Valuation of closing stock of finished goods at realizable value/sale price not amounts to understatement of closing stock

Issue before Tribunal:

• Whether CIT(A) erred in law in deleting the addition of Rs. 4,93,319/- made by the A.O. on account of finished goods elaborately explained in the assessment order by taking the value as shown in the bills by the assessee.
• Whether CIT(A) erred in law in deleting the addition of Rs. 2,94,300/- by ignoring the fact that the assessee did not taken this plea at the time of assessment proceedings.
• Whether CIT(A) erred in law in deleting the additions of Rs. 6,32,250/- by ignoring the fact that the assessee has valued semi-finished goods as the raw material.

Brief Facts:

• Assessee is a company engaged in the business of manufacturing and sale of cycle chains, wheel and axles. Assessee its return of income for AY 1997-98 was filed disclosing loss of Rs. 27,09,520/- and income of Rs. 1,08,544/- under the provisions of Section 115J.
• The assessment was completed u/s 143(3) at a loss of Rs. 1,26,032/- thereby, making addition of Rs. 25,83,492/-. However, this assessment order was rectified by the Assessing Officer under Section 154 at a loss of Rs. 12,75,648/-.
• Addition was on account of understatement of closing stock amounting to Rs. 4,93,319/-, on account of difference in cost of machinery amounting to Rs. 2,94,300/- and on account of valuation of seni finished goods as raw material.
• On appeal CIT(A) granted part relief. On further appeal by revenue ITAT set aside the matter to the file of CIT(A).
• Pursuant to directions of the ITAT, CIT(A) passed the impugned order allwing the appeal of assessee.

Contention of the revenue:

It was contended on behalf of revenue that Hon’ble CIT (A) ignored various facts at the time of deciding appeal.

Contention of the assessee:

Assessee relied upon the order of CIT (A).

Held by the tribunal: