M/s. Sree Alankar Vs PCIT (ITAT Cuttack)
In the instant case, we find that it is not in dispute that the assessee is consistently following the same method of valuation of closing stock which was also followed in the year under consideration. The profit was deduced in accordance with the method adopted by the assessee. Therefore, in our considered view, the Pr. Commissioner of Income Tax-1, Bhubaneswar was not justified in disturbing the consistent method of valuation.
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-
Per N.S.Saini, AM This is an appeal filed by the assessee against the order of the Pr. Commissioner of Income Tax-1, Bhubaneswar dated 17.3.2017 for the assessment year 2012-13.
2. The assessee has raised the following grounds of appeal:
‘1. That, the Ld. Principal CIT, on the facts and circumstances of the case, erred in law in having assumed jurisdiction u/s. 263 of the Act in order to substitute his subjective view in place of judicious view taken by the A.O. on the same set of facts, method of valuation & evidences on record, by holding that the order passed u/s. 143(3) of the Act dated 31.03.2015 was erroneous and prejudicial to the interests of revenue.
2. That, the Ld. Pr. CIT erred in having invoked jurisdiction u/s.263 of the Act completely under wrong notion that the valuation of closing stock of old jewellery by taking the cost price of opening stock was not acceptable method though the appellant had filed year-wise quantitative details of opening & closing stock, purchases and sales evidencing that the closing stock represented unsold old design jewellery over the years and after verification of the same, assessment u/s. 143(3) was made.
3. That, the Ld. Pr. CIT further erred in having alleged that the A.O. has erroneously accepted the method of Tower of the cost price and net realizable value’ for the purpose of valuation of the stock in spite of the admitted fact that since inception such recognized method has been consistently followed by the appellant and accepted by the department in earlier as well as subsequent years.
4. That, the Ld. Pr. C.I.T. further erred in having assumed jurisdiction u/s.263 of the Act on surmise and conjecture and passed consequential order directing the A.O. to make fresh assessment in spite of the fact that he himself did not point out any irregularity/deficiency in the tax audit certificate about method of valuation prescribed u/s.l45A and having been followed since past and the A.O. after considering the past accepted position and evidence on record has taken a possible and judicious view.
5. That, without any prejudice to the above, the order of the Ld. Pr. C.I.T. u/s.263 of the Act suffers from illegality inasmuch as, according to settled position in law, a valid method of accounting adopted by the taxpayer consistently and regularly cannot be discarded by the departmental authorities on the view that the taxpayer should have adopted a different method of keeping accounts or of valuation.
6. That, therefore, in view of the facts and circumstances of the case, the assessment order passed u/s. 143(3) of the Act accepting the method of valuation of closing stock adopted by the appellant being not erroneous and hence not prejudicial to the interests of revenue, the order passed u/s.263 of the Act directing to make fresh assessment de novo is without any basis, bad in law and liable to be quashed.”
3. The brief facts of the case are that the Pr. Commissioner of Income Tax-1, Bhubaneswar observed that from the records, it is found that in the profit and loss account, the assessee has shown closing stock at Rs.5,54,19,940/-, which included gold jewellery of Rs.5,20,66,830/- and silver jewellery of Rs.33,26,990/-. As per Tax Audit Certificate, method of valuation of closing stock employed during the previous year relevant to assessment year 2012-13 was ‘at cost price or net realizable value whichever is lower’ and, therefore, there was no deviation from the method of valuation prescribed u/s 145 A of the Act. From the details of closing stock as submitted by the assessee, it was seen that the valuation of closing stock was made taking cost price as on 01.04.2012 {Opening price of gold @ 657.51 per gram and Silver @ 10.17per gram) instead of taking the average of opening and purchase price (gold @ 1928.43 per gram and silver @ 33.14 per gram). The valuation of closing stock by taking the cost price of opening stock was not an acceptable method for valuation of closing stock, where purchases had been made during the year.Further, there was no material available on record to substantiate the basis on which the rates of closing inventory were arrived.While completing the assessment, the Assessing Officer failed to properly examine the above issue. Hence, proceedings u/s 263 of the Income Tax Act, 1961 was initiated and a show cause dated 17th January, 2017 was issued to the assessee.
