NAROTTAM R. MEHTA, MUMBAI V. ITO 18(2)(1), MUMBAI

ITA 4217/MUM/2013

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9458 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-03-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 24-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JEETENDRA KUMAR
• Section: 143(3); 263

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI N.K . BILLAIYA, A CCOUNTANT M EMBER / I .T.A. NO . 4217/MUM/2013 ( / ASSESSMENT YEAR : 2006 - 07 SHRI NAROTTAM R. MEHTA, 8, GIRIKRUPA, ASH LANE, DR. BABREKAR MARG, DADAR(W), MUMBAI - 400 028 / VS. THE ITO 18(2)(1), PIRAMAL CHAMBERS, LALBAUG, MUMBAI - 400 012 ./ ./ PAN/GIR NO. : AAIPM 2605D ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI GIRISH DAVE SHRI VINAYAK R. PANDYA / RESPONDENT BY : SHRI JEETENDRA KUMAR / DATE OF HEARING : 18 . 0 3 .2015 / DATE OF PRONOUNCEMENT : 20 .03 .2015 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) - 16, MUMBAI DT. 8.2.2013 PERTAINING TO ASSESSMENT YEAR 2006 - 07. 2. THE ASSESSEE HAS RAISED TWO SUBSTANTIVE GROUNDS OF APPEAL. WITH GROUND NO. 1, THE ASSESSEE HAS CHALLENGED THE CORRECTNESS OF THE ORDER OF THE LD. CIT(A ) SETTING ASIDE THE ASSESSMENT AND DIRECTING THE AO TO ITA. NO. 4217/M/2013 2 VERIFY THE VALUE OF CLOSING STOCK. THE OTHER GRIEVANCE RELATES TO THE ADDITION OF RS. 7,000/ - AS PERSONAL EXPENDITURE ON ACCOUNT OF TEA AND COFFEE EXPENSES. 3. BEFORE PROCEEDING FURTHER, LET US F IRST UNDERSTAND THE FACTS OF THE CASE. IN THIS CASE, THE ORIGINAL ASSESSMENT WAS MADE ON 27.3.2008 U/S. 143(3) OF THE ACT WHICH WAS SET ASIDE BY THE COMMISSIONER U/S. 263 OF THE ACT VIDE ORDER DT. 9.12.2009 DIRECTING THE AO FOR REINVESTIGATION INTO THE ME THOD OF VALUATION OF THE STOCK AND FRAMING OF THE FRESH ASSESSMENT ORDER DENOVO. PURSUANT TO THE DIRECTIONS OF THE CIT U/S. 263, THE AO MADE THE FRESH ASSESSMENT. 3.1. SO FAR AS THE VALUE OF CLOSING STOCK IS CONCERNED, DURING THE COURSE OF THE FRESH ASS ESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO PRODUCE PURCHASE AND SALES BILLS ALONGWITH CLOSING STOCK REGISTER FOR VERIFICATION. ON VERIFICATION, THE OFFICER FOUND THAT THE ASSESSEE HAS NOT MAINTAINED THE ANY PROPER STOCK REGISTER. A HAND WRITTEN STATE MENT OF THE CLOSING STOCK AS ON THE LAST DATE OF THE FINANCIAL YEAR WAS SUBMITTED. THE AO OBSERVED THAT THERE IS NO USE OF PURCHASE BILLS AS THE ASSESSEE COULD NOT ESTABLISH WHETHER HE IS FOLLOWING LIFO OR FIFO METHOD. THE AO FINALLY CONCLUDED BY HOLDI NG THAT THE CLOSING STOCK HAS BEEN UNDERVALUED BY 10%. HE ACCORDINGLY MADE AN ADDITION OF RS. 2,50,000/ - . THE AO PROCEEDED FURTHER BY MAKING AN ADDITION OF RS. 7,000/ - ON ACCOUNT OF TEA AND COFFEE EXPENSES. 4. THE ASSESSEE CARRIED THE MATTER BEFORE T HE LD. CIT(A). IT WAS CONTENDED THAT THE AO HAS NOT VERIFIED THE RELEVANT PURCHASE VOUCHER IN ORDER TO ASCERTAIN THE VALUE OF THE CLOSING STOCK. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS, THE LD. CIT(A) OBSERVED THAT THE AO HAS NOT ITA. NO. 4217/M/2013 3 POINTED OUT ANY DEFECTS IN THE BOOKS OF ACCOUNTS EXCEPT THAT NO STOCK REGISTER WAS MAINTAINED AND THE ASSESSEE NEITHER FOLLOWED LIFO OR FIFO SYSTEM. THE LD. CIT(A) FURTHER OBSERVED THAT THE AO HAS NOT ASCERTAINED WHETHER THE INVENTORY OF THE CLOSING STOCK WAS CORRECTLY VALUED AS PER THE DIRECTIONS OF THE CIT U/S. 263 OF THE ACT. THE LD. CIT(A) HELD THAT THE AO WAS NOT CORRECT IN MAKING AN ADHOC ADDITION TO CLOSING STOCK. THE LD. CIT(A) SET ASIDE THE ASSESSMENT DIRECTING THE AO TO VERIFY THE VALUE OF STOCK AS PER LAST P URCHASE INVOICE. 4.1. IN SO FAR AS THE ADDITION ON ACCOUNT OF TEA AND COFFEE EXPENSE IS CONCERNED, THE LD. CIT(A) CONFIRMED THE ADDITIONS MADE BY THE AO. 5. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. 6. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY SUBMITTED THAT THE LD. CIT(A) HAS GROSSLY ERRED IN SETTING ASIDE THE ASSESSMENT FOR VERIFICATION OF THE VALUE OF THE CLOSING STOCK WHEN THE ENTIRE DETAILS WERE MADE AVAILABLE BEFORE THE LD. CIT(A). THE LD. COUNSEL FURTHER STATED THAT THE LD. CIT(A) HAS NO POWER TO SET ASIDE THE ASSESSMENT. FOR THE ADDITION ON ACCOUNT OF TEA AND COFFEE EXPENSES, THE LD. COUNSEL STATED THAT THERE WAS NO SUCH ADDITION IN THE ORIGINAL ASSESSMENT ORDER THEREFORE THERE CANNOT BE SUCH ADDITION IN THE ASSESSMENT ORDER PURSUANT TO THE DIRECTION OF THE CIT MADE U/S. 263 OF THE ACT. 7. THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ASSESSMENT ORDER. 8. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO GONE THROUGH THE ORDER MADE U/S. 263 OF THE ACT VIS - - VIS ITA. NO. 4217/M/2013 4 ORIGINAL ASSESSMENT ORDER. IT IS AN UNDISPUTED FACT THAT THE CIT U/S. 263 OF THE ACT DIRECTED THE AO TO VERIFY THE VALUE OF THE CLOSING STOCK. IT IS ALSO AN UNDISPUTED FACT THAT THE ASSESSEE PRODUCED PURCHASE BILLS AND SALES BILL BEFORE THE AO. THERE IS NO DOUBT THAT THE ASSESSEE HAS NOT MAINTAINED PROPER STOCK REGISTER BUT AT THE SAME TIME, THERE IS NO DENIAL THAT THE AS SESSEE HAS QUANTIFIED THE CLOSING STOCK AS ON THE LAST DAY OF THE FINANCIAL YEAR. THE UNDISPUTED FACT IS THAT THERE IS NO ADVERSE OBSERVATION IN SO FAR AS THE QUANTITY OF THE CLOSING STOCK IS CONCERNED, THE DISPUTE IS ONLY IN RELATION TO THE VALUE ADOPTED BY THE ASSESSEE. THE LD. CIT(A) INSTEAD OF VERIFYING THE VALUE FROM THE LAST PURCHASE BILLS HIMSELF OR CALLING FOR A REMAND REPORT FROM THE AO IN THIS RESPECT HAS SET ASIDE THE ASSESSMENT. 8.1. SEC. 251(1)(A) SPELLS THE POWER OF THE LD. CIT(A) IN DISP OSING OF AN APPEAL W.E.F. 1.6.2001 , T HE POWERS TO SET ASIDE THE ASSESSMENT HAS BEEN WITHDRAWN. THEREFORE, THE LD. CIT(A) ERRED IN LAW IN SETTING ASIDE THE ASSESSMENT , O N THIS FINDING ITSELF, THE ORDER OF THE LD. CIT(A) DESERVES TO BE SET ASIDE. HOWEVER, TO COMPLETE THE ADJUDICATION, SINCE NO ADVERSE FINDINGS HAVE BEEN GIVEN , SO FAR AS THE QUANTITY OF THE CLOSING STOCK IS CONCERNED AND SINCE THE PURCHASE BILLS WERE MADE AVAILABLE TO THE REVENUE AUTHORITIES TO VERIFY THE VALUATION MADE BY THE ASSESSEE , FAI LING TO DO SO H AS MADE THE ORDER OF THE LOWER AUTHORITIES ERRONEOUS ON FACTS. WE, THEREFORE DIRECT THE AO TO DELETE THE ADDITION OF RS. 2,50,000/ - . 8.2. IN SO FAR AS THE ADDITION OF RS. 7,000/ - ON ACCOUNT OF TEA AND COFFEE EXPENSES ARE CONCERNED, UNDISPU TEDLY, THIS ADDITION WAS NOT MADE IN THE ORIGINAL ASSESSMENT ORDER, THEREFORE, IN THE FRESH ASSESSMENT ORDER PURSUANT TO THE DIRECTIONS OF THE CIT, THE AO SHOULD NOT HAVE MADE THIS ADDITION. WE, ACCORDINGLY, DIRECT THE AO TO DELETE THE ADDITION. ITA. NO. 4217/M/2013 5 9. IN T HE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. OR DER PRONOUNCED IN THE OPEN COURT ON 20 TH MARCH, 2015 SD/ - SD/ - ( VIJAY PAL RAO ) (N.K. BILLAIYA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 20 TH MARCH, 2015 . . ./ RJ , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI