COMMISSIONER INCOME TAX THIRUVANANTHAPURAM Vs. K RAVINDRANATHAN NAIR

JUDGEMENT

(1.) This reference is at the instance of the Revenue. The Tribunal, Cochin Bench, has referred the following questions of law :

(2.) The relevant facts pertaining to the above questions are stated in the order of reference of the Tribunal. For the asst. yr. 1985-86 the AO made an addition of Rs. 2,14,425 towards the value of closing stock of tins used for packing of cashew nut for export. The assessee had paid excise duty amounting to Rs. 5,91,596 on manufacture of tin and obtained a refund of Rs. 7,84,500 being the duty drawback on manufacture of tins. The AO enhanced the unit cost of production by the margin of duty drawback adjusted and valued the closing stock of tins, thereby making the addition of Rs. 2,14,425. Following the decision in the assessee's own case for the asst. yr. 1983-84 the CIT(A) held that the adjustment in the closing stock of the tins was unwarranted and deleted the addition so made. The Revenue preferred a second appeal before the Tribunal. The Tribunal did not advert to the issue raised on merits rather held that in the absence of new facts brought on record and good reasons shown there was no scope to differ from the view taken by the CIT(A).

(3.) From the assessment order Annex. A, the assessee has deducted an amount of Rs. 7,84,500 being the drawback received by the assessee on tin sheets, while valuing closing of tins. The AO did not accept this and arrived at the average cost of tins including the drawback. Since the assessee has valued the closing stock at the rate of Rs. 11.12 per tin based on the calculation, the AO found that the tin should be valued at the rate of Rs. 13.19 per tin and additions have been made by the AO. The first appellate authority found that the assessee had debited an amount of Rs. 7,84,500 being the drawback received on tin sheets while valuing the closing stock of tins. It was consistent with the stand taken in the earlier year's assessment order that the AO revalued the closing stock by adding back the duty drawback. The ITO has also stated that it is consistent with the earlier year's order that he is making the revaluation. Therefore, it cannot be disputed that the adding back by the Department was consistently being made in the past years as well. In other words, what the assessee did was not accepted by the Department in respect of the earlier assessment orders.