RING PLUS AQUA LTD, MUMBAI V. ADDL CIT RG 9(3), MUMBAI

ITA 4652/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55611 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 13-10-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 04-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SATBIR SINGH
• Assessee Lawyers: NITESH JOSHI
• Keywords: Opportunity of being heard
• Section: 43B; 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, D, MUMBAI BEFORE S/SHRI D.K.AGARWAL (JM) AND PRAMOD KUMAR (A. M ) ITA NO. 4652/MUM/2010 (ASSESSMENT YEAR: 2007-08) M/S RING PLUS AQUA LTD., 1 ST FLOOR, J.K.FILES (INDIA) LTD. ANNEX BUILDING, POKHRAN ROAD NO.1, JEKEGRAM, THANE (WEST)-400606. PAN: AABCR3220M THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE 9(3), AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 APPELLANT V/S RESPONDENT DATE OF HEARING : 13.10.2011 DATE OF PRONOUNCEMENT : 19.10.2011 APPELLANT BY : SHRI NITESH JOSHI RESPONDENT BY : SHRI SATBIR SI NGH O R D E R PER D.K.AGARWAL (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 25.3.2010 PASSED BY THE LD. CIT(A) FOR THE ASSESSMENT YEAR 2007-08. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE COMPANY IS ENGAGED IN THE BUSINESS OF TRADING IN AUTO ANCILLARIES AND ENGINEERING PRODUCTS, FILED RETURN SHOWING TOTAL INCOME OF RS.13,63,99,809/-. DURING THE COU RSE OF ASSESSMENT PROCEEDINGS IT WAS INTERALIA OBSERVED BY THE AO ITA NO. 4652/MUM/2010 (ASSESSMENT YEAR: 2007-08) 2 THAT THE ASSESSEE IS REQUIRED TO VALUE THE CLOSING STOCK IN ACCORDANCE WITH THE PROVISIONS OF SECTION 145A OF THE INCOME TAX ACT, 1961(IN SHORT THE ACT) AFTER ADJU STING THE AMOUNT OF TAX DUTY ETC IN BRINGING THE GOODS TO THE PLACE OF THEIR LOCATION. BASED ON THE WORKING GIVEN BY THE ASSESSEE, THE AO NOTED THAT THE CLOSING STOCK SHOULD HAVE B EEN VALUED BY THE ASSESSEE AT RS.6,04,76,590/- AFTER S UCH ADJUSTMENT WHEREAS THE ASSESSEE HAD SHOWN THE VAL UE OF CLOSING STOCK AT RS.5,03,13,763/-. THUS, THE AO H AS WORKED OUT THE DIFFERENCE OF RS.1,01,62,827/- I.E. BY 20. 1989% IN THE VALUE OF CLOSING STOCK OF RAW MATERIAL SHOWN B Y THE ASSESSEE. THE AO AFTER APPLYING THE SAME PERCENTA GE ON THE TOTAL INVENTORY OF RS.10,21,48,499/- WORKED OU T THE INCREASE IN THE VALUE OF CLOSING STOCK BY AN AMOUN T OF RS.2,06,32,874/- U/S 145A OF THE ACT AND ACCORDINGL Y HE MADE THE ADDITION OF RS.2,06,32,874/- TO THE TOTAL INCOME OF THE ASSESSEE. ON APPEAL, THE LD. CIT(A) RELYING ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN CI T V/S MAHALAXMI GLASS WORKS PVT. LTD. (2009) 318 ITR 116( BOM.) WHEREIN THEIR LORDSHIPS CONCURRED WITH THE VIEW TA KEN BY THE HONBLE DELHI HIGH COURT HIGH COURT IN CIT V/S MAHAVIR ALUMINIUM LTD. (2008) 297 ITR 77(DEL.) DIRECTED THE AO TO RE-WORK THE ADJUSTMENT BY TAKING INTO ACCOUNT THE O PENING ITA NO. 4652/MUM/2010 (ASSESSMENT YEAR: 2007-08) 3 STOCK, PURCHASES, SALES AND CLOSING STOCK AND KEEPI NG IN VIEW THE PROVISIONS OF SECTION 43B OF THE ACT. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 4. GROUND NO.1 AND 2 ARE AGAINST THE APPLICATION O F PROVISIONS OF SECTION 145A AND SUSTENANCE OF ADDITI ON OF RS.2,06,32,874/-. 5. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ASSESSEE IS FOLLOWING EXC LUSIVE METHOD OF ACCOUNTING. HE FURTHER SUBMITS THAT AS PER ANNEXURE-A TO THE STATEMENT OF THE FACTS SUBMITTED BEFORE THE LD. CIT(A) THERE IS NIL IMPACT ON THE PROFIT AND LOSS ACCOUNT I.E. IN THE PROFITABILITY AFTER MAKING ADJ USTMENT U/S 145A OF THE ACT. HE FURTHER SUBMITS THAT THE LD. CIT(A) WHILE GIVING DIRECTION TO THE AO TO RE-WORK THE ADJUSTME NT BY TAKING INTO ACCOUNT THE OPENING STOCK, PURCHASES, S ALES AND CLOSING STOCK AND PROVISIONS OF SECTION 43B OF THE ACT HAS NOT CONSIDERED THE FACT THAT THE LIABILITY OF EXCIS E DUTY ARISES ONLY AT THE TIME OF REMOVAL OF GOODS FROM FACTORY A ND NOT PRIOR THERETO AND FOR THIS PROPOSITION THE RELIANCE WAS ALSO PLACED ON THE DECISIONS IN (1) ACIT V/S D&H SECHE RON ELECTRODES (P.) LTD.(2008) 173 TAXMAN 188 (MP), (2) CIT V/S PARRY CONFECTIONARY LTD.(2008) 299 ITR 321 (MAD.) A ND (3) ITA NO. 4652/MUM/2010 (ASSESSMENT YEAR: 2007-08) 4 ACIT V/S NARMADA CHEMATUR PETROCHEMICALS LTD. (2010 ) 327 ITR 369 (GUJ.). HE, THEREFORE, SUBMITS THAT THE ORD ER PASSED BY THE LD. CIT(A) BE MODIFIED BY GIVING SUITABLE DI RECTIONS IN THIS REGARD. 6. ON THE OTHER HAND, THE LD. D.R. SUPPORTS THE ORD ER OF THE A.O. AND LD. CIT(A). 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. UNDER THE PROVISIONS OF SECTION 145A OF THE ACT, AD JUSTMENTS ON ACCOUNT OF MODVAT ARE REQUIRED TO BE MADE IN RESPECT OF PURCHASES, SALES AND INVENTORY IN THE CLOSING STOCK . WE FIND THAT RECENTLY THE HONBLE JURISDICTIONAL HIGH COURT IN CIT V/S MAHALAXMI GLASS WORKS PVT. LTD. (2009) 318 ITR 116( BOM.) WHILE AGREEING WITH THE REASONING AND FINDING GIVE N BY THE HONBLE DELHI HIGH COURT IN CIT V/S MAHAVIR ALUMINI UM LTD. (2008) 297 ITR 77(DEL.) THAT TO GIVE EFFECT TO SECT ION 145A, IF THERE IS ANY CHANGE IN THE CLOSING STOCK AT THE EN D OF THE YEAR THEN THERE MUST NECESSARILY BE A CORRESPONDING ADJUSTMENT MADE IN THE OPENING STOCK OF THAT YEAR A ND THIS WOULD NOT AMOUNT TO GIVE DOUBLE BENEFIT TO THE ASSE SSEE AND WOULD BE NECESSARY TO COMPUTE THE TRUE AND CORRECT PROFIT FOR THE PURPOSE OF ASSESSMENT, UPHELD THE ORDER OF THE TRIBUNAL IN DIRECTING THE ASSESSING OFFICER TO MAKE NECESSAR Y ITA NO. 4652/MUM/2010 (ASSESSMENT YEAR: 2007-08) 5 CORRESPONDING ADJUSTMENT IN THE OPENING STOCK OF N EXT YEAR. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUGH T ON RECORD BY THE PARTIES WE RESPECTFULLY FOLLOWING THE ABOVE JUDGMENTS, SET ASIDE THE ISSUE TO THE FILE OF THE A SSESSING OFFICER TO DECIDE THE SAME AFRESH IN THE LIGHT OF THE FINDING GIVEN BY THE LD. CIT(A) AND ACCORDING TO LAW INCLUD ING THE DECISIONS IN MAHALAXMI GLASS WORKS PVT. LTD. (SUPRA ), MAHAVIR ALUMINIUM LTD.,(SUPRA), D&H SECHERON ELECTR ODES (P.) LTD. (SUPRA), PARRY CONFECTIONARY LTD.(SUPRA) AND NARMADA CHEMATUR PETROCHEMICALS LTD. (SUPRA) AFTER PROVIDING A REASONABLE OPPORTUNITY OF BEING HEARD T O THE ASSESSEE. THE GROUNDS TAKEN BY THE ASSESSEE ARE THE REFORE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 8. GROUND NO.3 IS AGAINST THE LEVY OF INTEREST U/S 234B AND 234D OF THE ACT. 9. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT ARGUE THE ABOVE GROUND. HOWEVER, KEEPING IN VIEW OF OUR FINDINGS RECORDED IN PARAGRAPH 7 OF THIS ORDER AND IN THE INTEREST OF JUSTICE, WE SET ASIDE THE AB OVE ISSUE TO THE FILE OF THE AO TO DECIDE THE SAME IN ACCORDANCE WITH LAW AND ACCORDINGLY THE GROUND TAKEN BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 4652/MUM/2010 (ASSESSMENT YEAR: 2007-08) 6 10. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 19 OCT.,201 1. SD SD (PRAMOD KUMAR) (D. K.AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEM BER MUMBAI, DATED 19TH OCTOBER, 2011 SRL: COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI