DCIT, Circle- 11(1), New Delhi V. Halla Visteon Climate Systems India Ltd., Bhiwadi

ITA 4061/DEL/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4330 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 19-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AGAINST DATED PASSED
• Section: 143(3); 143(2); 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: C, NEW DELHI BEFORE SHRI O.P. KANT, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.4061/DEL./2017 ASSESSMENT YEAR: 2010-11 DCIT, CIRCLE-11(1), NEW DELHI VS. M/S. HALLA VISTEON CLIMATE SYSTEMS INDIA LTD., SP-812A, INDUSTRIAL AREA, PHASE-II, BHIWADI, RAJASTHAN PAN :AAACC1074D (APPELLANT) (RESPONDENT) ORDER PER O.P. KANT, AM: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER DATED 15/02/2017 PASSED BY THE LEARNED CIT(APPEALS) -39, NEW DELHI [IN SHORT THE LD. CIT(A)] FOR ASSESSMENT YE AR 2010-11 RAISING FOLLOWING GROUNDS: 1. WHETHER ON THE FACTS & CIRCUMSTANCES OF THE CASE , THE LEARNED CIT(A) IS CORRECT IN DELETING THE ADDITION OF RS.3, 74,11,219/- ON ACCOUNT OF DIFFERENCE IN TRADING ACCOUNT IGNORING T HE FACT THAT THE ASSESSEE HAS FAILED TO REFLECT CORRECT INCOME AS PE R MEMORANDUM OF TRADING ACCOUNT AS PER PROVISIONS OF SECTION 145 A OF THE IT ACT, 1961. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LEARNED CIT(A) IS CORRECT IN EXCLUDING THE DUTY/CESS/FEES I N THE APPELLANT BY SHRI S.N. MEENA, SR.DR RESPONDENT BY SHRI ROHIT TIWARI, ADV. SHRI K.N. GUPTA DATE OF HEARING 20.02.2020 DATE OF PRONOUNCEMENT 24.02.2020 2 ITA NO. 4061/DEL./2017 MEMORANDUM TRADING ACCOUNT IGNORING THE PROVISIONS OF SECTION 145A OF THE I.T. ACT, 1961. 3. THE APPELLANT CRAVES LEAVE, TO ADD, ALTER OR AME ND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF THE HEARING. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSE SSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE O F RADIATORS, IN COOLING MODULES AND INTERCOOLERS. THE ASSESSEE F ILED RETURN OF INCOME ON 15/10/2000 AND DECLARING INCOME OF 24,66,84,120/- THE CASE WAS SELECTED FOR SCRUTINY ASSESSMENT AND N OTICE UNDER SECTION 143(2) OF THE INCOME-TAX ACT, 1961 (IN SHOR T THE ACT) WAS ISSUED AND COMPLIED WITH. IN THE SCRUTINY ASSESSMEN T COMPLETED UNDER SECTION 143(3) OF THE ACT ON 24/03/2014, THE ASSESSING OFFICER MADE CERTAIN ADDITIONS/DISALLOWANCES. THE F URTHER APPEAL FILED BY THE ASSESSEE WAS ALLOWED PARTLY BY THE LD. CIT(A) VIDE IMPUGNED ORDER DATED 15/02/2017. AGGRIEVED, THE REV ENUE IS IN APPEAL BEFORE THE TRIBUNAL RAISING THE GROUNDS AS R EPRODUCED ABOVE. 3. BEFORE US, THE LEARNED DR RELIED ON THE ORDER OF T HE ASSESSING OFFICER AND SUBMITTED THAT ADDITION IN DI SPUTE MIGHT BE SUSTAINED. 4. ON THE CONTRARY, THE LEARNED COUNSEL OF THE ASSESS EE FILED A COPY OF THE TAX AUDIT REPORT IN THE CASE OF THE ASS ESSEE AND REFERRED TO THE APPENDIX -II OF THE SAID REPORT, WH ICH IS THE STATEMENT SHOWING DETAILS OF EFFECT OF INCLUSIVE AN D EXCLUSIVE METHOD FOR VALUATION OF THE STOCK ON THE PROFIT AND LOSS ACCOUNT. THE LEARNED COUNSEL SUBMITTED THAT PROFIT BEFORE TA X IN BOTH THE INCLUSIVE AND EXCLUSIVE METHOD OF THE VALUATION IS SAME AND THEREFORE NO ADDITION WAS JUSTIFIED. HE ALSO SUBMIT TED THAT THE IDENTICAL ISSUE WAS RAISED IN EARLIER ASSESSMENT YE AR 2008-09 AND 3 ITA NO. 4061/DEL./2017 2009-10 AND THE TRIBUNAL IN ITA NO. 903 AND 995/DEL /2013 HAS ALLOWED IN FAVOUR OF THE ASSESSEE. 5. WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE ISSUE IN DISPU TE INVOLVED IN THE CASE IS WHETHER THERE ANY DIFFERENCE IN VALUATI ON OF THE STOCK AS COMPARED TO EXCLUSIVE METHOD, IF INCLUSIVE METHO D IS ADOPTED FOR VALUATION OF THE STOCK. THE LD. CIT(A) HAS ADJU DICATED THE ISSUE IN DISPUTE AND DELETED THE ADDITION OF 3,74,11,219/-. THE RELEVANT FINDING OF THE LD. CIT(A) IS REPRODUCED AS UNDER: 5.5 COMING TO THE GROUND AT (C) ABOVE WITH RESPECT TO THE DISALLOWANCE ON ACCOUNT OF THE DIFFERENCE IN TRADIN G ACCOUNT U/S 145A IN THE IMPUGNED ORDER, IT IS OBSERVED THERE FR OM THAT IT IS MENTIONED, INTER ALIA, ...THE ASSESSEE HAS FAILED TO REFLECT INCOME AS PER MEMORANDUM OF TRADING ACCOUNT AS ABOVE. THE PLE A OF THE ASSESSEE THAT DUTY EXPENSES WERE UTILIZED CANNOT BE ACCEPTED BECAUSE AS PER PROVISIONS OF SECTION 145A, OPENING STOCK, PURCHASES, SALES AND CLOSING STOCK WILL INCLUDE DUT Y/CESS/FEE ETC. AND ACCORDINGLY IN MEMORANDUM TRADING ACCOUNT ALL T HE HEAD OF TRADING ACCOUNT INCLUDES DUTY /CESS / FEE IN OTHER WORDS ALL THE ITEMS OF ORIGINAL TRADING ACCOUNT INCLUDES DUTY EIT HER IN CREDIT SIDE OR IN DEBIT SIDE AND AFTER INCLUSION OF DUTY IN ALL TH ESE ITEMS THE GROSS PROFIT OF THE ASSESSEE COMES MORE BY RS.37411219/- AND WHICH IS CLEARLY INCOME OF THE ASSESSEE U/S 145A. THEREFORE THE PLEA OF THE ASSESSEE ON THIS ACCOUNT CANNOT BE ACCEPTED. IN THE CASE OF CIT VS BRITISH PAINTS INDIA LIMITED (1991) 188 ITR 44 THE HONBLE SUPREME COURT HELD AS UNDER: IN THE VALUATION OF CLOSING STOCK OF GOOD-IN-PROCES S OR FINISHED GOODS, ALL OVERHEAD EXPENSES, BESIDES THE COST OF R AW MATERIAL, HAD TO BE ADDED. IF ANY SYSTEM OF ACCOUNT ING EXCLUDED THESE EXPENSES, IT WILL RESULT IN DISTORTE D PICTURE OF PROFITS AS THE PROFIT OF ONE YEAR WAS LIKELY TO BE SHIFTED TO ANOTHER YEAR. EACH YEAR BEING A SELF-CONTAINED UNIT UNDER THE INCOME TAX ACT, IT WAS NOT ONLY THE RIGHT BUT THE D UTY OF THE ASSESSING AUTHORITY TO DETERMINE WHAT WOULD BE THE CORRECT INCOME OF THE RELEVANT YEAR. IN VIEW OF THE POSITION EXPLAINED ABOVE AN AMOUNT O F RS.3,74,11,219/- IS HEREBY DISALLOWED... FROM THE EXTRACT TAKEN FROM THE IMPUGNED ORDER, IT IS OBSERVED THAT THE REASON BEHIND THE ALLOWANCE IS THE DIFFERE NCE IN THE TRADING ACCOUNT U/S 145A OF THE ACT - THERE IS A DIFFERENCE IN THE PROFIT 4 ITA NO. 4061/DEL./2017 BETWEEN THE TRADING ACCOUNT COMPUTED UNDER THE EXCL USIVE METHOD WHEREIN DUTY IS NOT INCLUDED IN THE VALUE OF AN EXP ENDITURE OR INVENTORY OR SALE OR CLOSING STOCK AND UNDER THE IN CLUSIVE METHOD DUTY IS INCLUDED; THE SANCTITY OF THE ACCOUNT WILL REMAIN ONLY IF UNDER BOTH METHODS, THE RESULTS (PROFITS) ARE SAME. 5.6 FROM THE SUBMISSION OF THE AR OF THE APPELLANT IT IS OBSERVED THAT IN THE CALCULATION MENTIONED IN THE IMPUGNED O RDER, ARITHMETICAL ERRORS HAVE CREPT IN INADVERTENTLY WHEREBY THE DIFF ERENCE IN PROFIT HAS ARISEN IN THE TRADING ACCOUNTS BETWEEN BOTH MET HODS. ALSO, OTHER MISTAKES POINTED OUT DURING THE APPEAL HEARIN G APPEAR PLAUSIBLE AS THESE DO APPEAR IN THE CALCULATIONS CO NTAINED IN THE IMPUGNED ORDER TOTALING ERROR - TOTAL ON BOTH DEBIT AND CREDIT SIDE DOES NOT MATCH PAYMENT OF EXCISE DUTY A/A T NOT CONSIDERED UNDE R INCLUSIVE METHOD INCREASE IN SALES ON CREDIT SIDE BY INCLUDING SA LES TAX NOT DONE CLOSING STOCK OF FINISHED GOODS MENTIONED TWICE (CLOSING STOCK AND WIP) ON RECTIFYING THE AFOREMENTIONED ERRORS, THE FIGURE S FOR THE GP TALLY WITH THAT DISCLOSED IN THE RETURN OF INCOME THEREBY QUASHING THE THEORY OF CONCEALMENT IN THE IMPUGNED ORDER. ACCORD INGLY, THE CONTENTION OF THE APPELLANT, BORNE OUT FROM RECORDS AND IN ACCORDANCE WITH THE EXTANT LAW, THE DISALLOWANCE OF RS.3,74,11,219/- MADE ON THIS POINT IN THE IMPUGNED ORDER, IS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 5.1 BEFORE US, THE LEARNED COUNSEL HAS REFERRED TO THE RELEVANT PAGES OF THE TAX AUDIT REPORT, WHEREIN THE TAX AUDI TOR HAS ANALYSED THE INCLUSIVE AS WELL AS EXCLUSIVE METHOD OF VALUATION AND THE IMPACT ON THE PROFIT AND LOSS ACCOUNT. THE RELEVANT PART OF THE TAX AUDIT REPORT (SUPRA) FILED BY THE LEARNE D COUNSEL IS REPRODUCED AS UNDER: 5 ITA NO. 4061/DEL./2017 6 ITA NO. 4061/DEL./2017 5.2 THE LEARNED AUDITOR HAS POINTED OUT THAT THERE IS NO DIFFERENCE IN THE PROFIT BEFORE TAX IN BOTH THE INC LUSIVE AND EXCLUSIVE METHOD OF INDIRECT TAXES/DUTY/CESS/FEE ET C. FOR VALUATION OF THE STOCK. 5.3 THE TRIBUNAL IN THE CASE OF THE ASSESSEE IN ASSESS MENT YEAR 2008-09 AND 2009-10 IN ITA NO. 903 AND 995/DEL/2013 , HAS ON THE BASIS OF THE REPORT OF THE TAX AUDITOR UPHELD T HE ORDER OF THE LD. CIT(A). THE RELEVANT FINDING OF THE TRIBUNAL IS REPRODUCED AS UNDER: 7. ON CONSIDERING RIVAL CONTENTIONS, WE FIND THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS EXAMINED T HE FACTUAL MATRIX AND HAS GRANTED RELIEF TO THE ASSESSEE. THE EXERCISE AS TO WHETHER AN ADJUSTMENT/ADDITION IS REQUIRED CONSEQUE NT TO COMPUTATION OF INCOME BY APPLYING INCLUSIVE METHOD AS REQUIRED U/S 145A, WAS EXAMINED BY THE TAX AUDITOR AND THIS REPO RT WAS ACCEPTED BY THE LEARNED CIT(A). UNDER THESE CIRCUMS TANCES, WE SEE NO REASON AS TO WHY THE ISSUE SHOULD BE SENT BACK T O THE ASSESSING OFFICER FOR FRESH VERIFICATION. IN THE RESULT, THE FINDING OF THE FIRST APPELLATE AUTHORITY IS UPHELD AND THAT OF THE ASSES SING OFFICER IS DISMISSED. 5.4 IN VIEW OF THE IDENTICAL ISSUE OF VALUATION OF THE STOCK AND ADDITION UNDER SECTION 145A OF THE ACT INVOLVED, RE SPECTFULLY FOLLOWING THE FINDING OF THE TRIBUNAL (SUPRA), WE A RE OF THE VIEW THAT THAT NO ADDITION IS REQUIRED UNDER SECTION 145 A OF THE ACT FOLLOWING THE INCLUSIVE METHOD. THE FINDING OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE IS UPHELD. THE GROUND NOS. 1 & 2 OF THE APPEAL OF THE REVENUE ARE ACCORDINGLY DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH FEBRUARY, 2020. SD/- SD/- ( KULDIP SINGH ) ( O.P. KANT ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 24 TH FEBRUARY, 2020. 7 ITA NO. 4061/DEL./2017 RK/- (D.T.D.S.) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI