DCIT, Pune V. M/S Oriental Rubber Industries Ltd, Pune

ITA 1144/PUN/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 5238 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 12-11-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 31-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L PATHADE
• Keywords: Deemed to accrue or arise in india; Question of law; Reassessment proceedings
• Section: 43B; 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.1144/PN/2012 A.Y. 2008-09 ADDL. CIT, RANGE-3, PUNE APPELLANT VS. M/S. ORIENTAL RUBBER INDUSTRIES LTD., SHRAVANI GARDEN, 20 VIMAN NAGAR ROAD, PUNE PAN: AAACO 1592L RESPONDENT APPELLANT BY : SHRI P.L. P ATHADE RESPONDENT BY : SHRI KIS HOR PHADKE DATE OF HEARING: 12.11.2013 DATE OF ORDER : 27.11.2013 ORDER PER SHAILENDRA KUMAR YADAV, JM THIS APPEAL HAS BEEN FILED BY REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-II [(IN SHORT CIT(A)-II], PUNE, DATED 12-01-2012 FOR A.Y. 2008-09 ON THE FOLL OWING GROUNDS: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) GROSSLY ERRED IN DELETING THE ADDITION OF RS.34,66, 768/- 2 MADE IN THE ASSESSMENT BY APPLYING THE PROVISIONS O F SEC. 145A OF THE INCOME TAX ACT, 1961, INSTEAD OF CONFIRMING THE SAID ADDITION. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) GROSSLY ERRED IN FAILING TO APPRECIATE THAT IN THE TAX AUDIT REPORT, THE AUDITOR HIMSELF HAD QUANTIFIED TH E PROFITS AS PER THE PROVISIONS OF SEC. 145A AT RS.10,90,44,768/- WHEREAS THE NET PROFIT AS PER THE PROFIT AND LOSS ACCOUNT WAS RS.10,55,78,000/-; AND ALSO THAT THE AUDITOR HAD GIVEN NO JUSTIFICATION FO R HIS COMMENTS THAT THE IMPACT OF THE DEVIATION FROM THE METHOD OF VALUATION PRESCRIBED UNDER SEC. 145A WOUL D BE NIL. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) GROSSLY ERRED IN FAILING TO APPRECIATE THE FACTS AN D LAW SO ELABORATELY AND JUSTIFIABLY BROUGHT OUT IN THE ASSESSMENT ORDER IN SUPPORT OF THE ADDITION. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) GROSSLY ERRED IN DELETING THE ADDITION OF RS.28,47, 463/- MADE IN THE ASSESSMENT BY APPLYING THE PROVISIONS O F SEC.2(24)(X) R.W.S.36(1)(VA) INSTEAD OF CONFIRMING THE SAID ADDITION. 6. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) GROSSLY ERRED IN FAILING TO APPRECIATE THAT THE PAY MENTS MADE BY AN ASSESSEE IN RESPECT OF THE EMPLOYEES CONTRIBUTION TO PROVIDENT FUND ARE GOVERNED BY THE PROVISIONS OF SEC.36(1)(VA) AND THE EXPLANATION THEREUNDER WHEREAS THE DECISION OF THE HONBLE SUPR EME COURT IN THE CASE OF ALOM EXTRUSIONS LTD., 319 ITR 206 (2009), RELIED UPON BY THE COMMISSIONER OF INCOME T AX (APPEALS) DEALT WITH THE PROVISIONS OF SEC.43B IN R ESPECT OF EMPLOYERS CONTRIBUTION TOWARDS PROVIDENT FUND, AND HENCE, THE SAID DECISION WOULD NOT APPLY. 7. IN VIEW OF THE ABOVE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) GROSSLY ERRED IN MISTAKING THE DUE DATE FOR PAYING THE IMPUGNED CONTRIBUTIONS AS THE D UE DATE OF FILING OF THE RETURN OF INCOME WHEREAS THE APPLICABLE DUE DATE IS AS PRESCRIBED IN THE EXPLANA TION UNDER SEC.36(1)(VA); AND THE ASSESSEE HAD NOT MADE THE PAYMENTS WITHIN THE SAID APPLICABLE DUE DATES. 8. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) GROSSLY ERRED IN DELETING THE ADDITION OF RS.23,60, 000/- 3 MADE IN THE ASSESSMENT U/S.41(1) OF THE INCOME TAX ACT,1961 INSTEAD OF CONFIRMING THE SAID ADDITION. 9. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) GROSSLY ERRED IN FAILING TO APPRECIATE THAT THE CONVEYANCE STAMP DUTY PAYABLE OF RS.23,60,000/- RELATED TO THE YEAR 1989 AND THE VERY FACT THAT THE MATTER WAS HANGING FOR NEARLY 20 YEARS WOULD ESTABL ISH THAT THE LIABILITY PROVIDED BY THE ASSESSEE IN THIS REGARD WAS NO LONGER PAYABLE. 10. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) GROSSLY ERRED IN DELETING THE ADDITION OF RS.14,53, 562/- MADE IN THE ASSESSMENT BY WAY OF DISALLOWING THE EXCESS LEAVE ENCASHMENT PROVISION MADE BY THE ASSESSEE WHICH IS A PROVEN FACT IN VIEW OF THE VALU ATION OF THE LIABILITY AS ON 31/03/2008 MADE BY THE ACTUA RY. 11. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THAT THE EXCESS PROVISION TOWA RDS LIABILITY WHICH WAS NO LONGER PAYABLE BY THE ASSESS EE AS ON 31/03/2008 HAD BEEN CORRECTLY ADDED IN THE ASSESSMENT. 12. FOR THESE SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF THE HEARING, THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. 13. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND A NY OR ALL THE GROUNDS OF APPEAL. 2. THE ASSESSEE IS A RESIDENT COMPANY ENGAGED IN TH E BUSINESS OF MANUFACTURING RUBBER CONVEYER BELTS REQUIRED IN THE MATERIAL HANDLING APPLICATION IN STEEL, COAL, CEMENT, POWER GENERATION PLANTS, FERTILIZERS, MINING, QUARRYING AND FOOD IND USTRIES. THE ASSESSEE COMPANY FILED RETURN OF INCOME DECLARING T OTAL INCOME OF RS.8,30,53,440/- AND SAME HAS BEEN ASSESSED U/S. 14 3(3) DETERMINING THE TOTAL INCOME AT RS.9,68,23,233/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSING OFFICER HAS MADE ADDITION ON ACCOUNT OF FOLLOWING DISALLOWANCES / AD DITION. 4 1. RS.34,66,768/- U/S.145A 2. RS.28,74,463/- U/S.2(24)(X) 3. RS.36,42,000/- U/S. 37(1) 4. RS.23,60,000/- U/S.41(1) 5. RS.14,53,562/- U/S. 37(1) EXTRA PROVISION OF LEAVE ENCASHMENT 3. FIRST ISSUE IS WITH REGARD TO ADDITION OF RS.34, 66,768/- MADE IN THE ASSESSMENT ORDER BY ASSESSING OFFICER B Y APPLYING PROVISIONS OF SEC.145A OF I.T. ACT. DURING THE COU RSE OF ASSESSMENT PROCEEDINGS, ASSESSING OFFICER OBSERVED THAT TAX AUDIT REPORT SUBMITTED BY ASSESSEE MENTIONED WITH R ESPECT TO DEVIATION FROM METHOD OF VALUATION PRESCRIBED U/S.1 45A OF I.T. ACT. IT HAS BEEN MENTIONED THAT PROFITS AS PER PRO VISIONS OF SEC.145A OF I.T ACT WAS RS.10,90,44,768/- WHEREAS N ET PROFIT AS PER PROFIT AND LOSS ACCOUNT RS.10,55,78,000/- AND A NNEXURE -3 OF THE TAX AUDIT REPORT IT WAS MENTIONED THAT IMPAC T ON PROFIT AND LOSS ACCOUNT DUE TO DEVIATION FROM METHOD OF VA LUATION PRESCRIBED U/S.145A WAS NIL. ASSESSING OFFICER HAS SOUGHT AN EXPLANATION FROM THE ASSESSEE WITH RESPECT TO DISAL LOWANCE OF RS.34,66,768/- U/S. 145A OF I.T ACT. AFTER CONSIDE RING THE SUBMISSIONS ON BEHALF OF ASSESSEE, ASSESSING OFFICE R HAS MADE ADDITION OF RS.34,66,768/-. 3.1 MATTER WAS CARRIED BEFORE FIRST APPELLATE AUTHO RITY, WHEREIN CIT(A) HAS CONSIDERED THE SUBMISSIONS ON BEHALF OF ASSESSEE AND CIT(A) GRANTED RELIEF AND SAME HAS BEEN OPPOSED BY REVENUE, INTER ALIA STATED THAT CIT(A) GROSSLY ERRED IN DELE TING ADDITION OF RS.34,66,768/- MADE IN THE ASSESSMENT BY APPLYING P ROVISION OF SEC. 145A OF I.T ACT INSTEAD OF CONFIRMING THE SAID ADDITION. CIT(A) FAILED TO APPRECIATE THAT IN THE TAX AUDIT R EPORT, AUDITOR HIMSELF HAD QUANTIFIED PROFIT AS PER PROVISIONS OF SEC.145A AT RS.10,90,44,768/- WHEREAS, NET PROFIT AS PER PROFIT AND LOSS ACCOUNT WAS RS.10,55,78,000/- AND ALSO THAT AUDITOR HAS GIVEN 5 NO JUSTIFICATION FOR HIS COMMENTS THAT IMPACT OF DE VIATION FROM METHOD OF VALUATION PRESCRIBED U/S.145A WOULD BE NI L. ACCORDINGLY, REQUESTED TO SET ASIDE THE ORDER OF CI T(A) AND RESTORED THAT OF ASSESSING OFFICER ON THE ISSUE. 3.2 THE STAND OF THE ASSESSEE HAS BEEN THAT ASSESSE E COMPANY FOLLOWED THE EXCLUSIVE METHOD OF ACCOUNTING AND AS PER THE COMPUTATION OF METHOD OF VALUATION OF CLOSING STOCK , A DETAILED WORKING WAS SUBMITTED IN TAX AUDIT REPORT CERTIFYIN G THAT IMPACT OF SEC.145A ON PROFIT OF COMPANY WAS NIL. DETAILED WORKING WAS GIVEN BEFORE CIT(A). ACCORDINGLY, CIT(A) WAS JUSTI FIED IN DELETING THE ADDITION IN QUESTION. SAME SHOULD BE UPHELD. 3.3 AFTER GOING THROUGH THE RIVAL SUBMISSION AND MA TERIAL RECORD, WE FIND THAT ASSESSEE HAS CHOICE OF USING M ETHOD OF VALUATION OF STOCK. HE IS REQUIRED TO FOLLOW THE S AME YEAR AFTER YEAR WHERE METHOD IS CONSISTENTLY FOLLOWED, IT IS N OT OPEN TO ASSESSING OFFICER TO QUESTION THE SAME BY IMPOSING DIFFERENT METHODS AND HAVING ACCEPTED A METHOD IT IS NOT OPEN TO ASSESSING OFFICER TO QUESTION THE SAME. THE ISSUE RELATING TO WHETHER VALUE OF CLOSING STOCK OF INPUTS, WORK IN P ROGRESS AND FINISHED GOODS MUST NECESSARILY INCLUDE ELEMENT FOR WHICH MODVAT CREDIT IS AVAILABLE WAS DEBATABLE ISSUE AT R ELEVANT POINT OF TIME. PROVISIONS OF SEC. 145A CLARIFY THAT WHILE COMPUTING VALUE OF INVENTORY AS PER METHOD OF ACCOUNTING REGULARLY EMPLOYED BY ASSESSEE, SAME SHALL INCLUDE THE AMOUNT OF TAX, DUT Y, CESS OR FEES PAID OR LIABILITY INCURRED FOR SAME UNDER ANY LAW IN FORCE, NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SEC.145 A. THE EXPLANATION TO SEC. 145A PROVIDE THAT FOR THE PURPO SE OF THIS SECTION ANY TAX, DUTY, CESS OR FEE UNDER ANY LAW FO R THE TIME BEING IN FORCE SHALL INCLUDE ALL SUCH PAYMENTS NOTW ITHSTANDING ANY RIGHT ARISING AS CONSEQUENCE TO SUCH PAYMENT. HONBLE SUPREME COURT IN THE CASE OF CIT VS. INDO-NIPPON CH EMICALS CO. 6 LTD., (2003) 261 ITR 275 (SC) POINTED OUT THAT VALU E OF UNCONSUMED RAW MATERIAL AND WORK IN PROGRESS AT THE END OF THE YEAR AT NET METHOD WOULD BE CONSISTENT WITH THE PRI NCIPLES OF ACCOUNTANCY. ADOPTING GROSS METHOD FOR PURCHASE AN D NET METHOD FOR UNSOLD STOCK AT THE END OF YEAR IS NOT S O CONSISTENT AND IS NOT PERMISSIBLE. ADOPTION OF UNIFORM NET ME THOD COULD NOT BE FAULTED, WHERE IT IS CONSISTENTLY ADOPTED TH AT EXCISE DUTY IS PAYABLE ON REMOVAL FROM FACTORY SITE. BUT WHERE CL OSING STOCK WAS NOT CLEARED, THERE IS NO LIABILITY TO PAY EXCIS E DUTY, SO THAT IT COULD NOT BE ADDED IN VALUATION OF CLOSING STOCK. HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. ENGLISH ELECTRIC CO. OF INDIA LTD., (2000) 243 ITR 512 (MAD) RELIED UPON THE NATU RE OF EXCISE DUTY FOR DECISION AS TO WHETHER EXCISE DUTY SHOULD BE ADDED TO THE VALUE OF CLOSING STOCK. HONBLE HIGH COURT OBS ERVED THAT IT DOES NOT BECOME COST TILL EXCISE DUTY IS LEVIABLE O N SUCH PRODUCTION. SINCE IT WAS LEVIABLE ONLY ON REMOVAL MERE PROSPECT OF LIABILITY COULD NOT CONVERTED INTO AN ASSETS IN THE MANNER EXPECTED BY ASSESSING OFFICER. IF SUCH LIABILITY H AS BEEN INCURRED IT COULD HAVE BEEN ADDED TO THE STOCK WHILE CLAIMIN G LIABILITY ITSELF AS A CHARGE ON PROFIT WHERE THERE HAS BEEN N O SUCH CHARGE, THE INFERENCE THAT AMOUNT SHOULD BE ADDED TO CLOSIN G STOCK WOULD NOT BE CORRECT. THIS REASONING WILL POSSIBLY NOT APPLICABLE IN CASES OF DISPUTED DUTY, WHERE IT HAS BEEN ADJUDI CATED AS PAYABLE IN A LATER YEAR. 3.1 IT WAS FOUND MISUNDERSTANDING OF THIS POSITION OF ACCOUNT AND LAW, THAT HAS RESULTED IN THE ENACTMENT OF SEC. 145A REQUIRING ANY TAX ACTUALLY PAID OR INCURRED BY THE ASSESSEE TO BRING GOODS TO THE PLACE OF ITS LOCATION AS ON THE DATE OF VALUATION TO BE ADDED TO THE CLOSING STOCK. BUT EVEN THIS PRO VISION, IF PROPERLY UNDERSTOOD WOULD REFER TO EXCISE DUTY 'ACT UALLY PAID OR INCURRED'. THE QUESTION OF INCLUSION OF EXCISE ELEM ENT IN VALUATION OF STOCK IS NOW A MATTER GOVERNED BY SEC. 145A AND NOT 7 SO MUCH AN ISSUE TO BE DECIDED ON THE BASIS OF ACCO UNTING PRINCIPLES. SECTION 145A HAS ALSO BEEN THE SUBJECT MATTER OF SUBSTITUTION BY THE FINANCE ACT, 2009 WITH EFFECT F ROM A.Y. 2010- 11. PRIOR TO THIS AMENDMENT THE SECTION DID RECOGNI ZE THE SYSTEM REGULARLY ADOPTED, BUT SUBJECT TO ADJUSTMENT IN RES PECT OF ANY TAX, DUTY, CESS, OR FEE WITH REFERENCE TO ACTUAL PA YMENT, SO THAT WHERE NO ACTUAL PAYMENT IS MADE THE AMOUNT COULD NO T BE RECKONED FOR PURPOSES OF INVENTORY VALUATION. SEC. 145A COVERS ONLY SUCH TAX OR DUTY, WHICH HAD BEEN PAID, IT SHOU LD NOT MAKE A DIFFERENCE WHETHER THE MANUFACTURED GOODS IN STOCK HAVE LEFT FACTORY PREMISES OR NOT, SO AS TO REQUIRE CLEARANCE UNDER THE EXCISE LAW. WHEN THE ASSESSING OFFICER ADDED THE EX CISE DUTY PAYABLE AS SOON AS THE GOODS WERE MANUFACTURED, THE QUESTION OF INCLUSION OF EXCISE OVER THE UNCLEARED GOODS CANNOT ARISE, THOUGH SEC.145A USES THE EXPRESSION 'ACTUALLY PAID OR INCU RRED BY THE ASSESSEE'. IT CAN BE TREATED AS HAVING BEEN INCURRE D ONLY ON CLEARANCE. IT IS UNDER THESE CIRCUMSTANCES, THE ADD ITION FOR EXCISE ON GOODS, WHERE EVEN THE PAYMENT HAS NOT BEE N MADE, WAS FOUND UNTENABLE BY THE TRIBUNAL IN ASHIWN A SHA H VS ACIT (2010) 1 ITR (TRIB) 683 (AHD) WHICH RELIED AND FOLL OWED THE DECISION OF THE HIGH COURT IN CIT VS ENGLISH ELECTR IC CO OF INDIA LTD, (SUPRA) AND CIT VS PARRY CONFECTIONARY LTD (20 08) CITED SUPRA. 3.2 WHERE ADDITIONS ARE MADE TO THE CLOSING STOCK O N THE BASIS THAT THE PROCESSING COST HAD NOT BEEN CORRECTLY ASC ERTAINED, THE ISSUE THAT ARISES, IS WHETHER SIMILAR REVISION OF T HE OPENING STOCK WOULD BE NECESSARY. THE HIGH COURT IN CIT VS INDIAN NATIONAL TANNERY P LTD (2005) 278 ITR 213 (ALL) FOUND THAT T HE PRINCIPLE THAT THE OPENING STOCK SHOULD BE VALUED IN THE SAME MANNER AS CLOSING STOCK OF THE PRECEDING YEAR WOULD APPEAR TO BE THE GENERAL RULE. IN THE CASE OF MELMOULD CORPORATION V S CIT (1993) 202 ITR 787 (BOM), THE HIGH COURT HELD THAT IT IS N OT NECESSARY 8 TO REVALUE THE OPENING STOCK ON THE REVISED BASIS A S DONE FOR CLOSING STOCK. IN COMING TO THE CONCLUSION, THE HIG H COURT HAD FOLLOWED THE DECISIONS IN CIT VS MOPEDS INDIA LTD ( 1998) 173 ITR 347 (AP) WHERE IT WAS POINTED OUT THAT, IF THE OPEN ING STOCK WERE TO BE DISTURBED, THERE WOULD BE A SNOWBALLING EFFEC T, BECAUSE OF THE CLOSING STOCK OF THE IMMEDIATELY PRECEDING YEAR AND THE COMPUTATION OF EVERY EARLIER YEAR WILL NEED REVISIO N. IT WAS MADE CLEAR, THAT THE PRINCIPLE, THAT NO CHANGE IS NECESS ARY FOR OPENING STOCK IN SUCH CASES, WOULD HAVE APPLICATION ONLY WH ERE THE ASSESSEE CHANGES HIS METHOD OF VALUATION BONAFIDE. SIMILAR VIEW WAS ALSO TAKEN IN THE CASE OF CIT VS MAHAVIR ALUMIN IUM LTD (2008) 297 ITR 77 (DEL). 3.3 IN WEST COAST PAPER MILLS LTD VS CIT (2006) 286 ITR (AT) 252 (MUMBAI), THE TRIBUNAL HELD THAT WHERE THERE IS A CHANGE IN METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE INCLUD ING EXCISE DUTY IN CLOSING STOCK, IT IS NOT OPEN TO THE ASSESS EE TO REVALUE THE OPENING STOCK. IN THIS CASE, THE ASSESSEE HAD CHANG ED THE METHOD BECAUSE OF THE STATUTORY REQUIREMENT OF SEC. 145A OF THE IT ACT. A SIMILAR ISSUE HAD ARISEN IN CIT VS MAHALA XMI GLASS WORKS P LTD (2009) 318 ITR 116 (BOM) WHERE THE ASSE SSEE MADE A CLAIM FOR ADOPTION OF CLOSING STOCK OF THE PREVIO US YEAR IN THE OPENING STOCK OF SUCCEEDING YEAR. THE ISSUE IN THIS CASE RELATED TO STOCK VALUATION ON ADJUSTMENT OF UNUTILIZED MODV AT CREDIT. THE TRIBUNAL ALLOWED THE ADJUSTMENT. SINCE SUCH ADJUSTM ENT WAS CONCEALED BY THE DEPARTMENTAL REPRESENTATIVE BEFORE THE TRIBUNAL THAT, IT COULD ISSUE A DIRECTION FOR VERIFICATION F OR ASSESSEE'S CLAIM ON FACTS, THERE WAS NO QUESTION OF LAW TO BE DEBATE D BY THE HIGH COURT. 3.4 THE ISSUE RELATING TO WHETHER THE VALUE OF CLOS ING STOCK OF THE INPUTS, WORK-IN-PROGRESS AND FINISHED GOODS MUST NECESSARILY INCLUDE THE ELEMENT FOR WHICH MODVAT C REDIT IS 9 AVAILABLE WAS A DEBATED TOPIC. SECTION 145A WAS I NDUCTED TO CLARIFY THAT WHILE COMPUTING THE VALUE OF INVENTORY AS PER THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSE SSEE, THE SAME SHALL INCLUDE THE AMOUNT OF ANY TAX, DUTY, CES S OR FEES PAID OR LIABILITY INCURRED FOR THE SAME. THE EXPLANATION TO SEC. 145A PROVIDES THAT FOR THE PURPOSES OF THIS SECTION, ANY TAX, DUTY, CESS OR FEES UNDER ANY LAW FOR THE TIME BEING IN FORCE, SHALL INCLUDE ALL SUCH PAYMENT NOTWITHSTANDING ANY RIGH T ARISING AS A CONSEQUENCE TO SUCH PAYMENT. 3.5 IN THE CASE OF THE BOMBAY HIGH COURT IN THE CAS E OF CIT VS LOKNETE BALASAHEB DESAI SSK LTD (2011) 243 CTR (BOM ) 181, IT WAS HELD THAT THE EXCISE DUTY LIABILITY CRYSTALLIZE S ON THE DATE OF CLEARANCE OF EXCISABLE GOODS AND NOT ON THE DATE OF MANUFACTURE, AND THEREFORE, EXCISE LIABILITY WAS NOT INCURRED BY THE ASSESSEE IN RESPECT OF UNSOLD SUGAR LYING IN STOCK AND COULD NO T BE INCLUDED IN THE VALUE OF CLOSING STOCK OF SUGAR. IT FURTHER HELD THAT THE EXPRESSION 'INCURRED BY THE ASSESSEE' IN SEC. 145A (B) IS FOLLOWED BY THE WORDS 'TO BRING THE GOODS TO THE PLACE OF IT S LOCATION AND CONDITION AS ON THE DATE OF VALUATION 1 . THUS THE EXPRESSION 'INCURRED BY THE ASSESSEE' RELATES TO THE LIABILITY DETERMINED AS TAX, DUTY, CESS OR FEE PAYABLE IN BRINGING THE GOOD S TO THE PLACE OF ITS LOCATION AND CONDITION OF THE GOODS. EXPLANATIO N TO SEC. 145A(B) MAKES IT FURTHER CLEAR THAT THE INCOME CHAR GEABLE UNDER THE HEAD' PROFIT AND GAINS OF BUSINESS' SHALL BE AD JUSTED BY THE AMOUNT PAID AS TAX OR DUTY. THEREFORE, THE EXPRESS ION 'INCURRED' IN SEC. 145A(B) MUST BE CONSTRUED TO MEAN LIABILITY ACTUALLY INCURRED BY THE ASSESSEE. IN THE CASE OF EXCISABLE GOODS MANUFACTURED AND LYING IN STOCK, EXCISE DUTY LIABIL ITY CRYSTALLIZING ON THE DATE OF CLEARANCE OF GOODS AND NOT ON THE DATE OF MANUFACTURE. CONSEQUENTLY, ASSESSEE CANNOT BE SA ID TO HAVE INCURRED THE EXCISE DUTY LIABILITY IN RESPECT OF EX CISABLE GOODS LYING IN STOCK TILL THE DATE OF CLEARANCE OF SUCH G OODS. 10 3.6 IN VIEW OF THE ABOVE FACTS, AND THE RATIO OF JU DICIAL CITATIONS MENTIONED ABOVE THE DISALLOWANCE MADE BY THE ASSESS ING OFFICER OF RS.34,66,768/- WAS RIGHTLY DELETED BY CIT(A). T HIS REASONED FACTUAL LEGAL FINDING OF CIT(A), NEED NO INTERFEREN CE FROM OUR SIDE, WHEREIN CIT(A) HAS DELETED THE ADDITION OF RS.34,66 ,768/- MADE BY ASSESSING OFFICER BY APPLYING THE PROVISIONS OF SEC.145A OF I.T ACT. 4. NEXT ISSUE IS WITH REGARD TO DISALLOWANCE MADE B Y ASSESSING OFFICER ON ACCOUNT OF CONTRIBUTION TOWARDS PROVIDEN T FUND AMOUNTING TO RS.28,47,463/-. ASSESSING OFFICER NOT ICED FROM THE DETAILS OF PAYMENT OF EMPLOYEES CONTRIBUTION TO PF THAT IN CERTAIN MONTHS PAYMENTS WERE REALIZED BEYOND DATE. THE DET AILS OF SAME ARE AS UNDER: S.NO. MONTH AMOUNT DEDUCTED AMOUNT PAID DUE DATE PAID ON REALIZED ON 1 APRIL 07 374801 374801 15.05.07 15.05.07 22.05.07 2 JUNE 07 273440 273440 15.07.07 16.07.07 21.07.07 3 JULY 07 256173 256173 15.08.07 16.08.07 23.08.07 4 AUG 07 304107 304107 15.09.07 17.09.07 22.09.07 5 OCT 07 323393 323393 15.11.07 15.11.07 21.11.07 6 NOV 07 322086 322086 15.12.07 15.12.07 22.1.08 7 DEC 07 320783 320783 15.1.08 15.1.08 22.1.08 8 JAN 08 336340 336340 15.2.08 15.2.08 22.2.08 9 FEB 08 336340 336340 15.3.08 15.3.08 25.3.08 4.1 ASSESSING OFFICER HELD THAT PAYMENTS MADE BY AS SESSEE OF EMPLOYEES CONTRIBUTION TO PF WAS BEYOND THE STIPULA TED PERIOD OF 5 DAYS GRACE ALLOWED UNDER PROVIDENT FUND ACCOUNT I N HIS NAME AS FOR 9 MONTHS MENTIONED ABOVE. SO, HE HELD THAT DEDUCTION AS MENTIONED IN SECTION 36(1)(VA) OF I.T ACT WAS NOT A VAILABLE TO THE ASSESSEE AND ACCORDINGLY, AS PER PROVISIONS OF SECT ION 2(24)(X) 11 AMOUNT TOTALING TO RS.28,47,463/- WHICH WAS TOTAL C ONTRIBUTION PAID BEYOND DUE DATE ADDED TO THE TOTAL INCOME. 4.2 THE MATTER WAS CARRIED BEFORE FIRST APPELLATE A UTHORITY, WHEREIN CLAIM OF ASSESSEE WAS ALLOWED AND THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVENUE. ON OTHER H AND, LEARNED AUTHORIZED REPRESENTATIVE SUPPORTED THE ORDER OF CI T(A) ON THE ISSUE. 4.3 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND M ATERIAL RECORD, WE FIND THAT CIT(A) HAS FOLLOWED APEX COURT DECISION IN THE CASE OF ALOM EXTRUSSIONS LTD 319 ITR 306 (SC), WHICH HAS BEEN FOLLOWED IN CIT VS. RAJ AGRO INDUSTRIES LTD (2 011) 334 ITR 122 (P&H) OBSERVED THAT PAYMENTS OF ESI CONTRIBUTIO N MADE BEFORE DUE DATE OF FILING RETURN COULD NOT BE DISAL LOWED U/S. 43B. OMISSIONS OF SECOND PROVISO TO 43B IN CURATIVE NATU RE AND WOULD APPLY RETROSPECTIVELY W.E.F. 1.4.1988. THUS, IN VI EW OF ABOVE RATIO DISCUSSED ABOVE PAYMENTS MADE BY ASSESSEE SHOULD BE ALLOWED, HELD BY CIT(A). THIS REASONED FACTUAL FINDING OF C IT(A) NO NEED OF INTERFERENCE FROM OUR SIDE. WE HELD THE SAME. 5. NEXT ISSUE IS WITH REGARD TO DISALLOWANCE OF RS .23,60,000/- TOWARDS STAMP DUTY PAYABLE. DURING ASSESSMENT PROC EEDINGS, IT WAS NOTICED BY ASSESSING OFFICER THAT UNDER CURRENT LIABILITIES AND PROVISIONS, DETAILS AS PER ANNEX-3 SHOWED AN AM OUNT OF RS.23,60,000/- AS CONVEYANCE DEED, STAMP DUTY PAYAB LE. ASSESSEE DURING THE ASSESSMENT PROCEEDINGS EXPLAINE D BEFORE ASSESSING OFFICER THAT AN AGREEMENT OF SALE HAD BEE N ENTERED INTO BETWEEN ASSESSEE AND M/S. KUKREJA DEVELOPMENT CORPO RATION IN THE YEAR 1989 WITH RESPECT TO PROPERTY AT BHANDUP, MUMBAI. AS PER AGREEMENT OF SALE, STAMP DUTY WAS TO BE BORNE I N RATIO OF 50:50 BETWEEN BUYER AND SELLER AND LIABILITY OF THE ASSESSEE WAS RESTRICTED TO A MAXIMUM OF RS.23,00,000/-. THE SAI D AMOUNT OF 12 STAMP DUTY WAS TO BE DUE AND PAYABLE WHEN M/S. KUKR EJA DEVELOPMENT CORPORATION COMPLETED REGISTRATION FORM ALITIES FOR SAID PROPERTY AT BHANDUP, MUMBAI. HENCE, THE AMOUN T HAS BEEN SHOWN PAYABLE. IT WAS ALSO STATED BY THE ASSE SSEE THAT AS PER TERMS OF THE AGREEMENT SAID AMOUNT WAS KEPT IN A ESI BANK ACCOUNT BY SOLICITOR OF THE COMPANY AND INTEREST RE CEIVED / ACCRUED WAS ACCOUNTED IN BOOKS OF ACCOUNTS. ASSESS ING OFFICER HELD THAT AMOUNT PAYABLE WAS IN DISPUTE AND THAT IT WAS DUE AND PAYABLE ONLY AFTER COMPLETION OF THE CERTAIN FORMAL ITIES BY PURCHASER OF THE PROPERTY. LIABILITY COULD NOT BE SAID TO BE ASCERTAINED OR ACCRUED LIABILITY AND THUS PROVISION CREATED BY THE ASSESSEE WAS NOT VALID AND HAD BECOME CONTINGENT IN NATURE. ACCORDINGLY, HE ADDED BOTH THE AMOUNT OF RS.23,60,0 00/- BEING LIABILITY IN DISPUTE AND WHICH HAD NOT BECOME DUE A ND PAYABLE U/S. 41(1) OF I.T ACT. 5.1 MATTER WAS CARRIED BEFORE FIRST APPELLATE AUTHO RITY, WHEREIN ASSESSEE WAS GRANTED RELIEF. SAME HAS BEEN OPPOSED BEFORE US BY REVENUE INTER ALIA STATED THAT CIT(A) WAS NOT JU STIFIED IN DELETING ADDITION IN QUESTION MADE IN ASSESSMENT U/ S. 41(1) OF I.T ACT INSTEAD OF CONFIRMING THE SAME. CIT(A) FAI LED TO APPRECIATE THAT CONVEYANCE STAMP DUTY PAYABLE OF RS.23,60,000/- RELATED TO THE YEAR 1989 AND FROM FA CT THAT MATTER WAS HANGING FOR 20 YEARS WOULD ESTABLISH THA T LIABILITY PROVIDED BY ASSESSEE IN THIS REGARD WAS NO LONGER P AYABLE. SO, ORDER OF CIT(A) ON ISSUE BE SET-ASIDE AND ASSESSING OFFICER ON THE ISSUE BE RESTORED. ON OTHER HAND, LEARNED AUTHORIZE D REPRESENTATIVE SUPPORTED THE ORDER OF THE CIT(A). 5.2 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND M ATERIAL RECORD, WE FIND THAT LIABILITY WHICH HAS BEEN SHOWN BY ASSESSEE OF STAMP DUTY PAYABLE PERTAINS TO THE TRANSACTION W HICH TOOK PLACE IN THE YEAR 1989 AND AS PER TERMS OF AGREEMEN T OF STAMP 13 DUTY BE SHARE AT 50:50 BASIS. THE AMOUNT OF RS.23, 60,000/- WAS SET-ASIDE BY ASSESSEE AND DEPOSITED WITH THE SOLICI TOR OF THE ASSESSEE COMPANY. AS THE BUYER HAD NOT REGISTERED THE SALE DEED, THE SAID AMOUNT HAS REMAINED PAYABLE AND WHIC H NOW BECAME SUBJECT MATTER OF THE APPEAL AS ASSESSING OF FICER HAS HELD THE SAID LIABILITY TO BE IN DISPUTE AND NOT PA YABLE BY ASSESSEE AND HAS TAXED THE AMOUNT U/S. 41(1) OF I.T ACT. THE SCOPE OF SECTION 41(1) IS TO BRING TAX ANY LOSS, EX PENDITURE OR TRADING LIABILITY ALLOWED IN EARLIER YEAR BUT, WHIC H IS RECOUPED BY REMISSION OR CESSATION OF SUCH LIABILITY IN LATER Y EAR. IT WOULD APPEAR THAT DEDUCTION IN EARLIER YEAR WAS PRIMARY C ONDITION FOR JURISDICTION U/S.41(1) WHEN SEPARATE AMOUNT WAS KEP T, THE CREDIT THEREIN, IF HAD BEEN TAXABLE AND HAD BEEN TAXED, RE MISSION OR REFUND WOULD GET TAXED U/S.41(1) SINCE THE SECTION BEGINS WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN THE ASSE SSMENT YEAR FOR ANY YEAR. SINCE NO DEDUCTION IN RESPECT OF STA MP DUTY HAD BEEN EARLIER CLAIMED OR ALLOWED, THE FINDING OF ASS ESSING OFFICER WAS NOT JUSTIFIED AS PER PROVISIONS OF SEC. 41(1) O F I.T ACT. IN CASE OF CIT VS G.P. INTERNATIONAL LTD. (2010) 325 ITR 25 (P&H) WHEREIN, THERE WAS AN OUTSTANDING LIABILITY OF RS.3 ,30,000/- TOWARDS ONE OF THE CREDITOR COMPANY. IT WAS HELD T HAT MERELY BECAUSE ASSESSEE FAILED TO PROVE THE EXISTENCE AND GENUINENESS OF SUCH LIABILITY, CESSATION OF SUCH LIABILITY COUL D NOT BE PRESUMED SO AS TO BRING IT TO TAX AS DEEMED INCOME U/S. 41(1 ) OF I.T ACT, WITH THE RESULT ADDITION WAS DELETED. IN SUCH CASE , LIABILITY WAS SHOWN CARRIED FORWARD ITEM OF CREDIT IN BALANCE SHE ET IN LATER YEAR IS NOT FOUND TO BE GENUINE. THE PROPER COURSE IS ONLY IS TO TAKE REASSESSMENT PROCEEDINGS FOR THE YEAR IN WHICH IT WAS CARRIED OUT AND NOT IN LATER YEAR, SINCE WHAT WAS N OT GENUINE IN LATER YEAR COULD NOT HAVE BEEN GENUINE IN THE YEAR IT WAS BOOKED AS LIABILITY. IN CASE OF CIT VS. SMT. SITA DEVI JU NEJA (2010) 325 ITR 593 (P&H) WHEREIN ASSESSEE HAVING SHOWN THE IMP UGNED LIABILITY IN ITS BALANCE SHEET AND FILED COPIES OF ACCOUNTS OF 14 SUNDRY CREDITORS SIGNED BY CONCERNED CREDITORS, SUC H LIABILITY COULD NOT BE TREATED TO HAVE CEASED BECAUSE THEY AR E OUTSTANDING FOR THIS YEAR AND THEREFORE, ADDITION MADE U/S. 41( 1) OF I.T ACT COULD NOT BE SUSTAINED, MORE SO WHEN THE ASSESSING OFFICER HAS FAILED TO ESTABLISH THAT DEDUCTION HAS BEEN ALLOWED IN RESPECT OF ANY TRADING LIABILITY OR THAT ASSESSEE HAS OBTAINED ANY BENEFIT CONCERNING SUCH LIABILITY BY WAY OF REMISSION OR CE SSATION THEREOF IN THE RELEVANT YEAR. IN VIEW OF ABOVE DISCUSSION, CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION MADE BY ASSESSIN G OFFICER U/S. 41(1) OF I.T ACT. THIS REASONED FACTUAL FINDING NE EDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 6. NEXT ISSUE IS WITH REGARD TO DISALLOWANCE OF RS. 14,53,562/- ON ACCOUNT OF PROVISION FOR LEAVE ENCASHMENT. DURI NG ASSESSMENT PROCEEDINGS, ASSESSING OFFICER NOTICED F ROM THE DETAILS OF PROVISIONS FOR EXPENSES, AN AMOUNT OF RS .37,40,460/- HAD BEEN PROVIDED TOWARDS LEAVE ENCASHMENT FOR PERI OD APRIL 2007 TO MARCH 2008 AND SAID AMOUNT WAS STATED BY AS SESSEE TO BE THE CLOSING BALANCE OF LEAVE ENCASHMENT PAYABLE AS ON 31.03.2008. HOWEVER, AS PER ACTUAL VALUATION OF LI ABILITY TOWARDS LEAVE ENCASHMENT AS WAS SUBMITTED BY ASSESSEE SUCH LIABILITY AS ON 31.03.2008 WAS ONLY RS.22,86,898/-. IN THE FINA L ACCOUNTS OF BALANCE SHEET OF ASSESSEE, PROVISION OF LEAVE ENCAS HMENT WAS MENTIONED AT RS.22,86,898/-. ASSESSING OFFICER THU S, HELD THAT PROVISION MADE BY ASSESSEE IN BOOKS OF ACCOUNTS TOW ARDS LEAVE ENCASHMENT OF RS.37,40,460/- WAS FAR IN EXCESS OF A SSESSEES LIABILITY DETERMINED BY AUTHENTIC ACTUARIAL VALUATI ON OF RS.22,86,898/-. ASSESSING OFFICER THUS, HELD THAT ASSESSEE HAS MADE AN EXCESS PROVISION OF RS.14,53,562/- (37,40,4 60 22,86,898) AND THAT EXCESS LEAVE ENCASHMENT PROVISI ON SO MADE BY ASSESSEE OF RS.14,53,562/- WAS NOT ACTUALLY LIAB ILITY OF ASSESSEE AND HENCE NOT PAYABLE AND ACCORDINGLY, AN AMOUNT OF RS.14,53,562/- WAS ADDED BACK TO THE INCOME OF THE ASSESSEE. 15 6.1 IN APPEAL, THE SAME WAS DELETED, WHICH HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVENUE, INTER ALIA STATED T HAT CIT(A) ERRED IN DELETING ADDITION OF RS.14,53,562/- MADE IN THE ASSESSMENT BY WAY OF DISALLOWING EXCESS LEAVE ENCASHMENT PROVISIO N MADE BY ASSESSEE, WHICH IS PROVEN FACT IN VIEW OF VALUATION OF LIABILITY AS ON 31.03.2008 MADE BY ASSESSING OFFICER. CIT(A) FA ILED TO APPRECIATE THAT EXCESS PROVISION TOWARDS LIABILITY WHICH WAS NO LONGER PAYABLE BY ASSESSEE AS ON 31.03.2008 HAD BEE N CORRECTLY ADDED IN THE ASSESSMENT. ACCORDINGLY ORDER OF CIT( A) ON THE ISSUE BE SET-ASIDE AND THAT OF THE ASSESSING OFFICE R BE RESTORED. ON OTHER HAND, LEARNED AUTHORIZED REPRESENTATIVE RE LIED ON THE DECISION OF CIT(A). 6.2 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND M ATERIAL ON RECORD, IT IS FOUND THAT EXPENDITURE DEBITED TO PRO FIT & LOSS ACCOUNT ON ACCOUNT OF LEAVE ENCASHMENT FOR THE YEAR UNDER CONSIDERATION OF RS.6,97,046/- WAS PRIMA FACIE CORR ECT AS IN THE TABLE GIVEN BY ASSESSING OFFICER IN THE ASSESSMENT ORDER WITH RESPECT TO YEAR WISE BREAK UP LEAVE ENCASHMENT DISA LLOWED. CIT(A) OBSERVED FROM THE NOTE ATTACHED TO THE TABLE THAT OUT OF AFORESAID AMOUNT, RS.4,40,495/- HAD BEEN PAID BY AS SESSEE AND BALANCE UNPAID AMOUNT OF RS.2,56,551/- HAD BEEN DIS ALLOWED. ASSESSING OFFICER HOWEVER, HELD THAT ENTIRE AMOUNT SHOWN AS LEAVE ENCASHMENT PAYABLE TO BE PROVISION MADE BY AS SESSEE FOR THE YEAR UNDER CONSIDERATION AND PAYABLE OF RS.37,4 0,458/- AS LEAVE ENCASHMENT PAYABLE AS ON 31.03.2008 HAS BEEN COMPARED WITH THE FIGURES OF FINAL ACCOUNTS, WHERE PROVISION WAS MENTIONED WAS AT RS.22,86,898/- AND THUS HAS WRONGLY INFERRED THE DIFFERENCE OF RS.14,53,562/- TO BE EXTRA PROVISION MADE BEING FOR IN EXCESS OF ASSESSEES LIABILITY. THE DETAILS AS NOTED FROM TABLE FURNISHED IN ASSESSMENT ORDER INDICATED THE ACCUMUL ATED LIABILITY ON ACCOUNT OF LEAVE ENCASHMENT PRIOR TO 3 1.03.2002 TO TILL A.Y. 2008-09. ASSESSEE AS HIMSELF DISALLOWED UNPAID LIABILITY 16 ON ACCOUNT OF LEAVE ENCASHMENT ON YEAR TO YEAR BASI S AS PER PROVISIONS OF SECTION 43B OF I.T ACT. IN CASE DISA LLOWANCE HAS TO BE MADE FOR ANY UNPAID AMOUNT, IT HAS TO BE MADE IN RESPECT OF ASSESSMENT YEARS TO WHICH SUCH AMOUNT PERTAIN TO AN D NOT IN ONE YEAR I.E. A.Y. 2008-09 AS DONE BY ASSESSING OFF ICER. IN CASE OF BHARAT EARTH MOVERS VS. CIT (2000) 245 ITR 428 ( SC), THE PROVISION FOR LEAVE ENCASHMENT WAS HELD TO BE DEDUC TIBLE AND HELD THE SAME TO BE CONTINGENT LIABILITY AND NOT AC CRUED LIABILITY. HOWEVER, THE DECISION OF HONBLE SUPREME COURT WAS ANNULLED BY THE AMENDMENT BRINGING PROVISION FOR LEAVE ENCASHME NT WITHIN THE PURVIEW OF SECTION 43B SO THAT IT IS LIABLE ONL Y ON PAYMENT. AS THE ASSESSEE HAS ALREADY PAID AN AMOUNT OF RS.4, 40,495/- AND DISALLOWED RS.2,56,551/- HIMSELF IN VIEW OF SEC TION 43B PROVISION, OUT OF THE TOTAL AMOUNT DEBITED OF RS.6, 97,046/- TO THE PROFIT & LOSS ACCOUNT, NO FURTHER DISALLOWANCE WAS CALLED FOR. ASSESSING OFFICERS ACTION OF TAKING INTO ACCOUNT T HE BOOK BALANCE OF UNPAID LIABILITY OF NUMBER OF YEARS AND COMPARIN G THE SAME WITH ACTUAL VALUATION FOR YEARS TOGETHER WAS NOT CO RRECT AND THEREFORE, NO DISALLOWANCE HAS MADE BY ASSESSING OF FICER WAS CALLED FOR. ACCORDINGLY, CIT(A) WAS JUSTIFIED IN D IRECTING THE ASSESSING OFFICER TO DELETE THE SAME, THIS REASONED FINDING NEED NO INTERFERENCE FROM OUR SIDE. WE UPHELD THE SAME. 7. IN THE RESULT, THE APPEAL FILED BY REVENUE IS DI SMISSED. PRONOUNCED IN THE OPEN COURT ON THE DAY 27 TH NOVEMBER, 2013. SD/- SD/- (R.K. PANDA) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 27 TH NOVEMBER 2013 GCVSR 17 COPY TO:- 1) DEPARTMENT 2) ASSESSEE 3) THE CIT(A)-II, PUNE 4) THE CIT-II, PUNE 5) THE DR, A BENCH, I.T.A.T., PUNE. 6) GUARD FILE //TRUE COPY// BY ORDER SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE