Asst. CIT, Circle-3, Nanded V. M/s. Kwality Pulse Industries, Latur

ITA 2093/PUN/2012

• Counselvise Citation: 209324514 RSA 2012
• Duration Of Justice: 1 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 29-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Keywords: Fair market value
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 2093/PN/2012 (ASSTT.YEAR : 2009-10) ACIT, CIRCLE-3, NANDED .. APPELLANT VS. M/S. KWALITY PULSE INDUSTRIES, C/O. B. RAGHUNATH KALANTRI, 18-A, MARKET YARD, LATUR .. RESPONDENT PAN NO.AABFK6085G APPELLANT BY : SHRI S.P.WALIMBE RESPONDENT BY : SHRI M.K. KULKARNI DATE OF HEARING : 31-10-2013 DATE OF PRONOUNCEMENT : 31-10-2013 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 28-08-2012 OF THE CIT(A), AURANGABAD RELATING TO ASSESSMENT YEAR 2009-10. 2. GROUNDS OF APPEAL NO.1 BY THE REVENUE READS AS U NDER : 1. THE CIT(A) AURANGABAD HAS ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER, ON ACCOUNT OF EXCESS PURCHASE P RICE PAID TO THE SISTER CONCERN, AT RS.29,97,528/- IGNORING THE FACTS AN D CIRCUMSTANCES OF THE CASE. 2.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF MANUFACTURING OF TO OR DAL AND ALLIED PRODUCTS. DURING THE COURSE OF ASSESSMENT PROCEEDI NGS THE ASSESSING OFFICER NOTED FROM THE DETAILS OF PURCHASES FILED B Y THE ASSESSEE THAT THE ASSESSEE HAS MADE MOST OF THE PURCHASES FROM ITS SI STER CONCERN M/S. B. RAHUNATH KALANTRI. FROM THE DETAILS FURNISHED BY T HE ASSESSEE REGARDING 2 THE PURCHASES FROM THE ABOVE RELATED PARTY AS WELL AS OTHERS THE ASSESSING OFFICER OBSERVED AS UNDER : I. PURCHASES FROM B.R. KALANTRI, LATUR QUANTITY BASIC RATE BASIC VALUE EFFECTIVE RATE 35006.22 QTL. 3124.72 QT. 109384494.41 3124.72 QTL. II. PURCHASES FROM OTHERS QUANTITY BASIC RATE BASIC VALUE EFFECTIVE RATE 1345.62 QTL. 3039.09 QTL. 4089455.00 3039.09 QTL. 2.2 FROM THE ABOVE, THE ASSESSING OFFICER NOTED THA T THE ASSESSEE HAS PAID RS.3124.72 PER QUINTAL OF TOOR DAL TO M/S. B. RAGHUNATH KALANTRI (THE SISTER CONCERN) WHEREAS THE AVERAGE PRICE PAID FOR PURCHASES FROM OTHERS STANDS AT RS.3039.09 PER QUINTAL. HE, THERE FORE, ASKED THE ASSESSEE TO JUSTIFY THE PAYMENT MADE TO THE SISTER CONCERN A ND ASKED THE ASSESSEE TO EXPLAIN AS TO WHY DISALLOWANCE U/S.40A(2)(B) SHO ULD NOT BE MADE. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASS ESSEE THE ASSESSING OFFICER MADE ADDITION OF RS.29,97,528/-. 3. BEFORE LD.CIT(A) IT WAS SUBMITTED THAT THE ASSES SEE HAS PURCHASED 35006.22 QUINTAL FROM THE SISTER CONCERN WHEREAS TH E PURCHASE FROM THE OTHER PARTIES WAS ONLY 1345.62 QUINTAL. THE DATES OF PURCHASE FROM OTHER PARTIES ARE MAINLY DURING THE PERIOD APRIL AND MAY WHEN THE GOODS WERE AVAILABLE AT LOWER PRICE. FURTHER, THE QUALITY OF THE GOODS PURCHASED FROM SISTER CONCERN AND FROM OTHERS AND THE MARKET PRICE PREVAILING ON THE DATE OF PURCHASE WERE IGNORED BY THE ASSESSING OFFICER. THE ASSESSEE ALSO BROUGHT TO THE NOTICE OF THE CIT(A) T HE SCRUTINY ASSESSMENT ORDER IN THE CASE OF THE ASSESSEE FOR THE A.Y. 2005 -06 AND SUBMITTED THAT IN THE SAID ORDER ALSO THE MAJOR PURCHASES WERE FRO M THE SISTER CONCERN AND NO DISALLOWANCE U/S.40A(2)(B) WAS MADE BY THE A SSESSING OFFICER. 3 VARIOUS DECISIONS WERE ALSO BROUGHT TO THE NOTICE O F THE CIT(A) TO THE PROPOSITION THAT NO DISALLOWANCE U/S.40A(2)(B) SHOU LD BE MADE UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFI CER BY OBSERVING AS UNDER : 5.2.1 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND RIVAL CONTENTIONS. ON PERUSAL OF THE SAME IT HAS BEEN NOTIC ED THAT THE A.O. HAS MADE THE ADDITION U/S.40A(2)(B) BY SIMPLY CONSIDERING THE AVERAGE RATE OF TOOR PURCHASED DURING THE YEAR FROM THE SISTER CONC ERN AND FROM THE OTHER CONCERNS. THE A.O. HAS NOT CONSIDERED THE RATE OF PURCHASE FROM THE SISTER CONCERN ON THE DATE OF PURCHASE AND THE RAT E OF PURCHASE FROM OTHER PARTIES ON THE SAME DATE OF PURCHASE. THE APPEL LANT HAS POINTED OUT THAT THERE IS NO MUCH DIFFERENCE BETWEEN THE SAID RATES IF CONSIDERED ON THE SAME DATE. THE APPELLANT HAS ALSO POINTED OUT T HAT THE PRICE OF TOOR WAS ON LOWER SIDE WHEN THE SAME WAS PURCHASED FROM OUTSIDE PARTIES MAINLY DURING APRIL & MAY, 2008 AND IN THE O THER MONTHS WHEN THE GOODS WERE PURCHASED FROM SISTER CONCERNS, THE RATE OF PURCHASE WAS ON HIGHER SIDE. IN VIEW OF THE ABOVE FACTS AND FIGURE S, THE APPELLANT HAS ESTABLISHED THAT THE A.O. HAS ERRED IN CONSIDERING AVER AGE RATE OF PURCHASE PRICE FOR THE YEAR UNDER APPEAL WHILE MAKIN G ADDITION U/S 40A(2)(B). 5.2.2 THE APPELLANT HAS ALSO POINTED OUT THAT THE AD DITION U/S 40A(2) CAN BE MADE ONLY IF THE EXPENDITURE CLAIMED IS EXCESSI VE HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS. THE APPELLANT HA S FILED PURCHASE RATE OF TOOR DURING THE 12 MONTHS IN THE YEAR UNDER APPEA L DULY CERTIFIED BY KRUSHI UTPANNA BAZAR SAMITI, LATUR IN SUPPORT OF THE CONTENTION THAT THE TOOR PURCHASED BY THE APPELLANT DURING THE VARIOUS MO NTHS IN THE YEAR UNDER APPEAL IS AT MARKET VALUE AND NOT AT EXCESSIVE P RICE. THE APPELLANT HAS ALSO FILED AVERAGE RATE OF TOOR PURCHASED DURING T HE YEAR UNDER APPEAL BY VARIOUS OTHER CONCERNS SITUATED AT LATUR WHI CH HAS ALSO ESTABLISHED THAT THE APPELLANT HAS PURCHASED TOOR FROM SISTER CONCERN AT MARKET PRICE. THE OBJECT, SCOPE AND EFFECT OF THE IN TRODUCTION OF SECTION 40A(2)(A) WAS EXPLAINED BY THE BOARD IN ITS CIRCULAR NO. 6P OF 1968 DATED 06/07/1968 AND IN THAT CIRCULAR THE BOARD HAS STATED THAT WHERE PAYMENT FOR ANY EXPENDITURE IS FOUND TO HAVE BEEN MA DE TO A RELATIVE OR ASSOCIATE CONCERN FALLING WITHIN THE SPECIFIED CATEGO RIES, IT WILL BE NECESSARY FOR THE ASSESSING OFFICER TO SCRUTINIZE THE REASO NABLENESS OF THE EXPENDITURE WITH REFERENCE TO THE CRITERIA MENT IONED IN THE SECTION. IT WAS FURTHER STATED THAT THE ASSESSING OFFICER IS EXPECTED TO EXERCISE HIS JUDGEMENT IN A REASONABLE AND FAIR MANNER, AND IT SHO ULD BE BORNE IN MIND THAT THESE PROVISIONS ARE MEANT TO CHECK EVASION O F TAX THROUGH EXCESSIVE OR UNREASONABLE PAYMENT TO RELATIVES AND ASSOCI ATE CONCERNS AND SHOULD NOT BE APPLIED IN A MANNER, WHICH WILL CA USE HARDSHIP IN BONA FIDE CASES. 5.2.3 THE APPELLANT HAS ALSO POINTED OUT THAT THE SISTE R CONCERN FROM WHOM THE TOOR WAS PURCHASED HAS EARNED PROFIT @ 1 % IN RESPECT OF TOOR SOLD TO THE APPELLANT; THE SISTER CONCERN HAS ALSO INCU RRED COST ON ACCOUNT 4 OF HAMALI AND MARKET FEES. THE APPELLANT ACCORDINGLY CLAIMED THAT THE TOOR WAS NOT PURCHASED AT EXCESSIVE PRICE COMPARED TO P REVAILING MARKET PRICE. THE APPELLANT HAS FURTHER POINTED OUT THAT THE ASSESSMENT FOR A.Y.2005-06 WAS COMPLETED U/S 143(3) AND NO DISALL OWANCE WAS MADE U/S 40A(2)(B). 5.2.4 THE APPELLANT HAS ALSO POINTED OUT THAT THE ASSE SSMENT OF THE SISTER CONCERN M/S B. RAGHUNATH KALANTRI HAS BEEN COMPL ETED U/S. 143(3) FOR A.Y.2009-10 AT RS.11,02,590/- AND NO MAJO R DISCREPANCY HAS BEEN FOUND BY THE A.O. IN THE ASSESSMENT. IN VIEW OF TH IS FACT, IT IS EVIDENT THAT THE SISTER CONCERN M/S B. RAGHUNATH KALANTRI HAS N OT CHARGED EXCESSIVE PRICE OF TOOR OF RS.29,97,528/- AS ALLEGED BY THE A.O. WHILE ASSESSING INCOME OF THE APPELLANT. IF THE SAID ALLEGATIO N WOULD HAVE BEEN TRUE, THE INCOME OF THE SISTER CONCERN M/S B. RAGHUNAT H KALANTRI WOULD HAVE BEEN ASSESSED AT LEAST AT MORE THAN RS.40,00,000/- AS AGAINST ASSESSED U/S. 143(3) AT RS.11,02,590/-. 5.2.5 THE CONTENTION OF THE APPELLANT IS THAT THE AD DITION MADE BY THE A.O. CONSIDERING AVERAGE PURCHASE PRICE FOR THE YEAR UNDER APPEAL AND THAT TOO WITHOUT CONSIDERING THE QUALITY OF THE GOOD S PURCHASED IS NOT JUSTIFIED. THIS CONTENTION OF THE APPELLANT IS SUPPORT ED BY THE DECISION OF HON'BLE BENCH OF AHMEDABAD ITAT IN THE CASE OF DCIT VS. MS. JIVRAJ TEA COMPANY (1832) TAX PUB(DT). THE RELEVANT PORTION OF THIS DECISION HAS BEEN REPRODUCED IN THE EARLIER PARAGRAPH. THE APPEL LANT'S CONTENTION THAT THE ADDITION IS NOT JUSTIFIED ON THE FACTS OF THE CASE IS ALSO SUPPORTED TO SOME EXTENT BY THE DECISION OF HON'BLE BOMBAY HIGH COURT RELIED ON BY THE APPELLANT. THE FACTS OF THE CASE DECIDED BY HO N'BLE BOMBAY HIGH COURT RELIED ON BY THE APPELLANT ARE DIFFERENT TO SO ME EXTENT. HOWEVER, THE RATIO LAID DOWN BY THE DECISION OF HON'BLE BENCH OF AHMEDABAD ITAT IN THE CASE OF DCIT VS. MS. JIVRAJ TEA COMPANY (1832) TAX PUB(DT) IS SQUARELY APPLICABLE TO THE FACTS OF THE CASE OF THE AP PELLANT. 5.2.6 IN VIEW OF THE ABOVE FACTS AND DISCUSSION, I AM OF THE CONSIDERED VIEW THAT THE APPELLANT HAS ESTABLISHED THAT THE EX PENDITURE ON PURCHASE OF TOOR FROM SISTER CONCERN WAS NOT EXCESSIVE OR UNREA SONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE SAME. THE A.O. IS, THEREFORE, NOT JUSTIFIED IN DISALLOWING RS.29,97,528/- U/S 40A(2)(B) OF THE ACT. THE ADDITION OF RS.29,97,528/- IS DELETED. GROUND NOS. L(A), L(B) & L(C) ARE ALLOWED. 4.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REV ENUE IS IN APPEAL BEFORE US. 5. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DIS PUTE TO THE FACT THAT THE ASSESSEE HAS MADE SUBSTANTIAL PURCHASES FROM THE SI STER CONCERN M/S. B.RAGHUNATH KALANTRI. WE FIND THE ASSESSING OFFICE R MADE ADDITION 5 U/S.40A(2)(B) ON THE GROUND THAT THE PRICE PAID TO THE SISTER CONCERN IS HIGHER THAN THE AVERAGE PRICE PAID TO OTHER PARTIES . WE FIND THE LD.CIT(A) DELETED THE ADDITION ON THE GROUND THAT T HE ASSESSING OFFICER HAS NOT CONSIDERED THE RATE OF PURCHASE FROM THE SI STER CONCERN ON THE DATE OF PURCHASE AND THE RATE OF PURCHASE FROM THE OTHER PARTIES ON THE SAME DATE OF PURCHASE. HE HAS ALSO GIVEN A FINDING THAT THE ASSESSEE HAS PURCHASED TOOR DAL DURING THE ENTIRE 12 MONTHS IN T HE YEAR FROM THE SISTER CONCERN AND THE PRICE PAID IS AT PAR WITH TH E PRICE PREVAILING AT THE KRUSHI UTPANNA BAZAR SAMITTEE AND THEREFORE NO EXC ESS PRICE HAS BEEN PAID TO THE SISTER CONCERN. HE HAS ALSO CONSIDERED THE SCRUTINY ASSESSMENT ORDER FOR A.Y. 2005-06 DURING WHICH THE ASSESSEE HAD ALSO MADE PURCHASES FROM THE SAME SISTER CONCERN AND NO DISALLOWANCE WAS MADE U/S.40A(2)(B). FURTHER, THE ASSESSING OFFICER WHILE MAKING THE ADDITION/DISALLOWANCE HAS ALSO NOT CONSIDERED THE Q UALITY OF THE MATERIAL PURCHASED FROM THE SISTER CONCERN AS WELL AS THE OT HER PARTIES. CONSIDERING ALL THE ABOVE FACTS AND RELYING ON VARI OUS DECISIONS THE LD.CIT(A) DELETED THE DISALLOWANCE MADE BY THE ASSE SSING OFFICER U/S.40A(2)(B). THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT POINT OUT ANY DISTINGUISHABLE FEATURE IN THE ORDER OF THE LD. CIT(A) SO AS TAKE A DIFFERENT VIEW. SINCE THE LD.CIT(A) HAS DISCUSSED ELABORATELY WHILE DELETING THE ADDITION AND THE LD. DEPARTMENTAL REPR ESENTATIVE WAS UNABLE TO POINT OUT ANY MISTAKE IN THE SAME, THEREF ORE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD.CIT(A). ACCORDING LY, THE SAME IS UPHELD AND THE GROUND RAISED BY THE REVENUE IS DISMISSED. 6. GROUNDS OF APPEAL NO.2 BY THE REVENUE READS AS U NDER : 2. THE CIT(A) AURANGABAD HAS ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER, ON ACCOUNT OF UNDER VALUATION OF STOCK, AT RS.11,44,410/- IGNORING THE FACTS AND CIRCUMSTANCES OF THE CASE. 6 6.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE A.O O BSERVED THAT THE ASSESSEE HAS SHOWN THE VALUE OF CLOSING STOCK OF TO OR DAL OF 3093 QUINTALS AT RS.95,88,300/-, I.E.@ RS.3,100/- PER QU INTAL. THE AO FURTHER OBSERVED THAT IN THE MONTH OF MARCH THE ASSESSEE HA S PURCHASED TOOR DAL OF 5685 QUINTALS @RS.3,470/ PER QUINTAL. THE A.O., THEREFORE, WORKED OUT THE DIFFERENCE AS UNDER VALUATION OF STOCK AT R S.370/- PER QUINTAL, I.E. (RS.3,470/- (-) RS.3,100/-). THE A.O. ACCORDINGLY D ETERMINED THE UNDER VALUATION OF STOCK AT RS.11,44,410/-, I.E. (RS.370/ - X 3093 QUINTAL). THE RELEVANT OBSERVATION OF THE AO WHILE REJECTING THE EXPLANATION OF THE ASSESSEE AND MAKING THE ADDITION AT PARA 11 OF THE ASSESSMENT ORDER READS AS UNDER : 'I GONE THROUGH THE EXPLANATION FILED BY ASSESSEE AND FOUND THAT IT IS UNACCEPTABLE. THE ASSESSEE WAS FOLLOWING FIRST IN FIRST OUT METHOD IN STOCK VALUATION. IF FIFO METHOD IS FOLLOWED THE PURC HASES MADE DURING THE LAT 2-3 DAYS REMAIN AS STOCK. AS PER THE STOCK SHOWN BY THE ASSESSEE 3093 QUINTALS REMAIN STOCK PURCHASED DURING THE LAST DA YS OF THE FEB AND MARCH-2009. THE AVERAGE PRICE FOR LAST PURCHASES ( 3093) WORKS OUT TO RS.3470/-, HENCE THE RATE SHOWN BY THE ASSESSEE AT RS.3 100 IS LESS BY RS.370/-. AS CAN BE SEEN FROM THE ABOVE IT IS CLEAR TH AT THE ASSESSEE HAS SUPPRESSED CLOSING STOCK TO REDUCE THE PROFIT. THEREFORE , RS.11,44,410/- (370 X 3093) IS ADDED TO THE TOTAL INCOME OF THE ASSESSE E ON ACCOUNT OF STOCK UNDER VALUATION.' 7. BEFORE THE CIT(A) IT WAS SUBMITTED THAT THE ASSE SSEE HAS NOT FOLLOWED THE FIFO METHOD AS CLAIMED BY THE AO AND H AS CONSIDERED THE ACTUAL STOCK OF TOOR DAL AND ITS QUALITY AND PURCHA SE COST AND HAS ACCORDINGLY VALUED THE SAME AT THE YEAR END. THE R ELEVANT SUBMISSION OF THE ASSESSEE AS REPRODUCED BY LD.CIT(A) AT PAGE 11 OF HIS ORDER READ AS UNDER : 'THERE WAS A CLOSING STOCK OF TOOR WEIGHING 2180 Q UINTALS. THIS WAS VALUED BY THE ASSESSEE AT RS 3100/- PER QUINTAL. THE STOCK CONSISTED OF RESIDUAL GOODS TO A CERTAIN EXTENT. THE GOODS SHO WN TO HAVE PURCHASED ON 7 31/03/2009, WERE RECEIVED DURING THE PERIOD OF 27/0 3/2009 TO 30/03/2009 AND WERE THROWN IN PRODUCTION TO A SIZAB LE EXTENT. THEREFORE GOODS REMAINING IN STOCK ARE OF RESIDUAL NATURE COM ING FROM EARLIER PURCHASES. THEY HAVE TO BE VALUED AT A DISCOUNTED RATE CONSIDE RING THE QUALITY. HENCE THE VALUATION @3100/- IS PROPER. THE METHOD OF VALUAT ION FOLLOWED BY THE ASSESSEE IS 'AT COST OR MARKET VALUE WHICHEVER IS LESS'. TH E A.O HAS PRESUMED THAT FIFO METHOD HAS TO BE APPLIED. BUT THE ASSESSEE DOES NOT APPLY THE FIFO METHOD. IDENTIFICATION OF THE GOODS IS DONE AND THEY ARE VA LUED AS PER THEIR QUALITY. AS THE STOCK CONSISTED OF RESIDUAL GOODS THEY WERE NOT VALUED AT THE RATES OBTAINING FOR YEAR END PURCHASES (AVERAGE RS.3485/- ), BUT THEY WERE VALUED AT SOME WHAT DISCOUNTED RATES DUE TO THEIR RESIDUAL NA TURE. THUS THE VALUATION MADE IN ON PROPER BASIS. THERE IS NO NEED TO MAKE A NY ADDITION IN RESPECT OF THE SAME. THE ADDITION MADE OF RS. 11,44,410/- MAY BE DELETED.' 8. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) DELETED THE ADDITION BY HOLDING AS UNDER : 6.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND RIVAL CONTENTIONS. ON PERUSAL OF THE SAME, IT HAS BEEN NOTICED THAT THE A .O. HAS CONSIDERED THE VALUE OF THE STOCK AT AVERAGE PRICE OF THE GOOD S PURCHASED DURING MARCH' 2009. THE A.O. HAS ALSO ASSUMED THAT THE ASS ESSEE HAS FOLLOWED FIFO METHOD OF VALUATION OF CLOSING STOCK. ON THE OTHER HAND THE APPELLANT HAS CLAIMED THAT IT HAS NOT FOLLOWED FIFO METHOD BUT HA S CONSIDERED THE ACTUAL GOODS IN STOCK AND QUALITY OF THE SAME AND ACC ORDINGLY VALUED THE SAME BY FOLLOWING ACTUAL COST OR MARKET VALUE WHICHEV ER IS LEAST METHOD. THIS CONTENTION OF THE APPELLANT IS ALSO SUPPORTED BY THE TAX AUDIT REPORT. IN THE TAX AUDIT REPORT, IT HAS BEEN MENTIONED IN A NNEXURE TO FORM-3CD THAT RAW MATERIAL INCLUDING THAT IN PROCESS AND FINISHED GO ODS PURCHASED ARE VALUED AT COST OR MARKET VALUE WHICHEVER IS LESS AND FINISHED GOODS MANUFACTURED ARE VALUED AT MARKET VALUE I.E. ESTIMA TED NET REALIZABLE VALUE. FURTHER, IT IS ALSO A FACT THAT THE ALLEGED UNDER V ALUATION OF STOCK SHALL RESULT INTO HIGHER PROFIT TO THE SAME EXTENT IN THE S UBSEQUENT YEAR. IN VIEW OF THE ABOVE FACTS AND DISCUSSION, I AM OF THE CONSI DERED VIEW THAT THE A.O. IS NOT JUSTIFIED IN MAKING ADDITION OF RS.11,44,410/- ON ACCOUNT OF UNDER VALUATION OF STOCK. THE ADDITION OF RS.11,44,410/- I S DELETED. THE A.O. IS DIRECTED ACCORDINGLY. GROUND NO.2 STANDS ALLOWED. 8.1 AGGRIEVED WITH SUCH ORDER OF CIT(A) THE ASSESSE E IS IN APPEAL BEFORE US. 9. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES. THE LD. DR COULD NOT CONTROVERT THE FINDING GIVEN B Y THE LD.CIT(A) THAT THE ASSESSEE HAS FOLLOWED ACTUAL COST OR MARKET VAL UE WHICHEVER IS LESS WHICH HAS BEEN REFLECTED IN THE TAX AUDIT REPORT AN D NOT FIFO METHOD AS ALLEGED BY THE AO. SINCE THE ASSESSEE IS CONSISTENT LY FOLLOWING THE ABOVE METHOD AND THE AO HAS ONLY PRESUMED THAT THE ASSESS EE HAS FOLLOWED 8 FIFO METHOD FOR VALUATION OF CLOSING STOCK, THEREFO RE, WE FIND NO INFIRMITY IN THE ORDER OF LD.CIT(A) ACCEPTING THE V ALUATION OF CLOSING STOCK ADOPTED BY THE ASSESSEE. NOTHING CONTRARY WA S BROUGHT TO OUR NOTICE AGAINST THE FACTUAL FINDING GIVEN BY LD.CIT( A). ACCORDINGLY, SAME IS UPHELD AND THE GROUNDS RAISED BY THE REVENU E IS DISMISSED. 10. GROUNDS OF APPEAL NO. 3 BY THE REVENUE READS AS UNDER : 3. THE CIT(A) AURANGABAD HAS ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER, ON ACCOUNT OF OIL EXPENDITURE AT RS.2,82,059/- IGNORING THE FACTS AND CIRCUMSTANCES OF THE CASE. 10.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO M ADE ADHOC ADDITION OF 20% OF THE EXPENDITURE ON ACCOUNT OF OIL EXPENDITUR E FOR WANT OF PROPER BILLS AND VOUCHERS. BEFORE CIT(A) IT WAS SUBMITTED THAT THE OIL IS REQUIRED FOR THE PROCESS OF MANUFACTURE. THESE EXPE NSES ARE ALL SUPPORTED BY BILLS ISSUED BY THE SUPPLIERS. THE CO PIES OF THE BILLS WERE FILED WITH THE A.O. THESE ARE NOT IN HOUSE VOUCHERS AS ALLEGED BY THE A.O. THEY ARE BILLS OF THE SUPPLIERS. TOTAL OIL EX PENDITURE FOR THE YEAR UNDER CONSIDERATION IS RS.14,10,296/- FOR TOTAL CON SUMPTION OF RAW MATERIAL OF 36259 QUINTALS. THIS COMPARES FAVOURABL Y WITH TOTAL EXPENDITURE OF RS.12,43,899/- FOR TOTAL CONSUMPTION OF RAW MATERIAL OF 30755 QUINTALS FOR EARLIER YEAR. AS THE EXPENDITUR E IS SUPPORTED BY BILLS AND VOUCHERS, THERE IS NO NEED TO MAKE ANY ADDITION OUT OF THE SAME. THE ADDITION OF RS.2,82,059/-MAY BE DELETED. 11. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) DELETED THE ADDITION BY HOLDING AS UNDER : 7.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND RIVAL CONTENTIONS. ON PERUSAL OF THE SAME IT HAS BEEN NOTIC ED THAT THE APPELLANT HAS MAINTAINED REGULAR BOOKS OF ACCOUNTS IN THE COURSE OF HIS BUSINESS AND HAS ALSO AUDITED THE SAME. THE APPELLANT HA S POINTED OUT 9 THAT ALL THE BILLS AS SUPPLIED BY THE SUPPLIERS OF OIL H AVE BEEN KEPT ON RECORD AND THE PAYMENT HAS BEEN MADE BY BANK CHEQUES. FURTHER, THE A.O. HAS MADE ADHOC DISALLOWANCE WITHOUT POINTING OUT SPECIFIC DISCREPANCY IN SPECIFIC ENTRY OF EXPENDITURE. IN VIE W OF THE ABOVE FACTS AND DISCUSSION, I AM OF THE CONSIDERED VIEW THAT THE A. O. IS NOT JUSTIFIED IN MAKING ADHOC ADDITION OF RS.2,82,059/-. THE ADDI TION OF RS.2,82,059/- IS DELETED. THE A.O. IS DIRECTED ACCORD INGLY. GROUND NO.3 STANDS ALLOWED. 11.1 AGGRIEVED WITH SUCH ORDER OF CIT(A) THE ASSESS EE IS IN APPEAL BEFORE US. 11.2 AFTER HEARING BOTH THE SIDES, WE FIND NO INFIR MITY IN THE ORDER OF LD.CIT(A). THE LD. DEPARTMENTAL REPRESENTATIVE COU LD NOT CONTROVERT THE FINDINGS GIVEN BY THE LD.CIT(A) THAT ALL BILLS SUPPLIED BY THE SUPPLIERS HAVE BEEN KEPT ON RECORD, THE PAYMENTS HA VE BEEN MADE BY BANK CHEQUES AND ADHOC DISALLOWANCE HAS BEEN MADE W ITHOUT POINTING OUT ANY SPECIFIC DISCREPANCY IN SPECIFIC ENTRY OF E XPENDITURE. IN VIEW OF THE ABOVE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD.CIT(A). ACCORDINGLY, THE SAME IS UPHELD. THE GROUND RAISED BY THE REVENUE IS DISMISSED. 12. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ITSELF, I.E. ON 31-10-2013. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PA NDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED : 31 ST OCTOBER, 2013 SATISH COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A), AURANGABAD 4. THE CIT, AURANGABAD 5. D.R. B BENCH, PUNE 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE