TMI Blog2015 (9) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... f stock was done on 31-03-2002. Thus there was no production carried out by the company since 31-03-2002. The ld. DR could not controvert this findings of the ld. CIT(A). The cases relied on by the assessee are squarely applicable to the case of the assessee. Therefore, in view of the above facts and circumstances of the case, we confirm the order of the ld. CIT(A). - Decided against revenue. - ITA No. 795/JP/2012 - - - Dated:- 11-8-2015 - SHRI R.P. TOLANI AND SHRI T.R. MEENA, JJ. For The Revenue : Smt. Neena Jeph, JCIT For The Assessee : Shri Madhukar Garg and Shri Anirudh Garg, CA ORDER PER T.R. MEENA, AM This is an appeal filed by the Revenue against the order of the ld. CIT(A)-II, Jaipur dated 20-07-2012 for the assessment year 2002-03 raising therein solitary ground as under:- On the facts and in the circumstances of the case, the ld. CIT(A) has erred in deleting penalty of ₹ 7,65,060/- imposed by AO u/s 271(1)(c ) holding the change of accounting system which resulted valuation of stock at a lower side do not show deliberate intention of the assessee of furnishing inaccurate particulars/ concealment of facts. 2.1 Brief facts of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement in the cases of CIT vs. Gold Coin Health Food (P) Ltd. (208) 172 Taxman 386/ 304 ITR 308 (SC) and also Hon'ble Jurisdictional High Court judgment in the case of CIT vs. Mohd. Mohtram Farooqui (2002) 177 CTR 434. Thus in view of the above findings, the AO treated the addition of ₹ 21.43 lacs as concealed income on which 100% penalty of tax sought to be evaded at ₹ 7,65,051/- was imposed. 2.4 Being aggrieved by the order of the AO, the assessee carried the matter before the ld. CIT(A) who deleted the penalty by observing as under:- 3.1 I have duly considered the submissions of the appellant. The assessee company was engaged in the business of manufacturing of woolen yarn and synthetic yarn. As the assessee company was incurring losses consistently, it had made reference to BIFR to declare it a sick company. Even in the current year, the losses of the appellant company stood at ₹ 4266 lacs. The AO noticed that the assessee company had changed its method of valuation of closing stock and as a result the profit had been reduced by an amount of ₹ 21.43 lacs. The AO held that there was no justification whatsoever for change in the method of valua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivergent views are expressed by different High Courts and there is no uniformity or consensus of opinion on any aspect of law, the assessee cannot be faulted for taking a particular stand. The caveat, of course, is that the assessee must have placed all his cards on the table by disclosing each and every fact to the Departmental authorities or the Court concerned or the High Court concerned does not concur with the legal stand adopted by the assessee that will not be reason enough to hold that the assessee is guilty of concealment of income or of furnishing inaccurate details. In the case of CIT vs. Devson Logistics (P) Ltd. (329 ITR 483), the Tribunal reversed the of the CIT (Appeals) by holding that during the period under consideration, the assessee had changed its method of accounting and such change was not bona fide and the onus cast upon the assessee of proving the factum of rendering services by the sundry creditors of the assessee was not discharged by mere filing of a log book. The Assessing Officer imposed a penalty of ₹ 33,07,220/- invoking the provisions to Explanation 1 to Section 271(1) on the ground that the assessee had concealed the particulars of its incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtment itself to be genuine creditors of the assessee. The creditors were paid their entire outstanding amounts by the assessee and this fact has been verified by the Department from the creditors themselves. It is well settled that though findings recorded in the assessment proceedings may constitute evidence in the course of penalty proceedings, they cannot be regarded as conclusive. The Tribunal in assessment proceedings had restored both the additions made by the Assessing Officer but the findings of the Tribunal in assessment proceedings were not conclusive and binding on a Coordinate Bench of the Tribunal in penalty proceedings. It was incumbent upon the Tribunal in penalty proceedings to independently examine the evidence and the material on record for the purpose of judging whether the penalty proceedings on account of concealment of income or furnishing of inaccurate particulars thereof were justified. It was held that this had been done by the Tribunal in the instant case. The Hon'ble Delhi High Court held that divergent views amongst Departmental authorities in respect of both the additions positively indicated that it would be unsafe to infer that the assessee was g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t it was also mentioned that in the Thread Unit valuation of stock in process has been changed from cost plus expenses to estimated realizable value which has resulted in higher claim of by a sum of ₹ 21.43 lacs. Copy of tax audit report has been placed at PBP No.17-28 and attention is invited to the page 27 being the Annexure-B to the tax audit report wherein this fact has clearly been disclosed in the column method of accounting employed . Further, on page 28 being Annexure-C to the tax audit report showing method of valuation of closing stock in trade against process stock it is duly mentioned that the same is valued at estimated net realizable value. Thus, complete disclosure was made by the assessee company in the return of income and in fact even the Assessing Officer has mentioned in the assessment order that it has been noticed from Annexure-B to the audit report pertaining to method of accounting employed that valuation of stock in process has been changed from cost plus expenses to estimated realizable value(para 3 page 2). Section 210 of the Companies Act, 1956 requires the board of directors of a company to place at every annual general meeting, a balance s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of their dues and in exercise of powers conferred under Rajasthan Land Revenue Act 1956 it attached the entire plant office of the Thread Division at Raila on 19.10,2001. As the production had stopped the net realizable value of stock of work in process had gone down substantially and the assessee had also furnished a statement showing the working of net realizable value of work in process. (PBP No.15). The learned Assessing Officer while completing the assessment had wrongly worked out the figure of profit as he has not taken into consideration the employee cost. The assessee had duly furnished the working of the losses in manufacturing before the learned CIT(Appeals)-II, Jaipur and attention is invited to PBP No.29. We may also point out that the said plant is still under the control of AVVNL and no production has been done in the said plant since 19.10.2001. Thus, in this case the assessee company had correctly done the valuation by following the Companies Act as well as the accounting standards. In this case the assessee company had claimed deduction by reducing the value of stock which course of action was not accepted by the Assessing Officer. If there is some decli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s being punished for an act which is unjustified . Reliance is also placed on the decision of ITAT, Jodhpur Bench in case of DCIT Bhilwara vs. M/s. RSWM Ltd., Gulabpura.(PBP No.34-39) In the said case the assessee was a public limited company and its shares were listed on stock exchange. On the basis of past experience it adopted a prudent accounting estimate of reducing the value of closing stock of non moving items by 10%, 25% and 50% according to their holding period. The Assessing Officer disallowed this claims and initiated penalty proceedings under section 271(1)(c ) of the IT Act and he imposed penalty at 100% of the amount of tax sought to be evaded. The CIT(Appeals) deleted the penalty and held that in respect of under valuation of closing stock the assessee has explained reasons for claiming aging discount in respect of stock which remained unsolved for a period of 90 days or more and also held that penalty under section 271(1)( c) cannot justifiably be levied simply for the reason that additions have been sustained in appeal. Since Assessing Officer has not brought any adverse material on record to prove that the explanation given by the assessee regarding valuatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of Hon ble Gujarat High Court in the case of BTX Chemicals vs. CIT reported in 288 ITR 196. In the said case it was held that where the assessee has claimed double deduction for loss of stock due to fire, once by debiting the same in the P L account and by also reducing the value of closing stock no penalty under section 271(1)( c) was imposable. The ld. AR of the assessee at the end of his arguments requested to confirm the order of the ld. CIT(A). 2.7 We have heard the rival contentions and perused the materials available on record. The assessee had submitted its explanation before the AO at the time of assessment proceedings as well as penalty proceedings. The assessee has changed the method of valuation of closing stock which will automatically be the opening stock of subsequent year. The assessee had duly disclosed complete particulars regarding change in the method of valuation of stock in process from cost plus expenses to estimated realizable value which was mentioned by the assessee in its annual report of the company and tax audit report that in the Modern Thread Unit, the valuation of stock in process had been changed from cost plus expenses to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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