M/S. SWATHI TRADERS,,TIRUPUR vs. ACIT, CIRCLE-2,, TIRUPUR

This appeal by the assessee is arising out of the order of the Commissioner of Income Tax (Appeals)-2, Coimbatore-3 in Appeal No.CIT(A),Coimbatore-3/10448/2016-17 dated 28.07.2020. The assessment was framed by the ACIT, Circle-2, Tirupur for the assessment year 2014-15 u/s.143(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’) vide order dated 27.12.2016.

The only issue in this appeal of assessee now argued before us is that the CIT(A) erred in upholding the addition made by the AO being difference in valuation of closing stock of gold ornaments at Rs.6,53,24,552/-. For this, assessee has raised various grounds running into 13 numbers but all those are argumentative, exhaustive and hence, need not be reproduced.

We have heard rival contentions and gone through facts and circumstances of the case. Brief facts are that the assessee is engaged in the business of manufacturing and selling of jewellery. The AO during the course of scrutiny assessment proceedings noted that the assessee is having branches at Trichy, Vellore and Ooty with head office at Tirupur. The assessee submitted the consolidated statement of closing stock valuation as on 31.03.2014 by adopting rate of Rs.2610 per gram for closing stock of gold jewellery of 2,72,185.634 grams. The AO noted that the rate adopted by assessee for branch transfer are notional, the purchases from third parties are considered and therefore, he adopted the valuation of closing stock of gold ornament at the rate of Rs.2850 per gram by taking the following:-

We have heard rival contentions and gone through facts and circumstances of the case. Before us, the ld.AR for the assessee challenged the very adoption of valuation of closing stock on purchase from third parties and rate adopted for earlier years as well as this year, as pointed by assessee’s counsel. He only requested that the rate adopted by the assessee at Rs.2610/- per gram for valuing the closing stock is also without any basis and further, the rate adopted by the Department is at Rs.2850/- per gram is also not at all based on any method. He referred to the Wealth Tax Rules for adopting market rate of gold and silver for wealth tax purposes for valuation as is given in the Direct Tax Ready Reckoner 2015 by Vinod K. Singania and also stated that the valuation should be done based on cost price or market price as prescribed u/s.145A of the Act. He stated that the valuation of inventory shall be made at lower of the actual cost or net realizable value computed in accordance with the income computation and disclosure standards notified u/s.145(2) of the Act. He stated that none of the authorities below or the assessee has adopted the same.

When the same was confronted to ld. Senior DR, he could not reply but only made request that the matter can go back for ascertaining the actual market value of closing stock in term of section 145A of the Act.

After hearing both the sides and going through the facts of the case, we noted that neither the assessee nor the Department has carried out the correct valuation of closing stock of gold ornaments.

In the result, the appeal filed by the assessee is allowed for statistical purposes.