FAMM LTD, MUMBAI V. ACIT 5(1), MUMBAI

ITA 2299/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83648 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 19-12-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 09-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL KUMAR SINGH
• Assessee Lawyers: JITENDRA JAIN
• Keywords: Depreciation; Rectification of order; Opportunity of being heard; Unabsorbed depreciation
• Section: 144; 154

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE HONBLE S/SHRI D. MANMOHAN , VICE-PRESIDENT AND B.R.BASKARAN (AM) , . , . . , ! ./I.T.A. NO.2299/MUM/2012 ( '#$ % / ASSESSMENT YEAR : 2006-07) M/S FAMM LTD, 401, SAI NARA BUILDING, 21, JUNCTION OF NORTH AVENUE, LINKING ROAD, SANTACRUZ(W), MUMBAI-400054 / VS. ASSTT. COMMISSIONER OF INCOME TAX 5(1), AAYAKAR BHAVAN, M K ROAD, MUMBAI-400020 ( !&' / APPELLANT) .. ( ()&' / RESPONDENT) & ./ *+ ./PAN/GIR NO. : AAACF0504D !&' , / APPELLANT BY : SHRI JITENDRA JAIN ()&' - , /RESPONDENT BY : SHRI SUNIL KUMAR SINGH . / - 01 / DATE OF HEARING : 21.8.2014 2 %$ - 01 /DATE OF PRONOUNCEMENT : 28 .8.2014 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 8.2.2012 PASSED BY LD CIT(A)-9, MUMBAI AND IT RELAT ES TO THE ASSESSMENT YEAR 2006-07. 2. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN CONFIRMING THE ADDITION OF RS.2.23 CRORES MADE BY THE AO WITH THE NARRATION CLOSING STOCK DEBITED TO PROFIT AND LOSS ACCOUNTS. 3. FACTS RELATING THERETO ARE STATED IN BRIEF. THE ASSESSMENT IN THE HANDS OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WAS C OMPLETED ON 31.12.2008 U/S 144 OF THE INCOME TAX ACT, 1961 (THE ACT.) ACCEPTIN G THE RETURNED LOSS OF I.T.A. NO.2299/MUM/2012 2 RS.2,02,08,981/-. SUBSEQUENTLY, THE AO NOTICED FROM THE PROFIT AND LOSS ACCOUNT THAT THE ASSESSEE HAS CLAIMED A SUM OF RS.2.23 CROR ES AS LOSS ARISING ON ACCOUNT OF CLOSING STOCK BY DEBITING THE SAME TO THE PROFIT AND LOSS ACCOUNT AND THE SAME WAS ALLOWED IN THE ASSESSMENT ORDER. THE AO TOOK T HE VIEW THE LOSS SO ALLOWED IS A MISTAKE APPARENT FROM RECORD. ACCORDINGLY, TH E AO PASSED THE RECTIFICATION ORDER U/S 154 OF THE ACT WHEREIN HE DISALLOWED THE ABOVE SAID AMOUNT OF RS.2.23 CRORES WITH NARRATION STATED ABOVE AND THE SAME RES ULTED IN A POSITIVE TOTAL INCOME OF RS.21.38 LAKHS AND THE AO RAISED DEMAND O F TAX ON THE SAME. AGGRIEVED BY THE SAID ORDER, THE ASSESSEE FILED APP EAL BEFORE THE LD. CIT(A) WHO CONFIRMED THE RECTIFICATION ORDER PASSED BY THE AO. AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE HAS FILED APPEAL BEFORE US. 4. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD . IN ORDER TO APPRECIATE THE ISSUE CONTESTED BEFORE US, WE FEEL I T NECESSARY TO EXTRACT BELOW THE PROFIT AND LOSS ACCOUNT OF THE YEAR UNDER CONSI DERATION. THE ASSESSEE IS PLACED IT IN PAGE 3 OF ITS PAPER BOOK. FAMM PRIVATE LIMITED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 ST MARCH, 2006 CURRENT YEAR PREVIOUS YEAR INCOME SCH RS. RS. SALES 12 23 , 950 , 000 8 , 022 , 002 OTHER INCOME 13 3 , 385 , 559 320 , 805 INCREASE/(DECREASE) IN STOCK 14 (22,347,346) (2,906,696) 4 , 988 , 213 5 , 436 , 111 EXPENDITURE COST OF GOODS SOLD 15 26,408,563 19 , 06 , 504 MANUFACTURING AND OTHER EXPENSES 16 2 , 04 8, 907 13 , 384 , 039 DEPRECIATION 103 , 798 199 , 526 INTEREST 17 2 , 944 , 740 28 , 561 , 268 18 , 434 , 809 (LOSS)/PROFIT (23 , 573 , 055) (12 , 998 , 698) THE LD. AR SUBMITTED THAT THE AMOUNT OF RS.2,23,47, 346/- SHOWN IN BRACKETS IN THE INCOME SIDE OF THE PROFIT AND LOSS ACCOUNT ACTU ALLY REPRESENTS THE VALUE OF I.T.A. NO.2299/MUM/2012 3 OPENING STOCK OF FINISHED GOODS AND WORK IN PROGRES S. IN THIS REGARD, THE LD. AR INVITED OUR ATTENTION TO THE SCH.14 OF THE BALANCE SHEET, WHICH IS PLACED AT PAGE 7 OF THE PAPER BOOK. THE LD. AR SUBMITTED THAT THE VALUE OF OPENING STOCK IS USUALLY SHOWN IN THE DEBIT SIDE (EXPENDITURE SIDE) OF THE PROFIT AND LOSS ACCOUNT IN T TYPE FORMAT. HOWEVER, IN THE VERTICAL TYPE FO RMAT AS THE ONE PREPARED BY THE ASSESSEE, THE DIFFERENCE BETWEEN THE OPENING ST OCK AND CLOSING STOCK IS SHOWN EITHER AS EITHER INCREASE OR DECREASE IN THE VALUE OF STOCK IN THE INCOME SIDE. THE LD. AR SUBMITTED THAT THE ASSESSE E HAS ALSO RECAST THE PROFIT AND LOSS ACCOUNT IN T TYPE FORMAT AND THE SAME IS PLACED IN PAGE 12 OF THE PAPER BOOK. THE LD. AR FURTHER SUBMITTED THAT THE ASSESSEE DID NOT HAVE ANY CLOSING STOCK AT THE YEAR END AND HENCE THE ENTIRE AMOUNT OF OPENING STOCK WAS SHOWN AS DECREASE IN THE VALUE OF STOCK. ACCORDI NGLY, THE LD. AR SUBMITTED THAT THESE FACTS COULD NOT BE PROPERLY BROUGHT OUT BEFORE THE TAXING AUTHORITIES. 5. ON THE CONTRARY, THE LD. DR SUBMITTED THAT T HE AO HAS PASSED THE IMPUGNED RECTIFICATION ORDER ON THE BASIS OF AUDIT REPORT. THE LD. DR FURTHER SUBMITTED THAT THE ASSESSING OFFICER DID NOT HAVE T HE BENEFIT OF EXPLANATIONS NOW OFFERED BEFORE THE TRIBUNAL AND ACCORDINGLY SUBMITT ED THAT THE SAID EXPLANATIONS NEEDS TO BE VERIFIED BY THE AO. THE LD A.R ALSO D ID NOT OBJECT TO THE PLEA PUT FORTH BY THE LD D.R. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF THE PARTI ES AND CAREFULLY PERUSED THE RECORD. ADMITTEDLY, THE AO HAS MADE THE ADDITI ON UNDER THE IMPRESSION THAT THE ASSESSEE HAS WRONGLY CLAIMED THE VALUE OF CLOSI NG STOCK AS DEDUCTION IN THE PROFIT AND LOSS ACCOUNT. HOWEVER, THE LD. A.R HAS SUBMITTED OUT BEFORE US THAT THE AMOUNT DEDUCTED FROM THE INCOME SIDE OF THE PRO FIT AND LOSS ACCOUNT ACTUALLY REPRESENTS THE VALUE OF OPENING STOCK OF F INISHED GOODS AND WORK IN PROGRESS, WHICH, IN ANY CASE, SHOULD BE ALLOWED AS DEDUCTION. THE LD. AR HAS FURTHER POINTED OUT THAT THE ASSESSEE DID NOT POSSE SS ANY CLOSING STOCK OF FINISHED GOODS AND WORK IN PROGRESS AS AT THE YEAR END. IN THAT CASE, THE VIEW ENTERTAINED BY THE TAX AUTHORITIES THAT THE ASSESSE E HAS CLAIMED THE VALUE OF CLOSING STOCK AS DEDUCTION DOES NOT APPEAR TO BE CO RRECT. HOWEVER, WE NOTICE THAT THE ASSESSEE DOES NOT APPEAR TO HAVE EXPLAINED THESE FACTUAL ASPECTS BEFORE THE AO. HENCE, WE ARE OF THE VIEW THAT THIS ISSUE REQUIRES FRESH EXAMINATION AT I.T.A. NO.2299/MUM/2012 4 THE END OF THE AO. ACCORDINGLY, WE SET ASIDE THE O RDER OF LD. CIT(A) AND RESTORE THE SAME TO THE FILE OF THE AO WITH A DIRECTION TO EXAMINE THIS ISSUE AFRESH AFTER AFFORDING NECESSARY OPPORTUNITY OF BEING HEARD TO T HE ASSESSEE AND TAKE APPROPRIATE DECISION IN ACCORDANCE WITH LAW. 7. THE NEXT GROUND RELATES TO SETTING OFF OF BROUGH T FORWARD BUSINESS LOSSES AND UNABSORBED DEPRECIATION AGAINST THE TOTAL INCOM E ASSESSED IN THE HANDS OF THE ASSESSEE. SINCE THE MAIN ISSUE RELATING TO TH E ADDITION OF CLOSING STOCK IS SET ASIDE TO THE FILE OF THE AO, WE RESTORE THIS ISSUE ALSO TO HIS FILE FOR HIS CONSIDERATION IN ACCORDANCE WITH LAW. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 28TH AUG, 2014 . 2 %$ . 3 4 5 6 28TH AUG, 2014 - 7/ 8 SD SD ( . / D. MANMOHAN ) ( . . , / B.R. BASKARAN ) / VICE- PRESIDENT / ACCOUNTANT MEMBER . / MUMBAI: 28TH AUG,2014. . ' . ./ SRL , SR. PS !'#$% &%'# / COPY OF THE ORDER FORWARDED TO : 1. !&' / THE APPELLANT 2. ()&' / THE RESPONDENT. 3. . =0 ( ! ) / THE CIT(A)- CONCERNED 4. . =0 / CIT CONCERNED 5. >?7 ('0'@# , !1 !@#$ , . / / DR, ITAT, MUMBAI CONCERNED 6. 7 / / GUARD FILE. A . / BY ORDER, TRUE COPY * (ASSTT. REGISTRAR) !1 !@#$ , . / /ITAT, MUMBAI