DCIT, CIR-8(1), KOLKATA, Kolkata V. M/s ITC Ltd., Kolkata

ITA 478/KOL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1388 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 23-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MD USMAN
• Assessee Lawyers: J P KHAITAN ADOVCATE
• Keywords: Business income; Revised return
• Section: 43B; 143(3); 147; 148

Judgement Text

1 ITA NO.478/KOL/2015 ITC LTD., AY 2005-06 , A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE .., /AND , ) [BEFORE SHRI A. T. VARKEY, JM & SHRI WASEEM AHMED, AM] I.T.A. NO. 478/KOL/2015 ASSESSMENT YEAR: 2005-06 DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-8(1), KOLKATA. VS. M/S. ITC LTD. (PAN:AAACI5950L) APPELLANT RESPONDENT DATE OF HEARING 05.07.2017 DATE OF PRONOUNCEMENT 20.09.2017 FOR THE APPELLANT MD. USMAN, CIT FOR THE RESPONDENT SHRI J. P. KHAITAN, ADOVCATE ORDER PER SHRI A.T.VARKEY, JM THIS IS AN APPEAL PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A)-3, KOLKATA DATED 11.02.2015 FOR AY 2005-06. 2. THE SOLE ISSUE OF REVENUES APPEAL IS AGAINST TH E ACTION OF LD. CIT(A) IN DELETING THE ADDITION OF RS.270,06,83,951/- IN RESPECT OF EXCIS E DUTY ON CLOSING STOCK. 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN MANUFACTURE AND SALE OF TOBACCO PRODUCTS, CONSUMER GOODS, HOTEL BUSINESS ET C. THE ASSESSEE FILED ITS RETURN OF INCOME ON 31.10.2005 DECLARING TOTAL INCOME OF RS.2 559,04,19,101/- BUT SUBSEQUENTLY FILED REVISED RETURN ON 29.12.2006 DECLARING TOTAL INCOME OF RS.2285,26,27,554/-. CONSEQUENTLY, ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE INCOME- TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) ON 26.12.2008 AT A TOTAL INCOME OF RS .2313,57,88,013/-. SUBSEQUENTLY, THE AO WAS OF THE OPINION THAT DOUBLE DEDUCTION HAS BEE N ALLOWED TO THE ASSESSEE IN RESPECT OF EXCISE DUTY ON CLOSING STOCK OF RS.270,06,83,951/-. ACCORDINGLY, NOTICE U/S. 148 OF THE ACT WAS ISSUED ON 29.03.2012 AND LATER ON NOTICE U/S. 1 43(2) OF THE ACT AND THE REASONS RECORDED FOR PROCEEDINGS U/S. 147 WAS ISSUED. BEFO RE THE AO, ON BEHALF OF THE ASSESSEE IT 2 ITA NO.478/KOL/2015 ITC LTD., AY 2005-06 WAS SUBMITTED THAT THERE IS NO CHARGE OF EXCISE DUT Y ON CLOSING STOCK AS ON 31.03.2005 IN THE P&L ACCOUNT FOR FY 2004-05 I.E. THE DEDUCTION FOR E XCISE DUTY ON CLOSING STOCK AS ON 31.03.2005 OF RS.270.07 CRORES IS NOT CLAIMED AND ALLOWED TO THE COMPANY THROUGH THE P&L ACCOUNT IN AY 2005-06. IT WAS ALSO SUBMITTED T HAT EXCISE DUTY ON THE CLOSING STOCK FOR FY 2004-05, WHICH HAS BEEN PAID WITHIN THE DUE DATE OF FILING THE RETURN FOR AY 2005- 06 HAS TO BE ALLOWED U/S. 43B OF THE ACT IN THE AY 2005-06 ITSELF ON PAYMENT BASIS, IN LINE WITH THE PROVISIONS OF SECTION 43B OF THE ACT AND A LSO THE SUPREME COURT'S DECISION IN BERGER PAINTS INDIA LTD VS. CIT. ACCORDINGLY, THE SAID SUM OF RS.270.07 CRORES RELATING TO EXCISE DUTY ON CLOSING STOCK, WHICH HAS BEEN PAID I N LINE WITH THE PROVISIONS OF SECTION 43B OF THE ACT WITHIN THE DUE DATE OF FILING THE RETURN FOR AY 2005-06, WHICH HAS BEEN CLAIMED AS A DEDUCTION IN FY 2004-05 (RELEVANT TO AY 2005-0 6) U/S. 43B OF THE ACT AND IN ACCORDANCE WITH THE DECISION OF HON'BLE SUPREME COU RT IN BERGER PAINTS INDIA LTD VS. CIT AND CORRECTLY ALLOWED. SINCE THERE IS NO CHARGE OF EXCISE DUTY ON CLOSING STOCK AS ON 31.03.2005 IN THE PROFIT AND LOSS ACCOUNT OF FY 200 4-05 I. E. DEDUCTION FOR EXCISE DUTY ON CLOSING STOCK AS ON 31-3-2005 OF RS. 270.07 CRORES IS NOT CLAIMED/ALLOWED THROUGH THE PROFIT & LOSS ACCOUNT BY THE COMPANY IN AY 2005-06, THE CLAIM FOR EXCISE DUTY ON CLOSING STOCK, PAID WITHIN THE DUE DATE OF FILING RETURN FO R THE AY, HAS BEEN MADE SEPARATELY IN RETURN FOR AY 2005-06. THIS ACCORDING TO ASSESSEE P ROVES THAT NO DOUBLE DEDUCTION HAS BEEN CLAIMED FOR THIS AMOUNT OF RS 27 0.07 CRORES. FURTHER, IT WAS BROUGHT TO THE NOTICE OF AO THAT THE SAID AMOUNT O F RS 270.07 CRORES HAS BEEN ADDED BACK TO BUSINESS INCOME SEPARATELY IN THE NEXT FINANCIAL YEAR I.E. FY 2005-06 RELEVANT TO AY 2006-07. BEING DISSATISFIED WITH THE SUBMISSIONS O F THE ASSESSEE, THE AO HELD THAT THE EXCISE DUTY ON CLOSING STOCK HAD ALREADY BEEN CLAIM ED IN THE P&L ACCOUNT AND HENCE, THE CLAIM OF DEDUCTION OF RS.270.07 CRORES ON PAYMENT B ASIS AMOUNTED TO CLAIM FOR DOUBLE DEDUCTION. HENCE, THE AO DISALLOWED THE SAID CLAIM , WHICH RESULTED IN ADDITION OF RS.270.07 CRORES. ON APPEAL, THE LD. CIT(A) WHILE DELETING THE ADDITION VIDE PARA 10 HAS HELD AS UNDER: 10. I HAVE CONSIDERED THE FACTS OF THE CASE. THE APPELLANT HAS BEEN REGULARLY FOLLOWING THE PRACTICE UNDER WHICH IT DEBITS P&L ACCOUNT BY EXCIS E DUTY ON SALES ONLY. SINCE OPENING AND CLOSING STOCK WERE VALUED INCLUSIVE OF EXCISE DUTY, IT PASSES A CONTRA- ENTRY TO REVERSE EFFECT OF EXCISE DUTY COMPONENT IN OPENING AND CLOSING STOCK. THUS, NO NET AMOUNT IS CHARGED TO P&L ACCOUNT IN RESPECT OF EXCISE DUTY ON CLOSING STOCK. SINCE THE CLOSING STOCK IS (MOSTLY) CLEARED IN THE SUBSEQUENT YEAR PRIOR TO DUE DATE OF FILING OF RETURN OF INCOME, IT CLAIMS DEDUCTION FOR EXCISE DUTY ON THE CLEARANCE OUT OF THE SAME AS PER PROVISO OF SECTION 438 OF THE IT ACT, 1961. 3 ITA NO.478/KOL/2015 ITC LTD., AY 2005-06 AS AND WHEN IT FILES RETURN OF INCOME FOR THE SUBSE QUENT YEAR, IT ADDS BACK EXCISE DUTY ON OPENING STOCK AS THE SAME HAD ALREADY BEEN CLAIMED AS DEDUCTION IN THE RETURN OF THE PRECEDING YEAR IN FORM OF EXCISE DUTY ON (THE THEN) CLOSING STOCK. I DO NOT SEE AS TO HOW THE SAME CAN BE CALLED CLAIMING DEDUCTION DOUBLY. IN FA CT, THE ENTIRE EXERCISE IS REVENUE NEUTRAL OVER THE PERIOD OF A FEW YEARS. EVEN FOR A SINGLE Y EAR, THE METHOD APPEARS TO BE IN CONFORMITY WITH WELL ACCEPTED PRINCIPLE OF ACCOUNTING AS WELL AS THE PROVISION OF SECTION 145A AND SECTION 438 OF THE INCOME TAX ACT, 1961. IT IS NOTE D, THAT THIS ISSUE WAS EXAMINED BY KOLKATA BENCH OF TRIBUNAL IN ITA NO.1640/KO1/2012 IN THE CA SE OF DCIT CIR-1, KOLKATA VS. EXIDE INDUSTRIES LTD. A.Y.2006-0, IN WHICH ADDITION FOR S IMILAR GROUND HAD BEEN MADE. IN ITS ORDER DATED 19.4.2013, THE TRIBUNAL HAD, FOLLOWING ITS OW N ORDER IN THE EARLIER ASSESSMENT YEARS, DELETED THE DISALLOWANCE WITH THE FOLLOWING OBSERVA TION:- WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULLY PERUSED THE MATERIAL AVAILABLE ON RECORD. ON CAREFUL PERUSAL OF FACTS AND CIRCUMSTANC ES OF THE CASE LEADING TO DISALLOWANCE U/S. 43B OF THE ACT BY HYPOTHETICALLY HOLDING A VIEW THAT THE CLAIM OF THE ASSESSEE BECOMES DOUBLE DEDUCTION HAS NOT BEEN INTE RPRETED CORRECTLY BY THE AO FOR THE IMPUGNED ASSESSMENT YEAR EVEN WHEN THE MATTER H AS BEEN ADJUDICATED UPON AND DELIBERATED BY THE TRIBUNAL IN ASSESSEE'S OWN CASE FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEARS BEGINNING FROM 1996-97. WE HAVE AL SO PERUSED THE COMPUTATION MADE AS CONTRADICTORY IN THE ORDER OF AO WHO HAS MI SINTERPRETED THE FINDING OF THE TRIBUNAL IN HIS OWN MANNER IN SO FAR HE HAS DISCUSS ED THE DECISION OF THE ITAT KOLKATA BENCH AT PAGE 4 OF HIS ORDER WHICH REQUIRED CONSIDERATION WAS FOR THE VALUATION OF STOCK SETTLES THE ISSUE AS PER THE REQ UIREMENT OF LAW WHETHER COULD BE CHALLENGED UNDER THE SAME LAW OF CLAIMING DEDUCTION FOR DISALLOWANCE U/S. 43B OF THE ACT AS WELL. IN SO FAR AS THE LD. DR HAS NOT BEEN A BLE TO POINT OUT ANY SPECIFIC DEFECT IN THE ACCOUNTING THEREIN WHEN ON THE JUDICIAL CITA TIONS AS RELIED UPON AND WERE BEFORE THE TRIBUNAL AS WELL AS THE HON'BLE HIGH COU RT THE MATTER WAS ACTUALLY CLARIFIED IN SO FAR AS THE VALUATION OF STOCK IS NO T PART OF THE CLAIM OF EXCISE DUTY REMAINING UNPAID. THEREFORE, IT WAS MISAPPLICATION OF FACTS AND FIGURES IN THE MIND OF THE AO TO HAVE DISCOVERED DOUBLE DEDUCTION FOR THE PURPOSE OF DISALLOWANCE U/S. 438 OF THE ACT. APPEAL FILED BY THE DEPARTMENT AGAINST THE SAID ORD ER WAS DISMISSED BY THE HON'BLE CALCUTTA HIGH COURT IN CIT, KOLKATA-1 VS. EXIDE INDUSTRIES L TD. ITA NO. 158/2013 VIDE ORDER DATED 20.01.2014. THUS, THE ISSUE IS NOW COVERED IN FAVOU R OF THE APPELLANT BY THE ORDER OF JURISDICTIONAL BENCH OF HON'BLE TRIBUNAL, CONFIRMED BY HON'BLE HIGH COURT. IN VIEW OF THE SAME, THE ADDITION MADE BY THE ASSESSING OFFICER BY WAY OF DISALLOWANCE OF EXCISE DUTY PAYMENT AMOUNTING TO RS. 270,06,83,951/- IS DELETED . AGGRIEVED, REVENUE IS NOW IN APPEAL BEFORE US. 5. AT THE TIME OF HEARING BEFORE US, LD. DR RELIED ON THE ORDER OF THE AO AND ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE SUBMIT TED THAT THE ISSUE IS NOW SQUARELY COVERED IN FAVOUR OF THE ASSESSEE IN ITS OWN CASE I N ITA NOS. 301/K/2015, 684/K/2014 & 1027/K/2013 FOR AYS 2009-10, 2008-09 AND 2007-08 VI DE ORDER DATED 03.02.2016. 6. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE COORDINATE BENCH OF THIS TR IBUNAL VIDE ITS ORDER DATED 03.02.2016 IN ASSESSEES OWN CASE, CITED SUPRA ON IDENTICAL ISSUE ALLOWED THE CLAIM OF ASSESSEE AND 4 ITA NO.478/KOL/2015 ITC LTD., AY 2005-06 DISMISSED THE REVENUES APPEAL ON THIS ASPECT. SIN CE THE FACTS ARE SIMILAR AND ISSUE IS IDENTICAL AND THE LD. DR WAS UNABLE TO BRING OUT AN Y CONTROVERTING MATERIAL ON FACTS OR CHANGE IN LAW WHICH COULD HAVE WARRANTED OUR INTERF ERENCE, WE RESPECTFULLY FOLLOWING THE TRIBUNALS ORDER DATED 03.02.2016, CITED SUPRA, DEL ETE THE DISALLOWANCE AS MADE BY THE AO. THEREFORE, THIS GROUND OF APPEAL OF REVENUE IS DISM ISSED. 7. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSE D. ORDER IS PRONOUNCED IN THE OPEN COURT ON 20.09.2017 SD/- SD/- (WASEEM AHMED) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED :20TH SEPTEMBER, 2017 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT DCIT, CIRCLE-8(1), KOLKATA 2 RESPONDENT M/S. ITC LIMITED, 37, CHOWRINGHEE ROAD , KOLKATA-71. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, SR. PVT. SECRETARY