The ACIT, Circle-1, Bhavnagar V. M/s. P.R.Patel & Co., Bhavnagar

ITA 1350/AHD/2010

• Counselvise Citation: 135020514 RSA 2010
• Duration Of Justice: 2 year(s) 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 29-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B K S PANDYA
• Assessee Lawyers: SUNIL H TALATIAR
• Keywords: Tax effect
• Section: 143(3)

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD , .. , '# ' $ BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ./ I.T.A. NO.1350/AHD/2010 ( & ' & ' & ' & ' / / / / ASSESSMENT YEAR : 2007-08) THE ACIT CIRCLE-1 BHAVNAGAR & & & & / VS. M/S.P.R. PATEL & CO. 400, VIJAYRAJNAGAR STREET NO.4, BHAVNAGAR ( '# ./)* ./ PAN/GIR NO. : AACFP 5361 P ( (+ / // / APPELLANT ) .. ( ,-(+/ RESPONDENT ) (+ . '/ APPELLANT BY : SHRI B.K.S.PANDYA, CIT-DR ,-(+ / . ' / RESPONDENT BY : SHRI SUNIL H.TALATI, AR &0 / #/ // / DATE OF HEARING : 13/6/12 12' / # / DATE OF PRONOUNCEMENT : 13/6/12 '3/ O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE ON 29.4.2011 IS A GAINST THE ORDER OF CIT(APPEALS)-XX, AHMEDABAD DATED 27.01.2010, RAISIN G FOLLOWING GROUNDS :- 1. THE LD. CIT(A)-XX, AHMEDABAD HAS ERRED IN LAW A ND ON FACTS IN DELETING THE ADDITION OF RS.5,96,722/- MAD E BY THE AO ON ACCOUNT OF UNDER VALUATION OF THE CLOSING ST OCK, WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD BY THE ASSESSING OFFICER . 1.2. IN DOING SO, THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THAT THE ASSESSEE HAD NOT INCLUDED THE ITA NO. 1350/AHD/2010 ACIT VS. M/S.P.R.PATEL & CO. ASST.YEAR 2007-08 - 2 - LABOUR CHARGES INCURRED BY IT FOR CONVERTING THE RA W MATERIAL INTO WORK-IN-PROGRESS WHILE VALUING THE WO RK-IN- PROGRESS AND THEREFORE THE SAID LABOUR EXPENSES WER E RIGHTLY INCLUDED BY THE AO FOR VALUING THE CLOSING STOCK. 1.3. IN DOING SO, THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN OBSERVING THAT THE AO HAD NOT BROUGHT ANY MATERIAL OR EVIDENCE OF ACTUAL INCURRING OF LABOUR CHARGES ON T HE MATERIAL LYING IN STOCK AS ON 31.3.2007, WITHOUT APPRECIATING THAT THE STOCK OF MATERIAL COULD NOT H AVE BEEN CONVERTED INTO WORK-IN-PROGRESS WITHOUT THE INCURRI NG THE LABOR CHARGES. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS E NGAGED IN THE BUSINESS OF CONSTRUCTION WORK. THE ASSESSEE FIL ED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 27-09-2007 DECL ARING TOTAL INCOME OF RS.78,39,350/- AND THE ASSESSMENT WAS COMPLETED U/ S. 143(3) OF THE ACT ON 03.12.2009 DETERMINING TOTAL INCOME AT RS.84,36 ,070/-. AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE THE FIRST APPELL ATE AUTHORITY. 3. THE LD. CIT(A) HAS DECIDED THE APPEAL IN FAVOUR OF THE ASSESSEE WITH THE FOLLOWING OBSERVATIONS :- 4.2. IN VIEW OF THE ABOVE I HOLD THAT WHEN THE APP ELLANT HAD NOT INCURRED ANY OVERHEADS LIKE LABOUR CHARGES ON THE S TOCK OF BUILDING MATERIAL PURCHASED DURING LAST FEW DAYS OF THE LAST MONTH OF THE PREVIOUS YEAR, THE ENTIRE APPROACH OF ALLOCA TING PRO-RATA LABOUR CHARGES ON SUCH CLOSING STOCK IS NOT JUSTIFI ED AND CANNOT BE APPROVED. I, THEREFORE, DIRECT THE ASSESSING OFFIC ER TO DELETE THE SAID ADDITION OF RS.5,96,722/-. 4. FROM THE SIDE OF THE RESPONDENT-ASSESSEE, A PREL IMINARY OBJECTION WAS RAISED IN RESPECT OF THE TAX INVOLVED IN THIS A PPEAL OF THE REVENUE. LEARNED AUTHORISED REPRESENTATIVE MR.SUNIL H. TALAT I HAS STATED THAT THIS ITA NO. 1350/AHD/2010 ACIT VS. M/S.P.R.PATEL & CO. ASST.YEAR 2007-08 - 3 - APPEAL OF THE REVENUE DESERVES TO BE DISMISSED IN LIMINE BECAUSE THE TAX EFFECT OF RS.2,17,940/- WHICH IS BELOW THE LIMIT P RESCRIBED BY SEVERAL CBDT CIRCULARS. 5. A QUERY WAS RAISED BY THE BENCH AS TO THE MAINT AINABILITY OF THE APPEALS, IN VIEW OF RECENT CBDT CIRCULAR RESTRICTIN G FILING OF APPEAL BY THE REVENUE, THE LEARNED DR DID NOT CONTROVERT THE SAME, AND STATED THAT THE TAX EFFECT IN THE PRESENT CASE IS BELOW THE TAX LIMIT PRESCRIBED THE CBDT; REFER PAGE ONE OF THE NOMENCLATURE OF CIT(A) ORDER. 6. AFTER HAVING HEARD BOTH PARTIES, CONSIDERING THE MATERIAL AVAILABLE ON RECORD AND THE CBDT CIRCULARS ON THIS ISSUE, WE FIND THAT THE TAX EFFECT IN THIS CASE IS LESS THAN RS.3 LACS. SO AFTE R CONSIDERING THE SUBMISSIONS OF LD. DR AND GOING THROUGH THE MATERIA LS ON RECORD, WE ARE OF THE VIEW THAT THE DEPARTMENT OUGHT NOT HAVE FILE D THE APPEAL. OUR VIEW IS SUPPORTED BY THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. MANGLAM RICINUS LTD. (2008) 174 TAX MAN 186 (DEL) AND INSTRUCTION NO.3/2011 [F.NO.279/MISC.142/2007-ITJ] DATED 9-2-2011 . AS THE APPEAL SO FILED IS AGAINST THE EXECUTIV E INSTRUCTIONS WHICH ARE BINDING ON THE DEPARTMENT, WE DISMISS THE APPEAL IN LIMINE. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/06/2012 SD/- SD/- ( .. ) ( ) '# ( T.R. MEENA ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL ME MBER ..&, .&../ T.C. NAIR, SR. PS ITA NO. 1350/AHD/2010 ACIT VS. M/S.P.R.PATEL & CO. ASST.YEAR 2007-08 - 4 - '3 / ,4 5'4' '3 / ,4 5'4' '3 / ,4 5'4' '3 / ,4 5'4'/ COPY OF THE ORDER FORWARDED TO : 1. (+ / THE APPELLANT 2. ,-(+ / THE RESPONDENT. 3. 6 / CONCERNED CIT 4. 6() / THE CIT(A)-XX, AHMEDABAD 5. 49: ,& , , / DR, ITAT, AHMEDABAD 6. :; <0 / GUARD FILE. '3& '3& '3& '3& / BY ORDER, -4 , //TRUE COPY// = == =/ // / ) ) ) ) ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD 1. DATE OF DICTATION / (COPIED MATTER 13.6.12 ) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 13.6.12 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S14.6.12 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 14.6.12 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER