M/s. Korchem Industries, Ahmedabad V. The CIT,A'bad-I, Ahmedabad

ITA 637/AHD/2012

• Counselvise Citation: 63720514 RSA 2012
• Duration Of Justice: 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-11-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 15-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHELLEY JINDAL
• Assessee Lawyers: S N DIVATIA
• Keywords: Revision of order
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH AHMEDABAD (BEFORE SHRI D. K. TYAGI, JM AND SHRI A. MOHAN ALAN KAMONY, AM) ITA NO.637/AHD/2012: AY -2007-08 M/S. KORCHEM INDUSTRIES, A/19, AMBICA INDUSTRIAL ESTATE, AMBICA NAGAR ROAD, ODHAV, AHMEDABAD 382 415 P. A. NO. AADFK 3027C VS THE COMMISSIONER OF INCOME TAX, AHMEDABAD I, AHMEDABAD (APPELLANT) (RESPONDENT) APPELLANT BY SHRI S. N. DIVATIA, AR RESPONDENT BY SHRI SHELLEY JINDAL, CIT DR DATE OF HEARING: 09-11-2012 DATE OF PRONOUNCEMENT: 21-12-2012 O R D E R PER A. MOHAN ALANKAMONY: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGGRIEVED BY THE ORDER OF THE LEARNED CIT, AHMEDABAD- I PASSED U/S 263 OF THE IT ACT ON 11-01-2012. 2. THE BRIEF FACTS:- THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF FOUNDR Y FLUX AND CHEMICALS, FILED ITS RETURN OF INCOME FOR THE ASSES SMENT YEAR 2007-08 ON 25-10-2007 DECLARING TOTAL INCOME AT RS.9,19,350 /-. THE LEARNED AO COMPLETED THE REGULAR ASSESSMENT U/S 143(3) OF T HE ACT ON 09-04- 2009 DETERMINING THE TOTAL INCOME OF THE ASSESSEE A T RS.9,34,340/-. SUBSEQUENTLY, THE LEARNED CIT ISSUED NOTICE U/S 263 OF THE ACT ON 15- 12-2011 PROPOSING TO REVISE THE ORDER OF THE LEARNE D AO CITING IT TO BE ITA NO.637/AHD/2012 (AY:2007-08) M/S. KORCHEM INDUSTRIES VS CIT, AHMEDABAD-I 2 ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE FOR THE FOLLOWING TWO REASONS: (I) THE CLOSING STOCK WAS UNDERVALUED BY RS.8,885/- ON THE BASIS OF GP RATE. (II) THERE WAS DEFAULT OF MAKING TDS IN RESPECT OF PAYMENTS UNDER CONTRACT, COMMISSION, INTEREST, SECURITY CHAR GES AND LOADING & UNLOADING EXPENSES. 3. THE ASSESSEE HAS RAISED SEVERAL GROUNDS RUNNING FROM GROUND NO.1.1 TO 4.2; HOWEVER, THE CRUX OF THE ISSUE IS TH AT THE LEARNED CIT WAS NOT JUSTIFIED TO HOLD THAT THE ORDER OF THE LEA RNED AO DATED 09-04- 2009 IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST O F THE REVENUE DUE TO THE FOLLOWING REASONS: (I) THE CLOSING STOCK OF FINISHED GOODS WAS UNDERVA LUED BY RS.8,885/- SINCE THE CLOSING STOCK WAS DETERMINED B Y REDUCING THE SALES VALUE OF FINISHED GOODS BY GP RATE AT 17% INSTEAD OF 15.4%. (II) THERE WAS A DEFAULT U/S 40(A) (IA) OF THE ACT WITH RESPECT TO DEDUCTION OF TAX AT SOURCE. 4. UNDERVALUING OF CLOSING STOCK BY RS.8,885/- . THE LEARNED CIT OBSERVED THAT THE ASSESSEE HAD SHOWN GP RATE AT 15. 4% IN ITS PROFIT & LOSS STATEMENT AS AGAINST THE GP RATE OF 16.59% S HOWN IN THE PRECEDING YEAR. THE LEARNED CIT FURTHER OBSERVED TH AT DURING THE RELEVANT ASSESSMENT YEAR THE ASSESSEE HAD WORKED OU T THE CLOSING STOCK OF FINISHED GOODS AT RS.4,60,888/- BY REDUCIN G 17% FROM THE SALE VALUE OF THE CLOSING STOCK OF FINISHED GOODS. THE LEARNED CIT, THEREFORE, HELD THAT THE ASSESSEE INSTEAD OF WORKIN G OUT THE CLOSING ITA NO.637/AHD/2012 (AY:2007-08) M/S. KORCHEM INDUSTRIES VS CIT, AHMEDABAD-I 3 STOCK BY REDUCING 15.4% FROM THE SALE VALUE OF CLOS ING STOCK OF FINISHED GOODS HAD ERRONEOUSLY ADOPTED THE RATE OF 17%, THEREBY REDUCED THE PROFIT BY RS.8,885/- BY UNDERVALUING TH E CLOSING STOCK. AT THE OUTSET, WE MUST SAY THAT THOUGH THE GRIEVANCE O F THE LEARNED CIT IS GENUINE, CONSIDERING THE TOTAL INCOME OF THE ASS ESSEE DETERMINED BY THE LEARNED AO AT RS.9,34,350/-, THE ERROR POINT ED OUT BY THE LEARNED CIT IS QUITE NEGLIGIBLE AND FURTHER IT WILL BE IRONED OUT IN THE SUBSEQUENT YEAR SINCE THE CLOSING STOCK OF THE CURR ENT YEAR WILL BE THE OPENING STOCK OF THE SUBSEQUENT YEAR. FROM THE FACTS AND CIRCUMSTANCE OF THIS CASE, AS THE DISCREPANCY IS QU IT NEGLIGIBLE, WE ARE OF THE VIEW THAT THE LEARNED CIT IS NOT JUSTIFI ED IN HOLDING THE ORDER OF THE LEARNED AO TO BE ERRONEOUS AND PREJUDICIAL T O THE INTEREST OF REVENUE ON THIS ISSUE. ACCORDINGLY THIS GROUND RAIS ED BY THE ASSESSEE IS ALLOWED IN ITS FAVOUR. 5. DEFAULT U/S 40(A) (IA) OF THE ACT. THE LEARNED CIT ON VERIFYING THE FORM NO.26 FILED BY THE ASSESSEE CAME TO A CONC LUSION THAT DATE OF DEPOSITING OF THE CHEQUES WITH REGARD TO PAYMENT OF TDS WAS BEYOND THE END OF THE RELEVANT ASSESSMENT YEAR AND BEFORE THE DUE DATE OF FILING OF THE RETURN. SINCE THE LEARNED AO HAD NOT INVOKED THE PROVISIONS OF SECTION 40(A) (IA) OF THE ACT, THE LE ARNED CIT HELD THAT THE LEARNED AO HAD NOT CONDUCTED NECESSARY INQUIRIE S BEFORE PASSING THE ASSESSMENT ORDER AND, THEREFORE, THE OR DER OF THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. AT THE BEGINNING OF THE HEARING THE LEARNED AR RELIED ON T HE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS V IRGIN CREATIONS IN GA NO.3200/2011 DATED 23-11-2011 WHEREIN THE ISSUE WAS DECIDED ITA NO.637/AHD/2012 (AY:2007-08) M/S. KORCHEM INDUSTRIES VS CIT, AHMEDABAD-I 4 IN FAVOUR OF THE ASSESSEE AND WAS FOLLOWED BY THE I TAT AHMEDABAD BENCH IN ITA NO.747/AHD/2012 ASSESSMENT YEAR 2006 -07 DATED 01-06-2012. IN THESE CIRCUMSTANCES, WE DO NOT FIND IT JUSTIFIABLE FOR THE LEARNED CIT TO INVOKE THE PROVISIONS OF SECTION 263 OF THE ACT ON ACCOUNT OF THIS ISSUE. IT IS ORDERED ACCORDINGLY. 6. SINCE, WE HAVE HELD BOTH THE GROUNDS TAKEN BY TH E ASSESSEE IN ITS FAVOUR; WE DO NOT HAVE ANY HESITATION TO QUASH THE ORDER PASSED BY THE LEARNED CIT U/S 263 OF THE ACT. 7. IN THE RESULT, THE APPEAL THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 21-12-2012 SD/- SD/- (D. K. TYAGI) JUDICIAL MEMBER (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER LAKSHMIKANTA LAKSHMIKANTA LAKSHMIKANTA LAKSHMIKANTA DEKA/ DEKA/ DEKA/ DEKA/ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 13-12-12 (DIRECT ON COMPUTER) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 14-12-12 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR.P.S ./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: