Commissioner of Income Tax (Central), Jaipur vs Amit Jindal

This is an appeal filed by the Revenue u/s 260A of the income tax Act against an order dated 19.06.2009 passed by I.T.A.T., Jaipur Bench, Jodhpur (for short called Tribunal) in I.T.A. No. 1469/JP/2008 arising out of AY 2005-06. By impugned order, the Tribunal allowed the cross objection of assessee and dismissed the appeal of the Revenue and in consequence reversed the order of Commissioner of Appeals on the issue raised in this appeal.

So the question that arises for consideration in this intra court appeal is whether appeal involves any substantial question of law within the meaning of Section 260A ibid?

Having heard the learned counsel for the appellant and on perusal of record of the case, we are inclined to dismiss the appeal in limine as in our opinion the appeal does not involve any substantial question of law as is required to be made out within the meaning of Section 260A ibid.

The assessee is engaged in the business of garments. The question arose before AO in assessment proceedings as to how and in what manner, the stock of goods maintained by the assessee be valued for determining its value for calculating his yearly business turn over so that his profitability can be taxed. The assessee came out with an explanation that the entire stock maintained by him does not consists of new arrival but it consists of partly old and partly new stocks of goods. The Tribunal then examined the issue in the light of explanation offered by the assessee and held that only 20% of the stock be treated as dead and obsolete and accordingly it be valued at 50% of its cost. The Tribunal accordingly granted relief to the assessee to the extent of Rs. 8,18,220/-. This is what the Tribunal held : -

Considering the above submission of the parties, we find substance in the contention of the Ld. A/R. The assessee is maintaining huge stock as opening stock. It is a fact that due to non-acceptability of certain colours and unsold old and obsolete stock, the cost to the assessee cannot be realized. Considering huge opening stock, it cannot be presumed that the whole stock so available with the assessee is a fresh arrival. Therefore, we find the claim of the assessee that 20% of stock should be considered as dead and obsolete and it should be valued at 50% of the cost as reasonable. Therefore, in the circumstances and facts of the case, we are of the view that the lower authorities were not justified in rejecting the claim of the assessee against dead and obsolete stock. We thus, while setting aside adverse findings of the lower authorities in this regard, direct the AO to compute the value of the physical stock at cost or market price which ever is less by further allowing deduction of Rs. 8,18,220/-. In result cross objection No. 2 in CO No. 38/JP/09 is allowed.

It is this finding which is impugned by the Revenue in this appeal.

In the first place, what is involved in the case is a pure question of fact and not any question of law much less substantial question of law. Secondly, this Court cannot again in this appeal undertake the examination of factual issues nor can draw any factual inferences on the basis of explanation offered by assessee. Thirdly, once the explanation is accepted by an appellate court on facts, then in such event, a finding recorded on such explanation is binding on the High Court.

Perusal of the impugned finding would go to show that Tribunal did examine the issue in detail and then recorded a finding. Such finding when challenge does not constitute any substantial question of law within the meaning of Section 260A ibid in an appeal arising out of such order.

In our opinion, therefore, once the Tribunal accepted the factual explanation of assessee and accordingly, deleted the additions in question made by A.O. by granting them partial relief in the matter of valuation of their stock in exercise of its appellate discretionary powers, then it would not involve any substantial question of law. In other words, this Court in its appellate jurisdiction u/s 260A ibid, would not hold another de novo factual inquiry with a view to find out as to whether explanation offered by assessee and which found acceptance to the Tribunal is good or bad. It is only when the factual finding recorded is found to be entirely de hors the subject, or when it is based on no reasoning, or absurd reasoning to the extent that no prudent man of average judicial capacity could ever record, or when it is found against any provision of law, then a case for framing any substantial question of law on such finding can arise. Such is not the case here on facts.

The question as to how much stock should be treated as new and how much should be treated as old and how then it be valued and at what % for determining the yearly turn over is a matter of discretion of taxing authorities. In this case, while exercising this discretion, it was considered that only 20% stock should be treated as being old and not more. We find no good ground to interfere in exercise of this discretion because such finding was capable of being recorded by the taxing authorities. Such question does not involve any question of law much less substantial question of law. We thus, do got find any merit in the appeal. It fails and is accordingly dismissed in limine by holding that it does not involve any substantial question of law within the meaning of Section 260A of the Act.

No costs.