TaxTMI 
TaxTMI 
2022 (1) TMI 625
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....retrieval of stock is recorded in the books of account and offered to tax over and above the normal profits, and therefore, it could not be added again as income. 2.3. The learned AO as well as the learned CIT(A) failed to appreciate that the adding of retrieval of stock of 14990MT as income would result in double taxation of the same income. 2.4. The learned AO as well as the learned CIT(A) failed to appreciate that section 41(1)(a) has no application to retrieval of stock which is accounted and disclosed in the books of account. VALUATION OF CLOSING STOCK. 3. The learned AO as well as the learned CIT(A) failed to appreciate that the addition of Rs. 46,25,232/- as purported undervaluation of stock was unjustified. CESSATION OF LIABILITY. 4. The learned CIT(A) ought to have appreciated that the relevant material facts were already on record before him regarding the credit balance of Rs. 4,23,986/- in the name of M/s SRMT Logistics, Bellary and in the admitted and undisputed factual background that this credit balance is not written off in the present assessment year and further that it is written off in the following assessment ....
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....luation of closing stock 46,25,232/- 1.3. The learned CIT(A) partly allowed the appeal and further appeal is filed to the Tribunal on the following issues: Sl. No. Particulars of Addition/Disallowance Amount (In Rs.) (i). Addition of liability ceased to be in existence u/s 41(1) 4,23,986/- (ii). Addition of Retrieval of Stock u/s 41(1)(a) 2,77,31,506/- (iii). Difference in valuation of closing stock 46,25,232/- RETRIEVAL OF STOCK. 2.1. In view of the banning of mining activities in Bellary District, the assessee company faced difficulty of procuring iron ore, which is the main raw material in the production of sponge iron. Hence the assessee conducted cleaning of stocks in the dumping yard to retrieve the stock settled in the bottom of the stockyard and in the process, 14990 MT of iron ore was retrieved. 2.2. It requires to be mentioned that in the earlier years, the company claimed ground/handling and transportation loss. Hence the retrieval of stock of 14990 MT was added to the closing stock. The assessee disclosed total closing stock 124409 MT in the books of account, which are audited as per the provisions of section 44AB of th....
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.....O himself has computed the closing stock of 124409 MT after including the said retrieved stock of 14990 MT. He has also added the amount of Rs. 46,25,232/- on the ground that the closing stock of 124409 MT was not valued including all the costs. The learned AO has observed (in Sl. No. (vi) of page 7 & 8 that the closing stock of iron ore of 124409 MT is valued at Rs. 34,95,89,290/- by adopting the cost at Rs. 2810/- (Rs. 1804+Rs. 1106) being cost of iron ore. The learned AO has increased the value of closing stock of 124409 MT of iron ore at Rs. 35,42,14,522/- and on this basis added a sum of Rs. 46,25,232/- as income. If the closing stock of iron ore was only 109,919 MT (124409 - 14490) i.e., if it did not already included the retrieved stock of 14990 MT the working of the quantity and its valuation of the closing stock would have been different. Having adopted the closing stock of iron ore at 124409 MT which is inclusive of retrieved stock of 14990 MT on the basis of the book results for the purpose of valuation of closing stock and consequential addition of the said amount of Rs. 46,25,232/-, the learned AO ought not to have contradicted himself by stating that the said retriev....
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....r words, the said quantity of retrieved iron ore of 14490 MT was already included in the closing stock of 124409 MT as on 31-03-2012 and therefore, it is shown as the opening stock in the following year as on 01-04-2012 as per the books of account. These material facts on record completely disprove the version of the learned AO that the retrieved stock was not included in the closing stock during the subject assessment year. 2.9. It is further submitted that the assessee consented for the addition if the amount was to be added applying section 41(1) subject to its reworking of the closing stock, as it would be revenue/tax neutral in the final analysis. The assessee explained the issue of retrieval of stock before the learned AO vide letter dated 05-02-2015 (reproduced in the assessment order in page 6) and another letter dated, 24-02-2015. As may be seen from the First letter (reproduced in the assessment order) that there is no consent for addition of the value of the retrieved stock. However, the submissions on this issue were made in the second letter dated, 24- 02-2015, and the relevant para is reproduced below for the sake of ready reference: "IMPLICATION OF SECTIO....
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....ion of compulsion or coercion cannot be accepted on a mere statement. It is too late in the day to claim any compulsion. The present stand is nothing but an afterthought self-serving and appears to have been made to suit the convenience. The petitioner himself has signed it on March 13, 1995. Therefore, it will not be permissible to allow the petitioner to go back on his own stand before the authorities below. Such a stand is permissible and will not go against any law." c. The Hon'ble Supreme Court in the case of Turner Morrison &Co. Ltd Vs. Hunger Ford Inv. 85 ITR 607, held that: "The authorized representative making agreement during assessment proceedings is binding on the assessee -copy of order sheet placed on this files" d. The Punjab & Haryana High Court in the case of Kanshi Ram Wadhwa 138 ITR 830 where in held that: "Had the assessee not consented to have an agreed order of assessment, the ITO would have perhaps held an enquiry for determining his actual income for that year. The assessee having derived the benefit of an agreed order cannot be allowed to turn round and urge that such an order was incorrect or unwarranted." e....
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....he has specifically mentioned in Annexure F of tax audit report -----space left intentionally ---- as follows:- 9. The above table clearly shows that closing stock as on 31/3/2012 has been arrived at after adding retrieval stock of 14,998 MT to the opening stock. Thus, the closing stock has been increased by this amount of quantity of retrieval stock. Thus, the AO is not justified in observing that retrieval stock has given into manufacturing and P&L account. Therefore there is no justification in recalling the claim of the assessee that retrieval stock has already gone into computation of income. The AO has not pointed out what is the basis of for observing that the closing stock has not gone into manufacturing and P&L account. We find no infirmity in the claim of the assessee. As the above statement produced by the tax auditor report u/s 44AB of the Act clearly demonstrate that retrieval stock has been gone into computation of closing stock and it has been included in the closing stock. The closing stock would only be 109419 MT instead of 124409 MT if it is not included in the closing stock arrived on 31.03.2012. 9.1 Futher, the as noticed from the G.P rate in the A.Y....
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.... Hon'ble Bombay High Court in the case of Nirmala L. Mehta vs. A. Balasubramaniam, C.I.T. (2004) 269 ITR 1 (Bom) held that : ""there cannot be any estoppel against the statute. Article 265 of the Constitution of India in unmistakable terms provides that no tax shall be levied or collected except by authority of law. Acquiescence cannot take away from a party the relief that he is entitled to where the tax is levied or collected without authority of law." (iii) The Hon'ble Supreme Court in the case of CIT, Madras vs V. MR. P. Firm, Muar reported in 56 ITR 67(SC) held as under:- "If a particular income is not taxable under the Income-tax Act, it cannot be taxed on the basis of estoppel or any other equitable doctrine. Equity is out of place in tax law; a particular income is either exigible to tax under the taxing statute or it is not. If it is not, the Income-tax Officer has no power to impose tax on the said income."" 12. Being so, in our opinion, the assessee cannot be disentitled to file appeal against the addition made by the AO on account of retrieval stock. Accordingly, this ground of appeal of the assessee is allowed. 13. The next ground for o....