The ACIT, Circle-6, Ahmedabad V. M/s. Matangi Industries, Ahmedabad

ITA 3034/AHD/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6780 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 29-04-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 04-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RIMESH K DAS
• Assessee Lawyers: S N SOPARKAR
• Keywords: Period of limitation; Difference of opinion; Change of opinion
• Section: 43B; 148; 154

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE S/SHRI M.K. SHRAWAT, JM AND D.C.AGRAWAL, AM ASSTT. CIT, CIR.6, AHMEDABAD. VS. M/S MATANGI INDUSTRIES, PLOT NO.28, PHASE-1, GIDC, VATVA, AHMEDABAD. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI RIMESH K. DAS, DR RESPONDENT BY:- SHRI S. N. SOPARKAR, AR O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER . THESE ARE THE TWO APPEALS FILED BY THE REVENUE FOR ASST. YEARS 2002-03 AND 2004-05, RAISING FOLLOWING GROUNDS. 2. THE GROUNDS TAKEN IN ASST. YEAR 2002-03 ARE AS U NDER :- (1) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS.5,47,263/- MADE ON ACCOUNT OF UNDER VALUATION OF CLOSING STOCK BY NOT INCLUDING EXCISE DUTY. (2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO. WHEREAS GROUNDS RAISED IN ASST. YEAR 2004-05 ARE AS UNDER :- (1) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING THE ADDITION OF RS.8,00,374/- MADE ON ACCOUNT OF UNDER VALUATION OF CLOSING STOCK BY NOT INCLUDING EXCISE DUTY IN THE V ALUE. ITA NOS.3034 & 3035/AHD/2010 ASST. YEARS 2002-03 & 2004-05 ITA NOS.3034 & 3035/AHD/2010 ASST. YEARS 2002-03 & 2004-05 2 (2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO. ASST. YEAR 2004-05 3. IN RESPECT OF THIS ASST. YEAR THE LD. AR FOR THE ASSESSEE HAD SUBMITTED THAT LD. CIT(A) HAS QUASHED THE REOPENING BY OBSERVING AS UNDER :- 2.1 THIS IS REGARDING THE VALIDITY OF NOTICE UNDER SECTION 148. THE APPELLANT HAS STATED THAT THE NOTICE HAS BEEN ISSUE D BEYOND THE PERIOD OF FOUR YEARS. THE ORIGINAL ASSESSMENT WAS COMPLETED U NDER SECTION 14393). THE APPELLANT STATED THAT THE SAME ADDITION WAS MAD E BY THE AO UNDER SECTION 154, WHICH WAS DELETED BY THE CIT APPEAL AN D HENCE NO SUCH ADDITION SHOULD BE MADE BY REOPENING THE ASSESSMENT UNDER SECTION 147. THE NOTICE HAS BEEN ISSUED ON 18 TH OF DECEMBER 2007 WHICH IS BEYOND THE PERIOD OF LIMITATION. THE REASONS RECORDED FOR REOP ENING THE ASSESSMENT IS INCLUSION OF EXCISE DUTY OF RS.547263 IN THE VAL UE OF CLOSING STOCK. THIS ISSUE WAS REFLECTED IN THE AUDITED ACCOUNTS, WHICH WERE DULY SCRUTINIZED DURING THE ASSESSMENT PROCEEDINGS AND HENCE IT IS A CHANGE OF OPINION. IN VIEW OF THIS REASON, THE APPELLANT HAS STATED THAT A NOTICE ISSUED UNDER SECTION 148 IS BAD IN LAW. 2.1.1 IN THE ASSESSMENT ORDER, THE AO HAS REPRODUCE D THIS OBJECTION TAKEN DURING THE ASSESSMENT PROCEEDING. HE HAS NOT MADE ANY COMMENT ON THE SAME. I HAVE PERUSED THROUGH THE ORDER UNDER SECTION 154 AND THE ORDER OF CIT(A). THE CIT(A) HAS DELETED THE SAME AD DITION SAYING THAT IT WAS INCLUDED IN THE CLOSING STOCK. IN VIEW OF THIS REASON THE REOPENING WAS NOT CORRECT AND THIS GROUND OF APPEAL IS ALLOWE D. SINCE REVENUE HAS NOT RAISED ANY GROUND RELATING TO QUASHING OF REOPENING, THE GROUNDS IN RELATION TO MERIT OF THE CASE WILL NOT SURVIVE. 4. WE HAVE HEARD THE PARTIES. IN OUR CONSIDERED VIE W THE CONTENTION RAISED BY THE LD. AR IS REQUIRED TO BE UPHELD. IF R EASSESSMENT PROCEEDINGS U/S 147/148 ARE HELD AS NOT CORRECT AND APPEAL OF T HE ASSESSEE ON THIS GROUND RAISED BEFORE LD. CIT(A) IS ALLOWED AND REVE NUE HAS PREFERRED NOT TO RAISE THIS GROUND BEFORE THE TRIBUNAL, THEN APPE AL OF THE REVENUE ON ITA NOS.3034 & 3035/AHD/2010 ASST. YEARS 2002-03 & 2004-05 3 MERITS WILL NOT SURVIVE. THE GROUNDS RAISED BY THE REVENUE HAVE THEREFORE, BECOME INFRUCTUOUS. ACCORDINGLY, THE APP EAL FILED BY THE REVENUE FOR ASST. YEAR 2004-05 IS DISMISSED. ASST. YEAR 2002-03 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO FOUND THAT ASSESSEE HAS NOT INCLUDED EXCISE DUTY OF RS.5,47,26 3/- IN THE CLOSING STOCK AND ACCORDINGLY THERE IS UNDER VALUATION OF CLOSING STOCK TO THIS EXTENT. HE ACCORDINGLY MADE THE ADDITION. 6. THE LD. CIT(A) ALLOWED THE CLAIM BY HOLDING THAT IF CLOSING STOCK IS INCREASED BY ADDING THE EXCISE DUTY THEN THE SAME E XCISE DUTY WILL HAVE TO BE SHOWN IN THE DEBIT SIDE AS THE SAME HAS BEEN PAID BEFORE DUE DATE OF FILING OF RETURN AND ACCORDINGLY IT WILL BE ALLOWAB LE UNDER SECTION 43B. 7. WE HAVE HEARD THE PARTIES. THE ARGUMENT OF THE L D. DR IS THAT SECTION 145A SHOULD BE FOLLOWED STRICTLY AND BY INC LUSION PRINCIPLES BOTH OPENING STOCK, CLOSING STOCK, PURCHASE AND SALES SH OULD BE EFFECTED BY THE AMOUNT OF EXCISE DUTY EMBEDDED IN THEM. THE ASSESSE E HAS APPARENTLY FOLLOWED EXCLUSION PRINCIPLE IN RESPECT OF ALL THE ITEMS WHICH IS NOT TENABLE IN VIEW OF SECTION 145A. 8. AGAINST THIS, THE LD. AR SUBMITTED THAT THE TRIB UNAL CANNOT EXTEND THE SCOPE OF ADDITION. IF AO HAS CONFINED TO DISTUR B ONLY CLOSING STOCK U/S 145A THEN FURTHER ADDITION BY DISTURBING OTHER THRE E INGREDIENTS CANNOT BE DONE. SECONDLY LD. AT SUBMITTED THAT THE ISSUE IS N OW COVERED BY THE DECISION OF THIS TRIBUNAL IN THE CASE OF M/S CHEMIC ALS & DYESTUFF INDUSTRIES VS. CIT, BARODA IN ITA NO.1077/AHD/2009 ASST. YEAR 2004-05 PRONOUNCED ON 19.6.2009 WHEREIN IT IS HELD THAT EXC ISE DUTY CANNOT BE ITA NOS.3034 & 3035/AHD/2010 ASST. YEARS 2002-03 & 2004-05 4 INCLUDED IN THE CLOSING STOCK UNLESS GOODS LEAVE TH E PREMISES/WAREHOUSE. HE REFERRED TO PARA 3 FROM THAT JUDGMENT AS UNDER : - 3. IN THE APPEAL AGAINST THE ABOVE ORDER OF THE CI T, IT IS CONTENDED THAT THE DECISION OF THE ASSESSING OFFICER IS IN ACCORDANCE WITH THE DECISION OF THE MADHYA PRADESH HIGH COURT IN ACIT V D & H SECHERON ELECTRODES (P) LTD (2008) 173 TAXMAN 188 AND THEREFORE THERE IS NO ERR OR IN THE ASSESSMENT ORDER. IN THAT CASE, THE ASSESSING OFFICER ADDED TH E VALUE OF EXCISE DUTY PAYABLE ON THE GOODS MANUFACTURED BY THE ASSESSEE T O THE VALUE OF THE CLOSING STOCK DECLARED BY THE ASSESSEE BY INVOKING SEC.145A UNDER WHICH THE VALUE OF ANY TAX, DUTY, CESS OR FEE WAS REQUIRED TO BE INCLU DED IN THE CLOSING STOCK. HE HAD ALSO REFERRED TO THE JUDGMENT OF THE SUPREME CO URT IN BRITISH PAINTS (SUPRA). THE HONBLE MADHYA PRADESH HIGH COURT OBSE RVED THAT THE SUPREME COURT WAS NOT CONCERNED WITH LIABILITY FOR EXCISE D UTY AND FURTHER THAT U/S 145A IT IS ONLY WHEN THE TAX, DUTY, CESS OR FEE IS ACTU ALLY PAID OR INCURRED BY THE ASSESSEE TO BRING THE GOODS TO THE PLACE OF ITS LOC ATION THAT THE SAID AMOUNT FORMS PART OF THE VALUE. IT IS NOT DISPUTED IN THE PRESENT CASE THAT THE EXCISE DUTY HAD NOT BEEN PAID BY THE ASSESSEE ON THE GOODS IN STOCK AS THE GOODS DID NOT LEAVE THE PREMISES. IN THE LIGHT OF THESE OBSE RVATIONS, WHICH APPLY TO THE CASE BEFORE US, WE ARE INCLINED TO ACCEPT THE SUBMI SSION OF THE ASSESSEE. FURTHER, THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF ACIT V M/S. NARAN LALA PVT. LTD, NAVSARI IN ITA NO.686/AHD/2006 (AY 2002-03) HAVE HELD BY ORDER DATED 20-3-2009 (COPY FILED) THAT WHERE TH E GOODS HAVE NOT LEFT THE PREMISES THE UNPAID EXCISE DUTY CANNOT BE ADDED TO THE VALUE OF THE CLOSING STOCK BY INVOKING SEC.145A. IN ANOTHER ORDER OF THE AHMEDABAD BENCH IN DCIT V GUJARAT FLUORO-CHEMICALS LTD IN ITA NO.3472/AHD/2 002 (AY 1999-2000) DATED 28-9-2006 (COPY FILED) THE TRIBUNAL HAS HELD THAT THE EXCISE DUTY IS INCLUDIBLE IN THE CLOSING STOCK U/S 145A BUT THE AS SESSEE SHOULD BE ALLOWED DEDUCTION IN RESPECT OF THE LIABILITY SO INCURRED P ROVIDED THE ASSESSEE HAS MADE THE PAYMENT OF THE DUTY BEFORE THE DUE DATE FOR FIL ING THE RETURN OF INCOME U/S ITA NOS.3034 & 3035/AHD/2010 ASST. YEARS 2002-03 & 2004-05 5 139(1) AS PROVIDED BY SEC.43B. THE BENCH COULD NOT HAVE HAD THE BENEFIT OF THE JUDGMENT OF THE MADHYA PRADESH HIGH COURT (SUPRA) S INCE THE JUDGMENT WAS DELIVERED AFTER THE TRIBUNALS ORDER, VIZ., ON 21-1 1-2007. THUS, WHICHEVER WAY THE MATTER IS LOOKED AT, THE ORDER OF ASSESSMENT CA NNOT BE SAID TO BE ERRONEOUS. FIRSTLY, THE EXCISE DUTY PAYABLE ON CLOSING STOCK O F FINISHED GOODS WHICH HAVE NOT LEFT THE PREMISES OF THE ASSESSEE CANNOT BE INC LUDED IN THE VALUE OF THE STOCK BY VIRTUE OF THE JUDGMENT OF THE MADHYA PRADESH HIG H COURT (SUPRA). SECONDLY, EVEN IF IT IS INCLUDIBLE, AS HELD BY THE CIT ON THE BASIS OF THE JUDGMENT OF THE SUPREME COURT IN BRITISH PAINTS (SU PRA) IT IS CORRESPONDINGLY DEDUCTIBLE U/S 43B IF PAID WITHIN THE PRESCRIBED TI ME. SINCE NO JUDGMENT TAKING A VIEW CONTRARY TO THE VIEW TAKEN BY THE MADHYA PRA DESH HIGH COURT HAS BEEN BROUGHT TO OUR NOTICE, WE HOLD, RESPECTFULLY FOLLOW ING THE JUDGMENT, THAT THE CIT WAS NOT RIGHT IN SAYING THAT THE ASSESSMENT ORD ER ON THIS POINT WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. 9. WE HAVE HEARD THE PARTIES. IN OUR CONSIDERED VIE W THE AO HAS APPLIED THE PROVISIONS OF SECTION 145A INCORRECTLY. IF INCLUSION PRINCIPLE IS TO BE FOLLOWED THEN AMOUNT OF EXCISE DUTY RELATI NG TO OPENING STOCK, CLOSING STOCK, PURCHASE AND SALES SHOULD HAVE BEEN CONSIDERED ALL TOGETHER IN RESPECT OF THESE ITEMS AND FRESH TRADIN G ACCOUNT SHOULD HAVE BEEN DRAWN AND RESULTANT ADDITION, IF ANY, ALONE SH OULD HAVE BEEN MADE. BE AS IT MAY, SCOPE OF ADDITION CANNOT BE INCREASED AT THIS STAGE. THE ISSUE WHETHER EXCISE DUTY SHOULD BE INCLUDED IN THE CLOSING STOCK AND IF INCLUDED, WHETHER EFFECT TO SECTION 43B BE GIVEN IS NOW SETTLED BY THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S CHEMICA LS & DYESTUFF INDUSTRIES (SUPRA) AS REFERRED ABOVE. SINCE THE FAC TS ARE THE SAME I.E. ASSESSEE HAS PAID THE EXCISE DUTY BEFORE DUE DATE O F FILING OF RETURN THERE IS NO QUESTION OF MAKING ANY ADDITION IN THE CLOSIN G STOCK IN RESPECT OF ITA NOS.3034 & 3035/AHD/2010 ASST. YEARS 2002-03 & 2004-05 6 EXCISE DUTY. RESPECTFULLY FOLLOWING THE ABOVE DECIS ION OF THE TRIBUNAL, WE DISMISS THE APPEAL FILED BY THE REVENUE. 10. IN THE RESULT, BOTH THE APPEALS FILED BY THE RE VENUE ARE DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 4/5/11. SD/- SD/- (M. K. SHRAWAT) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMB ER AHMEDABAD, DATED : 4/5/11. MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 29/4/2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 29/4/ 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..