Western India Ceramics Pvt. Ltd., Baroda V. The ACIT.,Circle-4(2), Baroda

ITA 2313/AHD/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 2347 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 12-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMIT KAUR
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD D BENCH (BEFORE S/SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND D.C. AGRAWAL, ACOUNTANT MEMBER) ITA NO.2313/AHD/2010 [ASSTT. YEAR : 2006-2007] DICTATED ON: 07-01-2011 WESTERN INDIA CERAMICS P. LTD. BARODA PADRA HIGHWAY NR. CERAMIC NAGAR PADRA, DIST. BARODA. PAN AAACW 1838 K VS. ACIT, CIR.4(2) BARODA. (APPELLANT) (RESPONDENT) REVENUE BY : SMT. SUMIT KAUR ASSESSEE BY : NONE O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER : THIS APPEAL IS BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF THE CIT(A)-I II, BARODA DATED 22-2-2010 ARISING OUT OF THE ORDER OF THE ASSESSING OFFICER P ASSED UNDER SECTION 143(3) OF THE I.T. ACT, 1961. 2. THE ONLY GROUND RAISED IN THIS APPEAL READS AS U NDER: 1. THE LD.CIT(A) HAS ERRED IN LAW AND IN FACTS IN UPHOLDING ACTION OF THE LD. AO IN NOT ALLOWING THE VALUATION OF CLOSING STOCK WHICH WAS TAKEN AS PER SALES PRICE LESS 5% NET PROFIT ON THE GROUND THAT PROVISIONS OF SECTION 145A DOES NOT ENTITLE THE APPELLANT TO R EDUCE VALUATION BY SOME OTHER FANCY METHOD. THE IMPUGNED DISALLOWANCE OF RS.13,42,368/- BEING COMPLETELY IN DISREGARD TO FACTS AVAILABLE AN D BAD IN LAW IS PRAYED TO BE ALLOWED. 3. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS THAT T HE AO HAS ESTIMATED THE NET PROFIT UNDER SECTION 145A BY GIVING EFFECT TO E XCISE DUTY ELEMENT IN THE CLOSING STOCK. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF CERAMIC TILES. THE AS SESSMENT WAS COMPLETED AT A ITA NO.2313/AHD/2010 -2- LOSS OF RS.1,36,36,700/-. THE AO MADE ADDITION OF RS.13,42,368/- ON ACCOUNT OF UNDER VALUATION OF THE CLOSING STOCK. THE ASSES SEE IS TAKING THE VALUATION OF THE STOCK BY ADOPTING THE SALE PRICE LESS THAN 5% O F THE NET PROFIT. THE AO HOWEVER, DID NOT ALLOW THE REDUCTION OF 5% AND MADE IMPUGNED ADDITION. THE LEARNED CIT(A) DISMISSED THE APPEAL FILED BY THE AS SESSEE ON ACCOUNT THAT THE THERE IS NO JUSTIFICATION FOR REDUCING THE VALUE OF THE STOCK BY 5% AS IT WAS NOT RECOGNISED METHOD. FURTHER, THE PROVISION OF SECTI ON 145A ALSO DOES NOT ENTITLE THE ASSESSEE TO REDUCE THE VALUATION BY ANY ARBITRA RY METHOD. 4. WE HAVE HEARD THE LEARNED DR AND CONSIDERED THE MATERIAL AVAILABLE ON RECORD. IN OUR CONSIDERED VIEW, STOCK HAS TO BE VA LUED ONLY AT COST OR NET REALISABLE VALUE. THE AUTHORITIES BELOW HAVE NOT V ERIFIED AS TO WHETHER REDUCTION FROM THE SALE PRICE AT A RATE OF 5% WOULD BRING THE STOCK AT COST. FURTHER, THE EFFECT OF PROVISIONS OF SECTION 145A H AS ALSO NOT BEEN CONSIDERED. AS PER THAT PROVISION, THE STOCK HAS TO BE VALUED A T INCLUSION METHOD. THE EXCISE DUTY ELEMENT HAS TO BE CONSIDERED BOTH IN OP ENING AS WELL AS IN CLOSING STOCK IN PURCHASES AS WELL AS IN SALES AND NET EFFE CT HAS TO BE CONSIDERED WHILE COMPUTING THE PROFIT OF THE BUSINESS. SINCE THE RE VENUE AUTHORITIES HAVE NOT CORRECTLY VALUED THE STOCK, WE RESTORE THE MATTER T O THE FILE OF THE AO FOR ASKING THE ASSESSEE TO GIVE THE VALUATION AT COST OR MARKE T PRICE WHICHEVER IS LESS AND ALSO ON THE BASIS OF INCLUSION PRINCIPLE AS ABOVE A S PER SECTION 145A. 5. IN RESULT, THE ASSESSEE IS ALLOWED FOR STATISTIC AL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON 13 TH JANUARY, 2011 SD/- SD/- (MAHAVIR SINGH) JUDICIAL MEMBER (D.C. AGRAWAL) ACCOUNTANT MEMBER PLACE : AHMEDABAD DATE : 13-01-2011 ITA NO.2313/AHD/2010 -3- COPY OF THE ORDER FORWARDED TO: 1) : ASSESSEE 2) : DEPARTMENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD