M/s. PMS Diesels, Phagwara V. The Joint. Commissioner of Income-tax (OSD), Phagwara

ITA 260/ASR/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8865 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 9 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 31-12-2015
• Assessment Year: 2001-2002
• Appeal Filed On: 22-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S KANWAL
• Assessee Lawyers: RAVISH SOOD
• Keywords: Depreciation; Bonafide belief; Additional evidence; Question of law; Unabsorbed depreciation
• Section: 80HHC; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH; AMRITSAR BEFORE SH. A.D. JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER ITA NO.260(ASR)/2013 ASSESSMENT YEAR:2001-02 PAN:AAAF9505H M/S. PMS DIESELS, VS. JT. COMMR. OF INCOME TAX (OS D), G.T.ROAD, PHAGWARA. PHAGWARA CIRCLE, PHAGWARA. (APPELLANT) (RESPONDENT) APPELLANT BY:SH. RAVISH SOOD, ADVOCATE RESPONDENT BY: SH. S.S. KANWAL, DR DATE OF HEARING: 31/12/2015 DATE OF PRONOUNCEMENT: 10/02/2016 ORDER PER T.S. KAPOOR, AM: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LD. CIT(A), JALANDHAR, DATED 18.02.2013, RELEVANT TO AS SESSMENT YEAR 2001- 02. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS O F APPEAL: 1. THAT THE CIT(A) HAS ERRED IN LAW AND FACTS OF T HE CASE IN SUSTAINING THE PENALTY IMPOSED BY THE AO PERTAINING TO AN ADDITION OF RS.17,97,139/- MADE IN THE HANDS OF THE ASSESSEE FIRM. 2. THAT THE CIT(A) FAILING TO APPRECIATE THE FACTS OF THE CASE AS WELL AS THE CONTENTIONS OF THE ASSESSEE FIRM, HAD G RAVELLY ERRED IN LAW AND FACTS OF THE CASE IN UPHOLDING THE PENALTY IMPOSED BY THE AO PERTAINING TO ALLEGED DISCREPANCY AS REGARDS THE VALUATION OF CLOSING STOCK. 3. THAT THE LD. CIT(A) WHILE SUSTAINING THE PENALTY IMPOSED BY THE AO HAD FAILED TO APPRECIATE THAT NOW WHEN THE I MPUGNED ADDITION OF RS.17,97,139/- IN ITSELF WAS BASED ON S USPICIONS, ASSUMPTIONS, PRESUMPTIONS AND SURMISES, AND NOT ON ANY ITA NO.260(ASR)/2013 AY: 2001-02 2 CONCRETE EVIDENCE/MATERIAL THEREIN THE ASSESSEE FIR M COULD NOT HAVE BEEN SADDLED WITH PENALTY U/S 271(1)(C). 4. THAT THE LD. CIT(A) HAS GRAVELY ERRED IN LAW BY FAILING TO APPRECIATE THAT IN LIGHT OF A PLAUSIBLE EXPLANATION GIVEN BY THE ASSESSEE FIRM AS REGARDS THE ALLEGED DISCREPAN CY IN THE VALUATION OF CLOSING STOCK, NO PENALTY U/S 271(1)(C ) WAS LIABLE TO BE IMPOSED. 5. THAT THE LD. CIT(A) HAS GRAVELY ERRED IN LAW BY FAILING TO APPRECIATE THAT AS THE ASSESSEE FIRM HAD FULLY AND TRULY DISCLOSED THE QUANTITATIVE DETAILS WITH RESPECT TO 302 ITEMS OF THE CLOSING STOCK, THEREFORE, MERELY DUE TO VARIANC E AS REGARDS THE BASIS OF VALUATION ADOPTED BY THE AO, A S AGAINST THAT FOLLOWED BY THE ASSESSEE FIRM, PENALTY U/S 27 1(1)(C) FOR ALLEGED FURNISHING OF INACCURATE PARTICULARS OF INC OME COULD NOT HAVE BEEN IMPOSED OF THE ASSESSEE FIRM. 2. THE BRIEF FACTS OF THE CASE AS NOTED IN THE PENA LTY ORDER ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME DECLARING N IL INCOME AFTER SET OFF OF BROUGHT FORWARD LOSSES. THE ASSESSMENT WAS COMP LETED AFTER MAKING AN ADDITION OF RS.17,97,139/- ON ACCOUNT OF DIFFERE NCE IN VALUATION OF STOCK AND ALSO AFTER REJECTING THE ASSESSEES CLAIM , WHICH WAS MADE U/S 80HHC OF THE ACT FOR CLAIMING A DEDUCTION OF RS,9,0 1,914/-. THE ADDITION OF RS.17,97,139/- WAS MADE ON ACCOUNT OF DIFFERENCE IN RATES OF CERTAIN ITEMS OF CLOSING STOCK AS COMPARED TO RATES TAKEN B Y ASSESSEE FOR SAME ITEMS IN OPENING STOCK. THE AO IN THE ASSESSMENT OR DER DATED 26.03.2004 AT PAGE-2 HAD NOTED THAT IN RESPECT OF C ERTAIN ITEMS, THE ASSESSEE HAD TAKEN A LOWER RATES FOR VALUING THE S AME. THE AO HAS MADE THIS FINDING AFTER COMPARING THE RATES OF SU CH ITEMS AS ON 31.03.2000 AND AS ON 31.03.2001. FROM THE COMPARISO N, THE AO ARRIVED THE TOTAL SUPPRESSION AMOUNT IN VALUE OF CLOSING S TOCK TO THE TUNE OF ITA NO.260(ASR)/2013 AY: 2001-02 3 RS.17,97,139/-. FURTHER, THE AO HAD REJECTED THE CL AIM OF THE ASSESSEE U/S 80HHC OF THE ACT AND, THEREFORE, THE AO IMPOSE D A PENALTY OF RS.15,00,000/- AS HE OBSERVED THAT THE MINIMUM PENA LTY WAS RS.11,08,409/- AND THE MAXIMUM PENALTY WAS RS.33,2 5,227/-. 3. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE TH E LD. CIT(A). HOWEVER, THE LD. CIT(A) DELETED THE PENALTY ON AC COUNT OF DENIAL OF SECTION 80HHC, BUT HE CONFIRMED THE PENALTY IMPOSED BY THE AO ON ACCOUNT OF SUPPRESSION OF STOCK. THE RELEVANT FINDI NGS OF THE LD. CIT(A) ARE REPRODUCED BELOW: 9. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE , ASSESSMENT ORDER, PENALTY ORDER, ORDERS OF THE LD. CIT(A) AND HONBLE ITAT IN QUANTUM PROCEEDINGS AS WELL AS PE NALTY PROCEEDINGS AND THE MATERIAL ON RECORDS. 10. THE FIRST ISSUE IS LEVY OF PENALTY ON REDUCTION OF DEDUCTION U/S 80HHC OF THE ACT. THE LD. CIT(A) DELETED THE PENALT Y ON LEGAL GROUND RELYING ON THE CASE OF M/S. VIRTUAL SOFT SYSTEMS LT . 289 ITR 83 (SC). NOW THIS CASE STANDS REVERSED BY THE HONBLE SC ITS ELF IN THE CASE OF M/S. GOLD COIL HEALTH FOOD (P) LTD. 304 ITR (SC). I N VIEW OF THIS LEGAL ISSUE IS SETTLED WHICH GOES AGAINST ASSESSEE, AS FA R AS QUANTUM ADDITION IS CONCERNED, WHICH WAS ACCEPTED BY THE AS SESSEE AND WAS NOT CHALLENGED BEFORE LD. CIT(A) ON THIS COUNT. 11. ON MERITS IT IS CONTENDED THAT AS PER THE C.A. THE DEDUCTION U/S 80HHC OF THE ACT WAS COMPUTED BEFORE SETTING OF F BROUGHT FORWARD LOSSES AND THE ACTION OF THE ASSESSEE WAS T HUS BONAFIDE. THIS BELIEF WAS BASED ON THE DECISION OF THE HONBL E A.P. HIGH COURT IN THE CASE OF M/S. GONGEINI TOBACCO LTD. (1999) 23 8 ITR 970 WHEREIN IT WAS HELD THAT THE DEDUCTION U/S 80HHC O F THE ACT IS TO BE ALLOWED FROM CURRENT YEARS PROFITS BEFORE ADJUS TING UNABSORBED DEPRECIATION AND UNABSORBED BUSINESS LOSSES CARRIED FROM EARLIER YEARS. NO QUESTION OF LAW ARISES FOR REFERENCE. WHE N THE MATTER CAME TO HONBLE SC, IT, VIDE ITS ORDER DATED 15.7.1 999 SO PASSED IN CASE OF M/S. GONGEINI TOBACCO LTD. 253 ITR 800 PUBL ISHED IN 2002 ALLOWED AN SLP WHICH WAS FINALLY DECIDED IN 2007 AT 291 ITR 380. THE SUM AND SUBSTANCE OF THIS ARGUMENT IS THAT AT T HE TIME OF FILING OF THE RETURN THE DECISION OF HONBLE A.P. HIGH COU RT (SUPRA) WAS AVAILABLE AND WAS NOT REVERSED BY THE HONBLE S.C. IN 253 ITR 800 BUT ONLY A QUESTION OF LAW WAS DIRECTED TO BE REFER RED TO HONBLE ITA NO.260(ASR)/2013 AY: 2001-02 4 H.C. OF A.P. I FIND THAT THIS POSITION IS TRUE AND THE AOS REASONING THAT THE HONBLE S.C. HAS REVERSED THE DECISION OF THE HONBLE A.P. HIGH COURT IN (1999) 253 ITR 800 IS NOT CORRECT. IN ANY CASE, THIS DECISION OF THE HONBLE S.C. WAS ONLY PUBLISHED IN 2002 I.E. AFTER THE FILING OF RETURN ON 31.10.01. IN FACT AT THE TI ME OF FILING OF RETURN OF INCOME ANOTHER DECISION OF HONBLE BOMBAY HIGH COURT IN M/S. SHIRKE CONSTRUCTION EQUIPMENTS, 246 ITR 429 WAS ALS O AVAILABLE WHEREIN THE DECISION OF HONBLE A.P. HIGH COURT WAS APPROVED. AT THE TIME OF FILING OF RETURN, NO DECISION CONTRARY TO THAT WAS AVAILABLE WHICH WOULD FAVOUR REVENUE. ALL PARTICULARS WERE DU LY PLACED IN THE COMPUTATION BEFORE AO. OF COURSE, A CLAIM WAS MADE WHICH WAS FOUND OTHERWISE NOT ALLOWABLE BUT IN VIEW OF EXISTE NCE OF DECISION OF HONBLE HIGH COURT AT THE TIME OF FILING OF THE RET URN OF INCOME WHICH WAS PREVAILING, THE CLAIM CAN ONLY BE SAID TO BE MA DE BONAFIDE ON THE ADVICE OF THE CHARTERED ACCOUNTANT. THE ADDITIO N ON THIS COUNT STANDS DULY ACCEPTED BY THE ASSESSEE AND IT DID NOT CONTEST IT FURTHER, BUT THIS ALONE IS NOT SUFFICIENT TO SADDLE THE ASSESSEE WITH THE PENALTY. THE DECISIONS OF HONBLE S.C. IN CASE OF M/S. RELIANCE PETROPRODUCTS LTD. 322 ITR 158 COMES TO THE RESCUE OF THE ASSESSEE. IN ANOTHER CASE OF M/S. PRICE WATERHOUSE COOPER (P) LTD., 348 ITR (SC) THE FACTS WERE ON WORSE FOOTING THAN IN THE CA SE OF THE ASSESSEE. IN THAT CASE, EVEN THE AUDITORS HAD QUEST ION A CLAIM WHICH WAS MADE. BUT THE HONBLE S.C. HELD THAT THE ASSESSEE COULD MAKE SILLY MISTAKES EVEN IF IT WAS A REPUTED ACCOUN TANCY FIRM. THE DECISION OF M/S. DEEP TOOLS (P) LTD. 274 ITR 603 (P &H), B.B. SINGHAL IN ITA NO.725 OF 2010 DATED 05.01.2011 (P&H) AND M/ S. RAJ OVERSEAS 336 ITR 261 (P&H) ARE ALSO SIMILAR. IN VIEW OF THE ABOVE, I HOLD THAT THE LEVY OF PENAL TY ON REDUCTION OF DEDUCTION U/S 80HHC OF IT ACT WAS NOT WARRANTED ON THE MERITS OF CASE, AND HENCE THE PENALTY LEVIED ON THIS COUNT IS DELETED. 12. NOW, REMAINS ANOTHER ADDITION OF RS.17,97,139/- MADE ON ACCOUNT OF VALUATION OF CLOSING STOCK. THE FACTS EN UMERATED ABOVE ARE CRYSTAL CLEAR. MOST OF THE ITEMS WERE OUT OF OP ENING STOCK AND NO SALE OR PURCHASERS WERE MADE DURING THE YEAR. AT TH E YEAR END THEIR VALUE WAS SHOWN AS REDUCED BY RS.17,97,139/- BY THE ASSESSEE, MEANING THEREBY THAT THE CLOSING STOCK WAS UNDER V ALUED TO THAT EXTENT. THE AO MADE INQUIRIES REGARDING THE PRICES OF RAW MATERIALS FROM A WEBSITE AND FOUND THAT MOST OF RAW MATERIALS INCREASED IN PRICE AS COMPARED TO THE PRECEDING YEAR. HENCE, THE RE WAS NO QUESTION OF REDUCTION OF PRICES IN RESPECT OF ITEMS IN CLOSING STOCK. THE ITAT IN THE ORDER IN APPEAL AGAINST QUANTUM PRO CEEDINGS HAVE HELD THAT DESPITE VARIOUS OPPORTUNITIES, NO EXPLANA TION WAS PROVIDE. IT HAD BEEN BROUGHT ON RECORDS BY THE AO THAT THERE WAS INCREASE OF 5.3% IN THE RATE OF M.S. ANGLES, ONE OF MAIN RAW MATERIAL DURING THE YEAR. ALL THE ARGUMENTS TAKEN BY THE ASSESSEE B EFORE THE ITA NO.260(ASR)/2013 AY: 2001-02 5 HONBLE ITAT WERE FOUND HOLLOW. EVEN NOW IT IS CLA IMED THAT THE REDUCTION IN VALUE WAS THERE, AS THE SAID ITEMS WER E EITHER OUTDATED OR OBSOLETE, BUT THESE ITEMS WERE VERY MUCH THE P ART OF CLOSING STOCK AND HOW THE REDUCTION IS ARRIVED AT IS STILL UNEXPLAINED. IT IS NOT THE CASE OF ASSESSEE THAT THE GOODS WERE PERISH ABLE IN NATURE. IN FACT, THEY WERE ENGINE PARTS. THE ASSESSEE MERELY R ELIES ON THE NOTE IN AUDITORS REPORT THAT THE CLOSING STOCK WAS VALUE D AT COST OR NET REALIZABLE VALUE, BUT THERE IS COMPLETE VOID ON HOW NET REALIZABLE VALUE WAS REDUCED. THIS ARGUMENT IS OF NO HELP TO A SSESSEE. THE HEAVY RELIANCE OF ASSESSEE ON THE CASE OF M/S. H.P. STATE FOREST CORPORATION LTD., 340 ITR 204 IS ALSO MISPLACED. IN THAT CASE ASSESSEE WAS A GOVT. CORPORATION, THE CLOSING STOCK WAS WOOD AND THE REDUCTION IN VALUE WAS SUPPORTED IN THE REPORTS OF VARIOUS OFFICERS OF THE CORPORATION. THE FACTS IN THE CASE OF ASSESSEE ARE ENTIRELY DIFFERENT AS NO BASIS FOR THE CLAIM OF RED UCTION IN VALUE IS VISIBLE, EXCEPT SOME UNTENABLE ARGUMENTS. ANOTHER A RGUMENT THAT THERE WAS NO QUANTITATIVE DIFFERENCE IS TOTALLY IRRELEVANT, AS WHEN THE OPENING STOCK AS IT IS (IN MOST OF THE ITEMS) W AS TAKEN TO CLOSING STOCK THERE CANNOT BE A VARIATION IN QUANTITIES BUT HERE THE ARBITRARY REDUCTION IN VALUE SO AS TO REDUCE THE PROFITS IS T HE KEY ISSUE. IT IS A DELIBERATE ACT OF ASSESSEE WHICH IS NOT EXPLAINED A T ALL. THIS ACTION OF ASSESSEE CANT ALSO BE TREATED AS A MISTAKE AS T HIS WAS A DELIBERATE ACTION OF COMMISSION ON THE PART OF THE ASSESSEE WHICH WAS WITHOUT BASIS WITH A SOLE MOTIVE OF SHOWING RED UCED PROFITS. THE CASE LAW RELIED BY THE ASSESSEE IN M/S. SIDHART H ENTERPRISES 322 ITR 80 ( P & H) IN FACT GOES AGAINST ASSESSEE A S IN THIS CASE THERE WAS NO MISTAKE BUT A DELIBERATE DEFAULT. 13. IN VIEW OF THIS, I AM CONVINCED THAT ON THE ADD ITION OF RS.17,97,139/- THE PENALTY WAS RIGHTLY LEVIED AND T HE ACTION OF THE AO IS HEREBY CONFIRMED. 14. THE LAST THING TO BE GONE INTO IS THE COMPUTATI ON OF PENALTY. THE AO CALCULATED THE MINIMUM PENALTY AT RS.11,08,4 09/- AND LEVIED IT AT RS.15,00,000/- APPARENTLY HIGHER THAN 100%. IT IS ALSO NOT CLEAR AS TO HOW THE MINIMUM PENALTY WAS CALCUL ATED. AS OF NOW THE PENALTY ON THE ADDITION OF RS.17,97,139/- IS CO NFIRMED AND LOOKING TO THE TOTALITY OF THE CIRCUMSTANCES, THE P ENALTY IS DIRECTED TO BE LEVIED AT 100% OF THE TAX SOUGHT TO BE EVADED ON THE ADDITION OF RS.17,97,139/-. 4. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THIS BENCH. ITA NO.260(ASR)/2013 AY: 2001-02 6 5. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE WAS A MANUFACTURER AND IT REQUIRED HUNDRED OF ITEMS FOR MANUFACTURE OF THE ARTICLES. HE SUBMITTED THAT AS P ER PHYSICAL INVENTORY PREPARED AS ON THE CLOSE OF THE YEAR THERE WERE 302 ITEMS OUT OF WHICH THE AO HAD NOTED DIFFERENCE IN PRICES OF OPENING ST OCK AND CLOSING STOCK IN RESPECT OF ONLY 8 ITEMS AND THESE ITEMS WERE SLO W MOVING ITEMS AS THERE WAS NO DIFFERENCE IN QUANTITATIVE POSITION OF MOST OF THESE ITEMS AND NO FRESH PURCHASES WERE MADE DURING THE YEAR. H E SUBMITTED THAT SINCE THE ITEMS HAD BECOME OBSOLETE, THEREFORE, WIT H THE HELP OF TECHNICAL PERSONS SUCH STOCK WAS VALUED AT A LO WER PRICE. HE SUBMITTED THAT THE ASSESSEE DURING THE ASSESSMENT P ROCEEDINGS HAD FILED QUANTITATIVE DETAILS OF OPENING STOCK AND CLOSING S TOCK FROM WHICH ONLY THE AO OBSERVED THE DIFFERENCE IN PRICES IN FEW ITE MS AND THEREFORE, THE ASSESSEE CANNOT BE SAID TO HAVE ACTED WITH A MALAFI DE INTENTION. HE SUBMITTED THAT THERE WAS NO MALAFIDE INTENTION AS THE ASSESSEE HAD GIVEN COMPLETE BREAK-UP OF ITEMS AND THE LOWER VALU ATION FOR SLOW MOVING ITEMS WAS DONE IN CONSULTATION WITH TECHNIC AL PERSONS AND THEREFORE, THERE WAS A BONAFIDE BELIEF THAT ASSE SSEE WAS VALUING ITS STOCK AT COST OR NET REALIZABLE VALUE WHICHEVER IS LOWER. THE LD. COUNSEL IN THIS RESPECT RELIED UPON THE CASE LAW OF CIT VS. SS P (P) LTD., DECIDED BY THE HONBLE PUNJAB & HARYANA HIGH COURT, REPORTED I N 302 ITR 43. THE LD. COUNSEL ALSO RELIED UPON THE CASE LAW OF CIT VS . RELIANCE PETROPRODUCTS LTD., REPORTED IN 322 ITR 158 DECI DED BY THE HONBLE ITA NO.260(ASR)/2013 AY: 2001-02 7 SUPREME COURT. THE LD. COUNSEL FURTHER RELIED UPON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF PRICE WATERHOU SE COOPER (P) LTD. VS. CIT, REPORTED IN 348 ITR 306. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE CASE OF PRICE WATERHOUSE COOP ER (P) LTD. (SUPRA), WHICH WAS A PROFESSIONAL COMPANY AND WAS ENGAGED IN TAXATION MATTERS RELATING TO ITS CLIENTS NOR WHILE FILING ITS OWN R ETURN OF INCOME HAD FAILED TO ADD THE PROVISION FOR GRATUITY TO ITS TOTAL INCO ME AND IN THIS CASE THE HONBLE SUPREME COURT HELD THAT THE ABSENCE OF DUE CARE, IN A CASE SUCH AS THE PRESENT, DOES NOT MEAN THAT THE ASSESSEE WA S GUILTY OF EITHER FURNISHING INACCURATE PARTICULARS OR CONCEALMENT OF ITS INCOME. 6. THE LD. COUNSEL FOR THE ASSESSEE FURTHER RELIED UPON THE CASE LAW OF CIT-I, JALANDHAR VS. RAJIV BATRA DECIDED BY THE HO NBLE PUNJAB & HARYANA HIGH COURT IN ITA NO.428 OF 2009 (O&M) AND OUR SPECIFIC ATTENTION WAS INVITED TO PB-83 REGARDING CERTAIN OB SERVATIONS OF THE COURT. HE SUBMITTED THAT OTHERWISE ALSO, THE SUPPRE SSION OF STOCK IS REVENUE NEUTRAL AS CLOSING STOCK OF THIS YEAR WILL BECOME OPENING STOCK OF NEXT YEAR AND THEREFORE, IN THE NEXT YEAR, THE A SSESSEE WILL BE CLAIMING LOWER OPENING STOCK AND THUS, THIS WILL BE REVENUE NEUTRAL. 7. THE LD. DR, ON THE OTHER HAND, SUBMITTED THAT TH E ASSESSEE HAD DELIBERATELY ATTEMPTED TO EVADE TAXES BY SUPPRESSIN G THE VALUATION OF THE STOCK AND COULD NOT EXPLAIN THE DIFFERENCE IN THE Q UANTUM PROCEEDINGS ALSO AND THE TRIBUNAL IN THE QUANTUM PROCEEDINGS HA S ALSO DECIDED ITA NO.260(ASR)/2013 AY: 2001-02 8 AGAINST THE ASSESSEE BY HOLDING THAT NO EXPLANATION WAS FILED BY THE ASSESSEE. 8. AS REGARDS THE ARGUMENT OF THE LD. COUNSEL FOR T HE ASSESSEE THAT THE CLOSING STOCK OF THE PRESENT YEAR WILL BECOME O PENING STOCK IN THE NEXT YEAR, THE LD. DR CONTENDS THAT THIS DOES NOT M EAN ANYTHING, AS IN THAT EVENTUALITY, THE MAINTENANCE OF ACCOUNTS ON ME RCANTILE SYSTEM WILL HAVE NO MEANING. 9. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH ROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ISSU E IN DISPUTE IS AS TO WHETHER PENALTY CAN BE IMPOSED ON THE ALLEGED UNDE R VALUATION OF CLOSING STOCK AS DECLARED BY THE ASSESSEE. THE ASSE SSEE DURING ASSESSMENT PROCEEDINGS HAD SUBMITTED COMPLETE BREAK -UP OF OPENING STOCK AND CLOSING STOCK FROM WHERE THE AO WAS ABLE TO OBSERVE THAT IN RESPECT OF FEW ITEMS, THE ASSESSEE HAD TAKEN LOWER VALUATION RATES AS COMPARED TO THE RATES TAKEN IN THE OPENING STOCK. F ROM THE CHART PREPARED BY THE AO AT PAGE-2 OF THE ASSESSMENT ORDE R, WE FIND THAT THE AO HIMSELF HAS NOTED THAT THE QUANTITY IN RESPECT OF OPENING STOCK AND CLOSING STOCK OF MOST OF THE ITEMS REMAINS THE SA ME. THEREFORE, THE FACT REMAINED THAT THESE ITEMS WERE SLOW MOVING ITEMS WH EREIN NO PURCHASE OR SALE OR CONSUMPTION WAS MADE DURING THE YEAR. T HE ASSESSEE IS VALUING ITS STOCK OF RAW MATERIAL AT COST OR NET RE ALIZABLE WHICHEVER IS LOWER AS IS APPARENT FROM THE COPY OF AUDIT REPORT, PLACED AT PB-92. THEREFORE, THE ASSESSEE IN ITS OWN WISDOM AND WITH THE HELP OF TECHNICAL STAFF HAD ARRIVED AT THE VALUATION OF THESE ITEMS ON THE BASIS OF NET ITA NO.260(ASR)/2013 AY: 2001-02 9 REALIZABLE VALUE BEING LOWER THAN COST PRICE. THIS IS AN ACCEPTED METHOD OF VALUATION OF STOCK AND AS PER AUDIT REPORT, THE SAME IS BEING FOLLOWED BY THE ASSESSEE CONSISTENTLY. WE FURTHER FIND THAT THE ASSESSEE HAD PROVIDED A COMPLETE BREAK-UP OF OPENING STOCK AND CLOSING STOCK TO THE AO AND FROM SUCH DETAILS ONLY THE AO COULD FIND OU T THE DIFFERENCES. THEREFORE, IT CANNOT BE SAID THAT THERE WAS A MALAF IDE INTENTION ON THE PART OF ASSESSEE IN THE VALUATION OF THE CLOSING S TOCK. THE ASSESSEE ON THE BASIS OF NET REALIZABLE VALUE HAD VALUED CERTA IN ITEMS OF STOCK AT PRICES LOWER THAN COST PRICE AND THIS ACT CANNOT BE SAID TO BE FURNISHING WRONG PARTICULARS OF INCOME OR CONCEALMENT OF INCOM E. WE FURTHER FIND FROM THE ORDER OF THE HONBLE TRIBUNAL IN QUANTUM P ROCEEDINGS THAT ASSESSEE BEFORE LD. CIT(A) HAD FILED ADDITIONAL EV IDENCE IN THE FORM OF PRICE LISTS/RATE LISTS OF SUCH ITEMS FROM WHOM THE SE WERE PURCHASED AND ASSESSEE HAD SUBMITTED BEFORE THE LD. CIT(A) THAT THESE ITEMS WERE VALUED ON THE BASIS OF PREVALENT MARKET PRICES. HO WEVER, THE LD. CIT(A) HAD NOT ADMITTED SUCH ADDITIONAL EVIDENCE AND THE T RIBUNAL HAD ALSO CONFIRMED THE ACTION OF THE LD. CIT(A) IN NOT ADMIT TING THE ADDITIONAL EVIDENCE. THESE FACTS ARE NOTED BY THE TRIBUNAL IN ITS ORDER DATED 5.10.2007 AT PAGE 3 ONWARDS OF ITS ORDER. 10. FROM THESE OBSERVATIONS NOTED BY THE TRIBUNAL, WE FIND THAT ASSESSEE HAD TRIED TO JUSTIFY ITS CLAIM OF VALUATIO N OF STOCKS WHICH IT COULD NOT JUSTIFY DUE TO NON ADMISSION OF ADDITIONA L EVIDENCE. THIS FACT STRENGTHENS THE BELIEF THAT THERE WAS NO MALAFIDE I NTENTION ON THE PART OF ITA NO.260(ASR)/2013 AY: 2001-02 10 ASSESSEE AND IT WAS ONLY DUE TO DIFFERENCE OF OPINI ON THAT CLAIM OF THE ASSESSEE WAS NOT ACCEPTED. 11. THE HONBLE SUPREME COURT IN THE CASE OF RELIA NCE PETROPRODUCTS (P) LTD., REPORTED IN 322 ITR 158 HAS HELD THAT MAKING AN INCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISHING OF IN ACCURATE PARTICULARS OF INCOME, MERELY BECAUSE THE ASSESSEE CLAIMED DEDU CTION WHICH HAS NOT BEEN ACCEPTED BY THE REVENUE. THE RELEVANT FINDING OF THE HONBLE SUPREME COURT ARE REPRODUCED AS UNDER: A GLANCE AT THIS PROVISION OF S. 271(1)(C) WOULD SUGGEST THAT IN ORDER TO BE COVERED, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY , THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS I NCOME. PRESENT IS NOT THE CASE OF CONCEALMENT OF THE INCOME. THAT IS NOT THE CASE OF THE REVENUE EITHER. AS PER LAW LEXICON, THE MEAN ING OF THE WORD 'PARTICULAR' IS A DETAIL OR DETAILS (IN PLURAL SENS E); THE DETAILS OF A CLAIM, OR THE SEPARATE ITEMS OF AN ACCOUNT. THEREFO RE, THE WORD 'PARTICULARS' USED IN THE SECTION 271(1)(C) WOULD EMBRACE THE MEANING OF THE DETAILS OF THE CLAIM MADE. IT IS AN ADMITTED POSITION IN THE PRESENT CASE THAT NO INFORMATION GIVEN IN TH E RETURN WAS FOUND TO BE INCORRECT OR INACCURATE. IT IS NOT AS I F ANY STATEMENT MADE OR ANY DETAIL SUPPLIED WAS FOUND TO BE FACTUAL LY INCORRECT. HENCE, AT LEAST, PRIMA FACIE, THE ASSESSEE CANNOT B E HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. THE WORDS ARE PL AIN AND SIMPLE. IN ORDER TO EXPOSE THE ASSESSEE TO THE PENALTY UNLE SS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROV ISION CANNOT BE INVOKED. BY ANY STRETCH OF IMAGINATION, MAKING AN I NCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISHING INACCURATE P ARTICULARS. THEREFORE, IT IS OBVIOUS THAT IT MUST BE SHOWN TH AT THE CONDITIONS UNDER SECTION 271(1)(C) MUST EXIST BEFORE THE PEN ALTY IS IMPOSED. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPE ND UPON THE RETURN FILED BECAUSE THAT IS THE ONLY DOCUMENT, WHE RE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. 12. WE FURTHER FIND THAT THE HONBLE PUNJAB & HARYA NA HIGH COURT IN THE CASE OF CIT VS. SSP (P) LTD (SUPRA) HAS HELD THAT IT WOULD BE NOT RIGHT TO TREAT THE RETURN AS A FALSE RETURN INVITIN G IMPOSITION OF PENALTY ITA NO.260(ASR)/2013 AY: 2001-02 11 UNLESS THE FILING OF INACCURATE RETURN IS ACCOMPAN IED BY A GUILTY MIND. THE FINDINGS OF THE COURT ARE REPRODUCED BELOW: PENALTY UNDER SECTION 271(1)(C)-CONCEALMENT BONAF IDE BELIEF WHERE THE ASSESSEE DOES NOT INCLUDE A PARTICULAR IT EM IN THE TAXABLE TURNOVER OR CLAIMS A DEDUCTION UNDER BONA FIDE BELI EF THAT HE IS NOT LIABLE SO AS TO INCLUDE THE SAME, OR ENTITLED TO D EDUCTION, IT WOULD NOT BE RIGHT TO TREAT THE RETURN AS A FALSE RETURN INVITING IMPOSITION OF PENALTY-UNLESS THE FILING OF AN INACCURATE RETURN I S ACCOMPANIED BY A GUILTY MIND, PENALTY CANNOT BE IMPOSED TRIBUNAL HAVING FOUND ON CONSIDERATION OF MATERIAL ON RECORD AND LAW APPLICA BLE THAT ASSESSEE HAD NOT FILED INACCURATE PARTICULARS OF IN COME OR CONCEALED ITS INCOME, WAS JUSTIFIED IN DELETING PENALTY. 13. IN THE PRESENT CASE, WE FIND THAT THE MALAFIDE INTENTION IS MISSING AS THE ASSESSEE HAD FILED COMPLETE DETAILS OF OPENI NG STOCK AND CLOSING STOCK AND HAD ALSO FILED LATEST PRICE LISTS FROM MANUFACTURERS FROM WHOM THESE WERE PURCHASED IN THE FORM OF ADDITIONAL EVIDENCE WHICH, HOWEVER, WAS NOT ADMITTED. 14. IN VIEW OF THE ABOVE, WE FIND MERITS IN THE ARG UMENTS OF THE LD. COUNSEL FOR THE ASSESSEE AND ACCORDINGLY, THE APPEA L OF THE ASSESSEE IS ALLOWED. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10/02/201 6 SD/- SD/- (A.D. JAIN) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 10/02/2016 /SKR/ COPY OF ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. PMS DIESEL, PHAGWARA 2. THE JCIT (OSD), PHAGWARA, 3. THE CIT(A), JLR 4. THE CIT, JLR .5. THE SR. DR, ITAT, ASR.