2010 (1) TMI 271 - HC - Income Tax

Re-Assessment- Whether in the facts and circumstances of the case the hon ble Tribunal was right in confirming the order of the Commissioner of Income-tax (Appeals) by directing to take the figure of closing stock of the immediately preceding year based on provisional accounts as opening stock of current year instead of the figure of opening stock available as per the audited accounts and adopted by the Assessing Officer? Held that- once the factual position was similar in respect of the earlier assessment years, for the disputed assessment year 2003-04 no different view could be taken. The Tribunal was right in confirming the order of the Commissioner (Appeals) directing the Assessing Officer to take the figure of closing stock of the immediately preceding year based on the provisional accounts.

Summary

Issues:
Challenge to order of Income-tax Appellate Tribunal regarding treatment of closing stock as opening stock for assessment year 2003-04 based on provisional accounts.

Analysis:
The Revenue challenged the order of the Income-tax Appellate Tribunal regarding the treatment of closing stock as opening stock for the assessment year 2003-04. The primary issue was whether the Tribunal was correct in confirming the order of the Commissioner of Income-tax (Appeals) to consider the figure of closing stock from provisional accounts as the opening stock for the current year, rather than the figure from audited accounts adopted by the Assessing Officer. The Tribunal upheld the view that once the Revenue accepted the closing stock, it automatically became the opening stock for the subsequent assessment year. It was noted that the Revenue had previously finalized assessments based on provisional accounts, even when final audited accounts were available. The Tribunal emphasized the principle of consistency and cited a judgment of the Supreme Court to support its decision.

The Tribunal found that the Revenue could not adopt a selective approach in finalizing assessments by choosing higher profits from either provisional or final audited accounts, as this would violate the principle of consistency. It was observed that the value of closing stock for one year matched the opening stock for the following year in several instances, indicating a consistent approach over multiple assessment years. The Tribunal relied on the principle of consistency and cited relevant case law to support its decision. The court noted that since the factual position was similar in earlier assessment years and there was no change in circumstances, a different view could not be taken for the disputed assessment year 2003-04. The court concluded that the appeal lacked merit, as no substantive question of law necessitating admission of the appeal arose. Therefore, the appeal was dismissed.

In conclusion, the court upheld the decision of the Tribunal regarding the treatment of closing stock as opening stock for the assessment year 2003-04 based on provisional accounts. The court emphasized the importance of consistency in finalizing assessments and rejected the Revenue's challenge, stating that the appeal lacked merit and did not raise any substantive legal questions warranting admission.