D.P. WIRES P.LTD, MUMBAI V. ITO 6(2)(2), MUMBAI

ITA 1096/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3397 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 07-05-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 15-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI P.M. JAGTAP, AM AND DR. S.T.M. PAVALAN , JM ./I.T.A. NO. 1096/MUM/2012 ( / ASSESSMENT YEAR :2007-08) D.P. WIRES PRIVATE LIMITED, 72, GANDHI NAGAR, OPP. MUNICIPAL INDIL. ESTATE, WORLI, MUMBAI- 400 018 / VS. THE INCOME TAX OFFICER, WARD 6(2)(2), AYAKAR BHAVAN, M.K. ROAD, MUMBAI-400 020 ./PAN : AABCD2393P ( /APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI VIMAL PUNMIYA / RESPONDENT BY : SHRI RAJARSHI DWIVEDY /DATE OF HEARING : 08.05.2013 / DATE OF PRONOUNCEMENT : 17.05 .2013 / O R D E R PER P.M. JAGTAP, A.M. : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LD. CIT(A)-12 MUMBAI DATED 09.11.2011 AND THE SOLITARY ISSUE ARISING OUT OF THE SAME RELATES TO THE ADDITION OF RS.8,91,381/- MADE BY TH E AO AND CONFIRMED BY THE LD. ITA NO.1096 OF 2012 D.P. WIRES PVT. LTD. 2 CIT(A) ON ACCOUNT OF UNUTILIZED MODVAT CREDIT BALAN CE INCLUDED IN THE VALUE OF CLOSING STOCK. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF STEEL WIRE, GAS CYLIND ER AND PLASTIC SHEETS. THE RETURN OF THE INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 31.10.2007 DECLARING TOTAL INCOME OF RS. 26,65,449/- UNDER THE NORMAL PROVISIONS OF THE ACT AND BOOK PROFIT OF RS.2,79,17,483/- UNDER SECTION 1 15 JB OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE AO THAT THE ASSESSEE HAS FOLLOWED EXCLUSIVE METHOD FOR THE VALUATION OF CLOS ING STOCK AND ACCORDINGLY THE UNUTILIZED MODVAT CREDIT ON THE LAST DAY OF THE PRE VIOUS YEAR WAS NOT INCLUDED IN THE VALUED OF CLOSING STOCK. SINCE THE VALUATION OF CLOSING STOCK MADE BY THE ASSESSEE WAS NOT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 145A OF THE ACT, THE AO REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY THE M ODVAT CREDIT BALANCE SHOULD NOT BE INCLUDED IN THE VALUE OF CLOSING STOCK, IN V IEW OF THE PROVISIONS OF SECTION 145A. IN REPLY, IT WAS SUBMITTED ON BEHALF OF THE A SSESSEE, INTER ALIA, THAT THE VALUATION OF OPENING CLOSING STOCK WAS DONE BY FOLL OWING EXCLUSIVE METHOD AND IF AT ALL THE ADJUSTMENT WAS TO BE DONE BY INCLUDING THE MODVAT CREDIT BALANCE, THE SAME SHOULD BE DONE TO OPENING STOCK AS WELL AS CLO SING STOCK. THIS STAND OF THE ASSESSEE WAS ACCEPTED BY THE AO AND AFTER ADJUSTING THE VALUE OF OPENING STOCK AND CLOSING STOCK BY MODVAT CREDIT BALANCE, THE NET DIFFERENCE OF RS.8,91,381/- WAS ADDED BY HIM TO THE TOTAL INCOME OF THE ASSESSE E. 3. ON APPEAL THE LD. CIT(A) CONFIRMED THE ADDITION MADE BY THE AO FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPH 7 OF HIS IMPUG NED ORDER. 7. I HAVE CONSIDERED THE ORDER THE ASSESSING OFFICE R AND THE SUBMISSION OF THE APPELLANT. I FIND THAT THIS ISSUE WAS ALSO RAISED I N A.Y. 2004-05 AND IN A.Y. 2006- 07 WHEREIN AFTER CONSIDERING THE VARIOUS POINTS AND THE CASE LAWS IN QUESTION IT WAS DECIDED BY THE CIT(A) THAT THE AO SHOULD MAKE T HE ADDITION ONLY WHEN THERE ITA NO.1096 OF 2012 D.P. WIRES PVT. LTD. 3 IS A DIFFERENCE OF MODVAT CREDIT YET TO BE AVAILED ON ACCOUNT OF PURCHASES AND MODVAT BALANCE AVAILABLE IN THE MODVAT CREDIT ACCOU NT. IF THERE IS NO DIFFERENCE NO ADDITION IS REQUIRED TO BE MADE. KEEPING THIS IN VIEW, THE ORDER OF THE AO WHEN SEEN SHOWS THAT THE AO HAS DONE EXACTLY THAT. THE A O HAD REQUIRED THE APPELLANT TO PROVIDE THE DETAILS IN RESPECT OF THE UNUTILIZED MODVAT CREDIT AND IT IS SEEN THAT THE APPELLANT HAS ITSELF STATED THAT THE NET EFFECT ON THE PROFIT AND LOSS ACCOUNT FOR THE YEAR WOULD AMOUNT TO RS.8,91,381/-. IN THE DETA ILS GIVEN, THE APPELLANT HAS TAKEN INTO CONSIDERATION THE ADDITION MADE IN ASSES SMENT YEAR 2006-07 WHICH HAS BEEN CONSIDERED AS A PART OF THE OPENING STOCK IN T HE CURRENT ASSESSMENT YEAR. AS THE AO HAS FOLLOWED THE ORDER OF THE CIT(A), I FIND NO INFIRMITY IN THE SAID ORDER. BESIDES THAT, IT IS ALSO FOR CONSIDERATION THAT SEC TION 145A OF THE INCOME-TAX ACT IS A MANDATORY AND STATUTORY SECTION WHICH REQUIRES TH AT AN INCLUSIVE METHOD OF VALUATION OF STOCK IS TO BE FOLLOWED. THIS SECTION HAS ALSO BEEN UPHELD BY THE HONBLE DELHI HIGH COURT IN THE CASE OF MAHAVIR ALU MINUM (2008) 297, ITC, 77 (DELHI) AND BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF MAHALAXMI ENGINEERING (2009)318 ITC 116 (BOM). IT HAS BEEN HE LD BY THE HONBLE COURTS THAT AN AMOUNT OF UNUTILIZED MODVAT CREDIT IS LIABL E TO BE ADDED TO THE VALUE OF CLOSING STOCK AS PER SPECIFIC PROVISIONS CONTAINED IN SECTION 145A OF THE INCOME- TAX ACT, 1961. UNDER THE CIRCUMSTANCES, I FIND THAT THERE IS NO REASON TO INTERFERE WITH THE ORDER OF THE ASSESSING OFFICER. HOWEVER, R ELYING ON THE ABOVE MENTIONED JUDICIAL DECISIONS, THE AO IS ALSO DIRECTED TO ACCO RD THE BENEFIT OF THE ADDITION SO MADE IN THE CLOSING STOCK FOR THE ASSESSMENT YEAR 2 007-08 IN THE OPENING STOCK OF THE SUBSEQUENT YEAR. THE ADDITION MADE BY THE AO IS, THEREFORE, CONFIRMED AND UPHELD. THE GROUND OF APPEAL IS DISMISSED. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSE SSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS PER THE SPECIFIC PROVISIONS CONTAINED IN SECTION 145A, IF THE ASSESSEE IS FOLLOWING EXCLUSIVE METHOD FOR THE VALU ATION OF INVENTORY, ADJUSTMENT IS REQUIRED TO BE MADE TO THE VALUE OF INVENTORY BY INCLUDING THE AMOUNT OF ANY TAX, DUTY ETC. ACTUALLY PAID OR INCURRED BY THE ASS ESSEE TO BRING THE GOODS TO THE PLACE OF ITS LOCATION AND CONDITION AS ON THE DATE OF VALUATION. IN THE CASE OF MAHALAXMI ENGINEERING (SUPRA) RELIED UPON BY THE LD . CIT(A) IN HIS IMPUGNED ORDER, HONBLE BOMBAY HIGH COURT HAS HELD THAT, IF THE ADJUSTMENT IS TO BE MADE ON ACCOUNT OF ANY TAX DUTY ETC. TO THE VALUE OF INV ENTORY AS PER SECTION 145A, THE ITA NO.1096 OF 2012 D.P. WIRES PVT. LTD. 4 SAME IS TO BE MADE TO THE VALUE OF OPENING STOCK AS WELL AS CLOSING STOCK. SINCE THE ASSESSING OFFICER IN THE PRESENT CASE HAS MADE ADJU STMENT UNDER SECTION 145A TO THE VALUE OF OPEN STOCK AS WELL AS CLOSING STOCK AN D HAS ADDED ONLY THE NET DIFFERENCE TO THE TOTAL INCOME OF THE ASSESSEE, WE FIND THE SAME TO BE IN ACCORDANCE WITH THE DECISION OF HONBLE JURISDICTIO NAL HIGH COURT IN THE CASE OF MAHALAXMI ENGINEERING (SUPRA). THE LEARNED COUNSEL FOR THE ASSESSEE, HOWEVER HAS SUBMITTED THAT THE DIFFERENCE SO WORKED OUT BY THE AO IS NOT CORRECT, INASMUCH AS THERE IS A CHANGE IN THE SAID WORKING AS A RESUL T OF SIMILAR ADJUSTMENT MADE IN THE VALUE OF CLOSING STOCK OF THE IMMEDIATELY PRECE DING YEAR WHICH IS BOUND TO AFFECT THE VALUATION OF THE OPENING STOCK FOR THE Y EAR UNDER CONSIDERATION. KEEPING IN VIEW THIS SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE, WE RESTORE THIS ISSUE TO THE FILE OF THE AO FOR THE LIMITED PURPOSE OF RECOMPUTING THE ADDITION TO BE MADE UNDER SECTION 145A AFTER VERIFYING THE RELEVAN T FACTS. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TRE ATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS THE DAY 17 TH OF MAY. 2013 ! ' # $ % 17 TH MAY. 2013 & ' SD/- SD/- ( DR. S.T.M. PAVALAN) ( P.M.JAGTAP) ! ( / JUDICIAL MEMBER / ACCOUNTANT MEMBER ' ) MUMBAI; $ DATED 17/05/2013 MAY/2013 . ( . . / ASHISH PS ITA NO.1096 OF 2012 D.P. WIRES PVT. LTD. 5 !'#$ %$' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. * ( ) / THE CIT(A)-37, MUMBAI 4. * / CIT I, MUMBAI 5. +, & ((-. , -. , ' ) / DR, ITAT, MUMBAI H 6. & /0 1 / GUARD FILE. & / BY ORDER, + ( //TRUE COPY// ' / &( ) (DY./ASSTT. REGISTRAR) , ' ) / ITAT, MUMBAI