ACIT, CHENNAI V. M./s. Rasi Silk Industries Limited, CHENNAI

ITA 800/CHNY/2008

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7757 (ITAT-CHENNAI)
• Duration Of Justice: 4 year(s) 3 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 25-07-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 16-04-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIRUDH RAI IRS
• Assessee Lawyers: DR ANITA SUMANTH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT, AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NO.800/MDS/2008 (ASSESSMENT YEAR: 2003-04) ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-V(3), 4 TH FLOOR, MAIN BUILDING, 121, N.H.ROAD, CHENNAI-600 034, VS. M/S.RASI SILK INDUSTRIES LTD., 1, SANNADHI STREET, MYLAPORE, CHENNAI-600 004. PAN:AABCR5878D (APPELLANT) (RESPONDENT) APPELLANT BY : MR. ANIRUDH RAI, IRS, CIT DR RESPONDENT BY : DR. ANIT A SUMANTH, ADVOCATE DATE OF HEARING : 25 TH JULY, 2012 DATE OF PRONOUNCEMENT : 25 TH JULY 2012 O R D E R PER VIKAS AWASTHY, JUDICIAL MEMBER: THE APPEAL HAS BEEN FILED BY THE REVENUE ASSAIL ING THE ORDER OF THE CIT(A)-V, CHENNAI DATED 07.11.2007 . THE ONLY GROUND AGITATED BY THE REVENUE IN THE APPEAL I S WITH REGARD TO THE TREATMENT OF SAMPLES OF FABRICS AND S ARIS PURCHASED BY THE ASSESSEE AS CLOSING STOCK. 2. THE ASSESSEE IS A MANUFACTURER AND EXPORTER OF S ILK FABRIC AND TEXTILES. THE ASSESSEE FILED RETURN OF I NCOME RELEVANT TO THE ASSESSMENT YEAR 2003-04 ON 14.11.20 03 ITA NO. 800/MD S/2008 2 ADMITTING LOSS OF ` 57,09,650/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143( 2) WAS ISSUED ON 25.11.2004 TO THE ASSESSEE. THE ASSESSIN G OFFICER VIDE ASSESSMENT ORDER DATED 28.2.2006 MADE ADDITION ON ACCOUNT OF CLOSING STOCK OF DESIGNS TO THE TUNE OF ` 8.39 CRORES AND COMPUTERIZED DESIGNS AMOUNTING TO ` 1 CRORES. 3. AGGRIEVED AGAINST THE ASSESSMENT ORDER, THE ASSE SSEE PREFERRED AN APPEAL BEFORE THE CIT(A)-V, CHENNAI. T HE CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE AND DELETED THE ADDITIONS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ADDITIO N MADE IN RESPECT OF CLOSING STOCK. THE REVENUE HAS COME IN S ECOND APPEAL IMPUGNING THE ORDER OF THE CIT(A) ON THE GRO UND THAT THE CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSING OFFICERS ACTION OF TREATING THE COST OF FABRICS/SARIS FOR DE VELOPMENT OF DESIGNS AS CLOSING STOCK AND SAMPLES OF THE DESIGN S EXPORTED REMAINED WITH THE ASSESSEE COMPANY AS CL OSING STOCK IS NOT IN ORDER THEREBY DELETING THE ADDITION OF ` 9,39,01,498/- MADE TOWARDS CLOSING STOCK. 4. SHRI ANIRUDH RAI APPEARING ON BEHALF OF THE REVE NUE SUBMITTED THAT THE CIT(A) HAS NOT TAKEN INTO CONSID ERATION THE ITA NO. 800/MD S/2008 3 FACT THAT PURCHASES MADE BY THE ASSESSEE AS DESIGNS REMAINED WITH THE ASSESSEE AND/OR SOLD SUBSEQUENTLY AT A DISCOUNTED RATE. HE FURTHER SUBMITTED THAT THE DESI GNS WHICH REMAIN WITH THE ASSESSEE BECAME PART OF THE CLOSIN G STOCK OF THE ASSESSEE. 5. ON THE OTHER HAND, DR. ANITA SUMANTH, APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ORDER PAS SED BY THE CIT(A) IS A WELL-REASONED AND DETAILED ORDER. THER EFORE, NO INTERFERENCE IN THE ORDER IS CALLED FOR. THE APPEAL OF THE REVENUE MAY BE DISMISSED BY THE TRIBUNAL BEING DEVO ID OF MERIT. 6. WE HAVE HEARD THE SUBMISSIONS MADE BY THE PARTIE S AND HAVE GONE THROUGH THE ORDERS OF THE LOWER AUTHO RITIES. WE ARE OF THE CONSIDERED OPINION THAT THE SAMPLES OF D ESIGNS PURCHASED BY THE ASSESSEE COMPANY CANNOT BE CONSIDE RED AS PART OF THE CLOSING STOCK. THE DESIGNS ARE NOT M EANT TO BE SOLD AS SUCH AS A PRODUCT. THE CIT(A) IN HIS WELL-R EASONED AND DETAILED ORDER HAS HELD THAT THE COMMERCIAL POT ENTIAL OF THE DESIGNS HAD ALREADY BEEN EXHAUSTED IN THE PROCE SS OF SALE AND EXPORT. THE LEFT OVER BITS AND PIECES ARE SOLD EITHER ITA NO. 800/MD S/2008 4 AS BITS OR AS SCARVES AND SALE CONSIDERATION OF SUC H WASTAGE IN THE DESIGNS AND DEVELOPMENT PROCESS HAS ALREADY BEEN ACCOUNTED FOR IN THE BOOKS. THEREFORE, TO CONSIDER THE COST OF FABRICS AND SARIS FOR DEVELOPMENT OF DESIGNS AS CLO SING STOCK AND SAMPLES OF DESIGNS EXPORTED WHICH REMAINED WITH THE ASSESSEE AS CLOSING STOCK IS NOT APPROPRIATE. 7. WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF TH E CIT(A). NO INTERFERENCE IN THE ORDER OF THE CIT(A) IS CALLE D FOR. WE, THEREFORE, UPHOLD THE FINDINGS OF THE CIT(A) AND DI SMISS THE APPEAL OF THE REVENUE BEING DEVOID OF MERITS. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON WEDNESDAY, THE 25 TH DAY OF JULY, 2012 AT CHENNAI. SD/- SD/- (DR. O.K.NARAYANAN) (VIKAS AWASTHY) VICE PRESIDENT JUDICIAL MEMBER CHENNAI, DATED THE 25 TH JULY, 2012. SOMU COPY TO: (1) APPELLANT (4) CIT(A) (2) RESPONDENT (5) D.R. (3) CIT (6) G.F.