COMMISSIONER OF INCOME TAX vs. M/S. BEST CHOICE,

TCA/498/2017HC Madras30 March 2021Bench: Hon`ble Mr Justice M.DURAISWAMY6 pages

AI SummaryWithdrawn

What did the High Court hold?

The High Court dismissed the appeal as withdrawn on account of low tax effect, as per CBDT Circular No. 17/2019. The Court noted the submission by the Revenue's counsel that the tax effect was below the increased threshold limit for pursuing appeals before the High Court. Consequently, the substantial questions of law framed in the appeal were left open. The Court granted liberty to the Revenue to seek restoration of the appeal if the tax effect was found to be above the threshold limit. No decision was made on the merits of the substantial questions of law.

What were the facts?

The Revenue, Commissioner of Income Tax, Central Circle IV, Chennai, filed an appeal under Section 260A of the Income Tax Act, 1961, against an order dated 05.08.2016 passed by the Income Tax Appellate Tribunal, Chennai, "B" Bench. The appeal pertained to Assessment Year 2008-09 and concerned the assessee, M/s. Best Choice. The appeal was filed challenging the Tribunal's decision regarding the deductibility of an ad-hoc provision from the book value of stock and the assessee's method of stock valuation. The Revenue later submitted that the appeal was not being pursued due to low tax effect, citing CBDT Circular No. 17/2019 which increased the monetary limit for appeals to Rs. 1 crore.

What were the issues?

The Tribunal had to decide three substantial questions of law: 1. Whether the deduction of an ad-hoc provision from the book value of stock to arrive at the closing stock is permissible under the law. 2. Whether the assessee's method of valuation is acceptable when the Tribunal itself found it to be based on the assessee's perception and not an acceptable accounting standard. 3. Whether the Tribunal was right in granting relief on the ground that the Assessing Officer failed to reconcile stock with by-numbers, when the assessee also failed to do so during a search, thus leaving the burden of proof undischarged on the assessee. The Revenue contended that the Tribunal was not justified in allowing the ad-hoc provision and that the assessee's valuation method was not acceptable. The Revenue also argued that the assessee failed to discharge the burden of proof regarding stock reconciliation. The judgment does not record specific arguments from the assessee on these issues, other than their counsel appearing.

Which sections of the Income-tax Act were involved?

Section 260A

AI-generated summary — verify with the full judgment below

T.C.A.No.498 of 2017 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 30.03.2021 CORAM THE HON'BLE MR. JUSTICE M.DURAISWAMY AND THE HON'BLE MRS.JUSTICE T.V.THAMILSELVI T.C.A.No.498 of 2017 Commissioner of Income Tax, Central Circle IV, Chennai. ... Appellant Vs. M/s.Best Choice, No.176F, Trivandrum Road, Tirunelveli 627 003. ... Respondent Appeal preferred under Section 260A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal, Madras, “B” Bench, dated 05.08.2016 in I.TA.No.1767/Mds/2014, Assessment Year 2008-09. For Appellant : Mrs.V.Pushpa Standing Counsel For Respondent : Mr.R.Venkata Narayanan for M/s.Subbaraya Aiyar Page 1/6 https://www.mhc.tn.gov.in/judis/ T.C.A.No.498 of 2017 JUDGMENT (Judgment was delivered by M.DURAISWAMY, J.) We have heard Mrs.V.Pushpa, learned Standing Counsel for the appellant/Revenue and Mr.R.Venkata Narayanan for M/s.Subbaraya Aiyar, learned counsel for the respondent/assessee. 2.The appeal, filed by the Revenue under Section 260A of the Income Tax Act, 1961 (for short, the Act) is directed against the order dated 05.08.2016 made in I.TA.No.1767/Mds/2014 on the file of the Income Tax Appellate Tribunal, Chennai, “B” Bench (for brevity, the Tribunal) for the Assessment Year 2008-09. 3.The Revenue has raised the following substantial questions of law in the above appeal : “1.Whether on the facts and in the circumstances of the case and in law, the Hon'ble Income Tax Appellate Tribunal was legally justified in holding that the deduction of adhoc provision from the book value of stock to arrive the closing Page 2/6 https://www.mhc.tn.gov.in/judis/ T.C.A.No.498 of 2017 stock is permissible? 2.Whether on the facts and in the circumstances of the case and in law, the Hon'ble Income Tax Appellate Tribunal was correct in holding that assessee's method of valuation is acceptable when the Income Tax Appellate Tribunal itself has given a finding that such valuation is based on assessee's perception only and not based on any acceptable standard of accounting? 3.Whether on the facts and in the circumstances of the case and in law, the Hon'ble Income Tax Appellate Tribunal is right in giving relief on the ground that Assessing Officer failed to reconcile such stock with the by-numbers given when the assessee itself failed to do so during the course of search, and thus the burden remains undischarged on the assessee who made the said assertion?” 4.The learned Standing Counsel for the appellant submits that the above appeal is not pursued by the Revenue on account of the Low Tax Effect in terms of Circular No.17/2019 dated 08.08.2019 issued by the Page 3/6 https://www.mhc.tn.gov.in/judis/ T.C.A.No.498 of 2017 Central Board of Direct Taxes. By the said Circular, the monetary limit for filing or pursuing an appeal before the High Court has been increased to Rs.1 crore. It is further submitted that the tax effect in this case is less than the threshold limit. 5.In the light of the said submissions, the above Tax Case Appeal is dismissed as withdrawn on account of the Low Tax Effect. The substantial questions of law framed are left open. In the event the tax effect in this case is above the threshold limit fixed in the said Circular, liberty is granted to the Revenue to make a mention to this Court to restore the appeal to be heard and decided on merits. No costs. [M.D., J.] [T.V.T.S., J.] Index : Yes/No 30.03.2021 Internet : Yes (3/5) mkn

To Page 4/6 https://www.mhc.tn.gov.in/judis/ T.C.A.No.498 of 2017 1.The Income Tax Appellate Tribunal, Chennai, “B” Bench 2.The Commissioner of Income Tax, Central Circle IV, Chennai. Page 5/6 https://www.mhc.tn.gov.in/judis/ T.C.A.No.498 of 2017 M.DURAISWAMY, J. and T.V.THAMILSELVI, J. mkn T.C.A.No.498 of 2017 30.03.2021 (3/5) Page 6/6 https://www.mhc.tn.gov.in/judis/

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