The Assistant Commr. of Income Tax, Junagadh Circle, JUNAGADH V. Smt. Gracy Kuthumkal Thomas, Veraval

ITA 542/RJT/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3341 (ITAT-RAJKOT)
• Duration Of Justice: 3 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 05-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MJ RANPURA
• Keywords: Business income
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT [CONDUCTED THROUGH E-COURT AT AH MEDABAD] (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI WASEEM AHMED, ACCOUNTANT MEMBER) ITA. NO: 542/RJT/2015 (ASSESSMENT YEAR: 2011-12) THE A.C.I.T., JUNAGADH CIRCLE, JUNAGADH V/S SMT. GRACY KUTHUMKAL THOMAS, PROP. OF M/S. JINNY MARINE TRADERS, PLOT NO. 1306/1311, GIDC ESTATE, VERAVAL (APPELLANT) (RESPONDENT) PAN: ABSPT 1009K APPELLANT BY : SHRI JITENDRA KUMAR, CIT/D R RESPONDENT BY : SHRI M.J. RANPURA, A.R. ( )/ ORDER DATE OF HEARING : 11 -02-201 8 DATE OF PRONOUNCEMENT : 11-02-2018 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE LD. CIT(A), JAMNAGAR DATED 26.08.2015 FOR A.Y. 2011-12 AND FOLLOWING GROUNDS HAVE BEEN TAKEN: ITA NO. 542/ RJT/2015 . A.Y. 2011-1 2 2 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 1,47,81,036/- MADE ON ACCOUNT OF UNDER VALUATION OF CLOSING STOCK. 2. ANY OTHER GROUND THAT THE REVENUE MAY RAISE BEFORE OR DURING THE PROCEEDING BEFORE THE HONBLE ITAT. 3. ON THE FACTS OF THE CASE AND IN LAW, THE LD. CIT(AZ ) OUGHT TO HAVE UPHELD THE ORDER OF THE A.O. 4. IT IS THEREFORE, PRAYED THAT THE ORDER OF THE LD.CI T(A) MAY BE SET ASIDE AND THAT OF THE A.O. BE RESTORED TO THE ABOVE EXTENT. 2. THE FACTS OF THE CASE ARE THAT, THE APPELLANT, AN I NDIVIDUAL, AND ENGAGED IN THE BUSINESS OF FISH PROCESSING, PRESERVATION AND EXPOR T OF FISHES, SHRIMPS ETC., HAD FILED HER RETURN OF INCOME ON 08.09.2011 DECLARING TOTAL INCOME OF RS. 1,16,17,120/-. THE A.O. VIDE ORDER U/S. 143(3) OF T HE ACT ASSESSED THE TOTAL INCOME AT RS. 2,63,98,156/- WHEREIN HE MADE AN ADDI TION OF RS. 1,47,81,036/- ON ACCOUNT OF UNDER VALUATION OF CLOSING STOCK, FOR WHICH THE APPELLANT IS IN APPEAL. 3. THEREAFTER ASSESSEE PREFERRED FIRST STATUTORY APPEA L BEFORE THE LD. CIT(A) HELD THAT DEPB PROCEEDS ARE CREDITED TO THE PROFIT AND L OSS ACCOUNT, AND THIS IS TO OFF-SET THE COST, IN ORDER TO STAND COMPETITIVE IN THE INTERNATIONAL MARKET. IT WOULD BE TOO BIASED TO HOLD THAT THE VALUE OF DEPB INCREASES THE VALUE OF CLOSING STOCK. THE STOCK IS VALUED AT COST OR MARKE T PRICE WHICHEVER IS LESS. IN THE ASSESSMENT PROCEEDINGS FULL QUANTITATIVE DETAIL S OF CLOSING STOCK HAS BEEN SUBMITTED AND COPY OF WHICH IS ALSO MADE PART OF TH E SUBMISSION FURNISHED BEFORE THE LD. CIT(A) GIVING ALL DETAILED PERTAININ G TO WORKING OF CLOSING STOCK AND EXPLAINED ALONG WITH SUPPORTING AS TO HOW THE S AME HAS BEEN ARRIVED AND ITA NO. 542/ RJT/2015 . A.Y. 2011-1 2 3 NO SPECIFIC FAULT OR DISCREPANCIES IN THE SAME HAS BEEN POINTED OUT BY THE A.O. THEREAFTER, ON THIS COUNT, LD. CIT(A) GRANTED RELIE F TO THE ASSESSEE. 4. REVENUE HAS COME IN APPEAL AND SAID THAT LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 1,47,81,036/- MADE ON ACCOUNT OF U NDER VALUATION OF CLOSING STOCK. 5. AT THE OUTSET, LD. A.R. CITED AN ORDER OF CO-ORDINA TE BENCH IN ASSESSEES OWN CASE IN EARLIER ASSESSMENT YEAR I.E. 2010-11 WHEREI N RELIEF HAS BEEN GRANTED TO THE ASSESSEE AND RELEVANT PARA OF THE CO-ORDINATE B ENCH IS REPRODUCED: 4. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PRO CEEDINGS, THE A.O. WAS NOT SATISFIED WITH THE METHOD OF VALUATION OF CLOSING S TOCK EMPLOYED IN THE PREVIOUS YEAR BY THE ASSESSEE. ON PERUSAL OF TAX AUDIT REPOR T, THE AO. FOUND THAT THE ASSESSEE HAS VALUED ITS CLOSING STOCK LOWER OF THE COST OR MARKET VALUE. THE A.O. WAS OF THE OPINION THAT THE SALE PRICE ACTUALLY REA LIZED BY THE ASSESSEE FROM ITS SALES DOES NOT IN FACT REFLECT THE TRUE PREVAILING MARKET PRICE ON THE DATE AS THE ASSESSEE HAS DETERMINED THE SALE PRICE CONSIDERING THE RECEIPT OF DEPB GAINS AS HIS BUSINESS RECEIPTS. THE A.O. WAS OF THE FIRM BEL IEF THAT IF THE MARKET PRICE IS COMPUTED TAKING INTO EFFECT, THE DEPB GAINS THE ACT UAL MARKET PRICE SO COMPUTED WOULD BE MORE THAN THE COST PRICE TO THE ASSESSEE. ACCORDING TO THE A.O, THE STOCK HAS TO BE VALUED ADOPTING THE COST PRICE AS I T WOULD BE THE LOWER OF COST OR MARKET VALUE TO THE ASSESSEE. THE A.O. CONCLUDED BY HOLDING THAT THE ASSESSEE HAS UNDERVALUED THE CLOSING STOCK AND PROCEEDED BY VALUING THE CLOSING STOCK AT RS. 4,81,72,674/-. SINCE THE ASSESSEE HAD SHOWN THE CLOSING STOCK AT RS. 4,41,60,187/-, THE A.O. DETERMINED THE UNDERVALUATI ON OF STOCK AT RS. 40,12,487/- AND MADE THE IMPUGNED ADDITION. 5. ASSESSEE ASSAILED THE ASSESSMENT BEFORE THE LD. CIT(A) AND STRONGLY CONTENDED THAT THE A.O. HAS GROSSLY ERRED IN APPRECIATING THE FACTS IN TRUE PERSPECTIVE. IT WAS BROUGHT TO THE NOTICE OF THE LD. CIT(A) THAT THE AS SESSEE HAS FURNISHED FULL QUANTITATIVE DETAILS OF RAW MATERIALS, FINISHED GOO DS AND VALUATION THEREON. THE A.O. HAS NOT POINTED OUT ANY DEFECT OR IRREGULARITY OR ERROR IN THE TRADING DETAILS FURNISHED BY THE ASSESSEE. IT WAS FURTHER BROUGHT T O THE NOTICE OF THE LD. CIT(A) THAT THE ASSESSEE IS CONSISTENTLY AND REGULARLY FOL LOWING THE SAME METHOD OF ITA NO. 542/ RJT/2015 . A.Y. 2011-1 2 4 VALUATION OF CLOSING STOCK WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT IN PREVIOUS YEARS. 6. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS, THE LD. CIT(A) WAS CONVINCED THAT THE A.O. HAS NOT BROUGHT ANY EVIDENCE/INFORMAT ION AND THERE IS NO CASE FOR DISTURBANCE OF VALUATION OF CLOSING STOCK DECLARED BY THE ASSESSEE AND DIRECTED THE A.O. TO DELETE THE IMPUGNED ADDITIONS. 7. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. 8.THE LD. D.R. STRONGLY SUPPORTED THE FINDINGS OF T HE A.O. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN S TATED BEFORE THE LOWER AUTHORITIES. 9.WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE O RDERS OF THE AUTHORITIES BELOW. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE A.O. HAS CONTRADICTED HIMSELF. ON THE ONE HAND, THE A.O. SAYS THAT THE EF FECT OF DEPB WOULD BE THAT THE MARKET PRICE WOULD BE LOWER THAN THE COST PRICE. ON THE OTHER HAND, THE A.O. HAS MADE THE ADDITION FOR UNDERVALUATION OF CLOSING STO CK. 10.ASSUMING, YET NOT ACCEPTING, IF THE EFFECT OF DE PB IS TO MAKE THE MARKET PRICE LOWER THAN THE COST PRICE THEN THE CLOSING STOCK WO ULD BE VALUED AT MARKET PRICE AS THE METHOD OF ACCOUNTING EMPLOYED BY THE ASSESSE E IS LOWER OF COST OR MARKET PRICE. 11.THE A.O. FURTHER ERRED IN STATING THAT IF THE MA RKET PRICE IS COMPUTED TAKING INTO CONSIDERATION, THE DEPB GAINS THE ACTUAL MARKE T PRICE SO COMPUTED WOULD BE MORE THAN THE COST PRICE. IN FACT, IF THE DEPB GAIN S ARE CONSIDERED THEN THE MARKET PRICE WOULD BE LESS THAN THE ACTUAL COST. 12.THE UNDISPUTED FACT IS THAT THE ASSESSEE HAS BEE N CONSISTENTLY FOLLOWING THE SAME METHOD OF ACCOUNTING SINCE PAST MANY YEARS WHI CH HAS NOT BEEN DISTURBED BY THE DEPARTMENT. THEREFORE, WE DO NOT FIND ANY LO GIC IN DISTURBING THE WELL RECOGNIZED METHOD OF VALUATION OF CLOSING STOCK ADO PTED BY THE ASSESSEE. WE DO NOT FIND ANY ERROR OR INFIRMITY IN THE FINDINGS OF THE LD. CIT(A). 13.IN THE RESULT, ALL THESE APPEALS ARE ACCORDINGLY DISMISSED. ITA NO. 542/ RJT/2015 . A.Y. 2011-1 2 5 6. SINCE CO-ORDINATE BENCH HAS ALREADY GRANTED RELIEF IN EARLIER YEAR IN ASSESSEES OWN CASE, THEREFORE, RESPECTFULLY FOLLOWING THE SAM E, WE DISMISS THE APPEAL OF THE REVENUE. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 11 - 02- 2019 SD/- SD/- (WASEEM AHMED) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 11 /02/2019 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD