ITO 16(1)(2), MUMBAI v. SUCHITA S SHAH, MUMBAI

ITA 5174/MUM/2009 | 2004-2005
Pronouncement Date: 09-03-2011 | Result: Dismissed

Appeal Details

RSA Number 517419914 RSA 2009
Assessee PAN AAPPS7643Q
Bench Mumbai
Appeal Number ITA 5174/MUM/2009
Duration Of Justice 1 year(s) 5 month(s) 29 day(s)
Appellant ITO 16(1)(2), MUMBAI
Respondent SUCHITA S SHAH, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 09-03-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted E
Tribunal Order Date 09-03-2011
Date Of Final Hearing 16-02-2011
Next Hearing Date 16-02-2011
Assessment Year 2004-2005
Appeal Filed On 10-09-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI BEFORE SHRI R.S.SYAL AM AND SHRI VIJAY PAL RAO JM ITA NO.5174/MUM/2009 : ASST.YEAR 2004-2005 THE ASSTT.COMMISSIONER OF INCOME-TAX CIRCLE 16(1) MUMBAI. VS. SMT.SUCHITA S.SHAH PROP : WEST COAST HOSIERY PRODUCTS 13 WALKESHWAR HOUSE 38 WALKESHWAR ROAD MUMBAI 400 006. PAN :AAPPS7643Q. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI HEMANT LAL RESPONDENT BY : SHRI N.S.PORWAL O R D E R PER R.S.SYAL AM : THIS APPEAL BY THE REVENUE ARISES OUT OF THE ORDER PASSED BY THE CIT(A) ON 17.06.2009 IN RELATION TO ASSESSMENT YEAR 2004-2005 . 2. FIRST GROUND IS AGAINST THE DELETION OF ADDITION OF RS.2 29 57 830 MADE BY THE ASSESSING OFFICER ON ACCOUNT OF VALUATION OF ST OCK. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE FURNISHED RETURN DEC LARING TOTAL LOSS OF RS.2.39 CRORES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A SSESSING OFFICER NOTED THAT THERE WAS SALES TO THE TUNE OF RS.5.89 LAKHS AND OT HER INCOME OF RS.12.26 LAKHS (SALE OF EXPORT ENTITLEMENTS AND SUNDRY BALANCES WR ITTEN OFF). AS AGAINST THAT MATERIAL CONSUMPTION WAS SHOWN AT RS.2.23 CRORES. O N BEING CALLED UPON TO EXPLAIN AS TO HOW THERE WAS MATERIAL CONSUMPTION OF RS.2.23 CRORES AS AGAINST SALE OF RS.5.89 LAKHS THE ASSESSEE SUBMITTED THAT IT WA S NOT THE CASE OF MATERIAL CONSUMPTION BUT REDUCTION IN THE VALUE OF CLOSING S TOCK DUE TO OLD EXPORT STOCK VALUED AT MARKET REALIZABLE VALUE AT THE END OF THE YEAR. AS AGAINST THE OPENING STOCK VALUED AT RS.2.67 CRORES THE CLOSING STOCK WAS VALUED AT RS.37.71 LAKHS THEREBY LEADING TO LOSS OF RS.2.29 CRORES ON THIS V ALUATION OF STOCK. IN SUPPORT OF DECLINE IN THE MARKET VALUE THE ASSESSEE STATED T HAT THE FABRIC AND YARN PURCHASED ITA NO.5174/MUM/2009 SMT.SUCHITA S.SHAH 2 IN THE EARLIER YEAR COULD NOT BE SOLD IN THIS YEAR DUE TO LOCK OUT AND HENCE STOCK PRODUCED FOR EXPORT COULD NOT BE SOLD. ON BEING QUE STIONED AS TO HOW THE VALUE OF THE CLOSING STOCK WAS ARRIVED AT THE ASSESSEE STAT ED THAT IT SOLD SOME FABRIC DURING THE YEAR AT RS.22.50 PER KG. AND HENCE THE REMAININ G FABRIC IN CLOSING STOCK WAS VALUED AT RS.30 PER KG. AND YARN AT RS.40 PER KG. A S AGAINST EARLIER VALUE OF 239.42 AND RS.139.25 PER KG. EACH. THE ASSESSING OFFICER O PINED THAT IT WAS NOT POSSIBLE TO ACCEPT SUCH DRASTIC UNDER-VALUATION. HE FURTHER OBSERVED THAT IF THERE WAS A STRIKE THE ASSESSEE COULD HAVE SOLD THE STOCK AT WHATEVER PRICE RATHER THAN LEAVING IT IN THE FACTORY. HE FURTHER SUGGESTED THAT THE STOCK CO ULD HAVE BEEN SOLD AND EVEN THE BANKS WOULD HAVE BEEN HAPPY TO RECOVER THEIR AMOUNT S TO THAT EXTENT. HE THEREFORE REJECTED THE ASSESSEES CONTENTION AND V ALUED THE CLOSING STOCK AT THE SAME VALUE AT WHICH IT WAS VALUED IN OPENING STOCK . THIS LED TO THE ADDITION OF RS.2.29 CRORES. THE LEARNED CIT(A) HOWEVER GOT CONV INCED WITH THE ASSESSEES SUBMISSION AND ORDERED FOR THE DELETION OF ADDITION . 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD IT IS NOTED THAT THE ASSESSEE WAS FOLLOWING METHOD OF COST OR MARKET PRICE WHICHEVER IS LESS FOR VALUING ITS STOCK. IN THE YE AR IN QUESTION SOME PART OF THE OPENING STOCK WAS SOLD AT RS.22.50 PER KG. THE FIGU RE OF SALE HAS BEEN ACCEPTED BY THE ASSESSING OFFICER. IT SHOWS THAT THE FACT OF TH E ASSESSEE SOLD FABRIC AT RS.22.50 PER KG. WAS CORRECT. WHEN WE VIEW THIS FACT ALONG WITH THE VALUATION OF REMAINING FABRIC AT RS.30 PER KG. AND YARN AT RS.40 PER KG. IT BECOMES PALPABLE THAT THE VALUATION OF CLOSING STOCK IS STILL HIGHER THAN THE ACTUAL REALIZATION FROM SALES DURING THE YEAR IN QUESTION. WHEN THE METHOD OF `CO ST OR MARKET PRICE WHICHEVER IS LESS IS FOLLOWED FOR THE PURPOSE OF VALUING THE C LOSING STOCK IT IS NATURAL TO VALUE THE CLOSING STOCK AT A MARKET PRICE IF IT IS LOWER THAN THE COST PRICE. AS IN THE INSTANT CASE THE ASSESSEE HAS SHOWN VALUE OF CLOSING STOCK AT HIGHER FIGURE THAN THAT AT WHICH PART OF THE OPENING STOCK WAS SOLD DURING THE YEAR WE DO NOT FIND ANY REASON TO DISTURB THE SAME. THE ASSESSING OFFICER EXCEPT FOR MAKING ADDITION BY VALUING ITA NO.5174/MUM/2009 SMT.SUCHITA S.SHAH 3 THE CLOSING STOCK AT THE SAME VALUE AT WHICH IT WA S APPEARING IN THE OPENING STOCK DID NOT ADDUCE ANY REASON AS TO WHY THE ASSESSEES CONTENTION ABOUT STOCK MANUFACTURED FOR THE PURPOSE OF EXPORT COULD NOT BE SOLD DUE TO LOCK OUT WAS NOT ACCEPTABLE. WHEN WE VIEW THE COPY OF PROFIT AND L OSS ACCOUNT FOR THE YEAR UNDER CONSIDERATION IT IS SEEN THAT THERE ARE NO PURCHA SES THROUGHOUT THE YEAR. THE LEARNED CIT(A) HAS ALSO TAKEN NOTE OF THE FACT THAT THE ASSESSEES BUSINESS WAS CLOSED WITH EFFECT FROM 1.4.2004 WHICH HAS REMAINE D UNCONTROVERTED BY THE LD. DR. THE AO ASSUMED ADVISORY ROLE IN SUGGESTING THAT THE ASSESSEE SHOULD HAVE DONE THIS OR THAT IN THE GIVEN CIRCUMSTANCES WITHO UT SEEING WHAT WAS ACTUALLY DONE. FURTHER WHEN THE MARKET PRICE IS STILL HIGHE R THAN THE ACTUAL SALE PRICE DURING THE YEAR WHICH HAS NOT BEEN DISPUTED BY THE AO A ND THERE IS NO MATERIAL TO INDICATE THAT THE GOODS IN STOCK WERE OF ANY VALUE HIGHER THAN THAT REFLECTED BY THE ASSESSEE IN OUR CONSIDERED OPINION THE AO WAS NOT JUSTIFIED IN HIS ACTION IN VALUING THE CLOSING STOCK AT THE VALUE OF THE OPENI NG STOCK. ALL THESE FACTS INDICATE THAT VALUATION OF THE CLOSING STOCK AS DONE BY THE ASSESSEE WAS APPROPRIATE AND DID NOT CALL FOR ANY INTERFERENCE. WE THEREFORE UPHOL D THE IMPUGNED ORDER ON THIS ISSUE. THIS GROUND IS NOT ALLOWED. 4. THE ONLY OTHER EFFECTIVE GROUND IS AGAINST RESTR ICTING CAPITAL GAIN ON SALE OF GALA AT RS.61 475. FACTS APROPOS THIS GROUND ARE TH AT THE ASSESSEE CREDITED A SUM OF RS.12 LAKHS TO HIS CAPITAL ACCOUNT ON SALE OF GALA. NO CAPITAL GAIN WAS OFFERED. ON BEING CONFRONTED THE ASSESSEE STATED THAT HIS INCOM E WAS LOSS AND THE LONG TERM PROFIT WOULD BE SET OFF AGAINST THE CURRENT YEARS LOSS. IN ORDER TO CALCULATE THE LONG TERM CAPITAL GAIN ON THE SALE OF THIS PROPERTY THE ASSESSEE WAS ASKED TO PRODUCE THE REGISTERED DOCUMENTS OF SALE AND PURCHASE SO THAT T HE VALUE AS PER SECTION 50C COULD BE WORKED OUT. THE ASSESSEE EXPRESSED HIS IN ABILITY TO PRODUCE THE SAME. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD S HOWN SALE PRICE AT RS.12 LAKHS. CONSIDERING THE AREA OF GALA AND THE LOCALITY IN WH ICH IT WAS LOCATED AND AFTER MAKING LOCAL INQUIRIES HE ADOPTED SALE VALUE AT RS .15 LAKHS AND COMPUTED LONG ITA NO.5174/MUM/2009 SMT.SUCHITA S.SHAH 4 TERM CAPITAL GAIN AT RS.3 61 475. THE LEARNED CIT(A ) ACCEPTED THE SALE PRICE OF RS.12 LAKHS AND RESTRICTED THE ADDITION ON ACCOUNT OF LONG TERM CAPITAL GAIN TO RS.61 475 THEREBY ALLOWING RELIEF OF RS.3 LAKHS AG AINST WHICH THE REVENUE HAS COME UP IN APPEAL BEFORE US. 5. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD IT IS NOTICED THAT THE ASSESSEE SHOWED SALE PRICE OF GALA AT RS.12 LAKHS AS PER THE AGREEMENT. THE ASSESSING OFFICER AT HIS OWN WHIMS AND FANCIES ESTIMATED THE SALE VALUE AT RS.15 LAKHS AND PROCEEDED TO CO MPUTE THE LONG TERM CAPITAL GAIN AT RS.3.61 LAKHS. THERE IS ABSOLUTELY NO BASIS WITH THE ASSESSING OFFICER TO ESTIMATE THE SALE PRICE AT RS.15 LAKHS AS AGAINST THE VALUE AS PER AGREEMENT OF RS.12 LAKHS. WE THEREFORE HOLD THAT THE LEARNED CIT(A) WAS JUS TIFIED IN ADOPTING THE SALE VALUE AT RS.12 LAKHS. THAT BEING THE POSITION THE AMOUNT OF LONG TERM CAPITAL GAIN BECOMES RS.61 475. WE THEREFORE APPROVE THE VIEW TAKEN BY THE LEARNED CIT(A) ON THIS ISSUE. 6. IN THE RESULT THE APPEAL IS DISMISSED. ORDER PRONOUNCED ON THIS 9 TH DAY OF MARCH 2011 . SD/- SD/- (VIJAY PAL RAO) (R.S.SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI : 9 TH MARCH 2011. DEVDAS* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT(A) XVI MUMBAI. 5. THE DR/ITAT MUMBAI. 6. GUARD FILE. ITA NO.5174/MUM/2009 SMT.SUCHITA S.SHAH 5 TRUE COPY. BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI.