ACIT, New Delhi V. M/s. Lakshmi Sugar Mills Co. Ltd., New Delhi

ITA 3445/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4045 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 02-05-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 14-07-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K MONGA
• Assessee Lawyers: MOHAN PD PATEL
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D NEW DELHI) BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI B.K. HALDAR, ACCOUNTANT MEMBER I.T.A. NO.3445 /DEL/2010 ASSESSMENT YEAR : 2005-06 ACIT, M/S LAKSHMI SUGAR MILLS CO. CIRCLE-4 (1), LTD. FORMERLY KNOWN AS NEW DELHI THE MAHALAKSHMI SUGAR MILLS CO. LTD.704, SIDDARTH BLDG.96-NEHRU PLACE, NEW DELHI. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AAACT AAACT AAACT AAACT- -- -0034 0034 0034 0034- -- -G GG G APPELLANT BY : SHRI A.K. MONGA, DR. RESPONDENT BY : SHRI MOHAN PD. PATEL, C.A. ORDER PER B.K. HALDAR, AM: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORD ER OF LD CIT(A)-VII, NEW DELHI DATED 27.5.2010 FOR ASSESSMENT YEAR 2005-06. 2. GROUNDS RAISED BY THE REVENUE ARE AS UNDER:- 1. THE ORDER OF THE LD CIT(A) IS ERRONEOUS AND CONTRARY TO FACTS AND LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION OF `.7, 78,172/- MADE PAGE 2 OF 10 ITA NO3445/DEL/10 BY THE ASSESSING OFFICER ON ACCOUNT OF INTEREST EARNED O N EXCESS LEVY PRICE COLLECTED. 2.1.THE LD CIT(A) IGNORED THE FACT THAT FDRS IN QUEST ION ARE IN THE POSSESSION OF THE ASSESSEE AND INTEREST EARNED THEREON I S TAXABLE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION OF `.2,34,567/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF MOLASSES STORA GE FUND COLLECTED FOR BUYERS. 3.1. THE LD CIT(A) IGNORED THE FACT THAT THE FUNDS I N QUESTION ARE IN THE POSSESSION OF THE ASSESSEE COMPANY.. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION OF `.69,91,983/- MADE BY THE ASSESSING OFFICER U/S 43B READ WITH SECTION 1 45A OF THE ACT ON ACCOUNT OF EXCISE DUTY. 4.1. THE LD CIT(A) IGNORED THE FACT THAT THE PROVISI ONS OF SECTION 43B READ WITH SECTION 145A AS THE AMOUNT HAS BEEN SHOWN PAYABLE IN 3CD REPORT FILED WITH THE RETURN OF THE ASSESSEE. 3. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT INTEREST OF `.7,78,172/- ACCRUED TO THE ASSESSEE ON THE EXCESS LEVY PRICE COLLECTED BY IT AND KEPT AS FIXED DE POSIT WITH ALLAHABAD BANK. WHEN THE ASSESSEE WAS ASKED BY THE ASSESSING OFFICER AS TO WHY THE ABOVE AMOUNT SHOULD NOT BE TAX ED IN THE YEAR UNDER CONSIDERATION, IT WAS SUBMITTED BY THE ASSESSEE TH AT A SETTLEMENT WAS ENTERED INTO BY THE ASSESSEE WITH THE GOV T. OF INDIA AS A RESULT OF WHICH THE ASSESSEE WAS DIRECTED TO PAY THE PR INCIPLE PAGE 3 OF 10 ITA NO3445/DEL/10 AMOUNT ALONG WITH INTEREST AT 12.5% TO THE GOVT. OF INDIA. THE REMAINING AMOUNT WAS PAID TO THE ASSESSEE COMPANY. IT W AS NOTED BY THE ASSESSING OFFICER THAT AFTER THE ABOVE SETTLEMENT TH E ASSESSEE RECEIVED `.84,92,889/- ON 10.4.2006 AND THE DETAILS OF THE SAME SHOW THAT INTEREST WHICH ACCRUED FROM TIME TO TIME AND WA S LIABLE TO BE TAXED IN THE HANDS OF THE ASSESSEE AMOUNTED TO `.7,78,1 72/- DURING THE RELEVANT PREVIOUS YEAR. HE, THEREFORE, ADDED TH E IMPUGNED AMOUNT AS INCOME OF THE ASSESSEE. 3.1. ON APPEAL BEFORE THE LD CIT(A), IT WAS SUBMITTE D BY THE ASSESSEE THAT THE ADDITION OF `.7,78,172/- WAS ON ACCOUNT OF INTEREST ACCRUED ON EXCESS LEVY PRICE COLLECTED AS PER COURTS ORDER AND KE PT IN THE FORM OF FDRS WITH THE REGISTRAR OF HIGH COURT. THE ADDITION W AS MADE ON THE GROUND THAT THE FDRS WERE IN THE NAME OF THE ASSESSEE C OMPANY AND THE ISSUE INVOLVED DID NOT REACH FINALITY AND THE AMO UNT HAD NOT YET BEEN PAID TO THE GOVT. OF INDIA OR ITS NOMINEE. IT WAS FURTHER SUBMITTED THAT THE ISSUE IS COVERED BY THE DECISION OF THE HON'BL E ITAT IN APPELLANTS OWN CASE IN I.T.A. NO.4778/DEL/84 FOR ASSE SSMENT YEAR 1979-80 DATED 14.3.1986 WHEREIN ADDITION ON IDENTIC AL ISSUE WAS DELETED BY HON'BLE ITAT. THE LD CIT(A) ALSO NOTED T HAT THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE LD CIT(A) IN A SSESSMENT YEAR 2001-02 AND 2004-05. TREATING THE ISSUE BEING COVERE D BY THE DECISION OF ITAT AND THE CIT(A) IN EARLIER YEARS, THE LD CIT(A) GRANTED RELIEF OF `.7,78,172/-. 3.2. BEFORE US IT HAS BEEN CONTENDED BY THE LD AUTHOR IZED REPRESENTATIVE FOR THE ASSESSEE THAT THE ISSUE IS SQUARELY C OVERED BY THE ITAT DELHI BENCH D ORDER DATED 9 TH SEPTEMBER, 2010 IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2004-05. THE LD DEPARTMENT AL REPRESENTATIVE HAS ALSO EXPRESSED THE SAME VIEW. PAGE 4 OF 10 ITA NO3445/DEL/10 3.3. WE HAVE HEARD THE PARTIES AND PERUSED THE RECOR D. IT APPEARS THAT THERE IS CONTRADICTION OF FACTS AS MENTIONED BY T HE ASSESSING OFFICER AND AS NOTED BY THE LD CIT(A). THERE IS A CLE AR CUT FINDING OF THE ASSESSING OFFICER THAT A SETTLEMENT WAS ARRIVED AT WITH T HE GOVT. OF INDIA AND THE ASSESSEE HAS RECEIVED `.84,92,889/- ON 10. 4.2006. NO EVIDENCE HAS BEEN BROUGHT BEFORE US THAT THE ABOVE STA TEMENT OF FACT MADE BY THE ASSESSING OFFICER IS UN-TRUE. IN THE ABOVE CIRCUMSTANCES, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW ON THI S ISSUE AND REMIT THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH TH E DIRECTION THAT COPY OF SETTLEMENT, IF ANY, ARRIVED WITH THE GOVT. O F INDIA BY THE ASSESSEE, EVIDENCE OF RECEIPT OF `.84,92,889/- ON 10.4. 2006 BY THE ASSESSEE AND ANY OTHER EVIDENCE TO SHOW THAT THE ISSUE WAS ULTIMATELY SETTLED ON 10.4.2006 SHOULD BE BROUGHT ON RECORD AND AFTER GIVING ADEQUATE OPPORTUNITY TO THE ASSESSEE, THE ISSUE BE DECIDE D AS PER LAW. WE OBSERVE THAT THE FACTS OF THE PRESENT CASE WITH REFE RENCE TO THIS GROUND OF APPEAL ARE QUITE DIFFERENT FROM THE FACTS OBTAINED IN EARLIER ASSESSMENT YEARS. WHEN THE ISSUE IS FINALLY SETTLED, ACCRUA L OF INCOME, IF ANY HAS TO BE DECIDED IN TERMS OF THE SETTLEMENT AG REEMENT. THUS, THIS GROUND OF APPEAL TAKEN BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 4. THE ASSESSING OFFICER MADE AN ADDITION OF `.2,34,567 /- BEING THE AMOUNT ON ACCOUNT OF MOLASSES STORAGE FUND COLLECTED F ROM BUYERS. ON APPEAL, LD CIT(A) HELD THAT THE ISSUE WAS SQUARELY C OVERED IN FAVOUR OF THE ASSESSEE AS PER THE HON'BLE ITAT ORDER DA TED 14.1.2009 FOR ASSESSMENT YEAR 1990-91 IN I.T.A. NO.3853/DEL/1995. IN THIS VIEW OF THE MATTER, LD CIT(A) DELETED THE IMPUGNED ADDITION . IN THE APPEAL BEFORE US, LD AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE ORDE R OF TRIBUNAL IN PAGE 5 OF 10 ITA NO3445/DEL/10 I.T.A. NO.4472/DEL/20094 DATED 08.09.2010. LD DR HA S NOT DISPUTED THE ABOVE SUBMISSION OF THE LD AR FOR THE ASSESSEE. THE FA CTS AND CIRCUMSTANCES OF THE PRESENT CASE BEING SIMILAR TO THAT OF ASSESSMENT YEAR 2004-05, RESPECTFULLY FOLLOWING THE ORDER OF TH E ITAT DELHI BENCH D, WE CONFIRM THE FINDING OF THE LD CIT(A) WITH R EFERENCE TO THIS GROUND AND DISMISS THE GROUND TAKEN BY THE REVENUE. 5. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT IN FORM NO.3 CD, THE CHARTERED ACCOUNT ANT HAS REFLECTED THE SUM OF `.69,91,983/- AS DISALLOWABLE AMOUNT AS PER THE PROVISIONS OF SECTION 43B OF THE ACT. THE ASSESSING OFFICER, THERE FORE, REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY THE IMPUGNED AMOUNT SH OULD NOT BE DISALLOWED. IT WAS SUBMITTED BY THE ASSESSEE THAT THE ENT RY RELATED TO THE ABOVE AMOUNT ON ACCOUNT OF EXCISE DUTY HAS NOT BE EN PASSED THROUGH THE P&L A/C AND THEREFORE NO DISALLOWANCE ON THIS ACCOUNT SHOULD BE MADE. THE ASSESSING OFFICER BROUGHT TO THE ASSE SSEES NOTICE THE PROVISIONS OF SECTION 145A OF THE ACT WHICH MANDATES THAT THE VALUE OF OPENING STOCK, PURCHASES AND CLOSING STOCKS WERE REQUIRED TO BE VALUED BY INCLUDING ALL DUTIES PAYABLE. THE A SSESSING OFFICER OPINED THAT THE OPENING STOCK FIGURE COULD NOT BE CH ANGED AS THE SAME WOULD DISTURB THE PROFIT OF THE EARLIER YEAR. THUS, HE WAS OF THE OPINION THAT ALL OTHER ITEMS WERE REQUIRED TO BE VALUED AS PE R THE PROVISIONS OF SECTION 145A OF THE ACT AND IF ANY TAX DUTY ETC. AS E NUMERATED IN SECTION 43B WAS PAYABLE ON 31.3.2005 AND NOT PAID BEF ORE THE DUE DATE AS MENTIONED IN THE SAID SECTION WAS REQUIRED TO BE DISALLOWED AS PER THE PROVISIONS OF THE ACT. AS THE TAX AUDIT REPO RT HAD WORKED OUT THE EXCISE DUTY LEVIABLE ON THE CLOSING STOCK AS ON 31 .3.2005 AT `.2,80,56,430/- AND AS OUT OF THE SAME AN AMOUNT OF `.2,10,64,449/- WAS PAID BY THE ASSESSEE UP TO 30.9.2005 AND IT WAS NOT SHOWN BY THE ASSESSEE THAT ANY FURTHER AMOUNT WAS PAID BY IT TILL TH E DUE DATE OF PAGE 6 OF 10 ITA NO3445/DEL/10 FILING OF RETURN, THE ASSESSING OFFICER ADDED THE IMPUG NED AMOUNT OF `.69,91,983/- U/S 43B READ WITH SECTION 145A OF THE A CT. 5.1. ON APPEAL, BEFORE THE LD CIT(A), THE ASSESSEE TOOK THREE PLEAS NAMELY:- 1) THE REMARKS OF THE TAX AUDITOR ARE WRONG IN SO FAR AS SECTION43B AND SECTION 145A CANNOT BE READ TOGETHER. AS THE ASSESSE E DID NOT TOOK ANY ENTRY RELATING TO THE EXCISE DUTY THAT MAY BE LEVIED AT THE TIME OF REMOVAL OF GOODS FROM THE FACTORY, SEC TION 43B WAS NOT APPLICABLE. THUS, NO ADDITION WAS CALLED FOR. 2) EVEN SECTION 145A OF THE ACT WAS NOT APPLICABLE TO FI NISHED GOODS WHICH ARE LYING IN THE FACTORY. RELIANCE WAS PL ACED ON THE JUDGMENT OF HON'BLE APEX COURT IN THE CASE OF CIT V. BRITISH PAINTS INDIA LTD. 188 ITR 44; THE DECISION OF HON'BLE MADHYA PRADESH HIGH COURT IN THE CASE OF CIT V. D & H SECHER ON ELECTRODES (PVT.) LTD. 173 TAXMAN 188 AND CBDT CIRCU LAR NO.772 DATED 23.12.1998. NO ADDITION IS CALLED FOR. 3) THE ASSESSEE SINCE ASSESSMENT YEAR 1993-94 WAS CONSISTENTLY FOLLOWING VALUATION OF STOCK ON THE BASIS OF MARKET PR ICE. THE LEVY STOCK IS CONTROLLED BY THE GOVT. THE SAME IS REQU IRED TO BE STORED AND THE SALE COULD BE MADE ONLY UPON RECEIPT O F RELEASE ORDER. ON SUCH STOCK LYING IN THE STORE ON THE LAST DA Y OF THE PREVIOUS YEAR EXCISE DUTY CANNOT BE ADDED IN TERMS OF SECTION 145A. IF THE INCOME IS INFLATED ON ACCOUNT OF FICTI ON, THE TRUE PROFIT & LOSS WOULD NOT BE ASSESSED. RELIANCE WAS PLACED O N THE DECISION OF HON'BLE ITAT ALLAHABAD BENCH IN THE CASE OF SHYAM BIDI WORKS LTD. V. CIT IN 108 ITD 489. FURTHER A CLA RIFICATION FROM TAX AUDIT DATED 14.1.2010 STATED THAT THE EFFECT OF SECTION 145A PAGE 7 OF 10 ITA NO3445/DEL/10 ON THE PROFITABILITY OF THE COMPANY WAS NIL. THUS, N O ADDITION WAS CALLED FOR. 5.2. AFTER CONSIDERING THE ABOVE, THE LD CIT(A) OPIN ED THAT IN ANNEXURE A OF THE TAX AUDIT REPORT, AUDITORS HAVE ON LY SHOWN THE IMPACT OF ADJUSTMENT MADE U/S 145A OF THE ACT ON THE PROFIT OF THE COMPANY WHICH IS NIL. IN ANNEXURE-E OF THE SAID REPO RT, THE AUDITORS U/S 43B(D) HAS SHOWN OUTSTANDING LIABILITY OF THE EXCISE DU TY AT THE END OF THE YEAR AS NIL. THE ABOVE FACTS HAVE NOT BEEN DISP UTED BY THE ASSESSING OFFICER IN THE REMAND REPORT. IN THE ABOVE C IRCUMSTANCES, IT WAS HELD BY THE LD CIT(A) THAT DISALLOWANCE OF `.69,9 1,983/- WAS REQUIRED TO BE DELETED. 5.3. BEFORE US, LD DR HAS RELIED ON THE ORDER OF THE ASSESSING OFFICER WHERE AS LD AR FOR THE ASSESSEE HAS RELIED ON THE ORDER O F THE LD CIT(A). 5.4. THE PROPOSITIONS RAISED BY THE ASSESSEE BEFORE THE LD CIT(A) WERE FURTHER BEEN STRENGTHEN BY CITING VARIOUS CASE LAWS WHI CH ARE ON RECORD OF THE TRIBUNAL. THE LD AUTHORIZED REPRESENTA TIVE FOR THE ASSESSEE HAS EMPHASIZED THE FACT THAT NO CLAIM OF EXCISE OR OTHER DUTY LEVIABLE ON CLOSING STOCK GOODS, ON THE DATE WHEN THE SAME WAS MANUFACTURED HAS BEEN MADE BY THE ASSESSEE. ON THIS BASIS, NO ENTRIES HAVE BEEN TAKEN IN THE BOOKS OF ACCOUNTS ON FINALIZATION OF ACCOUNTS. ANNEXURE-A, HAS BEEN MADE BY THE AUDITORS ON THE BASIS THAT LIABILITY TO PAY DUTY ETC WAS INCURRED BY THE A SSESSEE ON THE DATE WHEN THE MANUFACTURING OF THE GOODS WAS COMPLETED. HO WEVER, IN VIEW OF THE TRIBUNAL DECISION IN THE CASE OF SHYAM BI RI WORKS LTD. V. CIT 108 ITD 489, THE EXCISE DUTY ETC. WILL BE PAYABL E ONLY WHEN THE SAME IS REMOVED FROM BONDED WAREHOUSE OR FACTORY PREMI SES. EVEN IF PAGE 8 OF 10 ITA NO3445/DEL/10 IT IS CONSIDERED THAT LIABILITY TOWARDS PAYMENT OF EX CISE DUTY IS INCURRED BY THE ASSESSEE ON THE DATE WHEN THE SAME IS MANUFACTURE D, AS PER THE PROVISIONS OF SECTION 145A BOTH THE OPENING STOCK AS WELL AS THE CLOSING STOCK HAVE TO BE VALUED BY INCLUDING THE EXCI SE DUTY COMPONENTS. IT HAS SO BEEN HELD BY THE HON'BLE DELHI H IGH COURT IN THE CASE OF CIT V. MAHAVIR ALUMINUM LTD. 297 ITR 77. THI S VIEW HAS BEEN FOLLOWED BY THE ITAT BOMBAY BENCH A IN THE CASE OF HAWKINS COOKERS LTD. V. ITO 286 (AT) 252. IT WAS THEREFORE CONTENDED BY THE LD AR FOR THE ASSESSEE THAT THE ORDER OF THE LD CIT(A) BE CONFIRM ED ON THIS ISSUE. 5.5. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD . THE REVENUE HAS NOT DISPUTED THAT IF THE OPENING AND CLOSING STOCK ARE VALUED BY CONSIDERING THAT EXCISE DUTY WAS LEVIABLE ON THE DATE OF MANUFACTURE , THE AFFECT OF THE SAME WOULD BE NIL ON THE PROFIT OF THE COMPANY. IT HAS ALSO NOT DISPUTED THE FACT THAT THE ASSESSEE DID NOT CLA IM ANY EXPENDITURE ON ACCOUNT OF EXCISE DUTY PAYABLE ON THI S BASIS IN ITS PROFIT & LOSS ACCOUNT. THERE IS ALSO A POSSIBLE VIEW THAT TO FI ND OUT THE EFFECT OF SECTION 145A OF THE ACT BOTH THE OPENING AND CLOSI NG STOCK OF THE YEAR HAVE TO BE VALUED ON THE SAME BASIS. THERE IS ALSO A VIEW THAT INCURRING OF LIABILITY TOWARDS EXCISE DUTY WOULD ARISE ONLY ON REMOVAL OF SUCH GOODS FROM THE FACTORY PREMISES OR BONDED WAREHOUSE . AS SUCH THE LAST PROPOSITION ALSO FINDS SUPPORT IN THE DECISION O F HON'BLE GUJARAT HIGH COURT IN THE CASE OF ACIT V. NARMADA PETROCHEMI CALS LTD 327 ITR 369. IN THE ABOVE VIEW OF THE MATTER, WE FIND NO I NFIRMITY IN THE ORDER OF THE LD CIT(A) IN GIVING THE IMPUGNED RELIEF TO T HE ASSESSEE AND CONFIRM THE SAME. THUS, THIS GROUND OF APPEAL FILED B Y THE REVENUE IS DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWE D IN PART. PAGE 9 OF 10 ITA NO3445/DEL/10 7. ORDER PRONOUNCED IN THE OPEN COURT ON THE DAY OF 6TH MAY, 2011. SD/- SD/- (R.P. TOLANI) (B.K. HALD AR) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 6.5.2011. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). DATE OF HEARING 2 ND MAY, 2011 DATE OF DICTATION 3 RD MAY, 2011 DATE OF ORDER SIGNED BY THE HON'BLE MEMBER. DATE OF ORDER SENT TO THE CONCERNED BENCH PAGE 10 OF 10 ITA NO3445/DEL/10