Jalaram Ceramics Ltd, Ahmedabad V. The ACIT.,(OSD)-I,Range-4, Ahmedabad

ITA 223/AHD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60327 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 08-05-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 27-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: N C AMIN

Judgement Text

ITA NO.223/ AHD/2011 A.YR. 2007- 08. 1 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AH MEDABAD (BEFORE SHRI D. K. TYAGI, JM & SHRI ANIL CHATURVED I A.M.) I.T.A. NO. 22 3/AHD/2011. (ASSESSMENT YEAR: 2007 -08) JALARAM CERAMICS LTD., 511, SHIROMANI COMPLEX, NEAR NEHRUNAGAR, S.M. ROAD, AMBAWADI, AHMEDABAD. (APPELLANT) VS. THE ASSISTANT COMMISSIONER OF INCOME TAX (OSD)-1,RANGE-4, KENDRIYA PRATYALSHA BHAVAN, NEAR PANJARA POLE, AMBAWADI, AHMEDABAD. (RESPONDENT) PAN: AAACJ 4876E APPELLANT BY : SHRI N.C.AMIN RESPONDENT BY : SHRI VINOD TANWANI, SR.D.R. ( )/ ORDER DATE OF HEARING : 8-5-2012 DATE OF PRONOUNCEMENT : 11-5-2012 PER: SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER OF CIT(A)-VIII, AHMEDABAD DATED 15-12-2010 FORE THE ASSESSMENT YEAR 2007-08. 2. THOUGH THE ASSESSEE HAS RAISED FOUR GROUNDS OF A PPEAL IN ITS APPEAL BUT THE ONLY EFFECTIVE GROUND IS REGARDING CONFIRMA TION OF ADDITION OF RS. 18,79,399/- MADE BY THE A.O. ON ACCOUNT OF ALLEGED UNDERVALUATION OF CLOSING STOCK. ITA NO.223/ AHD/2011 A.YR. 2007- 08. 2 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF CERAMIC GLAZE AND VITR IFIED TILES. IT FILED ITS RETURN OF INCOME ON 31-10-2007 DECLARING TOTAL INCO ME AT RS.2,01,15,620/-. THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COUR SE OF ASSESSMENT PROCEEDINGS, THE A.O. ASKED THE ASSESSEE TO JUSTIFY THE VALUATION OF CLOSING STOCK. THE ASSESSEE SUBMITTED A DETAILED REPLY TO THE A. OS QUERY VIDE ITS LETTER DATED 10-12-2009 BUT IT WAS NOT ACCEPTED BY THE A.O. AND HE THEREFORE MADE ADDITION ON ACCOUNT OF UNDERVALUATIO N OF CLOSING STOCK OF RS.18,79,399/-. AFTER MAKING THE AFORESAID ADDITION S AND OTHER DISALLOWANCES THE TOTAL INCOME WAS DETERMINED AT RS .2,24,03,834/- VIDE ORDER DATED 24-12-2009. THEREAFTER, THE ASSESSEE CA RRIED THE MATTER IN APPEAL BEFORE THE CIT (A) AGAINST THE ABOVE CONFIRM ATION. 4. THE CIT (A) UPHELD THE ACTION OF THE A.O. BY OBS ERVING AS UNDER:- 4.2. I HAVE CAREFULLY CONSIDERED THE FINDINGS OF T HE A.O. AS WELL AS SUBMISSION OF THE LD. A.R. OF THE APPELLANT. ON THE IDENTICAL FACTS IN THE A.Y. 2006-07, MY PREDECESSOR LD. CIT (A) VIDE A PPEAL NO. CIR(A)-8/AC-4/213/08-09 DATED 20-11-2009 CONFIRMED THE ADDITION GIVING THE FINDINGS AS UNDER:- 7.4. I HAVE CONSIDERED THE FACTS OF THE CASE AND TH E SUBMISSIONS OF THE LD. A.R. CAREFULLY. AS PER THE P ROVISIONS OF SECTION 145A OF THE ACT THE VALUATION OF PURCHASE AND SALE OF GOODS AND INVENTORY FOR THE PURPOSES OF DETERMINING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION SHALL BE - ITA NO.223/ AHD/2011 A.YR. 2007- 08. 3 (A ) IN ACCORDANCE WITH THE METHOD OF ACCOUNTING RE GULARLY EMPLOYED BY THE ASSESSEE; AND (B) FURTHER ADJUSTED TO INCLUDE THE AMOUNT OF ANY T AX, DUTY, CESS OR FEE (BY WHATEVER NAME CALLED) ACTUALLY PAID OR INC URRED BY THE ASSESSEE TO BRING THE GOODS TO THE PLACE OF ITS LOC ATION AND CONDITION AS ON THE DATE OF VALUATION. 7.5. THEREFORE, UNDER THESE CIRCUMSTANCES, THE APP ELLANT IS REQUIRED TO INCLUDE THE EXCISE DUTY IN THE VALUE OF CLOSING STOCK. THE CASE LAWS RELIED UPON BY THE A.R. DO NOT SUPPOR T HIS CASE THEY HAVE BEEN RENDERED ON DIFFERENT FACTS. IN VIEW OF THIS THE ADDITION MADE BY THE A.O. AMOUNTING TO RS.18,.02,93 1/- IN THE INCOME OF THE APPELLANT IS HEREBY CONFIRMED. THE AL TERNATIVE CONTENTION OF THE LD. A.R. REGARDING CORRESPONDING CHANGE IN OPENING STOCK SHOULD BE MADE, HAS ALSO BEEN CONSIDE RED. THIS IS BEING CONSEQUENTIAL IN NATURE AND NOT REQUIRE AN Y SEPARATE ADJUDICATION. HOWEVER, THE APPELLANT IS OPEN TO APP LY BEFORE THE A.O. TO GET RECTIFICATION OF THE ORDER FOR SUBSEQUE NT YEAR AS OPENING STOCK ACCORDINGLY. IN THIS REGARD RELIANCE IS PLACED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE V KJ BUILDERS AND CONTRACTORS P. LTD VS. CIT 319 ITR 204 WHEREIN THE APEX COURT HAS HELD THAT IT IS A FUNDAMENTAL PR INCIPLE OF ACCOUNTANCY THAT FIGURES OF THE CLOSING STOCK OF TH E EARLIER YEAR HAS TO FORM THE OPENING STOCK OF THE NEXT YEAR. 4.3. FOLLOWING THE FINDINGS OF THE LD. CIT (A) IN T HE A.Y. 2006- 07,SINCE THE FACTS ARE IDENTICAL, THERE IS NO REASO N TO INTERFERE IN THE FINDINGS OF THE A.O. AND THEREFORE, THE ADDITION OF RS.18,79,399/- ON ACCOUNT OF UNDER VALUATION OF CLOSING STOCK IS CONF IRMED. 5. AGGRIEVED BY THE ORDER OF CIT (A), THE ASSESSEE IS NOW IN APPEAL BEFORE US. IT WAS SUBMITTED BY THE A.R. THAT IT IS CONSISTENT PRACTICE OF THE ASSESSEE TO VALUE FINISH GOODS STOCK AT LOWER OF CO ST OR MARKET VALUE WITHOUT INCLUDING EXCISE DUTY PAYABLE ON IT. THE EX CISE DUTY BECOMES DUE FOR PAYMENT ON CLEARANCE OF GOODS FROM FACTORY PREM ISES AND NOT ON ITA NO.223/ AHD/2011 A.YR. 2007- 08. 4 PRODUCTION OF GOODS IN FACTORY. THE ASSESSEE HAD PA ID EXCISE DUTY ON CLEARANCE OF GOODS BEFORE FILING OF THE INCOME TAX RETURN FOR A.Y. 2007-08. THUS EXCISE DUTY PAYABLE ON FINISHED GOODS WAS PAID BEFORE FILING OF RETURN OF INCOME. IT WAS FURTHER STATED THAT IF EXCISE DUT Y IS INCLUDED IN THE VALUE OF FINISHED GOODS THEN ON THE OTHER HAND PRODUCTION FO R EXCISE DUTY EXPENSES IS REQUIRED TO BE MADE. THUS IT IS TAX NEUTRAL. THE ASSESSEE HAS NEITHER DEBITED EXCISE DUTY PAYABLE ON CLOSING STOCK IN THE P & L ACCOUNT NOR MADE ADDITION IN VALUE OF CLOSING STOCK LYING AT FA CTORY PREMISES. HE ALSO RELIED ON THE DECISION OF MADRAS HIGH COURT IN THE CASE OF DYNA VISION LTD (267 ITR 600). BEFORE US THE A.R. OF THE ASSESSEE ALSO SUBMITTED A COPY OF ITATS ORDER IN ASSESSEES OWN CASE FOR ASSESSME NT YEAR 2005-06 IN APPEAL NO.ITA 2187/AHD/2009 AHMEDABAD C BENCH DATED 6-1-2012 WHEREIN ON IDENTICAL FACTS THE ISSUE HAS BEEN DECI DED IN FAVOUR OF THE ASSESSEE BY HOLDING AS UNDER:- 5. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES, IT WAS FOUND THAT THE ASSESSEE HAD MAINTAINED A SEPARATE ACCOUNT FOR THE EXCISE DUTY AND THAT THE ASSESSEE HAD PAID THE EXCISE DUTY LEVIABLE ON FINISHED GOOD STOCK BEFORE THE FILING OF THE RETURN . THE EXCISE DUTY WAS NOT DEBITED TO P &L ACCOUNT AND IT WAS NOT CLAI MED AS AN EXPENDITURE. FOR THIS PROPOSITION CASE LAW CITED IS CIT VS. PARRY CONFECTIONARY 299 ITR 321. THE NEXT ARGUMENT IS THA T THE EXCISE DUTY IS LEVIABLE AND INCLUDIBLE IN THE CLOSING STOCK WHE N THE STOCK IS CLEARED FROM THE FACTORY. SINCE IT WAS NOT CLEARED FROM THE FACTORY, THEREFORE NOT INCLUDIBLE IN THE VALUE OF CLOSING ST OCK. CASE LAW RELIED UPON IS ACIT VS. NARMADA CHEMATUR PETROCHEMICALS LT D., 327 ITR 369 (GUJ.).IT HAS ALSO BEEN ARGUED THAT IN THE PAST NO SUCH ADJUSTMENT WAS EVER MADE, HENCE THE ADJUSTMENT FOR THE YEAR UNDER CONSIDERATION IS OTHERWISE REVENUE NEUTRAL FOR THIS LEGAL PROPOSITION CASE LAW RELIED UPON IS CIT VS. REALEST BUILDERS AN D SERVICES LTD. 307 ITR 202 (SC). ASSESSEE HAS ALSO PLACED RELIANCE ON ASHWIN A. SHAH 1 ITR 356 (TRIB) (AHD.) FOR THE LEGAL PROPOSIT ION THAT THE LIABILITY ARISES ONLY AT THE TIME OF REMOVAL OF GOODS FROM TH E FACTORY. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTA NCES OF THE CASE ITA NO.223/ AHD/2011 A.YR. 2007- 08. 5 AND THE LAW DISCUSSED IN ABOVE, WE HEREBY REVERSE T HE FINDING OF THE LD. CIT (A) AND ALLOW THIS GROUND. ASSESSEES APPE AL IS ALLOWED. 6. THE LD. D.R. ON THE OTHER HAND RELIED ON THE OR DER OF A.O. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. IT IS A FACT THAT THE FACTS OF THE ASSESSEE S CASE IN THE IN THE PRESENT CASE ARE IDENTICAL TO THAT OF ITS OWN CASE FOR A.Y . 2005-06 . ON IDENTICAL FACTS THE CO-ORDINATE BENCH HAS ALLOWED THE ASSESSE ES APPEAL IN EARLIER YEAR. SINCE THE FACTS FOR A.Y. 2005-06 AND 2007-08 ARE IDENTICAL, WE FOLLOW THE DECISION OF CO-ORDINATE BENCH (ITA NO.2187/AHD/ 2009) AND FOLLOWING THE DECISION OF COORDINATE BENCH OF THE TRIBUNAL (S UPRA) WE HEREBY ALLOW THE APPEAL OF THE ASSESSEE. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 11 - 5 - 201 2. SD/- SD/- (D. K. TYAGI) (ANIL CHATURVEDI) JUDICIAL MEMBER ACC OUNTANT MEMBER AHMEDABAD. S.A.PATKI. ITA NO.223/ AHD/2011 A.YR. 2007- 08. 6 COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)-VIII,AHMEDABAD. 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD. 1.DATE OF DICTATION 8 - 5 -2012 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 9 / 5 / 2012 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S - -2012. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT - -2012 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S - -2012 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK - -2012. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..