Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH, AHMEDABAD
ITA No. 1514/Ahd/2014 Shri Chimanlal H Soni Vs. CIT Assessment year: 2009-10 Page 1 of 5
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “B” BENCH, AHMEDABAD [Coram: Pramod Kumar AM and Mahavir Prasad JM] ITA No. 1514/Ahd/2014 Assessment Year: 2009-10 Chimanlal H. Soni ............…………......Appellant Prop. C H Jewellers, 8, Alkapuri, Concord Lane, R C Dutt Road, Baroda-390007 [PAN : AJKPS 6990 C] Vs. Commissioner of Income-tax-I ...........................Respondent Baroda
Appearances by:
SN Soparkar & Urvashi Shodhan for the Appellant Vibha Bhalla for the Respondent
Date of concluding the hearing : 24.01.2018 Date of pronouncing the order : 23.04.2018
O R D E R Per Pramod Kumar, AM:
By way of this appeal, the assessee-appellant has challenged correctness of learned CIT’s order dated 28.03.2014 in the matter of revision under section 263 r.w.s. 143(3) of the Income-tax Act, 1961, for the assessment year 2009-10.
Grievances raised by the appellant are as follows:-
“1. Ld. CIT erred in law and on facts in invoking provisions of section 263 of the Act seeking to revise scrutiny assessment u/s 143 (3) of the Act holding it as erroneous and prejudicial to the interest of revenue. The order of CIT directing AO to revise order that is neither erroneous nor prejudicial to the interest of revenue is unjust, untenable and against principles of Natural Justice that deserves to be quashed. It be so held now.
Ld. CIT erred in law and on facts in directing AO to pass fresh order after verifying month wise break up of opening stock, closing stock, converted stock, sale & purchase of 24 ct, 22 ct and 18 ct gold already verified by AO in scrutiny assessment. Ld. CIT ought to have appreciated that silence on issues accepted by AO after proper scrutiny need not mean order is erroneous or prejudicial to the interest of revenue. It be so held now.
ITA No. 1514/Ahd/2014 Shri Chimanlal H Soni Vs. CIT Assessment year: 2009-10 Page 2 of 5
Ld. CIT erred in law and on facts in ignoring the fact that appellant valued closing stock as per AS - 2 confirming with provisions prescribed u/s 145 of the Act and is accepted by department year after year. Ld. CIT ought to have appreciated that FIFO method or Weighted Average Cost method is correct method for valuation of closing stock. It be so held now.
Ld. CIT erred in law and on facts in not appreciating submissions on merits that appellant valued closing stock on weighted average cost also accepted by the Hon'ble ITAT in appellant's own case and not simple average cost. Ld. CIT in spite of the order of Hon'ble Tribunal exercised jurisdiction u/s 263 to revise assessment order neither erroneous nor prejudicial. The order of Id. CIT deserves to be quashed. It be so held now.
Ld. CIT erred in law and on facts in holding valuation of closing stock to be hypothetical workings not appreciating that method followed by the appellant is in consonance with the Income Tax Act and as prescribed by ICAI that inventories to be valued at lower of cost or market value. Ld. CIT ought to have held that weighted average cost considering each and every item of sales and purchases for the year adopted by the appellant is the correct method for valuation of closing stock. It be so held now.”
The relevant material facts are like this. The scrutiny assessment under section 143(3) of the Act was finalized on 21.12.2011. On subsequent perusal of records, learned Commissioner was of the view that the assessment order so passed by the Assessing Officer was erroneous and prejudicial to the interest of the revenue. The reason for initiating the revision proceedings, as set out in the show- cause notice, was stated to be as follows:-
“During the year the assessee had converted 218162.250 grams of gold bar (24 carat) into 22 carat gold after adding another metal of 19832.932 grams for melting purpose after which the 22 carat gold weighed at 237995.182 grams. The price of this 22 carat gold (stock in trade) as valued by the assessee comes to Rs.1384.62 gram. As per assessee own working the labour expense comes to Rs.101.07 per gram. Moreover, the price of 19832.932 grams of alloys (remaining 2/24 portion of other metal like copper or silver or another metal) were also required to be added for stock valuation. Thus the value of 22 carat gold ornament per gram comes to Rs.1485.69 (1384.62+101.07). Thus the valuation of 195547.193 grams 22 carat gold ornament comes to Rs.29,05,21,993/- against which the valuation shown by you is Rs.24,40,42,890/-. Thus there is under valuation of 22 carat gold to the tune of Rs.4,64,79,103/-. ”
It was pointed out by the assessee that the method of valuation of stock has been followed by the assessee for several years and has been accepted by the revenue authorities all along, that, during the scrutiny assessment proceedings, this aspect of the matter was examined by the Assessing Officer at great length, that the valuation of stock is as per Accounting Standard 2 issued by the Institute of Chartered Accountants of India and that, given the undisputed facts of this case, learned Commissioner will act beyond his lawful jurisdiction in subjecting the said assessment order to revision proceedings under section. The facts of the case, as
ITA No. 1514/Ahd/2014 Shri Chimanlal H Soni Vs. CIT Assessment year: 2009-10 Page 3 of 5
also judicial precedents in support of proposition advanced by the assessee, were set out in detail. Learned CIT proceeded with exercising his powers under section 263, though on a slightly different ground. While doing so, he, inter alia, observed as follows:-
“3. The submission of the assessee vis-a-vis the case records of the assessee has been verified. It is noticed that during assessment proceedings the Assessing Officer had not examined the detailed working of weighted average cost including monthly opening, purchase, issued and closing inventory and same had not been asked for and there so not verified by the Assessing Officer. In such circumstances, the correctness of weighted average cost calculated by the assessee cannot be said flawless.
3.1 On verification of the case records of the assessee as per part (b) of Annexure -H enclosed with the return of income the closing stock of 24ct gold is 5519.381 gms, whereas vide submission submitted by the assessee during the proceedings u/s 263 of the Act, which is also mentioned above, the closing stock of 24ct gold for March'2009 is 5123.591 gms. It is evident that the annual closing date and the closing date of month March'2009 is same i.e. 31.03.2009, which means annual closing stock, taken on 31.03.2009 and closing stock, taken for the month March'2009 should be same. But in the case the annual closing stock for 24ct gold is 5519.381 gms and closing stock for month March'2009 is 5123.591 gms.
3.2 Further, vide aforesaid submission, the assessee had attempted to explain the procedure followed for evaluation of 22ct gold. For this purpose the assessee had mentioned three tables in the submission, which are as under:
Particulars Qty (grams) Value (Rs) Rate (Rs) 24ct Standard Gold 1,000 28,00,000 2,800
Particulars Qty (grams) Value (Rs) Rate (Rs) 22Ct 1,090 28,00,000 2,668 Labour Charges 1,09,000
Particulars Qty (grams) Value (Rs) Rate (Rs) 24Ct 1,000 28,00,000 2,800 22ct - Conversion from 24ct to 22ct 1,090 28,00,000 Labour 1,09,000 2,588 Ornaments purchase 1,000 25,00,000
The assessee had attempted to explain through a hypothetical situation, which does not hold any substance. In the abovementioned table if quantity of 22ct converted Gold will be more than the purchased 22ct Gold ornaments, than the average per gram cost will tend towards the per gram cost of 22ct converted Gold and vice versa. Same is explained as under:
ITA No. 1514/Ahd/2014 Shri Chimanlal H Soni Vs. CIT Assessment year: 2009-10 Page 4 of 5
Particulars Qty Rate Value Avg/Gm (grams) (Rs) Cost (Rs) 24Ct 1,000 2800 28,00,000 22ct - Conversion from 24ct to 22ct 2,000 2668 53,36,000 2,612 Ornaments purchase 1,000 2500 25,00,000
Therefore, true position cannot be ascertained with such hypothetical workings. In view of these facts and circumstances, the assessment is set- aside with a direction to the Assessing Officer to pass afresh order denovo after getting and verifying detailed month-wise break-up of opening stock, closing stock, converted stock, sale and purchase and other details of 24ct, 22ct and 18ct Gold after affording reasonable opportunity of being heard.”
The assessee is aggrieved and is in appeal before us.
We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.
We have noted that a co-ordinate bench of this Tribunal, in assessee’s own case for the assessment year 2006-07, has categorically accepted the same method of accounting, as accepted by the Assessing Officer in the impugned assessment order, for valuation of closing stock. It was also noted that this method is “in consonance with” the statutory provisions and “the Accounting Standards prescribed by the ICAI” and has also been used for “arriving at the cost of goods sold”. When Tribunal has approved the method, after detailed discussions on the same, it cannot be said that, at the minimum, it is a reasonably possible view of the matter. It is also elementary that in the garb of exercising powers under section 263, Commissioner cannot substitute one possible view of the matter by the other possible view of the matter.
We have also noticed that the CIT has exercised his powers on a ground which is altogether different from the ground on which revision proceedings were initiated and the assessee was not at all heard on the ground on which revision was eventually subjected to. In the show-cause notice, learned Commissioner started with alleged undervaluation of closing stock by Rs.4,64,79,103/-, but then, in the operative portion, he has simply directed that “the AO to pass a fresh order de novo after getting and verifying detailed month-wise break up of opening stock, closing stock, converted stock, sale and purchase and other details of 24ct, 22ct and 18ct gold after affording reasonable opportunity of being heard”. There is nothing on record to suggest, nor has that been demonstrated to us by the learned Departmental Representative, that the Commissioner heard the assessee on the point of inadequate inquiry, which at best is his case. This aspect of the matter, regarding correctness of closing stock valuation, has been examined at length by the Assessing Officer and the detailed questions on the issue, as also reply thereto, have been placed before us in the paper-book pages 49 to 63. In any case, the impugned revision order was passed on 28.03.2014, i.e. much before the Explanation 2(a) to section 263 came into force on 1st June, 2015. Under these circumstances, exercising the revision powers on the ground that the order was passed without making such enquiries and verifications, which should have been made in the opinion of the Commissioner, was simply not permissible.
ITA No. 1514/Ahd/2014 Shri Chimanlal H Soni Vs. CIT Assessment year: 2009-10 Page 5 of 5
We may also mention that the Assessing Officer has asked the questions, accepted the explanations but has not discussed the issue in great detail in the assessment order. This, however, cannot be put against the assessee for the reason that, in the esteemed opinion of Hon’ble Gujarat High Court, the absence of detailed discussions in the body of the assessment order does not imply that the Assessing Officer has not applied his mind – CIT Vs. Nirma Chemical Works Pvt Ltd [(2009) 309 ITR 67 (Guj.)]. In fact, Hon’ble Gujarat High Court has observed that “an assessment order cannot incorporate reasons for making/granting a claim…. if it does so, an assessment order will cease to be an order and become an epic….”. When such are the views of Their Lordship, it can be safely assumed that absence of a specific discussion about reasons of accepting explanation cannot, by itself, be reason enough for exercise of powers under section 263. That precisely, however is the case.
In view of the above discussions, as also bearing in mind entirety of the case, we uphold the plea of the assessee, and, therefore, quash the impugned revision order.
In the result, the appeal is allowed. Pronounced in the open court today on the 23rd April, 2018
Sd/- Sd/-
Mahavir Prasad Pramod Kumar (Judicial Member) (Accountant Member) Ahmedabad, the 23rd day of April, 2018 **bt Copies to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order TRUE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad 1. Date of dictation: .....order prepared as per 7 pages manuscripts of Hon’ble AM which are attached...23.04.2018... 2. Date on which the typed draft is placed before the Dictating Member: ....... 23.04.2018.......... 3. Date on which the approved draft comes to the Sr. P.S./P.S.: …23.04.2018... 4. Date on which the fair order is placed before the Dictating Member for Pronouncement: .. 23.04.2018. 5. Date on which the file goes to the Bench Clerk : .. 23.04.2018.... 6. Date on which the file goes to the Head Clerk : …23.04.2018…………………………. 7. The date on which the file goes to the Assistant Registrar for signature on the order: …… 8. Date of Despatch of the Order: ………………......