2014 (10) TMI 400 - HC - Income Tax

Undervaluation of stock - Whether the Tribunal was right in deleting the disallowance made by the AO on account of under valuation of stock even when the entry tax levied was includible in the closing stock of the assessee as per the provisions of Section 145A following the decision in Commissioner of Income Tax, Faridabad Versus M/s Lakhani Rubber Udyog (P) Ltd. 2011 (2) TMI 546 - PUNJAB AND HARYANA HIGH COURT - The nature of entry tax being as such it has nothing to do with the goods, it cannot become part of stock as it did not relate to it and hence, was not worked out by the appellant company or disclosed in the books of account - section 145A is not applicable and the addition on a/c of undervaluation of closing stock on the basis of effecting entry tax is liable to be set aside Revenue is unable to distinguish the judgments or refer to any statutory provisions or raise any argument that would enable us to hold to the contrary - Decided against revenue.

Summary

Issues:
Delay in re-filing the appeal, Challenge to orders of CIT(A) and ITAT, Question of law regarding under valuation of stock and entry tax inclusion in closing stock.

Delay in re-filing the appeal:
The appellant filed an application to condone a delay of 766 days in re-filing the appeal. The court, after hearing the counsel for the appellant and finding sufficient cause shown, allowed the application and condoned the delay.

Challenge to orders of CIT(A) and ITAT:
The revenue challenged orders dated 24.03.2011 and 10.08.2011 passed by the CIT(A) and the Income Tax Appellate Tribunal (ITAT) regarding the deletion of disallowance of a certain amount made by the Assessing Officer on account of under valuation of stock. The court considered whether the ITAT and CIT(A) erred in deleting the disallowance and framed a question of law for adjudication.

Question of law regarding under valuation of stock and entry tax inclusion in closing stock:
The court examined the substantial question of law raised by the revenue regarding the deletion of disallowance of a specific amount due to under valuation of stock. The court noted that the ITAT relied on a previous order in a similar case, which was affirmed by the court. The counsel for the revenue failed to distinguish the judgments or provide any argument contrary to the previous decision. As the question of law had been answered against the revenue in a prior case, the court dismissed the appeal in line with the previous judgment.

This judgment highlights the importance of timely filing of appeals, challenges to orders of lower authorities, and the significance of precedent in deciding tax matters. The court's decision was based on the interpretation of statutory provisions and previous judgments, emphasizing consistency in legal outcomes.