THE ITO 3(2)(4), MUMBAI V. M/S. PISTO OIL & FATS P. LTD, MUMBAI

ITA 4520/MUM/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1576 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 03-07-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K SINGH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: MUMBAI BEFORE SHRI R.K. GUPTA, JUDICIAL MEMBER AND SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER ITA NO 4520/MUM/2008 (ASSESSMENT YEAR: 2005-06) INCOME TAX OFFICER 3(2)(4), ROOM NO.608, 6TH FLOOR, AAYAKAR BHAVAN, MUMBAI -400 020 VS M/S PISTO OIL & FATS PVT LTD, MAKER CHAMBERS V, NARIMAN POINT MUMBAI -400 021 PAN: AAACP 2771 Q APPELLANT RESPONDENT APPELLANT BY: SHRI S K SINGH RESPONDENT BY: NONE ORDER PER R.K. GUPTA, JUDICIAL MEMBER THIS APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT (A) RELATING TO ASSESSMENT YEAR 2005-06. 2. THE DEPARTMENT IS OBJECTING IN DELETING THE ADDI TION OF RS 14,51,004/- (WHICH IS WRONGLY WRITTEN AS RS 14,51,04/- IN GROUNDS OF APPE AL), MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNDER VALUATION OF CLOSING STOCK. 3. WHILE MAKING THE ABOVE ADDITION, THE ASSESSING O FFICER ADOPTED THE AVERAGE PURCHASE PRICE OF VARIOUS ITEMS IN THE CLOSING STOC K AND HAS APPLIED ON THE QUANTITY TO ARRIVE AT VALUE OF CLOSING STOCK. WHEREAS, THE ASS ESSEE HAD ADOPTED THE STANDARD VALUE METHOD OF COST OR MARKET PRICE, WHICHEVER IS LOWER BASED UPON FIFO METHOD OF ACCOUNTING. IT WAS SUBMITTED BEFORE THE CIT (A) TH AT AVERAGE COST METHOD HAS NO SIGNIFICANCE SINCE ASSESSEE HAS BEEN CONSISTENTLY F OLLOWING THE SYSTEM OF VALUATION BASED ON COST OR MARKET PRICE, WHICHEVER IS LOWER. IT WA S CONTENDED THAT ASSESSING OFFICER HAS ITA 4520/M/2008 PISTO OIL & FATS PVT LTD 2 NOT FOUND ANYTHING WRONG WITH THIS METHOD OF ACCOUN TING AS HE HAS SIMPLY SUBSTITUTED THE RATES ADOPTED BY ASSESSEE BY AVERAGE RATES AND HAS MADE THE ADDITION. THE CIT (A) AFTER CONSIDERING THESE SUBMISSIONS FOUND THAT ASSE SSING OFFICER WAS NOT JUSTIFIED IN DISTURBING THE METHOD OF VALUATION ADOPTED BY THE A SSESSEE WHICH, WAS ADOPTED CONSISTENTLY. ACCORDINGLY, HE DELETED THE ADDITION . THE LEARNED DEPARTMENTAL REPRESENTATIVE PLACED RELIANCE ON THE ORDER OF THE ASSESSING OFFICER. NONE APPEARED ON BEHALF OF THE ASSESSEE. THE ASSESSEES APPEAL IS D ISPOSED OFF TAKING INTO CONSIDERATION THE ORDER OF THE ASSESSING OFFICER AND CIT (A). 4. AFTER CONSIDERING THE ORDER OF THE ASSESSING OFF ICER AND CIT (A) WE SEE NO REASON TO INTERFERE WITH THE ORDER OF LEARNED CTI (A). FI NDING OF CIT (A) ARE RECORDED IN PARA 5 AT PAGE 3 OF HIS ORDER AS UNDER: 5. I HAVE PERUSED THE FACTS OF THE CASE AND I FIND THAT ASSESSING OFFICER HAS WORKED OUT THE AVERAGE RATES OF THE VARIOUS ITEMS U SED BY APPELLANT AND HAS ADOPTED THE SAME FOR VALUATION OF CLOSING STOCK. T HE ASSESSING OFFICER HAS NOT COMMENTED UPON THE METHOD OF VALUATION BEING ADOPTE D BY APPELLANT YEAR AFTER YEAR. THE ASSESSING OFFICER HAS NOT ARGUED THAT AP PELLANTS METHOD IS NOT GIVING TRUE AND FAIR PICTURE OF THE BUSINESS AND HAS WITHO UT ANY SUCH ARGUMENT SUBSTITUTED HIS OWN VALUATION ON AVERAGE COST FOR T HE VALUES ADOPTED BY APPELLANT. IN CONTRAST, APPELLANT HAS BEEN REGULARLY FOLLOWING THE STANDARD METHOD OF VALUATION BEING COST OR MARKET PRICE WHICHEVER IS L OWER. THE ASSESSING OFFICER IS NOT JUSTIFIED IN CHANGING THE METHOD OF VALUATION W ITHOUT ARGUING AT ALL AGAINST THE EXISTING SYSTEM ADOPTED BY APPELLANT. MOREOVER, TH E AVERAGE METHOD ADOPTED BY ASSESSING OFFICER DOES NOT GIVE TRUE AND CORRECT PI CTURE OF THE STATE OF BUSINESS ON THE LAST DAY OF THE ACCOUNTING YEAR. WHAT IS RELEV ANT ON THE LAST DAY IS EITHER THE EXISTING MARKET PRICE ON THAT DAY OR THE PRICE AT W HICH THE ITEMS UNDER CONSIDERATION WERE PURCHASED. TO MY MIND THERE CAN NOT BE ANY OTHER METHOD FOR VALUATION OF CLOSING STOCK. IT IS AN ESTABLISHED A CCOUNTING PRINCIPLE, AND HAS EVEN BEEN ACCEPTED BY VARIOUS COURTS INCLUDING HONBLE S UPREME COURT AS A VALID AND JUST SYSTEM OF VALUATION OF CLOSING STOCK. THEREFO RE ASSESSING OFFICER REPLACING THE SYSTEM BY HIS OWN HAS NO JUSTIFICATION AND CONSEQUE NTLY THE ADDITIONS MADE CANNOT BE UPHELD. THE ADDITION MADE IS THEREFORE D ELETED. 5. THE ABOVE FINDING NEITHER COULD BE CONTROVERTED NOR ANY OTHER MATERIAL WAS BROUGHT ON RECORD, TO ESTABLISH OTHERWISE. THE CIT (A) HAS GIVEN FINDING OF FACT THAT ITA 4520/M/2008 PISTO OIL & FATS PVT LTD 3 THERE WAS NO MATERIAL TO DISTURB THE CONSISTENT MET HOD OF VALUATION ADOPTED BY THE ASSESSEE. THEREFORE, IN VIEW OF THE REASONING GIVE N BY CIT (A) WE CONFIRM HIS ORDER. 6. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS D ISMISSED. ORDER PRONOUNCED ON 25TH DAY OF NOVEMBER 2009. SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER SD/- (R.K. GUPTA) JUDICIAL MEMBER MUMBAI, DATE: 25TH NOVEMBER 2009 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) III, MUMBAI. 4) THE CIT-3, MUMBAI. 5) THE D.R. C BENCH, ITAT, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR CHAVAN* I.T.A.T., MUMBAI ITA 4520/M/2008 PISTO OIL & FATS PVT LTD 4 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 17.11.09 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 18.11.09 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS SR.PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS 7 FILE SENT TO THE BENCH CLERK SR.PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER