AUNDE FAZE THREE AUTO FAB LTD, MUMBAI V. ITO 6(1)(4), MUMBAI

ITA 4817/MUM/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4132 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 08-02-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 16-06-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 143(3); 147; 148

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI .. , , , BEFORE, SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI JOGINDER SINGH, JUDICIAL MEMBER ITA NO.4817/MUM/2011 ASSESSMENT YEAR: 2005-06 AUNDE FAZE THREE AUTO FAB LTD. 102, SHIV SMRUTI CHAMBERS, 49-A, DR. A.B. ROAD, WORLI, MUMBAI-400018 / VS. ITO-6(1)(4), AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 ( !'#$ /ASSESSEE) ( % / REVENUE) PAN. NO. AACCA4981F !'#$ / ASSESSEE BY SHRI VIJAY MEHTA % / REVENUE BY SHRI AARSI PRASAD & %'($) / DATE OF HEARING : 08/02/2016 ($) / DATE OF ORDER: 09/02/2016 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER D ATED 11/03/2011 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. ITA NO.4817/MUM/2011 AUNDE FAZE THREE AUTO FAB LTD. 2 2. DURING HEARING OF THIS APPEAL, SHRI VIJAY MEHTA , LD. COUNSEL FOR THE ASSESSEE, DID NOT PRESS THE ADDITIO N WITH RESPECT TO RS.26,92,010/-, MADE BY THE ASSESSING OF FICER AND CONFIRMED BY THE LD. COMMISSIONER OF INCOME TAX (AP PEALS). THE LD. DR, SHRI AARSHI PRASAD, HAD NO OBJECTION TO THE REQUEST OF THE ASSESSEE, THEREFORE, THIS GROUND OF THE ASSESSEE IS DISMISSED AS NOT PRESSED. 2.1. THE ONLY GROUND/PART OF THE GROUND, AGITATED BY THE LD. COUNSEL FOR THE ASSESSEE IS WITH RESPECT TO UPH OLDING THE ADDITION OF RS.56,83,114/- MADE U/S 145A OF THE INC OME TAX ACT, 1961 (HEREINAFTER THE ACT). THE CRUX OF ARGUME NT ADVANCED ON BEHALF OF THE ASSESSEE IS THAT THE ASSE SSEE COMPANY WAS FOLLOWING EXCLUSIVE METHOD OF ACCOUNTIN G OF RECORDING THE EXCISE DUTY AND THUS THE OPENING STOC K HAS TO BE ADJUSTED. THE LD. COUNSEL INVITED OUR ATTENTION TO VARIOUS PAGES OF THE ASSESSMENT ORDER AS WELL AS IMPUGNED O RDER. IT WAS ALSO PLEADED THAT DURING LAST YEAR, IDENTICAL W ORKING WAS GIVEN EFFECT BY THE LD. ASSESSING OFFICER BY DECIDI NG THE SAME IN FAVOUR OF THE ASSESSEE. ON THE OTHER HAND, THE L D. DR, THOUGH DEFENDED THE ADDITION BUT DID NOT CONTROVERT THAT IDENTICALLY IN THE LAST YEAR, EFFECT WAS GIVEN TO T HE WORKING OF THE ASSESSEE. 2.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUS INESS OF MANUFACTURING OF TEXTILE FABRIC COATING, LAMINATED WOVEN AND ITA NO.4817/MUM/2011 AUNDE FAZE THREE AUTO FAB LTD. 3 KNITTED FABRIC, DECLARED NIL INCOME IN THE ORIGINAL RETURN AND WORKED OUT THE BOOK PROFIT OF RS.2,89,07834/-, WHIL E COMPLETING THE ASSESSMENT U/S 143(3) OF THE ACT VID E ASSESSMENT ORDER DATED 14/12/2007. SUBSEQUENTLY, TH E CASE WAS REOPENED WITH THE ISSUANCE OF NOTICE U/S 148 OF THE ACT DATED 17/02/2009, TO WHICH THE ASSESSEE FILED RETUR N OF INCOME ON 23/03/2009 ALONG WITH LETTER DATED 22/12/ 2009 ASKING THE ASSESSING OFFICER TO FURNISH THE REASONS OF REOPENING THE ASSESSMENT U/S 147 OF THE ACT. DURING THE RELEVANT PERIOD, THE ASSESSEE COMPANY WAS FOLLOWING THE EXCLUSIVE METHOD OF ACCOUNTING OF RECORDING OF EXCI SE DUTY. THE LD. ASSESSING OFFICER ASKED THE ASSESSEE AS TO WHY ADJUSTMENT SHOULD NOT BE MADE ACCORDING TO SECTION 145A OF THE ACT BY FOLLOWING INCLUSIVE METHOD OF ACCOUNTING . THIS PROPOSITION OF THE LD. ASSESSING OFFICER WAS OPPOSE D BY THE ASSESSEE. THE LD. ASSESSING OFFICER DID NOT ACCEPT THE PLEA OF THE ASSESSEE AND MADE THE ADDITION OF RS.56,83,114/ -, BEING THE DIFFERENCE BETWEEN THE MODVAT ON THE CLOSING IN VENTORY AS ON 31/03/2004 AND MODVAT ON OPENING INVENTORY AS ON 01/04/2004. ON APPEAL, THE LD. COMMISSIONER OF INC OME TAX (APPEALS) AFFIRMED THE STAND OF THE LD. ASSESSI NG OFFICER, WHICH IS UNDER CHALLENGE BEFORE THIS TRIBUNAL. 2.3. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, IF K EPT IN ITA NO.4817/MUM/2011 AUNDE FAZE THREE AUTO FAB LTD. 4 JUXTAPOSITION AND ANALYZED, WE FIND THAT IN PARA 4 OF THE REASONS FOR REOPENING THE ASSESSMENT U/S 147 OF THE ACT, IT HAS BEEN MENTIONED AS UNDER:- 4. ON GOING THROUGH THE TAX AUDIT REPORT FILED AS PER ANNEXURE-2 TO TAX AUDIT REPORT, THE ASSESSEE HAS SUBMITTED THAT ADJUSTMENT TO THE CLOSING STOCK AS P ER SECTION 145A IS RS.(-)1900369/-. IT MAY BE MENTIONE D THAT THE ASSESSEE FOLLOWS EXCLUSIVE METHODS FOR VAL UATION OF INVENTORY WHEREAS AS PER SECTION 145A INCLUSIVE METHODS NEEDS TO BE FOLLOW. HENCE THE ASSESSEE HAS GIVEN THE ADJUSTMENTS REQUIRED TO BE MADE ON ACCOUN T OF VALUATION OF INVENTORY AND HAS MADE THE ADJUSTMENTS SO COMPUTED IN THE COMPUTATION OF INCOME FILED WITH TH E RETURN.. 2.4. IF THE AFORESAID OBSERVATION OF THE LD. ASSES SING OFFICER IS ANALYZED, CLEARLY IT IS OOZES OUT THAT T HE AFORESAID OBSERVATION IS BASED UPON TAX AUDIT REPORT FILED BY THE ASSESSEE ITSELF AND THE ASSESSEE WAS FOLLOWING EXCL USIVE METHOD OF VALUATION OF INVENTORY. THE ASSESSEE ALS O FILED COMPUTATION OF INCOME ALONG WITH THE RETURN, WHEREI N, THE FIGURE OF RS.58,39,250/- HAS BEEN MENTIONED AS MODV AT ON OPENING STOCK IN FINANCIAL YEAR 2004-05 AND FURTHER THE AMOUNT OF RS.56,83,114/- HAS BEEN SHOWN AS EXCISE D UTY ON CLOSING STOCK OF FINISH GOODS. THE AMOUNT OF RS.1,5 6,176/- HAS BEEN ADDED AS MODVAT ON CLOSING STOCK, THUS, TH E FIGURES, FURNISHED BY THE ASSESSEE EXACTLY MATCHES ITA NO.4817/MUM/2011 AUNDE FAZE THREE AUTO FAB LTD. 5 (RS.56,83,114+1,56,176 = RS.58,39,290/-) AS PER COMPUTATION OF LAST YEAR. THUS, THE PROPOSED ADDITI ON OF RS.56,83,114/- IS NOT WARRANTED AS OPENING STOCK HA S TO BE ADJUSTED. 2.5. SECTION 145A OF THE ACT WAS INSERTED BY THE F INANCE (NO.2) ACT OF 1998, WITH EFFECT FROM 01/04/1999 WIT H A VIEW TO PUT AN END TO THE POINT OF LITIGATION AS TO WHET HER, THE VALUE OF CLOSING STOCK OF THE INPUTS, WORK IN PROGR ESS AND FINISHED GOODS MUST NECESSARILY INCLUDE THE ELEMENT FOR WHICH MODVAT CREDIT IS AVAILABLE. AS PER SUB-SECTI ON (A) TO SECTION 145A OF THE ACT, THE VALUATION OF PURCHASE AND SALE OF GOODS AND INVENTORY FOR THE PURPOSES OF DETERMINING THE INCOME CHARGEABLE UNDER THE HEAD PROFIT & GAINS OF BUSINESS OR PROFESSION SHALL BE (I) IN ACCORDANCE WITH THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE AND ( II) FURTHER ADJUSTED TO INCLUDE THE AMOUNT OF ANY TAX, DUTY, CESS OR FEE (BY WHATEVER NAME CALLED) ACTUALLY PAID OR I NCURRED BY THE ASSESSEE TO BRING THE GOODS TO THE PLACE OF ITS LOCATION AND CONDITION AS ON THE DATE OF VALUATION. THE SCOP E AND EFFECT OF SECTION 145A HAVE BEEN ELABORATED IN DEPA RTMENTAL CIRCULAR NO. 772, DATED 23/12/1998. IN VIEW OF THE CLEAR CUT PROVISION APPLICABLE TO THE ASSESSMENT YEAR IN QUES TION, WE FIND MERIT IN THE ARGUMENT OF THE LD. COUNSEL FOR T HE ASSESSEE, THUS, THE ADDITION SO MADE IS DELETED. ITA NO.4817/MUM/2011 AUNDE FAZE THREE AUTO FAB LTD. 6 FINALLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOW ED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN TH E PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 08/02/2016. SD/- SD/- ( G.S. PANNU ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER & ' MUMBAI; + DATED : 09/02/2016 F{X~{T? P.S/. .. %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. , -. / THE APPELLANT 2. /0-. / THE RESPONDENT. 3. 11 & 2$ ( , ) / THE CIT, MUMBAI. 4. 11 & 2$ / CIT(A)- , MUMBAI 5. 4%5/$! , 1, ),!6 , & ' / DR, ITAT, MUMBAI 6. 7'8' / GUARD FILE. / BY ORDER, 04$/$ //TRUE COPY// / (DY./ASSTT. REGISTRAR) , & ' / ITAT, MUMBAI