HP State Forest Corp. Ltd., Shimla V. DCIT, Shimla

ITA 1065/CHANDI/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8529 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 05-10-2015
• Assessment Year: 1988-1989
• Appeal Filed On: 01-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: Y K SUD
• Keywords: Rectification of order
• Section: 143(3); 260A; 147; 154

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L. KARWA, HONBLE VICE PRESIDENT AND MS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NO. 1065/CHD/2014 ASSESSMENT YEAR : 1988-89 HP STATE FOREST CORP. LTD. VS. THE DCIT VAN NIGAM BHAWAN, SDA CIRCLE COMMERCIAL COMPLEX SHIMLA KASUMPTI SHIMLA PAN NO. AAACH4036L (APPELLANT) (RESPONDENT) APPELLANT BY : SH. Y.K. SUD RESPONDENT BY : SH. MANJIT SINGH DATE OF HEARING : 18/01/2016 DATE OF PRONOUNCEMENT : 12/02/2016 ORDER PER ANNAPURNA MEHROTRA A.M. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A), SHIMLA, H.P. DT. 04/09/2014. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL 1. THAT THE CIT(A) WAS NOT JUSTIFIED IN DISMISSING THE APPEAL OF THE ASSESSEE ON THE TECHNICAL GROUNDS THAT STATEMENT OF FACTS HAD NOT BEEN GIVEN IN FORM NO. 35. SHE FAILED TO APPRECIATE THAT GROUNDS OF APPEAL WERE CLEARLY RAIS ED AND IT IS NOT MANDATORY TO FILE STATEMENT OF FACTS IN FORM NO. 35. 2. THAT EVEN OTHERWISE SHE FAILED TO APPRECIATE THE FA CTS AT THE TIME OF DECIDING THE APPEAL WERE AVAILABLE WITH HER IN THE WRITTEN SUBMI SSIONS AND WHICH HAVE BEEN DULY REPRODUCED BY HER IN ORDER ALSO THEREFORE SHE WAS N OT JUSTIFIED IN IGNORING THE SAME AND DISMISSING THE APPEAL ON TECHNICAL GROUNDS. 3. THAT THE CIT(A) HAS ERRED IN NOT DECIDING THE GROUN DS OF APPEAL OF THE ASSESSEE ON MERITS ON THE GROUND THAT THAT THESE GROUNDS ARE AD MINISTRATIVE IN NATURE AND THERE WAS NO INFIRMITY WITH THE ORDER PASSED U/S 154 BY THE A O AND THUS DISMISSING THE APPEAL AS NOT MAINTAINABLE . 3. BRIEF FACTS RELATING TO THE CASE ARE THAT AN ADD ITION OF RS. 2,12,18,295/- WAS MADE IN THE CLOSING STOCK OF THE ASSESSEE FOR A .Y. 87-88 BY THE AO WHICH WAS UPHELD BY THE ITAT. THE AO WHILE PASSING THE AS SESSMENT ORDER FOR THE IMPUGNED ASSESSMENT YEAR DID NOT ADD THE ENHANCEME NT MADE TO THE OPENING STOCK OF THE YEAR. THE ASSESSEE MOVED A REC TIFICATION APPLICATION DT. 12.12.2000 SEEKING ADJUSTMENT OF THE ADDITION MADE IN THE CLOSING STOCK OF THE 2 PRECEDING YEAR, TO THE OPENING STOCK OF THE IMPUGNE D YEAR. THE AO REJECTED THE APPLICATION AGAINST WHICH THE ASSESSEE PREFERRE D AN APPEAL TO CIT(A) WHO DISMISSED THE ASSESSEEE APPEAL. 4. AGGRIEVED BY THE SAME THE ASSESSEE FILED AN APPE AL TO THE ITAT WHO VIDE THEIR ORDER DT. 29/08/2005 DIRECTED THE AO TO GRANT THE NECESSARY ADJUSTMENT TO THE VALUE OF OPENING STOCK OF THE ASSESSEE. THEREAF TER THE ASSESSEE FILED AN APPLICATION TO THE AO FOR PASSING AN APPEAL EFFECT ORDER CONSEQUENT TO THE ORDER PASSED BY THE HONBLE ITAT. THE AO REJECTED T HE APPLICATION BY HOLDING THAT THE ITAT HAD WRONGLY ALLOWED THE ASSESSEE APPE AL. THE ORDER OF THE AO IS REPRODUCED HERE UNDER: ORDER U/S 154/254 OF THE INCOME TAX ACT, 1961 THE ASSESSEE HAS FILED AN APPLICATION U/S 154 DATED 13.06.2007 OF THE INCOME-TAX ACT, 1961 (FOR SHORT, ACT). IN ITS APPLICATION, THE ASSESSEE HAS REQUESTED FOR GIVING EFFECT TO THE APPELLATE ORDER PASSED BY THE ITAT DA TED 29/08/2005 AND GRANTING OF RESULTANT REFUND TO THE ASSESSEE COROPORATION. BRIEF FACTS OF THE CASE ARE THAT THE A.O. MADE AN A DDITION OF RS. 2,12,18,29/- IN THE CLOSING STOCK OF THE ASSESSEE FOR THE ASSESSMENT YE AR 1987-88. WHILE MAKING ASSESSEMENT FOR THE ASSESSMENT YEAR 1988-89, THE A. O. ADDED THIS AMOUNT IN THE OPENING STOCK AND ALSO IN THE CLOSING STOCK VIDE AS SESSMENT ORDER U/S 143(3) OF THE ACT DATED 31.03.1994. ON THE SAME DAY, THE A.O. , ON APPLICATION FROM THE ASSESSEE REDUCED THE FIGURE OF RS. 2,12,18,295/- FR OM THE OPENING STOCK, THEREBY REDUCED INCOME TO THIS EXTENT. THE ASSESSEE FILED A PPEAL BEFORE THE CIT(A) ON OTHER POINTS. THE CIT(A), ISSUED AN ENHANCEMENT NOT ICE TO THE ASSESSEE STATING THAT WHEN A FIGURE IS ADDED IN THE OPENING STOCK, T HE SAME SHOULD BE REFLECTED IN THE CLOSING STOCK ALSO, IN THIS CASE ESPECIALLY, BE CAUSE THAT STOCK HAD REMAINED UNSOLD UPTO 22/08/1990. THE ORDER PASSED U/S 143(3) OF THE ACT DATED 31.03.1994 WAS HELD INVALID BY THE HONBLE HIGH COURT. SUBSEQU ENTLY, FRESH ASSESSMENT WAS MADE IN THIS CASE ON 31.12.1999 BECAUSE THE EARLIER ASSESSMENT MADE ON 31.031994 WAS HELD INVALID BY THE HONBLE HIGH COUR T. SUBSEQUENTLY, IN A SEPARATE APPEAL, THE ASSESSMENT DATED 31.12.1999 HA S ALSO BEEN HELD TO BE INVALID BY THE HONBLE ITAT AGAINST WHICH THE DEPAR TMENT HAS ALREADY PREFERRED APPEAL U/S 260A OF THE ACT BEFORE THE HONBLE HIGH COURT. SINCE THE ASSESSEE HAS PURSUED AN APPEAL IN RESPECT OF AN ADDITION MADE IN AN ASSESSMENT ORDER, WHICH ORDER HAS ALREADY BEEN DECL ARED INVALID BY THE HONBLE HIGH COURT, AND THIS FACT WAS NOT BROUGHT TO THE KN OWLEDGE OF THE HONBLE ITAT, THE ITAT HAS WRONGLY ALLOWED THE PRESENT APPEAL OF THE ASSESSEE. TO BE MORE PRECISE THE HONBLE ITAT HAS ERRED IN DECIDING A MA TTER WHICH WAS ARISEN FROM INVALID PROCEEDINGS. HOWEVER, THERE IS NOT EFFECT O F ITATS ORDER AS THE WHOLE MATTER IS SUB-JUDICE BEFORE THE HONBLE HIGH COURT OF HIMACHAL PRADESH. IN CASE, THE HONBLE HIGH COURT RESTORES THE ASSESS MENT FRAMED BY THE A.O., IT WILL RESTORE THE ORDER OF ASSESSMENT DATED 31.12.1999 IN WHICH THE IMPUGNED ADDITION OF RS. 2,12,18,295/- HAS BEEN MADE. THE RECTIFICATI ON ORDER AGAINST WHICH THE ASSESSEE HAS PROCURED RELIEF FROM THE ITAT HAS BEEN RENDERED INVALID BECAUSE THE ORIGINAL ASSESSMENT ORDER GIVING RISE TO THE RECTIF ICATION ORDER HAS BEEN DECLARED NON-EST BY THE HONBLE HIGH COURT. THEREFORE, APPLI CATION OF THE ASSESSEE REQUESTING FOR GIVING EFFECT TO THE APPELLATE ORDER PASSED BY THE ITAT DATED 29/08/2005 IS HEREBY REJECTED. 3 5. AGGRIEVED BY THE SAME THE ASSESSEE FILED AN APPE AL TO THE LD. CIT(A) WHO VIDE HER ORDER DT. 04/09/2014 DISMISSED THE ASSESSE ES APPEAL BY TREATING THE APPEAL AS DEFECTIVE IN THE ABSENCE OF STATEMENT OF FACTS IN FORM NO. 35. FURTHER THE LD. CIT(A) UPHELD THE ORDER OF THE AO BY HOLDIN G AS FOLLOWS: 5. I HAVE GONE THROUGH THE FACTS OF THE CASE, SUBMI SSION OF ASSESSEE AND CASE LAWS CITED. DURING THE COURSE OF APPELLATE PROCEEDINGS ASSESSEE WAS REQUIRED TO GIVE STATEMENT OF FACTS, AS FORM NO. 35 FILED ON 13/11/2007 DID NOT CONTAIN THE STATEMENT OF FACTS. ASSESSEE WAS REQUIRED TO EXPLAIN WHY THE APPEAL SHOULD NOT BE TREATED AS DEF ECTIVE IN ABSENCE OF STATEMENT OF FACTS IN FORM FORM NO. 35. ASSESSEE VIDE LETTER DT. 21/06/20 14 SUBMITTED THAT THE APPEAL CANNOT BE DECLARED AS DEFECTIVE SINCE IT IS NOT MANDATORY TO GIVE STATEMENT OF FACTS IN FORM NO. 35. HOWEVER, FOR STATEMENT OF FACT YOU MAY KINDLY REFER TO THE WRITTEN SUBMISSION OF ASSESSEE DATED 10/08/2009 FILED BEFORE MY PREDECESSOR AND THE SAME MAY BE TREATED AS STATEMENT OF FACTS. THE CONTENTION OF ASSESSEE CANNOT BE ACCEPTED. KEEP ING IN VIEW PROVISIONS OF RULE 45 WHEREIN IT IS MANDATORY THAT ASSESSEE SHOULD GIVE CLEAR FACTS FOR ADJUDICATING THE VARIOUS ISSUES RAISED IN GROUNDS OF APPEAL. MOREOVER AS ON DATE OF HEARING T HE CASE HAS TRAVELLED THROUGH VARIOUS FACTUAL STAGES IF ASSESSEE IS NOT GIVING COMPLETE S TATEMENT OF FACTS APPEAL OF ASSESSEE CANNOT BE HELD TO BE VALID. THUS THE APPEAL OF ASSESSEE IS DISMISSED ON THE TECHNICAL ISSUE OF BEING DEVOID OF UP TO DATE STATEMENT OF FACTS. 6. AGGRIEVED BY THE SAME THE ASSESSEE FILED THE PRE SENT APPEAL BEFORE US. 7. BEFORE US LD. AR STATED THAT IN VIEW OF THE FACT THAT THE ENHANCEMENT IN VALUE OF CLOSING STOCK OF ASSESSMENT YEAR 1987-88 BY RS. 2,12,18,295/- WAS UPHELD BY THE ITAT, CONSEQUENT EFFECT OF THE SAME I N THE OPENING STOCK OF THE IMPUGNED ASSESSMENT YEAR WAS JUSTIFIED AND HAD BEE N RIGHTLY UPHELD BY THE ITAT VIDE ITS ORDER DT. 29/08/2005 . LD. AR STATED THAT THE HONBLE ITAT HAD GIVEN A CLEAR DIRECTION FOR ENHANCING THE VALUE OF OPENIN G STOCK TO THE EXTENT OF RS. 2,12,18,295/-. LD. AR ALSO. LD. AR ALSO SUBMITTED IN WRITING BEFORE US THAT NO APPEAL HAD BEEN FILED BY THE DEPARTMENT AGAINST THE ORDER OF THE ITAT DT. 29/08/2005 DIRECTING ADJUSTMENT IN THE VALUE OF THE OPENING STOCK. HE THEREFORE ARGUED THAT THE ASSESSEE BE GRANTED CONSEQUENTIAL R ELIEF IN THE APPEAL EFFECT ORDER. LD. DR ON THE OTHER HAND RELIED UPON THE ORD ER OF THE AO / CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. 9. THE UNDISPUTED FACTS EMERGING IN THE PRESENT CAS E ARE THAT IN ASSESSMENT YEAR 1987-88 I.E. THE IMMEDIATELY PRECEDING YEAR T HE VALUE OF CLOSING STOCK HAD BEEN ENHANCED BY RS. 2,12,18,295/- DURING ASSESSMEN T PROCEEDING WHICH WAS 4 UPHELD IN APPEAL RIGHT UPTO THE ITAT. THEREFORE UN DENIABLY THE CLOSING STOCK OF ASSESSMENT YEAR 1987-88 WAS INCREASED BY RS. 2,12, 18,295/-. THAT THE ASSESSEE HAD NOT CLAIMED THE CONSEQUENT ENHANCED VALUE OF OP ENING STOCK IN THE IMPUGNED ASSESSMENT YEAR IN ITS RETURN OF INCOME F ILED IS ALSO AN ADMITTED FACT. FURTHER NO ADJUSTMENT OF THE SAME WAS GRANTED TO TH E ASSESSEE IN THE ASSESSMENT ORDER PASSED U/S 143(3) / 147 DT. 31/12/ 1999. THEREAFTER AN APPLICATION U/S 154 DT. 12/12/2000 WAS FILED BY THE ASSESSEE SEEKING ENHANCEMENT IN THE VALUE OF OPENING STOCK. THE SAME WAS REJECTED BY THE AO AND CIT(A), BUT THE HONBLE ITAT DIRECTED THE RECTI FICATION VIDE ITS ORDER DT. 29/08/2005 WHEREIN IT HELD AS FOLLOWS AT PARA 8. 8. NOW THE QUESTION AROSE WHETHER THE RECTIFICATIO N CAN BE DONE UNDER SECTION 154 OF THE ACT UNDER THE SITUATION. AT THE OUTSET WE ARE OF THE VIEW THAT THERE CANNOT BE TWO VALUATIONS FOR RECTIFICATION OF MISTAKE U/S 154, THE MISTAKE MUST BE OBVIOUS AND PATENT AND EVEN A MISTAKE OF LA W WHICH IS GLARING AND OBVIOUS CAN BE RECTIFIED. THERE IS A SPECIFIC FINDI NG BY THE LEARNED CIT(A) AT PAGE 2 (PARA 2.1) THAT THE ASSESSING OFFICER ACCEPTED TH E CONTENTION OF THE ASSESSEE CORPORATION AND REDUCED THE INCOME ALREADY ASSESSED BY ORDER UNDER SECTION 154. HOWEVER, THE VALUE OF THE OPENING STOCK IN THE NEXT ACCOUNTING YEAR SHOULD BE IDENTICAL TO THE VALUE OF THE CLOSING STOCK OF T HE PREVIOUS ACCOUNTING PERIOD AS THE SAME IS A SETTLED PRINCIPLE OF ACCOUNTANCY O THERWISE THERE WILL BE A TOTAL DISTORTION OF THE PROFITS OF THE BUSINESS. IN VIEW OF THESE FACTS THERE IS A FORCE IN THE CONT ENTION OF THE SUBMISSIONS OF THE LD. COUNSEL LD. AR FOR THE ASSESSEE THAT THE VALUE OF THE OPENING STOCK HAS TO BE THE SAME AS THAT OF THE CLOSING STOCK OF THE PREVIO US YEAR, SO THIS GROUND OF THE ASSESSEE IS ALLOWED. THE ASSESSEE THEREAFTER FILED AN APPLICATION DT. 13 /06/2007 FOR GIVING APPEAL EFFECT TO THE AFORESTATED ORDER OF THE ITAT. IN VIE W OF THE DIRECTION OF THE ITAT IN ITS ORDER DT. 29/08/2005 WE SEE NO REASON WHY EFFEC T OF THE SAME SHOULD BE DENIED TO THE ASSESSEE. IT IS A SETTLED ACCOUNTING PRINCIPLE THAT CLOSING STOCK OF ONE YEAR IS THE OPENING STOCK OF THE NEXT YEAR. SIN CE IN THE IMPUGNED CASE THE CLOSING STOCK OF THE PRECEDING YEAR WAS ENHANCED BY RS. 2,12,18,295/- WHICH WAS UPHELD BY THE ITAT AND HAD ATTAINED FINALITY, T HE OPENING STOCK OF THE IMPUGNED YEAR SHOULD ALSO HAVE BEEN TAKE AT THE ENH ANCED FIGURE. THE AO WE FIND HAS DENIED THE BENEFIT OF ENHANCEMEN T OF VALUE OF OPENING STOCK TO THE ASSESSEE, FOR THE REASON THAT ITAT HAD DECIDED THE MATTER WHICH HAD ARISEN FROM AN INVALID PROCEEDING. THIS OBSERVA TION OF THE AO WE FIND IS INCORRECT ON FACTS. THE ITAT HAS DECIDED THE MATTER IN PROCEEDING U/S 154. IN 5 FACT IT WAS THE PROCEEDING U/S 143(3)/147 WHICH WER E HELD INVALID BY THE ITAT VIDE ITS ORDER DT. 29/08/2005 AND NOT THE PROCEEDIN G U/S 154. IN VIEW OF THE SAME, THE AO HAD TO GIVE APPEAL EFFECT TO THE ORDER OF THE ITAT AND ENHANCE THE OPENING STOCK BY RS. 2,12,18,295/- AND CONSEQUE NTLY REDUCE THE ASSESSEES INCOME TO THIS EXTENT. MOREOVER WE FIND THAT THE LD. CIT(A) HAS REJECTED T HE ASSESSEES APPEAL HOLDING IT TO BE DEFECTIVE, IN VIEW OF THE FACT THAT THE AS SESSEE HAD NOT GIVEN THE STATEMENT OF FACTS IN FORM NO. 35 FILED BY IT. THIS VIEW OF THE LD. CIT(A) WE FIND IS INCORRECT AS THERE IS NO PROVISION OF LAW TREATING THE APPEAL FILED AS DEFECTIVE IN THE ABSENCE OF SUBMISSION OF STATEMENT OF FACTS. IN VIEW OF THE ABOVE, THE AO IS DIRECTED TO GIVE AP PEAL EFFECT TO THE ORDER OF THE ITAT AND ENHANCE THE OPENING STOCK FOR THE IMPU GNED YEAR BY RS. 2,12,18,295/-. 10. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 12/02/2016 SD/- SD/- (H.L. KARWA) (ANNAPURNA MEHROTRA) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 12/02/2016 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR