Asstt.Commissioner of Income Tax, C-4(1), Chandigarh V. M/S SML Isuzu Limited, Chandigarh

ITA 441/CHANDI/2018

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 3928 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 09-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS MONA MOHANTY
• Section: 43B; 143(3); 115JB

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH B CHANDIGARH !, ' # $ . .. . & , '( # BEFORE: SMT. DIVA SINGH, JM & DR. B.R.R.KUMAR, AM ITA NO. 441/CHD/2018 ASSESSMENT YEAR : 2013-14 THE A CIT, CIRCLE-4(1), CHANDIGARH. VS M/S SML ISUZU LTD., SCO 204-205, SECTOR 34A, CHANDIGARH. PAN NO: AACCS2991P APPELLANT RESPONDENT ! REVENUE BY : MRS. MONA MOHANTY, CIT-DR '# ! ASSESSEE BY : SHRI NEERAJ JAIN $ % #& DATE OF HEARING : 17.07.2018 '()* #& D ATE OF PRONOUNCEMENT : 03.10.2018 ')/ ORDER PER DIVA SINGH THE PRESENT APPEAL FILED BY THE REVENUE ASSAILING THE COR RECTNESS OF THE ORDER 25.01.2018 OF CIT(A) CHANDIGARH PERTAINING TO 2 013-14 ASSESSMENT YEAR ON THE FOLLOWING GROUNDS : (I) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS NOT ERRED IN DELETING THE ADDITION OF RS. 1,74,99,101/- MADE BY THE AO BY INVOKING THE PROVISIONS OF SECTION 145? (II) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS NOT ERRED IN DELETING THE ADDITION OF RS. 1,74,99, 101/ - MADE BY THE AO ON ACCOUNT OF FOLLOWING THE INCLUSIVE METHOD FOR ACCOU NTING FOR THE PURPOSE OF DETERMINING INCOME AS REQUIRED U/S 145A OF THE A CT, 1961. 2. THE RELEVANT FACTS OF THE CASE ARE THAT THE AO CON SIDERING THE FACT THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE O F COMMERCIAL VEHICLES REQUIRED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE CLOSING WORK IN PROGRESS OF RS.14,01,61,000/- BE NOT LOADED WITH EX CISE DUTY OF 12.485 % (INCLUDING R&D CESS @ 0.125% AND EDU. CESS @ 3%). CONSIDERING THE REPLY FILED, THE AO HELD IT TO BE NOT ACCEPTABLE ON THE FOLLOWING GROUNDS : 4.1 THE REPLY OF THE ASSESSEE HAS BEEN CONSIDERED B UT IS NOT ACCEPTABLE. THE ASSESSEE IS REQUIRED TO FOLLOW AN INCLUSIVE METHOD FOR THE PURPOSES OF DETERMINING ITS INCOME FOR INCOME TAX PURPOSES. AFTER GOING THROUGH THE NOTES TO ACCOUNTS IT IS ITA 441/CHD/2018 A.Y. 2013-14 PAGE 2 OF 4 OBSERVED THAT EXCISE DUTY IS INCLUDED IN VALUATION OF FINISHED GOODS ONLY. HOWEVER, FOR THE PURPOSES OF VALUATION OF WORK-IN-PROGRESS, THE EXCISE DUTY WAS NOT BEING TAKEN INTO CONSIDERATION. AS PER THE PROVISIONS OF SECTION 145A(A)(II) / WORK IN PROGRESS HAS TO BE INCREASED BY ADDING THE EXCISE D UTY APPLICABLE [I.E. @ 12.485% (INCLUDING R&D CESS @ 0.125% AND EDUCESS @ 3%) ON W ORK-IN-PROGRESS OF RS.14,01,61,000/-], AMOUNTING TO RS.1,74,99,101/-. THE ASSESSEE HAS CLAIMED THAT IT IS FOLLOWING THE SAME ACCOUNTING POLICY CONSISTENTLY. HOWEVER, THIS CLAIM IS NOT ACCEPTABLE AS WHEN A PARTICULAR PROVISION IS THERE IN THE INCOME TAX ACT FOR ACCOUNTING TREATMENT TO BE GIVEN TO CERTAIN CLAIM/E XPENDITURES IN THE PROFIT & LOSS ACCOUNT, THE ASSESSEE IS REQUIRED TO FOLLOW IT AND IT IS MANDATORY FOR THE ASSESSEE TO EVEN CHANGE THE METHOD BEING FOLLOWED B Y IT, IF SO REQUIRED AS PER THE PROVISIONS OF THE ENACTED LAW. THE ISSUE HAS BEEN D ISCUSSED IN DETAIL IN VARIOUS CASES DECIDED BY THE HON'BLE ITAT, A FEW OF WHICH ARE AS FOLLOWS:- WEST COAST PAPER MILLS LTD. VS. ACIT, ITAT MUMBAI-I BENCH,103 1TD 19 (MUMBAI) DATED 3.4.2006_ J.B.CHEMICALS AND PHARMACEUTICALS LTD. VS. ADDL.CIT ITAT MUMBAI 'B'BENCH (2006) 10 SOT 362(MUMBAI) DATED 24.4.2006 ACIT VS. S.P.FABRICATORS (P) LTD. ITAT, MUMBAI I BE NCH (2006) 10 SOT 652 (MUMBAI) DATED 3.4.2006 CROYODON CHEMICAL WORKS LTD. VS. ACIT ITAT MUMBAI ' C BENCH (2007) 11 SOT 295 (MUMBAI) DATED 24.5.2006 4.2 THE CLOSING STOCK HAS BEEN LOADED WITH EXCISE DUTY DUE TO THE REASON THAT WHATEVER CONSTITUTES THE CLOSING STOCK HAS COM E FROM THE RAW MATERIAL CONSUMED, ON WHICH EXCISE DUTY IS CHARGED. THE ASSE SSEE GETS THE CREDIT FOR THE EXCISE DUTY PAID ON RAW MATERIAL IN THE FORM OF MOD VAT/CENVAT CREDIT AND IT CAN SET OFF ITS LIABILITY OF EXCISE DUTY ON SALES AGAINST I T. THE AMOUNT OF EXCISE DUTY SHOWN IN THE SALES AND DEBITED TO PROFIT AND LOSS ACCOUNT HAS NOT BEEN CONSIDERED IN THE ABOVE CALCULATIONS AS IT WILL NOT BE HAVING ANY EFF ECT FOR THE PURPOSES OF PROFIT AFTER CONSIDERING PROVISIONS OF SECTION 145A. 4.3 THIS ISSUE HAD BEEN TAKEN UP FOR SCRUTINY IN THE LA ST ASSESSMENT IN THE CASE I.E. FOR THE ASSESSMENT YEAR 2012-13 AS WELL AND VA LUATION OF WORK IN PROGRESS WAS REASSESSED AFTER LOADING THE ELEMENT O F EXCISE DUTY AT THE PREVALENT RATE. THEREFORE, TAKING INTO ACCOUNT THE FOREGOING DISCUSSION AND IN KEEPING WITH JUDICIAL CONSISTENCY, THE INCOME OF TH E ASSESSEE IS HEREBY INCREASED BY AN AMOUNT OF RS. 1,74,99,101/- ON ACCOUNT OF UND ER VALUATION OF CLOSING WORK IN PROGRESS. SINCE THE ASSESSEE HAS CONCEALED THE PARTICULARS OF ITS INCOME BY FOLLOWING EXCLUSIVE METHOD OF ACCOUNTING, PENALTY PROCEEDINGS U/S 271(L)(C) ARE INITIATED FOR FURNISHING OF INACCURAT E PARTICULARS OF INCOME. 4.4 IN THE LIGHT OF THE ABOVE DISCUSSION, THE INCOME IS COMPUTED AS UNDER: RETURNED INCOME AS PER ASSESSEE RS. 32,87,04,510/-. ADDITIONS: ASSESSED UNDER SECTION 143(3) R.W.S. 144C AT RS.34, 62,03,611 /-AND TAX BE DETERMINED ON THE SAME. AS PER 115JB THE BOOK PROFI T IS ASSESSED AT RS. 48 / 49 / 15,364/. ISSUE REQUISITE DOCUMENTS. PENALTY PROCEED INGS UNDER SECTION 271(L)(C) ARE INITIATED SEPARATELY FOR FURNISHING I NACCURATE PARTICULARS OF INCOME. 3. THE ASSESSEE CARRIED THE ISSUE IN APPEAL BEFORE THE C IT(A) WHO RELYING UPON THE DECISION TAKEN IN 2005-06 TO 2012-13 ASSESSME NT YEAR BY HIS PREDECESSOR, ALLOWED THE APPEAL OF THE ASSESSEE HOLDING AS UNDER : 6.1 SIMILAR ADDITION WAS MADE IN PRECEDING YEARS AY 2005-06 TO 2012-13 AND THE SAID ADDITION HAS BEEN CONSISTENTLY DELETED BY MY P REDECESSORS IN APPEAL. AS THE FACTS IN THIS YEAR ARE SAME AS IN THE SAID EARLIER YEARS, THE ADDITION MADE OF RS. 1,74,99,101/- BY THE AO IS DELETED. GROUNDS OF APPE AL NOS. 1 AND 2 ARE ALLOWED. EXCISE DUTY ADDED IN W.I.P AS DISCUSSED IN THE ORDER RS. 1,74,99,101/- ASSESSED INCOME RS.34,62,03,611/- ITA 441/CHD/2018 A.Y. 2013-14 PAGE 3 OF 4 4. THE LD. SR.DR RELIES UPON ASSESSMENT ORDER. 5. LD. AR INVITING ATTENTION TO THE ORDER DATED 14.05.2018 IN ITA 79/CHD/2009 AND OTHERS SUBMITTED THAT IDENTICAL ISSUE CA ME UP FOR CONSIDERATION BEFORE THE ITAT IN 2005-06 ASSESSMENT YEA R WHEREIN THE DEPARTMENTAL APPEAL ON THE SAID GROUND WAS DISMISSED. TH E SAID VIEW, IT WAS SUBMITTED, HAS BEEN FOLLOWED OVER THE YEARS RIGHT FROM 2007-08, 2009- 10, 2010-11, 2011-12 TO 2012-13 ASSESSMENT YEARS. ACC ORDINGLY, IT WAS HIS SUBMISSION THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD. IT IS SEEN THAT THE CO-ORDINATE BENCH IN ITS CON SOLIDATED ORDER DATED 14.05.2018 CONSIDERING THE DEPARTMENTAL APPEAL IN ITA 112/ CHD/2009 FOR 2005-06 ASSESSMENT YEAR CONSIDERED THE ISSUE IN GROUND NO. 3 RAISED BY THE REVENUE IN THE FOLLOWING MANNER : 27. VIDE GROUND NO.3, THE REVENUE HAS AGITATED THE ACTION OF THE CIT(A) IN DELETING THE ADDITION OF RS. 89,81,813/- MADE BY THE ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SECTION145A BY LOADING EXCISE DUTY ON CLOSING STOCK OF WORK IN PROGRESS. 28. THE BRIEF FACTS OF THE CASE ARE THAT DURING ASS ESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD FAILED TO INCLU DE EXCISE DUTY FOR THE PURPOSE OF VALUATION OF CLOSING STOCK OF WORK IN PROGRESS WHICH WAS IN V IOLATION OF THE PROVISIONS OF SECTION 145A OF THE ACT. THE LD. CIT(A), HOWEVER, DELETED T HE IMPUGNED ADDITIONS MADE BY THE ASSESSING OFFICER RELYING ON THE DECISION OF THE HO N'BLE JURISDICTIONAL PUNJAB & HARYANA HIGH COURT IN THE CASE OF NAHAR SPINNING MILLS LTD. REPORTED IN 172 TAXMAN 1. 29. BEFORE US, LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET,HAS SUBMITTED THAT FIRSTLY ADJUSTMENT MADE U/S 145A OF THE ACT ARE TAX NEUTRAL AND WOULD NOT HAVE ANY IMPACT ON TRADING ACCOUNT OF THE ASSESSEE, THAT WHETHER THE ASSESSEE HAS BEEN FOLLOWING THE EXCLUSIVE METHOD OF ACCOUNTING OR INCLUSIVE METHOD OF ACCOUNT ING, THE GP IN THE TRADING ACCOUNT WOULD REMAIN THE SAME. THE LD. COUNSELHAS FURTHER P LEADED THAT IN THE CASE HAND, THE ASSESSING OFFICER DID NOT MAKE ANY ADJUSTMENT ON AC COUNT OF MODVAT CREDIT BUT HAS MADE ADDITION ON ACCOUNT HYPOTHETICAL AMOUNT OF EXCISE D UTY CALCULATED @ 16.32% OF THE AMOUNT OF CLOSING WORK-IN-PROGRESS. THE LD. COUNSEL HAS FU RTHER SUBMITTED THAT ASPER THE PROVISIONS OF SECTION 145A, THE AMOUNT OF DUTY ACTU ALLY PAID OR INCURRED ONLY IS INCLUDIBLE FOR THE PURPOSE OF VALUATION OF INVENTORY AND PURC HASES AND SALES. THAT THERE WAS NO EXCISE DUTY PAYABLE BY THE ASSESSEE ON THE WORK IN PROGRESS.THAT THE EXCISE DUTY, OTHERWISE, IS PAYABLE ON THE MANUFACTURED GOODS AND THAT TOO W HEN SUCH GOODS ARE MOVED OUT OF FACTORY. THUS, THE QUESTION OF LEVY OF EXCISE DUTY ON THE WORK IN PROGRESS DID NOT ARISE AT ALL. THE LD. COUNSEL HAS FURTHER SUBMITTED THAT EVEN OTH ERWISE, IF THE AFORESAID AMOUNT IS TO BE ADDED TO THE PURCHASES / CLOSING STOCK BY VIRTUE OF SECTION 145A OF THE ACT, EVEN THEN THE SAID AMOUNT WOULD BE SEPARATELY DEDUCTIBLE WHILE CO MPUTING THE TAXABLE INCOME U/S 43B OF THE ACT AS THE ASSESSEE HAS PAID THE ENTIRE DUTIES OF TAX BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION. THE LD. COUNSEL IN THIS RESPECT HAS RELIED ON THE DECISION OF THE HON'BLE DELHI HIGH CO URT IN THE CASE OF CIT VS. PUROLATOR INDIA LTD. ITA 999/2007, WHEREIN, THE DELHI HIGH CO URT HAS HELD THAT WHERE DUE TO ADJUSTMENTS EITHER BY FOLLOWING INCLUSIVE METHOD OR EXCLUSIVE METHOD OF ACCOUNTING, IT WOULD NOT MAKE ANY IMPACT ON THE PROFIT AND LOSS AN D IT WILL NOT EFFECT THE INCOME OF THE ASSESSEE, NO ADDITIONS ARE WARRANTED. 30. WE HAVE CONSIDERED THE RIVAL CONTENTIONS. IN TH E CASE IN HAND, THE ASSESSEE HAS NOT PAID ANY EXCISE DUTY ON THE CLOSING WORK IN PROGRES S AND HENCE THERE WAS NO QUESTION OF LOADING ANY EXCISE DUTY ON ESTIMATION BASIS. EVEN OTHERWISE, IF THE VALUE OF THE EXCISE DUTY HAS TO BE INCLUDED IN THE CLOSING STOCK THEN THE VA LUE OF EXCISE DUTY HAS ALSO TO BE INCLUDED IN THE OPENING STOCK AND IN THAT EVENT THERE WOULD BE NO DIFFERENCE IN THE RESULT OF THE VALUE OF THE OPENING STOCK AND CLOSING STOCK. RELIANCE I N THIS RESPECT IS PLACED ON THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF PUROLATOR IND IA LTD. (SUPRA) AND OF THE ALLAHABAD ITA 441/CHD/2018 A.Y. 2013-14 PAGE 4 OF 4 HIGH COURT IN THE CASE OF CIT VS. SANGAMSTRUCTURAL S LTD. (2013) 35 TAXMAN.COM 148 (ALL.) IN VIEW OF THIS, WE DO NOT FIND ANY JUSTIFICATION I N MAKING THE AFORESAID ADDITION. WE, THEREFORE, UPHOLD THE DECISION OF THE CIT(A) IN DEL ETING THE ADDITION ON THIS ISSUE. IN THE RESULT, THE APPEAL OF THE REVENUE IS HEREBY DISMISSED. 7. IT IS SEEN THAT THE SAID VIEW WAS CONFIRMED IN 2007-08 ASSESSMENT YEAR WHEREIN IN ITA 25/CHD/2012 IDENTICAL DEPARTMENTAL G ROUND WAS DISMISSED. SIMILAR IS THE POSITION FROM 2009-10 TO 2012-13 A SSESSMENT YEAR WHEREIN IN ITA 1086/CHD/2014, ITA 1212/CHD/2016, ITA 5 75/CHD/2017 THE DEPARTMENTAL APPEALS ON IDENTICAL GROUNDS WERE DISMISS ED FOLLOWING THE VIEW TAKEN IN 2005-06 ASSESSMENT YEAR. IN THE ABSENCE OF ANY CONTRARY SUBMISSION ON FACT OR POSITION OF LAW, APPEAL OF THE REVENUE IS DISMISSED. SAID ORDER WAS PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING IT SELF. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 03.10. 2018. SD/- SD/- ( . .. . & ) ( ! ) (DR. B.R.R. KUMAR) (DIVA SINGH) '( #/ ACCOUNTANT MEMBER ' #/ JUDICIAL MEMBER + , (+ #,-.-# COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT - 2. THE RESPONDENT - 3. $ /# CIT 4. $ /#01 THE CIT(A) 5. -2#45&456789 DR, ITAT, CHANDIGARH 6. 8:% GUARD FILE (+ $ BY ORDER, ; ASSISTANT REGISTRAR