Hari Oil & General Mills, Kolkata V. ACIT, CIRCLE-43, KOLKATA, Kolkata

ITA 55/KOL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4580 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-09-2016
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Next Hearing Date: 29-08-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 13-01-2014
• Court: TRIBUNAL
• Assessee Lawyers: ANIL KUMAR AGARWAL
• Section: 143(3)

Judgement Text

I.T.A. NO. 55/KOL./2014 ASSESSMENT YEAR: 2009-2010 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA SMC BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER I.T.A. NO. 55 /KOL/ 2014 ASSESSMENT YEAR: 2009-2010 HARI OIL & GENERAL MILLS,.......................... .............................APPELLANT 46, KALI KRISHNA TAGORE STREET, 3 RD FLOOR, KOLKATA-700 007 [PAN : AACFH 8271 J] -VS.- ASSISANT COMMISSIONER OF INCOME TAX,............... ...................RESPONDENT CIRCLE-43, KOLKATA, 3, GOVERNMENT PLACE (WEST), KOLKATA-700 001 APPEARANCES BY: SHRI ANIL KUMAR AGARWAL, FCA, FOR THE ASSESSEE SHRI SALLONG YADEN, ADDL. CIT, D.R., FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : AUGUST 29, 2016 DATE OF PRONOUNCING THE ORDER : SEPTEMBER 02, 2016 O R D E R THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XXX, KOLKA TA DATED 20.11.2013 AND THE SOLITARY ISSUE INVOLVED THEREIN RELATES TO THE ADDITION OF RS.1,39,258/- MADE BY THE ASSESSING OFFICER AND CON FIRMED BY THE LD. CIT(APPEALS) ON ACCOUNT OF ALLEGED UNDER-VALUATION OF CLOSING STOCK. 2. THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSHI P-FIRM, WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF MUSTARD OIL AND CAKE. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION W AS FILED BY IT ON 22.08.2009 DECLARING TOTAL INCOME OF RS.30,05,620/- . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE ASSES SING OFFICER THAT THE ASSESSEE HAS BEEN REGULARLY FOLLOWING THE METHOD OF VALUATION OF STOCK AT COST OR REALIZABLE VALUE, WHICHEVER IS LOWER, B UT THE PALLEDARI EXPENSES INCURRED DURING THE YEAR UNDER CONSIDERATION WERE N OT ADDED I.T.A. NO. 55/KOL./2014 ASSESSMENT YEAR: 2009-2010 PAGE 2 OF 4 PROPORTIONATELY IN THE VALUE OF CLOSING STOCK. ACCO RDING TO HIM, THE SAID EXPENSES MAINLY INCLUSIVE OF LOADING, UNLOADING AND PACKING WERE IN THE NATURE OF DIRECT EXPENSES INCURRED BY THE ASSESSEE IN CONNECTION WITH PURCHASES AND THE SAME, THEREFORE, WERE LIABLE TO B E INCLUDED ON PROPORTIONATE BASIS WHILE DETERMINING THE VALUE OF CLOSING STOCK. ACCORDINGLY, SUCH EXPENSES WORKED OUT ON PROPORTION ATE BASIS AT RS.1,39,258/- WERE ADDED BY THE ASSESSING OFFICER T O THE VALUE OF CLOSING STOCK OF THE ASSESSEE AND THE ADDITION TO THAT EXTE NT WAS MADE BY HIM TO THE TOTAL INCOME OF THE ASSESSEE IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) VIDE AN ORDER DATED 30.12.2011. 3. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICE R UNDER SECTION 143(3), AN APPEAL WAS PREFERRED BY THE ASSESSEE BEF ORE THE LD. CIT(APPEALS) AND AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECORD, THE LD . CIT(APPEALS) CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICE R ON ACCOUNT OF ALLEGED UNDER-VALUATION OF CLOSING STOCK BY THE ASS ESSEE FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH NO. 4.3 OF HIS IMPUGNED ORDER:- 4.3.: DECISION:- THE APPELLANT HAS SHOWN IN CLOSIN G STOCK RAW MATERIAL OF RS.3,15,67,704/-. THE PALLEDARI EXPENSE S OF RS.17,16,884/- HAS BEEN CLAIMED ON DEBIT SIDE OF P& L A/C. AND IT IS LOADING, UNLOADING AND PACKING EXPENSES FOR RAW MATERIALS. THE APPELLANT HAS NOT USED A PART OF THIS EXPENSE I N CLOSING STOCK. CLOSING STOCK DOES NOT GIVE RISE TO PROFIT O N ITS OWN IF PROPERLY COMPUTED. CLOSING STOCK VALUE MERELY REPRE SENTS BALANCING CHARGE FOR COST, WHICH APPEARS ON EXPENSE SIDE OF P&L ACCOUNT IN THE FORM OF PURCHASES AND OTHER DIRECT E XPENSES. IF COMPUTATION OF CLOSING STOCK VALUE DOES NOT INCLUDE ALL DIRECT COSTS, CLOSING STOCK DOES NOT TRULY REFLECT THE VAL UE OF STOCK AND TO THAT EXTENT PROFIT OF THE YEAR GETS REDUCED. THU S CLOSING STOCK IS NOT A SOURCE OF INCOME OR LOSS, BUT IN THE CASE WHERE DIRECT COSTS AND PURCHASES ARE NOT PROPORTIONATELY INCLUDE D IN THE CLOSING STOCK, THE VALUE OF STOCK BECOMES LOWER THA N REQUIRED AS PER BALANCING CHARGE AND THE PROFITS BECOMES LOWER THAN WHAT OUGHT TO HAVE RESULTED ON SALES. THUS, THE A.O. HAS RIGHTLY INCREASED THE VALUE OF STOCK AND THUS HAS RIGHTLY I NCREASED THE PROFIT/INCOME BY RS.L,39,258/-. THE PLEAS OF THE APPELLANT THAT THE VALUE BECOMES T HE OPENING STOCK OF THE FOLLOWING YEAR AND PROFIT ONLY GETS POSTPONED AND THERE IS NO ESCAPEMENT FROM CHARGE OF TAX, CANNOT BE ACCEPTED AS THE CHARGE IS ON INCOME EARNED IN TH E CURRENT I.T.A. NO. 55/KOL./2014 ASSESSMENT YEAR: 2009-2010 PAGE 3 OF 4 YEAR. INCOME OF THIS YEAR CANNOT BE CHARGED TO TAX IN THE EARLIER YEAR OR LATER YEAR. IN FACT POSTPONING TAX CHARGE M AY LEAD TO INDEFINITE POSTPONEMENT THROUGH SUCCESSIVE ACTS OF POSTPONEMENT IN EACH YEAR. TAX HAS TO BE LEVIED ON INCOME OF CURRENT YEAR. BY REDUCING THE VALUE OF CLOSING STOC K PROFIT ON SALES OF CURRENT YEAR IS REDUCED ARTIFICIALLY AND I S REDUCED BELOW WHAT IS ACTUAL PROFIT ON SALES OF CURRENT YEAR. AS A RESULT, THE GROUND IS NOT ALLOWED. AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE, THE PALLEDARI EXPENSES IN QUESTION WE RE MAINLY INCURRED ON WEIGHING OF MUSTARD SEEDS AND THE SAME NOT BEING IN THE NATURE OF DIRECT EXPENSES INCURRED BY THE ASSESSEE FOR ACQUISITION O F RAW MATERIAL WERE NOT LIABLE TO BE INCLUDED IN THE VALUE OF CLOSING S TOCK DETERMINED ON THE BASIS OF COST OR REALIZABLE VALUE, WHICHEVER IS LOWER. HE HAS ALSO SUBMITTED THAT THE SAID EXPENSES ON PROPORTIONATE B ASIS WERE NOT INCLUDED BY THE ASSESSEE EVEN IN THE VALUE OF OPENI NG STOCK AND IF THE SAME ARE INCLUDED IN THE VALUE OF OPENING STOCK, WH ICH WAS MORE IN QUANTITATIVE TERMS THAN IN CLOSING STOCK, THERE WOU LD BE NO ADDITION TO THE TOTAL INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. HE HAS ALSO SUBMITTED THAT THE VALUE OF CLOSING STOCK AS T AKEN BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAS BEEN ADOPTED AS TH E VALUE OF OPENING STOCK FOR THE IMMEDIATELY SUCCEEDING YEAR AND THE C ONSEQUENTIAL EFFECT OF THE ADDITION MADE IN THE YEAR UNDER CONSIDERATION, WHICH IS REQUIRED TO BE GIVEN FOR THE IMMEDIATELY SUCCEEDING YEAR, WOULD BE REVENUE NEUTRAL. HE HAS CONTENDED THAT THE ADDITION MADE IN THE YEAR UNDER CONSIDERATION OTHERWISE WOULD RESULT IN DOUBLE TAXATION OF THE SA ME AMOUNT. KEEPING IN VIEW ALL THESE SUBMISSIONS MADE BY THE LD. COUNSEL FOR THE ASSESSEE, WHICH HAVE REMAINED UNCONTROVERTED BY THE LD. D.R., I AM OF THE VIEW THAT THE ADDITION MADE BY THE ASSESSING OFFICER AND CONF IRMED BY THE LD. CIT(APPEALS) ON ACCOUNT OF THE ALLEGED UNDER-VALUAT ION OF CLOSING STOCK IS I.T.A. NO. 55/KOL./2014 ASSESSMENT YEAR: 2009-2010 PAGE 4 OF 4 NOT SUSTAINABLE. ACCORDINGLY, I DELETE THE SAME AND ALLOW THIS APPEAL OF THE ASSESSEE. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON SEPTEMBER 02, 2016. SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER KOLKATA, THE 2 ND DAY OF SEPTEMBER, 2016 COPIES TO : (1) HARI OIL & GENERAL MILLS, C/O. SATNALIWALA & CO., 1 ST FLOOR, ROOM NO. 108, 62, BENTINCK STREET, KOLKATA-700 069 (2) ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-43, KOLKATA, 3, GOVERNMENT PLACE (WEST), KOLKATA-700 001 (3) COMMISSIONER OF INCOME TAX (APPEALS)-XXX, KOLK ATA; (4) COMMISSIONER OF INCOME TAX- , (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.