THE COMMISSIONER OF INCOME TAX vs. M/S.SOUTHERN CASHEW EXPORTERS

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ITA/17/2014HC KeralaKLHC01026583201427 February 2019Author: HONOURABLE MR.JUSTICE K.VINOD CHANDRAN,HONOURABLE MR. JUSTICE ASHOK MENON4 pages

AI SummaryDismissed

What did the High Court hold?

The High Court held that the adjudication by the lower authorities, including the Tribunal, was based on facts. The Tribunal had affirmed the finding that the quantity of closing stock declared was identical and that there was no evidence of sales having been conducted but not reflected in the books of accounts. The difference in valuation was explained by the bank's adoption of market price and the assessee's use of cost price, along with the bank's observation of damaged stock. Consequently, no substantial question of law arose for consideration by the High Court. The appeal filed by the Revenue was rejected. No costs were awarded.

What were the facts?

The assessee, M/s. Southern Cashew Exporters, declared closing stock. The bank authorities, upon verification, found the valuation of this closing stock to be lower than what was declared by the assessee in its accounts and to the Income Tax Department. The Assessing Officer (AO) inferred that this difference was due to undervaluation of sales and made an addition to the assessee's income. The Commissioner, however, noted that while the quantity of stock was the same, the valuation differed. The bank had adopted market price, whereas the assessee used the cost price. The bank also observed that a portion of the stock had become unusable due to spoilage or damage. The appellate authority concluded there was no suppression of sales, a view affirmed by the Tribunal.

What were the issues?

1. Whether the High Court should entertain an appeal on a question of law arising from the Tribunal's order, given the facts of the case. The Revenue contended that the AO's estimation based on the bank's finding of undervaluation was justified. The assessee argued that the quantity of closing stock declared to the bank and the Department was identical. The difference in valuation was due to the bank adopting market price while the assessee used cost price, and the bank's observation of damaged stock, which did not indicate suppressed sales. The appellate authority and the Tribunal found no suppression of sales, affirming the assessee's position.

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON WEDNESDAY,THE 27TH DAY OF FEBRUARY 2019 / 8TH PHALGUNA, 1940 ITA.No. 17 of 2014 AGAINST THE ORDER/JUDGMENT IN ITA 566/2011 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 28-06-2013 APPELLANT/S: THE COMMISSIONER OF INCOME TAX THIRUVANANTHAPURAM BY ADVS. SRI.P.K.R.MENON,SENIOR COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC FOR INCOME TAX RESPONDENT/S: M/S.SOUTHERN CASHEW EXPORTERS, CHANDANATHOPE, KOLLAM. BY ADVS. SRI.ANIL D. NAIR SMT.C.S.SULEKHA BEEVI SMT.ROSIE ATHULYA JOSEPH SRI.JOSE JOSEPH (CHEMPLAYIL) SRI.R.SREEJITH OTHER PRESENT: THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 27.02.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: I.T.A. No. 17 of 2014 2

JUDGMENT Vinod Chandran, J.

The issue raised in the above appeal is with respect to the estimation made by the Assessing Officer (for short “AO”) on the basis of an undervaluation found by the bank of the closing stock. The assessee had declared certain closing stock before the bank authorities as also the Income Tax Department. The bank authorities verified the same and found that the valuation of the closing stock was not as shown in the accounts of the assessee. The AO then assumed that the difference was due to a sale carried out in the said year. An addition was made to that extent. The Commissioner interfered with the same finding that the quantity as declared before the Department and the bank was the same. However, there was a different valuation shown before the bank and before the Department. Before the bank, the market price was adopted and before the Department it was at the cost incurred by the assessee. The bank infact noticed that many of the stock had been rendered useless by reason of it having turned rotten and some having been found broken. The appellate authority found that there is no reason to find suppression of sales. The Tribunal affirmed the finding since the quantity declared was identical and there was no question of sales having been conducted, which was not reflected in the books of accounts. We find that the adjudication was on facts and no question of law arises. We hence, reject the appeal of the Revenue. No costs. K.VINOD CHANDRAN JUDGE ASHOK MENON dkr JUDGE

Appendix — schedule of exhibits

APPENDIX APPELLANT'S(S) ANNEXURES ANNEXURE A COPY OF THE ORDER OF THE ASSESSING OFFICER U/S 143(3) DATED 30.12.2010 ANNEXURE B COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) DATED 25.07.2011 ANNEXURE C COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL DATED 28.06.2013.

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