ACIT, C-4(1), Chandigarh V. M/s Sunder Jewellers, Chandigarh

ITA 454/CHANDI/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8541 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 11-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ASHOK KHANNA
• Keywords: Competent authority; Onus to prove; Retraction
• Section: 143(3); 133A; 13; 145(3); 22; 145; 154

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BE NCH B, CHANDIGARH (VIRTUAL COURT) .., ! '# .. , $ %& BEFORE: SHRI. N.K.SAINI, VP & SHRI , R.L. NEGI, JM ITA NO. 454/CHD/2019 ASSESSMENT YEAR : 2014-15 THE ACIT, C - 4(1) CHANDIGARH M/S SUNDER JEWELLERS SCO 94, SECTOR 35-C CHANDIGARH PAN NO: AAUFS0336H APPELLANT RESPONDENT !' ASSESSEE BY : SHRI ASHOK KHANNA, ADDL. CIT #!' REVENUE BY : SHRI TEJMOHAN SINGH, ADVOCATE $ %! & DATE OF HEARING : 02/08/2021 '()*! & DATE OF PRONOUNCEMENT : 12/08/2021 %'/ ORDER PER N.K. SAINI, VICE PRESIDENT THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE ORD ER DT. 30/01/2019 OF LD. CIT(A)-2, CHANDIGARH. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEA L: (I) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS NOT ERRED IN LAW AS WELL AS FACTS IN ALL OWING THE APPEAL OF THE ASSESSEE WITHOUT APPRECIATING THE FACTS OF THE CASE ? (II) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A)HAS NOT ERRED IN ACCEPTING ASSESSEE'S VERSION THAT DIFFERENCE IN STOCKS WAS ATTRIBUTABLE TO RATE DIFFERENCE WHEREAS THE ASSESSE E IN HIS STATEMENT RECORDED DURING THE COURSE OF SURVEY ON 11.11.2013 HIMSELF A DMITTED THAT 'INVENTORY OF STOCK IS NOT MAINTAINED' AS A RESULT OF WHICH HE OF FERED A SUM OF RS. 3.41 CRORES ON ACCOUNT OF DIFFERENCE IN STOCK AS ADDITIONAL INCOME . 2 (III) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A)HAS NOT ERRED IN DELETING THE ADDITION OF RS. 2,44,30,607/- MADE BY THE AO ON ACCOUNT OF DIFFERENCE IN STOCKS(3,41,00,000 - RE VISED RETURN RS. 96,69,393/-) WHEN THE ASSESSEE HAD ADMITTED DURING SURVEY TO NON - MAINTENANCE OF PROPER STOCKS REGISTER/INVENTORY/PHYSICAL TALLY, WHICH WOU LD HAVE ENABLED THE SURVEY TEAM TO VERIFY THE CORRECTNESS OF WHETHER THE DIFFE RENCE IN STOCK WAS DUE TO RATE OR QUANTITY ? (IV) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS NOT ERRED IN DELETING THE ADDITION OF RS . 2,44,30,607/- MADE BY THE AO ON ACCOUNT OF DIFFERENCE IN STOCKS WHEN THE ASSESSE E HIMSELF ADMITTED AND OFFERED RS. 3,41,00,000/- DURING SURVEY AS HIS ADDI TIONAL INCOME AND A STATEMENT MADE VOLUNTARILY CAN FORM THE BASIS OF ASSESSMENT A S HELD IN 91 ITR 18 (SC) AND OTHER JUDICIAL PRECEDENTS ESPECIALLY WHEN THE TAXPA YER HAS NOT DISCHARGED BURDEN TO PROVE IT WAS WRONG OR GIVEN UNDER COERCIO N . (V) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) HAS NOT ERRED IN DELETING THE ADDITION OF RS . 2,44,30,607/- WHEREAS THE ASSESSEE HIMSELF ADMITTED A SUM OF RS. 3.41 CRORES ON ACCOUNT OF DIFFERENCE IN STOCK AS ADDITIONAL INCOME IN HIS STATEMENT AND THE ASSESSEE NEVER CLAIMED BEFORE THE AO THAT THE STATEMENT INITIALLY RECORDED WAS FACTUALLY INCORRECT AND HAD THUS FAILED TO DISCHARGE THE BURDEN OF ESTABLIS HING THAT ADMISSION MADE DURING SURVEY WAS WRONG, THROUGH ANY 'EFFECTIVE EVI DENCE' OR THAT IT WAS GIVEN THROUGH COERCION. (VI) IT IS PRAYED THAT THE ORDER OF LD. CIT(A) BE S ET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. (VII) THE APPELLANT CRAVES LEAVE TO ADD OR AMEND AN Y GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD OR IS DISPOSED OFF. FROM THE AFORESAID GROUNDS IT IS GATHERED THAT ONLY GRIEVANCE OF THE DEPARTMENT RELATES TO THE DELETION OF ADDITION OF R S. 2,44,30,607/- MADE BY THE A.O. ON ACCOUNT OF DIFFERENCE IN STOCK. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE E-FILED ITS RETURN OF INCOME ON 30/11/2014 DECLARING AN INCOME OF RS. 1,69,32,38 0/-. LATER ON, THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A.O. NOTICED THAT A SURVEY UNDER SECTION 133A O F THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT) WAS CARRIED OUT ON 11/11/2013 AT THE BUSINESS PREMISES OF THE ASSESSEE. DURING THE COURSE OF SURV EY DISCREPANCY WAS FOUND IN 3 THE VALUATION OF STOCK AND THE ASSESSEE SURRENDERED AN AMOUNT OF RS. 3,41,00,000/- OVER AND ABOVE THE NORMAL INCOME ON A CCOUNT OF UNDERVALUATION OF STOCK. THE A.O. ASKED THE ASSESSEE TO FURNISH TH E TRADING ACCOUNT BEFORE AND AFTER THE SURVEY. IN RESPONSE THE ASSESSEE SUBMITTE D AS UNDER: TRADING ACCOUNT UPTO 11.11.2013 PARTICULARS AMOUNT(RS.) PARTICULARS AMOUNT(RS.) OPENING STOCK 109370975 SALES 142792433 OP. STOCK PACKING MATERIAL 25000 PURCHASES 139248537 LABOUR CHARGES 2390010 CLOSING STOCK PACKING MATERIAL 25000 CARTAGE AND FREIGHT 4235 CLOSING STOCK 129732305 PACKING MATERIAL 234909 STOCK ADD- INCOME TAX SURVEY 9669393.47 GROSS PROFIT 30945465.97 TRADING ACCOUNT FOR 12.11.2013 TO 31.03.2014 PARTICULARS AMOUNT (RS.) PARTICULARS AMOUNT (RS.) OPENING STOCK 139401698.97 SALES 84611066 OP. STOCK PACKING MATERIAL 25000 PURCHASES 69711162 LABOUR CHARGES 896275 CLOSING STOCK PACKING MATERIAL 25000 CARTAGE AND FREIGHT 5468 CLOSING STOCK 138177497.38 PACKING MATERIAL 200755 GROSS PROFIT 12573204.41 3.1 THE A.O. ASKED THE ASSESSEE TO SUBMIT ITS BOOKS OF ACCOUNT INCLUDING STOCK REGISTER AND CASH BOOK, HE ALSO ASKED TO SHOW CAUSE AS TO WHERE THE SURRENDERED AMOUNT HAD BEEN DECLARED IN THE BOOKS / ITR AND AS TO WHETHER OR NOT THE TAX ON THE SAID SURRENDERED AMOUNT HAD BEEN PAID. IN RESPONSE THE ASSESSEE SUBMITTED AS UNDER: 4 'REGARDING EFFECT OF SURRENDER AMOUNT DURING SURVEY ON THE BUSINESS PREMISES OF THE ASSESSEE, IT IS SUBMITTED THAT A SUM OF RS. 3410000 /- WAS OFFERED FOR TAXATION DURING SURVEY PROCEEDINGS U/S 133A. THIS SURRENDER WAS BASED ON VALUATION OF STOCK ARRI VED ON BY THE REGISTERED VALUER OF THE INCOME TAX DEPARTMENT, WHI CH WAS BASED ON MARKET PRICE, AS ON 11.11.2013 I.E. THE DATE OF SURVEY. IT IS FURTHER SUBMITTED TH AT NO DIFFERENCE IN STOCK WAS FOUND BY THE SURVEY TEAM OF THE INCOME TAX DEPARTME NT. HOWEVER THE INCOME TAX RETURN FOR A. Y. 2014-15 I.E. F.Y.2013-14 HAS BEEN FILED B Y THE ASSESSEE FIRM TAKING INTO CONSIDERATION GROSS PROFIT ARRIVED AT BY ADOPTING A VERAGE RATE OF PURCHASES & SALES ON DAY TO DAY BASIS, WHICH IS RECOGNIZED METHOD OF CAL CULATION OF GROSS PROFIT. THERE IS NO RETRACTION FROM SURRENDER DURING SURVEY. AS THERE IS NO ACCOUNTANCY METHODS OF ADOPTING METHOD OF VALUATION OF STOCK ON CURRENT PRICE AS SUCH THE REC OGNIZED METHOD OF VALUATION OF STOCK, OF ADOPTING AVERAGE PURCHASE AN D SALE PRICE ON DAY TO DAY BASES HAS BEEN ADOPTED. FURTHER AS THE ASSESSEE HAD NO DIFFER ENCE IN STOCK AND HAS ADOPTED CONSTANTLY BEING FOLLOWED AND RECOGNIZED METHOD OF VALUATION OF STOCK, YOUR GOOD SELF IS REQUESTED TO NOT TO MAKE ANY ADDITION ON THIS GROUN D.' 3.2 THE ASSESSEE ALSO FURNISHED STOCK REGISTER AND THE CASH BOOK. THE A.O. OBSERVED THAT THE STOCK REGISTER DID NOT SHOW AS TO HOW VALUATION OF STOCK HAD BEEN ARRIVED AT AND THAT THE VALUATION OF DIAMOND, GOLD AND JEWELLERY DEPENDS ON ITS PURITY AND QUALITY. HE ALSO OBSERVED THAT STOCK REGISTER DID NOT CONTAIN QUALITY-WISE, ITEM-WISE, DAY-WISE RECORD OF STOCK, THEREFORE, IT WAS NOT POSSIBLE TO VERIFY THE PURCHASES AND SALES ON A PAR TICULAR DATE AND TO EVALUATE THE CORRECTNESS OF THE VALUE OF THE CLOSING STOCK A S SHOWN BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT. THE A.O. OBSERVED THAT THE DEFECT S WERE FOUND IN THE CASH BOOK AND SEVERAL ENTRIES WERE SEEN IN THE CREDIT SI DE OF THE CASH BOOK WHICH EXCEEDED RS. 20,000/- IN A DAY. 3.3 THE ASSESSEE SUBMITTED TO THE A.O. THAT THE AMO UNTS SHOWN ON THE CREDIT SIDE WERE BASICALLY SALES, IN SUPPORT OF THAT THE A SSESSEE ALSO FURNISHED SOME BILLS. HOWEVER THE A.O. WAS NOT SATISFIED AND REJECTED THE BOOKS OF ACCOUNT BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE AC T. THE A.O. OBSERVED THAT DURING THE COURSE OF SURVEY PROCEEDINGS ON 11/11/20 13 THE VALUATION OF STOCK WAS GOT DONE BY REGISTERED VALUER OF THE DEPARTMENT AND THE STOCK WAS VALUED AT RS. 16,37,95,953/- WHEREAS AS PER THE BOOKS OF T HE ASSESSEE ON THAT DATE, THE CLOSING STOCK AMOUNTED TO RS. 12,97,32,305/-. HE FU RTHER OBSERVED THAT THE 5 PARTNER OF THE ASSESSEE FIRM SHRI MAHENDER KHURANA WAS CONFRONTED AND WAS ASKED TO EXPLAIN / RECONCILE THE DIFFERENCE OF 3,40 ,63,650/-, HE STATED IN HIS STATEMENT RECORDED ON 11/11/2016 AS UNDER: .AS THE INVENTORY OF STOCK HAS NOT BEEN MAINTAIN ED SEPARATELY, I AM OFFERING A SUM OF RS. 3,40,63,650/- THE DIFFERENCE ROUNDED OFF TO RS. 3,41,00,000/-(RUPEES THREE CRORES AND FORTY ONE LACS) WHICH IS THE DIFFE RENCE IN STOCK OF JEWELLERY AS ADDITIONAL INCOME ON A/C OF STOCK DIFFERENCE FOR AY 2014-15 TO BUY PEACE OF MIND AND AVOID ANY FURTHER LITIGATION AND ADVANCE T AX OR OTHER DUES SHALL BE PAID ACCORDINGLY. 3.4 THE A.O. OBSERVED THAT EVEN DURING THE COURSE O F SURVEY PROCEEDINGS THE PARTNER OF THE ASSESSEE FIRM HAD ADMITTED THAT THE INVENTORY OF STOCK WAS NOT MAINTAINED PROPERLY AND VOLUNTARILY SURRENDERED THE AMOUNT OF RS. 3,41,00,000/- WHICH WAS BASICALLY THE DIFFERENCE IN THE STOCK AS RECORDED IN THE BOOKS OF ACCOUNT AND THE VALUE OF STOCK DETERMINED BY THE RE GISTERED VALUER OF THE DEPARTMENT. THE A.O. FURTHER OBSERVED THAT IN THE T RADING ACCOUNT FURNISHED BY THE ASSESSEE AS ON 11/11/2013 THE ASSESSEE HAD DEC LARED STOCK OF RS. 96,69,393.47 OVER AND ABOVE THE STOCK WHICH WAS APP EARING IN THE BOOKS OF ACCOUNTS. HE THEREFORE MADE THE ADDITION OF RS. 2,4 4,30,607/-(RS. 3,41,00,000/-(-) RS. 96,69,393/-). 4. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED AS UNDER: 'IT IS SUBMITTED THAT THE ASSESSEE IS FOLLOWING AVE RAGE COST RATE METHOD OF ACCOUNTING SINCE INCEPTION WHICH IS AN ACCEPTED NOR M AND HAS BEEN ACCEPTED BY THE DEPARTMENT. DURING THE COURSE OF SURVEY, THE DEPARTMENTAL VALUER APPLIED THE MARKET PRICE TO ARRIVE AT THE VALUATION AND NOT THE REGULARLY APPLIED METHOD ADOPTED BY THE ASSESSEE. THE OPENING STOCK AS TAKEN BY THE VALUATION OFFICER WAS CALCULATED ON THE REGULARLY APPLIED METHOD I.E AVERAGE COST BUT WHILE COMPUTING THE STOCK AS ON 11.11.2013, MARKET PRICE WAS APPLIED BY THE VALUER. IT IS PERTINENT TO MENTION HERE THAT THE QUANTITATIVE DETAILS OF STOCK AS FOUND ON THE DATE OF SEARCH ARE NOT IN DISPUTE. THE SAME HAS BEE N TAKEN BY THE ASSESSEE TO ARRIVE AT THE STOCK VALUED ON AVERAGE COST METHOD W HICH IS THE REGULARLY APPLIED METHOD. THERE WAS NO DIFFERENCE IN THE QUANTITY AS APPEARING IN THE BOOKS AND AS PER ACTUAL PHYSICAL VERIFICATION. NO EXCESS/SHOR T STOCK HAS BEEN FOUND DURING THE COURSE OF SURVEY. THE STOCK FOUND MATCHED WITH THAT FOUND RECORDED IN THE BOOKS OF ACCOUNT. IT IS ONLY A DIFFERENCE IN METHOD OF VALUATION WHICH HAS LED TO LESSER VALUATION. IT WAS FOUND AT THE TIME OF PREPA RATION OF THE FINAL ACCOUNTS BY THE QUALIFIED CHARTERED ACCOUNTANTS THAT THE WORKIN G OF THE VALUATION OF STOCK 6 WAS ON TWO DIFFERENT PARAMETERS WHICH ARE AGAINST T HE ACCEPTED ACCOUNTING STANDARDS ISSUED BY ICAI. THE ASSESSEE WAS PERPLEXE D AT THE TIME OF SURVEY AND WAS NOT AWARE OF THE INTRICACIES OF VALUATION WHICH IS THE JOB OF THE PROFESSIONAL ACCOUNTANTS. IT IS PERTINENT TO MENTION HERE THAT D URING THE COURSE OF RECORDING OF THE STATEMENT OF THE PARTNER, HE SPECIFICALLY STATE D THAT THERE WAS NO DIFFERENCE IN STOCK WHICH WAS VALUED BY THE ASSESSEE AT COST O R MARKET PRICE WHICHEVER IS LESS. AS PER THE DETAILED VALUATION, IT WOULD BE SE EN THAT THE VALUE AS PER BOOKS BASED ON AVERAGE COST COMES TO RS. 13,93,96,823.91 AS AGAINST RS. 16,37,96,524.95 IT IS THEREFORE STATED THAT WHEN THE QUANTITATIVE D ETAILS ARE NOT IN DISPUTE, THE DIFFERENCE HAS TO BE WORKED OUT FOLLOWING IDENTICAL SCALE. THE FACT ALSO REMAINS THAT THAT THE METHOD OF ACCOUNTING REGULARLY FOLLOW ED BY THE ASSESSEE REQUIRES TO BE ADOPTED FOR THE PURPOSE OF VALUATION OF STOCK. R ELIANCE IS PLACED ON THE DECISION OF THE JURISDICTIONAL ITAT RENDERED IN THE CASE OF M/S TALWAR SONS JEWELLERS IN ITA NOS. 1313 TO 1317/ CHD/2012 WHEREIN THE DEPA RTMENTAL APPEAL WAS DISMISSED ON IDENTICAL GROUNDS. THE DEPARTMENTAL VA LUER HAD ADOPTED MARKET RATE FOR THE PURPOSE OF VALUATION INSTEAD OF THE CO ST OR MARKET PRICE WHICH WAS REGULARLY FOLLOWED BY THE ASSESSEE. RATHER THE CASE OF THE INSTANT ASSESSEE IS ON A STRONGER FOOTING IN AS MUCH AS NO EXCESS STOCK WAS FOUND DURING SURVEY WHICH COULD HAVE ATTRACTED APPLICATION OF SOME OTHER METH OD OF VALUATION. IT IS, THEREFORE, STATED THAT WHEN THE QUANTITATIVE DETAIL S ARE NOT IN DISPUTE, THE DIFFERENCE HAS TO BE WORKED OUT FOLLOWING IDENTICAL SCALE. THE FACT ALSO REMAINS THAT THAT THE METHOD OF ACCOUNTING REGULARLY FOLLOW ED BY THE ASSESSEE REQUIRES TO BE ADOPTED. RELIANCE IS PLACED ON THE DECISION OF THE HON'BLE ITAT RENDERED IN THE CASE OF SHRI KULDEEP CHAND JAIN FOR THE SAID PR OPOSITION. THIS DECISION HAS BEEN APPROVED BY THE HON'BLE HIGH COURT VIDE ITS OR DER DATED 08.09.2015.' 4.1 APART FROM THE AFORESAID SUBMISSION THE ASSESSE E FURTHER SUBMITTED AS UNDER: 'ON LAST HEARING, IT WAS SUBMITTED THAT THE ASSESSEE HAS BEEN FOLLOWING THE SAME METHOD OF ACCOUNTING FOR VALUATION OF STOCK SINCE I NCEPTION. COPIES OF THE AUDIT REPORT FOR AY 2011-12 AND 2012-13 ARE ANNEXED HEREW ITH TO CORROBORATE THIS CONTENTION. ATTENTION IS DRAWN TO PAGES 286 AND 302 OF THE PAPER BOOK WHEREIN IT IS SPECIFICALLY MENTIONED IN THE NOTES ON ACCOUNT T HAT CLOSING STOCK IS VALUED ON AVERAGE COST METHOD. FURTHER AS PER AS1 OF THE ACCOUNTING STANDARDS AS I SSUED BY THE ICAI, IT IS ACCEPTED AS A FUNDAMENTAL ACCOUNTING ASSUMPTION THA T ACCOUNTING POLICIES ARE CONSISTENT FROM ONE PERIOD TO ANOTHER. THE SAME FINDS PLACE AT PAGE 312 OF THE COMPILATION ANNEXED WITH THIS SUBMISSION. SIMIL ARLY, AS PER AS2 WHICH DEALS WITH VALUATION OF INVENTORIES, IT IS MENTIONED THAT INVENTORIES SHOULD BE VALUED AT LOWER OF COST AND NET REALIZABLE VALUE. THIS IS WHA T HAS BEEN THE METHOD OF VALUATION AS FINDS MENTION IN THE AUDIT REPORT FOR ALL THE YEARS. AS SUCH, IT IS PRAYED THAT THE REGULARLY FOLLOWED M ETHOD OF ACCOUNTING IS TO BE ADOPTED FOR VALUATION OF STOCK. IT MAY NOT BE OUT O F PLACE TO MENTION HERE THAT EVEN IN CASE THE METHOD ADOPTED BY THE REVENUE IS C ONSIDERED, THE CLOSING STOCK SO ADOPTED BY THE REVENUE SHALL BECOME THE OP ENING STOCK FOR THE SUBSEQUENT YEAR WHICH WOULD REDUCE THE PROFITS OF T HE SUBSEQUENT YEAR. THUS, THE 7 ENTIRE EXERCISE WOULD BE REVENUE NEUTRAL WHICH IS N OTHING BUT TINKERING WITH THE REGULARLY ACCEPTED METHOD OF ACCOUNTING.' 4.2 THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE DELETED THE ADDITION MADE BY THE A.O. BY OBSERVING IN PARA 7.3 OF THE IMPUGNED ORDER AS UNDER: 7.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELL ANT AS WELL AS THE REASONS LEADING TO THE IMPUGNED ADDITION. IT IS SEEN THAT T HE ASSESSING OFFICER HAS MADE THE ADDITION ONLY ON THE BASIS OF THE STATEMENT OF THE ASSESSEE RECORDED ON THE DATE OF SURVEY WHEREIN HE SURRENDERED RS. 3,41,00,0 00/- BEING THE DIFFERENCE IN STOCK OF JEWELLERY. SHE HAS FAILED TO CONSIDER THE REPLY FILED BY THE ASSESSEE WHICH IS FORMING PART OF THE ASSESSMENT ORDER WHEREIN IT IS EMPHASIZED THAT THE VALUATION DONE BY THE DEPARTMENTAL VALUER WAS AT THE MARKET P RICE. IT IS CORRECT THAT THE ASSESSEE HAS SURRENDERED AN AMOUNT OF RS. 3,41,00,0 00/- DURING THE COURSE OF SURVEY. IT IS ALSO CORRECT THAT WHILE COMPUTING T HE VALUE OF JEWELLERY FOUND DURING THE COURSE OF SURVEY, THE DEPARTMENTAL VALUER APPLI ED THE MARKET PRICE TO ARRIVE AT THE VALUATION AS HAS BEEN DEMONSTRATED BY THE CO UNSEL OF THE ASSESSEE DURING THE COURSE OF APPELLATE PROCEEDINGS AND NOT THE REG ULARLY APPLIED METHOD ADOPTED BY THE ASSESSEE I.E. AVERAGE COST METHOD. S PECIFIC ATTENTION WAS DRAWN TO PAGE 125 OF THE PAPER BOOK TO EVIDENCE THAT THE VALUER HAD APPLIED RATE OF RS. 30,850/- PER 10 GM FOR 24 CARAT GOLD AS ON 11.1 1.2013 I.E. THE DAY OF SURVEY. ON THE OTHER HAND, THE OPENING STOCK IN THE SAME CALCU LATION HAS BEEN TAKEN WHILE PREPARING THE TRADING ACCOUNT AS REPRODUCED IN THE ASSESSMENT ORDER AS 10,93,70,975/- WHICH HAS BEEN CALCULATED ON THE BAS IS OF AVERAGE COST METHOD . FOR THIS PURPOSE ATTENTION WAS DRAWN TO THE TRADING ACCOUNT PLACED AT PAGE 17 OF THE PAPER BOOK WHEREIN OPENING STOCK HAS BEEN TAK EN AT RS. 10,93,70,975/-. FURTHER RELIANCE WAS PLACED ON AUDIT REPORT PLACED IN THE PAPER BOOK WITH SPECIFIC THRUST ON PAGE 15 SPECIFYING THE METHOD OF VALUATION OF CLOSING STOCK AS AVERAGE COST METHOD. I HAVE PERUSED THE AUDIT REPOR TS FOR THE ASSESSMENT YEARS AND IT IS SEEN THAT THE METHOD OF VALUATION OF STOC K HAS CONSISTENTLY BEEN AVERAGE COST METHOD. ASSESSEE HAS PLACED IN THE PAP ER BOOK AT PAGES 127-129 JUSTIFICATION IN RESPECT OF DIFFERENCE IN STOCK VAL UATION AS PER VALUER'S REPORT AND AS PER BOOKS AS ON THE DATE OF SURVEY. THIS DIFFERENCE HAS ARISEN ONLY BECAUSE OF THE METHOD OF VALUATION AS ADOPTED BY THE APPOINTED VAL UER OF THE DEPARTMENT HAVING APPLIED THE MARKET RATE WHILE REACHING AT VA LUE OF THE STOCK. THE ASSESSING OFFICER HAS NOWHERE REBUTTED THIS CONTENT ION OF THE ASSESSEE. IT IS ALSO SEEN THAT THE ASSESSEE HAS NOT DISPUTED THE QUANTIT Y OF STOCK FOUND AT THE TIME OF SURVEY FOR THE PURPOSE OF VALUATION. THERE CANNOT B E TWO METHODS ADOPTED FOR PURPOSE OF VALUATION. THE OPENING STOCK AND CLOSING STOCK HAVE TO BE VALUED APPLYING THE SAME METHOD. IN THE INSTANT CASE, IT I S SEEN THAT THE ASSESSEE HAS BEEN FOLLOWING THE SAME METHOD THROUGHOUT FOR THE P URPOSE OF VALUATION OF STOCK. RELIANCE HAD ALSO BEEN PLACED BY THE ASSESSE E'S COUNSEL ON THE DECISION OF M/S TALWARSONS JEWELLERS IN ITA NOS. 1313 TOL317 /CHD./2012 AND SHRI KULDEEP CHAND JAIN OF THE HON'BLE JURISDICTIONAL HIGH COURT COPIES OF WHICH WERE PLACED AT PAGE NOS.255-272 IN THE PAPER BOOK. THE P&H HIGH COURT IN ITS DECISION IN CASE 8 OF SH. KULDEEP CHAND JAIN IN ITA NO. 165 OF 2014(O& M) IN CASE OF SHRI KULDEEP CHAND JAIN INCORPORATED THE FINDING OF THE ITAT, CH ANDIGARH BENCH IN ITS DECISION IN CASE OF ABOVE SAID ASSESSEE FOR A.Y. 2007-08, WH EREIN ITAT HELD AS FOLLOWS: WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED T HE RECORD. THE ASSESSE IS ENGAGED IN THE BUSINESS OF SALE AND PURCHASE OF JEW ELLARY. THE ASSESSEE, IN ORDER TO VALUE ITS CLOSING STOCK IS FOLLOWING LIFO METHOD WHICH IS ONE OF THE PRESCRIBED METHOD OF ACCOUNTING STANDARDS ISSUED BY ICAI FOR V ALUATION OF INVENTORY. THE SAID METHOD OF VALUING THE CLOSING STOCK OF GOLD OR NAMENTS HAS BEEN CONSISTENTLY FOLLOWED BY THE ASSESSEE FROM YEAR TO YEAR. SIMILAR METHODS WAS FOLLOWED BY THE ASSESSEE IN A.Y. 2007-08. THE AO IN ASSESSMENT YEAR 2007-08 HAS MADE AN ADDITION OF RS. 32,08,977/- ON ACCOUNT OF V ALUATION OF CLOSING STOCK OF GOLD ORNAMENTS. THE TRIBUNAL IN ITA NO. 1378/CHD/20 10 RELATING TO A.Y 2007-08 IN DCIT VS. SH. KULDEEP CHAND JAIN, HUF, VIDE ORDER DA TED 24.04.2012, HAS HELD AS UNDER: 'WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS, F ACTS OF THE CASE AND RELEVANT RECORD. THE BRIEF FACTS OF THE CASE ARE THAT THE AP PELLANT IS A WHOLESALE & RETAIL SARAFA MERCHANT. THE ASSESSEE FILED RETURN OF INCOM E ON31.10.2007, DECLARING INCOME OF RS.29,20,088/-. A SURVEY U/S 133A OF THE ACT WAS CONDUCTED, ON THE BUSINESS PREMISES OF THE ASSESSEE, ON 13.10.2006, D URING WHICH APPELLANT SURRENDERED AN ADDITIONAL INCOME OF RS.26 LACS ( RS .17 LACS ON ACCOUNT OF UNEXPLAINED OLD GOLD AND DIAMOND JEWELLERY AND RS. 9 LACS ON ACCOUNT OF EXCESS CASH FOUND. THE AO FRAMED ASSESSMENT U/S 143(3) AT A N INCOME OF RS. 61,29,065/- AFTER MAKING DISALLOWANCE OF RS.32,08,977/- ON ACCO UNT OF UNDER VALUATION OF CLOSING STOCK. AO ALSO REJECTED THE BOOKS OF ACCOUNT OF THE APPELLANT AND TREATED THE SURRENDERED AMOUNT OF RS.26 LACS AS DEE MED INCOME. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESS EE INFORMED THE AO, THAT LIFO METHOD OF ACCOUNTING WAS FOLLOWED IN VALUATION OF C LOSING STOCK. THE CONTENTION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE AO. THE AO, REFERRED TO A.S.-2, THAT SPECIFIES OF ONLY THREE METHODS OF DETERMINING THE COST OF INVENTORIES I.E. SPECIFIC IDENTIFICATION METHOD, FIFO AND WEIGHTED AV ERAGE COST METHOD. THE AO MADE AN ADDITION OF RS.32,08,977/ - FOLLOWING THE W EIGHTED AVERAGE COST METHOD OF THE CLOSING STOCK. THE ID. CIT(A), ON APPRECIATI ON OF THE CASE LAWS AND SUBMISSIONS FILED BEFORE HER, GAVE HER FINDINGS IN PARA 5.2 OF THE APPELLATE ORDER, WHICH ARE REPRODUCED HERE UNDER '5.2 I HAVE CAREFULLY CONSIDERED THE SUBMISSION FIL ED BY THE APPELLANT, IT WAS INFORMED THAT THE AO HAS ACCEPTED THE CALCULATION ER ROR IN THE CLOSING STOCK VALUATION AND HAS RECTIFIED THE SAME BY PASSING ORD ER U/S 154 DATED30.06.2010 VIDE WHICH THE DIFFERENCE IN STOCK STAND REDUCED FR OM RS.32,08,977/- TO SEEN THAT DURING THE A.Y. 2003-04,2005-06 AND 2006-07 ASSESSM ENT FOR WHICH WAS COMPLETED U/S 143(3), THE METHOD OF VALUATION OF CLOSING STOC K HAS BEEN ACCEPTED BY THE AO INCLUDING BY THE AO WHO HAS PASSED THE ASSESSMENT ORDER FOR THE YEAR UNDER APPEAL. THEREFORE, THE AO CANNOT REJECT THE METHOD O F VALUATION OF CLOSING STOCK WHICH IS CONSISTENTLY' FOLLOWED BY THE APPELLANT AN D HAS ALSO BEEN ACCEPTED BY THE AO IN THE PAST. I AGREE WITH THE APPELLANT THAT RULE OF CONSISTENTLY HAS TO BE FOLLOWED AND OBSERVED. FURTHER, IT IS SEEN THAT THE HON'BLE PUNJAB & HARYANA HIGH 9 COURT IN APPELLANT'S OWN CASE CTT VS. SANT RAM MANG AT RAM(195CTR345)OBSERVED AS UNDER :-'LT IS AN ADMITTE D POSITION THAT FROM THE INCEPTION OF ITS BUSINESS, THE ASSESSEE HAD CONTINU OUSLY ADOPTED THE SAME METHOD OF VALUATION OF THE CLOSING STOCK AND NO OBJ ECTION WAS RAISED BY THE DEPARTMENT IN ANY OF THE PREVIOUSYEARS.5 RATHER, TH E COMPETENT AUTHORITY ACCEPTED THE METHOD ADOPTED BY THE ASSESSEE AND ACC ORDINGLY, MADE ASSESSMENT. THIS BEING THE POSITION, WE DO NOT FIND ANY VALID GROUND TO ACCEPT THE ARGUMENT OF SHRI BINDAL THAT THE METHOD ADOPTED BY THE ASSESSEE FOR VALUATION OF THE STOCK WAS LEGALLY IMPERMISSIBLE AN D ON THAT ACCOUNT, THE ADDITIONS MADE BY THE INSPECTING ASSISTANT COMMISSI ONER SHOULD BE RESTORED. IN UNITED COMMERCIAL BANK V. CIT [1999] 240 ITR 355, T HEIR LORDSHIPS OF THE SUPREME COURT HELD THAT THE METHOD WHICH WAS CONSISTENTLY F OLLOWED BY THE APPELLANT- BANK FOR VALUING THE STOCK-IN-TRADE COULD NOT BE RE JECTED BY THE ACCESSING AUTHORITY IN A PARTICULAR YEAR. 'THERE IS MERIT IN THE APPELLANT'S SUBMISSIONS THAT THE PRINCIPLE OF JUDICIAL DISCIPLINE REQUIRES THAT THE ORDER OF THE HIGHER APPELLATE AUTHORITY SHOULD BE FOLLOWED UNRESERVEDLY BY THE SU BORDINATE AUTHORITIES. THEREFORE, IN VIEW OF THE ABOVE STATED FACTS - ASSE SSEE HAVING CONSISTENTLY EMPLOYED THE SAME METHOD OF VALUATION OF CLOSING ST OCK AND AO HAVING NOT QUESTIONED THE SAME AND IN FACT HAVING ACCEPTED IT IN THE PREVIOUS ASSESSMENT YEARS, IT IS HELD THAT THE METHOD OF VALUATION OF C LOSING STOCK COULD NOT BE REJECTED. THEREFORE, THE ADDITION MADE BY THE AO WH ICH BY HER ORDER OF RECTIFICATION U/S 154 STANDS REDUCED TO RS. 19,45,0 73/- ON ACCOUNT OF DIFFERENCE IN VALUATION OF CLOSING STOCK IS DELETED. THIS GROUN D OF APPEAL IS ALLOWED.' 6. A BARE PERUSAL OF THE FINDINGS OF CIT(A) REVEALS THAT ON T HE BASIS OF THE DOCTRINE OF CONSISTENCY IN RELATION TO METHOD OF VALUATION OF I NVENTORY AS ALSO THE DECISION OF THE JURISDICTIONAL HIGH COURT IN ASSESSEE'S OWN CAS E, SHE RECORDED FINDINGS IN FAVOUR OF THE ASSESSEE. HAVING REGARD TO THE FACT-S ITUATION OF THE CASE, DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT, RELIED UPON BY THE ID. CIT(A), AND THE RELEVANCE OF CONSISTENCY PRINCIPLE IN THE MATTER, W E DO NOT FIND ANY INFIRMITY, IN THE FINDINGS OF THE CIT(A), AND HENCE, THE SAM E ARE UPHELD. THUS, THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED.' THERE IS MERIT IN THE APPELLANT'S SUBMISSIONS THAT THE PRIN CIPLE OF JUDICIAL DISCIPLINE REQUIRES THAT THE ORDER OF HIGHER APPELL ATE AUTHORITY SHOULD BE FOLLOWED UNRESERVEDLY BY THE SUBORDINATE AUTHORITIE S. THEREFORE, IN VIEW OF THE ABOVE STATED FACTS, ASSESSEE HAVING CONSISTENTLY EM PLOYED THE SAME METHOD OF VALUATION OF CLOSING STOCK AND AO HAVING NOT' QUEST IONED THE SAME AND IN FACT HAVING ACCEPTED IT IN PREVIOUS YEARS, IT IS HELD TH AT THE METHOD OF VALUATION OF CLOSING STOCK COULD NOT BE REFECTED. THEREFORE, THE ADDITION MADE BY THE AO WHICH BY HER ORDER OF RECTIFICATION U/S 154 STANDS REDUCED TO RS. 19,45,073/- ON ACCOUNT OF DIFFERENCE IN VALUATION OF CLOSING STOCK IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. THE RELEVANT EXTRACT OF THE JUDGEMENT OF ITAT, CHAN DIGARH IN CASE OF TALWARSONS JEWELLERS IN ITA NO. 1313 TO 1317/CHD/2012, IN WHIC H THE DECISION OF CIT(A) WAS CONFIRMED THE ITAT, IS REPRODUCED BELOW: '52 WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY. THE CIT(A) HAS DECIDED THE ISSUE VIDE PARA 5.1 WHICH IS AS UNDER 10 HOWEVER THE ISSUE IS THE MANNER OF VALUATION OF THE EXCESS STOCK, AS THE QUANTITATIVE DETAILS OF THE GOLD AND DIAMOND JEWE LLERY ARE NOT IN DISPUTE. IT IS THE CASE OF THE AO THAT THE EXCESS STOCK DETERMINED WAS BASED OF TRADING A/C DRAWN UP ON BASIS OF DETAILS FURNIS HED BY THE ASSESSEE AND THAT THE CLOSING STOCK INVENTORIED BY THE DEPARTMENTAL V ALUER WAS IN THE PRESENCE OF THE ASSESSEE WHO HAD NO OBJECTION TO THE APPOINTMENT OF THE GOVERNMENT APPROVED VALUER FOR VALUATION PURPOS E. ON THE OTHER HAND, THE ASSESSEE HAS CONTENDED THAT HE HAD ONLY ACCEPTED TH E APPOINTMENT OF THE GOVERNMENT APPROVED VALUER. IT TRANSPIRES THAT THE TRADING RESULT OF GOLD WAS BASED ON THE GP RATE OF LAST FINANCIAL YEAR AT 19.4 6%, WHEREIN THE STOCK HAD BEEN VALUED AT COST PRICE AS PER METHOD OF ACCOUNTING RE GULARLY FOLLOWED WHILE THE VALUER VALUED THE EXCESS STOCK AT MARKET PRICE. TH E METHOD OF VALUATION OF THE CLOSING STOCK FOLLOWED WAS STATED TO BE COST OR MAR KET WHICHEVER IS LOWER. SO IT WAS SUBMITTED THAT THE EXCESS BE FIRSTLY DETERMINED TO WHICH THE VALUE ADOPTED BY THE VALUER COULD BE APPLIED. 1 FIND THAT THE ASS ESSMENT ORDER IS SILENT ON THE METHOD OF THE VALUATION OF THE STOCK. THE ALTERNATE PLEA OF THE ASSESSEE IS THAT AT THE YEAR END, THE EXCESS STOCK VALUE WILL G ET SET OFF IN ANY CASE. BE THAT AS IT MAY, I AM INCLINED TO ACCEPT THE ARGUMENTS OF TH E ASSESSEE, THAT AS THE VALUE OF THE STOCK FOR THE PURPOSE OF TRADING ACCOUNT HAS BEEN WORKED OUT BY TAKING THE INVENTORY AT COST VALUE, NOT THE MARKET VALUE, SO FOR MAKING A COMPARISON THE VALUE SHOULD BE ARRIVED AT BY THE SAME METHOD. IN O THER WORDS, THE BOOK VALUE OF THE STOCK IS VALUED AT COST WHEREAS THE PHYSICAL STOCK IS VALUED AT MARKET VALUE. NO DOUBT THE DETAILS FOR DRAWING UP THE TRAD ING ACCOUNT AS ON THE DATE OF SEARCH WAS PROVIDED BY THE ASSESSEE AND THE GP RATE IS ALSO NOT IN DISPUTE. IT IS THEREFORE ONLY FAIR THAT WHEN THE QUANTITATIVE DETA ILS ARE NOT IN DISPUTE, THE DIFFERENCE SHOULD BE NECESSARILY WORKED OUT FOLLOWI NG IDENTICAL SCALE. THE FACT ALSO REMAINS THAT THE METHOD OF ACCOUNTING REGULARL Y FOLLOWED BY THE ASSESSEE REQUIRES TO BE ADOPTED. IN THIS CASE, THERE IS NO R EJECTION OF THE BOOKS OF ACCOUNTS, NOR ANY ADVERSE FINDINGS ON THE SYSTEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE. ' COM ING TO THE ISSUE OF DIFFERENCE IN THE STOCK OF GOLD, THE EXCESS STOCK OF GOLD @ RS.1380 P ER GM FOR 22 CT AS WELL AS GOLD BULLION MELTED AS TAKEN BY THE VALUER, WORK S OUT TO 9952.20 GMS (9897 GMS OF 18 CT AND 55.20 GMS OF 22 CT) WHICH IS THE ACCEP TED DIFFERENCE IN WEIGHT AS PER VALUATION AND AS PER BOOKS. ASIDE, THE 18 CT GOLD W HERE IN NO DIFFERENCE WAS FOUND (IN FACT THE BOOKS SHOWED 2.904 GM MORE) WAS VALUED BY THE VALUER @ RS.1200 PER GM. ON THEREFORE APPLYING THE RATE AS DO NE BY THE VALUER, THE VALUE COMES TO RS. 13,58,37,331/-. I FIND THAT THE VALUE OF THE GOLD AS PER THE BOOKS OF ACCOUNT HAS BEEN WORKED OUT AT RS. 10,10,49,782/- THE ENSUING DIFFERENCE, THUS, COMES TO RS. 3,47,87,549/~. HOWEVER, ON APPLYING THE COST PRICE TO THE EXCESS GOLD STOCK, THE VALUE COMES TO RS. 1,37,51,760/-. THUS THE DIFFERENCE WHICH HAD BEEN ADDED BY THE LD AO OF RS. 2,08,35,789/- IS THEREFORE FOUND TO BE ARISING DUE TO DIFFERENCE ON ACCO UNT OF VALUATION ONLY AS ASSESSEE HAS VALUED HIS STOCK AT COST WHILE THE VAL UER HAS VALUED AT THE MARKET RATE AT THE TIME OF SEARCH. THIS EXCESS STOCK VALU E THEREOF, OF RS. 1,37,51,760/- IS FOUND TO BE CORRESPONDING TO AMOUNT SURRENDERED BY THE ASSESSEE ON ACCOUNT OF EXCESS STOCK OF GOLD. AS REGARDS THE SURRENDER O N ACCOUNT OF EXCESS DIAMOND OF RS. 4,37,56,1591- ,THE SAME IS NOT IN DISPUTE. C ONSEQUENTLY THE ASSESSEE DESERVES TO SUCCEED IN THIS GROUND OF APPEAL.' 11 WE FIND THAT THE ID. CIT(A) HAS CORRECTLY ADJUDICAT ED THE ISSUE. IF THE PHYSICAL QUANTITY OF THE STOCK WHICH WERE FOUND DURING SEARC H IS COMPARED WITH THE STOCK RECORDED THEN THE ASSESSEE HAS ALREADY VALUED THE E XCESS STOCK ON THE VALUE WHICH WAS APPLIED BY THE VALUER. THE RATIO OF THE DECISIONS IN ABOVE SAID CASES ARE CLEARLY APPLICABLE TO THE FACTS OF THE APPEAL AT HAND. FOLLOWING THE SAID JUDGEMENT S OF JURISDICTIONAL HIGH COURT 8 B ITAT, IT IS HELD THAT SINCE THE SURRENDER MADE WAS NOT ON THE BASIS OF ANY EXCESS STOCK, BUT ON THE BASIS OF ADOPTION OF MARKET RATE INSTEAD OF AVERAGE COST METHOD REGULARLY EMPLOYED BY THE ASSESSEE, IT IS HE LD THAT THERE WERE NO GROUNDS/FINDING REJECTING THE CONTENTION OF THE ASS ESSEE TO THIS EFFECT AND ACCORDINGLY, THE ADDITION MADE BY AO IS DELETED. GROUNDS OF APPEAL NO.2, 3 & 4 ARE ALLOWED. 5. NOW THE DEPARTMENT IS IN APPEAL. 6. THE LD. DR STRONGLY SUPPORTED THE ASSESSMENT ORD ER PASSED BY THE A.O. AND REITERATED THE OBSERVATIONS MADE THEREIN. IT WA S FURTHER SUBMITTED THAT DURING THE COURSE OF SURVEY HELD ON 11/11/2013 IT W AS NOTICED THAT THERE WAS DIFFERENCE IN THE CLOSING STOCK PHYSICALLY FOUND VI S A VIS RECORDED IN THE BOOKS OF ACCOUNTS AND THE ASSESSEE WAS ASKED TO EXPLAIN /REC ONCILE THE DIFFERENCE OF RS. 3,40,63,650/-, THE PARTNER OF THE ASSESSEE FIRM, OF FERED THE DIFFERENCE IN STOCK JEWELLERY ROUNDED OFF TO RS. 3.41 CRORES AS ADDITIO NAL INCOME. HOWEVER WHILE FURNISHING THE TRADING ACCOUNT AS ON 11/11/2013, TH E ASSESSEE DECLARED ONLY RS. 96,69,393/- OVER AND ABOVE STOCK WHICH WAS APPEARIN G IN THE BOOKS OF ACCOUNT ON THE DATE OF SURVEY, THEREFORE THE BALANCE AMOUNT OF RS. 2,44,30,607/- WAS RIGHTLY ADDED BY THE A.O. IN THE INCOME OF THE ASSE SSEE AND THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE SAID ADDITION, PARTIC ULARLY WHEN THE REJECTION OF BOOKS BY THE A.O. WERE UPHELD BY THE LD. CIT(A). 7. IN HIS RIVAL SUBMISSIONS THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND FURTHER SUBMITTED THAT THERE WAS NO DIFFERENCE IN THE STOCK FOUND DURING THE COURSE OF SURVEY AND AS RECORDED IN THE BOOKS OF ACCOUNTS, THE ONLY DIFFERENCE WAS IN THE M ETHOD OF VALUATION OF STOCK ADOPTED BY THE VALUER OF THE DEPARTMENT AND FOLLOWE D BY THE ASSESSEE. IT WAS 12 CONTENDED THAT THE ASSESSEE WAS FOLLOWING THE AVERA GE COST PRICE METHOD FOR VALUATION OF THE CLOSING STOCK, CONSISTENTLY FROM Y EAR TO YEAR WHICH HAD BEEN ACCEPTED BY THE DEPARTMENT. HOWEVER, THE VALUER OF THE DEPARTMENT APPLIED THE MARKET RATE WHILE VALUING THE STOCK FOUND DURIN G THE COURSE OF SURVEY AND WORKED OUT THE DIFFERENCE IN VALUATION AT RS. 3,41, 00,000/- BUT THE ACTUAL DIFFERENCE IN VALUATION WAS RS. 96,69,393/-, WHICH WAS OFFERED BY THE ASSESSEE FOR TAXATION, THEREFORE THE BALANCE ADDITION AMOUNTING TO RS. 2,44,30,607/- WAS RIGHTLY DELETED BY THE LD. CIT(A). IT WAS ALSO SUBM ITTED THAT THE LD. CIT(A) WHILE DELETING THE ARBITRARY ADDITION MADE BY THE A.O. FO LLOWED THE DECISION OF THE ITAT CHANDIGARH BENCH IN THE CASE OF M/S TALWARSON S JEWELLERS VS. ACIT IN ITA NOS. 1313 TO 1317/CHD/2012 & ITA NO. 81/CHD/2013 FO R THE A.Y. 2004-05 TO 2006- 07 AND 2009-10 TO 2010-11 VIDE ORDER DT. 30/09/2013 AND THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T, PANCHKULA VS. SHRI KULDEEP CHAND JAIN (HUF) IN ITA NO. 165 OF 2014 ORDER DT. 0 8/09/2015, THEREFORE THE IMPUGNED ADDITION WAS RIGHTLY DELETED BY THE LD. CI T(A). 8. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE IT IS AN ADMITTED FACT THAT DURING THE COURSE OF SURVEY ON 1 1/11/2013 AT THE BUSINESS PREMISES OF THE ASSESSEE NO DIFFERENCE WAS FOUND IN THE QUANTITY OF THE STOCK FOUND PHYSICALLY AND AS RECORDED IN THE BOOKS OF AC COUNT. HOWEVER DIFFERENCE WAS THERE IN THE VALUATION MADE BY THE REGISTERED V ALUER OF THE DEPARTMENT WHO APPLIED THE MARKET RATE AND WORKED OUT THE TOTA L STOCK OF THE JEWELLERY AT RS. 16,37,95,953/- WHEREAS AS PER BOOKS OF THE ACCO UNT OF THE ASSESSEE ON THE SAID DATE THE CLOSING STOCK WAS AT RS. 12,97,32,305 /-. IN THE PRESENT CASE, WHEN THE TRADING ACCOUNT WAS PREPARED AS ON 11/11-2013, THE ASSESSEE OFFERED THE DIFFERENCE IN VALUATION AMOUNTING TO RS. 96,69,393/ -. THE ASSESSEE WHILE WORKING OUT THE ABOVE DIFFERENCE APPLIED THE AVERAGE PRICE WHICH WAS FOLLOWED CONSISTENTLY, WHEREAS THE REGISTERED VALUER OF THE DEPARTMENT APPLIED THE 13 MARKET RATE FOR VALUATION OF THE CLOSING STOCK. IT IS WELL SETTLED THAT THE METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE CONSISTENTLY AND REGULARLY CANNOT BE DISCARDED. 8.1 ON A SIMILAR ISSUE THEIR LORDSHIP OF THE JURISD ICTIONAL HIGH COURT IN THE CASE OF CIT, PANCHKULA VS. SHRI KULDEEP CHAND JAIN (HUF) (SUPRA)OBSERVED IN PARA 7 TO 9 AS UNDER: 7. APEX COURT IN UNITED COMMERCIAL BANKS CASE (SUP RA) DEALING WITH A CASE OF VALUATION OF STOCK HELD THAT A METHOD OF ACCOUNTING ADOPTED BY THE TAX-PAYER CONSISTENTLY AND REGULARLY CANNOT BE DISCARDED BY T HE REVENUE ON THE VIEW THAT DIFFERENT METHOD OF KEEPING ACCOUNTS OR OF VALUATIO N OUGHT TO HAVE BEEN ADOPTED BY THE ASSESSEE. THE BROAD PRINCIPLES OF VA LAUATION OF STOCK HAD BEEN SUMMARIZED BY THE SUPREME COURT AS UNDER:- (1) THAT FOR VALUING THE CLOSING STOCK, IT IS OPEN TO THE ASSESSEE TO VALUE IT AT THE COST OF MARKET VALUE, WHICHEVER IS LOWER; (2) IN THE BALANCE-SHEET, IF THE SECURITIES AND SHA RES ARE VALUED AT COST BUT 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 ACC OUNTS, AND FOR THAT PURPOSE, TO VALUE STOCK-IN-TRADE EITHER AT COST OR MARKET PR ICE. (3) A METHOD OF ACCOUNTING ADOPTED BY THE TAXPAYER CONSISTENTLY AND REGULARLY CANNOT BE DISCARDED BY THE DEPARTMENTAL AUTHORITIES ON THE VIEW THAT HE SHOULD HAVE ADOPTED A DIFFERENT METHOD OF KEEPING ACCOUNTS OR OF VALUATION. (4) THE CONCEPT OF REAL INCOME IS CERTAINLY APPLICA BLE IN JUDGING WHETHER THERE HAS BEEN INCOME OR NOT, BUT, IN EVERY CASE, IT MUST BE APPLIED WITH CARE AND WITHIN THEIR RECOGNIZED LIMITS. (5) WHETHER THE INCOME HAS REALLY ACCRUED OR ARISEN TO THE ASSESSEE MUST BE JUDGED IN THE LIGHT OF THE REALITY OF THE SITUATION . (6) UNDER SECTION 145 OF THE ACT, IN A CASE WHERE A CCOUNTS ARE CORRECT AND COMPLETE BUT THE METHOD EMPLOYED IS SUCH THAT IN TH E OPINION OF THE INCOME-TAX OFFICER, THE INCOME CANNOT BE PROPERLY DEDUCED THERE FROM, THE COMPUTATION SHALL BE MADE IN SUCH MANNER AND ON SUCH BASIS AS T HE INCOME-TAX OFFICER MAY DETERMINE. 8. FOLLOWING THE AFORESAID PRONOUNCEMENT, A DIVISIO N BENCH OF THIS COURT IN SANT RAM MANGAT RAMS CASE (SUPRA) HAD HELD AS FOLL OWS: IT IS AN ADMITTED POSITION THAT FROM THE INCEPTION OF ITS BUSINESS, THE ASSESSEE HAD CONTINUOUSLY ADOPTED THE SAME METHOD OF VALUATION O F THE CLOSING STOCK AND NO OBJECTION WAS RAISED BY THE DEPARTMENT IN ANY OF TH E PREVIOUS YEARS. RATHER, THE COMPETENT AUTHORITY ACCEPTED THE METHOD ADOPTED BY THE ASSESSEE AND ACCORDINGLY, MADE ASSESSMENT. THIS BEING THE POSITI ON, WE DO NOT FIND ANY VALID 14 GROUND TO ACCEPT THE ARGUMENT OF SHRI BINDAL THAT T HE METHOD ADOPTED BY THE ASSESSEE FOR VALUATION OF THE STOCK WAS LEGALLY IMP ERMISSIBLE AND ON THAT ACCOUNT, THE ADDITIONS MADE BY THE INSPECTING ASSISTANT COMM ISSIONER SHOULD BE RESTORED. 9. UNDISPUTEDLY, IN THE EARLIER YEARS, THE REVENUE HAD ACCEPTED THE LIFO METHOD FOR VALUATION OF CLOSING STOCK OF THE ASSESS EE. LEARNED COUNSEL FOR THE REVENUE COULD NOT DEMONSTRATE THAT THE APPROACH OF THE TRIBUNAL WAS ERRONEOUS OR PERVERSE IN ANY MANNER WARRANTING INTERFERENCE B Y THIS COURT. 8.2 IN THE INSTANT CASE ALSO THE REVENUE DEPARTMENT UNDISPUTEDLY ACCEPTED THE AVERAGE COST PRICE METHOD FOR VALUATION OF THE OPENING STOCK FOR THE YEAR UNDER CONSIDERATION AS WELL AS THE VALUATION OF THE CLOSING STOCK IN THE EARLIER YEARS, THEREFORE, THE VALUATION OF THE CLOSING STOC K AS ON 11/11/2013 FOUND DURING THE COURSE OF SURVEY, BY APPLYING THE MARKET RATE WAS NOT JUSTIFIED, AS SUCH THE LD. CIT(A) RIGHTLY DELETED THE IMPUGNED AD DITION MADE BY THE A.O. WE DO NOT SEE ANY VALID GROUND TO INTERFERE WITH THE F INDINGS GIVEN BY THE LD. CIT(A). ACCORDINGLY WE DO NOT SEE ANY MERIT IN THIS APPEAL OF THE DEPARTMENT. 9. IN THE RESULT APPEAL OF THE DEPARTMENT IS DISMIS SED. (ORDER PRONOUNCED IN THE OPEN COURT ON 12/08/2021 ) SD/- SD/- .. .., (R.L. NEGI ) ( N.K. SAIN I) $ %&/ JUDICIAL MEMBER ! / VICE PRESIDENT AG DATE: 12/08/2021 (+! ,-.- COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. $ / CIT 4. $ / 01 THE CIT(A) 5. -2 45&456789 DR, ITAT, CHANDIGARH 6. 8:% GUARD FILE