2015 (9) TMI 804 - HC - Income Tax

Addition being direct expenses added to the value of closing stock on estimate basis by the A.O. u/s 145A - CIT(A)deleted the addition - Held that - We find that the CIT(A) has rendered a finding of fact in the subject assessment year that the valuation of closing stock includes direct expenses such as freight charges incurred on them and are duly supported by the material receipt vouchers. This finding of fact was upheld by the Tribunal by also relying upon it s own order dated 13 January 2011 for the earlier Assessment Year. The reliance placed by the revenue on the observations made in the audit report as reflected in the order of the Assessing Officer would not govern the field, where the CIT(A) and the Tribunal had rendered a finding of fact that direct expenses on account of freight charges, etc. incurred on the closing stock had been added to arrive at valuation of closing stock and are also duly supported by material receipt vouchers. In view of the fact that two authorities have reached a concurrent finding of fact on examination of material receipt vouchers, we see no substantial question of law arising for our consideration - Decided against revenue.

Summary

Issues:
1. Appeal challenging the order of the Income Tax Appellate Tribunal for A.Y. 2008-09.
2. Questions of law raised by the revenue regarding delayed P.F. payments and deletion of direct expenses from closing stock valuation.

Analysis:
1. The High Court dealt with two questions of law raised by the revenue. The first question (a) concerned the allowance of delayed P.F. payments based on a Supreme Court decision. The Court had dismissed this question earlier, following the precedent set by the Supreme Court. The second question (b) related to the deletion of direct expenses from the closing stock valuation. The Court focused on this question for consideration during the current appeal.

2. The Assessing Officer had enhanced the value of closing stock for A.Y. 2008-09 under Section 145A of the Income Tax Act, 1961, due to direct expenses not being considered. The respondent filed an appeal to the CIT(A), who found that the closing stock value already included direct charges supported by material vouchers. The CIT(A) allowed the appeal based on previous orders and upheld that direct expenses were included in the closing stock valuation.

3. The revenue appealed to the Tribunal, which dismissed the appeal by relying on its earlier order for A.Y. 2007-08. The Tribunal emphasized that the closing stock valuation included expenses to bring it to its location and condition. The Court noted that the revenue's reliance on the audit report did not supersede the findings of the CIT(A) and Tribunal based on material vouchers.

4. The revenue argued that each assessment year should be considered independently, without undue reliance on previous years. However, the Court upheld the concurrent findings of the CIT(A) and Tribunal for A.Y. 2008-09, which included direct expenses in the closing stock valuation. The Court found no substantial question of law in this matter and noted the similarity with the earlier A.Y. 2007-08, where the same principles applied.

5. Consequently, the Court dismissed both questions (a) and (b), as the first had been previously dismissed and the second did not raise a substantial question of law. The appeal was dismissed, and no costs were awarded.