M/s. G.H.Industries, Ahmedabad V. The ACIT.,Circle-3, Ahmedabad

ITA 2613/AHD/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9535 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 17-12-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 20-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P M MEHTA WITH SHRI G M THAKOR
• Keywords: Initiation of penalty proceedings
• Section: 234B; 145; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, A HMEDABAD , (BEFORE SHRI ANIL CHATURVEDI, A.M. & SHRI S. S. GOD ARA, J.M.) ( , !'# ' $' $%& , ! '( ) ITA NO. 2613/AHD/2011 (ASSESSM ENT YEAR: 2008-09) M/S. G. H. INDUSTRIES 26/3, G.I.D.C., PHASE-III, NARODA, AHMEDABAD 380025 VS. ACIT, CIRCLE 3, AHMEDABAD PAN NO. AABFG7456M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P. M. MEHTA WITH SHRI G. M . THAKOR, A.R. RESPONDENT BY : SHRI KEYUR PATEL, SR. D.R. DATE OF HEARING : 17 -12-201 5 DATE OF PRONOUNCEMENT : 12-02-2016 ( )/ ORDER PER ANIL CHATURVEDI, ACCOUNTANT MEMBER THIS APPEAL FILED BY ASSESSEE IS AGAINST THE ORDER OF CIT(A)-6, AHMEDABAD, DATED 01.09.2011 FOR THE ASSESSMENT YEAR 2008-09 . 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER: 3. THE ASSESSEE IS A PARTNERSHIP FIRM STATED TO BE ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF FERROS AND NON-FERROS METALS. ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 2008-09 ON 12.09.2008 DEC LARING TOTAL INCOME AT RS. 24,80,190/-. THE CASE WAS SELECTED FOR SCRUTINY AN D THEREAFTER ASSESSMENT WAS ITA NO.2613/AHD/11 A.Y. 2008-09 (M/S. G. H . INDUSTRIES VS. ACIT) 2 FRAMED U/S.143(3) OF THE ACT VIDE ORDER DATED 30.11 .2010 AND THE TOTAL INCOME WAS DETERMINED AT RS. 78,96,870/-. AGGRIEVED BY THE OR DER OF ASSESSING OFFICER, ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) W HO VIDE ORDER DATED 01.09.2011 DISMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD. CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE GROUNDS WHICH WERE LATER CONCISED AND THE CONCISED GROUNDS READ AS UNDER: 1. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF T HE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN TREATING GROUND NO. 1 OF THE APPEL LANT'S APPEAL CHALLENGING THE VALIDITY OF THE ASSESSMENT ORDER IMPUGNED BEFORE HIM AS BEIN G ONLY GENERAL IN NATURE AND NOT REQUIRING ADJUDICATION. 2. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN UPHOLDING THE ADDITION OF RS.54,16 ,674 (WHICH AMOUNT WAS ERRONEOUSLY TAKEN BY THE LEARNED ASSESSING OFFICER INSTEAD OF T HE CORRECT AMOUNT OF RS. 34,06,778 AND FOR CORRECTING WHICH THE LEARNED CIT(A) HAS ISSUED DIRECTION AT THE END OF PARA 3 OF THE IMPUGNED APPELLATE ORDER)ON ACCOUNT OF UNUTILIZED B ALANCE OF MODVAT CREDITS AS AT THE END OF THE YEAR ON 31.3.2008 MADE BY THE LEARNE D ASSESSING OFFICER ON THE GROUND THAT IN TERMS OF THE PROVISIONS OF SECTION 145A OF THE INCOME-TAX ACT, 1961, IT WAS REQUIRED TO BE ADDED TO THE VALUE OF THE CLOSING ST OCK AS AT 31.3.2008 WHICH THE APPELLANT NOT HAVING DONE, THE PROFIT AS PER ITS PROFIT AND L OSS ACCOUNT HAD BEEN UNDERSTATED TO THAT EXTENT. 3. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF T HE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN DISMISSING GROUND NO. 3 OF THE APP ELLANT'S APPEAL BEFORE HIM ON THE GROUND THAT LEVY OF INTEREST U/S. 234B AND 234C WAS MANDATORY. 4. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN DISMISSING GROUND NO. 4 OF THE APP ELLANT'S APPEAL BEFORE HIM CHALLENGING THE INITIATION OF PENALTY PROCEEDINGS U /S. 271(1)(C), AS PREMATURE. 4. BEFORE US, AT THE OUTSET, LD. A.R. SUBMITTED THA T THE ASSESSEE HAS RAISED VARIOUS GROUNDS BUT THE SOLITARY ISSUE WHICH IS TO BE DECIDED IS GROUND NO.2 WHICH IS WITH RESPECT TO THE ADDITION WITH RESPECT TO UNU TILIZED BALANCE OF MODVAT CREDITS. 4.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON PERUSING THE BALANCE SHEET, ASSESSING OFFICER NOTICED THAT ASSESSEE HAD SHOWN R ECEIVABLE OF RS.54,16,674/- WITH RESPECT TO MODVAT CREDITS. HE ALSO NOTICED TH AT THE SAID AMOUNT HAS NOT ITA NO.2613/AHD/11 A.Y. 2008-09 (M/S. G. H . INDUSTRIES VS. ACIT) 3 BEEN INCLUDED AS PART OF CLOSING STOCK. HE WAS OF THE VIEW THAT AS PER THE PROVISIONS OF SECTION 145A OF THE ACT, ASSESSEE WAS REQUIRED TO INCLUDE THE SAME WHILE VALUING THE CLOSING STOCK. THE STATEMENT OF THE ASSESSEE THAT IT WAS FOLLOWING EXCLUSIVE METHOD OF ACCOUNTING FOR ACCOUN TING OF EXCISE DUTY WHICH IS IN LINE WITH THE ACCOUNTING STANDARDS ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANT WAS NOT FOUND ACCEPTABLE TO THE A.O. HE WAS OF THE VIEW THAT MODVAT CREDITS SHOULD HAVE BEEN INCLUDED TO THE VAL UE OF CLOSING STOCK. HE, ACCORDINGLY, ADDED RS.54,16,674/- BEING THE BALANC E OF MODVAT CREDIT TO THE TOTAL INCOME OF THE ASSESSEE. 5. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, AS SESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WHO UPHELD THE ACTION OF A.O. BY HOLDING AS UNDER: 3.3 I HAVE CONSIDERED THE FACTS OF THE CASE, ASSES SMENT ORDER AND APPELLANT'S SUBMISSION. AS PER PROVISIONS OF SECTION 145A, THE ASSESSEE IS REQUIRED TO ADD EXCISE DUTY, TAX, CESS ETC IN THE RAW MATERIAL, IN GOODS I N PROCESS AND FINISHED GOODS. IF THE ASSESSEE IS FOLLOWING EXCLUSIVE METHOD OF ACCOUNTIN G, THEN IN THE TAX AUDIT REPORT, IT IS REQUIRED TO GIVE AN ADJUSTMENT SHEET AND BY ALL THE SE TAXES IS REQUIRED TO BE ADDED AND THE DEVIATION IF ANY HAS TO BE ADDED IN THE COMPUTA TION OF INCOME. THE ASSESSEE HAS ADMITTED THAT IT HAS NEVER FOLLOWED THE PROVISIONS OF SECTION 145A. IT IS STATED THAT THE ASSESSEE HAS NO OPTION BUT TO FOLLOW THE PROVISIONS OF SECTION 145A BECAUSE THIS PROVISION IS THERE ON THE STATUTE BOOK. THE DECISIONS OF HONO URABLE SUPREME COURT IN THE CASE OF INDO NIPPON CHEMICALS LTD AND THE DECISION OF HONOU RABLE GUJARAT HIGH COURT IN THE CASE OF UNIQUE INDUSTRIES ARE DISTINGUISHABLE ON FA CTS. AS PER THE PROVISIONS OF SECTION 145A, THE APPELLANT IS REQUIRED TO INCLUDE THE EXCI SE DUTY IN THE CLOSING STOCK. IN VIEW OF THE ABOVE, THE ADDITION ON ACCOUNT OF EX CISE DUTY AND OTHER TAXES PAID ON RAW MATERIAL AND OTHER INPUTS ARE TO BE ADDED TO THE VALUE OF CLOSING STOCK OF RAW MATERIAL, SEMIFINISHED AND FINISHED GOODS. THE METH OD OF ACCOUNTING IS NOT RELEVANT AFTER SECTION 145A CAME INTO EXISTENCE WITH EFFECT FROM A SSESSMENT YEAR 1999-2000. PRIOR TO THAT, METHOD OF ACCOUNTING REGULARLY FOLLOWED BY TH E APPELLANT IS RELEVANT. IN VIEW OF THIS, THE DECISION OF HONOURABLE GUJARAT HIGH COURT IN TH E CASE OF ACIT V/S NARMADA CHEMATURE PETROCHEMICALS LTD, 327 ITR 369 IS NOT AP PLICABLE. IN THE SAID DECISION IT IS CLEARLY MENTIONED THAT ASSESSMENT YEAR BEING 1997-9 8, THE PROVISIONS OF SECTION 145A OF THE ACT INSERTED BY FINANCE ACT 1998 WITH EFFECT FROM APRIL 1, 1999 COULD NOT BE INVOKED. SINCE JURISDICTIONAL HIGH COURT IN THIS CASE CLEARL Y DISTINGUISHED THE ISSUE SINCE SECTION 145A WAS NOT APPLICABLE TO ASSESSMENT YEAR 1997-98. THE CONSISTENCY AND METHOD OF ACCOUNTING RELEVANT IN THAT YEAR WILL NOT BE APPLICABLE AFTER ENACTMENT OF SPECIFIC PROVISION FOR INCLUSION OF TAXES, EXCISE D UTY AND CESS. ACCORDINGLY IT IS CLEAR THAT ITA NO.2613/AHD/11 A.Y. 2008-09 (M/S. G. H . INDUSTRIES VS. ACIT) 4 THE JURISDICTIONAL HIGH COURT DECISION DOES NOT SUP PORT APPELLANT'S VIEW FOR THIS ASSESSMENT YEAR. APPELLANT RELIED UPON THE DECISION OF DELHI HIGH CO URT IN WHICH IT IS HELD THAT TAXES AND DUTY SHOULD BE ADDED TO THE OPENING STOCK WHILE APPLYING PROVISIONS OF SECTION USA PROVIDED THERE IS NO DOUBLE DEDUCTION. HOWEVER INCLUDING TAX AND DUTY IN OPENING STOCK WITHOUT INCLUDING THE SAME IN LAST YEAR'S CLO SING STOCK IS DOUBLE DEDUCTION. OPENING STOCK IS TAKEN FROM THE CLOSING STOCK OF LA ST YEAR AND WITHOUT CHANGING THE CLOSING STOCK OF LAST YEAR, IF OPENING STOCK IS INC REASED THEN IT AMOUNTS TO EXTRA DEDUCTION TO THE EXTENT OF TAX AND DUTY WHICH WERE NOT INCLUDED IN LAST YEAR'S CLOSING STOCK. THEREFORE EVEN BY APPLYING DELHI HIGH COURT DECISIO N, TAX AND DUTY CANNOT BE ADDED TO THE OPENING STOCK WITHOUT DISTURBING THE C LOSING STOCK OF LAST YEAR. THE DECISIONS OF TRIBUNALS RELIED UPON BY THE ASSESSING OFFICER A ND QUOTED IN PARA-3.1 ABOVE, IT IS CLEAR THAT THE ADJUSTMENT ON ACCOUNT OF SECTION 145A WILL RESULT IN ADDITION IN FIRST YEAR. HOWEVER IN SUBSEQUENT YEARS THE EFFECT OF INCLUSION METHOD WILL BE TAX NEUTRAL. IN THE FIRST YEAR, THE ADDITION ON ACCOUNT OF TAX AND DUTY IS TO BE MADE AND THE SAME IS SUSTAINABLE. CONSIDERING THIS AND RESPECTFULLY FOLLOWING THE DEC ISIONS RELIED UPON BY THE ASSESSING OFFICER WHICH ARE DIRECTLY APPLICABLE TO THE FACTS OF THE CASE, THE ADDITION ON ACCOUNT OF ADJUSTMENT UNDER SECTION 145A IS CONFIRMED. APPELLANT SUBMITTED THAT ASSESSING OFFICER MADE THE ADDITION OF GROSS PROFIT INSTEAD OF MODVAT CREDIT; IN THIS REGARD AO IS DIRECTED TO MAKE THE ADDITION OF CORRECT FIGURES. 6. AGGRIEVED BY THE ORDER OF LD. CIT(A), ASSESSEE I S NOW IN APPEAL BEFORE US. 6.1 BEFORE US, LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER AND LD. CIT(A) AND FURTHER SUBMITTED THAT A SSESSEE IS CONSISTENTLY FOLLOWING THE METHOD OF ACCOUNTING UNDER WHICH THE ENTIRE AMO UNT OF EXCISE DUTY INCURRED DURING YEAR FOR WHICH ASSESSEE IS ENTITLED TO GET M ODVAT CREDIT IS DEBITED TO MODVAT CREDIT RECEIVABLE ACCOUNT. HE SUBMITTED THA T IF THE ASSESSEE INCLUDES THE EXCISE AMOUNT TO THE VALUE OF CLOSING STOCK THE N CORRESPONDING ADJUSTMENT WOULD HAVE BEEN TO BE MADE TO THE OPENING STOCK, PU RCHASES AND OTHER FIGURES WHICH WOULD NOT AFFECT THE PROFIT AND LOSS ACCOUNT. HE SUBMITTED AND POINTED OUT AT PAGE 105 THAT HAD THE ASSESSEE VALUED THE STOCK AFTER CONSIDERING THE MODVAT AS PART OF STOCK, THE GROSS PROFIT WOULD REMAIN THE SAME. HE ALSO PLACED RELIANCE ON THE DECISION OF CO-ORDINATE BENCH IN CASE OF TH E CO-ORDINATE BENCH IN CASE OF ITO VS. GUJARAT PARAFINS PVT. LTD. IN ITA NO.2335/A HD/2011 AND ALSO PLACED ON ITA NO.2613/AHD/11 A.Y. 2008-09 (M/S. G. H . INDUSTRIES VS. ACIT) 5 RECORD A COPY OF THE AFORESAID DECISION. HE, THERE FORE, SUBMITTED THAT IN THE PRESENT CASE NO ADDITION WAS CALLED FOR. LD. D.R. ON THE O THER HAND SUPPORTED THE ORDER OF ASSESSING OFFICER AND LD. CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO IN CLUSION OF EXCISE DUTY TO THE VALUE OF CLOSING STOCK. WE FIND THAT IDENTICAL ISSUE WA S DECIDED BY THE CO-ORDINATE BENCH OF TRIBUNAL IN CASE OF ACIT VS. M/S. KIRAN IN DUSTRIES PVT. LTD. IN ITA NO.1450/AHD/2012 & C.O. NO.135/AHD/2012 ORDER DATED 04.09.2015 AND THE ISSUE WAS DECIDED IN FAVOUR OF ASSESSEE BY HOLDING AS UND ER: 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS WITH RESPECT TO INCLUSION OF EXCISE DUTY TO THE VALUE OF CLOSING STOCK. BEFORE US, IT IS ASSESSEES SUBMISSION THAT IN FOLL OWS EXCLUSIVE METHOD OF ACCOUNTING OF EXCISE FOR THE VALUATION OF STOCK. THE AFORESAID SU BMISSION OF THE ASSESSEE HAS NOT CONTROVERTED BY REVENUE BY PLACING ANY CONTRARY MAT ERIAL ON RECORD. WE FURTHER FIND THAT ON SIMILAR ISSUE, THE CO-ORDINATE BENCH OF TRIBUNAL IN THE CASE OF ASIATIC INDUSTRIES (SUPRA) HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSE SSEE BY HOLDING AS UNDER:- 8. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED T HE MATERIAL ON RECORD. WE FIND THAT THE ISSUE IN THE PRESENT APPEAL IS WITH RESPECT TO INCLUSION OF EXCISE DUTY AND VAT TO THE VALUE OF CLOSING STOCK, IN A CASE WHERE THE ASS ESSEE IS FOLLOWING EXCLUSION METHOD OF ACCOUNTING OF EXCISE AND VAT FOR VALUATION OF ST OCK. WE FIND SIMILAR ISSUE WERE BEFORE THE CO-ORDINATE BENCH OF TRIBUNAL. WE FURTHE R FIND THAT IN THE CASE OF SNEHAL PHARMA CHEM (SUPRA) THE ISSUE WAS DECIDED IN THE FA VOUR OF ASSESSEE BY THE CO- ORDINATE BENCH OF TRIBUNAL BY HOLDING AS UNDER:- 3. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. D. R. AND HAVE GONE THROUGH THE MATERIAL ON RECORD AND THE ORDERS PASSED BY AUT HORITIES BELOW. WE FIND THAT THERE IS SUBMISSION OF THE ASSESSEE BEFORE THE AUTHORITIES BELOW THAT WHILE THE ENTIRE AMOUNT OF EXCISE DUTY REALIZED ON SALES WAS INCLUDED IN THE SALE AMOUNT BUT OUT OF ENTIRE AMOUNT OF EXCISE DUTY PAID ON PURCHASES, ONLY THAT PORTION OF SUCH EXCISE DUTY PAID WHICH WAS UTI LIZED BY WAY OF MOD VAT, HAD BEEN INCLUDED IN THE VALUE OF PURCHASES AND THE BALANCE AMOUNT OF MODVAT CREDIT WHICH COULD NOT BE UTILIZED IN THE PR ESENT YEAR WAS SHOWN IN THE BALANCE SHEET AS AN AMOUNT RECEIVABLE AND THIS PORTION OF RS.L1,25,3427- WAS NOT INCLUDED IN THE VALUE OF PURCHASES. LD. D.R . COULD NOT CONTROVERT THESE SUBMISSIONS OF THE ASSESSEE MADE BY THE ASSES SEE BEFORE THE AUTHORITIES BELOW. ONCE IT IS ACCEPTED THAT THESE SUBMISSIONS O F THE ASSESSEE ARE CORRECT, IT MEANS THAT EXCISE DUTY PAID BUT NOT INCLUDED IN THE PURCHASES WAS SHOWN IN THE BALANCE SHEET AS EXCISE DUTY RECEIVABLE AND THE REFORE, THERE CANNOT BE A REASON TO MAKE ANY ADDITION IN THE INCOME OF THE AS SESSEE BECAUSE EVEN IF WE ITA NO.2613/AHD/11 A.Y. 2008-09 (M/S. G. H . INDUSTRIES VS. ACIT) 6 INCLUDE SUCH EXCISE DUTY RECEIVABLE IN THE VALUE OF CLOSING STOCK, THE SAME IS ALSO REQUIRED TO BE INCLUDED IN THE VALUE OF PURCHA SES AND IT WILL HAVE NO IMPACTS ON THE PROFITS OF THE ASSESSEE. THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A). 9. WE FURTHER FIND THAT IN THE CASE OF BLOOM DEKOR LTD. (SUPRA) SIMILAR ISSUE WAS DECIDED BY THE CO-ORDINATE BENCH OF TRIBUNAL IN FAV OUR OF THE ASSESSEE BY HOLDING AS UNDER:- 4. ON PERUSING THE FINANCIAL STATEMENTS ASSESSING OFFICER NOTICED THAT AS PER THE NOTES TO ACCOUNTS, EXCISE DUTY ON FINISHED GOODS NO T CLEARED AS PER FACTORY WAS ESTIMATED AT R. 47.38 LACS AND CUSTOM DUTY ON STOCK LYING AT PORT ESTIMATED AT RS. 46.5 LACS WAS NOT PROVIDED FOR IN THE BOOKS AND WAS ALSO NOT CONSIDERED IN THE VALUATION OF INVENTORIES. ASSESSING OFFICER WAS OF THE VIEW THAT AS PER PROVISION OF SECTION 145A INSERTED WITH EFFECT FROM 1.04.1999 EXCISE DUTY HAS TO BE ADDED WHILE VALUING FINISHED GOODS. HE THUS CONSIDERED TH E AMOUNT OF EXCISE DUTY ON FINISHED GOODS NOT CLEARED FROM FACTORY AT RS. 47.3 8 LACS AND CUSTOM DUTY ON STOCK LYING AT PORT AT 46.51 LACS AGGREGATING TO RS . 93,89,000/- AND ADDED IT TO THE VALUE OF INVENTORY. AGGRIEVED BY THE ACTION OF THE ASSESSING OFFICER, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) AFTER CONS IDERING THE SUBMISSIONS OF THE ASSESSEE AND RELYING ON THE DECISION OF AHMEDABAD T RIBUNAL IN THE CASE OF ITA 1358/AHD/2009 ALLOWED THE APPEAL OF THE ASSESSEE BY HOLDING AS UNDER:- THE APPELLANT ALSO POINTED OUT THAT HON'BLE IT AT, AHMEDABAD VIDE ITA NO. 1358/AHD/2009 HAS ALSO CONCURRED WITH A VIEW THAT E XCISE DUTY AND/OR CUSTOMS DUTY SHOULD NOT BE INCLUDED IN THE CLOSING STOCK. THE OP ERATIVE PART INDICATING OBSERVATION OF THE HON'BLE ITAT IS REPRODUCED HEREIN AS UNDER: 'AT THE TIME OF HEARING, BOTH THE PARTIES AGREED TH AT THE ISSUE IS NOW SQUARELY COVERED BY THE DECISION OF HON'BLE JURISDICTIONAL H IGH COURT IN THE CASE OF ACIT VS. NARMADA CHEMATUR PETROCHEMICALS LTD. 327 ITR 369 (G UJ.), WHEREIN FOLLOWING WAS HELD: 'HELD, DISMISSING THE APPEAL, THAT TRIBUNAL WAS JUS TIFIED IN EXCLUDING THE EXCISE DUTY AT THE TIME OF VALUATION OF THE CLOSING STOCK OF FI NISHED GOODS AT THE END OF THE ACCOUNTING PERIOD BECAUSE: (A) NO DEDUCT ION FOR THE LIABILITY HAD BEEN CLAIME D BY THE ASSESSEE.THE EXCISE DUTY PAYABLE ON THE FINISHED GOODS LYING IN THE CLOSING STOCK AT THE END OF THE RELEVANT ACCOUNTING PERIOD HAD BEEN PAID IN THE SUBSEQUENT Y EAR BEFORE_THE DUE DATE OF FILING OF THE RETURN OF INCOME AND THAT WAS HOW THE AMOUNT WAS AVAILABLE CONSIDERING THE FACT THAT THE ASSESSMENT HAD BEEN FRAMED AND THE SH OW-CAUSE NOTICE WAS ISSUED MUCH AFTER THE CLOSE OF THE ACCOUNTING YEAR; (B) THE ASSESSING OFFICE HAD NOT HAD RECOURSE TO SU B-SECTION (3) OF SECTION 145 OF THE ACT. THE ASSESSEE WAS FOLLOWING THE MERCANTILE SYST EM OF ACCOUNTING BUT IT WAS NOT THE CASE OF THE ASSESSING OFFICER THAT THE ASSESSIN G OFFICER WAS NOT IN A POSITION TO DEDUCE TRUE PROFITS OF THE YEAR UNDER CONSIDERATION . SUCH DUTY OF CENTRAL EXCISE IF ADDED TO ENHANCE THE VALUE OF CLOSING STOCK WOULD R ESULT IN ENHANCED OPENING STOCK ON THE FIRST DAY OF THE NEXT ACCOUNTING PERIOD, NAM ELY, APRIL 1, 1997. SO THE NEXT YEAR'S PROFITS WOULD GET DEPRESSED ACCORDINGLY, OVE R A PERIOD OF TIME THE WHOLE EXERCISE WOULD EVEN OUT, IN OTHER WORDS, BE REVENUE NATURAL. AT THE SAME TIME WHILE ITA NO.2613/AHD/11 A.Y. 2008-09 (M/S. G. H . INDUSTRIES VS. ACIT) 7 DISTURBING THE VALUE OF THE CLOSING STOCK THE ASSES SING AUTHORITY COULD NOT CHANGE THE METHOD OF ACCOUNTING REGULARLY EMPLOYED. (C) THE ASSESSMENT YEAR BEING 1997-98 THE PROVISIO NS OF SECTION 145A OF THE ACT INSERTED BY THE FINANCE (NO. 2) ACT, 1998 WITH EFFE CT FROM APRIL 1, 1999 COULD NOT BE INVOKED. [4.4] I HAVE PERUSED THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSIONS MADE IN THIS REGARD. SINCE THE ISSUE IS SQUARELY COVERED BY THE JURISDICTIONAL 1TAT, I AM OF THE VIEW THAT NO ADDITION SHOULD BE MADE ON ACCOUNT OF EXCISE AND CUSTOMS DUTY IN THE VALUATION OF CLOSING STOCK. THE ADDITION MADE BY TH E AO IS THUS DIRECTED TO BE DELETED. THE GROUNDS RAISED BY THE APPELLANT ARE TH US ALLOWED. 5. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER REVENUE IS NOW IN APPEAL BEFORE US. 6. BEFORE US, LEARNED D.R. RELIED ON THE ORDER OF T HE ASSESSING OFFICER. 7. WE HAVE HEARD THE LEARNED D.R. AND PERUSED THE M ATERIAL ON RECORD. CIT(A) WHILE DELETING THE ADDITION HAS HELD THAT THE ISSUE IS SQ UARELY COVERED BY THE DECISION OF JURISDICTIONAL TRIBUNAL AND ACCORDINGLY RELYING ON THE AFORESAID DECISION DELETED THE ADDITION. NOTHING HAS BEEN BROUGHT ON RECORD TO CO NTROVERT THE FINDINGS OF CIT(A) AND THUS WE FIND NO REASON TO INTERFERE IN HIS ORDE R AND THIS THE APPEAL OF REVENUE IS DISMISSED. 10.SINCE THE ISSUE IN THE PRESENT APPEAL IS SIMILAR TO THE ISSUES IN THE APPEALS CITED HEREINABOVE, WE RESPECTFULLY FOLLOWING THE DECISION S OF CO-ORDINATE BENCH OF TRIBUNAL CITED HEREINABOVE, WE ARE OF THE VIEW THAT NO ADDITION ON ACCOUNT OF MODVAT AND VAT AS MADE BY THE A.O NEEDS TO BE MADE IN THE PRESENT CASE. WE THEREFORE DIRECT ITS DELETION. THUS THIS GROUND OF ASSESSEE IS ALLOWED. 10. WE FURTHER FIND THAT ON THE ISSUE OF GUIDANCE N OTES AND ACCOUNTING STANDARDS ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANT OF INDIA, THE HIGH COURT OF TELENGANA AND ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT VS. PACTS SEC URITIES AND FINANCIAL SERVICES LTD. (2015) 374 ITR 681 (T & A.P) AT PARA 13 HAS NOTED T HAT THE MERELY BECAUSE THE CENTRAL GOVERNMENT HAS NOT NOTIFIED IN THE OFFICIAL GAZETTE ACCOUNTING STANDARDS TO BE FOLLOWED BY ANY CLASS OF ASSESSEES OR IN RESPECT OF ANY CLASS OF INCOME, IT CANNOT BE STATED THAT THE ACCOUNTING STANDARDS PRESCRIBED BY THE INS TITUTE OF CHARTERED ACCOUNTANTS OF INDIA OR THE ACCOUNTING STANDARDS REFLECTED IN THE GUIDANCE NOTE CANNOT BE ADOPTED AS AN ACCOUNTING METHOD BY AN ASSESSEE. IT FURTHER HEL D THAT NOTWITHSTANDING THE FACT THAT THE OPINION OF THE CHARTERED ACCOUNTANTS OF INDIA W AS EXPRESSED IN THE GUIDANCE NOTE, WHICH HAD NOT ATTEND A MANDATORY STATUS, WOULD NOT BE A GROUND TO DISCARD THE BOOKS OF ACCOUNTS OF THE ASSESSEE OR THE METHOD OF ACCOUNTIN G FOLLOWED. 11. IN VIEW OF THE AFORESAID FACTS AND FOLLOWING TH E DECISIONS OF THE CO-ORDINATE BENCH CITED AND THE DECISION OF HONBLE HIGH COURT HEREINABOVE, WE ARE OF VIEW THAT NO ADDITION ON ACCOUNT OF UNUTILIZED CENVAT CREDIT WAS CALLED FOR IN THE PRESENT CASE. WE THUS DISMISS THE APPEAL OF REVENUE AND ALLOW THE C.O OF ASSESSEE . ITA NO.2613/AHD/11 A.Y. 2008-09 (M/S. G. H . INDUSTRIES VS. ACIT) 8 7.1 BEFORE US, REVENUE HAS NOT POINTED OUT ANY CONT RARY BINDING DECISION NOR HAS POINTED OUT ANY DISTINGUISHING FEATURE OF THE P RESENT CASE WITH THAT OF ACIT VS. M/S. KIRAN INDUSTRIES PVT. LTD. (SUPRA). IN VIEW OF THE AFORESAID FACTS, WE RESPECTFULLY, FOLLOWING THE AFORESAID DECISION OF T HE CO-ORDINATE BENCH OF TRIBUNAL AND FOR SIMILAR REASONS, ARE OF THE VIEW THAT NO AD DITION ON ACCOUNT OF UNUTILIZED MODVAT CREDIT IS CALLED FOR IN THE PRESENT CASE. W E, THUS, ALLOW THIS GROUND OF ASSESSEE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN OPEN COURT ON 12 - 02 - 2016. SD/- SD/- (S. S. GODARA) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 12.02.2016 TRUE COPY S K SINHA COPY OF THE ORDER FORWARDED TO:- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD