THE ASSISTANT COMMR. OF INCOME TAX, JUNAGADH CIRCLE,, JUNAGADH vs. SMT. GRACY KUTHUMKAL THOMAS,, VERAVAL

The facts of the case are that, the appellant, an individual, and engaged in the business of fish processing, preservation and export of fishes, shrimps etc., had filed her return of income on 08.09.2011 declaring total income of Rs. 1,16,17,120/-. The A.O. vide order u/s. 143(3) of the Act assessed the total income at Rs. 2,63,98,156/- wherein he made an addition of Rs. 1,47,81,036/- on account of under valuation of closing stock, for which the appellant is in appeal.

Thereafter assessee preferred first statutory appeal before the ld. CIT(A) held that DEPB proceeds are credited to the Profit and Loss account, and this is to off-set the cost, in order to stand competitive in the international market. It would be too biased to hold that the value of DEPB increases the value of closing stock. The stock is valued at cost or market price whichever is less. In the assessment proceedings full quantitative details of closing stock has been submitted and copy of which is also made part of the submission furnished before the ld. CIT(A) giving all detailed pertaining to working of closing stock and explained along with supporting as to how the same has been arrived and

Revenue has come in appeal and said that ld. CIT(A) has erred in deleting the addition of Rs. 1,47,81,036/- made on account of under valuation of closing stock.

At the outset, ld. A.R. cited an order of Co-ordinate Bench in assessee’s own case in earlier assessment year i.e. 2010-11 wherein relief has been granted to the assessee and relevant para of the Co-ordinate Bench is reproduced:

During the course of the scrutiny assessment proceedings, the A.O. was not satisfied with the method of valuation of closing stock employed in the previous year by the assessee. On perusal of Tax Audit report, the AO. Found that the assessee has valued its closing stock lower of the cost or market value. The A.O. was of the opinion that the sale price actually realized by the assessee from its sales does not in fact reflect the true prevailing market price on the date as the assessee has determined the sale price considering the receipt of DEPB gains as his business receipts. The A.O. was of the firm belief that if the market price is computed taking into effect, the DEPB gains the actual market price so computed would be more than the cost price to the assessee. According to the A.O, the stock has to be valued adopting the cost price as it would be the lower of cost or market value to the assessee. The A.O. concluded by holding that the assessee has undervalued the closing stock and proceeded by valuing the closing stock at Rs. 4,81,72,674/-. Since the assessee had shown the closing stock at Rs. 4,41,60,187/-, the A.O. determined the undervaluation of stock at Rs. 40,12,487/- and made the impugned addition.

Assessee assailed the assessment before the ld. CIT(A) and strongly contended that the A.O. has grossly erred in appreciating the facts in true perspective. It was brought to the notice of the ld. CIT(A) that the assessee has furnished full quantitative details of raw materials, finished goods and valuation thereon. The A.O. has not pointed out any defect or irregularity or error in the trading details furnished by the assessee. It was further brought to the notice of the ld. CIT(A) that the assessee is consistently and regularly following the same method of

After considering the facts and the submissions, the ld. CIT(A) was convinced that the A.O. has not brought any evidence/information and there is no case for disturbance of valuation of closing stock declared by the assessee and directed the A.O. to delete the impugned additions.

Aggrieved by this, the revenue is before us.

In the result, the appeal filed by the Revenue is dismissed.