ACIT, Meerut V. M/s Nelco (India) (P) Ltd., Meerut

ITA 4305/DEL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91405 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 06-07-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 07-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DANKANUNJNA
• Assessee Lawyers: RAVINDER AGGARWAL
• Keywords: Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E NEW DELHI BEFORE SHRI R. S. SYAL, ACCOUNTANT MEMBER AND SHRI A. T. VARKEY, JUDICIAL MEMBER I.T.A .NO. 4305 /DEL/2012 ASSESSMENT YEAR: 2003 - 04 ACIT VS. M/S NELCO(INDIA) PVT. LTD. CIRCLE - 2 B - 15/16, SPORTS COMPLEX . MEERUT. DELHI ROAD, MEERUT. PAN: AAAC N5716F (APPE LLANT) ( RESPONDENT) REVENUE BY : SH. P. DANKANUNJNA , SR. DR ASSESSEE BY: SH. RAVINDER AGGARWAL, CA . & SH. SANDEEP SAPRA, ADV. DATE OF HEARING : 07 /07/2015 DATE OF PRONOUNCEMENT: 08 /07/2015 ORDER PER R. S. SYAL, AM. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A) ON 10.05 .201 2 IN RELATION TO THE ASSESSMENT YEAR 200 3 - 0 4 . I.T.A .NO. 4305/DEL/2012 2 2. THE REVENUE HAS FILED REVISED GROUNDS OF APPEAL. A COMMON ISSUE RAISED THROUGH BOTH THE EFFECTIVE GROUNDS IS AGAINST THE ALLOWING OF CLAIM OF THE ASSESSEE OF RS.33,91 , 077/ - AS THE PART VALUE OF THE OPENING STOCK OF FINISHED GOODS ON 1.04.2002 . 3. IT IS THE SECOND ROUND OF PROCEEDINGS. T HE ASSESSEE CHANGED THE METHOD OF VALU ATION OF ITS CLOSING STOCK OF FINISHED GOODS AT SELLING PRICE LESS 40% AS AGAINST THE LAST YEAR S METHOD OF VALUING CLOSING STOCK OF FINI SHED GOODS AT SELLING PRICE LESS 10%. LAST YEAR S CLOSING STOCK OF FINISHED GOODS WAS VALUED AT RS.1,01,63,726/ - . HOWEVER, WHILE DRAWING T RADING ACCOUNT FOR THE YEAR IN QUESTION, THE ASSESSEE ADOPTED REDUCED VALUE OF OPENING STOCK OF FINISHED GOODS AT RS.6 7,72,849/ - . THE DIFFERENCE BETWEEN THE FIGURE OF LAST YEAR S CLOSING STOCK OF FINISHED GOODS AND THAT TAKEN AS OPENING STOCK OF FINISHED GOODS FOR THE YEAR , ON THE BASIS OF VALUATION AT SALE PRICE MINUS 4 0%, THE ASSESSEE DEPICTED THE BALANCE AMOUNT OF RS.33,91,077/ - (RS.1,01,63,728/ - MINUS RS.67,72,649/ - ) IN THE P & L APPROPRIATION ACCOUNT. IN THAT WAY, THE ASSESSEE DID NOT CLAIM ANY DEDUCTION FOR THE AMOUNT DEBITED IN THE P&L APPROPRIATION ACCOUNT I.T.A .NO. 4305/DEL/2012 3 IN THE COMPUTATION OF ITS TOTAL INCOME. D URING THE COURSE OF THE ASSESSMENT PROCEEDINGS , IT WAS CONTENDED THAT THE REMAINING PART OF THE VALUE OF THE OPENING STOCK OF FINISHED GOODS AT RS.33,91,077/ - SHOULD ALSO BE ALLOWED AS DEDUCTION BY ENHANCING THE FIGURE OF OPENING STOCK TO ITS FULL VALUE IN ITS TRADING ACCOUNT . THE A SSESSING O FFICER CAME TO HOLD THAT SUCH A CLAIM COULD BE ENTERTAINED ONLY BY MEANS OF REVISED RETURNED AND IN THE ABSENCE OF THE ASSESSEE HAVING FURNISHED A REVISED RETURN, THIS CLAIM WAS NOT ACCEPTABLE. 4 . THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) , WHO RELYING ON THE JUDGMENT OF HON BLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. VS. CIT 284 ITR 323 (SC) , UPHELD THE ASSESSMENT ORDER DENYING THE ASSESSEE S CLAIM FOR INCREASING THE VALUE OF OPENING STOCK OF FINISHED GOODS AS ON 1.04.2002 BY RS.33.91 LAC . IN THE SECOND APPEAL , THE TRIBUNAL HELD THAT THERE WA S NO RESTRICTION IN NOT CONSIDERING A CLAIM WHICH WAS MADE BEFORE THE AO OTHERWISE THAN BY REVISING THE RETURN OF INCOME. THE MATTER WAS RESTORED TO THE FILE OF AO FOR CONSIDERING THE ASSESSEE S CLAIM AFRESH AS PER LAW GIVING DUE OPPORTUNITY TO THE ASSESSEE. I.T.A .NO. 4305/DEL/2012 4 5. IN THE SECOND ROUND OF PROCEEDINGS , THE AO AGAIN FOLLOWED HIS EARLIER VIEW AND DID NOT ALLOW DEDUCTION FOR THE DIFFERENTIAL AMOUNT OF THE VALUE OF THE OPENING STOCK OF FINISHED GOODS . THE LD. CIT(A) ACCEPTED THE ASSESSEE S CLAIM , AGAINST WHICH THE REVENUE HAS COME UP IN APPEAL BEFORE US. 6 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS NOTICED THAT THE DISPUTE IN THE INSTANT APPEAL LIES IN A NARROW COMPASS . T HE SHORT POINT IS WHETHER THE ASSESSEE IS ENTITLED FOR INCREASING THE VALUE OF ITS OPENI NG STOCK BY SUM OF RS.33.91 LAC AND THEREBY REDUCI N G ITS TOTAL INCOME TO THAT EXTENT. THERE IS NO DISPUTE ON THE FIGURE OF CLOSING STOCK OF FINISHED GOODS FOR THE PRECEDING YEAR , WHICH IS APPARENT FROM THE A NNUAL ACCOUNT OF THE ASSESSEE FOR THE YEAR IN QUESTION AT RS.101.63 LAC. IT IS EVIDENT FROM T HE ASSESSEE S T RADING ACCOUNT FOR THE CURRENT YEAR THAT THE VALUE OF OPENING STOCK OF FINISHED GOODS HAS BEEN TAKEN UP AT RS.67.72 LAC AND THAT IS HOW THE AMOUNT GROSS PROFIT AND THE RESULTANT NET PROFIT WA S DETERMINED. THIS FIGURE OF RS.67.72 LAC WAS COMPUTED BY CONSIDERING THE CHANGE IN THE METHOD OF VALUATION OF CLOSING STOCK OF FINISH ED I.T.A .NO. 4305/DEL/2012 5 GOODS FROM THIS YEAR ONWARDS F ROM THE EARLIER YEAR S SALE PRICE LESS 10% TO THE CURRENT YEAR S SALE PRICE LESS 40%. THE DIFFERENTIAL AMOUNT OF RS.33.91 LAC IS NOTHING BUT THE DIFFERENCE OF 30% DUE TO THE CHANGE IN THE METHOD OF VALUATION OF OPENING STOCK OF FINISHED GOODS . THIS DIFFERENTIAL AMOUNT OF RS.33.91 LAC WAS DEBITED TO THE P & L APPRECIATION ACCOUNT , BUT NOT CLAIMED AS DEDUCTI ON IN THE COMPUTATION OF TOTAL INCOME. 7. THE FIGURE OF THE VALUE OF THE OPENING STOCK OF FINISHED GOODS OF LAST YEAR IS NOT DISPUTED. THERE CAN BE NO DISPUTE ON THE PROPOSITION THAT THE VALUE OF CLOSING STOCK OF PRECEDING YEAR CONSTITUTES VALUE OF OPENING STOCK OF THE CURRENT YEAR. UNDER NO CIRCUMSTANCES THERE CAN BE ANY DIFFERENCE BETWEEN THE VALUE OF CLOSING STOCK SHOWN IN THE ACCOUNTS OF PRECEDING YEAR AND THE VALUE OF OPENING STOCK OF THE CURRENT YEAR. THOUGH THE REFLECTION BY THE ASSESSEE OF RS.33.91 LAC IN ITS P & L APPROPRIATION ACCOUNT IS AN ERRONEOUS APPROACH OF SHOWING THE VALUE OF OPENING STOCK, WHICH AMOUNT SHOULD HAVE BEEN IN FACT, CONSIDERED IN ENTIRE TY IN THE TRADING ACCOUNT, BUT SUCH AN ERRONEOUS ACCOUNTING TREATMENT CANNOT IMPACT THE CALCULATION OF CORRECT TOTAL I.T.A .NO. 4305/DEL/2012 6 INCOME. IN OUR CONSIDERED OPINION THE LD. CIT(A) WAS JUSTIFIED IN ENHANCING THE VALUE OF OPENING STOCK OF FINISHED GOODS WITH RS.33.91 L AC AND THEREBY REDUCING THE TOTAL INCOME TO THIS EXTENT. WE THEREFORE, COUNTENANCE THE VIEW TAKEN BY THE LD. CIT(A) ON THIS ISSUE. 8 . IN THE RESULT, THE REVENUE APPEAL IS DISMISSED. ORDER PRONOUN CED IN THE OPEN COURT ON 08 /07/2015. SD/ - SD/ - (A. T. VARKEY) (R. S. SYAL) JUDICIAL MEMBER ACCOUNTANT M EMBER DATED: 08 /07/2015 *AK VERMA* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR