2018 (6) TMI 1448 - AT - Income Tax

Assessment u/s 153A - selection of assessment year - Held that - As decided in RAJIV KUMAR VERSUS ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1 CHANDIGARH, 2016 (12) TMI 1722 - ITAT CHANDIGARH It is well settled that an assessment is to be framed for the previous year which precedes the assessment year. For the previous year 2006-07, the assessment year 2007-08, this assessment year succeeds the period of search and not precedes. From the plain language of the provisions contained in cl. (b) of sub-s(1) of section 153A of the Act, it is clear that the assessment under section 153A of the Act could have been framed for the 6 Assessment Years which precedes the assessment year 2007-08. Therefore, we are of the confirmed view that the assessment under section 153A of the Act could have been framed from the Assessment Years 2001-02 to 2006- 07 only and not for the Assessment Year 2007-08 Valuation of Inventories - addition on account of stock difference between books and found during the course of search - Held that - A method of accounting adopted by the taxpayer consistently and regularly cannot be discarded by the departmental authorities on the view that he should have adopted a different method of keeping accounts or of valuation. Assessee firm is has adopted the valuation of inventory on average cost method / weighted cost which is a scientific method approved by ICAI in AS-2-Accounting Standard-2 Valuation of Inventories. The assessee has also filed the copy of inventory of stock taken by search team containing pages 18 to 26 assessee s paper book. Looking into the facts and circumstances of the case and also the decision in the case of UCO Bank vs CIT 1999 (9) TMI 4 - SUPREME COURT it is noted that there is merit in the submission of the assessee and we concur with the same - decided in favour of assessee.

Summary

Issues involved:
1. Legality of notice u/s 142(1) r.w.s. 153A for Assessment Year 2014-15
2. Addition of excess stock amounting to ?5,39,033 during assessment

Issue 1: Legality of notice u/s 142(1) r.w.s. 153A for Assessment Year 2014-15:

The appellant contended that the notice u/s 142(1) r.w.s. 153A for the Assessment Year 2014-15 was beyond the AO's legislative powers as the financial year 2013-14 was the search year. The AO completed the assessment u/s 143(3) r.w.s. 153B(1)(b) of the Act, resulting in a total income of ?5,66,220/-. The CIT(A) held that although the notice u/s 153A was not required for the instant assessment year, it did not prejudice the appellant. The CIT(A) noted that no legal or procedural disputes were raised by the appellant during the assessment process. The ITAT Jaipur concurred with the CIT(A)'s decision, dismissing the appellant's appeal in Ground No. 1.

Issue 2: Addition of excess stock amounting to ?5,39,033 during assessment:

During assessment, the AO made an addition of ?5,39,033 in the appellant's income under section 69B of the Act due to excess stock found during the search. The appellant's contention that employees present during the search were not aware of the cost and quoted sales price was rejected by the AO. The CIT(A upheld the addition, stating that the valuation of stock was done in the presence of independent witnesses and no objections were raised during the search. However, the ITAT Jaipur, following the decision of the ITAT Chandigarh Bench in a similar case, allowed the appellant's appeal on this ground. The ITAT noted that the method of valuation consistently followed by the appellant since the inception of the firm was valid, as approved by the ICAI, and hence, the addition was deleted.

In conclusion, the ITAT Jaipur allowed the appeal of the assessee, overturning the addition of excess stock and dismissing the challenge to the legality of the notice issued for the Assessment Year 2014-15.