DCIT, V. M/s Cheema Boilers Ltd., Mohali

ITA 1016/CHANDI/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68578 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 1 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 22-05-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 08-10-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J S NAGAR
• Keywords: Cost of acquisition
• Section: 145

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 1016/CHD/2012 ASSESSMENT YEAR: 2009-10 THE DCIT, CIRCLE 6(1), VS M/S CHEEMA BOILERS LTD. , MOHALI MOHALI PAN NO. AABCC4031B (APPELLANT) (RESPONDENT) DATE OF HEARING : 20.11.2013 DATE OF PRONOUNCEMENT : 28.11.2013 APPELLANT BY : SHRI J.S. NAGAR RESPONDENT BY : SHRI AJAY JAIN ORDER PER T.R.SOOD, A.M. THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 18.7.2012 OF LD. CIT(A), CHANDIGARH. 2. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLOWIN G GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN ALLOWING APPEAL OF THE ASSESSEE WITHOUT APPRECIATING THE FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) HAS ERRED IN ALLOWING THE EXCLUSIVE METHOD O F ACCOUNTING ADOPTED BY THE ASSESSEE CONTRARY TO THE PROVISION OF SECTION 1 45A WHICH PROHIBITS THE SAME. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE AS P ER THE SPECIFIC PROVISION OF SECTION 145A, RELYING UPON THE DECISION OF THE H ONBLE APEX COURT WHICH 2 PERTAIN TO A.Y. 1989-90 WHEREAS THE PROVISIONS OF S ECTION- 145A WERE INSERTED WITH EFFECT FROM 01/04/1999. 4. IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 3. AFTER HEARING BOTH THE PARTIES, WE FIND THAT DURING ASSESSMENT PROCEEDINGS IT WAS NOTICED THAT IN THE TAX AUDIT REPORT, THE AU DITOR HAS MENTIONED THAT OPENING AND CLOSING STOCK OF RAW MATERIAL AND WORKE D IN PROGRESS HAS BEEN VERIFIED WITHOUT INCLUDING THE EXCISE DUTY ELEMENT AS PER SECTION 145A. ACCORDING TO ASSESSING OFFICER AFTER INCLUSION OF S ECTION 145A W.E.F. 1.4.1999 INCLUSION OF EXCISE DUTY WAS OF MANDATORY NATURE AN D ACCORDINGLY HE INCREASED VALUE OF CLOSING STOCK. HE WORKED OUT THE NET ADDI TION AS UNDER:- VALUE OF RAW MATERIAL AS ON 31.03.2009 22,33,3 3,607/- WORK IN PROGRESS EXEMPTED - 2,57,07,800/- TAXABLE - 19,11,06,628/- 19,11,06,628/- TOTAL EXCISABLE RAW MATERIAL AND WORK IN PROGRESS 41,34,40,235/- INCREASE IN VALUE OF CLOSING STOCK OF RAW MATERIAL AND WIP ON INCLUSION OF EXCISE DUTY @ 10.30% ON 41,34,40,23 5/- 4,25,84,344/- CENVAT CREDIT UTILIZED DURING THE YEAR 16,50,51 ,786/- TOTAL- X- 20,76,36,130/- LESS: INCREASE IN PURCHASE COST OF RAW MATERIAL ON INCLUS ION OF EXCISE DUTY ON WHICH CENVAT CREDIT IS AVAILED Y-- 15,39,46,930/- ADD: INCREASE IN PURCHASE COST OF RAW MATERIAL ON INCLUS ION OF EXCISE DUTY PAID THOUGH PLA-Z- 1,74,30,711/ - TOTAL (Y+Z) 17,13,77,641/- BALANCE X-(Y+Z) 3,62,58,489/- LESS: ADDITION ON VALUE OF CLOSING STOCK AFTER INCLUSION OF EXCISE DUTY IN LAST YEAR 3,50,66,391/- NET ADDITON 11,92,098/- ACCORDINGLY, ASSESSING OFFICER MADE AN ADDITION OF RS. 11,92,098/- TO THE INCOME OF THE ASSESSEE. ON APPEAL, IT WAS SUBMITTED THAT ISSUE WAS COVERED IN 3 FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL . THE LD. CIT(A) FOLLOWING THE ORDER OF THE TRIBUNAL DECIDED THE ISSUE VIDE PA RA 5, WHICH READ AS UNDER:- 5. I HAVE GONE THROUGH THE SUBMISSION OF THE LD. C OUNSEL FOR THE APPELLANT AND THE ORDER OF HONBLE ITAT CHA NDIGARH IN A.Y. 2005-06 IN ITA NO. 1013/CHD/2008 DATED 29.04.2 009. THE HONBLE PUNJAB & HARYANA HIGH COURT HAS ALSO DELETE D SUCH ADDITION IN ITA NO. 503 OF 2007 IN THE CASE OF M/S NAHAR SPINNING MILLS LTD. BY RESPECTFULLY FOLLOWING THE D ECISION OF HONBLE PUNJAB & HARYANA HIGH COURT (SUPRA) AND HON BLE ITAT CHANDIGARH, THE ADDITION MADE U/S 145A OF THE ACT IS DELETED. ALL THE GROUNDS OF APPEAL TAKEN BY THE APP ELLANT ARE ALLOWED. 4. BEFORE US, THE LD. DR SUBMITTED THAT IN THE EARL IER YEARS, THE TRIBUNAL HAS SIMPLY FOLLOWED THE DECISION OF HON'BLE PUNJAB & H ARYANA HIGH COURT IN CASE OF CIT V NAHAR SPINNING MILLS LTD AND OTHERS IN ITA NOS. 503, 370, 387 & 399 & 399 OF 2007. HE SUBMITTED THAT ORDER WAS PASSED F OR ASSESSMENT YEAR 1999- 2000 AND SECTION 145A WAS INTRODUCED W.E.F. 1.4.199 9. IN THAT DECISION, AMENDED PROVISIONS WERE NOT CONSIDERED. THE AMENDED PROVISION HAS BEEN DULY CONSIDERED IN THE CASE OF CIT V NAHAR ALUMINUM LTD BY HON'BLE DELHI HIGH COURT IN 297 ITR 77(DELHI). THIS DECISION WAS AGA IN FOLLOWED BY HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT V MAHALAXMI GL ASS WORKS P. LTD 318 ITR 116 (BOM). 5. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSE SSEE SUBMITTED THAT AN EARLIER DECISION IF WAS NOT TO BE FOLLOWED THEN ADJ USTMENT ON ACCOUNT OF EXCISE DUTY SHOULD BE ALLOWED TO BE MADE EVEN IN RESPECT O F OPENING STOCK AND ONLY THE NET AMOUNT IS TO BE TAXED. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY. SECTION 145A OF THE ACT READS AS UNDER:- 4 145A. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN SECTION 145 , (A) THE VALUATION OF PURCHASE AND SALE OF GOODS AN D INVENTORY FOR THE PURPOSES OF DETERMINING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION SHALL BE (I) IN ACCORDANCE WITH THE METHOD OF ACCOUNTING REGULAR LY EMPLOYED BY THE ASSESSEE; AND (II) FURTHER ADJUSTED TO INCLUDE THE AMOUNT OF ANY TAX, DUTY, CESS OR FEE (BY WHATEVER NAME CALLED) ACTUALLY PAID OR INCURRED BY THE ASSESSEE TO BRING THE GOODS TO THE PLACE OF ITS LOCATION AND CONDITION AS ON THE DATE OF VALUAT ION. EXPLANATION.FOR THE PURPOSES OF THIS SECTION, AN Y TAX, DUTY, CESS OR FEE (BY WHATEVER NAME CALLED) UNDER ANY LAW FOR THE TIME BEING IN FORCE, SHALL INCLUDE ALL SUCH PAYMENT NOTW ITHSTANDING ANY RIGHT ARISING AS A CONSEQUENCE TO SUCH PAYMENT. (B) INTEREST RECEIVED BY AN ASSESSEE ON COMPENSATI ON OR ON ENHANCED COMPENSATION, AS THE CASE MAY BE, SHALL BE DEEMED T O BE THE INCOME OF THE YEAR IN WHICH IT IS RECEIVED. 7. THE PLAIN READING OF THE ABOVE PROVISION WOULD S HOW THAT IT IS OF MANDATORY NATURE AND MANDATES THAT ANY TAX, DUTY ET C. HAD TO BE INCLUDED IN THE VALUE OF THE CLOSING STOCK. HOWEVER, AT THE SAME T IME THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V NAHAR ALUMINUM LTD (SUPR A) HELD AS UNDER;- HELD, DISMISSING THE APPEAL, THAT PARAGRAPH 23.13 OF THE GUIDANCE NOTE ON TAX AUDIT UNDER SECTION 44AB ISSUE D BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA MADE IT CLEAR THAT WHENEVER ANY ADJUSTMENT IS MADE IN THE VALUATION OF INVENTORY, THIS WILL AFFECT BOTH THE OPENING AS WEL L AS THE CLOSING STOCK. IF ANY ADJUSTMENT WAS REQUIRED TO BE MADE BY A STATUTE, EFFECT SHOULD BE GIVEN TO IT IRRESPECTIVE OF ANY CONSEQUENCES ON THE COMPUTATION OF INCOME FOR TAX P URPOSES. SECTION 145A BEGINS WITH A NON OBSTANTE CLAUSE AND THEREFORE TO GIVE EFFECT TO SECTION 145A, IF THERE IS A CHANG E IN THE OPENING STOCK AS ON MARCH 31, 1999, THERE MUST NECE SSARILY BE A CORRESPONDING ADJUSTMENT MADE IN THE OPENING S TOCK AS ON APRIL 1, 1998. THUS, THE QUESTION OF DOUBLE DEDU CTION DID 5 NOT ARISE SINCE NO ADJUSTMENT WAS MADE BY THE ASSES SEE IN THE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDING MARCH 3 1, 1998. 8. THE ABOVE CLEARLY SHOWS THAT ADJUSTMENT TO BE MA DE U/S 145A IS TO BE MADE BOTH IN RESPECT OF OPENING STOCK AS WELL AS CL OSING STOCK. THE SAME VIEW HAS BEEN TAKEN EVEN BY THE HON'BLE BOMBAY HIGH COUR T IN THE CASE OF CIT VS MAHALAXMI GLASS WORKS P. LTD (SUPRA). FOLLOWING TH ESE DECISIONS, WE SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE ASSESSING O FFICER TO ADJUST THE VALUE OF OPENING AS WELL AS CLOSING STOCK AND ONLY THE NET D IFFERENCE SHOULD BE ADDED TO THE INCOME OF THE ASSESSEE. 9. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.11.2013. SD/- SD/- (SUSHMA CHOWLA) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMER DATED : 28 TH NOVEMBER, 2013 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH