ADDL CIT RG 14(1), MUMBAI V. S.K. SETH JEWELLERS, MUMBAI

ITA 2506/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55267 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 07-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 31-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARTHA SARATHI NAIK
• Assessee Lawyers: PRADIP KEDIA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AN D SHRI V. DURGA RAO, JUDICIAL MEMBER ITA NO. 2506/MUM./2010 (ASSESSMENT YEAR : 2006-07 ) DY. COMMISSIONER OF INCOME TAX CIRCLE-14(1), MUMBAI .. APPELLANT V/S M/S. S.K. SETH JEWELLERS 226/230, GIRIRAJ BUILDING SHOP NO.201, 2 ND FLOOR EARNEST HOUSENARIMAN POINT MUMBAI 400 021 AACFS2877H .... RESPONDENT REVENUE BY : MR. PARTHASARATHI NAIK ASSESSEE BY : MR. PRADIP KEDIA DATE OF HEARING 07.09.2011 DATE OF ORDER 16.09.2011 O R D E R PER J. SUDHAKAR REDDY, A.M. THIS APPEAL PREFERRED BY THE REVENUE, IS DIRECTED AGAINST THE IMPUGNED ORDER DATED 6 TH JANUARY 2010, PASSED BY THE COMMISSIONER (APPEALS)-XXV, MUMBAI, FOR ASSESSMENT YEAR 2006-07. IN THIS CASE, THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSIN ESS OF MANUFACTURING OF JEWELLERY ITS SALE THEREOF. THE SOLE DISPUTE IN THI S APPEAL IS, WHETHER OR NOT THE COMMISSIONER (APPEALS) WAS JUSTIFIED IN DELETIN G THE ADDITION OF ` 13,65,718 MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CHANGE IN METHOD OF STOCK VALUATION. M/S. S.K. SETH JEWELLERS ITA NO.2506/M./2010 2 2. WE HAVE HEARD THE LEARNED DEPARTMENTAL REPRESENTATI VE, MR. PARTHASARATHI NAIK, ON BEHALF OF THE REVENUE AND TH E LEARNED COUNSEL, MR. PRADIP KEDIA, ON BEHALF OF THE REVENUE. ON A CAREFU L CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON PERUSAL OF THE PAPERS ON RECORD, WE FIND THAT, THE ASSESSEE WAS MAINTAINING A PARTIC ULAR LEVEL OF INVENTORY FOR THE LAST SO MANY YEARS. IT WAS ALSO INCURRING EXPEN SES BY WAY OF INTEREST. THE ASSESSEE HAS, RIGHTLY, NOT ADDED THE INTEREST C OST TO THE INVENTORY. THE ASSESSING OFFICER, IN OUR OPINION, HAS WRONGLY DISA LLOWED INTEREST ON THE GROUND THAT THE ASSESSEE WAS MAINTAINING HIGH QUANT ITY OF INVENTORY. IT IS NOT FOR THE ASSESSING OFFICER TO STEP INTO THE SHOE S OF THE ASSESSEE AND HOLD THAT A PARTICULAR LEVEL OF INVENTORY ONLY CAN BE MA INTAINED. THE CONCLUSIONS OF THE ASSESSING OFFICER ARE NOT SUSTAINABLE AS WHA T IS TO BE SEEN WHILE EXAMINING DEDUCTION UNDER SECTION 36(1)(III) OF THE ACT IS WHETHER THE AMOUNT HAS BEEN BORROWED AND UTILISED WHOLLY AND EX CLUSIVELY FOR THE PURPOSE OF BUSINESS. AS RIGHTLY HELD BY THE COMMISS IONER (APPEALS), THE ASSESSING OFFICER HAS NOWHERE GIVEN FINDING THAT TH E AMOUNTS BORROWED WERE NOT FOR THE PURPOSE OF BUSINESS. THE ASSESSING OFFI CER MADE THE ADDITION ON NOTIONAL BASIS BASED ON CONJECTURES AND SURMISES. T HE ASSESSING OFFICERS OPINION THAT IF THE ASSESSEE LIQUIDATED CERTAIN QUA NTITY OF STOCKS, THEN HE COULD HAVE POSSIBLY REDUCED HIS BORROWINGS RESULTIN G IN SAVINGS OF INTEREST, IS NOT A GROUND FOR MAKING A DISALLOWANCE UNDER SECTIO N 36(1)(III) OF THE ACT. CONSEQUENTLY, WE UPHOLD THE ORDER OF THE COMMISSION ER (APPEALS) AND DISMISS THE GROUND RAISED BY THE REVENUE. 3. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH SEPTEMBER 2011 SD/- V. DURGA RAO JUDICIAL MEMBER SD/- J. SUDHAKAR REDDY ACCOUNTANT MEMBER MUMBAI, DATED: 16 TH SEPTEMBER 2011 M/S. S.K. SETH JEWELLERS ITA NO.2506/M./2010 3 COPY TO : (1) THE ASSESSEE; (2) THE RESPONDENT; (3) THE CIT(A), MUMBAI, CONCERNED; (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, F BENCH, ITAT, MUMBAI. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY ASSISTANT REGISTRAR SR. PRIVATE SECRETARY ITAT, MUMBAI BENCHES, MUMBAI DATE INITIAL 1. DRAFT DICTATED ON 7.9.2011 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 8.9.2011 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 9.9.2011 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 9.9.2011 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 9.9.2011 SR.PS 6. DATE OF PRONOUNCEMENT 16.9.2011 SR.PS 7. FILE SENT TO THE BENCH CLERK 16.9.2011 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER