Asst. Commissioner of Income tax Cir. 2, Goa V. M/s. Bandekar Brouthers Pvt. Ltd., Goa

ITA 13/PAN/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1486 (ITAT-PANAJI)
• Duration Of Justice: 1 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 21-07-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 13-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SMRITI BHARDWAJ
• Keywords: Revised return
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI N.S. SAINI , HONBLE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER ITA NO. 13 /PNJ/201 4 (ASST. YEAR : 200 6 - 0 7 ) ACIT, CIRCLE - 2, MARGAO, GOA. VS. M/S. BANDEKAR BROTHERS PVT. LTD., SUVARNA BANDEKAR BUILDING, P.B.NO. 11, SWATANTRAPATH, VASCO - DA - GAMA, GOA. PAN NO. AAACB 5502 B (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MIHIR NANIWADEKAR ADV. DEPARTMENT BY : SMT. SMRITI BHARDWAJ - D R DATE OF HEARING : 05 / 0 8 /2015 . DATE OF PRONOUNCEMENT : 0 5 / 0 8 /201 5 . O R D E R PER N.S. SAINI , ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) , PANAJI , DATED 2 2/ 1 0/201 3 . 2. THE SOLE ISSUE INVOLVED IN THIS APPEAL IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN ALLOWING RELIEF TO THE ASSESSEE IN RESPECT OF VALUATION OF CLOSING STOCK OF LOW GRADE IRON ORE. 3 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER OBS ERVED THAT THE ASSESSEE HAS GIVEN WORKING OF CLOSING STOCK WHICH IS AS UNDER: - 2 ITA NO. 13 /PNJ/201 4 HIGH GRADE M.T. TOTAL COST INCL. TAILING VALUE AS PER BOOKS DIFFERENCE TO BE ADDED FINES 409409 35826155 3654739 - 721284 LUMPY 37611 3291226 3357488 - 66262 LOW GRADE FINES 145364 7353920 7499564 - 145644 LUMPY 66272 3352680 3419487 - 66807 ROM - LUMPS 95365 3600363 3684368 - 84005 ROM - FINES 271692 10257324 10496654 - 239330 LOW GRADE TAILING 71730 2708059 0 2708059 4 . FROM THE ABOVE TABLE , THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS NOT PROPERLY VALUED ITS CLOSING STOCK. THERE ARISE DIFFERENCE AS PER BOOKS AND THE TOTAL VALUE AS PER THE REVALUATION , T HEREFORE, THE DIFFERENCE IN THE VALUE OF CLOSING STOCK OF RS. 27,08,059/ - IS ADD ED TO THE TOTAL INCOME OF THE ASSESSEE. 5. THE ASSESSING OFFICER ALSO OBSERVED THAT THE ASSESSEE HAS NOT SHOWN VALUE OF LOW GRADE ORE AS CLOSING STOCK . THE ASSESSEE HAS CONSISTENTLY SUBMITTED THAT LOW GRADE IRON ORE WAS NOT SOLD FROM THE ASSESSMENT YEAR 2004 - 05 TO 2006 - 07 . EVEN IF THE ASSESSEE WAS SHOWING CLOSING STOCK AS OPENING STOCK IN SUBSEQUENT YEAR, IT WILL REMAIN IN CLOSING STOCK OF THAT YEAR ON ACCOUNT OF NON - SELLING OF LOW GRADE IRON ORE AS WAS HAPPENED IN THE ASSESSMENT YEAR 2005 - 06. THE ASSES SEE HAS NOT FILED ANY REVISED RETURN OF INCOME REDUCING ITS TOTAL INCOME ALREADY RETURNED ON ACCOUNT OF OPENING STOCK DIFFERENCE OR SALE OF LOW GRADE IRON ORE AS THE ASSESSEES BOOKS OF ACCOUNTS WAS CLOSED ON THE DATE OF PASSING THE ORDER FOR THE ASSESSMEN T YEAR 2004 - 05 AND EVEN THE RETURN FOR THIS YEAR WAS FILED AFTER THE DATE OF PASSING OF ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2004 - 05 . THE ISSUE OF VALUING OF LOW GRADE IRON ORE WAS CAME UP ONLY IN THE ASSESSMENT YEAR 2004 - 05 WHILE COMPUTING THE ASSESSMENT. T HE ASSESSMENT ORDER FOR 3 ITA NO. 13 /PNJ/201 4 THE ASSESSMENT YEAR 2004 - 05 WAS PASSED ON 28/12/2006 AND THE RETURN FOR THE ASSESSMENT YEAR 2006 - 07 WAS FILED BY THE ASSESSEE ON 31/10/2006 . IN THESE CIRCUMSTANCES, LOW GRADE IRON ORE IS STILL BEC OMES THE STOCK OF THE ASSESSEE FOR THE YEAR ENDING 31/03/2006 . SINCE THE ASSESSEE HAS FILED THE RETURN OF INCOME DECLARING HIGHER INCOME, THE SAME CANNOT BE REDUCED IN ANY MANNER EITHER BY FILING REVISED RETURN OF INCOME ALONG WITH FINAL ACCOUNTS , AS THE SAME WAS AUDITED ACCOUNTS . THE HONBLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. VS. CIT REPORTED IN 284 ITR 323 HELD THAT THE ASSESSEE CANNOT REDUCE HIS RETURNED TOTAL INCOME BY FILING A LETTER/REVISED COMPUTATION. THE ONLY OPTION AVAILAB LE TO THE ASSESSEE IS REDUCING THE TOTAL INCOME BY FILING A REVISED RETURN UNDER SEC. 139(5), WHICH OPTION IS NOT AVAILED BY THE ASSESSEE IN THE PRESENT CASE WHILE THE RE - ASSESSMENT PROCEEDINGS HAVE BEEN INITIATED BY ISSUANCE OF NOTICE UNDER SEC. 148 OF THE ACT. THEREFORE, THE REDUCTION IN TOTAL INCOME OF RS. 3,20,40,964/ - IS NOT IN COMPLIANCE WITH THE SUPREME COURT FINDINGS . IN VIEW OF THE ABOVE, THE VALUE OF LUMPY ORE OF RS. 6,50, 05,000/ - ( INCLUDING THE VALUE OF REDUCTION IN TOTAL INCOME IS RS. 3,20,40,964/ - ) IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 6 . BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS), THE ASSESSEE SUBMITTED AS UNDER: - 6.3. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANT FILED WRITTEN SUBMISSION, CONTENTS OF WHICH ARE REPRODUCED AS UNDER: IN THE PREVIOUS YEAR 2004 - 05 PERTAINING TO THE A.Y. 2005 - 06, STOCK OF LOW GRADE ORE AND LUMPS WAS VALUED AT RS. ZERO BY THE ASSESSEE AT THE TIME OF VALUATION OF THE CLOSING STOCK ON THE GROUNDS THAT THERE WAS NO LONG TERM DEMAND FOR LUMPY AND LOW GRADE IRON ORE. THE QUANTITY OF STOCK OF THE LOW GRADE ORE AND LUMPS ADDED TO THE RETURNED INCOME IS AS UNDER. 4 ITA NO. 13 /PNJ/201 4 IN ADDITION TO THE ABOVE, THE QUANTITY OF ORE CONSIDERED BY THE ASSESSEE ORIGINALLY FOR ITS VALUATION WAS 246299 MT, AGGREGATION THE TOTAL QUANTITY TO 776694 MT (VIZ. 530395 PLUS 246297 MT) IN THE SUBSEQUENT FINANCIAL YEAR 2005 - 06, THE TOTAL QUANTITY OF STOCK OF 776694 MT HAS BEEN CONSIDERED AS OPENING STOCK BY THE ASSESSEE, A RECONCILIATION OF THE STOCK IS AS UNDER: (QUANTITY IN MT) PARTICULAR HG FINES - 60% HG FINES+ 60 - 62 HG FINES+ 62% LUMPS TOTAL OPENING STOCK AS ON 1ST APRIL, 2005 4,50,786 26,358 1,26,544 1,73,004 7,76,692 PRODUCTION 7,29,897 49,300 2,66,467 3,39,856 13,85,520 DESPATCH/SALES 7,63,627 59,260 - 3,13,612 11,36,499 CLOSING STOCK 4,17,056 16,398 3,93,011 1,99,248 10,25,713 FOR THE A.Y. PERTAINING TO F.Y. 2005 - 06, THE A.O. HAS ACCEPTED THE QUANTITY OF 1,025,713 METRIC TONNES HOWEVER MADE ADDITION OF RS. 13,84,727/ - ON ACCOUNT OF TAILING STOCK OF 71,730 MT WHILE COMPLETING THE ASSESSMENT UNDER SECTION 143(3). HENCE, NO FURTHER ADDITION ON ACCOUNT OF LOW GRADE ORE AND LUMPS MADE BY THE ASSESSING OFFICER UNDER SECTION 148 R.W.S. 143(3) IS UNCALLED FOR AND ORDER OF THE ASSESSING OFFICER IS R EQUIRED TO BE DELETED. AS DESIRED BY YOUR HONOUR, WE ARE ENCLOSING HEREWITH BALANCE SHEET FOR THE YEAR ENDED 31.03.2006 AS ANNEXURE - 1, CONTAINING NOTE NO 4 IN SCHEDULE R TO NOTES ON ACCOUNTS, EXPLAINING THE FACT THAT THE ASSESSEE THEMSELVES HAVE VALUED THE LOW GRADE ORE IN ITS ACCOUNT FIRST TIME LEAVING NO SCOPE FOR FURTHER ADDITION ON ACCOUNT OF VALUE OF LOW GRADE IRON ORE. IRON ORE/GRADE QUANTITY METRIC TONNES HIGH GRADE LUMPS 43,155 ROM LUMPS 12,301 LOW GRADE FINES 1,17,548 LOW GRADE LUMPY 1,02,127 ROM FINES 2,55,264 TOTAL 5,30,395 5 ITA NO. 13 /PNJ/201 4 WE ARE ALSO ENCLOSING HEREWITH ASSESSMENT ORDER FOR ASST YEAR 04 - 05 AND FOR 2005 - 06 AS ANNEXURE - 2. PLEASE ALSO FIND ITAT ORDER FO R ASST YEAR 2004 - 05 AS ANNERE - 3, DELETING THE ADDITION ON ACCOUNT FOR LOW GRADE ORE MADE BY THE ASSESSING OFFICER. WE REQUEST YOUR HONOUR TO KINDLY TAKE THIS RECORD AND IF YOU NEED ANY FURTHER CLARIFICATION IN THIS REGARD. 7 . AFTER CONSIDERING THE ABOVE SUBMISSION S , THE COMMISSIONER OF INCOME TAX (APPEALS) HELD AS UNDER: - 6.4. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE SUBMISSION OF THE APPELLANT. I HAVE ALSO PERUSED THE DETAILS AND DOCUMENTS SUBMITTED BY THE APPELLANT DURING THE COURSE OF APPELLATE PROCEEDINGS. I HAVE CAREFULLY READ THE ORDER OF THE HONBLE ITAT ON THIS ISSUE. THE HONBLE ITAT IN THE CASE OF THE APPELLANT FOR A. YR. 2004 - 05 IN IT A NO. 29/PNJ/2008 DATED 7.0&2009 DECIDED THE ISSUE OF LOW GRADE AND LUMPY ORE WITH THE FOLLOWING CONCLUDING REMARKS: WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E FACTS ON RECORD. IT IS WELL RECOGNISED PRINCIPLE OF COMMERCIAL ACCOUNTING TO ENTER IN THE P&L ACCOUNT THE VALUE OF STOCK IN TRADE AT THE BEGINNING AND END OF THE ACCOUNTING YEAR AT COST OR MARKET PRICE, WHICHEVER IS LOWER. FOR THE PURPOSE OF ASCERTAINING THE PROFITS AND GAIN THE ORDINARY PRINCIPLES OF COMMERCIAL ACCOUNTING SHOULD BE APPLIED SO LONG AS THEY ARE NOT IN CONFLICT WITH THE PROVISIONS OF THE RELEVANT STATUTES. ADMITTEDLY, THE ASSESSEE IS IN THE EXCAVATION OF IRON ORE AND THE IRON ORE IS OF DIFF ERENT GRADES. AS PER THE NORMS IRON ORE WITH LESS THAN 60% FE CONTENT IS CONSIDERED AS LOW GRADE IRON ORE WHICH HAS NO REALISABLE MARKET AND ASSESSEE IS NOT BOTHERED TO ACCOUNT FOR IT OR FOR PROCESSING OF BENEFICIATION, ETC. FOR THE PURPOSE OF MARKETING OR EXPORT. THUS THE UNMARKETABLE PRODUCT IN THE FORM LOW GRADE IRON ORE EMERGES IN THE PROCESS OF PRODUCING THE MAIN PRODUCT, I.E. HIGH GRADE IRON ORE. THIS LOW GRADE IRON ORE IS SIMILAR TO THE SCRAP GENERATED IN THE MANUFACTURING ACTIVITY. IT IS ALSO AN ADM ITTED FACT THAT THE ASSESSE E HAS BEEN CONSISTENTLY AND REGULARLY VALUING THE CLOSING STOCK OF PRODUCTS AT COST OR MARKET PRICE WHICH EVER IS LOWER. THERE IS NO DENIAL OF THE FACT THAT LOW GRADE IRON ORE HAS NO REALISABLE VALUE AND THE ASSESSEE DO NOT MAINTA IN ANY PRECISE RECORD OF THE STOCK AS 6 ITA NO. 13 /PNJ/201 4 SUCH. EVEN THOUGH IT DOES NOT MEAN THAT THE LOW GRADE IRON ORE HAS NO COST OR IF AT ALL THERE IS SOME COST ATTRIBUTABLE TO THAT, THE SAME HAS GONE INTO THE COST OF PRODUCTION OF THE HIGH GRADE IRON ORE. IF THE SAID COS T OF PRODUCTION OF LOW GRADE IRON ORE IS TAKEN INTO CONSIDERATION OBVIOUSLY TO THAT EXTENT OF COST OF HIGH GRADE IRON ORE WILL HAVE TO BE REDUCED AND IT WILL NOT BE IN ANY WAY AFFECT THE GROSS PROFIT/NET PROFIT. CONSIDERING THE ISSUE IN ANY WAY, WE ARE NOT IN AGREEMENT WITH FINDING OF THE CIT(A) THAT THE ASSESSEE HAD A BENEFIT OF TAKING ADVANTAGE OF OPENING STOCK NEXT YEAR. IN OUR CONSIDERED OPINION BY TAKING THE VALUE OF CLOSING STOCK OF LOW GRADE IRON ORE AT NIL THE ASSESSEE HAS FOLLOWED THE WELL RECOGNIS ED PRIN CIPLE OF COMMERCIAL ACCOUNTING. SINCE THERE IS NO DISTORTION TO THE PROFITS OF THE ASSESSEE IN ANY OF THE YEAR AND SINCE THE ASSESSEE HAS BEEN CONSISTENTLY ACCOUNTING SALE OF LOW GRADE IRON ORE IN THE YEAR OF REALISATION BOTH IN PRODUCTION FIGURES AS WELL AS SALE FIGURES WE ARE NOT PERSUADED BY THE LOGIC OF THE CIT (A) IN CONFIRMING THE ADDITION. SINCE THE ASSESSEE HAS CONSISTENTLY FOLLOWING THE METHOD OF ACCOUNTING AND NO SUCH ADDITION HAS BEEN MADE IN EARLIER YEARS, EVEN THOUGH THE ASSESSEE IS IN THE BUSINESS FOR SO MANY YEARS, WE ARE NOT PERSUADED BY THE CONTENTION THAT THE ASSESSEE WOULD GET BENEFIT OF OPENING STOCK IN THE FOLLOWING YEAR. IN FACT THE CORRECT PROCEDURE WHICH COULD HAVE BEEN FOLLOWED BY THE A.O. IS TO CONSIDER THE AMOUNT OF OPENING STOCK OF LOW GRADE IRON ORE ALSO WHILE BRINGING TO TAX THE ENTIRE STOCK AVAILABLE, WHICH MIGHT HAVE BEEN PRODUCED OVER A PERIOD OF MANY YEARS, IN THE CLOSING STOCK OF THIS YEAR WHICH CERTAINLY DISTORT THE PROFITS OF THIS YEAR. SINCE WE ARE NOT IN AGREEMEN T WITH THE ADDITION OF CLOSING STOCK OF UNREALISABLE LOW GRADE IRON ORE, WE HAVE NO HESITATION IN DELETING THE ADDITION SO MADE BY THE A.O. ACCORDINGLY THE GROUNDS RAISED IN THE CROSS OBJECTION ARE CONSIDERED ALLOWED A,O. IS DIRECTED TO DELETE THE ADDITION . IN VIEW OF THE ORDER OF THE HONBLE ITAT AND SINCE THE FACTS ARE IDENTICAL, DURING THE YEAR UNDER CONSIDERATION, THE A.O. IS DIRECTED TO DELETE THE ADDITION MADE ON ACCOUNT OF UNDER VALUATION OF CLOSING STOCK. THIS GROUND OF APPEAL OF THE APPELLANT IS ALLOWED ACCORDINGLY. 8 . DEPARTMENTAL REPRESENTATIVE SIMPLY RELIED ON THE ORDER OF THE ASSESSING OFFICER. HE COULD NOT POINT OUT ANY SPECIFIC ERROR IN THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS). 7 ITA NO. 13 /PNJ/201 4 9. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE RELIED ON THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) . 10 . WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER BY FOLLOWING THE ORDER OF THIS BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2004 - 05 IN I.T.A.NO. 29/PNJ/2008 DATED 07/08/2009. THEREFORE, WE FIND NO GOOD REASON TO INTERFERE WITH TH E ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) , WHICH IS CONFIRMED AND THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 11 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE HEARING ON WEDNESDAY , THE 0 5 TH DAY OF AUGUST , 201 5 AT GOA . S D / - S D / - (GEORGE MATHAN) (N.S.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 0 5 RD AUGUST , 201 5 . VR/ - COPY TO: 1 . THE ASSESSEE. 2 . THE REVENUE. 3 . THE CIT 4 . THE CIT(A) 5 . THE D.R . 6 . GUARD FILE. BY ORDER ASSISTANT REGISTRAR I.T.A.T., PANAJI 8 ITA NO. 13 /PNJ/201 4 DATE INITIAL ORIGINAL DICTATION PAD & DRAFT ARE ENCLOSED IN THE FILE 1. DRAFT DICTATED ON 05 .0 8 .2015 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 06 .08 .2015 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 06 /08 /2015 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 06 /0 8 /2015 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 06 /08 /2015 SR.PS 6. DATE OF PRONOUNCEMENT 05 /0 8 /2015 SR.PS 7. FILE SENT TO THE BENCH CLERK 06 /08 /2015 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER