Income Tax Appellate Tribunal - Mumbai
Nico Extrusions Limited,Mumbai vs Dcit, Circle 2(3)(1) Mumbai, Mumbai on 18 March, 2026
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCH "B" MUMBAI
BEFORE SHRI OM PRAKASH KANT (ACCOUNT MEMBER)
AND
MS. KAVITHA RAJAGOPAL (JUDICIAL MEMBER)
ITA No.7619 & 7620/MUM/2025
Assessment Year: 2009-10
Nico Extrusions Limited DCIT, Circle 2(3)(1) Mumbai
A/54, New Empire Premises Chs Aayakar Bhavan, Maharshi Karve
Ltd, Kondivita Road, Andheri Vs. Road, New Marine Lines, Mumbai-
(East), Mumbai-400059 400020
PAN NO- AAACN2104R
Appellant Respondent
Assessee by : Shri Paresh Shapria
Department by : Shri Vijaykumar Soni, CIT DR. &
Shri Swapnil Choudhari (SR. DR.)
Date of Hearing : 19/02/2026
Date of pronouncement : 18/03/2026
ORDER
PER OM PRAKASH KANT, AM
These two appeals by the assessee are directed against two separate orders dated 29.09.2025 and 30.09.2025 passed by the Ld. Commissioner of Income Tax (Appeals) - National Faceless Appeal Centre (NFAC), Delhi [in short "Ld. CIT(A)"] for Assessment Year 2009-10. The impugned orders arise from assessment orders passed under section 143(3) read with section Nico Extrusions Limited 2 ITA No. 7619 & 7620/MUM/2025 7620 263 and section 143(3) read with section 254 of the Income-tax Act, 1961 (the Act) respectively.
2. Briefly stated, facts of the case are that the assessee filed its return of income on 19.09.2009 declaring a loss of ₹5,43,91,122/-.. The assessment was completed under section 143(3) on 18.10.2011 determining the loss at ₹5,29,69,448/ 5,29,69,448/- and book profit underr section 115JB at ₹66,78,263/-.
2.1 Subsequently, the Ld. Principal Commissioner of Income Tax (PCIT) examined the assessment records and formed a view that the assessee had undervalued its closing stock by ₹6,07,91,429/-,, on the ground that the assessee had adopted one method of stock valuation in the books of account and another for income-tax tax purposes purposes.. Invoking the provisions of section 263, the Ld. PCIT, vide order dated 25.03.2014,, set aside the assessment directing tthe Assessing Officer to re--examine the issue and disallow the difference in valuation attributable to foreign exchange fluctuation.
2.2 The Ld. PCIT accordingly in invoked provision of section 263 of the Act ct and passed order on 25th March, 2014 directing the Assessing Officer fficer to examine and pass a fresh order disallowing the difference of value of inventory in the books of accoun accounts and the value adopted for tax purpose, which was stated to be on account of currency exchange fluctuation.
Nico Extrusions Limited 3 ITA No. 7619 & 7620/MUM/2025 7620 2.3 Pursuant thereto, the Assessing Officer passed an order under section 143(3) read with section 263 on 13.10.2014, making an addition of ₹6,07,91,429/- on account of difference in valuation of the stock.
2.4 Meanwhile the assessee challenged the order pass passed under section 263 before the Tribunal. The Co Co-ordinate ordinate Bench of the Tribunal, vide order dated 08.07.2016 in ITA No.3662/Mum/2014 No.3662/Mum/2014,, upheld the assumption of jurisdiction under section 263 but directed the Assessing Officer to examine the issue afresh in accordance with law in the light of the material available on record record.. The direction given by the Ld. PCIT in question was accordingly modified. For ready reference, said direction is reproduced as under:
"8.
8. In view of the said direction, it is quite clear that the Assessing Officer has to do the reassessment in accordance with the directions passed by the CIT(8) Mumbai while passing the order u/s 263 of the Act. The said direction nowhere leaves the room for the Assessing Officer to examine the matter of ccontroversy ontroversy afresh in the light of the material available before him. We are of the view that the issue in question is required to be examined afresh independently by the Assessing Officer and to pass the fresh order in accordance with law. The direction gi given ven by the CIT(8) is question is hereby modified accordingly. However, the appeal filed by the assessee is hereby ordered to be dismissed.
dismissed."
2.5 The Assessing O Officer again, in compliance to the order of the Tribunal (supra) a allowed the opportunity of being g heard to the assessee and passed an ass assessment essment order under section 143(3) 143 read with section 254 of the Act on 29/09/2017.
3. The assessee preferre preferredd appeal before the Ld. CIT(A) CIT against the order under section 143 143(3) read ead with section 263 dated 13th Nico Extrusions Limited 4 ITA No. 7619 & 7620/MUM/2025 7620 October ber 2014 as well as order under section 143(3) 143 read with section 254 dated 29th September 2017. The Ld. First Appellate Authority uthority dismissed both the appeals filed by the assessee on merit.
4. Aggrieved, the assessee has filed appeal before the Tribunal against both the impugned orders of the Ld. CIT(A).
5. At the outset, the Ld. Counsel for the Assessee contended that the assessment order dated 13th October 2014, passed in consequence of the original Section 263 order, does not survive in law. We find merit rit in this submission. Once the Tribunal directed the Assessing Officer to reconsider the issue and pass a fresh order in accordance with law, the subsequent order dated 29.09.2017passed under section 143(3) read with section 254 replaced the earlier ord order er passed in consequence of section 263. In such circumstances, the earlier order passed under section 143(3) read with section 263 does not retain independent existence. Accordingly, the earlier assessment order dated 13/10/2014 has been rendered redundan redundantt and infructuous.
6. Accordingly, the appeal arising from the order of ld CIT(A) against the said order u/s 143(3) read with section 263 is rendered infructuous and the ITA No. 7619/Mum/2025 is dismissed as infructuous.
Nico Extrusions Limited 5 ITA No. 7619 & 7620/MUM/2025 7620
7. We now take up the appeal of the assessee in ITA No.7620/Mum/2025 No.7620/Mum/2025,, arising from the assessment order passed under section 143(3) read with section 254 254. 7.1 The dispute relates to the valuation of closing stock.
stock It is an admitted position that in the earlie earlierr years the assessee recognized the effect of foreign exchange fluctuation in the Profit and Loss Account.. However, during the year under consideration, the assessee, for the purpose of financial statements, statements included such foreign exchange fluctuation in th the valuation of inventory, inventory whereas for the purpose of computation of income under the Act, Act the assessee continued to follow the method consistently adopted in the earlier years. The Assessing Officer held that such differential treatment resulted in an exce excess ss deduction of ₹6,07,91,429/-,, and accordingly made an addition. The relevant finding of the Assessing Officer is reproduced as under :
"6. In the statement of computation of income, the excess deduction of Rs.6,07,91,429/- has been claimed by the assess assessee as under:-
6.1 By claiming the difference in valuation of inventories int he statement of computation of income, the assessee has adopted one system of valuation of stock in its final accounts and another system notionally for income tax purpose, which is contrary to th the provisions of the Act.
6.2 In this regard, the Authorized Representative of the Assessee Company vide its letter No. SMCA/16 SMCA/16-17/1259 17/1259 dated 0th March, 2017 has submitted Nico Extrusions Limited 6 ITA No. 7619 & 7620/MUM/2025 7620 that during the year under consideration there has been change in the valuation of stock tock only in the books of accounts and not in the valuation as per Income Tax Act, 1961. The assessee has claimed that the stock has correctly been valued as per the provisions of section 145A of the Act.
Reliance has been placed on various judicial decisi decisions.
6.3 The submissions made by the assessee have been carefully considered. The arguments put forth by the assessee are mere reiteration of the arguments presented during the proceedings u/s. 263 of the Act. All the said arguments and the judicial prono pronouncements uncements relied upon have already been considered and appropriately dealt with by the Commissioner of Income Income-tax-
8, Mumbai in the order passed u/s. 263 of the Act dated 25/03/2014. No new material or argument has been brought on record by the assessee, which ich may require fresh consideration.
6.4 The Hon. Calcutta High Court judgment in the case of CIT Vs. UCO Bank [200 ITR 68(Cal.)], had held that if the assessee follows a particular method of stock valuation for consistently year after year and draws his trading accounts on that basis, there can be no doubt that its taxable income will have to be computed accordingly. However, no assessee can be allowed to claim a notional basis for stock valuation only for tax purpose without following and adopting the sa same me in its books of accounts. The excess claim of deduction of Rs.6,07,91,429/ Rs.6,07,91,429/- claimed in the statement of computation of income, is therefore, disallowed and the total income of the assessee stands increased to that extent. By claiming such inadmissible d deduction, eduction, the assessee has not only furnished inaccurate particulars of income but has also concealed its income to that extent. Penalty proceedings u/s. 271(1)(c) of the Act are, therefore, initiated separately.
7. Considering the above discussion, total income of the assessee company is computed as under: -
7.2 On further appeal, the Ld. CIT(A) upheld the addition observing as under:
"5.1 The matter at hand has been perpended at length by me along with the assessment order passed u/s 254/143(3) dated 29.09.2017 assessing the income at Rs. 78,21,980/ 78,21,980/- (Book profits at Rs. 66,78,263) after making addition on account of difference in method v valuation aluation of stock of Rs.
6,07,91,429/- and order passed by the Hon'ble ITAT, Mumbai issued vide ITA No.3662/Mum/2014 dated 08.07.2016. Nico Extrusions Limited 7 ITA No. 7619 & 7620/MUM/2025 7620 5.2 Considered the facts and circumstances of the case, order passed u/s 254/143(3) dated 29.09.2017, the order dated 25 25.03.2014 .03.2014 u/s 263 of the Act, the impugned assessment order u/s 143(3)/263dated 13.10.2014 as well as the order of the Hon'ble ITAT, Mumbai issued vide ITA No.3662/Mum/2014 dated 08.07.2016 and also after considering the issues w.r.t additions made by the A AOO in set aside order dated 29.09.2017 u/s 143(3)/ 254 (AY 20092009-10).
10). The Hon'ble Tribunal had dismissed the assessee's appeal against the PCIT's order dated 25.03.2014 and had directed the AO to pass a fresh order in accordance with the law. From the perusall of wide spectrum of issues and evolution of the assessment since passing of order u/s 143(3) through section 143(3)/263 and further through 143(3) r.w.s. 254 of the Act, it is clear that following the directions of the Hon'ble ITAT, the AO has applied hi his s independent mind and has considered the entire matter afresh and accordingly passed the impugned assessment order u/s 143(3) r.w.s. 254 dated 29.09.2017. The relevant extract of the determination part of the AOs order is reproduced here under for the sak sake of brevity and recapitulation of the facts and underlying issues:
The Hon'ble Calcutta High Court judgment, in the case of CIT v. UCO Bank [200 ITR 68 (Cal.)], has held that if the assessee follows a particular method of stock valuation for consistently year after year and draws his trading accounts on that basis, there can be no doubt that its taxable income will have to be computed accordingly. However, no assessee can be allowed to claim a notional basis for stock valuation only for tax purposes witho without following and adopting the same in its books of accounts. The excess claim of deduction of Rs.6,07,91,429/ Rs.6,07,91,429/-claimed claimed in the statement of computation of income, is therefore, disallowed and the total income of the assessee stands increased to that extent. By claiming such inadmissible deduction, the assessee has not only furnished inaccurate particulars of income but has also concealed its income to that extent. Penalty proceedings u/s 271(1)(c) of the Act are, therefore, initiated separately.
5.3 Considered. The assessee cannot be allowed to adopt one system of valuation of stock in its final accounts and another system notionally for income tax purpose, which is contrary to the provisions of the Act. The undersigned is in agreement with the argume argumentnt of the AO. It is a trite law that a change in method of accounting is not permissible unless the same provides true and fair view of income. The method of accounting must normally be consistently followed from year after year. Reliance is placed on the decision of Hon'ble Supreme Court in CIT vs Punjab Stainless Steel Industries Ltd. (2014) (364ITR144) (SC) which rule that an assessee cannot adopt an inconsistent method of accounting if it results in artificial Court in CIT vs McMillan & Co.
reduction of income. Further, the Supreme C (1958) (33ITR182) (SC) held that any change in accounting method should not be used as a tool for tax evasion. The facts of the instant case clearly appear to be classic case of adoption of tax evasion practice by the appellant."
8. Before us, the assessee has raised following grounds of the appeal:
"I. GROUNDS OF APPEAL NOT ADJUDICATED BY CIT(A) Nico Extrusions Limited 8 ITA No. 7619 & 7620/MUM/2025 7620
1. The Learned CIT(A) CIT(A)-NFAC NFAC erred in law and facts in not adjudicating the following Grounds raised by the appellant.
a) Ground 2- Withoutithout prejudice to Ground No. 1: Direction for considering the impact of addition of Rs. 6,07,91,429/ 6,07,91,429/- (due to difference in closing stock valuation) iin n the opening stock for AY 2010- 2010 11
b) Ground 3 - Assessed loss wrongly considered at Rs. 5,29,69,448 without considering relief granted by CIT(A) and ITAT
c) Ground 4 - MAT Income wrongly considered at Rs. 66,78,263 without considering relief granted by CIT(A) and ITAT
2. The Learned CIT(A) CIT(A)-NFAC NFAC ought to have adjudicated all the grounds raised by the appellant.
ellant.
II. NON GRANT OF VIDEO CONFERENCE HEARING THEREBY VIOLATING THE PRINCIPLES OF NATURAL JUSTICE AND REASONABLE OPPORTUNITY
1. The Learned CIT(A) CIT(A)-NFAC NFAC erred in not granting opportunity for personal hearing through Video conference in spite of request made which is in violation of principal in natural justice.
2. The Learned CIT(A) CIT(A)-NFAC NFAC ought to have granted opportunity for personal hearing through Video conference.
3. Non grant of opportunity for personal hearing through Video conference in spite pite of request made is in violation of principal in natural justice and accordingly the order passed is bad in law.
III. CONFIRMATION OF ADDITION ON ACCOUNT OF VALUATION OF CLOSING STOCK OF RS. 6,07,91,429/ 6,07,91,429/-:-
1. The Learned CIT(A) CIT(A)-NFAC erred in confirming ing the addition of Rs.
6,07,91,429/- on account of difference in method of valuation of closing stock for the purposes of books of account and Income Tax purposes.
2. The Learned CIT(A) CIT(A)-NFAC failed to appreciate the fact that;
a) The valuation of closin closingg stock for Income Tax purposes have not been changed and is consistently being followed.
b) The appellant, during the year, first time changed the method of valuation of closing stock in the books by including foreign exchange fluctuation loss on Importe Importedd purchases as part of inventory cost, though the same is revenue expense.
c) The change in valuation of closing stocks in books was not as per AS-11 11 consistently and regularly followed.
3. The addition on account of valuation of closing stock of Rs. 6,0 6,07,91,429/-
requires to be deleted.
IV. WITHOUT PREJUDICE TO GROUND NO. III:
III:-
Nico Extrusions Limited 9 ITA No. 7619 & 7620/MUM/2025 7620 NON ADJUDICATING THE GROUND FOR GIVING CONSEQUENTIAL DIRECTION DUE TO ADDITION OF Rs. 6,07,91,429/ 6,07,91,429/- IN CLOSING STOCK, IN THE OPENING STOCK FOR AY 2010 2010-11
1. The Learned CIT(A) CIT(A)-NFAC NFAC erred in not adjudicating the ground for giving consequential direction due to addition of Rs. 6,07,91,429/ 6,07,91,429/- in the closing stock, in the opening stock for 01.04.2009 ie. AY 2010 2010-11
2. Consequential direction due to addition of Rs. 6,07,91,429 6,07,91,429/-in in the closing stock, in the opening stock for 01.04.2009 i.e. AY 2010 2010-11 11 requires to be given.
V. ASSESSED LOSS WRONGLY CONSIDERED AT RS. 5,29,69,448/ 5,29,69,448/-
WITHOUT CONSIDERING RELIEF GRANTED BY CIT(A) AND ITAT
1. The CIT(A)-NFAC NFAC has erred in not adjudicat adjudicating ing the ground relating to computation of total income of the appellant considered by AO at loss of Rs. 5,29,69,448/- as per order u/s 143(3) dated 18.10.2011 without considering the relief granted by CIT(A) (Appeal preferred against order u/s 143(3)) and ITAT
2. The CIT(A)-NFAC NFAC failed to appreciate the fact that:
a) The CIT(A) vide its order dated 19.11.2012 deleted the disallowance on account of mark to mark loss of Rs 13,05,884/ 13,05,884/- made in the order dated 18.10.2011 whereby the assessed loss should have been considered as Rs.5,42,75,332/ Rs.5,42,75,332/-
b) The Department filed an appeal against the order of CIT(A), which was dismissed by the ITAT vide order dated 1.10.2014.
3. The relief granted by CIT(A) and ITAT is required to be considered while computing total income me of the appellant.
4. Without prejudice to the above, a separate rectification application was filed on 22.11.2017 in this regard which is pending.
VI. MAT INCOME WRONGLY CONSIDERED AT RS. 66,78,263 WITHOUT CONSIDERING RELIEF GRANTED BY CIT(A) AND ITAT
1. The CIT(A)-NFAC NFAC has erred in not adjudicating the ground relating to computation of total income of the appellant u/s 115JB at Book Profits of Rs.66,78,263/- as per order u/s 143(3) dated 18.10.2011 without considering the relief granted by CIT(A) (Ap (Appeal peal preferred against order u/s 143(3)) and ITAT.
2. The CIT(A)-NFAC NFAC failed to appreciate the fact that:
a) The CIT(A) vide its order dated 19.11.2012 deleted the disallowance on account of mark to mark loss of Rs 13,05,884/ 13,05,884/- made in the order dated 18.10.2011.
b) The Department filed an appeal against the order of CIT(A), which was dismissed by the ITAT vide order dated 1.10.2014.
3. The CIT(A)-NFAC NFAC ought to have considered the relief of Rs. 13,05,884/ 13,05,884/-
granted by CIT(A) and ITAT while computing the total book profits of the Nico Extrusions Limited 10 ITA No. 7619 & 7620/MUM/2025 7620 appellant u/s 115JB of the Income Tax Act, 1961 whereby the Mat income would be Rs.53,72,379/ Rs.53,72,379/-.
4. Without prejudice to the above, a separate rectification application was filed on 22.11.2017 in this regard which is pending.
VII. ADDITIONAL ITIONAL GROUNDS IF ANY The appellant craves leave and reserves the right to add, alter, amend, modify or delete any of the ground/s before or during the course of the hearing."
9. We have heard rival submission of the parties and perused the relevant material on record. This appeal pertains to the substantive addition of ₹6,07,91,429/- regarding the valuation of closing stock. The core of the dispute lies in the treatment of foreign exchange fluctuations. Historically, the Assessee treated such fluctuations as part of the Profit & Loss account. However, in the year under consideration, the Assessee capitalized these fluctuations into the cost of closing stock for statutory book purposes, ses, while maintaining its historical valuation method for tax computation.
9.1 The Ld. CIT(A), is of view that an Assessee cannot maintain a dual-track track valuation system system--one one for books and another for tax--as as it may lead to an artificial reduction of taxable income. Reliance was placed on the Hon'ble Supreme Court's decisions in CIT vs. Punjab Stainless Steel Industries Ltd. and CIT vs. McMillan & Co.,, asserting that accounting consistency is paramount to prevent tax evasion.
9.2 Before us, the Assessee raised se several veral grievances, primarily that: (i) The Ld. CIT(A) failed to adjudicate specific grounds regarding the consequential impact of this addition on the Nico Extrusions Limited 11 ITA No. 7619 & 7620/MUM/2025 7620 opening stock of the subsequent year (AY 2010 2010-11);
11); (ii) The Ld. CIT(A) ignored the impact of prior reliefs granted by the ITAT in earlier rounds regarding MAT (Section 115JB) and total loss computations; and (iii) The change in book valuation was a statutory compulsion, whereas the tax valuation remained consistent with prior years.
9.3 From the impugned order order,, it is evident that several grounds raised by the assessee before the Ld. CIT(A) have not been adjudicated.. In particular, the following issues remain unaddressed:
(i) the consequential effect of addition in closing stock on the opening stock of the succeeding year,
(ii) the correct computation of assessed loss loss,
(iii) the determination of book profit under section 115JB 115JB, and
(iv) the core issue relating to treatment of foreign exchange fluctuation in valuation of inventory inventory,, particularly in the light of the method con consistently sistently followed by the assessee for tax computation.
9.4 It is trite law that the first appellate authority is duty duty-bound to adjudicate all grounds raised before it and pass a reasoned and speaking order.. Failure to do so vitiates the appellate order.
9.5 Further, where the assessee asserts that the method of valuation for the purposes of computation of income under the Nico Extrusions Limited 12 ITA No. 7619 & 7620/MUM/2025 7620 Act has remained unchanged unchanged,, the matter necessarily requires factual examination with reference to the method consistently followed in earlier rlier and subsequent years years.
9.6 Since the Ld. CIT(A) has not examined these aspects nor adjudicated all the grounds raised before him, we are of the considered view that the matter requires fresh examination at the level of the Ld. CIT(A) CIT(A).
9.7 Accordingly, the impugned order on this issue is set aside, and the matter is restored to the file of the Ld. CIT(A) for adjudication afresh. The Ld. CIT(A) shall consider all grounds raised by the assessee assessee,, including the consequential issues, and pass a reasoned orde orderr in accordance with law after providing adequate opportunity of hearing to the assessee assessee.
8. In the result, appeal in ITA No.7619/Mum/2025 is dismissed, whereas, appeal in ITA No.7620/Mum/2025 is allowed for statistical purposes.
Order pronounced in the op open Court on 18/0 /03/2026.
Sd/- Sd/
Sd/-
(KAVITHA
KAVITHA RAJAGOPAL
RAJAGOPAL) (OM
OM PRAKASH KANT)
KANT
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai;
Dated: 18/03/2026
Ankit, Sr. P.S.
Nico Extrusions Limited 13
ITA No. 7619 & 7620/MUM/2025
7620
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent.
3. CIT
4. DR, ITAT, Mumbai
5. Guard file.
BY ORDER,
//True Copy//
(Assistant Registrar)
ITAT, Mumbai