ACIT 24(1), MUMBAI V. N.R. JASANI, MUMBAI

ITA 4501/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 3120 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 31-03-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 05-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANTOSH MANKOSKAR SR
• Keywords: Rule of consistency
• Section: 143(3); 145

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - B,BENCH , , BEFORE S/SH. RAJENDRA,ACCOU NTANT MEMBER & SHAKTIJIT DEY ,JUDICIAL MEMBER /. ITA NO.4 501 /MUM/20 13 , / ASSESSMENT YEAR - 2008 - 09 ASTT. CIT - 24(1), C - 13, ROOM NO.503, PRAYAKSHAKAR BHAVAN, BANDRA (E) MUMBAI - 400 051. VS M/S. N.R. JASANI 139/G, AGARWAL INDL. ESTATE S.V. ROAD, JOGESHWARI (W) MUMBAI - 400 102. PAN:AAAFN 1478 K ( / APPELLANT ) ( / RESPONDENT ) /ASSESSEE BY :SHRI K. GOPAL / REVENUE BY :SHRI S ANTOSH MANKOSKAR - SR.AR / DATE OF HEARING : 30 - 0 9 - 2015 / DATE OF PRONOUNCEMENT : 30 - 09 - 2015 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 2 5 .03.201 3 OF CIT(A) - 34 ,MUMBAI,THE ASSESSING OFFICER(AO)HAS RAISED FOLLOWING GROUNDS OF APPEAL: '1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, TH E LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 15,35,292/ - MADE BY THE AC ON ACCOUNT OF NON - INCLUSION METHOD OF MODVAT CREDIT ADOPTED BY THE ASSESSEE WHEN THE METHOD ADOPTE D LEADS TO DOUBLE BENEFITS TO THE ASSESSEE, FIRSTLY BY EXCLUDING OF EXCISE DUTY FROM THE VALUE OF SALES AN D SECONDLY BY REDUCING THE VALUE OF STOCK TO THE EXTENT OF MODVAT CREDIT. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) BE SET ASIDE AND MATTE MA Y BE DECIDED ACCORDING TO LAW. THE APPELLANT CRAVES LEAVE TO AMEND 0 ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY . ASSESSEE - FIRM,ENGAGE IN THE BUSINESS OF MANUFACTURING OF MODULAR FURNITURE ,FILED ITS RETURN OF INCOME ON 29 .0 9 .200 8 ,ADMITTI NG TAXABLE INCOME OF RS. 2 . 0 5CRORES.THE AO COMPLETED THE ASSESSMEN T ON 29 .12.2007,U/S.143(3) OF THE ACT, DETERMINING INCOME OF THE ASSESSEE AT RS.2, 22,59,267 / - . 2. EFFECTIVE GROUND OF APPEAL IS ABOUT DELETING THE ADDITION OF RS.15.35 LAKHS MADE BY THE AO O N ACCOUNT OF MODVAT CREDIT. DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAD SHOWN CLOSING STOCK OF RS.2.19 CRORES,THAT THE ASSESSEE WAS FOLLOWING NON INCLUSIVE METHOD OF MODVAT CREDIT.HE DIRECTED THE ASSESSEE TO FILE EXPLANATION IN THA T REGARD. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE ,HE HELD THAT NON INCLUSIVE METHOD WOULD RESULT IN DECREASE IN TAXABLE INCOME.HE RE - WORKED OUT THE VALUE OF THE CLOSING STOCK BY INCLUDING THE EXCISE DUTY QUOTED ON THE TOTAL AS WELL AS THE VALUE O F MODVAT CREDIT INCLUDED IN THE COST OF RAW MATERIAL AND THE VALUE OF MODVAT CREDIT ON PURCHASES.THUS,HE ADDED THE UNUTILIZED MODVAT CREDIT AT THE END OF THE YEAR AND INCLUDED ELEMENT OF MODVAT CREDIT ON THE PURCHASES MADE.HE FINALLY ARRIVED AT A DIFFEREN CE OF RS.15,35,292/ - AND TREATING IT SUPPRE - SSION IN VALUE OF THE CLOSING STOCK ADDED THE SUM TO THE INCOME OF THE ASSESSEE . 3 . AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM IT WAS CONTENDED THE METHOD OF VALUATION OF CLOSING STOCK WAS FOLLOWED YEAR AFTER YEAR AND WAS ACCEPTED BY THE DEPARTMENT AS A PROPER METHOD AND IT REFLECTED THE CORRECT PROFIT,THAT NO CHANGE OR ALTERATION COULD BE MADE BY THE AO,THAT 4501/13NRJ - 08 - 09 2 THERE WOULD NO DIFFERENCE I N THE TAXABLE INCOME EVEN IF THE ASSESSEE WOULD FOLLOW INCLUSIVE METHOD.THE ASSESSEE FILED REWORKED STATEMENT OF MODVAT CREDIT BEFORE THE FAA. AFTER CONSIDERING THE ASSESSMENT ORDER AND THE SUBMISSIONS OF THE ASSESSEE , HE HELD THAT THE ISSUE WAS SQUARELY C OVERED BY THE DECISION OF THE HONBLE SUPREME COURT DELIVERED IN THE CASE OF INDO NIPPON CHEMICALS(261ITR275).HE FURTHER HELD THAT WHEN ADDITION WAS MADE TO CLOSING STOCK CORRESPONDING ADJUSTMENT WAS TO BE MADE TO OPENING STOCK,THAT IF ADDITION WAS TO BE M ADE TO CLOSING STOCK CORRESPONDING ADJUSTMENT HAD TO BE MADE TO OPENING STOCK,THAT THE EXERCISE WOULD BE REVENUE NEUTRAL,THAT THE DEPARTMENT HAD ACCEPTED THE METHOD OF VALUATION OF CLOSING STOCK FOR LAST SO MANY YEARS.FINALLY,HE DELETED THE ADDITION MADE B Y THE AO. 4 . BEFORE US,DEPARTMENTAL REPRESENTATIVE(DR)SUPPORTED THE ORDER OF THE AO.THE AUTHORISED REPRESENTATIVE(AR) RELIED UPON THE ORDER OF THE FAA AND STATED THAT IN THE SUBSEQUENT YEARS WHILE COMPLETING THE ASSESSMENTS U/S.143(3)OF THE ACT,THE AO HAD A CCEPTED THE SAME METHOD OF VALUATION, THAT FOLLOWING THE PRINCIPLE OF CONSISTENCY THE ORDER THE AO SHOULD NOT HAVE MADE THE ADDITION. 5 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE ASSESSEE WAS FOLLOWING THE EXCLU SIVE METHOD OF MODVAT CREDIT WHILE VALUING THE CLOSING STOCK FROM AY.1995 - 96,THAT THE AO.S.IN THE EARLIER AND SUBSEQUENT YEARS HAVE ACCEPTED THE METHOD WHILE COMPLETING THE ASSESSMENT U/S. 143(3) OF THE ACT, THAT THE AO HAD NOT GIVEN ANY REASON FOR NOT FOL LOWING THE METHOD FOR THE YEAR UNDER APPEAL, THAT THE FAA HAD GIVEN A CATEGORICAL FINDING OF FACT THAT WHOLE EXERCISE WAS REVENUE NEUTRAL IN NATURE. WE FIND THAT IN THE CASE OF INDO NIPPON CHEMICAL (SUPRA) THE HONBLE SUPREME COURT HAS HELD AS UNDER : IT IS NOT OPEN TO THE ASSESSING OFFICER TO TREAT OUTGOINGS AS INCOME UNDER SECTION 145 OF THE INCOME - TAX ACT, 1961. WHATEVER METHOD THE ASSESSING OFFICER ADOPTS AFTER INVOKING SECTION 145, IT HAS TO BE CONSISTENT WITH ACCEPTED PRINCIPLES OF ACCOUNTANCY.(I)TH AT MERELY BECAUSE THE MODVAT CREDIT WAS AN IRREVERSIBLE CREDIT AVAILABLE TO MANUFACTURERS UPON PURCHASE OF DUTY - PAID RAW MATERIAL, THAT WOULD NOT AMOUNT TO INCOME WHICH WAS LIABLE TO BE TAXED UNDER THE ACT : INCOME WAS NOT GENERATED TO THE EXTENT OF THE MO DVAT CREDIT ON UNCONSUMED RAW MATERIAL ;(II) THAT IT WAS NOT PERMISSIBLE FOR THE ASSESSING OFFICER TO ADOPT THE 'GROSS METHOD' FOR VALUATION OF RAW MATERIALS AT THE TIME OF PURCHASE AND THE 'NET METHOD' FOR VALUATION OF STOCK ON HAND. RESPEC TFULLY,FOLLOWI NG THE ABOVE JUDG MENT OF THE HONBLE APEX COURT WE ARE OF THE OPINION THAT THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL INFIRMITY. THEREFORE, CONFIRMING HIS ORDER WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT,APPEAL FILED BY AO STANDS DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH , SEPTEMBER,2015. 30 . . , 2015 SD/ - SD/ - ( / SHAKTIJIT DEY ) ( / RAJENDRA) / JUDI CIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE: 30 .09.2015 . . . JV. SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RES PONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 4501/13NRJ - 08 - 09 3 5. DR B BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.