ACIT, Ludhiana V. Sh. Sunil Goyal, Ludhiana

ITA 1354/CHANDI/2010

• Counselvise Citation: 135421514 RSA 2010
• Duration Of Justice: 1 year(s) 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 27-12-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 26-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Keywords: Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO.1354/CHD/2010 ASSESSMENT YEAR 2007-08 ACIT, C-V, V SHRI SUNIL GOYAL, LUDHIANA. C/O M/S ESS ESS FORGINGS, VPO JUGIANA, LUDHIANA. PAN: AEQP G-4895K & CO 8/CHD/2011 IN ITA NO.1354/CHD/2010 SHRI SUNIL GOYAL, V ACIT, C-V, C/O M/S ESS ESS FORGINGS, LUDHIANA. VPO JUGIANA, LUDHIANA. (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI N.K.SAINI ASSESSEE BY : SHRI SUDHIR SEHGAL DATE OF HEARING : 27.12.2011 DATE OF PRONOUNCEMENT : 04.01.2012 ORDER PER MEHAR SINGH, AM THE PRESENT APPEAL FILED BY THE REVENUE AND THE CRO SS OBJECTIONS BY THE ASSESSEE HAVE BEEN FILED AGAINST THE ORDER DATED, 27.09.2010, PASSED BY THE LD. CIT(A) U/S 250 (6) OF THE INCOME-TAX ACT,1961 (IN SHORT 'THE ACT'). 2. IN APPEAL, THE REVENUE HAS RAISED THE FOLLOW ING 2 GROUNDS OF APPEAL: 1. THAT THE LD. CIT(A)-II HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.8,46,815/- MA DE BY THE AO ON ACCOUNT OF UNDERVALUATION OF STOCK. 2. THAT WHILE DELETING ADDITION OF RS.7,53,949/- OU T OF TOTAL DELETED ADDITION AS ABOVE, LD. CIT(A) HAS NOT GIVEN ANY CATEGORICAL FINDING THAT LIFO WAS BEING CONSISTENTLY FOLLOWED BY THE ASSESSEE IN EARLIER YE ARS. 3. THAT WHILE DELETING THE ADDITION AS ABOVE, LD. CIT(A) HAS NOT DISCUSSED AS TO HOW THE VALUATION WA S DONE BY THE ASSESSEE AT COST PRICE AND HOW THE STOC K WAS CORRECTLY VALUED BY THE ASSESSEE. 4. THAT THE LD. CIT(A)-II HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.43,600/- MADE BY THE AO BY MAKING DISALLOWANCE UNDER SECTION 36(1)(I II) OF THE INCOME-TAX ACT,1961. 5. THAT THE ORDER OF THE CIT(A)-II BE SET ASIDE AND THAT OF THE AO BE RESTORED. 6. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUND OF APPEAL BEFORE IT IS FINALLY DISPOSED OFF. 3. IN CROSS OBJECTION, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THAT THE CIT(A)-II HAS RIGHTLY DELETED THE ADDI TION OF RS.8,46,815/- IN LAW AND FACTS MADE BY THE AO. 2. THAT THE LD. CIT(A)-II HAS RIGHTLY DELETED THE ADDITION OF RS.7,53,949/- OUT OF THE TOTAL ADDITION OF RS.8,46,815/- AFTER DISCUSSING ALL RELEVANT POINTS AND GIVING HIS DETAILED REASONS FOR DELETING THE ABOVES AID ADDITION. 3 3. THAT THE LD. CIT(A) HAS ALSO RIGHTLY DELETED THE ADDITION OF RS.43,000/- MADE BY THE AO BY MAKING DISALLOWANCE U/S 36(I)(III) OF THE INCOME-TAX ACT. 4. THAT THE LD. CIT(A)-II HAS ERRED IN UPHOLDING TH E ADDITION OF RS.7,60,000/- OUT OF TOTAL ADDITION OF RS.16,06,815/- MADE BY THE AO IN RESPECT OF SO-CALL ED UNDER VALUATION OF CLOSING STOCK. 5. THAT THE LD. CIT(A) HAS ALSO ERRED IN GIVING HIS FINDINGS AGAINST THE ASSESSEE FOR TAKING A CASE IN SCRUTINY. 6. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROUNDS OF APPEAL BEFORE THE APPEAL IS FINALLY HEARD OR DISPOSED OFF. 4. GROUND NO.1 PERTAINS TO THE CHALLENGE MADE BY TH E REVENUE AGAINST THE DELETION OF ADDITION OF RS.8,46 ,814/- MADE BY THE AO ON ACCOUNT OF UNDER VALUATION OF STO CK. LD. 'DR' PLACED RELIANCE ON THE ORDER OF THE AO WHE REAS THE LD. 'AR' SUPPORTED THE FINDINGS OF THE LD. CIT(A). THE AO HAS MADE THE TOTAL ADDITION OF RS.16,06,815/-, WHIC H COMPRISES OF THREE ISSUES AS UNDER : AMOUNT AS PER TABLE 1 RS.8,17,050.00 AMOUNT AS PER TABLE 2 RS.7,53,949.00 AMOUNT AS PER TABLE 3 RS. 35,816.00 TOTAL RS.16,06,815.00 5. THE CIT(A), ON APPRECIATION OF THE LEGAL AND FAC TUAL POSITION EXPLAINED BEFORE HIM RECORDED HIS FINDINGS IN PARA 9 OF HIS ORDER, WHICH IS REPRODUCED HEREUNDER : 9. I HAVE GONE THROUGH THE SUBMISSIONS OF BOTH THE PARTIES AND ALSO THE ASSESSMENT ORDER AND IT IS A F ACT THAT STOCK OF 1900 PIECES OF HUB PH/TYPE 40H HAVE 4 BEEN DISCLOSED IN THE LIST OF THE CLOSING STOCK AS ON 31.3.2007. THEREFORE, THE ASSESSEE IS ENTITLED TO THE RELIEF OF RS.36100/- (1900 PIECES X RS.19/-). AS REGARDS, THE SALES OF 40000 PIECES OF HUB PH/TYPE 40H, THROUGH, SUCH SALES HAVE BEEN REFLECTED IN THE STOCK REGISTER, BUT THE COUNSEL OF ASSESSEE HAS NOT BEEN ABLE TO FULLY SUBSTANTIATE HIS ARGUMENT AND, THEREFORE, TAKING INTO CONSIDERATION THE TOTALITY O F THE CIRCUMSTANCES, THE ADDITION OF RS.7,60,000/- (40000 PIECES X RS.19/-) IS CONFIRMED, OUT OF THE ADDITION OF RS.8,17,050/- AND THE RELIEF ALLOWED IS RS.57050/- AS STATED ABOVE. IT IS CLARIFIED HERE THAT THE AO HAS ADOPTED THE RATE OF THIS ITEM AT RS.19,50 AS PER NOTINGS MADE IN THE STOCK REGISTER. HOWEVER, THE OPENING STOCK AS ON 1.4.2006 OF THE SAME ITEM OF 41900 PIECES OF HUB PH/TYPE 40H HAD BEEN ADOPTED AT RS.19/- PER PIECE AND THE ASSESSEE HAD BEEN FOLLOWING CONSISTENT METHOD OF ACCOUNTING I.E. THE COST OR MARKET VALUE, WHICHEVER IS LESS AND, THEREFORE, THE VALUE TO BE ADOPTED IS TAKEN AT RS.19/- ONLY AND NOTINGS IN THE STOCK REGISTER OF THE RATES ARE NOT CONCLUSIVE EVIDENCE OF THE COST OF THE ITEM. 6. THE FINDINGS OF THE LD. CIT(A) ARE BASED ON THE MATERIAL BROUGHT BEFORE HIM BY THE ASSESSEE AND ON APPRECIATION OF THE SUBMISSIONS FILED BEFORE HIM. THE LD. CIT(A) CONFIRMED THE ADDITION OF RS.7,60,000/- OUT OF ADDITION OF RS.8,17,050/-, THUS GRANTING RELIEF OF RS.57,050/-. THE FINDINGS OF THE CIT(A) DO NOT SUF FER FROM ANY INFIRMITY AND HENCE, THE SAME ARE UPHELD. THUS , GROUND NO.1 OF THE REVENUE IS DISMISSED. 7. IN GROUND NO.2, THE REVENUE CHALLENGED THE DELET ION OF ADDITION OF RS.7,53,949/- OUT OF THE TOTAL ADDIT ION ON THE GROUND THAT CIT(A) HAS NOT GIVEN ANY CATEGORICA L 5 FINDING, THAT LIFO WAS CONSISTENTLY FOLLOWED BY THE ASSESSEE IN EARLIER YEARS. AS PER THE ASSESSMENT O RDER, THE AO TABULATED A CHART AT PAGE 2 OF THE ORDER WHEREIN HE ADOPTED THE RATES TAKEN IN DIFFERENT ITEMS AS MENTI ONED IN THE CLOSING STOCK AS ON 31.3.2007. THUS, AO WAS OF THE OPINION THAT ASSESSEE RESORTED TO UNDER-VALUATION O F CLOSING STOCK BY RS.7,53,949/-. THE LD. CIT(A) AFF ORDED REASONABLE OPPORTUNITY TO THE ASSESSEE WHO WAS PRES ENT IN THE COURSE OF APPELLATE PROCEEDINGS AND DELETED THE IMPUGNED ADDITION AS PER PARA 12 OF HIS ORDER. THE CONTENTS OF THE SAID PARA ARE REPRODUCED HEREUNDER : I HAVE GONE THROUGH THE ARGUMENT OF BOTH SIDES, I HAVE ALSO PERUSED A CHART FILED BEFORE ME AND I AM IN AGREEMENT WITH THE SUBMISSIONS OF THE COUNSEL OF THE ASSESSEE, THAT THE ASSESSEE HAD BEEN FOLLOWING CONSISTENT METHOD OF ACCOUNTING FOR VALUING AT COST OR MARKET VALUE, WHICHEVER IS LESS, AND ALSO MOST OF T HE ITEMS IN THE CLOSING STOCK ARE OUT OF THE OPENING STOCK AND, WHATEVER, ITEMS HAD BEEN PURCHASED, THEY HAVE BEEN SOLD AND THUS, THE AO WAS NOT JUSTIFIED TO ADOPTING THE RATES WHICH HAVE BEEN MENTIONED IN THE STOCK REGISTER IN AN ADHOC MANNER. THUS, THE ASSESSEE IS ENTITLED TO RELIEF OF A SUM O F RS.7,53,949/-. 8. A BARE PERUSAL OF THE FINDINGS OF THE CIT(A) REV EALS THAT THE ASSESSEE HAD BEEN CONSISTENTLY FOLLOWING M ETHOD OF ACCOUNTING FOR VALUING AT COST OR MARKET VALUE, WHICHEVER IS LESS. HE ALSO RECORDED THE FINDING TH AT AO WAS NOT JUSTIFIED TO ADOPT THE RATES WHICH HAVE BEE N MENTIONED IN STOCK REGISTER IN AN ADHOC MANNER. 6 CONSEQUENTLY, THE ADDITION OF RS.7,53,949/- WAS DEL ETED BY THE AO. 9. WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE CIT(A), HENCE GROUND RAISED BY THE REVENUE IS DISMI SSED. 10. THE GROUND NO.3 RAISED BY THE REVENUE IS INTER- CONNECTED WITH GROUND NO.2. HENCE, THE SAME STANDS DISPOSED OF IN TERMS OF FINDINGS GIVEN ABOVE IN RES PECT OF GROUND NO.2. 11. IN GROUND NO.4, THE REVENUE CONTENDED THAT CIT( A) ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.43,600/- MADE BY THE AO BY MAKING DISALLOWANCE U /S 36(1)(III) OF THE ACT. THE AO MADE DISALLOWANCE UN DER THE SAID SECTION ON ACCOUNT OF ADVANCES GIVEN TO SHRI R .K.RAM PAUL AND M/S VISHAV SALES CORPORATION, AMOUNTING TO RS.3 LACS AND RS.2,45,000/- RESPECTIVELY. THE AO WAS OF THE OPINION THAT SUCH ADVANCES WERE MADE WITHOUT ANY BUSINESS EXPEDIENCY AND HENCE, HE DISALLOWED INTERE ST OF RS.43,600/-. LD. CIT(A), BY PLACING RELIANCE ON TH E DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F S.A.BUILDERS 285 ITR 1 (S.C) HELD THAT THE ADVANCES WERE MADE FOR COMMERCIAL USE, HENCE IMPUGNED DISALLOWANC E WAS DELETED. IT WAS HELD BY THE LD. CIT(A) THAT TH ESE ADVANCES WERE BUSINESS ADVANCES IN ORDER TO PROCURE MORE BUSINESS AND HENCE, THERE EXISTED AN ELEMENT OF COMMERCIAL EXPEDIENCY. THE FINDINGS OF THE CIT(A) CANNOT BE HELD AS SUFFERING FROM ANY INFIRMITY, HENCE THE SAME ARE UPHELD. GROUND NO.4 OF THE REVENUE IS DISMISSED. 7 12. GROUND NOS. 5 & 6 ARE GENERAL IN NATURE AND NEE D NO SEPARATE ADJUDICATION. HENCE, THE SAME ARE DISMISS ED. 13. RESULTANTLY, APPEAL OF THE REVENUE IS DISMISSED . CO NO. 8/CHD/2011 14. THE LD. 'AR' STATED BEFORE US THAT GROUND NO. 1 TO 3 ARE SUPPORTIVE OF THE FINDINGS, IN RESPECT OF SUCH GROUNDS, AS RECORDED BY THE CIT(A). IN VIEW OF THIS, THESE G ROUNDS OF APPEAL IN C.O. ARE OF NO CONSEQUENCE, IN VIEW OF TH E DISPOSAL OF THE APPEAL OF THE REVENUE, ON SUCH ISSU ES. 15. GROUND NO. 4 RAISED IN THE C.O. HAS SINCE BEEN WITHDRAWN BY THE LD. 'AR' AND HENCE, THE SAME IS TR EATED AS DISMISSED AS WITHDRAWN. 16. GROUND NO.5 RAISED BY THE ASSESSEE HAS NOT BEEN PRESSED AND THE SAME IS TREATED AS DISMISSED. 17. GROUND NO.6 IS GENERAL IN NATURE AND NEEDS NO SEPARATE ADJUDICATION. 18. IN THE RESULT, THE APPEAL OF THE REVENUE AND TH E CO FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 04.01.2012. SD/- SD/- (H.L.KARWA) (MEHAR SINGH) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 04.01.2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT CHANDIGARH