Asian Tubes Ltd., Ahmedabad V. The Dy.CIT.,Circle-1, Ahmedabad

ITA 1358/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6389 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 08-06-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 27-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAKASH DUBEY
• Section: 145; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI G. D. AGARWAL, HONBLE VICE PRESIDENT AND SHRI D. K. TYAGI, JUDICIAL MEMBER I.T.A. NO. 1358/ AHD/2009 (ASSESSMENT YEAR 2003-04 ) ASIAN TUBES LTD., 101, SAKAR III, OPP: OLD HIGH COURT, AHMEDABAD VS. DCIT, CIRCLE 1, AHMEDABAD PAN/GIR NO. : AABCA2797E (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI GAURAV NAHTA, AR RESPONDENT BY: SHRI PRAKASH DUBEY, SR. DR O R D E R PER SHRI D. K. TYAGI, JM: THIS APPEAL BY THE ASSESSEE HAS BEEN PREFERRED AGA INST THE ORDER DATED 02.01.2009 OF CIT(A) VI, AHMEDABAD FOR THE ASSESSME NT YEAR 2003-04. THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS: 1) THE LD. CIT(A) V AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN PASSING APPELLATE ORDER DATED 02.01.2009 FOR ASSESS MENT YEAR 2003-04 IN THE CASE OF APPELLANT B HOLDING THAT THE A.O. WAS JUSTIFIED IN ISSUING NOTICE U/S 148 FOR REOPENING T HE ASSESSMENT. 2) THE LD. CIT(A) ALSO ERRED IN LAW AND ON FACTS IN CO NFIRMING THE ADDITION OF RS.14,09,510/- ON ACCOUNT OF NON INCLUS ION OF EXCISE DUTY IN THE CLOSING STOCK. I.T.A.NO.1358/AHD/2009 2 2. AT THE TIME OF HEARING NO SUBMISSIONS WERE MADE BY THE LD. A.R. OF THE ASSESSEE IN RESPECT OF GROUND NO.1 AND HENCE TH E SAME IS DISMISSED AS NOT PRESSED. 3. THE 2 ND GROUND RELATES TO THE ADDITION OF RS.14,09,510/- O N ACCOUNT OF NON INCLUSION OF EXCISE DUTY IN THE CLOSING STOCK. THE ASSESSEE IS CARRYING ON THE BUSINESS OF MANUFACTURING OF MS AND GI TUBES AND PIPES AND ALSO DEALS IN TRADING OF HR COILS. DURING THE ASSESSMEN T PROCEEDING THE A.O. OBSERVED THAT THE EXCISE DUTY OF RS.14,09,510/- (16 % OF RS.88,09,442/-) WAS NOT INCLUDED IN THE CLOSING STOCK AS PER SECTION 14 5A OF THE INCOME TAX ACT, 1961. THE ASSESSEE WAS ISSUED A SHOW CAUSE NOTICE PROPOSING THE ADDITION OF THE ABOVE MENTIONED AMOUNT. AFTER TAKING INTO C ONSIDERATION THE SUBMISSION OF THE ASSESSEE, THE A.O. WAS OF THE VIE W THAT THE EXCISE DUTY WAS LIABLE TO BE INCLUDED IN CLOSING STOCK AS PER S ECTION 145A OF THE INCOME TAX ACT, 1961, THEREFORE, THE SAME WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 3. BEFORE LD. CIT(A), IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE THAT BOOKS OF ACCOUNTS OF THE ASSESSEE WERE GOT AUDITED UNDER THE PROVISIONS OF COMPANIES ACT AS WELL AS NECESSARY AUDIT REPORT WAS ALSO OBTAINED UNDER THE PROVISIONS OF SECTION 44AB OF THE INCOME TAX ACT, 1 961. THE ASSESSEE HAD CONSISTENTLY FOLLOWED THE ACCOUNTING PRACTICE OF NO T INCLUDING EXCISE DUTY IN THE VALUATION OF THE CLOSING STOCK SINCE IT HAD ACCOUNTED FOR PURCHASES NET OF EXCISE DUTY, WHICH IS RECOGNIZED AND MANDATORY A S PER THE ACCOUNTING STANDARDS ISSUED BY THE INSTITUTE OF CHARTERED ACCO UNTANTS OF INDIA. THE EXCISE DUTY BEING COLLECTION ON BEHALF OF THE GOVER NMENT WAS ACCOUNTED FOR SEPARATELY AND THE SAID ACCOUNT WAS CREDITED TO EXC ISE DUTY COLLECTED THROUGH SALE BILLS AND SIMILARLY ACCOUNT WAS DEBITED FOR PA YMENTS AND CENVAT BE TAKEN. AS THE PURCHASES WERE ACCOUNTED FOR ON NET BASIS EXCLUDING THE I.T.A.NO.1358/AHD/2009 3 EXCISE DUTY OF CLOSING STOCK HAS TO BE VALUED ON NE T BASIS. IT WAS FURTHER SUBMITTED THAT IF EXCISE DUTY WAS INCLUDED IN THE V ALUATION OF THE CLOSING STOCK THEN SIMILAR EFFECT WAS REQUIRED TO BE GIVEN TO THE VALUATION OF OPENING STOCK AS HELD BY THE HON'BLE HIGH COURT OF DELHI IN THE C SE OF CIT VS MAHAVIR ALUMINIUM LTD. 297 ITR 77. IF THE CLOSING STOCK IS VALUED ON GROSS BASIS, THE VALUE IS INCREASED ACCORDINGLY THEN VALU E OF OPENING STOCK FOR THE ASSESSMENT YEAR 2004-05 WILL BE REQUIRED TO BE RECO MPUTED AND IT WILL LEAD TO RECOMPUTATION OF ALL THE SUBSEQUENT YEARS. AS T HIS WOULD NOT EFFECT ON THE PROFITS EVEN IF EXCISE DUTY IS INCLUDED IN THE VALU ATION OF STOCK, THE ADDITION MADE BY THE A.O. DESERVES TO BE DELETED. HOWEVER, LD. CIT(A) DID NOT ACCEPT THESE SUBMISSIONS OF THE ASSESSEE AND CONFIR MED THE ACTION OF THE A.O. FURTHER AGGRIEVED, NOW THE ASSESSEE IS IN APP EAL BEFORE US. 3. AT THE TIME OF HEARING, BOTH THE PARTIES AGREED THAT THE ISSUE IS NOW SQUARELY COVERED BY THE DECISION OF HONBLE JURISDI CTIONAL HIGH COURT IN THE CASE OF ACIT VS NARMADA CHEMATUR PETROCHEMICALS LTD . 327 ITR 369 (GUJ.), WHEREIN FOLLOWING WAS HELD: HELD, DISMISSING THE APPEAL, THAT THE TRIBUNAL W AS JUSTIFIED IN EXCLUDING THE EXCISE DUTY AT THE TIME OF VALUATION OF THE CLOSING STOCK OF FINISHED GOODS AT THE END OF T HE ACCOUNTING PERIOD BECAUSE : (A) NO DEDUCT ION FOR THE LIABILITY HAD BEEN CLAIME D BY THE ASSESSEE. THE EXCISE DUTY PAYABLE ON THE FINISHED G OODS LYING IN THE CLOSING STOCK AT THE END OF THE RELEVANT ACCOUN TING PERIOD HAD BEEN PAID IN THE SUBSEQUENT YEAR BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME AND THAT WAS HOW THE AMOUNT WAS AVAILABLE CONSIDERING THE FACT THAT THE ASSESSMENT HAD BEEN FRAMED AND THE SHOW-CAUSE NOTICE WAS ISSUED MUCH AF TER THE CLOSE OF THE ACCOUNTING YEAR; (B) THE ASSESSING OFFICER HAD NOT HAD RECOURSE TO S UB-SECTION (3) OF SECTION 145 OF THE ACT. THE ASSESSEE WAS FOL LOWING THE MERCANTILE SYSTEM OF ACCOUNTING BUT IT WAS NOT THE CASE OF THE ASSESSING OFFICER THAT THE ASSESSING OFFICER WAS NO T IN A I.T.A.NO.1358/AHD/2009 4 POSITION TO DEDUCE TRUE PROFITS OF THE YEAR UNDER C ONSIDERATION. SUCH DUTY OF CENTRAL EXCISE IF ADDED TO ENHANCE THE VALUE OF CLOSING STOCK WOULD RESULT IN ENHANCED OPENING STOC K ON THE FIRST DAY OF THE NEXT ACCOUNTING PERIOD, NAMELY, AP RIL 1, 1997. SO THE NEXT YEAR'S PROFITS WOULD GET DEPRESSED ACCO RDINGLY. OVER A PERIOD OF TIME THE WHOLE EXERCISE WOULD EVEN OUT, IN OTHER WORDS, BE REVENUE NEUTRAL. AT THE SAME TIME W HILE DISTURBING THE VALUE OF THE CLOSING STOCK THE ASSES SING AUTHORITY COULD NOT CHANGE THE METHOD OF ACCOUNTING REGULARLY EMPLOYED. (C) THE ASSESSMENT YEAR BEING 1997-98 THE PROVISION S OF SECTION 145A OF THE ACT INSERTED BY THE FINANCE (NO . 2) ACT, 1998 WITH EFFECT FROM APRIL 1, 1999 COULD NOT BE IN VOKED. 4. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF HON BLE JURISDICTIONAL HIGH COURT, THE ADDITION MADE BY THE A.O. AND CONFI RMED BY THE LD. CIT(A) IS HEREBY DELETED. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. 6. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH JUNE 2011. SD./- SD./- (G. D. AGARWAL) (D.K.TYAGI) VICE PRESIDENT JUDICIAL MEMBER AHMEDABAD; DATED :17 TH JUNE, 2011 SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD 6. THE GUARD FILE I.T.A.NO.1358/AHD/2009 5 1. DATE OF DICTATION. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER.. OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S. 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. ..