ACIT, Tuticorin V. V.S.Babu (HUF), Kovilpatti

ITA 1659/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90758 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 21-07-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 11-06-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH IRS
• Assessee Lawyers: R SRINIVASAN
• Section: 145

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI . . . , ! , ' #$ % [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ] ./ I.T.A.NO.1659/MDS/2014 / ASSESSMENT YEAR : 2008-2009 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE I, TUTICORIN. VS. M/S. V.S. BABU (HUF) PROP: M/S. M.S.S.V. ABARANA MALIGAI, 134, SOUTH BAZAAR, KOVILPATTI. [ PAN AADHV 0383C] ( &' / APPELLANT) ( ()&' /RESPONDENT) / APPELLANT BY : SHRI. A.V. SREEKANTH, IRS, JCIT. /RESPONDENT BY : SHRI. R. SRINIVASAN, ADVOCATE / DATE OF HEARING : 21-07-2015 / DATE OF PRONOUNCEMENT : 31-07-2015 / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, MADURA I, DATED 14.03.2014 FOR THE ASSESSMENT YEAR 2008-2009. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- ITA NO.1659/MDS/2014. :- 2 -: (1) THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE NOTED THAT THE ASSESSEE HAD ADMITTED AT THE TIME SU RVEY THAT EXCESS STOCK WAS ONLY UNACCOUNTED STOCK AND NEITHER THE ASSESSING OFFICER NOR THE ASSESSEE HAD ANY DIFFEREN CE OF OPINION IN VALUING THE STOCK ADOPTING AS PER LATEST PURCHASE PRICE AT THE TIME OF SURVEY. (2) THE COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO NOTE THAT WITH REGARD TO UNACCOUNTED STOCK, THE ASSESSEE DID NOT HAVE ANY EVIDENCE VIZ., PURCHASE OF BILLS, OTHER DETAILS (TO DIFFERENTIATE THE STOCK AS OLD, NEW, ETC) IN ORDER TO MAKE A CLAIM TO ADOPT AVERAGE COST METHOD TO VALUE THE STO CK. HENCE, IT IS NATURAL TO VALUE THE EXCESS STOCK (UNE XPLAINED INVESTMENT) BY ADOPTING THE MARKET VALUE AS ON THE DATE OF SURVEY. (3) THE CASES LAW RELIED UPON BY THE COMMISSIONER OF IN COME TAX (APPEALS) ARE DISTINGUISHABLE ON FACTS BECAUSE THEY RELATE TO VALUATION OF CLOSING STOCK AND NOT UNACCOUNTED E XCESS STOCK AS ON THE DATE OF THE SURVEY . 3. THE FACTS OF THE CASE ARE THAT A SURVEY U/S.133A WA S CONDUCTED IN THE BUSINESS PREMISES ON 14.03.2008. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY BY THE ASSESSING OFF ICER AND NOTICE U/S.143(2) WAS ISSUED ON 29.09.2009. THE LD. AUTHOR ISED REPRESENTATIVE FOR ASSESSEE PRODUCED BOOKS OF ACCOU NTS AND OTHER DETAILS CALLED FOR BY THE ASSESSING OFFICER. THE AS SESSING OFFICER AFTER VERIFYING THE BOOKS OF ACCOUNTS, COMPLETED THE ASS ESSMENT BY ADDING A SUM OF F28,79,883/- TOWARDS UNACCOUNTED STOCK OFF ERED DURING ASSESSMENT AND F58,05,425/- TOWARDS VALUE OF EXCESS GOLD FOUND AT THE TIME OF SURVEY. THE ASSESSING OFFICER CONSIDER ED THE VALUE OF 12,212 GRAMS OF JEWELLERY AT THE RATE OF F1,090/- PER GRAM AND ITA NO.1659/MDS/2014. :- 3 -: WORKED OUT THE TOTAL VALUE AT F1,33,11,080/-. HE M ADE FURTHER ADDITION OF F58,08,425/-, SINCE THE ASSESSEE HAS AL READY OFFERED F75,02,655/- TOWARDS EXCESS JEWELLERY FOUND DURING THE COURSE OF SEARCH. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). 4. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT THE ASSESSING OFFICER IS NOT JUSTIFIE D IN CONSIDERING THE VALUE OF THE GOLD JEWELLERY AT F1,090/- PER GRAM WH ICH WAS THE PRICE OF THE GOLD NEAR TO THE DATE OF SURVEY AND MAKING A N ADDITION OF F1,33,11,080/-. ACCORDING TO THE COMMISSIONER OF I NCOME TAX (APPEALS) AVERAGE RATE TO BE ADOPTED AT F834.55 PE R GRAM TO VALUE THE EXCESS STOCK OF 12,212 GRAM I.E. AVERAGE COST F OR THE PERIOD FROM 01.07.2007 TO 13.04.2008. ACCORDINGLY, HE ASSESSE D THE VALUE OF JEWELLERY AT F1,01,91,524/- AS AGAINST THE VALUE AD OPTED BY THE ASSESSING OFFICER AT F1,33,11,080/-. THIS WAS RESUL TED IN SUSTAINING ADDITION OF F26,88,869/- ONLY AS AGAINST F58,08,425 /- MADE BY THE ASSESSING OFFICER. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MAT ERIAL ON RECORD. THE PROVISIONS OF SECTION 145A OF THE INCO ME TAX ACT READS AS UNDER; ITA NO.1659/MDS/2014. :- 4 -: NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN SECTION 145 (A) THE VALUATION OF PURCHASER AND SALE OF GOODS AND INVENTORY FOR THE PURPOSES OF DETERMINING THE INCOME CHARGEABL E UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION S HALL BE (I) IN ACCORDANCE WITH THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE ; AND (II) FURTHER ADJUSTED TO INCLUDE THE AMOUNT OF ANY T AX, DUTY, CESS OR FEE (BY WHATEVER NAME CALLED) ACTUALLY PAID OR INCURRED BY THE ASSESSEE TO BRING THE GOODS TO THE PLACE OF ITS LOCATION AND CONDITION AS ON THE DATE OF VALUAT ION. (B) INTEREST RECEIVED BY AN ASSESSEE ON COMPENSATI ON OR ON ENHANCED COMPENSATION, AS THE CASE MAY BE, SHALL BE DEEMED TO BE THE INCOME OF THE YEAR IN WHICH IT IS RECEIVED. THUS, IT MEAN THAT THE VALUATION OF INVENTORY TO BE MADE IN ACCORDANCE WITH THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE. AS PER ACCOUNTING PRACTICE, VALUE OF STOCK TO BE VALU ED AT MARKET OR COST PRICE WHICHEVER IS LOWER, AND THERE IS NO SYSTEM TO VALUE THE CLOSING STOCK ON AVERAGE PRICE METHOD. THE COMMISSIONER OF INCOME TAX (APPEALS) FOLLOWED AVERAGE COST FOR THE PERIOD FRO M 1 ST APRIL 2007 TO 13.04.2008 AND ALSO HE FOLLOWED CUT OFF DATE AFTER THE CLOSE OF FINANCIAL YEAR. IN THIS CASE, CLOSE OF FINANCIAL YEAR WAS 31 .03.2008. THE ADOPTION OF CUT OFF DATE TO VALUE THE CLOSING AS ON 13.04.2008 INSTEAD OF 31.03.2008 WHICH IS NOT PERMISSIBLE. IN OUR OPI NION, IT IS APPROPRIATE TO FOLLOW THE MARKET PRICE OR COST PRIC E WHICH IS LOWER ON THE DATE OF SURVEY I.E. 14.03.2008 TO VALUE THE EXC ESS INVENTORY OF ITA NO.1659/MDS/2014. :- 5 -: GOLD OF 12,212.75 GRAM. 6. ACCORDINGLY, WE REMIT THIS ISSUE BACK TO THE FILE O F ASSESSING OFFICER FOR FRESH CONSIDERATION IN THE LIGHT OF ABO VE OBSERVATIONS. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON FRIDAY, THE 31ST DAY OF JULY, 2015, AT CHENNAI. SD/- SD/- ( . . . ! ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( ! ) (CHANDRA POOJARI) ' / ACCOUNTANT MEMBER '# / CHENNAI $% / DATED:31.07.2015 KV COPY TO: & 1. / APPELLANT 2. / RESPONDENT 3. & '&(! / CIT(A) 4. & ' / CIT 5. )*+& , / DR 6. +-&. / GF