Om Rice Mills Pvt. Ltd., Paschim Medinipur v. ACIT, Circle - 2, Midnapore, Midnapore

ITA 1286/KOL/2011 | 2005-2006
Pronouncement Date: 17-02-2012 | Result: Allowed

Appeal Details

RSA Number 128623514 RSA 2011
Assessee PAN AAACO6589R
Bench Kolkata
Appeal Number ITA 1286/KOL/2011
Duration Of Justice 4 month(s) 17 day(s)
Appellant Om Rice Mills Pvt. Ltd., Paschim Medinipur
Respondent ACIT, Circle - 2, Midnapore, Midnapore
Appeal Type Income Tax Appeal
Pronouncement Date 17-02-2012
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 17-02-2012
Assessment Year 2005-2006
Appeal Filed On 30-09-2011
Judgment Text
ITA NO. 1286 /KOL /20 11 ASSESSMENT YEAR: 2005 - 06 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA A BENCH KOLKATA BEFORE SHRI PRAMOD KUMAR (ACCOUNTANT MEMBER) AND SHRI N VIJAYKUMARAN (JUDICIAL MEMBER) I.T.A. NO. : 1286 / KOL . / 2011 ASSESSMENT YEAR : 2005 - 06 OM RICE MILLS PVT. LTD. .APPELLANT NUTANDIHI P.O. JHARGRAM DISTRICT PASCHIM MIDNAPORE WB [PAN: AAACO6589R ) VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE2 MIDNAPORE RESPONDENT APPEARANCES BY: GAUTAM GHOSH FOR THE APPELLANT ANJAN PRASAD ROY FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : FEBRUARY 0 9 2012 DATE OF PRONOUNCING THE ORDER : FEBRUARY 17 2012 O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL THE ASSESSEE APPELLANT HAS CHALLENGED CORRECTNESS OF CIT(A)S ORDER DATED 1 ST SEPTEMBER 2011 IN THE MATTER OF ORDER UNDER SECTION 154 R.W.S. 143(3) OF THE INCOME TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR THE ASSESSMENT YEAR 2005 - 06. THE SHORT ISSUE THAT WE ARE R EQUIRED TO ADJUDICATE IN THIS APPEAL IS WHETHER OR NOT THE CIT WAS JUSTIFIED IN UPHOLDING THE RECTIFICATION MADE BY THE ASSESSING OFFICER. ITA NO. 1286 /KOL /20 11 ASSESSMENT YEAR: 2005 - 06 PAGE 2 OF 5 2. THE ISSUE IN APPEAL LIES IN A VERY NARROW COMPASS OF MATERIAL FACTS. IN THIS CASE ASSESSMENT SCRUTINY ASSESSMEN T WAS COMPLETED ON 28 TH DECEMBER 2007 AT A LOSS OF RS 32 74 650. THE ASSESSEE APPEALED AGAINST THE SAID ASSESSMENT AND VIDE CIT(A)S ORDER DATED 25 TH FEBRUARY 2009 THE ASSESSMENT WAS REVISED AT A LOSS OF RS 29 55 923. IN THE MEANTIME HOWEVER THERE WAS AN AUDIT OBJECTION TO THE ASSESSMENT TO THE EFFECT THAT SCRUTINY OF ASSESSMENT RECORDS REVEALED THAT OPENING BALANCE FOR RS 2 17 420 HAS BEEN DEBITED IN THE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 - 03 - 05 ALTHOUGH THE CLOSING BALANCE FOR THE YEAR EN DED 31 - 03 - 04 WAS NIL . AGGRIEVED ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. IN ADDITION TO RAISING LEGAL ARGUMENTS THE ASSESSEE ALSO POINTED OUT IN THE STATEMENT OF FACTS BEFORE THE CIT(A) THAT THE ASSESSEE DID REC EIVE A SHOW CAUSE NOTICE ON 20.11.2009 WHICH GAVE HIM TIME UPTO 27.11.2009 AND ASSESSEE DID COMPLY WITH THE SAME BUT THE ASSESSING OFFICER PASSED THE IMPUGNED ORDER WITHOUT WAITING FOR THE REPLY TO SHOW CAUSE NOTICE. THE CIT(A) SIMPLY BRUSHED ASIDE THIS CONTENTION. THE CIT(A) HOWEVER DID TAKE NOTE OF THE ASSESSEES PLEA THAT THE AMOUNT OF RS 2 17 499.17 WAS SHOWN AS INVENTORIES OF GUNNY BAG RICE AND RICE BRAN IN THE AUDITED BALANCE SHEET FOR THE YEAR ENDED 31 ST MARCH 2004 UNDER THE PRE - OPERATIVE EXPENSES AND THE SAID AMOUNT WAS TAKEN AS OPENING STOCK FOR THE CURRENT YEAR BUT REJECTED THE SAME BY INTER ALIA OBSERVING THAT ... THE PRE - OPERATIVE CLOSING STOCK OF LAST YEAR WHICH THOUGH SHOWN AS INVENTORY IN T HE BALANCE SHEET BUT NOT PASSED THROUGH THE TRADING ACCOUNT CANNOT BE ENTERTAINED AS OPENING STOCK OF THE CURRENT YEAR .. HE THUS UPHELD THE ACTION OF THE ASSESSING OFFICER AND DECLINED TO INTERFERE IN THE MATTER. THE ASSESSEE IS NOT SATISFIED AND IS IN F URTHER APPEAL BEFORE US. 3. WE HAVE HEARD THE RIVAL CONTENTION PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION . ITA NO. 1286 /KOL /20 11 ASSESSMENT YEAR: 2005 - 06 PAGE 3 OF 5 4. IT IS ONLY ELEMENTARY AS HAS BEEN OBSERVED BY HONBLE SUPREME COURT IN THE CASE OF ITO VS VOLKART BROTHERS (82 ITR 50) THAT AN ERROR WHICH HAS TO BE ESTABLISHED BY A LONG DRAWN PROCESS OF REASONING ON POINTS WHERE THERE MAY CONCEIVABLY BE TWO OPINIONS CANNOT BE SAID TO BE AN ERROR APPARENT ON THE FACE OF THE RECORD AND THAT THE SCOPE OF MISTAKES WHICH CAN BE RECTIFIED UNDER SECTION 154 IS THEREFORE CONFINED TO ONLY SUCH MISTAKES ON WHICH NO TWO VIEWS ARE POSSIBLE. IN ORDER TO INVOKE THE PROVISIONS OF SECTION 154 NOT ONLY THAT THERE HAS TO BE MISTAKE BUT THE MISTAK E HAS TO BE SUCH ON WHICH NO VIEWS ARE POSSIBLE. THAT APART IN TERMS OF THE PROVISIONS OF SECTION 154(3) ANY RECTIFICATION OF MISTAKE WHICH HAS THE EFFECT OF ENHANCING AN ASSESSMENT OR REDUCING A REFUND OR OTHERWISE INCREASING THE LIABILITY OF THE ASS ESSEE SHALL NOT BE MADE UNDER THIS SECTION UNLESS THE AUTHORITY CONCERNED HAS GIVEN NOTICE TO THE ASSESSEE OF ITS INTENTION SO TO DO AND HAS ALLOWED THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD . IN THE LIGHT OF THE FUNDAMENTAL LEGAL POSITION SET OUT ABOVE LET US EXAMINE THE VALIDITY OF IMPUGNED RECTIFICATION ORDER UNDER SECTION 154 AS UPHELD BY THE CIT(A). 5. IF AN AMOUNT IS INCLUDED AS OPENING STOCK IN THE CURRENT YEARS PROFIT AND LOSS ACCOUNT BUT IT DOES NOT FORM PART OF THE OPENING INVEN TORY AS PER THE BALANCES BROUGHT FORWARD THE DEDUCTION IS INDEED NOT ADMISSIBLE BUT WHAT IS TO BE REALLY SEEN IS THE OPENING BALANCES BROUGHT FORWARD AND NOT THE ENTRIES IN THE LAST YEARS PROFIT AND LOSS ACCOUNT. HOWEVER THE ASSESSING OFFICER HAS PROCE EDED TO SIMPLY DISALLOW THE OPENING BALANCE OF INVENTORY WITHOUT EVEN VERIFYING WHETHER THE OPENING BALANCE WAS BROUGHT FORWARD FROM LAST YEARS BALANCE SHEET. LEARNED CIT(A) HAS ACCEPTED THE FACT OF THE OPENING BALANCE BUT THEN HE UPHOLDS THE IMPUGNED A DJUSTMENT ON THE GROUND THAT INVENTORY WAS NOT ROUTED THROUGH THE PROFIT AND LOSS ACCOUNT. IN OUR CONSIDERED VIEW THAT CANNOT BE A VALID GROUND FOR REJECTING THE INVENTORY DEBIT. WHAT HAS BEEN WRITTEN OFF AS INVENTORY IN THE PROFIT AND LOSS ACCOUNT OF THE CURRENT PREVIOUS ITA NO. 1286 /KOL /20 11 ASSESSMENT YEAR: 2005 - 06 PAGE 4 OF 5 YEAR IS RS 2 17 479.99 (AND NOT RS 2 17 420 AS REFERRED TO IN THE IMPUGNED RECTIFICATION ORDER) AND INCIDENTALLY IT IS EXACTLY THE SAME AMOUNT WHICH HAS BEEN SHOWN AS LAST YEARS VALUE OF INVENTORIES IN THE BALANCE SHEET AS ON 31.3.2005 . IF THE ASSESSING OFFICER HAD ONLY TAKEN A LOOK AT THE FIGURES FOR PREVIOUS YEARS IN CURRENT YEARS BALANCE SHEET HE WOULD HAVE PERHAPS REALIZED THAT THERE WAS INDEED A CLOSING BALANCE OF INVENTORIES IN THE LAST YEAR. WHETHER THIS AMOUNT IS ROUTED THROUG H THE PROFIT AND LOSS ACCOUNT OR NOT IS NOT SOMETHING WHICH WILL RESTRAIN AN OTHERWISE LEGALLY SUSTAINABLE WRITTEN OFF OF THE INVENTORY. JUST BECAUSE AN AMOUNT HAS NOT BEEN SHOWN AS CLOSING BALANCE IN LAST YEARS PROFIT AND LOSS ACCOUNT AND CREDITED TO PR E - OPERATIVE EXPENSES RATHER THAN THE CLOSING STOCK CANNOT BE A REASON ENOUGH FOR DECLINING THE DEDUCTION. IN OUR CONSIDERED VIEW THEREFORE BASED ON THE INFORMATION ON RECORD THERE IS NO MISTAKE APPARENT ON RECORD AND AS SUCH THERE WAS NO CAUSE OF AC TION FOR INITIATING IMPUGNED RECTIFICATION PROCEEDINGS. AN INVENTORY IS BEING WRITTEN OFF IN THE CURRENT YEARS PROFIT AND LOSS ACCOUNT WITHOUT THERE BEING A CORRESPONDING CLOSING BALANCE IN THE IMMEDIATELY PRECEDING YEARS PROFIT AND LOSS ACCOUNT COULD CERTAINLY BE A STARTING POINT FOR MAKING FURTHER ENQUIRIES INTO THE WRITE OFF BUT THAT FACT BY ITSELF CANNOT BE REASON ENOUGH TO DECLINE THE WRITE OFF. ON MERITS THEREFORE WE DISAPPROVE THE ACTION OF THE AUTHORITIES BELOW. WE HAVE ALSO NOTED THE ASS ESSEES CONTENTION THAT ASSESSING OFFICER HAS PROCEEDED TO RECTIFY THE ASSESSMENT ORDER SIMPLY ON THE BASIS OF AUDIT OBJECTION AND WITHOUT EVEN GIVING ANY OPPORTUNITY TO THE ASSESSEE TO EXPLAIN THE POSITION. IF THIS IS TRUE THAT IS CERTAINLY NOT SOMETHING WHICH CAN MEET ANY JUDICIAL APPROVAL. THIS APPROACH IS ALSO CLEARLY CONTRARY TO THE SPECIFIC PROVISIONS OF SECTION 154(3) OF THE ACT . HOWEVER IT IS NOT REALLY NECESSARY TO GO INTO THIS ASPECT OF THE MATTER ANY FURTHER OR TO GIVE ANY FINDINGS IN RESPECT OF THE SAME AS NEITHER THE ASSESSEE HAS PRESSED FOR THE COSTS NOR DID WE HAVE AN OCCASION TO PERUSE THE RECORDS. WITH THESE OBSERVATIONS WE DISAPPROVE THE STAND OF THE AUTHORITIES BELOW. ITA NO. 1286 /KOL /20 11 ASSESSMENT YEAR: 2005 - 06 PAGE 5 OF 5 6. FOR THE REASONS SET OUT ABOVE WE UPHOLD THE GRIEVANCE OF THE ASSESSEE AND QUASH THE IMPUGNED RECTIFICATION ORDER UNDER SECTION 154. THE ASSESSEE GETS THE RELIEF ACCORDINGLY. 7. IN THE RESULT THE APPEAL IS ALLOWED. PRONOUN CED IN THE OPEN COURT TODAY ON 17 TH DAY OF FEB RUARY 2012. SD/XX SD/XX N VIJAYKUMARAN PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA THE 17 TH DAY OF FEBRUARY 2012 COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES KOLKATA