Rupam Jewellers, Purba Medinipur V. ACIT,Circle,-27(1) Haldia, Haldia

ITA 267/KOL/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1348 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 13-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Assessee Lawyers: S K TULSIYAN
• Keywords: Question of law; Non-deduction of tax
• Section: 143(3); 194C; 145

Judgement Text

ITA NO.267/KOL/2017 RUPAM JEWELLERS A.Y.2013-14 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B KOL KATA [BEFORE HONBLE SHRI J.SUDHAKAR REDDY, AM & SHRI S.S.VISWANETHRA RAVI, JM ] ITA.NO.267/KOL/2017 ASSESSMENT YEAR : 2013-14 RUPAM JEWELLERS -VERSUS- A.C.I.T., CIRCLE-2 7(1) PURBA MEDINIPUR HALDIA (PAN: AAGFR 9559 R) (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI S..K.TULSIYAN, ADVOCATE FOR THE RESPONDENT: SHRI S.DASGUPTA, ADDL. CIT(DR) DATE OF HEARING : 08.01.2018. DATE OF PRONOUNCEMENT : 16.03.2018. ORDER PER J.SUDHAKAR REDDY, AM: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX-(A)-7, KOLKATA RELATING TO A.Y.2013-14. 2. THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN T HE BUSINESS OF MANUFACTURING AND RETAIL TRADING IN GOLD ORNAMENTS. IT FILED ITS RETURN OF INCOME FOR A.Y.2013-14 ON 31.08.2013 DECLARING TOTAL INCOME OF RS.17,89,270/- . THE AO COMPLETED THE ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT, 1961 ( ACT) ON 15.12.2015 DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS.2,64,90,350/ - INTER-ALIA MAKING ADDITIONS ON ACCOUNT OF SUPPRESSION OF CLOSING STOCK AND ALSO U /S 40(A)(IA) OF THE ACT FOR NON- DEDUCTION OF TAX AT SOURCE U/S 194C OF THE ACT ON P AYMENTS MADE FOR MELTING CHARGES AND HALL MARKING CHARGES. THE AO WAS OF THE VIEW TH AT THE ASSESSEE HAD UNDERVALUED ITS CLOSING STOCK AS IT HAD FOLLOWED LIFO METHOD WH ICH IS NOT IN ACCORDANCE WITH ACCOUNTING STANDARD-2 (AS-2) ISSUED BY THE INSTITUT E OF CHARTERED ACCOUNTANTS OF INDIA. THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE N OT REJECTED, BY THE AO. 3. AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APP EAL. THE FIRST APPELLATE AUTHORITY CONFIRMED THE ORDER OF THE AO. AGGRIEVED THE ASSESSEE IS BEFORE US ON THE FOLLOWING REVISED GROUNDS OF APPEAL :- ITA NO.267/KOL/2017 RUPAM JEWELLERS A.Y.2013-14 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED CIT(A) ERRED IN MAKING ADDITION OF AN AMOUNT OF RS.2,41,45,140/- AL LEGING SUPPRESSION OF VALUE OF CLOSING STOCK, WITHOUT APPRECIATING THE FACT THA T THE ASSESSEE HAS BEEN CONSISTENTLY FOLLOWING LIFO METHOD FOR VALUATION OF CLOSING STOCK SINCE THE INCEPTION OF THE BUSINESS WHICH HAS BEEN ACCEPTED A LL ALONG BY THE REVENUE IN THE EARLIER YEARS. 2(A) THE AO ERRED IN HAVING DISALLOWED MELTING AND HALLMARKING CHARGES PAID, ALLEGING NON-DEDUCTION OF TAX AT SOURCE, ALTHOUGH T HE IMPUGNED PAYMENT HAS NOT BEEN MADE UNDER ANY ORAL AND DOCUMENTARY CONTRACT, WARRANTING ANY SUCH DEDUCTION. 2(B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LEARNED CIT(A) ERRED IN DISALLOWING THE ENTIRE PAYMENT MADE ON ACCOUNT O F MELTING CHARGES AND PAYMENT MADE TO PARTY, M/S.G.N.HALLMARKING & REFINE RY PVT. LTD. ON ACCOUNT OF HALLMARKING CHARGES, U/S.40(A)(IA) OF THE ACT, WITH OUT APPRECIATING THE FACT THAT THE RECIPIENT PARTIES HAVE ALREADY OFFERED THE ALLE GED SUMS IN THEIR COMPUTATION OF TOTAL INCOME AND HAVE ACCORDINGLY PAID TAX ON TH E SAME. 3. THE APPELLANT CRAVES LEAVE TO AMEND, ALTER, MODI FY, SUBSTITUTE, ADD TO, ABRIDGE AND/ OR RESCIND ANY OR ALL OF THE ABOVE GROUNDS. 4. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT, THE AO, AS WELL AS THE LD. CIT(A) HAVE COMMITTED AN ERROR IN MAKING AN ADDIT ION ON ACCOUNT OF SUPPRESSION OF CLOSING STOCK FOR THE REASON THAT (A) THERE IS NO DISPUTE ON FACTS THAT THE ASSESSEE HAD VALUED ITS CLOSING STOCK BY FOLLOWING LIFO METHOD WHICH IS A ACCEPTED AND RECO GNISED METHOD OF VALUATION OF STOCK. (B) THERE IS NO DISPUTE THAT THIS METHOD OF VALUATI ON OF STOCK IS BEING FOLLOWED BY THE ASSESSEE YEAR AFTER YEAR AND THE REVENUE HAD BEEN A CCEPTING THE SAME. HENCE THE REGULAR SYSTEM OF ACCOUNTING BEING FOLLOWED BY THE ASSESSEE CANNOT BE DISTURBED UNLESS THERE IS A FINDING THAT THERE ARE DEFECTS IN , THE BOOKS OF ACCOUNTS OR THE STOCK REGISTER MAINTAINED BY THE ASSESSEE. THERE IS NO SU CH FINDING. (C) THERE IS NO FINDING BY THE AO THAT, THE STOCK R EGISTERS CONTAINING PURCHASE AND SALES DETAILS, MAINTAINED BY THE ASSESSEE, ARE NOT RELIAB LE. IN FACT THE QUANTITATIVE DETAILS MAINTAINED IN THE STOCK REGISTERS HAVE BEEN ACCEPTE D BY THE AO AND THE ADDITION HAS ITA NO.267/KOL/2017 RUPAM JEWELLERS A.Y.2013-14 3 BEEN MADE ONLY BY CHANGING THE METHOD OF VALUATION OF CLOSING STOCK AND NOT DUE TO ANY QUANTITATIVE VARIATIONS. (D) RELIANCE IS PLACED ON THE PROVISION OF SECTION 145A OF THE ACT WHEREIN IT IS SPECIFICALLY MANDATED THAT INVENTORIES SHALL BE VAL UED IN ACCORDANCE WITH THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE AN D THAT THIS SECTION OVER RIDES SEC.145 OF THE ACT. (E) FOR THE PROPOSITION ARGUED ABOVE RELIANCE IS PL ACED ON THE FOLLOWING CASE LAWS :- I)UNITED COMMERCIAL BANK VS CIT 240 ITR 355 (SC) (II)CIT VS BRITISH PAINTS 188 ITR 44 (SC) (III)CIT VS J.P.PATEL 263 ITR 421 (MP) (F) THE FINDINGS OF THE AO THAT LIFO METHOD OF VALU ATION OF INVENTORY IS NOT PRESCRIBED IN AS-2, IS FACTUALLY AND LEGALLY INCORR ECT, AS AS-2 GIVES LIBERTY TO THE ASSESSEE TO FOLLOW A VALID STOCK FORMULA THAT MAY B E APPLIED. (G) THE CALCULATION MADE BY THE AO, THAT THE ASSESS EE HAS VALUED ITS CLOSING STOCK AT RS.1294.69 PER GRAM IS FACTUALLY INCORRECT. 5. ON THE ISSUE OF DEDUCTION U/S 40(A)(IA) OF THE A CT, HE SUBMITTED THAT THERE IS NO CONTRACT WITH THE PERSONS, WHO ARE PAID MONEY TOWA RDS HALL MARKING CHARGES OR MELTING CHARGES AND HENCE THE PROVISION OF SECTION 194C OF THE ACT WOULD NOT APPLY. ALTERNATIVELY IT WAS SUBMITTED THAT THE PAYEE PARTI ES HAVE ALREADY OFFERED THE SAID SUMS RECEIVED BY THEM TO TAX, IN THEIR INCOME TAX R ETURNS AND IN VIEW OF THE SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT, NO DISALLO WANCE CAN BE MADE IN THE HANDS OF THE ASSESSEE. IT WAS SUBMITTED THAT THE ISSUE MAY B E REMITTED TO THE AO FOR FRESH ADJUDICATION AND EXAMINE THE ISSUE AS TO WHETHER TH E REQUIREMENTS OF THE 2 ND PROVISO TO SECTION 40(A)(IA) HAVE BEEN FULFILLED OR NOT. 6. THE LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHE R HAND, OPPOSED THE CONTENTIONS OF THE ASSESSEE AND SUBMITTED THAT THE ARGUMENTS OF THE LD. COUNSEL FOR THE ITA NO.267/KOL/2017 RUPAM JEWELLERS A.Y.2013-14 4 ASSESSEE THAT, THE REVENUE HAS BEEN ACCEPTING CONSI STENTLY, THE METHOD OF VALUATION OF CLOSING STOCK FOLLOWED BY THE ASSESSEE I.E. LIFO ME THOD IS NOT CORRECT, AS THE ASSESSEE COMMENCED ITS BUSINESS IN THE YEAR 2001 AND THIS CA SE WAS NEVER PICKED UP FOR SCRUTINY AND ALL THE RETURNS WERE ACCEPTED U/S 143( 1)(A) OF THE ACT. HE SUBMITTED THAT THERE WAS NO CHANCE FOR THE REVENUE TO LOOK INTO TH E METHOD OF VALUATION OF CLOSING STOCK FOLLOWED BY THE ASSESSEE. HE SUBMITTED THAT A S-2 ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA HAD BEEN NOTIFIED U NDER THE INCOME TAX ACT AND THAT IT MANDATES THAT THE ASSESSEE VALUES ITS STOCK AT C OST OR MARKET VALUE WHICH EVER IS LESS AND THE COST HAS TO BE DETERMINED EITHER BY FIFO ME THOD OR AVERAGE COST METHOD. HE POINTED OUT THAT THE LD. CIT(A) HAS OBSERVED THAT T HE ASSESSEE IS NOT MAINTAINING ITEM- WISE STOCK REGISTER AND HENCE ADOPTION OF LIFO METH OD WOULD LEAD TO PERPETUAL UNDERVALUATION OF STOCK. HE SUBMITTED THAT THE ASSE SSEE WOULD HAVE SOLD THE MAJOR PART OF OLD STOCK AND YET CLAIMED VALUE OF OLD STOC K, ON THE PRESUMPTION THAT OLD STOCK IS STILL LYING IN THE SHOP. 7. IN REPLY THE LD. COUNSEL FOR THE ASSESSE SUBMITT ED THAT THE PRINCIPLES OF STOCK VALUATION ARE WELL SETTLED AND IF THE REVENUE CHOSE S TO DISTURB THE VALUATION OF CLOSING STOCK THEN THE OPENING STOCK SHOULD ALSO BE RE-VALU ED WITH ON THE VERY SAME PRINCIPLES AS THOSE APPLIED TO THE CLOSING STOCK. 8. HEARD THE RIVAL SUBMISSIONS. ON CAREFUL CONSIDER ATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND PERUSAL OF THE PAPERS ON RECORD AND THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS CASE LAWS CITED WE HOL D AS FOLLOWS :- 8.1. THE UNDISPUTED FACTS THAT EMERGE FROM THE RECO RD IS THAT THE ASSESSEE HAS BEEN FOLLOWING LAST IN FIRST OUT (LIFO) METHOD OF VALUAT ION OF CLOSING STOCK FROM THE YEAR OF ITS INCEPTION. THE ARGUMENTS OF THE ASS ESSEE BEFORE THE REVENUE AUTHORITIES IS THAT, OLD GOLD ORNAMENTS WHICH ARE TO BE IN DISP LAY HAVE BECOME OUT OF FASHION AND HENCE ARE SLOW MOVING AND THAT THE CUSTOMERS ARE R EGULARLY IN SEARCH OF NEW DESIGNS AND HENCE FRESH INVENTORIES MANUFACTURED TO THE TAS TE AND DIRECTIONS OF THE CUSTOMERS ARE SOLD FAST AND NOT OLD INVENTORIES. THUS IT WAS CONTENDED THAT THE ASSESSEE HAD ITA NO.267/KOL/2017 RUPAM JEWELLERS A.Y.2013-14 5 SPECIFICALLY CHOSEN LIFO METHOD OF VALUATION OF CLO SING STOCK AS IT WOULD BE BEST SUITED FOR THE BUSINESS REALITIES OF THE ASSESSEE. 8.2. THE ASSESSEE HAS PRODUCED ITS BOOKS OF ACCOUNT AND THEY HAVE BEEN AUDITED U/S 44AB OF THE ACT. THE AO HAS NOT POINTED OUT ANY DEF ECTS EITHER IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE OR IN THE STOCK REGISTER MAINTAINED BY IT. THE BOOKS OF ACCOUNTS HAVE NOT BEEN REJECTED. IT IS NO T THE CASE OF THE AO THAT THERE IS ANY VARIATIONS OR DIFFERENCES IN THE QUANTITIES OF CLO SING STOCK. THE ONLY GROUND ON WHICH THE ADDITION HAS BEEN MADE IN THIS CASE, IS THAT, L IFO METHOD OF STOCK VALUATION IS NOT APPROVED UNDER AS-2 OF THE INSTITUTE OF CHARTERED A CCOUNTANTS OF INDIA, WHICH IS NOTIFIED BY THE GOVERNMENT, UNDER THE INCOME TAX AC T. 8.3. THE LD. CIT(A) GOES A STEP FURTHER AND HOLDS T HAT THE ADOPTION OF LIFO METHOD WOULD LEAD TO PERPETUAL UNDERVALUATION OF STOCK. HE ALSO CONCLUDES THAT THE SHOP KEEPERS WOULD EXHAUST THE OLD STOCK BY GIVING DISCO UNT TO THE CUSTOMERS AND WOULD ONLY KEEP NEW STOCK. BOTH THESE CONCLUSIONS IN OUR VIEW ARE NOT CORRECT. 8.4. THE PRINCIPLES OF VALUATION OF CLOSING STOCK HAVE BEEN LAID DOWN IN JUDGMENTS OF THE VARIOUS COURTS. WE EXTRACT SOME FO R READY REFERENCE :- A)IN THE CASE OF UNITED COMMERCIAL BANK VS CIT 240 ITR 355 (SC) IT IS HELD AS FOLLOWS :- THE PRINCIPLES APPLICABLE IN VALUATION OF STOCK AR E (1) THAT FOR VALUING THE CLOSING STOCK, IT IS OPEN TO THE ASSESSEE TO VALUE IT AT THE COST OR MARKET VALUE, WHICHEVER IS LOWER; (2) IN THE BALANCE-SHEET, IF TH E SECURITIES AND SHARES ARE VALUED AT COST, FROM THAT NO FIRM CONCLUSION CAN BE DRAWN. A TAXPAYER IS FREE TO EMPLOY FOR THE PURPOSE OF HIS TRADE, HIS OWN METHOD OF KEEPING ACCOUNTS, AND (OR THAT PURPOSE, TO VALUE STOCK-IN-TRADE EITHER AT COS T OR MARKET PRICE ' (3) A METHOD OF ACCOUNTING ADOPTED BY THE TAXPAYER CONSISTENTLY AND REGULARLY CANNOT BE DISCARDED BY THE DEPARTMENTAL AUTHORITIES ON THE VI EW THAT HE SHOULD HAVE ADOPTED A DIFFERENT METHOD OF KEEPING ACCOUNTS OR O F VALUATION ' (4) THE CONCEPT OF REAL INCOME IS CERTAINLY APPLICABLE IN JUDGING W HETHER THERE HAS BEEN INCOME OR NOT, BUT, IN EVERY CASE, IT MUST BE APPLIED WITH CARE AND WITHIN RECOGNISED LIMITS ' (5) WHETHER THE INCOME HAS REALLY ACCRUED OR ARISEN TO THE ASSESSEE MUST BE JUDGED IN THE LIGHT OF THE REALITY OF THE SITUAT ION,' (6) UNDER SECTION 145 OF THE ACT, IN A CASE WHERE ACCOUNTS ARE CORRECT AND COMPL ETE BUT THE METHOD EMPLOYED IS SUCH THAT IN THE OPINION OF THE INCOME-TAX OFFIC ER, THE INCOME CANNOT BE ITA NO.267/KOL/2017 RUPAM JEWELLERS A.Y.2013-14 6 PROPERLY DEDUCED THERE FROM, THE COMPUTATION SHALL BE MADE IN SUCH MANNER AND ON SUCH BASIS AS THE INCOME-TAX OFFICER MAY DETERMI NE:.... ( EMPHASIS SUPPLIED ) B) IN THE CASE OF CIT VS. BRITISH PAINTS 188 ITR 44 (SC) IT IS HELD AS FOLLOWS :- .........THE QUESTION TO BE DETERMINED BY THE ASSE SSING OFFICER IN EXERCISE OF HIS POWER UNDER SECTION 145 IS WHETHER OR NOT INCOME CA N PROPERLY BE DEDUCED FROM THE ACCOUNTS MAINTAINED BY THE ASSESSEE, EVEN IF TH E ACCOUNTS ARE CORRECT AND COMPLETE TO THE SATISFACTION OF THE OFFICER AND THE INCOME HAS BEEN COMPUTED IN ACCORDANCE WITH THE METHOD REGULARLY EMPLOYED BY' T HE ASSESSEE...... C) IN THE CASE OF CIT VS. J.P.PATEL 263 ITR 421 (MP ) IT IS HELD AS FOLLOWS :- THAT IT HAD NOT BEEN DISPUTED THAT IN VALUING STOC K THE ASSESSEE HAD ADOPTED THE LAST IN FIRST OUT METHOD WHICH IS A RECOGNISED METH OD. ONCE A RECOGNISED METHOD HAS BEEN TAKEN RECOURSE TO AND THE VALUE OF CLOSING STOCK HAD BEEN COMPUTED ON THE BASIS OF AVERAGE, NO QUESTION OF LAW WOULD ARIS E FROM ITS ORDER. 8.5. APPLYING THE ABOVE LAID DOWN PROPOSITION OF LA W TO THE FACTS OF THIS CASE WE HOLD THAT IT IS WELL SETTLED THAT THE CONSISTENT M ETHOD OF ACCOUNTING OR STOCK VALUATION FOLLOWED BY THE ASSESSEE CANNOT BE DISTURBED BY THE AO, WITHOUT POINTING OUT THE DEFECTS IN THE METHOD. LIFO IS A WELL ACCEPTED AND RECOGNISED METHOD OF VALUATION OF CLOSING STOCK. 8.6. IN OUR VIEW, AS-2 BY INSTITUTE OF CHARTERED A CCOUNTANTS OF INDIA DOES NOT STATE THAT VALUATION OF CLOSING STOCK UNDER LIFO METHOD CANNOT BE DONE. AT PARA-17 OF AS-2 IT IS STATED AS FOLLOWS : A VARIETY OF COST FORMULAS IS USED TO DETERMINE TH E COST OF INVENTORIES OTHER THAN THOSE FOR WHICH SPECIFIC IDENTIFICATION OF INDIVIDU AL COSTS IS APPROPRIATE. THE FORMULA USED IN DETERMINING THE STOCK OF AN ITE M OF INVENTORY NEEDS TO BE SELECTED WITH A VIEW TO PROVIDING THE FAIREST POSSIBLE APPRO XIMATION TO THE COST INCURRED IN BRINGING THE ITEM TO ITS PRESENT LOCATION AND CONDI TION. THUS AS-2 DOES NOT SPECIFICALLY MENTION THE LIFO METHOD OF VALUATION O F CLOSING STOCK IS NOT AN APPROVED ITA NO.267/KOL/2017 RUPAM JEWELLERS A.Y.2013-14 7 METHOD. THE CHOICE OF THE METHOD IS ALWAYS WITH TH E ASSESSEE. THE ONLY CONDITION IS THAT , IT HAS TO BE REGULARLY AND CONSISTENTLY FOLL OWED. 8.7. BE IT AS IT MAY SECTION 145A OF THE ACT MANDAT ES THAT (A) THE VALUATION OF PURCHASE AND SALE OF GOODS AND INVENTORY FOR THE PURPOSES OF DETERMINING THE INCOME CHARGEABLE UNDER THE HEAD P ROFITS AND GAINS OF BUSINESS OR PROFESSION SHALL BE (I) IN ACCORDANCE WITH THE METHOD OF ACCOUNTING REGULAR LY EMPLOYED BY THE ASSESSEE. THE SECTION SUPPORTS THE ABOVE VIEW EXPRESSED BY US AND ALSO OVER RIDES SECTION 145 OF THE ACT. THE ACT MANDATES THAT THE VALUATION OF INVENTORY SHOULD BE MADE IN ACCORDANCE WITH THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE. THUS THE AO, IS WRONG IN DISTURBING THE METHOD OF ACCOUN TING REGULARLY EMPLOYED BY THE ASSESEE FOR VALUATION OF CLOSING STOCK. HENCE THE A DDITION IS BAD IN LAW. 8.8. EVEN OTHERWISE, THE AO AS WELL AS THE LD. CIT( A) HAVE COMMITTED AN ERROR BY REVALUING OF THE CLOSING STOCK ONLY BY ADOPTING WEI GHTED AVERAGE METHOD OF COSTING AND ARRIVED AT THE PROFITS OF THE YEAR WITHOUT DOIN G THE SAME METHOD OF VALUATION TO THE OPENING STOCK OF THE ASSESSEE. THIS GIVES ABSU RD RESULTS. THE OPENING STOCK OF THE ASSESSEE SHOULD ALSO BE VALUED IN THE SAME MANNER IN WHICH THE CLOSING STOCK OF THE ASSESSEE IS VALUED. THUS, BY NOT VALUING THE OPENIN G STOCK OF THE ASSESSEE BY EMPLOYING WEIGHTED AVERAGE STOCK METHOD, THE REVENU E AUTHORITIES, COMMITTED A MISTAKE. HENCE ON THIS GROUND ALSO THE ADDITION IS BAD IN LAW. 8.9. MOREOVER, THE AO COMMITTED THE CALCULATION MIS TAKE. THE ASSESSEE BROUGHT THIS CALCULATION MISTAKE TO THE NOTICE OF THE LD. C IT(A). THE LD. CIT(A) HAS NOT ACTED ON THE SAME. THE ALLEGATION OF THE LD. AO THAT THE ASSESSEE HAS VALUED THE CLOSING STOCK AT RS.1294.69 PER GRAM IS WRONG. THE ASSESSEE HAS VALUED THE CLOSING STOCK AT RS.2491.96 PER GRAM. THE CALCULATION IS EXTRACTED B ELOW :- QUANTITATIVE DETAILS & VALUATION OF STOCK AS ON 31.03.2013 ITA NO.267/KOL/2017 RUPAM JEWELLERS A.Y.2013-14 8 AVERAGE RATE OF PRODUCTION UNIT PER GM. RS.16,31,27,839.00/54615.210 GM = RS.2986.85 PER GM . COST OF PRODUCTION 54615.210 GM PURCHASE ORNAMENTS 22CT. 259.480 GM PURCHASE GOLD BAR 99.50 20.000 GM 54894.690 GM LESS: SOLD ORNAMENTS 48831.260 GM SOLD GOLD BAR 20.000 GM 48851.260 GM 6043.430.GM CLOSING STOCK- 6043.430 GM@2986.85 RS.1,80,50,819.00 OPENING STOCK - 14123.390 GM RS. 80,58,949.00 TOTAL CLOSING STOCK 20166.820 GM VALUE= RS. 2,61,09,76.00 IN VIEW OF THE ABOVE DISCUSSION WE UPHOLD THE CONTE NTION OF THE ASSESSEE AND DELETE THE ADDITION MADE ON ACCOUNT OF SUPPRESSED VALUE OF CLOSING STOCK. 10. IN THE RESULT THIS GROUND OF APPEAL IS ALLOWED. 11. GROUND NO.2 IS AGAINST THE DISALLOWANCE MADE U/ S 40(A)(IA) OF THE ACT AS THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE U/S 194C OF THE ACT ON HALL MARKING CHARGES PAID AND MELTING CHARGES PAID. THE ASSESSEE SUBMITS THAT THE RECIPIENT PARTIES HAVE ALREADY OFFERED THIS RECEIPT TO TAX IN THEIR COMPU TATION OF TOTAL INCOME AND HAVE ACCORDINGLY PAID TAX ON THE SAME. THE SECOND PROVIS O TO SECTION 40(A)(IA) OF THE ACT PROVIDES THAT IN SUCH CASES NO DISALLOWANCE CAN BE MADE U/S 40(A)(IA) OF THE ACT. THE COURTS HAVE HELD THAT THIS PROVISO IS RETROSPECTIVE IN NATURE. THUS WE SET ASIDE THIS ISSUE TO THE FILE OF THE AO FOR VERIFICATION AND DE NOVO ADJUDICATION OF THIS ISSUE OF DISALLOWANCE U/S 40(A)(IA) OF THE ACT IN ACCORDANCE WITH LAW. 12. IN THE RESULT GROUND NO.2 IS ALLOWED FOR STATIS TICAL PURPOSES. 13. GROUND NO.3 IS GENERAL IN NATURE AND DOES NOT R EQUIRE ANY ADJUDICATION. ITA NO.267/KOL/2017 RUPAM JEWELLERS A.Y.2013-14 9 14. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED IN PART. O RDER PRONOUNCED IN THE COURT ON 16.03.2018. SD/- SD/- [S.S.VISWANETHRA RAVI] [ J.SUDHAKAR REDDY ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 16.03.2018. [RG SR.PS] COPY OF THE ORDER FORWARDED TO: 1.RUPAM JEWELLERS, SUPER MARKET, KAMARPUR, CONTAI-7 21401, PURBA MEDINIPUR. 2. A.C.I.T., CIRCLE-27(1), HALDIA. 3. C.I.T.(A)- 7, KOLKATA 4. C.I.T-9, KOLKATA 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER, SENIOR PRIVATE SECRETARY HEAD OF OFFICE/D.D.O, ITAT KOLKATA BENCHES