NCO EXTRUSIONS LTD,MUMBAI vs. CIT 8, MUMBAI

The assessee has raised the following grounds:-

The brief facts of the case are that the assessee company filed its e-return for A.Y.2009-10 on 19.09.2009 declaring loss of Rs.5,43,91,122/- of the Act. The assessment u/s.143(3) of the Act was completed on 18.10.2011 reducing the loss to the tune of Rs.5,29,69,448/- and book profit was computed to the tune of Rs.66,78,263/-. On examination of computation of income, it was noticed that the assessee had added notionally valued closing stock of inventories as per Accounting Standard – 2 and deducted closing stock inventories credited in the books. This deviation in valuation of inventory for income tax purpose resulted in undervaluation of closing stock and consequent under-assessment of income by Rs.6,07,91,429/-. Details of the said figures have been mentioned below:-

It was also noticed that the Assessing Officer while completing the assessment u/s.143(3) of the Act on 18.10.2011, has omitted to disallow this notional difference in valuation of inventories as the assessee had adopted one system of valuation of stocks in its final accounts and another system nationally for income tax purpose which is contrary to the provisions of the Act. Therefore notice u/s.263 of the Act was issued and after getting the reply the case was reopened and was ordered to be examined as per the directions given in the said orders. Feeling aggrieved the assessee has filed the present appeal before us.

We have heard the arguments advanced by the learned representative of the parties and perused the record. The learned representative of the assessee has argued that the assessee has already given the information in accordance with the accounting standard while passing the assessment order dated 18.10.2011 which has been examined by the Assessing Officer properly, therefore, in the said circumstances where two views are possible then in the said circumstances the case is not required to be reopened in view of the provision u/s.263 of the Act. It is also argued that the order passed by the Assessing Officer dated 18.10.2011 was not erroneous and prejudicial to the interest of revenue, therefore, the authority was not ITA No.3662/M/2014 A.Y. 2009-10 entitled to invoke the provision u/s.263 of the Act. The learned representative of the assessee has also argued that the Assessing Officer raised the query about the facts which has been raised by the Commissioner in the order passed u/s.263 of the Act and the assessee also submitted the reply in this regard by virtue of letter dated 10.10.2011 lies at page no.30, 31, 32 & 33 of the paper book. Therefore the case is not entitled to be taken up in view of the provision u/s.263 of the Act. In support of his contention the learned representative of the assessee has placed reliance upon the law settled in Spectra Shares and Scripts (P.) Ltd. Vs. CIT Hyderabad [2013] 36 taxman.com 348 (AP) and CIT Vs. Max India Ltd. 295 ITR 283 SC and CIT Vs. Honda Siel Power Products Ltd. 235 CTR 336 (Delhi SC) and CIT Vs. Malabar Industrial Co. Ltd. 243 ITR 83 (SC) and CIT Vs. Lucas TVS Ltd. 249 ITR 306 (SC).

On the other hand the learned representative of the department has strongly relied upon the order passed by the learned CIT(A) in question. Keeping in view of the argument advanced by the learned representative of the parties and perusing the record, it came into notice that the Assessing Officer did not examine this issue in his order dated 18.10.2011 passed by the Assessing Officer in view of the provision u/s.143(3) of the Act. The reply which has been attached by the representative of the assessee dated 10.10.2011 nowhere speaks about the letter issued by the Assessing Officer however, the letter

On appraisal of order dated 18.10.2011 we nowhere found any observation in this regard. The reply filed by the assessee also nowhere discussed in the order dated 18.10.2011. No view of any kind was taken by the Assessing Officer on this issue. There is no dispute with regard to the law relied by the learned representative of the assessee is concerned but the facts and circumstances of the present case are totally different. Therefore, the above said law is not applicable to the facts of the present case being non-identical. On appraisal of the order in question, it came into the notice that the ITA No.3662/M/2014 A.Y. 2009-10 CIT(8) Mumbai has given the specific finding which is reproduced below:-

In view of the said direction, it is quite clear that the Assessing Officer has to do the reassessment in accordance with the directions passed by the CIT(8) Mumbai while passing the order u/s.263 of the Act. The said direction nowhere leaves the room for the Assessing Officer to examine the matter of controversy afresh in the light of the material available before him. We are of the view that the issue in question is required to be examined afresh independently by the Assessing Officer and to pass the fresh order in accordance with law. The direction given by the CIT(8) in question is hereby modified accordingly. However, the appeal filed by the assessee is hereby ordered to be dismissed.

In the result, the appeal filed by the assessee is hereby dismissed.