The ITO, Ward-2, Navsari V. Shri Jayantilal Tulsidas Zinzuwadia, Navsari

ITA 3155/AHD/2010

• Counselvise Citation: 315520514 RSA 2010
• Duration Of Justice: 3 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 10-10-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 29-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: O P BHATEJA SR D R
• Assessee Lawyers: MITISH S MODI
• Keywords: Rejection of books of accounts; Business income; Depreciation; Opportunity of being heard; Rule of consistency
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMADABAD , , , , BEFORE SHRI D.K.TYAGI , JUDICIAL MEMBER AND .., SHRI T.R. MEENA, ACCOUNTANT MEMBER !.. , ' # $ # $ # $ # $ ITA NO. 3155/AHD/2010 ASSESSMENT YEAR :2007-08 INCOME-TAX OFFICER, WARD-2, NAVSARI V/S . SHRI JAYANTIBHAI TULSIDAS ZINZUWADIA SHANTINIKETAN APARTMENTS, GADKARI MARG, NAVSARI, DIST.NAVSARI PAN NO. A A A PZ3 219Q (APPELLANT) .. (RESPONDENT) %& ' ( BY APPELLANT SHRI O. P. BHATEJA, SR. D.R. )%& ' ( /BY RESPONDENT SHRI MITISH S. MODI, A.R. *+, ' -' /DATE OF HEARING 1 0 . 1 0 .201 3 ./0 ' -' /DATE OF PRONOUNCEMENT 17.12.2013 O R D E R PER : SHRI T.R.MEENA, ACCOUNTANT MEMBER THIS IS AN APPEAL AT THE BEHEST OF REVENUE WHICH HA S EMANATED FROM THE ORDER OF CIT(A), VALSAD, DATED 30.07.2010 FOR A SSESSMENT YEAR 2007-08. THE EFFECTIVE GROUNDS OF REVENUES APPEAL ARE AS UN DER: 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A), VALSAD, WITHOUT APPRECIATING THE FAC TS, HAS ERRED IN DELETING THE ADDITION OF RS.34,02,404/- IN RESPECT OF UNDERVALUATION OF CLOSING STOCK WHICH WAS MADE BY THE AO BY ADOPTI NG THE COST OR MARKET PRICE WHICHEVER IS LOWER FOR VALUATION OF TH E CLOSING STOCK IN ITA NO. 3155/AHD/10 A.Y. 07-08 PAGE 2 THE ABSENCE OF PROPER BOOKS OF ACCOUNTS AND ON THE BASIS OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F BRITISH PAINTS INDIA PVT. LTD. [188 ITR 44] AND THE DECISION OF TH E HONBLE GUJARAT HIGH COURT IN THE CASE OF KWALITY STEEL VS CIT [191 CTR(GUJ) 94 : (2004) 271 ITR 40 (GUJ) ] 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A), VALSAD HAS ERRED IN ALLOWING THE DI SALLOWANCES IN RESPECT TELEPHONE EXPENSES AND VEHICLE EXPENSES OF RS.10,000/- & RS.3,000/- RESP. WHICH WAS RIGHTLY DISALLOWED PROPO RTIONATELY BY THE AO ON ACCOUNT OF NON-MAINTAINING OF LOG-BOOK OR PER SONAL BOOK FOR PERSONAL USE OF THE TELEPHONE AND VEHICLE BY THE AS SESSEE AND HIS FAMILY. 2. THE FIRST GROUND IS AGAINST DELETING THE ADDITIO N OF RS.34,02,404/- IN RESPECT OF UNDERVALUATION OF CLOSING STOCK. THE A. O. OBSERVED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SALE OF GOLD ORNAMENTS WHICH MADE AT HIS WORKSHOP. THE ASSESSEE ALSO MADE ORNAMENTS ON A LABOUR JOB BASIS. THE ASSESSEE HAD SHOWN CLOSING STOCK OF RS.50,01,037/-. THE ASSESSEE DID NOT MAINTAIN QUANTITATIVE STOCK REGISTER BUT CLOSING ST OCK STATEMENT WAS PRODUCED BEFORE THE A.O. AT THE TIME OF ASSESSMENT PROCEEDIN G. THE ONLY QUANTITY WAS MENTIONED WITHOUT ANY VALUE. TOTAL GOLD OF 9244.71 GRAM HAD BEEN SHOWN AT CLOSING STOCK AND THE VALUE OF THE SAME HAD TAKEN A T RS.50,01,037/-. THEREFORE VALUE OF GOLD PER GRAM CALCULATED @ RS.54 1.91/-. WHEREAS, FROM THE PURCHASE BILL OF MARCH 2007, WAS RS.909/- PER G RAM. HOWEVER, WHILE VALUING THE COST OF GOLD FOR CLOSING STOCK PURPOSES , THE VALUE OF GOLD HAS BEEN CALCULATED ON THE BASIS OF RS.541/- PER GRAM, WHICH WAS LESSER BY RS.368/- ITA NO. 3155/AHD/10 A.Y. 07-08 PAGE 3 PER GRAM FROM THE PURCHASE MADE IN THE MONTH OF MAR CH 2007. THE LD. A.O. WORKED OUT UNDER VALUATION OF CLOSING STOCK AT RS.3 4,02,404/-. HE GAVE REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE, WHICH WAS AVAILED BY THE ASSESSEE. AFTER CONSIDERING THE ASSESSEES REP LY, IT WAS HELD BY THE A.O. THAT THE APPELLANT HAD NOT FOLLOWED ACCOUNTING POLI CY FOR VALUATION OF CLOSING STOCK WHICH IS LOWER OF THE COST OR MARKET PRICE. THE ASSESSEE HAD FOLLOWED AVERAGE RATE METHOD OF VALUATION OF CLOSING STOCK A ND HENCE, INCOME CHARGEABLE UNDER THE HEAD OF BUSINESS INCOME CANNOT BE CORRECTLY DETERMINED. HE RELIED UPON THE HONBLE SUPREME COU RT DECISION IN CASE OF BRITISH PRINTS INDIA PVT. LTD., 188 ITR 44 (SC), WHEREIN IT WAS HELD THAT ACCOUNTS ARE PREPARED WITHOUT DISCLOSING THE REAL C OST OF THE STOCK IN TRADE ALBEIT ON SOUND EXPERT ADVISE IN THE INTEREST OF EF FICIENT ADMINISTRATION OF BUSINESS, IT IS THE DUTY OF THE ASSESSING OFFICER T O DETERMINE THE TAXABLE INCOME BY MAKING ANY SUCH COMPUTATION AS HE THINKS FIT. THE LD. A.O. FURTHER OBSERVED THAT ASSESSEE WAS NOT MAINTAINING DAY TO D AY QUANTITATIVE STOCK REGISTER. ONLY A HUNDRED PAGE OF NOTE-BOOK IS MAIN TAINED AS HIS BOOKS OF ACCOUNTS WHEREIN EVERY ACCOUNTS SUCH AS LEDGER, CAS H BOOK, BANK BOOK, SALE PURCHASE, STOCK ARE ACCOUNTED FOR. THIS FACT PROVE S THAT SUCH BOOKS OF ACCOUNTS HAVE BEEN PREPARED LATER ON ACCORDING TO T HE SWEET WILL OF THE ASSESSEE AND NOT AS PER DAY TO DAY AFFAIRS OF THE B USINESS. THEREFORE, SUCH BOOKS OF ACCOUNTS CANNOT BE TAKEN AS RELIABLE ONE. SINCE, NO QUANTITATIVE ACCOUNTS WAS MAINTAINED, THERE WOULD BE NO CONTROL AS TO HOW MUCH GOLD-BAR, OLD ORNAMENTS, COPPER ETC. PURCHASED, HOW MUCH HAVE BEEN ISSUED FOR ITA NO. 3155/AHD/10 A.Y. 07-08 PAGE 4 PROCESSING AND HOW MUCH OF THEM SOLD OUT DURING THE YEAR AND IN THE END HOW MUCH ACTUALLY REMAINED A CLOSING STOCK. WITHOU T QUANTITATIVE DETAILS, IT IS DIFFICULT TO ASCERTAIN WHETHER EACH PURCHASE AND QU ANTITY OF GOLD ISSUED FOR PROCESSING HAVE BEEN DULY ACCOUNTED FOR OR NOT. EV EN IN CLOSING STOCK, THE STOCK POSITION HAD NOT BEEN SHOWN ON THE BASIS OF C ARAT. THIS FACT ALSO PROVES INCOMPLETENESS AND INCORRECTNESS OF THE ACCO UNTS. GENERALLY, GOLD JEWELLERY VALUED ON THE BASIS OF 18, 22 AND 24 CARA T ON THE BASIS OF PURITY OF GOLD. SIMILARLY THE ASSESSEE HAD DEBITED SALARY/WA GES OF RS.1,20,000/- TO P&L ACCOUNT AND LABOUR INCOME HAD BEEN CREDITED AT RS.3 1,30,008/-. THE MONTH- WISE SALE AND PURCHASE ALONGWITH QUANTITY AND VALUE HAS BEEN REPRODUCED AND CONCLUDED THAT THERE WAS NO BIFURCATION OF READ Y ORNAMENTS AND RAW- MATERIAL. IT IS ALSO NOT CLEAR FROM THE ACCOUNTS T HAT WHETHER THE APPELLANT FOLLOWED LIFO OR FIFO METHOD FOR SALE OF GOLD ORNAM ENTS. THEREFORE, HE REJECTED THE BOOK RESULT U/S.145(3) OF THE IT ACT. HE FURTHER RELIED UPON IN CASE OF HONBLE GUJARAT HIGH COURT DECISION IN CASE OF KWALITY STEEL VS CIT [191 CTR(GUJ) 94 : (2004) 271 ITR 40 (GUJ) ], WHEREIN IT WAS HELD THAT CLOSING STOCK HAS TO BE VALUED AT COST OR MARKET PRICE, WHI CHEVER IS LOW. THE LD. A.O. CALCULATED THE CLOSING STOCK @ RS.909/- PER GRAM. THUS, THE A.O. MADE ADDITION OF RS.34,02,404/- ON ACCOUNT OF UNDER VALU ATION OF CLOSING STOCK. 3. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE A SSESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO HAD ALLOWED THE ASSESSEES AP PEAL BY OBSERVING AS UNDER: ITA NO. 3155/AHD/10 A.Y. 07-08 PAGE 5 5.9 FINDINGS : I HAVE CAREFULLY GONE THOUGH THE SUBMISSION MADE BEFORE ME BY THE LD. A.R OF THE APPELLANT AND THE FINDINGS OF THE AO IN THE ASSESSMENT ORDER. I HAVE ALSO REFERRED TO THE JUDICIAL DECISIONS RELIED UPON BY B OTH SIDES. THE AO MADE THE ADDITIONS BY REWORKING THE VALUE OF THE CLOSING STOCK. THE AO WAS OF THE VIEW THAT THE APPE LLANT SHOULD ADOPT THE EITHER LIFO OR FIFO METHOD FOR THE VALUATION OF CLOSING STOCK. DURING THE ASSESSMENT PROCEEDING THE OBSERVED THAT THE APPELLANT HAS NOT BEEN MAINTAININ G DAY TO DAY QUANTITATIVE STOCK REGISTER AND FOUND THAT BOOK S OF A/C WAS MAINTAINED IN A 100 PAGE NOTE BOOK ONLY. THEREFORE, REJECTED THE BOOKS OF A/C. AS WELL. IT IS ALSO MATTER OF FAC TS THAT THE AO HAD NOT DISTURBED LIE OPENING BALANCE WHILE TAKING THE ABOVE VIEW. THE AO MADE ADDITIONS BASED ON THE COMPARISO N OF PURCHASE VALUE DURING THE MARCH AND THE VALUE ADOPT ED FOR THE CLOSING STOCK. THE MAIN OBSERVATION OF THE AO W AS THAT THE APPELLANT SHOULD ADOPT EITHER FIFO OR LIFO FOR STOCK VALUATION. IN THE PROCESS HE EXAMINED A FEW PURCHAS E BILLS FOR THE MONTH OF MARCH AND ARRIVED AT THE RATE OF GOLD/ ORNAMENTS AT A HIGHER RATE COMPARED TO WHAT THE APPELLANT HAD SHOWN. FURTHER THE AO DID NOT DISTURB THE FIGURE OF OPENIN G BALANCE. THE LD. AR MADE ELABORATE SUBMISSIONS TO FURTHER HI S CASE. THE THRUST OF HIS ARGUMENT WAS THAT THE APPELLANT H AS BEEN FOLLOWING WEIGHTED AVERAGE METHOD OF VALUATION OF S TOCK, A RECOGNIZED METHOD AS PER AS-2 ISSUED BY THE ICAI AN D GOVT. OF INDIA, SINCE MANY YEARS. IN THE RESULT, THE OPEN ING STOCK AND CLOSING STOCK HAVE STABILIZED OVER THE PERIOD W ITHOUT HAVING ANY IMPACT ON THE PROFITS/LOSS IN THE ACCOUN T OF THE APPELLANT. THE LD. AR FURTHER SUBMITTED THAT , THE ADDITION MADE OF RS. 34,02,4047- IS MUCH MORE HIGHER THAN TH E ACTUAL TURNOVER OF RS. 14,12,210/-. FURTHER IF SUCH ADDITI ON IS ITA NO. 3155/AHD/10 A.Y. 07-08 PAGE 6 CONSIDERED, THE_G.P. WOULD BE RS. 40,79,448/- WHICH IS 288.67% OF THE TOTAL TURNOVER OF RS.14,12,210/- WHI LE THE APPELLANT HAS SHOWN THE G.P. AT THE AVERAGE RATE OF 39.83%, SUCH GROSS PROFIT EARNING IN THIS TRADE IS IMPOSSIB LE PLEADED BY THE A.R. I HAVE CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE CAREFULLY. THERE IS A FORCE IN THE ARGUMENT OF THE LD. AR. THE APPELLANT HAS BEEN FOLLOWING WEIGHTED AVERAGE M ETHOD FOR VALUATION OF STOCK, A RECOGNIZED METHOD AS PER AS-2 ISSUED BY THE ICAI AND GOVT. OF INDIA, SINCE MANY Y EARS. THE AO CAN NOT DISTURB THIS UNLESS THERE IS A SERIOUS D ISCREPANCY IN THE VALUATION OF STOCK. IT IS ALSO NOT APPROPRIA TE TO ADOPT THE RATE BY VERIFYING A SMALL SAMPLE OF PURCHASE BILLS FOR THE MONTH OF MARCH. MOREOVER, THE AO HAD NOT ADOPTED SAME MET HOD FOR THE OPENING STOCK AS A RESULT OF WHICH THE G.P. RAT E HAS SHOOT UP TO 288.67% OF THE TOTAL TURNOVER OF THE APPELLAN T. FACTUALLY, SUCH UNREASONABLE ADDITIONS DO NOT STAND IN THE EYE S OF THE LAW. THEREFORE, I DIRECT THE AO TO DELETE THE ADDIT ION MADE IN THIS GROUND OF APPEAL. THUS, THIS GROUND OF APPEAL IS ALLOWED. 4. NOW THE REVENUE IS BEFORE US. LD. SR. D.R. VEHE MENTLY RELIED UPON THE ORDER OF THE A.O. AND ARGUED THAT THE ASSESSEE IS H AVING CLOSING STOCK MORE THAN 9 KG AND HAS SHOWN TOTAL SALE OF RS.14,12,210 /- AGAINST THE PURCHASE OF RS.9,37,685/-. THE ASSESSEE HAD SHOWN INCOME OF RS .1,45,570/- WHICH INCLUDES LABOUR RECEIPTS ALSO AND SHOWN IN NET PROF IT @ 10.51%. IT WAS ARGUED THAT WHEN A PARTY IS HAVING STOCK AS PER VAL UATION AT MORE THAN RS.50 LACS. IT GENERALLY ROTATED IN FORM OF SALES 4 AND 5 TIMES IN THE YEAR. IT SHOWS THAT THE ASSESSEE HAD NOT BEEN DISCLOSING CORRECT S ALE OF GOLD ORNAMENTS. HE ITA NO. 3155/AHD/10 A.Y. 07-08 PAGE 7 FURTHER ARGUED THAT WHETHER THE ASSESSEE FOLLOWED L IFO OR FIFO METHOD FOR VALUING THE CLOSING STOCK. GENERALLY, OLD ORNAMENT S SOLD FIRST AND NEW ORNAMENTS SOLD LATER ON AS NEW DESIGNS ARE BEING DE VELOPED BY THE GOLD MANUFACTURERS AS PER THE LATEST TREND IN THE MARKET . THEREFORE, IT WAS NOT POSSIBLE THAT ASSESSEE HAD KEPT GOLD ORNAMENT IN HI S POSSESSION WITHOUT SELLING IT. THE ASSESSEES AVERAGE METHOD OF VALUA TION IS ALSO NOT ACCEPTED IN THE LIGHT OF ACCOUNTING PRINCIPLE THAT IT SHOULD BE VALUED EITHER COST PRICE OR MARKET PRICE WHICHEVER IS LESS. THUS, HE PRAYED TO CONFIRM THE ORDER OF THE A.O. AT THE OUTSET, LD. A.R. FILED WRITTEN REPLY, WHICH IS REPRODUCED AS UNDER: THE ASSESSEE HAS CONSISTENTLY FOLLOWED THE RECOGNIZ ED METHOD OF VALUATION OF STOCK OF GOODS I.E. WEIGHTED AVERAGE COST METHOD FROM THE VERY INCEPTION OF THE BUSINESS AS JEWELERS, WHICH HAS BEEN ACCEPTED IN THE PAST AS WE LL AS IN THE SUBSEQUENT ASSESSMENT YEARS BY THE DEPARTMENT. MORE PARTICULARLY, THE REGULAR ASSESSMENT U/S 143(3) OF THE ACT FOR THE ASSTT.YEAR: 2009-10 HAS BEEN COMPLETED BY THE A O RIGHTLY ACCEPTING THE WEIGHTED AVERAGE COST METHOD FOR VALU ATION OF THE CLOSING STOCK FOR WHICH THE COPY OF ASSESSMENT ORDER AS WELL AS FINANCIAL STATEMENTS SUCH AS TRADING A/C, P & L A/C AND BALANCE SHEET FOR THE F.Y. 2007-08 AND 2008-09 ARE ATTACHED HEREWITH. THE ASSESSEE HAS NOT CHANGED THE METHOD OF VALUATIO N OF CLOSING STOCK DURING THE YEAR UNDER ASSESSMENT, BUT THE AO HAS ARBITRARILY DISREGARDED THE SAME WITHOUT POINTI NG OUT ANY LAWFUL REASON TO REJECT THE SAME. WEIGHTED AVERAGE COST METHOD FOR VALUATION OF CLOSI NG STOCK IS WELL ACCEPTED METHOD AND RECOGNIZED BY THE ICAI ACCOUNTING STANDARD 2. THE AO HAS COMPLETELY FAIL T O ITA NO. 3155/AHD/10 A.Y. 07-08 PAGE 8 UNDERSTAND IN THE PROPER AND RIGHT PERSPECTIVES THE VERY NATURE OF BUSINESS AS JEWELERS HAVING WIDE RANGE OF FLUCTUATIONS IN THE MARKET PRICE OF THE GOODS AND T HEREFORE, THE WEIGHTED AVERAGE COST METHOD FOR THE VALUATION OF S TOCK OF GOODS ADOPTED CONSISTENTLY IS THE SCIENTIFIC METHOD LOOKING TO THE VERY NATURE AND ATTRIBUTES OF THE BUSINESS OF T HE ASSESSEE. THE AO HAS RIGHTLY ACCEPTED THE VALUATION OF THE OP ENING STOCK MADE FOLLOWING THE SAME METHOD I.E. WEIGHTED AVERAGE COST METHOD. THE NON ACCEPTANCE OF THE VALUATION AND THE BOOK RE SULTS BY THE LEARNED AO IS IRRATIONAL, WITHOUT ANY FINDINGS AS TO ANY OMISSION, IRREGULARITY AND POSITIVE EVIDENCE OF ANY DEFECT OR DISCREPANCY. ON THE CONTRARY, ALL THE PURCHASES, SALES AND OPENING STOCK ARE SUPPORTED BY THE SALES TAX RECORD S AND THE METHOD FOR VALUATION OF STOCK HAS ALSO BEEN ACC EPTED BY THE SALES TAX AUTHORITIES (CIT VS. ANANDA METAL CORPORATION (2005) 273 ITR PAGE 262 (MAD)). THERE IS NO MATERIAL OR EVIDENCE ON THE RECORDS OF THE AO IN SUPPORT OF HIS ALLEGATION THAT THE ASSESSEE HAS EAR NED MORE PROFIT ON THE STOCK OF GOODS. THE AO HAS COMPLETELY FAILED TO UNDERSTAND THAT THE ASSESSEE HAS RIGHTLY FOLLOWED THE GENERALLY ACCEPTED PRINCIP LES FOR VALUATION OF CLOSING STOCK I.E. AT THE LOWER OF COS T OR MARKET VALUE. THE AO HAS FAILED TO UNDERSTAND THAT THE EXP RESSION 'COST' INCLUDES THE WEIGHTED AVERAGE COST WHICH IS SCIENTIFIC AND RATIONAL AS COMPARED TO THAT OF LIFO METHOD. JUDGMENTS RELIED UPON: (1) PANKAJ DIAMOND VS. ACIT (2010) 5 TTR (TRIB.) 469 (AHD.) (2) CIT VS. MOONLIGHT BUILDERS AND DEVELOPERS (2008) 307 ITR 197 (DEL.) ITA NO. 3155/AHD/10 A.Y. 07-08 PAGE 9 RULE OF CONSISTENCY- METHOD CONSISTENTLY FOLLOWE D: (3) CIT VS. SANTRAM MANGATRAM (2005) 275 ITR 312 (P&H) (3) CAPRIHANS INDIA LTD. VS. PRAKASHCHANDRA OTH ERS (2002) 256 ITR 721 (BOM.) (4) JOINT CIT VS. PACT SECURITIES AND FINANCIAL LTD. (2003) 86 ITD 115 (HYDERABAD) (5) ACIT VS. SEAWORD EXPORTS PVT. LTD. (2012) 17 ITR (TRIB.) 353 (JAIPUR) (6) JOINT CIT VS. PACT SECURITIES AND FINANCIAL LT D. (2003) 86 ITD 115 (HYDERABAD) (7) ACIT VS. PUNJAB BONE MILLS (2006) 103 TTJ (AMRITSAR) 564 (IN THE EARLIER YEARS AS WELL IN THE SUBSEQUENT YEA RS, THE METHOD OF VALUATION OF CLOSING STOCK HAS BEEN ACCEPTED BY THE DEPARTMENT) REJECTION OF BOOKS OF ACCOUNTS: (8) ACIT VS. PROTEIN CHEM (2006) 102 TTJ (AMRITSAR) 604 (9) ASHOKE REFRACTORINESS P. LTD. (2005) 279 ITR 457 (CAL.) (10) B.R. INDUSTRIES VS. ITO (2008) 114 TTJ (JP) 103 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE HAS SHOWN CLOSING STOCK ON TH E BASIS OF WEIGHTED AVERAGE COST METHOD. FURTHER, IT IS ALSO AGAINST T HE ACCOUNTING PRINCIPLE I.E. ITA NO. 3155/AHD/10 A.Y. 07-08 PAGE 10 COST PRICE OR MARKET PRICE, WHICHEVER IS LESS. THE CLOSING STOCK IN QUANTITY AS WELL AS IN VALUE DOESNT MATCH WITH THE PURCHASE AN D SALE MADE DURING THE YEAR AND ALSO WITH RETURN OF INCOME. THEREFORE, TH E A.O. IS DIRECTED TO VERIFY THE PAST RECORD WHETHER ASSESSEE CONSISTENTLY FOLLO WED WEIGHTED AVERAGE COST METHOD ON VALUATION OF CLOSING STOCK OR OTHER METHODS. FURTHER, A.O. IS DIRECTED TO ASK THE ASSESSEE TO FILE CARAT-WISE OPE NING STOCK AND CLOSING STOCK, PURCHASE AND SALE & VERIFY THE SAME. THEREA FTER TAKE DECISION AS PER LAW. THIS GROUND OF APPEAL OF REVENUE IS ALLOWED F OR STATISTICAL PURPOSE. 6. THE SECOND GROUND OF APPEAL IS AGAINST ALLOWING THE TELEPHONE EXPENSES AND VEHICLE EXPENSES OF RS.10,000/- AND RS .3,000/- RESPECTIVELY. THE A.O. OBSERVED THAT THE ASSESSEE HAD DEBITED TEL EPHONE EXPENSES OF RS.8,488/- AND VEHICLE EXPENSES OF RS.11,257/-. TH E PERSONAL USE OF ELEMENT CANNOT BE RULED OUT. THEREFORE, HE DISALLOWED RS.5 ,000/- AN DDEPRECIATION ON MARUTI CAR IS ALSO DISALLOWED AT RS.5,000/-. THUS, TOTAL ADDITION OF RS.10,000/- WAS MADE UNDER THIS HEAD. SIMILARLY OUT OF TOTAL S HOP EXPENSES AT RS.14,956/-, THE A.O. DISALLOWED RS.3,000/- ON ACCO UNT OF PAYMENTS WERE MADE IN CASH AND SELF-MADE BY VOUCHERS. THE LD. CI T(A) DELETED THE ADDITION BY OBSERVING THAT THE ADDITION MADE BY THE A.O. WAS PURELY ON AD-HOC BASIS. THE A.O. MUST GIVE PLAUSIBLE REASONS FOR MAKING ADD ITION/DISALLOWANCE BUT IN THAT CASE, NO COGENT REASONS WERE GIVEN BY THE A.O. TO MAKE SUCH ADDITION. THE LD. SR. D.R. SUBMITTED THAT UNDER THESE HEADS, PERSONAL ELEMENT OF USE ARE ALWAYS FOUND, THEREFORE, IT SHOULD BE CONFIRMED . AT THE OUTSET, LD. A.R. SUPPORTED THE ORDER OF THE CIT(A) AND ARGUED THAT E XPENDITURE INCURRED WHOLLY ITA NO. 3155/AHD/10 A.Y. 07-08 PAGE 11 AND EXCLUSIVELY FOR BUSINESS PURPOSES U/S.37 OF THE IT ACT. THE LD. CIT(A) WAS NOT RIGHT BY ACCEPTING THE ASSESSEES SIMPLE RE PLY WITHOUT ANY EVIDENCE THAT THERE IS NON BUSINESS PURPOSES AS ASSESSEES W ITHDRAWAL IS ALSO VERY LOW FOR HOUSEHOLD PURPOSES AND INCOME ALSO HAS BEEN SHO WN LESS. THEREFORE, WE REVERSE THE ORDER OF THE CIT(A) AND ALLOW THE RE VENUES APPEAL. 7. IN THE RESULT, THE REVENUES APPEAL IS PARTLY AL LOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 17.12.2013 SD/- SD/- ( D.K.TYAGI ) (T.R. MEENA) JUDICIAL MEMBER ACCOUN TANT MEMBER TRUE COPY S.K.SINHA 1 1 1 1 ' '' ' )-2 )-2 )-2 )-2 320- 320- 320- 320- / COPY OF ORDER FORWARDED TO:- 1. %& / APPELLANT 2. )%& / RESPONDENT 3. - *7 / CONCERNED CIT 4. *7- / CIT (A) 5. 2; )-+ , , / DR, ITAT, AHMEDABAD 6. = >? / GUARD FILE. BY ORDER/ 1 , @/ B , $