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Income Tax Appellate Tribunal, “C” BENCH, CHENNAI
Before: HON’BLE SHRI MAHAVIR SINGH & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member)
Aforesaid appeal by revenue for Assessment Year (AY) 2010-11 arises out of the order of learned Commissioner of Income Tax (Appeals)-12, Chennai [CIT(A)] dated 28.06.2019 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) of the Act on 31.03.2013. The grounds taken by revenue read as under:
1. 1. The order of the learned CIT(A) is contrary to facts and circumstances of the case.
2. The Learned CIT(A) erred in directing the Assessing Officer to pass order for assessment year 2010-11 by excluding the value of stock sold to make it the same as the opening stock for assessment year 2011-12. 2.1 The Learned CIT(A) failed to appreciate the fact that, as per Section 246, only an assessee aggrieved by the order the Assessing Officer can file appeal before CIT(A). 2.2 The Learned CIT(A) ought to have considered the facts that the assessee did not make any claim regarding valuation of closing stock either in the return of income for assessment year 2010-11 or during the course of assessment proceedings and Assessing Officer did not reject any such claims in the assessment order dated 31.03.2013. 2.3 The Learned CIT(A) failed to appreciate the fact that the issue involved is not emanating from the orders appealed against in assessment order dated 31.03.2013.
3. For these and other grounds that may be adduced at the time of hearing, it is prayed that the order of the learned CIT(A) may be set aside and that of the Assessing Officer restored.
The impugned order is common order for AYs 2010-11 and 2011-12. It has been submitted that no appeal has been preferred either by assessee or by revenue for AY 2011-12. Having heard rival submissions, the appeal is disposed-off as under.
The assessee being resident individual is stated to be engaged in sale and purchase of properties. The returned loss of AY 2010-11 for Rs.1930.63 Lacs was assessed on 31.03.2013 at Rs.1094.28 Lacs after certain adjustments.
The assessee was also scrutinized for AY 2011-12 vide order dated 11.03.2014. The assessee filed returned income of Rs.14.10 Lacs which was revised to ‘nil’. The income was finally determined at Rs.29.48 Lacs. One of the additions made in this year was stock expenditure of Rs.495.88 Lacs. The assessee submitted that the same was omitted to 3 - be disallowed. Accordingly, the same was brought to tax as Income from Business / Profession.
Both the orders were subjected to adjudication by Ld. CIT(A) vide common order dated 28.06.2019. It was noted that the assessee sold a land at Madurai during AY 2010-11 which was offered to tax in that year. However, while valuing closing stock, the cost of land so transferred for Rs.495.88 Lacs was omitted to be excluded from closing stock and accordingly, there was overvaluation of closing stock resulting into lesser business losses for the assessee for AY 2010-11.
The assessee held a belief that the enhanced value of closing stock would be taken as opening stock of the next year and therefore, the income of the next year would be correspondingly reduced and ultimately, there would be no tax effect. Hence, no appeal was initially filed for AY 2010-11. However, for AY 2011-12, Ld. AO reduced the amount of opening stock by that amount instead of adjusting the value of the closing stock from the earlier year. In other words, the income for AY 2011-12 was correspondingly increased but the value of closing stock for AY 2010-11 was not decreased. The assessee filed rectification for AY 2011-12 requesting to take opening stock as accepted and assessed as closing stock for AY 2010-11 which was rejected since there was no mistake apparent from record. The same led assessee to prefer further appeal for AY 2010-11 with a plea to reduce the value of closing stock for AY 2010-11.
Concurring with assessee’s plea, Ld. CIT(A) held as under: - 9. I have examined the submissions. For AY 2010-11, while computing the profit on sale of land, the total sale price Rs.80 crores was shown as income while the closing stock was shown as Rs.23.73 crores. This closing stock was inclusive of the value of land sold in AY 2010-11 for Rs.4.95 Crores which included by mistake. For AY 2011-12, the opening stock was taken at Rs.23.73 Crores consistent with the earlier wrong figure taken for closing stock for AY 2010-11. The Assessing Officer reduced the value of the opening stock of land by Rs.4.95 crores for AY 2011-12 without altering the closing stock value already returned for AY 2010-11. The appellant’s application for rectification was rejected to make the values consistent. 9.1 The value of the closing stock for the AY 2010-11 should be the value of the opening stock of the AY 2011-12. The Assessing Officer is directed to pass necessary orders in order to render justice by adopting the correct closing stock for assessment in 2010-11 by excluding the value of stock sold to make it the same as the opening stock for AY 2011-12.
As a result, appeal for AY 2010-11 is allowed. Appeal for AY 2011-12 is allowed for statistical purposes Aggrieved as aforesaid, the revenue is in further appeal before us. Our findings and Adjudication 7. We are of the considered opinion, the value of closing stock for AY 2010-11 and the value of opening stock for AY 2011-12 should be the same. The Ld. AO, though increased the value of opening stock for AY 2011-12, did not rectify the value adopted in AY 2010-11. The Ld. CIT(A) has merely directed Ld. AO to correct the same in AY 2010-11 which is logical and consistent with assessment framed for AY 2011-12. Therefore, the impugned order could not be faulted with, considering the peculiar facts of the case.
The appeal stand dismissed. Order pronounced on 12th October, 2022.