The ITO, Ward-1(3), Surat V. M/s. A K M Polyfab Pvt.Ltd., Surat

ITA 1858/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80506 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 03-11-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 31-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: K H SHAH
• Keywords: Assessment record
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL CHATURVEDI , A.M.) I. T. A. NO. 1858 / AHD/ 20 1 0 (A SSESSMENT YEAR: 2007 - 08) THE I.T.O., WARD 1(3), SURAT V/S M/S. A.K.M. POLYFAB PVT. LTD. C/O. KETAN H. SHAH, ADVOCATE 903, SAPPHIRE COMPLEX, C.G . ROAD, NAVRANGPURA, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAFCA 0031K APPELLANT BY : SMT. SONIA KUMAR, SR. D.R. RESPONDENT BY : SHRI K.H. SHAH, A.R. ( )/ ORDER DATE OF HEARING : 0 3 - 11 - 2014 DATE OF PRONOUNCEMENT : 14 - 11 - 2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF CIT(A) - I, SURAT DATED 30.03.2010 FOR A.Y. 2007 - 08. 2. THE FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE BUSINESS OF TRADING OF GREY AND FINISHED CLOTH. ASSESSEE ELECTRONICALLY FILED ITS RETURN OF INCOME FOR A.Y. 07 - 08 ON 26.10.2007 DECLARING TOTAL INCOME OF RS. 2,24,623/ - . THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SECTION ITA NO 1858/AHD/2010 . A.Y. 2007 - 08 2 143(3) VIDE ORDER DATED 29.09.2009 AND THE TOTAL INCOME WAS DETERMINED AT RS. 47,83,540/ - . AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A) WHO VIDE ORDER DATED 3 0.03.2010 GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE AFORESAID ORDER OF CIT(A) REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS ; - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN (A) DELE TING THE DISALLOWANCE MADE BY THE A.O ON ACCOUNT OF SUPPRESSION OF CLOSING STOCK OF RS. 44,18,439/ - . (B) DELETING THE ADDITION MADE BY THE A.O OF RS. 1,40,478/ - ON ACCOUNT OF SUPPRESSION OF CLOSING STOCK OF GREY FABRICS. 4. DURING THE COURSE OF ASSESSMENT PROC EEDINGS, A.O NOTICED THAT THE CLOSING STOCK OF GOODS SHOWN BY THE ASSESSEE INCLUDED GREY CLOTH AND FINISHED GOODS WHICH WERE VALUED AT RS. 10.60 PER METER AND RS. 11.66 PER METER RESPECTIVELY. IT WAS FURTHER NOTICED BY THE A.O THAT THE PURCHASE OF GREY CLO TH WAS MADE AT THE AVERAGE RATE OF RS. 10.65 PER METER WHEREAS THE PURCHASE OF FINISHED GOODS WERE MADE AT THE AVERAGE RATE OF RS. 14.36 PER METER. A.O ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE VALUATION RATE OF FINISHED GOODS NOT B E ADOPTED AT 14.36 PER METER IN STEAD OF RS. 11.66 PER METER ADOPTED BY THE ASSESSEE TO WHICH ASSESSEE INTERALIA SUBMITTED THAT INVENTORIES WERE VALUED AT LOWER OF COST AND NET RELIZABLE VALUE AND THE COST WAS ASCERTAINED ON FIFO /WEIGHTED AVERAGE METHOD. THE SUBMISSION OF THE A SSESSEE WAS NOT FOUND ACCEPTABLE TO THE A.O. A.O ALSO NOTED THAT ASSESSEE HAS NOT BEEN ABLE TO PROVIDE ITEM - WISE AND QUALITY - WISE BREAK UP OF CLOSING STOCK. HE WAS THEREFORE OF THE VIEW THAT THE VALUATION OF FINISHED GOODS AT RS. 11.66 PER METER W AS INCOR RECT. HE ACCORDINGLY VALUE D THE FINISHED GOODS AT 14.36 PER METER AND WORKED OUT THE SUPPRESSED VALUE OF CLOSING STOCK OF FINISHED GOODS AT RS. 44.18.439/ - . SIMILARLY, HE MADE ADDITION ON ACCOUNT OF GREY FABRICS OF CLOSING STOCK AT RS. 1,40,478/ - . AGGRI EVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A) WHO AFTER CONSIDERING THE S UBMISSIONS OF THE ASSESSEE DELETED THE ADDITION ON ACCOUNT OF VALUATION OF FINISHED GOODS BY HOLDING AS UNDER: - 3.3 I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AND THE OBSERVATION OF THE A.O. PERUSAL OF THE ASSESSMENT RECORDS SHOWS THAT THE PURCHASES FORMING PART OF THE CLOSING STOCK ARE THOSE WHICH HAVE BEEN PURCHASED IN THE MONTH OF DECEMBER 2006 TO JANUARY 2007. AS PER THE SALES DETAILS FILED ALTHOU GH THE SALES IN THE MONTH OF MARCH 2007 ARE ITA NO 1858/AHD/2010 . A.Y. 2007 - 08 3 VARYING FROM RS.18/ - PER METER TO RS.21/ - PER METER BUT IT IS SEEN THAT THE SALES IN THE IMMEDIATELY NEXT YEAR ARE AT MUCH LOWER FIGURE. IN THE MONTH OF MARCH 2007 THE LAST SALE THAT: HAS BEEN MADE IS ON 07.03.20 07 WHICH IS @RS.20/ - PER METER. THERE IS NO SALE THEREAFTER* HOWEVER, IMMEDIATELY IN THE NEXT YEAR, I.E. IN THE MONTH OF APRIL 2007, THERE ARE 14 INSTANCES OF SALES BILL AND RATE OF SALE HAS VARIED BETWEEN RS. 10.25 TO RS.12.15 PER METER. IN APRIL 2007 THE DETAILS OF SALES ARE AS UNDER: - DAT E BILL NO. RATE IN RS. PER METER 20. 04.2007 1 12.10 21.04.2007 2 12.05 22.04.2007 3 12.15 24.04.2007 4 12.15 24.04.2007 5 12.10 25.04.2007 6 12.10 26.04.200 7 7 12.1 0 28.04.2007 8 10.50 28.04 .2007 9 10.50 28.04.2007 10. 10.25 30.04.2007 11 10.75 30.04.2007 12 11.00 30.04.2007 13 11.00 30.04.2007 14 11.25 IN VIEW OF THE ABOVE, I AGREE WITH THE APPELLANT THAT SINCE THE PURCHASES IN THE DOSING STOCK ARE ONLY THOSE WHICH ARE PURCHASED FROM DECEMBER 2006 ONWARDS AND BECAUSE THE APPELLANT IS FOLLOWING FIFO METHOD, THE A.O IS NOT CORRECT IN ADOPTING THE AVERAGE OF THE WHOLE OF THE YEAR. FURTHER, FROM THE SALE INSTANCES FROM APRIL 2007 IT WAS CLEAR THAT THE MARKET PRICE WAS MUCH LESS AND HENCE THE RATE OF RS.11.66 PER METER (SALE RATE MINUS GROSS PROFIT) ADOPTED BY THE APPELLANT FOR THE VALUATION IS CORRECT. THE ADDITION MADE BY THE A.O. IS, THEREFORE, DELETED. THIS GROUND OF APPEAL IS ALLOWED. 5. WITH RESPECT TO THE ADDITION ON ACCOUNT OF GREY CLOTH THE SAME WAS DELETED BY THE CIT(A) BY HOLDING AS UNDER: - 4.3 I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AND THE OBSERVATION OF THE A.O. PERUSAL OF THE ASSESSMENT RECORDS SHOWS THAT THE PURCHASES FORMING PART OF THE CLOSING STOCK A RE THOSE WHICH HAVE BEEN PURCHASED IN THE MONTH OF DECEMBER 2006 TO JANUARY 2007. AS PER THE SALES DETAILS FILED ALTHOUGH IN MONTH OF MARCH 2007 ARE VARYING FROM RS.18/ - PER METER TO RS.21/ - PER METER BUT IT IS SEEN THAT THE SALES IN THE IMMEDIATELY NEXT ITA NO 1858/AHD/2010 . A.Y. 2007 - 08 4 Y EAR ARE AT MUCH LOWER FIGURE. IN THE MONTH OF MARCH 2007 THE LAST SALE THAT HAS BEEN MADE IS ON 07.03.2007 WHICH IS @RS.20/ - PER METER. THERE IS NO SALE THEREAFTER. HOWEVER, IMMEDIATELY IN THE NEXT YEAR, I.E. IN THE MONTH OF APRIL 2007, THERE ARE 14 INSTAN CES OF SALES BILL THE RATE OF SALE HAS VARIED BETWEEN RS. 10.25 TO RS.12.15 PER METER. IN APRIL 2007 THE DETAILS OF SALES ARE AS UNDER: - DATE BILL NO. RATE IN RS. PER METER 20.04.2007 1 12.10 21.04.2007 2 12.05 22.04.2007 3 12.15 24.04.2007 4 12.15 24.04.2007 5 12.10 25.04.2007 6 12.10 26.04.2007 7 12.10 28.04.2007 8 10.50 28.04.2007 9 10.50 28.04.2007 10 10.25 30.04.2007 11 10.75 30.04.2007 12 11.00 30.04.2007 13 11.00 30.04.2007 14 11.25 IN VIEW OF THE ABOVE AND AS DISCUSSED ABOVE, IF T HE RATE OF FINISHED CLOTH AT RS.11.66 PER METER IS CORRECT THEN THE RATE OF GREY CLOTH AT RS.10.60 PER METER IS QUITE REASONABLE. IN ANY CASE, AS DISCUSSED ABOVE THE APPELLANT HAS NOT BEEN ABLE TO SELL CLOTH AT A HIGH RATE WHICH HAS BEEN ADOPTED BY THE A.O . IN VIEW OF THE ABOVE, THE MARKET PRICE WAS MUCH LESS AND HENCE THE RATE OF RS.10.60 PER METER FOR GREY CLOTH ADOPTED BY THE APPELLANT FOR THE VALUATION IS CORRECT. THE ADDITION MADE BY THE A.O. IS, THEREFORE, DELETED. THIS GROUND OF APPEAL IS ALLOWED. 6. AGGRIEVED BY THE ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 7. BEFORE US, LD. D.R. RELIED ON THE ORDER OF A.O. ON THE OTHER HAND L.D. A.R. REITERATED THE SUBMISSIONS MADE BEFORE A.O AND CIT(A). HE FURTHER SUBMITTED THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE AUDITED AND NO SPECIFIC DEFECT IN THE ACCOUNTS HAVE BEEN POINTED OUT BY THE AUDITOR AND FURTHER THE BOOKS OF ACCOUNT HAVE NOT BEEN REJECTED. HE THUS SUPPORTED THE ORDER OF CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WITH RESPECT TO THE DELETION ON ACCOUNT OF VALUATION OF FINISHED GOODS, W E FIND THAT CIT(A) AFTER PERUSING THE DETAILS FILED BY THE ASSESSEE HAS NOTED THAT THE CLOSING STOCK OF FINISHED GOODS WERE PURCHASED FROM DECEMBER 2006 ONWARDS. AS THE ITA NO 1858/AHD/2010 . A.Y. 2007 - 08 5 AS SESSEE WAS FOLLOWING FIFO M ETHOD THE A.O WAS NOT CORRECT IN ADOPTING THE AVERAGE FOR THE WHOLE OF THE YEAR. WITH RESPECT TO THE GREY CLOTH WE FIND THAT AFTER CONSIDERING THE FACTS AND THE DETAILS SUBMITTED BY THE ASSESSEE, CIT(A) HAS NOTED THAT THE RATE OF GREY CLOTH AT RS. 10.60 PER METER IS QUITE REASONABLE AS THE MARKET PRICE WAS MUCH LESS. BEFORE US REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO CONTROVERT THE FINDINGS OF CIT(A). WE THEREFORE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A) AND T HUS THIS GROUND OF REVENUE IS DISMISSED. 9. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 14 - 11 - 201 4 . SD/ - SD/ - (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GU ARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD