The DCIT, Circle-1, JUNAGADH V. M/s Talala Taluka Sahakari Khand Udhyog Mandali Ltd.,

ITA 1155/RJT/2010

• Counselvise Citation: 115524914 RSA 2010
• Duration Of Justice: 1 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 30-09-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 09-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: YOGESH PANDE
• Assessee Lawyers: J C RANPURA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI D.K. TYAGI (JM) AND SHRI A.L. GEHLOT (A M) I.T.A. NO.1155/RJT/2010 (ASSESSMENT YEAR 2001-02) THE DY.CIT, CIR.1 VS M/S TALALA TALUKA SAHAKARI JUNAGADH KHAND UDHYOG MANDALI LTD AT : TALALA, DIST : JUNAGADH PAN : AAAAT2452L (APPELLANT) (RESPONDENT) DATE OF HEARING : 28-09-2011 DATE OF PRONOUNCEMENT : 21-11-2011 APPELLANT BY : SHRI YOGESH PANDE RESPONDENT BY: SHRI JC RANPURA O R D E R PER BENCH THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-IV, RAJKOT DATED 18-06-2010 FOR THE ASSESSMENT YEAR 200 1-02. 2. THE FIRST GROUND IS IN RESPECT OF DELETION OF AD DITION OF RS. 52,45,845 ON ACCOUNT OF VALUATION OF CLOSING STOCK. THE ASSESSI NG OFFICER MADE THE ADDITION ON THE GROUND THAT THE ASSESSEE CANNOT MAKE ANY CHANGE IN VALUATION OF THE CLOSING STOCK ON HIS OWN. THE METHOD OF VALUATION OF CLOSI NG STOCK, HOWEVER, CAN VARY WITH THE PERMISSION OF THE ASSESSING OFFICER. THE ADDITION MADE BY THE ASSESSING OFFICER HAS BEEN DELETED BY THE CIT(A) AS UNDER: ITA NO.1155/RJT/2010 2 4.2 I HAVE CAREFULLY CONSIDERED THE FINDING GIVEN BY THE ASSESSING OFFICER AND THE SUBMISSION OF THE AR OF T HE APPELLANT. THE AR OF THE APPELLANT HAS ALSO RELIED UPON VARIOU S JUDICIAL PRONOUNCEMENTS IN SUPPORT OF HIS CONTENTION. I HAV E VERIFIED THE CONTENTION SO PLACED FORTH BY THE LD.AR. I HAVE AL SO PERUSED THE ASSESSMENT ORDER AND THE RETURN FILED FROM AY 1998- 99 AND ON WARDS. IT IS SEEN THAT THE MANNER OF VALUING THE C LOSING STOCK IS BEING CONSISTENTLY FOLLOWED BY THE APPELLANT YEAR A FTER YEA AND THERE IS NO CHANGE IN THE VALUATION FOR THE YEAR UN DER CONSIDERATION. THE PRINCIPLES APPLICABLE IN VALUATION OF STOCK ARE (1) THAT FOR VALUING CLOSING STOCK IT IS OPEN TO THE APPELLANT T O VALUE IT AT THE COST OR MARKET VALUE, WHICHEVER IS LOWER (2) A METH OD OF ACCOUNTING ADOPTED BY THE APPELLANT CONSISTENTLY AN D REGULARLY CANNOT BE DISCARDED BY THE DEPARTMENT ON THE VIEW T HAT HE SHOULD HAVE ADOPTED A DIFFERENT METHOD (3) THE CONCEPT OF REAL INCOME IS CERTAINLY APPLICABLE IN JUDGING WHETHER THERE HAS B EEN INCOME OR NOT, BUT IN EVERY CASE, IT MUST BE APPLIED WITH CAR E AND WITHIN THE RECOGNIZED LIMIT AND (4) WHETHER THE INCOME HAS REA LLY ACCRUED OR ARISEN TO THE APPELLANT MUST BE JUDGED IN THE LIGHT OF THE REALITY OF THE SITUATION. THE ASSESSING OFFICER HAS CLEARLY M ISDIRECTED HIMSELF IN ADDING THE DIFFERENCE WHEN THE APPELLANT IS CONS ISTENTLY FOLLOWING THE SAME PRACTICE YEAR AFTER YEAR. THEREFORE, IN M Y OPINION, THERE IS NO CHANGE IN THE METHOD OF VALUATION AND HENCE, THE VALUATION OF STOCK MADE AT REALIZABLE VALUE IS AUTHENTIC AND ACC EPTABLE AND THEREFORE THE ADDITION IS DIRECTED TO BE DELETED. THIS GROUND OF THE ASSESSEE IS ALLOWED. 3. THE LD.DR SUBMITTED THAT THE ASSESSEE HAS GIVEN CUMULATIVE EFFECT DURING THE YEAR IN VALUATION OF CLOSING STOCK FROM MARKET VALUE TO COST. THE LD.AR SUBMITTED THAT THE EFFECT OF EARLIER YEARS CANNOT B E GIVEN IN THE YEAR UNDER CONSIDERATION. THE LD.AR, ON THE OTHER HAND, RELIE D UPON THE ORDER OF CIT(A) AND SUBMITTED THAT THE ASSESSEE HAS CLAIMED DEDUCTION O F RS.52,45,845 ON ACCOUNT OF STOCK VALUATION DIFFERENCE DUE TO CHANGE IN METH OD OF VALUATION OF SUGAR. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS FOLLOWED TH E SAME SYSTEM OF VALUATION OF THE CLOSING STOCK SINCE ASSESSMENT YEAR 1998-99. T HE LD. AR SUBMITTED THAT THE ASSESSING OFFICER FAILED TO APPRECIATE THE FACTS OF THE ISSUE THAT IN THE BOOKS OF ACCOUNT, THE ASSESSEE ADOPTED VALUATION OF CLOSING STOCK ON THE BASIS OF MARKET ITA NO.1155/RJT/2010 3 PRICE. HOWEVER, WHILE FILING THE RETURN OF INCOME, THE ASSESSEE HAS FOLLOWED VALUATION OF THE CLOSING STOCK AT MARKET PRICE OR C OST WHICHEVER IS LOWER AND ACCORDINGLY NET EFFECT OF THAT HAS BEEN ADJUSTED TO THE PROFIT DECLARED IN THE PROFIT & LOSS ACCOUNT. THE LD.AR SUBMITTED THAT THIS METH OD HAS BEEN FOLLOWED BY THE ASSESSEE SINCE ASSESSMENT YEAR 1997-98 AND YEARLY E FFECT OF ADJUSTMENT TO THE PROFIT WAS GIVEN IN EACH YEAR. THE LD.AR IN THIS R EGARD HAS SUBMITTED FOLLOWING DETAILS: SR. NO. ASSESSMENT YEAR STOCK AS PER BOOKS OF ACCOUNT (MARKET VALUE) RS. STOCK AS PER INCOME-TAX RETURNS(AT COST) RS. ADDITION TO INCOME DEDUCTION FROM INCOME (A) (B) (C) (D) (E) 1 1997-98 19,93,94,673 20,67,76,183 73,81,510 - 2 1998-99 24,68,60,626 28,15,13,098 3,46,52,472 - 3 1999-00 22,09,68,182 19,79,32,406 - 2,30,35,776 4 2000-01 28,78,81,479 27,43,61,487 - 1,35,19,992 5 2001-02 17,52,51,867 17,00,06,022 - 52,45,845 6 2002-03 3,59,88,976 4,26,40,055 66,51,079 - TOTAL 4,86,85,061 4,18,01,613 SUMMAY RS. TOTAL ADDITION IN INCOME 4,86,85,061 LESS:DEDUCTION FROM INCOME 4,18,01,613 TOTAL NET EFFECT I.E. ADDITION TO INCOME 68,83,4 48 4. WE HAVE HEARD THE LEARNED REPRESENTATIVE OF THE PARTIES, RECORD PERUSED. THE CIT(A) RECORDED THE FACT THAT THE ASSESSEE HAS FOLLOWED VALUATION OF CLOSING STOCK CONSISTENTLY YEAR AFTER YEAR AND THERE IS NO CHANGE IN THE VALUATION OF CLOSING STOCK FOR THE YEAR UNDER CONSIDERATION. TH E CIT(A) HAS ALSO NOTICED THAT THE ASSESSING OFFICER HAS CLEARLY MISDIRECTED HIMSE LF IN ADDING THE DIFFERENCE WHEN THE ASSESSEE IS CONSISTENTLY FOLLOWING THE SAM E PRACTICE YEAR AFTER YEAR. IT ITA NO.1155/RJT/2010 4 IS SETTLED PRINCIPLE FOR VALUATION OF THE CLOSING S TOCK THAT IT SHOULD BE VALUED AT MARKET PRICE OR COST PRICE, WHICHEVER IS LOWER. TH E VALUATION OF THE CLOSING STOCK IN THE BOOKS OF ACCOUNT BY THE ASSESSEE OTHER THAN THE ABOVE SETTLED PRINCIPLE DOES NOT AFFECT TOTAL INCOME / PROFIT. HOWEVER, IT IS ADMISSIBLE THAT SAME METHOD SHOULD FOLLOW IN BOOKS OF ACCOUNT. THE ASSESSEE HA S FOLLOWED THE ABOVE ACCEPTED PRINCIPLE, MARKET PRICE OR COST WHICHEVER IS LOWER WHILE FILING THE RETURN OF INCOME. THE LD.AR DEMONSTRATED THAT SO-CALLED D EDUCTION CLAIMED BY THE ASSESSEE IS AN ADJUSTMENT OF THE DIFFERENT METHOD A DOPTED AS PER BOOKS OF ACCOUNT AND WHILE FILING THE RETURN OF INCOME. WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THAT SYSTEM FOLLOWED BY THE ASSESSEE B ECAUSE THE VALUATION OF CLOSING STOCK WHILE FILING THE RETURN OF INCOME IS MARKET P RICE OR COST PRICE WHICHEVER IS LOWER. PRINCIPLE O VALUATION OF CLOSING STOCK HAS BEEN COMPLIED WITH. THE ASSESSEE HAS FOLLOWED THIS VALUATION METHOD CONSIST ENTLY, THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A). 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON -11-2011. SD/- SD/- (D.K. TYAGI) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER RAJKOT, DT : NOVEMBER, 2011 PK/- ORDER PRONOUNCED ON 21-11-2011 SD/- SD/- JM AM COPY TO: 1. ASSESSEE 2. REVENUE 3. THE CIT(A)-IV, RAJKOT 4. THE CIT-II, RAJKOT ITA NO.1155/RJT/2010 5 5. THE DR, I.T.A.T., RAJKOT (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, RAJKOT