9911796707
TMI Blog2022 (1) TMI 625X X X X Extracts X X X X X X X X Extracts X X X X ..... x over and above the normal profits, and therefore, it could not be added again as income. 2.3. The learned AO as well as the learned CIT(A) failed to appreciate that the adding of retrieval of stock of 14990MT as income would result in double taxation of the same income. 2.4. The learned AO as well as the learned CIT(A) failed to appreciate that section 41(1)(a) has no application to retrieval of stock which is accounted and disclosed in the books of account. VALUATION OF CLOSING STOCK. 3. The learned AO as well as the learned CIT(A) failed to appreciate that the addition of Rs. 46,25,232/- as purported undervaluation of stock was unjustified. CESSATION OF LIABILITY. 4. The learned CIT(A) ought to have appreciated that the relevant material facts were already on record before him regarding the credit balance of Rs. 4,23,986/- in the name of M/s SRMT Logistics, Bellary and in the admitted and undisputed factual background that this credit balance is not written off in the present assessment year and further that it is written off in the following assessment year and offered to tax, the addition was not sustainable. 5. The grounds are taken without prejudice to one ano ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance Amount (In Rs.) (i). Addition of liability ceased to be in existence u/s 41(1) 4,23,986/- (ii). Addition of Retrieval of Stock u/s 41(1)(a) 2,77,31,506/- (iii). Difference in valuation of closing stock 46,25,232/- RETRIEVAL OF STOCK. 2.1. In view of the banning of mining activities in Bellary District, the assessee company faced difficulty of procuring iron ore, which is the main raw material in the production of sponge iron. Hence the assessee conducted cleaning of stocks in the dumping yard to retrieve the stock settled in the bottom of the stockyard and in the process, 14990 MT of iron ore was retrieved. 2.2. It requires to be mentioned that in the earlier years, the company claimed ground/handling and transportation loss. Hence the retrieval of stock of 14990 MT was added to the closing stock. The assessee disclosed total closing stock 124409 MT in the books of account, which are audited as per the provisions of section 44AB of the Act. It may be mentioned that the company hired the services of the independent agency for physical verification of such retrieved stock and its valuation, which is also noted in para 3(b) of Annexure to Audit Report. 2.3. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. (vi) of page 7 & 8 that the closing stock of iron ore of 124409 MT is valued at Rs. 34,95,89,290/- by adopting the cost at Rs. 2810/- (Rs. 1804+Rs. 1106) being cost of iron ore. The learned AO has increased the value of closing stock of 124409 MT of iron ore at Rs. 35,42,14,522/- and on this basis added a sum of Rs. 46,25,232/- as income. If the closing stock of iron ore was only 109,919 MT (124409 - 14490) i.e., if it did not already included the retrieved stock of 14990 MT the working of the quantity and its valuation of the closing stock would have been different. Having adopted the closing stock of iron ore at 124409 MT which is inclusive of retrieved stock of 14990 MT on the basis of the book results for the purpose of valuation of closing stock and consequential addition of the said amount of Rs. 46,25,232/-, the learned AO ought not to have contradicted himself by stating that the said retrieved stock was not included in the closing stock. It is submitted that the learned AO is prohibited from adopting such a contradictory view in view of the maxim 'approbate and reprobate' i.e., the principle whereby a person cannot both approve and reject an instrument or a document. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stock was not included in the closing stock during the subject assessment year. 2.9. It is further submitted that the assessee consented for the addition if the amount was to be added applying section 41(1) subject to its reworking of the closing stock, as it would be revenue/tax neutral in the final analysis. The assessee explained the issue of retrieval of stock before the learned AO vide letter dated 05-02-2015 (reproduced in the assessment order in page 6) and another letter dated, 24-02-2015. As may be seen from the First letter (reproduced in the assessment order) that there is no consent for addition of the value of the retrieved stock. However, the submissions on this issue were made in the second letter dated, 24- 02-2015, and the relevant para is reproduced below for the sake of ready reference: "IMPLICATION OF SECTION 41(1). In addition to explanation submitted already pertaining to retrieval of stock (iron-ore) of 14990 MT in our letter dated, 05-02-2015, we further submit that the retrieval of stock (iron ore) from the stock yard took place on total clearing due to total closure of Mining operations in the sector. In the process whatever stock in the yard, over an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... low. Such a stand is permissible and will not go against any law." c. The Hon'ble Supreme Court in the case of Turner Morrison &Co. Ltd Vs. Hunger Ford Inv. 85 ITR 607, held that: "The authorized representative making agreement during assessment proceedings is binding on the assessee -copy of order sheet placed on this files" d. The Punjab & Haryana High Court in the case of Kanshi Ram Wadhwa 138 ITR 830 where in held that: "Had the assessee not consented to have an agreed order of assessment, the ITO would have perhaps held an enquiry for determining his actual income for that year. The assessee having derived the benefit of an agreed order cannot be allowed to turn round and urge that such an order was incorrect or unwarranted." e. ITAT Amritsar Bench (SMC)Anil Kumar vs. ITO [2008] 26 SOT 17 (Amritsar) wherei held that: "once addition was made on agreed basis,. same could not be challenged in appeal before C1T(A)." f. Further in the case of [2011] 14 taxmann.com 108 (Ahmedabad)In The ITAT Ahmedabad Bench 'C' Kantilal C. Shah vs. ACIT, Circle-3, Ahmedabad Stated that: "refraction of statement cannot be made without strong supporting evidence." 5. Furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee that retrieval stock has already gone into computation of income. The AO has not pointed out what is the basis of for observing that the closing stock has not gone into manufacturing and P&L account. We find no infirmity in the claim of the assessee. As the above statement produced by the tax auditor report u/s 44AB of the Act clearly demonstrate that retrieval stock has been gone into computation of closing stock and it has been included in the closing stock. The closing stock would only be 109419 MT instead of 124409 MT if it is not included in the closing stock arrived on 31.03.2012. 9.1 Futher, the as noticed from the G.P rate in the A.Y under consideration is it at 32.61% as against G.P rate at 16.62% in A.Y 2013-14. The Grosss profit rate in this A.Y 2012-13 has been increased due to retrieved stock gone in to computation of income. On this count also addition made by AO on this count to be deleted. 10. The other argument of the ld.DR is that this was agreed addition and assessee is precluded form challenging such addition. In our opinion, merely because the assessee agreed even after the retrieval stock included in the closing stock and considered for computation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7(SC) held as under:- "If a particular income is not taxable under the Income-tax Act, it cannot be taxed on the basis of estoppel or any other equitable doctrine. Equity is out of place in tax law; a particular income is either exigible to tax under the taxing statute or it is not. If it is not, the Income-tax Officer has no power to impose tax on the said income."" 12. Being so, in our opinion, the assessee cannot be disentitled to file appeal against the addition made by the AO on account of retrieval stock. Accordingly, this ground of appeal of the assessee is allowed. 13. The next ground for our consideration is with regard to addition of Rs. 4625232 towards net valuation of closing stock. 14. The contention of the ld.AR is that the learned AO added an amount of Rs. 46,25,232/- on the basis that the closing stock of 124409 MT require to be valued at cost. It may be seen that the learned AO has not given the consequential reduction in the subsequent assessment year, 2013-14. 1.1 It is submitted that the learned AO may be instructed to give consequential effect in the following assessment year. 15. The ld.DR relied on the orders of lower authorities. 16. We have heard th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
