VULCAN INDUSTRIAL ENGG. CO. P. LTD, MUMBAI V. ADDL CIT RG 5(3), MUMBAI

ITA 4949/MUM/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6273 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 03-11-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 28-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR
• Assessee Lawyers: JAYESH GANDHI
• Section: 43B; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'F' BENCH, MUMBAI BEFORE SHRI R.V. EASWAR, PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 4949/MUM/2009 (ASSESSMENT YEAR: 2005-06) M/S. VULCAN INDUSTRIAL ENGG. CO. P. LTD. ADDL.CIT, RANGE 5(3) C/O J.L. GANDHI & CO. MUMBAI 302 SAI CHAMBERRS, OPP. RLY. STN. VS. SANTACRUZ (E), MUMBAI 400055 PAN - AAACV 2931 Q APPELLANT RESPONDENT APPELLANT BY: MS. JAYESH GANDHI RESPONDENT BY: SHRI SURENDRA KUMAR O R D E R PER B. RAMAKOTAIAH, A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A)-V, MUMBAI DATED 23.06.2009. 2. ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) V, MUMBAI HAS ERRED IN ADDING RS.26,14,568/- ON THE WRONG CONCLUS ION THAT EXCISE DUTY LIABILITY WAS NOT DISCHARGED BEFORE DUE DATE O F FILING THE RETURN OF INCOME. 2. THE SAID CIT (APPEALS) V, HAS WRONGLY ADDED THE AMOUNT OF RS.26,14,568 U/S 43B OF THE INCOME TAX BEING UNDISC HARGED /UNPAID EXCISE DUTY LIABILITY IN CONNECTION WITH WO RKING OF VALUATION OF CLOSING STOCK AS PER METHOD PRESCRIBED UNDER SEC TION 145A. 3. BRIEFLY STATED, THE A.O. MADE CERTAIN ADDITIONS IN THE SCRUTINY ASSESSMENT, ONE SUCH BEING AN ADDITION UNDER SECTIO N 145A OF EXCISE DUTY COMPONENT IN THE CLOSING STOCK. THE ASSESSEE FOLLOW S EXCLUSIVE METHOD OF ACCOUNTING FOR TREATMENT OF MODVAT CREDITS AND PAYM ENTS. THE TAX AUDIT REPORT MAKES A REMARK IN ANNEXURE-3 OF THE TAX AUDI T REPORT THAT VALUATION OF CLOSING STOCK WAS NOT IN CONFORMITY WITH THE MET HOD PRESCRIBED UNDER ITA NO. 4949/MUM/2009 M/S. VULCAN INDUSTRIAL ENGG. CO. P. LTD. 2 SECTION 145A BUT THE METHOD ADOPTED BY THE ASSESSEE HAS NO EFFECT ON THE PROFITS FOR THE CURRENT YEAR. THE A.O. ANALYSED THE EXCISE DUTY, SALES TAX AND OTHER DUTY ELEMENTS IN THE PURCHASES AND SALES AND BROUGHT TO TAX AN AMOUNT OF ` 26,14,568/- AS AN ADDITION TO THE CLOSING STOCK VAL UATION. THE ASSESSEE CONTENDED BEFORE THE CIT(A) THAT EVEN IF T HE INCLUSIVE METHOD IS FOLLOWED IT DOES NOT HAVE ANY EFFECT ON THE PROFITS OR TOTAL INCOME OF THE ASSESSEE AND WHILE MAKING THE ADDITION THE A.O. MIS SED THE LAST STEP, I.E. PROVIDING FOR DEDUCTION OF EXCISE DUTY LIABILITY, A DDED TO THE VALUE OF CLOSING STOCK, AS AN EXPENDITURE FOR THE YEAR AS IT WAS ALR EADY PAID TO THE GOVERNMENT OF INDIA. IT WAS THE SUBMISSION THAT THE EXCISE DUTY EMBEDDED IN AND ADDED TO THE CLOSING STOCK HAS SINCE BEEN PA ID, THE SAME SHOULD HAVE BEEN ALLOWED AS DEDUCTION WHICH NEUTRALISES THE ADD ITION MADE. THE CIT(A), WHILE AGREEING WITH ASSESSEES CONTENTION ABOUT LIA BILITY BEING ALLOWABLE AS DEDUCTION, REJECTED THE CONTENTION ON THE PRETEXT T HAT THE ASSESSEE HAS NOT FURNISHED ANY DETAILS WITH REFERENCE TO DISCHARGE O F LIABILITY AND SO AS PER SECTION 43B THE SAME IS DISALLOWABLE AND ACCORDINGL Y NO RELIEF WAS PROVIDED TO THE ASSESSEE. 4. REFERRING TO THE PAPER BOOK FILED BEFORE THE CIT(A) AND SUBMISSIONS MADE, IT WAS THE CONTENTION OF THE LEARNED COUNSEL THAT THE ASSESSEE HAS PAID THE EXCISE DUTY AND ALSO FILED DETAILS OF MODV AT CREDIT AND ON THE BASIS OF THESE DETAILS ONLY THE A.O. MADE THE ADDITION WI THOUT CONSIDERING THE EXCISE DUTY AS A LIABILITY ALLOWABLE TO THE ASSESSE E. IN THE RESULT, AN ADDITION WAS MADE INCORRECTLY. THE CIT(A) HAS WRONGLY SUSTAI NED THE ADDITION STATING THAT THE ASSESSEE HAS NOT FURNISHED ANY EVIDENCE WH EREAS THE ASSESSEES CONTENTIONS WERE THAT IT HAS DISCHARGED EXCISE DUTY LIABILITY BEFORE THE CLOSURE OF THE YEAR ITSELF AND EVEN OTHERWISE THE E NTIRE LIABILITY STOOD DISCHARGED BY THE TIME RETURN WAS FILED AND SO THER E IS NO NEED FOR ANY ADDITION. THE LEARNED COUNSEL ALSO RELIED ON THE JU DGEMENT OF THE ITAT MUMBAI K BENCH IN THE CASE OF ACIT VS. TIME PACKA GING LTD. 26 SOT 216, WHICH ITSELF WAS RELIED UPON BY THE CIT(A). 5. THE LEARNED D.R., HOWEVER, RELIED ON THE ORDERS OF THE A.O. AND CIT(A) TO SUBMIT THAT THE ADDITION IS REQUIRED UNDER SECTI ON 145A OF THE I.T. ACT. ITA NO. 4949/MUM/2009 M/S. VULCAN INDUSTRIAL ENGG. CO. P. LTD. 3 6. WE HAVE CONSIDERED THE ISSUE. IT IS TRUE THAT PROVI SIONS OF SECTION 145A ARE TO BE EXAMINED VIS--VIS THE ACCOUNTING PR INCIPLES FOLLOWED BY THE ASSESSEE FOR PURCHASES AND SALES AND VALUATION OF INVENTORIES. AS STATED THE ASSESSEE IS FOLLOWING EXCLUSIVE METHOD O F ACCOUNTING AND THE COMPONENT OF DUTY INVOLVED FOR PURCHASE, SALES AND CLOSING STOCK ARE NOT REFLECTED IN THE P & L ACCOUNT BUT ARE ADJUSTED IN THE LEDGER ACCOUNTS SEPARATELY BY TAKING THE MODVAT CREDIT AVAILABLE AN D AVAILED AND THE BALANCE TAX, IF ANY, PAYABLE SEPARATELY WITHOUT CHA RGING TO THE P & L ACCOUNT. EVEN THOUGH THE AUDIT REPORT NOTED THAT TH E ASSESSEE WAS FOLLOWING EXCLUSIVE METHOD OF ACCOUNTING WHICH IS N OT IN CONFORMITY WITH THE PROVISIONS OF SECTION 145, IT ALSO GAVE A NOTE THAT IT DOES NOT HAVE ANY EFFECT ON THE P & L ACCOUNT. IN OUR OPINION THE A.O . HAS MISSED THIS ASPECT WHILE RELYING ON THE FIRST PART OF THE AUDIT NOTE. WHILE MAKING THE ADDITION ALSO, AS SUBMITTED BY THE ASSESSEE, THE A. O. DID NOT CONSIDER THE EXCISE DUTY ADDED AS A COMPONENT IN THE CLOSING STO CK AS THE LIABILITY PAYABLE TO THE GOVERNMENT OF INDIA WHICH THE ASSES SEE HAS STATED TO HAVE DISCHARGED BEFORE THE CLOSURE OF THE ACCOUNTIN G YEAR ITSELF. WHILE UPHOLDING ASSESSEES CONTENTIONS TO THAT EXTENT, TH E CIT(A), IN OUR OPINION, HAS WRONGLY CONFIRMED THE ADDITION EVENTHO UGH THE ASSESSEE HAS PLACED EVIDENCE BEFORE THE CIT(A) TO SUBMIT THAT TH E EXCISE DUTY COMPONENT WAS ALREADY PAID/DISCHARGED BEFORE THE DU E DATE OF FILING RETURN. THE ENTIRE WORKING OF THE A.O. AS WELL AS T HE SUBMISSIONS MADE BY THE ASSESSEE WERE ON THE BASIS OF FORM E.R. 1 (PAGE 115 OF THE PAPER BOOK) AND CORRESPONDING CHALLANS OF EXCISE DUTY PAI D. EVEN THOUGH THESE DETAILS WERE AVAILABLE, THE CIT(A) MISSED THIS ASPE CT AND UPHELD THE ADDITION UNDER SECTION 43B STATING THAT THE ASSESSE E HAS NOT PLACED ANY EVIDENCE ON RECORD. SINCE THE DETAILS ALREADY PLACE D ON RECORD HAVE NOT BEEN EXAMINED IN THE CORRECT PERSPECTIVE BY THE A.O . AND BY THE CIT(A), THE ASSESSEES COUNSEL HAS NO OBJECTION IF THE MATE R IS RESTORED TO THE FILE OF THE A.O. FOR EXAMINATION OF TAX PAYMENT AND GIVI NG NECESSARY DEDUCTION UNDER SECTION 43B. IN VIEW OF THIS, THE I SSUE TO THE EXTENT OF VERIFICATION OF PAYMENT OF EXCISE DUTY HAD BEEN RES TORED TO THE FILE OF THE ITA NO. 4949/MUM/2009 M/S. VULCAN INDUSTRIAL ENGG. CO. P. LTD. 4 A.O. TO ALLOW THE DEDUCTION U/S 43B IF PAID AS PER THE PROVISIONS. GROUNDS ARE CONSIDERED ALLOWED TO THAT EXTENT. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH NOVEMBER 2010. SD/- SD/- (R.V. EASWAR) (B. RAMAKOTAIAH) PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATED: 24 TH NOVEMBER 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) V, MUMBAI 4. THE CIT V, MUMBAI CITY 5. THE DR, F BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.