The Dy. CIT., Circle-4(1)(1), Ahmedabad V. M/s. Shilp Gravures Ltd., Ahmedabad

ITA 2462/AHD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8505 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 29-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R T SHAH
• Section: 43B; 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: SHR I S. S. GODARA , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER THE DCIT, CIRCLE - 4(1)(1)(1), AHMEDABAD - 380015 (APPELLANT) VS M/S. SHILP GRAVURES LTD. 101, KASHI PAREKH COMPLEX, B/H. BHAGWATI CHAMBES, C.G. ROAD, NAVRANGPURA, AHMEABAD - 380009 PAN: AADCS0868G (RESPONDENT) REVE NUE BY : S H RI PRASOON KABRA , SR. D . R. ASSESSEE BY: S H RI R.T. SHAH , A.R. DATE OF HEARING : 28 - 03 - 2 018 DATE OF PRONOUNCEMENT : 19 - 04 - 2 018 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS REVENUE S APPEAL FOR A.Y. 2009 - 10 , ARIS ES FROM ORDER OF THE CIT(A) - 8 , AHM EDABAD DATED 11 - 07 - 2016 , IN PROCEEDINGS UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1. WHETHER THE LD. CIT(A) IS RIGHT IN LAW AND ON FACTS IN DELETING THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE U/S. 145A OF RS. 58,44,592/ - . 3. IN THIS CASE, RETURN OF INCOME DECLARING INCOME OF RS. 2 , 13 , 39 , 631 / - WAS FILED ON 25 TH SEP, 2009. THE SCRUTINY ASSESSMENT U/S. 143(3) OF THE ACT WAS I T A NO . 2462 / A HD/20 1 6 A SSESSMENT YEAR 200 9 - 10 I.T.A NO. 2462 /AHD/20 16 A.Y. 2009 - 10 PAGE NO DCIT VS. M/S. SHILP GRAVURES LTD. 2 COMPLETED ON 22 ND NO, 2011 ASSESSING TO T AL INCOME AT RS. 2 , 54 , 26 , 460/ - . THEREAFTER , THE CASE WAS RE OPENED BY ISSUING OF NOTICE U/S. 148 OF THE ACT ON THE GROUND THAT ASSE SSEE WAS SHOWING PURCHASE AND SALE OF GOODS NET OF MODVAT AND CLOSING BALANCE OF MODVAT WAS REQUIRED TO BE ADDED FOR ARRIVING VALUE OF CLOSING STOCK OF FINISHED GOODS AND RAW MATERIAL . CONSEQUENTLY , THE ASSESSING OFFICER HAS MADE ADDITION FOR RS. 58,44,59 2/ - ON ACCOUNT OF UNDER VALUATION OF STOCK AS DISCUSSED ABOVE. 4. AGGRIEVED ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSE BY OBSERVING AS UNDER : - 5. APPELLATE FINDING: I HAVE CONSIDERED THE ASSESSMEN T ORDER AND SUBMISSION OF THE APPELLANT AND ALSO THE CASE LAWS REFERRED BY THE APPELLANT. FROM THE ASSESSMENT ORDER AND SUBMISSION BOTH, IT IS NOTICED THAT THE APPELLANT IS FOLLOWING EXCLUSIVE METHOD OF ACCOUNTING FOR LAST MANY YEARS AND ALL PURCHASES AND SALES OF GOODS ARE ACCOUNTED NET OF MODVAT INCLUDING INVENTORY I.E. OPENING STOCK AND CLOSING STOCK. ON THIS ISSUE THE HON'BLE ITAT BENCH OF AHMEDABAD IN THE CASE OF ALPANI L INDUSTRIES V. ACIT IN ITA NO. 1 69/AHD/2005 AND 17 0/AHD/2005 FOR A.Y. 1 999 - 2000 & 2000 - 2001 HAS DISCUSSED THE PRINCIPLE RELATED TO VALUATION OF CLOSING STOCK U/S.145A OF THE ACT. THE RELEVANT PORTION IS REPRODUCED AS UNDER: ' SECTION 145A REQUIRES REVALUATION OF NOT INVENTORY ALONE BUT ALSO REQUIRES REVALUATION OF PURCHASE AND SALES. ON REVALUATION OF PURCHASE BY INCLUDING THE AMOUNT OF EXCISE DUTY IN RESPECT OF WHICH MODVAT CREDIT IS AVAILABLE TO THE ASSESSEE, THE PURCHASE OF THE ASSESSEE WILL INCREASE RESULTING IN CORRESPONDING DECREASE IN THE PROFIT OF THE ASSESSEE. THE ASSESSEE 'S CO NTENTION THAT VALUE OF CLOSING STOCK IS CREDITED IN THE PROFIT AND LOSS ACCOUNT TO SET OFF THE VALUE OF UNCONSUMED ITEMS OF PURCHASE AND THEREFORE, BOTH SHOULD HAVE SAME BASIS CANNOT BE CONTROVERTED. THE ONLY EXCEPTION TO THIS THEORY IS THAT WHEN THE MODVA T VALUE IS LESS THAN THE COST THEN EFFECTIVELY UNREALIZED LOSS IS ALLOWED AS A DEDUCTION TO THE ASSESSEE ON THE WELL SETTLED PRINCIPLES. IN THE INSTANT CASE, THE LOWER AUTHORITIES WERE OT JUSTIFIED IN REVALUING ONLY CLOSING STOCK SO AS TO INCLUDE THE AMOUN T OF EXCISE DUTY PAID ON PURCHASE WITHOUT REVALUING THE CORRESPONDING PURCHASES. WE HAVE GONE THROUGH THE GUIDELINES EXPLAINED BY THE ICAI AND FIND OURSELVES IN AGREEMENT THEREWITH THAT THERE WILL NOT BE ANY EFFECT ON THE PROFIT OF LOSS ARRIVED AT EITHER B Y FOLLOWING INCLUSIVE METHOD OF ACCOUNTING OR EXCLUSIVE METHOD OF ACCOUNTING FOR EXCISE DUTY. THE ONLY EFFECT WILL BE THAT - THE EXCISE DUTY PAYABLE ON CLOSING STOCK OF FINISHED GOODS WILL BE TO THE EXTENT NOT DEPOSITED WITH THE GOVERNMENT BEFORE THE DUE DA TE OF FURNISHING OF RETURN WILL BE ADDED TO THE INCOME OF THE ASSESSEE IN VIEW OF PROVISION OF SECTION 43B OF THE ACT. IN VIEW OF THE DISCUSSION MADE HEREINABOVE, I N OUR CONSIDERED OPINION, THERE W ILL BE NO EFFECT IN THE TAXABLE PROFIT OF THE ASSESSEE BY I NCLUDING THE AMOUNT OF EXCISE DUTY PAID ON PURCHASE IN THE VALUE OF CLOSING STOCK OF RAW MATERIAL, WHETHER AS RAW MATERIAL OR AS FORMING PART OF WORK - IN PROGRESS OR FINISHED GOODS. WE THEREFORE, SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES ON THIS ISSUE I N BOTH THE YEAR UNDER APPEAL AND ALLOW THE GROUNDS OF APPEAL OF THE ASSESSEE.' I.T.A NO. 2462 /AHD/20 16 A.Y. 2009 - 10 PAGE NO DCIT VS. M/S. SHILP GRAVURES LTD. 3 IN VIEW OF THE DETAILED DISCUSSION ON THE ISSUE BY THE JURISDICTIONAL ITAT IN ABOVE QUOTED CASE, I HAVE NO REASON TO DIFFER FROM THE CONCLUSIONS ON THE APPLICABILITY OF SECTION 145A IN THE CASE OF THE APPELLANT. AS THE METHOD OF VALUATION OF CLOSING STOCK REMAINS THE SAME AS IN LAST YEARS, THE AO IS DIRECTED TO DELETE THE ADDITION OF RS. 58,44,592/ - . THE GROUND OF APPEAL IS ACCORDINGLY ALLOWED. 5. WE HAVE HEARD RIVAL CONTENTIO NS AND P ERUS ED THE MATERIAL ON RECORD CAREFULLY. AFTER CONSIDERING THE FINDING OF THE LD. CIT(A) ALONG WITH JUDICIAL FINDING, WE CONSIDER THAT THERE WILL BE NO EFFECT IN THE TAXABLE PROFIT OF THE ASSESSEE BY INCLUDING THE AMOUNT OF EXCISE DUTY PAID ON PUR CHASE IN THE VALUATION OF CLOSING STOCK O F RAW MATERIAL SINCE THE ASSESSEE WAS FOLLOWING EXCUSIVE METHOD OF ACCOUNTING AS ELABORATED IN THE FINDINGS OF THE LD.CIT(A) , THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE DECISION OF LD. CIT(A). ACCO RDINGLY , THE APPEAL OF THE REVENUE IS DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 19 - 04 - 201 8 SD/ - SD/ - ( S.S. GODARA ) ( AMARJIT SINGH ) JUDICIAL MEMB ER ACCOUNTANT MEMBER AHMEDABAD : DATED 19 /04 /2018 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,