The ACIT,(OSD), Circle-8, Ahmedabad V. M/s. SBJ Von Compounders Pvt.Ltd., Ahmedabad

ITA 2492/AHD/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6640 (ITAT-AHMEDABAD)
• Duration Of Justice: 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 06-05-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 11-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P TALATI
• Assessee Lawyers: MEHUL K PATEL
• Keywords: Rule of consistency; Difference of opinion; Revised return; Change of opinion
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND D. C. AGRAWAL , AM) ITA NO.2492/AHD/2010 A. Y.: 2004-05 THE A. C. I. T. (OSD), CIRCLE-8, 4 TH FLOOR, AJANTA COMMERCIAL CENTRES, A WING, ASHRAM ROAD, AHMEDABAD VS M/S. SBJ VON COMPOUNDERS PVT. LTD.,, D/11-12, SILVER ARC, KAVI NANNLAL MARG, ELLIS BRIDGE, AHMEDABAD PA NO. AADCS 0470 Q (APPELLANT) (RESPONDENT) C. O. NO. 277/AHD/2010 (IN ITA NO.2492/AHD/2010: AY: 2004-05) M/S. SBJ VON COMPOUNDERS PVT. LTD.,, D/11-12, SILVER ARC, KAVI NANNLAL MARG, ELLIS BRIDGE, AHMEDABAD VS THE A. C. I. T. (OSD), CIRCLE-8, 4 TH FLOOR, AJANTA COMMERCIAL CENTRES, A WING, ASHRAM ROAD, AHMEDABAD PA NO. AADCS 0470 Q (APPLICANT) (RESPONDENT) DEPARTMENT BY SHRI S. P. TALATI, SR. DR ASSESSEE BY SHRI MEHUL K. PATEL, AR O R D E R PER BHAVNESH SAINI: THE DEPARTMENTAL APPEAL AS WELL AS THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AG AINST THE ORDER OF ITA NO.2492/AHD/2010 AND CO NO.227/AHD/2010 M/S. SBJ COMPOUNDERS PVT. LTD. 2 THE LEARNED CIT(A) XIV, AHMEDABAD DATED 17 TH MAY, 2010 FOR ASSESSMENT YEAR 2004-05. 2. IN THE DEPARTMENTAL APPEAL, THE REVENUE CHALLENG ED THE ORDER OF THE LEARNED CIT(A) IN DELETING THE ADDITION ON ACCO UNT OF VALUE OF STOCK TO THE EXTENT OF RS.30,47,400/- AS WELL AS QU ASHING OF THE RE- OPENING OF THE ASSESSMENT. THE ASSESSEE IN THE CROS S OBJECTION STATED THAT IF THE DEPARTMENTAL APPEAL IS ALLOWED, THE AO MAY BE DIRECTED TO ENHANCE THE VALUE OF STOCK AS ON 1-4-20 04 AND CONSEQUENTLY REDUCE THE TOTAL INCOME FOR THE ASSESS MENT YEAR 2005- 06 BY THE SAME AMOUNT. 3. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE AO O N SCRUTINY OF THE RECORDS HAS FOUND THAT THE ASSESSEE COMPANY HAD SHO WN CLOSING STOCK OF STIFFENER AND RESIN RUBBER SHEET AND ADHES IVE TOTAL 11694 KG. OF RS.8,53,565/- OPENING STOCK OF 11694 KG. OF RS.1 9,50,482/- AND PREVIOUS YEAR OPENING STOCK OF 11694 KG. OF RS.39,0 9,065/- AND CLOSING STOCK OF 11694 KG AT RS.19,50,482/-. THUS, THERE WAS UNDER- STATEMENT OF CLOSING STOCK TO THE EXTENT OF RS.30,4 7,400/-. THE ASSESSEE IN ITS SUBMISSION EXPLAINED THAT INVENTORY IS BEING VALUED CONSISTENTLY BY THE ASSESSEE SINCE INITIAL YEAR AT THE LOWER OF THE COST OR REALIZABLE VALUE I.E. MARKET VALUE IN ACCORDANCE WITH WELL RECOGNIZED ACCOUNTING PRINCIPLE. IT WAS FURTHER SUB MITTED THAT THE MATERIAL UNDER CONSIDERATION WERE IMPORTED DURING T HE YEAR 1998-99. THE ASSESSEE WAS HOLDING UNSOLD INVENTORY OF THESE ITEMS AT RS.39 LACS AS ON 31-3-2002. THE SAID INVENTORY BEING DECO MPOSED, SPOILED AND NOT SALEABLE IN THE MARKET DUE TO SOME COMMERCI AL REASONS, THE ITA NO.2492/AHD/2010 AND CO NO.227/AHD/2010 M/S. SBJ COMPOUNDERS PVT. LTD. 3 SAID INVENTORY WAS IMPAIRED AND VALUED 50% LESS (RS .19.50 LACS) DURING THE YEAR 2002-03, RS.2.43 LACS OUT OF ADHESI VE REDUCED AND 50% REDUCTION (RS.8.53 LACS) IN OTHER MATERIALS DUR ING THE YEAR 2003- 04 AND ANOTHER 50% REDUCTION (RS.4.26 LACS) DURING THE EARLIER YEAR 2004-05 AND THE BALANCE OF RS.4.26 LACS HAS BEEN WR ITTEN OFF IN THE BOOKS DURING THE FINANCIAL YEAR 2005-06. THE AO DI D NOT ACCEPT THE EXPLANATION OF THE ASSESSEE BECAUSE THE ASSESSEE FA ILED TO COMPLY WITH QUERY OF THE AO AND FROM THE BOOKS OF ACCOUNTS AND AUDIT REPORT FOR THE YEAR UNDER CONSIDERATION. THE AO NOTED THAT STOCK IN QUESTION WAS LYING WITH THE ASSESSEE YEAR BY YEAR AND THE AS SESSEE WAS REDUCING THE VALUE OF THE STOCK WITHOUT PASSING ANY ENTRY IN THE BOOKS. IT WAS NOT MENTIONED IN THE AUDIT REPORT THA T STOCK HAS BECOME OBSOLETE OR IS WASTE OR SCRAP. IN THE ABSENCE OF AN Y SPECIFIC COMMENTS AND IN THE ABSENCE OF EVIDENCE, THE VALUE OF REDUCTION IN STOCK WAS NOT ACCEPTED. THE AO FURTHER OBSERVED THA T MERE REDUCING THE VALUE OF STOCK IS NOT SUFFICIENT TO PROVE ITS C LAIM AND IN THE ABSENCE OF ANY JUSTIFICATION OF THE CLAIM OF THE AS SESSEE AND VALUE OF THE OPENING STOCK OF ASSESSMENT YEAR 2003-04 AS TAK EN BY THE ASSESSEE OF RS.58,51,447/- WAS CONSIDERED TO BE VA LUE OF CLOSING STOCK OF THE ASSESSMENT YEAR 2004-05 UNDER APPEAL. AS PER INFORMATION AVAILABLE FROM THE RECORDS, SUCH QUANTI TY AS NARRATED ABOVE WAS FOUND TO BE HAVING LESSER VALUE BY RS.30 ,47,400/- IN THE ASSESSMENT YEAR UNDER APPEAL AND WAS ADDED TO THE V ALUE OF THE STOCK AND ADDITION WAS ACCORDINGLY MADE. IT WAS SUB MITTED BEFORE THE LEARNED CIT(A) THAT THE ASSESSEE IS CLOSELY HELD DO MESTIC COMPANY BEING A JOINT VENTURE OF US CORPORATION AND OTHER I NDIAN PARTNERS AND ENGAGED IN THE BUSINESS OF MANUFACTURING THERMOPLAS TIC RUBBER ITA NO.2492/AHD/2010 AND CO NO.227/AHD/2010 M/S. SBJ COMPOUNDERS PVT. LTD. 4 COMPOUNDS AT ITS FACTORY. THE ASSESSEE WHILE FILING THE REVISED RETURN HAS FURNISHED PRELIMINARY OBJECTIONS IN VIEW OF JUD GMENT OF THE HONBLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFT S INDIA LTD. 259 ITR 90 AND SAME SUBMISSIONS WERE REITERATED. IT WAS FURTHER SUBMITTED THAT THE MATTER IN ISSUE WAS SUBJECT MATT ER OF REASSESSMENT AND THE SAME FACTS HAVE BEEN ENQUIRED IN ASSESSMENT YEAR 2003-04 AND ASSESSMENT ORDER OF THE AO WAS REL IED UPON TO SHOW THAT CLAIM OF THE ASSESSEE HAS BEEN ACCEPTED. THE ASSESSEE ALSO DRAWN ATTENTION OF THE LEARNED CIT(A) TO THE A UDITED ACCOUNTS TO SHOW THAT DETAILS ARE CERTIFIED BY THE AUDITOR AND REVALUATION HAS BEEN DONE AND THAT CLAIM OF THE ASSESSEE HAS BEEN ACCEPT ED BY THE AO IN THE PRECEDING ASSESSMENT YEAR 2003-04 AND CONSEQUE NTLY THE TRADING DEPLETION LOSS WAS ACCEPTED IN THE PRECEDIN G ASSESSMENT YEAR. IT WAS, THEREFORE, SUBMITTED THAT ONCE SCRUTI NY ASSESSMENT HAS BEEN MADE IN THE PRECEDING ASSESSMENT YEAR AND COMP LETE DETAILS HAS BEEN EXAMINED, THEREFORE, SIMILAR ADDITION SHOU LD NOT HAVE BEEN MADE. IT WAS FURTHER SUBMITTED THAT RE-OPENING OF T HE ASSESSMENT IS BAD IN LAW BEING CHANGE OF OPINION AND THAT ON APPE AL BY THE DEPARTMENT, HONBLE SUPREME COURT DISMISSED THE SAM E VIDE ORDER DATED 18-1-2010. THE LEARNED CIT(A) ACCEPTED THE C ONTENTION OF THE ASSESSEE BECAUSE THE AO HAS NOT DISPOSED OF THE OBJ ECTION OF THE ASSESSEE ON MERIT FOR REOPENING OF THE ASSESSMENT. IT WAS ALSO FOUND THAT THE AO IN THE ASSESSMENT YEAR 2003-04 ACCEPTED THE CLAIM OF THE ASSESSEE ON THE SIMILAR REASONS FOR DEPLETION I N VALUE OF STOCK. THE LEARNED CIT(A) ACCEPTED THAT SINCE THE AO HAS A PPLIED HIS MIND ON THE SAME FACTS IN ASSESSMENT YEAR 2003-04 AND AD DITION HAS BEEN DELETED, SO THERE IS NO PURPOSE IN MAKING ADDITION ON MERIT. ITA NO.2492/AHD/2010 AND CO NO.227/AHD/2010 M/S. SBJ COMPOUNDERS PVT. LTD. 5 REOPENING OF THE ASSESSMENT WAS ALSO HELD TO BE BAD IN LAW. ACCORDING, ADDITION WAS DELETED. 4. THE LEARNED DR RELIED UPON THE ORDER OF THE AO. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE REITERAT ED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND R EFERRED TO THE ASSESSMENT ORDER IN THE PRECEDING ASSESSMENT YEAR 2 003-04 PASSED U/S 143(3) OF THE IT ACT DATED 23-12-2005 (PB-100) AND REFERRED TO PARA 4 OF THE SAID ASSESSMENT ORDER TO SHOW THAT ON SIMILAR ISSUE, THE AO ACCEPTED THE CLAIM OF THE ASSESSEE WITH REGARD T O REDUCTION IN VALUATION AS WELL AS TRADING DEPLETION LOSS. HE HAS SUBMITTED THAT SINCE THE STOCK WAS IMPORTED IN EARLIER YEARS AND I T VALUE REDUCED IN THE PRECEDING ASSESSMENT YEAR IN WHICH CLAIM OF THE ASSESSEE HAS BEEN ACCEPTED BY THE AO IN THE SCRUTINY PROCEEDINGS , THEREFORE, THE LEARNED CIT(A) CORRECTLY DELETED THE ADDITION. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND DO NOT FIND ANY MERIT IN THE DEPARTMENTAL APPEAL. THE FACTS NOTED A BOVE ARE NOT IN DISPUTE. THE AO MADE ADDITION OF RS.30,47,400/- ON ACCOUNT OF UNDER-VALUATION OF THE STOCK. THE ASSESSEE EXPLAINE D THE HISTORY OF IMPORTING THE MATERIAL IN QUESTION IN EARLIER YEARS AND ALSO EXPLAINED THAT THE INVENTORY OF THE SAID MATERIAL HAS REDUCED ITS COMMERCIAL VALUE, THEREFORE, IN SEVERAL PRECEDING YEARS THE VA LUE OF THE STOCK WAS REDUCED CONSIDERABLY. IDENTICAL CLAIM WAS CONSI DERED BY THE AO IN PRECEDING ASSESSMENT YEAR 2003-04 AND ACCEPTED T HE CLAIM OF THE ASSESSEE. THEREFORE, THERE IS NO REASON TO TAKE A D IFFERENT VIEW IN THE ASSESSMENT YEAR UNDER APPEAL. THE LEARNED CIT(A) ON PROPER ITA NO.2492/AHD/2010 AND CO NO.227/AHD/2010 M/S. SBJ COMPOUNDERS PVT. LTD. 6 APPRECIATION OF THE FACTS AND MATERIAL ON RECORD R IGHTLY DELETED THE ADDITION. THE LEARNED DR SUBMITTED THAT PRINCIPLE O F RES JUDICATA DOES NOT APPLY IN THE INCOME TAX ACT. HOWEVER, THOUGH IT IS TRUE THAT PRINCIPLE OF RES JUDICATA DOES NOT APPLY, THE RULE OF CONSISTENCY DOES APPLY. THE AO FAILED TO POINT OUT THOSE FACTS AND C IRCUMSTANCES ARE DIFFERENT IN THE ASSESSMENT YEAR UNDER APPEAL. WE R ELY UPON THE DECISION OF THE HONBLE MADHYA PRADESH HIGH COURT I N THE CASE OF CIT VS GODAVARI CORPORATION LTD. 156 ITR 835. THE H ONBLE SUPREME COURT IN THE CASE OF RADHASWAMI SATSANG VS CIT 100 CTR 267 HELD THAT CONSISTENCY HAS TO BE MAINTAINED. SINCE THE AO HAS CONSIDERED IDENTICAL ISSUE IN THE PRECEDING ASS ESSMENT YEAR 2003-04 AND ACCEPTED THE CLAIM OF THE ASSESSEE AND DID NOT MAKE THE SIMILAR ADDITION, WOULD PROVE, THE LEARNED CIT( A) RIGHTLY DELETED THE ADDITION IN THE ASSESSMENT YEAR UNDER APPEAL. T HE DEPARTMENTAL APPEAL HAS NO MERIT AND THE SAME IS DISMISSED. THIS WAS THE ONLY ADDITION MADE BY THE AO, THEREFORE, THERE IS NO NEE D TO CONSIDER WHETHER QUASHING OF THE REASSESSMENT BY THE LEARNED CIT(A) WAS JUSTIFIED OR NOT BECAUSE IT WOULD BE HAVING ACADEMI C INTEREST ONLY. 6. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMIS SED. 7. THE CROSS OBJECTION WAS DEPENDENT UPON THE OUT C OME OF THE DEPARTMENTAL APPEAL. SINCE WE HAVE DISMISSED THE DE PARTMENTAL APPEAL, THE CROSS OBJECTION STANDS INFRUCTUOUS AND IS DISMISSED. ITA NO.2492/AHD/2010 AND CO NO.227/AHD/2010 M/S. SBJ COMPOUNDERS PVT. LTD. 7 8. IN THE RESULT, THE DEPARTMENTAL APPEAL AS WELL A S THE CROSS OBJECTION OF THE ASSESSEE, BOTH ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13-05-2011 SD/- SD/- (D. C.AGRAWAL) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 13-05-2011 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD