ACIT, NEW DELHI vs. SH. PAWAN KUMAR KANSAL, DELHI

Thus, he noted that the there is a difference of Rs.26 per kg and accordingly he made an addition of Rs.59,24,490/- on account of under valuation of closing stock of finished goods.

Before the ld. CIT(A), it was argued that the assessee is dealing in Kitchenware and cutlery items and in the said segment the assessee deals in more than 170 products. It was argued that the sale price of each product is different and so is the costing. It was submitted that the Assessing Officer is totally wrong in adopting a single rate for all the products. Further, the method of valuation of stock by reducing gross profit from an average sale price is arbitrary. The cost price of finished goods determined by the Assessing Officer at Rs.180 per kg is the average cost of closing stock of finished goods and is not the actual cost. It was further argued that the stock of finished goods includes three categories of goods i.e. normal items, high value items and dead stock and slow moving items. The valuation of the closing stock of finished goods was argued to be as under :-

It was argued that the method for valuation adopted by the assessee is cost or net realizable value whichever is less. The Assessing Officer has nowhere disputed the details filed by the assessee. The decision of the Tribunal in assessee’s own case for assessment year 2009-10 was also brought to the notice of the ld. CIT(A) wherein the Tribunal had deleted the addition made by the Assessing Officer and sustained by the ld. CIT(A).

Based on the argument advanced by the assessee and the decision of the Tribunal in assessee’s own case in the earlier year, the ld. CIT(A) deleted the addition made by the Assessing Officer. While doing so, he observed that there is no valid basis for disbelieving the value of stock of finished goods declared by the assessee in its books of account. He observed that the assessee has maintained stock records which have not been proved to be untrue. The G.P. rate of 13.54% declared by the assessee has not been doubted by the Assessing Officer in the assessment order. The Assessing Officer has not pointed out any defect in the books maintained by the assessee as well as in the stock record.

Aggrieved with such order of the ld. CIT(A), the Revenue is in appeal before the Tribunal.

We have heard the rival arguments made by both the sides and perused the material available on record. We find the Assessing Officer made addition of Rs.59,24,490/- on account of valuation of closing of finished goods by adopting difference between the value declared by the assessee and the average cost of goods sold being Rs.22 per kg. We find the ld. CIT(A) deleted the addition on the ground that the assessee has maintained proper books of account and stock records which were not doubted by the Assessing Officer. There is no evidence with the Assessing Officer that the assessee has sold slow moving items at higher price in the subsequent year. He has also considered the decision of the Tribunal in assessee’s own case in the assessment year 2009-10 wherein the Tribunal has deleted the addition made by the Assessing Officer and sustained by the ld. CIT(A) on account of GP addition. Further, the assessee has given the chart showing various items such as normal items, high value items, dead and slow moving items which has not been disbelieved by the Assessing Officer. Under these circumstances and in view of the detailed reasoning given by the ld. CIT(A), we do not find any infirmity in the order of the ld. CIT(A) deleting the addition made by the Assessing Officer.

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