(Per : HONOURABLE MR.JUSTICE N.V. ANJARIA) The present appeal under section 216A of the Income Tax Act, 1961 has been preferred by the Revenue against the order dated 09-02-2011 of the Income Tax Appellate Tribunal, Ahmedabad Bench in ITA No.2860/Ahd/2010 proposing the below mentioned questions formulated in the Memorandum of Appeal as substantial questions of law:
"(A) Whether the Appellate Tribunal is right in law and on facts in deleting the addition of Rs.28,23,250/- made on account of under valuation of closing stock?"
(B) Whether the Appellate Tribunal is right in law and on facts in deleting the addition of Rs.18,25,149/- on account of unverified business expenses?"
(C) Whether the Appellate Tribunal is right in law and on facts in deleting the addition of Rs.1,15,165/- on account of disallowance u/s.40(a)?
(D) Whether the Appellate Tribunal is right in law and on facts in deleting the addition of Rs.3,122/- on account of disallowance of Telephone expenses and Rs.7,160/- on account of Vehicle expense?"
2. At the outset it may stated that Question (C) and question (D) related to the grounds nos. 3, 4 and 5 initially raised by the assessee before the Tribunal, but ultimately the assessee did not press the issues covered under said grounds, as recorded by the Tribunal in paragraph No.9 of its order. Those issues were with regard to the addition of commission expenses, labour expenses under section 40a(i), telephone expenses and vehicle expenses. In that view, the question in respect of them could not have been formulated and pressed in service for consideration in this appeal. Learned advocate for the appellant, therefore, rightly stated that she does not press question (C) and question (D).
2,1 Accordingly, Question (C) and question (D) are not pressed and we have considered the appeal in the context of question (A) and question (B).
3. We have heard learned advocate Ms. Mauna Bhatt for the appellant, who could took us through the impugned order and the record of the appeal.
4. The relevant facts for consideration of the present appeal are that the respondent assessee company in its Return of Income for the assessment year 2007-08 declared total income of Rs.8,76,140/-, but in the course of the assessment proceedings the Assessing Officer made certain additions. First addition of Rs.28,23,250/- was made in the closing stock. The assessee had shown the closing stock at Rs.27,60,000/-. According to the Assessing Officer, the stock was undervalued and as the assessee failed to furnish the details or any further information. The addition of Rs.28,23,250/- was made in the stock on the ground that on the last two days of the income year the assessee had made certain purchases. Another head of addition was in respect of unverified business expenses under various sub-heads such as labour expenses, truck and lorry expenses, commission expenses and salary expenses. For that the Assessing Officer was of the view that the gross sale was decreased compared to the previous year whereas the business expenses under different heads mentioned above showed increase and therefore the hike was disproportionate. On that basis 30% of the total expenses claimed by the assessee were disallowed, by the Assessing Officer.
5. The other disallowance was Rs.1,15,165/- under Section 40(a) of the Act Rs.3,122/- towards telephone expenses and Rs.7,160/- in respect of vehicle expenses which issues/grounds were dropped by the assessee before the Tribunal and consequentially as mentioned above, those two questions (C) and (D) are not being pressed by the appellant.
6. The Commissioner of Appeals did not accept the grounds raised by the assessee for justifying valuation of closing stock on average rate basis and dismissed the appeal qua that ground. The Appellate Commissioner also dismissed the appeal disallowing 30% expenses. The Income Tax Appellate Tribunal, however, came to the conclusion that as far as addition in respect of closing stock was concerned, the assessee had followed average method of valuation which was justified. It was observed that the Assessing Officer had adopted average rate on the basis of only five invoices and the assessee was found to have followed the method of valuation of stock on average rate for the whole year since several years consistently.
6.1 The Tribunal observed as under:-
"The assessee deals in variety of items having different sizes, gauge of items like sheets, plates, angles, beam, channels, TMT and others. The assessee purchased the channels, angles, and TMT from Steel Authority of India in Feb'07 totalling to 39.098 metric ton at an average rate of Rs.20.43 per kg. The assessee stated that he also purchased angles and channels from other parties @ Rs.24.25 to Rs.27.24. The assessee further stated that the AO has followed the principle of FIFO in respect of only one item i.e. sheets and there are several other items in respect of which the AO has not taken the value. In view of the above facts and circumstances of the case, we are of the view that the valuation of the closing stock should have been done by taking the average of the entire year and the assessee has rightly computed the differential in the stock at Rs.3,46,350/- i.e. (Rs.36,69,400 - Rs.28,23,250). Accordingly, we direct the Assessing Officer to make addition of Rs.3,46,350/- to the assessee's total income on this account. Accordingly, this issue of assessee's appeal is partly allowed."
7. In respect of addition of business expenses considered by the Assessing Officer viewing them as disproportionate to the figures of the gross turnover, the Tribunal after considering the facts and figures, observed that for the year under consideration, the expenses were given under the heads octroi, freight and truck/lorry expenses by putting them together under a common head as common business expenditure whereas in the earlier years they were not clubbed. The Tribunal thereupon directed the Assessing Officer to recompute the income by taking disallowance of 10% of Rs.23,00,000/- and thus partly allowed the appeal.
8. It is evident from the facts noted above that the Tribunal has come to a different conclusion in respect of additions made by the Assessing Officer in respect of closing stock and business expenses by going into facts and figures from the accounts of the assessee. The Tribunal was thereupon of the view that the assessee had rightly applied the average method of valuation of stock, whereas the Assessing Officer had worked out the average stock on the basis of five invoices only which was not justified. As regards addition in respect of unverified business expenses are concerned the Tribunal considered that it was due to manner of showing of the expenditure differently and clubbing of them differently in two years, it looked disproportionate to the gross sales. The Tribunal applied estimated rate at 10% and directed the Assessing Officer to recompute the income by taking disallowance at 10% of total expenditure of Rs.23,66,974/-.
9. These findings by the Tribunal are arrived at on the basis of facts and figures before it and are in the realm of factual appreciation. They are for all purposes the findings of fact. On the conspectus and factual scenario as above, they are reasonable and are properly arrived at. No perversity is noticed. In Vijaykumar Talwar v. CIT [(2011) 1 SCC 673] the apex court reiterated the settled principle that the Tribunal is a final fact finding authority and when no perversity was demonstrated in the findings of fact arrived at by the Tribunal, the High Court would not interfere while considering an appeal under section 260A of the Act.
10. In above view, no question of law, much less any substantial question of law arises for consideration in the present Tax Appeal. The Appeal is accordingly dismissed.
SAHAI, J.) (N.V.
ANJARIA, J.) (SN DEVU PPS) Top