ANUJ JEWELLERY P. LTD, MUMBAI V. DCIT CIR 5(1), MUMBAI

ITA 1555/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9230 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 11-12-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 26-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G, MUMBAI BEFORE SHRI RAJENDRA SINGH , ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NO. 1555/MUM/2010 (ASSESSMENT YEAR: 2006-07) ANUJ JEWELLERY PVT. LTD., LALWANI INDUSTRIAL ESTATE, UNIT NO. 1, 2 ND FLOOR, WADALA, MUMBAI-400 031 PAN: AADCA 0816 A VS DY. CIT, CIR 5(1), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : MR. KIRAN MEHTA RESPONDENT BY : MR. MOHIT JAIN DATE OF HEARING :11-12-2012 DATE OF PRONOUNCEMENT :19-12-2012 O R D E R PER VIVEK VARMA, JM: THE APPEAL FILED BY THE ASSESSEE ARISES FROM THE ORDER OF CIT(A) 9, MUMBAI, DATED 07.01.2010, WHEREIN THE FOLLOWING GROUNDS HAV E BEEN RAISED: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A)-9, MUMBAI HAS ERRED IN HOLDING THAT THE VALUATION OF CLOSING STOCK ON THE BASIS OF FIFO METHOD CONSISTEN TLY FOLLOWED BY THE APPELLANT WAS WRONG IN SPITE OF FOLLOWING A METHOD WHICH IS APPROVED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA UNDER ACCOUNTING STANDARDS 2 AND CONSISTENTLY FOLLOWED BY THEM. 2. WITHOUT PREJUDICE TO THE ABOVE CONTENTION THAT T HE FIFO METHOD CONSISTENTLY FOLLOWED BY THE APPELLANT IS AN ACCEPT ABLE METHOD IN ACCORDANCE WITH ACCOUNTING STANDARD, AS-2, THE LEAR NED CIT (A)-9, MUMBAI HAS ERRED IN ACCEPTING THE VALUATION DONE BY THE AO, WHEREIN IN CALCULATING THE AVERAGE PRICE, THE ASSESSING OFF ICER HAS IGNORED THE VALUE OF THE OPENING STOCK. 2. THE FACTS ARE THAT THE ASSESSEE IS A MANUFACTURER OF GOLD AND DIAMOND STUDDED JEWELLERY ALONG WITH PRECIOUS AND SEMI PRE CIOUS JEWELLERY. AT THE TIME OF HEARING, THE AR PLEADED THAT THE DISPUTE ARISING IN THE INSTANT APPEAL IS WITH REGARD TO THE VALUATIO N OF STOCKS, ANUJ JEWELLERY PVT. LTD . ITA NO. 1555/MUM/2010 2 WHICH ACCORDING TO THE ASSESSEE WAS BASED ON FIFO (FIRST IN FIRST OUT) METHOD AND THAT THE AO, CHANGED IT OVER TO AVERAGE ME THOD. ACCORDING TO THE AR, THE ASSESSEE HAD BEEN FOLLOWING FIF O CONSISTENTLY OVER THE YEARS AND, THEREFORE, THE AO WAS NOT JUSTIFIED T O CHANGE IT TO AVERAGE COST METHOD. 3. THE AO, WHILE FRAMING THE ASSESSMENT ORDER, CHANGED TH E METHOD TO AVERAGE COST METHOD AND PROPOSED AN ADDIT ION OF RS. 2,26,111/- AS SUPPRESSED VALUE. THIS ADDITION WAS SUSTAINED BY THE CIT(A). AGGRIEVED, THE ASSESSEE IS NOW BEFORE THE ITAT. BEFORE US, THE AR SUBMITTED THAT THE REVENUE AUTHORITIES WERE WRONG TO HAVE COMPUTED THE VALUE OF CLOSING STOCK ON AVERAGE COST BASIS, MAKING A CLEAR DEPARTURE FROM THE FIFO METHOD, REGULARLY EMPLOYED BY THE ASSESSEE. 4. ON GOING THROUGH THE ORDERS AND THE SUBMISSIONS AS E XTRACTED BY THE CIT(A) IN HIS ORDER, WE ARE OF THE OPINION, THAT THE AO WAS NOT JUSTIFIED TO CHANGE THE METHOD OF VALUATION TO AVERAGE CO ST METHOD, IN PLACE OF CONSISTENTLY FOLLOWED AND ACCEPTED METHOD OF COST OR NET REALIZABLE VALUE ON FIFO BASIS. WE HAVE ALSO NOT FOUND THAT THE AO HAS FOUNDED HIS REASON FOR CHANGE IN THE METHOD OF VALUATION, WHICH COULD BE BASED ON SOME EVIDENCE. 5. WE HAVE PERUSED THE ORDER OF THE REVENUE AUTHORITIE S AND WE FIND THAT THE ASSESSEE HAD BEEN VALUING ITS CLOSING STOCK ON COST OR NET REALIZABLE VALUE. EVEN IN THE SOF FILED BEFORE THE CIT(A) ALONG WITH THE GROUNDS OF APPEAL, THE ASSESSEE HAS MENTIONED THE METH OD OF VALUATION ADOPTED BY THE ASSESSEE WAS COST OR NET REALIZABLE VALUE . ANUJ JEWELLERY PVT. LTD . ITA NO. 1555/MUM/2010 3 6. WE, THEREFORE, ARE OF THE OPINION THAT THE ISSUE OF VALU ATION BE RESTORED TO THE FILE OF THE AO, WHO SHALL COMPUTE THE VALUA TION OF CLOSING STOCK ON THE METHOD WHICH HAS BEEN CONSISTENTLY FOLLOWED BY THE ASSESSEE, I.E. COST OR NET REALIZABLE VALUE ON FIFO BASIS , SO THAT THERE IS NO DEPARTURE OR INCONSISTENCY IN THE METHOD OF VALUING OPENING STOCK AND CLOSING STOCK, WHICH HAS ALSO BEEN ACCE PTED BY THE REVENUE AUTHORITIES. 7. THE ORDER OF CIT(A) IS THUS SET ASIDE WITH THE ABOVE D IRECTION TO THE AO, WHO SHALL COMPUTE THE VALUE OF CLOSING STOCK AS P ER ABOVE DIRECTION, AFTER AFFORDING ADEQUATE OPPORTUNITY TO THE ASSESSEE. 8. THE APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH DECEMBER, 2012. SD/- SD/- (RAJENDRA SINGH) (VIVEK VARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI : 19 TH DECEMBER, 2012 COPY TO: 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT (A)-9, MUMBAI. 4) THE CIT 5, MUMBAI 5) THE DR, G BENCH MUMBAI 6) COPY TO GUARD FILE BY ORDER / / TRUE COPY / / ASST. REGISTRAR, ITAT, MUMBAI *CHAVAN