2003 (4) TMI 54 - HC - Income Tax

Reference application The Tribunal has not gone into the validity of the method of valuation of closing stock followed by the assessee. The appeal has been rejected only on the ground that the material evidence was not produced and. that the finding of the Assessing Officer remained uncontroverted. However, on a perusal of the record, as discussed above, the assessee had challenged the finding of the Assessing Officer and there is nothing to show that the assessee was called upon by the Assessing Officer to produce the material supporting evidence regarding ageing of stock - The assessee is rightly allowed and permitted to raise the plea regarding not asking to produce the relevant evidence while making valuation of stock in the reference application - It is purely on facts of this case and in the interest of justice that we are permitting the assessee to raise this ground in the reference application

Summary

Issues:
Valuation of closing stock for assessment year 1986-87; Rejection of miscellaneous application under section 254(2) of the Income-tax Act; Dispute regarding non-compliance of rule 9 of the Appellate Tribunal Rules, 1963; Interference under section 260A of the Income-tax Act.

Valuation of Closing Stock:
The assessee, a trader in grinding wheels, cutting tools, and ingot steels, valued its stocks at Rs. 16,64,320 for the financial year ending December 31, 1985. The Assessing Officer added Rs. 8,30,996 to the total income, alleging under-valuation of closing stock due to lack of evidence on stock age and absence of a stock register. The Commissioner (Appeals) allowed the appeal, recognizing the assessee's consistent valuation method since 1965-66 based on the short life and rapid rusting of items. However, the Tribunal reversed this decision, citing the uncontroverted finding of the Assessing Officer on missing evidence regarding stock age. The Tribunal directed restoration of the Rs. 8,30,996 addition, leading to a subsequent miscellaneous application under section 254(2) seeking rectification.

Rejection of Miscellaneous Application:
The Tribunal dismissed the miscellaneous application, emphasizing the failure to raise non-compliance with rule 9 of the Appellate Tribunal Rules, 1963, during the application. The assessee argued that the Department's omission to enclose relevant documents with the memo of appeal led to the rejection. The Tribunal held that the non-compliance issue was not raised in the application and that rule 9(3) allowed discretion in accepting appeals without accompanying documents. The rejection prompted an appeal under section 260A of the Income-tax Act.

Interference under Section 260A:
In the appeal, the assessee's counsel contended that the Tribunal erred in rejecting the miscellaneous application, emphasizing the Assessing Officer's failure to request supporting evidence despite the assessee's consistent valuation method. The Department's senior counsel argued against court interference, citing the wide scope of the miscellaneous application and the pending reference application addressing similar issues. The court acknowledged the challenge to the Assessing Officer's finding and the absence of a directive to produce evidence, but declined interference under section 260A due to the comprehensive nature of the miscellaneous application and the pending reference application. The court permitted the assessee to raise the relevant point in the reference application for justice's sake, directing the Tribunal to grant the reference application accordingly.

In conclusion, the court disposed of the appeal without costs, allowing the assessee to address the valuation method issue in the pending reference application.