Srinivasulu Metri Vs DCIT (ITAT Bangalore)
Suspension Is Not Seizure — Bangalore ITAT Holds Closing Stock Cannot Be Taken at Nil; Matter Remanded for Fresh Valuation
The Bangalore ITAT (A Bench) allowed the Assessee’s appeal for statistical purposes and remitted the issue back to the AO, holding that mere suspension of mining activity does not amount to seizure or confiscation of stock, and therefore closing stock could not be valued at NIL.
The Assessee, engaged in mining, claimed loss of closing stock of ₹1.32 crore on the ground that iron ore stock was seized/impounded following suspension of mining activities pursuant to directions of the Mines & Geology Department and orders of the Hon’ble Supreme Court. The AO rejected the claim and added the value of stock, which was upheld by the CIT(A).
The Tribunal, after examining departmental notices and translated records (pages 5–8), found that:
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The documents only showed suspension of mining operations and direction to maintain status quo, not seizure or confiscation of stock before 31-03-2011.
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Ownership of iron ore stock continued to vest with the Assessee as on the balance sheet date.
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There was no legal basis to value closing stock at NIL, especially when purchases, sales, and quantities were identifiable.
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As per tax audit report, the Assessee followed mercantile system, requiring valuation of closing stock.
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The effect of the Supreme Court’s order dated 29-07-2011 could not retrospectively nullify closing stock as on 31-03-2011.
However, noting discrepancies in quantity and valuation adopted by the AO, the Tribunal remanded the matter to the AO for de novo assessment and proper valuation of closing stock, granting liberty to the Assessee to substantiate the claim with cogent evidence, while cautioning against unnecessary adjournments.
Accordingly, the appeal was allowed for statistical purposes and the issue restored to the AO for fresh adjudication
FULL TEXT OF THE ORDER OF ITAT BANGALORE
