EVERGREEN ENGINEERING CO. P. LTD, MUMBAI V. ACIT RG 8(1), MUMBAI

ITA 6739/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62432 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2001-2002
• Appeal Filed On: 22-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K V RAVI NAMBOODRI
• Assessee Lawyers: PARESH SHAPARIA
• Keywords: Opportunity of being heard
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E,MUMBAI BEFORE SHRI R.S. SYAL (AM) SHRI VIVEK VARMA (JM) I.T.A. NOS.6739 & 6740/MUM/2010 (A.YS. 2001-02 & 2006-07) M/S. EVERGREEN ENGG. CO. P. LTD., 35-B, MAHAL INDL. ESTATE, MAHAKALI CAVES ROAD, ANDHERI (E), MUMBAI-400 093. PAN: AAACE2499L VS. ASSTT. COMMR. OF INCOME-TAX, CIR. 8(1), AAYKAR BHAVAN, M.K. ROAD, MUMBAI-400 020. APPELLANT RESPONDENT APPELLANT BY SHRI PARESH SHAPARIA. RESPONDENT BY SHRI K .V. RAVI NAMBOODRI. DATE OF HEARING 14-05-2012 DATE OF PRONOUNCEMENT 18-05-2012 O R D E R PER R.S. SYAL, AM : THESE TWO APPEALS BY THE ASSESSEE RELATE TO ASSESSM ENT YEARS 2001-02 AND 2006-07. FOR THE SAKE OF CONVENIENCE WE HAVE CLUBBE D THEM FOR DISPOSAL BY THIS CONSOLIDATED ORDER. AY 2001-02: 2. THE ONLY ISSUE IS AGAINST THE CONFIRMATION OF AD DITION OF RS.2,38,019/- BEING DIFFERENCE IN CLOSING BALANCE OF CROMPTON GRE AVES. ITA NOS.6739-6740/MUM/2010 EVERGREEN ENGG. CO. P.LTD. 2 3. THIS IS SECOND ROUND OF PROCEEDINGS BEFORE THE T RIBUNAL. IN THE ASSESSMENT ORDER PASSED ORIGINALLY, A COPY OF WHIC H IS AVAILABLE ON RECORD, THE AO OBSERVED THAT THERE WAS DIFFERENCE IN THE BALANC E OF ACCOUNT WITH CROMPTON GREAVES AS APPEARING IN THE ASSESSEES BOOKS VIS-A- VIS IN THEIR BOOKS. SUCH DIFFERENCE TO THE TUNE OF RS.2,38,019/- WAS ADDED B Y THE AO. WHEN THE MATTER CAME UP BEFORE THE TRIBUNAL, IT REMITTED THE MATTER BACK TO THE FILE OF AO FOR EXAMINING THE ASSESSEES CONTENTION THAT THE ASSESS EE HAD OFFERED THE SAME AMOUNT TO TAX IN SUBSEQUENT ASSESSMENT YEAR. THIS O RDER OF THE TRIBUNAL IN ITA NO.6022/MUM/2004 CAME TO BE PASSED ON 21-04-2008, A COPY OF WHICH IS AVAILABLE ON RECORD. IN THE FRESH PROCEEDINGS FOR G IVING EFFECT TO THE TRIBUNAL ORDER, THE AO REQUIRED THE ASSESSEE TO PROVE ITS C ASE BY GIVING 5 DAYS TIME. AS PER THE AO, THERE WAS NO APPEARANCE FROM THE SIDE O F THE ASSESSEE TO SHOW THAT THE DIFFERENCE IN CLOSING BALANCE OF CROMPTON GREAV ES WAS OFFERED TO TAX IN SUBSEQUENT ASSESSMENT YEAR. HE, THEREFORE, REPEATED THE ADDITION WHICH CAME UP TO BE UPHELD IN THE FIRST APPEAL. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. A COPY OF ANNUAL ACCOUNTS FOR THE SUBSEQUEN T YEAR ENDING 31-3-2002 IS AVAILABLE ON RECORD. FROM THE DETAILS OF MISCELLANE OUS EXPENSES, IT IS SEEN THAT THE ASSESSEE HAS WRITTEN OFF SUNDRY BALANCE TO THE TUNE OF RS.33,557/-. THEN THERE IS A STATEMENT ON PAGE 5 OF THE PAPER BOOK, DEDUC ING THE SAID AMOUNT OF RS.33,557/-. THIS PAGE SHOWS THAT THE ASSESSEE WROT E OFF SUNDRY BALANCES TO THE ITA NOS.6739-6740/MUM/2010 EVERGREEN ENGG. CO. P.LTD. 3 DEBIT AS WELL AS CREDIT OF THIS ACCOUNT. THE NAME O F CROMPTON GREAVES IS APPEARING IN THIS STATEMENT WITH THE CREDIT BALANCE APPROPRIATED TO THE TUNE OF RS.4,84,737/-. PAGES 6 & 7 OF THE PAPER BOOK REPR ESENT COPY OF ACCOUNT OF CROMPTON GREAVES IN ASSESSEES BOOKS OF ACCOUNT. FR OM THIS ACCOUNT, IT CAN BE SEEN THAT THERE IS A DEBIT OF RS.4,78,750/- IN THE ACCOUNT OF UNIT NO. 1 AS ON 31- 3-2002 WITH THE NARRATION ADNS OF 00-01 REVERSED . SIMILAR ADJUSTMENT IS THERE IN CROMPTON GREAVES ACCOUNT UNIT NO.2 AMOUNTI NG TO RS.5,986.85 THEREBY MAKING TOTAL OF RS.4.84 LAKHS WHICH HAS BEEN APPROP RIATED LEADING TO THE NET DEBIT BALANCE OF RS.33,557/-. THIS INDICATES THAT T HE AMOUNT OF RS.2.28 LAKHS FOR THE PRECEDING YEAR WAS PART OF THE TOTAL AMOUNT ADJ USTED IN THE SUBSEQUENT YEAR TOTALING RS.4.84 LAKHS. IN OUR CONSIDERED OPINION, THE DIRECTION OF THE TRIBUNAL FOR VERIFICATION AS TO WHETHER THE AMOUNT WAS, IN F ACT, OFFERED AS INCOME IN THE SUBSEQUENT YEAR, STOOD FULLY COMPLIED WITH AS IT CAN BE SEEN THAT THE ASSESSEE DID OFFER SUCH AMOUNT ALONG WITH SOME AMOUNT FOR T HE SUCCEEDING YEAR TO INCOME IN THE NEXT YEAR. WE, THEREFORE, ORDER FOR T HE DELETION OF THIS ADDITION. 5. IN THE RESULT, THIS APPEAL IS ALLOWED. AY 2006-07: 6. THE ONLY ISSUE IN THIS APPEAL IS AGAINST THE CON FIRMATION OF NET ADDITION OF RS.17,356/- TOWARDS MODVAT (CLOSING BALANCE OF MO DVAT AT RS.94.31 MINUS OPENING BALANCE OF MODVAT AT RS.94.14 LAKHS). ITA NOS.6739-6740/MUM/2010 EVERGREEN ENGG. CO. P.LTD. 4 7. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE AO, FOLLOWING HIS ACTION TAKEN FOR AY 2001-02, HELD THAT THE CLOSING BALANCE OF MODVAT, AS IN EXCESS OF THE OPENING BALANCE, WAS REQUIRED TO BE ADDED. HE, THEREFORE, MADE ADDITION OF RS.17,356/-. NO RELIEF WAS ALLOWED IN THE FIRST APP EAL. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. FROM THE FACTS, IT IS CLEAR THAT THE AO HAS ADDED THE CLOSING BALANCE OF UNUTILIZED CENVAT CREDIT AND ALLOWED DEDUCTION IN R ESPECT OF THE OPENING BALANCE OF CENVAT CREDIT. SECTION 145A WAS INTRODUCED BY T HE FINANCE (NO.2) ACT, 1998, W.E.F. 1-4-1999. THE RELEVANT PART OF THE SECTION, AT THE MATERIAL TIME, PROVIDES THAT THE VALUATION OF PURCHASE AND SALE OF GOODS AN D INVENTORY FOR THE PURPOSE OF DETERMINING THE INCOME CHARGEABLE UNDER THE HEAD P ROFITS AND GAINS OF BUSINESS OR PROFESSION SHALL BE IN ACCORDANCE WITH THE METH OD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE AND FURTHER ADJUSTED TO IN CLUDE THE AMOUNT OF ANY TAX, DUTY, CESS OR FEE (BY WHATEVER NAME CALLED) ACTUAL LY PAID OR INCURRED BY THE ASSESSEE TO BRING THE GOODS TO THE PLACE OF ITS LOC ATION AND CONDITION AS ON THE DATE OF VALUATION. FROM THE MANDATE OF THIS SECTION , IT IS SELF-EVIDENT THAT NOT ONLY A CONSISTENT METHOD OF ACCOUNTING SHOULD BE FO LLOWED FOR VALUING THE STOCKS BUT THE FIGURES OF PURCHASES, SALES, OPENING STOCK AND CLOSING STOCK SHOULD BE SUITABLY AMENDED BY INCLUDING THE AMOUNT OF TAX, DU TY, CESS OR FEE ETC. ACTUALLY PAID OR INCURRED BY THE ASSESSEE. IN VIEW OF THE PR OVISIONS OF SEC. 145A, THE NET METHOD OF VALUATION OF CLOSING IS NO MORE IN VOGUE. VALUATION HAS TO BE DONE ON ITA NOS.6739-6740/MUM/2010 EVERGREEN ENGG. CO. P.LTD. 5 GROSS BASIS. FURTHER, THE RELEVANT THING IS THAT N OT ONLY THE VALUE OF OPENING AND CLOSING STOCK IS TO BE DONE ON GROSS BASIS, I.E. IN CLUSIVE OF TAX, DUTY, CESS, ETC., BUT THE FIGURES OF PURCHASES AND SALES HAVE ALSO TO BE VALUED ACCORDINGLY. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS. MAHALAXMI GLASS WORKS LTD. (2009) 318 ITR 116 (BOM) AND THE HONB LE DELHI HIGH COURT IN THE CASE OF CIT VS. MAHAVIR ALUMINIUM LTD. (2008) 2 97 ITR 77 (DEL) HAVE LAID DOWN TO THIS EXTENT. SINCE THE EXERCISE DONE BY THE AO IS RESTRICTED ONLY TO ADJUSTING THE OPENING & CLOSING BALANCE OF CENVAT CREDIT, WITHOUT EFFECTING THE COMPONENTS OF PURCHASES AND SALES ACCORDINGLY, WE H OLD THAT THE SAME CANNOT BE ACCEPTED. AT THE SAME TIME, THE VIEWPOINT OF THE AS SESSEE THAT THE ENTIRE ADDITION BE DELETED IS ALSO NOT ACCEPTABLE. IN VIEW OF THE A FORENOTED JUDGMENTS, WE SET ASIDE THE IMPUGNED ORDER AND RESTORE THE MATTER TO THE FILE OF AO FOR DECIDING THIS ISSUE IN ACCORDANCE WITH LAW AFTER ALLOWING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 9. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES. ORDER PRONOUNCED ON THE 18TH DAY OF MAY, 20 12. SD/- SD/- (VIVEK VARMA) (R.S. SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 18TH MAY , 2012. NG: ITA NOS.6739-6740/MUM/2010 EVERGREEN ENGG. CO. P.LTD. 6 COPY TO : 1. DEPARTMENT. 2.ASSESSEE. 3 CIT(A)-16, MUMBAI. 4 CIT-16,MUMBAI. 5.DR,E BENCH, MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER, ASST. REGISTRAR, ITAT, MUMBAI.