ACIT, Alwar V. GINNI INTERNATIONAL LIMITED, Alwar

ITA 746/JPR/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5598 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 24-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

ITA NO. 746/JP/13 THE ACIT, CIRCLE-2, ALWAR VS. M/S GINNI INTERNATION AL LTD. 1 IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA-@ ITA NO. 746/JP/13 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 LQUOKBZ DH RKJH[K DATE OF HEARING : 04 . 12.2015 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 08/01/2016 VKNS'K@ ORDER FU/KKZFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAJ MEHRA(JCIT)` PER SHRI VIKRAM SINGH YADAV, AM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A), ALWAR DATED 12.07.2013 WHEREIN THE REVENUE HAS TAK EN THE FOLLOWING GROUNDS OF APPEAL:- THE ACIT, CIRCLE - 2, ALWAR CUKE V/S. M/S GINNI INTERNATIONAL LTD, RIICO INDUSTRIAL AREA, NEEMRANNA, ALWAR LFKK;H YS[KK LA-@THVKJBZVKJ LA-@ PAN NO. AAACG 0182 E ITA NO. 746/JP/13 THE ACIT, CIRCLE-2, ALWAR VS. M/S GINNI INTERNATION AL LTD. 2 (1) THAT THE LD. CIT(A) ALWAR, HAS ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION OF RS. 31,94,62/- MADE BY THE AO ON /C OF UNDER VALUAT ION OF STOCK WHEN THE VALIDITY OF THE STATEMENT THAT MARKET VALUE WAS LOWER THAN COST WAS NOT ESTABLISHED. (2) THAT THE LD. CIT(A), ALWAR HAS ERRED IN LAW AS WEL L AS THE FACTS AND CIRCUMSTANCES OF THE CASE IN RESTRICTING THE DIS ALLOWANCE MADE BY THE AO OUT OF EXPENSES OF RS. 32,03,350/- TO RS. 15,00,000/- EVEN WHILE HOLDING THAT THE FINDING OF THE AO HAVE NOT BEEN CONTRADICTED. (3) THE CIT(A) HAS ERRED IN RESTRICTING ON AN ADHOC BASIS THE DISALLOWANCE OUT OF EXPENSES FROM RS. 32,03,350/- T O RS. 15,00,000/- BY NOT SPELLING OUT THE REASON FOR ARRI VING AT THE FIGURE OF RS. 15,00,000/-. 2. REGARDING GROUND NO.1, THE RELEVANT FACTS AS APP ARENT FROM THE ASSESSMENT ORDER ARE THAT THE AO NOTICED THAT THE ASSESSEE HAS VALUED CERTAIN STOCK AT A VALUE WHICH IS LOWER THAN THE C OST PRICE. HERE IT IS TO BE NOTED THAT THE ASSESSEE HAD TOTAL CLOSING STOCK OF RS. 879.64 LACS AT THE CLOSE OF FINANCIAL YEAR AND OUT OF THE SAME, ST OCK OF ONLY RS. 448.55 LACS WHICH WAS VALUED AT A PRICE LOWER THAN COST I S UNDER DISPUTE. AS PER THE AO, THE ASSESSEE COMPANY HAS SUPPOSEDLY VALUED THE STOCK AT NET REALIZATION VALUE BUT NO BASIS OF ARRIVING AT SUCH NET REALIZABLE VALUE HAS BEEN GIVEN. THE AO WAS OF THE VIEW THAT THE CO MPANY HAS ITA NO. 746/JP/13 THE ACIT, CIRCLE-2, ALWAR VS. M/S GINNI INTERNATION AL LTD. 3 SUPPRESSED THE VALUE OF THE CLOSING STOCK BY AN AMO UNT OF RS. 31,94,562/- WHICH IS ADDED TO THE INCOME OF THE ASS ESSEE. 2.1 BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R IN APPEAL BEFORE THE LD. CIT(A), ALWAR WHO HAS DELETED THE SAID ADDI TION STATING THAT AT NO POINT OF TIME, THE AO HAS DOUBTED THE RATE AT WHICH STOCK HAS BEEN VALUED IN THE BOOKS AT MARKET PRICE. THE RELEVANT OBSERVATIONS OF THE CIT(A) ARE REPRODUCED AS UNDER:- I HAVE CONSIDERED THE ASSESSMENT ORDER AS WELL AS SUBMISSIONS MADE BY THE APPELLANT AND FIND THAT THE ADDITION WA S MADE PRIMARILY ON THE GROUND THAT CLOSING STOCK OF YARN, WOVEN FABRIC AND DENIM FABRIC HAS BEEN VALUED AT THE MARKET PRICE WHICH WAS LOWER THAN THE COST PRICE OF THE STOCK. AT NO POINT OF TIME THE AO HAS DOUBT ED THE RATE AT WHICH THE STOCK HAS BEEN SHOWN/VALUED IN THE BOOKS AT MA RKET PRICES. AR HAS STATED THAT STOCK HAS TO BE VALUED AT COST OR MARKE T PRICE WHICHEVER IS LOWER. ACCOUNTING STANDARD AS-2 ALSO MANDATES THE SAME AS BASIS FOR STOCK VALUATION. IT HAS BEEN SUBMITTED THAT THE A PPELLANT HAS BEEN FOLLOWING THIS ACCOUNTING PRACTICE CONSISTENTLY SIN CE INCEPTION I.E. 1996. THERE HAS BEEN NO CHANGE IN THE METHOD OF VALUATION OF CLOSING STOCK, IT HAS BEEN STATED BY THE AR THAT THE YARN INDUSTRY HA D BEEN PASSING THROUGH DIFFICULT PERIOD DUE TO GLOBAL RECESSION. THESE FACTS RESULTED IN THE FALL IN MARKET PRICES. CONSIDERING ALL THESE FA CTS, I DELETE THE ADDITION OF RS. 31,94,562/- MADE ON ACCOUNT OF UNDE R VALUATION OF STOCK. 2.2 DURING THE COURSE OF HEARING, THE LD. AR SUBMIT TED THAT BOTH OPENING AND CLOSING STOCK HAVE BEEN VALUED AT LOWE R OF COST OR NET ITA NO. 746/JP/13 THE ACIT, CIRCLE-2, ALWAR VS. M/S GINNI INTERNATION AL LTD. 4 REALIZABLE VALUE ON CONSISTENT BASIS AS PER THE RE QUIREMENTS OF AS-2 ISSUED BY ICAI. THERE IS PROPER VALUATION FOR EACH QUALITY OF YARN & FABRIC. DURING THE PREVIOUS YEAR RELEVANT TO A.Y. 2008-09, THERE WAS NO CHANGE IN THE VALUATION POLICY AND THE SAME WAS AL SO CERTIFIED BY THE STATUTORY AUDITORS IN THEIR REPORT ATTACHED TO THE BALANCE SHEET OF THE ASSESSEE. FURTHER THE AFORESAID FACT WAS ALSO CONFI RMED BY THE TAX AUDITOR IN FORM 3 CD ATTACHED TO THE TAX AUDITORS REPORT. FURTHER REFERENCE WAS DRAWN TO THE DECISIONS OF THE HONBLE SUPREME COURT IN CASE OF EXCEL INDUSTRIES 358 ITR 295 AND DECISION OF PUNJAB AND HARYANA HIGH COURT IN CASE OF SATISH ESTATE (P) L TD. 226 TAXMAN-11. 2.3 THE LD. DR ARGUED THE MATTER AT LENGTH AND SUPP ORTED THE ORDER OF THE AO. 2,4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. FIRSTLY IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS BEEN CONSISTENTLY FOLLOWING THE REQUIREMENTS OF AS-2 IS SUED BY THE ICAI AND VALUING ITS STOCK (BOTH OPENING AND CLOSING) AT LOW ER OF COST OR NET REALIZABLE VALUE AND THERE IS NO CHANGE IN THE VALU ATION POLICY DURING THE YEAR UNDER CONSIDERATION. FURTHER THE BOOKS OF ACCOUNT HAVE BEEN ITA NO. 746/JP/13 THE ACIT, CIRCLE-2, ALWAR VS. M/S GINNI INTERNATION AL LTD. 5 STATUTORILY AUDITED AS WELL AS THE TAX AUDITOR HAVE ISSUED A REPORT WHEREIN THERE IS NO ADVERSE FINDING OF THE AUDITOR IN TERMS OF NON-COMPLIANCE OF AS-2. SECONDLY IT IS NOTED FROM THE PERUSAL OF THE ASSE SSMENT ORDER THE ASSESSEE HAS SUBMITTED THE DETAILED BASIS AND CALCU LATION OF VALUE OF STOCK AS PART OF ITS SUBMISSION WHICH IS REPRODUCED AT PARA 5.2 PAGE 3 OF THE ASSESSMENT ORDER. THE LD. AR ALSO SUBMITTED A COPY OF SAID DETAILED BASIS AND CALCULATION WHICH IS CONTAINED AT PAGE 9- 21 OF THE PAPER BOOK WHICH IS ON RECORD. THE LD. CIT(A) HAS ALSO GIVEN A FINDING THAT AT NO POINT OF TIME THE AO HAS DOUBTED THE RATE AT WHICH THE STOCK HAS BEEN VALUED IN THE BOOKS AT MARKET PRICE. IN LIGHT OF A BOVE, WE ARE UNABLE TO ACCEDE TO THE GROUND TAKEN BY THE REVENUE THAT THE VALIDITY OF THE STATEMENT OF THE ASSESSEE THAT MARKET VALUE WAS LOW ER THAN THE COST WAS NOT ESTABLISHED. HENCE THE GROUND NO.1 TAKEN BY THE REVENUE IS DISMISSED. 3. REGARDING GROUND NO. 2 & 3 WHICH RELATES THE DIS ALLOWANCE OF RS, 32,03,350/- MADE BY THE AO AND LD. CIT(A) HAS ALLOW ED RELIEF OF RS. 17,03,350/-. WE HAVE GONE THROUGH THE ORDER OF THE LD. CIT(A) AND WE ITA NO. 746/JP/13 THE ACIT, CIRCLE-2, ALWAR VS. M/S GINNI INTERNATION AL LTD. 6 SEE NO INFIRMITY IN THE SAID ORDER, HENCE THE GROUN D NOS. 2 & 3 TAKEN BY THE REVENUE ARE DISMISSED. IN THE RESULT THE APPEAL FILED BY THE REV ENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 08/01/ 2016. SD/- SD/ VKJ-IH-RKSYKUH FOE FLAG ;KNO (R.P.TOLANI) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 08/01 /2016 PILLAI VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT THE ACIT, CIRCLE-2,ALWAR 2. THE RESPONDENT M/S GINNI INTERNATIONAL LTD. A LWAR 3. THE CIT(A), ALWAR 4. THE CIT, ALWAR 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO.746/JP/13) VKNS'KKUQLKJ@ BY ORDER, ;D IATHDKJ@ ASSISTANT. REGISTRAR