DCIT CIR 7(1), MUMBAI V. PENWALT AGRU PLASTICS LTD, MUMBAI

ITA 2215/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3743 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 03-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 145

Judgement Text

C IN THE INCOME TAX APPELLATE TRIBUNAL C BENC H, MUMBAI . . , , . , ! ' BEFORE SHRI I.P. BANSAL, JM AND SHRI D. KARUNAKARA RAO, AM ./I.T.A. NO.2215/M/2012 ( # $ %$ / ASSESSMENT YEAR :2006-2007) DCIT - 7(1), ROOM NO.622, M.K. ROAD, MUMBAI 400 020. # / VS. M/S. PENWALT AGRU PLASTICS LTD, 507, KAKAD CHAMBERS, 132 DR. A.B. ROAD, WORLI, MUMBAI-18. & ! ./PAN : AABCP 3757 B ( &' /APPELLANT) .. ( ()&' / RESPONDENT) &' * + / APPELLANT BY : RAJARSHI DWIVEDY, SR. DR ()&' * + / RESPONDENT BY : NONE # * ,! /DATE OF HEARING :16.4.2013 -.% * ,! /DATE OF PRONOUNCEMENT : 08-05-2013 / / / / / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 3.4.2012 IS AG AINST THE ORDER OF CIT (A)- 20, MUMBAI DATED 13.1.2012 FOR THE ASSESSMENT YEAR 2006-2007. 2. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROU ND WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAWS, THE LD CIT (A) ERRED IN DELETING THE ADDITION MADE BY THE AO ON AC COUNT OF UNUTILISED MODVAT CREDIT BY HOLDING THAT THE NET IMPACT ON THE TRADING ACCO UNT IS NIL FOLLOWING THE INCLUSIVE OR EXCLUSIVE METHOD OF VALUATION OF CLOSI NG STOCK. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT (A) ERRED IN DELETING THE ADDITION MADE BY THE AO IN RE SPECT OF UNUTILIZED MODVAT CREDIT WITHOUT APPRECIATING THE DETAILED ILLUSTRATION GIV EN BY THE AO, SHOWING THE IMPACT ON THE NET PROFIT FOLLOWING THE EXCLUSIVE ME THOD AND INCLUSIVE METHOD OF VALUATION OF CLOSING STOCK. 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE TH AT THE ASSESSEE IS A MANUFACTURER AND TRADER IN POLYETHYLENE PIPES AND FITTING. ASSE SSEE FILED THE RETURN OF INCOME DECLARING THE TOTAL LOSS OF RS. 65,67,660/-. ASSES SING OFFICER SCRUTINIZED THE RETURN FILED BY THE ASSESSEE U/S 143(3) OF THE ACT AND ASS ESSED THE LOSS OF RS. 41,96,389/-, AFTER MAKING CERTAIN ADDITIONS U/S 145A OF THE ACT, BEING MODVAT CREDIT OF RS. 18,79,943/- OF THE INCOME TAX ACT. IN RESPECT OF MODVAT CREDIT ISSUE, AO NOTICED THAT THE ASSESSEE HAS SHOWN CREDIT BALANCE OF CENVAT AMOUNTING TO RS. 18,79,328/- IN RESPECT OF RAW MATERIAL AND RELEVANT DETAILS WERE NOT FURNISHED BY THE ASSESSEE IN SUPPORT OF NON-INCLUSION OF THE ABOVE S AID AMOUNT IN THE COMPUTATION OF INCOME. EX CONSEQUENTI, AO ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESS EE U/S 145A OF THE ACT. AGGRIEVED, ASSESSEE IS IN APPEAL B EFORE THE FIRST APPELLATE AUTHORITY. 4. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLAT E AUTHORITY, IN RESPECT OF CENVAT CREDIT ON CLOSING STOCK OF RAW MATERIALS OF RS. 18,79,328/-, ASSESSEE SUBMITTED THAT THE SAME WAS A CLOSING BALANCE AS A PPEARING IN THE EXCISE DUTY DEPOSIT ACCOUNT. THUS, THE CENVAT CREDIT HAS NO REL EVANCE WITH THE RAW MATERIALS LYING THE IN CLOSING STOCK AND HENCE, THE SAME CANN OT BE ADDED TO THE CLOSING STOCK OF U/S 145A OF THE ACT. AFTER CONSIDERING THE SUBM ISSIONS OF THE ASSESSEE, CIT (A) DELETED THE ADDITION MADE BY THE AO U/S 145A OF THE ACT. PARA 3.2 OF THE IMPUGNED ORDER IS RELEVANT IN THIS REGARD AND SAME IS AS UND ER: 3.2. I HAVE PERUSED THE ASSESSMENT ORDER AND WRITTE N SUBMISSIONS OF THE APPELLANT. THIS ISSUE HAS BEEN EXAMINED BY HONBLE BOMBAY HIGH COURT IN MAHALAXMI GLASS WORKS (318 ITR 116) WHICH FOLLOWED THE DECISI ON OF HONBLE HIGH COURT IN THE CASE OF MAHAVIR ALUMINIUM (297 ITR 77) WHEREBY THE APPELLANT IS EXPECTED TO SUBMIT THE DETAILED OF MODVAT CREDIT EITHER BOTH ON EXCLUSIONS AS WELL AS INCLUSION BASIS AND IF THERE IS ANY IMPACT ON PROFITS THE SAM E IS ADDED U/S 145 OF THE IT ACT, 1961. THE ASSESSING OFFICER HAS MADE ADJUSTMENT IN THE CLOSIN G STOCK WITHOUT CORRESPONDING ADJUSTMENT IN OPENING STOCK. IN THIS CONNECTION THE APPELLANT DREW ATTENTION TO CLAUSE 12(B) OF TAX AUD IT REPORT, WHERE IT IS SEEN THAT IRRESPECTIVE OF METHOD OF ACCOUNTING FOLLOWED BY TH E ASSESSEE INCLUSIVE METHOD IN ACCORDANCE WITH SECTION 145A OR EXCLUSIVE METHOD IN ACCORDANCE WITH AS-2 ISSUED BY ICAI THERE WAS NO IMPACT ON THE PROFITS. AS SUCH, THE ONE SIDED ADDITION U/S 145A TO THE CLOSING STOCK IS DELETED. 4.1. AGGRIEVED, REVENUE FILED THE PRESENT APPEAL BE FORE THE TRIBUNAL WITH THE ABOVE MENTIONED GROUND NO.2. 5. DURING THE PROCEEDINGS BEFORE US, LD DR RELIED O N THE ORDER OF THE AO AND MENTIONED THE ISSUE RELATING TO THE MODVAT IS SETTL ED AT THE LEVEL OF THE JURISDICTIONAL HIGH COURT OF BOMBAY AND THEREFORE, THE APPEAL CAN BE DECIDED EVEN WITHOUT THE PRESENCE OF THE REPRESENTATIVE OF THE ASSESSEE. 6. ON THE OTHER HAND, NONE APPEARED TO REPRESENT ON BEHALF OF THE ASSESSEE. 7. WE HAVE HEARD THE LD DR, PERUSED THE ORDERS OF T HE REVENUE AUTHORITIES AND THE MATERIAL PLACED BEFORE US. IT IS THE CASE OF TH E ASSESSEE THAT THE ASSESSING OFFICER MADE ADJUSTMENT IN THE CLOSING STOCK WITH OUT MAKING CORRESPONDING ADJUSTMENT IN OPENING STOCK AND OTHER INVENTORIES . FURTHER, IN VIEW OF CLAUSE 12(B) OF THE TAX AUDIT REPORT, WHEREIN IT CAN BE NOTICED THAT IRRESPECTIVE OF METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE IE INCLUSIVE M ETHOD IN ACCORDANCE WITH SECTION 145A OR EXCLUSIVE METHOD IN ACCORDANCE WITH AS-2 ISSUED BY ICAI, THERE WAS NO IMPACT ON THE PROFITS. IT IS A SETTLED ISSUE THAT THE ADJUSTMENT IF AT ALL HAS TO BE MADE, THE SAME SHOULD BE DONE ALL THE INVENTORIES S UCH AS OPENING STOCK, CLOSING STOCK AND THE PURCHASES. CONSIDERING THE SETTLED NA TURE OF THE ISSUE, IN VIEW OF THE BINDING JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF MAHALAXMI GLASS WORKS (SUPRA ) AND THE MAHAVIR ALUMINIUM (SUPRA) , WE ARE OF THE OPINION THAT THE ORDER OF THE CIT (A) DOES NOT CALL FOR ANY INTE RFERENCE. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE DISMISSED . 8. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DIS MISSED. 0 ,1 2 * !02 * 2, 34 ORDER PRONOUNCED IN THE OPEN COURT ON 08.05.2013. . / * -.% ! 5#1 08/05/2013 . * 6 SD/- SD/- (I.P. BANSAL) (D. KARUNAKARA RAO ) / JUDICIAL MEMBER ! / ACCOUNTANT MEMBER MUMBAI; 5# DATED 08/05 /2013 . # . ./ OKK , SR. PS / / / / * ** * (,78 (,78 (,78 (,78 98%, 98%, 98%, 98%, / COPY OF THE ORDER FORWARDED TO : 1. &' / THE APPELLANT 2. ()&' / THE RESPONDENT. 3. : ( ) / THE CIT(A)- 4. : / CIT 5. 8;6 (,# , , / DR, ITAT, MUMBAI 6. 6$ < / GUARD FILE. )8, (, //TRUE COPY// /# /# /# /# / BY ORDER, = == = / 3 3 3 3 2 2 2 2 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI