Indiana Textiles Mill, Kolkata V. ACIT, Cir.43 Kolk, Kolkata

ITA 1432/KOL/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1838 (ITAT-KOLKATA)
• Duration Of Justice: 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2017
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Next Hearing Date: 30-12-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 04-07-2016
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR
• Section: 143(3); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC, BE NCH KOLKATA BEFORE SHRI J.SUDHAKAR REDDY, AM ./ ITA NO.1432/KOL/2016 ( / ASSESSMENT YEAR:2011-2012) INDIANA TEXTILES MILL, 10A, MADAN MOHAN BURMAN STREET, KOLKATA-700007 VS. ACIT, CIRCLE-43, 3, GOVERNMENT PLACE(WEST), KOLKATA-700001 ./ ./PAN/GIR NO. : AAAFI 6173 Q ( /APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY: SH.SUBASH AGARWAL, ADVOCATE /REVENUE BY : SHRI SAURABH KUMAR, ADDL.CIT / DATE OF HEARING : 12/04/2017 /DATE OF PRONOUNCEMENT 28/04/2017 / O R D E R THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-13 KOLKATA , DATED 15/03/2016 FOR THE ASSESSMENT YEAR 2011-12. 2. THE ASSESSEE IS A MANUFACTURER OF HOSIERY GOODS. HE SUBMITS THAT THIS INVOLVES A NUMBER OF PROCESSES LIKE KNITTING, DYING, BLEACHING, CUTTING, STITCHING AND PACKING. THE ASSESSEE FILED ITS RETUR N OF INCOME 30/09/2011 FOR THE ASSESSMENT YEAR 2011-12 DECLARING INCOME OF RS.10,50,751/-. THE ASSESSING OFFICER COMPLETED ASSESSMENT UNDER SECTIO N 143(3) ON 27/03/2014 COMPUTING THE TOTAL INCOME AT RS.43,74,4 84/-, INTER ALIA , MAKING ADDITIONS FOR UNDERVALUATION OF CLOSING STOC K, DONATIONS AND SUBSCRIPTIONS, TRAVELLING EXPENSES, TELEPHONE AND C ONVEYANCE EXPENSES ETC. AGGRIEVED THE ASSESSEE CARRIED THE MATTER BEFO RE THE LD. CIT(A) IN APPEAL. THE LD. CIT(A) GRANTED PART RELIEF. FURTHER AGGRIEVED, THE ASSESSEE IS BEFORE US. 3. I HAVE HEARD SH. SUBASH AGARWAL THE LD. COUNSEL FOR THE ASSESSEE AND SH. SOURAV KUMAR THE LD. SENIOR DR ON BEHALF OF THE REVENUE. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCE S OF THE CASE AND A PERUSAL OF THE PAPERS ON RECORD AND THE ORDERS OF T HE AUTHORITIES BELOW AS WELL AS CASE LAWS CITED, I HOLD AS FOLLOWS: ITA NO.1432/16 INDIANA TEXTILES MILL 2 3.1 GROUND NO. 1 IS GENERAL IN NATURE. 3.2 GROUND NO. 2 IS AGAINST THE SUSTENANCE OF THE A DDITION BY THE LD. CIT(A) OF RS.23,18,166/ MADE BY THE AO, ON THE GRO UND THAT THERE IS UNDER VALUATION OF CLOSING STOCK, INSOFAR AS EXPENS ES LIKE CARRIAGE AND FREIGHT, COOLIE & CARTAGE AND CLEARING AND FORWARDI NG INCURRED BY THE ASSESSEE HAVE NOT BEEN PROPORTIONATELY INCLUDED IN THE CLOSING STOCK VALUATION. THE ASSESSEE HAS SUBMITTED THAT THE AFOR ESAID EXPENDITURE WAS INCURRED WHILE DISPATCHING THE GOODS TO VARIOUS CUSTOMERS AND ARE NOT IN ANY WAY CONNECTED WITH THE MANUFACTURING COS T. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE WAS CONSISTENTLY FOLLOW ING THIS METHOD OF STOCK VALUATION AND THE REVENUE HAS BEEN ACCEPTING THE SAME OVER THE YEARS. IT WAS POINTED OUT THAT UNDER ACCOUNTING STA NDARD-2 ISSUED BY THE ICAI FOR VALUATION OF CLOSING STOCK, THE COST OF IN VENTORIES DO NOT INCLUDE EXPENSES THAT ARE INCURRED FOR DISPATCH OF FINISHED GOODS. THE LD. CIT(A) WAS OF THE VIEW THAT THE ASSESSEE HAD NOT MADE SUCH AN ARGUMENT BEFORE THE ASSESSING OFFICER AND HAS NOT SUBMITTED THE DET AILS OF THE COST INCURRED BY BRINGING THE RAW MATERIAL TO THE LOCATI ON OF THE ASSESSEE. IN MY VIEW, THIS IS NOT A GROUND TO CONFIRM THE ADDITI ON MADE BY THE AO. THE ASSESSING OFFICER, IN THIS CASE, HAS NOT GIVEN ANY SHOW CAUSE NOTICE TO THE ASSESSEE AND, HENCE, THE ASSESSEE HAD NO OCCASION T O PRESENT ITS CASE BEFORE THE AO. THE ASSESSEE HAS BEEN CONSISTENTLY V ALUING ITS CLOSING STOCK OVER THE YEARS IN THE METHOD WHICH WAS FOLLOW ED THIS YEAR ALSO. THE REVENUE HAS BEEN ACCEPTING THE SAME. UNDER THE CIRC UMSTANCES, I AM OF THE OPINION THAT THE ADDITION MADE ON THE GROUND TH AT THERE IS UNDER VALUATION OF CLOSING STOCK IS ARBITRARY AND MADE ON MERE CONJECTURES AND SURMISES. HENCE, I ALLOW GROUND NO. 2 RAISED BY THE ASSESSEE BY DELETING THE ADDITION. 3.3 GROUND NO. 3 IS AGAINST THE SUSTENANCE OF DISAL LOWANCE BY THE LD. CIT(A) OF RS.9,950/ MADE BY THE AO ON THE ALLEGED GROUND THAT THE EXPENSES CLAIMED FOR PAYMENTS MADE TO LOCAL CLUBS/S OCIETIES ARE NOT ALLOWABLE. ASSESSEES CASE IS THAT THESE PAYMENTS W ERE MADE ON ITA NO.1432/16 INDIANA TEXTILES MILL 3 DIFFERENT SOCIAL AND CULTURAL OCCASIONS TO MAINTAIN HARMONIOUS BUSINESS ENVIRONMENT. PAYMENTS ON THE OCCASION OF FESTIVITIE S LIKE POOJA ETC ARE COMMON AND ARE INCURRED FOR THE SAKE OF KEEPING HAR MONIOUS BUSINESS ENVIRONMENT. THIS CANNOT BE DISALLOWED AS THE SAME IS ALLOWABLE UNDER SECTION 37 OF THE INCOME TAX ACT. HENCE, THIS GROUN D IS ALLOWED. 3.4 GROUND NO. 4 AND 5 ARE AGAINST THE AD HOC DISAL LOWANCE OF 20% OF THE EXPENDITURE CLAIMED ON TRAVELLING, TELEPHONE AN D CONVEYANCE. AFTER HEARING RIVAL CONTENTIONS, I AM OF THE CONSIDERED O PINION THAT THE DISALLOWANCE OF 10% OF THE EXPENSES CLAIMED WOULD M EET THEIR ENDS OF JUSTICE. 4. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28/04 /2017. SD/ - (J. SUDHAKAR REDDY) / ACCOUNTANT MEMBER /KOLKATA ; $% DATED 28/04/2017 & ()* /PRAKASH MISHRA , SR.PS. / COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) $ % , / ITAT, 1. / THE APPELLANT-INDIANA TEXTILES MILL 2. / THE RESPONDENT.-ACIT, CIR-43, KOLKATA 3. 4 ( ) / THE CIT(A), KOLKATA. 4. 4 / CIT 5. 56 7 8 , 8 , / DR, ITAT, KOLKATA 6. 7 9 / GUARD FILE. 5 //TRUE COPY//