- (1.) By way of this appeal, the Department has challenged the judgment and order of the Tribunal which has affirmed the order of the CIT (A).
(2.) The facts of the case are that the assessee respondent company is engaged in the business of export of stones. The return of the income was filed on 15.11.2007 for A.Y. 2007- 08 at an income of Rs. 46,55,550/-. The case was selected for scrutiny and notice under Section 143(2), 142(1) and notice was duly served on the assessee. During the course of assessment proceedings it was found by the Assessing Officer on perusal of stock and sale details that the value of breakage and closing stock was calculated by using average FIFO method after taking purchase cost into consideration. The AO required the director of the company to explain the said statement and after submission of the explanation it was found by the AO that the assessee had not followed the accepted FIFO method. The AO calculated the cost of stock by adopting the average cost of purchases and even after adopting the average cost the cost per sq. mtr. came to Rs. 238.61/- whereas the assessee had adopted the average cost at Rs. 176.63. Further, the AO added average direct expenses cost to the average purchase cost i.e. Rs. 238.61 + Rs. 31.31 which came to Rs. 269.92 per sq. mtr. The value of stock shown in the books was Rs. 9588146/- against Rs. 14652183/- by taking the value @ Rs. 269.92 per sq. mtr. Hence the stock was under valued by Rs. 5064037/- which was added in the income following the judgment of the Hon'ble Supreme Court in the case of CIT Vs. British Paints India Ltd., 1991 188 ITR 44. The AO observed that on the total goods including purchases and closing stock of 2,82,254.16 sq. mtr., breakage of Rs. 35,925/- was claimed @ 12.70%. The assessee had claimed more than the accepted breakage rate which in the assessee own case for AY 2006-07 was 7.94%. The AO further held that since the closing stock was not kept as per FIFO method so the real production in breakage could not be ascertained and hence the breakage was allowed at the preceding years rate i.e. 7.9% and the rest of excess claim for Rs. 3677709/- was disallowed and added to the income of the assessee. Regarding disallowance to be made u/s 40 (a) (ia) on account of non deduction of TDS on the freight inward. Therefore, an addition of Rs. 631036/- was made by the AO. It was also found by the AO that assessee company had made payment of Rs. 23,01,840/- under the head clearing and forwarding expenses out of which TDS was deducted upon a small amount of Rs. 485853/- @ 2.02%. It was observed that TDS was not deducted on reimbursement charges so the AO made an addition of Rs. 2292664/- by disallowing the same u/s 40(a)(ia). The AO also found that payment to shipping agents for Rs. 1304132/- were subject to TDS but no TDS was deducted and hence the expenses was disallowed u/s 40(a)(ia). 2.1. Against the order of AO, the assessee filed an appeal before the CIT. However, in respect of addition of Rs. 5064037/- account of under valuation of stock, it was held by the CIT (A) that there was no justification to disturb the method of valuation of stock followed by the assessee so the addition made was deleted. In respect of addition of Rs. 3647709/- on account of breakage, the CIT (A) after comparison with the previous year found the rate of breakage inappropriate and deleted the addition. With regard to addition on account of disallowance u/s 40(i)(ia) for Rs.631036/- on freight inward, it was held by CIT (A) that there was no evidence of the contract entered into with 5 truck owners so there was no requirement to deduct the TDS u/s 194C and accordingly the addition was deleted by the CIT(A). 2.2 Further, the disallowance u/s 40(a)(ia) made on account of payment to non resident shipping companies, for Rs. 1304132/- it was held that there was no evidence that Sai Shipping Service and three others were agents of the assessee so no TDS was required to be deducted and hence the addition wad deleted by the CIT(A). 2.3 That being aggrieved by the order of the CIT (A) the department filed an appeal before the Tribunal. In respect of addition of Rs. 50,64037/- on account of under valuation of stock, it was held by the Tribunal at para 7 of its order that the statement of the Director was not read completely and the Accounting Standard 2 was also not applied correctly and further, there was no change in the method of accounting applied in the earlier years. Therefore, the CIT (A) was justified in deleting the addition. With regard to the addition of Rs. 36,47,709/- made by the AO on account of breakage claimed by the assessee at 12.70% against the claim of 7.94% made for previous year, it was held by the Tribunal at para 13 of its order that the findings of the CIT (A) remained uncontroverted so the findings being finding of fact, the Tribunal confirmed the order of the CIT(A). Further, in respect of Rs. 6,31,036/- made by the AO u/s 40(a)(ia) it was held by the Tribunal at para 18 of its order that the CIT (A) was justified in deleting the addition as the total payment did not exceed Rs. 50,000/- so the order of the CIT (A) was confirmed. On the issue of addition of Rs. 22,92,664/- made u/s 40(a)(ia) in respect of expenses made under various heads it was held by the Tribunal at para 22 of its order that the payments made by the assessee were on account of reimbursement of expenses or payment made on crane charges which were not hit by provisions of section 40(a)(ia) as there was no regular contract. So o interference was required in the findings of the CIT (A) and hence the made addition made by the AO was deleted. Further, disallowance of Rs.13,04,132/- made u/s 40(a)(ia) for payments made to non resident shipping company, it was held by the Tribunal para 27 of its order that there was no reason to interfere with the finding of the CIT (A) and hence the addition was deleted. The Tribunal dismissed the appeal of the department and confirmed the order of the CIT (A) vide order dated 21.10.2011. Being aggrieved against the aforesaid order of the Tribunal, the appellant revenue submits the further appeal under Section 260A.
(3.) Counsel for the appellant has submitted revised substantial questions of law which reads as under: "(1) Whether the Tribunal was legally justified in upholding the order of the CIT (A) and deleting the addition of Rs. 50,64,037/- made on account of under valuation of closing stock when the Assessing Officer adopted the average cost method followed by the assessee and did not change the formula of calculating the cost of inventories (2) Whether the findings of the Tribunal are perverse in deleting the addition made for undervaluation of closing stock when the Assessing Officer applied average cost method including the average cost of direct expenses on the basis of books of accounts, in accordance with the procedure prescribed in Accounting Standard (3) Whether the findings of the Tribunal are perverse in deleting the addition of Rs. 36,47,709/- and increasing the claim of breakage to 12.70% against 7.94% applied by the Assessing Officer taking into account the rate of the preceding previous year i.e. 7.94% when the sale price for the relevant year was less than the earlier year (4) Whether the findings of the Tribunal are perverse in deleting the addition of Rs. 6,31,036/- made u/s 40(a)(ia) on account of freight expenses being against the provisions of Section 194C which applies to every financial year irrespective of the term of contract and the number of contractors (5) Whether the findings of the Tribunal are perverse in deleting the addition of Rs. 6,31,036/- on account of freight payment when admittedly the payment during the year exceeded Rs. 50,000/- and there was a short term contract between the assessee and the contractors (6) Whether the findings of the Tribunal are perverse in deleting the addition of Rs. 22,92,664/- made u/s 40(a)(ia) on account of clearing and forwarding charges on which the TDS was not deducted when the same were hit by provisions of Section 194C since the definition of "work" is inclusive u/s 194C (7) Whether the findings of the Tribunal are perverse in deleting the addition of Rs. 13,04,132/- made u/s 40(a)(ia) made on account of Ocean Freight paid to the agents of non residents on which TDS u/s 194C was not deducted -;