The DCIT, Circle-1(1)(2),, Ahmedabad V. M/s. Corus Decor Pvt. Ltd., Ahmedabad

ITA 3653/AHD/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 6041 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 29-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER THE DCIT, CIRCLE - 1(1)(2), AHMEDABAD (APPELLANT) VS M/S. CORUS DCOR PVT. LTD. 26, DEVPRIYA BUNGLOW - 1, B/H. MANGALYA PARTY PLOT, SATELLITE, AHMEDABAD - 380015 PAN:AADCC8607R (RESPONDENT) REVENUE BY : S H RI PRASOON KABRA , SR. D . R. ASSESSEE BY: S H RI SAKAR SHARMA , A.R. DATE OF HEARING : 11 - 01 - 2 018 DATE OF PRONOUNCEMENT : 15 - 02 - 2 018 / ORDER P ER : AMARJIT SINGH , ACCOUNTANT MEMBER : - THIS REVENUE S APPEAL FOR A.Y. 2012 - 13 , ARIS ES FROM ORDER OF THE CIT(A) - 1 , AHM EDABAD DATED 26 - 10 - 2015 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE REVENUE HAS RAISED FOLLOWING GROU NDS OF APPEAL: - 'THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.57,95,447/ - , ON ACCOUNT OF CENVAT CREDIT, MADE BY THE ASSESSING OFFICER KEEPING IN VIEW OF THE SPECIFIC PROVISIONS OF SEC,145A OF THE I. T. ACT.' ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER TO THE EXTENT MENTIONED ABOVE SINCE THE ASSESSEE HAS FAILED TO DISCLOSE HIS TRUE INCOME/BOOK PROFIT. I T A NO . 3653 / A HD/20 15 A SSESSMENT YEAR 2012 - 13 I.T.A NO. 3653 /AHD/20 15 A.Y. 2012 - 13 PAGE NO DCIT VS. M/S. CORUS DCOR PVT. LTD. 2 3. IN THIS CASE, RETUR N OF INCOME DECLARI NG LOSS OF RS . - 7544630/ - WAS FILED ON 27 TH AUGUST, 2012. SUBS EQUENTLY, THE NOTICE U/S. 143(3) WAS ISSUED ON 06 - 08 - 2013. THEREAFTER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON EXAMINATION OF AUDIT REPORT IN FORM NO. 3CD THE ASSESSING OFFICER NOTI CE D THAT THERE WAS CLOSING BALANCE OF MOD VAT/CENVAT CREDIT AVAILABLE TO THE ASSESSEE SHOWN IN THE BALANCE SHEET AS LOAN AND ADVANCES. THE ASSESSING OFFICER NOTICED THAT THERE WAS NO OPENING BALANCE OF MODVAT/CENVAT AND T HE ASSESSEE HAS AVAILED THE MO DVAT/CENVAT CREDIT OF RS. 82 , 15 , 636 / - AND UTILIZED ONLY RS. 24 , 20 , 189/ - WHICH RESULTED IN CLOSING BALANCE OF RS. 57 , 95 , 447/ - . T HE ASSESSING OFFICER OBSERVE THAT ASSESSEE HAS NOT TAKEN INT O CONSIDERATION THE CREDIT OF RS . 57 , 95 , 447/ - IN VALUING THE CLOSIN G STOCK . CONSEQUENTLY, THE ASSESSING OFFICER HAS ADDED THE AMOUNT OF RS. 57 ,95,447 TO THE TOTAL INCOME OF THE ASSESSSEE BY STATING THAT ASSESSEE HAS NOT VALUED THE CLOSING STOCK AS PER INCLUSIVE METHOD AS REQUIRED U/S. 14 5 A OF THE ACT. 4. AGGRIEVED ASS ESSEE FILED APPEAL BEFORE THE LD. CIT(A) BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE BY OBSERVING AS UNDER: - 3.3. I HAVE GONE THROUGH THE FACTS AND THE SUBMISSION OF THE APPELLANT CAREFULLY. IN THE ASSESSMENT ORDER A.O HA S OBSERVED THAT THE APPELLANT HAS NOT TAKEN INTO CONSIDERATION THE CREDIT OF RS. 57,95,447/ - IN VALUING THE CLOSING STOCK. THE PROVISIONS OF SECTION 145A(A)(II) OF THE ACT STIPULATES THAT THE VALUATION OF PURCHASE AND SALE OF GOODS AND INVENTORY FOR THE PU RPOSE OF DETERMINING THE INCOME CHARGEABLE UNDER THE HEAD PROFIT & GAINS OF BUSINESS OR PROFESSION SHALL BE FURTHER ADJUSTED TO INCLUDE THE AMOUNT OF ANY TAX, DUTY, CESS OR FEE ACTUALLY PAID OR INCURRED BY THE ASSESSEE TO BRING THE GOODS TO THE PLACE OF IT S LOCATION AND CONDITION AS ON DATE OF VALUATION. THE ASSESSEE HAS NOT VALUED THE CLOSING STOCK AS PER INCLUSIVE METHOD AS REQUIRED U/S.145A OF THE ACT, THE AMOUNT OFRS. 57,95,447/ - IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THE APPELLANT HAS SUBMITTED THAT SUCH DUTY OF CENTRAL EXCISE IF ADDED TO ENHANCE THE VALUE OF CLOSING STOCK WOULD RESULT IN ENHANCED OPENING STOCK ON THE FIRST DAY OF THE NEXT ACCOUNTING PERIOD. SO THE NEXT YEAR'S PROFITS WOULD GET DEPRESSED ACCORDINGLY, OVER A PERIOD OF TIME THE WHO LE EXERCISE WOULD EVEN OUT, IN OTHER WORDS, BE REVENUE NATURAL. AT THE SAME TIME WHILE DISTURBING THE VALUE OF THE CLOSING STOCK THE ASSESSING AUTHORITY COULD NOT CHANGE THE METHOD OF ACCOUNTING REGULARLY EMPLOYED. THE APPELLANT HAS FURTHER SUBMITTED WHEN THE STATUES AND THE GUIDELINES WHICH ARE MANDATORY FOR THE APPELLANT TO MAINTAIN THE BOOKS OF ACCOUNT HAVE SPECIFICALLY PRESCRIBED THE TREATMENT OF THE CENVAT CREDIT WHICH IS UNUTILIZED AT THE END OF THE YEAR WHY WOULD THE APPELLANT DO THE IMPRUDENT ACT OF CONTRADICTING THEM. THE APPELLANT HAS BEEN CORRECT, RIGHTEOUS AND JUDICIOUS IN SHOWING THE UNUTILIZED CENVAT CREDIT UNDER THE HEAD OF SHORT TERM ADVANCES ON THE ASSET SIDE OF THE BALANCE SHEET AND THE AO WAS ERRONEOUS IN MAKING THE ADDITION OF THE SAID CE NVAT CREDIT, TREATING THE SAME AS PART AND PARCEL OF THE CLOSING STOCK OF THE APPELLANT. THE APPELLANT HAS ALSO CITED THE VARIOUS DECISIONS OF ITAT, AHMEDABADAND GUJARAT HIGH COURT (SUPRA). I.T.A NO. 3653 /AHD/20 15 A.Y. 2012 - 13 PAGE NO DCIT VS. M/S. CORUS DCOR PVT. LTD. 3 3.4. AFTER THROUGH THE OF THE CASE AND POSITION, JURISDICTIONS! H IGH COURT IN THE OF NARMADA CHEMATUR PETROCHEMICALS 327 ITR 369 (GUI.) HAS HELD THAT UNLESS AND UNTIL THE AMOUNT OF THE DUTY IS NOT ENTERED ON ONE SIDE AS AN ITEM OF COST, IT CANNOT BE TAKEN AS A COMPONENT OF THE VALUE OF THE CLOSING STOCK ON THE EITHER SI DE. THE TRUE PURPOSE OF CREDITING THE VALUE OF UNSOLD STOCK IS TO BALANCE THE COST OF THOSE GOODS ENTERED INTO OTHER SIDE OF ACCOUNT. THERE IS AN ANOTHER DECISION OF AN HON'BLE GUJARAT HIGH COURT PRONOUNCED IN THE CASE OF CIT VS. UNIQUE INDUSTRIES 307 ITR 350 (GUJ.), WHEREIN IT IS HELD THAT THE EXCISE DUTY, SALES TAX AND OTHER DUTIES FORM PART OF THE CLOSING STOCK WHEN THE SAME ARE INCURRED. IN THAT CASE, IT WAS NOTED THAT THE ASSESSEE HAD NOT DEBITED ANY EXCISE DUTY OR SALES - TAX TO THE PURCHASE ACCOUNT OR P&L ACCOUNT. THE COURT HAS HELD THAT THE QUESTION OF INCLUDING THE EXCISE DUTY IN THE VALUE OF STOCK ARISES ONLY IF THE PURCHASES DEBITED TO P&L ACCOUNT ARE INCLUSIVE OF EXCISE DUTY. RATHER, THE COURT HAS CLARIFIED THAT THE EXPENDITURE INCURRED ON EXCISE D UTY BUT IF PURCHASES DEBITED ARE EXCLUSIVE OF EXCISE DUTY, THEN THE QUESTION OF INCLUDING THE SAME IN THE CLOSING STOCK ACCOUNT DOES NOT ARISE SINCE THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE BY DEBITING TO P&L ACCOUNT. SIMILARLY, IN THE PRESENT CASE TO O, IT IS NOTED THAT THE ASSESSEE HAD NOT DEBITED ANY EXCISE DUTY OR SALES - TAX TO THE PURCHASE ACCOUNT OR P&L ACCOUNT AND THUS THE QUESTION OF INCLUDING THE EXCISE DUTY IN THE VALUE OF STOCK DOES NOT ARISES AT ALL. FURTHER, AS PER PROVISION OF SECTION 145A, ADJUSTMENT OF DUTY TAX CESS ETC. IS NOT REQUIRED TO BE MADE ONLY IN CLOSING STOCK BUT ALSO IN OPENING STOCK PURCHASES AND SALES ALSO WHICH THE AO HAS NOT DONE. THEREFORE, HIS OWN ACTION IS NOT IN CONFORMITY WITH PROVISION OF SECTION 145A ON WHICH HE HAS R ELIED. FURTHER, DURING THE COURSE OF HEARING, THE AR ALSO MADE AN ALTERNATE ARGUMENT THAT THE CLOSING STOCK WOULD BE OPENING STOCK IN THE SUCCEEDING YEAR WHICH WOULD AGAIN REDUCE THE PROFIT IN A Y 2013 - 14. THEREFORE, THERE WOULD BE NO LOSS TO REVENUE AS SU CH EVEN IF SUCH AMOUNT IS ADDED IN CLOSING STOCK FOR AY 2012 - 13. THE ENTIRE EXERCISE OF SECTION 145A WOULD BE TAX NEUTRAL; SAME DULY SHOWN AND BY THE TAX AUDITOR IN THE RECONCILIATION CHART IN THE TAX AUDIT REPORT. I FIND THAT THE APPELLANT HAS SUBMITTED B EFORE THE AO 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 BY WAY OF MODVAT, HAD INCLUDED IN THE VAL UE OF PURCHASES AND THE OF WHICH COULD NOT BE UTILIZED IN THE PRESENT YEAR WAS SHOWN IN THE BALANCE SHEET AS AN AMOUNT RECEIVABLE AND THIS PORTION OF RS.57,95,447/ - WAS NOT INCLUDED IN THE VALUE OF PURCHASES. THE AO COULD NOT CONTROVERT THESE SUBMISSIONS O F THE ASSESSEE MADE BY THE ASSESSEE. ONCE IT IS FOUND THAT THESE SUBMISSIONS OF 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 THEREFORE, THERE CANNOT BE A REASON TO MAKE ANY ADDITION IN THE INCOME OF THE ASSESSEE BECAUSE EVEN IF WE INCLUDE SUCH EXCISE DUTY RECEIVABLE IN THE VALUE OF CLOSING STOCK, THE SAME IS ALSO REQUIRED TO BE INCLUDED IN THE VALUE OF PURCHASES AND IT WILL HAVE NO IMPACTS ON THE PROFI TS OF THE ASSESSEE. THE ITAT HON'BLE AHMEDABAD ITAT IN THE CASE OF LTO V/S GUJARAT PARAFINS PVT. LIMITED (ITA NO. 2335/AHD/2011) DATED 20 TH MARCH, 2015 HAD FOLLOWED THE RATIOS OF THE GUJARAT HIGH COURT REFERRED TO ABOVE AND HAS CATEGORICALLY HELD THAT UNUT ILIZED CENVAT CREDIT CANNOT BE SUBJECT MATTER OF ADDITION UNDER SECTION 145A OF THE ACT BEING TAX NEUTRAL. CONSIDERING THE FACTS DISCUSSED HEREIN ABOVE AND RELYING UPON DECISIONS REFERRED, SUPRA, ADDITION OF RS. 57,95,447/ - MADE BY ASSESSING OFFICER IS DEL ETED. THE GROUND OF THE APPELLANT IS ALLOWED. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD CAREFULLY. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD SHOWN CLOSING BALANCE OF CENVAT CREDIT OF RS. 58 , 01 , 214/ - WHICH WAS REFLECTED IN ANNEXTURE - 4 OF 3CD REPORT. THIS CLOSING CENVAT CREDIT OF RS . 58 , 01 , 214 WAS ALSO REFLECTED UNDER T HE SHORT TERM LOANS AND ADVANCES. THE ASSESSING OFFICER HAD ADDED THE CENVAT CREDIT OF RS. 57,95,447/ - PERTAINING TO THE REVENUE ITEM ON THE GRO UND THAT ASSESSEE HAS NOT VALUED THE CLOSING STOCK AS PER INCLUSIVE METHOD AS REQUIRED U/S. 145A OF THE ACT. WE FURTHER OBSERVED THE ASSESSEE HA D INCLUDED THE ENTIRE EXCISE REALIZED ON SALES IN THE TOTAL SALE VALUE. IT HAD ALS O INCLUDED THE I.T.A NO. 3653 /AHD/20 15 A.Y. 2012 - 13 PAGE NO DCIT VS. M/S. CORUS DCOR PVT. LTD. 4 PART OF THE EXCIS E DUTY IN THE PURCHASES WHICH HAS BEEN UTILIZED OUT OF THE MODVAT CREDIT AND THE REMAINING BALANCE HAS BEEN SHOWN IN T HE BALANCE SHEET. WE OBSERVE THAT ABOVE METHOD OF ACCOUNTING HAS BEEN REGULARLY EMPLOYED BY THE ASSESSEE. THE UN UTILIZED MODVAT CREDIT IS BEING ADJUSTED AGAINST THE FUTURE EXCISE DUTY LIABILITY. IN CA SE IT IS ADDED TO THE VALUE OF CLOSING STOCK , IT WOULD RESULT IN INCREASING THE VALUE OF OPENING STOCK OF THE NEXT ACCOUNTING PERIOD. CONSIDERING THE ABOVE, WE UPHOLD THE DECISION O F THE LD. CIT(A) . A CCORDINGLY, THE APPEAL OF THE REVENUE IS DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 15 - 02 - 201 8 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 15 /02 /2018 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUA RD FILE. BY ORDER/ , / ,