Raj Kumar,, Dhuri v. ITO,, Malerkotla

ITA 66/CHANDI/2010 | 2006-2007
Pronouncement Date: 23-07-2010 | Result: Allowed

Appeal Details

RSA Number 6621514 RSA 2010
Assessee PAN ADAPK9876F
Bench Chandigarh
Appeal Number ITA 66/CHANDI/2010
Duration Of Justice 6 month(s) 9 day(s)
Appellant Raj Kumar,, Dhuri
Respondent ITO,, Malerkotla
Appeal Type Income Tax Appeal
Pronouncement Date 23-07-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 23-07-2010
Date Of Final Hearing 14-05-2010
Next Hearing Date 14-05-2010
Assessment Year 2006-2007
Appeal Filed On 13-01-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI G.S.PANNU ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA JUDICIAL MEMBER ITA NO.66/CHD/2010 ASSESSMENT YEAR: 2006-07 SHRI RAJ KUMAR VS. THE ITO WARD IV(4) S/O SHRI KARAM CHAND MALERKOTLA PROP. M/S DELHI RICE MILLS DHURI PAN NO. ADAPK9876F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ MOHAN SINGH RESPONDENT BY: SMT. JAISHREE SHARMA ORDER PER SUSHMA CHOWLA JM THE APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF CIT(A)-II LUDHIANA DATED 6.11.2009 RELATING TO ASSESSMENT YEA R 2006-07 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF THE I.T. ACT. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND OF APPEAL:- 1. THAT THE ORDER PASSED BY THE ITO WARD-IV(4) MALERKOTLA AND CONFIRMED BY THE HON'BLE CIT(A)-II L UDHIANA IS ILLEGAL UNJUST AND UNCALLED FOR. 2. THAT THE VALUE OF RICE TAKEN AT THE RATE OF RS. 1300/- PER QUINTAL LYING AS CLOSING STOCK WITH THE APPELL ANT AND MAKING AN ADDITION OF RS. 4 16 682/- ON ACCOUNT OF VALUATION OF CLOSING STOCK OF RICE IS ILLEGAL UNJUST AND AGA INST THE ACTUAL FACTS OF THE CASE ON THE FILE. 3. THAT THE VALUE OF HUSK TAKEN AT THE RATE OF RS. 135.56 PER QUINTAL LYING AS CLOSING STOCK WITH THE APPELL ANT AND 2 MAKING AN ADDITION OF RS. 5 37 592/- ON ACCOUNT OF VALUATION OF CLOSING STOCK OF RICE IS ILLEGAL UNJUST AND AGA INST THE ACTUAL FACTS OF THE CASE ON THE FILE. 4. THAT THE VALUE OF RICE TAKEN AT THE RATE OF RS. 14/- PER QUINTAL LYING AS CLOSING STOCK WITH BARDANA APPELL ANT AND MAKING AN ADDITION OF RS. 3 30 038/- ON ACCOUNT OF VALUATION OF CLOSING STOCK OF BARDANA IS ILLEGAL UNJUST AND AGAINST THE ACTUAL FACTS OF THE CASE ON THE FILE. 5. THAT THE VALUE OF RICE TAKEN AT THE RATE OF RS. 14/- PER BAG LYING AS CLOSING STOCK WITH THE APPELLANT AND MAKING AN ADDITION OF RS. 4 16 682/- ON ACCOUNT OF VALUATION OF CLOSING STOCK OF RICE IS ILLEGAL UNJUST AND AGAINST THE AC TUAL FACTS OF THE CASE ON THE FILE. 6. THAT THE VALUE DETERMINED BY THE LEARNED ITO AND CONFIRMED BY THE HON'BLE CIT(A)-II LUDHIANA ON ACC OUNT OF RICE HUSK AND BARDANA LYING WITH THE APPELLANT IS ILLEGAL UNJUST AND AGAINST THE LAW. THAT THE ADDITIONS MADE ON ACCOUNT OF CLOSING STOCK LYING WITH THE APPELLANT I.E. RICE HUSK AND BARDANA ARE ILLEGAL AND HIGHLY EXCESSIVE ONE. 3. THE GROUND NO.1 RAISED BY THE ASSESSEE BEING GEN ERAL IS DISMISSED. 4. THE ISSUE IN GROUND NO.2 TO 6 RAISED BY THE ASSE SSEE IS AGAINST THE VALUATION OF CLOSING STOCK OF RICE HUSK AND BARDANA . THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD SHOWN CLOSING STOC K OF RICE AT 987 QUINTALS VALUED @ RS. 877.83 PEAR QUINTAL AS AGAINS T OPENING STOCK OF RICE HUSK OF 1143 QUINTAL VALUED @ RS. 1 300/- PER QUINT AL. THE ASSESSING OFFICER REQUISITIONED THE ASSESSEE TO FURNISH THE B ASIS OF VALUATION OF CLOSING STOCK WITH DOCUMENTARY EVIDENCE. THE ASSES SEE EXPLAINED THAT IT HAD NOT SOLD RICE DURING THE YEAR EXCEPT SUPPLY OF 169 QUINTALS TO MARKFED 3 AND CONTENDED THAT THE VALUE OF CLOSING STOCK WAS T AKEN ON THE BASIS OF SALE BY OTHER PARITIES. THE PHOTOCOPY OF SALE BILL S OF OTHER PARITIES WERE FURNISHED BY THE ASSESSEE ALONG WITH HIS REPLY DATE D 27.11.2008. THE ASSESSING OFFICER ADOPTING THE RATE OF OPENING STOC K WORKED OUT SUPPRESSION IN VALUE OF CLOSING STOCK OF RICE AT RS . 4 16 682/-. SIMILAR SUPPRESSION IN THE VALUE OF STOCK OF HUSK OF 8200 Q UINTALS BEING THE DIFFERENCE IN THE RATE OF CLOSING STOCK AT THE RAT E OF RS. 70/- PER QUINTAL VIS-A-VIS RATE OF OPENING STOCK AT RS. 135.56 PER Q UINTAL WAS ADOPTED TO WORK OUT THE ADDITION OF RS. 5 37 592/-. THE ASSE SSING OFFICER ALSO MADE AN ADDITION OF RS. 3 30 038/- BEING THE SUPPRESSED VALUE OF CLOSING STOCK OF BARDANA OF 44005 BAGS WHEREIN THE VALUE OF OPEN ING STOCK WAS AT THE RATE OF RS. 14/- PER BAG AND THE VALUE ADOPTED FOR CLOSING STOCK WAS RS. 6.50 PER BAG. THE LEARNED COUNSEL FOR THE ASSESSE E BEFORE THE CIT(A) EXPLAINED THAT DURING THE YEAR THE ASSESSEE DID NOT CONDUCT ANY BUSINESS WITH REGARD TO MILLING OF PADDY ON HIS OWN ACCOUNT EXCEPT THE JOB WORK I.E. MILLING FOR GOVERNMENT AGENCIES ONLY. IT WAS FURTHER EXPLAINED THAT FOR DOING JOB WORK OF AGENCIES IT WAS NECESSARY FO R THE ASSESSEE TO GIVE ADVANCE RICE AGAINST WHICH THE ASSESSEE WOULD BE EN TITLED TO LIFT THE PADDY FOR MILLING FOR THE GOVERNMENT AGENCIES AND IT SUPP LIED 1157 QUINTALS OF RICE TO MARKFED WHICH WAS AVAILABLE AS OPENING STOC K WITH IT. THE ASSESSEE CLAIMED THAT IT WAS VALUING ITS STOCK AT C OST OR MARKET PRICE WHICHEVER WAS LESS AND HAD VALUED THE CLOSING STOCK ON THE BASIS OF MARKET VALUE WHICH WAS LESS THAN THE VALUE AS ON 1. 4.2006. THE ASSESSEE FURTHER SUBMITTED THAT THE ENHANCEMENT IN THE VALUA TION OF THE CLOSING STOCK WITHOUT ANY MATERIAL ON RECORD WAS BAD IN LAW . FURTHER CONTENTION WAS THAT THE ENTIRE RICE WAS SOLD IN THE NEXT YEAR AND THE ENTIRE PROFIT HAS BEEN SHOWN IN THE NEXT YEAR. IN CASE ANY ADDITIO N WAS MADE IN THE VALUATION OF CLOSING STOCK THE SAME IS TO BE TAKEN AS VALUE OF OPENING STOCK AS ON 1.4.2006 WHICH HAS NOT BEEN CONSIDERED BY THE ASSESSING 4 OFFICER. THE PLEA OF GIVING ADVANCE RICE TO THE GOV ERNMENT AGENCIES AGAINST MILLING OUT OF OPENING STOCK WAS REJECTED B Y THE CIT(A) BEING A NEW PLEA. FURTHER IN THE ABSENCE OF ANY EVIDENCE THAT THE QUALITY OF RICE IN THE OPENING STOCK WAS THE SAME AS THAT SOLD BY T HE GOVERNMENT AGENCIES HENCE MARKET VALUE BEING LESS WAS REJECTE D BY CIT(A). THE PLEA OF ADOPTING THE MARKET PRICE AT A LOWER FIGURE WAS REJECTED BY THE CIT(A) AND THE ADDITION MADE BY THE ASSESSING OFFIC ER WAS UPHELD. THE SECOND PLEA OF THE ASSESSEE THAT THE CLOSING STOCK VALUE IS TO BE CONSIDERED AS THE OPENING STOCK OF THE NEXT YEAR WA S HELD BY THE CIT(A) TO BE TAKEN CARE OF BY THE ASSESSING OFFICER IF TH E ASSESSEE APPROACHES UNDER THE RELEVANT PROVISIONS OF THE ACT. THE ADD ITION MADE ON ACCOUNT OF VALUATION OF CLOSING STOCK OF HUSK WAS ALSO UPHE LD BY THE ASSESSING OFFICER AS NONE OF THE BILLS PRODUCED BY THE ASSESS EE REFLECTED THE MARKET VALUE OF HUSK AS ON 31.3.2006 AT RS. 70/- PER QUINT AL. SIMILARLY THE CONTENTION OF THE ASSESSEE THAT THE BARDANA LYING W ITH IT WAS REUSED IN THE MILLING PROCESS OF GOVERNMENT AGENCIES WAS REJECTED AS THE ASSESSEE HAD NOT MADE ANY PURCHASES OF HIS OWN DURING THE YEAR. ACCORDINGLY THE ADDITION MADE BY THE ASSESSING OFFICER WAS UPHELD. 5. SHRI TEJ MOHAN SINGH APPEARED FOR THE ASSESSEE A ND SMT. JAISHREE SHARMA APPEARED FOR THE ASSESSEE AND PUT FORWARD TH EIR CONTENTIONS. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. THE ISSUE IN THE PRESENT APPEAL IS IN CONNECTION WITH T HE VALUATION OF CLOSING STOCK OF RICE HUSK AND BARDANA. THE ASSESSEE DUR ING THE YEAR UNDER CONSIDERATION CLAIMED THAT IT HAD NOT CARRIED OUT A NY TRANSACTION OF PURCHASE AND SALE IN THE ABOVE SAID COMMODITIES AND ALSO HAD NOT CARRIED OUT ANY MILLING OF PADDY ON ITS OWN ACCOUNT DURING THE YEAR. THE 5 ASSESSEE WAS ENGAGED IN THE MILLING OF PADDY ON ACC OUNT OF RICE SUPPLIED BY GOVERNMENT AGENCIES ONLY DURING THE YEAR. THE A SSESSEE HAD AN OPENING STOCK OF RICE OF 1143 QUINTALS AND HAD SHOW N CLOSING STOCK OF RICE AT 987 QUINTALS. IT WAS EXPLAINED BY THE ASSESSE E BEFORE CIT(A) THAT FOR DOING THE JOB WORK OF GOVERNMENT AGENCIES IT WAS NE CESSARY FOR THE ASSESSEE TO GIVE ADVANCE RICE AGAINST WHICH IT COUL D LIFT PADDY FROM THE SAID AGENCIES FOR MILLING. THE STOCK AVAILABLE WIT H THE ASSESSEE WAS CLAIMED TO HAVE BEEN SUPPLIED TO M/S MARKFED. THOU GH THE ASSESSEE HAD NOT CARRIED OUT ANY SALE OF THE RICE HUSK OR BARDAN A DURING THE YEAR BUT VALUING THE CLOSING STOCK THE SAID ITEMS OF STOCK W ERE VALUED AT A LESSER FIGURE THAN THE ONE DECLARED FOR WORKING OUT THE OP ENING STOCK. THE EXPLANATION OF THE ASSESSEE FOR THE SAID WAS THAT I T WAS VALUING ITS STOCK EITHER AT COST OR MARKET PRICE WHICHEVER WAS LESS AND AS THE MARKET PRICE OF THE ITEMS AT THE CLOSE OF THE YEAR WAS LESS THAN THE VALUE OF OPENING STOCK THE LESSER RATE OF MARKET VALUE WAS ADOPTED TO WORK OUT THE VALUE OF CLOSING STOCK. THE ASSESSEE HAD FURNISHED ON REC ORD EVIDENCE TO JUSTIFY THE ADOPTION OF LESSER RATES BEING MARKET VALUE OF THE ITEMS WHICH WERE ADOPTED TO WORK OUT THE VALUE OF CLOSING STOCK. T HE ASSESSEE HAS PRODUCED THE AFORESAID EVIDENCE IN RESPECT OF THE M ARKET VALUE OF ITEMS OF STOCK BEFORE US AND THE SAME IS PLACED ON RECORD. THE QUANTITATIVE DETAILS OF THE STOCK HAVE BEEN ACCEPTED BY THE LOW ER AUTHORITIES AND THE ADDITIONS HAS BEEN MADE ONLY BY ADOPTING THE VALUE OF OPENING STOCK FOR WORKING THE VALUE OF CLOSING STOCK. 7. ADDITION OF RS. 4 16 682/- HAS BEEN MADE ON ACC OUNT OF VALUATION OF CLOSING STOCK OF RICE RS. 5 37 592/- ON ACCOUNT OF VALUATION OF CLOSING STOCK OF HUSK AND RS. 3 30 038/- ON ACCOUNT OF VAL UATION OF CLOSING STOCK OF BARDANA. IT IS AN ACCEPTED PRINCIPLE OF ACCOUNT ING THAT THE ASSESSEE IS TO ADOPT EITHER THE COST OR MARKET PRICE WHICHEVER IS LESS FOR WORKING OUT 6 THE VALUE OF IT STOCK. THE MARKET VALUE OF THE TH REE ITEMS OF STOCK ARE LESSER AT THE CLOSE OF THE YEAR AS IS BACKED BY THE VARIOUS EVIDENCES FILED BY THE ASSESSEE ON RECORD. THE ASSESSEE IS FOLLOW ING A PARTICULAR METHOD OF ACCOUNTING FOR VALUING ITS STOCK FROM YEAR TO YE AR AND WE FIND NO MERIT IN DISTURBING THE SAID METHOD OF ACCOUNTING. IN T HE ABSENCE OF ANY CONTRARY EVIDENCE BEING BROUGHT ON RECORD WE FIND NO MERIT IN THE ORDER OF ASSESSING OFFICER IN REJECTING THE METHOD OF ACC OUNTING CONSISTENTLY BEING FOLLOWED BY THE ASSESSEE AND IN VIEW OF THE LOWERING IN THE MARKET RATES OF THE VARIOUS ITEMS OF STOCK. RELIANCE IS PLACED ON THE RATIO LAID BY THE HON'BLE SUPREME COURT IN CHAINRUP SAMPAT RAM VS. CIT (24 ITR 481) (SC) FOR THE RATIO THAT THE CLOSING STOCK IS T O BE VALUED EITHER AT COST OR MARKET VALUE WHICHEVER IS LOWER AND THE VALUE O F STOCK CANNOT BE APPRECIATED HIGHER THAN THE COST BECAUSE THE CLOSIN G STOCK IS NOT THE SOURCE OF PROFIT. FURTHER IN CASE THE VALUE OF CL OSING STOCK IS TO BE INCREASED THE VALUE OF OPENING STOCK HAS TO BE INC REASED TO REFLECT THE TRUE PROFITS. 8. RESPECTFULLY FOLLOWING THE AFORESAID RATIO OF TH E HON'BLE SUPREME COURT IN CHAINRUP SAMPAT RAM VS. CIT (SUPRA) WE DI RECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS. 12 84 312/- ( RS. 41 66 82/- RS. 5 37 592/- AND RS. 3 30 038/-) ON ACCOUNT OF VALUA TION OF CLOSING STOCK OF RICE HUSK & BARDANA RESPECTIVELY. FURTHER WE FIND MERIT IN THE CONTENTION OF THE ASSESSEE THAT THE CLOSING STOCK OF THE YEAR ONCE ADOPTED IS THE OPENING STOCK OF THE SUCCEEDING YEAR AND ASSESSEE H AVING SOLD THE SAID STOCK IN THE SUCCEEDING YEAR THE INCOME DECLARED I N THE SUCCEEDING YEAR WOULD ACCORDINGLY BE REDUCED. IN THE ENTIRETY OF CIRCUMSTANCES WE SET ASIDE THE ORDER OF THE CIT(A) AND DELETE THE ADDITI ON OF RS. 12 84 312/- MADE ON ACCOUNT OF VALUATION OF CLOSING STOCK OF RI CE HUSK AND BARDANA. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE TH US ALLOWED. 7 9. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF JULY 2010. SD/- SD/- (G.S.PANNU) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 23R DULY 2010 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR