Panasonic India Private Ltd., CHENNAI V. ACIT, CHENNAI

ITA 477/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7786 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 09-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PATHLAVATH PEERYA
• Assessee Lawyers: R A KAPOOR C AS
• Section: 143(3); 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , D B ENCH, CHENNAI . . . , . , & BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NOS.476 & 477/MDS/2015 ( / ASSESSMENT YEAR: 2008-09 & 2009-10) M/S.PANASONIC INDIA PVT.LTD., (FORMERLY M/S.PANASONIC SALES & SERVICES PVT.LTD.) 6 TH FLOOR, SPIC BUILDING AVENUE, 88, MOUNT ROAD, GUINDY, CHENNAI-600 032. VS THE ASSISTANT COMMISSIONER OF INCOME TAX , COMPANY CIRCLE-V(1) CHENNAI-34. PAN:AADCP9391B ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR.PRADEEP DINODIA, & MR. R.A.KAPOOR, C.AS /RESPONDENT BY : MR. PATHLAVATH PEERYA, CIT /DATE OF HEARING : 6 TH JANUARY, 2016 /DATE OF PRONOUNCEMENT : 9 TH MARCH, 2016 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THESE TWO APPEALS ARE FILED BY THE ASSESSEE AGGRIEV ED BY THE COMMON ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX, CHENNAI-5 DATED 23.02.2015 IN C.NO.2 (13)/CR- 5/263/CIT-5/2013-14 PASSED UNDER SECTION 263 OF THE ACT FOR THE ASSESSMENT YEARS 2008-09 & 2009-10 RESPECTIVELY . 2. THE ASSESSEE HAS RAISED SEVERAL ELABORATE GROUND S, HOWEVER THE CRUXES OF THE ISSUES ARE AS FOLLOWS:- I) THE LEARNED COMMISSIONER OF INCOME TAX HAS GROSSLY ERRED IN LAW BY HOLDING THAT THE DRAFT OF T HE 2 ITA NO.476 & 477 /MDS/2015 PROPOSED ORDER PASSED UNDER SECTION 144C IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE BY INVOKING THE PROVISIONS OF SECTION 263 OF THE AC T. II) THE LEARNED COMMISSIONER OF INCOME TAX HAS ERRE D BY HOLDING THAT THE PROVISIONS MADE FOR SLOW MOVIN G ITEMS /OBSOLETE INVENTORIES AMOUNTING TO RS.7,62,94,000/- IS LIABLE TO BE DISALLOWED. 3. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FILED ITS RETURNS OF INCOME FOR THE ASSESSMENT YEARS 2008-09 & 2009- 10 ON 29.09.2009 AND 30.09.2009 DECLARING LOSS / INCOM E OF RS.(-)7,37,20,126/- & RS.3,27,80,020/- RESPECTIVELY . SUBSEQUENTLY ORDER UNDER SECTION 143(3) R.W.S. 144C (13) WAS PASSED ON 19.10.2012 FOR THE ASSESSMENT YEAR 20 08-09 AND ORDER UNDER SECTION 143(3) OF THE ACT WAS PASSE D FOR THE ASSESSMENT YEAR 2009-10 BY THE LEARNED ASSESSING OF FICER. THEREAFTER THE LEARNED COMMISSIONER OF INCOME TAX N OTICED THAT THE ASSESSEE HAD DEDUCTED CERTAIN AMOUNT FROM THE CLOSING STOCK TOWARDS PROVISION FOR SLOW MOVING OBS OLETE INVENTORY. THE LEARNED COMMISSIONER OF INCOME TAX O PINED THAT SUCH PROVISION IS CONTINGENT IN NATURE AND NOT ALLOWABLE AS DEDUCTION AS HELD BY THE HONBLE JURISDICTIONAL MADRAS HIGH COURT IN THE CASE OF NORTH ARCOT DISTRICT CO-O PERATIVE SUPPLY & MARKETING SOCIETY VS. CIT REPORTED IN 165 ITR 623. 3 ITA NO.476 & 477 /MDS/2015 THEREFORE, INVOKING HIS POWER UNDER SECTION 263 OF THE ACT THE LEARNED COMMISSIONER OF INCOME TAX DIRECTED THE ASSESSING OFFICER TO DISALLOW THE PROVISION FOR SLO W MOVING OBSOLETE INVENTORY FOR BOTH THE ASSESSMENT YEARS. A GGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX, THE ASSESSEE IS IN APPEAL BEFORE US FOR BOTH THE ASSESS MENT YEARS. 4. THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED BEFORE US THAT THE CLOSING STOCK HAS TO BE VALUED A S PER THE MARKET VALUE OR COST WHICHEVER IS LESS WHILE ARRIVI NG AT THE PROFIT/LOSS OF THE ASSESSEE FOR THE RELEVANT ASSESS MENT YEAR. THEREFORE, THE ASSESSEE HAD VALUED THE CLOSING STOC K AS PER THE MARKET VALUE WITH RESPECT TO SLOW MOVING OBSOLE TE INVENTORY. HENCE, IT WAS ARGUED THAT THE VALUE ADOP TED BY THE ASSESSEE IS JUSTIFIABLE AND THEREFORE THE DIRECTION OF THE LEARNED COMMISSIONER OF INCOME TAX IS ERRONEOUS. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE ARGUED I N THE SUPPORT OF THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX. 4 ITA NO.476 & 477 /MDS/2015 6. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY PER USED THE MATERIALS AVAILABLE ON RECORD. AS POINTED BY TH E LEARNED AUTHORIZED REPRESENTATIVE THE VALUE OF THE CLOSING STOCK TO BE REFLECTED IN THE PROFIT AND LOSS STATEMENT SHOUL D BE THE ACTUAL COST OR THE MARKET PRICE WHICHEVER IS LESS A S ON THE LAST DATE OF THE FINANCIAL YEAR IN ORDER TO ARRIVE AT THE CORRECT PROFIT / LOSS OF THE ASSESSEE FOR THE RELEVANT PREVIOUS YEAR. HOWEVER, THE ESTIMATE OF THE MARKET VALUE HAS TO BE MADE ON SOME REASONABLE BASIS. IN THE CASE OF THE ASSESSEE, IT APPEARS THAT THE LEARNED ASSESSING OFFICER HAS NOT LOOKED INTO THE VALUATION MADE BY THE ASSESSEE WITH RESPEC T TO ITS SLOW MOVING OBSOLETE INVENTORY. THE AMOUNT OF PROVI SION MADE BY THE ASSESSEE IS ALSO QUITE SIGNIFICANT. THE REFORE, WE ARE OF THE OPINION THAT THE LEARNED COMMISSIONER OF INCOME TAX WAS JUSTIFIED IN INVOKING HIS POWERS UNDER SECT ION 263 OF THE ACT. HOWEVER, HE HAS ERRED IN DIRECTING THE LEA RNED ASSESSING OFFICER TO DISALLOW THE ENTIRE AMOUNT OF DIMINUTION IN THE VALUE OF CLOSING STOCK. THE RELIANCE PLACED BY THE LEARNED COMMISSIONER OF INCOME TAX IN THE CASE OF N ORTH ARCOT DISTRICT CO-OPERATIVE SUPPLY & MARKETING SOCI ETY VS. CIT SUPRA DOES NOT APPEAR TO BE APPLICABLE TO THE C ASE OF THE 5 ITA NO.476 & 477 /MDS/2015 ASSESSEE BECAUSE THE ISSUE IN THAT CASE IS RESERVE FOR DEFICIT STOCK, HOWEVER THE CASE OF THE ASSESSEE IS WITH RE SPECT TO DIMINUTION IN THE VALUE OF SLOW MOVING INVENTORY. NEVERTHELESS, WE HEREBY UPHOLD THE ORDER OF THE LEA RNED COMMISSIONER OF INCOME TAX FOR INVOKING THE PROVISI ONS OF SECTION 263 OF THE ACT FOR THE ABOVE MENTIONED REAS ONS, AND AT THE SAME BREATH WE HEREBY DIRECT THE LEARNED ASS ESSING OFFICER TO EXAMINE THE METHOD OF VALUATION ADOPTED BY THE ASSESSEE IN VALUING ITS SLOW MOVING OBSOLETE STOCK AND THEREAFTER DECIDE THE ISSUE BY DISALLOWING OR ALLO WING THE DIMINUTION IN VALUE OF SLOW MOVING OBSOLETE INVENTO RY AS DEDUCTION ACCORDING TO MERITS OF THE CASE AND AS PE R LAW. 7. IN THE RESULT, APPEALS OF THE ASSESSEE ARE PARTL Y ALLOWED AS INDICATED HEREIN ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THE 9 TH MARCH, 2016 SD/- SD/- ( . . . ) ( . ) (N.R.S. GANESAN) ( A.MOHAN ALANKAMONY ) # % / JUDICIAL MEMBER % / ACCOUNTANT MEMBER # /CHENNAI, ( /DATED 9 TH MARCH, 2016 SOMU 6 ITA NO.476 & 477 /MDS/2015 *+ ,+ /COPY TO: APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /GF