Punjab-Haryana High Court
Commissioner Of Income-Tax (Central) vs M/S Majestic Auto Limited on 22 May, 2013
Bench: Hemant Gupta, Ritu Bahri
IN THE HIGH COURT OF PUNJAB AND HARYANA
AT CHANDIGARH
I.T.A. No.116 of 2004
Date of Decision:22.05.2013
Commissioner of Income-tax (Central), Ludhiana .....Appellant
Vs.
M/s Majestic Auto Limited, Ludhiana .....Respondent
CORAM:- HON'BLE MR. JUSTICE HEMANT GUPTA
HON'BLE MS. JUSTICE RITU BAHRI
Present:- Mr. Rajesh Katoch, Advocate,
for the appellant.
Mr. Akshay Bhan and Mr. Alok Mittal, Advocates,
for the respondent.
HEMANT GUPTA, J.(Oral)
The present appeal arises out of an order dated 21.11.2003 passed by the Income Tax Appellate Tribunal, Chandigarh Bench `B', Chandigarh pertaining to the assessment year 1994-95.
The appeal was admitted on the following question of law:-
(i) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the addition of Rs.9,04,632/- on account of closing stock of stores, spares, tools etc.?
The return filed by the assessee was processed under Section 143(3) of the Income Tax Act, 1961 (for short, `the Act'). The Assessing Officer made addition of Rs.9,04,632/- as a value of tools and spares for one month since such stock was not reflected in the closing stock of the previous year. However, in appeal, the Commissioner of Income Tax (Appeals) held that the basis adopted by the Assessing Officer for making the addition is justified but the addition need to be reduced to the stock of 15 days instead of one month and thus, the addition was Kumar Vimal ordered to remain at 50% of Rs.9,04,632/-. However, in further appeal, the learned 2013.05.31 11:47 I attest to the accuracy and integrity of this document Chandigarh I.T.A. No.116 of 2004 -2- Income Tax Appellate Tribunal relied upon its earlier order dated 21.8.2002 in respect of assessment year 1991-92 and order dated 23.11.2002 in respect of assessment year 1989-90 titled 'M/s Hero Cycles Ltd., Ludhiana Vs. ACIT, Ludhiana'.
Still aggrieved, the revenue is in appeal under Section 260-A of the Act.
Learned counsel for the appellant has argued that during the course of assessment, the assessee filed written reply on 11.3.1997 wherein the assessee has taken a stand that the items of spares are small in nature and numerous and, that the valuations takes long time. The assessee has been following the same method of accounting since the assessment year 1983-84. It is also pointed out that stock of the company is of 15 days and that 40 days estimation of the stocks is highly out of proportion. It is thus contended that the assessee has admitted that it retains stock of spares for 15 days and, therefore, the order of the Assessing Officer to make additions in respect of stock of spares for 30 days is just reasonable. In any case, the addition made by the Commissioner of Income Tax (Appeals) is in reliance of the reply submitted by the assessee, therefore, the Tribunal has erred in law in relying upon the order passed by the Tribunal in the case of other assessee.
On the other hand, learned counsel for the assessee referred to order passed by this Court in I.T.A. No.162 of 2008 - CIT Ludhiana II v. M/s Rockman Cycle Ind. Ltd., wherein the revenue's appeal in respect of similar question was dismissed for the reason that the assessee has been maintaining the similar stand in the various assessment years.
We have heard learned counsel for the parties and find that the order of the Tribunal is not sustainable in law. The assessee in its reply has admitted that Kumar Vimal it is maintaining stocks of spares but for 15 days. The items may be small in 2013.05.31 11:47 I attest to the accuracy and integrity of this document Chandigarh I.T.A. No.116 of 2004 -3- nature, may be numerous but each item which is in stores of the assessee is required to be valued, therefore, the assessee cannot be permitted to assert that the stock of spares is not required to be valued in the closing stock. Though the Assessing Officer has taken into consideration 30 days of stock but the learned Commissioner of Income Tax (Appeals) has taken the valuation of stock for 15 days as the value of the closing stock.
The order passed by this Court in M/s Rockman Cycle's case (supra), is only to the effect that the revenue is unable to show any reason for deviating from the past assessment years. However, there is nothing on record in respect of the present assessee, that it has not been showing closing stock of spares and tools in its accounts. In view of the said fact, we do not find that the judgment of this Court in M/s Rockman Cycle's case (supra), is of any assistance to the argument raised by the assessee.
We find that the valuation accepted by the Commissioner of Income Tax (Appeals) is in tune with the reply filed by the assessee i.e. the assessee is maintaining average stock of 15 days. Therefore, the order passed by the Tribunal is unjustified and the same is set aside.
Consequently, the question of law is answered in favour of the revenue and against the assessee.
( HEMANT GUPTA )
JUDGE
May 22, 2013 ( RITU BAHRI )
renu/Vimal JUDGE
Kumar Vimal
2013.05.31 11:47
I attest to the accuracy and
integrity of this document
Chandigarh