Sh. Abhay Singhvi, JAIPUR V. ITO, UDAIPUR

ITA 267/JODH/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99648 (ITAT-JODHPUR)
• Duration Of Justice: 4 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 20-12-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 15-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI G.C. GUPTA, H O NBLE VICE PRESIDENT SHRI R.C. SHARMA , HONBLE ACCOUNTANT MEMBER ITA NO S . 244 / JODH / 20 1 1 [ ASSESSMENT YEAR 200 6 - 0 7 ] ITA NO. 267/JODH /201 1 [ASSESSMENT Y EAR 2008 - 09 ] ITA NO. 268 / JODH /201 3 [ASSESSMENT YEAR 2009 - 10 ] SHRI BHADAR CHAND SONI VS. THE I.T .O PROP. SURYA JEWELLERS WARD - 1 145, JAWAHAR MARKET SRIGANGANAGAR SRIGANGANAGAR PAN NO : AJTPS 9489 D (APPELLANT) (RESPONDENT) A SSESSEE B Y : SHRI SURESH OJHA DEPARTMENT B Y : SHRI S.L. MOURYA DATE OF H EARING : 0 1 . 0 9 .201 5 DATE OF PRONOUNCEMENT : 04 . 0 9 . 201 5 ORDER PER R.C. SHARMA, AM : - TH ESE ARE T HREE APPEAL S FILED BY THE SAME ASSESSEE AGAINST THE ORDER OF THE CIT(A ) - 1, JAIPUR DATED 24 .0 2 .201 1 AND 28 - 02 - 2013 FOR A.YS. 2006 - 07, 2008 - 09 AND 20 09 - 10 IN THE MATTER OF 2 ORDER PASSED U/S 143(3) OF THE INCOME - TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT, FOR SHORT]. 2. COMMON GROUNDS HAVE BEEN TAKEN IN ALL THE A.YS UNDER CONSIDERATION . F ACTS AND CIRCUMSTANCES IN BOTH THE CASES ARE SAME AND SINCE THE ISSUES INVOLVED ARE COMMON, WE ARE ADJUDICATING UPON THEM BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. 4. FA CTS, IN BRIEF, ARE THAT D URING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO OBSERVED THAT THE ASSESSEE SHOWED CLOSING STOCK OF RS. 1714.520 KGS VALUED AT RS. 7,845/ - PER 10 GRAM AND GOLD JEWELLERY DISPLAY STOCK AT 4 KGS VALUED AT RS. 5,775/ - PER 10 GRAM. T HERE EXISTED A DIFFERENCE OF RS. 2,070/ - PER 10 GRAM AND THE TOTAL CLOSING STOCK OF 4 KG OF GOLD WAS FOUND TO HAVE BEEN UNDER - VALUED BY RS. 8,28,000/ - . ACCORDING TO THE AO, THE JEWELRY ON DISPLAY AND OTHER SELLABLE JEWELLERY HAD THE SAME PURITY AND FETCHE D THE SAME PRICE BY VIRTUE OF WHICH DUAL METHOD OF VALUATION WAS NOT ACCEPTABLE. THE AO THEREFORE, ADDED RS. 8,28,000/ - IN THE INCOME OF THE ASSESSEE ON ACCOUNT OF VALUATION OF STOCK AS PROPOSED BY THE ASSESSEE. 3 5. BY THE IMPUGNED ORDER, THE LD. CIT(A) CO NFIRMED THE ADDITION AGAINST WHICH THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 6. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BLOW AND FOUND FROM RECORD THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSE SSEE CONTINUED TO BE A JEWELER AND ALSO ENGAGED IN THE BUSINESS OF PAWNING. DURING THE CURRENT YEAR THE ASSESSEE HAD OPENED A NEW SHOWROOM. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE CHANGED ITS METHOD OF VALUATION OF CLOSING STOCK BY BIFURCATING THE STOCK IN TWO CATEGORIES I.E. ONE FOR SELLING [REGULAR STOCK] AND THE OTHER FOR DISPLAY PURPOSES [FIXED STOCK]. THE FIXED STOCK WAS MAINTAINED AS A MINIMUM STOCK WAS REQUIRED FOR DISPLAY PURPOSES. THE FIXED STOCK WAS VALUED AT THE VALUE OF OPENING STO CK AND THE REGULAR STOCK AT MARKET PRICE LESS IMPURITIES. THE AO ACCEPTED THE VALUATION OF REGULAR STOCK BUT REJECTED THE VALUATION OF FIXED STOCK. 4 7. FROM THE RECORD WE FOUND THAT THE ASSESSEE IS TRADING IN GOLD AND SILVER ORNAMENTS AND ALSO DOING JOB WORK IN RESPECT OF THE SAME. UPTO A.Y. 2005 - 06, THE ASSESSEE WAS VALUING THE CLOSING STOCK AT MARKET VALUE. HOWEVER, IN THE CURRENT YEAR THE APPELLANT BIFURCATED THE CLOSING STOCK INTO FIXED STOCK & REGULAR STOCK AND CHANGED THE METHOD OF VALUATION OF CLOS ING STOCK. THE FIXED STOCK WAS VALUED AT COST PRICE WHEREAS THE REGULAR STOCK WAS VALUED AT MARKET RATE LESS IMPURITIES. THE REASON GIVEN FOR BIFURCATION OF STOCK THAT IT HAD TO MAINTAIN UNIFORM STOCK FOR DISPLAY PURPOSES IS NOT TENABLE IN VIEW OF THE FACT THAT THE NATURE OF BUSINESS OF THE APPELLANT DID NOT UNDER GO ANY CHANGE EITHER DURING THE YEAR UNDER CONSIDERATION OR IN THE FUTURE. SECONDLY, NO SEPARATE INVENTORIES ARE PREPARED FOR EITHER THE FIXED STOCK OR REGULAR STOCK. THIRDLY, THE NATURE OF ORNAMENTS IN FIXED STOCK AND/OR REGULAR STOCK IS NO DIFFERENT. FOURTHLY, FIXED STOCK IS NOT JUST MEANT FOR DISPLAY PURPOSES ONLY . FURTHERMORE, WHEN THE NATURE OF JEWELLERY IN BOTH THE FIXED STOCK AND REGULAR STOCK IS SIMILAR, IF NOT IDENTICAL, THE PURPOSE OF VALUING IT DIFFERENTLY DOES NOT STAND TO ANY REASON OR LOGIC. HENCE STOCK OF SIMILAR NATURE OUGHT TO BE VALUED SIMILARLY . IN VIEW OF ABOVE DISCUSSION, WE DO NOT FIND ANY JUSTIFICATION FOR CHANGE OF METHOD OF VALUATION DURING THE YEAR UNDER CONSIDERATI ON 5 WHICH WAS SAID TO CONSISTENTLY FOLLOWED IN THE SUBSEQUENT YEAR. HOWEVER, WE ACCEPT THE CONTENTION OF THE LD. A.R. TO THE EFFECT THAT IN CASE ENHANCED VALUATION IS SUSTAINED, THE AO SHOULD BE DIRECTED TO GIVE ADJUSTMENT OF ENHANCED VALUATION IN THE OPEN ING STOCK OF THE FOLLOWING YEAR. ACCORDINGLY, WE DIRECT THE AO TO GIVE DUE CREDIT FOR ENHANCEMENT IN THE VALUE OF CLOSING STOCK WHILE TAKING OPENING STOCK OF THE SUBSEQUENT YEAR AND SO ON. WE DIRECT ACCORDINGLY. 8 . IN THE RESULT, THE APPEAL IS ALLOWED I N PART. 9. AS THE FACTS AND CIRCUMSTANCES IN OTHER A.YS ARE SAME, FOLLOWING THE REASONS GIVEN HEREINABOVE, WE DIRECT THE AO TO GIVE DUE CREDIT FOR ENHANCEMENT OF CLOSING STOCK. 10. TO SUM UP, IN THE RESULT, ALL THE THREE APPEALS OF THE ASSESSEE ARE PA RTLY ALLOWED. ORDER PRON OUNCED IN THE COURT ON 04 - 0 9 - 201 5 . SD/ - SD/ - (G.C. GUPTA) ( R.C. SHARMA ) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 04 TH SEPTEMBER , 2015 . 6 VL/ - COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) BY ORDER 5. THE DR ASSISTANT REGISTRAR ITAT, JODHPUR