UNICHEM LABORATORIES LTD, MUMBAI V. ADDL CIT 5(3), MUMBAI

ITA 5330/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71737 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 03-12-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 24-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH RANJAN PRASAD
• Section: 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUM BAI , , BEFORE SHRI SANJAY ARORA, A.M. AND SHRI AMIT SHUKL A, J.M. ! ./ I.T.A. NO. 5330/MUM/2012 ( / ASSESSMENT YEAR: 2009-10) UNICHEM LABORATORIES LTD., UNICHEM BHAVAN, PRABHAT ESTATE, S.V. ROAD, JAGESHWARI (WEST), MUMBAI-400 102 / VS. ADDL. CIT, CIRCLE 5(3), AAYKAR BHAVAN, M. K. ROAD, CHURCHGATE, MUMBAI-400 020 $ ./ % ./PAN/GIR NO. AAACU 0551B ( !$& /APPELLANT ) : ( '($& / RESPONDENT ) !$& ) / APPELLANT BY : SHRI NITESH JOSHI '($& * ) / RESPONDENT BY : SHRI RAJESH RANJAN PRASAD +,- * . / DATE OF HEARING : 03.12.2013 / 01 * . / DATE OF PRONOUNCEMENT : 03.12.2013 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE AGITATING THE ORD ER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-9, MUMBAI (CIT(A) FOR SHORT) DATED 11.06.2012, DISMISSING THE ASSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S.143 (3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) DATED 30.12.2011 FOR THE ASSESSME NT YEAR (A.Y.) 2009-10. 2 ITA NO. 5330/MUM/2012 (A.Y. 2009-10) UNICHEM LABORATORIES LTD . VS. ADDL. CIT 2. THE PRINCIPAL ISSUE ARISING IN THIS APPEAL, PROJ ECTED PER ITS GROUND NO.1 BY THE ASSESSEE, IS IN RELATION TO THE MANNER IN WHICH THE EFFECT TO SECTION 145A OF THE ACT IS TO BE GIVEN. WHILE BOTH THE PARTIES ARE IN AGREEMENT T HAT SECTION 145A IS MANDATORY IN ITS APPLICATION W.E.F. A.Y. 1999-2000, THE CONTROVERSY, AS EXPLAINED BY THE LEARNED AR DURING HEARING, ARISES AS THE SAME IS TO BE APPLIED TO ALL THE ELEMENTS OF THE TRADING ACCOUNT, I.E., THE OPENING STOCK, PURCHASES, SALES AS WELL AS THE CLOSING STOCK. DOING SO WOULD NOT RESULT IN ANY ADDITION TO THE REPORTED PR OFIT AS PER THE ACCOUNTS MAINTAINED FOLLOWING THOUGH THE NET METHOD. THE ADDITION IN TH E INSTANT CASE ARISES AS THE REVENUE HAS APPLIED THE SAID SECTION ONLY TO THE STOCK-IN-T RADE HELD BY THE ASSESSEE AS AT THE YEAR- END, I.E., THE CLOSING STOCK, AND WHICH CANNOT BE. TOWARD THIS HE WOULD PLACE ON RECORD THE DECISIONS BY THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE TWO IMMEDIATELY PRECEDING YEARS, BEING A.Y. 2008-09 (ITA NO.7093/M/ 2011 DATED 27.02.2013) AND A.Y.2007-08 (ITA NO. 2872/M/2011 DATED 13.04.2012). THE ISSUE THEREFORE IS IN FACT FULLY COVERED. GROUND NO.2, HE CONTINUED, IS ESSENTIALLY A COROLLA RY TO THE FIRST ISSUE IN-AS-MUCH AS THE VALUE OF THE CLOSING STOCK AS DETERMINED BY THE REVENUE FOR A.Y.2008-09 IS TO BE ADOPTED AS THE VALUE OF THE OPENING STOCK FOR THE F OLLOWING YEAR, I.E., THE CURRENT YEAR. THE LD. DR, ON BEING CONFRONTED WITH THE SAME, WOUL D AGREE TO THIS BEING THE ONLY CONTROVERSY ARISING IN THE INSTANT APPEAL, THO UGH CONTEND THAT THE VERIFICATION OF THE ASSESSEES CLAIM/S WOULD HAVE TO BE MADE BY THE ASS ESSING OFFICER (AO). 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE ASSESSEE IS ADMITTEDLY FOLLOWING EXCLUSIVE METHOD FOR ACCOUNTIN G, I.E., VALUING ITS PURCHASES AND SALES AND, CONSEQUENTLY, INVENTORIES, AT NET OF ANY CESS OR DUTY LEVIED/LEVIABLE THEREON, CLAIMING THE SAME TO BE TAX-NEUTRAL, AS WAS STATED BY THE LD. AR DURING HEARING TO HAVE BEEN INDEED FOUND BY THE AO ON RESTORATION OF THE M ATTER BACK TO HIS FILE BY THE TRIBUNAL FOR A.Y.2007-08. THE ASSESSEE IS ADMITTEDLY NOT FOL LOWING SECTION 145A, THE MANDATORY APPLICATION WHICH IS NOT DISPUTED OR IN DOUBT. THOU GH, THEREFORE, IT MAY CLAIM THE SAME TO 3 ITA NO. 5330/MUM/2012 (A.Y. 2009-10) UNICHEM LABORATORIES LTD . VS. ADDL. CIT BE TAX-NEUTRAL, AS IT DOES THROUGH ITS TAX AUDIT RE PORT UNDER SECTION 44AB FOR THE YEAR, IT IS BOUND, ON BEING CALLED UPON TO, TO DEMONSTRATE THE SAME TO THE REVENUE. AS EXPLAINED BY THE TRIBUNAL WHILE DEALING WITH THE MATTER AT LENGT H IN THE CONTEXT OF A DIFFERENCE ARISING ON ACCOUNT OF ADJUSTMENT IN RESPECT OF MODVAT CREDI T IN THE CASE OF HERCULES PIGMENT INDUSTRY V. ITO (IN ITA NO. 271/MUM/2012 DATED 29/5/2013), THAT TH ERE CAN BE NO INFERENCE AS TO REVENUE NEUTRALITY, WHICH MAY NOT O BTAIN IN ALL CASES. THE SAME IS A MATTER OF FACT, AND WHICH WOULD THEREFORE NEED TO BE VERIF IED BY THE AO BY ACTUAL APPLICATION OF SECTION 145A, IN ITS TERMS. THAT THE ASSESSEE FOLLO WS THE NET OR EXCLUSIVE METHOD OF ACCOUNTING IS A DIFFERENT MATTER, SO THAT THE DIFFE RENCE, IF ANY, FOUND UPON PROPER APPLICATION OF U/S.145A I.E., BY ADOPTING VALUES AT GROSS OF INCIDENT LEVIES, WOULD NECESSARILY HAVE TO BE GIVEN EFFECT TO IN COMPUTING INCOME U/S. 28 OF THE ACT. SECONDLY, AGAIN, WITHOUT DOUBT SECTION 145A IS NOT ONLY IN RESPECT OF CLOSING STOCK, AND WOULD APPLY TO ALL THE FACTORS OF PRODUC TION OR OF THE TRADING ACCOUNT, EVEN AS PRESCRIBED BY THE SECTION ITSELF (REFER: RAJ PETRO SPECIALITIES (P.) LTD. V. ASST. CIT IN ITA NOS. 7260 & 7261/MUM/2010 DATED 15/3/2013). THE ASS ESSEES CASE IN THIS REGARD IS UNEXCEPTIONAL AND, RATHER THAN BEING COVERED BY THE DECISIONS BY THE TRIBUNAL, IS COVERED BY THE CLEAR TERMS OF THE PROVISION, I.E., THE LAW, ITSELF, AS OBSERVED BY THE BENCH DURING HEARING. THE ASSESSEES GROUND NO.2 IS AGAIN A MATT ER THAT SHOULD NOT REQUIRE OUR INTERVENTION INASMUCH AS THE VALUE OF THE CLOSING S TOCK, AS DETERMINED IN TERMS OF SECTION 145A, IS TO BE NECESSARILY CONSIDERED AS THE VALUE OF THE OPENING STOCK FOR THE FOLLOWING YEAR. THE MATTER IS ACCORDINGLY RESTORED BACK TO THE FILE OF THE AO TO ALLOW THE ASSESSEE AN OPPORTUNITY TO PRESENT ITS CASE BEFORE HIM QUA THE APPLICATION OF SECTION 145A AS NOT LEADING TO ANY DIFFERENCE IN THE DISCLOSED PROFIT P ER ITS ACCOUNTS. THE AO SHALL DETERMINE AND ADJUDICATE THE MATTER BY ISSUING CLEAR AND DEFI NITE FINDING/S OF FACT. WE DECIDE ACCORDINGLY. 4 ITA NO. 5330/MUM/2012 (A.Y. 2009-10) UNICHEM LABORATORIES LTD . VS. ADDL. CIT 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON DECEMBER 03, 2013 SD/- SD/- (AMIT SHUKLA) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER 2- MUMBAI; 3+ DATED : 03/12/2013 +../ AK.PATEL . PS ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. !$& / THE APPELLANT 2. '($& / THE RESPONDENT 3. ( ! ) / THE CIT(A) 4. / CIT CONCERNED 5. 6,78 '+9: , !. 9: 1 , 2- / DR, ITAT, MUMBAI 6. 8;< - / GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , 2- / ITAT, MUMBAI