C I T vs. M/S PUNJAB STATE WAREHOUSING

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ITA/670/2008HC Punjab & HaryanaPHHC01080684200828 January 2010Bench: MR. JUSTICE M.M. KUMAR,MR. JUSTICE AJAY TEWARI3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the appeal was without merit and no substantive question of law arose. The Court agreed with the ITAT's finding that once the Revenue accepts the closing stock of a preceding year, it automatically becomes the opening stock for the subsequent assessment year. The Court noted that the Revenue itself had accepted provisional accounts for earlier assessment years (1994-95 to 2000-01) despite the availability of final audited accounts. For assessment years 1999-2000 and 2000-01, the AO had ignored final audited accounts and proceeded with provisional accounts. The Court found that the Revenue could not adopt a 'pick and choose' method and had to follow the principle of consistency. The factual position was similar for earlier assessment years, and therefore, no different view could be taken for the disputed assessment year 2003-04. The Court relied on the principle of consistency and the Supreme Court judgment in Berger Paints India Ltd. v. CIT. The appeal was dismissed.

What were the facts?

The Revenue, Commissioner of Income Tax-1, Chandigarh, filed an appeal before the High Court challenging an order dated 8.2.2008 passed by the Income Tax Appellate Tribunal (ITAT), Chandigarh. The ITAT's order was in relation to ITA No. 895/CHD/2006 for the assessment year 2003-04. The dispute concerned whether the opening stock of the current year should be based on the closing stock of the preceding year as per provisional accounts, or as per audited accounts adopted by the Assessing Officer (AO). The ITAT had upheld the order of the CIT (Appeals) which directed the use of provisional accounts for opening stock. The Revenue had accepted provisional accounts for earlier assessment years despite audited accounts being available, and the ITAT noted consistency in stock values between closing and opening for several assessment years.

What were the issues?

1. Whether, in the facts and circumstances of the case, the Hon'ble Tribunal was right in confirming the order of the CIT (A) by directing to take the figure of closing stock of the immediately preceding year based on provisional accounts as opening stock of the current year instead of the figure of opening stock available as per audited accounts and adopted by the AO? (Question of law/mixed law and fact, turning on principles of accounting and consistency in assessment). Assessee's contentions (as per Tribunal's findings): The Tribunal reiterated the CIT(A)'s view that once the Revenue accepts the closing stock of a year, it automatically becomes the opening stock for the subsequent year. The Revenue had previously finalized assessments for assessment years 1994-95 to 2000-01 based on provisional accounts, even when final audited accounts were available. For assessment years 1999-2000 and 2000-01, returns were filed with final audited accounts, but the AO used provisional accounts. The Revenue could not adopt a selective approach. The Tribunal relied on the principle of consistency and the Supreme Court judgment in Berger Paints India Ltd. v. CIT 266 ITR 99 (SC). Revenue's contentions: The Revenue argued that the opening stock should be based on audited accounts adopted by the AO, not provisional accounts.

Which sections of the Income-tax Act were involved?

Section 147,Section 148

AI-generated summary — verify with the full judgment below

ITA No.670 of 2008 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT

CHANDIGARH. ITA No. 670 of 2008 Date of decision 28 .1.2010 The Commissioner of Income tax-1,Chandigarh ... Appellant Versus M/s Punjab State Warehousing Corporation ... Respondents. CORAM: HON'BLE MR. JUSTICE M.M. KUMAR HON'BLE MR. JUSTICE AJAY TEWARI Present: Ms. Urvashi Dhugga ,Advocate for the appellant 1.To be referred to the Reporter or not ? 2.Whether the judgement should be reported in the Digest ? M.M.KUMAR, J. The revenue has approached this Court challenging order dated 8.2.2008 passed by the Income Tax Appellate Tribunal, Bench B, Chandigarh (for brevity 'the Tribunal') in ITA No. 895/ CHD/ 2006 in respect of the assessment year 2003-04. The Revenue has claimed that following substantive questions of law would emerge for determination of this Court: “ Whether in the facts and circumstances of the case the Hon'ble Tribunal was right in confirming the order of the CIT (A) by directing to take the figure of closing stock of the immediately preceding year based on provisional accounts as opening stock of current year instead of the figure of opening stock available as per audited accounts and adopted by the A.O.”? The Tribunal while reiterating the view taken by the CIT (Appeals) has recorded a categorical finding that once the Revenue has accepted then

ITA No.670 of 2008 2 closing stock it would automatically become the opening stock for the subsequent assessment year. There has not been any dispute on the fact that the department itself finalised assessment for the assessment years 1994-95 to 2000-01 on the basis of provisional accounts inspite of availability of final audited accounts. For the assessment years 1999-2000 and 2000-01, returns were filed in response to notices issued under Sections 147 and 148 of the Act which were accompanied by final audited account. However, the assessment was framed on the basis of provisional accounts submitted with the original return and the Assessing Officer ignored the final audited accounts. Accordingly, the Revenue could not have adopted pick and choose method to finalize the assessment i.e. the higher profit out of provisional account or final audited accounts for the calculation of taxable profit by ignoring the principles of consistency. The Tribunal has noticed the fact that for the assessment year 1999-2000 the value of the closing stock as on 31st March was the same amount which was the amount shown as the opening account for the assessment year 2000-01 as on 1st April. Similar factual position is prevalent in respect of the assessment years 2000- 01, 2001-02, 2002-03 ad 2003-04. Accordingly the principles of consistency has been relied upon and the judgement of the Hon'ble Supreme Court rendered in the case of Berger Paints India Ltd. v. CIT 266 ITR 99 (SC) has been cited. Having heard the learned counsel we are of the considered view that once the factual position is similar in respect of the earlier assessment years, for the disputed assessment year 2003-04 no different view could be taken. We find that categorical findings of fact have been recorded in that regard which cannot be re-opened especially when there is no change of

ITA No.670 of 2008 3 circumstance warranting a different view. The appeal is wholly without merit and no substantive question of law warranting admission of the appeal would arise. Accordingly, the appeal fails and the same is dismissed. (M.M.Kumar) Judge

(Ajay Tewari) 28.1.2010 Judge okg

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