Rm.K.V.Fabrics v. The Deputy Commissioner of Income-tax, Central Circle-1(1) Chennai
[Citation -2020-LL-1006-28]

Citation 2020-LL-1006-28
Appellant Name Rm.K.V.Fabrics
Respondent Name The Deputy Commissioner of Income-tax, Central Circle-1(1) Chennai
Court HIGH COURT OF MADRAS
Relevant Act Income-tax
Date of Order 06/10/2020
Assessment Year 2012-13
Judgment View Judgment
Keyword Tags substantial question of law • valuation of closing stock • assessment order • return of income • total income
Bot Summary: Whether the Tribunal was right in law in not appreciating that addition towards valuation of closing stock would arise only when the stock continues to be held by the assessee in the next year and not in a case where the business of the assessee along with stock was taken over by a company on 08.01.2012 3. The business of assessee's firm was taken over by a private limited company on 08.01.2012 together with all its assets and liabilities, as they stood in the books of the firm at the close of business on 07.01.2012. The assessee aggrieved by such order, preferred an appeal before the Commissioner of Income Tax, Appeals 18, for brevity 'CITA' Chennai, who by order dated 22.06.2016 confirmed the addition by following the earlier order of the Tribunal in assessee's group cases dated 26.08.2015. Upon going through the material papers placed before us, we find that the assessing officer had noted that on 08.01.2012, the business of the assessee firm was taken over by the company and therefore, assessment period was restricted from 01.04.2011 to 07.01.2012. 568 of 2018 us the endevaour of the assessee is to convince us that the valuation of the closing stock would arise only when the stock continues to be held by the assessee in the next year and not in a case where the business of the assessee along with the stock was taken over by the company on 08.01.2012. On a reading of the impugned order passed by the Tribunal, we find that though this issue was raised by the assessee before the Tribunal in a slightly different form, than what has been raised before us, the Tribunal did not deal with the said issue, but followed the earlier decision in assessee's case dated 08.02.2017 and dismissed the assessee's appeal. In our considered view the issue with regard to whether valuation of closing stock would arise when the business of the assessee along with the stock was taken over by the company needs to be decided.


T.C.A.No.568 of 2018 IN HIGH COURT OF JUDICATURE AT MADRAS DATED: 06.10.2020 CORAM: HONOURABLE MR.JUSTICE T.S.SIVAGNANAM and HONOURABLE Mrs.JUSTICE V.BHAVANI SUBBAROYAN Tax Case Appeal No.568 of 2018 M/s Rm.K.V.Fabrics, 176F, Trivandrum Road, Tirunelveli - 627 003 .. Appellant Vs. Deputy Commissioner of Income Tax, Central Circle -1(1) Chennai .. Respondent Tax Case Appeal filed under Section 260A of Income Tax Act, 1961, against order made in ITA No.2471/Mds/2016 dated 26.07.2017 passed by Income Tax Appellate Tribunal, Madras 'B' Bench, Chennai for Assessment Year 2012-2013. For Appellant : Mr.R.Vijayaraghavan for Mr.Venkata Narayanan for M/s Subbaraya Aiyar Padmanaban 1/7 http://www.judis.nic.in T.C.A.No.568 of 2018 For Respondent : Mr.M.Swaminathan Senior Standing Counsel Mr.V.Pushpa Junior Standing Counsel JUDGMENT [Judgment of Court was delivered by T.S.SIVAGNANAM, J.] This appeal, at instance of assessee filed under Section 260A of Income Tax Act, 1961 (the 'Act' for brevity), is directed against order passed by Income Tax Appellate Tribunal, 'B' Bench, Chennai in ITA No.2471/Mds/2016 dated 26.07.2017 for Assessment Year 2012-2013. 2. following Substantial Question of Law was raised for consideration: 1. Whether Tribunal was right in law in not appreciating that addition towards valuation of closing stock would arise only when stock continues to be held by assessee in next year and not in case where business of assessee along with stock was taken over by company on 08.01.2012? 3. assessee is in business of retail sale of garments. For assessment year, 2012-2013, assessee filed return of income on 29.09.2012 declaring income of Rs.1,46,34,570/-. This return was 2/7 http://www.judis.nic.in T.C.A.No.568 of 2018 revised on 03.10.2012 declaring same income. case was selected for scrutiny and notice under Section 143(2) of Act was issued on 19.08.2013. Subsequently, notice under Section 142(1) of Act was issued along with questionnaire. assessee produced details called for pursuant to such notice. business of assessee's firm was taken over by private limited company on 08.01.2012 together with all its assets and liabilities, as they stood in books of firm at close of business on 07.01.2012. fact regarding taking over of company has not been disputed by assessing officer rather recorded in assessment order dated 27.03.2015. 4. scrutiny assessment was completed under Section 143(3) of Act by order dated 27.03.2015 for period from 01.04.2011 to 07.01.2012 determining total income at Rs.7,54,46,598/-. assessing officer while completing assessment made addition of Rs.2,51,214/- towards valuation of closing stock among others on ground that valuation of closing stock does not give true and correct status of business and profit and matter relating to allowability of this method of stock valuation was not accepted by Department in earlier years and additions were made to extent of closing stock. 3/7 http://www.judis.nic.in T.C.A.No.568 of 2018 Accordingly, assessing officer held that closing stamp has been under valued by Rs. 2,51,214/- and this was added to total income. 5. assessee aggrieved by such order, preferred appeal before Commissioner of Income Tax, [Appeals] 18, [for brevity 'CITA'] Chennai, who by order dated 22.06.2016 confirmed addition by following earlier order of Tribunal in assessee's group cases dated 26.08.2015. Aggrieved by same, assessee preferred appeal before Tribunal, which was dismissed by impugned order. 6. We have elaborately heard Mr.R.Vijayaraghavan, learned counsel for Mr.Venkata Narayanan, learned counsel for M/s Subbaraya Aiyar Padmanaban, learned counsel for appellant and Mr.M.Swaminathan, learned senior standing counsel assisted by Ms.V.Pushpa, learned junior standing counsel for respondent / revenue. 7. Upon going through material papers placed before us, we find that assessing officer had noted that on 08.01.2012, business of assessee firm was taken over by company and therefore, assessment period was restricted from 01.04.2011 to 07.01.2012. Before 4/7 http://www.judis.nic.in T.C.A.No.568 of 2018 us endevaour of assessee is to convince us that valuation of closing stock would arise only when stock continues to be held by assessee in next year and not in case where business of assessee along with stock was taken over by company on 08.01.2012. 8. It is further submission that what was relevant to be noted is that it is sale of stock and not valuing of stock, which will be continuing with assessee in next year. On reading of impugned order passed by Tribunal, we find that though this issue was raised by assessee before Tribunal in slightly different form, than what has been raised before us, Tribunal did not deal with said issue, but followed earlier decision in assessee's case dated 08.02.2017 and dismissed assessee's appeal. 9. In our considered view issue with regard to whether valuation of closing stock would arise when business of assessee along with stock was taken over by company needs to be decided. This is mixed question of fact and law, which has to be considered because revenue did not dispute fact that business of assessee along 5/7 http://www.judis.nic.in T.C.A.No.568 of 2018 with stock was taken over by company on 08.01.2012, therefore, we deem it appropriate to remand matter to assessing officer for fresh consideration on this aspect after due opportunity to assessee. For above reasons, Tax case Appeal is allowed. impugned order passed by Tribunal is set aside and matter is remanded to Assessing Officer to verify aspect, which has been pointed out in preceding paragraphs. Consequently, substantial question of law is left open. No costs. [T.S.S.J.,] [V.B.S.J.,] 06.10.2020 Internet: Yes / No Speaking Judgment / Non speaking Judgment To Income Tax Appellate Tribunal, Madras 'B' Bench, Chennai ssd 6/7 http://www.judis.nic.in T.C.A.No.568 of 2018 T.S.SIVAGNANAM,J AND V.BHAVANI SUBBAROYAN,J ssd Tax Case Appeal No.568 of 2018 06.10.2020 7/7 http://www.judis.nic.in Rm.K.V.Fabrics v. Deputy Commissioner of Income-tax, Central Circle-1(1) Chennai
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