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

ITA 656/KOL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1952 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 12-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G HANGSHING
• Keywords: Revised return
• Section: 43B; 143(3); 142(1); 147; 148

Judgement Text

1 ITA NO.656/KOL/2016 ITC LTD., AY 2006-07 , D , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: KOL KATA () BEFORE .., /AND . , ) [BEFORE SHRI A. T. VARKEY, JM & SHRI M. BALAGANESH , AM] I.T.A. NO. 656/KOL/2016 ASSESSMENT YEAR: 2006-07 JOINT COMMISSIONER OF INCOME-TAX (OSD), CIRCLE-8(1), KOLKATA. VS. M/S. ITC LTD. (PAN:AAACI5950L) APPELLANT RESPONDENT & C.O. NO.32/KOL/2016 IN I.T.A. NO. 656/KOL/2016 ASSESSMENT YEAR: 2006-07 M/S. ITC LTD. VS. DEPUTY COMMISSIONER OF INCOME-TA X, CIRCLE-8, KOLKATA. CROSS OBJECTOR RESPONDENT DATE OF HEARING 07.11.2017 DATE OF PRONOUNCEMENT 10.01.2018 FOR THE REVENUE SHRI G. HANGSHING, CIT FOR THE ASSESSEE/CROSS OBJECTOR SHRI J. P. KHAITAN, ADOVCATE ORDER PER SHRI A.T.VARKEY, JM THIS APPEAL PREFERRED BY THE REVENUE AND THE CROSS OBJECTION PREFERRED BY THE ASSESSEE ARE AGAINST THE ORDER OF LD. CIT(A)-3, KOL KATA DATED 28.01.2016 FOR AY 2006-07. 2. THE SOLE ISSUE OF REVENUES APPEAL IS AGAINST TH E ACTION OF LD. CIT(A) IN DELETING THE ADDITION OF RS.276,12,87,066/- IN RESPECT OF EXCIS E DUTY ON CLOSING STOCK. 3. 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 27.11.2006 DECLARING TOTAL INCOME OF RS.3 041,42,53,870/- BUT SUBSEQUENTLY FILED 2 ITA NO.656/KOL/2016 ITC LTD., AY 2006-07 REVISED RETURN ON 19.03.2008 DECLARING TOTAL INCOME OF RS.3040,47,74,966/-. CONSEQUENTLY, ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE INCOME- TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) ON 31.12.2009 AT A TOTAL INCOME OF RS .3126,11,87,690/-. SUBSEQUENTLY, THE AO WAS OF THE OPINION THAT THE ASSESSEES CLAIM OF DOUBLE DEDUCTION IN RESPECT OF EXCISE DUTY ON CLOSING STOCK RESULTED IN UNDER ASSESSMENT OF INCOME OF RS.276,12,87,066/- . ACCORDINGLY, NOTICE U/S. 148 OF THE ACT WAS ISSUED ON 01.03.2013 AND LATER ON NOTICES U/S. 143(2) AND 142(1) OF THE ACT WERE ISSUED ON 11.09.2 013 AND 06.02.2014 ALONG WITH THE REASONS RECORDED FOR PROCEEDINGS U/S. 147 WAS ISSUE D. BEFORE THE AO, ON BEHALF OF THE ASSESSEE A DETAILED SUBMISSION VIDE LETTER DATED 03 .03.2014 WAS SUBMITTED AND IT WAS REPRODUCED BY THE AO IN HIS ASSESSMENT ORDER. THE E XPLANATION SUBMITTED BY THE ASSESSEE WAS NOT FOUND TENABLE BY THE AO, AND, THEREFORE, HE OBSERVED THAT SINCE THE DEDUCTION OF EXCISE DUTY ON CLOSING STOCK WAS ALREADY ALLOWED IN THE P&L ACCOUNT, FURTHER DEDUCTION OF THE EXCISE DUTY ON CLOSING STOCK IN THE COMPUTATION OF INCOME U/S. 43B OF THE ACT IS NOT ALLOWABLE AND ACCORDINGLY, HE ADDED BACK THE AMOUNT OF RS.276.13 CRORES TO THE INCOME OF THE ASSESSEE. ON APPEAL, THE LD. CIT(A) WHILE DELE TING THE ADDITION HAS HELD AS UNDER: I HAVE PERUSED THE AO'S ORDER FOR RE-ASSESSMENT A ND THE APPELLANT'S SUBMISSION AND THE CASE LAWS THAT HAVE BEEN RELIED UPON. THE APPELLANT COMP ANY HAS BEEN FOLLOWING THIS PRACTICE OF DEBITING PROFIT AND LOSS ACCOUNT BY EXCISE DUTY ON SALES. IT, THUS, PASSES A CONTRA-ENTRY TO REVERSE THE EFFECT OF EXCISE DUTY COMPONENT IN OPEN ING AND CLOSING STOCK. SINCE BOTH OPENING AND CLOSING STOCK WERE VALUED TAKING THE COMPONENT OF EXCISE DUTY, THERE IS NO NET EFFECT I.E. CHARGE TO THE PROFIT AND LOSS ACCOUNT IN RESPECT OF EXCISE DUTY ON CLOSING STOCK . IN THE PREVIOUS YEAR, I.E. AY 2005-06 TOO, THE ISSU E HAD BEEN REOPENED BY THE AO AND MY LD. PREDECESSOR CIT(A) HAD ALLOWED THE CLAIM OF THE ASS ESSEE ON THE BASIS OF THE FOLLOWING ARGUMENTS:- '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 43B OF THE IT AC T, 1961. AS AND WHEN IT FILES RETURN OF INCOME FOR THE SUBSEQUENT YEAR, IT ADDS BACK EXC ISE DUTY ON OPENING STOCK AS THE SAME HAD ALREADY BEEN CLAIMED AS DEDUCTION IN THE R ETURN 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 FACT, THE ENTI RE EXERCISE IS REVENUE NEUTRAL OVER THE PERIOD OF A FEW YEARS. EVEN FOR A SINGLE YEAR, THE METHOD APPEARS-TO BE IN CONFORMITY WITH WELL ACCEPTED PRINCIPLE OF ACCOUNTI NG AS WELL AS THE PROVISION OF SECTION 145A AND SECTION 43B OF THE IT ACT, 1961. I T IS NOTED, THAT THIS ISSUE WAS EXAMINED BY KOLKATA BENCH OF TRIBUNAL IN ITA NO.164 0IKOI12012 IN THE CASE OF DCIT CIR-I, KOLKATA VS. EXIDE INDUSTRIES LTD A. Y. 2006- 07, IN WHICH ADDITION FOR SIMILAR GROUND HAD BEEN MADE. IN ITS ORDER DATED 19.04.2013 , THE TRIBUNAL HAD, FOLLOWING ITS OWN ORDER IN THE EARLIER ASSESSMENT YEARS, DELETED THE DISALLOWANCE WITH THE FOLLOWING OBSERVATION: 3 ITA NO.656/KOL/2016 ITC LTD., AY 2006-07 'WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULLY PERUSED THE MATERIAL AVAILABLE ON RECORD. ON CAREFUL PERUSAL OF FACTS AN D CIRCUMSTANCES OF THE CASE LEADING TO DISALLOWANCE U/S 43B OF THE ACT BY HYPOT HETICAL HOLDING A VIEW THAT THE CLAIM OF THE ASSESSEE BECOMES DOUBLE DEDUCTION HAS NOT BEEN INTERPRETED CORRECTLY BY THE AO FOR THE IMPUGNED ASSESSMENT YEA R EVEN WHEN THE MATTER HAS BEEN ADJUDICATED UPON AND DELIBERATED BY THE TR IBUNAL IN ASSESSEE'S OWN CASE FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEARS BEGINNING FROM 1996-97. WE HAVE ALSO PERUSED THE COMPUTATION MADE AS CONTRA DICTORY IN THE ORDER OF AO WHO HAS MISINTERPRETED THE FINDING OF THE TRIBUN AL IN HIS OWN MANNER IN SO FAR HE HAS DISCUSSED THE DECISION OF THE ITAT KO LKATA 8ENCH AT PAGE 4 OF HIS ORDER WHICH REQUIRED CONSIDERATION WAS FOR THE VALUATION OF STOCK SETTLES THE ISSUE AS PER THE REQUIREMENT OF LAW WHETHER COU LD 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 ABLE TO POINT OUT ANY SPECIFIC DEFECT IN THE ACCOUNTING THEREIN WHEN ON THE JUDICIAL CITATIONS A S 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 MISAPPLICA TION OF FACTS AND FIGURES IN THE MIND OF THE AO TO HAVE DISCOVERED DOUBLE DED UCTION FOR THE PURPOSE OF DISALLOWANCE U/S.43B 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-I VS. EXIDE IND USTRIES LTD ITA NO. 158/2013 VIDE ORDER DATED 20.01.2014. THUS, THE ISSUE IS NOW COVE RED IN FAVOUR OF THE APPELLANT BY THE ORDER OF JURISDICTIONAL BENCH OF HON'BLE TRIBUN AL, CONFIRMED BY HON'BLE HIGH COURT. IN VIEW OF THE SAME, THE ADDITION MADE BY TH E A.O. BY WAY OF DISALLOWANCE OF EXCISE DUTY PAYMENT AMOUNTING TO RS. 270,06,83,951/ - IS DELETED.' THE RELEVANT PARA OF THE ORDER OF THE JURISDICTIONA L HIGH COURT IN THE CASE OF CIT VS. EXIDE INDUSTRY (ITA NO. 158/20I3) VIDE ORDER DATED 20.01.2014 IS AS UNDER.- 'THE LD. ADVOCATE FOR THE APPELLANT FAIRLY SUBMITTE D ALL THE POINTS URGED BY THE REVENUE IN THIS APPEAL ARE NOW COVERED BY THE J UDGMENT OF THE SUPREME COURT OR OF THE TRIBUNAL ITSELF. IN VIEW OF THIS M ATTER, THERE IS NOTHING FOR US TO EXAMINE. THE APPELLANTS CASE IS SQUARELY COVERED BY THE EXI DE INDUSTRYS CASE. THEREFORE, FOLLOWING THE JURISDICTIONAL HIGH COURTS ORDER WHICH IN TURN HAD FOLLOWED THE ORDER OF THE APEX COURT, THE ADDITION MADE BY THE AO BY WAY OF DISALLOWANCE OF EXCISE DUTY PAYMENT TO RS.276,12,87,066/- IS DELETED. AGGRIEVED, REVENUE IS NOW IN APPEAL BEFORE US. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUG H FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE EXCISE DUTY PAID ON CLOSING STOCK AMOUNTING TO RS.276,12,87,066/- WAS CLAIMED IN THE REVISED RETURN BY THE ASSESSEE. THE PWC CERTIFICATE CONFIRMED THE PAYMENT BEFORE THE RETURN FILING DATE ALONG WITH DE TAIL JUSTIFICATION. SINCE THERE WAS NO CHARGE IN THE AUDITED P&L ACCOUNT IN RESPECT OF THE SAID EXCISE DUTY ON CLOSING STOCK FOR THE FY ENDED ON 31.03.2006, A SEPARATE DEDUCTION U/ S. 43B OF THE ACT WAS CLAIMED FOR RS.276,12,87,066/- AND THE SAID AMOUNT WAS ADDED BA CK IN THE FOLLOWING YEAR I.E. AY 2007- 4 ITA NO.656/KOL/2016 ITC LTD., AY 2006-07 08. WE NOTE THAT THE DEDUCTION CLAIMED IN THE EARL IER YEAR I.E. AY 2005-06 OF RS.270,06,83,951/- WAS ADDED BACK IN THE RELEVANT A SSESSMENT YEAR UNDER CONSIDERATION I.E. AY 2006-07. THIS TREATMENT IS INCONSONANCE WITH TH E RATIO DECIDENDI OF THE HONBLE SUPREME COURT DECISION IN BERGER PAINTS INDIA LTD. VS. CIT 266 ITR 99 (SC). WE NOTE THAT SIMILAR ISSUES AROSE IN SUBSEQUENT YEAR IN ASSESSEE S OWN CASE FOR AYS. 2009-10, 2008-09 AND 2007-08 AND THE TRIBUNAL HELD THAT THE TREATMEN T CARRIED OUT BY THE ASSESSEE IN RESPECT OF THE EXCISE DUTY AS LEGALLY TENABLE. WE NOTE THA T IN IDENTICAL CASE THE DECISION OF THE COODINATE BENCH OF THE TRIBUNAL IN THE CASE OF EXID E INDUSTRIES LTD., AY 2006-07 WAS UPHELD BY THE HONBLE JURISDICTIONAL HIGH COURT IN ITA NO. 158/2013 VIDE ORDER DATED 20.01.2014 AND THE LD. CIT(A) HAS RELIED ON THE TRI BUNALS ORDER IN ORDERING DELETION OF THE ADDITION MADE BY THE AO. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY LD. CIT(A) AND WE UPHOLD THE SAME. THEREFORE, APPE AL OF REVENUE IS DISMISSED. 5. THE CROSS OBJECTION FILED BY THE ASSESSEE IS DIS MISSED AS NOT PRESSED. 6. IN THE RESULT, BOTH THE APPEAL OF REVENUE AND CO OF ASSESSEE ARE DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 10TH JANUA RY, 2018 SD/- SD/- (M. BALAGANESH) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED :10TH JANUARY, 2018 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT JCIT(OSD), 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