The ACIT, Circle-1, Rajahmundyr, Rajahmundry V. M/s Doctors Organic Chemicals Ltd, Tanuku

ITA 267/VIZ/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 72673 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 09-12-2013
• Assessment Year: 1999-2000
• Appeal Filed On: 08-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D MANOJ KUMAR
• Keywords: Reassessment proceedings
• Section: 145; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, VISHAKHAPATNAM BEFORE S/SHRI B. RAMAKOTAIAH (AM) & SAKTIJIT DEY (JM) I.T.A. NO.267/VIZ/2011 ASSESSMENT YEAR :1999 - 2000 ACIT, CIRCLE - 1, RAJAHMUNDRY. VS. DOCTORS ORGANIC CHEMICALS LTD., VENTATARAYAPURAM, TANUKU. PAN/GIR NO. : AABCD 0051G ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI D.MANOJ KUMAR RESPONDENT BY : SHRI D.L.NARASIMHA RAO DATE OF HEARING : 0 9/12/2013 DATE OF PRONOUNCEMENT : 11 /12/2013 O R D E R PER SAKTIJIT DEY, JM THE DEPARTMENT HAS FILED THIS APPEAL FOR ASSESSMENT YEAR 1999 - 2000 AGAINST ORDER DATED 20.6.2011 OF LD CIT(A) - RAJAHMUNDRY. 2. THE ONLY ISSUE IN THE PRESENT APPEAL IS, CIT(A) NOT UPHOLDING THE AOS ACTION OF INCLUDING EXCISE DUTY IN THE VALUATION OF CLOSING STOCK. 3. BRIEFLY STATED THE FACTS ARE THAT THE ASSESEE COMPANY IS ENGAGED IN MANUFACTURE AND SALE OF MEDICINES FOR HUMAN CON SUMPTION. FOR THE IMPUGNED ASSESSMENT YEAR, THE ASSESSEE FILED THE RETURN OF INCOME DEC LARING LOSS OF RS.5,18,88,750/ - . SUBSEQUENTLY, NOTICE UNDER SECTION 148 WAS ISSUED ON 17.3.2006 ON THE GROUND THAT INCOME HAS ESCAPED ASSESSMENT AS ASSESSEE HAS NOT INCLUDED EXCISE DUTY PAYABLE ON FINISHED GOODS AMOUNTING TO RS.14,91,155/ - IN THE VALUATION OF CLOSING STOCK AS ON 31.3.1999. DURING REASSESSMENT PROCEEDINGS, WHEN THE AO ASKED THE ASSESSEE TO REPLY ON THE ISSUE, THE ASSESSEE CONTENDED THAT EXCISE DUTY PAYABLE ON STOCK OF FINISHED 2 GOO DS IS ACCOUNTED ON CLEARANCE OF FINISHED GOODS AND S UCH EXCISE DUTY ON UN - CLEARED STOCK OF FINISHED GOODS AS AT 31.3.1999 IS ESTIMATED AT RS.14,91,155/ - , WHICH, HOWEVER HAS NO EFFECT TO PROFIT/LOSS. THE ASSESSEE FURTHER BRI NGING TO THE NOTICE OF THE AO THE FACT THAT THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE FOR THE ASSESSMENT YEAR 1997 - 98, SUBMITTED THAT THE ASSESSEE HAD BEEN FOLLOWING THE SAME ACCOUNTING POLICY SINCE THE YEAR OF INCORPORATION TO VALUE THE FINISHE D GOODS AT LOWER COST OR AT MARKET VALUE EXCLUDING THE EXCISE DUTY AND EXCISE DUTY IS ACCOUNTED ONLY AT THE TIME OF CLEARANCE OF GOODS FROM THE FACTORY. IN SUPPORT OF SUCH CONTENTION, ASSESSEE RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. BRITISH PAINTS, 54 ITR 499(SC). IT WAS FURTHER CONTENDED BY THE ASSESSEE THAT THERE IS CHANGE IN THE ACCOUNTING STANDAR D FOR ASSESSMENT YEAR 2000 - 2001 AND THE VALUATION OF CLOSING STOCK INCLUDING THE VALUE OF EXCISE DUTY WAS STARTED FROM THE AS SESSMENT YEAR 2000 - 2001. IT WAS SUBMITTED THAT EVEN SECTION 145 HAS COME INTO FORCE W.E.F. 1.4.1999, IN WHICH YEAR, THE ASSESSEE HAS CHANGED ITS VALUATION METHOD ACCORDING TO THE ACCOUNTING STANDARDS STIPULATED. IT WAS FURTHER SUBMITTED BY THE ASSESSEE TH AT THE EXCISE DUTY OF RS.14,91,155/ - ON CLOSING STOCK OF FINISHED GOODS AS ON 31.3.1999 WAS COLLECTED ON SALES MADE TO THE PARTIES DURING THE SUBSEQUENT YEAR. THE AO, HOWEVER, DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND HELD THAT THE ASSESSEE OUGHT TO HAVE TAKEN INTO ACCOUNT EXCISE DUTY PAYABLE FOR ARRIVING AT THE VALUE OF THE CLOSING STOCK. HENCE, THE AO REDUCED THE NET LOSS DECLARED BY THE ASSESEE TO THE EXTENT OF RS.14,91,155/ - BEING THE EXCISE DUTY PAYABLE ON THE FINISHED GOODS BY INCLUDING IT I N THE VALUE OF CLOSING STOCK AND DETERMINED THE NET LOSS AT RS.5,03,97,598/ - 4. IN THE FIRST APPEAL, LD CIT(A) ON CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND F OLLOWING THE DECISION OF ITAT VISAKHAPATNAM BENCH IN I.T.A. NO.62 & 63/VIZAG/2005 DATED 19.1 2.2008 IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1997 - 98 , ALLOWED THE ASSESSEES APPEAL BY OBSERVING AS UNDER: 3, DURING THE APPELLATE PROCEEDINGS, THE APPELLANTS AUTHORIZED REPRESENTATIVE POINTED OUT THAT SIMILAR ISSUE WAS RAISED DURING THE A.Y. 1997 - 9 8. ON APPEAL, THE CIT(A) VIDE ORDER DT.11.12.2004 DECIDED THE ISSUE IN FAVOUR OF THE APPELLANT. ON FURTHER APPEAL BY THE DEPARTMENT, THE HONBLE ITAT DISMISSED THE DEPARTMENTAL APPEAL. THE OPERATIVE PORTION OF THE HONBLE TRIBUNAL ORDER DT.19.12.2008 IN I.T.A. NO.62 & 63/VIZAG/ 2005 IS REPRODUCED HEREUNDER: 3 WHEREAS EXCISE DUTY IS PAYABLE ONLY AT THE TIME OF CLEARANCE OF THE FINISHED GOODS AND THUS IT CANNOT BE SAID THAT IT IS A PART OF THE VALUE OF THE CLOSING STOCK, PARTICULARLY WHEN ASSESSEE FOLLOWS A CONSISTENT METHOD OF ACCOUNTING IN THAT REGARD. HAVING REGARD TO THE COGENT REASONS GIVE BY THE LD CIT(A), WE ARE OF THE VIEW THAT THE SAME DO NOT CALL FOR ANY INTERFERENCE. 4. THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE PRESENT YEAR ARE SAME. RESPEC TFULLY FOLLOWING THE HONBLE ITATS ORDER (SUPRA), I HOLD THAT THE EXCISE DUTY IS NOT INCLUDIBLE IN THE VALUE OF CLOSING STOCK. THE AO IS DIRECTED TO DELETE THE SAID ADDITION. 5. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES VIS - - VIS MATERIAL S AVAILABLE ON RECORD. THE ISSUE BEFORE US IS WHETHER EXCISE DUTY PAYABLE CAN FORM PART OF THE CLOSING STOCK BEFORE CLEARANCE OF THE FINISHED GOODS. AS IS EVIDENT FROM THE ORDER OF THE CIT(A), THE ISSUE IN DISPUTE HAS BEEN DECIDED IN FAVOUR OF THE ASSES SEE BY A COORDINATE BENCH IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 1997 - 98(SUPRA) BY HOLDING THAT EXCISE DUTY PAYABLE ONLY AT THE TIME OF CLEARANCE OF FINISHED GOODS CANNOT FORM PART OF THE VALUE OF THE CLOSING STOCK. IT IS ALSO A FACT THAT THE VAL UATION OF CLOSING STOCK HAS BEEN MADE BY THE ASSESSEE IN CONSONANCE WITH THE METHOD OF ACCOUNTING STANDARD CONSISTENTLY FOLLOWED BY IT. IN THE AFORESAID FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY REASON TO TAKE A CONTRARY VIEW OVERLOOKING THE VIEW ALREADY TAKEN BY THE COORDINATE BENCH IN ASSESSEE;S OWN CASE (SUPRA), WHICH HAS BEEN FOLLOWED BY THE CIT(A). THE DEPARTMENT HAS ALSO NOT BROUGHT ANY CONTRARY DECISION OF THE HIGHER COURT TO OUR NOTICE . IN THIS VIEW OF THE MATTER, WE UPHOLD THE ORDE R OF THE CIT(A) BY REJECTING GROUND OF APPEAL TAKEN BY THE DEPARTMENT. 6. IN THE RESULT, APPEAL F ILED BY DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11/12/2013 . SD/ - SD/ - (B.RAMAKOTAIAH ) ( SAKTIJIT DEY ) ACCOUNTANT MEMBER JUDICIAL MEMBER VISHAKHAPATNAM DATED 11 / 12/2013 PARIDA , SR. PS 4 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT : ACIT, CIRCLE - 1,RAJAHMUNDRY 2. DOCTORS ORGANIC CHEMICALS LTD.,,VENTATARAYAPURAM, TANUKU.WEST GODAVARI 3. THE CIT(A) - RAJAMUNDRY. 4. CIT , RAJAMUNDRY. 5. DR, ITAT, VISHAKHAPATNAM 6. GUARD FILE. BY ORDER SR.PS, ITAT, VISHAKHAPATNAM //TRUE COPY//