TMI Blog2021 (5) TMI 398X X X X Extracts X X X X X X X X Extracts X X X X ..... A No .128/CTK/2019 - - - Dated:- 10-5-2021 - S/Shri Chandra Mohan Garg, Judicial Member And Laxmi Prasad Sahu, Accountant Member For the Assessee : Shri S.K.Sarangi, AR For the Revenue : ShriM.K.Gautam, CIT DR ORDER PER BENCH This is an appeal filed by the assessee against the order of the Pr. CIT, Cuttack dated 29.3.2019 u/s.263 of the Act for the assessment year 2014-15. 2. The assessee has raised following grounds in its appeal: 1. For that order dated 29.3.2019 as passed by the Pr. CIT, Cuttack u/s.263 of the I.T. Act is far from just and legal on the facts and in the circumstances of the case. 2. For that Ld Pr. CIT is not justified in invoking jurisdiction u/s.263 of the Act and modifying the assessment order passed u/s.143(3) of the I.T.Act, on 23.11.2016 under 'Limited Scrutiny' category in conformity with CBDT instructions on the facts and in the circumstances of the case. 3. For the Id Pr. CIT is not justified in invoking jurisdiction u/s.263 in respect of valuation of closing stock when the same was not the subject matter of Limited scrutiny in the assessment completed u/s.143(3) on the facts and in the circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d have called for assessee's statutory Annual Mining return in Form-H1, which the assessee was supposed to file under Rule 45 of Mineral Conservation and Development Rules 1988, before the Regional Controller of Mines in the Indian Bureau of Mines and ought to have verified assessee's claim of wastage/loss of stock of Iron ore as per Balance Sheet vis-a-vis information provided in the said statutory Annual Mining return, which he has not done. 3. Further, on scrutiny of the cost of materials purchase as per Note-21 and quantity of materials purchases as per Annexure-1 of the tax audit report, it was noticed that assessee had incurred expenditure of ₹ 57.82.13.678/- for purchase of 160535 MT of Iron Ore @ ₹ 3 601/- per ton in its P L account in the relevant previous year Since the assessee was adopting FIFO at actual cost method for valuation of its closing stock, the value of closing stock of 7796 Ton of Iron Ore should have been at ₹ 2,80,73,396/- (7796 x ₹ 3601) instead of ₹ 82,44,039/- as declared by the assessee. As such, closing stock was undervalued by ₹ 1,98,29,357/- (₹ 2,80,73,396 - ₹ 82,44,039) and the AO ought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtage/loss of stock of iron ore of 3205 MTs, Pr. CIT in para 11 of the said order observed no irregularity with regarding to the claim of wastage/loss of iron ore as claimed by the assessee in its return of income. Therefore, no adverse inference was drawn and consequently, this issue was dropped. 9. We have heard the rival arguments of both the sides and carefully perused the relevant materials placed on the record of the Tribunal. 10. Ld A.R. of the assessee, reiterated the submissions made before the Ld Pr. CIT and further submitted that in the tax audit report at 35(a) of Form 3CD, quantitative details of iron ore fines was given and shortage has been disclosed at 3205 MT and closing stock was mentioned after deduction of shortage. The assessee had maintained proper record and inventory of iron ore fines. He further submitted that the shortage is 1.8% of the total quantity. He submitted that the assessee is following FIFO method consistently, which is accepted and recognised method of valuation of closing stock. Ld A.R. referred to following decisions of the Tribunal to contend that the FIFO method by the assessee has been accepted by the Tribunal: i) ITAT Kolkata in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT. Therefore, the impugned order as well as consequent proceedings may kindly be quashed. 13. Besides the above submissions, ld CIT DR drew our attention towards the impugned assessment order dated 23.11.2016 and submitted that there is no enquiry by the AO on this issue. Therefore, it is a clear case of no enquiry of a glaring issue which goes to the root of the matter. Therefore, the Pr. CIT was also correct on this count holding the assessment order erroneous and prejudicial to the interest of the revenue. 14. On careful consideration of the rival submissions, first of all, we may point out that the AO has passed the impugned assessment order u/s.143(3) and there is no deliberation or discussion therein regarding valuation of closing stock by the assessee. We may also point out that from the Note 20 of the profit and loss account, it was clear that the assessee has shown closing stock of ₹ 82,44,039/- as inventory of iron ore at the end of the year and same was shown as inventory under the head of current assets in the balance sheet as on 31.3.2014. It was also clear that tax auditor at point no.14(a) of Form 3CD stated that the method of valuation of closing s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horities had disturbed the method of valuation adopted by the assessee by adopting weighted average method of costing and arrived at the profits of the year without doing the same method of valuation to the opening stock of the assessee. On appeal, the Tribunal observed that the revenue authorities have committed the mistake. However, in the present case at hand, the Pr. CIT has not disturbed the method employed by the assessee i.e. FIFO method of valuation but recomputed the cost of valuation, which bill was not considered by the AO while passing the assessment order. Similar is in the case of Sree Alankar (supra) passed by ITAT, Cuttack. Hence, the decisions relied on by ld counsel for the assessee have no application in the present case. 18. From the careful reading of the revisional order u/s.263 of the Act, it is clear that Pr. CIT has not disturbed or disputed the method of valuation adopted by the assessee i.e. FIFO method but the computation made by the assessee was examined and found to be incorrect because only by including 4th bill to the details of three bills submitted by the assessed, it was observed that after inclusion of 4th bill, of the same period/date, the va ..... X X X X Extracts X X X X X X X X Extracts X X X X
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