Madras High Court
Commissioner Of Income-Tax vs G.R. Thangamaligai on 9 October, 2002
Equivalent citations: (2003)185CTR(MAD)560, [2003]259ITR129(MAD)
Author: R. Jayasimha Babu
Bench: R. Jayasimha Babu, K. Raviraja Pandian
ORDERAbsence of finding of Commissioner that there was loss to revenue Catch Note: Assessee valued closing stock of gold at market wholesale rate claiming a discount for loss of purity--Assessing officer did not reject reasons given by assessee for adopting method of valuation but added an ad-hoc amount to value given by assessee--Commissioner invoking section 263 did not find that discount claimed for impurity would be less but held that assessing officer ought not to have given deduction for any other factor--Tribunal dismissed order of Commissioner--Was justified in doing so--In the absence of any finding that there was any loss of revenue, interference under section 263 was not justified, order of Tribunal was, therefore, in order. Ratio: In the absence of any finding that there was any loss of revenue, interference under section 263 was not justified and order of Tribunal dismissing order in revision was, therefore, in order. Held: Having regard to the finding of the Commissioner that the deductions were required to be given on account of the impurities and change of fashion, it is clear that even he did not regard the market rate as one that was required to be adopted. He has not found that the rate actually adopted is less than the one that should have been adopted. In the absence of any finding that there is loss of revenue, interference under section 263 of the Act was not justified. Application: Also to current assessment year. Decision: In favour of assessee. Income Tax Act 1961 s.263 JUDGMENT R. Jayasimha Babu, J.
1. The questions referred to us at the instance of the Revenue are :
"(1) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law and had enough materials to hold that the fair market value of the closing stock of jewellery as on the date of retirement of partner, Shri G. Mahalakshmi Ammal, has to be adopted on the basis of wholesale rate and further deduction of 10-15 per cent, has to be allowed in respect of wastage as against the actual market rate quoted on the date of retirement ?
(2) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law and had enough materials to hold that the original assessment order was neither erroneous nor prejudicial to the interests of the Revenue ?
(3) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the Commissioner of Income-tax was not justified in initiating revisionary proceedings under Section 263 and setting aside the original assessment order ?"
The assessment year is 1987-88.
2. The assessee is a firm which had two partners. By a deed of dissolution dated July 27, 1986, one of the partners retired and the business continued as the proprietary concern of the other. The closing stock of gold as on the date of retirement was taken as 88,520 grams. The assessee valued it at Rs. 185 per gram, after stating that the market wholesale rate for 22 carat gold was at Rs. 193 per gram.
3. The rate adopted by the assessee was justified on the ground that the gold ornaments contained copper which is used for soldering and therefore, its purity was less and on account of loss of purity, a deduction of 15 per cent. was required to be made. He also took into account the expectation of any purchaser of that stock to make a profit out of the purchase and that profit was required to be discounted from the value of the stock.
4. The Assessing Officer did not reject those reasons, but merely added a sum of Rs. 2,00,000 to the valuation made by the assessee and finalised the assessment. That order was revised by the Commissioner, who took the view that the Assessing Officer should have given deduction for possible impurities, change of fashion, etc., only and not any other factor. The Commissioner did not find that the discount to be given on those grounds would be less than the discount from the market rate as had been calculated by the assessee and accepted by the Assessing Officer.
5. The Commissioner's order having been challenged before the Tribunal, the Tribunal set aside that order on the ground that the order of assessment was neither erroneous nor prejudicial to the interests of the Revenue.
6. The questions involved are essentially questions of fact with regard to the extent of discount to be given. We have no material before us on which the correctness or otherwise of the deduction given can be tested.
7. Having regard to the finding of the Commissioner that the deductions were required to be given on account of the impurities and change of fashion, it is clear that even he did not regard the market rate as one that was required to be adopted. He has not found that the rate actually adopted is less than the one that should have been adopted.
8. In the absence of any finding that there is loss of revenue, interference under Section 263 of the Act was not justified. Questions Nos. 2 and 3 are answered in favour of the assessee and against the Revenue.
9. As regards the first question, it is returned unanswered as we do not have proper material before us that question being essentially one of fact.