Smt Pokuri Mahalakshmi Suguna, Hyderabad V. The ITO, Ward-1(4), Vijayawada

ITA 395/VIZ/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50243 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 29-03-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 29-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D S SUNDER SINGH

Judgement Text

ITA NO 395 OF 2010 POKURI MAHALAKSHMI SUGUNA VIJAYA WADA PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.395/VIZAG/2010 ASSESSMENT YEAR: 2003-04 POKURI MAHALAKSHMI SUGUNA, VIJAYAWADA VS. ITO WARD-1(4) VIJAYAWADA (APPELLANT) PAN NO: AKBPP 8027 H (RESPONDENT) APPELLANT BY: SHRI G.V.N. HARI, CA RESPONDENT BY: SHRI D.S. SUNDER SINGH, SR.DR ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 31.01.2008 PASSED BY LEARNED CIT(A), VIJAYAWADA AND IT RELATES TO THE ASSESSMENT YEAR 2003-04. 2. THE EFFECTIVE GROUNDS RAISED BY THE ASSESSEE REA D AS UNDER: 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ADDITION OF RS.1,98,220/- M ADE BY THE ASSESSING OFFICER ON ACCOUNT OF DIFFERENCE I N THE VALUE OF CLOSING STOCK OF BENGAL GRAM DHAL. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT DELETING THE ADDITION OF RS.1,04,880/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DIFFERE NCE IN THE VALUE OF CLOSING STOCK OF DHAL ON CONSIGNMEN T. 3. THE FACTS RELATING TO THE ISSUES ARE STATED IN B RIEF. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN GREEN GRAM AN D BENGAL GRAM AND ALSO IN THE MANUFACTURE AND SALE OF DHALL. THE ASS ESSEE FILED THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ADMITTING A TOTAL INCOME OF RS.1,06,010/-. DURING THE COURSE OF SCRUTINY PROCEE DINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS NOT VALUED TH E CLOSING STOCK AS PER THE METHOD OF VALUATION STATED BY HER IN THE TAX AUDIT REPORT. ACCORDINGLY THE ASSESSING OFFICER RECOMPUTED THE CLOSING STOCK VALU E AS PER THE METHOD OF ITA NO 395 OF 2010 POKURI MAHALAKSHMI SUGUNA VIJAYA WADA PAGE 2 OF 4 VALUATION STATED IN THE TAX AUDIT REPORT. ACCORDIN GLY HE FOUND THAT THE VALUE OF CLOSING STOCK OF GREEN GRAM WAS UNDER VALUED BY RS.1,00,370/- AND THE VALUE OF FINISHED GOODS CONSISTING OF VARIOUS ITEMS WAS UNDER VALUED BY RS.5,28,681/-. SINCE THE ASSESSEE COULD NOT PROPERL Y EXPLAIN THE DIFFERENCES CITED ABOVE, THE ASSESSING OFFICER ADDED THE SAME T O THE TOTAL INCOME OF THE ASSESSEE. THE APPEAL FILED BY THE ASSESSEE WAS PARTLY ALLOWED BY THE LEARNED CIT (A). STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING ADDITIONS PERTAINING TO THE FINISHED GOOD S THAT WERE CONFIRMED BY THE LEARNED CIT(A). (A) VALUATION DIFFERENCE IN RESPECT OF DHALL SENT O N CONSIGNMENT BASIS RS.1,04,880/-. (B) VALUATION DIFFERENCE IN RESPECT OF BENGAL GRAM DHALL RS.1,98,220/- 4. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ASSESSEE WAS CONSTRAINED TO SELL THE IMPUGNED STOCKS IN THE MONT H OF APRIL, 2003 AT LOSS AND HENCE SHE HAS ADOPTED THE MARKET VALUE FOR THE PURPOSE OF ARRIVING AT THE VALUE OF CLOSING STOCK. HE FURTHER SUBMITTED TH AT IT IS PERMISSIBLE TO ADOPT THE MARKET RATE FOR THE PURPOSE OF VALUATION WHENEVER THE REALIZABLE VALUE FALLS BELOW THE COST PRICE. ON THE CONTRARY, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSING OFFICER HAS ONLY FOLLOWED THE METHOD OF VALUATION THAT WAS STATED TO BE FOLLOWED BY HER IN THE TAX AUDIT REPORT. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND CARE FULLY PERUSED THE RECORD. THE PRESENT DISPUTE BEFORE US PERTAINS TO THE VALUA TION OF TWO TYPES OF FINISHED STOCKS VIZ., DHALL ON CONSIGNMENT AND B ENGAL GRAM DHALL. IN RESPECT OF THE STOCK NAMED AS DHALL ON CONSIGNMENT , THE ASSESSEE HAD ADOPTED THE RATE AT RS.2,500/- PER QTL. AND THE ASS ESSING OFFICER HAS TAKEN THE VALUE OF RS.2,541.16 PER QTL., AS PER THE RATES GIVEN IN THE INVOICES. SIMILARLY IN THE CASE OF STOCK NAMED AS BENGAL GRA M DHALL, THE ASSESSEE HAD ADOPTED THE RATE OF RS.2,000/- PER QTL. AND THE ASSESSING OFFICER HAS TAKEN THE RATE AT RS.2575/- PER QTL. AS PER THE PUR CHASE INVOICE. ITA NO 395 OF 2010 POKURI MAHALAKSHMI SUGUNA VIJAYA WADA PAGE 3 OF 4 5.1 IN THE CASE OF DHALL ON CONSIGNMENT, THE LEA RNED CIT(A) HAS GIVEN FOLLOWING DIRECTION TO THE ASSESSING OFFICER AS PER PARA 5.2 OF HIS ORDER: THE A.O IS, THEREFORE, DIRECTED TO VALUE SUCH STOC K AT COST PRICE OR MARKET PRICE, SUBJECT TO THESE RATES IS MO RE THAN THE RATES ADOPTED BY THE APPELLANT. WE NOTICE THAT THE DIRECTION GIVEN BY THE LEARNED C IT(A) IS IN ACCORDANCE WITH THE CONTENTIONS OF LEARNED A.R. HOWEVER, THE PLEA OF THE LEARNED A.R WAS THAT THE WORDS WHICHEVER IS LESS IS MISSING I N THE SAID DIRECTION OF LEARNED CIT(A). THUS WE NOTICE THAT THE DIRECTION OF LEARNED CIT(A) IS INCOMPLETE WITHOUT THE WORDS WHICHEVER IS LESS, W HICH ARE TO BE INSERTED AFTER THE WORDS COST PRICE OR MARKET PRICE. ACCO RDINGLY WE CORRECT THE DIRECTION OF THE LEARNED CIT(A) AS UNDER: THE A.O IS, THEREFORE, DIRECTED TO VALUE SUCH STOC K AT COST PRICE OR MARKET PRICE WHICHEVER IS LESS, SUBJECT TO THE CONDITION THAT THESE RATES ARE MORE THAN THE RATES ADOPTED BY THE APPELLANT. 5.2 WITH REGARD TO THE VALUATION OF BENGAL GRA M DHALL, THE LEARNED CIT(A) HAS OBSERVED AS UNDER: 5.4 THE APPELLANT HAS VALUED BENGALGRAM DHALL STOC K (344.73 QUINTALS) @ RS.2,000/- WHEREAS THE A.O HAS VALUED IT @ RS.2,575/- ON THE BASIS OF PURCHASES MADE ON 30/3 /2003. THE APPELLANT CONTENDS THAT THERE WAS STEEP FALL IN THE PRICE OF BENGALGRAM IN SUBSEQUENT YEAR AND THE RATES WERE REDUCED TO AROUND RS.2,000/- TO RS.2,150/- PER QUIN TAL. THUS, THE STOCK OF BENGALGRAM DHALL HAS BEEN VALUED @ RS. 2,000/- ON THE BASIS OF RATES PREVAILED IN NEXT YEAR. THERE IS NO DISPUTE IN REGARD TO RATE OF RS.2,575/- PREVAILING ON 30/3/2003. THE APPELLANT HAS TO VALUE THE CLOSING S TOCK AT COST PRICE OR PREVAILING MARKET PRICE WHICHEVER IS LOWER ON 31/3/2003. THE APPELLANT HAS PURCHASED 319.5 QUINTA LS OF BENGALGRAM DHALL ON 30/3/2003 @ RS.2,575/- AND THE SAID PURCHASES REMAINED UNSOLD AT THE END OF THE ACCOUNT ING YEAR. THUS, 92.68% OF THE CLOSING STOCK IS NOTHING BUT OU T OF THE PURCHASES MADE ON 30/3/2003. THE RATES IN THE NEXT FINANCIAL YEAR ARE IMMATERIAL BECAUSE ASSESSEE HAS TO VALUE I TS STOCK AS ON 31/3/2003 ON THE BASIS OF COST PRICE OR MARKE T VALUE WHICHEVER IS LOWER. THE MARKET PRICE AND THE COST P RICE OF BENGALGRAM DHALL AS ON 31/3/2003 WAS THE SAME AND THEREFORE, STOCK HAS TO BE VALUED @ RS.2,575/- PER QUINTAL. THE CLOSING STOCK HAS TO BE VALUED AT THE RATES PRE VAILING AT THE END OF THE ACCOUNTING YEAR AND NOT AT THE RATES OF THE SUBSEQUENT YEAR. THUS, THE A.O WAS CORRECT IN VALUI NG STOCK ITA NO 395 OF 2010 POKURI MAHALAKSHMI SUGUNA VIJAYA WADA PAGE 4 OF 4 OF BENGALGRAM DHALL @ RS.2,575/- PER QUINTAL AGAINS T RS.2,000/- PER QUINTAL. THE ADDITION OF RS.1,98,220 /- IS, THEREFORE, SUSTAINED. WE HAVE CAREFULLY CONSIDERED THE REASONING GIVEN BY THE LEARNED CIT(A). THOUGH THE ASSESSEE CONTENDS THE DECISION OF LEARNE D CIT(A), YET SHE COULD NOT BRING ANY MATERIAL TO SHOW THAT THE MARKE T VALUE AS AT THE END OF THE RELEVANT FINANCIAL YEAR WAS LESS THAN THE COST RATE. IN THESE CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF LEARNED CIT(A) AND ACCORDINGLY WE UPHOLD HIS ORDER ON THIS ISSUE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 3/6/2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE: 3 RD JUNE, 2011. COPY TO 1 POKURI MAHALAKSHMI SUGUNA C/O SRI S. RAMA RAO, AD VOCATE, FLAT NO.103, H.NO.3-6-542/4, INDIRADEVI NILAYAM, ST.NO.7 , HIMAYATNAGAR, HYDERABAD 500029 2 THE INCOME TAX OFFICER, WARD-1(4) VIJAYAWADA 3 4. THE CIT VIJAYAWADA THE CIT(A), VIJAYAWADA 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM