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This is an appeal filed by the revenue against the order of the CIT(A)- Raipur, dated 3.10.2012 for the assessment year 2009-2010.

2. Ground Nos.1 to 3 are interconnected, which are as under:

"1. Whether in law and on facts & circumstances of the case, the CIT(A) has erred in deleting the additions of Rs.14,52,189/- made by the AO on account of undervaluation of raw material- Steel.
2. Whether in law and on facts & circumstances of the case, the CIT(A) has erred in deleting the additions of Rs.6628/- made by the AO on account of undervaluation of raw material-Zinc Assessment Year : 2009-2010
3. Whether in law and on facts & circumstances of the case, the CIT(A) has erred in deleting the additions of Rs.73593/- made by the AO on account of undervaluation of raw material- finished goods".

3. The facts of the case are that the assessee is a private limited company deriving income from fabrication and galvanization of power towers and telecom towers. The return of income was filed on 30.9.2009 declaring Nil income and profit under MAT was disclosed at Rs.44,88,353/-. The Assessing Officer found that the assessee has undervalued the closing stock of various items and has also concealed the value of closing stock of some items and that out of the total closing stock, the assessee has furnished the value of closing of following items alongwith basis as under:

Further, in respect of zinc, the Assessing Officer valued at cost price and the undervaluation is worked out after deducting the average cost from the actual, which comes to Rs.6628/-.

Similarly, in respect of value of Tower (finished goods), the Assessing Officer observed that for 11.700 MT of finished goods, the value was shown at Rs.,4,77,711/- by applying the average cost price of Rs.40,830/-. The selling price was shown at Rs.53,600/- per MT. Thus, the assessee has undervalued the closing stock of finished goods. Therefore, after deducting gross profit at 12.09% shown by the assessee, the cost price, including manufacturing expenses and adopted the cost of finished goods at Rs.,47,120/-. Accordingly, the under valuation in tower account was worked at Rs.73,593/-. In view of above, the Assessing Officer worked the addition of undervaluation of closing stock at Rsx.15,32,410/.

4.1 For the reasons given in regard to undervaluation of steel, the CIT(A) also deleted the addition of Rs.6628/- made on account of undervaluation of zinc.

4.2 In respect of addition on account of undervaluation of finished goods, the CIT(A) observed that the Assessing Officer has valued the inventory of finished goods by reducing the G.P. rate from the selling price. The CIT(A) observed that it was incumbent upon the Assessing officer to point out Assessment Year : 2009-2010 mistakes in the inventory valuation done by the assessee viz any particular head of cost which ought to have considered in determining the cost of production/manufacture but not included by the assessee. He observed that the Assessing Officer without pointing out any such mistake in calculation of cost, applied his own method without substantiating the same with reference d to the facts. When there is variation in the selling rate and inputs/raw materials, it is not correct on the part of the Assessing Officer to arrive at the cost by reducing G.P. rate. Accordingly, he deleted the addition of Rs.73,593/-.