COMMISSIONER OF INCOME TAX, FARIDABAD vs. M/S LAKHANI INDIA LTD., PLOT NO. 131, SECTOR-24, FARIDABAD

Facts

The Revenue, Commissioner of Income Tax, Faridabad, is in appeal before the High Court of Punjab and Haryana at Chandigarh. The appeal challenges orders passed by the CIT(A) on March 24, 2011, and the Income Tax Appellate Tribunal (ITAT), Delhi Bench 'D', on August 10, 2011. The core of the dispute is the deletion of a disallowance of Rs. 29,69,625/- made by the Assessing Officer. This disallowance was on account of alleged under-valuation of stock. The Revenue contends that entry tax levied should have been included in the closing stock as per Section 145A of the Income Tax Act, 1961.

Held

The High Court held that the ITAT was right in deleting the disallowance. The reasoning was based on the fact that the CIT(A) had relied on a prior order of the Tribunal in Income Tax Appeal No.3208/Del/2007 titled Lakhani Rubber Udyog Ltd. v. CIT (A), Faridabad. Crucially, this prior order had been affirmed by the High Court itself when it dismissed ITA No.312 of 2010 titled Commissioner of Income Tax, Faridabad v. M/s Lakhani Rubber Udyog(P) Ltd., on February 8, 2011. The counsel for the revenue was unable to distinguish these judgments or refer to any statutory provisions or arguments that would lead to a contrary conclusion. Therefore, the substantial question of law was answered against the revenue, following the precedent set in the earlier appeal. The operative direction was to dismiss the appeal.

Key Issues

1. Whether, on the facts and in the circumstances of the case, the Hon'ble ITAT was right in law in deleting the disallowance of Rs. 29,69,625/- made by the Assessing Officer on account of under-valuation of stock, even when the entry tax levied was includible in the closing stock of the assessee as per the provisions of Section 145A of the Income Tax Act, 1961? Assessee's Contentions: The judgment does not record any specific contentions made by the assessee. However, the ITAT's order, which was upheld, deleted the disallowance. The CIT(A) had relied on a previous ITAT order in Income Tax Appeal No.3208/Del/2007 titled Lakhani Rubber Udyog Ltd. v. CIT (A), Faridabad. Revenue's Contentions: The Revenue contends that the ITAT and CIT(A) erred in deleting the disallowance of Rs. 29,69,625/- made by the Assessing Officer on account of under-valuation of stock. The Revenue argues that entry tax levied was includible in the closing stock of the assessee as per Section 145A of the Income Tax Act, 1961.