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appeal is preferred by revenue againstthe order of CIT on the following grounds—
Deletion of addition made by AO on account of valuation of closing stock
Deletion of addition made by AO on account of low G.P.
Deletion of addition made by AO on account of unverifiable expenses
Deletion of addition made u/s 68 Held that—As the valuation of the assessee was backed by the trade tax order as well as data derived from appellant’s audited accounts we do not find any justification for sustaining the addition on account of under valuation of closing stock. Further, the addition has been made by AO only based on the valuation made by sister concern in its that case. It was also not known whether the valuation of stock made in that particular concern was on the basis of cost or net realizable value whichever is less. Merely because some other assessee has valued the stock at different figure, addition in the hands of the another person cannot be made without finding out that what is the cost of the goods purchased by that assessee as well as the net realizable value in the hands of that assessee. Therefore, in absence of any such finding by AO in the assessment order on in the remand proceedings, we do not find any infirmity in the order of the CIT (Appeals) in deleting the above addition. Held that—The book results have been discarded by the learned assessing officer despite there is comparative yield and burning loss in consonance with earlier financial years. On the reading of the order of learned assessing officer, it is apparent that without rejecting the books of accounts the book results have been enhanced by the learned assessing officer. If the assessing officer wanted to reject the books of accounts of the assessee then it is mandatory that he should have pointed out latent, patent, and glaring defects in the books of accounts. In absence of it the addition to the gross profit cannot be sustained. Over and above the books of accounts are audited and there is no finding of the assessing officer that system of accounting followed by the assessee is such which does not result into deducing the correct financial result there from. In view of this we uphold the order of the learned commissioner appeals in deleting the addition on this account. Held that—commissioner appeals upheld the addition on principle basis however, he found that it is on the higher side and therefore he restricted it to 50,000 out of 1 lakh disallowed by the learned AO. Even otherwise, we are of the view that those expenses should have been disallowed for which assessee failed to produce cogent evidence. Such instances should have been noted by the learned assessing officer and disallowance to that extent should have been made. The disallowance made by the learned AO is merely based on estimation. Such ad hoc disallowance as such cannot be sustained. No infirmity in the order of the learned commissioner appeals in deleting the addition of 50,000. Held that—It is apparent that during the course of appellate proceedings the learned CIT appeal has obtained to remand report from the assessing officer on the various submission and details furnished by the assessee. Same were also confronted to the assessee and obtained the rejoinder to the remand report. The assessee has submitted the detail chart mentioning the name and address of all the parties along with the permanent account number and amount of credit balance with the assessee company. The confirmations were also filed. Even otherwise when AO has allowed the creditors to continue without disallowing the purchases made from those creditors, part of which is transferred to the security deposit account, it is unusual to state that the genuineness of the creditors are not established. AO has accepted the genuineness of the purchases from this parties. In view of this, we do not find any infirmity in the order of CIT (Appeals) by deleting the above addition.

Shanti Prime Publication Pvt. Ltd.

Section 68, 69C, 145, 145A of Income Tax Act, 1961—In the instant case, appeal is preferred by revenue against the order of CIT on the following grounds—
Deletion of addition made by AO on account of valuation of closing stock
Deletion of addition made by AO on account of low G.P.
Deletion of addition made by AO on account of unverifiable expenses
Deletion of addition made u/s 68

Held that—As the valuation of the assessee was backed by the trade tax order as well as data derived from appellant’s audited accounts we do not find any justification for sustaining the addition on account of under valuation of closing stock. Further, the addition has been made by AO only based on the valuation made by sister concern in its that case. It was also not known whether the valuation of stock made in that particular concern was on the basis of cost or net realizable value whichever is less. Merely because some other assessee has valued the stock at different figure, addition in the hands of the another person cannot be made without finding out that what is the cost of the goods purchased by that assessee as well as the net realizable value in the hands of that assessee. Therefore, in absence of any such finding by AO in the assessment order on in the remand proceedings, we do not find any infirmity in the order of the CIT (Appeals) in deleting the above addition.

Held that—The book results have been discarded by the learned assessing officer despite there is comparative yield and burning loss in consonance with earlier financial years. On the reading of the order of learned assessing officer, it is apparent that without rejecting the books of accounts the book results have been enhanced by the learned assessing officer. If the assessing officer wanted to reject the books of accounts of the assessee then it is mandatory that he should have pointed out latent, patent, and glaring defects in the books of accounts. In absence of it the addition to the gross profit cannot be sustained. Over and above the books of accounts are audited and there is no finding of the assessing officer that system of accounting followed by the assessee is such which does not result into deducing the correct financial result there from. In view of this we uphold the order of the learned commissioner appeals in deleting the addition on this account.

Held that—commissioner appeals upheld the addition on principle basis however, he found that it is on the higher side and therefore he restricted it to 50,000 out of 1 lakh disallowed by the learned AO. Even otherwise, we are of the view that those expenses should have been disallowed for which assessee failed to produce cogent evidence. Such instances should have been noted by the learned assessing officer and disallowance to that extent should have been made. The disallowance made by the learned AO is merely based on estimation. Such ad hoc disallowance as such cannot be sustained. No infirmity in the order of the learned commissioner appeals in deleting the addition of 50,000.

Held that—It is apparent that during the course of appellate proceedings the learned CIT appeal has obtained to remand report from the assessing officer on the various submission and details furnished by the assessee. Same were also confronted to the assessee and obtained the rejoinder to the remand report. The assessee has submitted the detail chart mentioning the name and address of all the parties along with the permanent account number and amount of credit balance with the assessee company. The confirmations were also filed. Even otherwise when AO has allowed the creditors to continue without disallowing the purchases made from those creditors, part of which is transferred to the security deposit account, it is unusual to state that the genuineness of the creditors are not established. AO has accepted the genuineness of the purchases from this parties. In view of this, we do not find any infirmity in the order of CIT (Appeals) by deleting the above addition.[ACIT, CIRCLE-1, MUZAFFARNAGAR VERSUS RANA PAPERS LTD] [2018] [7] [ITCD Online] [56] [ITAT DELHI]