The ACIT, Mehsana Circle,, Mehsana v. Mehsana Dist.Co.Op.Milk Producers Union Ltd.,, Mehsana

ITA 2298/AHD/2008 | 2005-2006
Pronouncement Date: 06-08-2010 | Result: Dismissed

Appeal Details

RSA Number 229820514 RSA 2008
Bench Ahmedabad
Appeal Number ITA 2298/AHD/2008
Duration Of Justice 2 year(s) 1 month(s) 20 day(s)
Appellant The ACIT, Mehsana Circle,, Mehsana
Respondent Mehsana Dist.Co.Op.Milk Producers Union Ltd.,, Mehsana
Appeal Type Income Tax Appeal
Pronouncement Date 06-08-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 06-08-2010
Date Of Final Hearing 29-07-2010
Next Hearing Date 29-07-2010
Assessment Year 2005-2006
Appeal Filed On 16-06-2008
Judgment Text
- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE S/SHRI MUKUL KR. SHRAWAT JM AND D.C.AGRAWAL AM ASSTT. CIT MEHSANA CIRCLE MEHSANA. VS. MEHSANA DIST. CO-OP. MILK PRODUCERS UNION LTD. DUDHSAGAR DAIRY HIGHWAY MEHSANA. (APPELLANT) .. (RESPONDENT) ASSESSEE BY :- SHRI ALOK JOHRI CIT DR REVENUEBY:- SHRI MANISH J. SHAH AR O R D E R PER D. C. AGRAWAL ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE DEPARTMENT RAISING FOLLOWING GROUND:- (1) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN RESTRICTING THE ADDITION OF RS.2 38 64 430/- TO RS. 13 519/- MADE ON ACCOUNT OF DIFFERENCE IN OPENING STOCK. 2. THE FACTS OF THE CASE ARE THAT ASSESSEE IS A CO- OPERATIVE SOCIETY ENGAGED IN THE BUSINESS OF PROCESSING OF MILK AND M ILK PRODUCTS AND MANUFACTURING OF CATTLE FEED. THE RETURN OF INCOME FOR ASST. YEAR 2005- 06 WAS FILED ON 29.10.2005 DECLARING INCOME OF RS.3 70 97 814/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED T HAT A NOTE HAS BEEN APPENDED IN THE RETURN ABOUT VALUATION OF CLOSING S TOCK. THE NOTE STATED AS UNDER :- ITA NO.2298/AHD/2008 ASST. YEAR :2005-06 2 IN THE EARLIER YEARS ASSESSEE WAS VALUING CLOSING STOCK OF FINISHED GOODS BY REDUCING FIXED PERCENTAGE FROM SELLING PRICE TO DETERMINED C OST PRICE AND THE VALUATION WAS DONE AT COST OR MARKET PRICE WHICHEVER IS LOWER. HO WEVER FOR THE FIRST TIME IN ASST. YEAR 2001-02 THE METHOD WAS NOT ACCEPTED AND AO ACC EPTED 3% REDUCTION FROM SELLING PRICE WHICH IS CONTESTED IN APPEAL. ASSESS EE BELIEVE THAT METHOD FOLLOWED WAS CORRECT METHOD TO DEDUCE CORRECT PROFIT OF THE YEAR . HOWEVER TO AVOID THE LITIGATION ASSESSEE IS DETERMINED THE COST OF FINISHED GOODS A S ON 31/3/2005 BY APPLYING STANDARD COSTING METHOD AND DETERMINED THE VALUE OF STOCK ACCORDINGLY. CORRESPONDINGLY VALUE OF OPENING STOCK ALSO HAS BEE N CHANGED WHILE COMPUTING THE TOTAL INCOME. VALUE OF THE OPENING STOCK HAS BEEN W ORKED OUT AT RS.26 64 03 176/- AS AGAINST VALUE SHOWN IN THE BOOKS OF ACCOUNTS OF RS. 24 25 38 747/-. WORKING OF THE VALUE OF THE OPENING STOCK IS ENCLOSED HEREWITH MAR KED AS ANNEXURE-5. THE ABOVE VALUE OF OPENING STOCK IS SUBJECT TO FINA LIZATION OF ASSESSMENT AND IT IS SUBMITTED THAT WHATEVER IS FINALLY ASSESSED IN ASST . YEAR 2004-05 AS CLOSING STOCK AS OF 31.3.2004 SHOULD BE TAKEN AS OPENING STOCK AS ON 1.4.2004 FOR THE YEAR UNDER CONSIDERATION. THIS IS WITHOUT PREJUDICE TO OUR CONTENTION THAT ME THOD FOLLOWED EARLIER WAS CORRECT METHOD AND SHOULD BE FOLLOWED. IT IS FURTHER SUBMIT TED THAT IF ASSESSEE SUCCEED IN THE EARLIER YEARS AND METHOD FOLLOWED IN THE BOOKS OF A CCOUNTS IN THE EARLIER YEAR IS ACCEPTED THEN VALUE OF OPENING STOCK SHOULD BE MODI FIED ACCORDINGLY. ACCORDING TO THE AO ASSESSEE HAS NOT CORRECTLY DRAW N THE OPENING STOCK OF FINISHED GOODS THIS YEAR WHEREAS VALUE OF CLOSIN G STOCK IN ASST. YEAR 2004-05 WAS TAKEN ON 24 25 38 746/- WHEREAS OPENING IN ASST. YEAR 2005-06 HAS BEEN SHOWN AT RS.26 64 03 176/-. THE DI FFERENCE COMES TO RS.2 38 64 430/-. THIS WAS ADDED IN THE TRADING ACC OUNT AFTER ADOPTING CLOSING STOCK OF ASST. YEAR 2004-05 AS OPENING STOC K IN ASST. YEAR 2005- 06. 3. THE LD. CIT(A) POINTED OUT THAT ASSESSEE HAS GIV EN WORKING OF CLOSING STOCK AND OPENING STOCK RIGHT FROM ASST. YE AR 1998-99 TO THE ASST. YEAR 2005-06 WHICH HAS ALSO BEEN ANNEXED BY T HE AO AS ANNEXURE A TO THE ASSESSMENT ORDER. EVEN AS PER THIS WORKIN G CLOSING STOCK FOR ASST. YEAR 2004-05 HAS BEEN SHOWN AT RS.26 63 89 65 7/-. THEREFORE ADDITION IN ASST. YEAR 2005-06 IS WORKED OUT TO RS. 13 519/-. IN THIS 3 REGARD WE REPRODUCE PARA 2.2.4 TO 2.2.5 FROM THE OR DER OF LD. CIT(A) AS UNDER :- 2.2.4 AS PER THE AUTHORISED REPRESENTATIVE THE NET EFFECT OF THE ADDITION MADE ON THIS GROUND FROM ASSESSMENT YEAR 1998-99 TI LL THE ASST. YEAR 2005-06 IS WORKED IN THE ANNEXURE TO ASSESSMENT ORD ER WHICH WORKS OUT TO RS.2 38 64 430/-. THE DIFFERENCE STANDS TAXED IN THOSE YEARS. NOW NOT ADOPTING THE VALUE OF OPENING STOCK FOR ASST. YEAR 2005-06 AT RS.26 63 89 657/- WOULD MEAN THAT THE SAME FIGURE O F RS.2 38 64 430/- WILL GET TAXED TWICE. AS PER THE COMPUTATION PROVID ED WITH THE ASSESSMENT ORDER THE NET ADDITION FOR ASSESSMENT YEAR 2005-06 WORKS OUT TO ONLY RS.13 519/-. 2.2.5 THE MATTER HAS BEEN GIVEN DUE CONSIDERATION . THE FACTS AS BROUGHT OUT BY THE AUTHORISED REPRESENTATIVE ARE QUITE CLEA R AND ISSUES ARE MORE OR LESS SETTLED. THE REWORKING OF THE VALUATION OF STOCK IN HAND AT THE END OF VARIOUS YEARS HAS FINALLY LED TO VALUATION OF TH E CLOSING STOCK AT RS.26 63 89 657/- BY CIT(A) FOR ASST. YEAR 2004-05. THE SAID CLOSING STOCK HAS TO FORM THE OPENING STOCK OF THE APPELLAN T FOR THE NEXT ASST. YEAR UNDER ALL CIRCUMSTANCES. ALTHOUGH IN THE APPEL LANTS CASE THERE IS AN EXPRESS DIRECTION BY THE CIT(A) AND BY THE ITAT IN THE CONTEXT THIS WOULD HAVE BEEN IN ANY CASE IF THE TRUE PROFITS OF THE AP PELLANT WERE TO BE WORKED OUT. IT NEEDS TO BE APPRECIATED THAT ONCE TH E AO CHANGES THE VALUATION OF THE CLOSING STOCK IT HAS TO HAVE ITS CORRESPONDING EFFECT IN THE OPENING STOCK OF THE NEXT YEAR AND IF SUCH CHAN GES TAKE PLACE IN MORE THAN ONE YEAR ITS ACCUMULATIVE EFFECT WILL BE EVID ENT AT THE BEGINNING OF THE YEAR AFTER THE PERIOD FOR WHICH IT IS CONSIDERE D. THEREFORE IN THE CIRCUMSTANCES I DO NOT FIND ANY JUSTIFICATION FOR THE ADDITION OF RS.2 38 64 430/-. HOWEVER AS RIGHTLY CONCEDED BY T HE APPELLANT THERE IS A DIFFERENCE OF RS.13 519/- WITH RESPECT TO THE CLO SING STOCK AS ADOPTED FOR ASSESSMENT YEAR 2004-05 AND THE OPENING STOCK A S REWORKED BY THE APPELLANT FOR ASST. YEAR 2005-06. HENCE THE ADDITIO N WILL GET RESTRICTED TO RS.13 519/- ONLY. 4. WE HAVE HEARD THE PARTIES AND CAREFULLY PERUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THERE IS NO CASE FOR INTERFERENCE IN THE ORDER OF LD. CIT(A). THE LD. CIT(A) HAS CONSIDERED THE VARIATION IN OPENING AND CLOSING STOCK RIGHT FROM ASST. YEAR 199 8-99 TO ASST. YEAR 2005-06 AND WORKED OUT ADDITION IN THIS REGARD AT R S.13 519/- ONLY. NO 4 INFIRMITY IN THIS WORKING OR IN ANNEXURE TO THE ASS ESSMENT ORDER HAS BEEN POINTED OUT BY LD. DR. THUS THE APPEAL FILED BY THE REVENUE IS DISMISSED. 5. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 6/8/2010 SD/- SD/- (MUKUL KR. SHRAWAT) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT ME MBER AHMEDABAD DATED : 6/8/2010 MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD