ITO 16(3)(1), MUMBAI V. RASIKLAL & SONS, MUMBAI

ITA 1142/MUM/2012

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0036 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 22-03-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 17-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income
• Section: 143(3); 69; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.1142/M/2012 ASSESSMENT YEAR: 2004-05 INCOME TAX OFFICER-16(3)(1), MATRU MANDIR, TARDEO ROAD, MUMBAI 400 007 VS. M/S. RASIKLAL & SONS, 2301, PANCHARATNA, MP MARG, OPERA HOUSE, MUMBAI 400 004 PAN: AAFFR8180D (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI VIPUL JOSHI, A.R. REVENUE BY : SHRI PURUSHOTTAM KUMAR, D.R. DATE OF HEARING : 27.04.2017 DATE OF PRONOUNCEMENT : 30.06.2017 O R D E R PER D.T. GARASIA, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 24.11.2011 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2004-05. 2. THE ONLY GROUND IN THIS APPEAL IS IN RELATION TO ISSUE OF HEAD OF INCOME REGARDING THE VALUATION OF CLOSING STOCK WHICH WAS DECIDED UNDER SECTION 263 OF THE ACT. 3. THE SHORT FACTS OF THE CASE ARE AS UNDER: THE ASSESSEE IS A PARTNERSHIP FIRM CARRYING ON BUS INESS IN CUT AND POLISHED DIAMONDS. THE ASSESSMENT WAS COMPLETED ON 21.09.2007 DETERMINING THE TOTAL INCOME AT RS.1,23,09,723/-. THE ADDITION WAS MADE ON ACCOUNT OF UNDERVALUATION OF CLOSING STOCK OF ROUGH DIAMONDS/CUT AND POLISHED DIAMONDS. THE ISSUE INVOLVED WAS VALUING THE CLOSI NG STOCK OF ROUGH/CUT AND POLISHED DIAMONDS AT AVERAGE COST. THE DIFFERENCE IN VALUE ARISING ON ACCOUNT ITA NO.1142/M/2012 M/S. RASIKLAL & SONS 2 OF ADOPTING THE AVERAGE COST WAS BROUGHT TO TAX AS ASSESSEES BUSINESS INCOME BY THE ASSESSING OFFICER (HEREINAFTER REFERRED TO A S THE AO). 4. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT(A) HAS DELETED THE ADDITION. HOWEVER, THE ASSESSMENT WAS SET ASIDE UN DER SECTION 263 READ WITH SECTION 143(3) AND THE LD. CIT(A) OPINED THAT RESUL TANT INCOME HAS TO BE ASSESSED AS BUSINESS INCOME AND NOT AS DEEMED INCOM E UNDER SECTION 69 OF THE ACT AND ACCORDINGLY HE PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. HENCE, THE REVENUE IS IN APPEAL BEFORE US. 5. DURING THE COURSE OF HEARING, THE LD. D.R. SUBMI TTED THAT THE ORIGINAL ORDER WAS PASSED UNDER SECTION 143(3) OF THE ACT AN D THEREAFTER THE ORDER UNDER SECTION 263 OF THE ACT WAS PASSED ON 29.03.10 AND A S PER THE ORDER UNDER SECTION 263, THE LD. CIT HAS DIRECTED THE AO TO PAS S A FRESH ORDER GIVING AN OPPORTUNITY TO THE ASSESSEE CONSIDERING THE SUBMISS ION OF THE ASSESSEE. THEREFORE, WHEN THE ORDER IS PASSED BY LD. CIT WITH OUT HAVING THE JURISDICTION, THEN THE ASSESSEE SHOULD HAVE FILED THE APPEAL BEFO RE THE TRIBUNAL. 6. THE LD. A.R. SUBMITTED THAT THE ORDER PASSED BY THE LD. CIT(A) WAS TRAVELLED UP TO TRIBUNAL IN ITA NO.1974/M/2010 WHER EIN THE TRIBUNAL HAS DELETED THE ADDITION. THE DEPARTMENT HAS NO RIGHT TO AGITATE THIS APPEAL. 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. WE CONSIDER THE SEQUENCE OF EVENTS. THE ORIGINAL ASSESSMENT WAS CO MPLETED ON 21.09.07 DETERMINING THE TOTAL INCOME OF RS.1,23,09,723/-. THE ADDITION WAS MADE ON ACCOUNT OF UNDERVALUATION OF CLOSING STOCK OF ROUGH DIAMOND/CUT AND POLISHED DIAMOND. THE ISSUE WAS VALUING THE CLOSING STOCK O F ROUGH/CUT AND POLISHED DIAMOND ON AVERAGE COST. THE DIFFERENCE IN VALUE AR ISING ON ACCOUNT OF ADOPTING THE AVERAGE COST WAS BROUGHT TO TAX AS ASS ESSEES BUSINESS INCOME BY AO. ITA NO.1142/M/2012 M/S. RASIKLAL & SONS 3 8. THE MATTER WAS CARRIED TO LD. CIT(A) WHEREIN THE METHOD OF AVERAGE COST WAS UPHELD. THE ASSESSEE WENT IN APPEAL BEFOR E THE TRIBUNAL AND THE TRIBUNAL HAS ALLOWED THE APPEAL OF THE ASSESSEE ON 13.01.12. IN THE MEANTIME, THE ORIGINAL ASSESSMENT WAS SUBJECTED TO REVISION B EFORE LD. CIT(A) AND THE LD. CIT(A) HAS DIRECTED TO REFRAME THE ORDER ON 20. 03.2010. THEREAFTER, ORDER WAS PASSED ON 27.12.10. THE MATTER WAS CARRIED TO LD. CIT(A) AND THE LD. CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE. 9. WE FIND THAT THE LD. CIT(A) HAS DECIDED THE APPE AL ON 24.11.2011. THE SAME ADDITION WAS DELETED BY THE TRIBUNAL AND THERE FORE WE ARE OF THE VIEW THAT THIS APPEAL IS INFRUCTUOUS. HENCE, WE DISMISS THE DEPARTMENTAL APPEAL. ORDER PRONOUNCED IN THE OPEN COURT ON 30.06. 2017. SD/- SD/- (RAJESH KUMAR) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 30.06.2017. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.