The Dy. Commr. of Income Tax, Circle-1(1), RAJKOT-GUJARAT V. M/s. Rolex Rings Pvt. Ltd., RAJKOT-GUJARAT

ITA 175/RJT/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1255 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 06-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D R CHHATRE
• Assessee Lawyers: RD LALCHANDANI
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT [CONDUCTED THROUGH E-COURT AT AHMEDABAD] BEFORE SHRI S.S. GODARA JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ ././ ./ ITA NOS. 175 & 176 WITH CROSS OBJECTION NOS. 42 & 43/RJT/2015 DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE 1(1), RAJKOT VS M/S. ROLEX RINGS PVT LTD, GONDAL ROAD, VILL : KOTHARIA, RAJKOT PAN: AACCR 3790 B / // / (APPELLANT) / // / (RESPONDENT) & CROSS-OBJECTOR REVENUE BY : SHRI D.R. CHHATRE, SR DR ASSESSEE(S) BY : SHRI R.D. LALCHANDANI, ADVOCATE / // / DATE OF HEARING : 30/06/2016 / // / DATE OF PRONOUNCEMENT: 11/07/2016 / // / O R D E R PER BENCH :- THESE TWO REVENUES APPEALS AND ASSESSEES CROSS-O BJECTIONS FOR AY 2005-06 AND 2007-08 ARISE FROM SEPARATE ORDERS O F THE CIT(A)-1, RAJKOT DATED 16.02.2015 AND 18.02.2015, IN APPEAL N OS. CIT(A)- I/RJT/0081/13-14 AND CIT(A)-I/RJT/0080/13-14, DELET ING ADDITION OF RS.74,73,053/- AND RS.1,47,38,984/- MADE BY THE ASS ESSING OFFICER ON ACCOUNT OF UNUTILIZED CENVAT CREDITS BEING TREATED AS LATTERS INCOME, IN PROCEEDINGS U/S 143(3) R.W.S. 147 OF THE INCOME- TAX ACT, 1961 (IN SHORT THE ACT). 2. WE COME TO RIVAL PLEADINGS FIRST. BOTH PARTIES R AISED IDENTICAL SUBSTANTIVE GROUNDS IN THEIR RESPECTIVE APPEALS AND CROSS-OBJECTIONS. WE NOTICE THAT THE REVENUES SOLITARY SUBSTANTIVE G RIEVANCE IS IDENTICAL ITA NOS. 175 & 176/RJT/2015 & CO NOS.42 & 43/RJT/2015 DCIT VS. ROLEX RINGS PVT LTD AYS 2005-06 & 2007-08 2 IN BOTH THE ASSESSMENT YEARS I.E. IT SEEKS TO REVIV E ASSESSING OFFICERS ACTION IN ADDING THE UNUTILIZED CENVAT CREDIT OF RS .74,73,053/- AND RS.1,47,38,984/- AS DELETED IN THE LOWER APPELLATE PROCEEDINGS. THE ASSESSEE ON THE OTHER HAND HAS PREFERRED THE TWO IN STANT CROSS- OBJECTIONS CHALLENGING LEGALITY OF THE REOPENING IN QUESTION TAKEN RECOURSE TO BY THE ASSESSING OFFICER AND UPHELD BY THE CIT(A). BOTH LD. REPRESENTATIVES INFORM US THAT THE TWO ASSESSME NT YEARS IN QUESTION INVOLVE IDENTICAL SET OF FACTS AS WELL AS THE RELEV ANT ISSUE ARISING THERE FROM. WE TREAT REVENUES APPEAL ITA NO.175/RJT/201 5 AND ASSESSEES CO NO.42/RJT/2015 IN ASSESSMENT YEAR 2005-06 AS THE LEAD CASES. 3. THE ASSESSEE-COMPANY MANUFACTURES FORGED AND M ECHANIZED RINGS. IT FILED RETURN ON 31.10.2005 STATING NIL I NCOME. THE ASSESSING OFFICER FRAMED REGULAR ASSESSMENT IN ITS CASE ON 27 .12.2007 ASSESSING INCOME OF RS.37,45,690/-. HE THEREAFTER FORMED REA SONS TO BELIEVE THAT ASSESSEES TAXABLE INCOME LIABLE TO BE ASSESSED HAD ESCAPED ASSESSMENT. SECTION 148 NOTICE DATED 29.03.2012 STO OD ISSUED. THE ASSESSEE FILED RESPONSE THERETO ON 20.04.2012 SEEKI NG TO TREAT ITS ORIGINAL RETURN AS THE ONE FILED IN FURTHERANCE TO SECTION 148 NOTICE. 4. THE ASSESSING OFFICER TOOK-UP RE-ASSESSMENT. HE NOTICED THAT ASSESSEES UNUTILIZED CENVAT CREDITS OF RS.74,73,05 3/-. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE SAME WAS REQUIRED TO BE INCLUDED IN CLOSING STOCK OF ITS RAW MATERIAL AND W ORK-IN-PROGRESS THEREBY REDUCING THE COST OF GOODS MANUFACTURED AS PER THE PROVISIONS OF SECTION 145A OF THE ACT. THE ASSESSEE APPEARS TO HAVE FILED A ITA NOS. 175 & 176/RJT/2015 & CO NOS.42 & 43/RJT/2015 DCIT VS. ROLEX RINGS PVT LTD AYS 2005-06 & 2007-08 3 DETAILED REPLY. ITS MAIN PLEA WAS THAT THERE WAS NO CREDIT BALANCE IN CENVAT ACCOUNT. IT WAS STATED TO BE A CASE OF CENV AT DEBIT BALANCE RATHER. THE ASSESSEE EXPLAINED THAT THE SAID DEBIT BALANCE AROSE ON ACCOUNT OF EXCISE PAID IN PURCHASING RAW MATERIALS SINCE IT USED TO DEBIT THE SAID VALUE TO RAW MATERIAL PURCHASE ACCOU NT AND EXCISE PAID ON THE SAME TO CENVAT ACCOUNT. THE ASSESSEE FURTHE R CITED A CATENA OF CASE LAW HOLDING THAT SIMILAR EXCISE DUTY, CUSTO M DUTY AND CENVAT CREDIT ETC. NOT TO BE INCLUDED IN CLOSING ST OCK. IT ALSO RAISED AN ALTERNATIVE PLEA THAT IF ANY ADJUSTMENT HAD TO B E MADE IN CLOSING STOCK, THE CORRESPONDING FIGURE IS TO BE ALLOWED AS OPENING STOCK OF THE SUCCEEDING ASSESSMENT YEAR. THE ASSESSING OFFICER REITERATED HIS REOPENING REASONING IN ASSESSMENT ORDER DATED 20.03 .2013 FOR MAKING THE IMPUGNED CENVAT CREDIT ADDITION IN THE VALUE OF CLOSING STOCK. 5. THE ASSESSEE PREFERRED APPEAL. IT CHALLENGED LE GALITY OF THE IMPUGNED REOPENING FOLLOWED BY ITS PLEA ON MERITS A GAINST THE CENVAT ADDITION IN QUESTION. THE CIT(A) REJECTS THE FORMAL GROUND. HE HOWEVER HOLDS ON MERITS THAT THIS ASSESSEE IS FO LLOWING EXCLUSIVE METHOD OF ACCOUNTING AND IF THE CENVAT CREDIT IN QU ESTION IS ADDED TO ITS CLOSING STOCK, THE SAME COURSE IS TO BE FOLL OWED ON OPENING STOCK AND PURCHASES. HE CONCLUDES THAT THIS WILL GIVE RI SE TO NIL EFFECT IN P&L ACCOUNT GIVING RISE TO A CASE OF REVENUE NEUTRA L. THE CIT(A) ACCORDINGLY PROCEEDS TO DELETE THE IMPUGNED ADDITIO N. THE REVENUES SOLITARY SUBSTANTIVE GRIEVANCE ON ME RITS CHALLENGES THE LOWER APPELLATE ORDER DELETING CENVA T CREDIT ITA NOS. 175 & 176/RJT/2015 & CO NOS.42 & 43/RJT/2015 DCIT VS. ROLEX RINGS PVT LTD AYS 2005-06 & 2007-08 4 ADDITION. THE ASSESSEE ON THE OTHER HAND SEEKS TO Q UASH THE IMPUGNED RE-OPENING. 6. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RI VAL CONTENTIONS. RELEVANT FACTS NARRATED HEREINABOVE ARE NOT REPEATE D FOR THE SAKE OF BREVITY. THE REVENUES ARGUMENT VEHEMENTLY SUPPORT S ASSESSING OFFICERS ACTION. THE ASSESSEE STRONGLY SUPPORTS T HE LOWER APPELLATE ORDER ON MERITS. THERE IS NO DISPUTE ABOUT THE FAC T THAT ASSESSEE HAD PURCHASED ITS RAW MATERIALS. IT DID NOT INCLUDE TH E CORRESPONDING CENVAT CREDIT IN ITS CLOSING STOCK SINCE IT FOLLOWS EXCLUSIVE METHOD OF ACCOUNTING. THE ASSESSING OFFICER ADDED THIS CRE DIT AMOUNT IN VALUE OF ITS CLOSING STOCK AND WORK-IN-PROGRESS. THE CIT( A) DELETES THE SAID ADDITION BY TERMING IT AS A CASE OF REVENUE NEUTRAL SINCE ANY ADDITION IN CLOSING STOCK GIVE RISE TO THE CORRESPONDING FIG URE OF OPENING STOCK IN THE FOLLOWING ASSESSMENT YEAR. A PERUSAL OF THE PAPER BOOK REVEALS THAT A CO-ORDINATE BENCH OF THIS TRIBUNAL IN ITA NO .438/AHD/2011, ITO VS. M/S. IKON MULTIPACK DECIDED ON 22.07.2011 H AS ALREADY TAKEN A VIEW THAT SUCH AN ADDITION IN EITHER INCLUSIVE OR EXCLUSIVE METHOD OF ACCOUNTING IS REVENUE NEUTRAL AS EXPLAINED BY ICAI S GUIDELINES. THE REVENUE FAILS TO POINT OUT ANY DISTINCTION ON FACTS OR LAW. WE FIND NO REASON TO INTERFERE IN THE CIT(A)S ORDER ON MERITS IN THESE FACTS AND CIRCUMSTANCES. THE SAME STANDS CONFIRMED. REVENU ES APPEAL ITA NO.175/RJT/2015 FAILS. THE ASSESSEES CO NO.42/RJT /2015 FILED THEREIN IS RENDERED INFRUCTUOUS. 7. SAME ORDER TO FOLLOW IN REVENUES LATTER YEARS APPEAL & ASSESSEES CO I.E. ITA NO.176 & CO NO.43/RJT/2015. ITA NOS. 175 & 176/RJT/2015 & CO NOS.42 & 43/RJT/2015 DCIT VS. ROLEX RINGS PVT LTD AYS 2005-06 & 2007-08 5 8. THESE TWO REVENUES APPEALS ARE DISMISSED. ASSE SSEES CROSS- OBJECTIONS THEREIN ARE DISMISSED AS RENDERED INFRUC TUOUS. ORDER PRONOUNCED IN THE COURT ON 11 TH JULY, 2016 AT AHMEDABAD. SD/- SD/- (MANISH BORAD) (S.S . GODARA) ACCOUNTANT MEMBER JU DICIAL MEMBER AHMEDABAD; DATED 11/07/2016 *BT / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , , / DR, ITAT, RAJKOT 6. / GUARD FILE. / BY ORDER, TRUE COPY / // / ( DY./ASSTT.REGISTRAR) , , , , / ITAT, RAJKOT