Income Tax Officer, Ward-16(2), Hyderabad V. M/s Prapalsha Agros Limited, Hyderabad

ITA 756/HYD/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6213 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 17-01-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 25-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PALLAVI AGARWAL
• Assessee Lawyers: S RAMA RAO
• Keywords: Assessment record
• Section: 143(3); 142(1); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 756/HYD/2014 ASSESSMENT YEAR: 2007-08 INCOME-TAX OFFICER, WARD 16(2), HYDERABAD. VS. M/S PRAPALSHA AGROS LTD., (ASSESSEE) (RESPONDENT) REVENUE BY : SMT. PALLAVI AGARWAL ASSESSEE BY : SHRI S. RAMA RAO DATE OF HEARING : 17-01-2017 DATE OF PRONOUNCEMENT : 10-02-2017 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF CIT(A) - V, HYDERABAD, DATED 12/12/2013 FOR AY 2 007-08 WHEREIN THE REVENUE HAS RAISED THE FOLLOWING GROUND OF APPE AL (REVISED): THAT OF THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 90,83,347/- O N ACCOUNT OF SUPPRESSION OF CLOSING STOCK, MADE BY THE AO. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS A COMPANY IN WHICH THE PUBLIC ARE NOT SUBSTANTIALLY INTERESTE D AND IS ENGAGED IN TOBACCO. THE ACTIVITY OF THE ASSESSEE INCLUDE PROCU REMENT, PROCESSING AND SELLING OF TOBACCO AND TOBACCO PRO DUCTS. THE BOOKS OF ACCOUNT WERE AUDITED U/S 44AB OF THE ACT. 2.1 FOR THE AY 2007-08 THE ASSESSEE FILED THE RETUR N OF INCOME ON 19/11/2007 ADMITTING AN INCOME OF RS. 2,81,595/-. T HE AO CONVERTED THE CASE TO SCRUTINY AND ISSUED NOTICES U/S 143(2) AND 142(1) OF THE IT ACT. THE AO CALLED FOR INFORMATION AND ASSESSME NT WAS COMPLETED 2 ITA NO. 756/H/14 M/S PRAPALSHA AGROS LTD. U/S 143(3) ON 30/06/2009 DETERMINING THE TOTAL INCO ME AT RS. 4,17,600/-. 3 THE CIT, IN EXERCISE OF THE POWERS VESTED U/S 263 OF THE ACT, CALLED FOR THE ASSESSMENT RECORD AND EXAMINED. THE REVISIONAL AUTHORITY WAS OF THE OPINION THAT CLOSING STOCK OF THE GOODS HAS TO BE VALUED AT COST OR MARKET PRICE, WHICHEVER IS LESS, BUT, THE AO DID NOT EXAMINE THIS ASPECT. HE, THEREFORE, SET ASIDE THE O RDER PASSED BY THE AO WITH A DIRECTION TO HIM TO REDO THE ASSESSMENT B Y APPLYING THE SETTLED ACCOUNTING PRINCIPLE, I.E. COST OR MARKET P RICE, WHICHEVER IS LESS. 3.2 IT DESERVES TO BE NOTICED THAT THE CASE OF THE ASSESSEE WAS THAT TOBACCO LEAVES BEING AGRICULTURAL CROP, IT IS VERY SENSITIVE TO CLIMATIC CONDITIONS, MONSOON, SUN SHINE ETC. AND ACCORDINGLY , THE ASSESSEE CONSISTENTLY FOLLOWED THE PRINCIPLE OF COST OR MAR KET PRICE, WHICHEVER IS LESS AND THERE HAS BEEN NO DEVIATION IN THE SAME . IT WAS ALSO MENTIONED THAT DEPENDING ON THE FACT AS SAID ABOVE, THE PROCESS OF CLEANING OF TOBACCO AND GRADING THEM HAS TO BE UNDE RTAKEN. HOWEVER, CIT WAS OF THE OPINION THAT AO IS REQUIRED TO EXAMI NE THE ISSUE OF VALUATION OF CLOSING STOCK AFTER VERIFICATION OF ST OCK REGISTER, AFTER ANALYZING THE PRODUCE OF TOBACCO QUALITY WISE AND A RRIVE AT THE CORRECT QUANTITY OF TOBACCO QUALITY WISE. 3.3 CONSEQUENT TO THE DIRECTION BY THE CIT, AO PASS ED AN ORDER DATED 31/12/2012 WHEREIN HE ARRIVED AT VALUE OF SUP PRESSION OF STOCK AT RS. 90,83,347/-. 4. ON AN APPEAL BY THE ASSESSEE, THE CIT(A) DELETED THE ADDITION MADE BY THE AO AND, THUS, THE REVENUE IS IN APPEAL BEFORE US. 5. DURING THE COURSE OF HEARING LD. COUNSEL, APPEAR ING FOR THE ASSESSEE, SUBMITTED THAT THE ORDER PASSED BY THE RE VISIONAL AUTHORITY U/S 263 OF THE ACT WAS CHALLENGED BEFORE THE HONBL E ITAT AND THE A BENCH OF HYDERABAD, IN ITS ORDER DATED 28/10/20 16, QUASHED THE ORDER PASSED BY THE LD. CIT BY OBSERVING AS UNDER: 3 ITA NO. 756/H/14 M/S PRAPALSHA AGROS LTD. 16. LD. CIT HAS FOUND OUT THAT THE ORDER PASSED BY THE AO IS ERRONEOUS, BUT, COULD NOT BE QUANTIFIED HOW IT IS P REJUDICIAL TO THE INTERESTS OF REVENUE. THE ASSESSEE HAS BOUGHT THE T OBACCO LEAVES AND SOLD THE LEAVES AS PER THE PROCESSING RE SULT. THAT MEANS THE COST OF THE PURCHASE WAS APPORTIONED AND ADJUSTED IN THE SELLING PRICE. THE LEFT OVER OF THE STOCK WAS V ALUED AS PER MARKET PRICE. THIS WILL BE THE OPENING VALUE FOR TH E FOLLOWING YEAR. THERE IS NO LOSS TO THE REVENUE AS PRESUMED B Y THE LD. CIT. IN THE ABSENCE OF ANY FINDING AS LOSS TO THE REVENU E, WE FIND IT APPROPRIATE TO ADJUDICATE THAT THE ORDER OF THE AO IS NOT PREJUDICIAL TO THE REVENUE AND ACCORDINGLY THE ORDE R OF CIT IS QUASHED. 5.1 IT WAS THEREFORE SUBMITTED THAT APPEAL FILED BY THE REVENUE IS EVEN OTHERWISE INFRUCTUOUS SINCE THE CONSEQUENTIAL ORDER PASSED BY THE AO HAS NO LEGS TO STAND AND, AS A NECESSARY COR OLLARY, THE PROCEEDINGS EMANATING THEREFROM ARE OF ACADEMIC IMP ORTANCE. 6. LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDER PASSED BY THE AO. 7. WE ARE CONCERNED HEREIN WITH THE ASSESSMENT ORDE R DATED 31/12/2012, WHICH WAS PASSED TO GIVE EFFECT TO THE DIRECTION GIVEN BY THE REVISIONAL AUTHORITY U/S 263 OF THE ACT. SINCE THE ORDER PASSED U/S 263 WAS QUASHED BY THE ITAT, THE CONSEQUENTIAL ORDE R PASSED BY THE AO WOULD AUTOMATICALLY GETS VACATED. THUS, APPEAL F ILED BY THE REVENUE IS TREATED AS INFRUCTUOUS. 8. IN THE RESULT, FOR STATISTICAL PURPOSES, APPEAL FILED BY THE REVENUE IS TREATED AS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 10 TH FEBRUARY, 2017. SD/- SD/- (D. MANMOHAN) (S. RIFAUR RAHM AN) VICE PRESIDENT A CCOUNTANT MEMBER HYDERABAD, DATED: 10 TH FEBRUARY, 2017 KV 4 ITA NO. 756/H/14 M/S PRAPALSHA AGROS LTD. COPY TO:- 1) ITO, WARD 16(2), ROOM NO. 227, BLOCK 2, IT TOWERS, AC GUARDS, HYDERABAD. 2) M/S PRAPALSHA AGROS LTD., 7-1-38/A, FLAT NO. 30 6A, SHYAMKARAN ROAD, BEGUMPET, HYDERABAD 500 016 3) CIT(A) V, HYDERABAD. 4) CIT IV , HYD. 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6) GUARD FILE