COMMERCIAL AHMEDABAD MILLS COMPANY LIMITED Vs. INCOME TAX OFFICER
HIGH COURT OF GUJARAT
Commercial Ahmedabad Mills Company Limited
INCOME TAX OFFICER
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(1.) PETITIONER , a public limited company carrying on business of manufacture of yarn and textiles, has filed this petition, challenging the validity of the notice, annex. I, dated March 28, 1981, issued by the ITO, Companies Circle B, Ahmedabad, having jurisdiction to assess the petitioner company to income -tax (the respondent herein) under Section 148 read with Section 147(a) of the I.T. Act, 1961 (hereinafter referred to as ' the Act'), initiating proceedings to reopen its income -tax assessment for the assessment year 1972 -73, corresponding year of account being calendar year 1971.
(2.) PETITIONER is valuing its stock of yarn, yarn in process and cloth at a uniform method over a number of years. The controversy which arises in this petition and as a result of which notice as aforesaid came to be issued by the respondent, is on account of the method of valuation followed by the petitioner in valuing the yarn for weaving process (shortly ' yarn in process'). Petitioner was valuing yarn in process at the rate of 12 paise per kilogram describing the method of valuation as cost method. This method of valuing its stock at a fixed rate is followed since last many years. This is evident from the assessment order for the assessment year 1942 -43, wherein it is stated as follows :
' The assessee is valuing the stock since years past at a fixed rateand hence it is no use disturbing the same as this method of valuingwas accepted by us.'
The income -tax Department (hereinafter referred to as the 'Department') as is pointed out in the assessment order for the assessment year 1942 -43 had accepted the method of valuation adopted by the petitioner. Same method which was accepted by the Department was followed by the petitioner in valuing its stock in subsequent years including the year in question, namely, assessment year 1972 -73. The assessment for the assessment year 1972 -73 was completed on the basis of valuation of stock disclosed by the assessee. TheITO, however, issued notice, annex. I, under Section 148 read with Section 147 of the Act to reopen the assessment for the assessment year 1972 -73 on the ground that the petitioner had failed to disclose fully and truly all material facts necessary for its assessment for that year and as a result of such failure, the income chargeable to tax had escaped assessment for that year. Petitioner has filed this petition challenging the validity of the said notice mainly on the ground that there was no failure on its part to fully and truly disclose all material facts necessary for its assessment for that year and consequently there is no justification to reopen the assessment.
(3.) THE respondent has placed on record the reasons recorded by him for reopening the assessment for the year 1972 -73 and they are as follows ;
'During the course of assessment proceedings for A.Y. 1976 -77, the assessee has furnished the working of actual cost of weaving at the end of the year. Such cost of weaving is worked out at 7.90 per kg. of yarn woven in A.Y. 1976 -77. It is seen that for the purpose of valuation of stock, the assessee has been adopting the fixed rate of 12 np. per kg. of yarn in process. Due to adoption of incorrect fixed expenses at 12 np. per kg. there is undervaluation of stock of yarn in process by more than Rs. 10,000 for A.Y. 1972 -73. Thus the assessee has furnished deliberately inaccurate particulars and thereby income of Rs. 10,000 or more has escaped assessment. I send proposal to the C.I.T. for reopening the assessment Under Section 148 of the I.T. Act. ' ;
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