TaxTMI 
TaxTMI 
2023 (11) TMI 924
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....Appeals) has erred in upholding the re-opening of the Appellant's assessment u/s. 148 of the Income- tax Act, 1961. 2:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject the re-opening of assessment u/s. 148 was in excess of jurisdiction and the Commissioner of Income-tax (Appeals) ought to have held as such. 2:3 The Appellant submits that the proceedings u/s. 148 of the Act were not in accordance with law and consequently ought to be struck down. Without prejudice to the above 3:0 Re: Addition on account of slow and non-moving inventory: 3:1 The Commissioner of Income-tax (Appeals) has erred in upholding the action of the Assessing Officer of making an addition of Rs. 2,94,03,474/- to the total income of the Appellant for the year on account of a change in the method of accounting for slow and non- moving inventories. 3:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject no addition whatsoever is required and the stand taken by the Assessing Officer in this regard is incorrect and erroneous a....
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.... refers to the report of the statutory auditor section 44AB of the Act which report was already enclosed with the return filed by the assessee. Therefore, it was observed that factually, there was no new material that the AO came across so as to have 'reasons to believe that the income had escaped assessment'. Thus, the Ld. AR has submitted that when the original assessment was framed u/s 143(3) and reopening is after laps of four year from the end of the assessment year under consideration then the reopening of the assessment is hit by the first proviso to section 147 of the Act. He has further submitted that the assessing officer has not made any addition on the second point as recorded in the reasons for reopening and it is apparent that the same was dropped by the AO while passing reassessment order. Thus, he has submitted that the reopening is not valid and liable to be quashed. The Ld. AR has submitted that though the writ petition filed by the assessee challenging the validity of the reopening of the assessment was dismissed by the Hon'ble High Court however, it was specifically observed while passing the order that anything observed in the said order will not come in the wa....
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....xplanation-2 of Section 147 shall apply as they apply for the purposes of that section. The Explanation-2 of Section 147 reads as under. (Income escaping assessment) For the purpose of this Section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely (a). (b)... (ba)... (c) Where an assessment has been made, but- (i) income chargeable to tax has been under assessed; or (ii) such income has been assessed at too low rate; or (iii) such income has been made the subject of excessive relief under this Act; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed." 15. In light of the aforesaid statutory provision, in the present case, notice has been served within six years from the end of the relevant assessment year and the tax effect is in crores of rupees and therefore, the Assessing Officer was justified in initiating proceedings and in rejecting the objections raised by the petitioner. 16. Learned counsel for the petitioner has also placed reliance upon a judgment deliver....
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..../- to the closing inventory for the year, the Commissioner of Income-tax (Appeals) ought to have directed the Assessing Officer to consider the consequential impact of the increase in the valuation of inventory while determining the value of opening inventory for Assessment Year 2010-11." 8. Ld. AR of the assessee has submitted this additional ground raised by the assessee is only an alternative plea in respect of ground no.3 of the original grounds of appeal raised by the assessee. Thus, the Ld. AR has submitted that the additional ground is part and parcel of the original ground no. 3 and does not require any fresh investigation of facts. 9. On the other hand Ld. DR has not disputed the fact that the additional ground raised by the assessee is an alternative pleas in respect of ground no.3 raised in the original grounds of appeal. Accordingly in the facts and circumstances of the case and in the interest of justice the additional ground raised by the assessee is admitted for adjudication along with ground no.3 of the assessee appeal. 10. Ld. AR of the assessee has submitted that the assessee company is engaged in the manufacturing of turbochargers and due to fast change ....
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....isions. Therefore, there is a change in its estimation of provision for slow/non-moving inventory from age of the inventory to consumption pattern as a basis. He has relied upon the judgment of Hon'ble Supreme Court in case of CIT vs. Alfa Laval India Ltd. 295 ITR 45 & Mumbai Benches of the tribunal in case of DCIT vs. B. Arunkumar Tarding Ltd. 96 ITD 194 as well as decision of Delhi Benches of Tribunal in case of Pr. CIT vs. Tupperware India Pvt. Ltd. 151 ITD 719 and submitted that when the assessee is following consistent policy of valuation of closing stock on the basis of net realizable value which is in accordance with account principles then the basis of net realization value which is more realistic cannot be said to be divergent to the regularly employed method of valuation. Ld. AR has further submitted that for the year under consideration the assessee has followed the same principles of valuation but the realization of the non-moving inventory is changed from age of the stock to the consumption pattern which is more realistic. 12. Alternatively the Ld. AR has submitted that once the AO has made the addition on this issue by enhancing the value of the closing stock then ....
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....e income of the assessee. Before the AO the assessee has explained the reasons for change of the basis of the value of net realization value of the non-moving stock which is reproduced by the AO at page no.2 to 4 as under: "A. Slow/obsolete inventory Rs. 2,94,03,474/ The assessee Company is engaged in the manufacturing of turbochargers and during the financial year 2008-09, the company changed its estimate of providing for slow/non-moving inventory. Earlier Method Earlier the company was making the provision based on the age of the inventory New Method During the financial year 2008-09, the company changed the method. it has now moved to a more stringent method of making a provision based on the consumption pattern. In the new method, Company is using a window of 26 weeks' past history and 8 weeks' future to work out the slow/non-moving inventory. The slow/ non- moving inventory stock was written off based on the following parameters: Number of Weeks Percentage of reserve 0 to 50 0% 51 to 100 50% 101 to above 100% If any of the part is identified as obsolete, a 100% provision is required ....
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....ount, cost price of the items is given in profit and loss account and a provision is made for obsolescence in inventory showing that the market value is nil and that is the mode which the assessee was following even for the previous years. Under these circumstances, there is no justification to interfere with the well-considered order passed by both the authorities. [Para 10] - Held in favour of the Assessee. In another case the honorable Delhi High Court in CIT vs. Tupperware India (P.) Ltd. [2015] 53 taxmann.com 232 (Delhi) it has been held that One cannot appreciate and understand how the principle of matching can apply, without examining the question whether the market price of obsolete and unsaleable items was less than or lower than the manufacturing costs. If the market price of obsolete or unsaleable items is less than or lower than the cost price, the said position can be the basis for computing closing stock. It is noticeable that the respondent-assessee has been following this practise for several years and similar issue had arisen in the assessment year 2005-06, but the Revenue has not filed any appeal in respect of the said year. In fact, in the assessment yea....
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....hree times in the total income reported by the assessee in the subsequent assessment year and the AO has passed scrutiny assessment u/s 143(3) on 28.02.2014 whereby the total income of the assessee was assessed at Rs. 70,77,31,246/-. There is no adjustment made on account of this enhanced value of closing stock for the year under consideration to the opening stock of the subsequent year i.e. A.Y. 2010-11. Thus, this addition made by the AO for the year under consideration has resulted double taxation of the said income. 15. The Hon'ble Supreme Court in case of CIT vs. Excel Industries Ltd. (supra) has held in para 32 as under: "32. Thirdly, the real question concerning us is the year in which the assessee is required to pay tax. There is no dispute that in the subsequent accounting year, the assessee did make imports and did derive benefits under the advance licence and the duty entitlement pass book and paid tax thereon. Therefore, it is not as if the Revenue has been deprived of any tax. We are told that the rate of tax remained the same in the present assessment year as well as in the subsequent assessment year. Therefore, the dispute raised by the Revenue is entirel....