ACIT, Alwar V. GINNI INTERNATIONAL LIMITED, Alwar

ITA 60/JPR/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5528 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 27-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P C PARWAL CA DHK

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VH-VKJ-EHUK] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF; D LNL; DS LE{K BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA-@ ITA NO. 60/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2009-10 . THE ACIT, CIRCLE-2, ALWAR. CUKE VS. M/S. GINNI INTERNATIONAL LTD., RIICO, INDUSTRIAL AREA, NEEMRANANA, ALWAR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AAACG 0182 E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI KAILASH MANGAL (JCIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY S BY : SHRI P.C. PARWAL (C.A.) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 12 .01.2016. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 22/01/2016. VKNS'K@ ORDER PER SHRI LALIET KUMAR, J.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OR LD. CIT (A), ALWAR DATED 25 TH NOVEMBER, 2013 FOR THE A.Y. 2009-10. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS :- (1) THAT THE COMMISSIONER OF INCOME TAX (APPEALS), ALWAR HAS ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTANCES OF THE CA SE IN RESTRICTING THE ADDITION OF RS. 5,118/- TO RS. 605/- MADE BY THE AO ON ACCOUNT OF AT JOB. (2) THAT THE COMMISSIONER OF INCOME TAX (APPEALS), ALWAR HAS ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTANCES OF THE CA SE IN DELETING THE ADDITION RS. 24,66,271/- MADE BY AO ON A/C OF UNDER VALUATION OF STOCK. 2 ITA NO. 60/JP/2014 A.Y. 2009-10. ACIT VS. M/S. GINNI INTERNATIONAL LTD. (3) THAT THE COMMISSIONER OF INCOME TAX (APPEALS), ALWAR HAS ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTANCES OF THE CA SE IN RESTRICTING THE ADDITION MADE BY THE AO OUT OF EXPENSES OF RS. 33,2 2,950/- TO RS. 13,00,000/- MADE BY AO ON ACCOUNT OF DISALLOWANCE O UT OF THE CLAIM OF SEVERAL INDIRECT EXPENSES. GROUND NO. 1 : 2. REGARDING GROUND NO. 1, THE RELEVANT FACTS APPAR ENT FROM RECORD ARE THAT THE AO NOTICED THAT DURING THE YEAR UNDER CONSIDERATION, T HE ASSESSEE HAS CLAIMED THE VALUE OF STOCK AT JOB AT RS. ZERO, WHEREAS THE COST PRICE OF THE SAME WAS RS. 5118/-. THEREFORE, THE AO ASKED THE ASSESSEE TO EXPLAIN THE REASONS TH EREOF AND AS TO WHY AN ADDITION OF RS. 5118/- SHOULD NOT BE MADE. IN REPLY, THE LD. A /R OF THE ASSESSEE SUBMITTED AS UNDER :- WE HAD SHOWN STOCK AT JOB IN DENIM DIVISION OF 60 .62 KG. ONLY AND VALUED THE SAME AT RS. 84.42 AGAINST AVERAGE PRICE OF YARN IN PROCESS WHICH IS VALUED T RS. 94.40 AS ON 31.03.2009. THE S TOCK AT JOB OF 60.62 KG WAS VALUED LOWER AS COMPARE TO YARN IN PROCESS RATE AS THE SAME WAS OLD LOT DUE TO VERY SMALL QUANTITY. FURTHER YARN IN PRO CESS ALSO INVOLVES PROCESSING COST WHICH IS NOT APPLICABLE IN CASE OF STOCK AT JOB. WHERE ONLY YARN COST IS APPLICABLE EVEN IF WE VALUE THE SAME A S PER YARN IN PROCESS RATES THAN THE NET IMPACT OF RS. 605/- ONLY I.E. 60.62 KG X RS. 9.98 (94.40 - 84.42). THE REASONS GIVEN BY THE ASSESSEE WAS CONSIDERED BU T WAS NOT ACCEPTABLE TO THE AO. THE AO PLACING RELIANCE ON THE JUDGMENT OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. ROTORK CONTROLS INDIA LTD. (2007) 209 CTR ( MAD) 297 AND JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF INGERSOLL-RAND (IN DIA) LTD. VS. CIT (2009) 226 CTR 3 ITA NO. 60/JP/2014 A.Y. 2009-10. ACIT VS. M/S. GINNI INTERNATIONAL LTD. (BOM.) 555, HELD THAT THE AMOUNT OF RS. 5118/- IS A CONTINGENT LIABILITY AND DISALLOWING THE SAME ADDED TO THE INCOME OF THE ASSESSEE. 3. ON APPEAL BEFORE LD. CIT (A), THE LD. CIT (A) RE STRICTED THE ADDITION TO THE EXTENT OF RS. 605/- AND BALANCE ADDITION OF RS. 4513/- HAS BEEN DELETED BY OBSERVING AS UNDER :- 6.3. I HAVE CONSIDERED THE ASSESSMENT ORDER AS WE LL AS SUBMISSIONS MADE BY THE APPELLANT AND FIND THAT THIS GROUND IS ALSO LINKED TO THE VALUATION OF STOCK, WHICH HAS BEEN DEALT ABOVE. AO HAS MADE THE ADDITION ON THE GROUND THAT AT THE END OF THE YEAR VALUE OF STOCK AT JOB IN DENIM DIVISION OF 6062 KG HAS BEEN SHOWN AT RS. 84.42, WH EREAS THE AVERAGE PRICE OF THE SAME IS RS. 94.40 AS ON 31.03.2009. TH E AO HAS MADE THE ADDITION ON THE GROUND THAT THIS STOCK WAS VALUED A T ZERO PRICE. THE AR HAS EXPLAINED DURING THE APPELLATE PROCEEDINGS THAT THIS IS NOT CORRECT AS THE YARN IN PROCESS ALSO INVOLVES PROCESSING COST W HICH IS NOT APPLICABLE IN THE CASE STOCK AT JOB. EVEN IF THE SAME IS VALUED AS PER YARN IN PROCESS RATES THAN THE NET IMPACT WOULD BE OF RS. 605/- ONL Y I.E. 60.62X9.98 (94.40-84.42). THUS, BASED ON THIS VALUATION I CONF IRM THE ADDITION OF RS. 605/- MADE ON ACCOUNT OF CLOSING STOCK AND DELETE T HE BALANCE ADDITION OF RS. 4513/- MADE BY THE AO. 4. NOW THE REVENUE IS IN APPEAL BEFORE US. 4.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE ORDERS OF THE LOWER AUTHORITIES. AFTER CONSIDERING THE SUBMISSIONS OF THE LD. A/R OF THE ASSESSEE AND THE ORDER OF LD. CIT (A), WE FIND NO INFIRMITY IN THE O RDER OF LD. CIT (A) RESTRICTING THE 4 ITA NO. 60/JP/2014 A.Y. 2009-10. ACIT VS. M/S. GINNI INTERNATIONAL LTD. ADDITION TO THE EXTENT OF RS. 605/- FROM RS. 5118/- . THEREFORE, THE ORDER OF LD. CIT (A) IS UPHELD. GROUND NO. 2 : 5. REGARDING GROUND NO. 2, THE RELEVANT FACTS AS AP PARENT FROM THE ASSESSMENT ORDER ARE THAT THE AO ON GOING THROUGH THE AUDIT RE PORT, NOTICED THAT THE ASSESSEE HAS VALUED ALL ITEMS OF INVENTORIES AT LOWER OF COST OR NET REALIZABLE VALUE. THEREFORE, THE AO REQUIRED THE ASSESSEE TO FURNISH THE DETAILS OF DECLARED CLOSING STOCK OF FINISHED GOODS, WORK IN PROGRESS ALONG WITH BASIS AND DOCUME NTARY EVIDENCES IN SUPPORT OF THE CLAIM. IN REPLY, THE ASSESSEE FURNISHED THE DETAIL S AS REQUIRED BY THE AO. ON PERUSAL OF THE DETAILS, THE AO FOUND THAT THE ASSESSEE HAS UND ER VALUED THE CLOSING STOCK AT RS. 24,66,271/- BY DECLARING THE NET REALIZABLE VALUE E VEN LESS THAN THE COST PRICE OR THE MARKET PRICE, AND ASKED THE ASSESSEE WHY AN ADDITIO N OF RS. 24,66,271/- SHOULD NOT BE MADE ON ACCOUNT OF UNDER VALUATION OF CLOSING STOCK . THE REASONS GIVEN BY THE ASSESSEE WERE REPRODUCED BY THE AO IN HIS ORDER AT PARA 5.2. AFTER CONSIDERING THE REASONS GIVEN BY THE ASSESSEE, THE AO WAS OF THE VI EW THAT THE ASSESSEE HAS SUPPRESSED THE VALUE OF STOCK BY RS. 24,66,271/-. V ALUING THE STOCK BELOW THE COST PRICE OR MARKET PRICE IS NOT AT ALL JUSTIFIED. THU S THE AO ADDED AN AMOUNT OF RS. 24,66,271/- TO THE INCOME OF THE ASSESSEE. 6. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CIT (A), WHO HAS DELETED THE SAID ADDITION STATING THAT AT N O POINT OF TIME THE AO HAS DOUBTED 5 ITA NO. 60/JP/2014 A.Y. 2009-10. ACIT VS. M/S. GINNI INTERNATIONAL LTD. THE RATE AT WHICH THE STOCK HAS BEEN SHOWN/VALUED I N THE BOOKS AT NET REALIZABLE VALUE. THE RELEVANT OBSERVATIONS OF THE LD. CIT (A) ARE RE PRODUCED AS UNDER :- 5.3. I HAVE CONSIDERED THE ASSESSMENT ORDER AS WEL L AS SUBMISSIONS MADE BY THE APPELLANT AND FIND THAT THE ADDITION WA S MADE PRIMARILY ON THE GROUND THAT CLOSING STOCK OF YARN, WOVEN FABRIC , RETURNED GOODS AND DENIM FABRIC HAS BEEN VALUED AT THE NET REALIZABLE VALUE WHICH WAS LOWER THAN THE COST/MARKET PRICE OF THE STOCK. AT NO POIN T OF TIME THE AO HAS DOUBTED THE RATE AT WHICH THE STOCK HAS BEEN SHOWN/ VALUED IN THE BOOKS AT NET REALIZABLE VALUE. AR HAS STATED THAT STOCK H AS TO BE VALUED AT COST OR MARKET PRICE WHICH EVER IS LOWER. ACCOUNTING STA NDARD AS-2 ALSO MANDATES THE SAME AS THE BASIS FOR STOCK VALUATION. IT HAS BEEN SUBMITTED THAT THE APPELLANT HAS BEEN FOLLOWING THIS ACCOUNTI NG PRACTICE CONSISTENTLY SINCE INCEPTION I.E. 1996. THERE HAS BEEN NO CHANGE IN THE METHOD OF VALUATION OF CLOSING STOCK. FURTHER, THE STATUTORY AUDITORS HAVE CERTIFIED THIS FACT AND THIS CAN BE CONFIRMED BY THE TAX AUDI TORS REPORT IN FORM - 3CD ENCLOSED WITH THE AUDITORS REPORT. 5.4. IT HAS BEEN STATED BY THE AR THAT THE YARN IND USTRY HAD BEEN PASSING THROUGH A DIFFICULT PERIOD DUE TO GLOBAL RE CESSION. THESE FACTORS RESULTED IN THE FALL IN MARKET PRICES. CONSIDERING ALL THESE FACTS AND FOLLOWING THE FINDINGS GIVEN BY ME IN THE CASE OF T HE APPELLANT IN THE PRECEDING YEAR IN APPEAL NO. 284/10-11 VIDE ORDER D ATED 12.07.2013, I DELETE THE ADDITION OF RS. 24,66,271/- MADE ON ACCO UNT OF UNDER VALUATION OF STOCK. 7. NOW THE ASSESSEE IS BEFORE US. 6 ITA NO. 60/JP/2014 A.Y. 2009-10. ACIT VS. M/S. GINNI INTERNATIONAL LTD. 7.1 THE LD. A/R FOR THE ASSESSEE SUBMITTED THAT BOT H OPENING AND CLOSING STOCK HAVE BEEN VALUED AT LOWER OF COST OR NET REALIZABLE VALU E ON CONSISTENT BASIS AS PER THE REQUIREMENTS OF AS-2 ISSUED BY ICAI. THERE IS PROPE R VALUATION FOR EACH QUALITY OF YARN AND FABRIC. DURING THE PREVIOUS YEAR RELEVANT TO A .Y. 2009-10, THERE WAS NO CHANGE IN THE VALUATION POLICY AND THE SAME WAS ALSO CERTIFIE D BY THE STATUTORY AUDITORS IN THEIR REPORT ATTACHED TO THE BALANCE SHEET OF THE ASSESSE E. FURTHER, THE AFORESAID FACT WAS ALSO CONFIRMED BY THE TAX AUDITOR IN FORM 3 CD ATTA CHED TO THE TAX AUDITORS REPORT. THE LD. A/R FURTHER SUBMITTED THAT DUE TO GLOBAL RE CESSION DURING THE F.Y. 2008-09, ALL THE TEXTILE COMPANIES IN INDIA INCURRED HEAVY LOSSE S AND HAD TO SALE THEIR PRODUCTS AT LOWER OF COST PRICE. THE ASSESSEE HAD ALSO INCURRED LOSSES OF RS 1316.42 LACS DURING THE FINANCIAL YEAR 2008-09. AS AT THE END OF FINANCIAL YEAR 2008-09, THE ASSESSEE WAS HAVING FINISHED GOODS OF RS 486.62 LACS AND OUT OF THE SAME, STOCKS OF ONLY RS. 188.24 LACS WAS VALUED AT LOWER OF COST PRICE OR SALE PRIC E (NET REALIZABLE PRICE). 7.2. ON THE OTHER HAND, THE LD. D/R FOR THE REVENUE SUPPORTED THE ORDER OF THE AO. 7.3. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. FIRSTLY, IT IS NOT IN DISPUTE THAT THE ASSE SSEE HAS BEEN CONSISTENTLY FOLLOWING THE REQUIREMENTS OF AS-2 ISSUED BY THE ICAI AND VALUING ITS STOCK (BOTH OPENING AND CLOSING) AT LOWER OF COST OR NET REALIZABLE VALUE A ND THERE IS NO CHANGE IN THE VALUATION POLICY DURING THE YEAR UNDER CONSIDERATION. FURTHE R, THE BOOKS OF ACCOUNT HAVE BEEN STATUTORILY AUDITED AS WELL AS THE TAX AUDITOR HAVE ISSUED A REPORT WHEREIN THERE IS NO ADVERSE FINDING OF THE AUDITOR IN TERMS OF NON-COMP LIANCE OF AS-2. 7 ITA NO. 60/JP/2014 A.Y. 2009-10. ACIT VS. M/S. GINNI INTERNATIONAL LTD. 7.4. SECONDLY, IT IS NOTED FROM THE PERUSAL OF THE ASSESSMENT ORDER THAT THE ASSESSEE HAS SUBMITTED THE DETAILED BASIS AND CALCULATION OF VALUE OF STOCK AS PART OF ITS SUBMISSION WHICH IS REPRODUCED AT PARA 5.2 PAGE 5 O F THE ASSESSMENT ORDER. THE LD. CIT (A) HAS ALSO GIVEN A FINDING THAT AT NO POINT OF TI ME THE AO HAS DOUBTED THE RATE AT WHICH THE STOCK HAS BEEN VALUED IN THE BOOKS AT MAR KET PRICE. IN THE LIGHT OF ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT ( A) WHICH IS UPHELD. THUS, THE GROUND NO. 2 OF THE REVENUE IS DISMISSED. GROUND NO. 3 : 8. REGARDING GROUND NO 3, THE RELEVANT FACTS ARE TH AT THE AO ON GOING THROUGH THE PROFITS & LOSS ACCOUNT, NOTICED THAT THE ASSESSEE H AS CLAIMED FOLLOWING EXPENSES :- 1. MISC. EXPENSES RS. 11363000/- 2. FREIGHT & SELLING EXPENSES RS. 38429000/- 3. REPAIR & MAINTENANCE EXP. RS. 4295000/- 4. COMMUNICATION EXPENSES RS. 3057000/- 5. TRAVELLING & CONVEYANCE RS. 9315000/- TOTAL : RS. 6,64,59,000/- ON VERIFICATION BY THE AO, IT IS NOTICED THAT THE E XPENSES HAVE BEEN CLAIMED ON SELF MADE VOUCHERS WITHOUT ANY SUPPORTING BILLS/RECEIPTS . THE AO HELD THAT IN ABSENCE OF PROPER VOUCHERS, EXPENSES ARE NOT SUBJECT TO COMPLE TE VERIFICATION AND AS SUCH CANNOT BE ALLOWED IN TOTO. THEREFORE, HE CONSIDERED IT REA SONABLE TO DISALLOW 5% OF THE ABOVE EXPENSES WHICH COMES TO RS. 33,22,950/- AND ADDED T HE SAME TO THE INCOME OF THE ASSESSEE. 8 ITA NO. 60/JP/2014 A.Y. 2009-10. ACIT VS. M/S. GINNI INTERNATIONAL LTD. 9. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BEFORE LD. CIT (A). THE LD. CIT (A) CONSIDERED THE ASSESSMENT ORDER AND THE SUBMISS IONS MADE BY LD. A/R OF THE ASSESSEE. BEFORE LD. CIT (A), IT WAS SUBMITTED BY L D. A/R THAT THE TURNOVER DURING THE YEAR HAS INCREASED BY MORE THAN 9% AND THE CORRESPO NDING EXPENSES CLAIMED IN THIS YEAR HAVE DECREASED BY 6% AS COMPARED TO THE PRECED ING PERIOD. THE ADDITION HAS BEEN MADE BY THE AO ON THE BASIS OF SIMILAR ADDITIO N MADE IN LAST YEAR AND ON ESTIMATE BASIS. HOWEVER, THE LD. A/R COULD NOT CONTRADICT TH E FINDINGS GIVEN BY THE AO BY PRODUCING EVIDENCE BEFORE LD. CIT (A). THE LD. CIT (A), THEREFORE, KEEPING IN VIEW THE OVER ALL FACTS AND THE ORDER PASSED BY HIM FOR THE PRECEDING ASSESSMENT YEAR, RESTRICTED THE ADDITION OF RS. 13,00,000/- AND DELETED THE BAL ANCE ADDITION OF RS. 20,22,950/- UNDER THIS HEAD. 10. NOW THE REVENUE IS IN APPEAL BEFORE US. 11. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. A /R AND ALSO GONE THROUGH THE ORDER OF LD. CIT (A). SIMILAR ISSUE HAS COME UP BE FORE LD. CIT (A) FOR THE PRECEDING ASSESSMENT YEAR WHEREIN THE LD. CIT (A) HAS ALLOWED THE RELIEF BASED ON HIS FINDINGS GIVEN THEREIN. THIS ISSUE HAS ALSO COME UP BEFORE THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE PRECEDING ASSESSMENT YEAR WHEREIN THE COORDINATE BENCH OF THE TRIBUNAL HAS UPHELD THE ORDER OF LD. CIT (A) AND DISMISSED T HE REVENUES APPEAL ON THIS GROUND. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL FO R THE IMMEDIATE PRECEDING YEAR, WE DISMISS THE GROUND OF THE REVENUE FOR THE YEAR UNDE R CONSIDERATION. 9 ITA NO. 60/JP/2014 A.Y. 2009-10. ACIT VS. M/S. GINNI INTERNATIONAL LTD. 12. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 22/01/2 016. SD/- SD/- VH-VKJ-EHUK YFYR DQEKJ (T.R. MEENA) (LALIET KUMAR) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 22/01/2016 DAS/ VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE ACIT, CIRCLE-2, ALWAR. 2. IZR;FKHZ@ THE RESPONDENT- M/S. GINNI INTERNATIONAL LTD., ALWA R. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDRVIHY@ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 60/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR 10 ITA NO. 60/JP/2014 A.Y. 2009-10. ACIT VS. M/S. GINNI INTERNATIONAL LTD.