I. T. A. No. 703 of 2008 1
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH.
Case No. : I. T. A. No. 703 of 2008
Date of Decision : December 22, 2008.
Commissioner of Income Tax, Patiala .... Appellant
Vs.
The Improvement Trust, Patiala .... Respondent
CORAM : HON’BLE MR. JUSTICE ADARSH KUMAR GOEL
HON’BLE MR. JUSTICE L. N. MITTAL
* * *
Present : Ms. Urvashi Dhugga, Standing Counsel
for the Revenue.
* * *
ADARSH KUMAR GOEL, J. (Oral) :
1. Revenue has preferred this appeal under Section 260A of the
Income Tax Act, 1961 (for short, “the Act”) against the order of the Income
Tax Appellate Tribunal, Chandigarh Bench `B’, Chandigarh dated
08.05.2008 passed in I.T.A. No.809/Chandi/2007 in the case of Assistant
Commissioner of Income Tax Circle, Patiala vs. The Patiala
Improvement Trust, Patiala for the Assessment Year 2004-05, proposing
to raise following substantial questions of law :-
“1. Whether on the facts and in the
circumstances of the case, the ITAT was correct in
law in directing the A.O. to re-compute the income
by adopting value of opening and closing stock at
I. T. A. No. 703 of 2008 2cost or market price, whichever is lower, ignoring
the fact that the assessee could not alter the
opening stock by adopting a different method of
valuation of stock ?
2. Whether on the facts and in the
circumstances of the case, the ITAT was legally
justified in accepting the closing stock as declared
in the revised return ignoring the fact that the
provisions of section 139(5) of the Act permits
revising of return only if there was any omission or
wrong statement in the original return and that the
said section does not permit revising of return for
altogether changing the method of valuation of
stock ?”
2. The assessee is an institution registered under Section 12 AA of
the Act. It filed its original return for the assessment year 2004-05 on
01.11.2004. Subsequently revised return was filed on 31.03.2006, which
was rejected by the Assessing Officer on the ground that the assessee has
changed the method of accounting by adopting market price for valuation of
closing stock, as against the market price, which was being regularly
followed in the earlier assessment years. The CIT (A) allowed the appeal of
the assessee. It was held :-
“I have considered the facts of the
case and rival submissions. It is very clear that
Registration under section 12 AA of the Income
Tax Act has been granted and revised return filed
in response to that have been accepted & income
has been taken from the said revised return.
Moreover, it is an accounting principle that
opening & closing stock has to be valued on the
I. T. A. No. 703 of 2008 3same basis. The Assessing Officer is not permitted
to adopt the closing stock valuation from the
original return without varying the opening stock.
The profit during the year should be accepted on
the basis of opening stock valued at cost in the
revised return & hence the profit cannot artificially
increase with the valuation of closing stock at
market rate. Therefore, Assessing Officer is
directed to re-compute the income by adopting
value of closing stock at cost or market price
whichever is lower. Hence, to this extent,
appellant’s ground is allowed.”
3. The Tribunal upheld the said view.
4. We have heard leaned counsel for the Revenue.
5. It is clear that the revised return was within the prescribed time.
The assessee has only made correction by bringing closing stock in
consonance with the principle, on which opening stock was valued, so that
the income can be correctly arrived at. The view taken by the CIT (A) as
well as the Tribunal cannot be held to be perverse.
6. No substantial question of law arises.
7. The appeal is dismissed.
(ADARSH KUMAR GOEL)
JUDGE
December 22, 2008 ( L. N. MITTAL )
monika JUDGE