Resurgere Mines & Minerals India Ltd., New Delhi V. Addl. CIT, New Delhi

ITA 6600/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2809 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2008-2009
• Appeal Filed On: 05-12-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: ASHISH GOEL
• Keywords: Opportunity of being heard; Principle of natural justice
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: F , NEW DELHI BEFORE SHRI G.D.AGRAWAL , PRESIDENT AND SMT. BEENA A PILLAI, JUDICIAL MEMBER ITA NO. 6600 /DEL/201 4 A.Y. 20 08 - 09 RESURGERE MINES & MINERALS INDIA LTD. 307, D R CHAMBER, 12/56 DESH BANDHU GUPTA ROAD KAROLBAGH NEW DELHI 110 005 PAN: AAACE 0111B VS . ACIT, RANGE 15 NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY SMT. RANO JAIN, ADV. A ND SH. ASHISH GOEL, CA RESPONDENT BY SHRI ATIQ AHMAD, SR.D.R. DATE OF HEARING 19/12/2017 DATE OF PRONOUNCEMENT 22/12/2017 ORDER PER BEENA A PILLAI, JUDICIAL MEMBER T HE PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAINST ORDER DATED 23/07/12 PASSED BY LD.CIT(A) - 18, NEW DELHI FOR ASSESSMENT YEAR 2008 - 09 ON THE FOLLOWING GROUNDS OF APPEAL: ITA 6600/DEL/2014 A.Y. 2008 - 09 RESURGERE MINES & MINERALS INDIA LTD. VS. ACIT PAGE 2 OF 8 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] IS BAD, BOTH IN THE EYE OF LAW AND ON FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED CIT(A) IS BAD IN LAW HAVING BEEN PASSED THE SAME WITHOUT GIVING ASSESSEE A PROPER AND ADEQUATE OPPORTUNITY OF BEING HEARD IN CLEAR VIOLATION OF PRINCIPLE OF NATURAL JUSTICE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LE ARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF AO IN REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE, DESPITE THE SAME BEING MAINTAINED PROPERLY AS PER LAW. 4(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF AO IN MAKING ADDITION OF RS.1 ,69,57,108/ - ON ACCOUNT OF VALUATION OF STOCK SUBSTITUTING THE FIF A METHOD OF VALUATION IN PLACE OF WEIGHTED AVERAGE METHOD EMPLOYED BY THE ASSESSEE. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ABOVE SAID ADDITION DESPITE THE FACT THAT THE WEIGHTED AVERAGE METHOD IS AN APPROVED METHOD AND THE ASSESSEE HAS BEEN FOLLOWING THE SAME CONSISTENT LY. 5(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS.71,223/ - MADE BY AO INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT. (II) THAT THE ADDITION HAS BEEN CONFIRMED IGNORING THE FACT THAT THE A O HAD INVOKED PROVISIONS OF RULE 80 WITHOUT POINTING OUT ANY INCONSISTENCY IN THE AMOUNT OF RS.29,120/ - COMPUTED AND ADDED BACK BY THE ASSESSEE ITSELF. 6. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ANY OF THE GROUNDS OF APPEAL. ITA 6600/DEL/2014 A.Y. 2008 - 09 RESURGERE MINES & MINERALS INDIA LTD. VS. ACIT PAGE 3 OF 8 2. BRIEF FACTS OF THE CASE ARE AS UNDER : T HE ASSESSEE FILED ITS RETURN OF INCOME ON 30/09/08 DECLARING TOTAL INCOME OF RS. 92,82,71,270/ - . THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 (THE ACT) AND THE CASE WAS SEL ECTED FOR SCRUTINY. STATUTORY NOTICES UNDER SECTION 143(2) WERE ISSUED IN RESPONSE TO WHICH REPRESENTATIVES OF THE ASSESSEE ATTENDED THE ASSESSMENT PROCEEDINGS FROM TIME TO TIME. DURING THE ASSESSMENT PROCEEDINGS LD. AO CALLED UPON ASSESSEE TO FURNISH THE VALUATION OF STOCK FOR THE YEAR UNDER CONSIDERATION. IT WAS OBSERVED BY LD. AO THAT ASSESSEE VALUED CLOSING STOCK BY FOLLOWING WEIGHTED AVERAGE METHOD. LD. AO CONSIDERED THE SAME TO BE ARBITRARY AND REJECTED THE VALUATION MADE BY ASSESSEE A ND INSTEAD APPLIED FIFO METHOD. HE ALSO REJECTED THE BOOKS OF ACCOUNT S , TO THE EXTENT OF THE METHOD FOLLOWED BY ASSESSEE FOR VALUATION OF CLOSING STOCK. 2.1. LD. AO ALSO MADE DISALLOWANCE TO AN EXTENT OF RS. 71, 223 / - BY APPLYING R ULE 8D READ WITH SECTION 14 A OF THE A CT. 2.2. AGGRIEVED BY THE ASSESSMENT ORDER PASSED, ASSESSEE PREFERRED APPEAL BEFORE LD.CIT(A) WHO CONFIRMED THE ADDITIONS MADE BY LD. AO. 2.3. AGGRIEVED BY THE ORDER OF LD.CIT(A) ASSESSEE IS IN APPEAL BEFORE US NOW. 3. AT THE OUTSET LD. AR SUBMITTED THAT G ROUND NO. 1 AND 6 ARE GENERAL IN NATURE, G ROUND NO. 2 IS NOT PRESSED, G ROUND NO. 3 AND 4 ITA 6600/DEL/2014 A.Y. 2008 - 09 RESURGERE MINES & MINERALS INDIA LTD. VS. ACIT PAGE 4 OF 8 IS IN RELATION TO THE VALUATION OF CLOSING STOCK AND REJECTION OF BOOKS OF ACCOUNT TO THE EXTENT OF THE VALUATION MADE BY ASSESSEE , A ND G ROUND NO. 5 IS IN RESPECT OF T HE DISALLOWANCE MADE UNDER SECTION 14 A READ WITH R ULE 8D OF THE A CT. SHE SUBMITTED THAT DUE TO SMALLNESS OF AMOUNT INVOLVED GROUND NO.5 IS NOT PRESSED. 4. GROUND NO. 3 AND 4: LD. AR SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION ASSESSEE HAS SHOWN VALUATION OF CLOSING STOCK OF RS. 51.33 CRORES BY FOLLOWING WEIGHTED AVERAGE METHOD. IT HAS BEEN SUBMITTED BY LD.AR THAT THIS METHOD IS CONSISTENTLY FOLLOWED BY ASSESSEE IN THE EARLIER YEARS WHICH HAS NOT BEEN DISPUTED BY REVENUE. LD. AR FILED BEFORE US YEAR WISE CHART OF METHOD OF VALUATION OF CLOSING STOCK ADOPTED BY ASSESSEE AND ACCEPTED BY THE DEPARTMENT WHICH IS AS UNDER: ASSESSMENT YEAR METHOD EMPLOYED STATUS 2006 - 07 WEIGHTED AVERAGE METHOD WEIGHTED AVERAGE METHOD ACCEPTED. 2007 - 08 WEIGHTED AVERAGE METHOD WEIGHTED AVERAGE METHOD ACCEPTED IN ASSESSMENT U/S 143(3) OF THE ACT VIDE ORDER DT. 29.12.2009. 2008 - 09 WEIGHTED AVERAGE METHOD IMPUGNED ITA 6600/DEL/2014 A.Y. 2008 - 09 RESURGERE MINES & MINERALS INDIA LTD. VS. ACIT PAGE 5 OF 8 ASSESSMENT YEAR 2009 - 10 W EIGHTED AVERAGE METHOD WEIGHTED AVERAGE METHOD DISPUTED BY AO AND APPEAL IS PENDING BEFORE HON BLE TRIBUNAL 2010 - 11 WEIGHTED AVERAGE METHOD WEIGHTED AVERAGE METHOD ACCEPTED IN ASSESSMENT U/S 143(3) OF THE ACT VIDE ORDER DT. 26.03.2013 2011 - 12 WEIGHTED AVERAGE METHOD WEIGHTED AVERAGE METHOD ACCEPTED. 4.1. LD. AR SUBMITTED THAT A SSESSING O FFICER HAS RECAST ED CLOSING STOCK AS PER FIFO METHOD AT RS. 53,03,30,642/ - . 4.2. LD. AR SUBMITTED BY PLACING RELIANCE UPON THE ACCOUNTING STANDARD 2 , ISSUED BY INSTITUTE OF C HARTERED A CCOUNTANTS ON VALUATION OF INVENTORY . SHE SUBMITTED THAT BOTH WEIGHTED AVERAGE METHOD AND FIFO METHOD HAS BEEN CONSIDERED AS FAIR/GOOD METHOD OF VALUATION. SHE PLAC ED RELIANCE UPON THE RELEVANT EXTRACT OF A CCOUNTING S TANDARD 2, WHICH HAS ALSO BEEN APPROVED BY THE IC AI , WHICH IS REPRODUCED HEREUNDER: 16. COST OF INVENTORY IS, OTHER THAN THE ELEMENTARY DEALT WITH IN PARAGRAPH 13 SHALL BE ASSIGNED BY USING THE FIRST IN FIRST - OUT, ALL ITA 6600/DEL/2014 A.Y. 2008 - 09 RESURGERE MINES & MINERALS INDIA LTD. VS. ACIT PAGE 6 OF 8 WEIGHTED AVERAGE COST FORMULA. THE FORMULA USED SHALL REFLECT THE FAIREST POSSIBLE APPROXIMATION TO THE COST INCURRED IN BRINGING THE ITEMS OF INVENTORY TO THEIR PRESENT LOCATION AND CONDITION. 4.3. SHE THUS SUBMITTED THAT VALUATION OF INVENTORY CAN BE MADE EITHER ON FIFO METHOD OR WE IGHTED AVERAGE METHOD WHICH IS A WELL ACCEPTED METHOD. 4.4. ON THE CONTRARY LD. DR PLACED RELIANCE UPON THE ORDER PASSED BY AUTHORITIES BELOW. 5. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY BOTH THE SIDES IN THE LIGHT OF THE RECORDS PLACED BEFORE US. 6. AF TER EXAMINING THE RELEVANT STATUTORY PROVISIONS FOR COMPUTATION AND DISCLOSURE OF INCOME CHARGEABLE UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION, WE FIND THAT UNDISPUTEDLY ASSESSEE HAS BEEN FOLLOWING WEIGHTED AVERAGE METHOD IN VALUING TH E CLO SING STOCK IN THE PREVIOUS YEARS WHICH HAS NOT BEEN DISTURBED BY REVENUE AUTHORITIES. WE FURTHER OBSERVED THAT WEIGHTED AVERAGE METHOD IS ALSO CONSIDERED TO BE ONE OF THE METHOD WHICH REFLECTS THE FAIREST POSSIBLE APPROXIMATION OF COST INCURRED, BY THE INS TITUTE OF C HARTERED A CCOUNTANTS IN THEIR A CCOUNTING S TANDARDS. THEREFORE WE DO NOT FIND ANY JUSTIFICATION IN REJECTING THIS METHOD OF VALUATION BY LD. AO. MOREOVER LD. AO HAS ALSO NOT FURNISHED ANY REASONABLE EXPLANATION FOR REJECTING THE METHOD CONSISTENTLY ADOPTED BY ASSESSEE. WE ARE THEREFORE INCLINED TO ALLOW THIS GROUND RAISED BY ASSESSEE. AS WE HAVE UPHELD THE WEIGHTED ITA 6600/DEL/2014 A.Y. 2008 - 09 RESURGERE MINES & MINERALS INDIA LTD. VS. ACIT PAGE 7 OF 8 AVERAGE METHOD FOR VALUATION OF CLOSING STOCK, WE ALLOW GROUND NO. 3 RAISED BY THE ASSESSEE WHEREIN THE BOOKS OF ACCOUNTS HAVE BEEN REJECTED BY LD. AO TO THE EXTENT OF THE VALUATION OF ST OCKS. 6.1. ACCORDINGLY GROUND NO. 3 AND 4 RAISED BY ASSESSEE STANDS ALLOWED. 7 . IN THE RESULT APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22/12/2017. SD/ - SD/ - ( G.D.AGRAWAL ) (BEENA A PILLAI) PRESIDENT JUDICIAL MEMBER DATED : 22 ND DECEMBER , 2017. *MV COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER ASST. REGISTRAR ITAT, DELHI BENCHES, NEW DELHI ITA 6600/DEL/2014 A.Y. 2008 - 09 RESURGERE MINES & MINERALS INDIA LTD. VS. ACIT PAGE 8 OF 8 S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON DRAGON 19.12.2017 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 20.12.2017 SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 22/12/17 SR. PS/PS 7 FILE SENT TO BENCH CLERK SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER