RAJENDRA KUMAR MOHANLALJI,VIJAYAWADA vs. INCOME TAX OFFICER, WARD-2(4), VIJAYAWADA

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ITA 426/VIZ/2018Status: DisposedITAT Visakhapatnam07 August 2019AY 2007-086 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found a prima facie mistake in the AO's valuation of the closing stock, as the interpretation of 'pairs' as two sets might be incorrect. Therefore, the matter was remitted back to the AO for fresh verification and correct valuation.

What were the facts?

During a survey, the Assessing Officer (AO) inventoried the assessee's stock of ophthalmic glasses. The AO later valued this stock, interpreting 'pairs' as two sets of glasses, leading to an excess stock addition. The assessee contended that 'pairs' should mean one set, resulting in overvaluation.

What were the issues?

Whether the AO correctly valued the stock by interpreting 'pairs' as two sets of glasses, or if it should be considered as one set, leading to an overvaluation of stock.

Which sections of the Income-tax Act were involved?

Section 133A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM

Before: SHRI V. DURGA RAO& SHRI D.S. SUNDER SINGH

For Appellant: Shri C.Subrahmanyam, AR
Hearing: 18.07.2019Pronounced: 07.08.2019

Per Shri D.S.Sunder Singh, Accountant Member : Delay : There was a delay of 3 days in this appeal and the assessee filed condonation petition stating that the delay was due to viral fever. Since the reason for the delay is reasonable and there was a sufficient cause for delay in filing the appeal, the delay is condoned.

2 I.T.A. No.426/Viz/2018. A.Y.2007-08 Sri Rajendrakumar Mohanlalji, Vijayawada This appeal is filed by the assessee against the order of the Commissioner of Income Tax [CIT(A)], Kurnool vide ITA No.098/CIT(A)/KNL/2015-16 dated 02.05.2018 for the Assessment Year (A.Y.)2007-08.

2.

All the grounds of appeal are related to the valuation of stock found during the course of survey. The assessee is dealing in wholesale and retail trading of ophthalmic glasses. For the year under consideration, the assessee filed the return of income declaring taxable income of Rs.1,94,970/-. In this case, survey u/s 133A was conducted on 16.10.2006 and the case was selected for scrutiny as per the Board Norms. During the course of survey, the Assessing Officer (AO) has taken inventory of stock available in the business premises of the assessee, however, the stock was not valued during the course of survey. Subsequently a statement was recorded on 30.04.2007 and the stock was also valued at the time of recording the statement which worked out to Rs.24,64,220/-. The AO worked out the excess stock of Rs.10,20,517/- and taxed the same as additional income in the hands of the assessee.

3.

Aggrieved by the order of the AO, the assessee went on appeal before the CIT(A) and submitted that there were errors in the valuation of the

3 I.T.A. No.426/Viz/2018. A.Y.2007-08 Sri Rajendrakumar Mohanlalji, Vijayawada stock. He further submitted that while valuing the stock, the AO has taken two sets of glasses for each pair instead of one set and as a result the stock was overvalued by mistake. The Ld.AR further stated that while taking the quantitative details of stock, it was inventorized in pairs and the pair means one set of spectacles, whereas while valuing the closing stock, the AO has taken pair of glasses means two sets of glasses, thereby, the value of stock was doubled. The Ld.CIT(A) did not accept the contention of the assessee and decided the appeal as per the replies given by the assessee in the statement recorded on 30.04.2017, wherein the assessee had stated that the stock was correctly inventorized and valued. Accordingly, the Ld.CIT(A) upheld the addition made by the AO and dismissed the appeal of the assessee.

4.

Against the order of the Ld.CIT(A), the assessee is in appeal before this Tribunal. During the appeal hearing, the Ld.AR reiterated the submissions made before the Ld.CIT(A) and argued that the value of the stock was overvalued and in support he placed some purchase bills evidencing that pair means one set of glasses and requested to remit the matter back to the file of the AO to make correct valuation and decide the issue as per the outcome.

4 I.T.A. No.426/Viz/2018. A.Y.2007-08 Sri Rajendrakumar Mohanlalji, Vijayawada

5.

On the other hand, the Ld.DR referring the statements furnished in the paper book in page No.26 to 32 argued that the AO has taken pair means two sets of spectacles as stated by the assessee and the same was supported by the sale bills as mentioned in the statement. Hence, argued that there is no error in the value of the closing stock arrived by the AO and requested to confirm the addition made by the AO.

6.

We have heard both the parties and perused the material placed on record. We have gone through the stock statement during the survey and find that no valuation was made at the time of survey and only the quantitative details were taken. In the stock statement quantities were mentioned in pairs. At the time of valuing the stock on 30.04.2007, the AO has taken the pair means two sets of spectacles and accordingly quantity of 180 pairs was taken as 360 sets and valued the stock. The assessee placed some purchase bills/sale bills showing that quantity of one pair means one set of spectacle. Therefore, it appears that there was a mistake in the valuation of closing stock compiled by the AO on 30.04.2007. Though the assessee has stated that the stock was correctly inventorised and value was correctly made, if there is prima facie mistake, the same needs to be corrected. The Department has to collect taxes on genuine income but not

5 I.T.A. No.426/Viz/2018. A.Y.2007-08 Sri Rajendrakumar Mohanlalji, Vijayawada on inflated income. In the instant case, we observe that genuine mistakes have been crept in while valuing the stock. Therefore, we are of the considered opinion that the issue needs to be remitted back to the file of the AO to verify the correct value of closing stock with the relevant purchase bills and arrive at the resultant stock difference and decide the issue on merits afresh. Accordingly, we set aside the order of the lower authorities and remit the matter back to the file of the AO for de novo consideration. It is needless to mention that the AO should give reasonable opportunity to the assessee before concluding the proceedings. Accordingly, the appeal of the assessee is allowed for statistical purpose.

7.

In the result, appeal of the assessee is allowed for statistical purpose. Order pronounced in the open court on 7th August, 2019.

Sd/- Sd/- (िी.दुगाा राि) (धड.एस. सुन्दर धसंह) (V. DURGA RAO) (D.S. SUNDER SINGH) न्याधयक सदस्य/JUDICIAL MEMBERलेखा सदस्य/ACCOUNTANT MEMBER नवशधखधपटणम /Visakhapatnam नदनधंक /Dated : 07.08.2019 L.Rama, SPS

6 I.T.A. No.426/Viz/2018. A.Y.2007-08 Sri Rajendrakumar Mohanlalji, Vijayawada

आदेश की प्रतितिति अग्रेतिि/Copy of the order forwarded to:- 1. ननधधाऩरती/ The Assessee- Sri Rajendra Kumar Mohanlalji, Prop Rajendra Opticals, 28-1-56/2, Eluru Road, Vijayawada 2. रधजस्व/The Revenue - Income Tax Officer, Ward-2(4), Vijayawada 3. The Pr.Commissioner of Income Tax, Vijayawada 4. The Commissioner of Income Tax (Appeals), Kurnool 5. तिभागीय प्रतितिति, आयकर अिीिीय अतिकरण, तिशाखािटणम/DR, ITAT, Visakhapatnam 6.गार्डफ़ाईि / Guard file आदेशािुसार / BY ORDER // True Copy //

Sr. Private Secretary ITAT, Visakhapatnam

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