Asian Tubes Ltd., Ahmedabad V. The ACIT.,Range-1, Ahmedabad

ITA 2158/AHD/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67715 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 30-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P S KALYAN
• Assessee Lawyers: GAURAV NAHATA
• Keywords: Reopening of assessment; Depreciation; Opportunity of being heard; Difference of opinion; Assessment record; Change of opinion
• Section: 43B; 143(3); 147; 145; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE SHRI G.C.GUPTA , VICE PRESIDENT AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NOS. 2158-2160/AHD/2011 & 230/AHD/2013 ASSESSMENT YEARS :2003-04, 05-06, 08-09 & 09-10 RESP. ASIAN TUBES LTD. 101, SAKAR III, OPP: OLD HIGH COURT, ASHRAM ROAD, AHMEDABAD-380014 V/S . THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-1, AHMEDABAD PAN NO. AA BCA2797E (APPELLANT) .. (RESPONDENT) ITA NO. 2079/AHD/2011 & 734/AHD/2013 ASSESSMENT YEARS : 05-06 & 09-10 RESP. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-1, AHMEDABAD V/S . ASIAN TUBES LTD. 101, SAKAR III, OPP: OLD HIGH COURT, ASHRAM ROAD, AHMEDABAD- 380014 BY REVENUE SHRI P. S. KALYAN, CIT D.R. /BY ASSESSEE SRI GAURAV NAHATA, A.R. /DATE OF HEARING 26.07.2013 /DATE OF PRONOUNCEMENT 25.09.2013 O R D E R PER : SHRI T.R.MEENA, ACCOUNTANT MEMBER OUT OF SIX APPEALS, FOUR APPEALS FILED BY THE ASSES SEE AND TWO BY REVENUE WHICH HAVE EMANATED FROM THE ORDERS OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-VI, AHMEDABAD, DATED 20.06.201 1 FOR A.Y. 2003-04 & A.Y. 08-09, 17.06.2011 FOR A.Y. 05-06 & 24.12.2012 FOR A.Y. 2009-10. ITA NOS. 230 & 734/AHD/13, 2158-2160 & 2079/AHD/201 1 A.YS. 03-04, 05-06. 08-09 & 09-10. PAGE 2 ARGUMENTS IN ALL APPEALS ARE SAME. THEREFORE, WE A RE DECIDING ALL IN A CONSOLIDATE ORDER FOR THE SAKE OF CONVENIENCE. THE GROUNDS OF ALL APPEALS ARE AS UNDER:- ASSESSEES APPEALS ITA NO. 2158/AHD/2011 (A.Y. 03-04) 1. THE LD. CIT APPEALS VI AHMEDABAD HAS ERRED IN L AW AND ON FACTS IN PASSING APPELLATE ORDER DATED 20/06/2011 F OR A.Y. 2003-04 IN THE CASE OF APPELLANT BY HOLDING THAT THE A.O. W AS JUSTIFIED IN ISSUING NOTICE U/S 148 FOR REOPENING THE ASSESSMENT . 2. THE LD. CIT APPEALS HAS ERRED IN LAW AND ON FACT S IN JUSTIFIED THE ISSUING NOTICE U/S 147 AND REOPENING THE CASE A FTER FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR WHERE THE ORIGI NAL ASSESSMENT WAS DONE U/S 143(3). 3. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN THE CASE OF APPELLANT BY CONFIRMING DISALLOWANCE OF RS.43,05,34 3/- ON ACCOUNT OF INTEREST EXPENSES U/S.40A(2)(B) OF THE ACT. ITA NO. 2159/AHD/2011 (A.Y. 05-06) 1. THE LD. CIT APPEALS VI AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN PASSING APPELLATE ORDER DATED 17/06/2011 F OR A.Y. 2005-06 IN THE CASE OF APPELLANT BY HOLDING THAT THE A.O. W AS JUSTIFIED IN ISSUING NOTICE U/S 148 FOR REOPENING THE ASSESSMENT . IT IS RESPECTFULLY STATED THAT IT IS NOTHING BUT A CHANGE OF OPINION. ITA NOS. 230 & 734/AHD/13, 2158-2160 & 2079/AHD/201 1 A.YS. 03-04, 05-06. 08-09 & 09-10. PAGE 3 2. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN THE CASE OF APPELLANT BY CONFIRMING DISALLOWANCE OF RS.16,35,62 0/- ON ACCOUNT OF INTEREST EXPENSES U/S.40A(2)(B). ITA NO. 2160/AHD/2011 (A.Y. 08-09) 1. THE LD. CIT APPEALS VI AHMEDABAD HAS ERRED IN L AW AND ON FACTS IN PASSING APPELLATE ORDER DATED 20/06/2011 F OR A.Y. 2008-09 IN THE CASE OF APPELLANT BY CONFIRMING DISALLOWANCE OF RS.28,42,507/- ON ACCOUNT OF INTEREST EXPENSES U/S. 40A(2)(B) OF THE ACT. 2. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS BY CONFIRMING THE DISALLOWANCE OF RS.6775/- ON ACCOUNT OF LATE PA YMENT OF PF. ITA NO. 230/AHD/2013 (A.Y. 09-10) 1. THE LD. CIT APPEALS VI AHMEDABAD HAS ERRED IN L AW AND ON FACTS IN PASSING APPELLATE ORDER DATED 24/12/2012 F OR A.Y. 2009-10 IN THE CASE OF APPELLANT BY CONFIRMING DISALLOWANCE OF RS.87,09,674/- ON ACCOUNT OF INTEREST EXPENSES U/S. 40A(2)(B) OF THE ACT. 2. THE LD. CIT (A) HAS ALSO ERRED IN LAW AND ON FAC TS IN NOT DIRECTING THE A.O. TO TAKE THE CORRECT FIGURE OF DI SALLOWANCE OF INTEREST AT RS.76,97,749/- INSTEAD OF RS.87,09,674/ -. IT WAS STATED THAT THE A.O. HAS MADE A CALCULATION MISTAKE IN MAK ING THE DISALLOWANCE OF INTEREST U/S 40A(2)(B) AS STATED IN GROUND NO.1. 3. THE LD. CIT APPEALS VI, AHMEDABAD HAS ERRED IN L AW AND OR FACT IN CONFIRMING DISALLOWANCE OF RS.6,77,828/- ON ACCOUNT OF EXCESS DEPRECIATION ON STORAGE TANK. ITA NOS. 230 & 734/AHD/13, 2158-2160 & 2079/AHD/201 1 A.YS. 03-04, 05-06. 08-09 & 09-10. PAGE 4 REVENUES APPEALS ITA NO. 2079/AHD/2011 (A.Y. 05-06) 1. THE LD. CIT (A) ERRED IN LAW AND ON FACTS IN DI RECTING THE A.O. TO ALLOW CLAIM OF EXCISE DUTY OF RS.33,83,950/- IF PAID BEFORE DUE DATE OF FILING RETURN, SINCE THE ADDITION WAS MADE AS PER SECTION 145A INSTEAD OF SECTION 43B AS HELD BY LD. CIT(A). ITA NO. 734/AHD/2013 (A.Y. 09-10) 1. THAT THE CIT (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.2,08,94,571/- BEING UN-UTILIZED CENV ET CREDIT NOT INCLUDED IN CLOSING STOCK. 2. THE FIRST AND SECOND GROUNDS IN A.Y. 2003-04 & T HE FIRST GROUND IN A.Y. 05-06 ARE AGAINST REOPENING THE CASE U/S. 148 OF TH E IT ACT BY A.O. THE A.O. OBSERVED IN A.Y. 03-04 THAT IN THIS CASE RETURN OF INCOME WAS FILED ON 30.11.2003 DECLARING TOTAL INCOME AT RS.4,20,85,720 /- SUBSEQUENTLY THE ASSESSMENT U/S. 143(3) OF THE IT ACT, 1961, WAS COM PLETED ON 30.01.2005 DETERMINING TOTAL INCOME AT RS.4,21,15,023/-. THER EAFTER, ORDER U/S. 143(3) R.W.S. 147 OF THE ACT PASSED ON 31.10.2007 DETERMIN ING TOTAL INCOME OF RS.4,35,24,535/-. THEREAFTER, THE CASE WAS TAKEN U P FOR RE-ASSESSMENT AFTER DULY RECORDING THE REASONS FOR REOPENING. THE REAS ONS FOR REOPENING ARE REPRODUCED HEREUNDER: ITA NOS. 230 & 734/AHD/13, 2158-2160 & 2079/AHD/201 1 A.YS. 03-04, 05-06. 08-09 & 09-10. PAGE 5 THE TOTAL INCOME OF THE ASSESSEE AS DETERMINED VID E ORDER DTD.31/10/2007 U/S. 143(3) R.W.S. 147 OF THE I.T. A CT AT RS.4,35,24,535/-. PERUSAL OF THE RECORDS SHOWS THAT THE ASSESSEE HAS PAID INTEREST ON LOANS TAKEN FROM VARIOUS PARTIES. IT I S FURTHER SEEN THAT INTEREST TO RELATED PARTIES HAS BEEN PAID AT THE RA TE OF 24% AS AGAINST 15% PAID TO UNRELATED PARTIES. IT IS THEREFORE SEEN THAT EXCESS INTEREST HAS BEEN PAID TO RELATED PARTIES WHICH IS LIABLE TO BE DISALLOWED U/ S. 40A(2)(B) OF THE I.T. ACT. FROM THE RECORDS, IT IS FURTHER SEEN THA T IN THIS MANNER; INCOME HAS BEEN UNDER ASSESSED TO THE TUNE OF RS.43 ,05,343/-, ADOPTING 9% AS THE EXCESS INTEREST PAID TO THE RELA TED PARTIES. AFTER RECORDING THE REASONS, THE A.O. ISSUED NOTIC E U/S. 148 ON 30.03.2010. THE REASONS RECORDED BY THE A.O. WERE PROVIDED TO T HE ASSESSEE VIDE LETTER DATED 03.08.2010. THE ASSESSEE FURTHER FILED ITS O BJECTIONS ON THE ISSUE OF NOTICE AND REASONS RECORDED FOR REOPENING. THE SAM E WERE DISPOSED OF VIDE ORDER DATED 15/12/2010 PASSED IN ACCORDANCE WITH TH E DECISION OF THE HONBLE SUPREME COURT IN CASE OF G.K.N. DRIVESHAFTS (INDIA) LTD. VS. ITO & OTHERS 25 9 ITR 19 (SC). THE ASSESSEES OBJECTION AGAINST ISSUE OF NOTICE U/ S. 148 WAS CONSIDERED BY THE A.O., WHICH WAS NOT FOUND TENABLE TO HIM . SIMILARLY, IN A.Y. 05-06, THE RETURN OF THE INCOME WAS FILED ON 31.10. 2005, DECLARING TOTAL INCOME AT RS. 5,00,96,990/-. THEREAFTER ASSESSMENT U/S. 143(3) WAS COMPLETED ON 29.06.2007 DETERMINING TOTAL INCOME AT RS. 5,02,00,940/-. THEREAFTER, THE CASE WAS TAKEN UP FOR REASSESSMENT AFTER DULY RECORDED REASONS FOR REOPENING. THE REASONS FOR REOPENING A RE REPRODUCED AS UNDER: ITA NOS. 230 & 734/AHD/13, 2158-2160 & 2079/AHD/201 1 A.YS. 03-04, 05-06. 08-09 & 09-10. PAGE 6 'AS PER NOTES TO ACCOUNTS TO THE FINANCIAL STATEMEN TS FILED BY THE ASSESSEE, IT HAS BEEN FOUND THAT LIABILITY FOR EXCI SE DUTY ON FINISHED GOODS ARE ACCOUNTED AS AND WHEN THE FINISHED GOODS ARE CLEARED FROM FACTORY PREMISES. ON EXAMINATION OF THE FINANC IAL STATEMENTS, IT HAS ALSO BEEN FOUND THAT THE ASSESSEE-COMPANY HAD A CLOSING STOCK OF FINISHED GOODS AMOUNTING TO RS. 2,11,49,694/-. 4S PER SECTION 145 A OF THE INCOME TAX ACT, 1961 PR OVIDES THAT THE VALUATION OF INVENTORIES FOR THE PURPOSE O F DETERMINING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFIT AND GAINS OF BUSINESS' SHALL INCLUDE ANY TAX, DUTY OR FEE INCURRED BY THE ASSESSEE. IT HAS BEEN HELD IN THE CASE OF CIT VS BRITISH PAIN TS INDIA LTD (1991) 188 ITR 44 (SC) AS UNDER: IN THE VALUATION OF CLOSING STOCK OF GOODS-IN-PROC ESS OR FINISHED GOODS, ALL OVERHEAD EXPENSES, BESIDES THE COST OF RAW MATERIAL, HAD TO BE ADDED. IF ANY SYSTEM OF ACCOUNT ING EXCLUDED THESE EXPENSES, IT WILL RESULT IN DISTORTED PICTURE OF PROFITS, AS THE PROFIT OF ONE YEAR WAS LIKELY TO BE SHIFTED TO ANOT HER YEAR. EACH YEAR BEING A SELF-CONTAINED UNIT UNDER THE INCOME TAX AC T, 1961, IT WAS NOT ONLY THE RIGHT BUT THE DUTY OF THE ASSESSING AU THORITY TO DETERMINE WHAT WOULD BE THE CORRECT INCOME OF THE RELEVANT YE AR EXCISE DUTY, BEING AN OVERHEAD EXPENDITURE, DESERVE S TO BE INCLUDED IN THE VALUATION OF CLOSING STOCK OF FINIS HED GOODS. IT IS WELL SETTLED THAT THE LIABILITY OF EXCISE DUTY ARISES ON THE MANUFACT URE OR PRODUCTION OF GOODS, EVEN THOUGH IT MAY BE COLLECTED LATER ON AS A MEASURE OF ADMINISTRATIVE CONVENIENCE OR EXPED IENCY. THE EXCISE DUTY ON THESE GOODS @16% COMES TO RS.33,83,950/- WHICH SHOULD HAVE BEEN ADDED TO THE CLOSING STOCK. ITA NOS. 230 & 734/AHD/13, 2158-2160 & 2079/AHD/201 1 A.YS. 03-04, 05-06. 08-09 & 09-10. PAGE 7 THUS, AS PER THE FACTS AND LEGAL POSITIONS ABOVE, I HAVE REASONS TO BELIEVE THAT THERE HAS BEEN AN UNDERVALUATION OF TH E CLOSING STOCK OF FINISHED GOODS LEADING TO UNDERASSESSMENT OF INCOME CHARGEABLE TO TAX.' 3. BEING AGGRIEVED BY THE ORDER OF THE A.O. THE AS SESSEE CARRIED THE MATTER BEFORE CIT(A) IN BOTH YEARS AND CHALLENGED THE REOP ENING. AFTER CONSIDERING ASSESSEES REPLY IN BOTH YEARS, THE LD. CIT(A) HELD AS UNDER: FOR A.Y. 03-04. 2.3 I HAVE CONSIDERED THE FACTS OF THE CAS E; ASSESSMENT ORDER AND APPELLANT'S SUBMISSION. ASSESSING OFFICER REOPE NED THE ASSESSMENT ON THE GROUND THAT APPELLANT PAID EXCESS INTEREST @ 24% TO THE RELATED PARTIES WHERE AS INTEREST TO OUT SIDERS IS PAID @ 15%. ALL THE OBJECTIONS OF THE APPELLANT HAVE BEEN DEALT WITH BY THE ASSESSING OFFICER IN HIS ORDER. IT IS WRONG ON THE PART OF APPELLANT TO CLAIM THAT IN ORIGINAL ASSESSMENT, ASSESSING OFFICE R CONSIDERED THIS ISSUE AND IT IS MERE CHANGE OF OPINION. THERE IS NO DISCUSSION IN THE ORDER OR ASSESSMENT RECORD ABOUT EXCESSIVE CLAIM OF INTEREST. THEREFORE IT CANNOT BE SAID THAT AFTER CONSIDERING THE ISSUE ASSESSING OFFICER HELD THE INTEREST PAYMENT REASONA BLE. AS REGARDS NON-DISCLOSURE OF MATERIAL FACTS IT IS S EEN THAT APPELLANT ONLY DISCLOSED PAYMENT MADE TO SPECIFIED PERSONS IN TAX AUDIT REPORT. THE RATE OF INTEREST TO RELATED PARTIES OR PAYMENT OF INTEREST ALONG WITH THE RATE OF INTEREST TO OUTSIDE PARTIES IS NOT MENTIONED. IT IS ONLY DURING SUBSEQUENT ASSESSMENTS THIS EXCESS CLAI M OF INTEREST TO RELATED PARTIES IS NOTICED AND ACCORDINGLY ADDITION S WERE MADE IN THOSE YEARS, ASSESSING OFFICER CAME TO KNOW OF THIS EXCESSIVE PAYMENT OF INTEREST TO RELATIVES. APPELLANT HAS NOT DISCLOSED THIS MATERIAL FACT THAT IT WAS PAYING RELATIVES 24% INTE REST AND TO ITA NOS. 230 & 734/AHD/13, 2158-2160 & 2079/AHD/201 1 A.YS. 03-04, 05-06. 08-09 & 09-10. PAGE 8 NON-RELATIVES IT WAS PAYING ONLY 15%. THIS MATERIAL FACT WAS NOT DISCLOSED BY THE APPELLANT EITHER IN THE RETURN OF INCOME OR IN THE ASSESSMENT PROCEEDINGS. THEREFORE IT IS CLEAR THAT APPELLANT DID NOT DISCLOSE MATERIAL FACTS FULLY AND TRULY DUE TO WHICH TAXABLE INCOME HAS ESCAPED ASSESSMENT CONSEQUENT UPON CLAIM OF EXCESS INTEREST. I THEREFORE UPHOLD THE REOPENING OF ASSES SMENT WHICH FULFILS ALL LEGAL REQUIREMENTS. ACCORDINGLY THESE GROUNDS A RE DISMISSED. FOR A.Y. 05-06 3.3 I HAVE CONSIDERED THE FACTS OF THE CASE; ASSE SSMENT ORDER AND APPELLANT'S SUBMISSION. IT IS NOT IN DISPUTE THAT A SSESSMENT IS REOPENED WITHIN FOUR YEARS AND THEREFORE THE CONDIT ION OF NONDISCLOSURE OF MATERIAL FACTS ON THE PART OF ASSE SSEE IS NOT REQUIRED. WHAT IS TO BE CONSIDERED IS WHETHER ANY I NCOME HAS ESCAPED ASSESSMENT AND WHETHER THE SAME ISSUE WAS C ONSIDERED IN THE SCRUTINY ASSESSMENT EARLIER AND WAS DECIDED IN FAVOUR OF THE APPELLANT. APPELLANT DID NOT VALUE CLOSING STOCK BY INCLUDING EXCISE DUTY DESPITE THE SPECIFIC PROVISION OF SECTION 145A AND THEREFORE TO THE EXTENT OF EXCISE DUTY ON FINISHED GOODS QUANTIF IED BY THE AO HAS ESCAPED ASSESSMENT. AFTER INTRODUCTION OF THIS SECT ION, APPELLANT DOES NOT HAVE ANY CHOICE AS FAR AS VALUING CLOSING STOCK IS CONCERNED. BY NOT FOLLOWING THE PROVISIONS OF THE A CT, APPELLANT HAS UNDERSTATED THE VALUE OF CLOSING STOCK AND THEREFOR E TAXABLE INCOME HAS ESCAPED ASSESSMENT WHICH REQUIRES REOPENING OF ASSESSMENT. AS REGARDS APPELLANT'S ARGUMENT THAT THE ISSUE WAS EXAMINED AND IT IS MERE CHANGE OF OPINION, I HAVE GONE THROU GH THE ASSESSMENT ORDER, SUBMISSIONS GIVEN BY THE APPELLAN T AND I DO NOT FIND ANY INDICATION THAT THIS ISSUE WAS EVEN TOUCHE D UPON. NEITHER ASSESSING OFFICER CALLED ANY DETAIL IN THIS REGARD NOR APPELLANT SUBMITTED ANY REPLY WITH REGARD TO NON-INCLUSION OF EXCISE DUTY IN ITA NOS. 230 & 734/AHD/13, 2158-2160 & 2079/AHD/201 1 A.YS. 03-04, 05-06. 08-09 & 09-10. PAGE 9 CLOSING STOCK IN ITS SUBMISSION THEREFORE THE CLAIM THAT THERE IS CHANGE OF OPINION IS WITHOUT ANY BASIS. IN FACT THI S ISSUE WAS NOT AT ALL THERE IN THE ASSESSMENT AND ACCORDINGLY IT WAS RAISED BY THE ASSESSING OFFICER FOR THE FIRST TIME. THEREFORE, N ONE OF THE DECISIONS RELIED UPON BY THE APPELLANT APPLIES TO THE FACTS F OR THIS CASE. ACCORDINGLY I UPHOLD THE VALIDITY OF REOPENING OF A SSESSMENT AND REJECT BOTH THE GROUNDS RAISED BY THE APPELLANT. 4. NOW THE ASSESSEE IS BEFORE US. LD. COUNSEL FOR THE APPELLANT ARGUED THAT IN A.Y. 03-04, LD. A.O. ISSUED NOTICE BEYOND F OUR YEARS FROM THE RELEVANT ASSESSMENT YEAR AND AS REOPENING WAS MADE BY THE A. O. ON 30.03.2010. THE ASSESSEE HAS DRAWN OUR ATTENTION ON PAGE NOS. 1 1 & 12 ON ITEM NOS. 3,4, 20 & 24 OF LETTER DATED 20.12.2004 ISSUED BY THE A. O. BY WHICH ALL THE DETAILS HAD BEEN ASKED BY HIM. THE APPELLANT HAD SUBMITTED REPLY TO THE A.O. AND COPY OF THE LETTER ENCLOSED AT SERIAL NOS. 14 & 15 (DATE NOT MENTIONED) IN ITEM NO. 3, THE ASSESSEE HAD FURNISHED THE COMPLETE ADDR ESS, PAN, RATE OF INTEREST AS WELL AS OTHER INFORMATION REQUIRED BY THE A.O. I N FORM OF CONFIRMATION. THE REASONABLENESS OF THE INTEREST HAD BEEN EXPLAINED I N ITEM NO. 17 OF THIS LETTER. THEREFORE, THERE IS NO FAILURE ON THE PART OF THE A SSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIALS NECESSARY FOR ASSESSMENT. SIMI LARLY HE ARGUED FOR A.Y 05- 06, WHERE RE-OPENING WAS WITHIN FOUR YEARS. HE HAS DRAWN OUR ATTENTION ON PAGE NO. 7 ON ITEM NO.6 OF PAPER BOOK, WHICH WAS DE TAILED QUESTIONNAIRE LETTER OF A.O. AND INTEREST SHOWING RATE OF INTEREST BY FU RNISHING DETAIL INTEREST ACCOUNT. THE APPELLANT REPLIED TO THE A.O. AND COP Y OF LETTER IS ENCLOSED AT PAGE NOS. 9 TO 11 OF THE PAPER BOOK. HE HAS DRAWN OUR ATTENTION ON ITEM NO.6 (DATE NOT MENTIONED). FURTHER, HE ALSO HAS DRAWN O UR ATTENTION ON PAGE NO.12 ITA NOS. 230 & 734/AHD/13, 2158-2160 & 2079/AHD/201 1 A.YS. 03-04, 05-06. 08-09 & 09-10. PAGE 10 AND ARGUED THAT MODVAT CREDIT AND LIABILITY FOR EXC ISE DUTY ON FINISHED GOODS HAD BEEN ACCOUNTED. THEREFORE, THERE IS NO F AILURE ON THE PART OF THE ASSESSEE TO DISCLOSE THE MATERIAL FACTS FULLY AND T RULY. IT IS A SIMPLY CHANGE OF OPINION OF THE A.O. THUS, HE REQUESTED TO QUASH TH E REOPENING IN BOTH THE YEARS. WHEREAS, LD. CIT D.R. HEAVILY RELIED UPON T HE ORDER OF THE LOWER AUTHORITIES AND ARGUED THAT THE RATE OF INTEREST PR OVIDED TO THE RELATED PARTY AND OUTSIDE PARTY WERE NOT SUBMITTED TO THE A.O. AT THE TIME OF SCRUTINY ASSESSMENT IN BOTH THE YEARS. FOR A.Y. 05-06, THE ASSESSEE HAD NOT ADDED CENVAT CREDIT IN THE CLOSING STOCK AS PER SECTION 1 45 OF THE ACT. THEREFORE, REOPENING IN BOTH YEARS WERE JUSTIFIED. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE CASE HAD BEEN REOPENED AFTER FOUR YEAR S FROM THE END OF THE ASSESSMENT YEAR IN A.Y. 03-04. THE LD. A.O. RAISED QUERY ON THIS ISSUE VIDE HIS LETTER DATED 20.12.2004 AT ITEM NO. 3, 4, 20 & 24 WHICH WAS REPLIED BY THE ASSESSEE AND THIS ASPECT HAD BEEN CONSIDERED BY THE LD. A.O. THERE IS NO FAILURE ON PART OF ASSESSEE. THUS, REOPENING IS BA D IN LAW. ACCORDINGLY, WE REVERSE THE ORDER OF CIT(A) AND ALLOW THE ASSESSEE S APPEAL ON GROUND NOS. 1 & 2 IN A.Y. 03-04. 5(I). IN A.Y. 05-06, THE NOTICE U/S.148 WAS ISSUED WITHIN FOUR YEARS. THE LD. A.O. VIDE LETTER DATED 12.09.2006 RAISED THE QUERY FOR THE RATE OF INTEREST RECEIVED AND PAID. THE ASSESSEE HAS NOT REPLIED IN RESPONSE TO THE QUERY BEFORE THE A.O., HE SIMPLY FILED THE COPY OF INTERE ST ACCOUNT RECEIVED AND PAID. THUS, IT IS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE MATERIAL FACTS FULLY ITA NOS. 230 & 734/AHD/13, 2158-2160 & 2079/AHD/201 1 A.YS. 03-04, 05-06. 08-09 & 09-10. PAGE 11 AND TRULY. THEREFORE, WE HELD REOPENING IS JUSTIFI ED. THE ASSESSEES APPEAL ON THIS GROUND IS DISMISSED. 6. GROUND NO.3 IN A.Y. 03-04 IS AGAINST CONFIRMING THE ADDITION OF RS.43,05,343/- ON ACCOUNT OF INTEREST EXPENSES U/S. 40A(2)(B) OF THE ACT. SINCE, IN GROUND NOS. 1 & 2, WE HAD HELD REOPENING AS BAD. THEREFORE, WE ARE NOT DECIDING THIS ISSUE ON MERIT. 7. GROUND NO.3 IN A.Y. 03-04, GROUND NO.2 IN A.Y. 0 5-06, GROUND NO. 1 IN A.Y. 08-09 & GROUND NO. 1 & 2 IN A.Y. 09-10 ARE AGA INST CONFIRMING THE DISALLOWANCE OF INTEREST EXPENSES U/S. 40A(2)(B) OF THE IT ACT. THE DISALLOWANCE MADE BY THE A.O. ARE AS UNDER: SL. NO. ASSESSMENT YEA R AMOUNT 1 03-04 RS. 43,05,343/- 2 05-06 RS. 16,35,620/- 3 08-09 RS. 28,42,507/- 4 09 - 10 RS. 87,09,6 7 4/ - THE ASSESSEE CLAIMED INTEREST IN ABOVE YEARS AS UND ER: SL. NO. A.Y. INTEREST PAID RATE OF INTEREST TO THE RELATED PARTY RATE OF INTEREST TO THE OUTSIDE PARTY 1 03-04 RS. 1,14,80,914/- 24% 15% 2 05-06 RS. 98,13,720/- 18% 15% 3 08-09 RS. 2,28,07,061/- 18% 15% 4 09-10 RS. 78,47,467/- 22% 15% THE A.O. GAVE REASONABLE OPPORTUNITY OF BEING HEARD ON EXCESSIVE INTEREST PAID TO THE RELATED PARTY IN ALL YEARS, WHICH WAS R ESPONDED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING IN ALL T HE YEARS. THE ARGUMENT OF THE APPELLANT WAS THAT LOANS TAKEN FROM THE RELATED PARTIES WERE OUTSTANDING FOR LONG TIME, HAVE EXTENDED WITHOUT ANY SECURITY A ND ARE NOT RE-PAYABLE ON ITA NOS. 230 & 734/AHD/13, 2158-2160 & 2079/AHD/201 1 A.YS. 03-04, 05-06. 08-09 & 09-10. PAGE 12 DEMAND. THIS CONTENTION OF THE ASSESSEE WAS NOT FO UND CONVINCING TO THE A.O. ON THE GROUND THAT ALL THE UNSECURED LOANS FRO M THE OUTSIDE PARTY WERE AGAINST WITHOUT ANY SECURITY. THE BORROWING WAS FO R LONG TIME DID NOT JUSTIFY TO PAY HIGHER RATE TO THE RELATED PARTY. THERE WAS NO AGREEMENT BETWEEN RELATED PARTY AND APPELLANT REGARDING PAID HIGHER RATE OF I NTEREST. THE ASSESSEES ARGUMENT WAS THAT THE DIRECTORS/RELATED PARTIES WER E ASSESSED TO TAX HIGHEST TAX SLAB. THUS, THERE WAS NO REVENUE LOSS, WHICH W AS NOT FOUND ACCEPTABLE AS IN CASE OF COMPANY RATE OF TAX WAS 35% PLUS A SU RCHARGE OF 5%, WHEREAS INDIVIDUALS WERE ASSESSED TO TAX @ 30%. HE ALSO CO MPARED MARKET RATE AND FOUND UNREASONABLE RATE OF INTEREST PAID TO THE REL ATED PARTY. THUS, HE MADE ADDITION U/S. 40A(2)(B) OF THE IT ACT IN ALL THE YE ARS. SAME ARGUMENTS WERE GIVEN IN OTHER YEARS BY THE APPELLANT BEFORE THE A. O. 8. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE AS SESSEE CARRIED THE MATTER BEFORE THE CIT(A), IN ALL THE YEARS, WHO HAS CONFIRMED THE ADDITION MADE BY THE A.O. IN ALL THE YEARS. THE OPERATIVE P ORTION OF THE ORDER OF CIT(A) IN A.Y. 03-04 IS REPRODUCED AS UNDER: 3.3 I HAVE CONSIDERED THE FACTS OF THE CASE; ASSE SSMENT ORDER AND APPELLANT'S SUBMISSION. IT IS NOT IN DISPUTE THAT THE PARTIES TO WHOM INTEREST WAS PAID ARE RELATED AND COVERED WITH IN THE PROVISIONS OF SECTION 40 A (2) OF IT ACT. IF ANY EXCESS PAYMENT IS MADE TO THE RELATED PARTIES, SUCH EXCESS PAYMENT IS NOT ALLOWABLE AS AN EXPENSE. ASSESSING OFFICER BROUGHT OUT THE DE TAILS OF INTEREST PAYMENT TO RELATED PARTIES AND UNRELATED PARTIES AN D IT IS ESTABLISHED THAT RELATED PARTIES WERE PAID MORE INT EREST THAN UNRELATED PARTIES ON THE SIMILAR LOANS RECEIVED BY APPELLANT. THE ARGUMENT OF THE APPELLANT THAT LOANS RECEIVED FROM RELATED PARTIES ITA NOS. 230 & 734/AHD/13, 2158-2160 & 2079/AHD/201 1 A.YS. 03-04, 05-06. 08-09 & 09-10. PAGE 13 ARE PERMANENT AND MORE STABLE IS FOUND TO BE INCORR ECT BY THE ASSESSING OFFICER SINCE THERE WERE REGULAR INFLOW A ND OUTFLOW OF FUNDS FROM THE ACCOUNTS OF THESE RELATED PARTIES. T HIS MAKES IT VERY CLEAR THAT THE FUNDS PROVIDED BY RELATIVES WERE NOT STABLE OR PERMANENT. RATHER THEIR LOAN ACCOUNTS WERE USED AS CURRENT ACCOUNT FOR THE CONVENIENCE OF LENDERS. ON SUCH LOA NS INTEREST RATES HAVE TO BE SUBSTANTIALLY LOWER THAN MARKET RATE. BY NO REASONS INTEREST RATE ON SUCH LOAN CAN BE HIGHER THAN INTER EST PAID TO OUTSIDERS FOR RELATIVELY STABLE LOANS. CONSIDERING THIS I DO NOT FIND ANY REASON OR MATERIAL FOR PAYING HIGHER INTEREST T O RELATED PARTIES THAN TO OUTSIDERS WHO WERE ALSO NOT PROVIDED ANY SE CURITY FOR OBTAINING LOANS BY THE APPELLANT. THE RATE OF INTER EST PAID TO RELATED PARTIES IS EVEN HIGHER THAN BANK FINANCING WHICH IS NORMALLY HIGHER THAN PRIVATE FINANCING. THERE ARE SEVERAL DECISIONS AS PER WHICH EXCESS PAYMENT OF EXPENSES MADE TO RELATED PARTIES ARE TO BE DISALLOWED. SOME OF THESE DECISIONS ARE AS UNDER- 1- MADANLAL RADHESHYAM V. INCOME-TAX OFFICER, 80, TAXMAN 338 (INDORE) ITAT INDORE BENCH 2- CORONATION FLOUR MILLS V.ASSISTANT COMMISSIONER OF INCOME-TAX [2010], 88 TAXMAN 257 (GUJ.) HIGH COURT OF GUJARAT 3- ANANDJISHAH V.COMMISSIONER OF INCOME-TAX [1990] 51 TAXMAN 29 KERALA. CONSIDERING THE AFORESAID DECISIONS, IT IS CLEAR TH AT INTEREST PAID TO RELATIVES IN EXCESS OF INTEREST PAID TO OUT SIDERS IS EXCESSIVE AND UNREASONABLE AND THE SAME IS DISALLOWABLE. FACTS OF THE APPELLANT'S CASE ARE IDENTICAL TO THE FACTS OF THE CASE DECIDED BY HONORABLE ITAT INDORE BENCH. IN THAT CASE ALSO APPELLANT CLAIMED THAT FUNDS BORROWED FROM RELATIVES WERE LARGE AND F OR LONG PERIOD WHICH WAS NOT FOUND ACCEPTABLE BY THE TRIBUNAL AND THE DISALLOWANCE OF EXCESS INTEREST WAS CONFIRMED. DECISIONS OF HONO RABLE GUJARAT HIGH COURT AND KERALA HIGH COURT ARE ALSO SUPPORTIN G THE ASSESSING ITA NOS. 230 & 734/AHD/13, 2158-2160 & 2079/AHD/201 1 A.YS. 03-04, 05-06. 08-09 & 09-10. PAGE 14 OFFICER'S ACTION OF DISALLOWING EXCESS INTEREST PAI D TO RELATIVES. RESPECTFULLY FOLLOWING THESE DECISIONS IN THE LIGHT OF FACTS OF THE APPELLANT, THE DISALLOWANCE OF INTEREST MADE BY THE ASSESSING OFFICER IS CONFIRMED. THE IDENTICAL FINDINGS WERE GIVEN IN OTHER YEARS AL SO BY THE LD. CIT(A). IN A.Y. 09-10, LD. CIT(A) BY FOLLOWING THE ORDER OF CIT(A) IN A.Y. 08-09 HAD CONFIRMED THE ADDITION. 9. NOW THE ASSESSEE IS BEFORE US. LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT RATE OF INTEREST PROVIDED TO THE REL ATED PARTY IS NOT EXCESSIVE AS THE COMPANY HAD BORROWED SUBSTANTIAL AMOUNT FROM TH EM AND THE APPELLANT IS SURE THAT THEY WOULD NOT ASK TO RETURN MONEY AT A S HORT NOTICE. THEREFORE, THE APPELLANT IS CERTAIN ABOUT AVAILABILITY OF THE FUND FOR BUSINESS PURPOSES. HE HAS DRAWN OUR ATTENTION ON PAGE NO.11 OF PAPER BOOK FOR A.Y 09-10 TO DEMONSTRATE THAT RECIPIENTS ARE ASSESSED TO TAX AT HIGHEST RATE. THE LOAN ACCOUNT OF THE RELATIVE PARTIES ARE RUNNING ACCOUNT BUT HAD CREDIT BALANCE. THE TOTAL LOAN TAKEN FROM THE RELATIVE PARTIES IN A .Y. 08-09 WAS RS.10.98 CRORE AND FROM OTHER PARTIES, WAS RS. 2.94 CRORE WHICH IS NOT COMPARABLE. THE TURN OVER OF THE APPELLANT HAS GONE UP IN A.Y. 09-10 AT RS. 208.83 CRORE COMPARED TO RS.153.75 CRORE IN PRECEDING YEAR DUE TO SURETY OF THE LOAN. ALL THE FUNDS WERE USED FOR BUSINESS PURPOSES AS ADMITTED BY THE A.O., IN HIS ASSESSMENT ORDER, FOR PURCHASING GOODS. IT IS ASSESSEES DECI SION TO USE THE BORROWED FUND WHAT MANNER STATED TO IT AND REVENUE CANNOT SI T ON THE CHAIR OF BUSINESSMAN TO DIRECT HOW TO USE BORROWED FUND. HE FURTHER RELIED UPON IN CASE OF RAM AVTAR GARG VS. ITO, ITAT , JAIPUR BENCH,(2010) 4 ITR (TRIB) 245 ITA NOS. 230 & 734/AHD/13, 2158-2160 & 2079/AHD/201 1 A.YS. 03-04, 05-06. 08-09 & 09-10. PAGE 15 (JP), WHEREIN INTEREST PAYMENT @ 24% HELD REASONABLE. IN CASE OF ACIT VS. SAUMYA CONSTRUCTION PVT. LTD. IN ITA NO. 1129/AHD/2008 FOR A.Y. 2005-06, ITAT C BENCH, AHMADABAD, THE RATE OF INTEREST @ 36 % HELD REASONABLE. IN CASE OF SHRI AMIT PRAVINCHANDRA MANIAR VS. ITO IN ITA NO. 901/AHD/2010, ITAT A BENCH, AHMEDABAD, FOR A.Y. 2006-07, RATE OF INTEREST @ 18% WAS FOUND REASONABLE. THE HONBLE GUJARAT HIGH COURT I N CASE OF CIT VS. ADITYA MEDISALES LTD. IN TAX APPEAL NO. 559 OF 2009, ORDER DATED 04.05.2010, HELD RATE OF INTEREST @ 24% REASONABLE. THUS, HE PRAYED TO DELETE THE ADDITION. AT THE OUTSET, LD. CIT D.R. VEHEMENTLY ARGUED THAT THE ASSESSEE CLAIMED EXCESSIVE RATE OF INTEREST AND RELIED UPON THE ORDE R OF CIT(A) AND A.O. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE HAD PAID INTEREST TO THE RELA TED PARTY IN A.Y. 05-06 AND IN A.Y. 08-09 @ 18% AND UNRELATED PARTY @ 15% BUT I N A.Y. 09-10, THE APPELLANT PAID INTEREST TO THE RELATED PARTY @ 22% AND UNRELATED PARTY @ 15% AS DECIDED BY THE VARIOUS COURTS THAT PAYMENT OF IN TEREST RATE DEPENDS ON VARIOUS FACTORS, PARTICULARLY, INSTITUTIONAL BORROW ING WITH SECURITY WHEREAS OUTSIDE BORROWING WITHOUT SECURITY WHICH CARRIES MO RE INTEREST RATE. THERE IS NO THUMB RULE OF ALLOWABILITY OF INTEREST RATE. IT DEPENDS UPON CASE TO CASE AND BUSINESS EXPEDIENCY. THEREFORE, WE CONFIRM 20% RATE REASONABLE FOR A.Y 09-10 FOR THE RELATED PARTIES. THUS, THE A.O. IS D IRECTED TO CALCULATE DIFFERENCE @ 2% AND REVISE THE INCOME AND TAX ACCORDINGLY. AS IN A.Y. 05-06 AND IN A.Y. 08-09, THE ASSESSEE PAID INTEREST @ 18% WHICH IS REASONABLE. THEREFORE, WE DO NOT INTERFERE ON THE BASIS OF FIND ING GIVEN IN A.Y. 09-10. WE ITA NOS. 230 & 734/AHD/13, 2158-2160 & 2079/AHD/201 1 A.YS. 03-04, 05-06. 08-09 & 09-10. PAGE 16 MAKE IT CLEAR THAT WE HAVE DECIDED THE ISSUE IN THE LIGHT OF PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE AND IT SHALL NOT BECAME P RECEDENT FOR ALL CASES. IN THIS CASE, SINCE COMPANY AND THE DEPOSITORS WERE AS SESSED AT HIGHEST TAX RATE AND NO LOSS OF REVENUE. DEPOSIT FROM OUTSIDE PARTIES IS VERY MEAGER AS COMPARED TO RELATED PARTY AND ALSO BUSINESS TURN OV ER AND PROFIT HAVE INCREASED SUBSTANTIALLY AND THERE IS NO FINDING OF LOWER AUTHORITIES THAT THE AMOUNT OF LOAN RECEIVED FROM LOAN CREDITORS WERE NO T USED FOR BUSINESS PURPOSES. ACCORDINGLY, GROUND NO.3 IN A.Y. 03-04, GROUND NO.2 IN A.Y. 05-06, GROUND NO.1 IN A.Y. 08-09 ARE ALLOWED. HOWEVER, GR OUND NO.1 & 2 IN A.Y. 09- 10 IS PARTLY ALLOWED. 11. GROUND NO.2 IN A.Y. 08-09 IS AGAINST CONFIRMING THE DISALLOWANCE OF RS.6775/- ON ACCOUNT OF LATE PAYMENT OF PF. THE A. O. FOUND THAT THE APPELLANT HAD NOT PAID EMPLOYEES CONTRIBUTION OF RS . 6,775/- FOR THE MONTH OF MAY, 2007 WHICH WERE DUE ON 15 TH JUNE 2007 BUT HAD BEEN PAID ON 25.06.2007. THUS, HE MADE ADDITION U/S. 2(24)(X) R .W.S. 36(1)(VA) OF THE IT ACT. LD. CIT(A) HAS DIRECTED THE A.O. TO VERIFY TH E APPELLANTS CLAIM IN THE LIGHT OF CLAUSE 1 OF PARA-38 PF ACT. IF THE PAYMENT IS W ITHIN DUE DATES AS PER THIS CLAUSE, NO ADDITION WILL BE MADE. IF STILL THE PAY MENT IS FOUND TO BE AFTER DUE DATE, ADDITION IS CONFIRMED. THE APPELLANTS ARGUM ENT IS THAT THE ASSESSEE HAD PAID THIS AMOUNT ON 25.06.2007 RELEVANT TO MONT H OF MAY, 2007 BEFORE DUE DATE OF RETURN FILE ON 30.09.2008. AS VARIOUS COURTS HELD IF THE PAYMENT IS MADE BEFORE DUE DATE OF RETURN FILED, IS ALLOWABLE EXPENDITURE. THUS, WE ITA NOS. 230 & 734/AHD/13, 2158-2160 & 2079/AHD/201 1 A.YS. 03-04, 05-06. 08-09 & 09-10. PAGE 17 DELETE THE ADDITION AND REVERSE THE ORDER OF THE CI T(A). THIS GROUND OF ASSESSEES APPEAL IS ALLOWED. 12. GROUND NO. 3 FOR A.Y. 09-10 IS AGAINST CONFIRMI NG DISALLOWANCE OF RS.6,77,828/- ON ACCOUNT OF EXCESS DEPRECIATION ON STORAGE TANK. THE A.O. OBSERVED THAT THE ASSESSEE HAD CLAIMED DEPRECIATION OF RS.7,53,142/- @ 100% AS POLLUTION PLANT. THE ASSESSEE ALSO CLAIMED DEPRECIATION ON STORAGE TANK @ 100% WHICH IS RATE APPLICABLE TO POLLUTION P LANT. IT WAS HELD BY THE A.O. THAT STORAGE TANKS ARE BASICALLY OF THE NATURE OF STRUCTURE AND AT THE BEST ELIGIBLE FOR DEPRECIATION AS BUILDING WHICH IS AVAI LABLE @ 10%. THE A.O. GAVE REASONABLE OPPORTUNITY OF BEING HEARD ON THIS ISSUE . THE APPELLANT FILED ONLY COPY OF BILL BUT HAD NOT PROVED THAT CHEMICAL STORA GE TANK MEANT FOR POLLUTION PLANT. THUS, HE DISALLOWED THE DEPRECIATION OF RS. 6,77,828/- AND ONLY ALLOWED DEPRECIATION @ 10%. THE CIT(A) CONFIRMED THE ADDIT ION BY OBSERVING THE OBSERVATION OF THE A.O. REMAINED UNCONTROVERTED AT THE APPELLANT STAGE. THUS, HE HAD NOT INTERFERED IN THE ORDER OF THE A.O . THE A.R. OF THE APPELLANT CONTENDED THAT THIS IS A PART OF THE POLLUTION PLAN T . THE POLLUTION PLANT CANNOT BE USED INDEPENDENTLY. THEREFORE, 100% DEPRECIATIO N IS ALLOWABLE ON IT. LD. CIT D.R. VEHEMENTLY RELIED UPON THE ORDER OF THE CI T(A) AND REQUESTED TO CONFIRM THE ADDITION. AFTER CONSIDERING THE FACTS OF THE CASE AND NATURE OF THE ASSETS, IT IS FOUND THAT WITHOUT STORAGE TANK, THE POLLUTION PLANT CANNOT BE RUN. IT IS PART AND PARCEL OF THE POLLUTION PLANT. THE AUDITOR HAD CERTIFIED THESE ASSETS AS ALLOWABLE DEPRECIATION @ 100%. FURTHER, LD. A.O. ALLOWED THE 100% ITA NOS. 230 & 734/AHD/13, 2158-2160 & 2079/AHD/201 1 A.YS. 03-04, 05-06. 08-09 & 09-10. PAGE 18 DEPRECIATION ON REMAINING POLLUTION PLANT. THUS, W E REVERSE THE ORDER OF THE CIT(A) AND ALLOW THE ASSESSEES APPEAL. REVENUES APPEALS 13. GROUND NO.1 OF REVENUES APPEALS IN A.Y. 05-06 & 09-10 ARE AGAINST DELETING THE ADDITION MADE ON ACCOUNT OF UNUTILIZED CENVAT CREDIT NOT INCLUDED IN THE CLOSING STOCK. THE A.O. IN A.Y. 05 -06 FOUND THAT THE ASSESSEE HAD NOT MADE ADJUSTMENT U/S. 145A OF THE IT ACT. H E RELIED UPON CIT VS. BRITISH PAINTS INDIA LTD. (1991) 188 ITR 44 (SC), W HEREIN IT WAS HELD THAT CLOSING STOCK OF GOODS-IN-PROCESS OR FINISHED GOODS , ALL OVERHEAD EXPENSES, BESIDES THE COST OF RAW MATERIAL, HAD TO BE ADDED I N THE CLOSING STOCK FOR DETERMINING THE CORRECT INCOME. AS PER SECTION 145 A OF THE IT ACT, THIS SHOULD BE ADDED IN THE CLOSING STOCK. THUS, HE MADE ADDIT ION OF RS.33,83,950/- IN THE INCOME OF THE ASSESSEE IN A.Y. 05-06. SIMILARL Y, ADDITION OF RS.2,08,94,571/- WAS MADE IN A.Y. 09-10. 14. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT( A) WHO HAD ALLOWED THE APPEAL BY OBSERVING AS UNDER: 4.3 I HAVE CONSIDERED THE FACTS OF THE CASE; ASSES SMENT ORDER AND APPELLANTS SUBMISSION. IT IS NOT IN DISPUTE THAT AS PER THE PROVISIONS OF SECTION 145A, THE EXCISE DUTY HAS TO BE INCLUDED IN THE VALUE OF CLOSING STOCK. ASSESSING OFFICERS ACTION OF INCLU DING EXCISE DUTY IN THE VALUE OF CLOSING STOCK IS THEREFORE CONFIRMED. HOWEVER APPELLANT SUBMITTED THAT APPELLANT PAID EX CISE DUTY ON CLOSING STOCK AT THE TIME OF REMOVAL FROM THE FA CTORY BEFORE DUE DATE OF FILING RETURN AND ACCORDINGLY SUCH EXCISE D UTY IS ALLOWABLE AS DEDUCTION UNDER SECTION 43B. APPELLANT RELIED UPON SEVERAL ITA NOS. 230 & 734/AHD/13, 2158-2160 & 2079/AHD/201 1 A.YS. 03-04, 05-06. 08-09 & 09-10. PAGE 19 DECISIONS ON THIS ISSUE. APPELLANT SUBMITTED DETAI LS OF PAYMENTS INCLUDING COPY OF CHALLAN OF EXCISE DUTY ON CLOSING STOCK AND CLAIMED THAT IF THE ADDITION OF EXCISE DUTY IS MADE, THE SA ME SHOULD BE ALLOWED UNDER SECTION 43B ON PAYMENT BASIS. RESPEC TFULLY FOLLOWING THE DECISIONS OF VARIOUS COURTS RELIED UPON BY THE APPELLANT, ASSESSING OFFICER IS DIRECTED TO VERIFY WHETHER EXC ISE DUTY ADDED BY HIM TO THE VALUE OF CLOSING STOCK IS PAID BEFORE DU E DATE OF FILING RETURN OR NOT. IF ENTIRE EXCISE DUTY ADDED IS PAID BEFORE DUE DATE OF FILING RETURN, THE ADDITION WILL NOT SURVIVE SINCE THE SAME IS ALLOWABLE UNDER SECTION 43B. IN NUTSHELL, ASSESSING OFFICER IS DIRECTED TO ALLOW CLAIM OF EXCISE DUTY ADDED BY HIM IF THE SAME IS PA ID BEFORE DUE DATE OF FILING RETURN. SIMILAR FINDING WAS GIVEN IN A.Y. 09-10 AND ALLOWED THE APPEAL IN FAVOUR OF THE ASSESSEE. 15. NOW THE REVENUE IS BEFORE US. IT IS CONTENDED THAT SECTION 145A HAS BEEN AMENDED AND IT IS ESSENTIAL ON PART OF THE ASS ESSEE TO ADD THE CENVAT CREDIT IN THE CLOSING STOCK TO ADDUCE THE CORRECT I NCOME OF THE YEAR. THUS, THE A.O. WAS RIGHTLY MADE ADJUSTMENT IN THE CLOSING STO CK. HOWEVER, LD. COUNSEL FOR THE APPELLANT RELIED UPON THE ORDER OF THE CIT( A) AND ARGUED THAT IN ASSESSEES OWN CASE IN A.Y. 03-04 IN ITA NO. 1358/AHD/2009 HAD DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE. HE FURTHER R ELIED UPON RECENT DECISION OF THE HONBLE SUPREME COURT IN CASE OF ACIT VS. TORRENT CABLES LTD., CIVIL APPEAL NO. 6927 OF 2012 , WHEREIN IT WAS HELD THAT ASSESSEE HAD BEEN FOLLOWING THE NET METHOD OF VALUING THE CLOSING STO CK. IT ACCOUNTS FOR THE EXCISE DUTY AT THE TIME OF REMOVAL OF GOODS. THERE FORE, SAME IS NOT INCLUDIBLE ITA NOS. 230 & 734/AHD/13, 2158-2160 & 2079/AHD/201 1 A.YS. 03-04, 05-06. 08-09 & 09-10. PAGE 20 FOR VALUATION OF CLOSING STOCK. THEREFORE, HE REQU ESTED TO CONFIRM THE ORDER OF THE CIT(A). 16. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE LD. CIT D.R. HAD NOT CONTROVERTED THE FINDING GIVEN BY THE CIT(A) IN HIS ORDER AND ALSO THE ASSESSEE HAD PAID EXCISE DUTY ON CLOSING STOCK AT THE TIME OF REMOVAL OF GOODS FROM THE FACTORY BEFOR E DUE DATE OF FILING OF RETURN. ACCORDINGLY, SUCH EXCISE DUTY IS ALLOWABLE AS DEDUCTION U/S. 43B OF THE IT ACT. THUS, WE DISMISS THE APPEAL OF THE REVENUE IN BOTH YEARS AND CONFIRM THE ORDER OF THE CIT(A). 17. IN THE COMBINED RESULT, THE ASSESSEES APPEAL I N A.Y. 03-04 & 08-09 ARE ALLOWED. ASSESSEE'S APPEAL IN A.Y. 05-06 & A.Y 09- 10 IS PARTLY ALLOWED AND THE REVENUES APPEALS IN BOTH YEARS ARE DISMISSED. THESE ORDERS PRONOUNCED IN OPEN COURT ON 25.09.2013 SD/- SD/- (G.C.GUPTA) (T.R. MEENA) VICE PRESIDENT ACCOUNTANT MEMBER TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. / ASSESSEE 3. $%$& ' '( / CONCERNED CIT 4. ' '(- + / CIT (A) 5. -.+' &, ' ++' &, 01 % / DR, ITAT, AHMEDABAD 6. .34 56 / GUARD FILE. BY ORDER/ , 7/0' $+ ' ++' &,