9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (3) TMI 498 - HC - Income TaxDiscrepancy in the valuation of closing stock - addition to income - ITAT upholding the action of the CIT (A) in deleting the addition - Held that - Considering the assessee's submission that there was no reason to value the stock with flat profit rate of 25 per cent but admitted that in the assessment years 1985-86, 1986-87, 1987-88 and 1988-89, the gross profit rate remained fluctuating from 23.14 per cent to 26.12 per cent, therefore, for the purpose of annual valuation of closing stock, Assessee followed principle of average and applied the same by taking flat rate of 25 per cent since in some years it was on higher side i.e. upto 26.12 and for some of the years slightly on lower side i.e. upto 23.14. This process adopted by Assessee was found genuine and bona fide by CIT (Appeals) (hereinafter referred to as CIT(A) ), and, thus, in appeal, it reversed findings of Assessing Officer of addition of ₹ 1,51,000/-. The Assessing Officer took the view that valuation of stock should have been on highest profit rate, but this view taken by Assessing Officer has not been found reasonable and, hence, reversed by CIT (A). The Tribunal has concurred with the view taken by CIT (A) and has confirmed the order passed by CIT (A). This is a concurrent finding of fact recorded by CIT (A) and Tribunal. In absence of any patent illegality or arbitrariness shown therein, no reason to interfere with the same - Decided against Revenue. Valuation of closing stock - differences in the valuation of the stock as shown in the stock statement filed with the Bank and one before the Assessing Officer - ITAT upholding the action of the CIT (A) in deleting the addition - Held that - CIT (A) has clearly observed that one of the statement relied on by Assessing Officer was dated 3.4.1989, i.e., in relation to assessment year which ended on 31.3.1989, though this subsequent statement was not relevant for the year already ended on 31.3.1989. Moreover, the said statement was provisional. Therefore, the addition of ₹ 7,01,537/- was wholly baseless. This finding also has been confirmed by Tribunal. Since on this aspect there is concurrent finding recorded by both the authorities below, in absence of any perversity or illegality therein, we do not find any reason to interfere with the same. - Decided against Revenue. Disallowance of the quality control expenses - ITAT deleted disallowance - Held that - It is not in dispute that a sum of ₹ 4,42,592/- was actually paid towards quality control expenses to one R.N. Yadav, who appeared as witness and admitted to have received the aforesaid amount which was for 21 months. The Assessing Officer on its own conjectures and surmises took the view that such huge amount was not justified to be paid as quality control, particularly when the technical qualification of Sri R.N. Yadav was not disclosed. Repeatedly we asked from learned counsel appearing for Revenue as to what kind of technical qualification in the nature of business Assessee was doing, was expected from Sri R.N. Yadav, to which he could give no reply. Once it is admitted that under the head of 'quality control expenses' the aforesaid amount was actually paid and the person concerned admitted to have received the same, we do not find that Tribunal has erred in law in affirming the decision of disallowance of ₹ 4,42,592/-. Moreover, here also, concurrent finding has been recorded by both the authorities below which could not be shown perverse in any manner. - Decided against Revenue. Disallowance of commission paid in respect of sales made to the Government Department - ITAT upholding the action of the CIT (A) in deleting the addition - Held that - it is evident from record that a sum of ₹ 17,39,330/- was actually paid towards commission for procuring Government Orders, i.e., the Government Orders received by Assessee for supply. The names and details of parties to whom commission paid was also disclosed before Assessing Officer. CIT(A) has found that it is not the case of Assessing Officer that those persons are Benamidar of appellant. It is not the case of Revenue that the money, so given, came back to Assessee himself. The question whether commission was necessary to be paid or not is not to be examined from the point of view of Assessing Officer but what actually has been done by Assessee is to be examined. Once commission has actually been paid, the same cannot be disallowed only on the ground that payment of commission was not necessary. It is not the case of Revenue that amount of commission paid was excessive in comparison to the nature of business. - Decided against Revenue.
Issues:
1. Valuation of closing stock discrepancy 2. Valuation of closing stock differences 3. Disallowance of quality control expenses 4. Disallowance of commission paid for Government orders Valuation of Closing Stock Discrepancy: The appeal under Section 260A of the Income Tax Act, 1961 for the assessment year 1989-90 raised questions regarding the valuation of closing stock. The appellant argued against the addition of Rs. 1,51,000 to the income due to a discrepancy in the valuation method. The Court noted that the Assessee followed a genuine and bona fide principle of averaging the profit rate for stock valuation. The Commissioner of Income Tax (Appeals) and the Tribunal found this method reasonable, reversing the Assessing Officer's decision. The Court upheld this view, citing no illegality or arbitrariness, and ruled in favor of the Assessee. Valuation of Closing Stock Differences: The second issue concerned the addition of Rs. 7,01,537 based on differences in the valuation of closing stock as per statements filed. The Court found that the subsequent statement relied upon by the Assessing Officer was irrelevant and provisional. Both the CIT (A) and the Tribunal concurred that the addition was baseless. With no perversity or illegality in their findings, the Court ruled in favor of the Assessee on this issue as well. Disallowance of Quality Control Expenses: Regarding the disallowance of Rs. 4,42,592 made for quality control expenses, the Court noted that the amount was actually paid to a specific individual. The Assessing Officer questioned the justification for this payment without knowledge of the individual's technical qualifications. However, as the payment was admitted and received for services rendered, the Tribunal's decision to uphold the disallowance was deemed appropriate. The Court found no error in law in this regard and ruled against the Revenue. Disallowance of Commission Paid for Government Orders: The final issue involved the disallowance of Rs. 17,39,330 paid as commission for procuring Government Orders. The Court emphasized that once the commission was paid, it could not be disallowed solely on the grounds of necessity. Citing a previous judgment, the Court highlighted that such expenditures are common in obtaining Government Orders. As there was no evidence of excessive payment or wrongdoing, the Court ruled against the Revenue on this issue as well. In conclusion, the Court dismissed the appeal as lacking merit, upholding the decisions in favor of the Assessee on all the issues raised.
|
