Mr. T.k. Satapathy, Advocate v. M/S. Shree Alankar

Order No. 13. IN THE HIGH COURT OF ORISSA AT CUTTACK ITA No.10 of 2019 …. Appellant Principal Commissioner of Income Tax-1, Bhubaneswar Mr. T.K. Satapathy, Advocate -versus- …. M/s. Shree Alankar Respondent Mr. S.J. Biswal, Advocate and associates CORAM: THE CHIEF JUSTICE JUSTICE M.S. RAMAN ORDER 25.01.2023 1. The challenge in the present appeal by the Revenue is to an order dated 12[th] September 2018 passed by the Income Tax Appellate Tribunal, Cuttack Bench, Cuttack (ITAT) allowing the Assessee’s ITA No.108/CTK/2018 whereby the order dated 17[th]March 2017 of the Principal Commissioner of Income Tax, Bhubaneswar (PCIT) for the assessment year (AY) 2012-13 remanding the assessment proceedings to the Assessing Officer (AO) was set aside. 2. While admitting the present appeal on 5[th] February 2020, the following question was framed for consideration: “Whether on the facts and circumstances of the case and in law, the learned Tribunal was right in allowing the appeal of the Assessee and thereby setting aside the revisional order passed by the PCIT under Annexure-3 without discussing about the legality of reasons given in the said order?” 3. The background facts are that in the returns filed for the aforementioned AY, the Assessee had shown closing stock @ Rs.5,54,19,940/- included gold and silver jewelry. As per the tax audit certificate, the method of valuation of closing stock employed during the previous year relevant to AY 2012-13 was “at cost price or net realizable value whichever is lower”. Accordingly, there was no deviation from the method of valuation under Section 145A of the Act. 4. According to the Department, the valuation of closing stock by taking the cost price of the opening stock was not an acceptable method where purchases had been made during the year. The PCIT in the impugned order was of the view that there was no material available on record to substantiate the basis on which rates of closing inventory were arrived. Since according to the PCIT, the AO failed to properly examine the issue, invoking the power under Section 263 of the Act, the PCIT set aside the said assessment order and remanded the matter to the AO. 5. The ITAT has in the appeal noted that in the original assessment proceedings the AO had in fact made inquiries in respect of valuation of closing stock. Further, the Assessee was consistently following the same method of valuation of closing stock earlier in the earlier year as it was following in the AY in question. Profit was deduced according to the method adopted by the Assessee. S.K. Guin 6. Holding that the PCIT was not justified in disturbing the consistent method of the valuation adopted by the Assessee, the ITAT set aside the order passed by the PCIT. 7. Having heard Mr. T.K. Satapathy, learned Senior Standing Counsel for the Department and having perused the impugned order of the ITAT, the Court finds that indeed, the Assessee had been consistently following the same method for valuation of the closing stock earlier as was done in the AY in question. It was incumbent on the AO to have accepted this consistent method of valuation even by the rule of consistency. 8. There was no material to come to the conclusion that Assessee had tried to evade any payment of tax by adopting the aforementioned consistent method for valuation of its closing stock. 9. In the circumstances, the question framed is answered in the affirmative i.e., in favour of the Assessee and against the Department. The appeal is dismissed with no order as to costs. (Dr. S. Muralidhar) Chief Justice (M.S. Raman) Judge