Kusum Lata Garg, New Delhi V. ACIT, New Delhi

ITA 4025/DEL/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3052 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Assessment Year: 2007-2008
• Appeal Filed On: 17-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AGAINST IMPUGNED DATED PASSED
• Section: 14A

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F + SMC: NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO.4025/DEL/2015 ASSTT. YEAR: 2007-08 O R D E R PER AMIT SHUKLA, J.M. THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST IMPUGNED ORDER DATED 27.4.2015, PASSED BY LD. CIT (APPEALS) 17 NEW DELHI IN RELATION TO THE PENALTY PROCEEDINGS U/S 271(1)(C) FOR THE ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE IS MAINLY AGGRIEVED BY LEVY OF PENALTY OF RS. 4,21,262/- MADE BY THE AO ON THE ADDITION OF RS. 8,31,884/- WHICH WAS ON ACCOUNT OF DIFFERENCE IN THE VALUATION OF CLOSING STOCK DUE TO CHANGE IN THE METHOD OF ACCOUNTING. KUSUM LATA GARG, 1552/29, HARI SINGH NAIWALA STREET, KAROL BAGH, NEW DELHI 110 005 PAN AFXPG5971L VS. ACIT, CIRCLE 52 (1) NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI K.P. GARG, CA DEPARTMENT BY : SHRI N.K. BANSAL , SR. DR DATE OF HEARING 23 /08 /201 8 DATE OF PRONOUNCEMENT 28 /08 /2018 2 3. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE LD. AO HAS MADE THE ADDITION ON THE GROUND THAT EARLIER THE STOCK WAS VALUED AT THE COST, I.E., OPENING STOCK HAS BEEN VALUED AT COST WHILE CLOSING STOCK HAS BEEN VALUED AT COST PRICE OR MARKET PRICE WHICHEVER IS LOWER. ASSESSEE BEFORE THE AO HAS SUBMITTED THAT IT HAS CHANGED THE METHOD OF VALUATION OF CLOSING STOCK AS ON 31 ST MARCH, 2007 AT COST OR MARKET PRICE WHICHEVER IS LESS. THE AUDITORS IN AUDIT REPORT HAVE MENTIONED THE BASIS OF VALUATION OF STOCK AT COST WHICH IN FACT WAS BASED ON THE PREVIOUS YEARS AUDIT REPORT. NOW THE ASSESSEE HAS VALUED THE STOCK AS PER THE ICAI GUIDELINES, I.E., COST OR MARKET PRICE WHICHEVER IS LOWER AND THEREAFTER THE ASSESSEE HAS BEEN CONSISTENTLY FOLLOWING THIS METHOD. LD. AO FOUND THAT DUE TO CHANGE IN THE VALUATION METHOD THERE IS A DIFFERENCE OF RS. 8,31,884/- ON WHICH ADDITION HAS BEEN MADE. SIMPLY ON THIS ADDITION THE AO HAS LEVIED THE PENALTY NOT ONLY ON THE ALLEGED ADDITION OF RS. 8,31,884/- AND DISALLOWANCE MADE U/S 14A OF RS. 24,123/-, BUT ALSO ON THE RETURN INCOME. 3. LD. CIT (A) HAS CONFIRMED THE PENALTY ON ADDITION OF RS. 8,31,884/-, BUT HAD DELETED THE PENALTY ON DISALLOWANCE MADE U/S 14A OF RS. 24,123/- AND ALSO CANCELLED THE PENALTY ON THE RETURNED INCOME. 4. AFTER HEARING BOTH THE PARTIES AND ON PERUSAL OF THE IMPUGNED ORDER, WE FIND THAT THE ONLY ISSUE FOR LEVY OF PENALTY IS ON ADDITION OF RS. 8,31,884/- WHICH WAS ON ACCOUNT OF DIFFERENCE IN VALUATION OF CLOSING STOCK OF SHARES. THE ONLY REASON FOR THE ADDITION IS THAT ASSESSEE HAS CHANGED THE METHOD OF VALUATION OF STOCK DURING THE YEAR WHICH HAS RESULTED IN LOWERING OF THE PROFIT OF THE ASSESSEE. NOWHERE IT HAS BEEN STATED THAT THE VALUATION OF STOCK AS PER COST OR MARKET PRICE WHICHEVER IS LOWER IS EITHER ERRONEOUS OR HAS NOT BEEN CONSISTENTLY 3 FOLLOWED BY THE ASSESSEE IN THE SUBSEQUENT YEARS. BEFORE US, LD. COUNSEL HAS SUBMITTED THAT EARLIER THE COST PRICE OF THE STOCK WAS ALWAYS LOWER THAN THE MARKET PRICE. THEREFORE, THERE IS NO DIFFERENCE OF ACTUAL VALUATION IN THE OPENING STOCK. FROM THIS YEAR THE ASSESSEE HAS ADOPTED THE METHOD OF VALUATION AS PER THE ICAI GUIDELINES AND THEREFORE SUCH A VALUATION WAS IN ACCORDANCE WITH LAW AND IN ANY CASE IT CANNOT BE SAID THAT HE HAS FURNISHED EITHER INACCURATE PARTICULARS OF INCOME OR HAD CONCEALED ANY INCOME. LD. DR ON THE OTHER HAND STRONGLY RELIED UPON THE ORDER OF THE LD. CIT (A). LOOKING TO THE NATURE OF ADDITION MADE, WE DO NOT FIND THAT IT IS A FIT CASE FOR LEVY OF PENALTY U/S 271(1)(C) UNDER ANY OF THE CHARGE, BECAUSE NOWHERE THERE IS AN ALLEGATION BY THE DEPARTMENT THAT THE CHANGE IN THE METHOD OF VALUATION IS EITHER NOT IN ACCORDANCE WITH ACCOUNTING STANDARD OR ICAI GUIDELINES OR IT HAS NOT BEEN FOLLOWED CONSISTENTLY IN THE SUBSEQUENT YEARS. IF EARLIER THE COST PRICE WAS LOWER AND OPENING STOCK HAS BEEN VALUED AT COST, THEN IT CANNOT BE HELD THAT IF THE ASSESSEE WOULD HAVE FOLLOWED COST OR MARKET PRICE EARLIER COULD HAVE CHANGED THE VALUE OF OPENING STOCK. NOW THIS YEAR THE CLOSING STOCK HAS BEEN VALUED AT A MARKET PRICE WHICH WAS LOWER. IT DOES NOT MEAN THAT SUCH A CHANGE IN THE METHOD OF ACCOUNTING WAS NOT BONAFIDE ESPECIALLY WHEN IT HAS BEEN CONSISTENTLY FOLLOWED IN THE SUBSEQUENT YEARS. THEREFORE, PENALTY LEVIED ON ADDITION OF RS. 8,31,884/- IS DIRECTED TO BE DELETED. ACCORDINGLY THE APPEAL OF THE ASSESSEE IS ALLOWED. 5. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH AUGUST, 2018. SD/- SD/- (PRASHANT MAHARISHI) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 28/08/2018 4 VEENA COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI