The ACIT, Circle-1(1)(2), Surat V. M/s. Kalamandir Jewellers P. Ltd., Surat

ITA 2764/AHD/2015

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 2270 (ITAT-SURAT)
• Duration Of Justice: 2 year(s) 10 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 01-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SRINIVAS T BIDARI
• Assessee Lawyers: RASESH SHAH
• Keywords: Recovery proceedings; Rule of consistency; Wrong claim
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL,SURAT BENCH,SURAT , , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . / ITA NO.2764/AHD/2015/SRT [ [ / ASSESSMENT YEAR: 2011-12 ASST. COMMISSIONER OF INCOME TAX, CIRCLE-1(1)(2), SURAT. VS. M/S. KALAMANDIR JEWELLERS PVT. LTD., 2287, SURVEY NO.25/P, CHOKSI BAZAR, KOSAMBA, SURAT. [PAN: AADCK 6700F] ( / APPELLANT) ( /RESPONDENT) / ASSESSEE BY : SHRI RASESH SHAH, C.A /REVENUE BY : SHRI SRINIVAS T. BIDARI, CIT-DR /DATE OF HEARING : 30-05-2018 /DATE OF PRONOUNCEMENT : 07-08-2018 / ORDER PERC.M.GARG, JUDICIAL MEMBER : THIS APPEAL HAS BEEN FILED BY THE REVENUE CHALLENGING THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-1, SURAT (CIT(A) FOR SHORT) DATED 07.07.2015 FOR THE ASSESSMENT YEAR (A.Y) 2011-12. 2. THE GROUNDS RAISED BY THE REVENUEREAD AS FOLLOWS: 2 ITA NO.2764/AHD/2015/SRT (A.Y: 2011-12) M/S. KALAMANDIR JEWELLERS PVT. LTD. 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE ID. CIT(A) IS JUSTIFIED IN DELETING THE ADDITION OF RS.5,65,15,384/- MADE BY THE A.O. BY ADOPTING AVERAGE COST METHOD VIS-A-VIS LIFO METHOD OF VALUATION OF CLOSING STOCK ADOPTED BY THE ASSESSEE INSPITE OF THE FACT THAT LIFO METHOD IS NOT A PRESCRIBED METHOD AS PER AS-2 ISSUED BY ICAI. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE ID. CIT(A) IS JUSTIFIED IN DELETING THE DISALLOWANCE OF RS.1,72,840/- MADE ON ACCOUNT OF CLOSING STOCK OF BOXES AT THE END OF THE YEAR. GROUND NO.1 : 3. WE HAVE HEARD THE ARGUMENTS OF BOTH SIDES AND CAREFULLY PERUSED THE RELEVANT MATERIAL PLACED ON THE RECORD OF THE TRIBUNAL. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT THE ID. CIT(A) IS JUSTIFIED IN DELETING THE ADDITION OF RS.5,65,15,384/- MADE BY THE A.O. BY ADOPTING AVERAGE COST METHOD VIS-A-VIS LIFO METHOD OF VALUATION OF CLOSING STOCK ADOPTED BY THE ASSESSEE INSPITE OF THE FACT THAT LIFO METHOD IS NOT A PRESCRIBED METHOD AS PER AS-2 ISSUED BY ICAI. THE LD. DR ALSO SUBMITTED THAT THE ASSESSEE WAS STATED THAT IN AY 2007-08 AND IN AY 2010-11 (PART PERIOD) WHEN THE ASSESSEE WAS THE PROPRIETORSHIP CONCERN OF SHRI SHARD MOHANLAL SHAH, THE SAME ISSUE WAS RAISED BY THE AO AND ADDITIONS WERE MADE THEREON. HOWEVER, THE HON'BLE ITAT, AHMEDABAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE UPHOLDING THE LIFO METHOD IN THE CASE OF THE ASSESSEE, BUT APPEAL OF REVENUE IS PENDING BEFORE HON'BLE HIGH COURT. THE LD. DR VEHEMENTLY POINTED OUT THAT THE LIFO METHOD FOLLOWED BY THE ASSESSEE IS NOT PERMISSIBLE AS PER THE ACCOUNTING STANDARD-2 SINCE THE SAME DOES NOT PORTRAY THE TRUE AND CORRECT STATE OF PROFITS EARNED BY THE ASSESSEE. THE LD. DR SUBMITTED THAT 3 ITA NO.2764/AHD/2015/SRT (A.Y: 2011-12) M/S. KALAMANDIR JEWELLERS PVT. LTD. THE DIFFERENCE AMOUNT WAS RIGHTLY ADDED BY THE AO TO THE INCOME OF THE ASSESSEE AND THE SAME WAS DELETED BY THE LD. CIT(A) WITHOUT ANY LOGIC,BASISAND REASONING THEREFORE, THE IMPUGNED ORDER MAY KINDLY BE BY RESTORING THAT OF THE AO. 4. REPLYING TO THE ABOVE, THE LD. ASSESSEES REPRESENTATIVE (AR) SUBMITTED THAT THE AO TOOK A HYPER TECHNICAL APPROACH, WHEREAS THE LD. CIT(A) DELETED THE ADDITION BY FOLLOWING ORDER OF ITAT, AHMEDABAD IN ASSESSEES OWN CASE, THEREFORE IMPUGNED ORDER MAY KINDLY BE UPHOLD BY DISMISSING APPEAL OF THE REVENUE. 5. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISSIONS, FIRST OF ALL, WE MAY POINT OUT THAT THE LD. CIT(A) HAS GRANTED RELIEF TO THE ASSESSEE WITH THE FOLLOWING OBSERVATION AND CONCLUSIONS: DISCUSSION AND APPELLATE DECISION: 5.1 I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AND CONSIDERED THE WRITTEN SUBMISSION FURNISHED BY THE AR OF THE ASSESSEE AND ALSO PERUSED THE CASE LAWS CITED BY THE AR AND DECISION OF HON'BLE ITAT IN THE CASE OFSHARADMOHANLAL SHAH FOR A.Y. 2007-08 & CIT(A)-II, AHMEDABAD FOR A.Y.2010-11 . THE CONTENTION OF THE ASSESSEE THAT ID. AO HAD ERRED IN MAKING ADDITION OF RS.5,65,15,384/- BASED ON DIFFERENCE IN VALUE OF CLOSING STOCK AS PER AVERAGE COST VIS-A-VIS LIFO METHOD CONSISTENTLY FOLLOWED BY THE ASSESSEE IS NOT SUSTAINABLE, I AGREE WITH THIS CONTENTION OF THE APPELLANT AND ORDER TODELETE THE ADDITION ON THE FOLLOWING GROUNDS:- (A) THAT PREVIOUSLY THE BUSINESS WAS RUN IN THE PROPRIETORSHIP OF SHRI SHARAD M. SHAH WHICH WAS TAKEN OVER BY THE APPELLANT COMPANY W.E.F. 01.10.2009 WITH ALL ASSETS & LIABILITIES. THE PREDECESSOR PROPRIETARY CONCERN WAS CONSISTENTLY FOLLOWING LIFO METHOD OF VALUATION OF CLOSING STOCK FOR MANY YEARS. THE ASSESSMENT WAS COMPLETED U/S. 143(3) FOR A.YR. 2006-07, 2008-09 & 2009-10 WHEREIN RETURNED INCOME WAS ACCEPTED AS ASSESSED INCOME. THUS, THE ASSESSEE HAS BEEN CONSISTENTLY FOLLOWED THE SAME 4 ITA NO.2764/AHD/2015/SRT (A.Y: 2011-12) M/S. KALAMANDIR JEWELLERS PVT. LTD. METHOD WHICH WAS DULY ACCEPTED BY THE DEPARTMENT AS WELL. HENCE ON THE BASIS OF 'RULE OF CONSISTENCY' THE AO SHOULD HAVE ACCEPTED THE LIFO METHOD OF VALUATION OF STOCK. (B) THAT THE DISPUTE REGARDING METHOD OF VALUATION OF STOCK HAD REACHED TO HON'BLE ITAT IN A.Y. 2007-08 I(ERSTWHILE PROPRIETOR'S CASE) WHEREIN THE HON'BLE ITAT HAS DECIDED THE MATTER IN FAVOUR OF THE ASSESSEE. THE FINDINGS OF THE HON'BLE ITAT ARE AS UNDER:- '8 WE HAVE HEARD THE RIVAL SUBMISSION AND CAREFULLY PERUSED THE MATERIALS ON RECORD ALONG WITH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE PAPER BOOK SUBMITTED BY THE ASSESSEE. AS ARGUED BY THE LEARNED AR AND ACCEPTED BY THE LEARNED CIT(A), THE ASSESSEE IS AT LIBERTY TO VALUE THE CLOSING STOCK IN ANY PARTICULAR ACCEPTABLE METHOD. LIFO, BEING ONE SUCH METHOD, THE ASSESSEE MY ADOPT SUCH METHOD IN VALUING THE CLOSING STOCK, PROVIDED THE RULE OF CONSISTENTLY IS MAINTAINED. THIS VIEW IF FORTIFIED BY THE DECISIONS CITED BY THE LEARNED AR SUPRA. HOWEVER, THE LEARNED CIT(A) HAS HELD THAT CERTAIN PORTION OF STOCK DECLARED AT THE TIME OF SURVEY REMAINED UNSOLD AND THEREBY BECAME A PART OF CLOSING STOCK AND ACCORDINGLY, ADOPTED THE RATE AT RS.962/- PER GRAM FOR THE STOCK OF 4362.580 GRAMS. THIS ASPECT IS DISPUTED BY THE LEARNED AR. THEREFORE, IN THE INTEREST OF JUSTICE, WE REMIT THIS ISSUE BACK TO THE FILE OF THE LEARNED AO FOR VERIFYING THE COMPUTATION OF THE CLOSING STOCK BASED ON LIFO METHOD AND FURTHER HOLD THAT THE VALUATION OF CLOSING STOCK ADOPTION LIFO METHOD WHICH IS CONSISTENTLY FOLLOWED BY THE ASSESSEE SHALL BE ACCEPTED BY THE REVENUE. IT IS ORDERED ACCORDINGLY'. THUS, THERE IS A BINDING PRECEDENT OF ITAT IN THE CASE OF THE APPELLANT HIMSELF WHICH NEED TO BE FOLLOWED. THE ARGUMENT OF THE AO THAT SECOND APPEAL IS PENDING BEFORE HON'BLE HIGH COURT AGAINST THIS ORDER DOES NOT HOLD WATER. DECISION OF CO-ORDINATE BENCH IS BINDING ON ALL THE LOWER AUTHORITIES UNTIL & UNLESS THERE IS ANY CHANGE IN FACTS & SITUATION IN ANY PARTICULAR YEAR. NEVERTHELESS, THE DECISION OF HON'BLE HIGH COURT WHENEVER IT WOULD BE PRONOUNCED WILL BE GIVEN ITS DUE EFFECT AND TILL THEN IT IS NOT OPEN TO REVENUE AUTHORITY TO NOT TO FOLLOW THE BINDING PRECEDENT. THE DECISION OF HON'BLE AP HIGH COURT IN THE CASE OF JANA PRIYA ENGINEERS SYNDICATE (2015) 113 DTR 311 (AP) RELIED UPON BY THE ASSESSEE ALSO SUPPORTS THIS CONTENTION. (C) IN THE A.YR. 2010-11, THE ID. CIT(A )-II, AHMEDABAD VIDE ORDER NO.CIT(A)-II/CC.2/129/2012-13 DATED 18.09.2013 IN THE CASE OF SHARAD M. SHAH AFTER GIVING DETAILED REASONING DECIDED THE SAME ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING THAT AO WAS NOT JUSTIFIED IN NOT ACCEPTING THE METHOD OF VALUATION OF STOCK CONSISTENTLY FOLLOWED BY THE APPELLANT AND DELETED THE ADDITIONS. THUS, MY PREDECESSOR HAS APPROVED THE LIFO METHOD OF STOCK VALUATION WHICH WAS BEING 5 ITA NO.2764/AHD/2015/SRT (A.Y: 2011-12) M/S. KALAMANDIR JEWELLERS PVT. LTD. CONSISTENTLY FOLLOWED BY THE ASSESSEE. I DO NOT SEE ANY REASON FOR DEVIATING THE ESTABLISHED POSITION ON THIS ISSUE. (D) THE APPELLANT HAS ALSO PLACED RELIANCE ON FINAL REPORT OF ACCOUNTING STANDARDS COMMITTEE, GOI, MGF, CBDT IN AUGUST 2012 WHICH SAYS THAT IN CASE OF DISPUTE BETWEEN INCOME TAX PROVISIONS & TAX ACCOUNTING STANDARDS, THE PROVISIONS OF INCOME WOULD PREVAIL. THE INSTRUCTION OF CBDT ARE BINDING OF REVENUE AUTHORITY. (E) THAT THE APPELLANT PLACED RELIANCE ON THE DECISION OF DCIT VS. HARJIVANDAS H. ZAVERI (1998) 60 TTJ (AHD) 155 WHEREIN LIFO METHOD CONSISTENTLY FOLLOWED BY THE ASSESSEE WAS UPHELD AND ADDITION MADE ON THAT BASIS WAS DELETED. THE APPELLANT HAS ALSO PLACED RELIANCE ON DECISION OF HON'BLE ITAT, HYDERABAD IN CASE OF RAMESH CHAND JEWEIELRS VS. ITO IN ITA NO. 63 TO 65/HYD/06 WHEREIN HON'BLE ITAT HAD OBSERVED THAT THE LIFO METHOD ADOPTED CONSISTENTLY BY THE ASSESSEE WAS ACCEPTED BY THE DEPARTMENT THROUGHOUT IN THE PAST YEARS AND THEREFORE ACCORDINGLY TRADING ADDITIONS MADE FOR THE THREE YEARS WERE NOT JUSTIFIED AND ACCORDINGLY DELETED. IN VIEW OF THIS, CONSIDERING THE FACTS OF THE CASE, I DO NOT SEE ANY REASON AND JUSTIFICATION ON THE PART OF THE AO TO DISTURB THE CONSISTENTLY FOLLOWED METHOD OF VALUATION OF STOCK I.E. LIFO METHOD MAKE THE ADDITION SIMPLY ON THIS COUNT ITSELF. (F) WITHOUT PREJUDICE, IT IS A FACT THAT DURING THE COURSE OF SURVEY ACTION UNDERTAKEN AT ITS BUSINESS PREMISES ON 29/30.11.2012, THE APPELLANT IN ORDER TO AVOID LITIGATION ON THE ISSUE OF METHOD OF VALUATION OF STOCK, THE ASSESSEE COMPANY DECIDED TO CHANGE THE METHOD FROM 'LIFO TO AVERAGE METHOD' FROM F.YR. 2012-13 I.E. A.Y. 2013-14. IN VIEW OF THIS, ON THE DATE OF SURVEY I.E. 30.11.2012, THE ASSESSEE COMPANY CALCULATED THE STOCK VALUATION OF LIFO BASIS WHICH WORKED OUT TO RS.79,65,10,974/- AND ON AVERAGE BASIS WHICH WORKED OUT AT RS.103,27,32,712/- AND DIFFERENTIAL AMOUNT I.E. RS.23,62,21,738/- WAS VOLUNTARILY DISCLOSED AS INCOME OF A.Y. 2013-14 AND DUE TAXES WERE PAID THEREON. THE INCREASE IN PROFIT DUE TO CHANGE IN METHOD OF STOCK VALUATION HAS ACCUMULATED EFFECT FROM INCEPTION OF THE COMPANY (01.10.2009) TILL THAT DATE OF SURVEY I.E. 30.11.2012. THE APPELLANT HAS GIVEN THE YEAR WISE BREAK UP AS UNDER: AS ON 31.03.2010 53,426,960 AS ON 31.03.2011 56,515,384 AS ON 31.03.2012 91,419,302 AS ON 30.11.2012 34,860,092 DISCLOSURE DURING SURVEY(RS.) 236,221,738 AS EVIDENT FROM THE FACTS DISCUSSED ABOVE, THE ASSESSEE HAS INCORPORATED THE ENTIRE EFFECT OF CHANGE IN METHOD VALUATION OF STOCK IN THE DISCLOSURE MADE IN A.Y. 20:13-14 AND PAID DUE TAXES THEREON. NOW, MAKING ADDITION ON THIS COUNT SEPARATELY FOR EACH YEAR INVOLVED ONCE AGAIN IS NOT ONLY AMOUNT TO 'DOUBLE TAXATION' BUT THE WHOLE EXERCISE WOULD BE 'REVENUE NEUTRAL' BECAUSE AMOUNT IS TAXABLE 6 ITA NO.2764/AHD/2015/SRT (A.Y: 2011-12) M/S. KALAMANDIR JEWELLERS PVT. LTD. ONLY ONCE. IF THE PROPOSAL OF TAXING THE DIFFERENCE IN VALUATION OF STOCK IN THE RESPECTIVE YEARS IS ACCEPTED THEN, THE ASSESSEE DESERVE RELIEF IN A.Y. 2013-14 WHERE THE SAME AMOUNT HAS BEEN OFFERED & TAXED AS 'DISCLOSED INCOME'. THE AR ARGUED THAT DEPARTMENT HAS ACCEPTED THE AMOUNT OF DISCLOSURE OF RS.23,62,21,738/- MADE IN A.Y. 2013-14 AND TAXED ACCORDINGLY. ON THIS BASIS ALSO, ADDITION OF RS.5,65,15,384/- IN A.Y. 2011-12 IS NOT JUSTIFIED ON THE BASIS OF DOCTRINE OF 'PROMISSORY ESTOPPLE.' (G) LAST BUT NOT THE LEAST, THE AO HAD NOT REJECTED THE BOOK RESULTS U/S. 145(3) BEFORE EMBARKING UPON THE MAKING OF ADDITION OF RS.5,65,15,384/-. IT HAS BEEN SETTLED LAW THAT NO ADDITION IS CALLED FOR WITHOUT REJECTING THE BOOK RESULTS. IT HAS BEEN HELD IN THE CASE OF CIT VS. VIKRAM PLASTICS & ORS 239 ITR 161 (GUJ) THAT WITHOUT REJECTING THE BOOKS OF ACCOUNTS ANY ADDITION IS NOT SUSTAINABLE. ON THIS COUNT ALSO, THE ADDITION IS NOT SUSTAINABLE. 5.2 AFTER TAKING INTO CONSIDERATION THE FACTS & CIRCUMSTANCES OF THE CASE IN ITS ENTIREITY AND THE RATIO LAID DOWN BY VARIOUS COURTS INCLUDING ITAT AHMEDAABD'S DECISION & CIT(A)-II, AHMEDABAD'S DECISION IN ITS OWN CASE, I AM OF CONSIDERED VIEW THAT ID. AO WAS NOT JUSTIFIED IN DISTURBING THE METHOD OF VALUATION WITHOUT SPECIFICALLY REJECTING THE BOOKS OF ACCOUNTS. THE QUANTITATIVE RESULTS OF PURCHASES, SALES & CLOSING STOCK HAVE BEEN DULY ACCEPTED BY THE AO AND PROVISIONS OF SECTION 145(3) HAVE NOT BEEN INVOKED BY THE AO BEFORE MAKING ADDITION, THEREFORE, THERE WAS NO JUSTIFICATION FOR NOT ACCEPTING THE METHOD OF VALUATION OF STOCK CONSISTENTLY FOLLOWED BY THE APPELLANT AND DULY ACCEPTED BY THE DEPARTMENT IN THE PAST. BESIDES THIS, THE ASSESSEE HAS ALSO OFFERED THE EQUILENT AMOUNT REPRESENTING THE DIFFERENCE IN VALUATION AS PART OF COMMULATIVE DISCLOSURE OF RS.23,62,21,738/- AND PAID DUE TAXES THEREON. HENCE, ANY FURTHER ADDITION ON THE SAME ISSUE WOULD AMOUNT TO 'DOUBLE TAXATION' WHICH IS AGAINST ESTABLISHED PRINCIPLES OF TAXATION. THUS, THE WHOLE EXERCISE HAS BECOME OF ACADEMICAL INTEREST & REVENUE NEUTRAL. CONSIDERING THE ABOVE DISCUSSION, I ORDER TO DELETE THE ADDITION OF RS.5,65,15,384/- ACCORDINGLY. THIS GROUND OF APPEAL IS ALLOWED . 6. WHEN WE LOGICALLY ANALYZE THE FINDINGS AND CONCLUSION DRAWN BY THE LD. CIT(A) THEN, FIRST OF ALL WE OBSERVE THAT THE AO MADE IMPUGNED ADDITION ON THE BASIS OF DIFFERENCE AND VALUE OF CLOSING STOCK AS PER AVERAGE COST VIZ-A-VIZ LIFO METHOD AND UNDISPUTEDLY LIFO METHOD WAS CONSISTENTLY FOLLOWED BY THE ASSESSEE. IT IS ALSO NOT IN DISPUTE THAT PREVIOUSLY BUSINESS WAS IN THE PROPRIETORSHIP FIRM OF SHRI SHARATH M. 7 ITA NO.2764/AHD/2015/SRT (A.Y: 2011-12) M/S. KALAMANDIR JEWELLERS PVT. LTD. SHAH, WHICH WAS TAKEN OVER BY THE ASSESSEE WITH ALL ASSETS AND LIABILITIES AND THE PREDECESSOR PROPRIETARY FIRM WAS CONSISTENTLY FOLLOWING LIFO METHOD VALUATION OF CLOSING STOCK FOR MANY YEARS. THE ASSESSMENT U/S. 143(3) OF THE ACT WAS COMPLETED FOR PRECEDING ASSESSMENT YEARS I.E., 2006-07, 2008-09 & 2009-10, WHEREIN RETURNED INCOME WAS ACCEPTED BY THE AO, WHEREIN LIFO METHOD WAS FOLLOWED FOR VALUATION OF CLOSING STOCK AND THUS, WE SAFELY PRESUME THAT LIFO METHOD WAS CONTINUOUSLY ADOPTED BY THE ASSESSEE FOR VALUATION OF CLOSING STOCK AND THE SAME WAS CONSISTENTLY ACCEPTED BY THE DEPARTMENT WITHOUT ANY DISPUTE OR ADDITION. IN THESE SET OF FACTS, WE ARE IN AGREEMENT WITH THE CONCLUSION DRAWN BY THE FIRST APPELLATE AUTHORITY THAT ON THE BASIS OF RULE OF CONSISTENCY THE AO SHOULD HAVE ACCEPTED THE LIFO METHOD FOR VALUATION OF CLOSING STOCK. 7. FURTHER, WE CANNOT IGNORE THAT THE SAME DISPUTE IN AY 2007-08 WAS AGITATED UPTO THE LEVEL OF TRIBUNAL AND THE TRIBUNAL RESTORED THE ISSUE TO THE FILE OF THE A.O FOR VERIFICATION OF COMPUTATION OF CLOSING STOCK ON THE BASIS OF LIFO METHOD AND DIRECTING HIM TO ACCEPT THE SAME. THIS FACT IS ALSO A BASIS TAKEN BY THE LD. CIT(A) FOR GRANTED RELIEF TO THE ASSESSEE. IT WAS POINTED OUT BY THE AO THAT THE APPEAL OF THE DEPARTMENT IS PENDING BEFORE HON'BLE HIGH COURT OF GUJARAT, BUT THE LD. CIT(A) DID NOT ACCEPT THIS CONTENTION BY OBSERVING THAT THE DECISION OF CO-ORDINATE BENCH IS BINDING ON ALL LOWER AUTHORITIES UNTIL AND UNLESS THERE IS ANY CHANGE IN FACTS AND 8 ITA NO.2764/AHD/2015/SRT (A.Y: 2011-12) M/S. KALAMANDIR JEWELLERS PVT. LTD. SITUATION IN ANY PARTICULAR ASSESSMENT YEAR. AS PER DECISION OF HON'BLE HIGH COURT OF ANDHRA PRADESH IN THE CASE OF JANA PRIYA ENGINEERS SYNDICATE (SUPRA) NEVERTHELESS, THE DECISION OF HON'BLE HIGH COURT WHENEVER IT WOULD BE PRONOUNCED WILL BE GIVEN ITS DUE EFFECT RESPECTFULLY AND TILL THEN IT IS NOT OPEN TO THE REVENUE AUTHORITY TO NOT TO FOLLOW THE BINDING PRECEDENT RENDERED IN THE ORDERS OF THE TRIBUNAL. 8. IT IS ALSO NOT IN DISPUTE THAT FOR AY 2010-11 THE FIRST APPELLATE AUTHORITY IN ORDER DATED 18.09.2013 IN THE CASE OF SHRI SHARAD M. SHAH, I.E., THE PREDECESSOR PROPRIETORSHIP FIRM OF PRESENT ASSESSEE, HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY DISMISSING THE CONTENTION OF THE AO AND BY HOLDING THAT THE AO WAS CORRECT AND JUSTIFIED IN NOT ACCEPTING THE LIFO METHOD VALUATION OF CLOSING STOCK WHICH WAS CONSISTENTLY FOLLOWED BY THAT ASSESSEE. 9. FURTHER, IN THE VARIOUS ORDERS RENDERED BY THE TRIBUNAL INCLUDING ORDER OF ITAT, AHMEDABAD IN THE CASE OF DCIT VS. HARJIVANDAS H. ZAVERI (SUPRA) AND ORDER OF ITAT, HYDERABAD IN THE CASE OF RAMESH CHAND JEWELLERS VS. ITO (SUPRA), WHEREIN IT WAS HELD THAT THE LIFO METHOD, WHICH IS CONSISTENTLY ADOPTED BY THE ASSESSEE AND ACCEPTED BY THE DEPARTMENT THROUGH DURING THE PAST ASSESSMENT YEARS THEN, TRADE ADDITIONS MADE BY THE AO CANNOT BE HELD AS CORRECT AND JUSTIFIED AND DESERVE TO BE DELETED ON THIS COUNT. IN OUR CONSIDERED OPINION, THE 9 ITA NO.2764/AHD/2015/SRT (A.Y: 2011-12) M/S. KALAMANDIR JEWELLERS PVT. LTD. GLARING FACT EMERGES FROM THE ABOVE FACTUAL POSITION AND FINDINGS IS THAT THE ASSESSEES PREDECESSOR PARTNERSHIP FIRM WAS CONSISTENTLY FOLLOWING LIFO METHOD FOR VALUATION OF CLOSING STOCK AND THE SAME WAS ACCEPTED BY THE DEPARTMENT WITHOUT ANY FURTHER DISPUTE OR ADDITIONS BY ACCEPTING RETURNED INCOME OF THE ASSESSEE. IN THIS SITUATION, WHEN THE ASSETS AND LIABILITIES INCLUDING ALL THE STOCKS WAS TAKEN OVER BY THE PRESENT ASSESSEE FROM THE PREDECESSOR PROPRIETORSHIP FIRM AND THE PRESENT ASSESSEE BEING PRIVATE LIMITED COMPANY IS ALSO CONSISTENTLY FOLLOWING THE LIFO METHOD OF VALUATION OF STOCK IN THE SAME MANNER AS HAS BEEN DONE BY HIS PREDECESSOR ENTITY PROPRIETORSHIP FIRM, THEN THE AO CANNOT DISPUTE THE SAME FLOUTING THE RULE OF CONSISTENCY AND ADDITIONS MADE BY DISMISSING THE METHOD OF VALUATION CANNOT BE HELD AS SUSTAINABLE AND VALID. 10. ON CAREFUL CONSIDERATION OF FACTS EMERGING FROM THE RECORD THAT THE ASSESSEE HAS INCORPORATED THE ENTIRE EFFECT OF CHANGING METHOD OF VALUATION OF STOCK IN THE DISCLOSURE MADE IN AY 2013-14 AND AS ALSO PAID DUE TAXES THEREON THEN, MAKING ANY ADDITION ON THIS COUNT SEPARATELY FOR EACH AND EVERY ASSESSMENT YEAR WOULD DEFINITELY AMOUNT TO DOUBLE TAXATION AND THE ENTIRE EXERCISE WOULD BE FUTILE AND REVENUE NEUTRAL AS THE TAXING AUTHORITIES ARE ALLOWED TO TAX THE AMOUNT ONCE ONLY. IF, THE AO PROPOSE TO TAX THE DIFFERENCE IN VALUATION OF STOCK IN THE RESPECTIVE YEARS THEN, THE RECOVERY OF TAX IN AY 2013-14 WOULD NOT BE PERMISSIBLE AND THE 10 ITA NO.2764/AHD/2015/SRT (A.Y: 2011-12) M/S. KALAMANDIR JEWELLERS PVT. LTD. ADDITIONS IN THE OTHER RELEVANT ASSESSMENT YEARS WOULD AMOUNT TO DOUBLE TAXATION WHICH IS NOT PERMISSIBLE. THE LD. AO IN THE ASSESSMENT ORDER OR LD. DR DURING THE ARGUMENT BEFORE US COULD NOT CONTROVERT THE FACT THAT THE DEPARTMENT HAS ACCEPTED THE AMOUNT OF DISCLOSURE OF RS. 23,62,21,738/- DURING AY 2013-14 AND HAS RECOVERED DUE TAXES ETC. THEREON AND HENCE, AS PER PRINCIPLE OF PROMISSORY ESTOPPLE FURTHER TAXING THE SAME IS NOT PERMISSIBLE AND JUSTIFIED. 11. AS PER DECISION OF HONBLE JURISDICTIONAL HIGH COURT OF GUJARAT IN THE CASE OF CIT VS. VIKRAM PLASTICS (SUPRA) WITHOUT REJECTING BOOKS OF ACCOUNTS ANY ADDITION DISPUTING THE METHOD OF VALUATION OF STOCK IS NOT SUSTAINABLE THIS RATIO HAS BEEN RESPECTFULLY FOLLOWED BY THE LD. CIT(A) AND WE ARE UNABLE TO SEE ANY VALID REASON TO INTERFERE WITH THE SAME. IN THE PRESENT CASE, THE QUANTITATIVE RESULTS OF PURCHASES, SALES & CLOSING STOCK HAVE BEEN DULY ACCEPTED BY THE AO AND PROVISIONS OF SECTION 145(3) OF THE ACT HAVE NOT BEEN INVOKED BY THE AO BEFORE MAKING ADDITION, THEREFORE, THERE WAS NO JUSTIFICATION FOR NOT ACCEPTING THE METHOD OF VALUATION OF STOCK CONSISTENTLY FOLLOWED BY THE APPELLANT AND DULY ACCEPTED BY THE DEPARTMENT IN THE SEVERAL PAST ASSESSMENT YEARS. AS WE HAVE ALREADY NOTED ABOVE THAT THE ASSESSEE HAS OFFERED AND DISCLOSED AMOUNT OF RS. 23.62 CRORES DURING AY 2013-14 AND HAS PAID DUE TAXES THEREON THEREFORE, FURTHER ADDITION ON THE SAME ISSUE WOULD CERTAINLY 11 ITA NO.2764/AHD/2015/SRT (A.Y: 2011-12) M/S. KALAMANDIR JEWELLERS PVT. LTD. AMOUNT TO DOUBLE TAXATION, WHICH IS OBVIOUSLY AGAINST WELL ACCEPTED AND ESTABLISHED PRINCIPLES OF TAX JURISPRUDENCE.IN VIEW OF FOREGOING DISCUSSIONS, WE REACH TO A LOGICAL CONCLUSION THAT THE AO WAS NOT CORRECT IN MAKING ADDITION ON ACCOUNT OF DISMISSAL OF LIFO METHOD FOR VALUATION OF CLOSING STOCK AND THE LD. CIT(A) WAS RIGHT IN DELETING THE ADDITION ON THE BASIS OF VARIOUS FACTORS AND CIRCUMSTANCES AND BY FOLLOWING THE RULE OF CONSISTENCY AND ALSO KEEPING IN VIEW THE FACTUM OF DOUBLE TAXATION AND THUS, WE ARE UNABLE TO SEE ANY VALID REASON TO INTERFERE WITH THE FINDINGS ARRIVED BY THE LD. FIRST APPELLATE AUTHORITY AND THERE IS NO AMBIGUITY OR PERVERSITY THEREIN AND HENCE, WE UPHOLD THE SAME. ACCORDINGLY, GROUND NO.1 OF REVENUE BEING DEVOID OF MERITS IS DISMISSED. GROUND NO.2 : 12. APROPOS GROUND NO.2, THE LD. DR SUPPORTING THE ASSESSMENT ORDER AND SUBMITTED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE DISALLOWANCE OF RS. 1,72,840/- MADE ON ACCOUNT OF CLOSING STOCK OF BOXES AT THE END OF THE YEAR THEREFORE, IMPUGNED ORDER MAY KINDLY BE SET ASIDE BY RESTORING THAT OF THE AO. 13. THE LD. AR TOOK UP THROUGH THE RELEVANT PARA 6.2 OF THE FIRST APPELLATE ORDER AND SUBMITTED THAT THE EXERCISE UNDERTAKEN BY THE AO WAS REVENUE NEUTRAL THEREFORE, THE LD. CIT(A) WAS RIGHT IN DELETING THE ADDITION. 12 ITA NO.2764/AHD/2015/SRT (A.Y: 2011-12) M/S. KALAMANDIR JEWELLERS PVT. LTD. 14. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISSIONS, WE FIND THAT THERE WAS NO EVIDENCE WITH THE AO TO ESTIMATE THE QUANTITY OF STOCK REMAINED WITH THE ASSESSEE AND SINCE THE EXPENDITURE ON THE BOXES HAS BEEN CAME ON THE BASIS OF PURCHASES THEREFORE, CONSIDERING THE OPENING AND CLOSING BALANCE SHOWN THE BOOKS OF ACCOUNTS HAVE NO RELEVANCE FOR EXAMINING THE CLAIM OF THE ASSESSEE. IT IS NOT A CASE OF AO THAT THE ASSESSEE MADE WRONG OR BOGUS CLAIM ON ACCOUNT OF EXPENDITURE ON BOXESPURCHASED THEREFORE, NO ADDITION COULD HAVE BEEN MADE BY TAKING AND CONSIDERING THE OPENING AND CLOSING STOCK OF SUCH BOXES SHOWN BY THE ASSESSEE IN THE BALANCE SHEET/BOOKS OF ACCOUNTS. IN VIEW OF ABOVE, WE UPHOLD THE FINDING ARRIVED BY THE LD. CIT(A) AND CONSEQUENTLY GROUND NO.2 OF THE REVENUE IS ALSO DISMISSED. 15. IN THE RESULT,APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF07 TH AUGUST, 2018. / SURAT ; DATED :07 TH AUGUST, 2018 / EDN / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT ; 3. ( ) / THE CIT(A)-1, SURAT; 4. PRL. CIT-I, SURAT; 5. , , / DR, ITAT, SURAT; 6. / GUARD FILE . / BY ORDER , // TRUE COPY// SD/ - SD/ - ( ) ( O.P.MEENA ) / ACCOUNTANT MEMBER ( ) (C.M.GARG) / JUDICIAL MEMBER 13 ITA NO.2764/AHD/2015/SRT (A.Y: 2011-12) M/S. KALAMANDIR JEWELLERS PVT. LTD. / ASSISTANT REGISTRAR , / ITAT, SURAT