2016 (6) TMI 587 - AT - Income Tax

Scope of rectification of mistake - Addition to the closing stock - adopting cost of goods at the year end OR Cost or realisable value -Held that - The Tribunal in earlier occasion fairly considered the entire arguments of the assessee and has given a finding and decided the issue against the assessee. Now the assessee s counsel wants to re-argue the settled issue by putting some arguments. In our opinion if we consider the arguments of the assessee s counsel it will amount to review of our earlier order of this Tribunal for which the Tribunal has no power. An order under section 254(2) does not have existence de hors the order under section 254(1). Re-calling of the order is not permissible under section 254(2). Recalling of an order automatically necessitates rehearing and re-adjudication of the entire subject-matter of appeal. It is well-settled that statutory authority cannot exercise power of review unless such power is expressly conferred. There is no express power of review conferred on this Tribunal. Even otherwise the scope of review does not extend to rehearing of the case on merit.In view of the above we are inclined to reject the arguments of the assessee s counsel on the issue of valuation of closing stock in all these Misc. Applications. - Decided against assessee Addition towards stock discrepancies - Held that - Tribunal has considered the issue in dispute and categorically given a finding and decided the issue against the assessee and there is no reason to recall the earlier order of the Tribunal. Being so as discussed in earlier para we are inclined to reject the arguments of the ld. AR in all these three Misc. Applications on this issue. - Decided against assessee Disallowance towards lease commitment charges - Held that - Tribunal has given a finding that the expenditure of Rs. one crore incurred by the assessee towards lease commitment charges cannot be considered as wholly and exclusively for the purpose of business. Hence it is decided against the assessee. Now the assessee s counsel wants to re-argue the case and it cannot be possible. As discussed in earlier para we are inclined to reject the arguments of the ld. AR in all these three Misc. Applications on this issue also. - Decided against assessee Addition towards unexplained jewellery - Held that - As unsigned copy of grounds on our records wherein the assessee raised unexplained jewellery u/s.69A of the Act. Being so we are not in a position to uphold the argument of the assessee s counsel.- Decided against assessee

Issues Involved:
1. Valuation of closing stock.
2. Addition towards stock discrepancies.
3. Disallowance towards lease commitment charges.
4. Addition towards unexplained jewellery.

Issue-wise Detailed Analysis:

1. Valuation of Closing Stock:
The first grievance of the assessee concerns the Tribunal's direction regarding the addition to the closing stock by adopting the cost of goods at the year-end instead of the cost or realizable value method followed by the assessee. The Tribunal noted inconsistencies in the assessee’s method of valuing unsold stock, which varied arbitrarily between 25% and 50% reductions over different assessment years. The Tribunal rejected the assessee's method, labeling it as an afterthought post-search action aimed at reducing income. The Tribunal concluded that the closing stock must be valued consistently at market price or cost, whichever is less.

The assessee argued that the valuation method based on the net realizable value had been consistently followed and reflected in audited balance sheets and profit and loss accounts since 2006-07, predating the search in February 2009. The Tribunal, however, found that reconsidering these arguments would amount to a review of the earlier order, which is beyond its power, as statutory authority cannot exercise power of review unless expressly conferred. The Tribunal cited precedents, emphasizing that Section 254(2) of the IT Act limits its scope to rectifying mistakes apparent from the record and does not allow for recalling or rehearing the case on merits.

2. Addition Towards Stock Discrepancies:
The second issue pertains to confirming the addition towards stock discrepancies. The Tribunal had previously noted a difference between physical closing stock and book stock, with the Managing Partner admitting to a deficit stock of Rs. 1,27,64,281/-. The AO confirmed the excess stock found during the search, valued at Rs. 1,96,21,842/-, as unrecorded income. The Tribunal upheld the AO's addition of Rs. 9,43,980/- for Chennai Branch and Rs. 1,11,827/- for Tirunelveli Branch as unrecorded sales, finding no infirmity in the lower authorities' orders.

The assessee contended that the department had not provided the inventory list from the search, making it impossible to verify the stock accurately. The AO's acknowledgment of not having a detailed inventory further supported the assessee's claim. The Tribunal, however, maintained that the issue had been thoroughly considered and decided against the assessee, rejecting the argument for recalling the earlier order.

3. Disallowance Towards Lease Commitment Charges:
The third issue involves the disallowance of lease commitment charges. The Tribunal had found that the expenditure of Rs. one crore towards lease commitment charges was not incurred wholly and exclusively for business purposes. The assessee argued that the lease was necessary for providing parking space for customers, which directly benefited the business. The Tribunal, however, found no evidence of business advantage from the expenditure and decided against the assessee. The Tribunal reiterated that re-arguing the case was not permissible under Section 254(2) of the Act, rejecting the assessee's request to reconsider the disallowance.

4. Addition Towards Unexplained Jewellery:
The fourth issue concerns the addition of Rs. 29,92,775/- towards unexplained jewellery. The assessee claimed that this specific ground was raised before the CIT(A), but not adjudicated. The Tribunal noted that the ground was not found in the CIT(A)’s order, and an unsigned copy of the grounds raised was insufficient to uphold the assessee's argument. The Tribunal concluded that reviewing its order was not allowed under Section 254(2) of the Act and dismissed the assessee's request for reconsideration.

Conclusion:
In conclusion, the Tribunal dismissed all the Miscellaneous Applications filed by the assessee, finding no merit in the arguments for recalling or reviewing the earlier order. The Tribunal emphasized the limited scope of Section 254(2) of the IT Act, which does not permit rehearing or reviewing cases on merits. The order was pronounced on April 27, 2016, in Chennai.

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