Shri Chimanlal H. Soni, Baroda V. The CIT-I, Baroda

ITA 1514/AHD/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8408 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 06-09-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 16-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIBHA BHALLA
• Assessee Lawyers: S N SOPARKAR
• Keywords: Principle of natural justice
• Section: 143(3); 145; 263

Judgement Text

ITA NO. 1514/AHD/2014 SHRI CHIMANLAL H SONI VS. CIT ASSESSMENT YEAR: 2009-10 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND MAHAVIR PRASAD JM] ITA NO. 1514/AHD/2014 ASSESSMENT YEAR: 2009-10 CHIMANLAL H. SONI ..................APPELL ANT PROP. C H JEWELLERS, 8, ALKAPURI, CONCORD LANE, R C DUTT ROAD, BARODA-390007 [PAN : AJKPS 6990 C] VS. COMMISSIONER OF INCOME-TAX-I ...........................RESPONDENT BARODA APPEARANCES BY: SN SOPARKAR & URVASHI SHODHAN FOR THE APPELLANT VIBHA BHALLA FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 24.01.2018 DATE OF PRONOUNCING THE ORDER : 23.04.2018 O R D E R PER PRAMOD KUMAR, AM: 1. BY WAY OF THIS APPEAL, THE ASSESSEE-APPELLANT HA S CHALLENGED CORRECTNESS OF LEARNED CITS ORDER DATED 28.03.2014 IN THE MATTER OF REVISION UNDER SECTION 263 R.W.S. 143(3) OF THE INCOME-TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2009-10. 2. GRIEVANCES RAISED BY THE APPELLANT ARE AS FOLLOW S:- 1. LD. CIT ERRED IN LAW AND ON FACTS IN INVOKING P ROVISIONS OF SECTION 263 OF THE ACT SEEKING TO REVISE SCRUTINY ASSESSMENT U/ S 143 (3) OF THE ACT HOLDING IT AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THE ORDER OF CIT DIRECTING AO TO REVISE ORDER THAT IS NEITHER ERRONE OUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE IS UNJUST, UNTENABLE AND AGAINS T PRINCIPLES OF NATURAL JUSTICE THAT DESERVES TO BE QUASHED. IT BE SO HELD NOW. 2. LD. CIT ERRED IN LAW AND ON FACTS IN DIRECTING A O TO PASS FRESH ORDER AFTER VERIFYING MONTH WISE BREAK UP OF OPENING STOC K, CLOSING STOCK, CONVERTED STOCK, SALE & PURCHASE OF 24 CT, 22 CT AND 18 CT GO LD ALREADY VERIFIED BY AO IN SCRUTINY ASSESSMENT. LD. CIT OUGHT TO HAVE APPRECIA TED THAT SILENCE ON ISSUES ACCEPTED BY AO AFTER PROPER SCRUTINY NEED NOT MEAN ORDER IS ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF REVENUE. IT BE SO HE LD NOW. ITA NO. 1514/AHD/2014 SHRI CHIMANLAL H SONI VS. CIT ASSESSMENT YEAR: 2009-10 PAGE 2 OF 5 3. LD. CIT ERRED IN LAW AND ON FACTS IN IGNORING TH E FACT THAT APPELLANT VALUED CLOSING STOCK AS PER AS - 2 CONFIRMING WITH PROVISIONS PRESCRIBED U/S 145 OF THE ACT AND IS ACCEPTED BY DEPARTMENT YEAR A FTER YEAR. LD. CIT OUGHT TO HAVE APPRECIATED THAT FIFO METHOD OR WEIGHTED AVERA GE COST METHOD IS CORRECT METHOD FOR VALUATION OF CLOSING STOCK. IT B E SO HELD NOW. 4. LD. CIT ERRED IN LAW AND ON FACTS IN NOT APPRECI ATING SUBMISSIONS ON MERITS THAT APPELLANT VALUED CLOSING STOCK ON WEIGH TED AVERAGE COST ALSO ACCEPTED BY THE HON'BLE ITAT IN APPELLANT'S OWN CAS E AND NOT SIMPLE AVERAGE COST. LD. CIT IN SPITE OF THE ORDER OF HON'BLE TRIB UNAL EXERCISED JURISDICTION U/S 263 TO REVISE ASSESSMENT ORDER NEITHER ERRONEOUS NO R PREJUDICIAL. THE ORDER OF ID. CIT DESERVES TO BE QUASHED. IT BE SO HELD NOW. 5. LD. CIT ERRED IN LAW AND ON FACTS IN HOLDING VAL UATION OF CLOSING STOCK TO BE HYPOTHETICAL WORKINGS NOT APPRECIATING THAT METH OD FOLLOWED BY THE APPELLANT IS IN CONSONANCE WITH THE INCOME TAX ACT AND AS PRESCRIBED BY ICAI THAT INVENTORIES TO BE VALUED AT LOWER OF COST OR M ARKET VALUE. LD. CIT OUGHT TO HAVE HELD THAT WEIGHTED AVERAGE COST CONSIDERING EA CH AND EVERY ITEM OF SALES AND PURCHASES FOR THE YEAR ADOPTED BY THE APP ELLANT IS THE CORRECT METHOD FOR VALUATION OF CLOSING STOCK. IT BE SO HEL D NOW. 3. THE RELEVANT MATERIAL FACTS ARE LIKE THIS. THE SCRUTINY ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS FINALIZED ON 21.12.20 11. ON SUBSEQUENT PERUSAL OF RECORDS, LEARNED COMMISSIONER WAS OF THE VIEW THAT THE ASSESSMENT ORDER SO PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS AND P REJUDICIAL TO THE INTEREST OF THE REVENUE. THE REASON FOR INITIATING THE REVISION PRO CEEDINGS, AS SET OUT IN THE SHOW- CAUSE NOTICE, WAS STATED TO BE AS FOLLOWS:- DURING THE YEAR THE ASSESSEE HAD CONVERTED 218162.2 50 GRAMS OF GOLD BAR (24 CARAT) INTO 22 CARAT GOLD AFTER ADDING ANOTHER METAL OF 19832.932 GRAMS FOR MELTING PURPOSE AFTER WHICH THE 22 CARAT GOLD W EIGHED AT 237995.182 GRAMS. THE PRICE OF THIS 22 CARAT GOLD (STOCK IN TR ADE) AS VALUED BY THE ASSESSEE COMES TO RS.1384.62 GRAM. AS PER ASSESSEE OWN WORKING THE LABOUR EXPENSE COMES TO RS.101.07 PER GRAM. MOREOV ER, THE PRICE OF 19832.932 GRAMS OF ALLOYS (REMAINING 2/24 PORTION O F OTHER METAL LIKE COPPER OR SILVER OR ANOTHER METAL) WERE ALSO REQUIRED TO B E ADDED FOR STOCK VALUATION. THUS THE VALUE OF 22 CARAT GOLD ORNAMENT PER GRAM C OMES TO RS.1485.69 (1384.62+101.07). THUS THE VALUATION OF 195547.193 GRAMS 22 CARAT GOLD ORNAMENT COMES TO RS.29,05,21,993/- AGAINST WHICH T HE VALUATION SHOWN BY YOU IS RS.24,40,42,890/-. THUS THERE IS UNDER VALU ATION OF 22 CARAT GOLD TO THE TUNE OF RS.4,64,79,103/-. 4. IT WAS POINTED OUT BY THE ASSESSEE THAT THE METH OD OF VALUATION OF STOCK HAS BEEN FOLLOWED BY THE ASSESSEE FOR SEVERAL YEARS AND HAS BEEN ACCEPTED BY THE REVENUE AUTHORITIES ALL ALONG, THAT, DURING THE SCR UTINY ASSESSMENT PROCEEDINGS, THIS ASPECT OF THE MATTER WAS EXAMINED BY THE ASSESSING OFFICER AT GREAT LENGTH, THAT THE VALUATION OF STOCK IS AS PER ACCOUNTING STANDARD 2 ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA AND THAT, GIVEN THE UNDISPUTED FACTS OF THIS CASE, LEARNED COMMISSIONER WILL ACT BEYOND HIS LAWFUL JUR ISDICTION IN SUBJECTING THE SAID ASSESSMENT ORDER TO REVISION PROCEEDINGS UNDER SECT ION. THE FACTS OF THE CASE, AS ITA NO. 1514/AHD/2014 SHRI CHIMANLAL H SONI VS. CIT ASSESSMENT YEAR: 2009-10 PAGE 3 OF 5 ALSO JUDICIAL PRECEDENTS IN SUPPORT OF PROPOSITION ADVANCED BY THE ASSESSEE, WERE SET OUT IN DETAIL. LEARNED CIT PROCEEDED WITH EXER CISING HIS POWERS UNDER SECTION 263, THOUGH ON A SLIGHTLY DIFFERENT GROUND. WHILE DOING SO, HE, INTER ALIA, OBSERVED AS FOLLOWS:- 3. THE SUBMISSION OF THE ASSESSEE VIS-A-VIS THE CA SE RECORDS OF THE ASSESSEE HAS BEEN VERIFIED. IT IS NOTICED THAT DURI NG ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HAD NOT EXAMINED THE DETAILED WORKING OF WEIGHTED AVERAGE COST INCLUDING MONTHLY OPENING, PURCHASE, I SSUED AND CLOSING INVENTORY AND SAME HAD NOT BEEN ASKED FOR AND THERE SO NOT VERIFIED BY THE ASSESSING OFFICER. IN SUCH CIRCUMSTANCES, THE CORRE CTNESS OF WEIGHTED AVERAGE COST CALCULATED BY THE ASSESSEE CANNOT BE S AID FLAWLESS. 3.1 ON VERIFICATION OF THE CASE RECORDS OF THE ASSE SSEE AS PER PART (B) OF ANNEXURE -H ENCLOSED WITH THE RETURN OF INCOME THE CLOSING STOCK OF 24CT GOLD IS 5519.381 GMS, WHEREAS VIDE SUBMISSION SUBMITTED BY THE ASSESSEE DURING THE PROCEEDINGS U/S 263 OF THE ACT, WHICH IS ALSO M ENTIONED ABOVE, THE CLOSING STOCK OF 24CT GOLD FOR MARCH'2009 IS 5123.5 91 GMS. IT IS EVIDENT THAT THE ANNUAL CLOSING DATE AND THE CLOSING DATE OF MON TH MARCH'2009 IS SAME I.E. 31.03.2009, WHICH MEANS ANNUAL CLOSING STOCK, TAKEN ON 31.03.2009 AND CLOSING STOCK, TAKEN FOR THE MONTH MARCH'2009 SHOUL D BE SAME. BUT IN THE CASE THE ANNUAL CLOSING STOCK FOR 24CT GOLD IS 5519 .381 GMS AND CLOSING STOCK FOR MONTH MARCH'2009 IS 5123.591 GMS. 3.2 FURTHER, VIDE AFORESAID SUBMISSION, THE ASSESSE E HAD ATTEMPTED TO EXPLAIN THE PROCEDURE FOLLOWED FOR EVALUATION OF 22 CT GOLD. FOR THIS PURPOSE THE ASSESSEE HAD MENTIONED THREE TABLES IN THE SUBM ISSION, WHICH ARE AS UNDER: PARTICULARS QTY (GRAMS) VALUE (RS) RATE (RS) 24CT STANDARD GOLD 1,000 28,00,000 2,800 PARTICULARS QTY (GRAMS) VALUE (RS) RATE (RS) 22CT 1,090 28,00,000 2,668 LABOUR CHARGES 1,09,000 PARTICULARS QTY (GRAMS) VALUE (RS) RATE (RS) 24CT 1,000 28,00,000 2,800 22CT - CONVERSION FROM 24CT TO 22CT 1,090 28,00,000 LABOUR 1,09,000 2,588 ORNAMENTS PURCHASE 1,000 25,00,000 THE ASSESSEE HAD ATTEMPTED TO EXPLAIN THROUGH A HYP OTHETICAL SITUATION, WHICH DOES NOT HOLD ANY SUBSTANCE. IN THE ABOVEMENT IONED TABLE IF QUANTITY OF 22CT CONVERTED GOLD WILL BE MORE THAN THE PURCHASED 22CT GOLD ORNAMENTS, THAN THE AVERAGE PER GRAM COST WILL TEND TOWARDS TH E PER GRAM COST OF 22CT CONVERTED GOLD AND VICE VERSA. SAME IS EXPLAINED AS UNDER: ITA NO. 1514/AHD/2014 SHRI CHIMANLAL H SONI VS. CIT ASSESSMENT YEAR: 2009-10 PAGE 4 OF 5 PARTICULARS QTY (GRAMS) RATE VALUE (RS) AVG/GM COST (RS) 24CT 1,000 2800 28,00,000 22CT - CONVERSION FROM 24CT TO 22CT 2,000 2668 53,3 6,000 2,612 ORNAMENTS PURCHASE 1,000 2500 25,00,000 THEREFORE, TRUE POSITION CANNOT BE ASCERTAINED WITH SUCH HYPOTHETICAL WORKINGS. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, THE ASSESSMENT IS SET- ASIDE WITH A DIRECTION TO THE ASSESSING OFFICER TO PASS AFRESH ORDER DENOVO AFTER GETTING AND VERIFYING DETAILED MONTH-WISE BRE AK-UP OF OPENING STOCK, CLOSING STOCK, CONVERTED STOCK, SALE AND PURCHASE A ND OTHER DETAILS OF 24CT, 22CT AND 18CT GOLD AFTER AFFORDING REASONABLE OPPOR TUNITY OF BEING HEARD. 5. THE ASSESSEE IS AGGRIEVED AND IS IN APPEAL BEFOR E US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. 7. WE HAVE NOTED THAT A CO-ORDINATE BENCH OF THIS T RIBUNAL, IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006-07, HAS CATEGORIC ALLY ACCEPTED THE SAME METHOD OF ACCOUNTING, AS ACCEPTED BY THE ASSESSING OFFICER IN THE IMPUGNED ASSESSMENT ORDER, FOR VALUATION OF CLOSING STOCK. IT WAS ALSO NOTED THAT THIS METHOD IS IN CONSONANCE WITH THE STATUTORY PROVISIONS AND THE ACCOUNTING STANDARDS PRESCRIBED BY THE ICAI AND HAS ALSO BEEN USED FOR ARRIVING A T THE COST OF GOODS SOLD. WHEN TRIBUNAL HAS APPROVED THE METHOD, AFTER DETAILED DI SCUSSIONS ON THE SAME, IT CANNOT BE SAID THAT, AT THE MINIMUM, IT IS A REASONABLY PO SSIBLE VIEW OF THE MATTER. IT IS ALSO ELEMENTARY THAT IN THE GARB OF EXERCISING POWERS UN DER SECTION 263, COMMISSIONER CANNOT SUBSTITUTE ONE POSSIBLE VIEW OF THE MATTER B Y THE OTHER POSSIBLE VIEW OF THE MATTER. 8. WE HAVE ALSO NOTICED THAT THE CIT HAS EXERCISED HIS POWERS ON A GROUND WHICH IS ALTOGETHER DIFFERENT FROM THE GROUND ON WH ICH REVISION PROCEEDINGS WERE INITIATED AND THE ASSESSEE WAS NOT AT ALL HEARD ON THE GROUND ON WHICH REVISION WAS EVENTUALLY SUBJECTED TO. IN THE SHOW-CAUSE NOTICE, LEARNED COMMISSIONER STARTED WITH ALLEGED UNDERVALUATION OF CLOSING STOCK BY RS. 4,64,79,103/-, BUT THEN, IN THE OPERATIVE PORTION, HE HAS SIMPLY DIRECTED THAT THE AO TO PASS A FRESH ORDER DE NOVO AFTER GETTING AND VERIFYING DETAILED MONTH-WISE BRE AK UP OF OPENING STOCK, CLOSING STOCK, CONVERTED STOCK, SALE AND PURCHASE AND OTHER DETAILS OF 24CT, 22CT AND 18CT GOLD AFTER AFFORDING REASONABLE OPPORTUNITY OF BEIN G HEARD. THERE IS NOTHING ON RECORD TO SUGGEST, NOR HAS THAT BEEN DEMONSTRATED T O US BY THE LEARNED DEPARTMENTAL REPRESENTATIVE, THAT THE COMMISSIONER HEARD THE ASSESSEE ON THE POINT OF INADEQUATE INQUIRY, WHICH AT BEST IS HIS C ASE. THIS ASPECT OF THE MATTER, REGARDING CORRECTNESS OF CLOSING STOCK VALUATION, H AS BEEN EXAMINED AT LENGTH BY THE ASSESSING OFFICER AND THE DETAILED QUESTIONS ON THE ISSUE, AS ALSO REPLY THERETO, HAVE BEEN PLACED BEFORE US IN THE PAPER-BOOK PAGES 49 TO 63. IN ANY CASE, THE IMPUGNED REVISION ORDER WAS PASSED ON 28.03.2014, I .E. MUCH BEFORE THE EXPLANATION 2(A) TO SECTION 263 CAME INTO FORCE ON 1 ST JUNE, 2015. UNDER THESE CIRCUMSTANCES, EXERCISING THE REVISION POWERS ON TH E GROUND THAT THE ORDER WAS PASSED WITHOUT MAKING SUCH ENQUIRIES AND VERIFICATI ONS, WHICH SHOULD HAVE BEEN MADE IN THE OPINION OF THE COMMISSIONER, WAS SIMPLY NOT PERMISSIBLE. ITA NO. 1514/AHD/2014 SHRI CHIMANLAL H SONI VS. CIT ASSESSMENT YEAR: 2009-10 PAGE 5 OF 5 9. WE MAY ALSO MENTION THAT THE ASSESSING OFFICER H AS ASKED THE QUESTIONS, ACCEPTED THE EXPLANATIONS BUT HAS NOT DISCUSSED THE ISSUE IN GREAT DETAIL IN THE ASSESSMENT ORDER. THIS, HOWEVER, CANNOT BE PUT AGA INST THE ASSESSEE FOR THE REASON THAT, IN THE ESTEEMED OPINION OF HONBLE GUJ ARAT HIGH COURT, THE ABSENCE OF DETAILED DISCUSSIONS IN THE BODY OF THE ASSESSMENT ORDER DOES NOT IMPLY THAT THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND CIT VS . NIRMA CHEMICAL WORKS PVT LTD [(2009) 309 ITR 67 (GUJ.)]. IN FACT, HONBLE GUJAR AT HIGH COURT HAS OBSERVED THAT AN ASSESSMENT ORDER CANNOT INCORPORATE REASONS FOR MAK ING/GRANTING A CLAIM. IF IT DOES SO, AN ASSESSMENT ORDER WILL CEASE TO BE AN OR DER AND BECOME AN EPIC.. WHEN SUCH ARE THE VIEWS OF THEIR LORDSHIP, IT CAN B E SAFELY ASSUMED THAT ABSENCE OF A SPECIFIC DISCUSSION ABOUT REASONS OF ACCEPTING EXPLANATION CANNOT, BY ITSELF, BE REASON ENOUGH FOR EXERCISE OF POWERS UNDER SECTION 263. THAT PRECISELY, HOWEVER IS THE CASE. 10. IN VIEW OF THE ABOVE DISCUSSIONS, AS ALSO BEARI NG IN MIND ENTIRETY OF THE CASE, WE UPHOLD THE PLEA OF THE ASSESSEE, AND, THEREFORE, QUASH THE IMPUGNED REVISION ORDER. 11. IN THE RESULT, THE APPEAL IS ALLOWED. PRONOUNC ED IN THE OPEN COURT TODAY ON THE 23 RD APRIL, 2018 SD/- SD/- MAHAVIR PRASAD PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, THE 23 RD DAY OF APRIL, 2018 **BT COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD 1. DATE OF DICTATION: .....ORDER PREPARED AS PER 7 PAGES MANUSCRIPTS OF HONBLE AM WHICH ARE ATTACHED...23.04.2018... 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: ....... 23.04.2018.......... 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR . P.S./P.S.: 23.04.2018... 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: .. 23.04.2018. 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK : .. 23.04.2018.... 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK : 23.04.2018. 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER : 8. DATE OF DESPATCH OF THE ORDER: ......