1 Court No. - 35 Case :- INCOME TAX APPEAL No. - 708 of 2012 Appellant :- Commissioner Of Income Tax Respondent :- Mohd. Sahid Prop. M/S Azim Builders Counsel for Appellant :- S.S.C. I.T.,Manish Goel Counsel for Respondent :- Anay Kumar Srivastava,Ajay Kumar Srivastava,Jeet Bahadur Singh,S.S. Chauhan,Sarveshwar Singh Hon'ble Bharati Sapru,J. Hon'ble Saumitra Dayal Singh,J. Heard learned counsel for parties. This appeal under Section 260 of Income Tax Act, 1961 (hereinafter referred to as Act) has been filed by revenue against order of Income Tax Appellate Tribunal, Agra Bench, Agra dated 13.04.2012 for Assessment Year 2005-06. By that common order, Tribunal has decided revenue's appeal being ITA No. 5/Agr/2011 and assessee's appeal being ITA No. 460/Agr/2010. Tribunal has dismissed revenue's appeal and allowed assessee's appeal. present appeal has been filed on following questions of law: (1) Whether on facts and circumstances of case, Hon'ble ITAT was justified in law to hold that AO had no occupation to invoke Section 145(3)? (2) Whether on facts and circumstances of case, Hon'ble ITAT was justified in interpreting provisions of Section 68 in way it did in this present case? (3) Whether ITAT was justified in deleting addition made by AO u/S 68 solely on grounds that AO has accepted claim of Assessee in 2 remand report? (4) Whether ITAT had gone beyond its jurisdiction when it deleted additions made by A.O. as it amounted to curbing powers of A.O. granted by Legislature u/S 68? (5) Whether on facts and circumstances of case, Hon'ble ITAT was justified in law to hold that whatever reasons given by AO for rejecting books results of assessee are not reasonable? (6) Whether on facts and circumstances of case, Hon'ble ITAT was justified in law in deleting addition made by AO at Rs. 62.95 Lakh by rejecting books of account under Section 145 of I.T.Act, 1961? (7) Whether on facts and circumstances of case, order of Hon'ble ITAT may be set aside and that CIT (A) and AO be restored? At very outset, learned counsel for revenue states that instant appeal is being pressed on questions of law nos. 1, 2 and 6 only. While questions no. 1 and 6 relate to addition made to income of assessee on account of valuation of closing stock, question no.2 relates to addition made under Section 68 of Income Tax Act, 1961 (hereinafter referred to as 'Act'). assessee is individual engaged in construction and sale of residential flats in name of M/s Azim Builders. He had filed his return of income for Assessment Year 2005-06, disclosing income Rs 2,84,940/-. said return was taken up under scrutiny. Vide assessment order dated 14.12.2007, assessee 3 was assessed to tax on total income at Rs. 1,02,90,750/-. In that assessment, addition of Rs. 62,95,813/- was made by way of unexplained investment in closing stock under Section 69 of Act and another addition of Rs. 37,10,000/- was made on account of unexplained cash credit under Section 68 of Act. In appeal to CIT (Appeals), two remand reports were submitted by assessing officer especially with respect to alleged unexplained cash credit under Section 68 of Act. Commissioner of Income Tax (Appeal) vide his order dated 25.10.2010 partly allowed appeal. He restricted addition made under Section 68 of Act to Rs 1,70,000/-. However, he upheld addition of Rs. 35,40,000/-. Also, he upheld entire addition made on account of closing stock. While, revenue appealed against deletion of unexplained cash credit to extent of Rs. 35,40,000/-, assessee appealed against other part of that addition - Rs. 1,70,000/- and order of CIT (Appeals) by which he sustained addition of Rs. 62,95,813/- on account of valuation of closing stock. Tribunal while deciding assessee's appeal on issue of valuation of closing stock found that cost of construction material purchased by assessee had not been disputed by assessing officer. said purchase was in fact found to be duly supported 4 by vouchers maintained by assessee that were also duly signed by payees/recipients. Then, it found that consideration of turnover of sale of residential flats made by assessee at Rs. 1,94,42,000/- did not provide sound basis to determine value of closing stock inasmuch as those residential units had been sold by assessee in different assessment years which fact was found duly verified from books of account and other evidence including sale-deed found existing on record. Tribunal, therefore, rejected foundation/basis for re-computation of valuation of closing stock done by assessing authority. Also, Tribunal found that assessee had followed same method of accounting and had valued its stock in same manner for Assessment Years 2004-05, 2006- 07 and 2007-08 for which years also assessee had been subjected to assessment under Section 143(3) of Act and in those assessment proceedings value of closing stock disclosed by assessee had been accepted. Tribunal, therefore, did not find any reliable or cogent reason to reject book results of assessee and to make addition to value of closing stock of residential flats. Upon such discussion and reasoning made by Tribunal in detail and having thus considered facts and evidence on record, Tribunal deleted addition to closing stock of Rs. 62,95,813/-. 5 With respect to additions made under Section 68 of Act, while CIT (Appeals) had partly allowed grounds of appeal raised by assessee and sustained additions made under Section 68 of Act upto Rs. 1,70,000/-, Tribunal took note of fact that CIT (Appeals) had called for two remand reports and reading same together, Tribunal found that entire cash credit found recorded in assessee's books of account for previous year relevant to Assessment Year 2005-06 stood duly explained and reconciled inasmuch as entire amount of Rs. 37,10,000/- was found to have been adjusted against sale consideration for different flats sold by assessee in different assessment years, to same persons in whose name those cash credit entries were found existing in assessee books of account for Assessment Year 2005-06. Thus reasoning of assessing officer that identity of persons in whose cash credit entries standing was not established lost its relevance in face of registered sale-deeds found existing in favour of those very persons. Learned counsel for revenue submits that valuation of stock has been wrongly accepted by Tribunal, inasmuch as assessing office and CIT (Appeals) had found that assessee had not properly valued its stock and that those authorities had correctly 6 deduced valuation of closing stock with reference to sale price found recorded in books of account of assessee and gross profit rates disclosed by assessee for relevant period. As to deletion of addition made under Section 68 of Act, learned counsel for revenue submits that Rs. 8,00,000/- deposited on 09.02.2004 by Aashiq Ali Siddiqui could not have been deleted as that person did not appear in response to notice sent by assessing officer. No other challenge has been made to order of Tribunal. Learned counsel for assessee has relied on findings recorded by Tribunal and submitted that same are concluded findings of fact based on evidence and as such they do not warrant any interference. Having considered argument so advanced by learned counsel for parties, we find that ordinarily closing stock may be valued either at on cost or on market value basis. In instant case, apparently, assessee had valued its closing stock on cost basis. In that regard, Tribunal had specifically found that purchase of raw material was found to be duly vouched which vouchers upon examination were further found to have been duly signed by third parties. No other or further exercise was carried out by assessing officer 7 to doubt correctness or completeness of vouchers entries. Thus, in first place, there was clear documentary evidence in support of valuation disclosed by assessee. Then, Tribunal has rightly taken note of fact that for earlier year and two subsequent years assessee's book results had been accepted in proceedings under Section 143(3) of Act, though assessee was following same method of accounting, every year. Therefore, according to Tribunal, valuation of closing stock done following same method in previous year relevant to Assessment Year 2005-06 should also have been accepted. Again, there being no evidence to doubt correctness of method followed by assessee, Tribunal has again not committed any error in rejecting foundation of valuation made by assessing officer. In so far as it has noted that total sale turnover of residential units made by assessee was irrelevant inasmuch as sales of different units had been made in different years and same could not be clubbed together to apply gross profit rate thereto to infer deemed cost of closing stock. Here, we find that besides foundation being non-existent (as Tribunal has found), even method adopted by assessing officer is doubtful if not plainly erroneous. 8 In any case, valuation of closing stock being issue of fact that has cascading effect in different years, we find that Tribunal has accepted valuation of closing stock upon due appraisal of evidence inasmuch as it has found that cost claimed by assessee was duly verified from vouchers and assessee's same method of accounting had found acceptance during assessment proceedings for Assessment Years 2005- 06, 2006-07 and 2007-08 in proceedings under Section 143(3) of Act. Therefore, same does not suffer from any infirmity. finding recorded by Tribunal is pure finding of fact recorded on basis of material and evidence on record. It does not suffer from any infirmity. Question nos. 1 and 6 are answered in affirmative i.e. in favour of assessee and against revenue. Then as to question no. 2, we find that there is nothing to doubt correctness of finding of Tribunal that upon two remand reports, entire cash credit entry of Rs. 37,10,000/- considered for purpose of addition made under Section 68 of Act, stood reconciled against different sale deeds executed by assessee. Once registered sale deeds had been executed by assessee and cash credit entries found standing in books of account of assessee during previous year relevant to Assessment Year 9 2005-06 had been adjusted against same, there remained no further doubt as to identity of persons who deposited money with assessee in previous year relevant to Assessment Year 2005-06. fact that such person did not receive letter or did not appear in person during inquiry made by assessing officer at original assessment stage gets overshadowed and looses its relevance in absence of any evidence to doubt genuineness or correctness of registered sale deeds executed by assessee. Even in respect of amount of Rs. 8,00,000/- second remand report as extracted by CIT (Appeals) clearly mentioned that Aashiq Ali Siddiqui had got sale deed executed in his favour wherein amount of Rs. 8,00,000/- had been adjusted. Thus, finding of Tribunal on this issue is also concluded finding of fact recorded on basis of material and evidence on record and warrants no interference. Questions of law are answered in favour of assessee and against revenue. instant appeal lacks merit and is accordingly dismissed. No order as to costs. Order Date :- 5.12.2017 Lbm/- Commissioner of Income-tax v. Mohd. Sahid