M/s. Anand Jyoti Printers Pvt. Ltd., Jabalpur V. ACIT, Jabalpur

CO 4/JAB/2010

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0932 (ITAT-JABALPUR)
• Duration Of Justice: 8 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 28-05-2019
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 13-08-2010
• Court: TRIBUNAL
• Department Lawyers: A P SHRIVASTAVA; SA
• Assessee Lawyers: ABHISHEK SHUKLA
• Keywords: Fair market value; Revised return
• Section: 142(1); 139(5); 143(1)

Judgement Text

1 INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE (CAMP AT JABALPUR) BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO. 71/JAB/2010 A.Y.2007-08 ACIT CIRCLE 1(1) JABALPUR :: APPELLANT VS M/S ANAND JYOTI PRINTERS DEORI PAN AADCA-3737-C :: RESPONDENT CO NO. 4/JAB/2010 (ARISING OUT OF ITA NO. 71/JAB/2010) M/S ANAND JYOTI PRINTERS DEORI :: OBJECTOR VS ACIT CIRCLE 1(1) JABALPUR :: RESPONDENT APPELLANT BY SHRI ABHISHEK SHUKLA RESPONDENT BY SHRI A.P. SHRIVASTAVA & SHRI SAPAN USRETHE DATE OF HEARING 13.09.2013 DATE OF PRONOUNCEMENT 25.10.2013 2 O R D E R PER JOGINDER SINGH , JUDICIAL MEMBER THE REVENUE HAS FILED THE PRESENT APPEAL WHEREAS THE ASSESSEE HAS FILED THE CROSS OBJECTION AGAINST THE ORDER DATED10TH MARCH, 2010 PASSED BY THE LEARNED CIT(A) FOR THE A. Y. 2007-08 . 2. FIRST OF ALL, WE SHALL DEAL WITH THE APPEAL OF T HE REVENUE. THE FIRST GROUND TAKEN BY THE REVENUE PERTAINS TO D ELETING THE ADDITION OF RS.7,98,752/- BY THE LEARNED CIT(A) WHI CH WAS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SUPPRESSION OF CLOSING STOCK. 2. DURING HEARING, WE HAVE HEARD SHRI ABHISHEK SHUK LA, SENIOR DR, WHO SUBMITTED THAT THE LEARNED CIT(A) WA S NOT JUSTIFIED IN DELETING THE ADDITION IN QUESTION AS T HE ADDITIONAL INCOME OF RS. 7,98,752/-WAS OFFERED THROUGH INVALID RETURN AND SINCE THE RETURN ITSELF WAS INVALID, THE CIT(A) TRA VELLED OUTSIDE THE SCOPE OF INCOME TAX ACT IN DELETING THE ADDITION RI GHTLY MADE BY THE ASSESSING OFFICER. ON THE OTHER HAND, SHRI A.P. SHRIVASTAVA, LEARNED COUNSEL FOR THE ASSESSEE, SUPPORTED THE ORD ER OF THE LEARNED CIT(A) WITH THE SUBMISSION THAT SINCE THE R EVISED RETURN WAS FILED ON 31.3.2009 I.E. MUCH BEFORE COMPLETION OF ASSESSMENT ON 29.12.200, IT WAS A VALID RETURN AND THE LEARNED ASSESSING 3 OFFICER SHOULD HAVE CONSIDERED THE SAME. THE LEARNE D ASSESSING OFFICER WAS, THEREFORE, NOT JUSTIFIED IN TREATING T HE REVISED RETURN AS INVALID RETURN AND THEREBY DISALLOWING THE CLAIM OF THE ASSESSEE. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS, IN BR IEF, ARE THAT THE ASSESSEE HAD FILED RETURN OF INCOME ON 7.11.2007 DE CLARING INCOME OF S. 5,85,193/- WHICH WAS PROCESSED U/S 143 (1) ON 26.2.2009 AND REFUND OF RS. 1,14,583/- WAS ISSUED T O THE ASSESSEE ON 4.3.2009. FINALLY DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE FAILED TO COMPLY WITH THE NOTICES U/S 142(1) AND 143(2) OF THE ACT. THE ASSESSING OFFICER OBSERVED THAT DURING ASSESSMENT PROCEEDINGS FOR THE A.Y. 2006-07 THE ASS ESSEE HAD SUPPRESSED ITS CLOSING STOCK BY ADOPTING WRONG VALU ATION OF VARIOUS ITEMS OF CLOSING STOCK. HOWEVER, ON APPEAL, THE ADDITION ON THAT ACCOUNT MADE OF RS. 7,44,840/- WAS CONFIRME D BY THE LEARNED CIT(A). IN THE WAKE OF THESE FACTS, THE AS SESSEE FILED A REVISED RETURN AND INCREASED THE VALUE OF CLOSING S TOCK TO CLAIM BENEFIT. HOWEVER, THE REVISED RETURN WAS FILED ON 31.3.2009 BUT AFTER THE DATE OF PROCESSING U/S 143(1) WHICH HAD A LREADY BEEN COMPLETED ON 26.2.2009 AND EVEN THE REFUND WAS ISSU ED. IN VIEW 4 OF THESE FACTS, THE REVISED RETURN WAS TREATED AS I NVALID BY THE ASSESSING OFFICER AND ADDITIONAL INCOME OF RS. 7,98 ,752/- OFFERED BY THE ASSESSEE, WAS ADDED TO THE TOTAL INCOME OF T HE ASSESSEE ON ACCOUNT OF SUPPRESSION OF CLOSING STOCK. THE ASSESS ING OFFICER SIMILARLY OBSERVED IN HIS ORDER THAT ON PERUSAL OF BALANCE SHEET IT WAS FOUND THAT THE ASSESSEE HAD SOLD OFF ALL HIS IN VESTMENTS IN UNQUOTED SHARES. ON SUCH SALE, THE ASSESSEE HAD SHO WN A LOSS OF RS. 52,27,384/- WHICH ACCORDING TO THE ASSESSING OF FICER WAS RIGHTLY ADDED BACK BY THE ASSESSEE IN THE COMPUTATI ON OF TOTAL INCOME BEING NON-BUSINESS LOSS. HOWEVER, THE ASSESS ING OFFICER WAS OF THE VIEW THAT SINCE THE RETURN FOR THE A.Y. IN QUESTION HAS BEEN PROCESSED U/S 143(1) ON 26.2.2009 AND ASSESSEE FILED THE REVISED RETURN ON 31.3.2009, HE TREATED THE REVISED RETURN AS INVALID RETURN AND ACCORDINGLY MADE THE ADDITION OF RS. 7,98,752/- ON ACCOUNT OF SUPPRESSION OF CLOSING STO CK. BEING AGGRIEVED WITH THE ADDITION MADE BY THE ASSESSING O FFICER, THE ASSESSEE PREFERRED APPEAL BEFORE THE LEARNED CIT(A) . THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASS ESSEE IN THE WAKE OF THE FACTS OF THE CASE, OBSERVED AS UNDER :- NOW THE CONTENTION OF THE APPELLANT IS FOUND TO BE CORRECT. SO FAR AS ADDITION OF RS. 7,98,752/- IS CONCERNED, IN THE APPELLATE ORDER DATED 17 TH APRIL 2009 5 OF CIT(A)-L, JABALPUR DATED 17 TH APRIL 2009 IN APPEAL NO.J/CIT(A)-I/ACIT CIR.1(1)/JBP/140/2008-09 FOR A.Y . 2006-07 THE CIT(A) OBSERVED AS UNDER: 'ON CAREFUL CONSIDERATION OF THE FACTS, I DO NOT FI ND ANY REASON TO NOT TO ACCEDE TO THE ASSESSEE'S REQUEST S INCE IT IS A SETTLED POSITION OF LAW THAT THE OPENING-ST OCK- VALUE CORRESPONDS TO THE CLOSING STOCK VALUE OF THE PRECEDING YEAR. THE ASSESSEE THEREFORE IS ALLOWED T O TAKE THE OPENING STOCK VALUE FOR THE NEXT YEAR AT RS.19, 19,460/- BUT WITH THE DIRECTION THAT IT SHOU LD ALSO ENSURE THAT THE VALUATION OF THE CLOSING STOCK OF THE NEXT YEAR HAS RIGHTLY BEEN WORKED OUT AT THE SA LE PRICE.' THIS MEANS THAT IF THE CLOSING STOCK WAS VALUED AT SALE PRICE, THEN THE OPENING STOCK FOR THE IMMEDIAT ELY NEXT YEAR I.E. 2007-08 WOULD BE INCREASED BY THE VALUE OF RS.7,44,840/-. SINCE THIS ORDER IS ALREADY ON RECORD IN THE AO'S FILE EVEN WHEN THE ORIGINAL RETU RN WAS FILED AND WAS PROCESSED THIS SHOULD HAVE BEEN TAKEN INTO ACCOUNT AND ACCORDINGLY THE PROCESSING SHOULD HAVE BEEN COMPLETED. IN ANY CASE THE CASE WAS TAKEN UP FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED ON 29.12.2009 BUT MUCH BEFORE THIS DAE TH E REVISED RETURN U/S 139(5) WAS FILED ON 31.3.2009. THEREFORE IT WAS A VALID RETURN AND THE SAME SHOULD HAVE BEEN BASED FOR PURPOSE OF ASSESSMENT. STILL IT WAS THE LEGAL RIGHT OF THE ASSESSEE TO SET OFF THE INCREASED VALUE OF CLOSING STOCK OF THE IMMEDIATELY PRECEDING YEAR BY ENHANCING THE VALUE OF THE OPENIN G STOCK FOR THE PRESENT YEAR. INSTEAD OF DOING SO, ADDITION OF RS.7,98,752/- WAS MADE WHICH WAS NOT CORRECT AND IN ACCORDANCE WITH THE LAW. THE ADDITIO N OF RS.7,98,752/- IS THEREFORE HEREBY DELETED AND TH E AO IS DIRECTED TO ENHANCE THE OPENING STOCK AS DECLARED IN THE ORIGINAL RETURN BY RS.7,44,880/- AS DETERMINED BY THE CIT(A) IN HIS ORDER AND DIRECTED TO DO SO FOR THE NEXT ASSESSMENT YEAR, I.E. A.Y. 2007- 08, WHICH WAS DONE BY THE ASSESSEE IN HIS REVISED RETURN. 6 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. IF THE OBSERVATION MA DE IN THE ASSESSMENT ORDER, CONCLUSION DRAWN IN THE IMPUGNED ORDER, ASSERTION MADE BY THE LEARNED RESPECTIVE COUNSEL AN D THE MATERIAL AVAILABLE ON RECORD, ARE KEPT IN JUXTAPOSI TION AND ANALYSED, SO FAR AS DELETING THE ADDITION OF RS. 7, 98,752/- MADE ON ACCOUNT OF SUPPRESSION OF CLOSING STOCK IS CONCE RNED, THE IMPUGNED ADDITION WAS MADE BY THE ASSESSING OFFICER . THE ASSESSEE DISCLOSED CLOSING STOCK OF FINISHED GOODS AT RS.11,74,621/-. THE DETAILS OF CLOSING STOCK AND ME THOD OF VALUATION WAS VERIFIED BY THE ASSESSING OFFICER AND THE MISTAKE CREPT IN TAKING SALE PRICE OF FINISHED STOCK. THE A SSESSING OFFICER MADE ADDITION TO THE DISCLOSED INCOME ON ACCOUNT OF UNDER VALUATION OF CLOSING STOCK. THE LEARNED CIT(A) HAS FOLLOWED THE DECISION IN THE CASE OF THE ASSESSEE FOR THE A.Y. 2 006-07,THE OBSERVATION OF WHICH HAS BEEN REPRODUCED AT PAGE 14 OF THE IMPUGNED ORDER. THE ASSESSING OFFICER WAS DIRECTED TO ENHANCE THE OPENING STOCK AS DECLARED IN THE ORIGINAL RETUR N AT RS.7,44,880/- FOR THE NEXT ASSESSMENT YEAR 2007-08 WHICH WAS DONE BY THE ASSESSEE IN HIS REVISED RETURN, THEREFO RE, WE FIND NO INFIRMITY IN THE ORDER OF THE LEARNED CIT(A). 7 5. THE NEXT GROUND PERTAINS TO DELETING THE ADDITIO N OF RS.1,37,29,500/- MADE ON ACCOUNT OF SUPPRESSION OF SALE OF EQUITY SHARES. THE LEARNED COUNSEL FOR THE REVENUE DEFENDED THE ADDITION MADE BY THE ASSESSING OFFICER WHEREAS THE LEARNED COUNSEL FOR THE ASSESSEE DEFENDED THE IMPUGNED ORDE R. BEFORE COMING TO ANY CONCLUSION, WE ARE REPRODUCING HEREUN DER THE RELEVANT PORTION FROM THE ORDER OF THE LEARNED CIT( A) FOR READY REFERENCE :- SO FAR AS VALUATION OF FAIR MARKET VALUE OF THE SH ARES OF M /S EURISSKO AGRO LTD. IS CONCERNED, THE A.O. PROCEEDED IN RIGHT DIRECTION BUT ADOPTED ONLY PAID UP CAPITAL AND GENE RAL RESERVES WITHOUT TAKING INTO ACCOUNT THE LIABILITIE S. THE CORRECT WORKING OF VALUE OF THE SHARE THEREFORE SHOULD HAVE BEEN AS UNDER: VALUATION OF EQUITY SHARES OF EURISKO AGRO LTD. AS ON 31.3.2006 BASED ON BALANCE SHEET ASSETS: FIXED ASSETS 7,62,80,579 CURRENT ASSETS, LOANS & ADVANCES 14,9 0,526 (A) 7,77,71,105 LIABILITIES: PREFERENCE SHARE CAPITAL 2,66,24,380 SHARE APPLICATION MONEY 1,19,48,320 UNSECURED LOAN 55,34,919 CURRENT LIABILITIES & PROVISION 34,13,763 (B) 4,75,21,382 NET ASSETS (ASSETS - LIABILITIES) (A-B=C) 3,02,49, 723 NO. OF EQUITY SHARES (D) 31,45,061 NET ASSET VALUE (NAV) PER EQUITY SHARE (C/D) THUS THE ACTUAL VALUE PER SHARE SHOULD HAVE BEEN RS .9.62 AND ITS FAIR MARKET VALUE SHOULD HAVE BEEN RS.50,79,841 /-. NOW 8 THESE SHARES WERE PURCHASED @ RS.10 PER EQUITY SHAR E FOR RS.52,80,500/- AND THEREFORE THERE WAS NET LOSS OF RS.2,00,659/-. ACCORDINGLY THE LOSS CLAIMED BY THE APPELLANT WOULD BE REPLACED BY THE LOSS WORKED OUT AS ABOVE. HOWEVER, AS NO LOSS HAS BEEN CLAIMED AND AS IT DOES NOT EFFE CT THE REVENUE, THE INCOME RETURNED WAS TO BE TAXED. ACCOR DINGLY THE ADDITION OF RS. 1,37,29,300/- IS HEREBY DELETED. AS A RESULT, THE APPEAL IS ALLOWED. IF THE OBSERVATION MADE IN THE ASSESSMENT ORDER, CO NCLUSION DRAWN IN THE IMPUGNED ORDER, ASSERTION MADE BY THE LEARNED RESPECTIVE COUNSEL AND THE MATERIAL AVAILABLE ON RE CORD, ARE KEPT IN JUXTAPOSITION AND ANALYSED, WE FIND THAT THE LEA RNED CIT(A) WHILE COMING TO A PARTICULAR CONCLUSION HAS MENTION ED (AT PAGE 15) THE CORRECT WORKING OF THE VALUE OF SHARES OF E URISKA AGRO LIMITED AS ON 31.3.2006, BASED ON BALANCE SHEET. A S PER THIS VALUATION, THE ACTUAL VALUE, PER SHARE, COMES TO RS .9.62 RESULTING INTO FAIR MARKET VALUE OF RS.50,79,841/-. THE SHARE S WERE PURCHASED AT THE RATE OF RS. 10/- PER EQUITY SHARE FOR RS.52,80,500/- RESULTING INTO NET LOSS OF RS.2,00,6 59/-. DURING HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE ASSER TED THAT NO DEFECT WAS POINTED OUT BY THE ASSESSING OFFICER AND THE SHARES ARE UNQUOTED. THE UNIT WAS ALSO CLAIMED TO BE SICK. OUR ATTENTION WAS INVITED TO PAPER BOOK PAGES 48 AND 49 OF THE PA PER BOOK. IF THE TOTALITY OF FACTS IS ANALYSED, THERE IS NO LOSS IN BALANCE SHEET, RATHER THERE IS HUGE RESERVE BALANCE AS ON 31.3.200 6. THERE IS 9 NO DEBIT BALANCE OF LOSSES. AT PAGE 15 THE LEARNED CIT(A) HAS ANALYSED THE RECORD OF THE CA WHEREIN THERE IS IN-N EGLIGIBLE VARIATION OF CONTINGENT LIABILITY. IN VIEW OF THESE FACTS, WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN BY THE LEARNED CI T(A), THEREFORE, ON THIS GROUND ALSO, THE STAND OF THE LE ARNED CIT(A) IS AFFIRMED. 6. NOW WE SHALL TAKE UP THE CROSS OBJECTION OF THE ASSESSEE. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT OTHER LIABILITIES SHOULD HAVE BEEN ALLOWED BY THE CIT(A). IN ITS CROSS OBJECTION THE CRUX OF ARGUMENTS ON BEHALF OF THE AS SESSEE IS THAT HOW THE LEARNED CIT(A) ARRIVED AT A PARTICULAR FIGU RE IS NOT KNOWN AND FURTHER IN ESTIMATING THE SALE VALUE PER SHARE AT RS.9.62. WE NOTE THAT THE LEARNED CIT(A) WHILE COMING A PARTICU LAR CONCLUSION HAS MADE ELABORATELY DISCUSSION ON THE ISSUES RAISE D IN THE APPEAL. WHEREVER HE WAS NOT SATISFIED WITH THE EXP LANATION AND SUBMISSION OF THE ASSESSEE, HE TOOK A PARTICULAR DE CISION. WE HAVE ALSO GONE THROUGH HIS ORDER AND ARE SATISFIED THAT THE CONCLUSION DRAWN BY HIM IS WITHIN THE PARAMETERS OF THE ACT. EVEN OTHERWISE, THE LEARNED CIT(A) HAS DELIBERATED UPON IN A JUSTIFIED MANNER ON THE WORKING GIVEN BY THE ASSESS EE. WE, 10 THEREFORE, FIND NO JUSTIFICATION TO INTERFERE WITH THE SAME. AS SUCH, THE GROUNDS RAISED IN THE CROSS OBJECTION ARE DISMISSED. FINALLY, THE APPEAL OF THE REVENUE AS WELL AS THE CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 25.10.2013. SD/- SD/- (R.C.SHARMA) (JOGINDER SINGH ) ACCOUNTANT MEMBER JUDICIAL ME MBER DATED: 25.10.2013 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE !VYAS!