ITO, Ward - 32(3), Kolkata V. Shahjad Ahmed, Kolkata

ITA 1855/KOL/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48149 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 06-11-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K MALAKAR

Judgement Text

, , , , , , ,, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [ . . . . . .. . , , ! ! ! ! , , ,, , ] [BEFORE HONBLE SHRI S.V. MEHROTRA, AM & HONBLE SHRI MAHAVIR SINGH, JM] !' !' !' !' / I.T.A NO. 1855/KOL/2009 #$ %& #$ %& #$ %& #$ %&/ // / ASSESSMENT YEARS : 2006-07 INCOME TAX OFFICER/WARD-6(2) -VS.- SHAHJAD AHMED KOLKATA. KOLKATA. [ PAN : ABDPA 2817 M] [ () /APPELLANT ] [ +,()/ RESPONDENT ] () / FOR THE APPELLANT : - / SHRI S. K. MALAKAR +,() / FOR THE RESPONDENT : NONE . /ORDER [ . . . . . .. . , ] PER S.V. MEHROTRA, A. M. THE ASSESSEE HAS FILED THIS APPEAL FOR ASSESSMENT YEAR 2006-07 AGAINST ORDER OF CIT(A)-XIX, KOLKATA DATED 13.06.2010. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE NOR THER E IS ANY APPLICATION FOR ADJOURNMENT. WE, THEREFORE, DECIDED TO DISPOSE OF THE APPEAL AFTER H EARING THE LD. DEPARTMENTAL REPRESENTATIVE AND THE MATERIAL AVAILABLE ON RECORD. 3. THE ASSESSEE, IN THE RELEVANT ASSESSMENT YEAR, C ARRIED ON THE BUSINESS OF MANUFACTURING OF FINISHED LEATHER. HE HAD FILED ITS RETURN OF INCOME AT RS.7,70,618/-. THE ASSESSMENT WAS COMPLETED AT A TOTAL INCOME OF RS.52,05,670/- AFTER MAKING AN AD DITION OF RS.44,35,051/- ON ACCOUNT OF UNDER- VALUATION OF CLOSING STOCK. THE LD. CIT(A) DELETED THE ADDITION INTER ALIA, OBSERVING THAT ASSESSEE WAS REGULARLY FOLLOWING THE SAME METHOD OF VALUATIO N YEAR AFTER YEAR. FURTHER, ASSESSING OFFICER HAD NOT BROUGHT ANYTHING ON RECORD TO PROVE THAT THE ME THOD OF VALUATION ADOPTED BY THE ASSESSEE WAS [ ITA NO.1855/KOL/2009] 2 NOT CORRECT AND ALSO THAT THE CLOSING STOCK SHOULD BE VALUED BY ADOPTING THE AVERAGE COST. IN THIS CONTEXT, THE LD. CIT(A) HAS OBSERVED AS UNDER :- ON CAREFUL CONSIDERATION OF FACTS, NATURE OF BUSI NESS AND DOCUMENTS, I AM OF THE OPINION THAT THE A.O. WAS NOT CORRECT IN MAKING THE ADDITION OF RS.44,35,051/- TO THE VALUE OF CLOSING STOCK OF GOAT SKINS DECLARED B Y THE APPELLANT. THE APPELLANT HAS REGULARLY FOLLOWED THE SAME METHOD OF VALUATION YEA R AFTER YEAR, THE A.O. HAS NOT BROUGHT ANYTHING ON RECORD TO PROVE THAT THE METHOD OF VALUATION ADOPTED BY THE APPELLANT WAS NOT CORRECT AND ALSO WHY THE CLOSING STOCK SHOULD BE VALUED BY ADOPTING AVERAGE COST. I AGREE WITH THE CONTENTION OF THE APPELLANT THAT SINCE HE DEALS IN THE PERISHABLE ITEM, IT IS NOT POSSIBLE TO MAINT AIN QUALITY-WISE STOCK OF HIDE AND SKIN AND IT IS ALSO A FACT THAT THE QUALITY OF SKIN VARIES FROM THE STATE TO STATE DEPENDING ON THE CLIMATIC CONDITIONS. THE RATE OF S KIN ALSO VARIES DEPENDING THEIR FINISHING AND SIZE ETC. UNDER THE CIRCUMSTANCES, IT IS HELD THAT THE A.O. WAS NOT JUSTIFIED IN NOT ACCEPTING THE VALUE OF THE CLOSING STOCK DECLARED BY THE APPELLANT WITHOUT BRINGING ANYTHING POSITIVE ON THE RECORD TO PROVE OTHERWISE. 4. WE HAVE CONSIDERED THE SUBMISSIONS OF LD. DEPAR TMENTAL REPRESENTATIVE AND HAVE PERUSED THE RECORDS OF THE CASE. THE ASSESSING OFFICER NOTE D FROM THE DETAILS OF OPENING STOCK OF PURCHASES BY THE ASSESSEE, THAT THE AVERAGE RATE OF PURCHASE OF GOAT SKIN WAS RS.93.65, BUT THE ASSESSEE HAD TAKEN THE SAME AT RS.71/-. HE REQUIRED THE ASSESSEE TO SUBSTANTIATE ITS CLAIM THAT THE CLOSING STOCK WAS VALUED AT NET REALIZABLE VALUE. FOR THIS, HE RE QUIRED THE ASSESSEE TO PRODUCE ALL BILLS OF PURCHAS ES AND SALES OF THE SKINS AND HIDES. HE FURTHER REQUIR ED THE ASSESSEE TO FILE COPY OF STOCK REGISTRAR WIT H DETAILED ITEM AND QUALITY-WISE STOCK REGISTER AND A LSO SHOWING THE MOVEMENT OF THE SAME. HE FURTHER REQUIRED THE ASSESSEE TO FILE EVIDENCES INCLUDING C OPIES OF PURCHASE BILLS OF ALL STOCK VALUED AT MARK ET VALUE (BEING LOWER). HE ALSO REQUIRED THE ASSESSEE TO CORRELATE THE BILLS AND PURCHASES AND ALSO FILE EVIDENCES OF THE MARKET VALUE ADOPTED FOR THE SAME AND THE BASIS THEREOF. THE ASSESSEES REPLY HAS BEEN ENUMERATED AT PAGE-3 OF THE ASSESSMENT ORDER I N WHICH INTER ALIA, IT WAS POINTED OUT AS UNDER :- (1) CLOSING STOCK WAS NOT VALUED ON NET REALISABLE VALUE BUT ON ESTIMATED REALISABLE VALUE OF COST PRICE, WHICHEVER IS LOWER. (2) THE ASSESSEES BUSINESS WAS OF MANUFACTURING OF LEA THER FROM RAW HIDE & SKIN, WHICH IS IN THE NATURE OF PERISHABLE ITEMS UPTO THE CONVERSION OF RAW HIDE AND SKIN TO WET BLUE. (3) THE ASSESSEE DOES NOT MAINTAIN THE QUALITY-WISE STO CK REGISTER (WRONGLY MENTIONED QUANTITY) REGISTER. (4) FURTHER, HE CLARIFIED THAT KEEPING IN VIEW OF NATUR E OF TRADE, IT WAS NOT POSSIBLE TO SHOW THE MOVEMENT OF GOODS AS WELL AS TO CORRELATE THE PURCH ASE WITH SALES VALUE. 5. THE ASSESSING OFFICER, HOWEVER, EXAMINED THE BIL LS PRODUCED BEFORE HIM AND NOTICED THAT THE RATE OF GOAT SKIN HAD GONE UP FROM RS.51/- IN 1 ST AUGUST AND RS.120/- IN FEBRUARY. HE POINTED OUT [ ITA NO.1855/KOL/2009] 3 THAT ASSESSEE FAILED TO ESTABLISH THAT THE VALUE OF CLOSING STOCK WAS CORRECT. HE ACCORDINGLY, ADOPTED THE AVERAGE PURCHASE RATE. HOWEVER, BEFORE THE LD. CIT(A), IT WAS POINTED OUT THAT ASSESSEE HAD MAINTAINED STOCK REGISTER QUANTITY-WISE BUT NOT QUA LITY-WISE, WHICH WAS NOT PRACTICABLE IN VIEW OF NATURE OF ASSESSEES BUSINESS. IT IS SETTLED LAW, T HAT DEPENDING UPON THE NATURE OF ASSESSEES TRADE, BOOKS ARE TO BE MAINTAINED. IF, IT IS NOT PRACTICAB LE TO MAINTAIN THE STOCK REGISTER QUALITY-WISE, THE N THE REGULAR COURSE IN WHICH THE STOCK IS MAINTAINED HAS TO BE ACCEPTED. THE LD. CIT(A) HAS OBSERVED THAT WHILE ARRIVING AT THE VALUE OF STOCK OF GOAT S KIN, THE ASSESSEE HAS VALUED THE SAME ON THE BASIS OF QUALITY AND SIZE OF SKIN AND THEIR ESTIMATED REALIZ ABLE VALUE IN THE MARKET. HE HAS NOTED THAT THE VALUATION WAS DONE @ RS.150/-, RS.62/-, RS.60/- & R S.20/- PER PIECE DEPENDING UPON THE QUALITY OF SKIN. THOUGH THE ASSESSEE HAD NOT MAINTAINED THE ST OCK REGISTER QUALITY-WISE, BUT AT THE END OF THE YEAR, ON THE BASIS OF PHYSICAL VERIFICATION, VALUED THE CLOSING STOCK. THE METHODOLOGY ADOPTED BY THE ASSESSEE CANNOT BE FAULTED BECAUSE ASSESSEE HIMSELF HAS VALUED THE GOAT SKIN AT RS.150/- PER PIECE, WHEREAS THE ASSESSING OFFICER HAS CONSIDERED THE AV ERAGE VALUE OF GOAT SKIN AT RS.93.65 THIS IN ITSELF MAKES IT CLEAR THAT THE VALUATION ADOPTED BY THE ASSESSEE WAS ON REASONABLE BASIS AND CONSISTEN T WITH HIS PREVIOUS PRACTICE. THE LD. CIT(A) HAS RIGH TLY ACCEPTED THE ASSESSEES CONTENTION THAT SINCE HE DEALT WITH THE PERISHABLE ITEM, IT WAS NOT POSSI BLE TO MAINTAIN QUALITY-WISE STOCK OF HIDE AND SKIN , BUT WHEN THE CLOSING STOCK WAS TAKEN, THIS ASPECT W AS TAKEN INTO CONSIDERATION BY THE ASSESSEE. THE VALUATION HAS BEEN DONE ON ESTIMATED REALIZABLE VAL UE AND FOR THIS PURPOSE, ASSESSEE HAD ALSO PRODUCED CERTAIN SALE BILLS EVIDENCING THAT FINISHE D GOAT SKIN WAS SOLD AT RS.37/- AND RS.43/- PER PIECE INCLUSIVE OF TRANSPORT EXPENSES AND OTHER EXP ENSES. THEREFORE, TAKING INTO CONSIDERATION THE ENTIRE CONSPECTUS OF THE CASE, WE DO NOT FIND ANY I NFIRMITY IN THE ORDER OF THE LD. CIT(A) AND CONFIRM THE SAME. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. . . . . / / / / 0 /# 1 2 0 /# 1 2 0 /# 1 2 0 /# 1 2 ORDER PRONOUNCED IN THE OPEN C OURT ON 31. 05. 2011. SD/- SD/- [ ! , ] [ . ., ] [ MAHAVIR SINGH ] [S.V. M EHROTRA , ] JUDICIAL MEMBER ACCOUNTANT M EMBER 3) DATED : 31ST MAY, 2011. [ ITA NO.1855/KOL/2009] 4 . 5 + 6 76%/ COPY OF THE ORDER FORWARDED TO: 1. () /APPELLANT- INCOME TAX OFFICER/WARD-32(3), 10B, MI DDLETON ROW, KOLKATA-700 071. 2 +,() / RESPONDENT : SHAHJAD AHMED, 49, D.C. DEY ROAD, K OLKATA-700015. 3. .#/ THE CIT, 4. .# ()/ THE CIT(A), KOLKATA. 5. 1 + #/ DR, KOLKATA BENCHES, KOLKATA [,6 + / TRUE COPY] .#// BY ORDER, !? /DEPUTY/ASSTT REGISTRAR [ KKC @A #B? C /SR.PS]