M/s. Mahendra Chemicals, Ahmedabad V. The Jt.CIT, Range-3, Ahmedabad

ITA 1424/AHD/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 6307 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 20-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Assessee Lawyers: S N DIVATIA
• Keywords: Principle of natural justice

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD LOZJH IZNHI DQEKJ DSFM;K] YS[KK LNL; ,OA EGKOHN IZL KN] LOZJH IZNHI DQEKJ DSFM;K] YS[KK LNL; ,OA EGKOHN IZL KN] LOZJH IZNHI DQEKJ DSFM;K] YS[KK LNL; ,OA EGKOHN IZL KN] LOZJH IZNHI DQEKJ DSFM;K] YS[KK LNL; ,OA EGKOHN IZL KN] U;KF;D LNL; DS LE{KA U;KF;D LNL; DS LE{KA U;KF;D LNL; DS LE{KA U;KF;D LNL; DS LE{KA BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.1424/AHD/2015 ( / ASSESSMENT YEAR : 2011-12) M/S. MAHENDRA CHEMICALS, B-1, 217 + 218/2, GIDC ESTATE, NARODA, AHMEDABAD 382 330 / VS. THE JCIT, RANGE 3, B-110, 1 ST FLOOR, PRATYAKSH KAR BHAWAN AMBAWADI, AHMEDABAD 380 015 ./ ./ PAN/GIR NO. : AABFM 4908 L ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI S. N. DIVATIA, AR / RESPONDENT BY : SHRI V. K. SINGH, SR. D.R. / DATE OF HEARING 23/11/2017 !'# / DATE OF PRONOUNCEMENT 15/01/2018 $% / O R D E R PER MAHAVIR PRASAD, JUDICIAL MEMBER : THIS APPEAL OF THE ASSESSEE RELATING TO ASSESSMEN T YEAR 2011-12 IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-7, AHMEDABAD DATED 10.03.2015 WHICH IS AR ISING OUT OF ORDER U/S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS, THE ACT) DATED 11.11.2013 FRAMED BY JCIT, RANGE-3, AHM EDABAD, VIDE APPEAL NO.CIT(A)-7/305/14-15. ITA NO.1424/AHD/2015 M/S. MAHENDRA CHEMICALS VS. JCIT ASST.YEAR 2011-12 - 2 - 2. ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEAL: 1.1 THE ORDER PASSED U/S.250 ON 10-03-2015 FOR A.Y. 201 1-12 BY CIT(A)-7, ABAD, UPHOLDING PARTLY THE ADDITION MADE U/S. 145A IS WHOLLY ILLEGAL, UNLAWFUL AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 1.2 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND OR O N FACTS IN NOT CONSIDERING FULLY AND PROPERLY THE EXPLANATIONS FUR NISHED AND THE EVIDENCE PRODUCED BY THE APPELLANT. 2.1 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND OR O N FACTS IN UPHOLDING THAT RECEIVABLES BY WAY OF VAT , EXCISE R EBATE AND MODVAT CREDIT WERE REQUIRED TO BE INCLUDED IN THE V ALUATION OF STOCK U/S. 145A OF THE ACT AND THEREFORE, BOTH OPEN ING STOCK AND CLOSING STOCK WERE REQUIRED TO BE ADJUSTED ACCORDIN GLY. 2.2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN CONFIRMING TH AT THE PROVISIONS OF SECTION 145A WERE ATTRACTED AND THE R ECEIVABLES BY WAY OF VAT, EXCISE REBATE AND MODVAT CREDIT WERE RE QUIRED TO BE INCLUDED IN THE VALUATION OF CLOSING STOCK AND O PENING STOCK. 3.1 WITHOUT PREJUDICE TO ABOVE, AND IN THE ALTERNATIVE, IN CASE THE PROVISIONS OF SECTION 145A ARE HELD TO BE ATTRACTED , THE ID. AO OUGHT TO HAVE HELD THAT THE OPENING STOCK AS ON 1.4 .2011 SHOULD BE INCREASED ACCORDINGLY. 3. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- THE APPELLANT IS A PARTNERSHIP FIRM AND ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF DRUGS. 2.2 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E AO NOTICED THAT THE APPELLANT HAD SHOWN IN ITS BALANCE SHEET VAT AN D EXCISE RECEIVABLE BUT THE SAME WERE NOT INCLUDED IN THE VALUE OF CLOS ING STOCK AS REQUIRED U/S.145A. THE APPELLANT BY A DETAILED SUBMISSION AN D OTHER EVIDENCES VIDE REPLY DATED 30/12/2013 EXPLAINED THAT IN VIEW OF THE METHOD OF ACCOUNTING FOLLOWED BY IT AS PER ACCOUNTING STANDAR D PRESCRIBED BY ICAI ITA NO.1424/AHD/2015 M/S. MAHENDRA CHEMICALS VS. JCIT ASST.YEAR 2011-12 - 3 - IN AS-2, THE EFFECT OF UNAVAILED RECEIVABLE BY WAY OF VAT, EXCISE REBATE AND MODVAT CREDIT WAS REVENUE NEUTRAL. HOWEVER, AO CONCLUDED THAT THE PROVISIONS OF SECTION 145A MANDATORY REQUIRED THE A SSESSEE TO INCLUDE THE SAID RECEIVABLE IN THE VALUATION OF CLOSING STO CK. AND, ACCORDINGLY ADDITION OF RS.18,98,517/- WAS MADE. 2.3 AGAINST THE SAID ORDER APPELLANT PREFERRED FIRST STATUTORY APPEAL BEFORE LD.CIT(A) WHO HAS DIRECTED AO TO MAKE ADJUST MENT TO THE VALUATION OF STOCK IN ACCORDANCE WITH THE DECISION OF MAHAVIR ALUMINUM CORPORATION (297 ITR 77) I.E. BOTH THE OPENING STOC K AND CLOSING STOCK. 3. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMP UGNED ORDER. THE APPELLANT IS A PARTNERSHIP FIRM AND ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF DRUGS. IT FILED ITS RETUR N OF INCOME FOR AY. 2011-12 DECLARING TOTAL INCOME OF RS.60,81,210/-. A O CONCLUDE THAT THE PROVISIONS OF SECTION 145A MANDATORY REQUIRED THE A SSESSEE TO INCLUDE THE SAID RECEIVABLE IN THE VALUATION OF CLOSING STO CK. AND, ACCORDINGLY ADDITION OF RS.18,98,517/- WAS MADE. 4. IN APPEAL, LD.CIT(A) DIRECTED TO MAKE ADJUSTMENT IN ACCORDANCE WITH THE DECISION OF DELHI HIGH COURT IN THE CASE O F MAHAVIR ALUMINUM CORPORATION 297 ITR 77(DELHI). AS PER THE AO, ASSES SEE IS CONSISTENTLY FOLLOWING THE EXCLUSIVE METHOD AND HIS CASE IS TAX NEUTRAL. WE SEND IT BACK TO THE FILE OF THE ASSESSING OFFICER, WHO WILL VERIFY THE METHOD AND ITA NO.1424/AHD/2015 M/S. MAHENDRA CHEMICALS VS. JCIT ASST.YEAR 2011-12 - 4 - ALSO TO SEE WHETHER SAME IS TAX NEUTRAL OR NOT. THE REAFTER, CALCULATE THE TAX AND ACCORDINGLY DECIDE THE MATTER AS PER LAW. 4. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 15 / 01 /201 8 SD/- SD/- IZNHI DQEKJ DSFM;K IZNHI DQEKJ DSFM;K IZNHI DQEKJ DSFM;K IZNHI DQEKJ DSFM;K EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN YKS[KK LN YKS[KK LN YKS[KK LN YKS[KK LNL; L; L; L; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; (PRADIP KUMAR KEDIA) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 15/01/2018 PRITI YADAV, SR.PS !'#$ %$' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & '( ) / CONCERNED CIT 4. ) () / THE CIT(A)-7, AHMEDABAD 5. ,-. //'( , '(# , 12$&$ / DR, ITAT, AHMEDABAD 6. .34 5 / GUARD FILE. & ' / BY ORDER, , / //TRUE COPY// (/' )* ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION 11/01/2018 (DICTATION-PAD 2 PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 12/01/2018 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER