The DCITSabarkantha Circle, Himatnagar V. M/s. Sohni Ceramics, Himatnagar

ITA 2670/AHD/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9431 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-11-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 09-11-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 25-07-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Cost of acquisition
• Section: 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND A. N. PAHUJA, AM) ITA NO. 2670/AHD/2008 A. Y.: 2005 - 06 THE D. C. I. T., SABARKANTHA CIRCLE, 2 ND FLOOR, B/H. MEHTA PETROL PUMP, AMBALAL COMPLEX, HIMATNAGAR DIST. SABARKANTHA VS M/S. SOHNI CERAMICS, NR. GOVT. POLYTECHNIC COLLEGE, HIMATNAGAR, DIST. SABARKANTHA (APPELLANT) (RESPONDENT) APPELLANT BY SHRI RAJDEEP SINGH, SR. DR RESPONDENT BY NONE O R D E R PER BHAVNESH SAINI, JM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-X, AHMEDABAD DATED 30-05-2008 FOR ASSESSMENT YEAR 2005-06. 2. WE HAVE HEARD THE LEARNED DR AND PERUSED THE FIN DINGS OF THE AUTHORITIES BELOW. NONE APPEARED ON BEHALF OF THE A SSESSEE DESPITE SERVICE OF THE NOTICE AND NOTIFYING THE DATE OF HEA RING TO THE ASSESSEE THROUGH REGISTERED POST. 3. GROUND NO.1 OF THE APPEAL OF THE REVENUE READS A S UNDER: 1 THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS OF THE CASE IN RESTRICTING THE ADDITION OF RS.6,63,473/- TOWARDS UNDERVALUATION OF CLOSING STOCK OF RAW MATE RIAL TO RS.2,43,882/- (RS.2,41,272/- + RS.2,550/-). 4. THE AO MADE THE ADDITION OF RS.6,63,473/- TOWARD S UNDER VALUATION OF CLOSING STOCK. THE AO FOUND THAT THE A SSESSEE HAD VALUED CLOSING STOCK AT LOWER VALUE COMPARED TO PURCHASE C OST. THE AO CALLED FOR THE DETAILS OF PURCHASES AND COST OF PURCHASE O F VARIOUS RAW ITA NO.2670/AHD/2008 DCIT, HIMATNAGAR CIRCLE VS M/S. SOHNI CERAMICS 2 MATERIALS. THE ASSESSEE GAVE A STOCK SUMMARY AS PER THE INWARD REGISTER OF RAW MATERIALS WHICH HAS BEEN REPRODUCED AT PAGE 4 OF THE ASSESSMENT ORDER. THE AO TOOK THE PURCHASE PRICE IN THAT STOC K SUMMARY AS THE CORRECT PRICE FOR VALUATION OF CLOSING STOCK AND MA DE ADDITION AFTER WORKING OUT THE STOCK DIFFERENCE AS PER PAGE 12 OF THE ASSESSMENT ORDER AND THE DIFFERENCE WAS WORKED OUT AT RS.6,63,473/- AS PER THE TABLE GIVEN AT PAGE 12 OF THE ASSESSMENT ORDER AS UNDER: SR. NO. NAME OF STOCK RATE VALUED BY ASSESSEE (RS.) RATE VALUED BY A.O. (RS.) DIFFERENCE (RS.) 1 FUEL 20 23 78810 2 MIXTURE 11 12.50 144729 3 SANTALPUT CLAY 350.48 370 14168 4 DOLOMITE 448.80 635 48066 5 TALC POWDER 459 640 54481 6 PYROPHYLITE 448 780 28076 7 CHINA CLAY 674 840 13208 8 CLAY 263.93 380 80781 4.1 IN ADDITION TO THAT FOR THE BOXES OF FINISHED G OODS, THE ASSESSEE HAD VALUED @ RS.60.66 PER BOX WHEREAS ACCORDING TO THE AO THE PRODUCTION COST WAS OF RS.64/- ON AVERAGE, SO FOR THE DIFFEREN CE OF RS.4/- PER BOX FOR 60318 BOXES, THE DIFFERENCE WAS WORKED OUT AT RS.2, 01,154/- AND ADDITION WAS ACCORDINGLY MADE. 5. IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) THAT THE WORKING OF THE AO REGARDING VALUATION OF CLOSING STOCK IS INCORREC T AND BASED ONLY ON ESTIMATE AND WITHOUT SUPPORTING ANY EVIDENCE. IT WA S EXPLAINED THAT AVERAGE COST PRICE OF FUEL COMES OF RS.20.14 PER LI TRE WHILE ON VALUATION OF CLOSING STOCK AS PER AUDIT REPORT COMES TO RS. 20.1 5 PER LITRE. THEREFORE, THE ASSESSEE DECLARED HIGHER RATE OF CLOSING STOCK AS COST PRICED. FOR MIXTURE, AVERAGE COST OF PURCHASE COMES TO RS.10.48 PER KG. AND THE VALUATION OF THE CLOSING STOCK HAS BEEN SHOWN @ RS. 11/- PER KG. IT IS ITA NO.2670/AHD/2008 DCIT, HIMATNAGAR CIRCLE VS M/S. SOHNI CERAMICS 3 ALSO HIGHER COST. THE AO WITHOUT VERIFICATION OF TH E PURCHASE BILLS MADE THE ADDITION. IT WAS FURTHER EXPLAINED THAT AVERAGE COST OF PURCHASE OF SANTALPUR CLAY WAS RS.95.26/- PER TON AND THE VALUA TION OF CLOSING STOCK HAS BEEN SHOWN @ RS.350.48 PER TON. THE AO HAS CONS IDERED THE COST PRICE OF THE ASSESSEE BUT ADDED COST OF TRANSPORTAT ION OF RS.260/- PER TON DESPITE THE FACT THAT THERE IS NO COST FOR TRANSPOR TATION OF SANTALPUR CLAY. IT WAS ALSO EXPLAINED THAT ACTUAL COST OF DOLOMITE RAW MATERIAL COMES TO RS.393.52 PER TON AND THE ASSESSEE HAS SHOWN THE VA LUE IN THE CLOSING STOCK @RS.440.80 PER TON WHICH IS ALSO HIGHER COST. AS REGARDS TALC POWDER THE AVERAGE COST OF PURCHASE COMES TO RS.368 .19 PER TON AND THE VALUATION OF THE CLOSING STOCK HAS BEEN SHOWN @ RS. 459/- PER TON WHICH IS ALSO HIGHER COST. AS REGARDS PYROPHYLITE, THE AV ERAGE PURCHASE COST COMES TO RS.490.62 PER TON AND THE VALUATION OF THE CLOSING STOCK HAS BEEN SHOWN @ RS.459/- PER TON. TRANSPORTATION EXPEN SES HAVE BEEN WRONGLY ADDED. AS REGARDS CHINA CLAY, THE AVERAGE PURCHASE COST COMES TO RS.358/- PER TON AND THE VALUATION OF THE CLOSIN G STOCK HAS BEEN SHOWN @ RS. 674.56 PER TON IN WHICH ALSO TRANSPORTA TION CHARGES HAVE BEEN WRONGLY SHOWN. FOR BOXES WITH TILES OF VARIOUS SIZES THE AO CONSIDERED THE COST PRICE OF RS.64/- PER BOX OF THE FINISHED GOODS OF GLAZED TILES AND THE ASSESSEE HAS SHOWN CLOSING SOC K VALUATION AND WITH EXCISE DUTY IT COMES TO RS.64.04 PER BOX AND IN TH E AUDIT REPORT AFTER DUTIES ETC. IT WAS SHOWN AT RS.65.50 PER BOX. 5.1 IT WAS FURTHER EXPLAINED THAT THE ASSESSEE MAIN TAINED SAME REGULAR SYSTEM OF ACCOUNTING FOR VALUING CLOSING STOCK AND THERE IS NO CHANGE IN THE VALUATION OF CLOSING STOCK. THE AO ESTIMATED TH E VALUE OF CLOSING STOCK WITHOUT ANY EVIDENCE. THE ASSESSEE RELIED UPO N THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS MAHA VIR ALUMINIUM LTD. 297 ITR 77 IN WHICH AFTER CONSIDERING THE CIRCULAR OF CBDT AND EXPLANATORY NOTE, IT WAS HELD THAT IT IS CLEAR THAT WHENEVER ANY ADJUSTMENT IS MADE IN THE VALUATION OF THE INVENTOR Y, THIS WILL AFFECT BOTH ITA NO.2670/AHD/2008 DCIT, HIMATNAGAR CIRCLE VS M/S. SOHNI CERAMICS 4 THE OPENING AS WELL AS THE CLOSING STOCK. IT WAS FU RTHER EXPLAINED THAT IF ANY ADJUSTMENT IS MADE IN THE CLOSING STOCK THE ADJ USTMENT CREDIT AVAILED ON OPENING STOCK; THERE WI LL BE NO IMPACT IN THE PROFITS. IT WAS THEREFORE, EXPLAINED THAT THERE IS NOTHING ON RECORD TO SUSTAIN THE ADDITION. THE ASSESSEE HAS FILED PURCHA SE BILLS AND MATERIAL IN SUPPORT OF THE ABOVE CONTENTION BEFORE THE LEARN ED CIT(A). THE DETAILED SUBMISSIONS OF THE ASSESSEE HAVE BEEN INCORPORATED IN THE IMPUGNED ORDER TO SHOW THE AVERAGE COST OF THE CLOSING STOCK AND THE AVERAGE COST OF PURCHASES AS EXPLAINED ABOVE. IN NUTSHELL, THE A SSESSEE EXPLAINED BEFORE THE LEARNED CIT(A) THAT THE COST OF CLOSING STOCK AS SHOWN BY THE ASSESSEE AT HIGHER RATE IS AGAINST AVERAGE COST OF THE PURCHASES. THE LEARNED CIT(A) CONSIDERING THE EXPLANATION OF THE A SSESSEE, MATERIAL ON RECORD AND EVIDENCES DISCUSSED ALL THE ITEMS OF THE CLOSING STOCK AND SUSTAINED THE PART ADDITION. HIS FINDINGS IN PARA 3 .3 TO 3.3.10 ARE REPRODUCED AS UNDER: 3.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE A. R . CAREFULLY, THE A. R. HAS FURNISHED THE DETAILED BRE AKUP OF RAW-MATERIALS CONSUMED DURING THE YEAR OF RS.1,12,5 1,863/- AND THE A. R. SUBMITTED A PAPER BOOK GIVING DETAILS OF PURCHASES DURING THE MONTH OF MARCH, 2005 FOR FINDI NG OUT THE AVERAGE COST OF PURCHASE FOR THE MONTH OF MARCH, 20 05. THE A. R. HAS ALSO GIVEN THE DETAILS OF PURCHASED MADE DUR ING THE ENTIRE FINANCIAL YEAR 2004-05 FOR FINDING OUT THE A VERAGE COST OF PURCHASE FOR EACH RAW-MATERIAL. THE A. R. HAS SUBMITTED THAT THE RATES QUOTED IN THE STOCK SUMMARY WHICH HA S BEEN REPRODUCED BY THE A.O. AT PAGE-4 OF THE ASSESSMENT ORDER DO NOT SHOW THE CORRECT RATES FOR THE PURCHASE OF VARI OUS RAW MATERIALS AND VALUATION OF CLOSING SOCK AS CAN BE S EEN FROM THE AVERAGE COST OF PURCHASE FOR THE ENTIRE YEAR AN D THE AVERAGE COST OF PURCHASE OF THE MONTH OF MARCH, 200 5. FOR VARIOUS RAW-MATERIALS, THE VARIOUS FIGURES OF PURCH ASE COST ARE AS UNDER: ITA NO.2670/AHD/2008 DCIT, HIMATNAGAR CIRCLE VS M/S. SOHNI CERAMICS 5 S.NO RAW- MATERIALS ASSESSEES VALUATION AS PER BOOKS (RS.) A.OS VALUATIO N (REFER PAGE -12 OF THE ASSESSM ENT ORDER (RS.) AVERAG E RATE OF PURCHA SE FOR THE ENTIRE YEAR (RS.) AVERAGE RATE OF PURCHASE FOR THE MONTH OF MARCH, 2005 (RS.) REFERENCE (PAPER BOOK) 1 FUEL 20.15 PER LTR 23 20.16 18.85 PAGES 1 TO 5 2 GLAZED MIXTURE 11.00 PER KG 12.50 10.46 11.25 PAGES 6 TO 18 3 SANTALPUR CLAY 350.48 PER TON 370 95.26 96.62 PAGES 19 TO 24 4 DOLOMITE 448.80 PER TON 635 345.44 393.52 PAGES 25 TO 40 5 TALC POWDER 458.99 PER TON 640 368.18 441.73 PAGES 41 TO 56 6 PYROPHYLITE 448.49 PER TON 780 490.62 477.92 PAGES 57 TO 63 7 CHINA CLAY 674.56 PER TON 840 358 350.86 PAGES 64 TO 68 8 BALL CLAY 263.93 PER TON 380 137.53 130.14 - 3.3.1 AS REGARDS THE VALUATION OF FUEL, THE APPELL ANT HAS VALUED CLOSING STOCK AT RS.20.15 PER LITRE WHER EAS THE A. O. HAS VALUED THE SAME AT RS.23/- PER LITRE BASED O N THE STOCK SUMMARY STATEMENT GIVEN EARLIER BY THE APPELLANT WH ICH HAS BEEN FOUND TO BE NOT CORRECT AND THE AVERAGE PURCHA SE FOR THE ENTIRE YEAR COMES TO ONLY RS.20.16 PER LITRE THEREF ORE, THE APPELLANTS VALUATION OF CLOSING STOCK AT RS.20.16 PER LITRE IS FOUND O BE CORRECT AND CLOSER TO THE AVERAGE PURCHA SE COST AS THE PURCHASES ARE MADE FROM THE LOCAL DEALERS, NO F REIGHT EXPENDITURE HAS BEEN INCURRED, THEREFORE, THE APPEL LANTS VALUATION IS FOUND TO BE CORRECT AND THERE IS NO NE ED TO INCREASE THE VALUE OF CLOSING STOCK IN RESPECT OF T HE FUEL. 3.3.2 IT IS FOUND FOR THE GLAZED MIXTURE, THE AVER AGE COST FOR HE LAST MONTH OF PURCHASE COMES TO RS.11.25 PER KG. WHEREAS THE APPELLANT HAS VALUED THE CLOSING STOCK AS RS.11/- PER KG THE A. O. HAS VALUED THE SAME AT RS. 12.50 PER ITA NO.2670/AHD/2008 DCIT, HIMATNAGAR CIRCLE VS M/S. SOHNI CERAMICS 6 KG. INCLUDING TRANSPORTATION. THE APPELLANTS VALUA TION TALLIES WITH THE AVERAGE RATE OF PURCHASE FOR THE WHOLE YEA R I.E. RS.10.46 PER KG. IT IS THE CONTENTION OF THE APPELL ANT THAT THE APPELLANT HAS CONSISTENTLY FOLLOWED SIMILAR METHOD OF VALUATION OF CLOSING SOCK IN THE PAST AND THE TRANS PORTATION CHARGES HAVE ALREADY BEEN INCLUDED IN THE VALUATION OF RS.11/- ON THE BASIS OF ACTUAL EXPENDITURE INCURRED SO HERE IS NO JUSTIFICATION FOR ADOPTING VALUE OF RS.12.50 PER KG. 3.3.3 AS REGARDS SANTALPUR CLAY, THE APPELLANT VAL UED THE CLOSING SOCK OF RS.350.48 PER TON AND THE A.O. HAS VALUED THE SAME AT THE RATE OF RS.370/- PER TON ON THE BAS IS OF INWARD STOCK STATEMENT AS REPRODUCED IN PAGE -4 OF THE ASSESSMENT ORDER. THE APPELLANT HAS STATED THE FIGU RES GIVEN IN STOCK SUMMARY ARE ON ESTIMATE BASIS AND ALTHOUGH QUANTITY FIGURES TALLY THE RATE OF PURCHASE DOES NO T TALLY FOR THE VARIOUS RAW-MATERIALS. ALTHOUGH THE AVERAGE RAT E OF PURCHASE FOR THE YEAR IS RS.95.26 PER TON, THE APPE LLANT HAS VALUED THE CLOSING SOCK AT RS.350/- PER TON INCLUDI NG THE TRANSPORTATION COST AND THERE IS NO JUSTIFICATION F OR INCREASING THE VALUE OF RS.370/- PER TON. 3.3.4 AS REGARDS DOLOMITE, THE APPELLANT HAS VALUED THE CLOSING STOCK AT RS.448.79 PER TON WHICH IS HIGHER RATE THAN THE AVERAGE PURCHASE RATE OF MARCH, 2005 WHICH IS RSS.393.52 PER TON INCLUDING TRANSPORTATION COST AN D THEREFORE, THERE IS NO JUSTIFICATION FOR FURTHER IN CREASE IN THE VALUE OF RS.635/- PER TON AS HAS BEEN DONE BY THE A . O. THEREFORE, THE ADDITION TO CLOSING STOCK IN RESPECT OF DOLOMITE IS HELD TO BE NOT JUSTIFIED. 3.3.5 AS REGARDS TALC POWDER, THE AVERAGE RATE OF PURCHASE FOR THE OF MARCH, 2005 IS RS.441.73 PER TO N AS AGAINST WHICH THE APPELLANT HAS VALUED THE CLOSING STOCK AT RS.458.99 PER TON, THIS VALUE HAS BEEN INCREASED TO RS.640/- PER TON BY THE A. O. FOR WHICH THERE IS NO BASIS EX CEPT THE SOCK SUMMARY STATEMENT GIVEN BY THE APPELLANT WHICH LATE R HAS BEEN STATED TO BE NOT CORRECT AND WHICH HAS BEEN ST ATED TO HAVE BEEN GIVEN ON ESTIMATE, THEREFORE, THE APPELLA NTS VALUE OF CLOSING STOCK IS ACCEPTED IN RESPECT OF TALC POW DER AND INCREASE IN VALUE IS HELD TO BE NOT JUSTIFIED. 3.3.6 FOR PYROPHYLITE, THE AVERAGE RATE OF PURCHAS E FOR THE MONTH OF MARCH COMES TO RS.478/- PER TON WHEREA S THE APPELLANT HAS VALUED AT RS.448/- PER TON, THE A. O. HAS ITA NO.2670/AHD/2008 DCIT, HIMATNAGAR CIRCLE VS M/S. SOHNI CERAMICS 7 INCREASED THE VALUE TO RS.780/- PER TON, THE A.O.S VALUE IS HELD TO BE NOT PROPER, HOWEVER, THE APPELLANTS VAL UE IS LESS BY RS.30/- PER TON, SO THE CLOSING STOCK VALUATION IS TAKEN AT RS.478/- AND FOR 85 TONNES OF CLOSING STOCK THE ADD ITION IS INCREASED BY RS..30/- PER ON, THUS THE ADDITION OF RS.2,550/- IS SUSTAINED IN RESPECT OF UNDER VALUATION OF CLOSI NG STOCK OF PYROPHYLITE. 3.3.7 AS REGARDS CHINA CLAY, THE APPELLANT HAS VAL UED AT RS.674.56 PER TON AS AGAINST THE AVERAGE PURCHAS E OF RS.350.86 PER TON THEREFORE, FURTHER INCREASE MADE TO THE VALUATION OF CLOSING STOCK BY VALUING AT RS.840/- A S HAS BEEN DONE BY THE A. O. IS HELD TO BE NOT PROPER. 3.3.8 AS REGARDS BALL CLAY, THE AVERAGE VALUATION FOR THE MONTH OF MARCH, 2005 IS RS.130.14 PER TON AND T HE APPELLANT HAS VALUED THE SAME AT HIGHER RATE OF RS. 263.93 PER TON, SO FURTHER INCREASE TO RS.380/- PER TON AS HAS BEEN DONE BY THE A. O. AS HELD TO BE NOT PROPER AND NOT JUSTI FIED. 3.3.9 AS REGARDS THE FINISHED GOODS BOXES, THE A.O . HAS ADDED RS.4/- PER BOX AND MADE ADDITION OF RS.2,01,1 54/-. THE DIFFERENCE OF RS.4 PER BOX IS STATED TO BE DUE TO DIFFERENCE OF EXCISE DUTY AND EXCISE DUTY HAS TO BE INCLUDED I N THE CLOSING STOCK VALUATION AS PER THE PROVISIONS OF SE CTION 145A OF THE ACT, SO THIS ADDITION IS CONFIRMED. HOWEVER, TH E CORRECT ADDITION COMERS FOR 60318 BOXES @RS.4 COMES TO RS.2,41,272/- ADDITION OF RS.2,41,272/- IS SUSTAINE D. 3.3.10 IT IS FOUND THAT THE APPELLANT HAS CONSISTEN TLY FOLLOWED SIMILAR METHOD OF VALUATION OF CLOSING STO CK IN THE PAST AND IF ADDITION IS MADE TO CLOSING STOCK THEN IN THE SUBSEQUENT YEAR THE DEDUCTION SHALL BE GIVEN TOWARD S OPENING STOCK. FURTHER, IT IS FOUND THAT VALUATION OF STOCK OF ALL RAW MATERIALS HAS BEEN DONE AT PROPER VALUATION EXC EPT FOR PYROPHILIES AND FINISHED GOODS BOXES FOR WHICH ADDI TIONS OF RS.2,550/- AND RS.2,41,272/- SHOULD BE MADE. THUS, OUT OF ENTIRE ADDITION OF RS.6,43,473/- TOWARDS UNDERVALUA TION OF CLOSING STOCK ADDITIONS OF RS.2,41,272 AND RS.2,550 /- ARE SUSTAINED AS DISCUSSED ABOVE AND THE BALANCE ADDIT ION IS DELETED. THE A. O. IS HOWEVER DIRECTED TO ALLOW THE SAME AS OPENING STOCK IN THE SUBSEQUENT YEAR. ITA NO.2670/AHD/2008 DCIT, HIMATNAGAR CIRCLE VS M/S. SOHNI CERAMICS 8 6. ON CONSIDERATION OF THE SUBMISSION OF THE LEARNE D DR, WE DO NOT FIND IT TO BE A FIT CASE FOR INTERFERENCE. THE LEA RNED DR RELIED UPON THE ORDER OF THE AO AND SUBMITTED THAT THE MATTER MAY B E REMANDED TO THE FILE OF THE AO FOR FURTHER VERIFICATION OF THE ISSU E. HOWEVER, ON GOING THROUGH THE FINDINGS OF THE LEARNED CIT(A) IN THE L IGHT OF THE EVIDENCES AND MATERIALS DISCUSSED IN THE IMPUGNED ORDER, THER E IS NO NEED EVEN TO REMAND THE MATTER TO THE FILE OF THE AO. THE ASSESS EE ON EACH AND EVERY ITEM OF THE PURCHASES WHICH FORM PART OF THE CLOSIN G STOCK EXPLAINED THAT THE AVERAGE COST OF PURCHASE HAS EXPLAINED THROUGH MATERIAL ON RECORD AND SUPPORTED BY BILLS OF THE PURCHASES. THE ASSESS EE HAS SHOWN HIGHER VALUE OF THE CLOSING STOCK AS COMPARED WITH THE AVE RAGE COST OF THE PURCHASES WHICH IS RIGHTLY APPRECIATED BY THE LEARN ED CIT(A) FOR THE PURPOSE OF DELETING THE ADDITIONS. THE LEARNED CIT( A) HOWEVER, MAINTAINED PART ADDITION OF PYROPHYLITE AND FINISHE D GOODS BOXES ON WHICH NOTHING IS BROUGHT TO OUR NOTICE IF THE ASSES SEE IS IN APPEAL, THEREFORE, THERE IS NO NEED TO ADJUDICATE UPON THOS E ISSUES. CONSIDERING THE FINDINGS OF THE LEARNED CIT(A) WITH REGARD TO D ELETION OF THE ADDITIONS ON SUBSTANTIAL ITEMS UNDER VALUATION OF THE CLOSING STOCK, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF TH E LEARNED CIT(A). SINCE THE VALUATION OF THE CLOSING STOCK IS HIGHER AS COM PARED WITH THE AVERAGE COST OF THE PURCHASES, THEREFORE, THERE IS NO JUSTI FICATION TO DISTURB THE FINDING OF FACTS RECORDED BY THE LEARNED CIT(A). WE , THEREFORE, DO NOT FIND ANY MERIT IN GROUND NO.1 OF THE APPEAL OF THE REVEN UE. THE SAME IS ACCORDINGLY DISMISSED. 7. GROUND NO.2 OF THE APPEAL OF THE REVENUE READS A S UNDER: 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACT S OF HE CASE IN DELETING THE ADDITION OF RS.6,43,726/- AS U NEXPLAINED PURCHASE U/S 69, TOWARDS EMPTY BOXES NOT RECORDED I N THE BOOKS OF ACCOUNTS. ITA NO.2670/AHD/2008 DCIT, HIMATNAGAR CIRCLE VS M/S. SOHNI CERAMICS 9 8. THE AO MADE THE ADDITION OF RS.6,43,726/- TOWARD S EMPTY BOXES NOT RECORDED IN THE BOOKS OF ACCOUNT. THE AO OBSERV ED THAT THE ASSESSEE HAS SHOWN PURCHASE OF EMPTY BOXES OF RS.6,62,041/- THE COST OF EMPTY BOXES DEBITED IN THE BOOKS OF ACCOUNT WAS OF RS.9,5 9,959/- WHEREAS AS PER STATEMENT OF PACKING MATERIAL, THE TOTAL BOXES PURCHASED WERE 892877 WHOSE COST WORKED OUT TO RS.16,03,685/- AND THEREFORE, THERE WAS A DIFFERENCE OF RS.6,43,746/- WHICH WAS NOT DEB ITED IN THE BOOKS OF ACCOUNT. THEREFORE, ADDITION WAS MADE U/S 69 OF THE IT ACT AS UNEXPLAINED PURCHASES. IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) THAT ADDITION IS MADE WITHOUT ASKING EXPLANATION OF THE ASSESSEE AND NO SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE ON THIS ISS UE. IT WAS SUBMITTED THAT THE CORRUGATED BOXES WERE NOT UNACCOUNTED AND THE AO MADE ADDITION WITHOUT VERIFYING THE BOOKS OF ACCOUNT. TH E ASSESSEE HAS PURCHASED CORRUGATED BOXES NUMBER OF 662041 OF RS.1 2,15,259/- AND IT WAS RECORDED IN THE BOOKS OF ACCOUNT AND COPY OF TH E LEDGER ACCOUNT WAS ALSO FILED BEFORE THE LEARNED CIT(A). IT WAS, THERE FORE, EXPLAINED THAT THE AO HAS WRONGLY NOTED THE VALUE AT RS.6,62,041/- INS TEAD OF IT WAS THE NUMBER OF BOXES. IT WAS, THEREFORE, SUBMITTED THAT ADDITION IS CLEARLY UNJUSTIFIED. THE LEARNED CIT(A) ACCEPTED THE CONTEN TION OF THE ASSESSEE AND NOTED THAT NO SHOW CAUSE NOTICE WAS ISSUED BY T HE AO ON THIS ISSUE AND THAT ACTUAL NUMBER OF BOXES ARE 662041 BUT IT W AS TAKEN IN RUPEES BY THE AO. THE VALUE IN FACT, OF THOSE BOXES ARE R S.12,15,259/- . THEREFORE, THERE IS NO BASIS FOR MAKING THE ADDITIO N. THE LEARNED CIT(A) ALSO NOTED THAT THE ASSESSEE HAS NOT SUBMITTED ANY STATEMENT ON THIS ISSUE SO THAT ADDITION CAN BE MADE. THE LEARNED CIT (A) ACCORDINGLY DELETED THE ADDITION. 9. ON CONSIDERATION OF THE SUBMISSION OF THE LEARNE D DR, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LEARNED CIT(A). THE ASSESSEE HAS EXPLAINED THAT THE AO HAS WRONGLY TAKE N THE NUMBER OF BOXES IN RUPEES AND THAT ENTIRE VALUE OF THE BOXES HAS BEEN DEBITED IN ITA NO.2670/AHD/2008 DCIT, HIMATNAGAR CIRCLE VS M/S. SOHNI CERAMICS 10 THE BOOKS OF ACCOUNT. THE LEARNED CIT(A) ON PROPER APPRECIATION OF THE FACT RIGHTLY DELETED THE ADDITION. THERE IS NO MERI T IN THIS GROUND OF APPEAL OF THE REVENUE. THE SAME IS ACCORDINGLY DISM ISSED. 10. GROUND NO.3 OF THE APPEAL OF THE REVENUE READS AS UNDER: 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACT S OF THE CASE IN DELEING THE ADDITION OF RS.12,22,022/- U/S 69, TOWARDS TRANSPORTATION EXPENSES NOT RECORDED IN THE BOOKS OF ACCOUNTS. 11. THE AO MADE THE ADDITION OF RS.12,22,022/- AS T RANSPORTATION EXPENSES NOT RECORDED IN THE BOOKS OF ACCOUNT. IT W AS SUBMITTED BEFORE THE LEARNED CIT(A) THAT THE AO PRESUMED IN THE ASSE SSMENT ORDER THAT THE ASSESSEE HAS NOTHING TO EXPLAIN FOR UNACCOUNTED PAYMENT OF TRANSPORT FOR PURCHASE OF RAW MATERIAL. IT WAS SUBM ITTED THAT THE ASSESSEE SUBMITTED COMPLETE DETAILS AND FILED LEDGE R ACCOUNT OF TRANSPORT EXPENSES WHICH HAVE BEEN DEBITED IN THE BOOKS OF AC COUNT AND SOME OF THE TRANSPORT EXPENSES WHICH HAVE NOT BEEN PAID HAV E NOT BEEN DEBITED FOR PURCHASED OF RAW MATERIAL, THEREFORE, ADDITION IS CLEARLY UNJUSTIFIED. IT WAS SUBMITTED THAT THE AO HAS NOT FOUND ANY DISCREP ANCY IN THE BOOKS OF ACCOUNT AND WITHOUT VERIFYING THE FACTS MADE THE ADDITION. THE LEARNED CIT(A), ON VERIFICATION OF THE MATERIAL NOTED THAT THE ASSESSEE HAS DEBITED TRANSPORTATION EXPENSES OF RS.11,12,199/- AS CARRIA GE INWARD AS PER THE DETAILS FILED IN THE PAPER BOOK AT PAGES 77 TO 86 W HICH ARE SUPPORTED BY BILLS AND MATERIAL. THE LEARNED CIT(A) ALSO NOTED F ROM THE BILLS OF DHRUV MINERALS THAT THERE ARE NO SUCH TRANSPORTATION CHAR GED DEBITED AS RECORDED IN THE ASSESSMENT ORDER. THE LEARNED CIT(A ) ALSO NOTED THAT THE ASSESSEE HAS RIGHTLY CONTENDED THAT THE AO HAS TAKEN ESTIMATED FIGURE ON VARIOUS ITEMS WHICH IS NOT BASED ON ACTUAL FIGURE. THE LEARNED CIT(A), THEREFORE, NOTED THAT ENTIRE ADDITION IS MADE MEREL Y ON ESTIMATION WITHOUT ANY JUSTIFICATION AND ACCORDINGLY DELETED T HE ADDITION. ITA NO.2670/AHD/2008 DCIT, HIMATNAGAR CIRCLE VS M/S. SOHNI CERAMICS 11 12. ON CONSIDERATION OF THE SUBMISSION OF THE LEARN ED DR, WE DO NOT FIND IT TO BE A FIT CASE FOR INTERFERENCE. THE ASSE SSEE FILED COMPLETE DETAILS BEFORE THE LEARNED CIT(A) TO SHOW THAT THE FIGURES ADOPTED BY THE AO ARE NOT BASED ON EVIDENCE AND MATERIAL ON RECORD. ADDIT ION WAS MADE BY THE AO ON ESTIMATE BASIS. THE ASSESSEE EXPLAINED THAT I T HAS DEBITED ENTIRE TRANSPORT EXPENSES IN THE BOOKS OF ACCOUNT WHICH AR E ALSO SUPPORTED BY LEDGER ACCOUNT AND THE BILLS OF THE PARTIES. WHEREV ER NO TRANSPORT CHARGE HAS BEEN DEBITED, THE ASSESSEE PRODUCED BILLS OF TH E CONCERN PARTY TO SUPPORT THE CLAIM. IN THE ABSENCE OF ANY MATERIAL O N RECORD, WE DO NOT FIND IT TO BE A FIT CASE FOR INTERFERENCE. WE CONFI RM THE FINDINGS OF THE LEARNED CIT(A) AND DISMISS THIS GROUND OF APPEAL OF THE REVENUE. 13. NO OTHER POINT IS ARGUED OR PRESSED. 14. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMI SSED. ORDER PRONOUNCED ON 12-11-2010. SD/- SD/- (A N. PAHUJA) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 12-11-2010 LAKSHMIKANT/- 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 DY. REGISTRAR, ITAT, AHMEDABAD