MAHINDRA SONA LTD, MUMBAI V. DCIT CIR 2(2), MUMBAI

ITA 668/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8245 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 30-01-2015
• Court: TRIBUNAL
• Department Lawyers: OMI NINGSHEN
• Assessee Lawyers: PRASAD BAPAT
• Keywords: Opportunity of being heard
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H, MUMBAI BEFORE SHRI D.T. GARASIA (JUDICIAL MEMBER) AND SHRI ASHWANI TANEJA (ACCOUNTANT MEMBER) I.T.A. NO.668/MUM/2015 (ASSESSMENT YEAR: 2011-12) MAHINDRA SONS LTD GATEWAY BUILDING, APOLLO BUNDER FORT, MUMBAI-1 VS DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE 2(2), MUMBAI PAN NO. ( APPELLANT) (RESPONDENT) APPELLANT BY SHRI PRASAD BAPAT RESPONDENT BY SHRI OMI NINGSHEN DATE OF HEARING : 24-01-2017 DATE OF ORDER : 15 -02- 2017 O R D E R PER ASHWANI TANEJA, AM: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-5, MUMBAI [HER EINAFTER CALLED CIT(A)] DATED 14-11-2014 PASSED AGAINST THE ORDER OF THE AS SESSING OFFICER U/S 143(3) DATED 18-02-2014 FOR AY 2011-12 ON THE FOLLOWING GROUNDS :- BEING AGGRIEVED BY THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-5, MUMBAI (HEREINAFTER REFERRE D TO AS 'THE CIT(A)') YOUR APPELLANT SUBMITS THE FOLLOWING GROUN D OF APPEAL FOR YOUR SYMPATHETIC CONSIDERATION: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) ERRED IN ENHANCING THE ADDI TION MADE TO CLOSING STOCK ON ACCOUNT OF CENVAT CREDIT AND VA T SET OFF FROM INR 1,36,61,622/- TO INR 1,64,63,088/- ON THE CONTENTION THAT THERE IS DEVIATION FROM THE METHOD OF VALUATIO N PRESCRIBED UNDER SECTION 145A. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT T HE 2 I.T.A NO.668/MUM/2015 APPELLANT HAS BEEN CONSISTENTLY FOLLOWING THE 'EXCL USIVE METHOD' FOR VALUATION OF INVENTORIES MANDATED BY IC AI AND ACCORDINGLY, BOOKING ITS PURCHASES OF INPUTS AND VA LUING ITS INVENTORIES NET OF CENVAT AND SALES TAX SET OFF. THE LEARNED CIT(A) FURTHER ERRED IN REJECTING THE I MPACT OF DEVIATION ON PROFITS OF THE COMPANY WORKED OUT BY T HE APPELLANT GIVEN IN ANNEXURE IV OF TAX AUDIT REPORT. HE OUGHT TO HAVE APPRECIATED THAT THE IMPACT OF DEVIATION ON PROFITS IS NIL AND HAS BEEN WORKED OUT AS ILLUSTRATED IN GUIDA NCE NOTE OF TAX AUDIT U/S 44AB OF THE INCOME TAX ISSUED BY THE ICAI. 2. DURING THE COURSE OF HEARING, IT WAS STATED BY THE LD. COUNSEL OF THE ASSESSEE THAT THE ONLY ISSUE INVOLVED IN THIS APPEA L IS WITH REGARD TO THE VALUATION OF STOCK IN ACCORDANCE WITH SECTION 145A OF THE ACT. IDENTICAL ISSUE WAS INVOLVED IN A.YS. 2010-11 AND 2009-10 WHEREIN T HE TRIBUNAL VIDE ITS ORDERS DATED 06-06-2016 AND 08-06-2016 HAS RESTORED THE MA TTER BACK TO THE FILE OF THE AO. THEREFORE, IN THIS YEAR ALSO, THESE ORDERS MAY BE FOLLOWED AND THE ISSUE BE RESTORED TO THE FILE OF THE AO. 3. PER CONTRA, THE LD. DR DID NOT RAISE ANY OBJECTION IN RESTORING THE ISSUES BACK TO THE FILE OF THE AO IN LINE WITH THE ORDERS OF THE TRIBUNAL FOR EARLIER YEARS. 4. WE HAVE GONE THROUGH THE ORDERS PASSED BY THE LOWER AUTHORITIES AS WELL AS THE ORDERS PASSED BY THE TRIBUNAL FOR EARLI ER YEARS. IT IS NOTED THAT THE TRIBUNAL VIDE ITS ORDER FOR A.Y. 2010-11 HAS HELD A S UNDER:- 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE HAS DEMONSTRATED IN THE STATEM ENT PREPARED BY HIM THAT THERE IS NO IMPACT ON THE NET PROFIT, IF TAXES ARE ACCOUNTED EITHER UNDER EXCLUSIVE OR UNDER INCLU SIVE METHOD. WE HAVE NOTICED THAT THE TAX AUTHORITIES HAVE NOT EXAM INED THE STATEMENT FURNISHED BY THE ASSESSEE THOUGH LEARNED CIT(A) HAS MADE CERTAIN COMPUTATIONS AND GRANTED PARTIAL RELIE F TO THE ASSESSEE. WE HAVE NOTICED THAT HE HAS NOT FOUND FAU LT WITH THE 3 I.T.A NO.668/MUM/2015 STATEMENT FURNISHED BY THE ASSESSEE. UNDER THESE SE T OF FACTS, WE ARE OF THE VIEW THAT THIS ISSUE REQUIRES FRESH E XAMINATION AT THE END OF THE ASSESSING OFFICER BY DULY CONSIDERING RE CONCILIATION STATEMENT FURNISHED BY THE ASSESSEE. ACCORDINGLY, W E SET ASIDE THE ORDER PASSED BY LEARNED CIT(A) ON THIS ISSUE AND RE STORE THE SAME TO THE FILE OF THE ASSESSING OFFICER WITH THE DIREC TION TO EXAMINE THE RECONCILIATION STATEMENT FURNISHED BY THE ASSESSEE AND TAKE APPROPRIATE DECISION IN ACCORDANCE WITH LAW AFTER A FFORDING NECESSARY OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 5. SIMILAR VIEW HAS BEEN FOLLOWED BY THE TRIBUNAL IN O RDER FOR A.Y. 2009-10 WITH FOLLOWING OBSERVATIONS:- 6. SIMILAR ISSUE HAS BEEN DECIDED BY COORDINATE BEN CH OF THE TRIBUNAL IN THE CASE OF HAWKINS COOKERS LTD., I TA NO.505/MUM/2004, ORDER DATED 11-8-2008 [2008-(1D2)- GJX- 0272-TB0M], WHEREIN THE TRIBUNAL HELD AS UNDER:- ON CONSIDERATION OF SECTION 145A, ABOVE MEMORANDUM AND CBDT CIRCULAR EXPLAINING THE PROVISIONS SECTION 145A AND ABOVE JUDGMENT OF THE DELHI HIGH COURT WE NOTED THAT WHEN THE ADJUSTMENTS ARE MADE IN THE VALUATION OF INVENTORIES, THIS WILL AFFECT BOTH THE OPENING AS WELL AS CLOSING STOCK. WHATEVER ADJUSTMENT IS MA DE IN THE VALUATION OF CLOSING STOCK, THE SAME WILL BE REFLECTED IN THE OPENING STOCK ALSO IRRESPECTIVE OF ANY CONSEQUENCES ON THE COMPUTATION OF INCOME FOR TAX PURPOSES. WE FURTHER NOTICED THAT SECTION 145A STAR TS WITH THE NON-OBSTANTE CLAUSE 'NOTWITHSTANDING ANYTH ING TO THE CONTRARY CONTAINED IN SECTION 145'. THEREFOR E, TO GIVE EFFECT TO SECTION 145A, THE OPENING STOCK A S ON 1.4.98 WILL HAVE TO BE INCREASED BY ANY TAX, DUTY, CESS OR FEE ACTUALLY PAID OR INCURRED WITH REFERENCE TO SUCH STOCK IF THE SAME HAS NOT BEEN INCURRED WITH REFERE NCE TO SUCH STOCK IF THE SAME HAS NOT BEEN ADDED FOR THE P URPOSE OF VALUATION IN THE ACCOUNTS. THE AO IS DIRECTED T O GIVE THE EFFECT OF SECTION 145A AS PER ABOVE DISCUSSION. 7. SIMILAR VIEW HAS BEEN TAKEN BY HON'BLE BOMBAY HI GH COURT IN THE CASE OF M/S THE MAHALAXMI GLASS WORKS PVT. LTD. , 2009- (IT1)-GJX-0104BORN, VIDE ORDER DATED 1-4-2009. 8. AS PER OUR CONSIDERED VIEW WHEN THE DUE ADDITION IS MADE BY 4 I.T.A NO.668/MUM/2015 AO BY DISTURBING THE CLOSING STOCK, NECESSARY ADJUS TMENT IS ALSO REQUIRED TO BE MADE IN THE OPENING STOCK IN RESPECT OF MODVAT CREDIT. ACCORDINGLY, WE RESTORE THIS MATTER BACK TO THE FILE OF AO FOR MAKING NECESSARY ADJUSTMENT OF CENVAT CREDIT AND VAT IN THE VALUE OF OPENING INVENTORY. WE DIRECT ACCORD INGLY. 6. WE HAVE GONE THROUGH THE ORDERS PASSED BY THE TRIBU NAL. NO DISTINCTION HAD BEEN MADE OUT BY EITHER PARTY BEFORE US. THERE FORE, WE RESTORE THE ISSUE BACK TO THE FILE OF THE AO AND DIRECT HIM TO FOLLOW THE ORDERS OF THE TRIBUNAL FOR EARLIER YEARS AS REPRODUCED ABOVE AND DECIDE THIS I SSUE AFTER GIVING ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE FOR SUBMITTI NG REQUISITE DETAILS AND DOCUMENTARY EVIDENCES. AS A RESULT, THE APPEAL MAY BE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, THE APPEAL IS ALLOWED, FOR STATISTIC AL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT AT THE CONCLUSION OF THE HEARING. SD/- SD/- (D.T. GARASIA) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 15 TH FEBRUARY, 2017 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE , H-BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES