DCIT, CIR-1(1), KOLKATA, KOLKATA vs. M/S GARDEN REACH SHIPBUILDERS & ENGINEERS LTD., KOLKATA

The appeal preferred by the revenue and the Cross Objection preferred by the assessee are against the order of the Ld. CIT(A)-23, Kolkata dated 22.04.2015 for AY 2007- 08.

The main grievance of the revenue is against the direction of Ld. CIT(A) to increase the opening stock of the assessee for AY 2007-08, taking into consideration the fact that AO has ordered increase in closing stock to the tune of Rs.1,57,22,000/- for AY 2006-07.

Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who was pleased to allow the appeal by observing as under: “I have carefully considered the submission of the appellant for increasing the value of opening stock of the succeeding year by the amount of increase made in the value of closing stock of the preceding year by the A.O. The A.O. has rejected the rectification petition filed by the appellant on the ground that such contention of the appellant cannot be met up u/s.154 of the Income Tax Act, 1961.The appellant has further relied upon the judgement of the Apex Court in this regard. In view of the fact that there has been increase in the closing stock of the preceding year by the A.O., the opening stock of the succeeding year would be increased by that amount. This contention of the appellant is correct and the A.O. is directed to give effect to that extent. Further, in view of the fact that the opening stock is increased to that extent the closing stock of the financial it may also require enhancement or increase in the closing stock of the succeeding year i.e. A.Y.2007-08year corresponding to the assessment year 2007-08 is also required to be looked into and. Thus, the A.O. is directed to verify this aspect also and give consequential effect to the closing stock of this financial year pertaining to assessment year 2007-08 after giving due opportunity to the appellant.”

Aggrieved, the revenue is before us.

We have heard rival submissions and gone through the facts and circumstances of the case. We note that the AO for AY 2006-07 ordered increase in closing stock to the tune of Rs.1,57,22,000/- by order dated 29.10.2008. So, AO was aware that his said order will have 3 & CO No.38/Kol/2015 Garden Reach Ship Builders & Engineers Ltd., AY 2007-08 impact on the opening stock for AY 2006-07 and that the opening stock need to be increased by Rs.1,57,22,000/-. So, when the return of assessee was processed u/s. 143(1) of the Act and an intimation to the assessee was given on 02.02.2009, the department was aware of the assessment order passed on 29.10.2008. So, when the closing stock of assessee got increased for AY 2006-07, so the opening stock has to be increased by that amount of Rs.1,57,22,000/-. So, we find no infirmity in the order of Ld. CIT(A) and the direction of Ld. CIT(A) is justified in the facts and circumstances of the case and takes care of the Revenue’s interest too, so no interference is required from our part. Therefore, we confirm the order of Ld. CIT(A). Revenue’s appeal is, therefore, dismissed.