High Court Of Allahabad
Jai Prakash Sahu vs. CIT & Ors.
Section 145
Sushil Harkauli & Vikram Nath, JJ.
IT Appeal No. 94 of 2006
24th April, 2006
Counsel Appeared :
R.K. Upadhyaya, for the Respondents
JUDGMENT
By the court :
We have heard learned counsel for the appellant and Sri R.K. Upadhyaya, appearing for the IT Department. The questions sought to be raised for the purpose of this appeal are as follows :
(1) Whether the non-mention of s. 145 in the order of the AO vitiates the action by the AO ?
(2) Whether the question of undervaluation of the closing stock can be examined by the AO under the IT Act ?
(3) Whether the valuation of closing stock and consequent return under the U.P. Trade Tax Act which has been accepted by the tax authorities is binding on the IT Department thereby debarring the IT authorities from scrutinising question of valuation of closing stock ?
We have considered the impugned orders along with the above questions and we do not find any force in the appeal.
The AO has passed the detailed order which has been accepted by the appellate authorities and mere non-mention of s. 145 does not vitiate the proceedings because the criteria set out in that section has already been met in the impugned orders.
For the purpose of the second question raised above, learned counsel for the appellant relies upon a decision of the Gujarat High Court in the case of Sadhuram Gordhandas vs. CIT (2002) 172 CTR (Guj) 201 : (2002) 253 ITR 695 (Guj). The Gujarat High Court in turn relies upon certain decisions of the Supreme Court, namely : (1) Chainrup Sampatram vs. CIT (1953) 24 ITR 481 (SC) and (2) Sakthi Trading Co. vs. CIT (2001) 169 CTR (SC) 297 : (2001) 250 ITR 871 (SC).
We are unable to read any of the aforesaid two decisions of the Supreme Court or the decision of the Gujarat High Court to mean that valuation of closing stock can be done at the arbitrary whim of the assessee at any amount which the assessee likes.
On the contrary the Supreme Court has laid down the principle in the case of Sakthi Trading Co. (supra) that proper practice is to value the closing stock on cost with only exception where market value is lower than cost.
In the present case, the AO has rejected the valuation of the assessee and has applied the lowest value applicable on the day of acquisition as the cost and has thereby valued the closing stock. The case of the assessee was that stocks should have been valued at a lower value, as the market value was lower than that. The AO did not accept this contention as no proof was furnished by the appellant of the fact that market value on the relevant date was lower. This is basically a finding of fact recorded on the appreciation of evidence. We do not find any defect in approach of the authority especially because of not tendering any evidence from the appellant’s side to show that the market value was lower.
For the third proposition learned counsel for the appellant has relied upon a decision of the Madras High Court in CIT vs. Anandha Metal Corporation (2005) 273 ITR 262 (Mad).
The Madras High Court has said something of the nature, which the appellant is proposing as third question above, in para 7 of the judgment. However, after reading the whole judgment of the Madras High Court, we are unable to find out any cogent reason for the opinion that the valuation accepted under the Tamil Nadu General Sales-tax Act is binding on the IT authorities.
The U.P. Trade Tax Act and the IT Act are two different Acts. The authorities are different under the two Acts, functioning under different Governments. Thus, we see no reason how it can be held that an order or decision regarding stock valuation under the Trade Tax Act will virtually operate as res judicata in proceedings under the IT Act. Moreover, while computing the question of turnover under the U.P. Trade Tax Act, the valuation of closing stock is not very relevant and therefore, the trade tax authorities may not be seriously concerned with the question.
Because of the above reasons, we are unable to find any question of law on which this appeal can be admitted. It is accordingly dismissed.
[Citation : 295 ITR 268]
