SHRI RADHEY SHYAM KHANDELWAL, JAIPUR V. INCOME TAX OFFICER, WARD-4-2, JAIPUR

ITA 1451/JPR/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5421 (ITAT-JAIPUR)
• Duration Of Justice: 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 14-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A S NEHRA
• Section: 271(1)(c); 143(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S,B JAIPUR JH JESK LH0 KEKZ] YS[KK LNL; ,OA JH FOT; IKY JKO] U;KF;D LNL; DS LE{K BEFORE: SHRI RAMESH. C. SHARMA, AM & SHRI VIJAY PA L RAO, JM VK;DJ VIHY LA- @ ITA NO. 1451/JP/2018 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2014-15 SHRI RADHEY SHYAM KHANDELWAL C-184, ROAD NO. 9, VKI AREA, JAIPUR-302013. CUKE VS. THE ITO, WARD-4(2) JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ADRPK 7193 G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI MUKESH KHANDELWAL (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI A. S NEHRA (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 29/01/2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 04/02/2019 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 31.10.2018 OF CIT(A), JAIPUR ARISING FROM PENALTY O RDER PASSED U/S 271(1)(C) OF THE IT ACT FOR THE ASSESSMENT YEAR 201 4-15. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND:- 1. THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD. CIT (A) ERRED IN LAW AND ON FACTS IN CONFIRMING PEN ALTY OF RS. 1,89,589/- LEVIED BY THE LD. AO U/S 271(1)(C) OF TH E INCOME TAX ACT, 1961. RELIEF MAY KINDLY BE GIVEN BY DELETING T HE SAME. ITA NO. 1451/JP/2018 SHRI RADHEY SHYAM KHANDELWAL VS. ITO 2 2. THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUS INESS OF MANUFACTURING OF PULSES (DAL) AND TRADING OF GEMSTO NES AND ASSESSEE IS ALSO EARNING RENTAL INCOME. DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT THE AO MADE AN AD DITION ON ACCOUNT OF UNDERVALUATION OF CLOSING STOCK OF VARIOUS DALS BY TAKING THE VALUE AT COST INSTEAD OF THE VALUATION ADOPTED BY THE ASSESS EE AT MARKET RATE. THUS, THE AO MADE AN ADDITION OF RS. 6,80,767/-. TH E ASSESSEE DID NOT CHALLENGE THE SAID ADDITION MADE BY THE AO. SUBSEQU ENTLY THE AO INITIATED THE PROCEEDINGS FOR LEVY OF PENALTY U/S 2 71(1)(C) OF THE ACT AND LEVIED THE PENALTY OF RS. 1,89,589/- @ 100% OF TAX SOUGHT TO BE EVADED. THE ASSESSEE CHALLENGED THE ACTION OF THE A O BEFORE THE LD. CIT(A) AND CONTENDED THAT THE VALUATION OF THE CLOS ING STOCK DOES NOT AFFECT PROFIT OF THE BUSINESS OF THE ASSESSEE AS IT BECOMES OPENING OF STOCK OF THE NEXT YEAR AND THEREFORE, IT CANNOT BE TREATED AS FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE LD. CIT(A) WAS NOT IMPRESSED WITH THE EXPLANATION OF THE ASSESSEE AND CONFIRMED THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT. 3. BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMIT TED THAT THE ASSESSEE IN ITS AUDIT REPORT IN FROM 3CD HAS DISCLO SED THE METHOD OF VALUATION BEING AT COST IN RESPECT OF GEMSTONES AND AT MARKET PRICE FOR ITA NO. 1451/JP/2018 SHRI RADHEY SHYAM KHANDELWAL VS. ITO 3 CLOSING OF FOODGRAINS (DAL). THE ASSESSEE HAS BEEN FOLLOWING THE CONSISTENT METHOD OF VALUATION AND THEREFORE, THE V ALUATION OF CLOSING STOCK AT THE MARKET PRICE DOES NOT AFFECT THE REVEN UE OR PROFIT OF THE ASSESSEE AS THE SAME VALUE WILL BE TAKEN AS OPENING STOCK OF THE NEXT YEAR. FURTHER, THE AO HAS ARRIVED THE VALUATION BY TAKING COST OF THE INVENTORY AND FURTHER, APPLYING THE FIFO METHOD. TH E LD. AR HAS THUS SUBMITTED THAT THE VALUATION OF THE CLOSING STOCK B Y ADOPTING A DIFFERENT METHOD BY THE AO THAT OF THE ASSESSEE WOULD NOT AMO UNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME WHEN THE CLOSING STOCK WILL BE TAKEN AS OPENING OF THE STOCK OF THE SUBSEQUENT YEARS. FURTHER, THE ASSESSEE HAS NOT REVISED ITS OP ENING STOCK OF THE SUBSEQUENT YEAR BASED ON THE VALUATION DONE BY THE AO, HENCE, THE ASSESSEE HAS NOT TAKEN THE BENEFIT OF THE ENHANCED VALUATION OF THE CLOSING STOCK MADE BY THE AO. IN SUPPORT OF HIS CON TENTION, HE HAS RELIED ON THE ORDER OF THE COORDINATE BENCH DATED 2 9.08.2018 IN CASE OF JANTA CONSTRUCTION CO. VS ACIT IN ITA NO. 578/JP/20 18. THUS, THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT AN IDENTICAL ISSUE WAS CONSIDERED BY THIS TRIBUNAL WHERE THE PENALTY WAS LEVIED BY TH E AO AGAINST THE ADDITION MADE ON ACCOUNT OF VALUATION CLOSING STOCK . ITA NO. 1451/JP/2018 SHRI RADHEY SHYAM KHANDELWAL VS. ITO 4 4. ON THE OTHER HAND, THE LD. DR HAS REFERRED TO T HE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE AO CLEARLY MENTIONED THAT THE ASSESSEE IN HIS AUDIT REPORT HAS MENTIONED THAT THE CLOSING STOCK IS VALUED AT COST, HOWEVER, THE AO HAS FOUND THAT THE CLOSING STOCK IN RESPECT OF FOODGRAINS (DAL) IS UNDERVALUED AND CONS EQUENTLY THERE IS AN ADDITION ON ACCOUNT OF UNDERVALUATION OF THE CLOSIN G STOCK. THUS, IT IS A CLEAR CASE OF UNDER REPORTING OF THE INCOME WHICH A MOUNTS TO FURNISH INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME. HE HAS RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER HAS MADE AN ADDITION OF RS. 6,80,767/- ON ACCOUNT OF VALUATION OF CLOSING S TOCK OF FOODGRAINS (DAL). THE AO WAS FOUND THAT THE ASSESSE E HAS NOT VALUED CLOSING STOCK AT COST AND ALSO NOT APPLIED F IFO METHOD FOR VALUATION OF THE SAME. THUS, THE AO APPLIED FIFO ME THOD AND VALUED THE CLOSING STOCK AT COST WHICH HAS RESULTED AN ADDITION OF RS. 6,80,767/-. WE FIND THAT IN FORM NO. 3CD THE AS SESSEE IN COLUMN NO. 14(A) HAS SPECIFIED THE METHOD OF VALUAT ION OF CLOSING STOCK EMPLOYED DURING THE YEAR GEM STONES AT COST AND FOODGRAINS AT MARKET PRICE . SINCE, CLOSING STOCK OF FOODGRAINS ITA NO. 1451/JP/2018 SHRI RADHEY SHYAM KHANDELWAL VS. ITO 5 WERE VALUED AT MARKET PRICE, THEREFORE, THERE WAS N O QUESTION OF ADOPTING THE FIFO METHOD FOR THE PURPOSE OF VALUATI ON. FURTHER, THE AO HAS NOT POINTED OUT ANY INCONSISTENCY IN THE METHOD ADOPTED BY THE ASSESSEE IN COMPARISON TO THE EARLIE R YEARS AND IN THE SUBSEQUENT YEARS. THUS, ONCE THE ASSESSEE HAS B EEN CONSISTENTLY VALUING ITS CLOSING STOCK OF FOODGRAIN S (DAL) AT MARKET PRICE THEN, EFFECT IT WILL BE REVENUE NEUTRAL AS TH E CLOSING STOCK OF PRECEDING YEAR IS TAKEN AS OPENING STOCK OF THE SUB SEQUENT YEAR. APART FROM APPLYING A DIFFERENT METHOD THE AO DID N OT FIND ANY OTHER DISCREPANCY OR DEFICIENCY IN THE CLOSING STOC K OF THE ASSESSEE. WE NOTE THAT THE COORDINATE BENCH OF THIS TRIBUNAL IN CASE OF M/S JANTA CONSTRUCTION CO. VS. ACIT (SUPRA) WHILE CONSIDERING THE ISSUE OF PENALTY U/S 271(1)(C) AGAI NST THE ADDITION ON ACCOUNT OF VALUATION OF CLOSING STOCK HAS HELD I N PARA 4 AS UNDER:- 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THE AD DITION MADE BY THE AO OF RS. 14,25,059/- ON ACCOUNT OF SUPPRESSION OF CLOSING WORK IN PROGRESS HAS ATTAINED THE FINALITY. HOWEVER, THE S AID ADDITION WAS MADE BY THE AO ON THE BASIS OF DETAILS OBTAINED FRO M THE DEPARTMENTS FOR WHICH THE ASSESSEE HAS CARRIED OUT THE WORK CON TRACT AND RECEIVED THE PAYMENTS. AS PER THE DETAILS GIVEN BY THE AO, THE TOTAL RECEIPTS ITA NO. 1451/JP/2018 SHRI RADHEY SHYAM KHANDELWAL VS. ITO 6 DURING THE YEAR WAS SHOWN AT RS. 4,26,84,832/- WHER EAS THE ASSESSEE DECLARED THE TOTAL RECEIPTS IN ITS BOOKS OF ACCOUNT S AT RS. 4,61,66,265/- . THE AO AFTER ANALYZING THE PURCHASES MADE BY THE ASSESSEE DURING THE MONTH OF MARCH AND MEASUREMENT OF THE WORK BY T HE DEPARTMENT ON 8 TH MARCH, 2009 HAS COME TO THE CONCLUSION THAT THE CL OSING STOCK OF THE ASSESSEE SHOULD HAVE BEEN AT RS. 24,03,399/- AS AGAINST THE DECLARED CLOSING STOCK OF RS. 9,78,340/-. THEREFOR E, THE DIFFERENCE OF RS. 14,25,059/- WAS ADDED AS SUPPRESSION OF CLOSING WORK IN PROGRESS. CONSIDERING THESE FACTS ALONG WITH THE TOTAL RECEIP TS DECLARED BY THE ASSESSEE WHICH IS MORE THAN RS. 4.61 CRORES AS COMP ARED TO THE TOTAL RECEIPTS AS PER THE INFORMATION RECEIVED FROM THE D EPARTMENTS AT RS. 4,26,84,832/-, THE DIFFERENCE AMOUNT CAN BE PART OF THE DECLARED RECEIPTS OF THE ASSESSEE. HOWEVER, WITHOUT GOING I NTO THE SAID ISSUE, WHEN IT IS NOT DISPUTED THAT THE ASSESSEE HAS NOT C LAIMED THE SAID AMOUNT OF RS. 14,25,059/- AS PART OF THE OPENING BA LANCE OF WORK IN PROGRESS OF SUBSEQUENT YEAR THEN THE ADDITION MADE BY THE AO FOR THE YEAR UNDER CONSIDERATION WOULD NOT IPSO FACTO AMOUN T TO CONCEALMENT OF PARTICULARS OF INCOME. THE EXPLANATION OF THE AS SESSEE THAT THERE MAY BE A DISCREPANCY IN THE INFORMATION OBTAINED BY THE AO AND ANALYZING THE SAME WHEN THE ASSESSEE HAS ALREADY DE CLARED THE TOTAL RECEIPTS MORE THAN THE TOTAL RECEIPTS AS PER THE IN FORMATION FURNISHED BY THE DEPARTMENTS, THEN IN CONSIDERING THE TOTALIT Y OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT ALL THESE E XPLANATIONS OF THE ASSESSEE WOULD CONSTITUTE A BONAFIDE EXPLANATION TH OUGH THE SAME MAY NOT BE ACCEPTED FOR THE PURPOSE OF ADDITION IN QUANTUM PROCEEDINGS. HENCE IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DELETE THE PENALTY LEVIED UNDER SECTION 271(1)(C) O F THE ACT. ITA NO. 1451/JP/2018 SHRI RADHEY SHYAM KHANDELWAL VS. ITO 7 THE ASSESSEE BEFORE US HAS ALSO NOT TAKEN THE BENEF IT OF THE HIGHER VALUATION OF CLOSING STOCK BY REVISING ITS OPENING STOCK OF THE SUBSEQUENT YEAR, THEREFORE, THE ADDITION MADE B Y THE AO IN THE YEAR UNDER CONSIDERATION WILL NOT IPSO FACTO AM OUNT TO FURNISHING OF INACCURATE OF INCOME OR CONCEALMENT O F PARTICULARS OF INCOME. EVEN OTHERWISE WHEN IT IS A REGULAR AND CON SISTENT METHOD APPLIED BY THE ASSESSEE AND NOT A CASE OF ANY CHANG E OF METHOD FOR VALUATION OF CLOSING STOCK DURING THE YEAR UNDE R CONSIDERATION THEN, THE MERE ADDITION ON ACCOUNT OF VALUATION OF CLOSING STOCK BY ADOPTING A DIFFERENT METHOD WILL NOT ATTRACT THE PE NALTY U/S 271(1)(C) OF THE ACT. FOLLOWING THE ORDER OF THE CO ORDINATE BENCH IN CASE OF M/S JANTA CONSTRUCTION CO. VS. ACIT (SUP RA), WE DELETED THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04/02/2019 SD/- SD/- JESK LH0 KEKZ FOT; IKY JKO (RAMESH. C. SHARMA) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 04/02/2019. ITA NO. 1451/JP/2018 SHRI RADHEY SHYAM KHANDELWAL VS. ITO 8 * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI RADHEY SHYAM KHANDELWAL, JAIPUR . 2. IZR;FKHZ@ THE RESPONDENT- ITO, WARD-4(2), JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 1451/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR