The ITO, Ward-3, Mehsana V. M/s. Ikon Multipack, Gandhinagar

ITA 438/AHD/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6109 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2005-2006
• Appeal Filed On: 17-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAVDR
• Assessee Lawyers: TUSHAR P HEMANIAR
• Keywords: Principle of natural justice; Reassessment proceedings; Set aside
• Section: 43B; 143(3); 147; 145; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, D BENCH (BEFORE S/SHRI MUKUL SHRAWAT, JM & A.N. PAHUJA,AM ITA NO.438/AHD/2011 [ASSTT. YEAR : 2005-2006] ITO, WARD-3 MEHSANA. VS. M/S IKON MULTIPACK 816/1, PRAMUKH ESTATE, RAKHANPUR TAL. KALOL [PAN : AABFI 5024 K] (APPELLANT) (RESPONDENT) REVENUE BY : SHRI B.L. YADAV,DR ASSESSEE BY : SHRI TUSHAR P. HEMANI,AR O R D E R A.N. PAHUJA: THIS APPEAL BY THE REVENUE AGAINST AN ORDER DATED 25.11.2010 OF THE LD. CIT(APPEALS), GANDHINAGAR ,RA ISES THE FOLLOWING GROUNDS: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.13,67,447/- MADE UNDER SECTION 145 O F THE IT ACT, 1961. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. 3. IT IS, THEREFORE, PRAYED THAT ORDER OF THE LEARNED CIT(APPEALS) MAY BE SET ASIDE AND THAT OF THE AO BE RESTORED TO THE ABO VE EXTENT. 2. FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT ASSESSMENT IN THIS CASE WAS COMPLETED U/S 143(3) OF THE INCOME-TAX ACT,196 1[HEREINAFTER REFERRED TO AS THE ACT] ON 9.7.2007 ,DETERMINING TOTAL INCOME OF RS.59,620/-. THEREAFTER IT TRANSPIRED THAT UNUTILIZED CENVAT/MODVAT CREDIT OF RS.13,67,447/- WAS NOT CREDITED TO PROFIT & LOSS ACCOUNT IN TERMS OF P ROVISIONS OF SECTION 145A OF THE ACT. ACCORDINGLY, THE ASSESSMENT WAS REOPENED UNDER SECTION 147 OF THE ACT WITH THE SERVICE OF A NOTICE U/S 148 OF THE ACT ON 2.4.2009. IN RESPONSE , THE ASSESSEE SUBMITTED THAT RETURN FILED ORIGINALLY MAY BE TREATED AS RETURN IN RESPONSE TO NOTICE U/S 148 OF THE ACT. DURING THE C OURSE OF REASSESSMENT PROCEEDINGS, THE ASSESSEE SUBMITTED DETAILS OF PU RCHASES, SALES AND STOCK AFTER INCLUDING EXCISE DUTY AS UNDER: ITA NO.438/AHD/2011 -2- INCREASE IN PROFIT[IN RS.] DECREASE IN PROFIT[IN RS.] INCREASE IN OPENING STOCK AS A RESULT OF INCLUSION OF EXCISE DUTY ON WHICH CENVAT CREDIT WAS AVAILABLE/AVAILED - 7,85,668 INCREASE IN COST OF RAW MATERIAL ON INCLUSION OF EXCISE DUTY ON WHICH CENVAT CREDIT WAS AVAILABLE/AVAILED - 30,06,736 INCREASE IN SALES OF FINISHED GOODS ON INCLUSION OF EXCISE DUTY 24,24,957 - INCREASE IN CLOSING STOCK OF RAW MATERIAL ON INCLUSION OF EXCISE DUTY 13,67,447 37,92,404 37,92,404 SINCE THE ASSESSEE FAILED TO RECONCILE THE DIFFEREN CE OF RS.13,67,447/- NOR CONSIDERED IMPACT OF EXCISE DUTY ON CLOSING INVENTO RY OF FINISHED GOODS, THE AO ADDED THE AFORESAID AMOUNT OF RS. 13,67,447/- TO WARDS THE CLOSING STOCK. 3. ON APPEAL, THE ASSESSEE SUBMITTED BEFORE THE LD. CIT(A) AS UNDER: '4.7 THE APPELLANT MOST RESPECTFULLY SUBMITS THAT A S PER THE GUIDELINES ISSUED BY INSTITUTE OF CHARTERED ACCOUNT ANT'S OF INDIA, THE APPELLANT CAN HAVE. EITHER INCLUSIVE METHOD' FO R ACCOUNTING ENTRIES WITH REGARD TO MODVAT OR 'EXCLUSIVE METHOD' . IT IS EXPLAINED THAT IN THE 'INCLUSIVE METHOD' THE PURCHA SE OF RAW MATERIAL DEBITED IN THE BOOKS OF ACCOUNTS IS INCLUS IVE OF THE CORRESPONDING MODVAT ELEMENT .IT IS SUBMITTED THAT IF THE ITA NO.438/AHD/2011 -3- APPELLANT IS FOLLOWING THIS METHOD THEN THE DOSING STOCK HAS TO BE VALUED INCLUSIVE OF MODVAT ELEMENT. ON THE OTHER HA ND, IN THE 'EXCLUSIVE METHOD' THE COST OF RAW MATERIAL DEBITED IN THE PURCHASE ACCOUNT IS NET OF MODVAT ELEMENT. IN THIS SYSTEM, THE APPELLANT HAVE A SEPARATE ACCOUNT FOR ACCOUNTING FO R THE EXCISE DUTY PAYABLE AND THE MODVAT CREDIT AVAILABLE TO IT. THE APPELLANT SUBMITS THAT IF THE APPELLANT IS FOLLOWIN G THIS METHOD OF ACCOUNTING THEN THE CLOSING STOCK HAS TO BE VALUED EXCLUSIVE OF MODVAT ELEMENT. IT IS HOWEVER, EXPLAINED THAT IN EI THER OF THE METHODS ADOPTED AS ABOVE, THE PROFIT OF THE APPELLA NT WOULD NOT CHANGE. IT IS MOST RESPECTFULLY SUBMITTED THAT THOU GH THE APPELLANT WAS FOLLOWING 'EXCLUSIVE' METHOD OF ACCOUNTING AND THAT THEREFORE, THE CLOSING STOCK OF THE APPELLANT WAS TO BE VALUED EXCLUDING THE MODVAT ELEMENT,THE PROFIT OF THE APPELLANT WOULD NO T HAVE CHANGED IF THE APPELLANT HAD CONSIDERED THE INCLUSI VE METHOD. IN THE LATTER CASE, THE CLOSING STOCK WOULD HAVE BE EN VALUED AFTER INCLUDING THE CORRESPONDING MODVAT CLEMENT. F OR THIS CONTENTION PLEASE REFER TO PAGE NO.23 TO 25 OF WRIT TEN SUBMISSION WHICH IS ANNEXURE SHOWING NIL EFFECT ON PROFIT & LO SS ACCOUNT IF THE INCLUSIVE METHOD IS FOLLOWED. IT IS, THEREFORE, SUBMITTED THAT AS THE METHOD ADOPTED BY THE APPELLANT HAD NOT RESULTE D INTO ANY REDUCTION IN THE INCOME OF THE APPELLANT, THERE WAS NO JUSTIFICATION IN THE LEARNED ASSESSING OFFICER MAKI NG ADDITION OF RS.13,67,447/-. IT IS THEREFORE, SUBMITTED THAT THE ADDITION MADE BY THE ID. AO U/S 145A IS REQUIRED TO BE DELETED. T HE APPELLANT ALSO RELIES ON JURISDICTIONAL AHMEDABAD TRIBUNAL OR DER IN THE CASE OF M/S ALPANIL INDUSTRIES BEARING ITA NO.169 & 170/AHD/2005, WHEREIN UNDER IDENTICAL FACTS, THE HO NBLE BENCH HAS DELETED ADDITION U/S 145A MADE BY THE ID. AO. C OPY OF THE SAID ORDER IS ENCLOSED ON PAGE NOS.26 TO 47 OF WRIT TEN SUBMISSION. PLEASE REFER PARA 8 TO 12 PAGES 28 TO 37 OF WRITTEN SUBMISSION. 5. THE APPELLANT MOST RESPECTFULLY SUBMITS THAT ID. AO HAS NOT PROPERLY APPRECIATED AND CONSIDERED VARIOUS SUBMISS IONS, EVIDENCES AND SUPPORTING PLACED ON RECORD DURING THE COURSE O F THE ASSESSMENT PROCEEDINGS AND NOT PROPERLY APPRECIATED VARIOUS FA CTS AND LAW IN ITS PROPER PERSPECTIVE. APPELLANT MOST RESPECTFULLY SUBMITS THAT THIS ACTION OF ID. AO IN NOT APPRECIATING VARIOUS E VIDENCES PLACED BEFORE HIM AND FRAMING ASSESSMENT ORDER WITHOUT REF ERRING TO EVIDENCES PLACED BEFORE HIM IS IN BREACH OF PRINCIP LES OF NATURAL JUSTICE AND THEREFORE DESERVES TO BE QUASHED. 4. IN THE LIGHT OF AFORESAID SUBMISSIONS AND RELYI NG ON DECISION DATED 11- 9-2009 OF THE ITAT, AHMEDABAD IN THE CASE OF M/S.AL PANIL INDUSTRIES VS. ACIT, IN ITA NOS.169 & 170/AHD/2005 , THE LD. CIT(A ) DELETED THE ADDITION IN THE FOLLOWING TERMS: 5.3 I HAVE CONSIDERED THE FACTS OF THE CASE AND TH E SUBMISSION MADE BY THE ITA NO.438/AHD/2011 -4- ASSESSEE. ON THIS ISSUE, THE JURISDICTIONAL TRIBUNA L'S DECISION IN THE CASE OF M/S. ALPANIL INDUSTRIES VS ACIT (ITA NOS. 169 & 170 /AHD/2005 DATED 11/9/2009, AFTER DISCUSSING THE EXCLUSIVE METHOD (A S FOLLOWED BY THE ASSESSEE IN THE INSTANT CASE) AND THE INCLUSIVE MET HOD IS AS FOLLOWS WHICH IS THERE AT PAGE 19 OF THE ORDER: 'WE HAVE GONE THROUGH THE GUIDELINES EXPLAINED BY T HE ICAI AND FIND OURSELVES IN AGREEMENT THEREWITH THAT THERE WILL NOT BE ANY E FFECT ON THE PROFIT OF LOSS ARRIVED AT EITHER BY FOLLOWING INCLUSIVE METHOD OF ACCOUNTING OR EXCLUSIVE METHOD OF ACCOUNTING FOR EXCISE DUTY. THE ONLY EFFECT WILL BE THAT THE EXCISE DUTY PAYABLE ON CLOSING STOCK OF FINISHE D GOODS WILL BE TO THE EXTENT NOT DEPOSITED WITH THE GOVERNMENT BEFORE THE DUE DATE OF FURNISHING OF RETURN WILL BE ADDED TO THE INCOME OF THE ASSESSEE IN VIEW OF PROVISIONS OF SECTION 43B OF THE ACT' THIS IS NOT A CASE WHERE EXCISE DUTY PAYABLE ON CLO SING STOCK, FINISHED GOODS HAS NOT BEEN DEPOSITED TILL THE DATE OF FURNI SHING THE RETURN AND ADDITION U/S. SEC. 43B OF THE ACT IS REQUIRED. THER EFORE, FOLLOWING THE DECISION OF THE HON'BLE TRIBUNAL'S, THE ADDITION MA DE BY THE AO OF RS.13,67,447/- U/S. 145A IS DELETED. 5. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST T HE AFORESAID FINDINGS OF THE LEARNED CIT(A). THE LEARNED DR SUPPORTED TH E ORDER OF THE AO WHILE THE LD. AR ON BEHALF OF THE ASSESSEE RELIED ON THE FINDINGS OF THE LD. CIT(A) . 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE. WE FIND THAT THE CIT(A) WHILE DELETING THE ADDITION MERELY RELIED UPON THE DECISION OF THE ITAT, AHMEDABAD IN THE CASE OF M/S.ALPANIL INDUSTRIES (SUPRA). THE LD. DR APPEARING BEFORE US DID NOT PLA CE ANY MATERIAL, CONTROVERTING THE AFORESAID FINDINGS OF THE LD. CIT (A) NOR BROUGHT TO OUR NOTICE ANY CONTRARY DECISION. IN THESE CIRCUMSTANCES, WE D O NOT FIND ANY MERIT IN THE GROUND NO.1 IN THE APPEAL. CONSEQUENTLY GROUND NO.1 IN THE APPEAL IS DISMISSED. 7. GROUND NOS.2 AND 3 BEING MERE PRAYER NOR ANY SU BMISSIONS HAVING BEEN MADE ON THESE GROUNDS, DO NOT REQUIRE ANY SEPARATE ADJUDICATION AND ARE, THEREFORE, DISMISSED. ITA NO.438/AHD/2011 -5- 8. IN THE RESULT, APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 22 ND JULY, 2011 SD/- S D/- (MUKUL SHRAWAT) JUDICIAL MEMBER (A.N. PAHUJA) ACCOUNTANT MEMBER PLACE : AHMEDABAD DATED : 22-07-2011 COPY OF THE ORDER FORWARDED TO: 1) : M/S IKON MULTIPACK,816/1, PRAMUKH ESTATE, RAKHANPUR,TAL. KALOL 2) : ITO, WARD-3,MEHSANA. 3) : CIT(A) -GANDHINAGAR 4) : CIT CONCERNED 5) : DR, D BENCH,ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD