RAM RATNA WIRES LTD, MUMBAI V. ACIT 7(2), MUMBAI

ITA 2180/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4996 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2007-2008
• Appeal Filed On: 02-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V V SHASTRI
• Keywords: Tax effect

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - D BENCH. . .. . , !' !' !' !' # # # # $%&' $%&' $%&' $%&' , % % % % () () () () BEFORE S/SH.D.MANMOHAN,VICE-PRESIDENT & RAJENDR A,ACCOUNTANT MEMBER ./ ././ ./ ITA NO.2180/MUM/2012 , + + + +/ // / ASSESSMENT YEAR-2007-08 ./ ././ ./ ITA NO.8503/MUM/2011 , + + + +/ // / ASSESSMENT YEAR-2008-09 RAM RATNA WIRES LTD. RAM RATNA HOUSE, VICTORIA MILL COMPOUND, P.B.MARG, WORLI,MUMBAI- 400013. VS. ADDL. CIT RANGE 7(2) AAYAKAR BHAVAN, 5 TH FLOOR, M.K. ROAD, MUMBAI- 400020 PAN: AAACR2638C ( ,- / // / APPELLANT ) ( ./,- / RESPONDENT ) ,- ,- ,- ,- 0 0 0 0 % %% % / APPELLANT BY : SHRI RAJAN R. VORA & SHRI NIKHIL TIWARI. ./,- 1 0 % / RESPONDENT BY : SHRI V.V. SHASTRI. 1 11 1 2 2 2 2 / DATE OF HEARING : 03/09/2013 3+ 1 2 / DATE OF PRONOUNCEMENT : 13/09/2013 , 1961 1 11 1 254(1) % %% % &242 &242 &242 &242 (%5 (%5 (%5 (%5 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, A.M: CHALLENGING THE ORDERS DT.12-12-2011 AND 10.08.2011 RESPECTIVELY OF THE CIT(A)-13,MUMBAI ASSESSING-COMPANY HAS FILED SIMILAR GROUNDS OF APPE AL-THE ONLY DIFFERENCE IS OF AMOUNTS INVOLVED. AS THE ISSUE INVOLVED IN BOTH THE CASES A RE SAME,SO WE ARE ADJUDICATING THE APPEALS BY COMMON ORDER FOR SAKE OF CONVENIENCE . ITA NO. 2180/MUM/2012 AY 2007-08 GROUNDS OF APPEAL,FILED BY THE ASSESSEE FOR AY- 200 7-08,READ AS UNDER: ADDITIONS U/S.145A : 1.1.THAT THE LEARNED CIT(A) 13 ERRED ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE AND IN LAW IN NOT ALLOWING, THE WORKING OF ADJUSTMENTS AS DONE BY THE APPELLANT U/S.145A AND ALSO ERRED, IN MAKING ADDIT ION U/S.145A AT RS.343000/- AS AGAINST THE WORKING AT NIL DONE BY THE APPELLANT. 1.2.THAT THE LEARNED CIT(A)-13 ERRED ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE AND IN LAW IN NOT GIVING FINDINGS AGAINST THE GROUNDS OF APPEAL RELATED TO T HE ADJUSTMENTS U/S. 145A, THOUGH THE SAID GROUNDS O F APPEAL ARE RECITED IN APPEAL ORDER AND ALSO ERRED I N NOT CONSIDERING THE SUBSTANTIVE SUBMISSIONS MADE BY THE APPELLANT. 1.3.THAT THE LEARNED CIT(A) 13 ERRED ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE AND IN LAW IN MAKI NG ADDITIONS IN ADJUSTMENTS U/S.145A OF RS.343000/- BA SED ON WORKING/ASSUMPTIONS CONTRARY TO THE PROVISIO NS OF SEC.145A, NOT CONSIDERING CONSISTENCY IN ASSESSM ENTS IN THE CASE OF APPELLANT, IGNORING THE JUDICIA L PRONOUNCEMENTS AND WITHOUT GIVING PROPER/SPECIFIC O PPORTUNITY TO THE APPELLANT. 1.4.THAT THE LEARNED CIT(A)-13 ERRED ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE AND IN LAW IN NOT ACCEPTING THAT THE CENVAT CREDIT IS TO BE WORKED ON THE BASIS OF CONSUMPTION OF RAW MATERIAL AS RELIED/WORKED BY THE APPELLANT AND THE LEARNED CIT( A)-13 ERRED IN TAKING CENVAT CREDIT ON THE BASIS OF CENVAT SET OFF UTILIZED AS PER EXCISE REGISTER. 1.5.THE LEARNED CIT(A)-13 OUGHT TO HAVE ACCEPTED TH E WORKING OF ADJUSTMENTS U/S.145A OF THE APPELLANT RELIED/BASED ON THE GUIDANCE NOTE OF THE INSTITUTE OF INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA SUPPORTED BY JUDICIAL PRONOUNCEMENTS, AND AS PER SU BMISSIONS MADE BY APPELLANT. 2.APPELLANT CRAVES, LEAVE TO ADD, AMEND, ALTER, DEL ETE AND/OR MODIFY THE ABOVE GROUNDS OF APPEAL ON OR BEFORE THE FINAL DATE OF HEARING. 2 ITA NO. 2180/MUM/2012 RAM RATNA WIRES LTD. ITA NO. 8503/MUM/2011 AY 2008-09 FOR AY- 2008-09 FOLLOWING GROUNDS OF APPEAL HAVE BE EN FILED BY THE ASSESSEE : 1.ADDITIONS U/S.145A : 1.1.THAT THE LEARNED CIT(A) 13 ERRED ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE AND IN LAW IN NOT ALLOWING, THE WORKING OF ADJUSTMENTS AS DONE BY THE APPELLANT U/S.145A AND ALSO ERRED IN ENHANCING THE ADDITION U/S.145A AS UNDER: PARTICULARS ADDITIONS U/S.145A 1.1.1 AS PER WORKING OF ADJUSTMENT U/S.145A OF THE APPELLANT NIL 1.1.2 AS PER WORKING OF ADJUSTMENTS U/S.145A OF TH E ASSESSING OFFICER 5406435/- 1.1.3 AS PER WORKING OF THE ADJUSTMENTS, ON ENHANC EMENT, BY THE CIT(A)-13 14200000/- 1.2.THAT THE LEARNED CIT(A)-13 ERRED ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE AND IN LAW IN NOT GIVING FINDINGS AGAINST THE GROUNDS OF APPEAL R ELATED TO THE ADJUSTMENTS U/S. 145A, THOUGH THE SAID GROUNDS OF APPEAL ARE RECITED IN APPEAL ORDER AND ALSO ERRED IN NOT CONSIDERING THE SUBSTANTIVE SUBMISSIONS MADE BY THE APPELLANT. 1.3.THAT THE LEARNED CIT(A) 13 ERRED ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE AND IN LAW IN ENHANCING THE ADDITIONS IN ADJUSTMENTS U/S.145A TO RS.14200000/- BASED ON WORKING/ ASSUMPTIONS CONTRARY TO THE PROVISIONS OF SEC.145A, NOT CONSIDE RING CONSISTENCY IN ASSESSMENTS IN THE CASE OF APPELLANT, IGNORING THE JUDICIAL PRONOUNCEMENTS AND WITHOUT GIVING PROPER/SPECIFIC OPPORTUNITY TO THE APPELLANT. 1.4.THAT THE LEARNED CIT(A)-13 ERRED ON THE FACTS, IN THE CIRCUMSTANCES OF THE CASE AND IN LAW IN NOT ACCEPTING THAT THE CENVAT CREDIT IS TO BE WORKE D ON THE BASIS OF CONSUMPTION OF RAW MATERIAL AS RELIED/WORKED BY THE APPELLANT AND ERRED IN TAKING CENVAT CREDIT ON THE BASIS OF CENVAT SET OFF UTILIZED AS PER EXCISE REGISTER. 1.5.THE LEARNED CIT(A)-13 OUGHT TO HAVE ACCEPTED TH E WORKING OF ADJUSTMENTS U/S.145A OF THE APPELLANT RELIED/BASED ON THE GUIDANCE NOTE OF THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA SUPPORTED BY JUDICIAL PRONOUNCEMENTS. 2.APPELLANT CRAVES, LEAVE TO ADD, AMEND, ALTER, DEL ETE AND/OR MODIFY THE ABOVE GROUNDS OF APPEAL ON OR BEFORE THE FINAL DATE OF HEARING. ITA NO. 2180/MUM/2012 AY 2007-08 2. ASSESSEE-COMPANY, ENGAGED IN THE BUSINESS OF MANUFA CTURING ENAMELED COPPER WINDING WIRES, FILED ITS RETURN OF INCOME ON 18.10.2007 DECLARING TO TOTAL INCOME OF RS. 98.54 LACS.ASSESSMENT WAS FINALISED ON 23. 12.2009 U/S.143 (3)OF THE ACT BY THE ASSESSING OFFICER(AO) DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS.1.88 CRORES. 2.1. EFFECTIVE GROUND OF APPEAL IS ABOUT AN ADDITION OF RS. 3,43,000 /-,CONFIRMED BY THE FIRST APPELLATE AUTHORITY(FAA),U/S.145A OF THE ACT.DURING THE ASSESSMENT PROCEEDINGS,AO FOUND THAT ASSESSEE HAD NOT INCLUDED THE EXCISE DUTY IN THE VA LUATION OF CLOSING STOCK. HE HELD THAT,AS PER THE PROVISIONS OF SECTION 145A OF THE ACT,ASSESSEE SHOU LD HAVE INCLUDED EXCISE DUTY COMPONENT OF PURCHASE PRICE OF RAW-MATERIAL WHILE VALUING THE CL OSING STOCK OF FINISHED GOODS,WORK-IN-PROGRESS AND RAW-MATERIAL.THE ASSESSEE SUBMITTED BEFORE THE AO THAT NON-INCLUSION OF THE SAME WOULD HAVE NO EFFECT ON ITS COMPUTABLE PROFITS. REFERRING TO THE PROVISIONS OF SAID SECTION,AO HELD THAT SUBMISSION MADE BY THE ASSESSEE QUESTIONED THE WIS DOM OF LEGISLATURE,THAT THE CLARIFICATORY AMEN -DMENT INTRODUCED IN THE SECTION REQUIRED THE ASSES SEE TO VALUE THE CLOSING STOCK ON IMPORTS ETC. IN A PARTICULAR MANNER,THAT AFTER COMPUTING THE PROFIT AND GAINS OF THE BUSINESS/PROFESSION AS PER THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSE SSEE THE PROFIT HAD TO BE FURTHER ADJUSTED TO INCLUDE EXCISE DUTY COMPONENT OF COST PAID BY THE A SSESSEE ARISING AS A CONSEQUENCE OF SUCH PAYMENT,THAT THERE WAS NO DISCRETION IN THIS MATTER AND THE EXCISE COMPONENT OF THE COST INPUTS HAD TO BE INCLUDED IN CLOSING STOCK VALUATION IRRES PECTIVE OF CENVAT CLAIM.HE FURTHER HELD THAT GUIDANCE LINES OF TAX AUDIT ISSUED BY ICAI WOULD NO T OVERRIDE THE SPECIFIC PROVISIONS OF THE ACT, 3 ITA NO. 2180/MUM/2012 RAM RATNA WIRES LTD. THAT THE MECHANISM OF MODVAT/ CENVAT WAS JUST AN AD MINISTRATIVE MECHANISM TO ENSURE THAT GOVE -RNMENT COLLECTED EXCISE DUTY ONLY ON THE VALUE OF ADDITION BY MANUFACTURING GOODS, THAT IT DID NOT CHANGE THE COST OF INPUTS.COMPARING THE INCLUSIVE M ETHOD AND EXCLUSIVE METHOD OF GUIDANCE-NOTE HE WORKED THE PROFIT U/S. 145A OF THE ACT.FINALLY, HE ADDED AMOUNT OF RS. 86.85 LACS TO THE INCOME OF THE ASSESSEE AND HELD THAT NO CORRESPONDI NG ADJUSTMENT IN VALUATION OF OPENING STOCK WAS MADE. 2.1 .ASSESSEE PREFERRED AN APPEAL BEFORE THE FAA. IN HI S ORDER, HE GAVE DETAILS OF EXCISE POSITION AS PER SECTION 145A OF THE ACT AND HELD THAT ADDITI ON UNDER THE SAID SECTION SHOULD BE RESTRICTED TO RS.3.43 LACS. 2.2 .BEFORE US,AUTHORISED REPRESENTATIVE (AR) SUBMITTED THAT ADJUSTMENT REQUIRED U/S. 145A OF THE ACT WERE REVENUE NEUTRAL, THAT THE EXCISE DUTY,AMOU NTING TO RS.15,19,53,402/-,PAYABLE ON FINISHED GOODS WAS PAID BEFORE THE DUE DATE OF FILING OF RET URN OF INCOME , THAT EXCISE DUTY ON CLOSING STOCK ON FINISHED GOODS WAS RS. 63.71 LACS. HE REFERRED T O PAGES NO.2,19,83TO 91 OF THE PAPER BOOK.HE FURTHER STATED THAT NO ADJUSTMENT PERTAINING TO MOD VAT CREDIT WAS MADE IN EARLIER YEARS I.E.FROM AY 1999-2000 TO 2006-07,THAT ACCOUNTS OF THE ASSESS EE WERE PREPARED ON EXCLUSIVE METHOD,THAT ADJUSTMENTS AS CONTEMPLATED BY THE PROVISIONS OF SE CTION 145A OF THE ACT AND OTHER ADJUSTMENT IN CONSEQUENCE OF INCLUSIVE METHOD WERE REGULARLY SHOW N THE BOOKS OF ACCOUNTS, THAT IN MAKING ABOVE ADJUSTMENTS ASSESSEE HAD TAKEN SUPPORT FROM T HE GUIDANCE NOTE ISSUED BY THE ICAI, THAT GUIDANCE NOTE ISSUED BY THE INSTITUTE HAVE BEEN ACC EPTED JUDICIALLY.AR RELIED UPON THE ORDERS OF THE ITAT,MUMBAI PASSED IN THE CASE OF R.R.KABEL LT D.,A SISTER CONCERN OF THE ASSESSEE. (66DTR- TRIB-MUMBAI).HE ALSO REFERRED TO THE DECISIONS OF HAWKINS COOKERS LTD.(14 DTR 206-TRIB- MUMBAI)K.V.AROCHEM P.LTD.(ITA/129/M/10DTD.27.04.201 1-A BENCH,MUMBAI),FOURESS ENGG. INDIA LTD.(26SOT178-MUMBAI),WIPRO LTD.(34DTR493),KO LSITE MASCHINE FABRIK LTD. (DATED 20. 04.2009).DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE FAA. 2.3 .WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL BEFORE US.WE FIND THAT THE ASSESSEE IS CONSISTENTLY FOLLOWING EXCLUSIVE METHO D OF ACCOUNTING FOR MODVAT CREDIT FOR LAST SO MANY YEARS,THAT IT IS MAKING NECESSARY ADJUSTMENT I N THE BOOKS OF ACCOUNTS AS REQUIRED BY THE ACT AND SUGGESTED BY THE GUIDE NOTE ISSUED BY THE ICAI .FROM THE ACCOUNTS SUBMITTED BEFORE US,IT IS FOUND THAT EXCISE DUTY OF 15.19 CRORES WAS PAID BY THE ASSESSEE-COMPANY BEFORE THE DUE DATE OF FILING OF RETURN.AT PAGE NO.2 OF THE PAPER BOOK DET AILS HAVE BEEN FURNISHED WITH REGARD TO MODVAT ADJUSTMENT. FROM THE WORKING GIVEN BY THE ASSESSEE ONE THING IS CLEAR THAT TREATMENT GIVEN BY THE ASSESSEE ABOUT EXCISE DUTY IS REVENUE NEUTRAL.WE H AVE ALSO PERUSED THE ACCOUNTS PREPARED BY THE COMPANY FOLLOWING THE INCLUSIVE METHOD AS WELL AS T HE EXCLUSIVE METHOD (PAGE 83 OF THE PB) .WE FIND THAT AFTER NECESSARY ADJUSTMENTS MADE BY THE A SSESSEE,IN PURSUANCE OF THE GUIDE NOTE ISSUED BY THE ICAI,THERE IS NO DIFFERENCE IN THE NET RESUL T FROM TAXATION POINT OF VIEW.AT PG,NO.84 OF THE PB,ASSESSEE HAS GIVEN THE DETAILS OF EARLIER YEARS ADJUSTMENT AND TREATMENT GIVEN BY THE AO TO SUCH ADJUSTMENTS.WE FIND THAT IN THE EARLIER YEARS AO HAD ACCEPTED THE METHOD FOLLOWED BY THE ASSESSEE.IN OUR OPINION,PROVISIONS OF SECTION 145A OF THE ACT ARE APPLICABLE IN THE CASE UNDER CON -SIDERATION-NOBODY CAN CLAIM EXEMPTION FROM THE PRO VISIONS OF THE SAID SECTION.BUT,THE ACCOUNTS PREPARED BY THE ASSESSEE IN A PARTICULAR MANNER,AS DISCUSSED ABOVE,HAVE NEUTRAILISED THE TAX EFFECT AND BROUGHT IT TO NIL.THERE IS NO DENIAL THAT IT HA S FOLLOWED THE GUIDE NOTE OF THE ICAI AND THE NOTE HAS BEEN JUDICIALLY NOTED AT HIGHER FORUMS OF JUDIC IARY.WE FIND THAT IN THE CASE OF THE SISTER CONCERN OF THE ASSESSEE,R.R.KABEL,(SUPRA)OF ITAT MU MBAI HAS HELD AS UNDER: IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUGH T ON RECORD BY THE REVENUE, WE RESPECTFULLY FOLLOWING THE CONSISTENT VIEW OF THE TRIBUNAL AND K EEPING IN VIEW THAT THE ASSESSEE IS FOLLOWING CONSISTENT METHOD OF ACCOUNTING AND THERE IS NO CHA NGE IN ACCOUNTING SYSTEM FOLLOWED BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION, HOLD THAT THE LEARNED CIT(A) WAS FULLY JUSTIFIED IN DELETING THE ADDITION OF RS. 11,08,904 MADE BY THE AO UNDER S. 145A OF THE ACT. THE GROUNDS TAKEN BY THE REVENUE ARE THEREFORE REJECTED. CONSIDERING THE ABOVE REFERRED CASES,INCLUDING THE CASE OF R.R.KABEL,WE ARE OF OPINION THAT BY FOLLOWING EXCLUSIVE METHOD AND MAKING NECESSARY ADJ USTMENT ENTRIES IN THE BOOKS,ASSESSEE HAS FULFILLED THE CONDITIONS LAID DOWN BY THE PROVISION S OF SECTION 145A OF THE ACT.THEREFORE, 4 ITA NO. 2180/MUM/2012 RAM RATNA WIRES LTD. REVERSING THE ORDER OF THE FAA,WE DECIDE GROUND NO. 1 IN FAVOUR OF THE ASSESSEE . AS A RESULT,APPEAL FILED BY THE ASS ESSEE STANDS ALLOWED. ITA NO. 8503/MUM/2011 AY 2008-09 AS STATED EARLIER,GROUNDS FOR THE YEAR UNDER CONSID ERATION ARE SIMILAR TO THE GROUNDS FOR AY.2006- 07.THE ONLY DIFFERENCE IS THAT OF AMOUNT INVOLVED W ITH REGARD TO ADJUSTMENT MADE U/S. 145A OF THE ACT.EFFECTIVE GROUND IS ABOUT ADJUSTMENT ,AMOU NTING TO RS.1,42, 00,000/-,MADE UNDER THE SAID SECTION.WHILE FINALISING THE ASSESSMENT FOR TH E YEAR AO HAD MADE ADDITION OF RS.54.06 LAKHS, BUT THE FAA,IN APPELLATE PROCEEDINGS,ENHANCED IT TO RS.1.42 CRORES.WE FIND THAT FAA HAD NOT ISSUED A NOTICE BEFORE MAKING ENHANCEMENT,AS CONTEM PLATED BY SECTION 151(2) OF THE ACT.IN OUR OPINION ONLY ON THAT GROUND ORDER OF THE FAA CAN BE REVERSED.BUT,WE WOULD LIKE TO FOLLOW OUR ORDER FOR THE AY.2007-08 AND FOR THE REASONS GIVE A T PARAGRAPH 2.3 OF OUR ORDER WE DECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSE E. AS A RESULT APPEALS FILED BY THE ASSESSEE-COMPANY F OR THE AYS.2006-07 AND 2008-09 STAND ALLOWED. 6 )7 62 8 .. 2006-07 2, 2008-09 % # ( 9 1 4: ; $< 1 $ 2 =. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH SEPTEMBER, 2013 (%5 1 3+ % & ; >( 13, 2 2013 1 4 ? SD/- SD/- ( . / D. MANMOHAN ) ( $%&' $%&' $%&' $%&' / RAJENDRA) !' !' !' !' / VICE-PRESIDENT % % % % () () () () /ACCOUNTANT MEMBER / MUMBAI, >( /DATE: 13.09 . 2013 SK (%5 (%5 (%5 (%5 1 11 1 .2@ .2@ .2@ .2@ A%@+2 A%@+2 A%@+2 A%@+2 / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / ,- 2. RESPONDENT / ./,- 3. THE CONCERNED CIT(A)/ B C , 4. THE CONCERNED CIT / B C 5. DR D BENCH, ITAT, MUMBAI / @D 4 .2 , . . & . 6. GUARD FILE/ 4 E / @2 .2 //TRUE COPY// (%5 / BY ORDER, / $ DY./ASST. REGISTRAR , /ITAT, MUMBAI