Income Tax Appellate Tribunal - Chandigarh
Sh. Kuldeep Chand Jain (Huf), Ambala ... vs Assessee on 5 September, 2013
I N T H E I NC O ME T A X A P PE L L A T E T RI B U N AL
C H A NDI G A RH B E N CH E S ' B ' CH A N DI G A RH
BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER
AND MS SUSHMA CHOWLA, J UDIC IAL MEMBER
ITA No. 705/Chd/2013
Assessment Year:2009-10
The Dy. Commissioner of Income Tax, Vs Shri Kuldeep Chand Jain (HUF),
Circle, Prop.M/s Sat Ram Mangat Ram Jain
Ambala. Sarafa Bazar,
Ambala City.
PAN No. AAFHK-2242H
&
C.O. No. 22/Chd/2013
In ITA No. 705/Chd/2013
Shri Kuldeep Chand Jain (HUF), Vs The Dy. Commissioner of Income Tax,
Prop.M/s Sat Ram Mangat Ram Jain Circle,
Sarafa Bazar, Ambala.
Ambala City.
(Appellant) (Respondent)
A p p e l l a n t b y: Shri Manjit Singh
Respondent by : Shri Tej Mohan Singh
Date of Hearing : 05.09.2013
Date of Pronouncement : 23.09.2013
O R D E R
PER SUSHMA CHOWLA, J.M.
The revenue has filed the appeal and assessee has filed the Cross Objections against the order of the CIT(Appeals), Panchkula d a t e d 0 8 . 0 4 . 2 0 1 3 r e l a t i n g t o a s s e s s m e n t ye a r 2 0 0 9 - 1 0 a g a i n s t t h e order passed under section 143(3) of the Income-tax Act, 1961 ( 'the Act' for short).
2. Both the appeal filed by the revenue and the Cross Objections filed by the assessee were heard together and are being disposed of by this consolidated order for the sake of convenience. 2
3. The revenue has raised the following grounds of appeal:
"1. That the Ld. CIT(A)-II has erred in law and on facts in quashing the assessment by holding that reopening of assessment u/s 147 of the Income-tax Act, 1961 and issue of notice u/s 148 of the Income-tax Act, 1961 was not valid as there was no failure on the part of the assessee to disclose fully and truly all material facts relevant for assessment.
2. That the Ld. CIT(A)-II has erred in law and on facts in holding that even on merits also, the adjustments made by the A.O. for purpose of deductions u/s 80HHC were not valid and were not in order.
3. That the order of the CIT(A)-II be set aside and that of the A.O. be restored."
4. The assessee has raised following ground in the Cross Objections :
"1. The ld. CIT(Appeals) has erred in law as well as on facts in upholding the addition of Rs. 1,50,000/- applying the provisions of section 68 which are not applicable in the instant case and as such the addition upheld is arbitrary and unjustified."
5. The only issue raised in the appeal filed by the revenue is against the deletion of addition of Rs. 58,28,392/- made on account of valuation of closing stock.
6. The ld. AR for the assessee pointed out that similar issue arose before the Tribunal in assessee's own case relating to a s s e s s m e n t ye a r 2 0 0 7 - 0 8 a n d t h e m e t h o d o f v a l u a t i o n o f c l o s i n g stock followed by the assessee was accepted.
7. The ld. DR for the revenue placed reliance on the order of the Assessing Officer.
8. The issue arising in the present appeal is in relation to the rejection of books of account by the Assessing Officer and thereafter, computation of value of the closing stock of gold ornaments weighing 29836.225 grams on average basis method. The assessee claimed to have followed the LIFO method for 3 valuing its closing stock of gold ornaments. However, the Assessing Officer adopted the average price i.e. the value of opening stock of gold and value of purchases of gold to work out the value of closing stock and difference in valuation of stock i.e. as worked out by the Assessing Officer and as declared by the assessee at Rs. 58,28,290/- was added as income of the assessee.
9. The CIT(Appeals) deleted the addition made by the Assessing Officer in view of the findings of Tribunal in assessee's o w n c a s e r e l a t i n g t o a s s e s s m e n t ye a r 2 0 0 7 - 0 8 . The CIT(Appeals), thus held that there was no reason to interfere with the method of valuation of closing stock adopted by the assessee and the rejection of books of account to adopt new method of valuation of closing stock was held to be wrong. The addition of Rs. 58,28,390/- was, thus deleted by the CIT(Appeals).
10. We have heard the rival contentions and perused the record. The assessee is engaged in the business of sale and purchase of j e w e l l e r y. The assessee, in order to value its closing stock is following LIFO method which is one of the prescribed method of accounting standards issued by the Institute of Chartered A c c o u n t a n t s o f I n d i a f o r v a l u a t i o n o f i n v e n t o r y. The said method of valuing the closing stock of gold ornaments has been c o n s i s t e n t l y f o l l o w e d b y t h e a s s e s s e e f r o m ye a r t o y e a r . Similar m e t h o d w a s f o l l o w e d b y t h e a s s e s s e e i n a s s e s s m e n t ye a r 2 0 0 7 - 0 8 . The Assessing Officer in assessment year 2007-08 had made an addition of Rs. 32,08,977/- on account of valuation of closing stock of gold ornaments. The Tribunal in ITA No. 1378/Chd/2010 4 r e l a t i n g t o a s s e s s m e n t ye a r 2 0 0 7 - 0 8 i n D C I T V s S h r i K u l d e e p Chand Jain, HUF, vide order dated 24.4.2012, had held as under :
"4. We have carefully perused the rival submissions, facts of the case and relevant record. The brief facts of the case are that the appellant is a wholesale & retail sarafa merchant. The assessee filed return of income on 31.10.2007, declaring income of Rs.29,20,088/-. A survey u/s 133A of the Act was conducted, on the business premises of the assessee, on 13.10.2006, during which appellant surrendered an additional income of Rs.26 lacs ( Rs.17 lacs on account of unexplained old gold and diamond jewellery and Rs.9 lacs on account of excess cash found. The AO framed assessment u/s 143(3) at an income of Rs.61,29,065/- after making disallowance of Rs.32,08,977/- on account of under valuation of closing stock. AO also rejected the books of account of the appellant and treated the surrendered amount of Rs.26 lacs as deemed income.
5. In the course of assessment proceedings, the assessee informed the AO, that LIFO method of accounting was followed in valuation of closing stock. The contention of the assessee was not found acceptable by the AO. The AO, referred to A.S.-2, that specifies of only three methods of determining the cost of inventories i.e. specific identification method, FIFO and Weighted average cost method. The AO made an addition of Rs.32,08,977/- following the weighted average cost method of the closing stock. The ld. CIT(A), on appreciation of the case laws and submissions filed before her, gave her findings in para 5.2 of the appellate order, which are reproduced hereunder :
"5.2 I have carefully considered the submission filed by the appellant, it was informed that the AO has accepted the calculation error in the closing stock valuation and has rectified the same by passing order u/s 154 dated 30.06.2010 vide which the difference in stock stand reduced from Rs.32,08,977/- to seen that during the A.Y. 2003-04, 20Q5-06 and 2006-07 assessment for which was completed u/s 143(3), the method of Valuation of closing stock has been accepted by the AO including by the AO who has passed the assessment order for the year under appeal. Therefore, the AO cannot reject the method of valuation of closing stock which is consistently' followed by the appellant and has also been accepted by the AO in the past. I agree with the appellant that rule of consistently has to be followed and observed. Further, it is seen that the Hon'ble Punjab & Haryana High Court in appellant's own case CIT vs. Sant Ram Mangat Ram (195 CTR 345) observed as under :-
"It is an admitted position that from the inception of its business, the assessee had continuously adopted the same method of valuation of the closing stock and no objection was raised by the Department in any of the previous years.5
Rather, the competent authority accepted the method adopted by the assessee and accordingly, made assessment. This being the position, we do not find any valid ground to accept the argument of Shri Bindal that the method adopted by the assessee for valuation of the stock was legally impermissible and on that account, the additions made by the Inspecting Assistant Commissioner should be restored. In United Commercial Bank v. CIT [1999] 240 ITR 355, their Lordships of the Supreme Court held that the method which was consistently followed by the appellant-bank for valuing the stock-in-trade could not be rejected by the accessing authority in a particular year. "
There is merit in the appellant's submissions that the principle of judicial discipline requires that the order of the Higher Appellate Authority should be followed unreservedly by the subordinate authorities. Therefore, in view of the above stated facts - assessee having consistently employed the same method of valuation of closing stock and AO having not questioned the same and in fact having accepted it in the previous assessment years, it is held that the method of valuation of closing stock could not be rejected. Therefore, the addition made by the AO which by her order of rectification u/s 154 stands reduced to Rs. 19,45,073/- on account of difference in valuation of closing stock is deleted. This ground of appeal is allowed."
6. A bare perusal of the findings of CIT(A) reveals that on the basis of the doctrine of consistency in relation to method of valuation of inventory as also the decision of the jurisdictional High Court in assessee's own case, she recorded findings in favour of the assessee. Having regard to the fact-situation of the case, decision of the Hon'ble jurisdictional High Court, relied upon by the ld. CIT(A), and the relevance of consistency principle in the matter, we do not find any infirmity, in the findings of the CIT(A), and hence, the same are upheld. Thus, the ground of appeal of the revenue is dismissed."
11. In view of the issue raised in the present appeal being similar t o t h e i s s u e r a i s e d i n a s s e s s m e n t ye a r 2 0 0 7 - 0 8 a n d t h e a s s e s s e e having consistently followed the same method of valuation of its i n v e n t o r y, w e u p h o l d t h e o r d e r o f C I T ( A p p e a l s ) i n d e l e t i n g t h e addition of Rs. 58,28,390/-. The ground of appeal raised by the revenue is, thus dismissed.
12. The assessee in its Cross Objections has raised the issue against the addition of Rs. 1,50,000/-. During the course of 6 assessment proceedings, the Assessing Officer noted that there was a credit of Rs. 1,50,000/- on 15.12.2008 in the capital account of the assessee. The explanation of the assessee in this regard was that the said cheque had been received from M/s Good Faith Cement Pvt. Ltd. to whom the said amount was given on 07.09.2006. The assessee filed the confirmation from the said p a r t y. However, the notice issued by Assessing Officer under section 133(6) of the Act was received back undelivered at the address given by the assessee. The assessee sought time to contact the said party and it was also pointed out that since the amount has been routed through banking channels, enquiries may be made from the bank. The Assessing Officer rejecting the explanation of the assessee and in the absence of the assessee having discharged its onus made an addition of Rs. 1,50,000/-..
13. The CIT(Appeals) upheld the said addition of Rs. 1,50,000/-.
14. The ld. AR for the assessee pointed out that the sum of Rs. 1,50,000/- was advanced to M/s Good Faith Cement Pvt. Ltd. in cash on 07.09.2006 and the same was returned vide cheque on 05.12.2008 and the same was deposited in the bank account of the assessee, which is apparent from the bank statement. The ld. AR for the assessee stressed that sufficient opportunity was not granted to the assessee to furnish further information in this regard.
15. The ld. DR placed reliance on the order of the authorities below.
16. We have heard the rival contentions and perused the record. The assessee has filed the confirmation of M/s Good Faith Cement 7 Pvt. Ltd. at page 12 of the Paper Book alongwith the copy of the cheque issued by the said authority and the bank statement in which such cheque had been deposited. The explanation of the assessee was not accepted as the letter issued by the Assessing Officer under section 133(6) of the Act was received back undelivered. In the totality of the facts and circumstances of the case and following the principle of natural justice, we deem it fit to restore this issue back to the file of Assessing Officer to re- decide the same denovo after affording reasonable opportunity of hearing to the assessee. The assessee has to discharge the onus cast upon him and furnish the requisite information before the Assessing Officer. Thus, the ground of appeal raised in the Cross Objection is allowed for statistical purposes.
17. In the result, appeal of the revenue is dismissed and the Cross Objection of the assessee is allowed for statistical purposes.
Order Pronounced in the Open Court on this 23rd day of September, 2013.
Sd/- Sd/-
(T.R.SOOD) (SUSHMA CHOWLA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated 23rd September,2013
Poonam
Copy to:
1. The Appellant
2. The Respondent
3. The CIT
4. The CIT(A)
5. The DR
By Order
Assistant Registrar, ITAT,
Chandigarh