Volga Air Technic Limited, Ahmedabad V. The Income tax Officer, Ward-8(4), Ahmedabad

ITA 2467/AHD/2005

• Counselvise Citation: 246720514 RSA 2005
• Duration Of Justice: 7 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2002-2003
• Appeal Filed On: 30-11-2005
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: VARIS IRANI AR SHRI D K SINGH
• Keywords: Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, AHMEDABAD BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER I.T.A. NO.2467 / AHD/2005 (ASSESSMENT YEAR 2002-03) VOLGA AIR TECHNICS LIMITED, PLOT NO.472/470 VILLAGE CHANGODAR, TAJPUR ROAD, SARKHEJ BAVLA HGHWAY, TAL. SANAND, AHMEDABAD VS. ITO, WARD 8(4), AHMEDABAD PAN/GIR NO. : AAACV9965A (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI VARIS IRANI, AR SHRI D K SINGH, SR. DR RESPONDENT BY: DATE OF HEARING: 10.12.2012 DATE OF PRONOUNCEMENT: 31.12.2012 O R D E R PER SHRI A. K. GARODIA, AM:- THIS IS ASSESSEES APPEAL DIRECTED AGAINST THE ORD ER OF LD. CIT(A) XIV, AHMEDABAD DATED 02.09.2005 FOR THE ASSESSMENT YEAR 2002-03. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1 LEARNED CIT (A) HAS ERRED IN LAW AND ON F ACTS IN NOT ACCEPTING THE CLAIM OF THE APPELLANT TO VALUE CLOSI NG STOCK AT REDUCED REALIZABLE VALUE ON THE BASIS OF THE REPORT OF AN INDEPENDENT AGENCY AND THUS CONFIRMING THE ACTION T AKEN BY THE AO IN MAKING ADDITION TO THE TOTAL INCOME OF THE AS SESSEE COMPANY. THE ADDITION BEING WITHOUT ANY MERITS OR J USTIFICATION REQUIRES TO BE QUASHED. 2 THE ORDER PASSED BY CIT (A) IS WITHOUT PROP ERLY APPRECIATING THE FACTS OF THE CASE THAT THE ASSESSEE COMPANY IS A SICK INDUSTRIAL UNIT AND IS REGISTERED WITH BIFR HAVING RAW MATERIA L AND SEMI FINISHED GOODS WHICH HAD NO SALEABLE VALUE IN THE M ARKET AND I.T.A.NO.2467 /AHD/2005 2 THEREFORE THE REALIZABLE PRICES OF SUCH INVENTORY O N THE BASIS OF THE REPORT OF INDEPENDENT AGENCY WAS ADOPTED TO VALUE C LOSING STOCK AS PER ACCOUNTING STANDARD # 4_PERMITTMG TO MAKE ADJUS TMENTS OF ASSETS AND LIABILITIES FOR THE EVENTS OCCURRING AFT ER BALANCE SHEET DATE ON THE BASIS OF SIMILAR CONDITIONS PREVAILING ON THE DATE OF THE BALANCE SHEET. 3 ALTERNATIVELY AND WITHOUT PREJUDICE, THE VA LUE OF CLOSING STOCK ADDED IN THE HANDS OF THE APPELLANT MAY KINDL Y BE ALLOWED TO BE ADDED AS OPENING STOCK IN THE SUBSEQUENT ASSESSM ENT YEAR. 4 INITIATION OF PENALTY U/S 271 (1)(C) OF THE ACT IS NOT JUSTIFIED. 2. IT WAS SUBMITTED BY THE LD. A.R. THAT IN THAT CA SE, THE APPEAL WAS DISPOSED OFF BY THE TRIBUNAL EARLIER ON 24.04.2009 AND THE TRIBUNAL ORDER IS AVAILABLE ON PAGES 24-28 OF THE PAPER BOOK. HE FURTHERS SUBMITTED THAT AGAINST THIS TRIBUNAL ORDER, THE REVENUE PREFERRED AN APPEAL BEFORE HONBLE GUJARAT HIGH COURT AND THE SAME IS DISPOSED OF BY HONBLE GUJARAT HIGH COURT AS PER THE JUDGEMENT DATED 16.08 .2011 IN TAX APPEAL NO.2165/2009 AND THIS JUDGEMENT OF HONBLE GUJARAT HIGH COURT IS AVAILABLE ON PAGES 1-2 OF THE PAPER BOOK. HE FURTH ER SUBMITTED THAT AS PER THIS JUDGEMENT OF HONBLE GUJARAT HIGH COURT, T HE ISSUE HAS BEEN RESTORED BACK TO THE FILE OF THE TRIBUNAL FOR AFRES H DECISION AFTER ASCERTAINING AS TO WHETHER THE GITCO VALUATION OF C LOSING STOCK IS ON WHICH DATE I.E. 31.03.2002 OR 27.06.2002. BOTH THE SIDE AGREED THAT IN THE PRESENT PROCEEDING, THE TRIBUNAL HAS TO DECIDE THE LIMITED ASPECT AS PER THIS DIRECTION OF THE HONBLE GUJARAT HIGH COURT. 3. IN THIS REGARD, IT WAS SUBMITTED BY THE LD. A.R. THAT THE REPORT OF GITCO DATE 27.06.2002 IS AVAILABLE ON PAGES 10-12 O F THE PAPER BOOK. HE ALSO SUBMITTED A COPY OF THE ANNUAL REPORT OF TH E ASSESSEE FOR THE FINANCIAL YEAR 2001-02 WHICH IS RELEVANT FOR THE PR ESENT ASSESSMENT YEAR 2002-03 AND HE DREW OUR ATTENTION TO PAGE 13 OF THI S ANNUAL REPORT AND SUBMITTED THAT AS PER NOTE NO.6 OF THE ANNEXURE TO THE AUDIT REPORT, CLOSING STOCK WAS VALUED AS EXPLAINED IN SCHEDULE 1 4 OF NOTE OF ACCOUNTS I.T.A.NO.2467 /AHD/2005 3 PARTICULARLY NOTE NO.4. HE FURTHER SUBMITTED THAT THIS NOTE IS AVAILABLE ON PAGE 19 OF THE ANNUAL REPORT AS PER WHICH, BOARD HA S CONSIDERED VALUATION MADE BY GITCO. HE SUBMITTED THAT THIS SHOWS THAT THE VALUATION REPORT OF GITCO IS FOR 31.03.2002 AND HENCE, THE ADDITION MADE BY THE A.O. AND CONFIRMED BY LD. CIT(A) SHOULD BE DELETED AS HA S BEEN DONE BY THE TRIBUNAL IN THE FIRST ROUND. A QUERY WAS MADE BY T HE BENCH AS TO WHETHER THE SAME METHOD WAS ADOPTED BY THE ASSESSEE IN EARL IER AND LATER YEARS, IT WAS SUBMITTED BY THE LD. A.R. THAT MATERIAL IS NOT AVAILABLE ON RECORD IN THIS REGARD. RELIANCE WAS PLACED BY HIM ON THE JUD GMENT OF HONBLE MADRAS HIGH COURT RENDERED IN THE CASE OF CIT VS GO RGE OAKES LTD. AS REPORTED IN 303 ITR 357 (MAD.). 4. AS AGAINST THIS, IT WAS SUBMITTED BY THE LD. D.R . THAT ON THE FIRST PAGE OF THE GITCO REPORT DATE GIVEN IS 27.06.2002 A ND IT IS NOTED IN THE BOTTOM OF THIS REPORT THAT THIS IS IN REFERENCE TO ASSESSEES LETTER DATED 10.06.2002 AND HENCE, THE VALUATION CANNOT BE OF A DATE PRIOR TO THIS DATE OF LETTER OF THE ASSESSEE AND SINCE IN THE ENTIRE V ALUATION REPOT, NO DATE IS MENTIONED BY GITCO EXCEPT THE DATE OF 27.06.2002 ON THE 1 ST PAGE, THIS VALUATION REPORT SHOULD BE OF DATED 27.06.2002 ONLY . 5. IN THE REJOINDER, IT WAS SUBMITTED BY THE LD. A. R. THAT THE COPY OF THE MINUTES WERE SUBMITTED BEFORE THE A.O. AND THE RELEVANT PORTION HAS BEEN REPRODUCED BY THE A.O. ON PAGE 3 OF THE ASSESS MENT ORDER AND IN THE SAME, THE BOARD HAS APPROVED VALUATION OF CLOSING S TOCK AS ON 3.103.2002 AS PER VALUATION REPORT OF GITCO AT RS.31.51 LACS A S AGAINST COST PRICE OF RS.215.88 LACS AND HENCE, IT SHOULD BE ACCEPTED THA T THIS VALUATION REPORT OF DATE 31.03.2002. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD. HONBLE GUJARAT HIGH COURT HAS RESTORED TH IS MATTER BACK TO THE FILE OF THE TRIBUNAL TO FIND OUT AND ASCERTAIN AS T O WHETHER GITCO VALUATION OF CLOSING STOCK IS ON 31.03.2002 OR IS O N 27.06.2002. IN THIS I.T.A.NO.2467 /AHD/2005 4 REGARD, WHEN WE EXAMINE THE VALUATION REPORT OF GIT CO WHICH IS AVAILABLE ON PAGES 1-12 OF THE PAPER BOOK, WE FIND THAT PAGE 1 IS THE COVERING LETTER OF GITCO AND PAGE 2-12 IS ANNEXURE REGARDING VALUATION OF CURRENT ASSETS AND ON THESE PAGES FORM 2-12 I.E. ANNEXURE 1, NO DATE IS MENTIONED BY GITCO. ON PAGE 1, WE FIND THAT THE DA TE MENTIONED BY GITCO IS 27.06.2002 AND HERE ALSO, GITCO HAS NOT ME NTIONED AS TO WHETHER THIS VALUATION REPORT IS FOR THE VALUE OF C URRENT ASSETS AS ON 31.03.2002 OR OF SOME OTHER DATE. AT THE BOTTOM OF THIS LETTER, IT IS STATED BY GITCO THAT THIS VALUATION REPORT IS WITH REFEREN CE TO ASSESSEES LETTER NO.LD/SM/02-03-255 DATED JUNE 10, 2002. ON PAGE 3O F THE ASSESSMENT ORDER ALSO, AS PER THE MINUTES REPRODUCED BY THE A. O., WE FIND THAT IT IS NOTED THAT GITCO WAS APPOINTED BY CENTRAL BANK OF I NDIA AND ACCORDING TO GITCO, STOCK AS ON DATE OF VALUATION MADE IN JUN E 2002 HAD BEEN RS.28.50 LACS ONLY. THE RELEVANT PORTION OF THIS M INUTES REPRODUCED BY THE A.O. IN THE ASSESSMENT ORDER IS REPRODUCED BELO W FOR READY REFERENCE: VALUATION OF CLOSING STOCK:- CMD RECALLED THE DISCUSSION AT THE LAST MEETING HEL D ON 8 TH APRIL, 2002, AND REPORTED THAT AT THE JOINT METING HELD ON 5 TH JUNE, 2002, THE OA-IDBI ADVISED AT THE REQUEST OF CENTRAL BANK OF INDIA TO HAVE THE VALUATION OF CURRENT ASSETS DONE BY INDEPE NDENT VALUER AT COMPANYS COST. GITCO WAS APPOINTED BY CENTRAL BAN K OF INDIA AND ACCORDING TO GITCO, STOCK AS ON DATE OF VALUATI ON MADE IN JUNE, 2002, HAD BEEN RS.28.50 LACS ONLY. 7. FROM THE ABOVE MINUTES REPRODUCED BY THE A.O. IN THE ASSESSMENT ORDER, IT IS SEEN THAT AS PER THE MINUTES ITSELF, I T IS STATED BY THE BOARD OF THE ASSESSEE COMPANY THAT THIS IS ACCORDING TO GITC O STOCK AS ON DATE OF VALUATION MADE IN JUNE 2002 HAD BEEN RS.28.50 LACS. FURTHER, IT COMES OUT THAT VALUATION OF STOCK WAS DETERMINED AS PER T HIS VALUATION REPORT AS ON DATE OF VALUATION AND NOT ON THE LAST DATE OF YE AR ENDING I.E. 31.03.2002. HENCE, THE VALUATION REPORT OF GITCO I S NOT FOR THE VALUE OF I.T.A.NO.2467 /AHD/2005 5 CLOSING STOCK AS ON 31.03.2002 BUT THIS IS NOTED TH AT GITCO REPORT IS FOR THE VALUE OF CLOSING STOCK AS ON DATE OF VALUATION MADE IN JUNE 2002. I.E. 27.06.2002. IF THE VALUATION WAS MADE AT THE INSTA NCE OF THE ASSESSEE COMPANY FOR BALANCE SHEET PURPOSE, IT COULD HAVE BE EN ACCEPTED THAT THE COMPANY WILL GET THE STOCK VALUED ONLY FOR A DATE O F BALANCE SHEET BUT IN THE PRESENT CASE, GITCO WAS ASKED TO VALUE THE STOC K BY BANK AND HENCE, BANK MAY ASK TO VALUE THE STOCK ON ANY DATE AND IT CANNOT BE SAID THAT EVEN IN ABSENCE OF ANY DIRECTION FOR VALUING STOCK ON THE DATE OF YEAR END VALUATION DONE BY GITCO IS FOR YEAR END. 8. THERE WAS ONE MORE ARGUMENT OF THE LD. A.R. THAT THERE IS NO PURCHASE AND SALE DURING 01.04.2002 TO 27.06.2002 A ND HENCE, THE VALUE AS ON 27.06.2002 HAS TO BE ACCEPTED AS THE VALUE OF STOCK AS ON 31.03.2002 BUT WE DO NOT FIND FORCE IN THIS ARGUMEN T BECAUSE APART FORM THE PURCHASE AND SALE, DURING THIS PERIOD FROM 01.0 4.2002 TO 27.06.2002, THERE MAY BE MANY OTHER REASON DUE TO WHICH VALUE O F STOCK MAY BE DIFFERENT ON THESE TWO DATES I.E. O 31.03.2002 AND 27.06.2002, E.G. THERE MAY BE FIRE, BURGLARY ETC. DURING THIS PERIOD FROM 01.04.2002 TO 27.06.2002 AND IN THAT SITUATION, THE VALUE OF CLOS ING STOCK AS ON 27.06.2002 WILL BE LESSER THEN THE VALUE OF CLOSING STOCK AS ON 31.03.2002 EVEN IF THERE IS NO PURCHASE/SALE DURING THIS PERIO D. 9. REGARDING RELIANCE PLACED BY THE ASSESSEE ON THE JUDGEMENT OF HONBLE MADRAS HIGH COURT RENDERED IN THE CASE OF C IT VS GEORGE OAKES LTD. (SUPRA), WE FIND THAT THIS JUDGEMENT IS NOT AP PLICABLE IN THE PRESENT CASE BECAUSE IN THE PRESENT CASE, THE MATTER HAS BE EN RESTORED BACK BY HONBLE GUJARAT HIGH COURT FOR A LIMITED PURPOSE TH AT WHETHER THE VALUATION REPORT OF GITCO IS FOR VALUATION AS ON 31 .03.2002 OR 27.06.2002 AND THIS ASPECT HAS BEEN DECIDED BY US O N THE BASIS OF MATERIAL AVAILABLE ON RECORD AND FOR DECIDING THIS ASPECT, THE JUDGMENT OF I.T.A.NO.2467 /AHD/2005 6 HONBLE MADRAS HIGH COURT IS NOT RELEVANT. HENCE, THE ASSESSEE DOES NOT GET ANY HELP FORM THIS JUDGEMENT. 10. CONSIDERING THESE FACTS, WE ARE OF THE CONSIDER ED OPINION THAT VALUATION REPORT OF GITCO DATED 27.06.2002 CANNOT B E THE BASIS TO ADOPT THE VALUE OF CLOSING STOCK AS ON 31.03.2002. THERE IS NO OTHER BASIS INDICATED BY THE LD. A.R. TO JUSTIFY THE BASIS OF V ALUATION ADOPTED BY THE ASSESSEE OF THE CLOSING STOCK AS ON 31.03.2002 AND HENCE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A). 11. IN THE RESULT, APPEAL OF THE ASSESSEE STANDS DI SMISSED. 12. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD./- SD./- (KUL BHARAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD 1. DATE OF DICTATION 14.12.2012 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 26/12/2012.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 31/12/2012 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.31/12 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 31/12/2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. .