DCIT, Ambala V. Sh. Kuldeep Chand Jain (HUF), Ambala City

ITA 705/CHANDI/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68508 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 11-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Reopening of assessment; Principle of natural justice; Deemed to accrue or arise in india; Competent authority
• Section: 143(3); 80HHC; 133A; 133(6); 147; 68; 148; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 705/CHD/2013 ASSESSMENT YEAR:2009-10 THE DY. COMMISSIONER OF INCOME TAX, VS SHRI KULDEE P CHAND JAIN (HUF), CIRCLE, PROP.M/S SAT RAM MANGAT RAM JAIN AMBALA. SARAFA BAZAR, AMBALA CITY. PAN NO. AAFHK-2242H & C.O. NO. 22/CHD/2013 IN ITA NO. 705/CHD/2013 SHRI KULDEEP CHAND JAIN (HUF), VS THE DY. CO MMISSIONER OF INCOME TAX, PROP.M/S SAT RAM MANGAT RAM JAIN CIRCLE, SARAFA BAZAR, AMBALA. AMBALA CITY. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI MANJIT SINGH RESPONDENT BY : SHRI TEJ MOH AN SINGH DATE OF HEARING : 05.09.2013 DATE OF PRONOUNCEMENT : 23.09.2013 O R D E R PER SUSHMA CHOWLA, J.M. THE REVENUE HAS FILED THE APPEAL AND ASSESSEE HAS F ILED THE CROSS OBJECTIONS AGAINST THE ORDER OF THE CIT(APPEA LS), PANCHKULA DATED 08.04.2013 RELATING TO ASSESSMENT YEAR 2009-1 0 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 ( 'THE ACT' FOR SHORT). 2. BOTH THE APPEAL FILED BY THE REVENUE AND THE CRO SS OBJECTIONS FILED BY THE ASSESSEE WERE HEARD TOGETHER AND ARE B EING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIE NCE. 2 3. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LD. CIT(A)-II HAS ERRED IN LAW AND ON FACTS IN QUASHING THE ASSESSMENT BY HOLDING THAT REOPENING OF ASSESSMENT U/S 147 OF THE INCOME-TAX ACT, 1961 AND ISSUE OF NOTICE U/S 148 OF THE INCOME-TAX ACT, 1961 WAS NOT VALID AS THERE WAS NO FAILURE ON THE P ART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS RELEVAN T FOR ASSESSMENT. 2. THAT THE LD. CIT(A)-II HAS ERRED IN LAW AND O N FACTS IN HOLDING THAT EVEN ON MERITS ALSO, THE ADJUSTMENTS MADE BY THE A. O. FOR PURPOSE OF DEDUCTIONS U/S 80HHC WERE NOT VALID AND WERE NOT IN ORDER. 3. THAT THE ORDER OF THE CIT(A)-II BE SET ASIDE AND THAT OF THE A.O. BE RESTORED. 4. THE ASSESSEE HAS RAISED FOLLOWING GROUND IN THE CROSS OBJECTIONS : 1. THE LD. CIT(APPEALS) HAS ERRED IN LAW AS WELL A S ON FACTS IN UPHOLDING THE ADDITION OF RS. 1,50,000/- APPLYING THE PROVISIONS OF SECTION 68 WHICH ARE NOT APPLICABLE IN THE INSTANT CASE AND AS SUCH THE ADDITION UPHELD IS ARBITRARY AND UNJUSTIFIED. 5. THE ONLY ISSUE RAISED IN THE APPEAL FILED BY THE REVENUE IS AGAINST THE DELETION OF ADDITION OF RS. 58,28,392/- MADE ON ACCOUNT OF VALUATION OF CLOSING STOCK. 6. THE LD. AR FOR THE ASSESSEE POINTED OUT THAT SIM ILAR ISSUE AROSE BEFORE THE TRIBUNAL IN ASSESSEE'S OWN CASE R ELATING TO ASSESSMENT YEAR 2007-08 AND THE METHOD OF VALUATION OF CLOSING STOCK FOLLOWED BY THE ASSESSEE WAS ACCEPTED. 7. THE LD. DR FOR THE REVENUE PLACED RELIANCE ON TH E ORDER OF THE ASSESSING OFFICER. 8. THE ISSUE ARISING IN THE PRESENT APPEAL IS IN RE LATION TO THE REJECTION OF BOOKS OF ACCOUNT BY THE ASSESSING OFFI CER AND THEREAFTER, COMPUTATION OF VALUE OF THE CLOSING STO CK OF GOLD ORNAMENTS WEIGHING 29836.225 GRAMS ON AVERAGE BASIS METHOD. THE ASSESSEE CLAIMED TO HAVE FOLLOWED THE LIFO METH OD FOR 3 VALUING ITS CLOSING STOCK OF GOLD ORNAMENTS. HOWEV ER, THE ASSESSING OFFICER ADOPTED THE AVERAGE PRICE I.E. TH E VALUE OF OPENING STOCK OF GOLD AND VALUE OF PURCHASES OF GOL D TO WORK OUT THE VALUE OF CLOSING STOCK AND DIFFERENCE IN VALUAT ION OF STOCK I.E. AS WORKED OUT BY THE ASSESSING OFFICER AND AS DECLA RED BY THE ASSESSEE AT RS. 58,28,290/- WAS ADDED AS INCOME OF THE ASSESSEE. 9. THE CIT(APPEALS) DELETED THE ADDITION MADE BY T HE ASSESSING OFFICER IN VIEW OF THE FINDINGS OF TRIBUN AL IN ASSESSEE'S OWN CASE RELATING TO ASSESSMENT YEAR 2007-08. THE CIT(APPEALS), THUS HELD THAT THERE WAS NO REASON TO INTERFERE WIT H THE METHOD OF VALUATION OF CLOSING STOCK ADOPTED BY THE ASSESSEE AND THE REJECTION OF BOOKS OF ACCOUNT TO ADOPT NEW METHOD O F VALUATION OF CLOSING STOCK WAS HELD TO BE WRONG. THE ADDITION OF RS. 58,28,390/- WAS, THUS DELETED BY THE CIT(APPEALS). 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SALE AND PURCHASE OF JEWELLERY. THE ASSESSEE, IN ORDER TO VALUE ITS CLO SING STOCK IS FOLLOWING LIFO METHOD WHICH IS ONE OF THE PRESCRIBE D METHOD OF ACCOUNTING STANDARDS ISSUED BY THE INSTITUTE OF CHA RTERED ACCOUNTANTS OF INDIA FOR VALUATION OF INVENTORY. T HE SAID METHOD OF VALUING THE CLOSING STOCK OF GOLD ORNAMENTS HAS BEEN CONSISTENTLY FOLLOWED BY THE ASSESSEE FROM YEAR TO YEAR. SIMILAR METHOD WAS FOLLOWED BY THE ASSESSEE IN ASSESSMENT Y EAR 2007-08. THE ASSESSING OFFICER IN ASSESSMENT YEAR 2007-08 HA D MADE AN ADDITION OF RS. 32,08,977/- ON ACCOUNT OF VALUATION OF CLOSING STOCK OF GOLD ORNAMENTS. THE TRIBUNAL IN ITA NO. 1 378/CHD/2010 4 RELATING TO ASSESSMENT YEAR 2007-08 IN DCIT VS SHRI KULDEEP CHAND JAIN, HUF, VIDE ORDER DATED 24.4.2012, HAD HE LD AS UNDER : 4. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS , FACTS OF THE CASE AND RELEVANT RECORD. THE BRIEF FACTS O F THE CASE ARE THAT THE APPELLANT IS A WHOLESALE & RETAIL SARA FA MERCHANT. THE ASSESSEE FILED RETURN OF INCOME ON 31.10.2007, DECLARING INCOME OF RS.29,20,088/-. A SURVEY U/S 133A OF THE ACT WAS CONDUCTED, ON THE BUSINESS PREMISES OF THE ASSESSEE, ON 13.10.2006, DURING WHICH APPELL ANT SURRENDERED AN ADDITIONAL INCOME OF RS.26 LACS ( RS .17 LACS ON ACCOUNT OF UNEXPLAINED OLD GOLD AND DIAMOND JEWE LLERY AND RS.9 LACS ON ACCOUNT OF EXCESS CASH FOUND. THE AO FRAMED ASSESSMENT U/S 143(3) AT AN INCOME OF RS.61, 29,065/- AFTER MAKING DISALLOWANCE OF RS.32,08,977/- ON ACCO UNT OF UNDER VALUATION OF CLOSING STOCK. AO ALSO REJECTED THE BOOKS OF ACCOUNT OF THE APPELLANT AND TREATED THE SURREND ERED AMOUNT OF RS.26 LACS AS DEEMED INCOME. 5. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASS ESSEE INFORMED THE AO, THAT LIFO METHOD OF ACCOUNTING WA S FOLLOWED IN VALUATION OF CLOSING STOCK. THE CONTEN TION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE AO. THE A O, REFERRED TO A.S.-2, THAT SPECIFIES OF ONLY THREE METHODS OF DETERMINING THE COST OF INVENTORIES I.E. SPECIFIC IDENTIFICATION METHOD, FIFO AND WEIGHTED AVERAGE CO ST METHOD. THE AO MADE AN ADDITION OF RS.32,08,977/- FOLLOWING THE WEIGHTED AVERAGE COST METHOD OF THE C LOSING STOCK. THE LD. CIT(A), ON APPRECIATION OF THE CASE LAWS AND SUBMISSIONS FILED BEFORE HER, GAVE HER FINDINGS IN PARA 5.2 OF THE APPELLATE ORDER, WHICH ARE REPRODUCED HEREUN DER : 5.2 I HAVE CAREFULLY CONSIDERED THE SUBMISSION FIL ED BY THE APPELLANT, IT WAS INFORMED THAT THE AO HAS ACCEPTED THE CALCULATION ERROR IN THE CLOSING STOCK VALUATION AN D HAS RECTIFIED THE SAME BY PASSING ORDER U/S 154 DATED 30.06.2010 VIDE WHICH THE DIFFERENCE IN STOCK STAN D REDUCED FROM RS.32,08,977/- TO SEEN THAT DURING THE A.Y. 2 003-04, 20Q5-06 AND 2006-07 ASSESSMENT FOR WHICH WAS COMPLE TED U/S 143(3), THE METHOD OF VALUATION OF CLOSING STOC K HAS BEEN ACCEPTED BY THE AO INCLUDING BY THE AO WHO HAS PASSED THE ASSESSMENT ORDER FOR THE YEAR UNDER APPE AL. THEREFORE, THE AO CANNOT REJECT THE METHOD OF VALUA TION OF CLOSING STOCK WHICH IS CONSISTENTLY' FOLLOWED BY TH E APPELLANT AND HAS ALSO BEEN ACCEPTED BY THE AO IN T HE PAST. I AGREE WITH THE APPELLANT THAT RULE OF CONSISTENTL Y HAS TO BE FOLLOWED AND OBSERVED. FURTHER, IT IS SEEN THAT THE HON'BLE PUNJAB & HARYANA HIGH COURT IN APPELLANTS OWN CASE CIT VS. SANT RAM MANGAT RAM (195 CTR 345) OBSERVED AS UNDER :- 'IT IS AN ADMITTED POSITION THAT FROM THE INCEPTION OF ITS BUSINESS, THE ASSESSEE HAD CONTINUOUSLY ADOPTED THE SAME METHOD OF VALUATION OF THE CLOSING STOCK AND NO OBJ ECTION WAS RAISED BY THE DEPARTMENT IN ANY OF THE PREVIOUS YEARS. 5 RATHER, THE COMPETENT AUTHORITY ACCEPTED THE METHOD ADOPTED BY THE ASSESSEE AND ACCORDINGLY, MADE ASSESSMENT. T HIS BEING THE POSITION, WE DO NOT FIND ANY VALID GROUND TO ACCEPT THE ARGUMENT OF SHRI BINDAL THAT THE METHOD ADOPTED BY THE ASSESSEE FOR VALUATION OF THE STOCK WAS LEGALLY IMP ERMISSIBLE AND ON THAT ACCOUNT, THE ADDITIONS MADE BY THE INSP ECTING ASSISTANT COMMISSIONER SHOULD BE RESTORED. IN UNITE D COMMERCIAL BANK V. CIT [1999] 240 ITR 355, THEIR LORDSHIPS OF THE SUPREME COURT HELD THAT THE METHOD WHICH WAS CONSISTENTLY FOLLOWED BY THE APPELLANT-BANK FOR VALUING THE STOCK-IN-TRADE COULD NOT BE REJECTED BY THE ACC ESSING AUTHORITY IN A PARTICULAR YEAR. ' THERE IS MERIT IN THE APPELLANT'S SUBMISSIONS THAT THE PRINCIPLE OF JUDICIAL DISCIPLINE REQUIRES THAT THE ORDER OF THE HIGHER APPELLATE AUTHORITY SHOULD BE FOLLOWED UNRES ERVEDLY BY THE SUBORDINATE AUTHORITIES. THEREFORE, IN VIEW OF THE ABOVE STATED FACTS - ASSESSEE HAVING CONSISTENTLY E MPLOYED THE SAME METHOD OF VALUATION OF CLOSING STOCK AND A O HAVING NOT QUESTIONED THE SAME AND IN FACT HAVING ACCEPTE D IT IN THE PREVIOUS ASSESSMENT YEARS, IT IS HELD THAT THE METH OD OF VALUATION OF CLOSING STOCK COULD NOT BE REJECTED. T HEREFORE, THE ADDITION MADE BY THE AO WHICH BY HER ORDER OF RECTIFICATION U/S 154 STANDS REDUCED TO RS. 19,45,0 73/- ON ACCOUNT OF DIFFERENCE IN VALUATION OF CLOSING STOCK IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 6. A BARE PERUSAL OF THE FINDINGS OF CIT(A) REVEALS THAT ON THE BASIS OF THE DOCTRINE OF CONSISTENCY IN RELA TION TO METHOD OF VALUATION OF INVENTORY AS ALSO THE DECISI ON OF THE JURISDICTIONAL HIGH COURT IN ASSESSEE'S OWN CASE, S HE RECORDED FINDINGS IN FAVOUR OF THE ASSESSEE. HAVING REGARD TO THE FACT-SITUATION OF THE CASE, DECISION OF THE HON 'BLE JURISDICTIONAL HIGH COURT, RELIED UPON BY THE LD. C IT(A), AND THE RELEVANCE OF CONSISTENCY PRINCIPLE IN THE MATTE R, WE DO NOT FIND ANY INFIRMITY, IN THE FINDINGS OF THE CIT( A), AND HENCE, THE SAME ARE UPHELD. THUS, THE GROUND OF AP PEAL OF THE REVENUE IS DISMISSED. 11. IN VIEW OF THE ISSUE RAISED IN THE PRESENT APPE AL BEING SIMILAR TO THE ISSUE RAISED IN ASSESSMENT YEAR 2007-08 AND THE ASSESSEE HAVING CONSISTENTLY FOLLOWED THE SAME METHOD OF VAL UATION OF ITS INVENTORY, WE UPHOLD THE ORDER OF CIT(APPEALS) IN D ELETING THE ADDITION OF RS. 58,28,390/-. THE GROUND OF APPEAL RAISED BY THE REVENUE IS, THUS DISMISSED. 12. THE ASSESSEE IN ITS CROSS OBJECTIONS HAS RAISED THE ISSUE AGAINST THE ADDITION OF RS. 1,50,000/-. DURING THE COURSE OF 6 ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THERE WAS A CREDIT OF RS. 1,50,000/- ON 15.12.2008 IN THE CAP ITAL ACCOUNT OF THE ASSESSEE. THE EXPLANATION OF THE ASSESSEE IN T HIS REGARD WAS THAT THE SAID CHEQUE HAD BEEN RECEIVED FROM M/S GOO D FAITH CEMENT PVT. LTD. TO WHOM THE SAID AMOUNT WAS GIVEN ON 07.09.2006. THE ASSESSEE FILED THE CONFIRMATION FR OM THE SAID PARTY. HOWEVER, THE NOTICE ISSUED BY ASSESSING OFF ICER UNDER SECTION 133(6) OF THE ACT WAS RECEIVED BACK UNDELIV ERED AT THE ADDRESS GIVEN BY THE ASSESSEE. THE ASSESSEE SOUGHT TIME TO CONTACT THE SAID PARTY AND IT WAS ALSO POINTED OUT THAT SIN CE THE AMOUNT HAS BEEN ROUTED THROUGH BANKING CHANNELS, ENQUIRIES MAY BE MADE FROM THE BANK. THE ASSESSING OFFICER REJECTING THE EXPLA NATION OF THE ASSESSEE AND IN THE ABSENCE OF THE ASSESSEE HAVING DISCHARGED ITS ONUS MADE AN ADDITION OF RS. 1,50,000/-.. 13. THE CIT(APPEALS) UPHELD THE SAID ADDITION OF RS . 1,50,000/-. 14. THE LD. AR FOR THE ASSESSEE POINTED OUT THAT TH E SUM OF RS. 1,50,000/- WAS ADVANCED TO M/S GOOD FAITH CEMENT PV T. LTD. IN CASH ON 07.09.2006 AND THE SAME WAS RETURNED VIDE C HEQUE ON 05.12.2008 AND THE SAME WAS DEPOSITED IN THE BANK A CCOUNT OF THE ASSESSEE, WHICH IS APPARENT FROM THE BANK STATEMENT . THE LD. AR FOR THE ASSESSEE STRESSED THAT SUFFICIENT OPPORTUNI TY WAS NOT GRANTED TO THE ASSESSEE TO FURNISH FURTHER INFORMAT ION IN THIS REGARD. 15. THE LD. DR PLACED RELIANCE ON THE ORDER OF THE AUTHORITIES BELOW. 16. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE HAS FILED THE CONFIRMATION OF M/S GOOD FAITH CEMENT 7 PVT. LTD. AT PAGE 12 OF THE PAPER BOOK ALONGWITH TH E COPY OF THE CHEQUE ISSUED BY THE SAID AUTHORITY AND THE BANK ST ATEMENT IN WHICH SUCH CHEQUE HAD BEEN DEPOSITED. THE EXPLANAT ION OF THE ASSESSEE WAS NOT ACCEPTED AS THE LETTER ISSUED BY T HE ASSESSING OFFICER UNDER SECTION 133(6) OF THE ACT WAS RECEIVE D BACK UNDELIVERED. IN THE TOTALITY OF THE FACTS AND CIRC UMSTANCES OF THE CASE AND FOLLOWING THE PRINCIPLE OF NATURAL JUSTICE , WE DEEM IT FIT TO RESTORE THIS ISSUE BACK TO THE FILE OF ASSESSING OFFICER TO RE- DECIDE THE SAME DENOVO AFTER AFFORDING REASONABLE O PPORTUNITY OF HEARING TO THE ASSESSEE. THE ASSESSEE HAS TO DISCH ARGE THE ONUS CAST UPON HIM AND FURNISH THE REQUISITE INFORMATION BEFORE THE ASSESSING OFFICER. THUS, THE GROUND OF APPEAL RAIS ED IN THE CROSS OBJECTION IS ALLOWED FOR STATISTICAL PURPOSES. 17. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED AND THE CROSS OBJECTION OF THE ASSESSEE IS ALLOWED FOR STAT ISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF SEPTEMBER, 2013. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 23 RD SEPTEMBER,2013 POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH