D.C.I.T. 3(1), MUMBAI V. BAJAJ HINDUSTAN SUGAR & INDUSTRIES LTD., MUMBAI

ITA 5966/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84280 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 24-11-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 01-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHILENDRA YADAV
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI D. KARUNAKAR RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO. 5966/MUM/2012 ASSESSMENT YEAR: 2007-08 DCIT 3(1) R.NO. 607, 6 TH FLOOR, AAYAKAR BHAVAN M.K. ROAD MUMBAI VS. M/S. BAJAJ HINDUSTAN SUGAR & INDUSTRIES LTD. BAJAJ BHAVAN, 2 ND FLOOR, JAMANLAL BAJAJ MARG, 226, NARIMAN POINT MUMBAI- 400 021 PAN: AABCT 0694 H (APPELLANT) (RESPON DENT) ASSESSEE BY : SHRI KIRI T KAMDAR REVENUE BY : SHRI AKHILENDRA YADAV DATE OF HEARING : 24 . 11 . 2014 DATE OF ORDER : 24 . 1 1 .2014 O R D E R PER AMIT SHUKLA, JM: THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGA INST ORDER DATED 23.07.2012, PASSED BY THE LD.CIT(A) -5, MUMBAI, FOR THE QUANTUM OF ASSESSMENT PASSED U/S 143(3) FOR THE A.Y .A 2007-08. THE SOLE ISSUE RAISED BY THE REVENUE IS THAT, LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.2,00,27,105 /- MADE ON ACCOUNT OF UNDER VALUATION OF CLOSING STOCK. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUF ACTURING OF SUGAR. THE ASSESSING OFFICER ON THE PERUSAL OF THE AUDITED ACCOUNTS NOTED THAT, ASSESSEE HAD SHOWN OPENING STOCK OF MOL ASSES, (A ITA NO. 5966/MUM/2012 M/S. BAJAJ HINDUSTAN SUGAR & INDUSTRIES LTD ASSESSMENT YEAR: 2007-08 2 BYPRODUCT AT IN THE COURSE OF MANUFACTURING), WEIGH ING 13,116 MTS, WHICH HAS BEEN VALUED AT RS.4,09,87,113/-. THE PROD UCTION OF THE MOLASSES HAS BEEN SHOWN AT 25,722 MTS. THE ASSESSEE HAS MADE SALE OF MOLASSES OF 28,347 MTS, VALUED AT RS.8,85,32,350 /-. FROM THIS, HE DEDUCED THAT THE OPENING STOCK OF MOLASSES HAS BEEN VALUED AT RS. 3125/- PER MT AND AVERAGE SALE PRICE HAS BEEN SHOWN AT 3123 PER MT DURING THE YEAR. HOWEVER, THE CLOSING STOCK OF MOLA SSES WEIGHING 10,491 MTS HAS BEEN VALUED AT RS.1,27,46,779/- THAT IS @ RS.1215 PER MT. BEFORE THE ASSESSING OFFICER THE ASSESSEES MAI N CONTENTION WAS THAT IT HAS VALUED THE MOLASSES AT NET REALIZABLE VALUE INCLUDING EXCISE DUTY PAYABLE. AND THE VALUATION OF THE CLOSING STOCK HAS BEEN DONE AS PER THE ACCEPTED ACCOUNTING PRINCIPLE IN THE EARLIER YEARS. HOWEVER, THE ASSESSING OFFICER HELD THAT CLOSING STOCK OF MOLASS ES HAS BEEN VALUED AT MUCH LOWER PRICE THAN THE OPENING STOCK OF THE SALE S AND THEREFORE, THE VALUE OF SUCH STOCK SHOULD BE TAKEN AT RS.3125 AND ACCORDINGLY HE WORKED OUT THE UNDER VALUATION OF CLOSING STOCK AT RS.2,00,27,105/-. 3. BEFORE THE LD.CIT(A), IT WAS SUBMITTED THAT ASSE SSEE IS CONSISTENTLY FOLLOWING THE ACCOUNTING OF THE VALUAT ION OF THE CLOSING STOCK OF MOLASSES AT NET REALIZABLE VALUE. IN THE E ARLIER YEARS AND IN THE SUBSEQUENT YEARS THE ASSESSEE HAS FOLLOWED THE SAME SYSTEM OF VALUATION AND NO ADDITION HAS BEEN MADE BY THE DEPA RTMENT EVEN THOUGH ASSESSMENT HAVE BEEN MADE UNDER SCRUTINY PRO CEEDINGS. IT WAS FURTHER SUBMITTED THAT MOLASSES IS A RAW MATERIAL F OR ALCOHOL PRODUCTION, THE PRICE VARIATION IS QUITE HUGE DEPENDING ON THE MARKET FORCES. THE ASSESSEE ALSO GAVE THE AVERAGE RATE OF MOLASSES IN THE VARIOUS ASSESSMENT YEARS AS UNDER:- ITA NO. 5966/MUM/2012 M/S. BAJAJ HINDUSTAN SUGAR & INDUSTRIES LTD ASSESSMENT YEAR: 2007-08 3 ASSESSMENT YEAR RATE PER QTL (INCL. EXCISE DUTY) 2006-07 312 2007-08 122 2008-09 302 2009-10 427 THUS IN THE A.Y. 2007-08 THE RATE OF MOLASSES WAS V ERY LOW AS COMPARED TO THE OTHER YEARS. THE ASSESSEE HAS ALSO FILED SALE BILLS FOR THE MONTH OF APRIL 2006 AND MAY 2007 WHICH WERE TAK EN FOR THE PURPOSE OF VALUATION OF THE CLOSING STOCK. THESE WE RE AS UNDER:- APRIL 2006 NAME OF THE PARTY BASIC PRICE (A) EXCISE DUTY (B) TOTAL (A+B) INDIA GLYCOLS LTD. 220 75 295 J.R. ORGANICS LTD. 190 75 265 SARAYA DISTELLARY 190 75 265 SARAYA DISTELLARY 190 75 265 MAY 2007 NAME OF THE PARTY BASIC PRICE (A) EXCISE DUTY (B) TOTAL (A+B) INDIA GLYCOLS LTD. 45 75 120 INDIA GLYCOLS LTD. 45 75 120 INDIA GLYCOLS LTD. 45 75 120 4. THE LD.CIT(A) DULY APPRECIATED THE ASSESSEES CO NTENTION AND HELD THAT ASSESSEE HAS BEEN FOLLOWING THE SYSTEM OF ACCO UNTING OF VALUATION OF CLOSING STOCK IN A CONSISTENT MANNER, THAT IS, N ET REALIZABLE VALUE NOT ONLY IN THE EARLIER YEARS BUT ALSO IN THE SUBSEQUEN T YEARS. HE HAS EVEN TAKEN NOTE OF THE ASSESSMENT ORDERS FOR THE A.Y. 20 06-07 TO 2009-10, WHEREIN NO SUCH ADDITION HAVE BEEN MADE. THUS FOLLO WING THE PRINCIPLE ITA NO. 5966/MUM/2012 M/S. BAJAJ HINDUSTAN SUGAR & INDUSTRIES LTD ASSESSMENT YEAR: 2007-08 4 OF CONSISTENCY BE DELETED THE ADDITION. FOR COMING TO THIS CONCLUSION OF CONSISTENCY, HE REFERRED TO THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF GOPAL PUROHIT 336 ITR 287 (BOM). 5. BEFORE US THE LD. DR SUBMITTED THAT, IN THIS YEA R THERE WAS A HUGE DIFFERENCE IN THE SALE VALUE, VALUE OF OPENING STOC K AND THE VALUATION ADOPTED BY THE ASSESSEE FOR THE CLOSING STOCK. SUCH A VARIATION IN RATES LEADS TO ON INFERENCE THAT ASSESSEE HAS NOT SHOWN P ROPER VALUATION. HE THUS STRONGLY RELIED UPON THE ORDER OF THE AO. 6. ON THE OTHER HAND, LEARNED COUNSEL FOR THE ASSES SEE SUBMITTED THAT THE ASSESSEE HAD FILED THE SALE BILLS FOR APRI L AND MAY 2007 TO SHOW THAT THE SALE VALUE OF MOLASSES HAD DIPPED VERY LOW AT THE TIME OF VALUATION. THE AO HAS NOT TAKEN INTO COGNIZANCE SUC H BILLS WHICH WERE GIVEN ALONG WITH LETTER DATED 29.12.2009, WHICH HAS EVEN NOTED BY THE AO. THE COPY OF SUCH A LETTER ALONG WITH SALE BILLS HAS ALSO BEEN FILED BEFORE US. THUS HE SUBMITTED THAT THE VALUATION OF CLOSING STOCK AS ON 31.03.2007, HAS BEEN DONE ON THE BASIS OF RATE PREV ALENT IN THE MONTH OF APRIL AND MAY 2007, WHICH WAS VERY LOW. 7. WE HAVE HEARD THE RIVAL CONTENTION AND ALSO THE PERUSAL THE RELEVANT FINDING OF THE AO AS WELL AS LD.CIT(A). IT IS ADMITTED FACT THAT THE ASSESSEE HAD BEEN VALUING THE CLOSING STOCK OF MOLASSES AS PER NET REALIZABLE VALUE INCLUDING EXCISE DUTY PAYABLE. IN THIS YEAR THE VALUATION HAS BEEN DONE ON THE BASIS OF SALE INVOICES FOR THE MONTH OF APRIL AND MAY 2007, THE COPY OF WHICH WERE FILED BEFORE THE A O AND ALSO BEFORE US. THE LD.CIT(A) HAS ALSO INCORPORATED THE RATES O F AVERAGE RATE OF MOLASSES IN VARIOUS ASSESSMENT YEARS AND ALSO THE R ATES GIVEN IN SOME OF THE SALE BILLS FOR MAY 2007, AS HAVE BEEN INCORP ORATED ABOVE BY US IN ITA NO. 5966/MUM/2012 M/S. BAJAJ HINDUSTAN SUGAR & INDUSTRIES LTD ASSESSMENT YEAR: 2007-08 5 FOREGOING PARAGRAPH. THUS FROM THESE RECORDS IT IS AMPLY CLEAR THAT THE ASSESSEE HAS VALUED THE CLOSING STOCK OF MOLASSES A S PER THE NET REALIZABLE VALUE WHICH CAN BE FETCHED ON THE BASIS OF ACTUAL SALE BILLS FOR THE MONTH OF APRIL AND MAY 2007. IN ANY CASE THE ME THOD OF VALUATION OF CLOSING STOCK OF MOLASSES AT NET REALIZABLE VALU E HAVE BEEN CONSISTENTLY FOLLOWED BY THE ASSESSEE, NOT ONLY IN THE EARLIER YEARS BUT ALSO IN SUBSEQUENT YEARS WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT IN THE SCRUTINY PROCEEDINGS. THUS WE DO NOT FIND ANY R EASON TO DEVIATE FROM THE FINDING OF THE LD.CIT(A) IN THE SAME AS AF FIRMED. 8. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 24 TH DAY OF NOVEMBER, 2014. SD/- SD/- (D. KARUNAKAR RAO) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 24.11.2014 *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR B BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.