Exide Industries Limited, Kolkata V. DCIT, Circle - 1, Kolkata, Kolkata

ITA 260/KOL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54603 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2011
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 27-04-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 08-02-2010
• Court: TRIBUNAL
• Assessee Lawyers: R N BAJORIA
• Keywords: Depreciation; Question of law; Tangible material; Difference of opinion; Assessment record; Revised return; Reason to believe; Unabsorbed depreciation; Change of opinion; Reassessment proceedings
• Section: 43B; 143(3); 11A; 142(1); 147; 145; 148; 263; 154; 139

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : KOLKATA ( ) . . .. . , , , , , , ) [BEFORE HONBLE SRI S.V. MEHROTRA, A.M. & HONBLE SRI MAHAVIR SINGH, J.M.] ' ' ' ' / I.T.A NOS. 260, 261 & 262/KOL/2010 #$ %& / ASSESSMENT YEARS : 2001-2002, 2002-03 & 2003-2004 EXIDE INDUSTRIES LIMITED, -VS.- DEPUTY COMMISSIONER OF INCOME TAX, KOLKATA, (PAN-AAACE6641E) CIRCLE-1, KOLKATA ( '( /APPELLANT ) ( )*'( / RESPONDENT ) & ' ' ' ' / I.T.A NOS. 276, 277 & 278/KOL/2010 #$ #$ #$ #$ %& %& %& %& / ASSESSMENT YEARS : 2001-2002, 2002-03 & 2003-2004 DEPUTY COMMISSIONER OF INCOME TAX, -VS.- EXIDE INDUSTRIES LIMITED, CIRCLE-1, KOLKATA. KOLKATA, (PAN-AAACE6 641E) ( '( /APPELLANT ) ( )*'( / RESPONDENT ) FOR THE ASSESSEE : SHRI R.N. BAJORIA, FOR THE DEPARTMENT : SHRI D.R. SINDHAL , CIT, D.R. +# , - . /DATE OF HEARING : 16.08.2011 /% - . /DATE OF PRONOUNCEMENT : 21.10.2011 0 / ORDER PER BENCH THE ASSESSEE AS WELL AS THE DEPARTMENT HAVE FILED THESE APPEALS FOR ASSESSMENT YEARS 2001-02 TO 2003-04 AGAINST ORDER OF LD. COMMISSIONE R OF INCOME TAX (APPEALS)-XIII, KOLKATA DATED 23.11.2009. 2. IN ALL THE THREE YEARS UNDER CONSIDERATION, RE-A SSESSMENT PROCEEDINGS WERE INITIATED ON THE GROUND THAT ASSESSEE HAD CLAIMED DOUBLE DEDUCTI ON IN RESPECT OF EXCISE DUTY RELATABLE TO CLOSING STOCK. THE ASSESSING OFFICER AFTER CONSIDER ING ASSESSEES EXPLANATION, DENIED THE ASSESSEES CLAIM AND ALSO LEVIED INTEREST UNDER SEC TION 234D IN RESPECT OF REFUND GRANTED TO ASSESSEE. BEING AGGRIEVED WITH THE ORDER OF ASSESSI NG OFFICER, THE ASSESSEE PREFERRED APPEAL BEFORE LD. CIT (APPEALS) ASSAILING THE INITIATION O F PROCEEDINGS UNDER SECTION 148 IN ALL THE ITA NOS.260-262 & 276-278/KOL./2010 2 THREE YEARS AS WELL AS ON MERITS OF ADDITION. LEVY OF INTEREST UNDER SECTION 234D WAS ALSO ASSAILED. LD. CIT(APPEALS) CONFIRMED THE ASSESSING OFFICERS IN REGARD TO INITIATION OF RE- ASSESSMENT PROCEEDINGS AS WELL AS ON MERITS OF ADDI TION. HOWEVER, HE DELETED THE INTEREST LEVIED UNDER SECTION 234D ON REFUND GIVEN TO ASSESS EE. BEING AGGRIEVED WITH THE ORDER OF LD. CIT(APPEALS), BOTH ASSESSEE AND DEPARTMENT ARE IN A PPEAL BEFORE US. FIRST WE TAKE UP THE ASSESSEES APPEALS. ITA NO. 260/KOL./2010 (ASSESSMENT YEAR : 2001-02) 3. GROUNDS NO. 1 AND 2 FOR ASSESSMENT YEAR 2001-02 READ AS UNDER :- 1.(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) ERRED IN CONFIRMING THE PROCEEDINGS INITIATED BY TH E ASSESSING OFFICER U/S 147 OF THE ACT AFTER FOUR YEARS FROM THE END OF THE RELEVANT A SSESSMENT YEAR, WHEN THE ASSESSMENT OF THE APPELLANT HAD BEEN COMPLETED U/S 143(3) OF T HE ACT AND THERE WAS NO FAILURE ON THE PART OF THE APPELLANT TO DISCLOSE TRULY AND FUL LY ALL THE MATERIAL FACTS REQUIRED FOR THE ASSESSMENT OF THE RELEVANT ASSESSMENT YEAR. (B) THAT THE LD. CIT(APPEALS) FAILED TO APPRECIATE THE CONTENTION OF THE APPELLANT THAT THE REASSESSMENT PROCEEDINGS HAD BEEN INITIATED ON A POINT WHICH HAD BEEN EXAMINED BY HIS PREDECESSOR AT THE TIME OF SCRUTINY ASSESSME NT PROCEEDINGS AND THE SAME CONSTITUTES A CASE OF CHANGE OF OPINION, WHICH IS N OT A PERMISSIBLE GROUND FOR INITIATING REASSESSMENT PROCEEDINGS AS PER THE DECI SION OF THE APEX COURT IN THE CASE OF CIT VS FORAMER FRANCE REPORTED IN 264 ITR 566. 2.(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE AS SESSING OFFICER ON THE CLAIM FOR EXCISED DUTY PAYABLE / PAID ON CLOSING STOCK OF FIN ISHED GOODS LYING AT FACTORY AT STOCK POINTS AGGREGATING TO RS.9,94,27,363/- (RS.8,40,45, 799/- & RS.1,53,81,564/- RESPECTIVELY), WHICH WAS CLAIMED IN VIEW OF THE PRO VISIONS OF SECTION 43B AND THE SETTLED PRINCIPLE LAID DOWN BY THE APEX COURT IN TH E CASE OF BERGER PAINTS LTD AND THE TRIBUNALS DECISION IN APPELLANTS OWN CASE IN ASSE SSMENT YEAR 1996-97. (B) THAT THE LD. CIT(APPEALS) ERRED IN LAW BY DISRE GARDING THE DECISION OF THE TRIBUNAL IN THE APPELLANTS OWN CASE FOR THE ASSESSM ENT YEAR 2004-05. WHICH WAS BINDING ON HIM, THEREBY ACTING AGAINST THE PRINCIPL E LAID DOWN BY THE APEX COURT IN UNION OF INDIA VS. KAMALAKSHMI FINANCE LIMITED - AI R 1992 SC 711. 4. THE ASSESSEE, A WIDELY HELD DOMESTIC COMPANY, IN ALL THE ASSESSMENT YEARS UNDER CONSIDERATION, WAS ENGAGED IN THE BUSINESS OF MANUF ACTURE AND SALE OF BATTERIES. ORIGINAL REGULAR ASSESSMENT WAS COMPLETED UNDER SECTION 143( 3) VIDE ORDER DATED 31.03.2004 COMPUTING THE TOTAL INCOME OF THE ASSESSEE AT RS.29 ,10,29,833/-. THEREAFTER THE ORDER UNDER SECTION 143(3) DATED 31.03.2004 WAS RECTIFIED UNDER SECTION 154 ON 29.07.2004 AND THE TOTAL INCOME WAS DETERMINED AT RS.28,81,91,504/-. ON 19.0 3.2007, PROCEEDINGS UNDER SECTION 147 WERE INITIATED BY ISSUE OF NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT BY RECORDING ITA NOS.260-262 & 276-278/KOL./2010 3 REASONS. THUS, ADMITTEDLY THE NOTICE UNDER SECTION 148 HAS BEEN ISSUED BEYOND FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR. 5. BEFORE THE LD. CIT(APPEALS), THE ASSESSEE HAD S UBMITTED THAT THERE WAS NO FAILURE ON THE PART OF ASSESSEE TO DISCLOSE ALL MATERIAL FACTS RELATED TO THE TAXABILITY OF EXCISE DUTY PAID/ PAYABLE ON CLOSING STOCK. SINCE THERE WAS NO FAILUR E ON THE PART OF THE ASSESSEE, THEREFORE, THE NOTICE ISSUED UNDER SECTION 148 AFTER 4 YEARS OF EN D OF ASSESSMENT YEAR 2001-02 WAS BAD IN LAW. IT WAS SUBMITTED THAT DURING THE ORIGINAL ASSE SSMENT PROCEEDINGS, A COMPLETE NOTE WAS FURNISHED TO THE ASSESSING OFFICER ON THIS ASPECT A ND AFTER CONSIDERING THE SAME HE DID NOT MAKE ANY ADDITION ON THIS ISSUE. LD. CIT(APPEALS), HOWEVER, DID NOT ACCEPT THE ASSESSEES CONTENTION FOR THE FOLLOWING REASONS :- (I) IN THE COMPUTATION OF INCOME AND ALSO IN THE EXPLAN ATORY NOTE SUBMITTED TO THE ASSESSING OFFICER ABOUT VALUATION OF CLOSING STOCK AND TREATMENT OF EXCISE DUTY THE ASSESSEE HAD ONLY EXPLAINED WHAT ACCOUNTIN G TREATMENT WAS GIVEN TO THE EXCISE DUTY WHILE VALUING THE CLOSING STOCK. (II) THE FACT THAT THE EXCISE DUTY ON THE STOCK LYING IN GODOWNS AND DEPOTS OUTSIDE THE FACTORY HAD ACTUALLY BEEN PAID WAS NEVER INTIMA TED TO THE ASSESSING OFFICER EITHER IN THE RETURN OF INCOME OR IN THE SU BMISSIONS MADE DURING THE ASSESSMENT PROCEEDINGS. (III) IT WAS NOT MADE CLEAR TO THE ASSESSING OFFICER THAT THE EXCISE DUTY RELATED TO THE STOCK LYING IN FACTORY PREMISES HAD ALREADY BEE N DEBITED IN THE PROFIT & LOSS A/C. (IV) IT WAS NOT CLARIFIED THAT THE DEDUCTION FOR THE EXC ISE DUTY ON CLOSING STOCK LYING AT FACTORY AND GODOWNS WAS BEING CLAIMED TWIC E. ACCORDINGLY, HE HELD THAT ASSESSEE DID NOT DISCLOSE ALL THE MATERIAL FACTS RELATING TO TAXABILITY OF THE EXCISE DUTY PAID/ PAYABLE ON CLOSING STOCK B EFORE THE ASSESSING OFFICER AND UPHELD THE PROCEEDINGS UNDER SECTION 147. 6. SHRI R.N. BAJORIA, LD. SENIOR COUNSEL FOR THE A SSESSEE, SUBMITTED THAT THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT AND, THEREFORE, RE-ASSESSMENT PROCEEDING S INITIATED AFTER EXPIRY OF FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR WERE WITHOUT JU RISDICTION IN VIEW OF PROVISO TO SECTION 147. SHRI BAJORIA REFERRED TO PAGE 1 OF THE PAPER B OOK, WHEREIN NOTICE ISSUED UNDER SECTION ITA NOS.260-262 & 276-278/KOL./2010 4 148 OF THE ACT DATED 19.03.2007 IS CONTAINED. THE R EASONS RECORDED BY ASSESSING OFFICER ARE RE-PRODUCED HEREUNDER :- IN THE INSTANT CASE, SCRUTINY ASSESSMENT WAS COMP LETED U/S 143(3). AT THE LIME OF ASSESSMENT, FOLLOWING INCOME SUBJECT TO TAX ESCAPED ASSESSMENT IN TERMS OF SECTION 147 OF THE IT ACT ON THE FOLLOWING ACCOUNT: THE ASSESSEE HAD CLASSIFIED CLOSING STOCK OF FINISH ED GOODS UNDER TWO HEADS (I) STOCK DISPATCHED FROM FACTORY (DEPOT STOCK) AND (II) STOC K LYING IN FACTORY (FACTORY STOCK). CENTRAL EXCISE DUTY ON BOTH STOCK OF FINISHED GOODS , WAS INCLUDED IN VALUATION OF STOCK AND THE SAME AMOUNT WAS DEBITED IN ACCOUNTS. IN RESPECT OF DEPOT STOCK (DS)) THE CENTRAL EXCISE DUTY WAS PAID BEFORE END OF THE YEAR AND IN RESPECT OF FACTORY STOCK (FS) CENTRAL EXCISE DUTY WAS PAID BEFORE FILING OF RETURN. THOUGH THE AMOUNT OF EXCISE DUTY WAS DEBITED IN THE P&L A/C. THE ASSESSEE IN COMPUTATION OF TAXABLE INCOME OF THE ASSESSMENT YEAR 2001-02, F OLLOWED THE PRACTICE OF CLAIMING SEPARATE DEDUCTION OF EXCISE DUTY UNDER SECTION 43B AND ADDING BACK THE SAME AMOUNT FOR TAX DURING THE NEXT ASSESSMENT AS BELOW: A.Y. STOCK AS ON DEPOT. STOCK(DS) FA CTORY STOCK (FS) 01-02 31.3.01 84045799 15381564 (ADDED BACK IN02-03) THE PRACTICE RESULTED IN DOUBLE DEDUCTION AS THE SA ME AMOUNT WAS TAKEN INTO ACCOUNT TWICE (I) IN DETERMINING PROFIT & LOSS OF THE YEAR THROUGH DEBIT IN P&L A/C. AND (II) IN DETERMINING TAXABLE INCOME OF THE YEAR THROUGH SEPA RATE DEDUCTION FROM THE PROFIT/LOSS OF THE P&L A/C. OF RESPECTIVE ASSESSMENT YEAR. SINCE THE AMOUNT OF EXCISE DUTY WAS DEBITED IN THE RESPECTIVE YEAR TO DETERMINE THE PROFIT/LOSS OF THE YEAR, THERE WAS NO SCOPE OF CLAI MING SEPARATE DEDUCTION OF EXCISE DUTY U/S. 43B FOR THAT YEAR. IN VIEW OF THE ABOVE, I HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX AT LEAST FOR RS.9,94,27,363/- (RS.8,40,45,799/- + RS.1,53,81,564 /-) HAS ESCAPED ASSESSMENT AND SUCH ESCAPEMENT IS ATTRIBUTABLE TO THE ASSESSEE FOR DOUB LE DEDUCTION ON ACCOUNT OF EXCISE DUTY. NOTICE U/S. 148 MAY BE ISSUED SUBJECT TO KIND APPRO VAL OF ADDL. CIT, KOL.-I, KOLKATA. SHRI BAJORIA POINTED OUT THAT IN THE REASONS RECOR DED, THE ASSESSING OFFICER HAS NOT POINTED OUT TO EVEN A SINGLE FACT, WHICH WAS NOT DI SCLOSED BY THE ASSESSEE. HE SUBMITTED THAT THE ASSESSEE HAD FILED THE COMPUTATION OF INCOME AN D TAX PAYABLE THEREON WHILE FILING ITS ORIGINAL RETURN CONTAINED AT PAGE 2 OF THE PAPER BO OK. HE POINTED OUT THAT IN THE COMPUTATION ITSELF, THE ASSESSEE HAD MADE FOLLOWING TWO ADJUSTM ENTS :- (I) EXCISE DUTY ON DUTY PAID STOCK AS ON 31.03.00 CLAIMED AS A DEDUCTION IN AY 2000-01 ON PAYMENT BASIS IN VIEW OF SECTION 43B, NOW OFFERED TO TAX ITA NOS.260-262 & 276-278/KOL./2010 5 RS.87,128,885 (II) EXCISE DUTY PERTAINING TO GOODS MANUFACTURED DURING THE FINANCIAL YEAR ENDING ON 31.03.00, BUT NOT DISPATCHED FROM THE FACTORY AS 31.03.00 CLAIMED IN AY 2000-01 ON PAYMENT BASIS UNDER SECTION 43B, NOW OFFERED TO TAX RS.22,157,699 SHRI BAJORIA FURTHER REFERRED TO PAGE 6 OF THE PAP ER BOOK, WHEREIN COMPUTATION OF INCOME AND TAX PAYABLE THEREON FOR ASSESSMENT YEAR 2002-03 IS CONTAINED AND POINTED OUT THAT AS PER DISCLOSURE MADE IN THE COMPUTATION OF INCOME FOR ASSESSMENT YEAR 2001-02, THE ASSESSEE HAD MADE ADJUSTMENT IN ASSESSMENT YEAR 200 2-03 AS UNDER :- (I) EXCISE DUTY ON DUTY PAID STOCK AS ON 31.03.2001 AND CLAIMED AS A DEDUCTION IN AY 2001-02 ON PAYMENT BASIS IN VIEW OF SECTION 43B, NOW OFFERED FOR TAX RS.84,045,799 (II) EXCISE DUTY PERTAINING TO GOODS MANUFACTURED DURING THE FINANCIAL YEAR ENDING ON 31.03.01, BUT NOT DISPATCHED FROM TH E FACTORY AS 31.03.01 CLAIMED IN AY 2001-02 ON PAYMENT BASIS UND ER SECTION. 43B, NOW OFFERED FOR TAX RS.15,381,564/- WITH REFERENCE TO ABOVE NARRATION GIVEN IN THE COMP UTATION, SHRI BAJORIA SUBMITTED THAT ALL THE MATERIAL FACTS IN REGARD TO ASSESSEES CLAIM OF EXC ISE DUTY IN TERMS OF SECTION 43B WERE DULY DISCLOSED IN THE COMPUTATION. HE, THEREFORE, SUBMIT TED THAT IN VIEW OF PROVISO TO SECTION 148, PROCEEDINGS INITIATED UNDER SECTION 147 WERE WITHOU T JURISDICTION. 7. THE SECOND LIMB OF ARGUMENT OF LD. COUNSEL FOR T HE ASSESSEE IS THAT THE ENTIRE 148 PROCEEDINGS HAVE BEEN INITIATED ON ACCOUNT OF CHANG E OF OPINION, WHICH CANNOT BE DONE IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN TH E CASE OF CIT -VS.- KELVINATOR OF INDIA LTD. [2010] 187 TAXMAN 312 (SC). IN THIS REGARD, LE ARNED SENIOR COUNSEL SHRI BAJORIA POINTED OUT THAT, AS NOTED ABOVE, THE ASSESSEE HAD SPECIFIC ALLY DISCLOSED IN THE COMPUTATION THE MODE OF CLAIMING DEDUCTION UNDER SECTION 43B IN REGARD T O EXCISE DUTY PAYMENT. SHRI BAJORIA REFERRED TO PAGE 3 OF THE PAPER BOOK, WHEREIN THE N OTICE ISSUED UNDER SECTION 142(1) DATED 03.12.2003 IN COURSE OF REGULAR ASSESSMENT PROCEEDI NGS IS CONTAINED, IN WHICH AT SERIAL NO. 9, THE ASSESSING OFFICER HAD REQUIRED THE ASSESSEE TO GIVE DETAILS OF THE AMOUNT OF DUTY TAX, ETC. ON THE CLOSING STOCK AS ON 31.03.2001 AND DATE OF B ILL. LD. COUNSEL FURTHER REFERRED TO PAGE 5 ITA NOS.260-262 & 276-278/KOL./2010 6 OF THE PAPER BOOK, WHEREIN THE ASSESSEES REPLY IS CONTAINED AND REFERRED TO ANNEXURE-H TO THE SAID REPLY, WHICH WAS AS UNDER :- PARTICULARS AMOUNT INCLUDED IN CLOSING STOCK SUBSEQUENT PAYMENT UPTO 5.10.01 BALANCE UNPAID TAX AUDIT REPORT REF. EXCISE DUTY 15,381,564/- 15,369,596/- 11,968/- ANNEXURE 11A CLAUSE 21(I)(B) (SERIAL NO. 2) 7.1. SHRI BAJORIA FURTHER REFERRED TO LETTER DATED 12.01.2004 FILED BY THE ASSESSEE AT THE TIME OF PROCEEDINGS UNDER SECTION 143(3) CONTAINED AT PA GES 8 TO 10 OF THE PAPER BOOK AND SUBMITTED THAT THE ASSESSEE HAD DULY EXPLAINED THE MODE OF INCLUSION OF EXCISE DUTY IN THE CLOSING STOCK AND THE MANNER IN WHICH SUCH DEDUCTIO N WAS CLAIMED. HE REFERRED TO PAGE 13 OF THE PAPER BOOK, WHEREIN ANNEXURE-D REFERRED TO IN ASSESSEES REPLY DATED 12.01.2004 IS CONTAINED WHICH READS AS UNDER :- THE COMPANY HAD SINCE THE INSERTION OF SECTION 145 A IN THE INCOME TAX ACT, 1961 HAD ACCOUNTED FOR THE EXCISE DUTY ELEMENT IN VALUATION OF CLOSING STOCK OF FINISHED GOODS. THERE ARE TWO TYPES OF CLOSING STOCK OF FINISHED GO ODS (A) GOODS WHICH ARE DISPATCHED TO BRANCHES/ GODOWNS/ WAREHOUSES AND (B) LYING IN FACT ORY PREMISES NOT DISPATCHED. IN THE FIRST INSTANCE THE DUTY OF GOODS DISPATCHED IS PAID AND INCLUDED IN THE VALUE OF CLOSING STOCK, I.E. IN OTHER WORDS CREDITED TO THE PROFIT & LOSS ACCOUNT. SIMILAR AMOUNT IS ALSO DEBITED TO THE PROFIT AND LOSS ACCOUNT UPON PAYMENT OF THE DUTY THEREBY NEUTRALIZING THE IMPACTS ON PROFITS. IN THE SECOND CASE THE PRINCIPL E OF THE LIABILITY IS DETERMINED BY THE HONBLE SUPREME COURT IN THE CASE OF UJAGAR PAINTS VS. UNION OF,INDIA REPORTED IN 38 ELT 535 (SC) THAT SUCH LIABILITY TO PAY EXCISE DUTY ARISES UPON MANUFACTURE OF GOODS ALTHOUGH THE OBLIGATION TO DISCHARGE SUCH LIABILITY ARISES ONLY UPON CLEARANCE OF GOODS FROM THE FACTORY GATE. DUE TO THE ACCRUAL SYSTEM OF ACCOUNTING AND AMENDMENT IN SECTION 145A OF THE INCOME TAX ACT, THE ASSESSEE IS BOUND T O ACCOUNT FOR THE LIABILITY OF FINISHED GOODS OF GOODS LYING IN STOCK PENDING DISPATCH BY D EBITING THE AMOUNT OF DUTY IN THE PROFIT AND LOSS ACCOUNT. HOWEVER, WHILE ASCERTAINING THE V ALUE OF CLOSING STOCK OF FINISHED GOODS, PENDING DISPATCH, THE SAME AMOUNT OF EXCISE DUTY IS ALSO INCLUDED IN THE VALUE OF CLOSING STOCK, I.E. IN OTHER WORDS CREDITED TO THE PROFIT & LOSS ACCOUNT. THUS THIS WILL AGAIN NEUTRALISE ITS IMPACT IN THE PROFIT AND LOSS ACCOUN T. IT IS WELL ESTABLISHED THAT A LIABILITY TO BE ALLOW ED IN A YEAR IN WHICH IT ANSES AND SECTION 43B OF THE ACT CREATES AN EXCEPTION TO THE GENERAL RULE I.E. DEBITUM IN PRAESENTI, SOLVENDUM DEFUTURUO IN THE SENSE THAT THE LIABILITY IN RESPECT OF TAXES WILL BE ALLOWED ONLY IF THE AMOUNT HAS BEEN PAID BEFORE THE FILING OF TH E RETURN. THE ASESSEE HAD BOTH DEBITED AND CREDITED THE ELEMENT OF EXCISE DUTY ON DOSING S TOCK OF FINISHED GOODS IN THE PROFIT AND LOSS ACCOUNT OF THE COMPANY, IT HAD NEUTRALIZED THE IMPACT IN THE PROFITS OF THE COMPANY. HOWEVER THE SAID DUTY ARE ALLOWABLE BY VIRTUE OF TH E PROVISIONS OF SECTION 43B, I.E. SUCH LIABILITY WOULD BE ALLOWED ONLY IF THE COMPANY MAKE S THE PAYMENT BEFORE THE DATE F FILING OF THE RETURN. IT IS ALREADY STATED THAT THE DUTY ON STOCK TRANSFE RS TO VARIOUS BRANCHES/ GODOWNS (STOCK LYING AT STOCK POINT) ARE ACTUALLY PAID UPON DISPAT CH. HENCE THERE IS NO QUESTION OF NON- ALLOWABILITY UNDER SECTION 43B, SINCE THE DUTY IS A CTUALLY PAID BEFORE THE END OF THE ITA NOS.260-262 & 276-278/KOL./2010 7 FINANCIAL YEAR. THE DUTY AMOUNT FOR SUCH GOODS LYIN G AT VARIOUS STOCK POINTS/ GODOWNS FOR THE ASSESSMENT YEAR 2001-2002 AMOUNTS TO RS.1,149,6 10/- WHICH HAS BEEN CLAIMED AS A DEDUCTION SEPARATELY. FURTHER THE DUTY ELEMENT OF S TOCK OF GOODS MANUFACTURED BUT NOT SOLD AND LYING IN CLOSING STOCK AT FACTORY IS ACCOU NTED WITH THE DUTY PAYABLE ON SUCH GOODS UPON ACTUAL DISPATCH. THE DUTY ON SUCH CATEGO RY OF CLOSING STOCK AMOUNTS TO RS.15,381,564. THIS AMOUNT S SPECIFIED IN ANNEXURE 11A OF THE TAX AUDIT REPORT. ON A PERUSAL OF THE SAID ANNEXURE YOU WILL FIND THAT THE AMOUNT ACTUALLY PAID IS RS.1,53,69,569 AND HENCE THERE IS A SHORT PAYMENT OF RS.L1,968.THE SAID AMOUNT OF RS.11,968/- IS OFFERED TO TAX. SINCE IT IS ALREADY CERTIFIED BY THE TAX AU DITOR THAT THE AMOUNT OF RS.15,386,9569 HAS ACTUALLY BEING PAID OVER THE PERIOD APRIL 2002 TILL THE DATE OF FILING OF RETURN SUCH AMOUNT HAS RIGHTLY BEEN CLAIMED AS A DEDUCTION. IT IS WELL ESTABLISHED THAT A LIABILITY TO BE ALLOW ED IN A YEAR IN WHICH IT ARISES AND SECTION 43B OF THE ACT CREATES AN EXCEPTION TO THE GENERAL RULE I.E. DEBITUM IN PRAESENTI, SOLVENDUM DE FUTURUO IN THE SENSE THAT THE LIABILIT Y IN RESPECT OF TAXES WILL BE ALLOWED ONLY IF THE AMOUNT HAS BEEN PAID BEFORE THE FILING OF TH E RETURN. THERE CANNOT BE ANY DOUBT THAT THE DUTY HAS NOT BEEN PAID. MOREOVER, IN THE IMMEDI ATELY SUCCEEDING FINANCIAL YEAR ENDING 3LST MARCH, 2000 THE ASSESSEE HAD OFFERED T HE EXCISE DUTY PAID ON STOCK OF FINISHED GOODS AS ON 3LST MARCH, 2000, TO THE TAX RETURN FOR THE ASSESSMENT YEAR I.E. 2000-2001. THIS WAS DONE TO AVOID A DOUBLE DEDUCTION, WHICH TH E ASSESSEE HAD ALREADY CLAIMED IN THE IMMEDIATELY PRECEDING YEARS. SUCH DUTY AMOUNTED TO RS.1,86,31,680 AND 871,28,885/- RESPECTIVELY. THE ASSESSEE HAD RELIED ITS CLAIM FOLLOWING THE PRI NCIPLE LAID DOWN BY THE SPECIAL BENCH OF THE HONBLE DELHI TRIBUNAL IN THE CASE OF INDIAN COMMUNICATION NETWORK P. LTD. VS.- IAC REPORTED IN 206 ITR 96 (AT). IN A SIMILAR ISSUE BEFORE THE SPECIAL BENCH, WHERE THE ASSESSEE HAD ALL ALONG INCLUDED THE VALUE OF CUSTOM S DUTY, EXCISE DUTY PERTAINING TO GOODS UNSOLD AS A PART OF ITS CLOSING STOCK OF RAW MATERI AL AND FINISHED GOODS AND CLAIMED SUCH DUTY UPON ACTUAL PAYMENT AS PER THE PROVISIONS OF S ECTION 43B, IT WAS HELD THAT SUCH DUTY ELEMENT SHOULD BE ALLOWED AS A DEDUCTION UNDER THE EXPRESS PROVISIONS OF SECTION 43B. THE ISSUE NOW STANDS SETTLED BY THE HONBLE SUPREME COURT IN THE CASE OF BERGER PAINTS INDIA LIMITED VS CIT WB-IV, SLP NO 19351 TO 19353 O F 2002 (COPY ENCLOSED) 7.2. HE FURTHER REFERRED TO THE COPY OF LETTER DAT ED 05.03.2004 FILED BY THE ASSESSEE DURING THE PROCEEDINGS UNDER SECTION 143(3) CONTAINED AT P AGES 15 & 16 OF THE PAPER BOOK AND POINTED OUT THAT AGAIN NOTE ON EXCISE DUTY OF CLOSI NG STOCK CLAIMED AS DEDUCTION UNDER SECTION 43B WAS FILED BEFORE THE ASSESSING OFFICER. SHRI BA JORIA FURTHER REFERRED TO PAGE 29 OF THE PAPER BOOK, WHEREIN ANNEXURE 11A, BEING PART OF TAX AUDIT REPORT, IS CONTAINED. IN THIS ANNEXURE, DETAILS AS REQUIRED UNDER SECTION 21(1)(B ) OF THE TAX AUDIT REPORT ARE CONTAINED, WHEREIN SUMS REFERRED TO IN SECTION 43B(A), (C), (D ), (E)- DETAILS OF CURRENT YEAR, HAVE BEEN GIVEN. SHRI BAJORIA SUBMITTED THAT AFTER CONSIDERIN G ALL THESE DETAILS, ASSESSING OFFICER HAD PASSED THE ASSESSMENT ORDER DATED 31.03.2004 AND DI D NOT MAKE ANY DISALLOWANCE IN THIS REGARD. HE FURTHER SUBMITTED THAT MERELY BECAUSE AS SESSING OFFICER DID NOT DISCUSS THE ASSESSEES CLAIM IN REGARD TO PAYMENT OF EXCISE DUT Y, DOES NOT IMPLY THAT ASSESSING OFFICER HAD NOT APPLIED HIS MIND TO THE FACTS OF THE CASE. SHRI BAJORIA SUBMITTED THAT AFTER CONSIDERING THE DETAILED SUBMISSIONS, ASSESSING OFFICER PASSED THE ASSESSMENT ORDER. ITA NOS.260-262 & 276-278/KOL./2010 8 7.3. SHRI BAJORIA, LD. SENIOR COUNSEL FOR THE ASSES SEE, SUBMITTED THAT THE BOARD HAD ELABORATED ITS INTENTION WHILE CLARIFYING THE AMEND MENT IN SECTION 148 VIDE ITS CIRCULAR NO. 549 DATED 31.10.1989 (182 ITR STATUTE 1). IN CLAUSE 7.2 OF THE SAID CIRCULAR, IT IS CLEARLY STATED THAT THE AMENDMENTS HAD BEEN CARRIED OUT ONL Y WITH A VIEW TO ALLAY FEARS THAT THE OMISSION OF THE EXPRESSION REASON TO BELIEVE FROM SECTION 147 AND THEIR SUBSTITUTION BY THE TERM OPINION WOULD GIVE ARBITRARY POWERS TO THE A SSESSING OFFICER TO REOPEN PAST ASSESSMENT ON A MERE CHANGE OF OPINION. THUS, SHRI BAJORIA SU BMITTED THAT EVEN ACCORDING TO CENTRAL BOARD OF DIRECT TAXES, A MERE CHANGE OF OPINION CAN NOT FORM THE BASIS FOR REOPENING A COMPLETED ASSESSMENT. HE REFERRED TO THE DECISION O F HONBLE SUPREME COURT IN THE CASE OF CIT VS.- KELVINATOR OF INDIA LTD. REPORTED IN 187 TAXMAN 312 (SC), WHEREIN IT HAS BEEN HELD THAT ASSESSING OFFICER HAS THE POWER TO REOPEN THE ASSESSMENT PROVIDED THERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE IS E SCAPEMENT OF INCOME FROM ASSESSMENT. HONBLE APEX COURT FURTHER HELD THAT ASSESSING OFFI CER HAS NO POWER TO REVIEW, HE HAS THE POWER TO REASSESS, BUT THE REASSESSMENT HAS TO BE B ASED ON FULFILLMENT OF CERTAIN PRE- CONDITIONS AND IF THE CONCEPT OF CHANGE OF OPINION IS REMOVED AS CONTENDED ON BEHALF OF THE DEPARTMENT, THEN IN THE GARB OF REOPENING THE ASSES SMENT, REVIEW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF CHANGE OF OPINION AS AN IN-B UILT TEST TO CHECK ABUSE OF POWER BY THE ASSESSING OFFICER. HE FURTHER REFERRED TO THE DECIS ION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CARTINI INDIA LIMITED VS.- ADDL. CIT R EPORTED IN 314 ITR 275, WHEREIN IT HAS BEEN HELD THAT WHERE THE MATERIAL ON RECORD HAS ALR EADY BEEN CONSIDERED AND ADJUDICATED UPON, IT WOULD NOT BE OPEN TO THE ASSESSING OFFICER TO DISAGREE WITH THE VIEW ALREADY TAKEN ON THE MATERIAL ON RECORD. IN SUCH A CASE, REOPENING O F ASSESSMENT BASED ON MATERIAL ALREADY CONSIDERED AND ADJUDICATED, WOULD AMOUNT TO REVIEWI NG ASSESSMENT ORDER BY RE-APPRECIATING MATERIAL ON RECORD WHICH IS NOT CONTEMPLATED UNDER SECTION 147. 8. THE THIRD LIMB OF ARGUMENT OF SHRI BAJORIA, LD. SENIOR COUNSEL APPEARING ON BEHALF OF THE ASSESSEE IS THAT APPARENTLY ENTIRE REASSESSMENT PROCEEDINGS HAVE BEEN INITIATED ON THE BASIS OF ASSESSMENT ORDER PASSED UNDER SECTION 143(3) FOR ASSESSMENT YEAR 2004-05. HE SUBMITTED THAT THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2004- 05 IS DATED 22.12.2006 CONTAINED AT PAGES 20-23 OF THE PAPER BOOK AND THE NOTICE UNDER SECTIO N 148 HAS BEEN ISSUED ON 19.03.2007. HE SUBMITTED THAT TRIBUNAL HAS DECIDED THE ISSUE FOR A SSESSMENT YEAR 2004-05 BY UPHOLDING THE DECISION OF LD. CIT(APPEALS) DELETING THE ADDITION MADE BY THE ASSESSING OFFICER. THEREFORE, THE VERY BASIS, ON WHICH THE RE-ASSESSMENT PROCEEDI NGS WERE INITIATED, WAS NOT CORRECT. ITA NOS.260-262 & 276-278/KOL./2010 9 8.1. ON MERITS, LD. COUNSEL SUBMITTED THAT THE ISSU E FOR WHICH THE PROCEEDINGS UNDER SECTION 147 OF THE ACT HAD BEEN INITIATED IS CONCLUDED BY T RIBUNALS ORDER. HE SUBMITTED THAT FOR THE RELEVANT ASSESSMENT YEAR ASSESSING OFFICER EXAMINED THE ALLEGED DOUBLE CLAIM OF DEDUCTION ON ACCOUNT OF INCLUSION OF EXCISE DUTY IN CLOSING S TOCK OF FINISHED GOODS AMOUNTING TO RS.9,94,27,363/-. ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAD CLAIMED THE IMPUGNED DEDUCTION TWI CE-- ONCE BY DEBITING THE AFORESAID SUM IN THE PROFIT & LOSS A/C. AND FOR THE SECOND TIME, WHILE COMPUTING THE TOTAL INCOME FOR THE RELEVANT ASSESSMENT YEAR. IN THIS REGARD, LD. SENIO R COUNSEL SHRI BAJORIA EXPLAINED THAT SINCE THE INSERTION OF SECTION 145A IN THE INCOME TAX ACT , 1961, THE COMPANY HAD ACCOUNTED FOR THE EXCISE DUTY ELEMENT IN VALUATION OF CLOSING STO CK OF FINISHED GOODS. THERE WERE TWO TYPES OF CLOSING STOCKS OF FINISHED GOODS, I.E. (A) GOODS WHICH WERE DISPATCHED TO BRANCHES/ GODOWNS/WAREHOUSES (REFERRED TO AS DEPOT STOCK) AND (B) LYING IN FACTORY PREMISES NOT DISPATCHED (REFERRED TO AS FACTORY STOCK). HE SUBMI TTED THAT IN THE FIRST INSTANCE, I.E. (A) THE DUTY ON GOODS DISPATCHED WAS PAID AS AND WHEN THE G OODS WERE DISPATCHED FROM FACTORY TO A WAREHOUSE OR BRANCH. HOWEVER, SINCE THE GOODS HAD N OT BEEN SOLD OR TRANSFERRED TO ANY CUSTOMER AND WERE LYING WITH THE BRANCH, IT CONSTIT UTED STOCK OF THE COMPANY AND, THEREFORE, FORMED PART OF THE VALUE OF CLOSING STOCK, I.E. IN OTHER WORDS, CREDITED TO THE PROFIT & LOSS ACCOUNT. THE DUTY ELEMENT WAS ALSO INCLUDED IN THE VALUE OF CLOSING STOCK DISPATCHED BUT NOT SOLD. SIMILAR AMOUNT OF DUTY WAS ALSO DEBITED TO TH E PROFIT & LOSS ACCOUNT UPON PAYMENT OF THE DUTY (AS EXCISE DUTY PAID) THEREBY NEUTRALIZING THE IMPACTS ON PROFITS. THE RELEVANT ACCOUNTING ENTRIES WERE - EXCISE DUTY A/C. (PROFIT & LOSS A/C.) DR. 8,40,45 ,799/- TO PLA/RG 23A BALANCE CR. 8,40,45,799/- (BEING EXCISE DUTY PAID ON GOODS DISPATCHED FROM FA CTORY) INVENTORY- FINISHED GOODS DR.8,40,45,799/- TO EXCISE DUTY A/C. (PROFIT & LOSS A/C.) CR.8,40 ,45,799/- (BEING EXCISE DUTY ELEMENT OF FINISHED GOODS LYING IN BRANCHES/STOCK POINTS INCLUDED IN THE VALUE OF CLOSING STOCK) WITH REFERENCE TO THE AFOREMENTIONED ENTRIES, LD. C OUNSEL SUBMITTED THAT THESE ENTRIES NEUTRALIZED THE IMPACT OF EXCISE DUTY IN THE PROFIT & LOSS A/C. AND, THUS, THE ASSESSEE DID NOT GET ANY DEDUCTION OF THE EXCISE DUTY ELEMENT. ASSESSEES WRITTEN SUBMISSIONS ON MERITS REGARDIN G TREATMENT OF EXCISE DUTY IN CASE OF FACTORY STOCK ARE RE-PRODUCED HEREUNDER :- ITA NOS.260-262 & 276-278/KOL./2010 10 ACCOUNTING TREATMENT OF EXCISE DUTY IN CASE OF FACT ORY STOCK IN THE SECOND CASE ((I.E. (B)] THE PRINCIPLE OF THE LIABILITY IS DETERMINED BY THE HONBLE SUPREME COURT IN THE CASE OF UJAGAR PRINTS VS. UNIO N OF INDIA REPORTED IN 38 ELT 535 (SC) THAT SUCH LIABILITY TO PAY EXCISE DUTY ARISES UPON MANUFACTURE OF GOODS ALTHOUGH THE OBLIGATION TO DISCHARGE SUCH LIABILITY ARISES ONLY UPON CLEARA NCE OF GOODS FROM THE FACTORY GATE. DUE TO THE ACCRUAL SYSTEM OF ACCOUNTING AND AMENDM ENT IN SECTION 145A OF THE INCOME TAX ACT, THE ASSESSEE IS BOUND TO ACCOUNT FOR THE LIABI LITY OF FINISHED GOODS IN STOCK PENDING DISPATCH BY DEBITING THE AMOUNT OF DUTY IN THE PROF IT AND LOSS ACCOUNT. WHILE ASCERTAINING THE VALUE OF CLOSING STOCK OF F INISHED GOODS, PENDING DISPATCH, THE SAME AMOUNT OF EXCISE DUTY IS ALSO INCLUDED IN THE VALUE OF CLOSING STOCK, I.E. IN OTHER WORDS CREDITED TO THE PROFIT & LOSS ACCOUNT. THUS THIS WILL AGAIN NEUTRALIZE ITS IMPACT IN THE PROFIT AND LOSS ACCOUNT. THE RELEVANT ACCOUNTING ENTRIES ARE EXCISE DUTY ALE (PROFIT & LOSS ACCOUNT) DR 1,53,81,564 TO EXCISE DUTY PAYABLE A/C (LIABILITY) CR 1,53,81,564 (BEING THE AMOUNT OF EXCISE DUTY PAYABLE ON THE FIN ISHED GOODS LYING AS CLOSING STOCK PENDING DISPATCH) KINDLY NOTE THAT THIS LIABILITY OF EXCISE DUTY IS HIT BY THE PROVISIONS OF 43B AND IS SUBSEQUENTLY PAID BEFORE FILING OF THE RETURN - AS CERTIFIED BY THE TAX AUDITOR. INVENTORY FINISHED GOODS DR 1,53 ,81,564 TO EXCISE DUTY A/C. (PROFIT & LOSS A/C. CR.1,53 ,81,564 (BEING EXCISE DUTY ELEMENT OF FINISHED GOODS LYING IN STOCK PENDING DISPATCH NOW INCLUDED IN THE VALUE OF CLOSING STOCK). KINDLY NOTE THAT THE CORRESPONDING ACCOUNTING ENTRI ES ENTRY ALSO NEUTRALIZES THE IMPACT OF EXCISE DUTY IN THE PROFIT & LOSS ACCOUNT. AS PER THE PROVISIONS OF SECTION 43B OF THE ACT, AN Y STATUTORY DUTY, IRRESPECTIVE OF ITS ACCOUNTING TREATMENT WO1 ONLY BE ALLOWED AS A DEDUC TION, PROVIDED SUCH AMOUNT IS PAID BEFORE THE DUE DATE OF FILING OF RETURN. IT IS WELL ESTABLISHED THAT A LIABILITY IS TO BE ALLOWED IN A YEAR IN WHICH IT ARISES AND SECTION 43B OF THE ACT CREATES AN EXCEPTION TO THE GENERAL RULE I.E. DEBITUM IN PRAESENTI SOLVENDUM DEFUTURUO IN THE SEN SE THAT THE LIABILITY IN RESPECT OF TAXES WILL BE ALLOWED ONLY IF THE AMOUNT HAS BEEN PAID BEFORE THE FILING OF THE RETURN/ PRESCRIBED DATE. SINCE THE LIABILITY OF EXCISE DUTY ARISES ON MANUFA CTURE, THE COMPANY HAS PROVIDED FOR SUCH LIABILITY UNDER THE MERCANTILE SYSTEM AND THEREAFTE R PAID SUCH DUTY BEFORE FILING THE RETURN IN ORDER TO CLAIM DEDUCTION. SINCE THE COMPANY HAD BOTH DEBITED AND CREDITED THE ELEMENT OF EXCISE DUTY ON CLOSING STOCK OF FINISHED GOODS (BOTH FOR DEPOT STOCK & FACTORY S TOCK) IN THE PROFIT AND LOSS ACCOUNT OF THE COMPANY, IT HAD NEUTRALIZED THE IMPACT IN THE PROFI TS OF THE COMPANY. HOWEVER THE SAID DUTY ARE ALLOWABLE BY VIRTUE OF TH E PROVISIONS OF SECTION 43B, I.E. SUCH DUTY WOULD BE ALLOWED ONLY IF THE COMPANY MAKES THE PAYM ENT BEFORE THE DATE OF FILING OF THE RETURN. IT IS ALREADY STATED THAT THE DUTY ON STOCK TRANSFE RS TO VARIOUS BRANCHES/GODOWNS (STOCK LYING AT STOCK POINT) ARE ACTUALLY PAID UPON DISPATCH. HE NCE THERE IS NO QUESTION OF NON-ALLOWABILITY UNDER SECTION 43B, SINCE THE DUTY IS ACTUALLY PAID BEFORE THE END OF THE FINANCIAL YEAR. ITA NOS.260-262 & 276-278/KOL./2010 11 THE DUTY AMOUNT FOR SUCH GOODS LYING AT VARIOUS STO CK POINTS/ GODOWNS FOR EACH OF THE ASSESSMENT YEARS HAVE BEEN CLAIMED SEPARATELY IN TH E COMPUTATION OF INCOME. SINCE THE DUTY IS ALREADY PAID THERE IS NO SEPARATE DISCLOSURE IN THE TAX AUDIT REPORT REGARDING ITS PAYMENT. FURTHER AS PER THE CENTRAL EXCISE ACT, NO DISPATCH IS POSSIBLE WITHOUT PAYMENT OF DUTY AND HENCE THE DUTY IS ALREADY PAID ON DEPOT STOCK. FURTHER THE DUTY ELEMENT OF STOCK OF GOODS MANUFACT URED BUT NOT SOLD AND LYING IN CLOSING STOCK AT FACTORY IS ACCOUNTED WITH THE DUTY PAYABLE ON SUCH GOODS UPON ACTUAL DISPATCH. FOR EXAMPLE THE DUTY ON SUCH CATEGORY OF CLOSING STOCK FOR AY 2001-02 AMOUNTS TO RS.1,53,81,564/-. THIS AMOUNT IS SPECIFIED IN ANNEXURE 1 1A OF THE TA X AUDIT REPORT. SINCE IT IS ALREADY CERTIFIED BY THE TAX AUDITOR THAT THE AMOUNT OF RS.1,53,69,59 6/- HAS ACTUALLY BEEN PAID OVER THE PERIOD APRIL 2001 TILL THE DATE OF FILING OF RETURN (UPON DISPATCHES) SUCH AMOUNT IS RIGHTLY BEEN CLAIMED AS A DEDUCTION. THE COPY OF THE ANNEXURE- 1 1 A OF THE TAR IS ENCLOSED AT PAGE NO. 29 OF THE PAPER BOOK. 8.2. SHRI R.N. BAJORIA, LD. SENIOR COUNSEL FOR THE ASSESSEE SUBMITTED THAT MODE OF COMPUTATION IS IN CONFORMITY WITH THE PRINCIPLES LA ID DOWN IN THE CASE OF MARUTI UDYOG LTD. VS.- DCIT FOR ASSESSMENT YEAR 1999-2000 REPORTED I N [2005] 92 ITD 119 (DELHI) AND SPECIFICALLY REFERRED TO THE FOLLOWING OBSERVATIONS :- 39. THE NEXT QUESTION FOR CONSIDERATION IS WHETHER SUM OF RS.22,46,88,464, REPRESENTING THE CUSTOM DUTY PAID ON IMPORTS OF INPUTS FOR EXPOR T BUT REMAINED UN-UTILIZED BY THE END OF THE YEAR, COULD BE DISALLOWED UNDER SECTION 43-B RE AD WITH SECTION 145A. IN THIS REGARD, WE ARE OF THE CONSIDERED VIEW THAT NO DISALLOWANCE UN DER SECTION 43B COULD BE MADE IN VIEW OF THE JUDGMENT OF GUJARAT HIGH COURT IN THE CASE OF L AKHANPAL NATIONAL LTD.(SUPRA) AND SUPREME COURT JUDGMENT IN THE CASE OF BERGER PAINTS INDIA LTD. (SUPRA) AS WELL AS DECISION OF THE TRIBUNAL IN THE CASE OF INDIAN COMMUNICATION NETWORK LTD. (SUPRA) AND IN THE CASE OF SONA STEERING SYSTEM LTD. (SUPRA). THE OBJECTION OF ASSESSING OFFICER FOR DISALLOWANCE WAS THAT SUCH SUM WAS NOT DEBITED TO P&L ACCOUNT. IN OU R OPINION, THIS OBJECTION IS WITHOUT FORCE SINCE DEDUCTION UNDER SECTION 43B HAS TO BE A LLOWED ON ACTUAL PAYMENT BASIS IRRESPECTIVE OF THE METHOD OF ACCOUNTING. THE CIT(A ) HAS REJECTED THE CLAIM OF ASSESSEE TO THE EXTENT OF RS.20,60,14,392/- ON THE GROUND THAT SUCH AMOUNT WAS LIABLE TO BE INCLUDED IN THE PURCHASE AS WELL AS CLOSING STOCK SIMULTANEOUSL Y IN VIEW OF PROVISIONS OF SECTION 145A. THE STAND OF THE REVENUE IS THAT DEDUCTION OF CUSTO M STANDS ALLOWED BY DEBITING THE PURCHASES OF SUCH AMOUNT IN THE P&L ACCOUNT UNDER S ECTION 145A AND, THEREFORE, NO SEPARATE DEDUCTION CAN BE ALLOWED WHILE COMPUTING T HE INCOME. WE ARE UNABLE TO ACCEPT SUCH STAND OF THE REVENUE. THERE IS NO DISPUTE THAT AS PER SECTION 145A, THE PURCHASE AND CLOSING STOCK INVENTORY HAS TO BE ADJUSTED WITH THE CUSTOM DUTY PAID. SUCH TREATMENT UNDER SECTION L45A, IN OUR OPINION, WOULD NOT AFFECT THE CLAIM OF ASSESSEE BECAUSE IN SUCH SITUATION, CLAIM-OF DEDUCTION CANNOT BE SAID TO BE ALLOWED IN AS MUCH AS INCLUSION OF SIMILAR AMOUNT IN CLOSING STOCK NULLIFIES THE EFFECT OF DEB ITING THE DUTY PAID IN THE P&L ACCOUNT. IN FACT DUTY PAID ON IMPORTS FORMS PART OF COST OF PUR CHASE AND RESULTANTLY SUCH ELEMENT ALSO FORMS PART OF CLOSING STOCK. THE HONBLE SUPREME CO URT IN THE CASE OF CHAINRUP SAMPATRAM V. CIT [1953] 24 ITR 481 HAS HELD THAT CLOSING STOC K, SHOWN TO THE CREDIT SIDE OF TRADING ACCOUNT, HAS THE EFFECT OF CANCELLING THE PURCHASES TO THAT EXTENT DEBITED TO SUCH TRADING ACCOUNT. THEREFORE, IT CANNOT BE SAID THAT DEDUCTIO N ON ACCOUNT OF PURCHASES, TO THE EXTENT INCLUDED IN THE CLOSING STOCK, STANDS ALLOWED. APPL YING THE SAME PRINCIPLE, IT CANNOT BE SAID THAT THE CUSTOM DUTY PAID AND DEBITED TO PROFIT AND LOSS ACCOUNT STANDS ALLOWED TO THE EXTENT INCLUDED IN THE CLOSING STOCK. ITA NOS.260-262 & 276-278/KOL./2010 12 40. THIS VIEW OF OURS IS ALSO FORTIFIED BY THE DECI SION OF TRIBUNAL IN THE CASE OF SONA STEERING SYSTEM LTD (SUPRA) WHEREON SIMILAR FACTS S UCH CLAIM WAS ALLOWED. IN THAT CASE, THE ASSESSEE WAS DEBITING THE PURCHASES IN TRADING ACCO UNT INCLUSIVE OF CUSTOM DUTY AND SHOWING THE CLOSING STOCK INCLUSIVE OF SUCH DUTY. S UCH METHOD OF ACCOUNTING WAS IN CONSONANCE WITH THE METHOD NOW PRESCRIBED IN SECTIO N 145A. THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 43-B EQUAL TO THE AMOUNT OF CUSTOM DUTY INCLUDED IN THE CLOSING STOCK BUT SUCH CLAIM WAS DISALLOWED BY ASSESSING O FFICER ON THE GROUND THAT SUCH CLAIM STOOD ALLOWED BY DEBITING THE PURCHASES IN THE TRAD ING ACCOUNT. HOWEVER, THE TRIBUNAL ALLOWED THE CLAIM OF ASSESSEE BY HOLDING AS UNDER : - ACCORDING TO THE ACCOUNTING PRINCIPLES WHENEVER TH E RAW MATERIAL PURCHASED IS SHOWN IN THE CLOSING STOCK AND CARRIED FORWARD TO T HE NEXT YEAR IN THE FORM OF OPENING STOCK, IT CANNOT BE SAID THAT THE COST OF PURCHASE HAS BEEN ALLOWED. FOR THE SIMILAR REASON THE CUSTOM DUTY PAID BY THE ASSESSEE HAS BEE N ADDED TO THE COST OF RAW MATERIAL AND THE SAME HAS BEEN SHOWN IN THE CLOSING STOCK AND CARRIED FORWARD TO THE NEXT YEAR IN THE FORM OF OPENING STOCK. THEREFORE, IT CANNOT BE SAID THAT THE EXPENDITURE ON ACCOUNT OF CUSTOMS DUTY STANDS ALLOW ED TO THE ASSESSEE IN THE YEAR UNDER CONSIDERATION THEREFORE, FOLLOWING THE DECISI ON OF THE SPECIAL BENCH, THE ASSESSEE IS ENTITLED TO DEDUCTION OF THE AFORESAID AMOUNT UNDER SECTION 43B IN THE YEAR UNDER CONSIDERATION. THE ABOVE DECISION SQUARELY APPLIES TO THE FACTS OF PRESENT CASE. THEREFORE, FOLLOWING THE SAME, THE CLAIM OF ASSESSEE IS HELD TO BE ALLOWABLE UNDER N 43-B TO THE EXTENT OF RS.20,60,14,392. CONSEQUENTLY, THE ORDER OF CIT(A) IS SET ASIDE AND THE DISALLOWANCE OF RS.20,60,24,392 IS DELETED. HOWEVER, BEFORE PARTING WITH THIS ASPECT OF THE ISS UE, WE WOULD LIKE TO CLARIFY THAT ASSESSEE CANNOT BE ALLOWED DOUBLE DEDUCTION - ONCE ON THE BA SIS OF CASH PAYMENT IN THE YEAR UNDER CONSIDERATION UNDER SECTION 43B AND ON THE BASIS OF MERCANTILE SYSTEM IN THE NEXT YEAR. AS ALREADY STATED, THE UN-UTILIZED RAW MATERIAL DEBITE D TO P&L ACCOUNT GETS CANCELLED IT IS INCLUDED IN THE CLOSING STOCK AND THE SAME IS CARRI ED FORWARD TO NEXT YEAR AS OPENING STOCK. WHEN SUCH STOCK IS UTILIZED IN MANUFACTURING NEXT Y EAR, THE DEDUCTION WOULD STAND AUTOMATICALLY ALLOWED IN THAT YEAR. THAT WOULD AMOU NT TO DOUBLE DEDUCTION. HENCE, ASSESSING OFFICER WILL LOOK INTO THIS ASPECT WHILE ASSESSING THE INCOME OF NEXT YEAR. THE ASSESSING OFFICER WILL ENSURE THAT THE DEDUCTION AL LOWED IN THIS YEAR UNDER SECTION 43B IS INCLUDED IN THE INCOME OF NEXT YEAR WHEN SUCH OPENI NG STOCK IS DISPOSED OF. THIS CLARIFICATION WOULD APPLY IN RESPECT OF EACH DEDUCT ION UNDER SECTION 43-B WHERE THE DEDUCTION IS ALLOWED ON THE PRINCIPLE LAID DOWN IN THE CASE OF LAKHANPAL NATIONAL LTD. (SUPRA) AND IN THE CASE OF BERGER PAINTS INDIA LTD. (SUPRA). WITH REFERENCE TO AFOREMENTIONED OBSERVATIONS, LD. SENIOR COUNSEL SHRI BAJORIA SUBMITTED THAT SINCE ASSESSEE ITSELF HAD OFFERED TH E AMOUNT CLAIMED AS DEDUCTION UNDER SECTION 43B IN SUBSEQUENT YEAR AS ITS INCOME, THEREFORE, IN FINALE NO DOUBLE DEDUCTION HAD BEEN CLAIMED BY ASSESSEE. IN SUM AND SUBSTANCE, LD. SENIOR COUNSEL SUBMITTE D THAT ON MERITS, THE ISSUE IS CONCLUDED BY THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2004-05. ITA NOS.260-262 & 276-278/KOL./2010 13 9. LEARNED CIT(DR) SUBMITTED THAT ASSESSEE SHOULD NOT HAVE DEBITED EXCISE DUTY IN THE PROFIT & LOSS A/C. ON ACCRUAL BASIS BECAUSE THE DED UCTION IS GOVERNED BY THE PROVISIONS OF SECTION 43B. HE REFERRED TO PAGES 16 & 17 OF LD. CI T(APPEAL)S ORDER, WHICH IS AS UNDER :- NOW IF WE FIRST ANALYZE THE PROVISIONS OF SECTION 145A, WE FIND THAT THIS SECTION REQUIRES THAT WHATEVER MAY BE THE ACCOUNTING METHOD REGULARL Y FOLLOWED BY THE ASSESSEE, THE EXCISE DUTY PAID OR INCURRED BY THE ASSESSEE IN RES PECT OF CLOSING STOCK OF FINISHED GOODS SHOULD BE INCLUDED IN THE VALUATION OF SUCH GOODS. IN RESPECT OF THE GOODS LYING IN THE GODOWN/WAREHOUSES THE EXCISE DUTY HAS BEEN ACTUALLY PAID BY THE ASSESSEE. AS PER SECTION 145A THE AMOUNT OF THIS EXCISE DUTY SHOULD BE INCLUDED IN THE VALUE OF SUCH GOODS. THE A/R OF THE ASSESSEE HAS CLAIMED THAT WHE N THIS PAID EXCISE DUTY IS INCLUDED IN THE VALUE OF THE CLOSING STOCK OF THE FINISHED GOOD S THE CORRESPONDING ENTRY PASSED IN THE EXCISE DUTY PAID ACCOUNT (DEBITED IN THE P&L ACCOUN T) IS MERELY A NEUTRALIZING ENTRY AND BY DOING SO THE ASSESSEE IS NOT CLAIMING ANY DEDUCT ION. THEREFORE, THE ASSESSEE SHOULD BE PROVIDED ADDITIONAL DEDUCTION FOR THE SAME AMOUNT U LS.43B SEPARATELY. THIS ARGUMENT OF THE AR IS TOTALLY WRONG. THE FACT IS THAT WHEN THE EXCISE DUTY PAID IS INCLUDED IN THE VALUE OF THE CLOSING STOCK LYING AT GODOWNS/WAREHOUSES IT AMOUNTS TO GIVING EFFECT TO SECTION 145A. AND WHEN THE PAID EXCISE DUTY IS DEBITED TO P &L ACCOUNT THE ASSESSEE IS ACTUALLY CLAIMING DEDUCTION FOR EXCISE DUTY PAID. ONCE THE, DEDUCTION HAS BEEN ALLOWED WHERE IS THE QUESTION OF ALLOWING THE DEDUCTION FOR THE SAME AMOUNT ULS.43B. ONCE THESE ACCOUNTING ENTRIES ARE COMPLETED THE TREATMENT OF T HESE ENTRIES FOR TAXATION PURPOSES IN THE P & A/C. IS ALSO COMPLETED. THERE CANNOT BE ANY QUESTION FOR ALLOWING THE EXCISE DUTY PAID AS A DEDUCTION ONCE AGAIN U/S.43B. THIS IS A C LEAR CUT CASE OF CLAIM OF DOUBLE DEDUCTION WHERE THE SAME EXCISE DUTY WHICH HAS BEEN PAID ONLY ONCE IS BEING CLAIMED AS DEDUCTION TWO TIMES. THIS IS TOTALLY ABSURD AND SHO ULD NOT BE ALLOWED UNDER ANY CIRCUMSTANCES. BY DOING THIS THE ASSESSEE IS DEFEAT ING THE VERY PURPOSE FOR WHICH SECTION 145A WAS INTRODUCED. SIMILARLY IN THE CASE OF THE EXCISE DUTY RELATED TO GOODS MANUFACTURED AND LYING AT THE FACTORY PREMISES THE ASSESSEE HAS INCURRED LIABILIT Y TO PAID EXCISE DUTY OF RS.1,53,81,564/. AS PER THE PROVISIONS OF SECTION 145A THIS AMOUNT I S ALSO REQUIRED TO BE INCLUDED IN THE VALUE OF SUCH GOODS LYING AT THE FACTORY. IN THE BO OKS OF ACCOUNT WHEN THE ASSESSEE INCLUDES THIS AMOUNT IN THE VALUE OF CLOSING STOCK IT PASSES A CORRESPONDING DEBIT ENTRY IN THE P & L A.C THIS DEBIT ENTRY MEANS THAT THE AMOUN T OF EXCISE DUTY INCLUDED IN THE VALUE OF THE CLOSING STOCK IS BEING CLAIMED BY THE ASSESS EE AS A DEDUCTION. IF THE ASSESSEE ACTUALLY PAYS THIS OUTSTANDING EXCISE DUTY BEFORE T HE DUE DATE OF FILING OF THE RETURN, THIS AMOUNT DEBITED IN THE P & L A/C WILL BE FULLY ALLOW ED AS A DEDUCTION. OTHERWISE THE PORTION OF THIS OUTSTANDING EXCISE DUTY WHICH IS NO T PAID BEFORE THE DUE DATE OF FILING THE RETURN WILL BE ADDED BACK U/S.43B OF THE I.T. ACT. HERE IN CASE OF THE ASSESSEE SINCE THE WHOLE AMOUNT OF OUTSTANDING EXCISE DUTY OF RS.L,53, 81,564/- HAS BEEN PAID BEFORE THE DUE DATE OF FILING THE RETURN THEREFORE, THERE WILL NOT BE DISALLOWANCE U/S.43B. HOWEVER, NO FURTHER DEDUCTION FOR THIS AMOUNT CAN BE ALLOWED OV ER AND ABOVE WHAT HAS BEEN ALLOWED IN THE P & L A/C. LEARNED DEPARTMENTAL REPRESENTATIVE FURTHER REFERRE D TO PAGE 3 OF THE ASSESSMENT ORDER, WHICH READS AS UNDER :- THE EXPLANATION OF THE ASSESESE IS NOT ACCEPTED BE CAUSE AS SOON AS THE EXCISE DUTY ON THE CLOSING STOCK IS DEBITED IN THE P&L A/C., TH E ASSESSEE IS LIABLE TO PAY THE EXCISE DUTY AND IF PAYMENT IS NOT MADE, AS ON THE C LOSING DATE OF THE ACCOUNTS, THE AMOUNTS REMAINED PAYABLE AND THE EXPENDITURE IN RES PECT OF THE AMOUNT DEBITED IN THE P&L A/C. IS ALLOWABLE IF THE AMOUNT REMAINING P AYABLE AS ON 31.03.2001 WAS PAID BEFORE THE DUE DATE OF FILING THE RETURN UNDER SECTION. 139 OF THE I.T. ACT. ITA NOS.260-262 & 276-278/KOL./2010 14 9.1. LEARNED DEPARTMENTAL REPRESENTATIVE FURTHER RE FERRED TO PAGE 13 OF THE ORDER OF LD. CIT(APPEALS), WHEREIN HE HAS OBSERVED AS UNDER :- I HAVE CAREFULLY CONSIDERED THE ABOVE ARGUMENTS OF THE A/R AND THE VARIOUS DOCUMENTS SUBMITTED IN THE PAPER BOOK. IT IS NOTED THAT IN TH E COMPUTATION OF INCOME AND ALSO IN THE EXPLANATORY NOTE SUBMITTED TO THE A.O. ABOUT VALUAT ION OF CLOSING STOCK AND TREATMENT OF EXCISE DUTY THE ASSESSEE HAS ONLY EXPLAINED WHAT AC COUNTING TREATMENT IS GIVEN TO THE EXCISE DUTY WHILE VALUING THE CLOSING STOCK. THE FACT THAT THE EXCISE DUTY ON THE STOCK LYING IN GODOWNS AND DEPOTS OUTSIDE THE FACTORY HAD ACTUALLY BEEN PAID WAS NEVER INTIMATED TO THE A.O. EITHER IN THE RETURN OF INCOME OR IN THE SUBMI SSIONS MADE DURING THE ASSESSMENT PROCEEDINGS. SIMILARLY IT WAS NOT MADE CLEAR TO THE A.O. THAT THE EXCISE DUTY RELATED TO THE .STOCK LYING IN FACTORY PREMISES HAS ALREADY BEEN D EBITED IN THE P/L ACCOUNT. THUS, IN ANY OF THE SUBMISSIONS MADE TO THE ASSESSING OFFICER DU RING THE ASSESSMENT PROCEEDINGS IT NOT CLARIFIED THAT THE DEDUCTION FOR THE EXCISE DUTY ON CLOSING STOCK LYING AT FACTORY AND GODOWNS WAS BEING ELAIMED TWICE. IN VIEW OF THE ABO VE I AM OF THE OPINION THAT THE ASSESSEE DID NOT DISCLOSE ALL THE MATERIAL FACTS RE LATED TO EXCISE DUTY PAID/PAYABLE ON CLOSING STOCK BEFORE THE AO. SINCE THE EXCISE DUTY RELATED TO CLOSING STOCK HAD BEEN CLAIMED TWICE AS A DEDUCTION, THE INCOME OF THE ASSESSEE CH ARGEABLE TO TAX HAD BEEN UNDER- ASSESSED. AS PER CLAUSE C(I) OF EXPLANATION 2 UNDER SECTION 147 THIS IS A CASE OF DEEMED ESCAPEMENT OF INCOME. WITH REFERENCE TO THE ABOVE FACTS, LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT IT WILL BE WRONG TO SAY THAT THE ASSESSEE HAD DISCLOSED ALL MA TERIAL FACTS NECESSARY FOR ASSESSMENT. LD. DR REFERRED TO THE EXPLANATION 2, CLAUSE C(I) TO SE CTION 147 THAT SINCE INCOME CHARGEABLE TO TAX HAD BEEN UNDER-ASSESSED, IT WAS A CASE OF DEEME D ESCAPEMENT OF INCOME. ACCORDINGLY, ASSESSING OFFICER HAD RIGHTLY INITIATED THE RE-ASSE SSMENT PROCEEDINGS. 9.2. LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTE D THAT ASSESSING OFFICER HAD NOT RAISED ANY SPECIFIC POINT REGARDING DOUBLE DEDUCTION CLAIM ED BY ASSESSEE. IN THIS REGARD, HE REFERRED TO THE ORDER-SHEET NOTINGS DATED 16.12.2003 AND 25. 02.2004 TO DEMONSTRATE THAT ASSESSING OFFICER HAD ONLY RAISED GENERAL QUERY ABOUT EXCISE DUTY. LD. DR FURTHER SUBMITTED THAT LD. CIT ALSO APPLIED HIS MIND BEFORE ISSUANCE OF NOTICE UND ER SECTION 148. IN THIS REGARD, HE REFERRED TO ORDER DATED 15.03.2007 OF LD. CIT CONTAINED IN T HE PAPER BOOK. THE PROPOSAL WAS SENT ON 27.02.2007 BY DCIT, CIRCLE-1, KOLKATA TO LD. CIT, W HO VIDE HIS ORDER DATED 15.03.2007 GRANTED THE SAID PERMISSION AFTER DUE APPLICATION O F MIND. LD. DR SUBMITTED THAT IN THE NOTICE ISSUED UNDER SECTION 142(1), THERE WAS NO MENTION O F DOUBLE DEDUCTION AND, THEREFORE, ASSESSING OFFICER DID NOT APPLY HIS MIND TO THIS SP ECIFIC ISSUE. LD. DR FURTHER SUBMITTED THAT IN THE ASSESSMENT YEAR 2002-03 THE ALLEGED NOTE OF EXCISE DUTY ON CLOSING STOCK FILED ALONG WITH LETTER DATED 08.02.2005 WAS NOT BEFORE THE AS SESSING OFFICER. HE SUBMITTED THAT THERE IS NO INITIAL OF ASSESSING OFFICER AND ORDER SHEET ALS O DOES NOT REFER TO THE LETTER DATED 08.02.2005. IN THIS REGARD, HE REFERRED TO THE COPY OF ORDER SHEET FOR ASSESSMENT YEAR 2002-03 ITA NOS.260-262 & 276-278/KOL./2010 15 CONTAINED AT PAGES 5-9 OF THE PAPER BOOK TO DEMONST RATE THAT THERE IS NO NOTING OF THE SAID LETTER DATED 08.02.2005 AND PROCEEDINGS WERE ADJOUR NED TO 17.02.2005 AFTER PARTLY BEING DISCUSSED. HOWEVER, LD. CIT, DR FAIRLY SUBMITTED TH AT THE LETTER IS ON ASSESSMENT RECORD. IN THE ASSESSMENT YEAR 2003-04, HOWEVER, HE DID NOT DI SPUTE THE EXISTENCE OF NOTE ON EXCISE DUTY 9.3. LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE DECISION OF ITAT, AHMEDABAD, SPECIAL BENCH IN THE CASE OF GUJARAT CREDIT CORPORA TION LIMITED VS.- ACIT, REPORTED IN [2008] 302 ITR 250 (SB). IN THIS CASE, LOSS ON SALE OF SECURITIES HELD AS INVESTMENTS WAS CLAIMED AND ALLOWED IN ASSESSMENT AS BUSINESS LOSS INSTEAD OF AS CAPITAL LOSS. THESE FACTS PROVIDED A PRIMA FACIE BASIS TO THE ASSESSING OFFIC ER TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT. HE CONTENDED THAT THE CLAIM OF ASSESSEE WAS NOT ALLOWABLE AND, THEREFORE, THE SAME CONSTITUTED REASON TO BELIEVE THAT INCOME HA D ESCAPED ASSESSMENT. IN THIS CASE, TRIBUNAL PRIMARILY RELIED ON THE DECISION OF HONBL E GUJARAT HIGH COURT IN THE CASE OF PRAFUL CHUNILAL PATEL VS.- ACIT REPORTED IN 236 ITR 832], WHEREIN IT HAS BEEN HELD THAT IF THERE IS MATERIAL PLACED ON RECORD, WHICH WOULD SHOW EXISTEN CE OF INCOME CHARGEABLE TO TAX AND WHICH ORDINARILY OUGHT TO HAVE BEEN INCLUDED IN THE ASCERTAINMENT OF TAXABLE INCOME MADE IN THE ASSESSMENT ORDER BUT WAS NOT SO INCLUDED, THAT WOULD ITSELF PROVIDE A CAUSE OR JUSTIFICATION FOR A BELIEF TO THE ASSESSING OFFICER THAT SUCH INC OME HAD ESCAPED ASSESSMENT AND THE ASSESSING OFFICER IN SUCH CASES WOULD BE EX-FACIE J USTIFIED IN INITIATING THE PROCEEDINGS ON SUCH BASIS. THE CASES OF NON-ASSESSMENT OF AN ITEM OF INCOME CHARGEABLE TO TAX WOULD WARRANT FORMATION OF REQUISITE BELIEF TO INITIATE T HE PROCEEDINGS WITHIN FOUR YEARS OF THE END OF THE RELEVANT ASSESSMENT YEAR, EVEN WHERE FULL DISCL OSURES WERE MADE AND YET AN INCOME CHARGEABLE TO TAX HAD ESCAPED FROM BEING INCLUDED I N THE FINAL ASSESSMENT ORDER IN WHICH TAXABLE INCOME WAS WORKED OUT. LD. DR ALSO RELIED O N THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GIRILAL AND COMPANY VS.- ITO & OTHERS REPORTED IN [2008] 300 ITR 432 (BOM.), WHEREIN RE-ASSESSMENT PROCEEDINGS H AD BEEN UPHELD THOUGH REGULAR ASSESSMENT ORDER WAS PASSED UNDER SECTION 143(3) DE TERMINING THE TOTAL INCOME, ON THE GROUND THAT THERE WAS FAILURE ON THE PART OF ASSESS EE TO DISCLOSE MATERIAL FACTS NECESSARY FOR ASSESSMENT AND TO SPECIFY SIZE OF LAND CONDITION PR ECEDENT FOR CLAIMING SPECIAL DEDUCTION UNDER SECTION 80IB. IT WAS HELD THAT AVAILABILITY O F INFORMATION IN ANNEXURE TO RETURN WAS NOT SUFFICIENT. LD. DR ALSO REFERRED TO THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF ACIT VS.- APOLLO HOSPITALS ENTERPRISES LTD. REPORT ED IN [2008] 300 ITR 167 WHEREIN NOTICE UNDER SECTION 148 WITHIN FOUR YEARS WAS HELD TO BE VALID ON THE GROUND THAT BENEFIT OF CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION WAS WRONGLY ALLOWED. IN THIS CASE, THE SET OFF ITA NOS.260-262 & 276-278/KOL./2010 16 CLAIMED BY THE ASSESSEE WAS HELD TO BE ILLEGAL AND, THEREFORE, AO HAD GOT JURISDICTION TO REASSESS SUCH SET OFF ILLEGALLY AVAILED OFF BY THE ASSESSEE AND, THEREFORE, THERE COULD NOT BE ANY OTHER POSSIBLE VIEW, WHICH COULD BE TAKEN BY TH E ASSESSING OFFICER ON THE GIVEN SET OF FACTS. THE LD. D.R. RELIED ON THE DECISION OF HONB LE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS.- HINDUSTAN TOOLS & FORGINGS P. LTD . [2008] 306 ITR 209. IN THIS CASE RE- OPENING WAS UPHELD MERELY ON THE GROUND THAT THE AS SESSEE HAD BEEN ALLOWED EXCESSIVE RELIEF AND, THEREFORE, IN VIEW OF CLAUSE (C) OF EXPLANATIO N 1 TO SECTION 147 OF THE ACT, THE RE- ASSESSMENT PROCEEDING UNDER SECTION 147(B) WAS JUST IFIED. IN THIS CASE,, THE ASSESSEE FILED RETURN FOR ASSESSMENT YEAR 1978-79. SUBSEQUENTLY, I T FILED A REVISED RETURN CLAIMING DEDUCTION ON ACCOUNT OF ADDITIONAL LIABILITY OF SALES TAX OUT OF THE PROFIT. THE ASSESSMENT WAS COMPLETED. SUBSEQUENTLY, THE ASSESSING OFFICER REOPENED THE AS SESSMENT AND ISSUED NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT. HE OBSERVED THAT THE ASS ESSEE HAD COLLECTED SALES TAX AND CENTRAL EXCISE ON THE SALE PRICE OF THE VANASPATI INCLUDING THE AMOUNT OF EXCISE DUTY CHARGEABLE OF VANASPATI, BUT HAD NOT PAID TO THE STATE GOVERNMENT AND, THEREFORE, IT WAS LIABLE TO BE INCLUDED IN THE INCOME OF THE ASSESSEE. HONBLE PUN JAB & HARYANA HIGH COURT UPHELD THE RE- ASSESSMENT PROCEEDINGS OBSERVING THAT SPECIFIC INFO RMATION WAS SOUGHT AS TO WHEN PAYMENTS WERE ACTUALLY MADE TO THE GOVERNMENT. HOWEVER, THE ASSESSEE WITHOUT FURNISHING SPECIFIC INFORMATION GAVE COPIES OF SALES TAX ACCOUNT FOR TH E PREVIOUS YEAR SEPTEMBER 01, 1976 TO AUGUST 31, 1997 RELEVANT TO THE ASSESSMENT YEAR 197 8-79. IT WAS HELD THAT INFORMATION FURNISHED BY THE ASSESSEE GAVE NO PROOF TO THE PAYM ENT OF LIABILITY IN REGARD TO SALES TAX COLLECTED IN EXCESS. 10. SHRI BAJORIA, LD. SENIOR COUNSEL IN HIS REJOIN DER SUBMITTED THAT IN THE ORDER SHEET FOR ASSESSMENT YEAR 2001-02, THE NOTING ON 16.12.2003 I N COURSE OF REGULAR ASSESSMENT PROCEEDINGS READS AS UNDER :- EXCISE DUTY ON CLOSING STOCK AS DISCUSSED. HE FURTHER REFERRED TO THE OFFICE NOTE DATED 25.02. 2004, WHICH READS AS UNDER :- ALSO TO CLARIFY WHY EXCISE DUTY PAID AS ON 31.03.2 001 IS CLAIMED IN THE COMPUTATION. WITH REFERENCE TO THESE NOTINGS, SHRI BAJORIA SUBMI TTED THAT SPECIFIC QUERY HAD BEEN RAISED BY THE ASSESSING OFFICER. HE SUBMITTED THAT AFTER CONS IDERING THE DETAILS FURNISHED BEFORE THE ASSESSING OFFICER, HE WAS REQUIRED TO DRAW THE CONC LUSION WHETHER ASSESSEE HAD CLAIMED DOUBLE DEDUCTION OR NOT. IT WAS NOT FOR THE ASSESSE E TO GUIDE HIM FOR ARRIVING AT ANY CONCLUSION. LD. COUNSEL ALSO REFERRED TO THE DECISI ON OF ITAT, DELHI, SPECIAL BENCH IN THE ITA NOS.260-262 & 276-278/KOL./2010 17 CASE OF INDIAN COMMUNICATION NETWORK (P.) LTD. VS. - INSPECTING ASSISTANT COMMISSIONER REPORTED IN (1994) 49 ITD 56 , WHEREIN IT HAS BEEN, INTER ALIA, HELD AS UNDER :- AN ASSESSEE PRIOR TO INSERTION OF SECTION 43B, COU LD CLAIM THE ENTIRE EXPENDITURE AS DEDUCTION ON ACCRUAL BASIS AND THERE IS. NO REASON WHY THE SAME DEDUCTION CANNOT BE MADE AVAILABLE SUBJECT TO THE RIDER THAT THE ENTIRE AMOU NT HAS BEEN PAID IN THE YEAR ITSELF, AND THAT IS THE CONDITION WHICH SECTION 43B LAYS DOWN. IN THE INSTANT CASE, THE ASSESSEE HAD PAID CUSTOMS DUTY AND EXCISE DUTY AND CHARGED THE SAME T O THE TRADING/PROFIT AND LOSS ACCOUNT. A PART OF THE AMOUNTS ALSO FOUND PLACE IN THE CLOSING STOCK. BY THE AFORESAID MODE, THE DEDUCTION TO THE ASSESSEE WIDER SECTION 43B WAS GIV EN ONLY IN PART, WHEREAS THE INTENTION OF THE LEGISLATURE WAS TO ALLOW IT IN FULL IF ACTUALLY PAID AND IF OTHERWISE FOUND ALLOWABLE. IT WAS NOBODYS CASE THAT PAYMENTS ON ACCOUNT OF CUSTO MS DUTY AND EXCISE DUTY WERE NOT ALLOWABLE DEDUCTIONS. THE REMOVAL OF THE AMOUNT IN QUESTION FROM THE FIGU RE OF CLOSING STOCK WOULD NOT BE TANTAMOUNT TO TINKERING WITH THE CLOSING STOCK BU T ALLOWING TO THE ASSESSEE THE EFFECTIVE DEDUCTION TO WHICH IT WAS ENTITLED UNDER SECTION 43 B. ALSO, IN THE SUBSEQUENT ASSESSMENT YEAR, THE ASSESSEES OPENING STOCK WOULD STAND REDU CED BY A CORRESPONDING FIGURE SINCE IT COULD NOT AVAIL OF A DOUBLE DEDUCTION. HENCE, THE DEDUCTION OF THE IMPUGNED AMOUNT WAS ALL OWED TO THE ASSESSEE, AND THE OPENING STOCK FOR THE ASSESSMENT YEAR 1985-86 WAS DIRECTED TO BE REDUCED BY THE SAME FIGURE. 11. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. IN ALL THE THREE ASSESSMENT YE ARS, THE ASSESSMENT HAS BEEN COMPLETED UNDER SECTION 143(3). THE REASONS FOR INITIATION OF PROCEEDINGS UNDER SECTION 147 ARE IDENTICAL IN ALL THE THREE ASSESSMENT YEARS. THE ONLY DIFFERE NCE IS THAT THE PROCEEDINGS UNDER SECTION 147 FOR ASSESSMENT YEAR 2001-02 HAVE BEEN INITIATED AFTER FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR AND IN OTHER TWO ASSESSMENT YEARS, PROCEEDINGS HAVE BEEN INITIATED WITHIN FOUR YEARS FROM THE RELEVANT ASSESSMENT YEAR. THERE IS NO DISPUTE ON THIS ASPECT. THEREFORE, THE VALIDITY OF RE-ASSESSMENT PROCEEDINGS UNDER SEC TION 147 FOR ASSESSMENT YEAR 2001-02 HAS TO BE EXAMINED WITH REFERENCE TO PROVISO TO SECTION 147 AND IN RESPECT OF OTHER TWO YEARS IT IS TO BE EXAMINED UNDER THE MAIN PROVISIONS OF SECTION 147. AS FAR AS A.Y. 2001-02 IS CONCERNED, AS PER PROVISO, WHERE THE ASSESSMENT UN DER SUB-SECTION (3) OF SECTION 143, NO ACTION CAN BE TAKEN UNDER SECTION 147 AFTER THE EXP IRY OF FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TA X HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PAR T OF ASSESSEE, INTER ALIA, TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSM ENT, FOR THAT ASSESSMENT YEAR. IF WE EXAMINE THE FACTS FOR ASSESSMENT YEAR 2001-02, WE FIND THAT IN THE COMPUTATION OF INCOME, THE ASSESSEE HAD GIVEN IN DETAIL THE MODE OF CLAIMING DEDUCTION IN RESPECT OF EXCISE DUTY PAYMENT AS HAS BEEN REPRODUCED EARLIER IN THE SUBMISSIONS OF LD. C OUNSEL FOR THE ASSESSEE. THAT APART, IN THE NOTICE ISSUED UNDER SECTION 142(1) DATED 03.12.2003 , THE ASSESSING OFFICER HAD SPECIFICALLY ITA NOS.260-262 & 276-278/KOL./2010 18 REQUIRED THE ASSESSEE TO FURNISH TOTAL AMOUNT OF DU TY, TAX ETC. ON THE CLOSING STOCK AS ON 31.03.2001 AND DATE OF PAYMENT. THE ASSESSEE HAD FI LED DETAILS ON 16.12.2008 IN THIS REGARD, WHICH HAVE BEEN REPRODUCED EARLIER AS PER ANNEXURE H AT PAGE 7 OF THE PAPER BOOK, WHICH READS AS UNDER :- ITEM NO. 9 AMOUNT OF DUTY, TAX, ETC. INCLUDED IN THE CLOSING S TOCK AS REMAINED UNPAID AS AT 31 ST MARCH 2001:- PARTICULARS AMOUNT INCLUDED IN CLOSING STOCK SUBSEQUENT PAYMENT UPTO 05.10.01 BALANCE UNPAID TAX AUDIT REPORT REF. EXCISE DUTY 15,381,564/- 15,369,596/- 11,968/- ANNEXURE 11A CLAUSE 21(I)(B) (SENIOR NO. 2) FURTHER VIDE LETTER DATED 12.01.2004, THIS ISSUE WA S FURTHER CLARIFIED AT PAGE 9 OF THE PAPER BOOK, WHICH READS AS UNDER :- EXCISE DUTY INCLUDED IN CLOSING STOCK OF FINISHED G OODS DURING THE ASSESSMENT YEAR 2001-02 THE ASSESSEE HAD CLAIMED THE EXCISE DUTY PAID ON STOCK OF FINISHED GOODS AS ON 31 ST MARCH, 2001 AMOUNTING TO RS.84,045,799/- UNDER THE PROVISIONS OF SECTION 43B OF THE INCOME T AX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) SINCE THE SAME WAS PAID BEFORE THE DATE OF FILING OF THE RETURN. AS PER THE CONSISTENT ACCOUNTING PRACTICE OF THE CO MPANY, THE EXCISE DUTY IS ACCOUNTED FOR IN PROFIT AND LOSS ACCOUNT ONLY AT THE TIME OF SALE OF ITS PRODUCTS. ACCORDINGLY, EXCISE DUTY PAID ON FINISHED GOODS LYING IN THE FAC TOR AS ON 31 ST MARCH, 2001 HAS NOT BEEN DEBITED IN THE PROFIT AND LOSS ACCOUNT. IN FAC T, AS PER THE ACCOUNTING PRACTICE FOLLOWED BY THE COMPANY, THE DEDUCTION OF SUCH EXCI SE DUTY IS A AVAILED ONLY IN THE YEAR IN WHICH THE STOCK IS SOLD. IT MAY KINDLY BE NOTED THAT THE ASSESSEE HAS OFFERE D TO TAX THE ENTIRE SUM OF RS.84,045,799/- BEING THE CLAIM ON ACCOUNT OF EXCIS E DUTY PAID IN RESPECT OF CLOSING STOCK AS ON 31 ST MARCH, 2001 IN THE COMPUTATION OF TOTAL INCOME FOR THE ASSESSMENT YEAR 2002-03. A COPY OF THE COMPUTATION OF INCOME F OR THE ASSESSMENT YEAR 2002-03 IS ENCLOSED FOR YOUR KIND PERUSAL (ANNEXURE D). 11.1. ANNEXURE-D REFERRED TO IN ABOVE CLARIFICATI ON CLEARLY EXPLAINED THE MODE OF PAYMENT OF EXCISE DUTY AND CLAIM OF DEDUCTION UNDER SECTION 43B. AGAIN ON 05.03.2004, DETAILED NOTE OF EXCISE DUTY ON CLOSING STOCK OF FINISHED GOODS W AS FILED BEFORE DCIT, CIRCLE-1. FURTHER, AS FAR AS ASSESSMENT YEAR 2001-02 IS CONCERNED, THERE IS NO DISPUTE THAT THIS DETAILED NOTE WAS SUBMITTED BEFORE THE ASSESSING OFFICER. IN THE REAS ONS RECORDED, AS NOTED ABOVE, THE ASSESSING OFFICER HAS NOT POINTED OUT AS TO WHICH PARTICULAR FACT WAS NOT DISCLOSED BY ASSESSEE, WHICH ITA NOS.260-262 & 276-278/KOL./2010 19 WAS NECESSARY FOR ARRIVING AT THE ALLEGED CONCLUSIO N OF DOUBLE DEDUCTION BEING CLAIMED BY THE ASSESSEE. THE MANDATE OF PROVISO IS VERY CLEAR THAT UNLESS THERE IS A FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL NECESSARY FACTS FOR ASSESSMENTS, RE-OPENING CANNOT BE UPHELD. THE ALLEGED ESCAPEMENT MUST BE ON ACCOUNT O F ANY OMISSION OR FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR THE ASSESSMENT IN THE COURSE OF ASSESSMENT PROCEEDINGS. IT IS WELL SETTLE D LAW THAT ONCE THE ASSESSEE HAS DISCLOSED ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT, THEN W HAT INFERENCE IS TO BE DRAWN FROM THE SAID SET OF FACTS IS FOR THE ASSESSING AUTHORITY TO DECI DE AND ASSESSEE IS NOT SUPPOSED TO GUIDE THE ADJUDICATING AUTHORITY IN ARRIVING AT ANY PARTICULA R CONCLUSION. FROM THE DETAILS FURNISHED BY ASSESSEE, IT WAS FOR THE ASSESSING OFFICER TO DECID E WHETHER THE ASSESSEE HAD CLAIMED ANY DOUBLE DEDUCTION OR NOT. THEREFORE, THE PROCEEDINGS UNDER SECTION 147 WERE W ITHOUT JURISDICTION AND LIABLE TO BE QUASHED IN VIEW OF PROVISO TO SECTION 147. AS WE HAVE ALREADY QUASHED THE REASSESSMENT PROCEEDINGS, THEREFORE, WE NEED NOT TO GO INTO THE MERITS OF THE CASE AS RAISED BY THE ASSESSEE IN GROUND NO.2. HOWEVER, WE FIND THAT ON MERITS AL SO THE ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF I.T.A.T. IN THE ASSESSE ES OWN CASE FOR ASSESSMENT YEAR 2004-05, THE EXTRACTS OF WHICH WILL BE REPRODUCED IN THE SUB SEQUENT PART OF THIS ORDER. 12. RESULTANTLY, BOTH THE GROUNDS RAISED BY ASSESS EE ARE ALLOWED. ITA NO. 261 & 262/KOL./2010 (ASSESSMENT YEAR : 2002 -03& 2003-04) 13. THE RE-ASSESSMENT PROCEEDINGS WERE INITIATED FO R BOTH THESE ASSESSMENT YEARS WITH FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR . LD. CIT(APPEALS) UPHELD THE PROCEEDINGS UNDER SECTION 147 ON THE GROUND THAT AS SESSING OFFICER HAD ALLEGEDLY RECORDED THE REASONS THAT ASSESSEE HAD CLAIMED DOUBLE DEDUCT ION IN RESPECT OF EXCISE DUTY ON CLOSING STOCK AND, THEREFORE, THE PROCEEDINGS UNDER SECTION 147 OF THE ACT HAD BEEN INITIATED TO DISALLOW SUCH CLAIM OF ASSESSEE. AFTER GIVING THE S AME REASONS AS NOTED ABOVE FOR ASSESSMENT YEAR 2001-02, LD. CIT(APPEALS) FURTHER POINTED OUT THAT AS PER CLAUSE(C)(I) OF EXPLANATION 2, THERE WAS UNDER ASSESSMENT, THEREFORE, IN VIEW OF S UB-CLAUSE (I) OF EXPLANATION 2 UNDER SECTION 147 THE ESCAPEMENT OF INCOME IS DEEMED TO B E THERE AND THEREFORE, PROCEEDINGS WERE INITIATED. 14. IN THESE TWO ASSESSMENT YEARS, THE MAIN ASPECT TO BE EXAMINED IS WHETHER THE PROCEEDINGS UNDER SECTION 147 HAVE BEEN INITIATED O N ACCOUNT OF CHANGE OF OPINION OR NOT. IT IS WELL SETTLED LAW THAT MERELY ON THE BASIS OF CHA NGE OF OPINION, THE ASSESSING OFFICER CANNOT ITA NOS.260-262 & 276-278/KOL./2010 20 INITIATE 147 PROCEEDINGS. THE HONBLE SUPREME COURT IN THE CASE OF KELVINATOR INDIA LIMITED [2010] 187 TAXMAN 312 (SC) HAS OBSERVED AS UNDER :- HEAD NOTE ..THEREFORE, 1-4-1989, POWER TO RE-OPEN IS MUC H WIDER. HOWEVER, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATION TO THE WOR DS REASON TO BELIEVE: FAILING WHICH SECTION 147 WOULD GIVE ARBITRARY POWERS TO TH E ASSESSING OFFICER TO REOPEN ASSESSMENTS ON THE BASIS OF MERE CHANGE OF OPINION WHICH CANNOT BE PER SE REASON TO REOPEN. ONE MUST ALSO KEEP IN MIND THE CO NCEPTUAL DIFFERENCE BETWEEN POWER TO REVIEW AND POWER TO REASSESS. THE ASSESSIN G OFFICER HAS NO POWER TO REVIEW; HE HAS THE POWER TO REASSESS, BUT THE REASS ESSMENT HAS TO BE BASED ON FULFILLMENT OF CERTAIN PRE-CONDITIONS AND IF THE CO NCEPT OF CHANGE OF OPINION IS REMOVED AS CONTENDED ON BEHALF OF THE DEPARTMENT, T HEN IN THE GARB OF REOPENING THE ASSESSMENT, REVIEW WOULD TAKE PLACE. ONE MUST T REAT THE CONCEPT OF CHANGE OF OPINION AS AN IN-BUILT TEST TO CHECK ABUSE OF POWE R BY THE ASSESSING OFFICER. HENCE, AFTER 1-4-1989, THE ASSESSING OFFICER HAS PO WER TO REOPEN, PROVIDED THERE IS TANGIBLE MATERIAL TO COME TO CONCLUSION THAT T HERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. UNDER THE DIRECT TAX LAWS (AMENDME NT) ACT, 1987, THE PARLIAMENT NOT ONLY DELETED THE WORDS REASON TO BE LIEVE BUT ALSO INSERTED THE WORD OPINION IN SECTION 147. HOWEVER, ON RECEIPT OF REPRESENTATIONS FROM THE COMPANIES AGAINST OMISSION OF THE WORDS REASON TO BELIEVE THE PARLIAMENT RE- INTRODUCED THE SAID EXPRESSION AND DELETED THE WORD OPINION ON THE GROUND THAT IT WOULD VEST ARBITRARY POWERS IN THE ASSESSING OFF ICER. [PARA 4]. 14.1. IN ORDER TO EXAMINE, WHETHER RE-ASSESSMENT P ROCEEDINGS HAVE BEEN INITIATED ON ACCOUNT OF CHANGE OF OPINION OR NOT, WE HAVE TO EXA MINE WHETHER THE ASSESSING OFFICER HAD DULY APPLIED HIS MIND TO A PARTICULAR ISSUE AND IF WE FIND THAT ON THAT PARTICULAR ISSUE, AFTER EXAMINING THE RELEVANT DETAILS DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSING OFFICER ARRIVED AT A PARTICULAR CONCLUSION THEN, U NLESS SOME TANGIBLE MATERIAL COMES TO HIS POSSESSION POST-ASSESSMENT, ON SAME SET OF FACTS, R E-ASSESSMENT PROCEEDINGS CANNOT BE INITIATED. THE PHRASE CHANGE OF OPINION IMPLIES T HAT ASSESSING OFFICER HAD FORMED A POSITIVE OPINION ON A PARTICULAR ISSUE AFTER DUE APPLICATION OF MIND. HOWEVER, MERELY BECAUSE DETAILS WERE AVAILABLE BEFORE HIM FROM WHICH HE COULD ARRIV E AT A PARTICULAR CONCLUSION WOULD NOT IMPLY THAT HE FORMED ANY OPINION UNLESS HE ACTUALLY CONSIDERED THAT ISSUE. FROM THE ASSESSING OFFICERS ORDER IT SHOULD BE MANIFEST THA T HE HAD FORMED A PARTICULAR OPINION ON THAT ISSUE. BUT IF IT IS NOT SO, THEN MERELY ON THE BASIS OF SUFFICIENT INFORMATION BEING AVAILABLE BEFORE HIM, IT CANNOT BE CONCLUDED THAT HE FORMED A PARTICULAR OPINION ON AN ISSUE WHICH HAS NOT EVEN BEEN TOUCHED UPON BY HIM IN HIS ORDER. IT ALL DEPENDS ON THE FACTS OF EACH CASE. IN THE PRESENT CASE, WE FIND THAT ALL THE DETAILS AS R EQUIRED BY ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS WERE FURNISHED BEF ORE HIM AND DETAILED NOTE WAS ALSO FILED IN THIS REGARD. AFTER EXAMINING ALL THOSE ASPECTS, ASSESSING OFFICER ARRIVED AT A CONCLUSION ITA NOS.260-262 & 276-278/KOL./2010 21 THAT ASSESSEE HAD RIGHTLY CLAIMED THE DEDUCTION BUT HE DID NOT CONSIDER THE TRUE IMPORT OF METHODOLOGY ADOPTED BY ASSESSEE. HE DID NOT TAKE IN TO CONSIDERATION AS TO WHAT WAS THE EFFECT OF CLAIMING DEDUCTION ONCE ON MERCANTILE BAS IS OF ACCOUNTING AND AGAIN UNDER SECTION 43B IN THE COMPUTATION. THE TRUE EFFECT OF DOUBLE D EDUCTION, IN THE SAME YEAR, OF EXCISE DUTY PAID BY ASSESSEE, WAS AN IMPORTANT ISSUE, ON WHICH ASSESSING OFFICER SHOULD HAVE APPLIED HIS MIND AND THEN COME TO A CONCLUSION. NON-APPLICATION OF MIND ON SUCH A VITAL ASPECT CANNOT BE CONSIDERED AS FORMATION OF OPINION ON THE BASIS OF DETAILS AVAILABLE BEFORE HIM. WE ARE CONSCIOUS OF THE FACT THAT IT IS NOT THE DUTY OF AS SESSEE TO GUIDE THE ASSESSING OFFICER IN ARRIVING AT A PARTICULAR CONCLUSION BUT AT THE SAME TIME, IF ON ACCOUNT OF FAILURE ON THE PART OF ASSESSING OFFICER TO CONSIDER A VITAL ISSUE, EMANAT ING FROM THE DETAILS FURNISHED BY ASSESSEE, THERE IS PRIMA FACIE ESCAPEMENT OF INCOME THEN IT CANNOT BE SAID THAT THE INITIATION OF RE- ASSESSMENT PROCEEDINGS IS ON ACCOUNT OF CHANGE OF OPINION. WE, THEREFORE, ARE OF THE OPINION THAT IN VIEW OF THE FINDINGS ON THIS ISSUE IN ASSES SMENT ORDER FOR A.Y. 2004-05, THE ASSESSING OFFICERS PRIMA FACIE BELIEF REGARDING ES CAPEMENT OF INCOME CANNOT BE QUESTIONED PARTICULARLY IN THE LIGHT OF DEEMING PROVISION REGA RDING ESCAPEMENT OF INCOME CONTAINED IN EXPLANATION(2)(I) TO SECTION 147. LEARNED DEPARTME NTAL REPRESENTATIVE HAS RIGHTLY SUBMITTED THAT AT THE TIME OF RECORDING OF REASONS, THE ASSESSING OFFICER IS ONLY REQUIRED TO BE PRIMA FACIE SATISFIED REGARDING ESCAPEMENT OF INCOM E AND FINAL CONCLUSION IS TO BE ARRIVED AT ONLY AFTER THE RE-ASSESSMENT ASSESSMENT PROCEEDINGS ARE COMPLETED. HE RIGHTLY SUBMITS THAT ON BEING SATISFIED ABOUT DOUBLE DEDUCTION BEING CLA IMED BY ASSESSEE, THE ASSESSING OFFICER HAD ISSUED RE-ASSESSMENT NOTICE UNDER SECTION 148 B Y RECORDING REASONS. LD. COUNSEL HAS SUBMITTED THAT THE TRIBUNAL REVERSED THE FINDINGS O F ASSESSING OFFICER FOR ASSESSMENT YEAR 2004-05. IN OUR HUMBLE OPINION, IT IS NOT OF MUCH C ONSEQUENCE AS FAR INITIATION OF RE- ASSESSMENT PROCEEDINGS ARE CONCERNED WE, THEREFORE , ARE OF THE OPINION THAT RE-ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEARS 2002-03 AND 2003-0 4, WERE NOT INITIATED ON ACCOUNT OF CHANGE OF OPINION AND, THEREFORE, WE UPHOLD THE ORD ER OF LD. CIT (APPEALS). CONSEQUENTLY, GROUND NO.1 RAISED BY ASSESSEE CHALLENGING THE INIT IATION OF RE-ASSESSMENT PROCEEDINGS STANDS DISMISSED FOR A.Y.S 2002-03 AND 2003-04. 15. NOW COMING TO GROUND NO.2 RELATING TO THE MERI TS OF THE CASE. WE HAVE CONSIDERED IN DETAIL THE MODUS OPERANDI ADOPTED BY ASSESSEE IN RE GARD TO TREATMENT OF DEDUCTION CLAIMED IN REGARD TO EXCISE DUTY INCLUDED IN THE CLOSING STOCK . WE FIND THAT SINCE THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. IT HAD D EBITED THE EXCISE DUTY ON MANUFACTURE OF GOODS AND CORRESPONDINGLY INCLUDED EXCISE DUTY ELEM ENT IN THE CLOSING STOCK TO NEUTRALIZE THE ITA NOS.260-262 & 276-278/KOL./2010 22 EFFECT OF DEBIT IN THE PROFIT & LOSS A/C. THE DEDUC TION HAD BEEN CLAIMED ON THE BASIS OF ACTUAL PAYMENT UNDER SECTION 43B. HOWEVER, THE ASSE SSEE HAD MADE NECESSARY ADJUSTMENTS IN THE RESPECTIVE YEARS. FROM THE DETAILS NOTED ABOVE AND FROM THE SUBMISSIONS OF LD. COUNSEL, IT IS CLEAR THAT IN ULTIMATE ANALYSIS OF VARIOUS ASSES SMENT YEARS TAKEN TOGETHER, NO DOUBLE DEDUCTION HAD BEEN CLAIMED BY THE ASSESSEE. FURTHE R, IT IS PERTINENT TO NOTE THAT ASSESSING OFFICER HAS ALSO, INTER ALIA, OBSERVED AS UNDER:- TO OFFSET THE DOUBLE DEDUCTION, THE ASSESSEE SUO M OTO OFFERED THE EXCISE DUTY DEDUCTION CLAIMED U/S 43B OF THE IT ACT, IN THE ASS ESSMENT YEAR 2001-02 IN THE NEXT ASSESSMENT YEARS COMPUTATION. BY ADOPTING THIS PRA CTICE, THE ASSESSEE FIRSTLY DEFERRED THE TAX LIABILITY AND SECONDLY, DERIVED BE NEFIT FROM DIFFERENTIAL RATE OF SURCHARGE APPLICABLE IN THE A.Y.S 2001-02 AND 2002 -03. FROM THE AFOREMENTIONED OBSERVATIONS IT IS EVIDENT THAT IN ULTIMATE ANALYSIS ONLY THE DIFFERENCE IN RATES OF SURCHARGE AFFECTED THE TAX L IABILITY. FURTHER, WE FIND THAT THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF TRIBUNAL IN ASS ESSEES OWN CASE FOR A.Y. 2004-05, WHEREIN IT HAS BEEN HELD AS UNDER:- 4. AT THE TIME OF HEARING THE LD. DR SUBMITTED TH AT THE LD. CIT(A) WAS WRONG IN DELETING THE DISALLOWANCE BY APPLYING THE RATIO OF THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF M/S. BERGER PAINTS (I) LTD. 26 6 ITR 99 AS THE HONBLE APEX COURT HAS NOT DECIDED THE ISSUE ON MERITS AND THE ASSESSE ES APPEAL WAS ALLOWED BY HOLDING THAT IF THE REVENUE HAS NOT CHALLENGED THE CORRECTN ESS OF THE LAW LAID DOWN BY THE HIGH COURT AND ACCEPTED IT IN THE CASE OF ONE ASSES SEE THEN IT IS NOT OPEN TO THE REVENUE TO CHALLENGE IT CORRECTNESS IN THE CASE OF OTHER ASSESSEE WITHOUT JUST CAUSE, PLACING RELIANCE ON THE JUDGEMENTS OF THE HONBLE S UPREME COURT IN THE CASE OF UNION OF INDIA VS. KAURNUDINI NARAYAN DALAL [2001] 249 IT R 219; CIT V. NARENDRA DOSHI [2002] 254 ITR 606 AND CIT V. SHIVSAGAR ESTATE [200 2] 257 ITR 59. SINCE THE HONBLE APEX COURT IN THE CASE OF C.K.GANGADHAN AND ANR. VS. CIT 304 ITR 61 HAS TAKEN A DIFFERENT VIEW THAN WAS TAKEN BY IT IN THE CASES OF UNION OF INDIA VS. KAUMUDINI NARAYAN DALAL [2001] 249 ITR 219; CIT V. NARENDRA DOSHI [2002] 254 ITR 606 AND CIT V. SHIVSAGAR ESTATE [2002] 257 ITR 59, THE RATIO AS LAID DOWN BY THE HONBLE APEX COURT IN THE CASE OF BERGER PAINTS (I) LTD. IS NO MORE A GOOD LAW ON THE ISSUE AT HAND IN THIS APPEAL. IN VIEW OF THIS THE L D. DR SUBMITTED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN GIVING RELIEF TO THE ASSESSEE BY PLACING RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT, IN THE CASE OF BERGER PA INTS (I) LTD. 5. THE LD. AR, ON THE OTHER HAND, SUBMITTED THAT IT IS NOT CORRECT TO SAY THAT THE HONBLE APEX COURT IN THE CASE OF BERGER PAINTS (I) LTD. HAS NOT DECIDED THE MATTER ON MERITS. HE FURTHER SUBMITTED THAT THE HONBLE APEX COURT WHILE DECIDING THE CASE OF C.K. GANGADHARAN & ANR. -VS- CIT CITED SUPRA HAS NO T REVERSED ITS EARLIER DECISION IN THE CASE OF BERGER PAINTS LTD. AND REFERENCE OF THI S CASE HAS BEEN MADE AS HAS BEEN DONE OF MANY OTHER CASES AND THEREFORE THE CASE OF BERGER PAINTS (I) LTD. IS STILL A GOOD LAW ON THIS ISSUE. HE PLEADED THAT THE ORDER P ASSED BY THE LD. CIT(A) MAY KINDLY BE UPHELD. ITA NOS.260-262 & 276-278/KOL./2010 23 6. HEARD BOTH THE PARTIES AND PERUSED THE MATERI AL AVAILABLE ON RECORD. IN THE CASE OF C.K. GANGADHARAN & ANR. -VS- CIT CITED SUPRA THE ISSUE BEFORE THE HONBLE SUPREME COURT WAS WHETHER THE REVENUE CAN BE PRECLU DED FROM DEFENDING ITSELF BY RELYING UPON THE CONTRARY DECISIONS. WHILE ANSWERIN G THIS REFERENCE THE HONBLE APEX COURT HELD THAT MERELY BECAUSE IN SOME CASES THE RE VENUE HAS NOT PREFERRED APPEAL THAT DOES NOT OPERATE AS A BAR FOR THE REVENUE TO P REFER AN APPEAL IN ANOTHER CASE WHERE THERE IS JUST CAUSE FOR DOING SO OR IT IS IN PUBLIC INTEREST TO DO SO OR FOR A PRONOUNCEMENT BY THE HIGHER COURT WHEN DIVERGENT VI EWS ARE EXPRESSED BY THE TRIBUNALS OR THE HIGH COURTS. BUT WHILE DOING SO NO NE OF THE EARLIER DECISIONS OF THE HONBLE APEX COURT WERE REVERSED THOUGH WERE REFERR ED AND TAKEN NOTE OF THEREIN. 7. NOW COMING TO THE ARGUMENTS TAKEN BY THE LD. DR THAT THE HONBLE APEX COURT THE CASE OF BERGER PAINTS (I) LTD. HAS NOT DECIDED THE ISSUE ON MERITS, WE FIND THAT IN THAT CASE THE ASSESSEE WAS A COMPANY ENGAGED IN THE MANUFACTURE AND SALE PAINTS, VARNISHES AND OTHER ALLIED PRODUCTS. DURING THE A.Y R, 1984-85 THE ASSESSEE IN ITS RETURN DISCLOSED A SUM OF 1,33,31,370/-. DURING THI S PERIOD THE ASSESSEE INCURRED EXPENDITURE ON ACCOUNT OF CUSTOMS AND EXCISE DUTY A GGREGATING TO RS.5,85,87,181/- WHICH WAS DULY DEBITED TO THE PROFIT AND LOSS ACCOU NT AND WAS ALSO FULLY PAID DURING THE RELEVANT PREVIOUS YEAR. IN ADDITION THERETO, TH E ASSESSEE ALSO CREDITED TO THE PROFIT AND LOSS ACCOUNT AN AMOUNT OF RS.98,25,833/- RELATA BLE TO THE CUSTOMS AND EXCISE DUTY ON THE CLOSING STOCK OF INVENTORY BY INCLUDING THE SAID SUM IN THE VALUATION OF SUCH CLOSING STOCK. DURING THE ASSESSMENT PROCEEDINGS TH E ASSESSEE CLAIMED THAT UNDER SECTION 43B OF THE IT ACT, 1961 IT WAS ENTITLED TO DEDUCTION OF THE ENTIRE AMOUNT NOF RS.5,85,87,181/- BEING THE DUTIES ACTUALLY PAID DUR ING THE RELEVANT PREVIOUS YEAR. ON SIMILAR BASIS THE ASSESSEE CLAIMED DEDUCTION O F AN AMOUNT OF RS.1,22,54,261/- BEING THE ACTUAL CUSTOMS AND EXCIS E DUTY INCLUDING IN THE VALUE OF THE CLOSING STOCK FOR THE A.YR. 1986-87 AND OFFERED FOR TAX A SUM OF RS.98,25,833/- BEING CUSTOMS AND EXCISE DUTIES INCLUDED IN THE VALUE OF THE OPENING STOCK. SIMILARLY FOR THE A.YR. 1987-88 THE ASSESSEE CLAIMED DEDUCTION OF RS. 24,28,428/- (RS.1,22,54,26L - RS.98,25,833). THE ASSESSEE CLAIMED A DEDUCTION OF RS.77,81,739/- (RS.2,00,36,000 - RS.1,22,54,261) ON SIMILAR BASIS FOR THE A.YR. 1987 -88. IN THE ASSESSMENT PROCEEDINGS OF THE A.YR.1984-85 , THE AO ALLOWED THE ASSESSEES CLAIM THAT IT WAS ENTITLED TO DEDUCT THE ENTIRE SUM OF RS.5,85,87,181 BEING THE DUTIES ACTUALLY PAID DURING THE RELEVANT YEAR P REVIOUS TO THE ASSESSMENT YEAR 1984- 85. THE CIT INITIATED PROCEEDINGS U/S 263 OF THE AC T ON THE GROUND THAT THE AO HAD WRONGLY ALLOWED THE CLAIM FOR DEDUCTION OF AN AMOUN T OF RS.98,25,833 TOWARDS CUSTOMS AND EXCISE DUTY PAID DURING THE PREVIOUS YE AR BUT CREDITED TO THE PROFIT AND LOSS ACCOUNT IN CLOSING STOCK OF GOODS UNDER THE PR OVISIONS OF SECTION 43B. THE ASSESSEE RELIED UPON THE JUDGEMENT OF THE GUJARAT H IGH COURT IN LAKHANPAL NATIONAL LTD. -VS- ITO 162 ITR 240 IN SUPPORT OF ITS CLAIM. THE CIT TOOK THE VIEW THAT THE GUJARAT HIGH COURTS DECISION WAS DISTINGUISHABLE O N FACTS AND, THEREFORE, MADE AN ORDER UNDER SECTION 263 OF THE ACT DISALLOWING THE CLAIM OF THE ASSESSEE. ON APPEAL TO THE TRIBUNAL, THE TRIBUNAL HELD THAT THE GUJARAT HI GH COURTS JUDGEMENT IN LAKHANPAL NATIONAL LTD.S CASE WAS DISTINGUISHABLE AND CONFIR MED THE ORDER OF THE CIT. ON AN APPLICATION MADE UNDER SECTION 256(1) OF THE ACT AT THE INSTANCE OF THE ASSESSEE, THE TRIBUNAL, INTER ALIA, REFERRED THE FOLLOWING QUESTI ON OF LAW FOR THE OPINION OF THE HIGH COURT (253 ITR 738): ITA NOS.260-262 & 276-278/KOL./2010 24 WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE TRIBUNAL WAS RIGHT IN LAW IN REJECTING THE ASSESSEES CLAIM FOR DEDUCTION OF THE EXCISE AND CUSTOMS DUTIES OF RS.98,25,833 PAID IN T HE YEAR OF ACCOUNT AND DEBITED IN THE PROFIT AND LOSS ACCOUNT, ON THE GROU ND THAT THE CREDITING OF THE PROFIT AND LOSS ACCOUNT BY THE VALUE OF THE CLO SING STOCK, WHICH INCLUDED THE AFORESAID DUTIES, DID NOT HAVE THE EFF ECT OF WIPING OUT THE DEBIT TO THE PROFIT AND LOSS ACCOUNT? THE HIGH COURT ANSWERED THE QUESTION REFERRED TO IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. FOR THE A.YR. 1986-87 THE TRIBUNAL UPHELD THE CLA IM OF THE ASSESSEE AND ALLOWED A DEDUCTION AMOUNTING TO RS.77,81,948 CLAIM ED UNDER SECTION 43B OF THE ACT BEING CENTRAL EXCISE AND CUSTOMS DUTY, WHICH HAD BE EN INCLUDED IN THE VALUE OF THE CLOSING STOCK. AT THE INSTANCE OF THE REVENUE, THE FOLLOWING QUESTION OF LAW WAS REFERRED TO THE HIGH COURT FOR THE A.YR. 1986-87 (2 54 ITR 498). WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND UNDER EXPLANATION 2 TO SECTION 43B COMING INTO FORCE WITH EFFECT FROM APRIL 1, 1984. THE TRIBUNAL WAS JUSTIFIED IN LAW IN DIRECTIN G TO ALLOW THE AMOUNT OF RS. 77,81,948 UNDER SECTION 43B OF THE IT ACT, BEIN G CENTRAL EXCISE AND CUSTOMS DUTY WHICH HAD BEEN INCLUDED IN THE VALUE O F CLOSING STOCK? FOR THE A.YR. 1987-88, THE TRIBUNAL ALLOWED A SIM ILAR CLAIM AND A REFERENCE CAME TO BE MADE TO THE HIGH COURT IN THE FOLLOWING TERMS (254 ITR 498): WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE TRIBUNAL IS JUSTIFIED IN LAW IN DIRECTING THE INCOME-TAX OFF ICER TO ALLOW THE SUM OF RS 24,28,428 BEING CENTRAL EXCISE AND CUSTOMS DUTY UNDER SECTION 43B OF THE ACT ON THE GROUND THAT THE SAID AMOUNT HAS BEEN INCLUDED IN THE VALUE OF CLOSING STOCK. 16. THE HONBLE CALCUTTA HIGH COURT ANSWERED THE Q UESTIONS REFERRED IN BOTH THE REFERENCES IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. THOUGH AN APPLICATION WAS MADE FOR CERTIFICATE OF APPEAL TO THE HONBLE SUPREME CO URT U/S 261 WAS REJECTED BY THE HONBLE CALCUTTA HIGH COURT BUT THE ASSESSEE BEING AGGRIEVE D CHALLENGED THE DECISION OF THE HONBLE HIGH COURT FOR ALL THE THREE YEARS BY FILING APPEAL S BEFORE THE HONBLE APEX COURT. THE HONBLE APEX COURT SET ASIDE THE JUDGEMENT OF THE H ONBLE CALCUTTA HIGH COURT IN ALL THE A.YRS. AND ANSWERED THE QUESTION REFERRED TO AGAINS T THE REVENUE AND IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER :- THE JUDGEMENT OF THE GUJARAT HIGH COURT IN LAKHANPA L NATIONAL LID.S CASE [1986] 162 ITR 240 WAS RELIED UPON AND FOLLOWED BY THE BOM BAY HIGH COURT IN CIT V. BHARAT PETROLEUM CORPORATION LTD. [2001] 252 ITR 43 AS WELL AS BY THE MADRAS HIGH COURT IN CHEMICALS AND PLASTICS INDIA LTD. V. CIT [2003] 260 ITR 193. THE SPECIAL BENCH OF THE TRIBUNAL ALSO RELIED UPON THE JUDGEMENT OF THE GUJARAT HIGH COURT IN LAKHANPAL NATIONAL LTD.S CASE [1986] 162 ITR 240. THE REVENUE HAS ITA NOS.260-262 & 276-278/KOL./2010 25 ATTEMPTED TO DISTINGUISH THE JUDGEMENT OF THE GUJAR AT HIGH COURT ON THE FACILE GROUND THAT THE JUDGEMENT OF THE GUJARAT HIGH COURT WAS ONE RENDERED IN CONNECTION WITH A PROVISIONAL ASSESSMENT UNDER SECT ION 141A AND NOT IN A REGULAR ASSESSMENT. IN OUR VIEW, THIS DISTINCTION IS HARDLY ACCEPTABLE. IN ANY EVENT, A READING OF THE GUJARAT HIGH COURTS JUDGEMENT SHOWS THAT TH E JUDGEMENT IS NOT BASED MERELY ON THE ADJUSTMENTS PERMISSIBLE UNDER SECTION 141A, AS IS CONTENDED BY THE REVENUE, BUT THAT THE JUDGEMENT PROCEEDS ON AN ANALYSIS OF S ECTION 43B AND MAKES A FINDING THAT THE ENTIRE AMOUNT OF EXCISE DUTY/CUSTOMS DUTY PAID BY THE ASSESSEE IN A PARTICULAR ACCOUNTING YEAR WAS AN ALLOWABLE DEDUCTI ON IN RESPECT OF THAT YEAR IRRESPECTIVE OF THE AMOUNT OF EXCISE DUTY/CUSTOMS D UTY WHICH WAS INCLUDED IN THE VALUATION OF THE ASSESSEES CLOSING STOCK AT THE EN D OF THE ACCOUNTING YEAR. AFTER COMING TO THIS CONCLUSION, THE GUJARAT HIGH COURT T HEN PROCEEDED TO CONSIDER THE IMPACT OF SECTION 141A AND GRANTED APPROPRIATE RELI EF THEREUNDER. IT IS NOT POSSIBLE FOR US TO ACCEPT THE CONTENTION OF THE REVENUE THAT THE JUDGEMENT OF THE GUJARAT HIGH COURT IN LAKHANPAL NATIONAL LTD.S CASE [1986] 162 ITR 240 IS DISTINGUISHABLE ON THE GROUND PUT FORWARD . IT IS CLEAR FROM THE ABOVE THAT THE HONBLE APEX CO URT ALLOWED THE APPEAL OF THE ASSESSEE ON MERITS OF THE CASE. MERELY BECAUSE THE HONBLE APEX COURT ALSO HELD AS UNDER IT CANNOT BE SAID THAT THE COURT DID NOT DECI DE THE ISSUE ON MERITS : IF THE REVENUE HAS NOT CHALLENGED THE CORRECTNESS O F THE LAW LAID DOWN BY THE HIGH COURT AND HAS ACCEPTED IT IN THE CASE OF ONE A SSESSEE, THEN IT IS NOT OPEN TO THE REVENUE TO CHALLENGE ITS CORRECTNESS IN THE CASE OF OTHER ASSESSES, WITHOUT JUST CAUSE . 7.1. IN VIEW OF THE ABOVE, WE FIND OURSELVES UNABLE TO AGREE WITH THE ARGUMENTS ADVANCED BY THE LD. DR IN THIS RESPECT AND THE ORDE R PASSED BY THE LD. CIT(A) IS HEREBY UPHELD. 16.1. RESPECTFULLY FOLLOWING THE DECISION FOR A.Y.2 004-05, GROUND NO2 RAISED BY ASSESSEE IS ALLOWED. DEPARTMENTAL APPEALS VIDE I.T.A NOS. 276, 277 & 27 8/KOL/2010 17. THESE APPEALS ARE BARRED BY LIMITATION BY TWO DAYS. AFTER HEARING BOTH THE PARTIES THE DELAY IS CONDONED IN VIEW OF THE DECISION OF HONBL E SUPREME COURT IN THE CASE OF CIT VS. WEST BENGAL INFRASTRUCTURAL & FINANCIAL CORPORATION LTD REPORTED IN 2011 [ 196 TAXMAN 321 (SC)] AND THE APPEALS ARE DECIDED THE APPEAL ON ME RITS. 18. THE ASSESSING OFFICER HAD MADE ADDITION ON ACC OUNT OF CLAIM OF DEDUCTION UNDER SECTION 43B OF THE INCOME TAX ACT FOR PAYMENT OF EX CISE DUTY IN ALL THE THREE ASSESSMENT YEARS. WHILE COMPUTING THE TAX, ASSESSING OFFICER H AD CHARGED INTEREST UNDER SECTION 234D ON THE REFUND GRANTED TO THE ASSESSEE. THE LD. CIT( APPEALS) ALLOWED THE ASSESSEES CLAIM OBSERVING THAT SINCE PROVISIONS OF SECTION 234D HAV E COME INTO FORCE FROM 1.6.2003, THEREFORE, THIS WILL BE APPLICABLE FROM ASSESSMENT YEAR 2004-05 ONWARD. BOTH THE PARTIES ARE ITA NOS.260-262 & 276-278/KOL./2010 26 AGREED THAT THIS ISSUE IS NOW COVERED BY THE DECISI ON OF ITAT, SPECIAL BENCH IN THE CASE OF ITO VS.- EKTA PROMOTERS (P) LTD., REPORTED IN 113 ITD 719 (DELHI-SB), WHEREIN IT HAS BEEN HELD AS UNDER :- 71. IN VIEW OF THE ABOVE DISCUSSION OUR ANSWER TO QUESTION REFERRED TO US IS THAT INTEREST UNDER SECTION 234D IS CHARGEABLE FROM ASSE SSMENT YEAR 2004-05 AND IT COULD NOT BE CHARGED FOR EARLIER YEARS EVEN THOUGH REGULA R ASSESSMENTS FOR THESE YEARS ARE FRAMED AFTER 1-6-2003 OR THE REFUND WAS GRANTED FOR THOSE YEARS AFTER THE SAID DATE. RESPECTFULLY FOLLOWING THE DECISION OF ITAT, SPECIA L BENCH IN THE CASE OF ITO VS.- EKTA PROMOTERS (P) LTD. (SUPRA), WE UPHOLD THE ORDER OF LD. CIT(APPEALS). 19. RESULTANTLY, APPEALS FILED BY THE DEPARTMENT ARE DISMISSED. 20. IN THE RESULT, ASSESSEES APPEAL FOR ASSESSMEN T YEAR 2001-02 STANDS ALLOWED AND APPEALS FOR A.Y.S 2002-03 AND 2003-04 STAND PARTLY ALLOWED AND THE DEPARTMENTAL APPEALS FOR ALL THE THREE YEARS STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21/10/11. SD/- SD/- ( ) ( . . . . . .. . ) (MAHAVIR SINGH) JUDICIAL MEMBER (S. V.MEHROTRA), ACCOUNTANT MEMBER ( (( ( . . . .) )) ) DATE: 21-10-2011 COPY OF THE ORDER FORWARDED TO: 1. EXIDE INDUSTRIES LIMITED, EXIDE HOUSE, 59E, CHOWRIN GHEE ROAD, KOLKATA- 20. 2 DCIT, CIRCLE-1, KOLKATA, P-7, CHOWRINGHEE SQUARE, K OLKATA-700 069. 3. CIT(APPEALS)- ,KOLKATA 4. CIT- , KOLKATA 5 . DR, KOLKATA BENCHES, KOLKATA (TRUE COPY) BY ORDER ASSISTANT REGISTRAR, I.T.A.T., KOLKATA LAHA, SR. P.S.