DCIT 10(2), MUMBAI V. KOCH CHEMICAL TECHNOLOGY GROUP INDIA P.LTD, MUMBAI

ITA 3994/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55652 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 27-10-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 17-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K N KUTTY

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A : MUMBAI BEFORE SHRI D.K. AGARWAL, ( JUDICIAL MEMBER) AND SHRI RAJENDRA SINGH,(ACCOUNTANT MEMBER) ITA NO.3994/MUM/2010 ASSESSMENT YEAR : 2005-06 THE ACIT -10(2) ROOM NO.432, 4 TH FLOOR AAYAKAR BHAVAN, MK ROAD MUMBAI-400 020. ..( APPELLANT ) VS. M/S. KOCH CHEMICAL TECHNOLOGY GROUP INDIA P. LTD. (FORMERLY M/S. KOCH GLITSCH INDIA PVT. LTD.) 41 & 42, KALPATARU COURT, 4 TH FLOOR C.G. MARG, CHEMBUR MUMBAI-400 074. ..( RESPONDENT ) P.A. NO. (AABCK 3688 G) APPELLANT BY : SHRI K.N. KUTTY RESPONDENT BY : NONE DATE OF HEARING : 27.10.2011 DATE OF PRONOUNCEMENT : 27 TH OCTOBER, 2011 O R D E R PER RAJENDRA SINGH (AM). THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 3.3.2010 OF CIT(A) FOR THE ASSESSMENT YEAR 2005-06. THE ONLY DISPUTE RAISED BY THE REVENUE IN THIS APPEAL IS REGARDING ADDITION ON ACCOUNT OF ADJUSTMENT UNDER SECTION 145A OF THE INCOME TAX ACT. 2. THE AO DURING THE ASSESSMENT PROCEEDINGS NOTED T HAT THE ASSESSEE WAS FOLLOWING EXCLUSIVE METHOD OF ACCOUNTING IN RES PECT OF CENVAT / EXCISE ITA NO. 3994/M/10 A.Y:05-06 2 DUTY WHICH WAS NOT INCLUDED IN THE CLOSING STOCK. THE AO REFERRED TO THE PROVISIONS OF SECTION 145A AS PER WHICH ADJUSTMENT TO CLOSING STOCK WAS REQUIRED TO BE MADE ON ACCOUNT OF ANY TAX, DUTY, CE SS OR FEES. THE CENVAT RELATABLE TO THE CLOSING STOCK AS ON 31.3.2005 WAS RS.58,49,797/- AND THAT RELATABLE TO OPENING STOCK AS ON 31.3.2004 WAS RS.4 5,43,602/-. THE AO, THEREFORE, MADE AN ADDITION OF RS.13,06,195/- BEING DIFFERENCE OF CLOSING STOCK AND OPENING STOCK. IN APPEAL CIT(A) OBSERVED THAT UNDER THE PROVISIONS OF SECTION 145A ADJUSTMENT ON ACCOUNT OF TAX DUTY ETC. WAS REQUIRED TO BE MADE NOT ONLY IN RESPECT OF INVENTOR IES BUT ALSO IN RESPECT OF PURCHASES AND SALES OF GOODS WHICH THE AO HAD NOT C ONSIDERED. HE ALSO REFERRED TO TAX AUDIT REPORT IN WHICH IT WAS EXPLAI NED THAT IN CASE CENVAT/EXCISE DUTY WAS CONSIDERED WHILE VALUING THE PURCHASE AND SALES OF GOODS AND INVENTORIES THERE WOULD BE NO IMPACT ON P &L ACCOUNT AND NET PROFIT WILL BE THE SAME BOTH UNDER THE INCLUSIVE ME THOD AND UNDER EXCLUSIVE METHOD. CIT(A) ACCORDINGLY DIRECTED AO TO DELETE T HE ADDITION MADE AGGRIEVED BY WHICH, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 3. AT THE TIME OF HEARING OF THE APPEAL, NO ONE APP EARED ON BEHALF OF THE ASSESSEE THOUGH THE NOTICE HAD BEEN SERVED WELL IN ADVANCE. WE, THEREFORE, PROCEED TO DECIDE THE APPEAL ON THE BASIS OF MATERI AL AVAILABLE ON RECORD AND AFTER HEARING THE LD. DR WHO PLACED RELIANCE ON THE ORDER OF THE AO. 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE M ATTER CAREFULLY. THE DISPUTE IS REGARDING ADDITION ON ACCOUNT OF CENVAT/ EXCISE DUTY NOT INCLUDED IN THE CLOSING STOCK. THERE IS NO DISPUTE THAT THE AS SESSEE WAS FOLLOWING ITA NO. 3994/M/10 A.Y:05-06 3 EXCLUSIVE METHOD OF ACCOUNTING IN WHICH CENVAT/EXCI SE DUTY WERE SHOWN SEPARATELY AND NOT ROUTED THROUGH TRADING ACCOUNT. FURTHER UNDER PROVISIONS OF SECTION 145A, THE VALUATION OF PURCHASE AND SALE OF GOODS AND INVENTORY FOR THE PURPOSE OF COMPUTING PROFIT HAS TO BE MADE IN ACCORDANCE WITH THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSE SSEE AND FURTHER ADJUSTMENT IS REQUIRED TO BE MADE IN RESPECT OF ANY TAX, DUTY, CESS OR FEE ACTUALLY PAID OR INCURRED BY THE ASSESSEE TO BRING GOODS TO PLACE OF LOCATION AS ON THE DATE OF VIOLATION. THEREFORE, ADJUSTMENT ON ACCOUNT OF CENVAT/EXCISE DUTY IS REQUIRED TO BE MADE NOT ONLY IN OPENING STOCK AND IN CLOSING STOCK BUT ALSO TO PURCHASES AND SALES. THE REFORE, ORDER OF AO MAKING ADJUSTMENT ONLY TO OPENING STOCK AND CLOSING STOCK CAN NOT BE SUSTAINED. HOWEVER, CIT(A) HAS DELETED THE ADDITION ONLY ON THE BASIS OF AUDITORS REPORT WHICH STATED THAT EVEN BY FOLLOWING EXCLUSIVE METHO D THERE WILL BE NO NET ADDITION TO THE PROFIT ON ACCOUNT OF TAX. THIS ASP ECT HAS NOT BEEN VERIFIED EITHER BY AO OR CIT(A). WE, THEREFORE, SET ASIDE T HE ORDER OF CIT(A) AND RESTORE BACK THE MATTER TO THE FILE OF AO FOR PASSI NG A FRESH ORDER AFTER NECESSARY VERIFICATION AND AFTER ALLOWING OPPORTUNI TY OF HEARING TO THE ASSESSEE. 5. IN THE RESULT APPEAL OF THE REVENUE IS ALLOWED F OR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 27.10.2011. SD/- SD/- (D.K. AGARWAL) (RAJENDRA SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 27.10.2011. JV. ITA NO. 3994/M/10 A.Y:05-06 4 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.