The ACIT, Circle-10, Ahmedabad V. Shri Bachubhai Jivanbhai Soni, Ahmedabad

ITA 2399/AHD/2011

• Counselvise Citation: 239920514 RSA 2011
• Duration Of Justice: 3 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 22-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MK SINGH
• Assessee Lawyers: P M PATEL AR

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ ././ ./ ITA NO. 2399/AHD/2011 / ASSESSMENT YEAR: 2008-09 ACIT, CIRCLE-10, AHMEDABAD SHRI BACHUBHAI JIVANBHAI SONI, 18, DIPAWALI SOCIETY, NR. VISHVAKUNJ CROSS ROAD, NARAYANNAGAR ROAD, AHMEDABAD PAN : ACLPS 2933 B / // / (APPELLANT) / // / (RESPONDENT) REVENUE BY : SHRI M.K. SINGH, SR. DR. ASSESSEE(S) BY : SHRI P.M. PATEL, AR !' # $%&/ // / DATE OF HEARING : 16/03/2015 '( # $%& / // / DATE OF PRONOUNCEMENT: 19/03/2015 )* )* )* )*/ // / O R D E R PER G.D. AGRAWAL, VICE PRESIDENT: THIS IS AN APPEAL FILED BY THE REVENUE AND IS DIREC TED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME-TAX(APPEALS )-III, AHMEDABAD DATED 05.07.2011 PERTAINING TO THE ASSESSMENT YEAR 2008-09. 2. THE ONLY GROUND RAISED BY THE REVENUE READS AS U NDER:- THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DELETIN G THE ADDITION OF RS.13,34,624/- ON ACCOUNT OF UNDERVALUATION OF CLOS ING STOCK MADE BY THE AO. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE DERI VES INCOME MANUFACTURING AND TRADING OF JEWELLERY. FOR THE VA LUATION OF CLOSING STOCK, THE ASSESSEE IS FOLLOWING WEIGHTED AVERAGE COST MET HOD SINCE PAST MANY YEARS. THIS METHOD WAS ACCEPTED IN ALL THE EARLIER YEARS; HOWEVER, DURING ITA NO. 2399/AHD/2011 ACIT VS. SHRI BACHUBHAI JIVANBHAI SONI FOR AY 2008-09 2 THE YEAR UNDER CONSIDERATION, THE ASSESSING OFFICER REJECTED THE ASSESSEES METHOD OF ACCOUNTING AND VALUED THE CLOSING STOCK A S PER FIFO METHOD, WHICH RESULTED IN THE ADDITION OF RS.13,34,624/-. ON APPEAL, THE LD. CIT(A) DELETED THE ADDITION; HENCE THIS APPEAL BY THE REVE NUE. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL PLACED BEFORE US. AFTER CAREFULLY CONSIDERING THE ARGUMEN TS OF BOTH THE SIDES AND ORDERS OF BOTH THE LOWER AUTHORITIES, WE DO NOT FIN D ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A). THE CIT(A) ALLOWED THE RE LIEF TO THE ASSESSEE WITH THE FOLLOWING FINDINGS:- 4. I HAVE CONSIDERED THE SUBMISSIONS OF THE APPEL LANT. NO DEFECTS IN THE BOOKS OF ACCOUNTS HAVE BEEN NOTICED BY THE AO. THER E WAS NO DEFECT FOUND BY THE AO IN THE METHOD OF ACCOUNTING ADOPTED BY THE A PPELLANT FOR THE LAST 15 YEARS. DURING THE LAST 15 YEARS, THE APPELLANT HAS BEEN FOLLOWING THE WEIGHTED AVERAGE COST METHOD FOR THE PURPOSE OF VAL UATION OF STOCK. THIS METHOD IS RECOGNIZED METHOD AS PER AS2. IN FACT, AS PER AS2, AN ASSESSEE CAN ADOPT EITHER FIFO METHOD OR WEIGHTED AVERAGE COST M ETHOD. IN THE PAST AND DURING THE YEAR UNDER CONSIDERATION, THE APPELLANT HAS BEEN FOLLOWING THE WEIGHTED AVERAGE COST METHOD CONSISTENTLY. HOWEVER, IN THE YEAR UNDER CONSIDERATION, ACCORDING TO THE AO, THIS METHOD DOE S NOT REFLECT THE CORRECT PROFITS OF THE APPELLANT, THEREFORE, THE AO ADOPTED THE FIFO METHOD AND MADE THE ADDITION OF RS. 13,34,624 ON ACCOUNT OF UN DERVALUATION OF CLOSING STOCK. IF, THERE IS NO DEFECT IN THE BOOKS OF ACCOU NTS OF THE APPELLANT AND THERE IS NO DEFECT IN THE METHOD OF ACCOUNTING OF WEIGHTE D AVERAGE COST METHOD FOLLOWED BY THE APPELLANT, THEN IN MY OPINION, THE AO CANNOT IMPOSE ANOTHER METHOD NAMELY FIFO METHOD ON THE APPELLANT. FOR ADO PTING FIFO METHOD, THERE HAS TO BE A FINDING OF THE FACT THAT THE APPE LLANT HAS NOT ACCOUNTED FOR ALL THE EXPENSES IN THE COST OF THE CLOSING STOCK. IF ALL THE EXPENSES HAVE BEEN DULY ACCOUNTED FOR, THEN THE OPTION OF ADOPTING EIT HER OF THE TWO METHODS NAMELY FIFO METHOD AND WEIGHTED AVERAGE METHOD OF C OST IS OF THE ASSESSEE AND NOT OF THE AO. MERELY BECAUSE IN ONE PARTICULAR YEAR, THE FIFO METHOD RESULTS INTO HIGHER VALUATION OF CLOSING STOCK, THE REFORE, THIS METHOD SHOULD BE ADOPTED BY THE APPELLANT, IS NOT PROPER GROUND TO R EJECT THE WEIGHTED AVERAGE COST METHOD CONSISTENTLY FOLLOWED BY THE APPELLANT FOR THE LAST 15 YEARS. THEREFORE, I HAVE NO HESITATION IN HOLDING THAT THE AO WAS NOT JUSTIFIED IN VALUING THE CLOSING STOCK BY FOLLOWING THE FIFO MET HOD AS AGAINST THE WEIGHTED AVERAGE METHOD BEING CONSISTENTLY FOLLOWED BY THE APPELLANT. ON ITA NO. 2399/AHD/2011 ACIT VS. SHRI BACHUBHAI JIVANBHAI SONI FOR AY 2008-09 3 THIS GROUND ALONE, THE ADDITION OF RS.13,34,624/- M ADE BY THE AO ON ACCOUNT OF UNDERVALUATION OF CLOSING STOCK IS DIRECTED TO B E DELETED. 5. THE CIT(A) HAS CLEARLY RECORDED THE FINDINGS THA T THE ASSESSEE IS FOLLOWING THE SAME METHOD OF ACCOUNTING IN THE LAST 15 YEARS. IN ALL THE 15 YEARS, THE SAME METHOD WAS ACCEPTED BY THE REVENUE. THE METHOD BEING FOLLOWED BY THE ASSESSEE IS ONE OF THE RECOGNIZED M ETHODS AS PER AS2 AND MOREOVER, NO DEFECT WAS FOUND BY THE ASSESSING OFFI CER IN THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE. MERELY BECAUSE BY FIFO METHOD THE VALUATION OF CLOSING STOCK FOR THE YEAR UNDER CONSI DERATION WAS MORE WOULD BE NO GROUND FOR REJECTING THE ASSESSEES METHOD OF ACCOUNTING AND FOLLOWING ANOTHER METHOD OF ACCOUNTING. IN VIEW OF ABOVE, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF TH E CIT(A) AND THE SAME IS SUSTAINED. THUS, THE REVENUES APPEAL IS DISMISSED. 6. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE COURT ON 19 TH MARCH, 2015 AT AHMEDABAD. SD/- SD/- (KUL BHARAT) JUDICIAL MEMBER G.D. AGRAWAL VICE-PRESIDENT AHMEDABAD; DATED 19/03/2015 BIJU T., PS )* # $+ ,)+$ )* # $+ ,)+$ )* # $+ ,)+$ )* # $+ ,)+$/ COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. $ !- / CONCERNED CIT 4. !- ( ) / THE CIT(A) - III , AHMEDABAD 5. +01 $ , , / DR, ITAT, AHMEDABAD 6. 13 4' / GUARD FILE . )*! )*! )*! )*! / BY ORDER, TRUE COPY 5 55 5/ // / 6 6 6 6 ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD