DCIT, Circle - 8, Kolkata, Kolkata V. M/s Stesalit Limited, Kolkata

ITA 724/KOL/2012

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8118 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2012
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 07-05-2012
• Court: TRIBUNAL
• Department Lawyers: A K DEY
• Assessee Lawyers: S LOYALKA
• Keywords: Assessment record

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BEN CH A, KOLKATA () BEFORE , ,, , , SHRI MAHAVIR SINGH, JUDICIAL MEMBER. /AND . .. . ! ! ! !. .. . , '# SHRI C.D.RAO, ACCOUNTANT MEMBER $ $ $ $ / ITA NO . 724/KOL/2012 %& '(/ ASSESSMENT YEAR : 2003-04 (*+ / APPELLANT ) D.C.I.T., CIRCLE-8, KOLKATA. (,-*+/ RESPONDENT ) M/S.STESALIT LIMITED, KOLKATA. (PAN:AAECS 0758 A) *+ . / '/ FOR THE APPELLANT: SHRI A.K.DEY ,-*+ . / '/ FOR THE RESPONDENT: SMT.S.LOYALKA 0%1 . !# /DATE OF HEARING : 09.10.2012. 2' . !# /DATE OF PRONOUNCEMENT : 09.10.2012. '3 / ORDER . .. . ! ! ! !. .. . , '# PER SHRI C.D.RAO, AM THE ABOVE APPEAL IS FILED BY THE REVENUE AGAINST OR DER DATED 21.02.2012 OF THE LD. CIT-(A)-VIII, KOLKATA PERTAINING TO A.YR. 2003- 04. 2. IN THIS APPEAL THE REVENUE HAS TAKEN ONLY ONE EF FECTIVE GROUND WHICH RELATES TO THE DELETION OF ADDITION MADE BY AO ON ACCOUNT OF D IFFERENCE BETWEEN THE OPENING AND CLOSING STOCK. 3. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE AO H AS MADE AN ADDITION OF RS.22,47,792/- BY OBSERVING AS UNDER :- 2. ON EXAMINATION OF THE ASSESSMENT RECORD PERTAIN ING TO A.Y. 2003-04, IT IS SEEN FROM THE DETAILS OF INCREASE/DECREASE IN STOCKS THAT F INISHED GOODS AND SEMI-FINISHED GOODS WERE RS.4,76,62,730/- AND RS.79,31,301/- RESPECTIVE LY. BUT THE OPENING STOCK OF THESE TWO ITEMS AS ON 01.04.2002 WERE SHOWN AS RS.4,76,62 ,730/- AND RS.1,01,99,293/- RESPECTIVELY. THUS, THE VALUE OF SEMI-FINISHED GOOD S WERE ENHANCED IN THE ACCOUNTS BY 2 RS.22,67,792/-( RS.1,01,99,293 RS.79,31,501) WHIC H RESULTED IN DECREASE IN PROFIT BY AN IDENTICAL AMOUNT. THIS ANOMALY LED TO AN UNDERAS SESSMENT OF INCOME BY RS 22,67,792/- THUS IT IS SEEN THAT THE ASSESSEE HAS N OT DISCLOSED FACTS FULLY AND TRULY AND CONCEALED INCOME TO THE TUNE OF RS.22,67,792/-. THE SAME IS ADDED BACK. 3.1. HOWEVER, ON APPEAL THE LD. CIT(A) HAS DELETED THE SAME BY OBSERVING AS UNDER :- I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT, PERUSED THE REASON RECORDED BY THE AO AND THE IMPUGNED ASSESSMENT ORDE R, THE FACTS OF THE CASE AND THE MATERIALS AVAILABLE ON RECORDS. IT IS OBSERVED FROM THE EXP1ANATION FURNISHED BY THE APPELLANT THAT THE APPELLANT HAS FIVE UNITS WHICH H AVE BEEN IN OPERATION IN THE RELEVANT YEAR AND TWO OF THEM AT KOLKATA OUT OF WHICH ONE AT TARATALA AND ONE AT TANGRA AND OTHERS ARE BADDI UNIT I, BADDI UNIT II AND BADDI UN IT III. IT IS EXPLAINED THAT THE TANGRA UNIT HAS STARTED COMMERCIAL PRODUCTION DURING THE Y EAR, I.E ON 1.9.2002. IN THE IMMEDIATELY PRECEDING YEAR DURING THE TRIAL RUN, SE MI FINISHED GOODS OF RS.22,67,792/- WAS PRODUCED. AS PER THE GUIDANCE NOTE ON TREATMENT OF EXPENDITURE DURING CONSTRUCTION PERIOD ISSUED BY INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA, THE REVENUE EARNED FROM THE PRODUCTION OF TRIAL RUN IS NOT TO BE TAKEN AS P ROFIT BUT TO BE REDUCED FROM INITIAL PROJECT EXPENDITURE. IN OTHER WORDS, IT IS STATED T HAT THE SALE PROCEEDS OF THE TRIAL RUN PRODUCTION IS TO BE CREDITED TO INITIAL PROJECT EXP ENDITURE AND NOT TO SALES. SINCE THERE WAS NO SALE OF THE SAID PRODUCT IN THE ACCOUNTING Y EAR 2001-02, THE SAME WAS TAKEN INTO THE BALANCE SHEET AS SEMI FINISHED PRODUCT BY REDUC ING THE INITIAL PROJECT EXPENSES AND ACCORDINGLY TAKEN INTO THE PROFIT AND LOSS ACCOUNT AS OPENING STOCK IN THE ACCOUNTING YEAR 2002-03. HOWEVER FOLLOWING THE ABOVE MENTIONED GUIDANCE NOTE ISSUED BY THE ICAI THE SAID STOCK OF SEMI FINISHED GOODS WAS NOT CONSIDERED IN THE PROFIT AND LOSS ACCOUNT AS CLOSING STOCK FOR ACCOUNTING YEAR 2001-0 2. IT IS, FURTHER, SUBMITTED THAT THE SIMILAR ADDITION WAS MADE IN A.Y.2002-03 ALSO WHEN BADDI UNIT III COMMENCED COMMERCIAL PRODUCTION AND THE LD.CIT(A) VIII ACCEPT ING THE CONTENTION OF THE APPELLANT DELETED THE ADDITION. THE REVENUE HAS ALS O ACCEPTED THE SAME AND HAS NOT PREFERRED A SECOND APPEAL. A COPY OF THE SAID ORDER IS ALSO FURNISHED FOR READY REFERENCE. IN THE LIGHT OF THE ABOVE OBSERVATION AND DISCUSSIO N, CAREFULLY CONSIDERING THE FACTS OF THE CASE AND FOLLOWING THE DECISION OF MY PREDECESS OR IN OFFICE IN THE APPELLANTS OWN CASE WHILE DISPOSING THE APPEAL FOR THE AY 2002-03, IT IS HELD THAT THE AO IS NOT JUSTIFIED IN MAKING THE ADDITION OF RS. 22,67,792/- ON ACCOUNT OF DIFFERENCE BETWEEN OPENING AND CLOSING STOCK. THUS, THE AO IS DIRECTED TO DELETE THE ADDITION SO MADE AND GIVE RELIEF TO THE APPELLANT. 3.2. AGGRIEVED BY THIS NOW THE REVENUE IS IN APPEAL BEFORE US. 4. AT THE TIME OF HEARING BEFORE US THE LD. DR APPE ARING ON BEHALF OF THE REVENUE SUBMITTED THAT ASSESSEE HAS NOT FURNISHED ANY INFOR MATION BEFORE AO TO THE EFFECT THAT THE INCREASE/DECREASE IN STOCK OF SEMI FINISHED GOO DS HAS NO BEARING EITHER IN THE PROFIT OR IN THE LOSS OF ASSESSEE COMPANY. THAT IS WHY THE AO MADE THE ADDITION. HOWEVER, THE LD. CIT(A) BY FOLLOWING THE GUIDANCE N OTE ISSUED BY INSTITUTE OF 3 CHARTERED ACCOUNTANTS OF INDIA AND FURTHER STATING THAT THE ADDITION WAS MADE IN AY 2002-03 ALSO WHEN BADDI UNIT III COMMENCED COMMERCI AL PRODUCTION AND THE LD. CIT(A) VIII ACCEPTING THE CONTENTION OF THE ASSESSE E DELETED THE ADDITION. THE REVENUE HAS ALSO ACCEPTED THE SAME AND HAS NOT PREF ERRED A SECOND APPEAL. THEREFORE HE REQUESTED TO SET ASIDE THE ORDER OF LD. CIT(A) A ND RESTORE THE MATTER TO THE FILE OF AO. 5. ON THE OTHER HAND, THE LD. COUNSEL APPEARING ON BEHALF OF ASSESSEE BY FILING THE BALANCE SHEET, STOCK POSITION IN PROFIT AND LOSS AC COUNT ALONG WITH NOTES TO THE ACCOUNTS FOR THE FINANCIAL YEAR 2001-02 AND 2002-03 SUBMITTED THAT THE ACTION OF LD. CIT(A) IS JUSTIFIED. THE LD. COUNSEL FOR ASSESSEE F URTHER SUBMITTED THAT IN THE LETTER ADDRESSED TO THE AO DATED 21.04.2010 WHICH WAS KEPT ON RECORD THE ASSESSEE HAS EXPLAINED THAT THERE IS NO PRIMA FACIE REASON TO BE LIEVE THAT A SUM OF RS.22,67,792/- HAS ESCAPED INCOME FOR THE ASSESSMENT YEAR UNDER CO NSIDERATION. HOWEVER, THE LD. AO HAS NOT DISCUSSED THE SUBMISSIONS WHILE FRAMING THE ASSESSMENT ORDER. THE LD. CIT(A) HAS ALSO NOT CALLED FOR THE REMAND REPORT BASED ON THE SUBMISSIONS MADE BY THE LD. COUNSEL FOR ASSESSEE. THEREFORE, IN THE INTEREST OF JUSTICE, WE SET ASIDE THE ORDERS OF THE LD. CIT(A) AND RESTORE THE MATTER TO THE FILE OF AO TO CONSIDER THE SUBMISSIONS MADE BY ASSESSEE IN THE LETTER DATED 21.04.2010 AND IF T HERE IS NO IMPACT IN THE INCOME OF ASSESSEE ON ACCOUNT OF TREATMENT OF STOCK OF SEMI F INISHED GOODS IN THE CASE OF UNITS UNDER TRIAL, WE ARE OF THE VIEW THAT NO ADDITION ON ACCOUNT OF DIFFERENCE IN CLOSING AND OPENING OF SEMI FINISHED GOODS IS REQUIRED. 6. IN THE RESULT THE APPEAL OF THE REVENUE IS ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 09.10.2012. SD/- SD/- , , , , MAHAVIR SINGH, JUDICIAL MEMBER . .. . ! ! ! !. .. . , , , , '# '# '# '# , C.D.RAO, ACCOUNTANT MEMBER. ( (( (! ! ! !# ## #) )) ) DATE: 09.10.2012 R.G.(P.S.) 4 '3 . ,4 5'4'6- COPY OF THE ORDER FORWARDED TO: 1. M/S.STESALIT LIMITED, 71, PARK STREET, KOLKATA-7000 16. 2 D.C.I.T., CIRCLE-8, KOLKATA. 3. THE C.I.T. 4. CIT(A)-VIII, KOLKATA. 5. THE CIT(DR), KOLKATA BENCHES, KOLKATA -4 ,/ TRUE COPY, '3%0/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES 5