The Assistanta Commissioner of Income Tax, Circle 2, JAMNAGAR V. Mayank Metallurgical Pvt. Ltd., JAMNAGAR

ITA 1143/RJT/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 72659 (ITAT-RAJKOT)
• Duration Of Justice: 3 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 30-12-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 30-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR J B JHAVERI
• Assessee Lawyers: D M RINDANI CA

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBULAL; RAJKOT BENCH, RAJKOT BEFORE SHRI T. K. SHARMA, JM AND SHRI B. R. JAIN, A M ITA NO.1143/RJT/2010 / ASSESSMENT YEAR 2004-05 THE ACIT, CIRCLE-2, JAMNAGAR ( / APPELLANT MAYANK METALLURGICAL PVT LTD 283, GIDC, PHASE-II, DARED, JAMNAGAR PAN : AABCM 4319 E / RESPONDENT ! '# / REVENUE BY DR. J. B. JHAVERI, DR $% ! '# / ASSESSEE BY SHRI D.M. RINDANI, CA ' & ' %( / DATE OF HEARING 30.12.2013 ) %( / DATE OF PRONOUNCEMENT 31.12.2013 / ORDER B. R. JAIN, A. M. : THIS APPEAL BY THE REVENUE AGAINST THE ORDER DAT ED 03.06.2010 OF SHRI R.N. PRASAD, LEARNED CIT(A), JAM NAGAR RAISES THE FOLLOWING GROUNDS:- 1. THE CIT(A) ERRED IN LAW AND IN FACTS IN DELETING THE ADDITION OF RS.21,57,572/- MADE ON ACCOUNT OF UNDERVALUATION OF CLOSING STOCK. 2. THE CIT(A) FAILED TO APPRECIATE THE FACT THAT TH E ASSESSEE COMPANY FOLLOWED THE MERCANTILE SYSTEM OF ACCOUNTING AND THE FINISHE D GOODS WERE VALUED AT THE COST PRICE OR MARKET PRICE WHICHEVER WAS LOWER EXCLUSIVE OF EXCISE DUTY PAYABLE. THEREFORE, THE CLOSING STOCK WAS REQUIRED TO BE ADJUSTED AS PROVIDED IN PROVISIONS OF SECTION 145A OF THE ACT A ND THE FAILURE ON THE PART OF THE ASSESSEE TO DO SO RESULTED IN UNDERVALUATION OF THE CLOSING STOCK TO THE EXTENT OF EXCISE DUTY PAYABLE. 3. THE CIT(A) ERRED IN LAW AND IN FACTS IN DELETING THE ADDITION OF RS.1,86,782/- MADE ON ACCOUNT OF DISALLOWANCE OF PAYMENT OF EMPLO YEES CONTRIBUTION TO PROVIDENT FUND AND AS SUCH IN HOLDING THAT THE PAYM ENT MADE BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME U/S 139(1) OF TH E ACT WAS ELIGIBLE FOR DEDUCTION. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 5. IT IS THEREFORE PRAYED THAT THE ORDER OF THE LD. CIT(A) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 6. THAT THE REVENUE CRAVES LEAVE TO ADD, AMEND, ALT ER OR WITHDRAW ANY GROUNDS OF APPEAL. 1143-RJT-2010 MAYANK METALLURGICAL PVT LTD 2 2. BRIEFLY, THE FACTS IN GROUNDS NO.1 AND 2 IN APPE AL RELATING TO ADDITION OF RS.21,27,572/- ARE THAT THE ASSESSEE IS A MANUFACTU RER OF EXTRUDED RODS/WIRES ETC. IT HAS VALUED THE STOCK OF GOODS MANUFACTURED WITHOUT INCLUDING EXCISE DUTY PAYABLE THEREON. THE ASSESSING OFFICER BEING OF THE VIEW TH AT THE ASSESSEE HAS INCURRED LIABILITY OF EXCISE DUTY AS SOON AS THE GOODS HAVE BEEN MANUFACTURED AND ARE KEPT IN STOCK; THE COST SO INCURRED SHALL HAVE TO BE INCLUD ED AS PART OF THE COST OF STOCK OF THE ASSESSEE IN TERMS OF PROVISIONS OF SECTION 145A OF THE ACT. SINCE THE ASSESSEE DID NOT INCLUDE THE EXCISE DUTY PAYABLE THEREON AS COST IN VALUING THE CLOSING STOCK HELD BY IT AS AT THE CLOSE OF THE YEAR, IT DID NOT ACCEPT ASSE SSEES CASE OF ITS LIABILITY HAVING BEEN INCURRED AT THE TIME OF CLEARANCE AND AS SUCH PROCE EDED TO MAKE ADDITION OF RS.21,27,572/- AS UNDERVALUATION OF STOCK HELD BY T HE ASSESSEE. 3. THE LEARNED CIT(A), FOLLOWING TRIBUNALS DECISIO N IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1998-99 (WRONGLY MENTIONED AS ASSES SMENT YEAR 2004-05) IN ITA NO.381/RJT/2009 BY ORDER DATED 30.12.2009, DELETED THE ADDITION WITH THE REASONING THAT THE ASSESSEE NEVER CLAIMED A DEDUCTION FOR EXC ISE DUTY AS COST OF PURCHASE AND IN THE EVENT SUCH AN ADDITION TO THE COST IS MADE, SIM ILAR AMOUNT WILL HAVE TO BE ALLOWED AS DEDUCTION AS COST OF PURCHASE WITH RESULTED EFFE CT OF NO ADDITION AT ALL. 4. HEARD PARTIES WITH REFERENCE TO MATERIAL ON RECO RD AND CASE LAWS BROUGHT TO OUR NOTICE. THE LEARNED CIT(A) COMMITTED NO ERROR IN FO LLOWING THE TRIBUNALS DECISION IN ASSESSEES OWN CASE FOR THE EARLIER YEAR IN WHICH S ECTION 145A OF THE ACT WAS DULY CONSIDERED. ADMITTEDLY, THE TRUE PURPOSE OF CREDIT ING THE VALUE OF UNSOLD STOCK IS TO BALANCE THE COST OF THOSE GOODS ENTERED ON THE OTHE R SIDE OF THE ACCOUNT AT THE TIME OF THEIR PURCHASE, SO THAT THE CANCELLING OUT OF THE E NTRIES RELATING TO THE SAME STOCK FROM BOTH SIDES OF THE ACCOUNT WOULD LEAVE ONLY THE TRAN SACTIONS ON WHICH THERE HAVE BEEN ACTUAL SALES IN THE COURSE OF THE YEAR SHOWING THE PROFIT OR LOSS ACTUALLY REALISED ON THE YEAR'S TRADING. SUCH A VIEW IS ALSO TAKEN BY THE HO NBLE APEX COURT IN THE CASE OF CHAINRUP SAMPATRAM V. CIT (1953) 24 ITR 481 AND ALS O IN THE CASE OF CIT V. HINDUSTAN ZINC LTD., (2007) 291 ITR 391 (SC). ELABO RATE DISCUSSION ON THIS ISSUE HAS ALSO BEEN MADE BY THE APEX COURT IN THE CASE OF CIT V. DYNAVISION LTD., (2012) 348 ITR 380 (SC). IN THE APPELLANTS CASE BEFORE US, T HE GOODS MANUFACTURED HAVE NOT BEEN SOLD DURING THE YEAR UNDER CONSIDERATION NOR H AVE BEEN CLEARED FROM ASSESSEES PREMISES. CENTRAL EXCISE LIABILITY CANNOT BE SAID T O HAVE BEEN INCURRED ON SUCH UNSOLD MANUFACTURED GOODS LYING IN STOCK AND CONSEQUENTLY THE ADDITION OF EXCISE DUTY MADE BY THE ASSESSING OFFICER TO THE VALUE OF RS.21,27,5 72/- WAS RIGHTLY DELETED BY THE LEARNED CIT(A). THIS VIEW IS IN CONFORMITY WITH THE JUDGMENT RENDERED BY HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. LOKNETE BAL ASAHEB DESAI S.S.K. LTD., (2011) 339 ITR 288 (BOM). ACCORDINGLY, GROUNDS NO.1 AND 2 RAISED IN APPEAL BY THE REVENUE STAND REJECTED. 1143-RJT-2010 MAYANK METALLURGICAL PVT LTD 3 5. IN REST OF THE GROUNDS, I.E. GROUNDS NO. 3 TO 6, THE DISPUTE IS WITH REGARD TO THE DELETION OF DISALLOWANCE FOR LATE PAYMENT OF EMPLOY EES CONTRIBUTION TO PROVIDENT FUND FOR RS.1,86,782/- THOUGH THE SAME IS ADMITTED TO HA VE BEEN PAID BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME. 6. HEARD PARTIES WITH REFERENCE TO MATERIAL ON RECO RD. THE LEARNED CIT(A) DELETED THE DISALLOWANCE BY FOLLOWING THE JUDGMENT DELIVERE D BY HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. AIMIL LTD., (2010) 321 ITR 508 ( DEL) AND ALSO THE JUDGMENT DELIVERED BY THE HONBLE APEX COURT IN THE CASE OF CIT V VINA Y CEMENT LTD (2007) 213 CTR 268 (SC). ON THE ATTENDANT FACTS THE LEARNED CIT(A) RIG HTLY FOLLOWED THE RATIO OF THE JUDGMENTS AS AFORESAID. WE, THEREFORE, FIND NO REAS ON TO INTERFERE WITH HIS ORDER. AS A RESULT, GROUNDS NO. 3 TO 6 STAND REJECTED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.12.2013 SD/- SD/- (T. K. SHARMA ) (B. R . JAIN) '* /JUDICIAL MEMBER #( '* / ACCOUNTANT MEMBER *#+ ,*-/ ORDER DATE 31.12.2013 /RAJKOT *BT / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT- THE ACIT, CIRCLE-2, JAMNAGAR 2. /RESPONDENT- MAYANK METALLURGICAL PVT LTD, 283, GID C, PH-II, DARED, JAMNAGAR 3. '-2- % & 3% / CIT,JAMNAGAR 4. & 3%- / CIT (A), JAMNAGAR 5. 789 % , , / DR, ITAT, RAJKOT 6. 9; <= / GUARD FILE. *#+ '# / BY ORDER , TRUE COPY PRIVATE SECRETARY, , INCOME TAX APPELLATE TRIBUNAL, RAJKOT.