The ACIT, Navsari Circle, Navsari V. M/s. Vega Jewellery, Navsari

ITA 1743/AHD/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9101 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 04-01-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 01-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S N SOPARKAR
• Assessee Lawyers: SONIA KUMAR
• Keywords: Retrospective amendment; Tax effect
• Section: 143(3); 142(1); 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE SHRI RAJPAL YADAV, JM, & SHRI MANISH BORA D, AM. ITA NO. 1604/AHD/2011 ASST. YEAR: 2007-08 M/S VEGA JEWELLERY, 208, KOHINOOR INDUSTRIAL PREMISES CO-OP. SOCIETY LTD., NEAR VIRVANI ESTATE, WESTERN EXPRESS HIGHWAY, GOREGAON EAST, MUMBAI. VS. DCIT, NAVSARI APPELLANT RESPONDENT PAN AAEFV 2026 M ITA NO. 1743/AHD/2011 ASST. YEAR: 2007-08 ACIT, NAVSARI CIRCLE, NAVSARI. VS. M/S VEGA JEWELLERY, 208, KOHINOOR INDUSTRIAL PREMISES CO-OP. SOCIETY LTD., NEAR VIRVANI ESTATE, WESTERN EXPRESS HIGHWAY, GOREGAON EAST, MUMBAI. APPELLANT RESPONDENT ITA NO. 2716/AHD/2012 ASST. YEAR: 2009-10 M/S VEGA JEWELLERY, 208, KOHINOOR INDUSTRIAL PREMISES CO-OP. SOCIETY LTD., NEAR VIRVANI ESTATE, WESTERN EXPRESS HIGHWAY, GOREGAON EAST, MUMBAI. VS. ACIT, NAVSARI CIRCLE, NAVSARI. APPELLANT RESPONDENT ITA NO. 1604,1743, 2716 & 2808 VEGA JEWELLERY ASST. YEAR 2007-08 & 2009-10 2 ITA NO. 2808/AHD/2012 ASST. YEAR: 2009-10 ACIT, NAVSARI CIRCLE, NAVSARI. VS. M/S VEGA JEWELLERY, 208, KOHINOOR INDUSTRIAL PREMISES CO-OP. SOCIETY LTD., NEAR VIRVANI ESTATE, WESTERN EXPRESS HIGHWAY, GOREGAON EAST, MUMBAI. APPELLANT RESPONDENT APPELLANT BY SHRI S. N. SOPARKAR, AR RESPONDENT BY SMT. SONIA KUMAR, SR.DR DATE OF HEARING: 04.01.2016 DATE OF PRONOUNCEMENT: 18/03/2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THESE CROSS APPEALS FOR ASST. YEAR 2007-08 AND ASS T. YEAR 2009-10 ARE DIRECTED AGAINST THE ORDERS OF CIT(A), VALSAD DATED 30/- 03/2011 FOR ASST. YEAR 2007-08 AND DATED 25.9.2012 FOR ASST. YEAR 2009-10 PASSED AGAINST ORDERS U/S 143(3) OF THE IT ACT, 1961 (IN SHORT THE ACT) DATED 30 TH DECEMBER 2009 FOR ASST. YEAR 2007-08 AND DATED 26.12.2011 FOR ASST. YEAR 2009-10. AS THE COM MON ISSUES ARE INVOLVED IN THIS BUNCH OF FOUR APPEALS THEY HAVE BE EN HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 1604,1743, 2716 & 2808 VEGA JEWELLERY ASST. YEAR 2007-08 & 2009-10 3 2. FIRST WE TAKE UP ITA NO.1604/AHD/2011 FOR ASST. YEAR 2007-08 (ASSESSEES APPEAL) WHEREIN FOLLOWING GROUNDS HAVE BEEN RAISED :- GROUNDS OF APPEAL [BEFORE THE HON'BLE ITAT, AHMEDAB AD] 1. IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED A.O. ERRED IN ADDING RS.45,08,042/- BY DISALLOWING GENUINE MANUFA CTURING LOSS CLAIMED IN THE PROCESS OF MANUFACTURING OF HIGH CLASS DIAMOND STUDDED GOLD JEWELLERY BY OVERLOOKING THE WASTAGE NORMS STIPULATED FOR GEMS AND JEWELLERY IND USTRY AS PER FOREIGN TRADE POLICY 2004-2009, CITED BEFORE HIM & ALSO OVERLOOKING THE TYPICAL NATURE OF THE APPELLANT' S BUSINESS AND THEREBY ADOPTING ARBITRARY PERCENTAGE OF 0.5 TO 1 % WITHOUT CITING ANY COMPARABLE INSTANCE AND WITHOUT REJECTING BOOK RESU LT AND WITHOUT POINTING OUT ANY DEFECTS IN THE BOOKS OF ACCOUNTS. 2. IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX(A) ALSO ERRED IN CONFIRMING MANUFACTU RING LOSS OF RS.45,08,042/-. 3. THE AO ALSO ERRED IN LEVYING INTEREST U/S 234C. 3. BRIEFLY STATED FACTS AS CULLED OUT FROM THE ASSE SSMENT RECORDS ARE THAT ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF MANUFACTURING DIAMONDS STUDDED JEWELLERY. E-RETURN FOR ASST. YEAR 2007-08 WAS FILED ON 29.10.2007 DECLARING TOTAL INC OME AT RS.11,01,717/- ACCOMPANIED BY TAX AUDIT REPORT U/S 44AB OF THE ACT. THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE U/S 143(2) OF THE ACT WAS ISSUED ON 8.9.2008 AND SERVED UPON THE ASSESSEE ON 11.9.2008 FOLLOWED BY NOTICE U/S 142(1) OF THE ACT WAS ISSUED ON 31.07.2009 AND SERVED ON THE ASSESSEE ALO NG WITH QUESTIONNAIRE. THE CASE WAS DISCUSSED AND NECESSARY DETAILS AS REQUIRED BY LD. ASSESSING OFFICER WERE FURNISHED AN D DISCUSSION ON VALUATION OF CLOSING STOCK AND GENUINENESS OF MANUF ACTURING LOSS WERE MADE BY LD. ASSESSING OFFICER IN HIS ORDER AND ASSESSMENT WAS FRAMED ON 30.12.2009 BY ASSESSING THE INCOME OF ASS ESSEE AT RS.92,20,894/- AFTER MAKING FOLLOWING ADDITIONS :- ITA NO. 1604,1743, 2716 & 2808 VEGA JEWELLERY ASST. YEAR 2007-08 & 2009-10 4 1.DISALLOWANCE OF SUPPRESSION OF STOCK AS DISCUSSED IN PARA NO.5 RS.35,61,135/- 2.DISALLOWANCE OF MANUFACTURING LOSS AS DISCUSSED IN PARA NO.6 RS.45,08,042/- 3.OUT OF OFFICE EXPENSES AS DISCUSSED IN PARA NO.7 RS.50,000/- RS.81,19,177/- AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE LD. CIT(A ) WHO PARTLY ALLOWED THE APPEAL BY DELETING THE DISALLOWANCE FOR SUPPRESSION OF STOCK VALUE AT RS.35,61,135/-, DELETED THE DISALLOW ANCE OF RS.50,000/- ON ACCOUNT OF OFFICE EXPENSES AND SUSTA INING THE DISALLOWANCE OF RS.45,08,042/- ON ACCOUNT OF MANUFA CTURING LOSS. 4. AGGRIEVED, ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUNAL AGAINST THE CONFIRMATION OF DISALLOWANCE MADE BY LD . CIT(A) OF RS.45,08,042/-. DURING THE COURSE OF ASSESSMENT PRO CEEDINGS LD. ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS SHOWN PERCENTAGE OF SHORTAGE WITH RESPECT TO SALE AT 0.10% AND 0.06% FO R SALE OF DIAMONDS AND GOLD 18 KT WHEREAS SHORTAGE OF 10.59% WERE SHOWN BY ASSESSEE FOR MANUFACTURING OF GOLD ORNAMENTS OF 18 KT. AND THE REPLY MADE BY THE ASSESSEE DURING ASSESSMENT PROCEE DINGS COULD NOT CONVINCE THE ASSESSING OFFICER AND HE BY TAKING A VIEW THAT ASSESSEE HAS CLAIMED EXCESSIVE SHORTAGE LOSS IN COM PARISON TO NORMAL PERMISSIBLE LOSS IN THE MANUFACTURING PROCES S OF MAKING GOLD ORNAMENTS OF 18 KT., MADE A DISALLOWANCE OF RS.45,0 8,042/- BY ALLOWING SHORTAGE AT 1% AT THE PLACE OF 10.59% CLAI MED BY THE ASSESSEE. FURTHER DURING THE COURSE OF APPELLATE PR OCEEDINGS BEFORE LD. CIT(A), SUBMISSIONS WERE MADE BY ASSESSEE WITH RESPECT TO EXIM ITA NO. 1604,1743, 2716 & 2808 VEGA JEWELLERY ASST. YEAR 2007-08 & 2009-10 5 POLICY GUIDELINES WHICH REFERS TO THE PERCENTAGE OF WASTAGE ON GOLD STUDDED JEWELLERY IN BETWEEN 9% -10% BUT THE SAME COULD NOT CONVINCE LD. CIT(A) WHO DISMISSED THE GROUND OF ASS ESSEE BY OBSERVING AS UNDER :- 6.3 DECISION : I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE BY THE ID. AR AND THE FINDINGS OF THE AO. I HAVE ALSO PERUSED THE FACTS OF THE CASE. THERE IS NO DOUBT THAT THE HIGH END GOLD AND DIAMOND JEWELLE RY ARE MANUFACTURED BY HIGHLY SKILLED LABOURERS WITH HIGH QUALITY MACHINE TOOLS. FROM THE.CHART THE WORKING LOSS SHOWN BY THE APPELLANT FOR GOLD (I8KT) 10.59%, DIAM OND JEWELLERY 0.10% AND FOR CHAIN MAKING 0.06%. ALTHOUGH THE CHAIN MAKING PROCE SS IS RELATIVELY SIMPLE COMPARED TO THE HIGH END GOLD JEWELLERY, BUT THE MA KING LOSS RECORDED IS ABNORMAL. THE JEWELLERY IS MANUFACTURED ON CONDITIO NS ENVIRONMENTS SUCH AS OUTSIDE INTERFERENCE OF AIR, MOISTURE, DUST, LIGHT, NOISE ETC. ARE WELL CONTROLLED. THE ACCUMULATED GOLD DUSTS ARE CONDENSED AND RETRIEVED. THE SUPERIOR TOOLS USED ALLOWS BARE MINIMUM WASTAGE DURING THE MAKING. THE WORKERS ARE NEVER ALLOWED WASTAGE % IN EXCESS OF ACCEPTED NORMS. ENQUIRY FROM THE TRADE CIRCLES (BOTH BIG AND SMALL) UNANIMOUSLY STATED THAT THE RATE OF MAKI NG LOSS ACCEPTED CANNOT BE MORE THAN 0.50%. THE APPELLANT HEAVILY RELIED ON TH E PROPOSITION SET OUT IN THE EXIM POLICY TO DRIVE HOME ABOUT THE ISSUE. I AM NOT CONVINCED WITH SUCH ARGUMENT FOR THE REASONS THAT THE TENOR OF THE EXIM POLICY IS DIFFERENT FROM THE ISSUE AT HAND. THEREFORE, TAKING QUEUE FROM THE EXI M POLICY IS NOT RELEVANT. THE BASIC ISSUE IN THIS APPEAL IS CAN 10.59% MAKING LOS S BE ALLOWED. THE APPELLANT'S OWN ADMISSION MAKING LOSS RECORDED FOR DIAMOND JEWE LLERY 0.10% AND GOLD CHAINS (L8KT) 0.06%. THEN HOW THE MAKING LOSS FOR T HE GOLD JEWELLERY (I8KT) RECORDED BY THE APPELLANT WAS 10.59%' S NOT EXPLAINED. NORMALLY THE MAKING LOSS IN ACTUAL TERM NEUTRALIZES DUE TO THE IMPURITIES AD DED TO CONVERT 18KT. FROM 22 KTS./24 KTS FOR MAKING JEWELLERY. IN THIS CIRCUMSTA NCES, I AM IN COMPLETE AGREEMENT WITH THE FINDINGS OF THE AO THAT THE APPE LLANT HAD CLAIMED EXCESS MAKING LOSS AND THE ESTIMATE OF MAKING LOSS ADOPTED BY THE AO IS UPHELD. HENCE THIS GROUND OF APPEAL IS DISMISSED. 5. DURING THE COURSE OF PROCEEDINGS BEFORE THE TRIB UNAL, LD. AR SUBMITTED THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING GOLD JEWELLERY WHICH IS STUDDED WITH HIGHEST QUALIT Y OF DIAMONDS AND INVOLVES VARIOUS PROCESSES LIKE CASTING, HANDWORK, FILING, POLISHING, GOLD SETTING AND EMBEDDING OF DIAMONDS AND OTHER RE LATED PROCESSES ITA NO. 1604,1743, 2716 & 2808 VEGA JEWELLERY ASST. YEAR 2007-08 & 2009-10 6 AND IN THIS PROCESS THERE CERTAINLY IS LOSS OF GOLD BECAUSE TINNY PARTICLES OR IT GETS SUB-MERGED IN LIQUID SOLUTION AND, THEREFORE, CANNOT BE RECOVERED BY ANY REASONABLE HUMAN EFFORTS . 6. LD. AR FURTHER SUBMITTED THAT WASTAGE STANDARD E XHIBITED IN GEMS AND JEWELLERY INDUSTRIES IN SPECIAL EXPORT ECO NOMIC PROMOTION ZONE IS AROUND 9-10% AND IN SUPPORT HE REFERRED TO PAGE 47 49 OF THE PAPER BOOK WHERE WASTAGE NORMS FOR GEMS AND JEW ELLERY INDUSTRIES AS PER FOREIGN TRADE POLICY 2004-09 HAS BEEN PLACED. LD. AR ALSO SUBMITTED THAT IN THE EARLIER YEARS ALSO TH EY HAVE INCURRED SHORTAGE LOSS AT 9% FOR ASST. YEAR 2005-06 AND AT 1 1.05% FOR ASST. YEAR 2006-07 AND ASSESSMENTS WERE COMPLETED U/S 143 (3) OF THE ACT FOR ASST. YEAR 2005-06 AND 2006-07 ON 30.11.2007 A ND 5.12.2008 AND NO DISALLOWANCE FOR MANUFACTURING LOSS HAD BEEN MADE BY LD. ASSESSING OFFICER. LD. AR ALSO REFERRED AND RELIED ON THE DECISION OF ITAT, MUMBAI BENCH IN THE CASE OF SHUKRA JEWELLERY LTD. VS. ACIT IN ITA NO.7436(MUM) OF 2007 VIDE ORDER DATED 16 TH APRIL, 2009.. 7. THE LD. DR RELIED ON THE ORDERS OF LOWER AUTHORI TIES. 8. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. SOLITARY ISSUE IN THIS APPEAL IS AGAINST TH E DISALLOWANCE OF RS.45,08,042/- SUSTAINED BY LD. CIT(A). 9. DURING THE COURSE OF ASSESSMENT PROCEEDINGS ALL QUANTITATIVE DETAILS, RELATING TO PURCHASE, SALE, STOCK IN HAND, IN RELATION TO RAW MATERIAL AND FINISHED GOODS WERE PRODUCED BEFORE TH E ASSESSING ITA NO. 1604,1743, 2716 & 2808 VEGA JEWELLERY ASST. YEAR 2007-08 & 2009-10 7 AUTHORITY AND NO ERROR HAS BEEN POINTED OUT IN THE AUDITED QUANTITATIVE RECORDS WHICH HAVE BEEN REGULARLY MAINTAINED BY THE ASSESSEE SINCE LAST MANY YEARS AND THE ONLY REASON GENERATED IN TH E MIND OF ASSESSING OFFICER THAT IN THE NORMAL COURSE OF MANU FACTURING PROCESS RELATING TO GOLD ORNAMENTS, SHORTAGE LOSS AS PER HI S EXPERIENCE IS AROUND 1% WHEREAS ASSESSEE HAS CLAIMED 10.59% OF SH ORTAGE LOSS. APART FROM THIS OBSERVATION THERE IS NO OTHER FINDI NG PLACED ON RECORD. 10. WE ALSO FIND THAT IN THE HANDBOOK OF PROCEDURES (VOL.I) 1 ST SEPTEMBER 2004 31 ST MARCH, 2009 ISSUED BY MINISTRY OF COMMERCE AND INDUSTRY, DEPARTMENT OF COMMERCE, GOVERNMENT OF INDIA WHEREIN WASTAGE NORMS HAVE BEEN GIVEN IN COLUMN 4A- 2 WHICH READS THE WASTAGE OR MANUFACTURING LOSS ON GOLD/SILVER /PLATINUM JEWELLERY ARTICLES THEREOF IS NORMALLY AROUND 9%. FROM GOING THROUGH THE MANUFACTURING PROCESS SUBMITTED BY THE ASSESSEE WE FIND THAT IT IS ALSO INVOLVED IN THE MANUFACTURING OF GOLD STUDDED JEWELLERY 18 KT. AND THE MANUFACTURING LOSS SHOWN BY ASSESSEE IS AT 10.59% WHICH SHOWS THAT THERE IS NO MAJOR VARIATION BETWEEN THE WASTAGE NORMS OF 9% DEPICTED BY THE HANDBOOK OF PROCEDURES (VOL.I) 1 ST SEPTEMBER 2004 31 ST MARCH, 2009 ISSUED BY MINISTRY OF COMMERCE AND INDUSTRY, DEPARTMENT OF COMMERCE, GOVERNMENT OF IND IA AND LOSS OF 10.59% CLAIMED BY ASSESSEE. WE FURTHER OBSERVE THAT ASSESSEE HAS SHOWN 9% SHORTAGE MANUFACTURING LOSS FOR ASST. YEAR 2005-06 AND 11.05% FOR ASST. YEAR 2006-07 DURING WHICH TURNOVER OF THE ASSESSEE RAISED FROM 4.04 CR. TO 8.04 CR. AND ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT FOR BOTH THE YEARS ON 30.11.2005 AND 5.12.2008 AND THE SHORTAGE LOSS IN MANUFACTURING PROCESS SHOWN BY ASSESSEE AT ITA NO. 1604,1743, 2716 & 2808 VEGA JEWELLERY ASST. YEAR 2007-08 & 2009-10 8 9% AND 11.05% ACCEPTED BY THE REVENUE. THIS FACT RE VEALS THAT ASSESSEE HAS BEEN CONSISTENTLY SHOWING SHORTAGE LOS S IN MANUFACTURING PROCESS IN BETWEEN 9 11% SINCE LAST MANY YEARS AND IN THE PRECEDING YEAR NO ADDITION HAS BEEN MADE ON THIS ACCOUNT AND IN THE YEAR UNDER APPEAL NO SPECIFIC DEFECT IN THE BOOKS OF ACCOUNT HAS BEEN REVEALED BY THE ASSESSING OFFICER INCLUDING THE QUANTITATIVE DETAILS. 11. WE ALSO FIND THAT CO-ORDINATE BENCH, MUMBAI IN THE CASE OF SHUKRA JEWELLERY LTD. VS. ACIT (SUPRA) HAS DEALT WI TH SIMILAR ISSUE WHEREIN ASSESSEES CLAIM FOR LOSS OF 16.7% WAS DISA LLOWED WITHOUT ASSIGNING ANY REASON AND THEREAFTER 1% GROSS PROFIT ON TOTAL TURNOVER HAD BEEN ADOPTED AGAIN WITHOUT ASSIGNING ANY REASON SINCE ASSESSEE HAD FILED EVERY DETAIL OF PURCHASE AND SAL E. THE CO-ORDINATE BENCH ALLOWED THE APPEAL OF ASSESSEE BY OBSERVING A S UNDER :- 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CONSIDE RED THEM CAREFULLY. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE DESERVES TO SUCCEED IN IT S APPEAL. IT IS NOTED THAT THE ASSESSMENT FOR ASST. YR. 2002-03 WAS COMPL ETED UNDER S. 143(3), IN ASST. YR. 2002-03, THE ASSESSEE SHOWN LOSS OF 21 .75 PER CENT AND THE SAME HAS BEEN ACCEPTED BY THE AO. THE ASSESSMENT OR DER FOR ASST. YR. 2002-03 IS PLACED AT P. 91 OF THE PAPER BOOKS. IT I S SEEN THAT NET LOSS OF RS. 5.54 CRORES WAS ACCEPTED BY THE AO. THE METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE IS THE SAME METHOD OF ACCOU NTING ADOPTED IN EARLIER YEAR. EACH AND EVERY PURCHASE IS VOUCHED. N OT A SINGLE PURCHASE FOUND TO BE INCORRECT OR UNVERIFIABLE. THE AO ISSUE D NOTICES TO THE TWO MAIN PARTIES AND BOTH PARTIES HAVE RESPONDED BY GIV ING CONFIRMATIONS THAT THE HAVE MADE SALES TO THE ASSESSEE AS SHOWN I N THE PURCHASE ORDER AS PLACED ON RECORD. NO DISCREPANCY WHATSOEVER HAS BEEN POINTED OUT IN THE BOOKS OF ACCOUNT OR PURCHASE OR SALE VOUCHER S. PAYMENTS HAVE BEEN MADE THROUGH PROPER BANKING CHANNELS. IT IS NO T THE CASE OF THE ITA NO. 1604,1743, 2716 & 2808 VEGA JEWELLERY ASST. YEAR 2007-08 & 2009-10 9 DEPARTMENT THAT THE ASSESSEE IS SHOWING PURCHASE ON HIGHER RATES AND SELLING THE SAME ON LESSER RATE TO REDUCE THE PROFI T. THERE ARE HEAVY LOSSES SUFFERED BY THE ASSESSEE IN EARLIER YEAR. TH E LOSSES HAVE BEEN SHOWN ON ACCOUNT OF VALUATION OF CLOSING STOCK ON T HE BASIS OF MARKET PRICE OR PURCHASE PRICE. THEREFORE, IT CANNOT BE SA ID THAT THE ASSESSEE HAD SHOWN LOSS MALA FIDELY. IT IS FURTHER SEEN -THAT THE CLOSING STOCK PREPARED BY THE ASSESSEE FOR IMMEDIATELY PRECEDING YEAR HAS BEEN ACCEPTED BY THE AC WITHOUT COMMENTING AN\ DEFECTS. THE BOOKS OL ACCOUNT WERE MAINTAINED IN THE REGULAR COURSE OT BU SINESS AND THEY HAVE BEEN ACCEPTED BY THE AO. IT WAS FURTHER STATED THAT EVEN IN SUBSEQUENT ASSESSMENT YEAR I.E., 2004-05 THE OPENING STOCK WHICH WAS OF THE CLOSING STOCK OF THE YEAR UNDER CONSIDERATIO N HAS BEEN ACCEPTED BY THE DEPARTMENT, THEREFORE, FOR THIS REASON, REJE CTION OF THE CLOSING AS WELL AS OPENING STOCK BY THE AO, IN OUR CONSIDERED VIEW IS NOT JUSTIFIED AT ALL. THE AO CANNOT GO INTO THE FACTS OF THE IMME DIATELY PRECEDING YEAR. THE ASSESSEE HAS EXPLAINED THE CLOSING STOCK OF THE IMMEDIATELY PRECEDING YEAR, THE ASSESSMENT OF WHICH HAS ALSO BE EN COMPLETED UNDER S. 143(3). THEREFORE, CLOSING STOCK OF THE IMMEDIAT ELY PRECEDING YEAR HAS TO BE TAKEN INTO CONSIDERATION. IT HAS BEEN CAT EGORICALLY STATED THAT IN VIEW OF CONSISTENT METHOD OF VALUATION, LOSS IS INCURRED ON ACCOUNT OF VALUATION OF CLOSING STOCK ONLY. NEITHER THE VAL UATION OF THE CURRENT YEAR WAS EXAMINED BY THE AO NOR ANY OTHER MATERIAL WAS BROUGHT ON RECORD TO ESTABLISH THAT VALUATION DONE BY THE ASSE SSEE IS NOT PROPER. THE VALUATION HAS BEEN DONE CONTINUOUSLY ON THE BAS IS OF MARKET PRICE OR PURCHASE PRICE WHICH IS LOWER AND AS PER ACCEPTE D METHOD. RELIANCE HAS BEEN PLACED BY THE AO ON THE DECISION OF SAMIR DIAMONDS EXPON (SUPRA). HOWEVER, AS STATED ABOVE, EACH CASE HAS ITS OWN FAC TS AND EACH BUSINESSMAN HAS ITS OWN WAY OF DOING BUSINESS. THER E MAY BE PROFIT IN SOME ITEMS AND THERE MAY BE LOSS IN SOME OTHER ITEM S. VARIOUS REASONS HAVE BEEN EXPLAINED BEFORE THE AO. HOWEVER, THE AO DID NOT ACCEPT THE CONTENTIONS OF THE ASSESSEE. BY MERELY SAVING T HAT THE EXPLANATION IS NOT ACCEPTABLE AND WITHOUT BRINGING ANY OTHER MA TERIAL, IN OUR CONSIDERED VIEW, THE REJECTION OF BOOKS OF ACCOUNT WAS NOT JUSTIFIED AT THE END OF THE AUTHORITIES BELOW. 6.1 WE HAVE ALSO NOTED THAT THERE WAS A LOSS IN TRADING ACTIVITY FOR ASST. YR. 2001-02 ALSO AND THE ASSESSMENT FOR THAT YEAR W AS COMPUTED UNDER ITA NO. 1604,1743, 2716 & 2808 VEGA JEWELLERY ASST. YEAR 2007-08 & 2009-10 10 S. 143(3). BOOKS OF ACCOUNTS HAVE BEEN ACCEPTED FOR THAT YEAR ALSO. COPY OF THE ORDER FOR ASST. YR. 2001-02 IS PLACED A T PP. 83 TO 86 OF THE PAPER BOOK. 6 .2 WE HAVE FURTHER NOTED THAT EACH AND EVERY DETAIL AS REQUIRED BY THE AO WAS FILED FROM TIME TO TIME. THERE IS NOT A SING LE INSTANCE THAT THE ASSESSEE HAS NOT FILED THE DETAILS AS PER REQUIREME NT OF THE AO. COPIES OF THE LETTER ALONG WITH RETURN ARE PLACED AT PP. 3 1 TO 64 OF THE PAPER BOOK. ITEM-WISE PURCHASES AND ITEMS-WISE SALES ALON G WITH MONTH-WISE OPENING STOCK AND PURCHASE AND SALE HAVE BEEN FILED . THE AO DREW AN INFERENCE AGAINST THE ASSESSEE THAT THE TWO PARTIES OUT OF 4 PARTIES TO WHOM SUMMONS WAS ISSUED HAVE NOT COMPLIED WITH THE SUMMONS ISSUED UNDER S. 131. THERE MAY BE SO MANY REASONS I N NOT RECEIVING OR COMPLYING WITH THE NOTICES. THERE MAY BE CHANGES OF ADDRESS ALSO. THE ASSESSEE HAS DISCHARGED ITS BURDEN FOR FILING THE D ETAILS OF PURCHASE FROM THOSE PARTIES AND HAS GIVEN THEIR COMPLETE ADD RESSES AVAILABLE WITH THE ASSESSEE. IF BY ANY REASON, THE TWO PARTIE S FROM WHOM SIMILAR PURCHASES WERE MADE COULD NOT APPEAR BEFORE THE AO, THE ASSESSEE CANNOT BE HELD FAULTY AND NO INFERENCE SHOULD HAVE BEEN DAWN AGAINST THE ASSESSEE. THEREFORE, KEEPING IN VIEW OF THESE F ACTS AND CIRCUMSTANCES AND KEEPING IN VIEW OF VOLUMINOUS DET AILS REQUIRED BY THE AO FILED BEFORE HIM, WE FIND THAT THE AO AND TH E GIT (A) WERE NOT JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE. T HE AO AS WELL AS CIT(A) HAVE REJECTED THE LOSS CLAIMED BY THE ASSESS EE AT 16.70 PER CENT. THE ENTIRE LOSS HAS BEEN DISALLOWED WITHOUT ASSIGNI NG ANY REASON AND THEREAFTER, 1 PER CENT GROSS PROFIT ON THE TOTAL TU RNOVER HAS BEEN ADOPTED AGAIN WITHOUT ASSIGNING ANY REASON, THEREFORE, AS S TATED ABOVE, BOTH THE AUTHORITIES WERE NOT JUSTIFIED IN REJECTING THE BOO KS OF ACCOUNT AND NOT ALLOWING CLAIM OF LOSS OF THE ASSESSEE. ACCORDINGLY , WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND THE AO IS DIREC TED TO ALLOW THE CLAIM OF THE ASSESSEE AS CLAIMED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. 12. THE FACTS OF THE CASE DISCUSSED IN THE DECISION OF CO-ORDINATE BENCH IN THE CASE OF SHUKRA JEWELLERY LTD. VS. ACIT (SUPRA) ARE ALSO ITA NO. 1604,1743, 2716 & 2808 VEGA JEWELLERY ASST. YEAR 2007-08 & 2009-10 11 SIMILAR TO THE FACTS OF THE CASE WE ARE DEALING IN. WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDIN ATE BENCH REFERRED ABOVE AND ALSO ON THE BASIS OF OUR DISCUSSION MADE ABOVE, INCLUDING WASTAGE NORMS SET BY THE HANDBOOK OF PROCEDURES (VO L.I) 1 ST SEPTEMBER 2004 31 ST MARCH, 2009 ISSUED BY MINISTRY OF COMMERCE AND INDUSTRY, DEPARTMENT OF COMMERCE, GOVERNMENT OF INDIA AND ALSO FOLLOWING CONSISTENT PRINCIPLE OF MANUFACTURIN G PROCESS BY THE ASSESSEE DULY SUPPORTED BY AUDITED FINANCIAL STATEM ENTS AND COMPLETE QUANTITATIVE RECORDS, WE ARE OF THE VIEW T HAT NO DISALLOWANCE IS CALLED FOR IN MANUFACTURING LOSS AT RS.45,08,042/-. WE DELETE THE SAME. ACCORDINGLY THE APPEAL OF ASSESSEE IS ALLOWED. 13. GROUND NO.3 IS CONSEQUENTIAL. 14. NOW WE TAKE UP REVENUES APPEAL IN ITA NO.1743/ AHD/2011 FOR ASST. YEAR 2007-08 WHEREIN FOLLOWING GROUNDS HA VE BEEN RAISED: [1] ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE HONTOLE CIT(A) ERRED IN DELETING THE ADDITION OF RS. 35,61,135/- M ADE ON ACCOUNT OF SUPPRESSION OF VALUATION OF CLOSING STOCK AND ADDITION OF RS.50 ,000/- MADE ON ACCOUNT OF DISALLOWANCE OUT OF VARIOUS EXPENSES. [2] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A) OUGHT TO HAVE UPHELD THE ADDITION MADE BY THE A.O. [3] IT IS, THEREFORE, PRAYED TO SET ASIDE TH E ORDER PASSED BY THE CIT(A) AND THAT OF THE ORDER PASSED BY THE AO BE RESTORED. [4] THE APPELLANT CRAVES LEAVE TO ADD , ALTER OR AMEND ANY GROUNDS OF APPEAL. 15. ADDITION ON ACCOUNT OF SUPPRESSION OF VALUATION OF CLOSING STOCK AT RS.35,61,135/- MADE BY ASSESSING OFFICER ON THE BASIS OF HIS ITA NO. 1604,1743, 2716 & 2808 VEGA JEWELLERY ASST. YEAR 2007-08 & 2009-10 12 FINDING THAT ASSESSEE HAS SHOWN VALUATION OF CLOSIN G STOCK AT LOWER COST OF AND MARKET VALUE AND COST IS CALCULATED ON WEIGHTED METHOD. ON BEING ASKED ABOUT THE WEIGHTED COST METHOD TO TH E ASSESSEE IT WAS SHOWN THAT WEIGHTED AVERAGE COST HAS BEEN CALCU LATED FOR THE COMPLETE YEAR WHICH DID NOT CONVINCE THE ASSESSING OFFICER AS HE WAS OF THE VIEW THAT CLOSING STOCK OF GOODS IN HAND AS ON 31.3.2007 IS MAINLY ARISING OUT OF PURCHASES MADE IN THE MONT HS OF FEBRUARY, 2007 AND MARCH, 2007 AND WEIGHTED METHOD OUGHT TO H AVE BEEN CALCULATED BY TAKING AVERAGE OF THESE TWO MONTHS AN D APPLYING THE SAME VALUE OF CLOSING STOCK WAS RE-WORKED AND ADDIT ION OF RS.35,61,135/- WAS MADE ON ACCOUNT OF SUPPRESSION O F CLOSING STOCK. 16. REVENUE IS NOW IN APPEAL BEFORE THE TRIBUNAL. 17. LD. DR RELIED ON THE ORDER OF ASSESSING OFFICER WHEREAS LD. AR RELIED ON THE DECISION OF LD. CIT(A) AND REITERATED THE SUBMISSIONS MADE BEFORE LOWER AUTHORITIES AND ALSO RELIED ON TH E DECISION OF CO- ORDINATE BENCH IN THE CASE OF DCIT VS. SHRI CHIMANL AL H. SONI IN ITA NO.1663/AHD/2009 VIDE ORDER DATED 31.5.2012. 18. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THIS APPEAL RAISED BY REVENUE IN THE FIRST GROUND IS ON ACCOUNT OF DELETION OF ADDITION OF SUPPRESSIO N OF VALUATION OF CLOSING STOCK OF RS. 35,61,135/- AND DELETION OF AD DITION OF RS.50,000/- ON ACCOUNT OF DISALLOWANCE OF VARIOUS E XPENSES. ITA NO. 1604,1743, 2716 & 2808 VEGA JEWELLERY ASST. YEAR 2007-08 & 2009-10 13 19. FIRST WE TAKE UP SUPPRESSION OF VALUATION OF CL OSING STOCK AT RS. 35,61,135/-. FROM GOING THROUGH THE ASSESSMENT ORDE R WE FIND THAT ASSESSING OFFICER HAS ARRIVED AT THE WEIGHTED AVERA GE COST METHOD BY TAKING THE COST OF PURCHASES MADE IN FEBRUARY AN D MARCH, 2007. WHEREAS ASSESSEE HAS CALCULATED THE WEIGHTED AVERAG E ON THE BASIS OF PURCHASES OF 12 MONTHS . APART FROM THIS CALCULA TION, WHEREIN PURCHASES OF TWO MONTHS HAVE BEEN TAKEN AS A BASIS OF CALCULATING AVERAGE COST BY ASSESSING OFFICER, BUT THERE IS NO OTHER OBSERVATIONS IN RELATION TO ANY DEFECT IN THE REGULAR BOOKS OF A CCOUNT MAINTAINED BY THE ASSESSEE. 20. LD. CIT(A) HAS DELETED THE ADDITION BY OBSERVIN G AS UNDER :- DECISION : I HAVE CAREFULLY PERUSED THE SUBMISSION MADE BY THE ID. AR AND THE FINDINGS OF THE AO. ACCORDING TO THE AO THE WEIGHTE D AVERAGE COST METHOD ADOPTED BY THE APPELLANT DOES NOT REFLECT THE TRUE AND CORR ECT VALUE OF THE STOCK. FURTHER, THE AO OBSERVED THAT, I) THE APPELLANT HAS NOT FOLLOWED THE RECOGNIZED- COMMERCIAL ACCOUNTING POLICY FOR VALUATION OF CLOSING STOCK WH ICH IS LOWER OF COST OR MARKET PRICE INSTEAD ADOPTED WEIGHTED AVERAGE COST METHOD ON THE BASIS OF PURCHASE AND SALE OF ENTIRE YEAR, II) THE ASSESSEE OUGHT TO HAVE ADOPTED AVERAGE RATE OF FEBRUARY & 4ARCH 2007 TO ARRIVE AT THE CLOSING STOCK. THE DEFENCE OF THE ID. R HAS THE FOLLOWING APPROACHES; I. METHOD OF ACCOUNTING CONSISTENTLY FOLLOWED SINCE INCEPTION OF THE BUSINESS AND THE DEPARTMENT HAD ACCEPTED IN THE EARLIER YEAR S. II OPENING STOCK NOT CHANGED BY ASSESSING OFFICER : -IT IS SUBMITTED THAT MERELY CHANGING THE METHOD OF VALUATION OF CLOSING STOCK WITHOUT CHANGING THE METHOD OF VALUATION OF OPENING STOCK WOULD TOTALLY DISTORT THE INCOME OF-THE APPELLANT. , III AS-2 RECOGNIZES WEIGHTED AVERAGE COST :- IT WAS FURTHER POINTED OUT THAT, THE APPELLANT HAS CONSISTENTLY FOLLOWED THE METHOD OF V ALUATION OF CLOSING STOCK AS PER THE AS-2 OF THE ICAI. IV FIFO IS NOT THE ONLY METHOD TO BE FOLLOWED. ITA NO. 1604,1743, 2716 & 2808 VEGA JEWELLERY ASST. YEAR 2007-08 & 2009-10 14 V CHOICE IS WITH THE APPELLANT:-THE ASSESSING OFFIC ER REJECTED THESE CONTENTIONS OF THE APPELLANT BY STATING THAT THIS METHOD OF 'WE IGHTED AVERAGE COST IS NOT A RECOGNIZED COMMERCIAL POLICY FOR VALUATION OF CLOSI NG STOCK. THE ASSESSING OFFICER MERELY TOOK THE AVERAGE RATE OF PURCHASES O F FEBRUARY AND MARCH 2007 TO ARRIVE AT-VALUATION OF CLOSING STOCK. ; VI COMPARATIVE WORKING OF VALUATION OF STOCK ON FIF O BASIS AND WEIGHTED AVERAGE COST BASIS WAS GIVEN TO THE AO DURING THE A SSESSMENT PROCEEDING. THE RESULT WAS (-) RS.62,861/- THEREBY THE APPELLAN T HAD NOT DERIVED UNDUE ADVANTAGE BY ADOPTING WEIGHTED AVERAGE COST METHOD. 5.3 THE FACTUAL MATRIX OF THE CASE SUGGEST THA T THE CONTENTION OF THE ID. AR HAS A FORCE. THE APPROACH OF THE AO THAT THE STOCK SHOULD BE VALUED ON FIFO BASIS BY ADOPTING THE VALUE OF PURCHASES DURING FEBRUARY/MAR CH 2007 IS INAPPROPRIATE BECAUSE THE APPELLANT HAS BEEN CONSISTENTLY FOLLOWING THE W EIGHTED AVERAGE COST METHOD. UNLESS THERE IS INCONSISTENCY IN THE METHOD ADOPTED BY THE ASSESSEE, THE AO CANNOT THRUST ON THE APPELLANT WHICH METHOD SHOULD HE FOLL OW. MOREOVER, COMPARATIVE WORKING OF VALUATION OF STOCK, AS DESIRED BY THE AO , ON FIFO BASIS AND WEIGHTED AVERAGE COST BASIS WAS GIVEN TO THE AO DURING THE ASSESSMENT PROCEEDING AND THE RESULT WAS (-) RS.62,86I/~ THEREBY THE APPELLANT HA D NOT DERIVED UNDUE ADVANTAGE BY ADOPTING WEIGHTED AVERAGE COST METHOD. THE ID.AR AL SO SUPPORTED HIS ARGUMENT WITH RELEVANT CASE LAWS. IN THIS CIRCUMSTANCES, IN MY VIEW, THE AO IS NOT CORRECT TO THRUST UPON THE APPELLANT THE FIFO METHOD- OF VALUA TION OF STOCK WITHOUT BRINGING ANY MATERIALS EVIDENCE SHOWING THAT THE APPELLANT HAS D ERIVED BENEFIT BY ADOPTING WEIGHTED AVERAGE METHOD FOR VALUATION OF STOCK. THE AO OUGHT NOT TO HAVE REJECTED THE PLEA OF THE APPELLANT THAT FIFO METHOD HAS TO B E FOLLOWED FOR BOTH OPENING STOCK AND THE CLOSING STOCK AS WELL. THEREFORE, THE AO IS DIRECTED TO DELETE THE ADDITION MADE IN THIS GROUND. THE APPEAL IN THIS GROUND IS ALLOWED. 21. WE FURTHER FIND THAT CO-ORDINATE BENCH IN THE C ASE OF DCIT VS. SHRI CHIMANLAL H. SONI (SUPRA) HAS ALSO DEALT WITH SIMILAR ISSUE WHERE ASSESSING OFFICER HAS CALCULATED THE VALUATION OF C LOSING STOCK BY APPLYING DIFFERENT METHOD THAN REGULARLY ADOPTED BY THE ASSESSEE AND THE OBSERVATION OF THE CO-ORDINATE BENCH IS REP RODUCED BELOW :- 8. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORDS, IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAS VALUED THE ST OCK AT WEIGHTED AVERAGE COST IN THE CURRENT YEAR AND THE SAME METHOD WAS FOLLOWE D BY ASSESSEE IN EARLIER YEARS AND IT WAS ACCEPTED BY THE DEPARTMENT WHILE F INALIZING THE ASSESSMENT U/S. 143(3). THE ASSESSEE HAS ALSO ADOPTED THE SAME METH OD FOR ARRIVING AT THE 'COST ITA NO. 1604,1743, 2716 & 2808 VEGA JEWELLERY ASST. YEAR 2007-08 & 2009-10 15 OF GOODS SOLD'. THE METHOD OF VALUATION IS ALSO IN CONSONANCE WITH THE I.T. ACT AND THE ACCOUNTING STANDARDS PRESCRIBED BY ICAI. IT IS ALSO AN UNDISPUTED FACT THAT THE SIMILAR VALUATION METHOD OF STOCK HAS BEEN ACCEPTED BY THE DEPARTMENT IN CASE OF C.H. JEWELLERS (P ) LTD., ITS SISTER CON CERN. THE LD. CIT (A) HAS GIVEN A FINDING THAT WEIGHTED AVERAGE COST ADOPTED BY THE A SSESSEE FOR WORKING OUT THE VALUATION OF STOCK IS AFTER TAKING INTO EACH AND EV ERY ITEM OF SALES AND PURCHASE DURING THE YEAR. THE AMOUNT OF SALES TAX AND VAT EM BEDDED IN THE VALUE OF PURCHASE AND SALE HAS ALSO BEEN REFJECTED IN THE WE IGHTED AVERAGE COST. HE HAS ACCORDINGLY HELD THAT THE RATE OF RS.658.64 PER GM. APPLIED BY ASSESSEE TO VALUE ITS STOCK OF 22 CT. NEW ORNAMENTS WAS CORRECTLY DET ERMINED. THE LD. CIT (A) HAS FURTHER GIVEN A FINDING THAT THE -RATE OF RS.764/- GM IS ALSO NOT WEIGHTED AVERAGE RATE COMPUTED AFTER CONSIDERING ALL PERIODICAL TRAN SACTIONS. HE 'FURTHER GAVE A FINDING THAT THE BASIS OF AD-HOC ADDITION OF RS.10 LAC IS NOT KNOWN. THE FINDING OF CIT (A) 'HAS NOT BEEN CONTROVERTED BY THE DEPARTMEN T. NO MATERIAL HAS BEEN BROUGHT ON RECORD BY REVENUE BEFORE US'TO CONTROVER T THE AFORESAID FACTS. IN THE CASE OF ACIT VS. SHANTILAL NAGARDAS & CO. (SUPRA) T HE CO-ORDINATE BENCH HAS HELD WHEN REVENUE DEPARTMENT ACCEPTED A METHOD OF V ALUATION OF CLOSING STOCK IN EARLIER YEARS, ON THE SAME S ET OF FACTS AND CIRCUMSTANCES OF THE CASE OF THE BUSINESS OF ASSESSEE, THEN THE PRIN CIPLE OF CONSISTENCY SHOULD BE FOLLOWED BY DEPARTMENT WHILE MAKING THE ASSESSMENT THOUGH THE PRINCIPLE OF RES-JUDICATA DOES NOT APPLY TO INCOME TAX PROCEEDINGS. NEVERTHELESS, WHATEVER THE SETTLED LAW IS APPLICABLE IN RESPECT O F VALUATION OF CLOSING STOCK BUT THE PECULARITY OF THIS CASE IS THAT THE A.O. HAS ST ARTED TO VALUE THE STOCK AT CLOSE INTERVALS OF EACH MONTH BUT FINALLY THAT WAS NOT MA DE THE BASIS OF ADDITION. THE A.O. HAS LEFT THAT OBSERVATION/CALCULATION WITHOUT DRAWING A CONCLUSION HOWEVER FINALIZED THE VALUATION ON AN ADD-HOC BASIS. BECAUS E OF THIS PECULIAR SITUATION WE ARE NOT INCLINED TO APPROVE THE SAID APPROACH OF AS SESSMENT OF THE A.O. IN VIEW OF THE FOREGOING FACTS AND IN THE CIRCUMSTANCES OF THE CASE WE ARE OF THE CONSIDERED VIEW THAT CIT (A) HAS RIGHTL Y DELETED THE ADDITION OF RS.2,60,63,437/- MADE TO CLOSING STOCK. WE ACCORDIN GLY UPHELD THE ACTION OF CIT (A) AND DISMISS THIS GROUND OF REVENUE. 9. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSE D. 22. WE FIND THAT THE FACTS OF THE CASE DEALT IN THI S APPEAL ARE SIMILAR TO THE FACTS ADJUDICATED IN THE DECISION OF THE CO- ORDINATE BENCH, AHMEDABAD IN THE CASE OF DCIT VS. SHRI CHIMANLAL H. SONI (SUPRA) AND ALSO LOOKING TO THE FACT THAT ASSESSEE HAS BEEN MAINTAINING METHOD OF ACCOUNTING CONSISTENTLY AND NO CHANGE HAS BEEN MADE IN THE OPENING STOCK BY THE ASSESSING OFFICER, WEIGHTE D AVERAGE COST ITA NO. 1604,1743, 2716 & 2808 VEGA JEWELLERY ASST. YEAR 2007-08 & 2009-10 16 HAS BEEN CALCULATED AS PER ACCOUNTING STANDARD ISSU ED BY ICAI AND EVEN IF THE COMPARATIVE WORKING OF VALUATION OF STO CK ON FIFO BASIS AND WEIGHTED COST ON AVERAGE BASIS AS GIVEN BY THE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS THEN ALSO THE RESULT WILL BE IN NEGATIVE AND NOTHING CAN BE INFERRED THAT THE APPEL LANT HAD DERIVED ANY UNDUE ADVANTAGE. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT STOCK VALUATION METHOD ADOPTED BY THE ASSESSEE IN THE YEAR UNDER APPEAL HAS BEEN CONSISTENTLY FOLLOWED SINCE L AST MANY YEARS, NO DEFECT IN THE BOOKS HAVE BEEN POINTED OUT BY THE ASSESSING OFFICER NOR BOOKS OF ACCOUNT HAVE BEEN REJECTED AND THE VALUATION OF CLOSING STOCK BY APPLYING HIS OWN FORMULA OF WEIGHT ED AVERAGE COST WITHOUT APPLYING IT TO THE OPENING STOCK OF THE ASS ESSEE AND, THEREFORE, IN OUR VIEW THIS ADDITION FOR SUPPRESSIO N OF CLOSING STOCK IS UNCALLED FOR AND NEEDS TO BE DELETED. THEREFORE, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) AND UPHOLD T HE SAME. IN THE RESULT, THIS GROUND RELATING TO SUPPRESSION OF VALU ATION OF CLOSING STOCK IS DISMISSED. 23. AS FAR AS GROUND OF REVENUE RELATING TO DISALLO WANCE OF RS.50,000/- ON ACCOUNT OF OFFICE EXPENSES, WE FIND THAT LD. CIT(A) HAS DELETED THIS ADDITION BY OBSERVING AS UNDER :- 7.1 DECISION : WHILE FINALIZING THE ASSESSMENT THE AO NOTICED THAT THE APPELLANT HAS INCURRED OFFICE EXPENSES, OFFICE MAINTENANCE, M ISCELLANEOUS EXPENDITURE AND PRINTING AND STATIONERY EXPENDITURE AGGREGATING TO RS. 4,59,911/-. THE AO MADE AD- HOC ADDITION OF RS-50,000/- BY HOLDING THAT SOME VO UCHERS WERE NOT VERIFIABLE IN THE TERMS OF DATE, NAME OF THE PAYEE AND NON-AVAILABILI TY OF SMALL VOUCHERS. THE APPELLANT CONTENDED THAT SUCH AD-HOC ADDITION CANNO T BE MADE WITHOUT FINDING DISCREPANCY IN Y OF THE EXPENSES VERIFIED BY HIM. T HE ID. ID. AR ALSO RELIED ON VARIOUS CASE LAWS TO SUPPORT HIS CASE. I HAVE CAREF ULLY CONSIDERED THE FINDINGS OF THE ITA NO. 1604,1743, 2716 & 2808 VEGA JEWELLERY ASST. YEAR 2007-08 & 2009-10 17 AO AND THE SUBMISSION MADE BY THE ID. AR. WHAT IS C LEAR IS THAT THE ADDITION MADE BY THE AO IS AD-HOC AND WITHOUT ANY BASIS. FOR AD-H OC ADDITION HE OUGHT TO HAVE PINPOINTED THE NATURE OF EXPENDITURE AND THE DISCRE PANCY IN THE BILLS/VOUCHERS. IN THE INSTANT CASE THE AO HAS NOT DONE. THE ID. AR HAS A VALID POINT THAT SUMMARY AD-HOC DISALLOWANCE IS NOT PERMISSIBLE IN THE IT ACT. FOR MAKING ADDITION THERE HAS TO BE A FINDING BY THE AO. THE CASE OF THE APPELLANT IS SUP PORTED BY THE VARIOUS JUDICIAL DECISIONS CITED BY HIM. IN THIS CIRCUMSTANCES, THE AO IS DIRECTED TO DELETE THE ADDITIONS MADE IN THIS GROUND. THE APPEAL IN THIS G ROUND IS ALLOWED., 24. WE ARE OF THE VIEW THAT LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION BECAUSE SUCH KIND OF AD HOC DISALLOWANCE A RE NORMALLY UNCALLED FOR IN THE CASE OF ASSESSEES WHO ARE REGUL ARLY MAINTAINING BOOKS OF ACCOUNT WHICH ARE AUDITED U/S 44AB OF THE ACT AND ALL THE DOCUMENTS RELATING TO EXPENSES INCURRED ARE VERIFIE D BY THE AUDITORS AND ALSO LOOKING TO THE MAGNITUDE OF THE TURNOVER O F THE ASSESSEE WHICH IN THIS YEAR IS RS.17.36 CRORES, EXPENSES IN CURRED ON ACCOUNT OF OFFICE EXPENSES, OFFICE MAINTENANCE, MISCELLANEO US EXPENDITURE, PRINTING & STATIONERY EXPENDITURE AGGREGATING TO RS .4,59,911/-, CANNOT BE SAID AS UNREASONABLE. THEREFORE, LD. CIT(A) HAS RIGHTLY DELETED THE AD HOC ADDITION OF RS.50,000/- AS NO SPECIFIC DEFEC T AND DISCREPANCY HAS BEEN POINTED OUT BY THE ASSESSING OFFICER. ACCO RDINGLY, THIS GROUND OF APPEAL IS DISMISSED. 25. OTHER GROUNDS ARE GENERAL IN NATURE WHICH NEEDS NO ADJUDICATION. 26. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. 27. NOW WE TAKE UP ASSESSEES APPEAL IN ITA NO.2716 /AHD/2012 FOR ASST. YEAR 2009-10 WHEREIN FOLLOWING GROUNDS HA VE BEEN RAISED :- ITA NO. 1604,1743, 2716 & 2808 VEGA JEWELLERY ASST. YEAR 2007-08 & 2009-10 18 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE HONORABLE CIT (A), VALSAD HAS ERRED IN CONFIRMING THE ADDITIO N MADE BY THE LD. A.O. OF RS. 54,59,500/-, DISALLOWING GENUINE MANUFACTURING LOSS CLAIMED IN THE PROCESS OF MANUFACTURING OF HIGH CLASS DIAMOND STUD DED GOLD JEWELLERY AS PER THE SPECIFICATION OF THE CUSTOMERS. 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE ADDITION STATED ABOVE DESERVES TO BE DELETED, HENCE, IT IS P RAYED TO YOUR HONOUR TO DELETE THE SAME AND DO THE JUSTICE. 3 YOUR APPELLANT RESERVES HIS RIGHT TO ADD, AMEND, ALTER AND/OR WITHDRAW ANY GROUND OF APPEAL AT THE TIME OF HEARING OF THE APPEAL. 28. AS REGARDS GROUND NO.1, WE OBSERVE THAT SIMILAR ISSUE HAS BEEN DECIDED BY US IN FAVOUR OF ASSESSEE IN ITA NO.1604/ AHD/2011 FOR ASST. YEAR 2007-08 ABOVE, AFTER DETAILED DISCUSSION . THEREFORE, FOLLOWING THE SAME WE ALLOW THIS GROUND OF ASSESSEE . 29. OTHER GROUNDS OF THE APPEAL ARE GENERAL IN NATU RE, WHICH NEED NO ADJUDICATION. 30. THIS APPEAL OF ASSESSEE IS ALLOWED. 31. IN ITA NO.2808/AHD/2012 FOR ASST. YEAR 2009-10, GRIEVANCE OF REVENUE IS AS UNDER:- 1. THE ID. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE OF RS. 8,99,199/- ON ACCOUNT OF VALUATION OF CLOSING STUCK BY ADOPTING FIFO METHOD AS AGAINST WEIGHTED AVERAGE METHOD FOLLOWED BY THE AS SESSEE. ITA NO. 1604,1743, 2716 & 2808 VEGA JEWELLERY ASST. YEAR 2007-08 & 2009-10 19 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER INCOME TAX (A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 3. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A) MAY BE SET-ASIDE AND THAT OF THE ASSESSING OFFICE R BE RESTORED. 32. THIS APPEAL WAS PRESENTED ON 12/12/2012. ON 10 .12.2015 THE CBDT HAS ISSUED INSTRUCTIONS BEARING NO. 21/2015 PR OHIBITING ITS SUBORDINATE AUTHORITIES FROM FILING OF THE APPEAL T O THE TRIBUNAL AGAINST THE ORDER OF THE CIT(A) WHERE THE TAX EFFEC T BY VIRTUE OF THE RELIEF GIVEN BY THE CIT(A) IS LESS THAN RS.10 LAKHS . THE INSTRUCTIONS HAVE BEEN MADE APPLICABLE WITH RETROSPECTIVE EFFECT , MEANING THEREBY, THESE INSTRUCTIONS ARE APPLICABLE ON PENDI NG APPEALS ALSO. THE TAX EFFECT ON DELETION OF THIS TOTAL ADDITION W OULD BE LESS THAN RS.10 LAKHS. THE PRESENT APPEAL DESERVES TO BE DISM ISSED BEING TREATED TO BE FILED IN VIOLATION OF CBDT INSTRUCTIO NS. THE CASE DOES NOT FALL WITHIN THE AMBIT OF EXCEPTIONS PROVIDED IN THE INSTRUCTIONS. IT IS FURTHER OBSERVED THAT SINCE, WHILE HEARING THE A PPEAL, SUCH FACTORS WERE NOT CONSIDERED, THEREFORE, IN CASE, ON RE-VERI FICATION AT THE END OF THE AO, IT CAME TO THE NOTICE THAT THE TAX EFFEC T IS MORE OR IT FALLS WITHIN THE AMBIT OF EXCEPTIONS PROVIDED IN THE INST RUCTION, THEN THE DEPARTMENT WILL BE AT LIBERTY TO APPROACH THE TRIBU NAL FOR RECALL OF THIS ORDER. SUCH APPLICATION SHOULD BE FILED WITHIN FOU R YEARS OF THIS ORDER. IN VIEW OF THE ABOVE, THE APPEAL OF THE REVENUE IS DISMISSED. ITA NO. 1604,1743, 2716 & 2808 VEGA JEWELLERY ASST. YEAR 2007-08 & 2009-10 20 33. IN THE RESULT, APPEALS OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 18/03/201 6 SD/- SD/- (RAJPAL YADAV) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 18/03/2016 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 15/03/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 17/03/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK:1 8/3/16 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: