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TMI Blog2023 (11) TMI 924X X X X Extracts X X X X X X X X Extracts X X X X ..... essment u/s. 148 of the Income- tax Act, 1961. 2:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject the re-opening of assessment u/s. 148 was in excess of jurisdiction and the Commissioner of Income-tax (Appeals) ought to have held as such. 2:3 The Appellant submits that the proceedings u/s. 148 of the Act were not in accordance with law and consequently ought to be struck down. Without prejudice to the above 3:0 Re: Addition on account of slow and non-moving inventory: 3:1 The Commissioner of Income-tax (Appeals) has erred in upholding the action of the Assessing Officer of making an addition of Rs. 2,94,03,474/- to the total income of the Appellant for the year on account of a change in the method of accounting for slow and non- moving inventories. 3:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject no addition whatsoever is required and the stand taken by the Assessing Officer in this regard is incorrect and erroneous and the Commissioner of Income-tax (Appeals) ought to have held as such. 3:3 The Appellant submits that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn filed by the assessee. Therefore, it was observed that factually, there was no new material that the AO came across so as to have 'reasons to believe that the income had escaped assessment'. Thus, the Ld. AR has submitted that when the original assessment was framed u/s 143(3) and reopening is after laps of four year from the end of the assessment year under consideration then the reopening of the assessment is hit by the first proviso to section 147 of the Act. He has further submitted that the assessing officer has not made any addition on the second point as recorded in the reasons for reopening and it is apparent that the same was dropped by the AO while passing reassessment order. Thus, he has submitted that the reopening is not valid and liable to be quashed. The Ld. AR has submitted that though the writ petition filed by the assessee challenging the validity of the reopening of the assessment was dismissed by the Hon'ble High Court however, it was specifically observed while passing the order that anything observed in the said order will not come in the way of the assessee in respect of the proceedings which are going on before the income tax department as well as before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment) For the purpose of this Section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely (a). (b)... (ba)... (c) Where an assessment has been made, but- (i) income chargeable to tax has been under assessed; or (ii) such income has been assessed at too low rate; or (iii) such income has been made the subject of excessive relief under this Act; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed." 15. In light of the aforesaid statutory provision, in the present case, notice has been served within six years from the end of the relevant assessment year and the tax effect is in crores of rupees and therefore, the Assessing Officer was justified in initiating proceedings and in rejecting the objections raised by the petitioner. 16. Learned counsel for the petitioner has also placed reliance upon a judgment delivered by the apex Court in the case of Jeans Knit Pvt. Ltd. Bangalore Vs. The Deputy Commissioner of Income Tax Bangalore & Ors. passed in Civil Appeal No.11189/2016 on 08/12/201 on the ground of alternative remedy and this Court is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntory for Assessment Year 2010-11." 8. Ld. AR of the assessee has submitted this additional ground raised by the assessee is only an alternative plea in respect of ground no.3 of the original grounds of appeal raised by the assessee. Thus, the Ld. AR has submitted that the additional ground is part and parcel of the original ground no. 3 and does not require any fresh investigation of facts. 9. On the other hand Ld. DR has not disputed the fact that the additional ground raised by the assessee is an alternative pleas in respect of ground no.3 raised in the original grounds of appeal. Accordingly in the facts and circumstances of the case and in the interest of justice the additional ground raised by the assessee is admitted for adjudication along with ground no.3 of the assessee appeal. 10. Ld. AR of the assessee has submitted that the assessee company is engaged in the manufacturing of turbochargers and due to fast change of technology of automobile industry on account of Pollution norms and rapidly changes in the engineering of the vehicle produces and component of auto industry are also become obsolete within the short period of time. He has submitted that the assessee has n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 45 & Mumbai Benches of the tribunal in case of DCIT vs. B. Arunkumar Tarding Ltd. 96 ITD 194 as well as decision of Delhi Benches of Tribunal in case of Pr. CIT vs. Tupperware India Pvt. Ltd. 151 ITD 719 and submitted that when the assessee is following consistent policy of valuation of closing stock on the basis of net realizable value which is in accordance with account principles then the basis of net realization value which is more realistic cannot be said to be divergent to the regularly employed method of valuation. Ld. AR has further submitted that for the year under consideration the assessee has followed the same principles of valuation but the realization of the non-moving inventory is changed from age of the stock to the consumption pattern which is more realistic. 12. Alternatively the Ld. AR has submitted that once the AO has made the addition on this issue by enhancing the value of the closing stock then without giving the consequential effect of higher value of opening stock for the subsequent year would amount to double taxation. Ld. AR has submitted that neither the AO nor the Ld. CIT(A) has considered this aspect while passing the impugned order. He has refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4/ The assessee Company is engaged in the manufacturing of turbochargers and during the financial year 2008-09, the company changed its estimate of providing for slow/non-moving inventory. Earlier Method Earlier the company was making the provision based on the age of the inventory New Method During the financial year 2008-09, the company changed the method. it has now moved to a more stringent method of making a provision based on the consumption pattern. In the new method, Company is using a window of 26 weeks' past history and 8 weeks' future to work out the slow/non-moving inventory. The slow/ non- moving inventory stock was written off based on the following parameters: Number of Weeks Percentage of reserve 0 to 50 0% 51 to 100 50% 101 to above 100% If any of the part is identified as obsolete, a 100% provision is required irrespective of the usage category. Due to change in its estimate of providing for slow/ non-moving inventory, Company's profit before tax and Inventory for the financial year 2008-09 is lower by Rs. 2,94,03,474/-. It is hereby submitted that making provision of slow/non-moving inventory is mandatory in accordan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he authorities. [Para 10] - Held in favour of the Assessee. In another case the honorable Delhi High Court in CIT vs. Tupperware India (P.) Ltd. [2015] 53 taxmann.com 232 (Delhi) it has been held that One cannot appreciate and understand how the principle of matching can apply, without examining the question whether the market price of obsolete and unsaleable items was less than or lower than the manufacturing costs. If the market price of obsolete or unsaleable items is less than or lower than the cost price, the said position can be the basis for computing closing stock. It is noticeable that the respondent-assessee has been following this practise for several years and similar issue had arisen in the assessment year 2005-06, but the Revenue has not filed any appeal in respect of the said year. In fact, in the assessment year 2008-09, some of the obsolete items were sold and sale consideration received has been duly accounted for. This fact has been noted by the Tribunal in the impugned order. Thus, on the second issue, we see no reason to interfere. The appeals of the revenue are accordingly dismissed. Reliance is also placed on the principle laid down in the judgement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e subsequent year i.e. A.Y. 2010-11. Thus, this addition made by the AO for the year under consideration has resulted double taxation of the said income. 15. The Hon'ble Supreme Court in case of CIT vs. Excel Industries Ltd. (supra) has held in para 32 as under: "32. Thirdly, the real question concerning us is the year in which the assessee is required to pay tax. There is no dispute that in the subsequent accounting year, the assessee did make imports and did derive benefits under the advance licence and the duty entitlement pass book and paid tax thereon. Therefore, it is not as if the Revenue has been deprived of any tax. We are told that the rate of tax remained the same in the present assessment year as well as in the subsequent assessment year. Therefore, the dispute raised by the Revenue is entirely academic or at best may have a minor tax effect. There was, therefore, no need for the Revenue to continue with this litigation when it was quite clear that not only was it fruitless (on merits) but also that it may not have added anything much to the public coffers." 16. Therefore, when the assessee is paying tax at the same rate as in the year under consideration and rathe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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