIS PUTED BY THE LD. COUNSEL FOR THE ASSESSEE, SH. S.K. BANSAL THAT IN THE MONTH S OF APRIL, MAY & JUNE, 2004, THE PURCHASES OF RS.1,32,220/-, RS.1,46,226/- AND RS.1,44,601/- RESPECTIVELY WERE MADE WHEREAS THE SALES OF RS.5,5 2,968/-, RS.3,61,661/- AND RS.1,99,113/- WERE MADE RESPECTIVELY. THAT MEA NS THE TOTAL PURCHASES WERE AMOUNTING TO RS.4,23,047/- FROM APRIL, 2004 TO JUNE, 2004 WHEREAS THE SALES MADE WERE TOTALING RS.11,13,742/- . AFTER APP LYING G.P. RATE, IF THE QUANTITY OF GOODS SOLD OUT OF OPENING STOCK AS ON 0 1.04.2004 IS WORKED OUT, THE SAME APPROXIMATELY COMES ABOVE 1150 GMS. WHEREA S THE ARGUMENT OF THE LD. COUNSEL AND THE EXPLANATION BEFORE THE AO I S THAT THE OUT OF OPENING STOCK OF 5,953.14 GRAMS, THE ASSESSEE HAS INCLUDED 5047.6 GRAMS OF THE STOCK IN THE CLOSING STOCK AS AT 31 ST MARCH, 2005 MEANING THEREBY THE ASSESSEE HAD SOLD 905.540 GMS OF GOLD DURING THE IMPUGNED YEAR. WHERE AS PER THE WORKING OF THE AO DURING THE FIRST THREE MONTHS ONL Y THE SALE CROSSES OUT OF THE OPENING STOCK A MARK OF 1150 GMS. THE EXPLANATI ON OF THE ASSESSEE ON FACTS, THEREFORE, IS NOT ACCEPTABLE AND HAS RIGHTLY BEEN REJECTED BY BOTH THE 10 AUTHORITIES BELOW. BUT AT THE SAME TIME IT IS ALSO THE FACT THAT THE AO HAS NOT MADE THE APPLICATION OF SECTION 145(3) OF THE ACT A ND, THEREFORE, NO ADDITION ON THIS ACCOUNT CAN BE MADE. THUS, THE ADDITION MAD E BY THE A.O. IS DIRECTED TO BE DELETED AND ALL THE GROUNDS OF APPEAL ARE ALL OWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO.110(ASR)/2011 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28TH MARCH, 2012. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 28TH MARCH , 2012 /SKR/ COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE: SH. PANKAJ KUMAR JAIN, PROP. M/S. CH. SHANKER SHAH MUNI LAL, JAIN BAZAR, JAMMU. 2. THE ACIT, CIR.2, JAMMU. 3. THE CIT(A), JAMMU. 4. THE CIT, JAMU. 5. THE SR DR, ITAT, ASR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH : AMRITSAR.