Shri Jayantilal Mulchandbhai Modi, Ahmedabad V. The ACIT, Circle-6(1), Ahmedabad

ITA 2290/AHD/2018

AI Insights

The case involves an appeal by Shri Jayantilal Mulchandbhai Modi against the order of the Commissioner of Income Tax (Appeals)-6, Ahmedabad, concerning the assessment order for the year 2014-2015 under section 143(3) of the Income Tax Act, 1961. The primary issues in the appeal included the denial of a deduction claim under Chapter VIA for Rs. 1,25,000 and the addition of Rs. 59,36,822 due to the adjustment of opening stock. The Tribunal found no infirmity in the direction given by the CIT(A) regarding the deduction claim verification and upheld the addition related to the opening stock adjustment, but remanded the issue for fresh adjudication concerning the closing stock adjustment.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135818 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 10 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: C
• Next Hearing Date: 09-07-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 21-11-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: FORTHEASSESSEE.ATTHETIMEOFHEARINGWHATHASBEENCONTROVERTED; FORTHEASSESSEEEXCEPTTOTHEEXTENTOFTHEOPENINGSTOCKWHICHHADBEENSOLD

Judgement Text

आयकरअपीलीयअधिकरण , अहमदाबादनयायपीी INTHEINCOMETAXAPPELLATETRIBUNAL, ‘’C’’BENCH,AHMEDABAD BEFORESHRIWASEEMAHMED,ACCOUNTANTMEMBER And Ms.MADHUMITAROY,JUDICIALMEMBER आयकरअपीलसं./ITANo.2290/AHD/2018 धििाधरणवरध / Asstt.Year:2014-2015 ShriJayantilalMulchandbhaiModi, B-304,GhevarComplex, Sahibaug, Ahmedabad-380004. PAN:ABOPM4363R Vs. TheA.C.I.T, Circle-6(1), Ahmedabad. (Applicant)(Respondent) Assesseeby:ShriM.K.Patel,A.R Revenueby:ShriTruptiPatel,Sr.D.R सुिवाईकीतारीख/DateofHearing:10/07/2023 घोरणाकीतारीख/DateofPronouncement:06/10/2023 आदेश/ORDER PERWASEEMAHMED,ACCOUNTANTMEMBER: ThecaptionedappealhasbeenfiledattheinstanceoftheAssesseeagainst theorderoftheLearnedCommissionerofIncomeTax(Appeals)-6,Ahmedabad, arisinginthematterofassessmentorderpassedunders.143(3)oftheIncome TaxAct,1961(here-in-afterreferredtoas"theAct")relevanttotheAssessment Year2014-2015. ITAno.2290/AHD/2018 A.Y.2014-15 2 2.Theassesseehasraisedfollowinggroundsofappeal: 1.Thatonfactsandinlaw,thelearnedCIT(A)hasgrievouslyerredindirectingtheAOto verifytheclaimofdeductionunderchapterVIAinsteradofgrantingthesaiddeductionof Rs.1,25,000/- 2.Thatonfactsandinlaw,thelearnedCIT(A)hasgrievouslyerredinconfirmingthe additionofRs.59,36,822/-onaccountofadjustmentofopeningstock,withoutdirectingto reducethesameamountfromthevalueoftheclosingstockofthecurrentyear,thereby, resultinginunjustadditiontothecurrentyear’sincome. 3.Theappellantcravesleavetoadd,alter,amendanygroundofappeal. 3.ThefirstissueraisedbytheassesseeisthatthelearnedCIT(A)erredin directingtheAOtoverifytheclaimofdeductionunderchapterVIAoftheAct,for Rs.1,25,000/-whichoughttohavebeenallowedasdeduction. 4.Brieflystatedfactsarethattheassesseeinthepresentcaseisanindividual andengagedinthebusinessoftradingofOldMillMachineryandSparesand sellingofimmovableproperty.Theassesseeinthereturnofincomefortheyear underconsiderationhasclaimeddeductionunderchapterVIAoftheActfor Rs.1,25,000/-only.However,theAOwhiledeterminingtotalincomeofthe assesseeomittedtoallowthedeductionclaimedu/schapterVIAoftheActforRs. 1,25,000/-only.Aspertheassessee,inotherwords,theadditionwasmadeby theAOforRs.1,25,000/-tothetotalincome. 5.Onappeal,theLd.CIT(A),directedtheAOtoverifytheclaimofthe assesseeforthedeductionofRs.1,25,000/-underchapterVIAoftheAct,andif thesameisfoundgenuinethenthesameshouldbedeductedagainstthetotal incomeoftheassessee. 6.BeingaggrievedbytheorderoftheLd.CIT(A),theassesseeisinappeal beforeus. ITAno.2290/AHD/2018 A.Y.2014-15 3 7.TheLd.ARatthetimeofhearingfairlyconcededthatthereisnoinfirmity inthedirectiongivenbytheLd.CIT(A).Assuch,aspertheld.AR,therewasno grievanceagainstthedirectionoftheld.CIT-Atotheassessee. 8.Ontheotherhand,theLd.DRvehementlysupportedtheorderofthe authoritiesbelow. 9.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.ConsideringtheconcessiongivenbytheLd.ARfor theassesseeandthematerialsavailableonrecord,wedonotanyinfirmityinthe orderoftheLd.CIT(A).Hence,thegroundofappealoftheassesseeishereby dismissed. 10.ThesecondissueraisedbytheassesseeisthattheLd.CIT(A),erredin confirmingtheadditionofRs.59,36,822/-onaccountofadjustmentinthe openingstock. 11.TheAOduringtheassessmentproceedingsfoundthatintheimmediately precedingassessmentyeari.e.2013-14,theclosingstockofRs.5,37,36,771/- againstthecalculationmadebytheassesseeatRs.5,96,73,592/-wasdetermined. However,theassesseeintheyearunderconsiderationhastakentheopening stockatthehighervalueonlyi.e.Rs.5,96,73,592/-insteadofthevalue determinedbytheAOatRs.5,37,36,771/-whichhasresultedunderstatementof incomebytheamountofRs.59,36,821/-only.Thus,theAOmadetheadditionof Rs.59,36,822/-onaccountofadjustmentintheclosingstocktothetotalincome oftheassessee. 12.Aggrieved,assesseepreferredanappealtotheLd.CIT(A),whohas confirmedtheorderoftheAObyobservingasunder: ITAno.2290/AHD/2018 A.Y.2014-15 4 ThustheCIT(A)hasheldthatcapitalizinginterestonloansisacolourabledeviceusedby theappellantandeffectivelytheappellanthasdebitedinteresttotheP&LA/c.Thusin effecRs.59,36,822/-isinterestwhichhasbeendisallowed.Sincetheappellanthad capitalizedthisinterestintheClosingStock,thevalueofClosingStockgotreducedbythis amount.Hence,thecontentionoftheappellantcannotbeaccepted.TheAOhasrightly madeadditionofRs.59,36,822/-.Accordingly,additionofRs.59,36,822/-isupheld.This groundofappealisrejected. 13.BeingaggrievedbytheorderoftheLd.CIT(A),theassesseeisinappeal beforeus. 14.TheLd.ARbeforeusfiledapaperbookrunningfrompages1to54and submittedifanyadjustmentismadeintheopeningstock,thenthecorresponding effectshouldalsobegivenintheclosingstock.Therefore,onaccountof adjustmentintheopeningandtheclosingstock,therewouldnotbeanychange intheincomeoftheassessee.Thus,itwaspleadedbytheLd.ARthatnoaddition iswarrantedtothetotalincomeoftheassesseeinthegivenfactsand circumstances. 15.Ontheotherhand,theLd.DRvehementlysupportedtheorderofthe authoritiesbelow. 16.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Admittedly,thecorrectamountofopeningstockas determinedbytheAOstandsatRs.5,37,36,771/-whichhasnotbeenchallenged bytheLd.ARfortheassessee.Atthetimeofhearingwhathasbeencontroverted bytheld.ARisthisthatthereshouldalsobeanadjustmentbytheamountofRs. 59,36,821/-inthevalueofclosingstockshownbytheassesseefortheyearunder consideration.WedonotfindanyinfirmityintheargumentadvancedbytheLd. ARfortheassesseeexcepttotheextentoftheopeningstockwhichhadbeensold outintheyearconsideration.Itisbecausetheopeningstockwhichhasbeensold intheyearunderconsideration,thenthesamewillnotformpartoftheclosing stockshownbytheassesseeinthebooksofaccounts.However,theopening stockbroughtforwardfromtheearlieryearbutformingpartofclosingstockin ITAno.2290/AHD/2018 A.Y.2014-15 5 theyearunderconsideration,thentheadjustmentassuggestedbytheLd.AR shouldalsobemade.Withthisobservation,weset-asidetheissuetothefileof theAOforfreshadjudicationaspertheprovisionoflawandinthelightofabove stateddiscussion.Hence,thegroundofappealoftheassesseeisallowedforthe statisticalpurposes. 17.Intheresult,thegroundofappealoftheassesseeispartlyallowedforthe statisticalpurposes. OrderpronouncedintheCourton06/10/2023atAhmedabad. Sd/-Sd/- (MADHUMITAROY)(WASEEMAHMED) JUDICIALMEMBERACCOUNTANTMEMBER (TrueCopy) Ahmedabad;Dated06/10/2023 Manish