TaxTMI 
TaxTMI 
2022 (2) TMI 1089
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....(A.Y. 2010-11):- Ground No. 1:- 2. There is a delay of 915 days in filing the instant appeal before us. 3. We have heard the rival submissions made by the respective parties, and we have also perused the relevant materials available on record. 4. The appellate order upholding the addition in respect of undervaluation of closing stock and deleting other additions were received by the appellant on 13.02.2015 upon perusal of which the assessee was of the opinion that closing stock of the year in question would become the opening stock of the immediately succeeding year and, therefore, the addition was revenue neutral and no appeal before us was, therefore, filed. 5. On the other hand, the penalty imposed to the tune of Rs. 42,31,789/- under Section 271(1)(c) of the Act on the basis of the addition made in respect of undervaluation of the closing stock was challenged before the First Appellate Authority. 6. During the appellate proceeding in regard to the penalty matter the assessee felt some indication of confirmation of penalty on the basis of the addition made in the quantum proceeding. At that juncture on the basis of the advice given by the Ld. Advocate, quantum ....
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....d by the assessee. 12. Before the First Appellate Authority the appellant submitted the following: "5.1 "Grounds # 3-4 challenges the action of ld. AO in making an addition of Rs. 1,36,95,109/- on account of under valuation of closing stock. 6.1 The ld. AO, during the course of assessment proceedings, further observed that there was an opening stock of paper mill scale of Rs. 8,09,400/- at the beginning of the year although no sales were made during the year, no closing stock was shown by the appellant. It was further noticed that the closing stock of loose mill scale was shown at a rate lower than the cost price. The appellant was asked to explain the reasons for the same. In response, the Appellant furnished the details regarding stock purchased at Mumbai and Bhavnagar. The appellant further submitted that the stock lying at Mumbai remained unsold as it was of inferior quantity and thus the same was valued at 50% of the average purchase price of goods purchased during the year. However, the ld. AO did not appreciate the facts submitted by the Appellant and was of the view that there had been undervaluation of the closing stock by the appellant. Accordingly, t....
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....han the cost price; as per auditor's report the closing stock should have been valued at cost price and therefore closing stock at Mumbai was being valued at cost price; the value of the stock at Bhavnagar and at Mumbai totals to Rs. 3,28,47,859/-, as against which appellant had taken closing stock at Rs. 1,91,52,750/- only and therefore the difference amount was being added. The contentions of the Ld. A.R. are that the stock at Mumbai was of " inferior quality and therefore it was valued at 50% of the average purchase price and hence the addition was unwarranted. 5.3 Having considered the facts of the matter, I am not inclined to accept the contentions of the A.R.. For the detailed reasoning given in the assessment order A.O. came to the finding that the closing stock was under valued by the appellant. The contentions of the A.R. are general and vague. They do not controvert the specific findings given by the A.O regarding the closing stock at Bhavnagar and Mumbai. Impugned addition of Rs. 1,36,95,109/- is upheld. Ground no.3 is dismissed. 4.4 In view of finding at para-3.3, ground no.4 has become infructuous and is dismissed as such. Further A.O. made adopt ....
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....nd we have also perused the relevant materials available on record. 19. The assessee submitted the following before the First Appellate Authority: "Further, to the Grounds of appeal filed, your Appellant begs to submit as under Your Appellant is dealing in Mills scales which is a flaky surface or, hot rotted steel. Mittal scale is formed on the outer surfaces of plates, sheets of profiles when they are being produced by rolling red hot iron or steel billets in rolling mills. Mill scale is bluish black in color. Mill scale is a nuisance when the steel is to be processed Any paint applied over it is wasted, since it will come off with the scale as moisture-laden air gets under it. Mill scale generated in rolling mills are collected and sent to a sinter plant for recycling. There are no Sinters plants for recycling; of Mills scale or other technology in India but your Appellant was successful in finding buyer is from foreign countries and had been exporting it past few years. Majority the mills scale was exported to China since there was huge demand of steel and they had technology to produce steel from the Mills scale. Mills scale was procured from vario....
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.... ITR 0158, which squarely covers the present case also. The apex Court in this judgment has clearly held that the word 'inaccurate' as used in the Act would mean something which is not accurate, not exact or not correct. Something which is untrue is inaccurate. The same facts can be given two interpretations. If the interpretation given is plausible though not accepted by the assessing authority it cannot be said that the statement of particulars is as inaccurate or erroneous as to invite imposition of penalty. Merely because a wrong interpretation to the same set of facts is given would not, mean that the assessee reliable to pay penalty also. Penalty is by its very nature penal and somebody is being punished for an act is unjustified. The apex Court in Reliance Petro Products' case (supra) has clearly laid down that merely because the assessee makes a claim which is not sustainable in law, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Your Appellant had valued the closing at lower of the cost price on account of deterioration of old stock. This was being done on estimation on the basis of the offers received from vario....
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....e adjudicating this issue, the CIT(A)-6, Ahmedabad vide order dated 6-1-2015 in Appeal no. CIT(A)-686/13- 14 observed as follows : "5.2 This issue was discussed by the AO at psra-6 of the assessment order. He observed that there was opening stock of paper mill scale of Rs. 8,09,400/- at Bhavnagar at the beginning of the year; at the end of the year there was no dosing stock; further, no sales were re-corded during the year, it was further seen that the dosing stock of the loose mill scale was taken at the rate lower than the cost price, as per auditor's report the dosing stock should have been valued at cost price and therefore closing stock at Mumbai was being valued at cost price; the value of the stock at Bhavnagar and at Mumbai totals to Rs. 3,28,47,859/-, as against which appellant had taken closing stock, at Rs. l,9l,52,750/- only and therefore the difference amount was being added. The contentions of the Ld. A.R. are that the stock at Mumbai was of inferior quality and therefore it was valued at 50% of the average purchase price and hence the addition was unwarranted. 5.3 Having considered the facts of the matter, I am not inclined to accept the content....
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....appellant did not find good buyers. Earlier, the appellant was exporting this material to China. However, during the year under consideration prices offered by the potential buyers were much below cost price and therefore, the appellant decided not to sell it. Since stock was lying in open for more than 12 months, it had caught lot of humidity and also dust particles. Due to this, quality of these goods deteriorated. Since for export to China, there was stringent quality control this stock could not be sold at the normal price and the appellant was getting offers for export at, less than 50% of the cost price. Hence, the appellant considered rate of Rs. 370 per MT for valuation of the stock. As said above, the appellant has repeated its contention regarding reason for under valuation of stock during assessment proceedings, penalty proceedings and appellate proceedings for penalty. After thoroughly considering explanation filed by the appellant for under valuation of stock, it is felt that it lacks of substance. There is also an inherent contradiction in the submissions of the appellant. On one side it says that since price offered by the potential buyers were far below the....
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....t what it was doing was right, it would have been possible to consider the explanation of the appellant. However, in this case, after the appellant had valued its stock at the reduced cost, the auditor while auditing the account had clearly brought it to the notice of the appellant that "the stock should have been valued at cost". This is mentioned in the Audit Report. This fact is not denied by the appellant. Once this was pointed by the auditor, the appellant should have realized that what it was doing was not legally correct and it could have and should have rectified the mistake. However, it did not do so. Therefore, the malafide of the appellant in undervaluation of stock is clearly established. Further, it is on record that the appellant did not file appeal before the hon'ble ITAT, Ahmedabad against the above order of CIT(A) confirming the addition on account of undervaluation of stock. It is only during the present appeal proceedings when the appellant was asked whether it has filed appeal against order of CIT(A) or not, during hearing on 16-10-2017, the appellant submitted that on 16- 10-2017 it has filed an appeal before hon'ble ITAT, Ahmedabad against order of CIT....