UNICHEM LABORATORIES LTD, MUMBAI V. ADDL CIT 5(3), MUMBAI

ITA 2872/MUM/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62292 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 10-04-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 12-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBACHAN RAM
• Assessee Lawyers: NITESH JOSH
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI BEFORE SHRI RAJENDRA SINGH, A.M. AND SHRI VIJAY P AL RAO, J.M. ITA NO. : 2872/MUM/2011 ASSESSMENT YEAR : 2007-08 UNICHEM LABORATORIES LIMITED UNICHEM BHAVAN, S.V. ROAD JOGESHWARI (W) MUMBAI-400 102. PAN NO: AAACU 0551 B ADDL. COMMISSIONER OF INCOME TAX -5(3) AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 020. (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI NITESH JOSH RESPONDENT BY : SHRI SUBACHAN RAM DATE OF HEARING : 10.4.2012 DATE OF PRONOUNCEMENT : 13.4.2012 O R D E R PER RAJENDRA SINGH, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER D ATED 20.12.2012 OF CIT(A) FOR THE ASSESSMENT YEAR 2007-08. T HE ONLY DISPUTE RAISED IN THIS APPEAL IS REGARDING ADJUSTMENT ON ACCOUNT OF EXCISE DUTY AND SALES TAX UNDER SECTION 145A OF THE INCOME TAX ACT. 2. THE FACTS IN BRIEF ARE THAT THE AO DURING THE ASSESSM ENT PROCEEDINGS ASKED THE ASSESSEE TO EXPLAIN AS TO WHETHER ADJ USTMENT AS REQUIRED UNDER SECTION 145A HAVE BEEN MADE IN THE A CCOUNTS. THE ASSESSEE EXPLAINED THAT IT WAS FOLLOWING THE EXCLUSIVE MET HOD OF ACCOUNTING IN RELATION TO RAW MATERIAL AND WORK-IN-PR OGRESS AND VALUATION OF FINISHED GOODS WERE BEING MADE INCLUSIVE O F EXCISE DUTY. ITA NO. 2872/M/11 A.Y.07-08 2 IT WAS ALSO SUBMITTED THAT THE AUDITORS HAD COMPUTED THE NET IMPACT OF VALUATION METHOD BEING FOLLOWED BY THE ASSESSEE UNDE R SECTION 145A AS PER CLAUSE 12(B) OF THE AUDIT REPORT AND AS PER AUDITORS, THE NET EFFECT WAS NIL. THE AO HOWEVER OBSERVED THAT UNDER THE PROVISIONS OF SECTION 145A THE ASSESSEE WAS REQUIRED TO MAKE ADJUSTMEN T ON ACCOUNT OF ANY TAX, DUTY, CESS OR FEE IN RELATION TO PUR CHASES, SALES AND INVENTORY. HE WORKED OUT THE ADJUSTMENT TO BE MA DE UNDER SECTION 145A AS UNDER :- PARTICULARS EXCISE DUTY(RS.) SALES TAX (RS.) RAW MATERIALS 2,44,14,173/- 55,22,557/- PACKING MATERIAL 51,20,235/- 12,52,148/- STORES & SPARES 26,76,165/- 5,22,419/- TOTAL 3,22,10,573(A) 72,97,124(B) GRAND TOTAL (A+B) 3,95,07,697/- 2.1 AO, THEREFORE MADE ADDITION OF RS.3,95,07,697/- ON ACCOUNT OF ADJUSTMENT UNDER SECTION 145A. IN APPEAL CIT(A) OBSE RVED THAT THE ADJUSTMENTS UNDER SECTION 145A WERE MANDATORY AS ASSESSEE WAS FOLLOWING EXCLUSIVE METHOD IN RESPECT OF RAW MATERIAL, PACKING MATERIAL AND SPARE PARTS. HE, THEREFORE CONFIRMED THE ADDITION MADE BY AO AGGRIEVED BY WHICH, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. BEFORE US THE LD. AR FOR THE ASSESSEE SUBMITTED THAT T HERE WAS NO DISPUTE THAT ADJUSTMENT AS PROVIDED UNDER SECTION 145 A ON ACCOUNT OF ANY TAX OR DUTY IS REQUIRED TO BE MADE. THE AUDIT OR HAD COMPUTED THE ADJUSTMENT VIDE CLAUSE 12(B) OF THE TAX AUDIT REPO RT AS PER WHICH ADJUSTMENT TO BE MADE WAS NIL. IT WAS ALSO POINTED OU T THAT IN VIEW OF THE JUDGMENT OF HON'BLE HIGH COURT OF DELHI IN CASE OF CIT VS. MAHAVIR ITA NO. 2872/M/11 A.Y.07-08 3 ALUMINIUM LTD. (297 ITR 77) ADJUSTMENT WAS ALSO REQUIR ED TO BE MADE TO THE OPENING STOCK IN ADDITION TO THE CLOSING STOCK A ND PURCHASES AND SALES. AFTER CONSIDERING ALL THESE FACTORS, THE AUDIT ORS HAD COMPUTED THE ADJUSTMENT AS NIL WHICH HAD NOT BEEN ACCEPTE D BY THE AO WITHOUT ANY REASON. THE AO MADE HIS OWN COMPUTATION IN WHICH NO ADJUSTMENT HAD BEEN GIVEN IN OPENING STOCK. IT WAS A CCORDINGLY REQUESTED THAT THE ORDER OF CIT(A) SHOULD BE SET ASIDE . THE LD. DR PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING ADJUSTME NT TO BE MADE UNDER SECTION 145A OF THE I.T. ACT. UNDER THE PROVISION S OF THE SAID SECTION, THE ASSESSEE IS REQUIRED TO VALUE, PURCHASES, SALES A ND INVENTORY IN ACCORDANCE WITH THE METHOD OF ACCOUNTING RE GULARLY EMPLOYED AND FURTHER ADJUSTMENT IS REQUIRED TO BE MAD E TO INCLUDE ANY TAX, DUTY, CESS OR FEES ACTUALLY PAID OR INCURRED TO BRING THE GOODS TO THE PLACE OF ITS LOCATION AND CONDITION AS ON THE DA TE OF VALUATION. IN THIS CASE THE ASSESSEE WAS FOLLOWING EXCLUSIVE METHOD IN RESP ECT OF RAW MATERIAL, PACKING MATERIAL AND SPARE PARTS AND TH EREFORE ADJUSTMENT ON ACCOUNT OF TAX/DUTY IS REQUIRED TO BE M ADE IN RESPECT OF SUCH ITEMS IN THE PURCHASE/SALES, OPENING STOCK AND CLOSING STOCK. THE AUDITORS HAD COMPUTED THE ADJUSTMENT UNDER SECTION 145A AT NIL AS PER CLAUSE 12(B) OF THE AUDITORS REPORT WHICH HAS NOT BEEN ACCEPTED BY THE AO WITHOUT GIVING ANY REASONS. THE AO HAS MADE HIS OWN ADJUSTMENT WHICH DOES NOT GIVE DETAILS OF ADJUSTMENT M ADE IN RELATION TO OPENING STOCK, SALES AND CLOSING STOCK IN RELATION TO IT EMS MENTIONED BY HIM. THE MATTER IN OUR VIEW REQUIRES F RESH VERIFICATION AND AO IS REQUIRED TO GIVE SPECIFIC FINDING AS TO HOW AD JUSTMENT PREPARED BY AUDITORS WAS NOT FOUND ACCEPTABLE. WE, THE REFORE, SET ITA NO. 2872/M/11 A.Y.07-08 4 ASIDE THE ORDER OF CIT(A) AND RESTORE THE MATTER TO T HE FILE OF AO FOR PASSING A FRESH ORDER AFTER NECESSARY EXAMINATION IN THE LIGHT OF OUR OBSERVATIONS MADE ABOVE AND AFTER ALLOWING OPPORTUNIT Y OF HEARING TO THE ASSESSEE. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR ST ATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 13.4.2012. SD/- SD/- (VIJAY PAL RAO) JUDICIAL MEMBER (RAJENDRA SINGH) ACCOUNTANT MEMBER MUMBAI, DATED: 13.4.2012. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.