Income Tax Appellate Tribunal - Delhi
Resurgere Mines & Minerals India Ltd., ... vs Addl. Cit, New Delhi on 22 December, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES: 'F', NEW DELHI
BEFORE SHRI G.D.AGRAWAL, PRESIDENT
AND SMT. BEENA A PILLAI, JUDICIAL MEMBER
ITA No. 6600/Del/2014
A.Y. 2008-09
Resurgere Mines & Minerals ACIT, Range 15
India Ltd. vs. New Delhi
307, D R Chamber, 12/56
Desh Bandhu Gupta road
Karolbagh
New Delhi 110 005
PAN: AAACE 0111B
(Appellant) (Respondent)
Appellant by Smt. Rano Jain, Adv. and
Sh. Ashish Goel, CA
Respondent by Shri Atiq Ahmad, Sr.D.R.
Date of Hearing 19/12/2017
Date of Pronouncement 22/12/2017
ORDER
PER BEENA A PILLAI, JUDICIAL MEMBER
The present appeal has been filed by assessee against order dated 23/07/12 passed by Ld.CIT(A)-18, New Delhi for assessment year 2008-09 on the following grounds of appeal:
ITA 6600/Del/2014 A.Y. 2008-09 Resurgere Mines & Minerals India Ltd. vs. ACIT "1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [CIT(A)] is bad, both in the eye of law and on facts.
2. On the facts and circumstances of the case, the order passed by the learned CIT(A) is bad in law having been passed the same without giving assessee a proper and adequate opportunity of being heard in clear violation of principle of natural justice.
3. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of AO in rejecting the books of accounts of the assessee, despite the same being maintained properly as per law.
4(i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of AO in making addition of Rs.1,69,57,108/- on account of valuation of stock substituting the FIFA method of valuation in place of weighted average method employed by the assessee.
(ii) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the above said addition despite the fact that the weighted average method is an approved method and the assessee has been following the same consistently.
5(i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition of Rs.71,223/- made by AO invoking the provisions of Section 14A of the Act.
(ii) That the addition has been confirmed ignoring the fact that the AO had invoked provisions of Rule 80 without pointing out any inconsistency in the amount of Rs.29,120/- computed and added back by the assessee itself.
6. The appellant craves leave to add, amend or alter any of the grounds of appeal."
Page 2 of 8ITA 6600/Del/2014 A.Y. 2008-09 Resurgere Mines & Minerals India Ltd. vs. ACIT
2. Brief facts of the case are as under:
The assessee filed its return of income on 30/09/08 declaring total income of Rs. 92,82,71,270/-. The return was processed under section 143(1) of the Income Tax Act, 1961 (the Act) and the case was selected for scrutiny. Statutory notices under section 143(2) were issued in response to which representatives of the assessee attended the assessment proceedings from time to time. During the assessment proceedings Ld. AO called upon assessee to furnish the valuation of stock for the year under consideration. It was observed by Ld. AO that assessee valued closing stock by following weighted average method. Ld. AO considered the same to be arbitrary and rejected the valuation made by assessee and instead applied FIFO method. He also rejected the books of accounts, to the extent of the method followed by assessee for valuation of closing stock.
2.1. Ld. AO also made disallowance to an extent of Rs. 71,223/-by applying Rule 8D read with section 14 A of the Act.
2.2. Aggrieved by the assessment order passed, assessee preferred appeal before Ld.CIT(A) who confirmed the additions made by Ld. AO.
2.3. Aggrieved by the order of Ld.CIT(A) assessee is in appeal before us now.
3. At the outset Ld.AR submitted that Ground No. 1 and 6 are general in nature, Ground No. 2 is not pressed, Ground No. 3 and 4 Page 3 of 8 ITA 6600/Del/2014 A.Y. 2008-09 Resurgere Mines & Minerals India Ltd. vs. ACIT is in relation to the valuation of closing stock and rejection of books of account to the extent of the valuation made by assessee, and Ground No. 5 is in respect of the disallowance made under section 14A read with Rule 8D of the Act. She submitted that due to smallness of amount involved ground no.5 is not pressed.
4. Ground No. 3 and 4:
Ld.AR submitted that during the year under consideration assessee has shown valuation of closing stock of Rs. 51.33 crores by following weighted average method. It has been submitted by ld.AR that this method is consistently followed by assessee in the earlier years which has not been disputed by revenue. Ld.AR filed before us year wise chart of method of valuation of closing stock adopted by assessee and accepted by the Department which is as under:
Method employed Status
Assessment
Year
2006-07 Weighted Average Method Weighted Average
Method accepted.
2007-08 Weighted Average Method Weighted Average
Method accepted in
assessment u/s
143(3) of the Act vide
order dt. 29.12.2009.
2008-09 Weighted Average Method Impugned
Page 4 of 8
ITA 6600/Del/2014 A.Y. 2008-09
Resurgere Mines & Minerals India Ltd. vs. ACIT Assessment Year 2009-10 Weighted Average Method Weighted Average Method disputed by AO and appeal is pending before Hon'ble Tribunal 2010-11 Weighted Average Method Weighted Average Method accepted in assessment u/s 143(3) of the Act vide order dt. 26.03.2013 2011-12 Weighted Average Method Weighted Average Method Accepted.
4.1. Ld.AR submitted that Assessing Officer has recasted closing stock as per FIFO method at Rs. 53,03,30,642/-.
4.2. Ld.AR submitted by placing reliance upon the accounting standard 2, issued by Institute of Chartered Accountants on valuation of inventory. She submitted that both weighted average method and FIFO method has been considered as fair/good method of valuation. She placed reliance upon the relevant extract of Accounting Standard 2, which has also been approved by the ICAI, which is reproduced hereunder:
"16. Cost of inventory is, other than the elementary dealt with in paragraph 13 shall be assigned by using the First - in First - out, all Page 5 of 8 ITA 6600/Del/2014 A.Y. 2008-09 Resurgere Mines & Minerals India Ltd. vs. ACIT weighted average cost formula. The formula used shall reflect the fairest possible approximation to the cost incurred in bringing the items of inventory to their present location and condition."
4.3. She thus submitted that valuation of inventory can be made either on FIFO method or weighted average method which is a well accepted method.
4.4. On the contrary Ld. DR placed reliance upon the order passed by authorities below.
5. We have perused the submissions advanced by both the sides in the light of the records placed before us.
6. After examining the relevant statutory provisions for computation and disclosure of income chargeable under the head profit and gains of business or profession, we find that undisputedly assessee has been following weighted average method in valuing the closing stock in the previous years which has not been disturbed by revenue authorities. We further observed that weighted average method is also considered to be one of the method which reflects the fairest possible approximation of cost incurred, by the Institute of Chartered Accountants in their Accounting Standards. Therefore we do not find any justification in rejecting this method of valuation by Ld. AO. Moreover Ld. AO has also not furnished any reasonable explanation for rejecting the method consistently adopted by assessee. We are therefore inclined to allow this ground raised by assessee. As we have upheld the weighted Page 6 of 8 ITA 6600/Del/2014 A.Y. 2008-09 Resurgere Mines & Minerals India Ltd. vs. ACIT average method for valuation of closing stock, we allow ground No.
3 raised by the assessee wherein the books of accounts have been rejected by Ld. AO to the extent of the valuation of stocks.
6.1. Accordingly ground No. 3 and 4 raised by assessee stands allowed.
7. In the result appeal filed by the assessee stands partly allowed.
Order pronounced in the open court on 22/12/2017.
Sd/- Sd/-
(G.D.AGRAWAL) (BEENA A PILLAI)
President Judicial Member
Dated: 22nd December, 2017.
*mv
Copy of the Order forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
6. Guard File
By Order
Asst. Registrar
ITAT, Delhi Benches, New Delhi
Page 7 of 8
ITA 6600/Del/2014 A.Y. 2008-09
Resurgere Mines & Minerals India Ltd. vs. ACIT S.No. Details Date Initials Designation 1 Draft dictated on Dragon 19.12.2017 Sr. PS/PS 2 Draft placed before author Sr. PS/PS 20.12.2017 Draft proposed & placed 3 JM/AM before the Second Member Draft discussed/approved by 4 AM/AM Second Member Approved Draft comes to the 5 Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement 22/12/17 Sr. PS/PS 7 File sent to Bench Clerk Sr. PS/PS Date on which the file goes to 8 Head Clerk Date on which file goes to 9 A.R. 10 Date of Dispatch of order Page 8 of 8