ACIT, New Delhi V. Sh. Pawan Kumar Kansal, Delhi

ITA 6361/DEL/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2964 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2011-2012
• Appeal Filed On: 13-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F, NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO.6361/DEL/2016 ASSESSMENT YEAR : 2011-12 ACIT, CENTRAL CIRCLE- 19, NEW DELHI. VS. PAWAN KUMAR KANSAL, PROP. M/S JAGDAMA EXPORTS, A-7, ANTRIKSH APPARTMENTS, SECTOR- 14, ROHINI, DELHI. PAN : AHEPK0574L (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI ATIQ AHMAD, SR.DR ASSESSEE BY : SHRI VED JAIN, ADV. DATE OF HEARING : 26-12-2017 DATE OF PRONOUNCEMENT : 26-12-2017 O R D E R PER R. K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 08.08.2016 OF THE CIT(A)-13, NEW DELHI RELATING TO ASSESSMENT YEAR 2011-12. 2. DELETION OF ADDITION OF RS.59,24,490/- MADE BY T HE ASSESSING OFFICER ON ACCOUNT OF UNDER VALUATION OF FINISHED STOCK IS THE ONLY ISSUE RAISED BY THE REVENUE IN THE GROUNDS OF APPEAL. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS AN INDIVIDUAL AND DERIVES INCOME FROM BUSINESS OF MANUFACTURING AND T RADING OF S.S. STEEL CUTLERY AND UTENSILS. HE FILED HIS RETURN OF INCOM E ON 30.09.2011 DECLARING 2 ITA NO.6361/DEL/2016 TOTAL INCOME OF RS.1,78,90740/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FILED A CHART SHOWING THE MONTHLY SALE S WHICH INCLUDE SALES OF FINISHED GOODS ALSO. THE ASSESSING OFFICER OBSERVE D FROM THE SAID CHART THAT THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HA S SOLD 14,31,917 KGS. OF FINISHED GOODS FOR RS.37,84,88,303/- WHICH GIVES TH E AVERAGE SALE VALUE OF FINISHED GOODS AT RS.264 PER KG. AFTER TAKING THE AVERAGE SALE PRICE AT RS.264 PER KG., HE WORKED OUT THE COST OF GOODS SOLD BY RE DUCING GROSS PROFIT OF 13.54% AND PACKING CHARGES OF RS.22 PER KG OUT OF THE SAME AND WORKED OUT THE COST OF GOODS SOLD AT RS.206 PER KG. HE COMPARED THE SAME WITH THE VALUE OF CLOSING STOCK OF FINISHED GOODS SHOWN BY THE ASSESSEE IN IT S BOOK AT RS.180/- PER KG. THUS, HE NOTED THAT THE THERE IS A DIFFERENCE OF RS .26 PER KG AND ACCORDINGLY HE MADE AN ADDITION OF RS.59,24,490/- ON ACCOUNT OF UN DER VALUATION OF CLOSING STOCK OF FINISHED GOODS. 4. BEFORE THE LD. CIT(A), IT WAS ARGUED THAT THE AS SESSEE IS DEALING IN KITCHENWARE AND CUTLERY ITEMS AND IN THE SAID SEGME NT THE ASSESSEE DEALS IN MORE THAN 170 PRODUCTS. IT WAS ARGUED THAT THE SAL E PRICE OF EACH PRODUCT IS DIFFERENT AND SO IS THE COSTING. IT WAS SUBMITTED THAT THE ASSESSING OFFICER IS TOTALLY WRONG IN ADOPTING A SINGLE RATE FOR ALL THE PRODUCTS. FURTHER, THE METHOD OF VALUATION OF STOCK BY REDUCING GROSS PROFIT FROM AN AVERAGE SALE PRICE IS ARBITRARY. THE COST PRICE OF FINISHED GOODS DETERM INED BY THE ASSESSING OFFICER AT RS.180 PER KG IS THE AVERAGE COST OF CLOSING STO CK OF FINISHED GOODS AND IS NOT 3 ITA NO.6361/DEL/2016 THE ACTUAL COST. IT WAS FURTHER ARGUED THAT THE ST OCK OF FINISHED GOODS INCLUDES THREE CATEGORIES OF GOODS I.E. NORMAL ITEMS, HIGH V ALUE ITEMS AND DEAD STOCK AND SLOW MOVING ITEMS. THE VALUATION OF THE CLOSING ST OCK OF FINISHED GOODS WAS ARGUED TO BE AS UNDER :- DESCRIPTION QTY. RATE VALUE NORMAL ITEM 170898 180 30761640 HIGH VALUE ITEMSQ34180 34180 210 7177800 DEAD AND SLOW MOVING ITEMS 22787 110 2506570 TOTAL 227865 40446010 5. IT WAS ARGUED THAT THE METHOD FOR VALUATION ADOP TED BY THE ASSESSEE IS COST OR NET REALIZABLE VALUE WHICHEVER IS LESS. TH E ASSESSING OFFICER HAS NOWHERE DISPUTED THE DETAILS FILED BY THE ASSESSEE. THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-10 WAS ALSO BROUGHT TO THE NOTICE OF THE LD. CIT(A) WHEREIN THE TRIBUNAL HAD D ELETED THE ADDITION MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT( A). 6. BASED ON THE ARGUMENT ADVANCED BY THE ASSESSEE A ND THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE EARLIER YEAR , THE LD. CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. WHILE DOIN G SO, HE OBSERVED THAT THERE IS NO VALID BASIS FOR DISBELIEVING THE VALUE OF STO CK OF FINISHED GOODS DECLARED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT. HE OBSERV ED THAT THE ASSESSEE HAS MAINTAINED STOCK RECORDS WHICH HAVE NOT BEEN PROVED TO BE UNTRUE. THE G.P. RATE OF 13.54% DECLARED BY THE ASSESSEE HAS NOT BEE N DOUBTED BY THE ASSESSING 4 ITA NO.6361/DEL/2016 OFFICER IN THE ASSESSMENT ORDER. THE ASSESSING OFF ICER HAS NOT POINTED OUT ANY DEFECT IN THE BOOKS MAINTAINED BY THE ASSESSEE AS W ELL AS IN THE STOCK RECORD. HE OBSERVED THAT SINCE THE ASSESSEE IS ENGAGED IN T HE BUSINESS OF MANUFACTURING OF CUTLERY ITEMS WHERE SOME ITEMS ARE READILY SALEA BLE AND SOME ARE SLOW MOVING ITEMS WHEREIN THE REALIZABLE VALUE WILL NATU RALLY VARY. THE ASSESSING OFFICER HAS NOT POINTED OUT THAT THESE ITEMS HAVE B EEN SOLD AT A MUCH HIGHER PRICE IN THE SUBSEQUENT YEAR. IN VIEW OF THE ABOVE , THE LD. CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT O F VALUATION OF CLOSING STOCK IN TRADE OF FINISHED GOODS. 7. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 8. WE HAVE HEARD THE RIVAL ARGUMENTS MADE BY BOTH T HE SIDES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THE ASSE SSING OFFICER MADE ADDITION OF RS.59,24,490/- ON ACCOUNT OF VALUATION OF CLOSIN G OF FINISHED GOODS BY ADOPTING DIFFERENCE BETWEEN THE VALUE DECLARED BY T HE ASSESSEE AND THE AVERAGE COST OF GOODS SOLD BEING RS.22 PER KG. WE FIND THE LD. CIT(A) DELETED THE ADDITION ON THE GROUND THAT THE ASSESSEE HAS MAINTA INED PROPER BOOKS OF ACCOUNT AND STOCK RECORDS WHICH WERE NOT DOUBTED BY THE ASS ESSING OFFICER. THERE IS NO EVIDENCE WITH THE ASSESSING OFFICER THAT THE ASSESS EE HAS SOLD SLOW MOVING ITEMS AT HIGHER PRICE IN THE SUBSEQUENT YEAR. HE H AS ALSO CONSIDERED THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE ASSESSMENT YEAR 2009-10 5 ITA NO.6361/DEL/2016 WHEREIN THE TRIBUNAL HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) ON ACCOUNT OF GP AD DITION. FURTHER, THE ASSESSEE HAS GIVEN THE CHART SHOWING VARIOUS ITEMS SUCH AS NORMAL ITEMS, HIGH VALUE ITEMS, DEAD AND SLOW MOVING ITEMS WHICH HAS N OT BEEN DISBELIEVED BY THE ASSESSING OFFICER. UNDER THESE CIRCUMSTANCES AND I N VIEW OF THE DETAILED REASONING GIVEN BY THE LD. CIT(A), WE DO NOT FIND A NY INFIRMITY IN THE ORDER OF THE LD. CIT(A) DELETING THE ADDITION MADE BY THE AS SESSING OFFICER. ACCORDINGLY, THE SAME IS UPHELD AND THE GROUND RAIS ED BY THE REVENUE IS DISMISSED. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME HEA RING ITSELF I.E. ON THIS 26 TH DAY OF DECEMBER, 2017. SD/- SD/- (SUCHITRA KAMBLE) (R. K. P ANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 26-12-2017. SUJEET COPY OF ORDER TO: - 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT 4) THE CIT(A) 5) THE DR, I.T.A.T., NEW DELHI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, NEW DELHI