2013 (8) TMI 140 - HC - Income Tax

Undervaluation of closing stock - CIT confirmed the addition - Tribunal deleted addition - Held that - assessee had wherever found that the rough diamonds are having cost less than the market value, it had valued them at the cost. Wherever the market value of the rough diamonds is less than the cost, the assessee has applied the market value. This fact was not denied by the Assessing Officer. Any objection raised by the Assessing Officer was against the market value determined by the assessee. The onus is on the assessee to prove that the market value of the stock is less than the cost but it is a case where there is no independent evidence available which may confirm the market value. In the case of rough diamonds it is only the estimate, which can work out by the expert. If the Assessing Officer was not satisfied with the market value taken by the assessee, he could have taken the assistance of the expert but the Assessing Officer merely rejected the method of valuation consistently followed by the assessee and accepted by the Revenue in the earlier year and hence without obtaining any expert s opinion on the subject the Assessing Officer could not have rejected market value taken by the assessee - Following decision of The Assistant Commissioner of Income Tax Versus B. Sureshkumar & Co (RF) 2008 (7) TMI 849 - GUJARAT HIGH COURT - Decided against Revenue. Genuineness of the transactions - Certificate for deduction at lower rate issued - Tribunal deleted addition - Held that - when the certificate for deduction at source has already been issued, the question of doubting the identity of the payee or the genuineness of the transaction would not arise - No substantial question of law arises - Decided against Revenue.

Summary

Issues:
1. Challenging judgment of Income-Tax Appellate Tribunal under Section 260(A) of the Income-Tax Act, 1961.
2. Substantial questions of law proposed by Revenue regarding deletion of additions and disallowances.
3. Consideration of previous judgment by the Court.
4. Adjudication on the substantial questions of law raised by the Revenue.

Issue 1: Challenging Tribunal's Judgment
The High Court heard arguments challenging the judgment of the Income-Tax Appellate Tribunal under Section 260(A) of the Income-Tax Act, 1961. The Revenue raised substantial questions of law regarding the deletion of additions and disallowances made by the Assessing Officer and confirmed by the Commissioner of Income-Tax (Appeals)-IV, Surat. These questions included the undervaluation of closing stock, disallowance of specific amounts, and the reversal of findings without proper reasons.

Issue 2: Substantial Questions of Law
The Court considered the substantial questions of law proposed by the Revenue. The first question regarding the deletion of Rs.35,07,068/- from the closing stock valuation was previously addressed in a different case and did not require further consideration. The second question related to the disallowance of Rs.4,99,838/-, where the Tribunal found no valid reason to doubt the genuineness of transactions with a contractor who had received a certificate for deduction of tax at a lower rate. The Tribunal's decision was based on factual adjudication, and no perversity in findings was identified.

Issue 3: Consideration of Previous Judgment
The Court referenced a previous decision where the Tribunal had extensively discussed valuation methods for rough diamonds, emphasizing the importance of market value and expert opinions. The Tribunal's decision in that case was upheld, stating that the method of valuation chosen by the assessee was acceptable, and the Assessing Officer had not provided sufficient grounds for rejection.

Issue 4: Adjudication on Substantial Questions
Regarding the questions raised by the Revenue in the present case, the Court found that questions (iii) and (iv) were argumentative and were considered together. As for question (ii) on the disallowance of a specific amount, the Tribunal's decision was upheld based on the lack of valid reasons to doubt the transactions with the contractor. The Court concluded that no substantial question of law arose, and the Tax Appeal was dismissed accordingly.

This detailed analysis of the judgment highlights the issues raised by the Revenue, the Court's consideration of substantial questions of law, the reference to a previous decision, and the final adjudication on the specific issues presented in the case.