Ita/139/2011 Of Commissioner Of Income Tax, Kottayam v. M/S.karinos Weave Private Limited

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN MONDAY, THE 26TH DAY OF MARCH 2012/6TH CHAITHRA 1934 ITA.No. 139 of 2011 ( ) -----------------------(AGAINST ORDER IN ITA.39/COCH/2009 DATED 18/01/2011 ofI.T.A.TRIBUNAL,COCHIN BENCH) APPELLANT(S)/RESPONDENT/REVENUE: --------------------------------- COMMISSIONER OF INCOME TAX, KOTTAYAM KOTTAYAM. BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S)/APPELLANT/ASSESSEE: ------------------------ M/S.KARINOS WEAVE PRIVATE LIMITED P.B.NO.4642, SOUTH VADAI CANAL ROAD, ALAPPUZHA-688001. BY ADV. SMT.ANITA RAMACHANDRAN ADV.SRI.K.ANAND THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 26-03-2012, ALONG WITH ITA. 146/2011, THE COURT ON THE SAME DAY DELIVEREDTHE FOLLOWING: ITA NO.139/2011 APPENDIX APPELLANT'S EXHIBITS ANNEXURE-A :COPY OF ASSESSMENT ORDER UNDER SECTION 143(3) RWS 147DATED 30/12/2008. ANNEXURE-B :COPY OF CIT(A)'S ORDER IN APPEAL NO.ITA NO.11/ALPA/CIT(A)-IV/07-08 DATED 20/11/2008. ANNEXURE-C :COPY OF CIT(A)'S ORDER IN APPEAL NO.ITA NO.13/APY/CIT(A)-IV/07-08 DATED 15/01/2007 OF M/S.WILLIAM GOODACRE & SONS INDIA PVT.LTD. ANNEXURE-D :COPY OF ITAT'S ORDER IN APPEAL NO.ITA NO.319 & CO20/COCH/2007 DATED 21/11/2008. ANNEXURE-E :COPY OF ITAT'S ORDER IN APPEAL NO.ITA NO.39 &95/COCH/2009 DATED 18/01/2011. //TRUE COPY// jg PA TO JUDGE. C.N.RAMACHANDRAN NAIR & K.VINOD CHANDRAN, JJ. ....................................................................I.T.A. Nos.139 & 146 of 2011 ....................................................................Dated this the 26[th] day of March, 2012. J U D G M E N T Ramachandran Nair, J. The connected appeals are filed by the Revenue raising a major objection in the assessee pressing a ground before theTribunal contrary to the undertaking given in this Court whiledisposing of the assessment appeal, namely ITA No.99/2011,against the holding company. The common dispute arose inthe assessment of the holding company, namely M/s.WilliamGoodacre and Sons (India) Ltd. and its subsidiary companynamely, M/s.Karinos Weave Pvt. Ltd. with regard to assessmentof closing stock of the subsidiary company amounting toRs.82.47 lakhs, which was not shown as opening stock of thatcompany. However, the holding company declared an openingstock of the same amount in the account of the said Company.In other words, closing stock of the subsidiary company isshown as opening stock of the holding company, which is a ITA Nos.139 & 146/2011 -2- strange principle of accounting by both the companies. Wefelt that the value of the stock should be considered forassessment only at the hands of one company. When theappeal of the holding company was heard, learned Seniorcounsel appearing for the assessee after taking instructionsfrom the subsidiary company submitted that in the IncomeTax Appeal that was pending against the assessment ofclosing stock of the subsidiary company, they will not pressthat ground thereby accepting the closing stock of thatcompany to be treated as opening stock for assessment. Weaccordingly disposed of I.T.A. No.99/2009 filed against theholding Company, namely M/s.William Goodacre and Sons(India) Ltd. as follows:- “Counsel appearing for the assessee submitted thatground pertaining to the opening stock addition ofthe subsidiary company will not be contested by theassessee in that case. We therefore, dismiss theappeal on specific condition that the assessee willnot press the addition pertaining to the openingstock in the hands of the subsidiary companynamely, M/s.Karinos Weave Private Ltd.” ITA Nos.139 & 146/2011 “Counsel appearing for the assessee submitted thatground pertaining to the opening stock addition ofthe subsidiary company will not be contested by theassessee in that case. We therefore, dismiss theappeal on specific condition that the assessee willnot press the addition pertaining to the openingstock in the hands of the subsidiary companynamely, M/s.Karinos Weave Private Ltd.” ITA Nos.139 & 146/2011 However, the subsidiary company was given freedom todispute the determination of gross profit pertaining to thestock transfer reflected in the opening stock stated above. Inspite of the above judgment delivered based on undertakinggiven by the assessee in this Court the assessee did not informthe Tribunal about the above judgment and the matter wasargued on merit, which led to impugned orders issued by theTribunal. The consequence of this conduct of the assessee isthat the Department was disabled from contesting theTribunal's order at the hands of the holding company and theDepartment's appeal was dismissed. In the normal course, we should have imposed heavy coston the assessee for this attitude, which we deprecate.However, the Department is equally indifferent in the matterbecause they also did not bring our judgment to the notice ofthe Tribunal. We therefore, do not think the assessee aloneshould be penalised for this conduct. We therefore allow theappeals by setting aside the orders of the Tribunal and restore ITA Nos.139 & 146/2011 the matter to the Assessing Officer for re-consideration whilerevising the orders of assessment issued pursuant to thejudgment in ITA No.99/2009 in the case of M/s.WilliamGoodacre and Sons (India) Ltd. Since the very basis of theTribunal's decision on determination of gross profit also goesas a result of our judgment, it is for the Assessing Officer toreconsider the matter afresh and if the appellant hasgrievance, the appellant is free to challenge the same inanother round of appeal. These Income Tax Appeals are allowed as above. (C.N.RAMACHANDRAN NAIR, JUDGE) (K.VINOD CHANDRAN, JUDGE) jg