ITAT held that there was no error in AO's assessment and quashed reassessment

1. The assessee was engaged in the business of execution of contracts mainly in Civil, Mechanical and Trunkey Jobs in India and abroad, and structural and equipment erection works and manufacturing of Railway wagons etc. The return of income for the year under consideration was filed declaring total income of Rs.66,23,21,180, and assessment was completed u/s 143(3) (of Income Tax Act, 1961). The total income of the assessee was determined by the Assessing Officer at Rs74,11,91,710/- after making certain additions. The records of the said assessment came to be examined by the ld. CIT and on such examination, he found that the assessee-company had valued the closing stock of 'Tools & Tackles' on weighted average cost basis and written off 20% of such value every year on account of wear and tear. CIT held that since the assessee was following mercantile system of accounting, the closing stock of Tools and Tackles valued by the assessee after writing off 20% of the cost was not in accordance with the accepted accounting principles and this issue was not considered by AO during assessment. CIT issued notice u/s 263 (of Income Tax Act, 1961), and directed AO to do fresh assessment.

2. On appeal, the ITAT held as under:

"3. As is clearly evident from the written submissions filed by the assessee during the course of assessment proceedings, the basis of valuation of Tools and Tackles was explained by the assessee in reply to the query raised by the Assessing Officer during the course of assessment proceedings and it was also specifically brought to the notice of the Assessing Officer by the assessee that the same basis was consistently followed even in the earlier years, which had already been accepted. It is thus clear that a query on the issue of valuation of closing stock of Tools and Tackles was specifically raised by the assessee during the course of assessment proceedings and after having satisfied with the explanation offered by the assessee, the valuation of closing stock of Tools and Tackles as shown by the assessee was accepted by the Assessing Officer. At the time of hearing before us, the ld. CIT, D.R. has not been able to controvert or rebut this position which is clearly evident from the record. Having regard to all these facts and circumstances of the case, we are of the view that there was no error in the order of the Assessing Officer passed under section 143(3) (of Income Tax Act, 1961) as alleged by the ld. CIT calling for revision under section 263 (of Income Tax Act, 1961). In that view of the matter, we set aside the impugned order of the ld. CIT passed under section 263 (of Income Tax Act, 1961) and restore that of the Assessing Officer passed under section 143(3) (of Income Tax Act, 1961).”

Case Reference - Bridge & Roof Company (India) Limited Vs Deputy Commissioner of Income Tax.

IN THE INCOME TAX APPELLATE TRIBUNAL,KOLKATA 'B' BENCH, KOLKATA

Before Shri P.M. Jagtap, Accountant Member

and Shri S.S. Viswanethra Ravi, Judicial Member

I.T .A. No. 1772/KOL/ 2014

(Assessment Year: 2010-2011)