D.A. Shyam Sundar, Bangalore V. DCIT, Bangalore

ITA 776/BANG/2011

• Counselvise Citation: 77621114 RSA 2011
• Duration Of Justice: 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-01-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 02-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G V GOPALA RAO
• Assessee Lawyers: S R KIRON
• Section: 142(1); 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A BEFORE SHRI N. BARAT H VAJA SANKAR, VICE - PRESIDENT A ND SMT. P.MADHAVI DEVI , JUDICIAL MEMBER ITA NO.776(BANG)/2011 (ASSESSMENT YEAR: 2008-09) SHRI D.A. SHYAM SUNDAR, 608, AVENUE ROAD, NEXT TO RICE MEMORIAL CHURCH, BANGALORE - 560001 PAN: ABWPS 2610 M VS. APPELLANT DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE 2(1) BANGALORE RESPONDENT APPELLANT BY: SHRI S.R. KIRON. RESPONDENT BY : SHRI G.V.GOPALA RAO. DATE OF HEARING: 09 - 01 - 2012 DATE OF PRONOUNCEMENT: 09 - 01 - 2012 O R D E R PER N.BARATHVAJA SANKAR, VP: THIS IS AN APPEAL PREFERRED BY THE ASSESSEE- SHRI D.A.SHYAM SUNDER FOR THE ASSESSMENT YEAR 2008- 09 AGAINST THE APPELLATE ORDER DATED 8-8-2011 OF THE C IT(A)-I, BANGALORE. 2. THE ONLY ISSUE BROUGHT BEFORE US FOR ADJUDICATI ON IS REGARDING VALUATION OF CLOSING STOCK OF JEWELLERY O F THE ASSESSEE. THE RELEVANT GROUNDS OF APPEAL READ AS U NDER: ITA 776(BANG)/2011 PAGE 2 OF 4 2. THE LEARNED CIT(A) IS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF ` .1,37,98,322/- MADE BY THE ASSESSING OFFICER IN RESPECT OF VALUATION OF CLOSING STOCK BY PRESUMING THAT THE APPELLANT HAD VALUED HIS CLOSING STOCK BY FOLLOWING LIFO METHOD AND ACCORDINGLY CONVERTING THE ALLEGED LIFO METHOD INTO FIFO METHOD AND TREATING THE DIFFERENCE OF ` .1,37,98,322 THAT HAS ARISEN DUE TO SUCH CONVERSION AS INCOME, WHILE ALL ALONG THE FACT REMAINS THAT THE APPELLANT HAS BEEN CONSISTENTLY FOLLOWING AVERAGE OF COST METHOD. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE ADDITION MADE DESERVES TO BE DELETED. 3. WITHOUT PREJUDICE TO GROUND 2 ABOVE, THE LEARNED CIT(A) IS NOT JUSTIFIED IN STATING IN HIS ORDER THA T IN GROUND 9, THE AUTHORIZED REPRESENTATIVE PLEADS THAT ONCE RATE IS ADOPTED FOR VALUATION OF CLOSING STOCK, THE SAME RATE SHOULD HAVE BEEN ADOPTED FOR OPENING STOCK, WHEN THE APPELLANT HAD SOUGHT THAT THE METHOD ADOPTED BY ASSESSING OFFICER FOR VALUATION OF CLOSING STOCK SHOULD ALSO BE ADOPTED TO VALUE THE OPENING STOCK, TO ARRIVE AT THE CORRECT INCOME OF THE YEAR. THUS THE ADDITION OF ` .1,37,98,322 MADE BY THE ASSESSING OFFICER BY ADJUSTING ONLY THE CLOSING STOCK AND SUSTAINED BY THE LEARNED CIT(A) WITHOUT ACCORDINGLY CHANGING THE OPENING STOCK ALSO NEEDS TO BE DELETED. 4. WITHOUT PREJUDICE TO GRO UND 2 ABOVE, THE LEARNED AUTHORITIES BELOW HAVE ERRED COMPLETELY IN GIVING A GO BYE TO THE PROVISIONS OF SECTIONS 145 AND 145A OF THE INCOME-TAX ACT 1961. THEY ARE NOT JUSTIFIED IN INSISTING FOR A CHANGE IN WHAT IS NOT A PART OF THE ACT OR RECOMMENDED BY THE ACT. SECTIONS 145 AND 145A DO NOT PERMIT THE LEARNED ASSESSING OFFICER TO CHANGE THE METHOD OF ACCOUNTING REGULARLY FOLLOWED BY THE APPELLANT. 3. WE HAVE HEARD LEARNED AR AND LEARNED DEPARTMENT AL REPRESENTATIVE. WE FIND THAT THE AO AND THE CIT(A) HAVE CONCLUDED THAT THE ASSESSEE WAS FOLLOWING LIFO METH OD OF VALUING STOCK. THE LEARNED C.A. FOR THE ASSESSEE F ILED PAPER BOOK CONSISTING OF (I) COMPUTATION OF INCOME FOR TH E YEAR ENDING ITA 776(BANG)/2011 PAGE 3 OF 4 31-3-2008 (II) STOCK STATEMENTS CONTROL, DETAILED (III)FORM NO.3CB & FORM NO.3CD FOR AYS 2001-02, 2006-07 TO 20 09-10, (IV) NOTICE U/S 142 DT.19-11-2010 (V) ASSESSEES RE PLY TO NOTICE U/S 142(1) DT.24-11-2010 (VI) NOTICE U/S 143(2) DT. 13-8-2010 (VII) ASSESSEES LETTER DT.6-12-2010 OBJECTING TO A OS PROPOSAL SEEKING EXPLANATION AS TO WHY FIFO METHOD SHOULD NO T BE FOLLOWED AND (VIII) WRITTEN SUBMISSION DT.28-7-2011 ADDRESSED TO CIT(A) AND BY ADVERTING TO FORMS 3CD FOR VARIOUS ASSESSMENT YEARS, PLEADED THAT THE ASSESSEE HAS BEE N CONSISTENTLY FOLLOWING THE AVERAGE OF COST METHOD. HE ALSO PLEADED THAT THE AUTHORITIES BELOW HAD NOT ADVERTED TO THIS CLAIM OF THE ASSESSEE. LEARNED DEPARTMENTAL REPRES ENTATIVE PLEADED THAT IN THAT CASE THE MATTER MAY BE RESTORE D BACK TO THE FILE OF THE CIT(A) TO LOOK INTO THE ASPECT OF F OLLOWING AVERAGE OF COST METHOD. 4. WE HAVE CONSIDERED THE PAPER BOOK AND THE SUBMISSIONS OF BOTH SIDES. PRIMA FACIE IT APPEARS THAT THE ASSESSEE HAS BEEN FOLLOWING CONSISTENTLY THE AVERAG E OF COST METHOD FOR VALUING ITS CLOSING STOCK. IT IS TRITE LAW, IF THE ASSESSEE HAS BEEN FOLLOWING CONSISTENT METHOD IT NE ED NOT BE DISTURBED. HOWEVER, SINCE THE CIT(A) HAS NOT GONE INTO THIS ASPECT OF CONSISTENCY, WE DEEM IT FIT AND PROPER TO RESTORE THE MATTER BACK TO THE FILE OF THE CIT(A) TO LOOK INTO THE FACT WHETHER THE ASSESSEE HAS BEEN CONSISTENTLY FOLLOWIN G THE AVERAGE OF COST METHOD FOR VALUING ITS CLOSING STOC K. IF THE ASSESSEE HAS BEEN CONSISTENTLY FOLLOWING AVERAGE OF COST ITA 776(BANG)/2011 PAGE 4 OF 4 METHOD, IN OUR VIEW, THERE IS NO NEED TO DISTURB TH E METHOD FOLLOWED BY THE ASSESSEE. WITH THE ABOVE DIRECTION , WE ARE RESTORING THIS ISSUE TO THE FILE OF THE CIT(A). 5. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES ONLY. ORDER PRONOUNCED IN THE OPEN COURT AT THE END OF TH E HEARING ON 9 TH JANUARY 2012. SD/- SD/- ( SMT. P.MADHAVI DEVI ) JUDICIAL MEMBER (N.BHARAT H VAJA SANKAR) VICE-PRESIDENT PLACE : BANGALORE DATED: 9 TH JANUARY,2012 EKS COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) CONCERNED 4. CIT 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE