V.RIYAZ AHMED, VANIYAMBADI V. ACIT, VELLORE

ITA 3084/CHNY/2018

• Counselvise Citation: [2022] 107 COUNSELVISE.COM (IT) 0006 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 11-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard
• Section: 143(3)

Judgement Text

आयकर अपीलीय अिधकरण ‘ए’ ायपीठ चे ई म । IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI माननीय +ी वी. द ु गा1 राव, ाियक सद3 एवं माननीय +ी मनोज कु मार अ7वाल ,लेखा सद3 के सम9। BEFORE HON’BLE SHRI V. DURGA RAO, JUDICIAL MEMBER AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकरअपीलसं./ ITA No. 3084/Chny/2018 (िनधा1रणवष1 / Assessment Year: 2015-16) V. Riyaz Ahmed Proprietor of Riyaz Leathers 37/258, 4 th Street, Basheerabad, Muslimpur, Vaniyambadi – 635 751. बनाम/ V s. ACIT Circle -1, Vellore. थायीलेखासं./जीआइआरसं./P AN /GI R No. AK E P R-6 6 3 3 -C (अ पीलाथ /Appellant) : ( थ / Respondent) अपीलाथ कीओरसे/ Appellant by : CA Paul Sundar Raja – Ld. AR थ कीओरसे/Respondent by : Shri AR V Sreenivasan (Addl. CIT) – Ld. DR सुनवाईकीतारीख/Date of Hearing : 27-06-2022 घोषणाकीतारीख /Date of Pronouncement : 06-07-2022 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2015-16 arises out of the order of learned Commissioner of Income Tax (Appeals)-13, Chennai [CIT(A)] dated 03.08.2018 in the matter of assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) of the Act on 22.12.2017.The assessee has filed concise grounds of appeal which read as under: 1. The order of the Income tax officer is against facts and law of the case. - 2 - ITA No: 3084/Chny/2018 2. The dosing stock of locally procured and imported leather pieces vary in size, selection & quality and hence cannot be valued at same rate. 3. The valuation of closing stock was as per the generally accepted accounting principles which are consistently being followed by the assessee. 4. The CIT(A) did not give the appellant a reasonable opportunity of being heard in the case. The documents asked for during the appeal were duly provided. After accepting the submitted documents, there were no objections raised and no additional documents were asked. However, the case was dismissed without giving any reasons & opportunity of being heard. 5. The appellant, therefore, pray that the appeal may be admitted and orders may be passed rendering justice to the appellant. As evident the sole subject matter of appeal is addition arising out of valuation of closing stock. After hearing rival submissions and after careful consideration of material on record, the same is adjudicated as under. 2. The assessee is engaged in manufacturing of leather. It reflected closing stock of 34493 units of semi-finished leather. The same include 15975 local units which were valued at Rs.484/- per unit. It also includes 18518 imported units which are valued at approx. Rs.271/- per unit. The average rate per unit came to Rs.369/- per unit. The Ld. AO observed that considering average of opening stock value, purchase value and sale value per unit, the rate per unit of closing stock would be Rs.456/- per unit. Accordingly, the assessee was put to notice during assessment proceedings. The assessee defended the same on the ground that the closing stock was based on lower of cost price or net realizable value. The imported units were purchased at much lower price than the local price. The assessee also submitted that the closing stock value varies from unit to unit and the value is based on gradation process adopted by the assessee based on personal inspection of each unit. The closing stock consists of damaged pieces due to intermediate process and also - 3 - ITA No: 3084/Chny/2018 rejected pieces. The assessee also contended that imported component of the semi-finished leather pulls down the average closing stock value as it was of low quality and the quality could not be improved despite the best efforts of the assessee. However, alleging that there was under- valuation of closing stock for Rs.29.90 Lacs, Ld. AO added the same to the income of the assessee. The Ld. CIT(A) confirmed the stand of Ld. AO on the ground that the assessee did not furnish any supporting evidences. Aggrieved, the assessee is in further appeal before us. 3. Upon careful consideration, we find that the assessee adopted consistent method of valuing its closing stock and the same was as per the provisions of Section 145A as well as in accordance with accepted accounting norms and conventions. From the perusal of Tax Audit Report, it could be gathered that the closing stock of leather include two varieties which were valued on the basis of lower of cost or net realizable value. It has also been shown to us that the imported price per unit was much lower than the local price. The closing stock of imported unit was computed based on imported cost whereas local units were valued on the basis of local cost. Naturally, different varieties would be valued differently. This being so, the disturbance in valuation of closing stock by Ld. AO could not be held to be justified. By deleting the impugned addition, we allow the appeal. 4. The appeal stand allowed in terms of our above order. Order pronounced on 06 th July, 2022. Sd/- (V. DURGA RAO) ाियक सद3 /JUDICIAL MEMBER Sd/- (MANOJ KUMAR AGGARWAL) लेखासद3 /ACCOUNTANT MEMBER चे*ई/ Chennai; िदनांक/ Dated : 06-07-2022 JPV - 4 - ITA No: 3084/Chny/2018 आदेशकीUितिलिपअ7ेिषत/Copy of the Order forwarded to : 1. अपीलाथ /Appellant 2. यथ /Respondent 3. आयकरआयु (अपील)/CIT(A) 4. आयकरआयु /CIT 5. िवभागीय ितिनिध/DR 6. गाड फाईल/GF