2012 (5) TMI 24 - HC - Income Tax

Closing stock of the subsidiary company not shown as opening stock of that company but shown as opening stock of the holding company - Revenue stated that the value of the stock should be considered for assessment only at the hands of one company Held that - Since the subsidiary company submitted that in the Income Tax Appeal that was pending against the assessment of closing stock of the subsidiary company, they will not press that ground thereby accepting the closing stock of that company to be treated as opening stock for assessment - allow the appeals by setting aside the orders of the Tribunal and restore the matter to the Assessing Officer for re-consideration while revising the orders of assessment issued pursuant to the judgment in the case of Holding company

Summary

Issues:
1. Assessee pressing a ground before the Tribunal contrary to an undertaking given in the High Court.
2. Dispute regarding the assessment of closing stock of a holding company and its subsidiary company.
3. Failure to inform the Tribunal about a judgment given by the High Court.
4. Department's appeal dismissed due to the conduct of the assessee and the Department.
5. Consideration of re-assessment by the Assessing Officer.

Analysis:

1. The High Court addressed the issue of the assessee pressing a ground before the Tribunal contrary to an undertaking given in the High Court. The Revenue raised a major objection as the assessee did not adhere to the undertaking given while disposing of the assessment appeal against the holding company. The Court noted that the assessee failed to inform the Tribunal about the undertaking, leading to impugned orders by the Tribunal.

2. Another issue involved a dispute regarding the assessment of closing stock of a holding company and its subsidiary company. The holding company declared an opening stock equal to the closing stock of the subsidiary company, raising concerns about the accounting principles followed by both companies. The Court emphasized that the value of the stock should be considered for assessment only at the hands of one company, and the holding company's appeal was disposed of based on the undertaking given by the assessee.

3. The Court highlighted the failure of the assessee to inform the Tribunal about the judgment given by the High Court, which disabled the Department from contesting the Tribunal's order. Despite the indifference shown by both the assessee and the Department, the Court decided not to penalize only the assessee for this conduct.

4. Due to the conduct of the assessee and the Department, the Department's appeal was dismissed. The Court acknowledged that heavy costs could have been imposed on the assessee for their attitude, but considering the Department's negligence as well, the Court decided to set aside the orders of the Tribunal and restore the matter to the Assessing Officer for re-consideration.

5. The Court directed the Assessing Officer to re-consider the orders of assessment issued pursuant to the judgment in the case of the holding company. The basis of the Tribunal's decision on the determination of gross profit was affected by the High Court's judgment, and the Court allowed the appellant to challenge any grievance in another round of appeal if necessary. The Income Tax Appeals were allowed accordingly.