2016 (3) TMI 1293 - AT - Income Tax

Revision u/s 263 - valuation of Tools and Tackles - method of valuation of closing stock of Tools and Tackles - Held that - A query on the issue of valuation of closing stock of Tools and Tackles was specifically raised by the assessee during the course of assessment proceedings and after having satisfied with the explanation offered by the assessee, the valuation of closing stock of Tools and Tackles as shown by the assessee was accepted by the Assessing Officer. CIT, D.R. has not been able to controvert or rebut this position which is clearly evident from the record. Having regard to al l these facts and circumstances of the case, we are of the view that there was no error in the order of the Assessing Officer passed under section 143(3) as alleged by the ld. CIT calling for revision under section 263. - Decided in favour of assessee

Summary

Issues: Valuation of closing stock of Tools and Tackles under Income Tax Act, 1961

Comprehensive Analysis:

Issue 1: Valuation of closing stock of Tools and Tackles
The appeal was filed against the order passed by the Commissioner of Income Tax, Kolkata, under section 263 of the Income Tax Act, 1961, regarding the valuation of closing stock of Tools and Tackles by the assessee company. The company valued its closing stock on a weighted average cost basis and wrote off 20% of such value every year for wear and tear. The Commissioner found this method not in accordance with accepted accounting principles, leading to a show-cause notice under section 263 to revise the Assessing Officer's order under section 143(3).

Issue 1 Analysis:
The assessee contended that Tools and Tackles are not part of raw material or finished goods, hence section 145A does not apply. The company justified its method by explaining the useful life of Tools and Tackles and the decision to write off 20% annually based on technical evaluation. The Commissioner set aside the Assessing Officer's order and directed a fresh assessment. The Tribunal noted that the Assessing Officer had accepted the company's valuation method in previous years, and the explanation provided during assessment proceedings was satisfactory. The Tribunal found no error in the original order and set aside the Commissioner's revision under section 263, reinstating the Assessing Officer's decision under section 143(3).

Conclusion:
The Tribunal allowed the appeal, emphasizing the consistency of the company's valuation method for Tools and Tackles, which had been accepted in previous assessments. The Tribunal ruled in favor of the assessee, concluding that the original order under section 143(3) was appropriate, and the revision under section 263 was unwarranted.