ACIT, Coimbatore V. Elgi Electric and Industries Ltd., Coimbatore

ITA 2591/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86366 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 13-10-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N MADHAVAN
• Section: 143(3); 69

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . , . ' #$ , % & BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER ./ ITA NO.2591/MDS/2014 % $ ($ / ASSESSMENT YEAR : 2010-11 THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE I(2), 63-A, RACE COURSE ROAD, COIMBATORE. V. M/S ELGI ELECTRIC AND INDUSTRIES LTD., 737-D, ELGI TOWERS, GREEN FIELDS, PULLAKULAM ROAD, COIMBATORE 641 045. PAN : AAACE 4787 H (*+/ APPELLANT) (,-*+/ RESPONDENT) *+ . / / APPELLANT BY : SHRI N. MADHAVAN, JCIT ,-*+ . / / RESPONDENT BY : NONE ' . 0 / DATE OF HEARING : 05.02.2015 1( . 0 / DATE OF PRONOUNCEMENT: 20.03.2015 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAI NST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I , COIMBATORE, DATED 04.07.2014 RELEVANT TO THE ASSESSMENT YEAR 20 10-11. 2. FACTS IN BRIEF ARE THAT THE ASSESSEE-COMPANY, EN GAGED IN THE BUSINESS OF MANUFACTURING OF ENGINEERING GOODS , HAD FILED ITS 2 I.T.A. NO.2591/MDS/2014 RETURN OF INCOME. THE RETURN FILED BY THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME-TAX ACT, 1961 (I N SHORT 'THE ACT'). THEREAFTER, AFTER DUE PROCESS, THE ASSESSMENT WAS C OMPLETED UNDER SECTION 143(3) OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT ON VERIFICATION OF STOCK STATEMENT FILED BY THE ASSESSEE-COMPANY TO TH E BANKS ON 31.03.2010 AND CLOSING STOCK VALUE TAKEN FOR INCOME -TAX PURPOSE, THERE WAS A DIFFERENCE OF ` 2,90,31,034. THE ASSESSEE-COMPANY WAS ASKED TO FURNISH THE REASON FOR THE DIFFERENCE IN STOCK VALUATION. THE AUTHORIZED REPRESENTATIVE FILED A LETTER DATED 20 TH FEBRUARY, 2013 AND EXPLAINED THE DIFFERENCE OF STOCK VALUATIO N WHICH IS REPRODUCED AS UNDER:- THE RECONCILIATION BETWEEN CLOSING STOCK AS PER BALANCE AS ON 31.3.2010 AND STOCK STATEMENT SUBMITTED TO THE BA NK IS AS UNDER: PARTICULAR STOCK STATEMENT GIVEN TO BANK STOCK AS PER P & L ACCOUNT DIFFERENCE RAW MATERIAL (INCLUDING CONSUMABLES AND STORES) 5,75,64,685 4,98,08,829 79,55,856 WORK IN PROGRESS 2,84,33,257 2,19,03,338 65,29,919 FINISHED GOODS (INCLUDING TRADED GOODS) 2,37,50,467 92,05,208 1,45,45,259 TOTAL 10,97,48,409 8,07,17,375 2,90,31,034 3 I.T.A. NO.2591/MDS/2014 THE CLOSING STOCK OF 10,=.97 CRORES SUBMITTED TO T HE BANK WAS ARRIVED AT ON A NOTIONAL BASIS IN ORDER TO AVAIL NE CESSARY LIMITS FROM CORPORATION BANK, STATE BANK OF INDIA AND HDFC BANK. THE COMPANY HAS BEEN ENJOYING THE FOLLOWING CASH CR EDIT LIMITS. CORPORATION BANK 4.35 CRORES STATE BANK OF INDIA 5.00 CRORES HDFC BANK 2.92 CRORES AT ANY GIVEN POINT OF TIME, THE COMPANY IS EXPECTED TO MAINTAIN THE INVENTORY AND BOOK DEBTS WELL ABOVE THE DRAWING LIMITS. WHILE ARRIVING AT THE DRAWING POWER, THE BANK TAKES INTO ACCOUNT ONLY THE PAID STOCK I.E. THE TRADE CREDITORS OUTSTA NDING ON THE PARTICULAR DATE ARE REDUCED FROM THE VALUE OF INVEN TORY. IN THE CASE OF THE ASSESSEE COMPANY, THE DRAWING PO WER WAS CALCULATED AS UNDER: TOTAL STOCK VALUE 10,97,48,409 LESS: STOCK PURCHASED ON CREDIT 5,59,71,121 5,37,77,288 LESS: PROMOTERS MARGIN @ 25% 1,34,44,322 NET VALUE 4,03,32,966 THE ABOVE FIGURE 4.03 CRORES COUPLED WITH THE BOOK DEBTS OUTSTANDING FOR LOSS LESS THAN 90 DAYS HAVE BEEN TA KEN AS TOTAL DRAWING POWER OF THE ASSESSEE COMPANY. CLOSING STOCK SUBMITTED TO BANK ARE TAKEN AT COST T O ENJOY THE NECESSARY LIMITS FROM BANKS. WHEREAS CLOSING STOCK TAKEN IN BALANCE SHEET IS PHYSICALLY VERIFIED AND TAKEN AT L OWER OF COST OR NET REALIZABLE VALUE AS PER ACCOUNTING STANDARD 2 VALUATION OF INVENTORIES OF INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA. THE CLOSING STOCK CONSIDERED IN THE BALANCE SHEET IS PH YSICALLY VERIFIED BY THE MANAGEMENT AND METHOD OF VALUATION IS CONFIRMED BY THE AUDITORS OF THE COMPANY. THERE IS NO DIFFERENCE IN THE QUALITIES OF INDIVIDUAL ITEMS CON STITUTING THE TOTAL INVENTORY. THE DIFFERENCE IS ONLY IN THE MET HOD OF VALUATION. THE A.O. AFTER CONSIDERING THE EXPLANATION GIVEN BY THE ASSESSEE HAS OBSERVED THAT AS PER THE ACCOUNTING STANDARDS 2 ISSUED BY INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA, ALL TH E BANKS SANCTIONING 4 I.T.A. NO.2591/MDS/2014 CREDIT LIMITS TO THE COMPANIES ON THE BASIS OF VALU ATION OF STOCK FILED BY THEM, WHICH IS VALUED AT ON COST PRICE OR NET RE ALIZABLE VALUE WHICHEVER IS LOWER. IN VIEW OF THE ABOVE, DIFFEREN CE BETWEEN THE VALUE OF THE STOCK AS REFLECTED IN THE STOCK STATEM ENT SUBMITTED TO THE BANKS AND THE VALUE OF STOCKS SHOWN TO THE INCO ME-TAX DEPARTMENT IN THE RETURN FILED FOR ASSESSMENT YEAR 2010-11 AMOUNTING TO ` 2,90,31,034/- IS ASSESSED UNDER SECTION 69 OF THE ACT. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(APPEALS). THE LD. CIT(APPEALS) DELETED THE ADD ITION MADE BY THE ASSESSING OFFICER. 4. ON BEING AGGRIEVED, THE REVENUE CARRIED THE MATT ER IN APPEAL BEFORE THE TRIBUNAL. 5. THE LD. D.R. HAS SUBMITTED THAT SIMILAR ISSUE HA S COME UP BEFORE THE TRIBUNAL FOR CONSIDERATION FOR ASSESSMEN T YEAR 2008-09 IN I.T.A. NO. 2160/MDS/2011 DATED 29 TH APRIL, 2013. THE TRIBUNAL REMITTED BACK THE MATTER TO THE A.O. TO CONSIDER TH E EXPLANATION OF THE ASSESSEE AND DECIDE IN ACCORDANCE WITH LAW AND SUBMITTED THAT THIS MAY ALSO BE REMITTED TO THE A.O. FOR CONSIDERA TION AFRESH. 6. NONE APPEARED ON BEHALF OF THE ASSESSEE. 5 I.T.A. NO.2591/MDS/2014 7. WE HAVE HEARD LD. D.R. AND PERUSED THE RECORDS A ND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FI ND THAT THE A.O. HAS NOT CONSIDERED THE EXPLANATION GIVEN BY THE ASS ESSEE IN PROPER MANNER. THE LD. CIT(APPEALS) HAS ALSO NOT CONSIDER ED THE ISSUE IN DETAIL. THEREFORE, WE SET THE ORDER PASSED BY HE L D. CIT(APPEALS) AND DIRECT THE A.O. TO CONSIDER THE ISSUE AFRESH KE EPING IN VIEW THE ORDER OF THE TRIBUNAL IN I.T.A. NO. 2160/MDS/2011 D ATED 29 TH APRIL, 2013. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON FRIDAY, THE 20 TH OF MARCH, 2015 AT CHENNAI. SD/- SD/- ( . ) ( . ' #$ ) (A. MOHAN ALANKAMONY) (V. DURGA RAO) /ACCOUNTANT MEMBER % /JUDICIAL MEMBER /CHENNAI, > /DATED, THE 20 TH MARCH, 2015. KRI. 6 I.T.A. NO.2591/MDS/2014 ? . ,%0@A BA(0 /COPY TO: 1. *+ /APPELLANT 2. ,-*+ /RESPONDENT 3. ' C0 () /CIT(A)-I, COIMBATORE 4. ' C0 /CIT-I, COIMBATORE 5. A E# ,%0% /DR 6. #$ F /GF.