2016 (6) TMI 900 - HC - Income Tax

Reopening of assessment - assessee ought to have included CENVAT and VAT amounts lying in balance in the accounts of the assessee for the purpose of valuation of closing stock - Held that - As during assessing process itself, the assessee had pointed out the method of accounting which was exclusive of excise duty and other taxes. The Assessing Officer had not made any additions on this ground. Permitting re-opening would be on mere change of opinion. Additionally, it also appears that valuation of stocks, opening as well as closing, non-inclusion of CENVAT/VAT which remained in the account of the assessee at the relevant time, would not alter tax liability. Be that as it may. On the first ground itself, we are convinced that reassessment is not permissible. - Decided in favour of assessee

Summary

Issues:
1. Validity of notice re-opening assessment order for the assessment year 2011-2012.
2. Examination of value of opening and closing stock in original scrutiny assessment.

Analysis:
1. The petitioner challenged a notice issued by the Assessing Officer seeking to re-open the assessment order for the assessment year 2011-2012. The notice was based on the Assessing Officer's belief that income had escaped assessment due to the exclusion of CENVAT and VAT amounts from the valuation of closing stock, resulting in alleged undervaluation of approximately ?2.26 crores. The petitioner contended that the issue of stock valuation was already examined in the original scrutiny assessment, and the exclusion of CENVAT and VAT was revenue neutral. The court noted that the Assessing Officer's reasons for re-opening the assessment were based on the inclusion of CENVAT and VAT amounts in the valuation of stocks, which the petitioner had already explained during the original assessment process. The court held that permitting re-opening would amount to a mere change of opinion and quashed the notice, allowing the petition.

2. The Assessing Officer argued that the petitioner should have included CENVAT and VAT amounts in the valuation of both opening and closing stocks, alleging that the exclusion led to tax avoidance. However, the petitioner had already clarified during the original assessment process that they followed an exclusive method of accounting for excise duty and taxes. The court observed that the non-inclusion of CENVAT/VAT in the valuation of stocks would not alter the tax liability. The court concluded that reassessment was not permissible based on the grounds presented, and therefore, the notice re-opening the assessment order was quashed, and the petition was allowed.