THE CENTRAL COOPERATIVE WELFARE SOCIETY LIMITED,PORT BLAIR V. ITO, WARD 3(4), , PORT BLAIR

ITA 932/KOL/2025

AI Insights

The case involves The Central Cooperative Welfare Society Limited, which appealed against the order of the National Faceless Appeal Centre, Delhi, confirming the addition of Rs.1,25,98,834/- to the assessee's income for the Assessment Year 2015-16. The addition was related to the revaluation of damaged stocks. The assessee argued that the actual impact on profitability for the year was Rs.26,88,599/-, as opposed to the higher amount added by the Assessing Officer. The Tribunal examined the stock verification process and the valuation method used by the assessee, which involved a systematic and supervised assessment of damaged stocks, and found it to be reasonable.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 835812 (ITAT-KOLKATA)
• Duration Of Justice: 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 30-04-2025
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJIB KUMAR PAUL
• Assessee Lawyers: AKKAL DUDHWEWALA
• Keywords: Valuation report
• Section: 142(1)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRI PRADIP KUMAR CHOUBEY, JM ITA No. 932/KOL/2025 (Assessment Year:2015-16) The Central Cooperative Welfare Society Limited 64, M.G. Road, Aberdeen Bazar, Port Blair, Andaman and Nicobar Islands, 744101 Vs. ITO, Ward 3(4) Aaykar Bhawan, MB-210, Port Blair, Andaman and Nicobar Islands, 744102 (Appellant) (Respondent) PAN No. AADAT1759M Assessee by : Shri Akkal Dudhwewala, AR Revenue by : Shri Sanjib Kumar Paul, DR Date of hearing: 20.01.2026 Date of pronouncement: 10.02.2026 O R D E R Per Rajesh Kumar, AM: This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 03.03.2025 for the AY 2015-16. 2. The issue raised in Ground No. 1 is against the confirmation of addition of Rs.1,25,98,834/- by the ld. CIT (A) as made by the ld. AO in respect of revaluation of closing stock. 2.1. The facts in brief are that the assessee filed the return of income on 08.10.2015, declaring total income at Rs.2,34,360/-. Thereafter, the case of the assessee was selected for scrutiny and notice u/s 143(2) and 142(1) of the Income-tax Act, 1961 (the Act) along with Printed from counselvise.com Page | 2 ITA No. 932/KOL/2025; The Central Cooperative Welfare Society Limited; A.Y. 2015-16 questionnaire were issued and duly served upon the assessee. On perusal of the tax audit report, the ld. AO noted that the assessee had revalued damaged stocks having market value of Rs. 1,28,78,973/- at Rs. 2,80,134/-. The ld. AO issued show cause dated 18.12.2017 asking the assessee to substantiate the reason, basis and procedure of revaluation of such stock and why the reduction in value of stock should not be disallowed. After considering the response of the assessee, the ld. AO was of the view that the assessee was unable to offer any reasonable explanation and therefore added back the same. 2.2. The ld. CIT (A) confirmed the addition in the appellate proceedings. 2.3. The ld. AR stated that the assessee is a society dealing in hardware items and serving the remote parts of Andaman & Nicobar Islands. He submitted that, due to efflux of time, moisture and erosion, the hardware items stored in the remote locations are damaged and are rendered defective. He brought to our notice that each year, a stock verification exercise is conducted under the supervision of the Director of Societies and a statement is drawn up which contains the details of physical quantities along with their retail selling rates and the expected realizable value. He then invited our attention to the stock valuation exercise undertaken upon such stock verification which is also certified by the Chartered Accountant. He pointed out that, there were very old / damaged stocks lying in several locations whose retail price was Rs.1,28,78,973/-. It was shown to us that the stocks were continuously revalued downwards over the years and it was submitted that until FY 2013-14, the reduction in the value of such damaged stock was Rs.99,10,325/-. The ld. AR accordingly submitted that the opening value of stock as on 01.04.2014 was already lower Printed from counselvise.com Page | 3 ITA No. 932/KOL/2025; The Central Cooperative Welfare Society Limited; A.Y. 2015-16 by Rs.99,10,235/- and that further valuation loss of Rs.26,88,599/- [Rs.1,25,98,834 (-) Rs.99,10,235/-] was provided during the relevant FY 2014-15. He thus contended that the impact on profitability during the relevant year was Rs.26,88,599/- and not Rs.1,25,98,834/-. The ld. AR thereafter took us through the stock verification statements of FYs 2013-14 and 2014-15 along with the stock valuation reports signed by the auditor and he pointed out that the further reduction in value of Rs.26,88,599/- provided during the year, was attributable to the revision in the estimation of realizable value of old / damaged stock at 5% of MRP as opposed to 10% of MRP, already provided upto immediately preceding year. The ld. AR thus claimed that the basis of reduction in valuation of old / damaged stock stood explained and thus urged us to delete the impugned addition. 2.4. Per contra, the ld. DR appearing for the Revenue vehemently supported the findings of the lower authorities. He argued that the assessee had not provided any scientific basis for estimation of realizable value and thus wanted us to uphold the addition. 2.5. After hearing the rival contentions and perusing the materials available on record, it is seen that, the assessee society which is dealing in hardware items would conduct stock verification exercise at the year end and thereafter quantify the old / damaged stock and estimate their realizable value. The stock verification statement for the immediately preceding year read along with the TAR of AY 2014-15 reveals that, the assessee Society had already provided for reduction in value of old / damaged stock of Rs.99,10,235/- upto 31.03.2014. We thus find merit in the ld. AR’s contention that the reduction in valuation of closing stock debited in the accounts for the relevant FY 2014-15 was Rs.26,88,599/- and not Rs.1,25,98,834/- as quantified Printed from counselvise.com Page | 4 ITA No. 932/KOL/2025; The Central Cooperative Welfare Society Limited; A.Y. 2015-16 by the ld. AO. In so far as the basis of valuation is concerned, as noted earlier, the assessee has demonstrated that the valuation was undertaken in a scientific and reasonable manner in terms of which, the Director of Societies would supervise the physical stock exercise undertaken by the branch heads at the respective locations, identify the old damaged stock and thereafter estimate the net realizable value with the approval of the auditor. According to us, it cannot be said that the method and manner of valuation adopted by the assessee was arbitrary or unreasonable. It is also not a case that the ld. AO had invoked Section 145(3) and rejected the audited books of accounts and in that view of the matter, the valuation of closing stock as undertaken by the assessee society could not have been interfered with. Hence, the addition of Rs.1,25,98,834/- on account of valuation of closing stock is held to be unjustified and the ld. AO is directed to delete the same. This ground is accordingly allowed. 3. The issue raised in Ground Nos. 2 and 3 is not pressed at the time of hearing and therefore, Ground Nos.2 & 3 are dismissed. 4. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 10.02.2026. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated:10.02.2026 Sudip Sarkar, Sr.PS Printed from counselvise.com Page | 5 ITA No. 932/KOL/2025; The Central Cooperative Welfare Society Limited; A.Y. 2015-16 Copy of the Order forwarded to: BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. Printed from counselvise.com "