L & T CONSTRUCTION EQUIPMENT LTD, MUMBAI V. JT CIT (OSD) 2(2), MUMBAI

ITA 3801/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8074 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 27-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUM BAI , , BEFORE S/SHRI RAJENDRA, A.M. AND SANJAY GARG,J.M. ./ ././ ./ ITA NO.3801/MUM/2014 / ASSESSMENT YEAR: 2005-06 L&T CONSTRUCTION EQUIPMENT LTD. (FORMERLY L&T KOMATSU LTD.);TAXATION DEPARTMENT , L&T HOUSE, N.M. MARG, BALLARD ESTATE, MUMBAI-400 001. PAN: AAACL 4175 C VS. JT. CIT (OSD)-2(2) AAYAKAR BHAVAN, M.K. MARG MUMBAI-400 020. ( / // / APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI RAJESH KUMAR YADAV ASSESSEE BY: SHRI VIJAY MEHTA / // / DATE OF HEARING: 18.01.2017 !'#$ / DATE OF PRONOUNCEMENT: 09.03.2017 , ,, , 1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) , ,, , -PER RAJENDRA,AM: CHALLENGING THE ORDERS,DATED 20/03/2014 OF THE CIT( A)-5,MUMBAI THE ASSESSE HAS FILED THE PRESENT APPEAL.ASSESSEE-COMPANY,CARRYING ON BUSINES S MANUFACTURING OF CONSTRUCTION EQUIPMENTS,FIELD ITS RETURN OF INCOME ON 26/10/2005 ,DECLARING TOTAL INCOME AT RS.23.13 LAKHS UNDER THE NORMAL PROVISIONS AND BOOK PROFIT OF RS. 28.46 CRORES U/S.115JB OF THE ACT. THE ASSESSING OFFICER (AO) COMPLETED THE ASSESSMENT ON 12/12/2008 AT TOTAL INCOME OF RS. 23.13 LAKHS UNDER NORMAL PROVISIONS OF THE ACT. THE BOOK PROFITS WERE ASSESSED AT RS. 28.46 CRORES U/S.115 JB. BRIEF FACTS: 2. EFFECTIVE GROUND OF APPEAL IS ABOUT ADJUSTMENT TO B E MADE ON ACCOUNT OF ON UTILISED CENVAT CREDIT TO THE VALUE OF CLOSING STOCK U/S.145A OF TH E ACT. AFTER GOING THROUGH THE ASSESSMENT ORDER PASSED BY THE AO, ON 12/12/2008, U/S.143 (3), THE CIT- 2, MUMBAI OBSERVED THAT SAME WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF RE VENUE. A REVISIONARY ORDER, U/S.263 OF THE ACT,WAS PASSED ON 13/09/2010. IN HIS ORDER, HE OBSE RVED THAT THE AO HAD FAILED TO MAKE ADDITION ON ACCOUNT OF CENVAT CREDIT ATTRIBUTABLE T O THE CLOSING STOCK OF RAW MATERIAL OF RS.10.26 CRORE. HE DIRECTED THE AOS TO REDO THE AS SESSMENT AS PER LAW.ACCORDINGLY,THE AO COMPLETED THE ASSESSMENT U/S.143 (3) R.W.S.263 ON 1 4/12/2011.WHILE COMPLETING THE ASSESSMENT,HE MADE AN ADDITION OF RS.10.26 CRORES T O THE TOTAL INCOME ON ACCOUNT OF THE CENTVAT CREDIT ATTRIBUTABLE TO THE CLOSING STOCK. 3801/M/14(05-06)- L&T CONSTRUCTION EQUIPMENT LTD. 2 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM,IT MADE ELABORA TE SUBMISSIONS AND FILED RECONCILIATION STATEMENT ABOUT IMPACT OF EXCLUSIVE METHOD.FOLLOWIN G CHART WAS FURNISHED BY THE ASSESSEE : PARTICULARS IMPACT ON BOOK PROFIT INCREASE [RS.] REDUCTION [RS.] 1.CENVAT CREDIT: 1.ATTRIBUTABLE TO OPENING STOCK NOT INCLUDED IN STOCK VALUE 6,03,95,045 2.AVAILED CREDIT TO PURCHASE 37,80,65,808 3.ATTRIBUTABLE TO CLOSING STOCK NOT INCLUDED IN STOCK VALUE 10,26,62,648 4.ATTRIBUTABLE TO CONSUMPTION NOT REDUCED FROM PURCHASES 33,57,98,205 43,84,60,853 43,84,60,853 NET IMPACT NIL IT WAS FURTHER CONTENDED THAT THE ADJUSTMENT MANDAT ED BY SECTION 145 A OF THE ACT WERE REVENUE NEUTRAL,THAT THE EXCLUSIVE METHOD ADOPTED B Y IT WAS AS PER THE AS-2 ISSUED BY THE ICAI,THAT THE UNUTILIZED CENVAT CREDIT OF RS.31.03. 2005,AMOUNTING TO RS. 1.29 CRORES WAS FORMING PART OF BALANCE WITH CUSTOMERS UNDER THE SC HEDULE LOAN AND ADVANCES,THAT THE AO HAD WRONGLY ADDED RS. 10.26 CRORES. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE FAA HELD THAT THE ASSESSEE HAD ARGUED THAT THERE WAS NO IMPACT ON THE PROFIT FOR THE YEAR UNDER CONSIDERATION DUE TO THE METHOD FOLLOWED BY IT REGARDING CENVAT CREDIT AND THAT THE CLAIM WAS NOT VERIFIABLE.HE REFERRED TO THE ANNEXTURE-3 OF CLAUSE 12 TO THE AUDIT REPORT IN FOR M 3CD AND OBSERVED THAT CENVAT CREDIT ATTRIBUTABLE TO CONSUMPTION HAD BEEN WORKED OUT AT RS. 33.57 CRORE, THAT SAME WAS THE BALANCING FIGURE THAT ONE WOULD ARRIVE AT BY ADDING THE CENVAT CREDIT ATTRIBUTABLE TO OPENING STOCK AND PURCHASES AND REDUCING THEREFROM THAT ATT RIBUTABLE TO CLOSING STOCK, THAT THE AO HAD NOT COMPUTED THE IMPACT CORRECTLY, THAT HE HAD LIMI TED HIS EXERCISE ONLY BY TAKING INTO ACCOUNT THE CENVAT CREDIT ATTRIBUTABLE TO CLOSING S TOCK ONLY.HE DIRECTED THE ASSESSEE O RECAST THE P&L ACCOUNT BY INCLUSIVE METHOD OF ACCOUNTING A FTER INCLUDING CENVAT ON SALES AND CONSUMPTION AND TO WORK OUT THE IMPACT ON PROFIT.AS PER THE FAA THE ASSESSEE SHOWED HIS INABILITY TO PREPARE SUCH A STATEMENT.HE HELD THAT SECTION 43 WOULD BE APPLICABLE TO RS.16.88 CRORES (EXCISE DUTY).ACCORDINGLY HE PREPARED A CHAR T SHOWING THE IMPACT OF CENVAT ON PROFIT CENVAT ATTRIBUTABLE TO CONSUMPTION 33,57,98,205 CENVAT ATTRIBUTABLE TO SALES 53,72,77,536 EXCISE DUTY PAYABLE 16,88,17,723 3801/M/14(05-06)- L&T CONSTRUCTION EQUIPMENT LTD. 3 IN CASH [OVER AND ABOVE THE CENVAT CREDIT AVAILED] IMPACT ON PROFIT 3,26,61,608 53,72,77,536 53,72,77,536 FINALLY HE HELD THAT IF INCLUSIVE METHOD WAS APPLIE D THE TOTAL PROFIT WOULD INCREASE BY RS.2.36 CRORES AND DIRECTED THE AO TO VERIFY THE FIGURES.TH US THE ADDITION WAS REDUCED TO RS.3.26 CRORES AS AGAINST RS.10.26CRORES. 4. DURING THE COURSE OF HEARING BEFORE US,THE AUTHORIS ED REPRESENTATIVE (AR) ARGUED THAT ASSESSEE WAS FOLLOWING EXCLUSIVE METHOD WITH REGARD TO CENVAT CREDIT,THAT THE AO AND THE FAA HAD TAKEN A WRONG FIGURE OF RS.16.88 CRORES FOR CENVAT CREDIT PURPOSES,THAT THE ACTUAL FIGURE WAS RS.23.22 CRORES, THAT THE ASSESSEE HAD P AID EXCISE DUTIES ON VARIOUS DATES.HE REFERRED TO THE PAGE NO.1 TO 12 OF THE PAPER BOOK EVIDENCING THE PAYMENT OF EXCISE DUTY.HE FURTHER STATED THAT MATTER NEEDS VERIFICATION AT TH E END OF DEPARTMENTAL AUTHORITIES.THE DEPARTMENTAL REPRESENTATIVE (DR) LEFT THE ISSUE TO THE DISCRETION OF THE BENCH. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL BEFORE US.WE FIND THAT THE FAA HAS HELD THAT THERE WAS FALLACY IN THE ARGUMENT OF REVENUE NEUTRALITY, THAT HE HAD REDUCED THE ADDITION FROM RS.10.26 CRORES TO RS. 3. 26 CRORES ,THAT THE FACT OF PAYMENT OF EXCISE DUTY HAS NOT BEEN CONSIDERED BY THE AO/FAA.W E ARE OF THE OPINION THAT CONSIDERING THE PECULIAR FACTS OF THE CASE,THE MATTER SHOULD BE RESTORED BACK TO THE FILE OF AO FOR FRESH ADJUDICATION,IN THE INTEREST OF JUSTICE.HE IS DIREC TED TO VERIFY THE FIGURE AS TO WHETHER THE FIGURE SHOULD BE TAKEN AT RS.16.88 CRORES OR RS.23. 33CRORES IN THE TABLE APPEARING AT PAGE -15 OF THE ORDER OF THE FAA.HE IS FURTHER DIRECTED TO A FFORD A REASONABLE OPPORTUNITY TO THE ASSESSEE,WHO WOULD PLACE ALL THE NECESSARY AND RELE VANT DOCUMENTS BEFORE THE AO. EFFECTIVE GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE ASSES SEE,IN PART. AS A RESULT, APPEAL FILED BY THE ASSESSEE STANDS PA RTLY ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 09 TH MARCH, 2017. 09 2017 SD/- SD/- ( /SANJAY GARG) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 09.03.2017. JV.SR.PS. 3801/M/14(05-06)- L&T CONSTRUCTION EQUIPMENT LTD. 4 / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.