SAPAT INTERNATIONAL P. LTD, MUMBAI V. ADDL CIT RG 4(3), MUMBAI

ITA 6531/MUM/2010

• Counselvise Citation: 653119914 RSA 2010
• Duration Of Justice: 1 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2007-2008
• Appeal Filed On: 06-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARTHASARTHI NAIK
• Keywords: Question of law

Judgement Text

/IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER & SHRI VIVEK VARMA, JUDICIAL MEMBER. I.T.A. NO. 6531/MUM/2010 ASSESSMENT YEAR : 2007-08. M/S SAPAT INTERNATIONAL P. LTD., ADDL. COMMISSIONER OF 102/103, T.V. INDUSTRIAL ESTATE, VS. INCOME-TAX, RANGE-4(3), BEHIND GLAXO LAB., 248/A, MUMBAI. S.K. AHIRE MARG, WORLI, MUMBAI 400030. APPELLANT. RESPONDENT . APPELLANT BY : NONE RESPONDENT BY : SHRI PARTHASARTHI NAIK. DATE OF HEARI NG : 04-04-2012. DATE OF PRONOUNC EMENT : 09-04-2012, O R D E R PER P.M. JAGTAP, A.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LEARNED CIT(APPEALS)-8, MUMBAI DATED 09-06-2010 WHEREBY HE DIRECTED THE AO TO CHANGE THE OPENING STOCK BY THE VALUE OF SALES-TAX/VAT AS ON 01-04-2007 AS WELL AS TO CHANGE THE CLOSING STOCK OF PAST YEARS AND SET THE CHAIN REACTION IN MOTION. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF BLENDING AND PACKING OF TEA. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 31-10-2007 DECLARI NG TOTAL INCOME OF RS.7,71,77,880/-. DURING THE COURSE OF ASSESSMENT P ROCEEDINGS, IT WAS NOTICED BY THE AO THAT THE ASSESSEE HAS BEEN FOLLOWING EXCLUSI ON METHOD TO VALUE THE STOCK 2 ITA NO.6531/MUM/2010 BY EXCLUDING THE AMOUNT OF SALES-TAX/VAT. ACCORDING TO THE ASSESSEE, IF THE AMOUNT OF SALES-TAX/VAT WAS ADDED TO THE VALUE OF O PENING STOCK AS WELL AS CLOSING STOCK, THERE WOULD BE NO EFFECT ON TAXABLE PROFIT EVEN AS PER THE PROVISIONS OF SECTION 145A. THIS STAND OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE AO. ACCORDING TO HIM, ONLY THE VALUE OF CLOSING STOCK W AS REQUIRED TO BE DETERMINED BY INCLUDING THE AMOUNT OF SALES-TAX/VAT AS PER THE PR OVISIONS OF SECTION 145A AND ACCORDINGLY INVOKING THE SAID PROVISIONS, HE MADE A N ADDITION OF RS.5,83,914/- TO THE TOTAL INCOME OF THE ASSESSEE. 3. THE ADDITION MADE BY THE AO TO THE VALUE OF CLOS ING STOCK BY INVOKING THE PROVISIONS OF SECTION 145A WAS CHALLENGED BY THE AS SESSEE IN AN APPEAL FILED BEFORE THE LEARNED CIT(APPEALS) AND RELYING ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF MAHALAXMI GLASS WORKS PVT . LT. 318 ITR 116, THE LEARNED CIT(APPEALS) DIRECTED THE AO TO CHANGE THE OPENING STOCK BY THE VALUE OF SALES-TAX/VAT AS ON 01-04-2007 AS WELL AS TO CHANGE THE CLOSING STOCK OF PAST YEARS AND SET THE CHAIN REACTION IN MOTION. AGGRIEV ED BY THIS DIRECTION OF THE LEARNED CIT(APPEALS), THE ASSESSEE HAS PREFERRED TH IS APPEAL BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING BEFORE US, THE ASSESSEE H AS MOVED AN APPLICATION SEEKING ADJOURNMENT. HOWEVER, KEEPING IN VIEW THAT THE ISSUE INVOLVED IN THE PRESENT CASE IS SQUARELY COVERED BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF MAHALAXMI GLASS WORKS PVT.LTD. (SUPRA), THE REQUEST OF THE ASSESSEE FOR ADJOURNMENT IS NOT ACCEDED TO. THIS AP PEAL OF THE ASSESSEE IS, THEREFORE, BEING DISPOSED OF EXPARTE QUA ASSESSEE AFTER HEARING THE ARGUMENTS OF THE LEARNED DR AND PERUSING THE RELEVANT MATERIAL O N RECORD INCLUDING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF MAHALAX MI GLASS WORKS PVT. LTD. (SUPRA). ON A CAREFUL PERUSAL OF THE SAID DECISION OF HONBLE BOMBAY HIGH COURT, IT IS OBSERVED THAT THE RATIO OF THE SAID DECISION HAS BEEN WRONGLY APPLIED BY THE 3 ITA NO.6531/MUM/2010 LEARNED CIT(APPEALS) IN THE CASE OF THE ASSESSEE. T HE SUBSTANTIAL QUESTION OF LAW AS RAISED BY THE REVENUE IN THE SAID CASE BEFORE TH E HONBLE BOMBAY HIGH COURT WAS AS UNDER : WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE TRIBUNAL WAS JUSTIFIED IN CONFIRMING THE ORDER OF C IT(A) WHEREBY HE DIRECTED TO THE ASSESSING OFFICER TO MAKE ADJUSTMEN T OF UNUTILIZED MODVAT CREDIT TO THE OPENING STOCK AND THUS IGNORIN G THE RATIO LAID DOWN IN MELMOUND CORPORATION VS. CIT (202 ITR 789) BOMBA Y WHERE IT WAS HELD THAT CHANGING THE VALUE OF OPENING STOCK WILL LEAD TO CHAIN REACTION AND HENCE THE SAME SHOULD NOT BE DONE? WHILE DISMISSING THE APPEAL OF THE REVENUE IN THE C ASE OF MAHALAXMI GLASS WORKS PVT. LTD., THE HONBLE BOMBAY HIGH COURT HELD THAT THE QUESTION OF LAW AS RAISED BY THE REVENUE DID NOT ARISE. WHILE ARRIVING AT THI S CONCLUSION, HONBLE BOMBAY HIGH COURT AGREED WITH THE DECISION OF HONBLE DELH I HIGH COURT IN THE CASE OF CIT VS. MAHAVIR ALLUMINUM LTD. 297 ITR 77 WHEREIN I T WAS HELD THAT TO GIVE EFFECT TO SECTION 145A, IF THERE IS ANY CHANGE IN T HE CLOSING STOCK AT THE END OF THE YEAR THEN THERE MUST NECESSARILY BE A CORRESPONDING ADJUSTMENT MADE IN THE OPENING STOCK OF THAT YEAR. THE ARGUMENT RAISED ON BEHALF OF THE REVENUE RELYING ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF MELMOULD CORPORATION VS. CIT 202 ITR 789 THAT CHANGING VAL UE OF OPENING STOCK WILL LEAD TO CHAIN REACTION AND HENCE THE SAME SHOULD NOT BE DONE THUS WAS NOT ACCEPTED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF MAHALA XMI GLASS WORKS LTD. (SUPRA) IN THE CONTEXT OF SECTION 145A. THE DIRECTI ON GIVEN BY THE LEARNED CIT(APPEALS) TO THE AO IN THE PRESENT CASE TO CHANG E THE CLOSING STOCK OF PAST YEARS AND SET THE CHAIN REACTION IN MOTION THUS IS CONTRARY TO THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF MAHALAMI G LASS WORKS PVT.LTD. AND CANCELLING THE SAID DIRECTION, WE DIRECT THE AO TO MAKE ADJUSTMENT ON ACCOUNT OF 4 ITA NO.6531/MUM/2010 SALES-TAX/VAT ONLY TO THE VALUE OF OPENING STOCK AN D CLOSING STOCK AS CLAIMED BY THE ASSESSEE. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED ON THIS 9 TH DAY OF MAY, 2012. SD/- SD/- (VIVEK VARMA) ( P.M. JAGTAP) JUDICIAL MEMBER ACC OUNTANT MEMBER MUMBAI, DATED: 9 TH MAY, 2012. COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, E-BENCH. (TRUE COPY) BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI. WAKODE.