Commissioner Of Income Tax, Patiala v. The Improvement Trust, Patiala

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. Case No. : I. T. A. No. 703 of 2008Date of Decision : December 22, 2008. Commissioner of Income Tax, Patiala Vs. The Improvement Trust, Patiala ....Appellant....Respondent CORAM : HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE L. N. MITTAL * * * Present :Ms. Urvashi Dhugga, Standing Counselfor the Revenue. * * * ADARSH KUMAR GOEL, J. (Oral) : 1.Revenue has preferred this appeal under Section 260A of theIncome Tax Act, 1961 (for short, “the Act”) against the order of the IncomeTax Appellate Tribunal, Chandigarh Bench `B', Chandigarh dated08.05.2008 passed in I.T.A. No.809/Chandi/2007 in the case of AssistantCommissioner of Income Tax Circle, Patiala vs. The PatialaImprovement Trust, Patiala for the Assessment Year 2004-05, proposingto raise following substantial questions of law :- “1.Whether on the facts and in thecircumstances of the case, the ITAT was correct inlaw in directing the A.O. to re-compute the incomeby adopting value of opening and closing stock at cost or market price, whichever is lower, ignoringthe fact that the assessee could not alter theopening stock by adopting a different method ofvaluation of stock ? 2.Whether on the facts and in thecircumstances of the case, the ITAT was legallyjustified in accepting the closing stock as declaredin the revised return ignoring the fact that theprovisions of section 139(5) of the Act permitsrevising of return only if there was any omission orwrong statement in the original return and that thesaid section does not permit revising of return foraltogether changing the method of valuation ofstock ?” 2.The assessee is an institution registered under Section 12 AA ofthe Act. It filed its original return for the assessment year 2004-05 on01.11.2004. Subsequently revised return was filed on 31.03.2006, whichwas rejected by the Assessing Officer on the ground that the assessee haschanged the method of accounting by adopting market price for valuation ofclosing stock, as against the market price, which was being regularlyfollowed in the earlier assessment years. The CIT (A) allowed the appeal ofthe assessee. It was held :- “I have considered the facts of thecase and rival submissions. It is very clear thatRegistration under section 12 AA of the IncomeTax Act has been granted and revised return filedin response to that have been accepted & incomehas been taken from the said revised return.Moreover, it is an accounting principle thatopening & closing stock has to be valued on the same basis. The Assessing Officer is not permittedto adopt the closing stock valuation from theoriginal return without varying the opening stock.The profit during the year should be accepted onthe basis of opening stock valued at cost in therevised return & hence the profit cannot artificiallyincrease with the valuation of closing stock atmarket rate. Therefore, Assessing Officer isdirected to re-compute the income by adoptingvalue of closing stock at cost or market pricewhichever is lower. Hence, to this extent,appellant's ground is allowed.” 3.The Tribunal upheld the said view. 4.We have heard leaned counsel for the Revenue. 5.It is clear that the revised return was within the prescribed time.The assessee has only made correction by bringing closing stock inconsonance with the principle, on which opening stock was valued, so thatthe income can be correctly arrived at. The view taken by the CIT (A) aswell as the Tribunal cannot be held to be perverse. 6.No substantial question of law arises. 7.The appeal is dismissed. (ADARSH KUMAR GOEL)JUDGE December 22, 2008monika ( L. N. MITTAL ) JUDGE