Commissioner Of Income Tax-4, Mumbai v. M/S Hindustan Organics Chemicals Ltd

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 1574 OF 2013 Commissioner of Income Tax-4, Mumbai..Appellant Vs. M/s Hindustan Organics Chemicals Ltd...Respondent .... Mr. A.R. Malhotra a/w N.A. Kazi, Advocates for Appellant.Mr. Jitendra Singh a/w Neha Paranjape, Advocates for Respondent..... P.C.: CORAM : M.S. SANKLECHA & G.S. KULKARNI, JJ.DATED : 8 SEPTEMBER 2015 This appeal by revenue under Section 260A of the Income Tax Act, 1961 (the 'Act') challenges the order dated 9 November2012 passed by the Income Tax Appellate Tribunal (the 'Tribunal'').The Assessment Year involved is A.Y. 2008-09. 2.The revenue urges the following questions of law for our consideration: “(a)Whether on the facts and in thecircumstances of the case, the Tribunal, in law, was right in allowing the claim of the assessee on accountof delayed payments of P.F. of employee's contributionamounting to Rs.3,50,31,650/- by relying on thedecision of the Supreme Court in the case of CIT Vs.Alom Extrusion Ltd. (319 ITR 306)? (b)Whether, on the fact and in thecircumstances of the case and in law, the Tribunal wasjustified in deleting the addition of Rs.6,81,25,800/-made by the A.O. being direct expenses added to thevalue of closing stock on estimate basis by the A.O. u/s145A of the Income Tax Act, 1961?” 3. So far as Question (a) is concerned, this Court by anorder dated 7 May 2015 had dismissed it by following the decisionof Supreme Court in CIT Vs Alom Extrusions[1]. However, at thattime, so far as Question (b) is concerned, the appeal was adjournedto enable the parties to obtain details of pending appeals field bythe revenue. Thus today we only concerned with the Question (b)as framed by the revenue for our consideration. 4.Mr. Malhotra, the learned Counsel for the revenue pointsout that the impugned order of the Tribunal follows it's order dated 1 (2009) 319 ITR 306 13 January 2011 passed for the Assessment Year 2007-08. Mr.Malhotra also informs us that though an appeal was filed by therevenue from the order dated 13 January 2011 of the Tribunal forthe Assessment Year 2007-08 it was dismissed on 29 November2012 for failure to remove office objections. The revenue has nowtaken out a Notice of Motion No. 1757/2015 on 6 July 2015 seekingcondonation of delay and restoration of it's appeal for AssessmentYear 2007-08. Mr. Malhotra submits that the Question (b) hereincould be considered for admission by the Court today, as therelevant portion of the order dated 13 January 2011 passed by theTribunal for the Assessment Year 2007-08 on which reliance hasbeen placed is reproduced in the impugned order. Mr. JitendraSingh, learned Counsel appearing for respondent-assessee alsosubmitted copies of order dated 13 January 2011 passed by theTribunal for the Assessment Year 2007-08 dealing with the issuearising in Question (b) above. In the above view, at the request ofthe Counsel, we take up Question (b) as proposed for consideration. 5.For the Assessment Year 2008-09, the Assessing Officerfound that the Audit Report indicated that direct expesnes had notS.S.DESHPANDE3 / 7 been considered while computing the value of closing stock. Thusthe Assessing Officer invoked Section 145A of the Act and enhancedvalue of closing stock as direct expenses incurred such as freight,etc. had not been included to arrive at valuation of the closingstock. The Assessing Officer enhanced the value of the closing stockon estimated basis of 2% of the value of closing stock in the hisAssessment Order dated 29 December 2010. 5.For the Assessment Year 2008-09, the Assessing Officerfound that the Audit Report indicated that direct expesnes had notS.S.DESHPANDE3 / 7 been considered while computing the value of closing stock. Thusthe Assessing Officer invoked Section 145A of the Act and enhancedvalue of closing stock as direct expenses incurred such as freight,etc. had not been included to arrive at valuation of the closingstock. The Assessing Officer enhanced the value of the closing stockon estimated basis of 2% of the value of closing stock in the hisAssessment Order dated 29 December 2010. 6.Being aggrieved, the respondent-assessee filed an appealto CIT(A). The CIT(A) on examination found that value of closingstock included direct charges incurred thereon such as freight, etc.duly supported by material receipt vouchers. Further, CIT(A) alsorelied upon it's orders for the earlier years i.e. Assessment Years2002-03 and 2004-05 and of the Tribunal for the Assessment Years2003-04 and 2004-05 in the respondent-assessee's own case. Inview of the above, the appeal of the respondent-assessee wasallowed by order dated 23 September 2011 of the CIT(A). 7.Being aggrieved, the revenue carried the issue in appealto the Tribunal. By the impugned order, the Tribunal dismissed theS.S.DESHPANDE4 / 7 appeal of the revenue by placing reliance upon it's order dated 13January 2011 passed in respect of the Assessment Year 2007-08.The relevant portion of the order dated 13 January 2011 has beenquoted verbitam in the impugned order, wherein the CIT(A) hadheld that the valuation of closing stock was inclusive of expensesincurred to bring it to its location and condition on the date ofvaluation. It also relies upon the orders passed in the earlierassessment years, in favour of the respondent-assessee. In theabsence of any distinguishing features in the subject year, theTribunal dismissed the revenue's appeal. 8.Mr. Malhotra, learned Counsel for the revenue points outthat audit report submitted by the assessee indicates that therespondent had not considered direct expenses while computing thevaluation of closing stock. It is in the above view that the AssessingOfficer has added estimated expenses to arrive at the appropriatevaluation of the closing stock. It is further submitted that eachassessment has to be considered on the facts arising in the case forthat assessment year and undue reliance should not be placed upon the orders passed in respect of an earlier assessment year.Therefore, it is submitted the appeal be admitted on Question (b) asit raises a substantial question of law. 9.We find that the CIT(A) has rendered a finding of fact inthe subject assessment year that the valuation of closing stockincludes direct expenses such as freight charges incurred on themand are duly supported by the material receipt vouchers. Thisfinding of fact was upheld by the Tribunal by also relying upon it'sown order dated 13 January 2011 for the earlier Assessment Year.The reliance placed by the revenue on the observations made in theaudit report as reflected in the order of the Assessing Officer wouldnot govern the field, where the CIT(A) and the Tribunal hadrendered a finding of fact that direct expenses on account offreight charges, etc. incurred on the closing stock had been added toarrive at valuation of closing stock and are also duly supported bymaterial receipt vouchers. In view of the fact that two authoritieshave reached a concurrent finding of fact on examination ofmaterial receipt vouchers, we see no substantial question of law arising for our consideration so far as Question (b) is concerned.Moreover, the facts in the earlier Assessment Year 2007-08 werefound identical and nothing was shown to us as to why the samewas not correct and/or inapplicable to the subject assessment year. arising for our consideration so far as Question (b) is concerned.Moreover, the facts in the earlier Assessment Year 2007-08 werefound identical and nothing was shown to us as to why the samewas not correct and/or inapplicable to the subject assessment year. 10.Accordingly, Question (a) having been dismissed on 7May 2015 and Question (b) is also not being entertained as it is aquestion of fact, not giving rise to any substantial question of law.Thus, appeal dismissed. No orders as to costs. [G.S. KULKARNI, J] [M.S. SANKLECHA, J.]