DCIT, CIR-12, KOLKATA, Kolkata V. M/s Ganaga Rasayanie Pvt. Ltd., Kolkata

ITA 1019/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1687 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 01-05-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 15-05-2014
• Court: TRIBUNAL
• Department Lawyers: MD GHAYAS UDDIN
• Assessee Lawyers: MANOJ KATARUKA
• Keywords: Corroborative evidences
• Section: 143(3)

Judgement Text

I.T.A. NO. 1019/KOL./2014 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 933/KOL./2014 ASSESSMENT YEAR: 2009-2010 PAGE 1 OF 9 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 1019/KOL/ 2014 ASSESSMENT YEAR: 2009-2010 DEPUTY COMMISSIONER OF INCOME TAX,................. ............................APPELLANT CIRCLE-12, KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 -VS.- M/S. GANGA RASAYANIE PVT. LIMITED,................. ...............................RESPONDENT 50B, HARISH MUKHERJEE ROAD, KOLKATA-700 025 [PAN: AAACG 2051 L] & I.T.A. NO. 933/KOL/ 2014 ASSESSMENT YEAR: 2009-2010 M/S. GANGA RASAYANIE PVT. LIMITED,................. ...............................APPELLANT 50B, HARISH MUKHERJEE ROAD, KOLKATA-700 025 [PAN: AAACG 2051 L] -VS.- COMMISSIONER OF INCOME TAX (APPEALS)-XII,.......... .........................RESPONDENT AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 APPEARANCES BY: MD. GHAYAS UDDIN, JCIT, SR. D.R., FOR THE DEPARTMEN T SHRI MANOJ KATARUKA, A.R., FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : MAY 01, 2017 DATE OF PRONOUNCING THE ORDER : JUNE 07, 2017 O R D E R PER SHRI P.M. JAGTAP, A.M. .: THESE TWO APPEALS, ONE FILED BY THE REVENUE BEING I TA NO. 1019/KOL/2014 AND THE OTHER FILED BY THE ASSESSEE BEING ITA NO. 933/K OL/2014 ARE CROSS APPEALS, WHICH I.T.A. NO. 1019/KOL./2014 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 933/KOL./2014 ASSESSMENT YEAR: 2009-2010 PAGE 2 OF 9 ARE DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIO NER OF INCOME TAX (APPEALS)-12, KOLKATA DATED 12.02.2014. 2. THE SOLITARY COMMON ISSUE INVOLVED IN THESE APPE ALS RELATES TO THE ADDITION OF RS.48,00,000/- MADE BY THE ASSESSING OFFICER ON ACC OUNT OF UNDER-VALUATION OF CLOSING STOCK, WHICH IS SUSTAINED BY THE LD. CIT(APPEALS) T O THE EXTENT OF RS.13,72,363/- AND THE SAME IS RAISED BY BOTH THE SIDES BY WAY OF THE FOLL OWING GROUNDS:- ITA NO. 1019/KOL/2014 (REVENUES APPEAL) (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND AS PER LAW LD. CIT(A) ERRED IN RESTRICTING THE VALUATION OF CLOSING STOCK TO RS.13,72,363/- INSTEAD OF RS.48,00,000/- CALCULATED BY THE AO. (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND AS PER LAW LD. CIT(A) ERRED IN NOT CONSIDERING THE CALCULATION MAD E BY THE AO FOR VALUATION OF CLOSING STOCK. (3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND AS PER LAW LD. CIT(A) ERRED IN ALLOWING FRESH EVIDENCE DURING THE AP PEAL PROCEEDINGS IN VIOLATION OF RULE 46A. ITA NO. 933/KOL/2014 (ASSESSEES APPEAL) (1) THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRM ING THE ADDITION OF RS.13,72,363/- ALLEGING TO BE DIFFERENCE IN CLOSING STOCK. (2) THAT THE ADDITION HAS BEEN MADE WITHOUT APPRECIATI NG THE FACTS IN THEIR ENTIRETY AND IN THEIR TRUE PERSPECTIVE IGNORING THE EVIDENCES PRODUCED AND, THEREFORE, THE SAME IS WHOLLY UNWARRANTE D, ARBITRARY AND UNTENABLE BOTH IN LAW AND ON FACTS. 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, W HICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF CHEMICAL ITEMS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 01.10.2010 DECLARI NG TOTAL INCOME OF RS.2,09,57,326/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE DE TAILS OF CLOSING STOCK AS ON 31.03.2009 SUCH AS ITEMS, QUANTITY, RATE APPLIED ET C. WERE FURNISHED BY THE ASSESSEE. ON VERIFICATION OF THE SAID DETAILS, IT WAS NOTICED BY THE ASSESSING OFFICER THAT THERE WAS CONSIDERABLE DIFFERENCE IN THE RATE APPLIED BY THE ASSESSEE TO ARRIVE AT THE VALUE OF ITEMS OF FINISHED GOODS LYING IN THE CLOSING STOCK AND TH E AVERAGE SALE PRICE OF THE SAID ITEMS. THE SAID DIFFERENCE AS NOTICED BY THE ASSESSING OFF ICER AND POINTED OUT IN THE TABULAR FORM WAS AS UNDER:- I.T.A. NO. 1019/KOL./2014 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 933/KOL./2014 ASSESSMENT YEAR: 2009-2010 PAGE 3 OF 9 ITEM QUANTITY AS ON 31.03.2009 RATE/KG. ADOPTED FOR CLOSING STOCK VALUE SHOWN AS CLOSING STOCK AVERAGE SALES PRICE DIFFERENCE IN VALUE OF CLOSING STOCK MINERAL OIL DISTILLETE (2633) 59832 KG. RS.35/KG. 2094120.00 @RS.54/-KG. 3230928.00 1136800.00 MINERAL OIL DISTILLETE (2629) 215371 KG. RS.36.50/KG. 7861041.50 @RS.56/-KG. 12060776.00 4199734.50 GARASOLE 110(17/99) 23029 KG. RS.36/KG. 829044.00 @RS.40.50/- KG. 932674.50 103630.50 GARASOLE 150(21/98) 50330 KG. RS.45/KG. 2264850.00 @RS.47.21/- KG. 2376079.30 111229.30 MINERAL OIL DISTILLETE (2428) 8553 KG. RS.35/KG. 299355.00 @RS.52/-KG. 444756.00 145401.00 LESS VALUE OF CLOSING STOCK DECLARED IN THE ACCOUNT S AS ON 31.03.2009. 4. THE ASSESSEE WAS CALLED UPON BY THE ASSESSING OF FICER TO EXPLAIN THE ABOVE DIFFERENCE IN THE VALUATION OF CLOSING STOCK OF FIN ISHED GOODS AMOUNTING TO RS.56,96,795/-. IN REPLY, THE FOLLOWING EXPLANATION WAS OFFERED BY THE ASSESSEE IN WRITING:- 'MINERAL OIL DISTILLATE (GR 2428,2629 AND 2633) ARE PRODUCED FROM BONMAX. MINERAL OIL DISTILLATE ARE SPECIALIZED SOLVENTS AND LARGELY IMPORTED INTO INDIA AND USED MAINLY BY THE INK INDUSTRY. THE FEEDSTOCK FOR MINERAL OIL DISTILLATES ARE NORMA LLY NOT AVAILABLE EASILY IN INDIA. DURING FEBRUARY- MARCH 2009, INDIAN OIL CORPORATION LTD., BONGAIGAON (EARLIER OFFERED BONMAX TO US AND WANTED US TO DEVELOP THIS PRODUCT). SO WE HAD LIFTED A SUBSTANTIAL QUANTITY TO DO CERTAIN EXPERIMENTS WITH AN AIM TO PRODUCE VARIOUS GRADES OF MINERAL OIL DISTILLATES. WE HAD PURCHASED 504780 KG OF BONMAX AT RS 23/- KG AND DISTILLED THE ENTIRE QUANTITY. UNFORTUNATELY THE FINISHED PRODUCT DID NO T COME OUT WELL AND AS PER SPECIFICATION DESIRED EXCEPT FOR A VERY LITTLE QUAN TITY. THE QUANTITY WHICH COULD BE PRODUCED AS PER SPECIFI CATION WERE SOLD IMMEDIATELY WHILE THE OFF-GRADE STOCK WERE EITHER BLENDING WITH OTHER PRODUCTS OR SOLD OVER A VERY LONG PERIOD. IT ALMOST TOOK 6 MONTHS TO LIQUIDATE T HE STOCK. I.T.A. NO. 1019/KOL./2014 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 933/KOL./2014 ASSESSMENT YEAR: 2009-2010 PAGE 4 OF 9 GR 2629 THE CLOSING STOCK AS ON 31.03.09 OF 215371 KG IS OF F GRADE QUALITY AND HENCE VALUED AT APPROX 36/KG. OUT OF 215371 KG APPROX 32000 KG WAS BLENDING WITH OTHER PRODUCTS AND 189340 KGS WAS SOLD BETWEEN 01.04.09 TO 31.12.09 AT AN AVERAGE PRICE OF 41. 95/KG. GR2633 THE CLOSING STOCK AS ON 31.03.09 OF 59832 KG IS OFF GRADE QUALITY AND HENCE VALUED AT APPROX 35/KG. OUT OF 59832 KG. APPROX 14865 KG WAS BLENDING WITH OTHER PRODUCTS AND 33238 KG WAS SOLD BETWEEN 01.04.09 TO 31.12.09 AT AN AVERAGE PRICE OF RS.45.115/ KG. SOME OF THE STOCK HAD TO BE REPROCESSED OVER THE PERIOD TO BE SOLD.GR 2424. THE CLOSING STOCK AS ON 31.03.09 OF 59832 KG IS OFF GRADE QUALITY AND HENCE VALUED AT APPROX 35/KG. OUT OF 59832 KG APPROX 14865 KG WAS BLENDING WITH O THER PRODUCTS AND 33238 KG WAS SOLD BETWEEN 01.04.09 TO 31.12.09 AT AN AVERAGE PRICE OF RS 45.115/ KG. SOME OF THE STOCK HAD TO BE REPROCESSED OVER THE PERIOD TO BE SOLD'. 5. THE ABOVE EXPLANATION OFFERED BY THE ASSESSEE WA S NOT FOUND ACCEPTABLE BY THE ASSESSING OFFICER AS THE SAME WAS NOT BACKED WITH A NY SUPPORTING EVIDENCE TO SHOW THAT THE FINISHED GOODS LYING IN THE CLOSING STOCK WERE OF DOWN-GRADED QUALITY HAVING LESS VALUE. HE, HOWEVER, AGREED THAT IN ORDER TO AR RIVE AT THE COST OF FINISHED GOODS LYING IN THE CLOSING STOCK, GROSS PROFIT WAS REQUIRED TO BE DEDUCTED FROM THE SALE PRICE OF THE FINISHED GOODS. ACCORDINGLY, AFTER REDUCING THE GRO SS PROFIT AT THE RATE OF 12% AS DECLARED BY THE ASSESSEE AS WELL AS THE EXPENSES OF CARRIAGE INWARD AT 4%, THE DIFFERENCE IN THE VALUE OF CLOSING STOCK OF FINISHE D GOODS WAS WORKED OUT BY HIM AT RS.48,00,000/- AND AN ADDITION TO THAT EXTENT WAS M ADE BY HIM TO THE TOTAL INCOME OF THE ASSESSEE IN THE ASSESSMENT COMPLETED UNDER SECT ION 143(3) VIDE AN ORDER DATED 30.12.2011. 6. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICE R UNDER SECTION 143(3), AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(APPEALS) AND AFTER CONSIDERING ELABORATE SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS THE DETAILED WORKINGS FILED IN SUPPORT, THE LD. CIT(APPEALS) RESTRICTED THE ADDITI ON OF RS.48,00,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNDER-VALUATION OF CLOSING STOCK OF FINISHED GOODS TO RS.13,72,363/- AFTER RECORDING HIS OBSERVATIONS AND FINDINGS AS UNDER:- I.T.A. NO. 1019/KOL./2014 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 933/KOL./2014 ASSESSMENT YEAR: 2009-2010 PAGE 5 OF 9 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS PUT FORT H ON BEHALF OF THE APPELLANT ALONG WITH THE SUPPORTING DETAILS/DOCUMENTS FURNISHED, PERUSED THE FACTS OF THE CASE INCLUDING THE FINDINGS OF THE ASSES SING OFFICER AND OTHER MATERIALS BROUGHT ON RECORD. IT IS NOTED THAT THE AO HAS NOT ACCEPTED THE EXPLANAT ION OF THE APPELLANT THAT THE STOCK OF GOODS LYING AS ON 31.03.2009 WERE OFF-G RADE QUALITY AS THE APPELLANT'S CLAIM WAS NOT SUBSTANTIATED WITH SUPPORT ING DOCUMENTARY EVIDENCES. THE AO FURTHER OBSERVED FROM THE ITEM WISE SELLING RATES FURNISHED THAT THOUGH THOSE PRODUCTS WERE SOLD DURING THE YEAR AT MUCH HIGHER RATES BUT THE SAME ITEM OF GOODS HAVE BECOME DOWNGRADED OR OFF- GRADE ON THE LAST DATE OF THE AY 2009-10 I.E. 31/03/09, WHICH FORCED APP ELLANT TO ADOPT LESS RATE FOR THE SAME ITEMS FOR THE PURPOSE OF VALUING T HE CLOSING STOCK. ANOTHER OBSERVATION OF THE AO IS RELATED TO THE METHOD OF ACCO UNTING PRINCIPLE USED TO ARRIVE AT THE GP. IN THE INSTANT CASE, IT WAS OBSERVE D BY THE AO THAT THE G.P RATIO DISCLOSED AT 12.09%. THEREFORE, ACCORDING TO HI M, TO ARRIVE AT THE VALUE OF CLOSING STOCK AVERAGE RATE OF SALE FURNISHED SHOUL D BE DEDUCTED WITH THE G.P RATIO DISCLOSED BY THE APPELLANT. ON CALCULATION AS APPEARING IN THE CHART DIFFERENCE IN THE VALUE OF CLOSING STOCK BY CONSIDE RING THE AVERAGE RATE OF SALE DERIVED AT RS.56,96,795/- WHICH INCLUDES ELEMENT OF GR OSS PROFIT THEREIN. TO CALCULATE THE ACTUAL COST PRICE OF GOODS SOLD, ELEM ENT OF GROSS PROFIT IS TO BE DEDUCTED FROM THE DIFFERENCE. HENCE, CONSIDERING THE G.P RATIO OF 12% DIFFERENCE IN VALUE CLOSING OF THE AFORESAID ITEMS C OMES TO RS.50,13,179/- (RS.56,96,795/- - RS.6,83,615/-). HOWEVER, CONSIDER ING THE EXPENSES OF CARRIAGE INWARD SAY 4% WHICH CARRIES APPROXIMATELY RS .2,00,000/-, THE DIFFERENCE IN THE VALUE OF CLOSING STOCK OF THE ITEMS WORKED OUT TO RS.48,00,000/- APPROX. HENCE, THE AO HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEEE THAT THE LOWER VALUE OF THE SAID ITEMS WAS TAKEN ON THE GROUND THAT THE SAID ITEMS WERE OF POOR QUALITY HAS NO LEGS TO ST AND SINCE IT IS A GENERAL EXPLANATION WITH NO SUPPORTING DOCUMENTS TO SUBSTANT IATE THE SAME. IN THIS VIEW OF THE MATTER AND CONSIDERING THE FACTS, THE AO HAS INCREASED THE VALUE OF CLOSING STOCK AS ON 31/03/2009 BY A SUM OF RS.48,00 ,000/- AND THE SAME AMOUNT OF RS.48,00,000/- IS ADDED TO THE TOTAL INCOM E OF THE APPELLANT COMPANY. HOWEVER, THE APPELLANT'S CONTENTION IS THAT THE APPEL LANT HAS ALWAYS BEEN VALUING ITS CLOSING STOCK FOLLOWING ACCOUNTING STAN DARD 2. THE STOCK HAS BEEN VALUED AT COST PRICE OR NET REALIZABLE VALUE, WHICHE VER IS LOWER. IT IS SUBMITTED THAT GR 2428, GR 2629, GR 2633 HAVE BEEN MANUFACTURED BY PROCESSING BONMAX (A ALIPHATIC FEED STOCK SUPPLIED BY BRPL, GOV ERNMENT OF INDIA UNDERTAKING). THE APPELLANT HAD PURCHASED BONMAX IN B ULK QUANTITY ON TRIAL BASIS FOR PRODUCING SPECIAL ALIPHATIC FRACTIONS WHIC H ARE IMPORT SUBSTITUTE. THE APPELLANT FURNISHED A STATEMENT DETAIL SHOWING THE CALCULATION OF AVERAGE COST OF FRACTIONS PRODUCED FROM BONMAX (GR 2428,2629 2633) AND THE BASIS OF VALUATION OF CLOSING STOCK OF THOSE GRADES OF ITEMS AND CONTENTED THAT THE CLOSING STOCK VALUE HAS BEEN FAIRLY VALUED ON COST P RICE. IT IS ALSO ARGUED THAT THE A/O HAS WRONGLY VALUED THE CLOSING STOCK BASED ON AVERAGE SELLING PRICE WHICH IS NOT AS PER STANDARD PRACTICE. THE APPELLANT F URTHER CONTRADICTED THE I.T.A. NO. 1019/KOL./2014 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 933/KOL./2014 ASSESSMENT YEAR: 2009-2010 PAGE 6 OF 9 CALCULATION OF AVERAGE SELLING PRICE ARRIVED BY THE A/O BY RELYING ON THE TABLE OF STATEMENT FURNISHED NARRATING THE REASONS OF SUCH A CONTENTION. VIDE SUBMISSION DATED 05-02-2014, THE APPELLANT FURT HER STATED THAT EARLIER IT WAS SUBMITTED THAT THE AVERAGE SELLING PRICE (NET OF PACKING COST AND FREIGHT AND GP 12%) FOR GR 2428 WAS RSAO PER KG, GR 2629 WA S RSA1 PER KG, 2633 WAS RSA4 PER KG, GAROSOL 150 WAS RSA1 PER KG AND GA ROSOL 110 WAS RS. 37 PER KG. WHICH ARE BASED ON THE SALES REGISTER MAINTAIN ED BY THE APPELLANT, HOWEVER IT WAS NOT UNDERSTOOD HOW THE AO HAD DERIVED AT THE AVERAGE SELLING PRICE FOR GR 2428 - RS.52 PER KG, GR 2629 - RS.56 PER K G, GR 2633 - RS.54 PER KG, GAROSOL 150 - RSA7.21 PER KG AND GAROSOL 110 RS40.50 PER KG. THE AO HAS NOT RELIED ON THE GENERALLY ACCEPTED PRACTICE OF VALUATION BASED ON LOWER OF COST PRICE OR MARKET PRICE WHICHEVER IS LOWER; BUT INSTEAD RELIED ON PRINCIPLE OF DEDUCTING THE GP FROM THE AVERAGE SALE PRICE. IT IS SUBMITTED THAT EVEN IF GOING WITH THE PRINCIPLE FOLLOWED BY THE AO, W HICH IS NOT THE GENERALLY ACCEPTABLE PRACTICE, THERE IS HUGE DIFFERENCE IN THE VALUATION DONE BY THE AO AND THE VALUATION IF DONE ON THE ACTUAL AVERAGE SELLI NG RATE. IN SUPPORT OF THIS CONTENTION, THE APPELLANT FURNISHED THE UNDER MENTIO NED TABLE: ITEM QTY AS ON 31.3.2009 RATE ADOPTED BY AO VALUATION ACTUAL AVERAGE SELLING PRICE VALUATION DIFFERENCE GR 2633 59832 54 3230928 44 2632608 598320 GR 2629 215371 56 12060776 41 8830211 3220565 GR 2428 8533 52 443716 40 341320 102396 GARASOL 150 50330 47.21 2376079.3 41 2063530 312549.3 GARASOL 110 23029 40.5 932674.5 37 852073 80601.5 19044174 14719742 4324431.8 IT IS FURTHER CONTENDED BY DRAWING MY ATTENTION TO THE CONTENTS OF THE ABOVE TABLE THAT EVEN GOING BY THE AO'S VALUATION PRINCIPL E, THE ADDITION SHOULD HAVE BEEN FOR ONLY RS.13,72,363 (RS.56,96,95 LESS RS. 43,24,431) AND NOT RS.56,96,795 AS DETERMINED BY THE AO. HOWEVER, THE APP ELLANT REITERATED THAT THE VALUATION PRINCIPLE SHOULD BE MARKET PRICE OR COS T PRICE WHICHEVER IS LOWER AS PER THE GENERALLY ACCEPTABLE ACCOUNTING POL ICY AND PRACTICE. THE APPELLANT FOLLOWED THE SAME METHOD OF VALUATION OF I NVENTORY ON CONSISTENT BASIS FOR LAST SEVERAL YEARS. THE AO HAS NOT RELIED U PON ON THE GENERALLY ACCEPTED ACCOUNTING PRACTICE OF VALUATION BASED ON LOWER OF COST PRICE OR MARKET PRICE WHICHEVER IS LOWER. HOWEVER, AS THE ABOV E SELLING EXPENSES WERE NOT CONSIDERED BY THE AO, THEREFORE, IT IS SUBMITTED THAT THE BASIS OF CLOSING I.T.A. NO. 1019/KOL./2014 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 933/KOL./2014 ASSESSMENT YEAR: 2009-2010 PAGE 7 OF 9 STOCK VALUATION AS DERIVED BY THE ASSESSING OFFICER IS WRONG AND INCORRECT. THE AO HAS ALSO WRONGLY ALLEGED THAT DURING THE SUBSEQUENT YEAR THE APPELLANT HAD SOLD GOODS AT A HIGHER RATE. IN THIS RESPECT, THE AP PELLANT STATED THAT THE AVERAGE SELLING PRICE OF GR 2629 FOR THE PERIOD OF 1. 4.09 TO 31.12.09 WAS RS.42 PER KG MINUS G.P.12% = RS.37/KG. THE APPELLANT REITE RATED THAT THE BASIS OF COMPUTATION MADE BY THE AO BASED ON SELLING PRICE IS NOT AS PER ACCOUNTING STANDARDS SINCE THE APPELLANT HAS VALUED THE GOODS ON THE PRINCIPLE OF COST PRICE OR MARKET PRICE, WHICHEVER IS LOWER AND WHICH IS THE GENERALLY ACCEPTABLE PRACTICE. AFTER GOING THROUGH THE FACTS OF THE CASE, I FIND FORCE IN THE CONTENTION OF THE AO THAT IN RESPECT OF SOME OF THE ITEMS THERE IS CONSI DERABLE DIFFERENCE IN THE RATE APPLIED BY THE APPELLANT TO ARRIVE AT THE VALUE OF CLOSING STOCK WITH THAT OF AVERAGE SALE PRICE ADOPTED FOR THE STATEMENT OF S ALES. THEREFORE, APPARENTLY THE FINDING OF THE AO THAT BY ADOPTING LESSER RATE, T HE VALUE OF CLOSING STOCK HAS BEEN SUPPRESSED IS FOUND TO BE CORRECT. THUS, THE ADDITION MADE BY INCREASING THE VALUE OF CLOSING STOCK APPEARS TO BE IN RIGHT DIRECTION. HOWEVER, AFTER GOING THROUGH THE SUBMISSIONS OF THE APPELLANT AND THE SUPPORTING STATEMENTS/TABLES FURNISHED, I AM INCLINED TO AGREE WITH THE CONTENTION OF THE APPELLANT THAT THE AVERAGE SELLING PRICE, ON THE BAS IS OF SALE BILLS AND SALES REGISTER (NET OF PACKING COST AND FREIGHT AND GP 12%) FOR GR 2428 WAS RS.40 PER KG, GR 2629 WAS RS.41 PER KG, 2633 WAS RS.44 PER KG, GAROSOL 150 WAS RS.41 PER KG AND GAROSOL 110 WAS RS. 37 PER KG. WHIC H AS AGAINST THE AVERAGE SELLING PRICE FOR GR 2428 - RS.52 PER KG, GR 2629 - R S.56 PER KG, GR 2633 - RS.54 PER KG, GAROSOL 150 - RS.47.21 PER KG AND GARO SOL 110 - RS.40.50 PER KG WORKED OUT BY THE AO. IT IS SUBMITTED THAT EVEN GOI NG BY THE AO'S VALUATION PRINCIPLE, THE ADDITION SHOULD HAVE BEEN FOR ONLY RS.1 3,72,363/- (RS.56,96,95 LESS RS.43,24,431) AND NOT RS.56,96.795 AS DETERMINE D BY THE AO. THE FINDING OF THE AO THAT DURING THE SUBSEQUENT YEAR THE APPELLAN T HAD SOLD GOODS AT A HIGHER RATE WHICH WAS OBJECTED BY THE APPELLANT, APPARE NTLY FOUND TO BE INCORRECT AS EVIDENCED FROM THE SUPPORTING DOCUMENTS FURNISHED BY THE APPELLANT THAT THE AVERAGE SELLING PRICE OF GR 2629 FO R THE PERIOD OF 1.4.09 TO 31.12.09 WAS RS.42 PER KG MINUS G.P.12% = RS.37/KG. HOWEVER, I DO NOT FIND ANY MERIT IN THE ARGUMENT OF THE APPELLANT THAT THE B ASIS OF COMPUTATION MADE BY THE AO BASED ON SELLING PRICE IS NOT AS PER ACCOUNTING STANDARDS SINCE THE APPELLANT HAS VALUED THE GOODS ON THE PRINCIPLE OF COST PRICE OR MARKET PRICE; WHICHEVER IS LOWER. IN THE LIGHT OF THE ABOVE DISCUSSION AND FINDING AND P ERUSING THE ENTIRE FACTS OF THE CASE, THE ADDITION MADE BY THE ON ACCOUNT OF VALUE OF CLOSING STOCK IS RESTRICTED TO RS.13.72,363/- AS AGAINST RS.48,00,00 0/- MADE BY THE AO. THUS, THIS GROUND OF APPEAL IS PARTLY ALLOWED. AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE REVENUE AND ASSESSEE BOTH ARE IN APPEALS BEFORE THE TRIBUNAL. 7. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT T HE DIFFERENCE IN THE VALUATION OF CLOSING I.T.A. NO. 1019/KOL./2014 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 933/KOL./2014 ASSESSMENT YEAR: 2009-2010 PAGE 8 OF 9 STOCK OF FINISHED GOODS AS POINTED OUT BY THE ASSES SING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS WAS EXPLAINED BY THE ASSESSE E BY SUBMITTING THAT THE RELEVANT FINISHED GOODS LYING IN THE CLOSING STOCK WERE OF I NFERIOR OR OFF-GRADE QUALITY. SINCE THE SAID EXPLANATION OFFERED BY THE ASSESSEE WAS NOT SU PPORTED BY ANY DOCUMENTARY EVIDENCE, THE ASSESSING OFFICER REJECTED THE SAME. DURING THE COURSE OF APPELLATE PROCEEDINGS, AN ALTOGETHER DIFFERENT STAND, HOWEVER , WAS TAKEN BY THE ASSESSEE BY SUBMITTING THAT THE STOCK OF FINISHED GOODS WAS VAL UED AT COST OR NET REALISABLE VALUE BY FOLLOWING THE ACCOUNTING STANDARD 2. THE WORKING OF COST OF SOME OF THE ITEMS OF FINISHED GOODS WAS ALSO FURNISHED BY THE ASSESSEE B EFORE THE LD. CIT(APPEALS) TO SHOW THAT THE VALUE ADOPTED BY IT FOR SOME OF THE FINISH ED GOODS LYING IN THE CLOSING STOCK WAS AT ACTUAL COST. IT WAS FURTHER SUBMITTED ON BEHALF OF THE ASSESSEE BEFORE THE LD. CIT(APPEALS) THAT THE AVERAGE SELLING PRICE ADOPTED BY THE ASSESSING OFFICER FOR WORKING OUT THE DIFFERENCE IN THE VALUE OF CLOSING STOCK OF FINISHED GOODS WAS NOT CORRECT. THE WORKING IN THIS REGARD WAS ALSO FURNISHED BY THE AS SESSEE TO SHOW THE AVERAGE SELLING PRICE OF THE CORRESPONDING ITEMS OF FINISHED GOODS LYING IN THE OPENING STOCK ON THE BASIS OF SALES MADE IN THE MONTH OF MARCH. IN THE W ORKING SO FURNISHED, THE GROSS PROFIT @ 12% WAS REDUCED BY THE ASSESSEE FROM THE AVERAGE SELLING PRICE WORKED OUT BY IT TO SHOW THAT THE NET REALISABLE VALUE SO DETERMINED WA S CORRECTLY TAKEN FOR THE PURPOSE OF VALUATION OF CLOSING STOCK OF FINISHED GOODS. AS RI GHTLY CONTENDED BY THE LD. D.R., ALL THESE WORKINGS PREPARED AND FURNISHED BY THE ASSESSEE FOR THE FIRST TIME BEFORE THE LD. CIT(APPEALS) IN SUPPORT OF AN ALTOGETHER NEW STAND TAKEN TO EXPLAIN THE DIFFERENCE IN THE VALUATION OF CLOSING STOCK OF FINISHED GOODS WA S NOT FORWARDED BY HIM TO THE ASSESSING OFFICER FOR GIVING AN OPPORTUNITY TO VERI FY THE SAME, AS REQUIRED BY RULE 46A OF THE INCOME TAX RULES, 1962 AND THERE IS THUS A C LEAR VIOLATION OF THE SAID RULE BY THE LD. CIT(APPEALS) WHILE GIVING RELIEF TO THE ASSESSE E ON THIS ISSUE. WHEN THIS POSITION WAS CONFRONTED TO THE LD. COUNSEL FOR THE ASSESSEE AND HE WAS ASKED TO OFFER HIS EXPLANATION IN THE MATTER, HE HAS SUBMITTED THAT THE RELEVANT S TOCK RECORDS ARE MAINTAINED BY THE ASSESSEE AND IT IS POSSIBLE TO ASCERTAIN THE EXACT COST OF THE RELEVANT FINISHED GOODS LYING IN THE CLOSING STOCK. THE LD. REPRESENTATIVES OF BO TH THE SIDES HAVE ALSO AGREED THAT IF THE ACTUAL COST OF THE RELEVANT FINISHED GOODS LYING IN THE OPENING STOCK CAN BE ASCERTAINED FROM THE RELEVANT STOCK RECORDS, THE SAME HAS TO BE ADOPTED FOR THE PURPOSE OF VALUATION OF CLOSING STOCK UNLESS THE ASSESSEE IS IN A POSITI ON TO SHOW THAT IN CASE OF CERTAIN ITEMS I.T.A. NO. 1019/KOL./2014 ASSESSMENT YEAR: 2009-2010 & I.T.A. NO. 933/KOL./2014 ASSESSMENT YEAR: 2009-2010 PAGE 9 OF 9 OF FINISHED GOODS LYING IN THE CLOSING STOCK, THE N ET REALISATION VALUE IS LOWER THAN THE COST SO ASCERTAINED. KEEPING IN VIEW THIS SUBMISSIO N MADE BY BOTH THE SIDES, WE SET ASIDE THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING THE SAME AFRESH AFTER VERIFYING THE ACTUAL COST OF THE RELEVANT ITEMS OF FINISHED GOODS LYING IN THE CLOSING STOCK FROM THE RELEVANT STOCK RECORD MAINTAINED BY THE ASSESSEE. NEEDLESS TO OBSERVE THAT THE ASSESSING OFFICER SHALL AFFORD PROPER AND SUFFICIENT OPPORTUNITY OF B EING HEARD TO THE ASSESSEE. 8. IN THE RESULT, THE APPEAL OF THE REVENUE AND THA T OF THE ASSESSEE BOTH ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON JUNE 07, 2017 . SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT ME MBER KOLKATA, THE 7 TH DAY OF JUNE, 2017 COPIES TO : (1) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-12, KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 (2) COMMISSIONER OF INCOME TAX (APPEALS)-XII, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 (3) M/S. GANGA RASAYANIE PVT. LIMITED, 50B, HARISH MUKHERJEE ROAD, KOLKATA-700 025 (4) COMMISSIONER OF INCOME TAX (APPEALS)- , KOL KATA; (5) COMMISSIONER OF INCOME TAX ,KOLKAT A (6) THE DEPARTMENTAL REPRESENTATIVE (7) GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, HEAD OF OFFICE/DDO INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.