- (1.) THE subject matter of challenge in this appeal is a judgment and order dated 21st June, 2013 passed by the learned Income Tax Appellate Tribunal dismissing the appeal preferred by the revenue. The revenue has come up in appeal before this Court. The facts and circumstances of the case would appear from the assessment order dated 24th November, 2006, which are as follows: The valuation report of Bose & Chakraborty, Chartered Accountants dated 29.3.2004 for valuation of shares of Offshore India Ltd. following the audited Annual Accounts for the year ended 31st March, 2003 (copy enclosed), gives the break -up values of each of shares of Offshore India Ltd. at ( -) Rs. 1.89, 45,00,000 shares of Offshore India Ltd. were converted to stock as on 1.4.03 and included in the debit side of P & L A/c. at Rs. 2,47,05,000/ - which was taken to be the value of such shares since 31.3.2002, though valuation Report of the Auditor values the shares at ( -) Rs. 1.89 per share. These shares were not sold during the period 1.4.03 to 31.3.04. On 31.3.2004 it was shown as stock of 45,00,000 shares valued at Re. 1. Assessee has relied on the valuation report of the Chartered Accountant as per accounts as at 31.3.03 for valuing the closing stock of 31.3.04 at Re. 1 but the same amount of shares has been converted on 1.4.03 at Rs. 2,47,05,000/ -. Within the same financial year two different valuation has been adopted by the assessee for the same stock of shares which is not permissible. Without prejudice to the above discussion it is also noted that shares of another company namely, Yield Investment (P) Ltd. were also transferred from investment to stock along with shares of Offshore India Ltd. Part of the stock converted in Yield Investment (P) Ltd., were sold by the assessee during the year itself and the balance appears in the list of stock as held by the assessee as on 31/3/04. The method of the valuation of the shares of Yield Investment (P) Ltd. that has remained unsold on the last date of the previous year i.e. 31.3.04 is made on the same basis as per calculation of shares held as investment as on 31/3/03. This is direct contradiction to the method of valuation of shares held as investment and held as stock in trade in the case of shares of Offshore India Ltd. the reasons for which cannot be explained by the A/R.
(2.) THE assessing officer, in the circumstances, reduced the value of transfer from investment to stock -in -trade by a sum of Rs. 2,47,05,000/ -. Aggrieved by the order of the assessing officer, an appeal was preferred by the assessee before the CIT(A) who by his judgment and order dated 2nd June, 2008, allowed the appeal for the following reasons: The A.O. has justified the disallowance on the ground that the appellant followed different basis and method for accounting for recording transfer of shares from "investment" to "stock" and valuation of shares of Yield Investments (P) Ltd. and Off -Shore India Ltd. I however, find that in both the cases the appellant have followed identical methods of accounting and valuation. The A.O. was not justified in accepting the accounting and valuation in the case of Yield Investments (P) Ltd. and in not accepting the same accounting and valuation methodology in the case of OffShore India Ltd. In the factual background therefore, I have no hesitation in holding that the A.O. disputed the assessee's method of accounting for recording transfer of shares of Off -Shore India Ltd. merely because it resulted in substantial reduction of income. The appellant followed identical accounting method and principles for recording transfer of shares of Yield Investment P Ltd. & Off -Shore India Ltd., from "Investments" to "stock in trade" and the appellant followed same principles of Inventory valuation for valuing shares of both the companies as on 31st March 2004. In the circumstances, when the A.O. accepted the said method of accounting, accounting principles and basis of inventory valuation in relation to shares of Yield Investment Pvt. Ltd. there appears no legal justification for the A.O. to dispute and reject the same accounting method and principles only in relation to shares of OffShore India Ltd. The A.O. could not adopt diametrically opposite standards in relation to identical transactions which were carried out simultaneously and all essential attributes of both the transactions were same and identical. The A.O. was not justified in accepting tax effect involving transfer of shares of Yield Investment (P) Ltd. from "Investments" to "stock in trade" and out -rightly reject the taxation effect of transfer of shares in the case of Off -Shore India Ltd. I therefore, direct the A.O. to delete the addition of Rs. 2,47,05,000/ -. Ground No. 1 is therefore allowed.
(3.) THE revenue unsuccessfully challenged the order dated 2nd June, 2008 before the learned Tribunal which was dismissed by the judgment and order dated 21st June, 2013. The learned Tribunal, agreeing with the views of the CIT(A), dismissed the appeal and in doing so, held as follows: Out of the shares of two companies which were converted on the same system, the department has accepted the system as correct in the case of Yield Investments Pvt. Ltd. and has disputed only in the case of Off -Shore India Ltd. As on 01.04.2003, the fair market value of Off -Shore India Ltd. was determined on the basis of break -up value of last available balance -sheet as on that date, which was also accepted by the Revenue as the market value as on 31.03.2003, there was no reason to dispute that the same was not the market value as on 01.04.2003 on the basis of data available on that date. Thus, we find that no specific error in the order of the ld. CIT(A) could be pointed out by the Revenue by bringing any relevant material on record. We, therefore, do not find any good reason to interfere with the order of the CIT(A), which is confirmed and the ground of Revenue is dismissed.;