M/s. Cee Cee Jewellers Pvt. Ltd., Uttar Pradesh V. ACIT, Meerut

ITA 3478/DEL/2014

• Counselvise Citation: 347820114 RSA 2014
• Duration Of Justice: 1 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 2
• Next Hearing Date: 06-07-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 09-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROBIN RAWAL
• Keywords: Opportunity of being heard; Principle of natural justice
• Section: 143(3); 142(1); 145; 154

Judgement Text

ITA NO .3478/D EL/ 2014 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC - 2 , NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER I.T.A. NO . 3 478 /DEL/20 1 4 A.Y. : 20 0 6 - 20 0 7 M/S CEE CEE JEWELLERS PVT LTD., C/O M/S MALIK & CO., (ADVOCATES) 305/7, THAPAR NAGAR, MEERUT CITY (PAN:AAACC7504Q) VS . ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE - 1, AAYAKAR BHAWAN, BHANSALI GROUND, MEERUT (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE DEPARTMENT BY : SH. ROBIN RAWAL, SR. DR DATE OF HEARING: 0 6 . 0 7 .201 5 DATE OF ORDER : 20 . 0 7 .201 5 ORDER PER H.S. SIDHU : JM TH IS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE O RDER DATED 2 5 . 2 . 20 1 4 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) , MEERUT FOR THE ASSTT. YEAR 20 0 6 - 0 7 AND THE FOLLOWING GROUNDS HAVE BEEN RAISED: - 1. A) THAT ALL THE PURCHASES AND DIRECT EXPENSES UNDER DIFFERENT HEADS AND ALSO SALES WERE VERIFIABLE AND SUPPORTED BY DOCUMENTARY EVIDENCE. THE VALUE OF CLOSING STOCK WAS ON THE SAME BASIS AS CONSISTENTLY F OLLOWED IN ALL THE PRECEDING ASSESSMENT YEARS. NO DEFECT OR ANY ERROR IN THE METHOD COUNT EXISTED NOR FOUND AND DETECTED. THE G.P. RATE AS DECLARED WAS ALSO UNDISPUTED. THE CORRECTNESS OF THE ITA NO .3478/D EL/ 2014 2 DECLARED PROFIT AS REFLECTED IN THE TRADING ACCOUNT WAS WELL PRO VED AND SUBSTANTIATED BY THE METHOD OF ACCOUNTING REGULARLY EMPLOYED WAS NOT DISPUTED. THUS ON FACTS AND IN LAW THERE WAS NO WARRANT AND LEGAL JUSTIFICATION FOR REJECTION OF DECLARED VALUATION OF CLOSING STOCK. B) THAT THE AUTHORITIES BELOW ON FACTS AND I N LAW WENT WRONG TO REJECT THE DECLARED VERSION AND TO MAKE THE ADDITION OF RS. 2,11,326/ - . THE ADDITION BEING ERRONEOUS, ILLEGAL AND UNTENABLE ON FACTS AND IN LAW DESERVES TO BE DELETED. 2. A) THAT THE EXPENDITURE UNDER THE HEAD JOB WORK WAS FULLY VERIF IABLE AND GENUINELY INCURRED IN THE COURSE OF BUSINESS. SUCH EXPENDITURE BEING INCIDENTAL TO THE JOB RECEIPTS THERE WAS NO LEGAL WARRANT TO MAKE ANY DISALLOWANCE. B) THE IMPUGNED DISALLOWANCE OF RS. 37,457/ - , DESERVES TO BE DELETED BEING ILLEGAL, VOID AND BASED ON WRONG AND ERRONEOUS. 3. A) THAT THE EXPENDITURE OF RS. 3,435/ - UNDER THE HEAD TRADE TAX ON PURCHASES WAS GENUINELY INCURRED IN THE COURSE BUSINESS AND THUS CONSTITUTED ADMISSIBLE DEDUCTION. B) THE IMPUGNED DISALLOWANCE OF RS. 3435/ - DESERVES TO BE DELETED BEING ILLEGAL, VOID AND WITHOUT JURISDICTION. ( 4 .) (WRONGLY MENTIONED AS GROUND NO. 3 IN THE APPEAL) THAT THE LD. AUTHORITIES BELOW ERRED ON FACTS AND IN LAW IN NOT ALLOWING THE DETERMINED BROUGHT FORWARD LOSSES ITA NO .3478/D EL/ 2014 3 AMOUNTING TO R S . 6 , 44 , 262 / - . B ROUGHT FORWARDED LOSSES ON FACTS AND IN LAW DESERVES TO BE ALLOWED AGAI NST INCOME OF THE YEAR UNDER CONSIDERATION. 5. THAT ON FACTS AND IN THE CIRCUMSTANCES OF THE CASE, INTEREST ULS 2348 WAS NOT LEVIABL E. LEVY OF INTEREST ULS 2348 DESERVES TO BE DE LETED BEING ILLEGAL, VOID AND WITHOUT JURISDICTION. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE RETURN OF INCOME WAS FILED ON 30/11/06 DECLARING TOTAL INCOME AT RS. 35,679/ - . ORDER ULS 143( 1) OF THE IT ACT WAS PASSED ON 22/09/07 AT THE RETURNED INCOME. T HE CASE WAS SELECTED FOR SCRUTINY AND ACCORDINGLY NOTICE UNDER SECTION 143(2) DATED 12/10/07 AND 142(1) OF THE I.T. ACT ALONGWITH QUESTIONNAIRE DATED 02/06/08 WERE ISSUED TO THE ASSESSEE. IN COMPLIANCE TO THESE NOTICES, AUTHORIZED REPRESENTATIVE OF THE ASS ESSEE SH. M.M. CHHABRA, ADVOCATE APPEARED FROM TIME TO TIME AND FILED DETAILS AND THE CASE WAS DISCUSSED WITH HIM. BOOKS OF ACCOUNTS CONSISTING OF COMPUTERIZED CASH BOOK, LEDGER, PURCHASE AND SALE BILLS AND SOME EXPENSES BILLS /VOUCHERS WERE PRODUCED WHICH HAVE BEEN EXAMINED ON TEST CHECK BASIS. THEREAFTER, THE AO CONCLUDED THAT THE VALUE OF CLOSING STOCK IS TAKEN AS RS. 35,67,641/ - AS AGAINST RS. 33,56,315/ - DECLARED BY THE ASSESSEE AND MADE ADDITION OF RS. 2,11,326/ - IN THE TRADING . AND AO OBSERVED T HAT T HE ASSESSEE HAS ALSO DEBITED EXPENSES AMOUNTING TO RS. 37,45 7 / - UNDER THE HEAD JOB WORK PAID. ASSESSEE WAS ASKED ON 22/09/08 TO PRODUCE JOB WORK EXPENSE VOUCHERS/BILLS AND TO GIVE DETAILS OF ITEMS FOR WHICH JOB WORK EXPENSES HAVE BEEN CLAIMED. IT WAS ALSO ASKED TO PRODUCE THE STOCK RECORDS IN RESPECT OF THE SAME BUT NONE OF THE ABOVE RECORDS/BILLS/VOUCHERS AND OTHER EVIDENCES WERE PRODUCED. HENCE, ITA NO .3478/D EL/ 2014 4 ASSESSEE HAS FAILED TO PROVE THAT ALL THESE EXPENSES WERE ACTUALLY INCURRED FOR THE PURPOSE OF ITS BUSINES S AND FAILED TO PRODUCE ANY EVIDENCES IN SUPPORT OF THE SAME & THEREFORE THESE EXPENSES AMOUNTING TO RS. 37,457 / - WAS ALSO DISALLOWED VIDE ASSESSMENT ORDER DATED 13.10.2008 PASSED U/S. 143(3) OF THE I.T. ACT. 3. AGAINST THE ASSESSMENT ORDER DATED 13.10.2008, THE ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 25.2.2014 HAS DISMISSED THE APPEAL OF THE ASSESSEE. 4. IN THIS CASE THE NOTICE WAS SENT TO THE ASSESSEE FOR HEARING BY REGD. AD P OST FOR TODAY I.E. 06.07.2015 AT THE ADDRESS MENTIONED IN FORM NO. 36 VIDE COLUMN NO. 10, BUT NOBODY APPEARED ON BEHALF OF THE ASSESSEE NOR ANY ADJOURNMENT APPLICATION WAS FILED. IN MY CONSIDERED OPINION, NO USEFUL PURPOSE WOULD BE SERVED TO ISSUE NOTICE A GAIN AND AGAIN ON THE SAME ADDRESS. THEREFORE, I AM OF THE CONSIDERED VIEW THAT THE CASE MAY BE DECIDED EXPARTE QUA ASSESSEE, AFTER HEARING THE LD. DR. 5. LD. DR RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. 6. I HAVE HEARD THE LD. DR AND PERUSED THE RECORDS AVAILABLE WITH ME ESPECIALLY THE ORDERS OF THE REVENUE AUTHORITIES. WITH REGARD TO GROUND NO.1 (A) & (B) ARE CONCERNED, I FIND CONSIDERABLE COGENCY IN THE ASSESSEE S CONTENTION MENTIONED IN THE LD. CIT(A) ORDER THAT ALL THE PURCHASES AND DIRECT EXPENSES UNDER DIFFERENT HEADS AND ALSO SALES WERE VERIFIABLE AND SUPPORTED BY DOCUMENTARY EVIDENCE. THE VALUE OF CLOSING STOCK WAS ON THE SAME BASIS AS CONSISTENTLY FOLLOWED IN ALL THE PRECEDING ASSESSMENT YEARS. NO DEFECT OR ANY ERROR IN THE METHOD COUNT EXISTED NOR FOUND AND DETECTED. THE G.P. RATE AS DECLARED WAS ALSO UNDISPUTED. THE CORRECTNESS OF THE DECLARED PROFIT AS REFLECTED IN THE ITA NO .3478/D EL/ 2014 5 TRADING ACCOUNT WAS WELL PROVED AND SUBSTANTIATED BY THE METHOD OF ACCOUNT ING REGULARLY EMPLOYED WAS NOT DISPUTED. THUS ON FACTS AND IN LAW THERE WAS NO WARRANT AND LEGAL JUSTIFICATION FOR REJECTION OF DECLARED VALUATION OF CLOSING STOCK. I ALSO FIND FORCE IN THE ASSESSEE S CONTENTION THAT AO WAS WRONG TO HOLD THAT THE CLOSING STOCK WAS NOT CORRECTLY VALUED ON THE BASIS OF WHICH BY APPLYING FIFO METHOD HE MADE AN ADDITION OF RS. 2,11,326/ - ON THE BASIS OF DIFFERENCE IN VALUE OF UNSOLD CLOSING STOCK BY THAT METHOD AND ALSO REJECTED THE ACCOUNT BOOKS WHICH WERE DULY AUDITED BY AP PLYING THE PROVISIONS OF SECTION 145 ON THE SOLE BASIS OF DIFFERENCE IN UNSOLD CLOSING STOCK. FURTHER, THE AO HAS VIOLATED THE PROVISIONS OF LAW BY ADOPTING THE FIFO METHOD ON HIS OWN WITHOUT POINTING OUT THE DEFECTS IN LIFO METHOD WHICH IS A PRESCRIB ED METHOD WITHOUT PIN POINTING THE DEFECTS IN THE METHOD CONSTANTLY APPLIED BY THE ASSESSEE ON THE BASIS OF WHICH IF PROPER PROFIT CANNOT BE DEDUCED. I ALSO FIND THAT AS PER A PEX COURT THAT IT IS THE CHOICE OF THE ASSESSEE TO APPLY ANY METHOD FOR DETER MINING THE PROFIT, THEREFORE, BY CHARTING THE METHOD ON HIS OWN IS WITHOUT JURISDICTION. APART FROM THE ABOVE, IN THE CASE OF SANDVIK ASIA LTD. VS. DCIT 64 TTJ (PUNE) 815, IT HAS BEEN HELD THAT LIFO METHOD OF VALUATION STOCK IS ONE OF THE RECOGNIZED METHO D OF ACCOUNTING AND WHERE THE DEPARTMENT HAS ACCEPTED THE SAME IN THE CASE OF ASSESSEE FOR MORE THAN 20 YEARS IT CANNOT BE ALLOWED TO UNSETTLE THE SETTLED POSITION AND REJECT THAT METHOD IN ABSENCE OF ANY FRESH MATERIAL, THEREFORE, IN MY VIEW THE AO HA S WRONGLY APAPLIED THE FIFI METHOD AND WRONGLY REJECTED THE LIFO METHOD AS APPLIED BY THE ASSESSEE. I FURTHER FIND THAT THE HON BLE APEX COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX V. WOODWARD GOVERNOR INDIA P. LTD. [2009] 312 ITR 254 (SC) HAS HEL D THAT METHOD OF ACCOUNTING FOLLOWED BY ASSESSEE CONTINUOUSLY, BINDING ON AO UNLESS HE FIND THAT THE SYSTEM FOLLOWED DOES NOT ITA NO .3478/D EL/ 2014 6 REFLECT TRUE PROFIT. KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWING THE PRECEDENT S AS AFORESAID, I DELETE THE ADDITION MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) AND ALLOW THE GROUND NO. 1 (A) & (B) RAISED BY THE ASSESSEE. 7. WITH REGARD TO GROUND NO. 2(A) & 2(B) & 3(A) 3(B) ARE CONCERNED, I FIND THAT THE EXPENDITURE ON JOB WORK WAS GENUINELY INCURRED IN THE COURSE OF BUSINESS. IN MY CONSIDERED OPINION, SUCH EXPENDITURE BEING INCIDENTAL AND RELATING TO JOB WORK RECEIPTS OF RS. 2,15,250/ - DID NOT WARRANT ANY DISALLOWANCE AS THE SAME HAD BEEN CLAIMED IN THE PRECEDING AS WELL AS SUCCEEDING YEARS, WHICH WAS ACCEPTED BY THE DEPARTMENT, THEREFORE, THE IMPUGNED DISALLOWANCE OF RS. 37,457/ - IS NOT SUSTAINABLE IN THE EYES OF LAW, HENCE, I DELETE THE SAME. AS REGARDS ADDITION OF RS. 3,435/ - INCURRED UNDER THE HEAD TRADE TAX ON PURCHASE WAS GENUINELY INCURRED IN THE COURSE OF BUSINESS , HENCE, THE SAME IS ALSO NOT SUSTAINABLE IN THE EYES OF LAW, HENCE, I ALSO DELETE THE SAME. ACCORDINGLY, THE GROUND NOS. 2(A) & 2(B) & 3(A) 3(B) ARE ALLOWED. 8. WITH REGARD TO GROUND NO. 4 (WRONGLY MENTI ONED AS GROUND NO. 3), I FIND THAT THIS GROUND IS RELATED TO CARRY FORWARD OF LOSS NOT CLAIMED BY THE ASSESSEE IN COMPUTATION OF INCOME. THE ASSESSEE HAS SUBMITTED THIS WAS A MISTAKE. THIS MISTAKE WAS NOT POINTED OUT DURING THE ASSESSMENT PROCEEDINGS. H OWEVER, THE ASSESSEE MADE APPLICATION U/S. 154 OF THE I.T. ACT WHICH HAS NOT BEEN DISPOSED OFF BY THE AO. I FIND THAT LD. CIT(A) IN HIS FINDING HAS OBSERVED THAT THIS CARRY FORWARD OF LOSS CANNOT BE ALLOWED AT APPELLATE STAGE BECAUSE THE SAME WAS NOT CLA IMED IN THE ASSESSMENT AND THIS MATTER IS STILL PENDING U/S. 154 BEFORE THE AO, THEREFORE, LD. CIT(A) HAS REJECTED THE SAID GROUND, WHICH IS IN MY ITA NO .3478/D EL/ 2014 7 OPINION IS CONTRARY TO THE LAW AND PRINCIPLE OF NATURAL JUSTICE. IN VIEW OF ABOVE, IN THE INTEREST OF JUSTIC E, I DIRECT THE AO TO DECIDE THE APPLICATION U/S. 154 FILED BY THE ASSESSEE FIRST AND THEN DECIDE THE ISSUE IN DISPUTE BY PASSING A SPEAKING ORDER, AFTER GIVING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 9. IN THE RESULT, THE A PPEAL OF THE A SSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 20 . 0 7 .2015 . SD/ - [ H.S. SIDHU ] JUDICIAL MEMBER SR BHATNAGAR R DATE: 20 . 0 7 .2015 COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES