SHRI GOVIND SHANTILAL AGRAWAL,KHARGONE vs. THE DCIT, KHANDWA

आदेश /O R D E R

PER SHRI C.M. GARG, JM

This appeals has been filed by the assessee against the order

of the learned CIT(A)-22, New Delhi, having concurrent jurisdiction

over the CIT(A)-2, Indore, dated 15.6.2016 in First Appeal No.

487/13-14/58 for the assessment year 2011-12.

Shri Govind Shantilal Agrawal ITA No. 942/Ind/2016 2. The only ground taken by the assessee in this appeal reads as

under :-

“That the learned CIT(A) erred in confirming the addition of Rs.6,98,650/- made in the value of closing stock. That as per correct valuation, the valuation of closing stock comes to Rs.9,71,031/- and not Rs.16,69,681/-. The addition so made being wrong, the same require to be deleted.”

from trading in kitchen materials. The return of income was filed by

the assessee declaring total income at Rs.19,84,380/-. In this case,

survey u/s 133A of the Act was conducted by the revenue on

7.10.2010. During the course of survey, the assessee surrendered

total additional income of Rs.24,85,281/- i.e. on account of excess

cash found at Rs.8,15,600/- and excess stock found at

Rs.16,69,681/-. However, while filing the return of income, the

assessee has included excess stock of Rs.9,71,031/- only. The

Assessing Officer, therefore, required the assessee to justify this

retraction. In response, the assessee stated that the Revenue has

valued the stock of jewellery found at Rs.17,000/- per kg. whereas

its value as per LIFO method was to be adopted at Rs.11,000/- per

kg. and as such the assessee has shown the value of stock at

Rs.11,000/- per kg. while filing the return of income. However, the 2

Shri Govind Shantilal Agrawal ITA No. 942/Ind/2016 Assessing Officer was not satisfied with this explanation of the

assessee since the assessee did not file any material/document in

support of his claim. The Assessing Officer inferred that the version

of the assessee was without any basis. The Assessing Officer,

therefore, added difference of Rs.6,98,650/- to the total income of

the assessee.

Officer, the assessee preferred first appeal before the learned CIT(A).

The learned CIT(A) after considering the facts of the case in the light

of the submissions of the learned counsel for the assessee,

confirmed the addition with the following observations :-

“6.1 In this case, the stock of silver was valued by the

appellant himself at the time of survey at Rs.34,000/- per kg

and the purity of silver was stated to be 50% which gave the

value of Rs.17,000/- per kg. There was no valuer involved

and the A.O. has not substituted his valuation for the

valuation of the appellant. Without prejudice to the same, the

unaccounted stock found at the time of survey represents

unaccounted investment and has to be valued at the market

price on the date of survey. The appellant has reduced the 3

Shri Govind Shantilal Agrawal ITA No. 942/Ind/2016 valuation by averaging the cost of stock i.e. by adding the

value of stock as per books of accounts to the unaccounted

stock and by dividing the same with the total quantity. This

explanation and methodology is not correct. The stock as per

books is valued in the case of appellant at average cost and

the stock purchased in earlier years at lower value pushes

down the average cost. However, excess stock is

unaccounted investment during the year and has to be

valued at market price. Therefore, ground no. 1 of the appeal

is dismissed.”

the assessee has now come up in appeal before the Tribunal.

the assessee offered additional income on account of excess cash of

Rs.8,15,600/-. However, since the valuation of excess stock was

done at a higher figure during the survey proceedings, the assessee

replaced correct stock valuation and surrendered Rs. 9,71,031/-.

The learned counsel for the assessee also submitted that the

assessee has been consistently following average cost method by

applying LIFO system. The learned counsel for the assessee further 4

Shri Govind Shantilal Agrawal ITA No. 942/Ind/2016 submitted that the Assessing Officer did not accept the assessee’s

contention and went on by taking income surrendered at

Rs.24,85,281/- as against Rs.17,86,631/- offered by the assessee.

orders of the authorities below, submitted that since the excess

stock is unaccounted investment during the year, the authorities

below were justified in valuing the same at market price. He,

therefore, submitted that the orders of the authorities below deserve

to be affirmed.

the parties, we are of the view that the unaccounted stock found at

the time of survey proceedings represents unaccounted investment

and as such the same has to be valued at market price on the date

of survey. In this case the assessee has reduced the valuation by

averaging the cost of stock i.e. by adding the value of stock as per

books of accounts to the unaccounted stock and by dividing the

same with the total quantity. This practice of the assessee is against

the method of valuation of stock. After considering the facts of the

case, the learned CIT(A) has rightly held - “However, Excess stock is

unaccounted investment during the year and has to be valued at 5

Shri Govind Shantilal Agrawal ITA No. 942/Ind/2016 market price. This finding of the learned CIT(A) cannot be denied by

any stretch of imagination. From the copy of the inventory of stock

found out of accounts and treated as undisclosed investment of the

assessee, it is clear that the stock was valued on the market price

and the assessee did not raise any dispute regarding valuation of

such stock at the time of signing the inventory. In this view of the

matter, we are of clearly of the view that the authorities below have

rightly made and sustained the addition in question in the present

case. We, therefore, have no alternate but to confirm the orders of

the authorities below which we hereby do.

The order has been pronounced in open Court on 28th

March, 2017.

Sd/- sd/

लेखा सद�य �या�यक सद�य (O.P.Meena) (C.M. Garg) Accountant Member Judicial Member

March 28th 2017.

Dn/

Shri Govind Shantilal Agrawal ITA No. 942/Ind/2016