Bosch Rexroth (India) Limited, Ahmedabad V. The Dy.CIT(OSD), Range-1, Ahmedabad

ITA 1542/AHD/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8461 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 13-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 29-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VASUNDHARA UPMANYU
• Keywords: Cost of acquisition
• Section: 143(3); 145; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH BEFORE: SHR I S. S. GODARA , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER BOSCH REXROTH (INDIA) LTD. 206/2, 207, 214/P, SANAD VIRAMGAM HIGHWAY, MOUJE IYAVA, TALUKA SANAND, AHMEDABAD - 382170 PAN: AAACM9898F (APPELLANT) VS DEPUTY COMMISSIONER OF INCOME TAX (OSD), RANGE - 1, 3 RD FLOOR, P RATYAKSH KAR BHAVAN, OPP. POLYTECHNIC COLLEGE, AMBAVADI, AHMEDABAD - 380015 (RESPONDENT) REVENUE BY : S H RI SANJAY R. SHAH, A . R. ASSESSEE BY: SMT VASUNDHARA UPMANYU , D .R. DATE OF HEARING : 30 - 01 - 2 018 DATE OF PRONOUNCEMENT : 11 - 04 - 2 018 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS ASSESSEE S APPEAL FOR A.Y. 2009 - 10 , ARIS ES FROM ORDER OF THE CIT(A) - 1 , AHM EDABAD DATED 20 - 03 - 2015 , IN PROCEEDINGS UNDER SECTION 263 OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE ASSE SSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1. THE ORDER PASSED BY THE LEARNED CIT UNDER SECTION 263 OF THE INCOME - TAX ACT, 1961 (THE ACT) IS ERRONEOUS ON FACTS AND CONTRARY TO THE PROVISIONS OF LAW AND THEREFORE REQUIRES TO BE QUASHED. IT IS SUBMITTE D THAT IT BE SO HELD NOW. 1.1. THE LEARNED CIT ERRED ON FACTS AND IN LAW IN HOLDING THAT THE ORDER DATED 18.03.2013 PASSED BY THE ASSESSING OFFICER U/S 143(3) R.W.S. 144C OF THE ACT WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND THEREBY SETTI NG ASIDE THE AFORESAID ORDER AND I T A NO . 1542 / A HD/20 15 A SSESSMENT YEAR 200 9 - 10 I.T.A NO. 1542 /AHD/20 15 A.Y. 2009 - 10 PAGE NO BOSCH REXROTH (INDIA) LIMITED VS. DCIT 2 DIRECTING THE ASSESSING OFFICER ('AO') TO REFRAME THE ASSESSMENT. IT IS SUBMITTED THAT IT BE SO HELD NOW. 1.2. THE LEARNED CIT ERRED ON FACTS AND IN LAW IN HOLDING THAT THE ASSESSMENT ORDER PASSED BY THE AO WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE DESPITE THE FACT THAT ALL INFORMATION WITH RESPECT TO POLICIES AND METHOD OF ACCOUNTING VIDE THE ANNUAL ACCOUNTS OF THE COMPANY WERE DULY FURNISHED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THAT ASSESSME NT ORDER WAS FRAMED AFTER DUE CONSIDERATION OF THE DETAILS AND DUE APPLICATION OF MIND. IT IS SUBMITTED THAT IT BE SO HELD NOW. 1.3. THE LEARNED CIT FAILED TO APPRECIATE THAT THE VIEW TAKEN BY THE APPELLANT AND UPHELD BY THE LEARNED AO IN ASSESSMENT ORDER WAS A POSSIBLE VIEW DULY SUPPORTED BY JUDICIAL PRECEDENTS AND HENCE THE PROVISIONS OF SECTION 263 OF THE ACT HAD NO APPLICABILITY IN THE FACTS OF THE CASE. IT IS SUBMITTED THAT IT BE SO HELD NOW AND THE ORDER PASSED UNDER SECTION 263 OF THE ACT BE QUASHED. 2. THE LEARNED CIT FAILED TO APPRECIATE THAT WHETHER APPELLANT HAS FOLLOWED INCLUSIVE METHOD OR EXCLUSIVE METHOD IT IS REVENUE NEUTRAL AND HENCE NO PREJUDICE IS CAUSED TO THE DEPARTMENT. IT IS SUBMITTED THAT IT BE SO HELD NOW AND ORDER PASSED U/S 263 OF THE ACT BE QUASHED. 2.1. THE LEARNED CIT HAS ERRED IN LAW AND ON FACTS IN ADDING BACK THE CLOSING BALANCE OF CENVAT CREDIT OF RS.81, 94, 674/ - UNDER SECTION 145 A OF THE ACT. THE DIFFERENCE BETWEEN THE CLOSING AND OPENING BALANCE OF CENVAT CREDIT IS NOTHI NG BUT DEBIT BALANCE OF ADVANCE PAYMENTS OF CENVAT WHICH IS ALREADY REFLECTED ON THE ASSET SIDE OF BALANCE SHEET. IT IS SUBMITTED IT BE SO HELD NOW. IT IS THEREFORE PRAYED THAT THE ORDER PASSED BY LEARNED CIT U/S. 263 OF THE ACT BE QUASHED. 3. ALL T HE GROUNDS OF APPEAL ARE INTER - CONNECTED TO THE SAME ISSUE, THEREFORE, FOR THE SAKE OF CONVENIENCE , THEY ARE DECIDED TOGETHER AS UNDER: - 4. IN THIS CASE, RETURN OF INCOME DECLARING INCOME OF RS. 39 , 90 , 15 , 597/ - WAS FILED ON 26 TH SEPTEMBER, 2009. THE ASSES SMENT U/S. 143(3) R.W.S. 144C WAS COMPLETED ON 21 ST MARCH, 2013 AT TOTAL INCOME OF RS. 44 , 00 , 16 , 636/ - . SUBSEQUENTLY, THE LD. PR. CIT HAS ISSUED SHOW CAUSE NOTICE U/S. 263(1) OF THE ACT STA T ING THAT ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT WITHOUT P ROPERLY EXAMINING THE APPLICABILITY OF SECTION 14 5 A OF TH E ACT . T HERE A F ER , A NOTICE DATED 1 9 TH NOV, 2014 WAS ISSUED MAINLY STATING THAT THE ASSESSEE HAS FOLLOWED EXCLUSIVE METHOD OF ACCOUNTING WITHOUT INCLUDING THE ELEMENT OF TAX/DUTIES/CESS ETC. THOUGH I T HAD FOLLOWED EXCLUSIVE METHOD OF ACCOUNTING , THE CLOSING BALANCE OF CENVAT CREDIT RELATING TO THE RELEVANT PREVIOUS YEAR OF RS. 81 , 94 , 674/ - WAS REQUIRED TO BE ADDED IN TERMS OF SECTION 14 5 A OF THE ACT FOR COMPUTATION OF INCOME. THE BRIEF FACTS OF THE CA SE IS THAT T HE ASSESSEE HAS BEEN ENGAGED IN THE MANUFACTURING OF HYDROLIC EQUIPMENT S AND PARTS AND IT HAS FOLLOWED THE I.T.A NO. 1542 /AHD/20 15 A.Y. 2009 - 10 PAGE NO BOSCH REXROTH (INDIA) LIMITED VS. DCIT 3 EXCLUSIVE METHOD OF ACCOUNTING . IN THE FORM NO. 3CD OF IT RULE, 1962 FILED WITH THE INCOME TAX RETURN FOR THE RELEVANT PERIOD , THE ASSE SSEE HAS SHOWN UN - UTILIZED CENVAT CREDIT IN THE BALANCE SHEET AMOUNTING TO RS. 81 , 94 , 674/ - . THE LD. PR. CIT WAS OF THE VIEW THAT IN TERMS OF THE PROVISION S OF SECTION 14 5 A OF THE IT ACT, THE CLOSING BALANCE OF RS. 81 , 94 , 67 4 / - OF CENVAT CREDIT WAS REQUIRED TO BE SHOWN AS PART OF CLOSING STOCK. THEREFORE, HE STA T ED THAT THE GROSS PROFIT FOR THE RELEVANT PERIOD WAS SHOWN L E SS OF THE EXTENT OF R S. 81 , 94 , 674/ - . IN RESPONSE TO THE SHOW CAUSE NOTICE , THE ASSESSEE HAS EXPLAINED THAT T HE ASSESSEE COMPANY FOLLOWS E XCLUSIVE METHOD OF ACCOUNTING OF CENVAT CREDIT WHEREBY COST OF PURCHASE OF RAW MATERIAL, PACKA GING MATERIAL AND STOR E S OF SPARE IS ACCOUNTED FOR NET OF CENVAT CREDIT AVAILABLE. CONSEQUENTLY, THE VALUE OF CLOSING STOCK OF RAW MATERI AL, STORES OF SPA RE DOE S NOT INCLUDE EXCISE DUTIES PAID ON PURCHASE OF THE S A ME FOR WHICH CENVAT CREDIT IS CLAIMED BECAUSE THE S AME IS NOT DEBITED TO THE EXPENSES ACCOUNT BUT THE SAME APPEARS AS ADVANCE PAYMENT OF CENVAT IN THE BALANCE SHEET. THE LD. CIT(A) HAS NOT ACCEPTED THE EXPLA NATION OF TH E ASSESSEE AND OBSERVED THAT ASSESEE HAS FOLLOWED EXCLUSIVE ME THOD OF ACCOUNTING AS AGAINST INCLUSIVE MANDATED U/S. 145A OF THE ACT .T HE LD. PR. CIT HAS FURTHER STATED THAT PROVISION OF SECTION IS VERY CLEAR IN THIS REGARD WHICH MAKE S MANDATORY FOR THE ASSESSEE T O INCLUDE ANY TAX, DUTY, CESS O R FESS IN I T S ALL VALUATION MAINLY PURCHASE, SALES AND INVENTORY. IN VIEW OF THE SE FACTS, THE PR. CIT(A) HELD THAT THE ASSESSING OFFICER HAS SIMPLY ACCEPT E D THE CLAIM OF THE ASSESSE E AND FAILED TO MAKE ANY INQUIRY AS REQUIRED IN THE CIRCUMSTANCES O F THE CASE. THEREFORE, THE PR. CIT HAS CONCLUDED THAT THE ASSESSING OFFICER WHILE FINALIZING THE ASSESSMENT IN REFERENCE HAS NOT APPLIED THE PROVISION OF SECTION 145A OF T H E ACT PROPERLY WHICH RESULTE D IN ASSESSMENT AS ERRONEOUS AND PREJUDICIAL TO T HE INTEREST OF THE REVENUE AS ENVISAGED IN SECTION 263 OF THE ACT. THEREFORE, HE HELD THAT ASSESSMENT PASSED U/S. 143(3) R.W.S. 144A OF THE ACT DATED 18 TH MARCH, 2013 WAS ERRONEOUS AND PREJUDICIAL TO THE IN TEREST O F THE REVENUE. CONSEQUENTLY, HE CANCELLED THE SAID ASSESSMENT ORDER AND DIRECTED THE ASSESSING OFFICER TO MAKE FRESH ASSESSMENT OF TOTAL INCOME OF THE ASSESSEE I.T.A NO. 1542 /AHD/20 15 A.Y. 2009 - 10 PAGE NO BOSCH REXROTH (INDIA) LIMITED VS. DCIT 4 FOR THE ASSESSMENT YEAR UNDER CONSIDERATION . DURING THE COURSE OF APPELLATE PROCEEDING S BEFORE US, LD. COUNSEL HAS SUBMITTED PAPER BOOK CONTAINING SUBMISSION MADE BEFORE THE PR. CIT , COPY OF TAX AUDIT REPORT, COPY OF STATEMENT OF TOTAL INCOME, COPIES OF SUBMISSION AND DETAIL FILED BEFORE THE ASSESSING OFFICER, COPIES OF JUDICIAL PRONOUNCEME NT S ETC . HE HAS FURTHER CONTENDED THAT THE LD. PR. CIT HAS ERRED IN PASSING ORDER U/S. 263 AS THE ASSESSEE COMPANY HAS FURNISHED ALL THE DETAILS ALONG WITH THE FINANCIAL AND TAX AUDIT REPORT ETC. BEFORE THE ASSESSING OFFICER AND HE HAS FRAMED THE ASSESSM ENT AFTER TAKING INTO CONSIDERATION ALL THE RELEVANT MATERIAL FURNISHED BY THE ASSESSEE. ON THE OTHER HAND, LD . DEPARTMENTAL REPRESENTATIVE R ELIED ON THE ORDER OF PR. CIT . 5. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD CAREFULLY. IT IS UNDISPUTED FACT THAT ASSESSEE - COMPANY HAS FOLLOWED EXCLUSIVE METHOD FOR THE ACCOUNTING OF CENVAT CREDIT WHEREBY COST OF PURCHASES OF RAW MATER IAL, PACKING MATERIAL, AND STORE AN D SPARE IS ACCOUNTING FOR NET OF CENVAT CREDIT AVAILABLE . CONSEQUENTL Y, THE VALUE OF CLOSING OF RAW MATERIAL, STORE AND SPARES DOES NOT INCLUDE THE EXCISE DUTIES PAID OR PURCHASE S OF THE SAME FOR WHICH CENVAT CREDIT IS CLAIMED BECAUSE THE SAME IS NOT DEBITED TO EXPENSE ACCOUNT AND THE SAME APPEARS AS ADVANCE PAYMENT OF CE NVAT IN THE BALANCE SHEET. WE NOTICED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS , ASSESSEE HAS SUBMITTED A LETTER D A TED 19 TH JULY, 2011 AS CONTAINED IN THE PAPER BOOK AT PAGE NO. 65 & 66 DEMONSTRATING THE COMPLETE INFORMATION IN RESPECT OF ACCOUNT ING OF EXCISE DUTIES IN RESPECT OF SECTION 145 OF THE ACT .. T HE DETAIL OF ANNEXURE E IS REPRODUCED AS UNDER: - SR.NO PARTICULARS INCREASE IN PROFIT RS. DECREASE IN PROFIT RS. 1 INCREASE IN COST OF OPENING STOCK OF RAW MATERIALS AND STORES & SPARES ON INCLUSION OF EXCISE DUTY ON WHICH CENVAT CREDIT IS AVAILABLE/AVAILED. 38,382,503 2 INCREASE IN PURCHASE COST OF RAW MATERIAL STORES ETC. ON INCLUSION OF EXCISE DUTY ON WHICH CENVAT CREDIT IS AVAILABLE / AVAILED 157,454,411 I.T.A NO. 1542 /AHD/20 15 A.Y. 2009 - 10 PAGE NO BOSCH REXROTH (INDIA) LIMITED VS. DCIT 5 3 INCREASE IN SALES OF FINISHED GOODS ON INCLUSION ON EXCISE DUTY 160,111,721 4 EXCISE DUTY PAID ON THE SALE OF FINISHED GOODS AS A RESULT OF IT'S INCLUSION IN SALES 160,111,721 5 INCREASE IN CLOSING STOCK OF RAW MATERIALS AND STORES & SPARES ETC. ON INCLUSION OF EXCISE DUTY ( REFER NOTE BELOW) 53,542,235 6 ACCOUNTING OF CENVAT CREDIT AVAILED AND UTILIZED ON RAW MATERIALS AND STORES CONSUMED IN PAYMENT OF EXCISE DUTY ON FINISHED GOODS ACCOUNTED ON THE BASIS OF RAW MATERIAL AND STORES CONSUMED 142,294,679 TOTAL 355,948,635 355,948,635 ON PERUSAL OF THE ABOVE INFORMATION, WE OBSERVED THAT ASSESSEE HAS GIVEN COMPLETE ACCOUNTS OF TREATMENT OF EXCISE DUTIES AND CENVAT CREDIT IN ITS ACCOUNT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE ASS ESSING OFFICER HAS NOT FOUND ANY DEFECT IN THE TREATMENT OF EXCISE DUTIES PROVIDED BY THE ASSESSEE . THE P R. CIT HAS NOT DEMONSTRATED HOW THE ABOVE ACCOUNTING TREATMENT ADVERSELY AFFECT THE FINANCIAL RESULT AND ALSO NOT POINTED OUT ANY DEFICIENCY IN INQ UIRY AND KIND OF VERIFICATION REQUIRED TO BE MADE BY THE ASSESSING OFFICER. IN VIEW OF THE ABOVE WE ARE NOT INCLINED WITH THE OBSERVATION P R. CIT, THEREFORE, THE APPEAL OF ASSESSEE IS ALLOWED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 11 - 04 - 201 8 SD/ - SD/ - ( S.S. GODARA ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 11 /04 /2018 / COPY OF ORDER FORWARDED TO: - I.T.A NO. 1542 /AHD/20 15 A.Y. 2009 - 10 PAGE NO BOSCH REXROTH (INDIA) LIMITED VS. DCIT 6 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,