The Addl.CIT.,Range-4, Baroda V. M/s. Sun Petrochemicals Pvt.Ltd., Baroda

ITA 2340/AHD/2011

• Counselvise Citation: 234020514 RSA 2011
• Duration Of Justice: 4 year(s) 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 10-09-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 15-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DILIP KUMAR
• Assessee Lawyers: S N SOPARKAR
• Section: 143(3)

Judgement Text

I.T.A. NO.: 2340/AHD/2011 AND 1642/AHD/2012 ASSESSMENT YEAR: 2008 - 09 AND 2009 - 10 PAGE 1 OF 11 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD C BENCH, AHMEDABAD [CORAM : PRAMOD KUMAR AM AND S S GODARA JM] I.T.A. NO.: 2340/ AHD/201 1 AND 1642/AHD/2012 ASSESSMENT YEAR: 2008 - 09 AND 2009 - 10 ADDITIONAL COMMISSIONER OF INCOME TAX RANGE 4, BARODA .APPELLANT VS. SUN PETROCHEMICALS PRIVATE LIMITED . RESPONDENT 402, R K CENTRE, FATEHGANJ MAIN ROAD FETEHGANJ, BARODA [PAN: AAECS0891E] APPEARANCES BY: DILIP KUMAR FOR THE A PPELLANT S N SOPARKAR FOR THE REVENUE DATE OF CONCLUDING THE HEARING : SEPTEMBER 10 , 201 5 DATE OF PRONOUNCING THE ORDER : DECEMBER 9 TH , 201 5 O R D E R PER PRAMOD KUMAR AM : 1. THESE TWO APPEALS PERTAIN TO THE SAME ASSESSEE, INVOLVE SOME ISSUES AND WERE HEARD TOGETHER. AS A MATTER OF CONVENIENCE, THEREFORE, THESE TWO APPEALS ARE BEING DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER. ITANO. 2340/AHD/11 ASSESSMENT YEAR 2008 - 09 2 . BY WAY OF THIS APPEAL , THE ASSESSING OFFICER HAS CHALLENGED CORRECTNESS OF THE ORDER DATED 20 TH JUNE 2011 PASSED BY THE LEARNED CIT(A) IN THE MATTER OF I.T.A. NO.: 2340/AHD/2011 AND 1642/AHD/2012 ASSESSMENT YEAR: 2008 - 09 AND 2009 - 10 PAGE 2 OF 11 ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2008 - 09 . 3. IN THE FIRST GROUND OF APPEAL, THE ASSESSING OFFICER HAS RAISED THE FOLLOWING GRIEVANCE: (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF RS 3,34,86,633 MADE BY THE ASSESSING OFFICER IN THE VALUATION OF CLOSING STOCK IN RESPECT OF OLD STOCK WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD ADOPTED A COLOURABLE DEVICE TO ADJUST ITS STOCK VALUE ONLY TO ADJUST ITS PROFITS AS IT SUITED. (II) THE LEARNED CIT(A) ALSO IGNORED THE FACTS THAT THE ASSESSEE HAD NOT EXPLAINED THE QUANTITATIVE DISCREPANCIES, REGARDING THE SO CALLED OLD STOCK PERTAINI NG TO ONE YEAR, AND ITS QUANTIT Y SHOWN AT THE TIME OF ITS DEVALUATION/ SALES IN SUBSEQUENT YEARS. (III) THE LEARNED CIT(A) HAD ALSO ERRED IN FACTS AND IN LAW IN ACCEPTING THE SUBMISSIO N OF THE ASSESSEE THA T THE DETERIORATED STOCKS WERE PROCESSED AND THEN SOLD IN THE MARKET DESPITE THE FACT THAT THE ASSESSEE DID NOT MAINTAIN ANY SPECIFIC MECHANISM TO PROVE THAT HOW MUCH STOCKS HAS BEEN SOLD OUT OF CURRENT STOCKS AND OUT OF DETERIORATED S TOCKS AFTER REPROCESSING. 4. SO FAR AS THIS GRIEVANCE OF THE ASSESSING OFFICER IS CONCERNED, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. THE ASSESSEE BEFORE US IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND DEALING IN PETROCHEMICAL PRODUCTS. DURING THE CO URSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE QUANTITATIVE FIGURES OF THE ACB SHOW INCONSISTENCIES. IT WAS NOTED THAT THE OPENING STOCK OF ACB WAS 26,69,037 KGS AND THE INCREASE IN STOCK WAS 2,42,950 KG, WHILE PRODUCTI ON AND SALES FIGURES WERE 32,40,155 KGS AND 28,40,625 RESPECTIVELY. IT WAS ALSO THUS NOTED THAT ABNORMALLY HUGE QUANTITIES OF THIS PRODUCT ARE CARRIED IN STOCK YEAR AFTER YEAR . I.T.A. NO.: 2340/AHD/2011 AND 1642/AHD/2012 ASSESSMENT YEAR: 2008 - 09 AND 2009 - 10 PAGE 3 OF 11 THE ASSESSING OFFICER FURTHER NOTED THAT THE OPENING STOCK OF 26,69,037 KGS WA S VALUED WAS VALUED AT RS 11,86,92,275 @ RS 44.47 PER KG AND THE INCREASE IN QUANTITY OF STOCK OF 2,42,950 KGS WAS TO VALUED AT RS 1,49,43,369 @ RS 61.51. THE VALUATION OF STOCK WAS THUS AT LESS THAN THE PRODUCTION VALUE. IT WAS IN THIS BACKGROUND THAT TH E ASSESSEE WAS PUT TO NOTICE ON AS TO WHY THE ENTIRE CLOSING STOCK OF FINISHED GOODS (ACB) SHOULD NOT BE TREATED AS CURRENT YEARS STOCK, AND, VALUED, ACCORDINGLY AS PER FIFO METHOD . IT WAS EXPLAINED BY THE ASSESSEE THAT THE STOCK CARRIED IN THE INVENTORY INCLUDED THE STOCK WHICH WAS DETERIORATED AND WAS NON SALEABLE. IT WAS ALSO EXPLAINED THAT IN TERMS OF THE CONTRACTUAL OBLIGATIONS WITH THE RELIANCE INDUSTRIES LIMITED, THE ASSESSEE HAS TO TAKE E NTIRE QUANTITY OF THE ACETYLENE GAS AND EVEN IF WE REFUSE TO TAKE DELIVERY OF ACETYLENE GAS, THEN WE ARE BOUND TO MAKE PAYMENT (CLAUSE 4.3.2 OF AGREEMENT DATED 25 TH MARCH 1997) . THE ASSESSING OFFICER NOTED THE EXPLANATION OF THE ASSESSEE TO THE EFFECT THAT THE ASSESSEE WAS FORCED TO TAKE DELIVERY OF ACETYLENE GAS AND PRODUCE FINISHED GOODS IRRESPECTIVE OF SALES THEREOF AND AS A RESULT, FINISHED GOODS STOCK PILED UP AND DUE TO SLUGGISH DEMAND FROM CUSTOMERS, THE STOCK GOT DETERIORATED . IT WAS ALSO EXPLAINED THAT THE ASSESSEE CANNOT FORCE THE CUSTOMERS TO BU Y ON FIFO BASIS AND THE CUSTOMERS WOULD OBVIOUSLY WANT WHAT SATISFIES THEM WHICH ESSENTIALLY IS BETTER QUALITY PRODUCT. A REFERENCE WAS MADE TO THE ACCOUNTING STANDARD 2 ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA IN SUPPORT OF THE PROPOSITI ON THAT THE STOCK IS TO BE VALUED AT NET REALIZABLE VALUE WHICH IS REQUIRED TO BE ASSESSED AT THE BALANCE SHEET DATE. IT WAS EXPLAINED THAT THE VALUATION OF STOCK IS ON THE BASIS OF MARKET PRICE OF SUCH DETERIORATED STOCK AND THIS HAS BEEN DONE WITH THE AP PROVAL OF THE AUDITORS SO AS TO SHOW TRUE AND FAIR VIEW OF THE AFFAIRS. ALL THE RELEVANT DETAILS OF DEVALUATION OF STOCK DONE FROM TIME TO TIME WAS GIVEN TO THE ASSESSING OFFICER. THE ASSESSING OFFICER WAS, HOWEVER, FAR FROM IMPRESSED. HE WAS OF THE VIEW THAT THE DEVALUATION VIS - - VIS COST OF PRODUCTION HAS BEEN DONE ARBITRARILY, AND WITH A VIEW TO REDUCE THE TAX LIABILITY. THE ASSESSING OFFICER WAS OF THE VIEW THAT THIS VALUATION IS TO BE DONE ON THE FIFO BASIS AS NO PRUDENT BUSINESSMAN WILL KEEP THIS M UCH OF OLD STOCK AND SELL THE NEW STOCK . HE FURTHER NOTED THAT THE ASSESSEE HAS NOT BEEN ABLE TO JUSTIFY THAT THE ASSESSEE SOLD ONLY THE STOCK PRODUCED DURING THE CURRENT YEAR ONLY . HE THUS REVALUED THE STOCK ON FIFO BASIS AND BROUGHT TO TAX AN AMOUNT OF RS I.T.A. NO.: 2340/AHD/2011 AND 1642/AHD/2012 ASSESSMENT YEAR: 2008 - 09 AND 2009 - 10 PAGE 4 OF 11 3,34,86,633. AGGRIEVED BY THE ADDITION SO MADE, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). IN APPEAL, IN ADDITION TO THE OTHER ARGUMENTS, IT WAS POINTED OUT THAT THE ASSESSEE IS VALUING ITS STOCK AS COST OR AT MARKET PRICE WHICHEVER IS LESS. IT WAS ALSO POINTED OUT THAT THE PROVISIONS WERE CREATED IN THE BOOKS OF ACCOUNTS, WHICH WERE NOT CLAIMED AS DEDUCTION, IN THE ASSESSMENT YEARS 2004 - 05 AND 2005 - 06, FOR RS 191,74,498 AND RS 171,98,240 RESPECTIVELY, AND A CORRESPONDING ADJUSTMENT IS MADE FOR DEVALUATION. IT WAS SUBMITTED THAT THERE WAS NO JUSTIFICATION IN TREATING THE ENTIRE STOCK AS THE STOCK MANUFACTURED IN THE CURRENT YEAR, AND THAT THE APPROACH ADOPTED BY THE ASSESSING OFFICER IS INCORRECT AND INAPPROPRIATE. LEARNED CIT(A) UPHEL D THE GRIEVANCE OF THE ASSESSEE AND DELETED THE IMPUGNED ADJUSTMENT BY OBSERVING, INTER ALIA, AS FOLLOWS: 5.3 I HAVE CONSIDERED THE POINTS RAISED IN THE ASSESSMENT ORDER AS WELL AS SUBMISSIONS OF THE ASSESSEE. THE MAIN ARGUMENT OF THE ASSESSING OFFICER I S THAT ASSESSEE IS DEVALUING/REVALUING THE CLOSING STOCKS AT ITS OWN SWEET WILL AND THE SAME HAS BEEN DONE TO OBTAIN BENEFIT U/S 115JB. BUT THE FACT REMAINS THAT ALL SUCH DEVALUATIONS HAVE BEEN DONE IN PAST ASSESSMENT YEARS WHICH WERE SUBJECT MATTER OF AS SESSMENT U/S. 143(3) AND IN NONE OF THESE ORDERS SUCH DEVALUATIONS HAVE BEEN ADVERSELY COMMENTED UPON. THESE DEVALUATIONS ALSO DID NOT HAVE ANY IMPACT ON THE TOTAL INCOME OF THE ASSESSEE UNDER NORMAL PROVISIONS OF THE ACT AS THE PROVISIONS WERE ADDED BACK IN THE COMPUTATION OF INCOME. SO FAR AS IMPACT ON INCOME U/S 15JB IS CONCERNED, SUCH DIMINUTION IN VALUE OF STOCK CLAIMED BY THE ASSESSEE WERE DISALLOWED IN THE ASSESSMENT ORDER FOR THE A.Y. 2005 - 06 ON THE GROUND THAT IT WAS NOT IN ACCORDANCE WITH THE AC COUNTING POLICY BEING REGULARLY FOLLOWED BY THE ASSESSEE. THE ASSESSEE FILED APPEAL AGAINST SUCH DISALLOWANCE AND THE APPEAL WAS ALLOWED BY CIT(A). THUS, IN THE APPELLATE ORDER FOR THE ASSESSMENT YEAR 2005 - 06 IN THE ASSESSEE S OWN CASE, THE METHOD OF ACC OUNTING BEING FOLLOWED BY THE ASSESSEE REGARDING SUCH DEVALUATION OF STOCK HAS BEEN UPHELD BY THE CIT(A). HE HAS ALSO UPHELD THE ASSESSEE S CONTENTION THAT THE ASSESSEE I.T.A. NO.: 2340/AHD/2011 AND 1642/AHD/2012 ASSESSMENT YEAR: 2008 - 09 AND 2009 - 10 PAGE 5 OF 11 MANUFACTURES ACETYLENE CARBON BLACK (ACB) WHICH IS A CHEMICAL IN POWDER FORM WHICH DET ERIORATES OVER TIME DUE TO WHICH ITS REALIZABLE VALUE ALSO DETERIORATES CORRESPONDINGLY OVER TIME. HENCE THE REASONS GIVEN BY THE ASSESSING OFFICER FOR NOT ACCEPTING THE ASSESSEE S ACCOUNTING POLICY ARE NOT CORRECT. 5.4 ALSO NO DEVALUATION OF STOCK HAS BEEN DONE IN THE PREVIOUS YEAR 2007 - 08. WHATEVER WAS THE QUANTITY OF SUCH DETERIORATE STOCK IN THE OPENING STOCK, HAS BEEN CARRIED FORWARD AS PART OF THE CLOSING STOCK. THUS EVEN IF IT ASSUMED THAT THE ASSESSEE IS RESORTING TO SOME COLOURABLE DEVICE, THE SAME HAS NOT BEEN DONE IN THE CURRENT YEAR AND HENCE NO ACTION IS PERMISSIBLE IN THIS REGARD IN THIS YEAR. WHATEVER ACTION IS TO BE TAKEN, COULD HAVE BEEN TAKEN IN THE YEAR IN WHICH SUCH DEVALUATION WAS MADE. 5.5 SO FAR AS REVALUATION AND SELL OF SUCH S OCKS AT VALUES AT PAR WITH CURRENT STOCK IS CONCERNED, THE ASSESSEE HAS SUBMITTED THAT THE DETERIORATED STOCKS WERE REPROCESSED AND THEN WERE SOLD IN MARKET. AO HAS NOT BROUGHT ANYTHING ON RECORD TO REPUDIATE THIS CLAIM OF THE ASSESSEE. SUCH REPROCESSING AND SALE OF A PART OF THE DETERIORATED STOCK WAS ALSO MADE IN THE FY 2005 - 06 AND THE PART OF THE BALANCE OLD DETERIORATED STOCK WAS CARRIED FORWARD AS PART OF CLOSING STOCK WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT IN THE ASSESSMENT PROCEEDING FOR THE A.Y . 2006 - 07. IN SUCH CIRCUMSTANCE, NO ADVERSE INFERENCE CAN BE DRAWN ON THIS ACCOUNT. 5.6 COMING TO THE APPLICABILITY OF THE FIFO METHOD, THE DETERIORATED STOCKS FORMING PART OF THE OPENING AND CLOSING STOCK ARE NOT FROM THE CURRENT YEAR S PRODUCTION BUT W ERE PART OF EARLIER PRODUCTIONS. IN ALL THE I.T.A. NO.: 2340/AHD/2011 AND 1642/AHD/2012 ASSESSMENT YEAR: 2008 - 09 AND 2009 - 10 PAGE 6 OF 11 EARLIER YEAR, SUCH STOCKS HAVE BEEN PARTS OF OPENING AND CLOSING STOCKS AND THE SAME HAVE BEEN ACCEPTED IN THE ASSESSMENT ORDERS. THE REPROCESSING AND SALE OF A PART OF SUCH STOCK AND CARRY FORWARD OF THE BALAN CE OF SUCH STOCK AS CLOSING STOCK HAS ALSO BEEN ACCEPTED BY THE ASSESSING OFFICER IN THE ASSESSMENT PROCEEDING FOR A.Y. 2006 - 07. IN THE CURRENT YEAR TOO, THE ASSESSING OFFICER HAS ACCEPTED THEM AS PART OF THE OPENING STOCK AS NO CHANGE HAS BEEN MADE BY HI M TO THE OPENING STOCK. IN SUCH CIRCUMSTANCES THE ARGUMENTS OF THE ASSESSING OFFICER THAT THESE STOCKS WERE SOLD DURING THE CURRENT YEAR ONLY AND WERE NOT CARRIED FORWARD AS PART OF THE CLOSING STOCK CANNOT BE ACCEPTED IN ABSENCE OF ANY EVIDENCE BROUGHT O N RECORD BY THE ASSESSING OFFICER IN THIS REGARD. THE ASSESSEE S BOOKS OF ACCOUNTS ARE BEING REGULARLY AUDITED AND UNTIL AND UNLESS SOME DEFECT IS FOUND IN IT OR, AN ANALYSIS OF THE SALES MADE BY THE ASSESSEE, THE ASSESSING OFFICER PROVES THAT THE DETERIO RATED TOCKS HAVE BEEN SOLD IN THE CURRENT YEAR ITSELF, NO ADVERSE INFERENCE CAN BE DRAWN. JUST BECAUSE IN THE SUCCEEDING YEARS, THE DETERIORATED STOCKS WERE SOLD AT ALMOST THE SAME RATE AS FRESH STOCKS, IT CANNOT BE ASSUMED THAT THESE DETERIORATED STOCKS WERE SOLD IN THE CURRENT YEAR ITSELF DUE TO THE EXPLANATION OF THE ASSESSEE THAT THE DETERIORATED STOCKS WERE SOLD AFTER REPROCESSING. THIS CLAIM OF REPROCESSING HAS NOT BEEN FOUND TO BE INCORRECT BY THE ASSESSING OFFICER. THE ASSESSEE HAS MADE A SUBMIS SION FOR REASONS FOR SUCH OLD TOCKS LYING IN ITS OPENING AND CLOSING SOCK WHICH IS PLAUSIBLE AND HAS BEEN ACCEPTED BY THE DEPARTMENT AND THE CIT IN EARLIER YEARS. IN THE SUBSEQUENT YEARS, THE ASSESSEE HAS REPROCESSED SUCH STOCKS AND SOLD THEM AND SUCH SAL ES HAVE BEEN OFFERED FOR TAX. SO FAR AS APPLICABILITY OF FIFO METHOD IS CONCERNED, THIS WAS APPLICABLE, IF APPLICABLE AT ALL, IN THE YEAR IN WHICH THE ASSESSEE CLAIMED THE DEVOLUTION OF VALUE OF TOCK ON ACCOUNT OF DETERIORATION. ONCE THE EXISTENCE OF SUC H DETERIORATED STOCK HAS BEEN ACCEPTED BY THE DEPARTMENT IN EARLIER YEARS, THE SAME CANNOT BE REVERSED WITHOUT SUFFICIENT REASON IN THE CURRENT YEAR. I.T.A. NO.: 2340/AHD/2011 AND 1642/AHD/2012 ASSESSMENT YEAR: 2008 - 09 AND 2009 - 10 PAGE 7 OF 11 5.7 THUS THE ASSESSEE HAS EMPLOYED A REGULAR METHOD OF ACCOUNTING WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT IN ALL THE PAST YEARS. IN SUCH CIRCUMSTANCES, AS PER THE RATIO LAID DOWNY THE HON BLE GUJARAT HIGH COURT IN THE CASE OF VIKRAM PLASTICS REPORTED IN 239 ITR 161, WITHOUT POINTING OUT ANY DEFECT IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE, THESE CAN NOT BE REJECTED TO ADJUST THE VALUE OF THE CLOSING STOCK AS PER THE METHOD ADOPTED BY THE ASSESSING OFFICER. 5.8 SO FAR AS ASSESSING OFFICER S COMMENT THAT THE ASSESSEE COULD NOT EXPLAIN DISCREPANCIES REGARDING THE YEAR WISE STOCKS AND SALES THEREOF AS DI SCUSSED IN PARA 7.2 OF THE ASSESSMENT ORDER IS CONCERNED, THE ASSESSEE HAS EXPLAINED THE SAME VIDE THE SUBMISSIONS REPRODUCED ABOVE. ON ANALYSIS OF THE SUBMISSION MADE BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AS WELL THE UNDERSIGNED, IT IS SEEN THAT N O SUCH DISCREPANCY EXITS. 5.9 HENCE HE ASSESSING OFFICER S ACTION OF ADJUSTING THE VALUE OF CLOSING STOCK OF THE ASSESSEE IS NOT JUSTIFIED. ACCORDINGLY THE ADDITION ON THIS ACCOUNT IS DELETED. 5. THE ASSESSING OFFICER IS AGGRIEVED AND IS IN APPEAL BEFO RE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 7. WE FIND THAT THERE IS NO DISPUTE ABOUT THE FUNDAMENTAL LEGAL POSITION THAT THE CLOSING S TOCK IS TO BE VALUED AS COST OR AT MARKET PRICE - WHICHEVER IS LOWER. IN EFFECT, THEREFORE, AS LONG AS MARKET PRICE, OR NET REALIZABLE VALUE - AS THE TERMINOLOGY EMPLOYED IN THE ACCOUNTANTS STANDARDS PU T S IT, OF AN ITEM INCLUDED IN THE CLOSING IS STOCK IS LO WER THAN ITS COST, THE SAME IS T BE ADOPTED FOR THE PURPOSES OF VALUATION OF CLOSING STOCK. AS HELD IN THE CASE OF CHAINRUP SAMPATRAM VS CIT [(1953)24 ITR 481 (SC)] ' . ONE EXCEPTION IS VERY GENERALLY RECOGNISED ON PRUDENTIAL GROUNDS I.T.A. NO.: 2340/AHD/2011 AND 1642/AHD/2012 ASSESSMENT YEAR: 2008 - 09 AND 2009 - 10 PAGE 8 OF 11 AND IS NOW FULLY SA NCTIONED BY CUSTOM, VIZ., THE ADOPTION OF MARKET VALUE AT THE DATE OF MAKING UP ACCOUNTS, IF THAT VALUE IS LESS, THAN COST. IT IS OF COURSE AN ANTICIPATION OF THE LOSS THAT MAY BE MADE ON THOSE GOODS IN THE FOLLOWING YEAR, AND MAY EVEN HAVE THE EFFECT, IF PRICES RISE AGAIN, OF ATTRIBUTING TO THE FOLLOWING YEAR'S RESULTS A GREATER AMOUNT OF PROFIT THAN THE DIFFERENCE BETWEEN THE ACTUAL SALE PRICE AND THE ACTUAL COST PRICE OF THE GOODS IN QUESTION.'. CLEARLY THEREFORE, WHEN ACTUAL MARKET VALUE OF THE CLOSI NG STOCK IS LESS THAN THE PRICE AT WHICH IT IS ACQUIRED, IT S THE MARKET VALUE WHICH IS TO BE ADOPTED. IT IS NOT A QUESTION OF DEVALUATION OF THE STOCK VALUE, IT IS SIMPLY A QUESTION WHAT WOULD THE MARKET PRICE OF THE STOCK WILL BE. THE ASSESSING OFFICER W AS THUS CLEARLY IN ERROR IN HIS FUNDAMENTAL APPROACH. WHEN THE MARKET PRICE OF THE S TOCK IS TO BE DETERMINED, ONE HAS TO TAKE INTO ACCOUNT THE PRICE WHICH SUCH STOCK WILL EVENTUALLY REALIZE. THERE IS NO SCOPE OF PRESUMPTION. AS FOR THE FIFO METHOD, ADVOCATED BY THE ASSESSING OFFICER, IT ESSENTIALLY PROCEEDS ON THE ASSUMPTION THAT THE WHAT IS RECEIVED FIRST WILL BE SENT OUT FIRST BUT THEN IN THE EVENT OF STOCK BEING OF INFERIOR QUALITY WHICH ORDINARILY HAS NO TAKERS, SUCH A PRESUMPTION IS DIVORCED FRO M THE COMMERCIAL REALITY. THE ASSESSING OFFICER WAS CLEARLY IN ERROR IN THRUSTING THE FIFO ON THE ASSESSEE. THERE IS NO MATERIAL ON RECORD, EXCEPT PRESUMPTIONS OF ACCOUNTING THEORIES, TO ESTABLISH OR EVEN INDICATE INCORRECTNESS OF THE FACTUAL STAND TAKEN B Y THE ASSESSEE THAT CLOSING STOCK INCLUDED THE OLD STOCK OF SUB STANDARD QUALITY WHICH IS BEING CARRIED FORWARD FROM YEAR. THE FACT OF SUCH A HIGH VALUE OF CARRY FORWARD OF STOCK CAN AT BEST BE A TRIGGERING FACTOR FOR FURTHER INVESTIGATIONS BUT SUCH A FACT UAL SITUATION PER SE CANNOT BE REASON ENOUGH TO DISCARD THE STAND OF THE ASSESSEE THAT CLOSING STOCK INCLUDES SLOW MOVING STOCK OF SUBSTANDARD QUALITY WHICH HAS BEEN CARRIED FROM EARLIER YEARS. WE HAVE ALSO NOTED THAT THE ASSESSEE HAD CREATED PROVISIONS F OR FALL IN VALUE OF STOCK AT RS 191,74,498 AND RS 171,98,240, WHICH WAS NOT CLAIMED AS DEDUCTION, AND THE AGGREGATE OF THESE PROVISIONS IN LESS THAN ALLEGED UNDERSTATEMENT OF THE VALUE OF STOCK. LEARNED CIT(A) HAS GIVEN DETAILED REASONS FOR THE IMPUGNED RE LIEF, AND LEARNED DEPARTMENTAL REPRESENTATIVE HAS NOT BEEN ABLE TO SHOW ANY INFIRMITY IN THE SAME. IN VIEW OF ALL THESE FACTORS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE ARE NOT INCLINED TO DISTURB THE WELL REASONED FINDINGS OF THE CIT(A). WE CONFI RM THE SAME AND DECLINE TO INTERFERE IN THE MATTER. I.T.A. NO.: 2340/AHD/2011 AND 1642/AHD/2012 ASSESSMENT YEAR: 2008 - 09 AND 2009 - 10 PAGE 9 OF 11 8. GROUND NO. 1 IS THUS DISMISSED. 9. IN THE SECOND GROUND OF APPEAL, THE ASSESSING OFFICER IS AGGRIEVED OF LEARNED CIT(A) DELETING THE DISALLOWANCE OF RS 4,50,000 UNDER SECTION 40(A)(IA) BY HOLDING THA T THE PROVISIONS OF SECTION 194 C, AND NOT 194 J, ARE APPLICABLE ON THE FACTS OF THIS CASE AND THE ASSESSEE HAS DULY DEDUCTED TAX AT SOURCE UNDER SECTION 194C. 10. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THE ISSUE IS COVERED, IN FAVOUR OF THE ASSESSEE, BY HON BLE CALCUTTA HIGH COURT S JUDGMENT IN THE CASE OF CIT VS S K TEKRIWAL [(2013) 260 CTR 73 (CAL)] WHEREIN IT IS HELD THAT WHERE TAX IS DEDUCTED BY THE ASSESSEE UNDER WRONG PROVISIONS OF TDS, EVEN IF THAT BE SO, THE PROVISIONS OF SECTION 40(A)(IA) OF T HE ACT CANNOT BE INVOKED. THERE IS NO DISPUTE IN THE PRESENT CASE THAT THE TAX HAS BEEN DEDUCTED AT SOURCE, THOUGH UNDER SECTION 194C, AND, THEREFORE, THESE PAYMENTS CANNOT BE SUBJECTED TO DISALLOWANCE UNDER SECTION 40(A)(IA). WHETHER OR NOT THE TAX WAS DE DUCTIBLE UNDER SECTION 194J IS THUS WHOLLY ACADEMIC ASPECT OF THE MATTER. EVEN AS LEARNED DEPARTMENTAL REPRESENTATIVE ACCEPTS THIS POSITION, HE RELIES ON THE STAND OF THE AUTHORITIES BELOW. IN VIEW OF THE ABOVE DISCUSSIONS, AND RESPECTFULLY FOLLOWING THE E STEEMED VIEWS OF HON BLE CALCUTTA HIGH COURT IN THE CASE OF S K TE K RIWAL (SUPRA), WE UPHOLD THE RELIEF GRANTED BY THE CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. LEARNED CIT(A) S ORDER IS CONFIRMED ON THIS ASPECT AS WELL. 11. GROUND NO. 2 IS ALSO DISMI SSED. IN THE RESULT, THE APPEAL IS DISMISSED. ITANO. 2340/AHD/11 ASSESSMENT YEAR 2008 - 09 12. BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HAS CHALLENGED CORRECTNESS OF THE ORDER DATED 21 ST MAY 2012 PASSED BY THE LEARNED CIT(A) IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2009 - 10. I.T.A. NO.: 2340/AHD/2011 AND 1642/AHD/2012 ASSESSMENT YEAR: 2008 - 09 AND 2009 - 10 PAGE 10 OF 11 13. THIS APPEAL RAISED TWO GRIEVANCES OF THE ASSESSING OFFICER - FIRST, AGAINST LEARNED CIT(A) S DELETING THE ADDITION OF RS 2,95,52,834 IN RESPECT OF THE VALUATION OF CLOSING STOCK; AND SECOND, IN RESPECT OF LEARNED CIT(A) S DELETING THE DISALLOWANCE OF RS 4,50,000 UNDER SECTION 40(A)(IA). 14. LEARNED REPRESENTATIVES FAIRLY AGREE THAT WHATEVER WE DECIDE O N THE ASSESSING OFFICER S APPEAL FOR THE ASSESSMENT YEAR 2008 - 09, WHICH WAS HEARD ALONGWITH THIS APPEAL, WILL APPLY MUTATIS MUTANDIS ON THIS APPEAL AS WELL. VIDE OUR ADJUDICATION ON THE SAID APPEAL EARLIER IN THIS ORDER, WE HAVE REJECTED THE SIMILAR GRIEVANCES OF THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 2008 - 09. WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MATTER. ACCORDINGLY, ADOPTING THE REASONING SET OUT EARLIER IN THIS ORDER, WE REJECT BOTH THE GRIEVANCES OF THE ASSESSING OFFICER. THE ORDER OF THE CIT(A) IS CONFIRMED AND THE APPEAL IS REJECTED. 15. IN THE RESULT, BOTH THE APPEALS ARE DISMISSED. PRONOUNCED IN THE OPEN COURT TODAY ON 9 TH DAY OF DECEMBER, 2010. SD/ - SD/ - S S GODARA PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: THE 9 TH DAY OF DECEMBER , 201 5 . I.T.A. NO.: 2340/AHD/2011 AND 1642/AHD/2012 ASSESSMENT YEAR: 2008 - 09 AND 2009 - 10 PAGE 11 OF 11 COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD