ACIT, CHENNAI V. S.Kamal Bhndari, CHENNAI

ITA 1068/CHNY/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4517 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 08-10-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 20-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T N BETGIRI JT
• Assessee Lawyers: K BALASUBR AMANIAN
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI [BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI S. S. GODARA, JUDICIAL MEMBER] I.T.A.NO.645/MDS/2013 ASSESSMENT YEAR : 2008-09 SHRI S. KAMAL BHANDARI 17/2, VIJAYA COMPLEX VEERAPPAN STREET SOWCARPET, CHENNAI 600 079 VS THE ASSTT. COMMISSIONER OF INCOME-TAX BUSINESS RANGE XI CHENNAI [PAN AEEPK 6304 H ] (APPELLANT) (RESPONDENT) I.T.A.NO.1068/MDS/2013 ASSESSMENT YEAR : 2008-09 THE ASSTT. COMMISSIONER OF INCOME-TAX BUSINESS RANGE XI CHENNAI VS SHRI S. KAMAL BHANDARI 17/2, VIJAYA COMPLEX VEERAPPAN STREET SOWCARPET, CHENNAI 600 079 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K.BALASUBRAMANIAN, ADVOCATE DEPARTMENT BY : SHRI T.N.BETGIRI, JT.CIT DATE OF HEARING : 08-10-2013 DATE OF PRONOUNCEMENT : 21-10-2013 O R D E R PER S.S.GODARA, JUDICIAL MEMBER THESE CROSS APPEALS FILED BY THE ASSESSEE AND TH E REVENUE FOR ASSESSMENT YEAR 2008-09, ARE DIRECTED AGAINST T HE ORDER OF THE I.T.A.NO.645 & 1068/13 :- 2 -: COMMISSIONER OF INCOME-TAX (APPEALS)-IV CHENNAI, D ATED 29.1.2013, PASSED IN APPEAL NO. 126/2010-11, IN PROCEEDINGS UN DER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE AC T). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE; AN INDIVIDUAL, IS A TRADER IN SILVER BULLION AND JEWELLERY. ON 22.9. 2008, HE HAD FILED HIS RETURN DISCLOSING INCOME OF ` 4,23,204/-. THE SAME WAS SUMMARILY PROCESSED. THEREAFTER, THE ASSESSING OFFICER FRAME D REGULAR ASSESSMENT MAKING ADDITIONS OF ` 6,97,590/- QUA VALUE OF ALLOYS LIKE COPPER ETC. WEIGHING 37.975 KGS @ ` 18,369/- PER KG. ALONGWITH THE SAME, HE HAD ALSO ADDED DIFFERENCE IN VALUATION OF CLOSING STOCK AMOUNTING TO ` 1,29,89,409/-. IN ASSESSEES APPEAL, CIT(A) HAS DELETED THE FORMER ADDITION AND PARTLY CONFIRMED TH E LATTER ONE TO THE TUNE OF ` 33,08,997/-. IN THIS BACKDROP, BOTH PARTIES ARE I N APPEAL. THE ASSESSEES GRIEVANCE IS THAT THE CIT(A) OUGHT TO HAVE DELETED THE ENTIRE ADDITION OF DIFFERENCE IN STOCK, WHEREAS THE REVENUE IS AGITATED ON THE GROUND THAT IN LOWER APPELLATE PROCEEDINGS, THE ADDITION ON ACCOUNT OF VALUE OF ALLOYS HAS BEEN WRONGLY DELETED AND THE OTHER ONE QUA DIFFERENCE IN VALUATION OF CLOSING STOCK HAS BE EN WRONGLY RESTRICTED IN PART. I.T.A.NO.645 & 1068/13 :- 3 -: IN THE COURSE OF HEARING, BOTH PARTIES VEHEMENTLY PRAY FOR ACCEPTANCE OF THEIR RESPECTIVE APPEALS. 2. FIRST WE COME TO THE COMMON CONTENTION OF THE PARTI ES QUA ADDITION OF ` 1,29,89,409/- QUA DIFFERENCE IN STOCK. THERE IS N O DISPUTE ABOUT THE FACTUAL POSITION THAT THE ASSESS EE HAD DECLARED CLOSING STOCK OF 1185.018 KGS @ COST OR NET REALIZA BLE VALUE; WHICHEVER WAS LESSER. IN SUPPORT, HIS PLEA BEFORE THE ASSESSING OFFICER WAS THAT IN PRECEDING AS WELL AS SUCCEEDING ASSESS MENT YEARS, HE HAD BEEN FOLLOWING THE VERY METHOD OF COMPUTING THE STO CK. HE SUBMITTED THAT THE METHOD WAS IN ACCORDANCE WITH SE CTION 145A(A)(I) OF THE ACT. HE EXPLAINED THAT IN CASE HE DEVIATE D FROM THE AFORESAID METHOD OF COMPUTING THE STOCK, THE SAME MIGHT ADVER SELY AFFECT PROFITS OF THE SUBSEQUENT ASSESSMENT YEAR. THE ASS ESSING OFFICER DID NOT AGREE TO THE ASSESSEES SUBMISSIONS. IN H IS OPINION, THE ASSESSEE HAD TO COMPUTE THE STOCK AS PER NET REALIZ ABLE VALUE I.E MARKET PRICE INSTEAD OF THE COST OR NET REALIZATION VALUE WHICHEVER WAS LESSER. WHILE HOLDING SO, THE ASSESSING OFFICER RE FERRED TO FORM 3CD; COLUMN 12(A) SUBMITTED BY THE ASSESSEE. THEREAFT ER, HE TOOK INTO CONSIDERATION THE WEIGHT OF ALLOYS LIKE COPPER ETC. USED IN MAKING THE JEWELLERY WEIGHING 37.975 KGS AND COMPUTED THE VALU E OF THE STOCK AT I.T.A.NO.645 & 1068/13 :- 4 -: ` 2,09,54,673/-. SINCE THE ASSESSEE HAD DECLARED V ALUE OF THE STOCK AT ` 79,65,264/-, THE DIFFERENCE OF ` 1,29,89,409/- STOOD ADDED IN HIS INCOME . 3. IN ASSESSEES APPEAL, THE CIT(A) HAS FIRST DISCUSS ED ALL THREE METHODS OF VALUING THE STOCK I.E LIFO (LAST I N FIRST OUT), FIFO (FIRST IN FIRST OUT) AND AVERAGE PRICING METHOD. THEREAFTER, HE CONCLUDES AVERAGE PRICE METHOD AS THE MOST SUITABLE METHOD FOR THE COMPUTATION OF STOCK. ACCORDINGLY, THE CIT(A) HAS ADOPTED AVERAGE PRICING METHOD AND RESTRICTED THE ADDITION TO ` 33,08,997/- ONLY, WHICH LEAVES BOTH PARTIES AGGRIEVED. 4. WE HAVE HEARD BOTH PARTIES IN DETAIL AND PERUSED TH E CASE FILE. UNDISPUTEDLY, THE ASSESSING OFFICER, IN THE INSTANT CASE, HAS NOT SPECIFICALLY REJECTED THE CONTENTION OF THE ASSESS EE THAT VALUATION OF THE STOCK IN QUESTION HAS BEEN COMPUTED CONSISTENTL Y BY FOLLOWING THE COST OR NET REALIZATION VALUE WHICHEVER WAS LESSER. NEITHER THE ASSESSING OFFICER NOR THE CIT(A) HAVE HELD THAT TH E COMPUTATION OF THE ASSESSEE BY HOLDING THAT THE METHODOLOGY ADOPT ED IS CONTRARY TO THE PROVISIONS CONTAINED IN THE STATUTE I.E SECTION 145A(A)(I) OF THE ACT. RATHER, THE ASSESSEE HAS BEEN VEHEMENTLY CONTENDING THROUGHOUT THAT THE VALUATION AT COST OR NET REALIZATION VALUE WHIC HEVER LESSER HAS I.T.A.NO.645 & 1068/13 :- 5 -: BEEN RESORTED TO IN PRECEDING AS WELL AS SUCCEEDING ASSESSMENT YEARS. IN THESE CIRCUMSTANCES, WE HARDLY SEE ANY REASON TO DEVIATE FROM THE CONSISTENT PRACTICE FOLLOWED BY THE ASSESSEE. WHI LE HOLDING SO, WE DRAW SUPPORT FROM THE STATUTORY PROVISION WHICH SPE CIFICALLY IMPLIES THAT THE VALUATION OF STOCK HAS TO BE COMPUTED IN A CCORDANCE WITH THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASS ESSEE. IN OUR VIEW, FOR THE SAKE OF MAINTAINING CONSISTENCY, IT I S NECESSARY THAT THE METHOD OF VALUATION ADOPTED BY THE ASSESSEE AT COS T OR NET REALIZATION VALUE, WHICHEVER LESSER HAS TO BE ACCEPTED. HENC E, WE HOLD THAT THE AUTHORITIES BELOW HAVE WRONGLY HELD THAT THE STOCK HAS TO BE VALUED AT MARKET PRICE BY THE ASSESSING OFFICER AND AVERAGE P RICE BY THE CIT(A). IN THESE CIRCUMSTANCES, WE ACCEPT THE CONTENTIONS O F THE ASSESSEE AND REJECT THOSE ADVANCED BY THE REVENUE. CONSEQUE NTLY, THE RELEVANT GROUND IN ASSESSEES APPEAL IS ACCEPTED W HEREAS IN REVENUES APPEAL IT STANDS REJECTED. SINCE THERE IS ONLY ONE SUBSTANTIVE GROUND IN ASS ESSEES APPEAL, I.T.A.NO.645/MDS/2013 STANDS ACCEPTED. 5. NOW WE COME TO THE SECOND GROUND OF THE REVENUE CHALLENGING THE CIT(A)S ACTION IN DELETING THE ADD ITION OF ` 6,97,590/- QUA THE VALUE OF ALLOYS(SUPRA). WE MAKE IT CLEAR THAT NO PAPER BOOK I.T.A.NO.645 & 1068/13 :- 6 -: HAS BEEN FILED BY THE REVENUE TO POINT OUT AS TO HO W THE FINDINGS OF FACTS RECORDED BY THE CIT(A) ARE CONTRARY ON RECOR D. IN THE COURSE OF ASSESSMENT, THE ASSESSING OFFICER HAD MADE THE ADDI TION OF THE AFORESAID WEIGHT OF ALLOYS LIKE COPPER ETC. IN ASS ESSEES INCOME BY ADOPTING THE RATE OF ` 18369/- KG ON THE GROUND THAT IN THE PROFIT & LOSS ACCOUNT, THE SAME HAD BEEN DEBITED WITHOUT AS SIGNING ANY VALUE AND SIMILARLY, IN THE CLOSING STOCK AS WELL NO VAL UE WAS FORTHCOMING. THE CIT(A), IN HIS ORDER, REFERS TO COMMON BUSINESS PRACTICE IN THE JEWELLERY TRADE WHEREIN THE ALLOYS ARE USED IN MANU FACTURING ORNAMENTS. THEREAFTER, HE OBSERVES THAT SINCE THE ASSESSEE DID NOT ASSIGN THE VALUE OF THE ALLOYS IN PROFIT & LOSS ACC OUNT, THE SAME WAS CORRESPONDINGLY NOT VALUED IN THE CLOSING STOCK. T HE CIT(A) FINDS THE SAID ACTION OF THE ASSESSEE IN THIS REGARD AS JUST IFIABLE. BEFORE US, APART FROM RAISING HALF-HEARTED PLEA, THE REVENUE N OWHERE QUOTES ANY JUDICIAL PRECEDENT OR ANY OTHER EVIDENCE TO CONTROV ERT THE FINDINGS OF THE CIT(A). THEREFORE, WE SEE NO REASON TO RESTORE THE ADDITION OF VALUE OF ALLOYS IN QUESTION. THE RELEVANT GROUND I N THE REVENUES APPEAL STANDS REJECTED. 6. AS A RESULT, THE ASSESSEES APPEAL IS ALLOWED WHER EAS THAT FILED BY THE REVENUE IS DISMISSED. I.T.A.NO.645 & 1068/13 :- 7 -: ORDER PRONOUNCED ON MONDAY, THE 21 ST OF OCTOBER, 2013, AT CHENNAI. SD/- SD/- ( DR. O.K. NARAYANAN) VICE-PRESIDENT (S. S. GODARA) JUDICIAL MEMBER DATED: 21 ST OCTOBER, 2013 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR