2015 (8) TMI 1376 - AT - Income Tax

Valuation of closing stock of low grade iron ore - Held that - Commissioner of Income Tax (Appeals) has deleted the addition made by the Assessing Officer by following the order of this Bench of the Tribunal in assessee s own case in assessment year 2004-05. Since the assessee has consistently following the method of accounting and no such addition has been made in earlier years, even though the assessee is in the business for so many years, we are not persuaded by the contention that the assessee would get benefit of opening stock in the following year. In fact the correct procedure which could have been followed by the A.O. is to consider the amount of opening stock of low grade iron ore also while bringing to tax the entire stock available, which might have been produced over a period of many years, in the closing stock of this year which certainly distort the profits of this year. Since we are not in agreement with the addition of closing stock of unrealisable low grade iron ore, we have no hesitation in deleting the addition so made by the A.O. Accordingly the grounds raised in the cross objection are considered allowed A,O. is directed to delete the addition. - Decided in favour of assessee.

Summary

Issues involved: Valuation of closing stock of low grade iron ore.

Detailed Analysis:

Issue 1: Valuation of closing stock of low grade iron ore

Assessing Officer's Observation: The Assessing Officer noted a discrepancy in the valuation of closing stock of low grade iron ore by the assessee, adding the difference to the total income.

Assessee's Argument: The assessee contended that low grade iron ore was not sold in previous years and was valued at zero due to lack of demand. The quantity of stock was detailed, and the assessee maintained that the valuation was in line with commercial accounting principles.

Commissioner of Income Tax (Appeals) Decision: The Commissioner, after reviewing submissions and ITAT's previous order, concluded that the assessee's valuation method was consistent with commercial accounting principles. The addition made by the Assessing Officer was deemed unnecessary and was deleted.

Tribunal Decision: The Tribunal upheld the Commissioner's decision, citing consistency with the ITAT's previous ruling in the assessee's case for the assessment year 2004-05. As there was no identified error in the Commissioner's order, the Tribunal dismissed the Revenue's appeal.

In conclusion, the Tribunal affirmed the Commissioner's decision to delete the addition to the total income related to the valuation of low grade iron ore in the closing stock, based on the principles of commercial accounting and the ITAT's previous ruling in a similar case.