M/s Kailash Carpet Co., Agra v. Dy.C.I.T.-1, Agra

CO 21/AGR/2013 | 2006-2007
Pronouncement Date: 31-10-2013 | Result: Dismissed

Appeal Details

RSA Number 2120323 RSA 2013
Assessee PAN AABFK4484H
Bench Agra
Appeal Number CO 21/AGR/2013
Duration Of Justice 1 month(s) 28 day(s)
Appellant M/s Kailash Carpet Co., Agra
Respondent Dy.C.I.T.-1, Agra
Appeal Type Cross Objection
Pronouncement Date 31-10-2013
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 31-10-2013
Assessment Year 2006-2007
Appeal Filed On 02-09-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH AGRA BEFORE SHRI BHAVNESH SAINI JUDICIAL MEMMBER AND SHRI PRAMOD KUMAR ACCOUNTANT MEMBER ITA NO. 298/AGRA/ 2013 ASSESSMENT YEAR 2006-07 DY. COMMISSIONER OF INCOME TAX-1 VS. M/S KAILASH CA RPET COMPANY AGRA. DHOLPUR HOUSE M.G. ROAD AGRA. (PAN AABFK 4484 H) C.O. NO. 21/AGRA/2013 (IN ITA NO. 298/AGRA/ 2013) ASSESSMENT YEAR 2006-07 M/S KAILASH CARPET COMPANY VS. DY. COMMISSIONER O F INCOME TAX-1 DHOLPUR HOUSE M.G. ROAD AGRA AGRA. (PAN AABFK 4484 H) (APPELLANT) (RESPONDENT) REVENUE BY : SHRI K.K. MISHRA JR. D.R. ASSESSEE BY : NONE DATE OF HEARING : 30.10.2013 DATE OF PRONOUNCEMENT : 31.10.2013 ORDER PER BHAVNESH SAINI JUDICIAL MEMBER THE DEPARTMENTAL APPEAL IS DIRECTED AGAINST THE OR DER OF LD. CIT(A)-1 AGRA DATED 03.05.2013 FOR A.Y. 2006-07 CHALLENGING THE ORDER OF LD. CIT(A) IN DELETING ITA NO.298/AGRA/2013 A.Y.2006-07 C.O. NO. 21/AGRA/2013 A.Y.2006-07 2 THE ADDITION OF RS.10 02 480/- MADE ON ACCOUNT OF D EVALUATION OF STOCK. THE CROSS OBJECTION IS FILED MERELY IN SUPPORT OF THE ORDER O F LD. CIT(A). 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE A.O. FOUND THAT ASSESSEE HAS BOOKED A LOSS OF RS.10 02 480/- ON ACCOUNT OF DEVALUATION OF THE STOCK AND AS HELD BY HIM THE ASSESSEE COULD NOT EXPLAIN SATISFACTORILY AS TO HOW DEVALUATION OF STOCK HAS BEEN MADE AS PER THE PROVISIONS OF THE INCOME TAX ACT AN D THEREFORE HE DISALLOWED THE CLAIM OF LOSS MADE BY THE ASSESSEE ON ACCOUNT OF DE VALUATION OF STOCK. THE ASSESSEE CHALLENGED THE ADDITION BEFORE LD. CIT(A) AND WRITT EN SUBMISSION OF THE ASSESSEE IS INCORPORATED IN THE APPELLATE ORDER IN WHICH THE AS SESSEE HAS EXPLAINED THAT A VERY OLD STOCK WAS LYING WITH THE ASSESSEE FIRM. DUE TO SOME DISPUTE AMONGST PARTNERS THERE WERE NO SALES OR BUSINESS SINCE LAST FOUR YEA RS. AS PER PREVAILING PRACTICE AND METHOD BEING REGULARLY ADOPTED BY THE ASSESSEE FIRM I.E. LOWER OF COST OR MARKET PRICE THE STOCK WAS VALUED AT MARKET PRICE WHICH WAS LOWER THAN THE VALUE AT OPENING OF THE YEAR. THE LOWER VALUE OF THE STOCK W AS AS PER THE METHOD REGULARLY ADOPTED BY THE ASSESSEE AND THERE IS NO INCOME UNDE R THE ACT WHICH ESCAPED ASSESSMENT. THE LD. CIT(A) CONSIDERING THE EXPLANA TION OF THE ASSESSEE HAS DELETED THE ADDITION. HIS FINDINGS IN PARA NO.4 OF THE APPE LLATE ORDER ARE REPRODUCED AS UNDER:- ITA NO.298/AGRA/2013 A.Y.2006-07 C.O. NO. 21/AGRA/2013 A.Y.2006-07 3 I HAVE CONSIDERED THE ABOVE WRITTEN SUBMISSION AS WELL AS THE DISCUSSION MADE BY THE A.O. IN THE ASSESSMENT ORDER . AS EXPLAINED BY THE LD. AR THE DEVALUATION OF STOCK HAS BEEN MADE BY THE A SSESSEE (APPELLANT) BECAUSE THE STOCK OF CARPET LYING WITH THEM WERE QU ITE OLD STOCK AND THERE WERE NO SALES OR BUSINESS SINCE LAST FOUR YEARS AND THEREFORE TAKING OF LOWER VALUE OF CLOSING STOCK IN COMPARISON TO OPENING STO CK IS QUITE CORRECT AND VALUATION OF STOCK IS ACCORDING TO THE METHOD BEING ADOPTED REGULARLY AND HE HAS ALSO OFFERED FOR INSPECTION OF THE STOCK TO SHOW THAT AS TO HOW OLD THESE STOCK ARE WHICH HAS NO MARKETABLE VALUE AND THE SAME REQUEST WAS ALSO MADE TO THE AO BUT WITHOUT CONSIDERING THE FAC TS AND CIRCUMSTANCES OF THE CASE THE AO HAS DISCARDED THE VERSION OF THE A PPELLANT WITHOUT GIVING ANY REASON AND BASIS FOR IT. I HAVE GONE THROUGH TH E ASSESSMENT ORDER AND I HAVE FOUND THAT THE AO HAS DISCUSSED THE DEVALUATIO N OF STOCK DONE BY THE ASSESSEE (APPELLANT) IS NOT IN ACCORDANCE WITH THE PROVISIONS OF INCOME TAX ACT BUT HE HAS NOT SPECIFIED AS TO UNDER WHICH PROV ISION OF THE INCOME TAX ACT SUCH DEVALUATION OF STOCK CANNOT BE MADE. AS P ER THE FACT OF THE CASE WHICH IS ALSO NOT DISPUTED BY THE AO IN THE ASSESSM ENT ORDER THE STOCK OF THE CARPET LYING WITH THE ASSESSEE (APPELLANT) ARE QUIT E OLD AND NO SALE OF SUCH STOCK IS BEING MADE FOR LAST FOUR YEARS AND THEREFO RE IT IS QUITE OBVIOUS THAT BECAUSE OF THE OLD STOCK LYING WITH THE ASSESSEE (A PPELLANT) ITS MARKET VALUE HAS CERTAINLY GONE DOWN AND THEREFORE AS PER THE A CCOUNTING POLICY OF VALUING OF STOCK AT COST OR MARKET VALUE I FIND TH AT THE ASSESSEE (APPELLANT) HAS REASONABLY REDUCED THE VALUATION OF STOCK IN CL OSING STOCK AT 10% LESS THAN THE OPENING STOCK TO ARRIVE AT A VALUE OF THE STOCK AT MARKET VALUE ON ESTIMATE BASIS WHICH DOES NOT APPEAR TO BE A LARGE AMOUNT OF DEDUCTION IN THE VALUE OF STOCK AND SINCE THE ASSESSEE (APPELLAN T) IS NOT BEING ABLE TO SELL THIS STOCK THERE IS NOT GOING TO BE ANY LOSS TO TH E REVENUE BECAUSE OF DEVALUATION OF STOCK. IN ANY CASE IF SUCH STOCK IS SOLD BY THE ASSESSEE (APPELLANT) LATER ON IF THERE OCCURS ANY PROFIT ON SALE OF THE CARPET IT WOULD BE CERTAINLY DECLARED FOR THE PURPOSE OF TAXATION A ND IF THE SALE RATE OF THE CARPET HAPPENS TO MORE THAN THE REDUCED VALUE OF ST OCK THE MORE AMOUNT OF PROFIT WOULD BE DECLARED. IN CASE OF CIT VS. DHANRAJGIRIJI RAJA NARSINGHGIRI 91 ITR 544 (SC) WHILE DECIDING ALLOWABILITY OF CERTAIN EXPENDITURE CLAIMED BY THE ASSESSEE (APPELLANT) U/S 37(1) OF THE ACT THE HONBLE SUPREME COURT HAS OBSERVED THAT IT WAS FOR THE ASSESSEE TO DECIDE HOW BEST TO PROTECT HIS OWN INTEREST. IT IS FURTHER HELD BY THE HONBLE APEX COURT THAT IT IS NOT OPEN TO THE DEPARTMENT TO PRES CRIBE WHAT EXPENDITURE AN ITA NO.298/AGRA/2013 A.Y.2006-07 C.O. NO. 21/AGRA/2013 A.Y.2006-07 4 ASSESSEE SHOULD INCUR AND IN WHAT CIRCUMSTANCES HE SHOULD INCUR THAT EXPENDITURE. EVERY BUSINESSMAN KNOWS HIS INTEREST B EST. IN VIEW OF THE ABOVE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IT IS FOR THE ASSESSEE TO DECIDE ABOUT THE MARKET VALUE OF ITS STOCK LOOKING TO THE CONDITION OF THE STOCK LYING WITH IT. IN THE CASE UNDER CONSIDERATIO N THE AO PUT HIS LEGS TO THE SHOES OF THE ASSESSEE AND DETERMINED WHETHER REDUCT ION IN VALUATION OF CLOSING STOCK IS TO BE DONE OR NOT LOOKING TO ITS M ARKETABILITY AND THEREFORE HE HAS NOT ACCEPTED THE DEVALUATION OF STOCK DONE B Y THE ASSESSEE (APPELLANT) AND HE HAS WRONGLY MENTIONED THAT SUCH DEVALUATION OF STOCK IS NOT AS PER THE PROVISIONS OF THE INCOME TAX ACT WIT HOUT MENTIONING ANY SUCH PROVISIONS. THEREFORE I DELETE THE ADDITION OF RS.10 02 480/- MADE IN TH E RETURNED LOSS OF THE ASSESSEE (APPELLANT) ON ACCOUN T OF REJECTION OF ITS CLAIM FOR DEVALUATION OF STOCK. SINCE THE ASSESSEE S CONTENTION FOR DEVALUATION OF SOTCK HAS BEEN ACCEPTED BY ME HE HA S NOT PRESSED THE GROUND NO.1 TAKEN FOR CHALLENGING THE PROCEEDING U/S 147. AS T HE ADDITION MADE IN THE ASSESSMENT ORDER OF RS.10 02 480/- CHAL LENGED IN THIS APPEAL HAS BEEN ALLOWED THE APPEAL IS ALLOWED. 3. THE LD. D.R. RELIED UPON THE ORDER OF THE A.O. H OWEVER HE WAS NOT ABLE TO POINT OUT ANY INFIRMITY IN THE ORDER OF THE LD. CIT (A) IN DELETING THE ADDITION. NONE APPEARED ON BEHALF OF THE ASSESSEE DESPITE SERVICE OF NOTICE. 4. ON CONSIDERATION OF FACTS OF THE CASE IN THE LI GHT OF THE FINDINGS OF THE CIT(A) WE DO NOT FIND ANY MERIT IN THE DEPARTMENTA L APPEAL. IT WAS FOUND THAT DEVALUATION OF THE STOCK WAS MADE BY THE ASSESSEE B ECAUSE THE STOCK OF CARPET LYING WITH THE ASSESSEE WAS VERY OLD STOCK AND SINCE THER E WAS NO BUSINESS OR SALES CONDUCTED IN THE ASSESSMENT YEAR UNDER APPEAL AND P RIOR YEAR ALSO THE VALUATION OF THE STOCK WAS MADE ACCORDINGLY AS PER METHOD REGULA RLY ADOPTED BY THE ASSESSEE. ITA NO.298/AGRA/2013 A.Y.2006-07 C.O. NO. 21/AGRA/2013 A.Y.2006-07 5 SINCE THE STOCK WAS OLD AND WAS HAVING NO MARKETABL E VALUE THEREFORE LD. CIT(A) ON PROPER APPRECIATION OF THE FACTS AND MATERIAL ON RECORD CORRECTLY DELETED THE ADDITION. THE LD. CIT(A) CORRECTLY FOUND THAT A.O. HAS NOT SPECIFIED UNDER WHICH PROVISION THE DEVALUATION OF THE STOCK COULD NOT BE MADE. NO SPECIFIC REASONS HAVE BEEN GIVEN BY A.O. TO MAKE ADDITION. THE FINDING RE CORDED BY THE CIT(A) IS IN ACCORDANCE WITH LAW ACCORDINGLY DEPARTMENTAL APPEA L IS DISMISSED. 5. SINCE THE CROSS OBJECTION IS FILED MERELY IN SUP PORT OF THE ORDER LD. CIT(A) THEREFORE THE SAME IS NOT MAINTAINABLE AND IS ACCO RDINGLY DISMISSED. 6. IN THE RESULT DEPARTMENTAL APPEAL AS WELL AS CR OSS OBJECTION OF THE ASSESSEE BOTH ARE DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT) SD/- SD/- (PRAMOD KUMAR) (BHAVNESH SAIN I) ACCOUNTANT MEMBER JUDICI AL MEMBER AMIT/ COPY OF THE ORDER FORWARDED TO:- APPELLANT RESPONDENT CIT (APPEALS) CONCERNED CIT CONCERNED D.R. ITAT AGRA BENCH AGRA GUARD FILE. BY ORDER SR. PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL AGRA TRUE COPY