DCIT RG 22(2), NAVI MUMBAI V. MACHINE FABRIK, MUMBAI

ITA 2460/MUM/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88571 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 04-03-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 29-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reasonable cause

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'B' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO. 2460/MUM/2011 (ASSESSMENT YEAR: 2007-08) DY. CIT - 22(2) VS. M/S. MACHINE FABRIK 4TH FLOOR, TOWER NO. 6 VASHI RLY. STN. COMPLEX VASHI, NAVI MUMBAI B-1, ARJUN CENTRE, B.S. DEVSHI MARG, GOVANDI MUMBAI 400088 PAN - AAAFM7543C APPELLANT RESPONDENT ITA NOS. 141 & 2549/MUM/2011 (ASSESSMENT YEARS: 2006-07 & 2007-08) M/S. MACHINE FABRIK VS. ADDL. CIT - 22(2) B-1, ARJUN CENTRE, B.S. DEVSHI MARG, GOVANDI MUMBAI 400088 4TH FLOOR, TOWER NO. 6 VASHI RLY. STN. COMPLEX VASHI, NAVI MUMBAI PAN - AAAFM7543C APPELLANT RESPONDENT APPELLANT BY: SHRI V.K. BORA RESPONDENT BY: NONE DATE OF HEARING: 04.03.2015 DATE OF PRONOUNCEMENT: 04.03.2015 O R D E R PER D. MANMOHAN, V.P. THESE APPEALS ARE DIRECTED AGAINST THE ORDER PASSED BY CIT(A) 33, MUMBAI AND THEY PERTAIN TO A.Y. 2006-07 AND 2007-08 . 2. IN RESPECT OF A.Y. 2006-07 ASSESSEE DECLARED TOTAL INCOME OF ` 70,29,348/-. ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF PHARMACEUTICAL MACHINERY. DURING THE COURSE OF SCRU TINY ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE VALUED ITS WORK-IN-PROGRESS AT THE VALUE EQUAL TO THE RAW MATERIAL CONSUMED, I.E. BY EXCLUDING LABOUR CHARGES AND OTHER MANUFACTURING EXPENSES. ACCORDING TO THE AO, THOUGH THE ASSESSEE HAD BEEN CONSISTENTLY FOLLOWING THE PRACTI CE OF VALUING CLOSING ITA NO. 2460, 141 & 2549/MUM/2011 M/S. MACHINE FABRIK 2 WORK-IN-PROGRESS AT MATERIAL COST ONLY, BUT AS PER THE NORMAL ACCOUNTING PRACTICE CLOSING STOCK HAS TO BE VALUED AT COST AND SUCH COST INCLUDE COST OF RAW MATERIAL AS WELL AS OTHER DIRECT MANUFACTURING EXPENSES. IN THIS REGARD THE AO RELIED UPON THE DECISION OF THE HON'BLE BOMB AY HIGH COURT IN THE CASE OF MELMOULD CORPORATION 202 ITR 789 WHEREIN TH E COURT OBSERVED THAT IN CASE WHERE AN ASSESSEE IS FOLLOWING CONSISTENT M ETHOD OF ACCOUNTING, WHICH IS NOT IN ACCORDANCE WITH THE ACCOUNTING PRIN CIPLES, THE CLOSING STOCK HAS TO BE REVALUED BUT IT SHOULD NOT ALTER THE OPEN ING STOCK VALUES. ASSESSMENT WAS ACCORDINGLY MADE ON A TOTAL INCOME O F ` 1,54,72,000/- AND ` 1,58,63,820/- FOR A.Y. 2006-07 AND 2007-08, RESPECT IVELY. 3. AGGRIEVED, ASSESSEE PREFERRED APPEALS BEFORE THE CI T(A) CONTENDING, INTER ALIA, THAT THE AO WRONGLY MADE THE ADDITION B Y CHANGING THE METHOD OF VALUING OF WORK-IN-PROGRESS ADOPTED BY THE ASSESSEE . IT WAS CONTENDED THAT IF THERE IS ANY MISTAKE IN VALUATION OF CLOSING STO CK IT CANNOT BE RECTIFIED BY RAISING CLOSING STOCK ONLY; VALUATION OF BOTH OPENI NG AND CLOSING STOCK HAD TO BE RAISED. RELIANCE WAS ALSO PLACED UPON THE LAT EST DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF MAHALAXMI GLASS WO RKS (P) LTD. 318 ITR 116 TO CONTEND THAT IN THE EVENT OF CHANGING THE ME THOD OF VALUING THE CLOSING WORK-IN-PROGRESS THE SAME METHOD HAS TO BE FOLLOWED FOR THE OPENING WORK-IN-PROGRESS ALSO. IT IS ALSO CONTENDED THAT TH E DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF MELMOULD CORPORATI ON (SUPRA) IS DISTINGUISHABLE ON FACTS IN AS MUCH AS IN THE SAID CASE THE ASSESSEE HAD INADVERTENTLY/DELIBERATELY VALUED THE WORK-IN-PROGR ESS WRONGLY EVERY YEAR WHEREAS PRIOR TO THE INTRODUCTION OF SECTION 145A B OTH THE METHODS ARE RECOGNISED METHODS AND IF INCLUSION METHOD HAS TO B E THRUST UPON THE ASSESSEE THE OPENING STOCK OF INVENTORY HAS ALSO TO BE CHANGED. ACCORDINGLY, FOR A.Y. 2007-08 THE MATTER WAS RESTORED TO THE FIL E OF AO FOR RECOMPUTATION OF OPENING STOCK VALUE. HOWEVER, FOR A.Y. 2006-07 T HE CIT(A) OBSERVED AS UNDER: - RESPECTFULLY, FOLLOWING THE DECISION OF THE BOMBAY HIGH COURT, THE ASSESSING OFFICER IS DIRECTED TO ASK FOR DETAILS OF DIRECT EXPENSES FOR THE PURPOSE OF INCLUSION IN OPENING STOCK AND TO ADD ON LY THE NET EFFECT OF THE TWO FIGURES. ITA NO. 2460, 141 & 2549/MUM/2011 M/S. MACHINE FABRIK 3 4. REVENUE IS IN APPEAL AGAINST THE ORDER PASSED BY CI T(A) FOR A.Y. 2007- 08 WHEREAS ASSESSEE FILED APPEALS FOR A.Y. 2006-07 AND A.Y. 2007-08 ON THE SAME ISSUE. 5. AT THE OUTSET IT MAY BE NOTICED THAT THERE IS A DEL AY OF 28 DAYS AND 18 DAYS IN FILING ASSESSEES APPEALS FOR A.Y. 2006-07 AND A.Y. 2007-08, RESPECTIVELY. NOTICES ISSUED TO THE ASSESSEE AT THE ADDRESS FURNISHED IN FORM NO. 36 WERE RETURNED UNSERVED WITH POSTAL REMARKS LEFT AND ASSESSEE HAS NOT FURNISHED ANY NEW ADDRESS TO THE REGISTRY. ASSE SSEE HAS ALSO NOT PROVIDED ANY REASONABLE CAUSE FOR DELAY IN FILING T HE APPEALS. EVEN TODAY NONE APPEARED ON BEHALF OF THE ASSESSEE. UNDER THES E CIRCUMSTANCES WE ARE OF THE VIEW THAT THE APPEALS FILED BY THE ASSESSEE DESERVE TO BE DISMISSED AS UNADMITTED. APART FROM THIS, WE MAY ALSO NOTICE THA T THE DECISION OF THE LEARNED CIT(A) IS IN CONSONANCE WITH THE VIEW TAKEN BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF MAHALAXMI GLASS WORKS (P) LTD. AND WE FAIL TO UNDERSTAND AS TO WHY THE ASSESSEE PREFERRED THE APP EALS. THUS ON BOTH REASONS THE APPEALS FILED BY THE ASSESSEE ARE DISMI SSED. 6. IN RESPECT OF THE APPEAL FILED BY REVENUE IT IS NOT IN DISPUTE THAT REVENUE IS CHALLENGING THE VIEW TAKEN BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF MAHALAXMI GLASS WORKS (P) LTD. (SUPRA), WHICH WAS I N TURN FOLLOWED BY THE ITAT MUMBAI BENCHES CONSISTENTLY SINCE IT IS THE LA TER DECISION OF THE HON'BLE BOMBAY HIGH COURT WHEREIN THIS SPECIFIC ISSUE WAS C ONSIDERED WHILE ARRIVING AT THE CONCLUSION THAT WHEN CLOSING STOCK VALUATION IS CHANGED, EVEN THE OPENING STOCK VALUATION HAS TO BE SUITABLY AMENDED. SINCE THE LEARNED CIT(A) FOLLOWED THE VIEW TAKEN BY THE HON'BLE BOMBAY HIGH COURT, WE DO NOT FIND ANY INFIRMITY IN ORDER PASSED BY THE CIT(A) FOR A.Y. 20 07-08. 7. IN THE RESULT, THE APPEALS FILED BY ASSESSEE AND RE VENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH MARCH, 2015. SD/- SD/- (CHANDRA POOJARI) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATED: 4 TH MARCH, 2015 ITA NO. 2460, 141 & 2549/MUM/2011 M/S. MACHINE FABRIK 4 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 33, MUMBAI 4. THE CIT 22, MUMBAI CITY 5. THE DR, B BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.