L.K. Sons Alloy Pvt. Ld., Pune V. Additional Commissioner of Income-tax, Pune

ITA 1186/PUN/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 1922 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 08-12-2020
• Assessment Year: 2011-2012
• Appeal Filed On: 12-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: IS DIRECTED AGAINS T PASSED

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE VIRTUAL COURT BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA NO. 1186/PUN/2017 / ASSESSMENT YEAR : 2011-12 L.K. SONS ALLOY PVT. LTD., SHAH KHANDELWAL JAIN & ASSOCIATES CHARTERED ACCOUNTANTS, LEVEL 3, RIVERSIDE BUSINESS BAY, PLOT NO.84, WELLESLEY ROAD, NEAR RTO, PUNE 411 001 PAN : AABCL1635Q VS. ADDL.CIT, RANGE-9, PUNE APPELLANT RESPONDENT / ORDER PER R.S.SYAL, VP : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A)-6, PUNE ON 30-01-2017 IN RELATION TO THE ASSESSMENT YEAR 2011-12. 2. THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST THE CONFIRMATION OF ADDITION OF RS.42,77,408/- MADE BY THE AS SESSING OFFICER (AO) ON ACCOUNT OF VALUATION OF CLOSING STOCK. ASSESSEE BY SHRI NEELESH KHANDELWAL REVENUE BY SHRI S.P. WALIMBE DATE OF HEARING 08-12-2020 DATE OF PRONOUNCEMENT 08-12-2020 ITA NO.1186/PUN/2017 L.K. SONS ALLOY PVT. LTD., 2 3. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS E NGAGED IN THE BUSINESS OF TRADING IN STEEL, BARS AND SHEETS & RUNNI NG OF WINDMILL PROJECT. A RETURN WAS FILED DECLARING TOTAL INCOME OF RS.61.77 LAKH. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS, THE AO OBSERVED THAT VALUATION OF CLOSING STOCK WAS NOT DONE PROPERLY. HE CONSIDERED ONLY ONE OF THE ITEMS OF CLOSING STOCK, NAMELY, CHROME MOLY STEEL WHICH WAS VALUED BY THE ASSESSEE AT RS.3,49,78,586/-. THE AO OPINED THAT THE RATE OF VALUATION ADOPTED BY THE ASSESSEE AT RS.54.86 PER KG WAS NOT CORR ECT INASMUCH AS IT OUGHT TO HAVE BEEN VALUED AT AVERAGE PURCHA SE RATE. HE CONSIDERED RATE OF RS.61.57 PER KG AND WORKED OUT T HE ADDITION AT RS.42,77,408/-. THE LD. CIT(A) SUSTAINED THE ADDITION, AGAINST WHICH THE ASSESSEE HAS COME UP IN APPEAL BEFORE THE TRIB UNAL. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS THROUGH VIRTUAL COURT AND GONE THROUGH THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE WANT TO MAKE IT CLEAR THAT THE DISPUTE IN THE INSTANT APPEAL IS NOT ON THE QUANTITATIVE ASPECT OF INVENTORY BUT ONLY ON THE VALUATION OF A PARTICULAR ITEM OF STOCK, NAMELY, CHROME MOLY STEEL. THE ASSESSEE VALUED THE STOCK OF CHROME MOLY STEEL BY CONSIDER ING LEFT OVER STOCK FROM THE OPENING STOCK TO THE TUNE OF 3,93,2 50 KG AT RS.48.94 PER KG AND OUT OF PURCHASES DURING THE YEA R OF ITA NO.1186/PUN/2017 L.K. SONS ALLOY PVT. LTD., 3 2,44,566 KG VALUED AT RS.64.33 PER KG. AS AGAINST THAT, THE AO AVERAGED THE OPENING STOCK AND PURCHASES TO WORK OUT THE PER KG RATE OF RS.61.57. IN THIS REGARD, IT IS SEEN THAT THE ASSE SSEE HAS MAINTAINED COMPLETE ITEM-WISE STOCK TALLY, RELEVANT PARTS OF WHICH HAS BEEN PLACED ON RECORD. PAGE 40 ONWARDS IS A COPY OF REGISTER OF CHROME MOLY STEEL INDICATING INWARD QUANTITY, OUTWARD QUANTITY AND CLOSING STOCK QUANTITY. THE ASSESSEE TOOK PHY SICAL VERIFICATION OF THE STOCK AT THE END OF THE YEAR, WHOSE DETAILS ARE AVAILABLE AT PAGE 35 ONWARDS OF THE PAPER BOOK. SUCH DETA ILS ARE BACKED BY THE RELEVANT INVOICES. THERE CANNOT BE ANY HAR D AND FAST FORMULA OF VALUING STOCK ONLY ON THE BASIS OF FIFO IF STOCK R EGISTER INDICATES THE POSITION OTHERWISE. WHEN THE ASSESSEE GAVE C OPIOUS DETAILS OF THE INVENTORY WITH THE RELEVANT VALUE COMING EITHER FR OM THE OPENING STOCK OR FROM FRESH PURCHASES DURING THE YE AR, THE AO, IN OUR CONSIDERED OPINION OUGHT TO HAVE ACCEPTED THE SAME. THE ASSESSEE HAS BEEN CONSISTENTLY FOLLOWING THIS METHOD OF VALUATIO N WHICH HAS BEEN ACCEPTED BY THE AO DURING THE COURSE OF S CRUTINY PROCEEDINGS FOR THE ASSESSMENT YEARS 2008-09, 2009-10, LATER ASSESSMENT YEARS 2013-14 AND 2014-15 AS WELL. COPIES O F THE RELEVANT ASSESSMENT ORDERS HAVE BEEN PLACED ON RECORD. IN VIEW OF THE FOREGOING DISCUSSION, WE ARE SATISFIED THAT THE AUTHORITIES BELOW ITA NO.1186/PUN/2017 L.K. SONS ALLOY PVT. LTD., 4 WERE NOT JUSTIFIED IN REJECTING THE VALUATION DONE BY THE ASSESSE E AND ADOPTING THE METHOD OF VALUING THE STOCK ON THE BASIS OF AVERAGE OF OPENING STOCK AND PURCHASES. WE, THEREFORE , ORDER TO DELETE THE ADDITION. 5. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08 TH DECEMBER, 2020. SD/- SD/- (PARTHA SARATHI CHAUDHURY) (R.S.SYAL) JUDICIAL MEMBER VIC E PRESIDENT PUNE; DATED : 08 TH DECEMBER, 2020 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. THE CIT(A)-6, PUNE 4. 5. THE PR.CIT-5, PUNE , , / DR A, ITAT, PUNE 6. / GUARD FILE / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE ITA NO.1186/PUN/2017 L.K. SONS ALLOY PVT. LTD., 5 DATE 1. DRAFT DICTATED ON 08-12-2020 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 08-12-2020 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *