The ACIT, Circle-2(1)(2), Ahmedabad V. Mahavir Inducto melt Pvt. Ltd., Ahmedabad

ITA 1098/AHD/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4642 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-10-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 19-03-2020
• Assessment Year: 2006-2007
• Appeal Filed On: 01-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, ABENCH, AHMEDABAD (CONDUCTED THROUGH VIRTUAL COURT AT AHMEDABAD) BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ./ ITA NO. 1098/AHD/2018 / ASSTT. YEAR: 2006-2007 A .C.I.T., CIRCLE-2(1)(2), AHMEDABAD. VS. MAHAVIRINDUCTO MELT PVT. LTD., 7604, PHASE-IV, GIDC ESTATE,VATVA, AHMEDABAD PAN: AABCM8848G ( APPLICANT ) ( RESPON D ENT ) REVENUE BY : SHRI DILEEP KUMAR , SR.D .R ASSESSEE BY : SHRI ASEEM L. THAKKAR, A.R /DATE OF HEARING : 28/08/2020 /DATE OF PRONOUNCEMENT: 20/10/2020 /O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HASBEEN FILED AT THE INSTANCE OF THE REVENUE AGAINST THE ORDER OF THE LEARNEDCOMMISSIONER OF INCOME TAX( APPEALS)-11, AHMEDABAD,DATED 20/02/2018 (IN SHORT LD.CIT(A)) A RISING IN THE MATTER OF ASSESSMENT ORDER PASSED UNDER S.143(3)R.W.S. 263 OF THE INCOME TAX ACT, 1961 (HERE-IN-AFTER REFERRED TO AS 'THE ACT') RELEVANT T O THE ASSESSMENT YEAR 2006- 2007. ITA NO.1098/AHD/2018 ASSTT. YEAR 2006-07 2 2. THE ONLY ISSUE RAISED BY THE REVENUE IS THAT THE ''LD.CIT (A)'' ERRED BY DELETING THE ADDITION MADE BY THE AO FOR RS.3,80,07 ,933/- FOR THE ADJUSTMENT MADE IN THE SECTION 145A OF THE ACT. 3. THE FACT IN FACT BRIEF ARE THAT THE ASSESSEE IN THE PRESENT CASE IS A PRIVATE LIMITED COMPANY AND ENGAGED IN THE BUSINESS OF SHIP BREAKING. THE AO DURING THE ASSESSMENT PROCEEDINGS FOUND THAT THE ASSESSEE HAS SHOWN UNUTILIZED CENVAT CREDIT AMOUNTING TO RS.3,80,07,933/- IN ITS BALANCE SHEET AS ON 31/03/2006. AS PER THE AO THE AMOUNT OF UNUTILIZED CENVAT CREDIT W AS TO BE INCLUDED IN THE VALUE OF CLOSING STOCK IN PURSUANCE TO THE PROVISIO N OF SECTION 145A OF THE ACT BUT THE SAME HAS NOT BEEN DONE SO. ACCORDINGLY AO WAS O F THE VIEW THAT THE ASSESSEE HAS SHOWN LESS INCOME BY RS.3,80,07,933/- BY NOT IN CLUDING UNUTILIZED CENVAT CREDIT IN THE VALUE OF CLOSING STOCK SHOWN AS ON 31 /03/2006. THUS THE AO ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 4. AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO THE '' LD.CIT (A)'' WHO DELETED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER. IT IS FOUND THAT THE APPELLANT IS MAINTAINING EXC LUSIVE METHOD OF VALUATION OF INVENTORIES AND IT IS MAINTAINED FOR SEVERAL YEARS AND IT IS REVENUE NEUTRAL. IF ADDITIONS ARE MADE IN THE CLOSING STOCK, THAT WILL INCREASE THE OPENING STOCK OF THE NEXT YEAR AND THEREFORE, NEXT YEARS PROFIT WILL BE REDUCED BY THE SAME AMOUNT. THE APPELLANTS CASE HAS BEEN FOUND SQUARELY COVERE D BY THE SEVERAL JUDGMENTS OF HONBLE ITAT, AHMEDABAD. THE CASE LAWS ARE AS UNDER : I) M/S.G.H. INDUSTRIES V/S ACIT IN ITA NO.2613/AHD/201 1-A.Y. 2008-09 HONBLE ITAT D BENCH ORDER DATED 12.2.2016. II) ACIT V/S PUNEET INDUSTRIES P LTD. IN ITA NO.1443/AH D/2012-A.Y. 2006- 07-HONBLE ITAT A BENCH ORDER DATED 10.06.2016. KEEPING IN VIEW THE ABOVE MENTIONED BINDING JUDGEME NTS, THE ADDITION MADE BY THE AO ARE NOT JUSTIFIED, HENCE, ARE DELETED. TH IS GROUND OF APPEAL IS ALLOWED. AGGRIEVED BY THE ORDER OF THE ''LD.CIT (A)'' THE R EVENUE IS IN APPEAL BEFORE US. 5. BOTH THE LD. DR AND THE A.R BEFORE US VEHEMENTLY SUPPORTED THE ORDER OF THE AUTHORITIES BELOW AS FAVORABLE TO THEM. ITA NO.1098/AHD/2018 ASSTT. YEAR 2006-07 3 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE PROVISIONS OF SE CTION 145A OF THE ACT MANDATE TO FOLLOW THE EXCLUSIVE METHOD OF ACCOUNTING WHICH REQUIRES TO RECORD THE TRANSACTION OF PURCHASE, SALES OF THE STOCK AFTER I NCLUDING TAXES INCURRED IN RELATION TO PURCHASE/SALES OF GOODS. BUT IN THE CASE ON HAND WE FIND THAT THE ASSESSEE HAS NOT INCLUDED SUCH TAXES IN THE AMOUNT OF PURCHASES, SALES AND CLOSING STOCK. HOWEVER, WE NOTE THAT IF SUCH TAXES ARE INCLUDED IN THE OPENING STOCK, PURCHASE, SALES AND CLOSING STOCK THEN THERE WILL NOT BE ANY DIFFERENCE IN THE TOTAL INCOME DECLARED BY THE ASSESSEE. IT IS BECAUSE SUCH EXERCI SE IS TAX NEUTRAL IN THE GIVEN FACTS AND THE CIRCUMSTANCES. 6.1 WE ALSO FIND THAT THE SAME PLEA WAS ALSO TAKEN BY THE ASSESSEE BEFORE THE AO AS EVIDENT BELOW. WITHOUT PREJUDICE TO THE ABOVE, IT IS FURTHER STAT ED THAT THE MODVAT/CENVAT BALANCES AS APPEARING IN THE BOOKS OF ACCOUNTS AND SHOWN AS ASSETS IN THE BALANCE SHEET HAVE NOT BEEN CLAIMED BY WAY OF EXPEN DITURE WHILE DRAWING OUR THE P &L A/C. AS A CONSEQUENCE OF THIS THE QUESTION OF INCLUDING THE SAME WHILE VALUING THE CLOSING STOCKS DOES NOT ARISE. THE QUES TION OF INCLUDING THE CENVAT/MODVAT IN THE CLOSING STOCK WOULD ARISE ONLY WHEN THE SAME HAS BEEN CLAIMED BY WAY OF EXPENSES AND DEBITED TO THE TRADI NG /PROFIT & LOSS ACCOUNT AND NOT OTHERWISE. WE ARE ENCLOSING A CHART WHICH INDI CATES THE PROFIT BOTH WHEN THE INCLUSIVE AND EXCLUSIVE METHOD OF ACCOUNTING HAS BE EN FOLLOWED. THE PERUSAL OF THE CHART CLEARLY REVEALS THAT THERE IS NO DIFFEREN CE IN THE PROFIT ARISING TO THE ASSESSEE COMPANY IRRESPECTIVE OF THE ACCOUNTING SYS TEM FOLLOWED. 6.2 WE ALSO FIND THAT THE ASSESSEE HAS PLACED A CHA RT IN THE PAPER BOOK WHICH IS PLACED ON PAGE 1 DEPICTING THE PROFIT UNDER BOTH THE METHOD OF ACCOUNTING I.E. INCLUSIVE AND EXCLUSIVE METHOD OF ACCOUNTING AS PRO VIDED U/S145A OF THE ACT. ON PERUSAL OF THE CHART THERE IS NO DIFFERENCE IN THE PROFIT DECLARED BY THE ASSESSEE EXCEPT A MINOR DIFFERENCE OF RS.5091/- ONLY. 6.3 WE ALSO FIND THAT THE ITAT IN THE CASE OF ACIT VS PUNEET INDUSTRIES PVT. LTD. BEARING ITA NO.1442/AHD/2012 VIDE ORDER DATED 10/06/2016, IN IDENTICAL FACTS AND CIRCUMSTANCES HAS DECIDED THE ISSUE IN FAVOR OF THE ASSESSEE BY OBSERVING AS UNDER: ITA NO.1098/AHD/2018 ASSTT. YEAR 2006-07 4 3. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO INCLUSION OF UNUTIL IZED CENVAT CREDIT TO THE CLOSING STOCK. WE FIND THAT ID.CIT(A) WHILE DELETING THE AD DITION HAS GIVEN A FINDING THAT THE ASSESSEE WAS FOLLOWING EXCLUSIVE METHOD OF ACCO UNTING AND THE CENVAT WAS NOT DEBITED OR CREDITED TO THE PROFIT & LOSS ACCOUN T AND THE AFORESAID METHOD HAS BEEN CONSISTENTLY FOLLOWED BY THE ASSESSEE IN EARLI ER AND SUCCEEDING YEARS. WE FURTHER FIND THAT THE HON'BLE APEX COURT IN THE CAS E OF CIT VS. INDO NIPPON CHEMICALS CO. LTD. REPORTED AT (2003) 261 ITR 275 ( SC) OBSERVED THAT UNAVAILED MOD VAT CREDIT CANNOT BE CONSTRUED AS INCOME AND TH ERE IS NO LIABILITY TO PAY TAX ON SUCH UNAVAILED MODVAT CREDIT. FURTHER, BEFORE US , REVENUE HAS NOT BROUGHT ANY CONTRARY BINDING DECISION IN ITS SUPPORT. IN VI EW OF THE AFORESAID FACTS, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF T HE LD.CIT(A). THUS, THE GROUND OF REVENUE IS DISMISSED. IN VIEW OF THE ABOVE, WE NOTE THAT THERE IS NO INFI RMITY IN THE ORDER OF THE ''LD.CIT (A)''. THUS NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LD. CIT-A. HENCE, THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 20/10/2020 AT A HMEDABAD. SD/- SD/- (RAJPAL YADAV) (WASEEM AHMED) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD; DATED 20/10/2020 MANISH/TANMAY TRUE COPY / COPY OF THE ORDER FORWARDED TO : ! ' / BY ORDER, # / ' $% ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. !'#$$ , / DR, ITAT, 6. #%&' / GUARD FILE.