Asstt. Commissioner of Income Tax, Bareilly V. M/s Kisan Sahkari Chini Mills Ltd., Bareilly

ITA 693/LKW/2013

• Counselvise Citation: 69323714 RSA 2013
• Duration Of Justice: 1 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 11-02-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 25-09-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR ANANT KUMAR AGRAWAL
• Assessee Lawyers: SHYAM LAL
• Section: 43B; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI. A. K. GARODIA, ACCOUNTANT MEMBER ITA NO.693/LKW/2013 ASSESSMENT YEAR:2008-09 ACIT RANGE I BAREILLY V. M/S KISAN SAHAKARI CHINI MILLS LTD. SEMIKHERA DISTT. BAREILLY TAN/PAN:AAAAK3453A (APPELLANT) (RESPONDENT) APPELLANT BY: DR. ANANT KUMAR AGRAWAL, CIT (DR) RESPONDENT BY: SHRI. SHYAM LAL, C.A. DATE OF HEARING: 19 02 2015 DATE OF PRONOUNCEMENT: 11 03 2015 O R D E R PER SUNIL KUMAR YADAV: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A), INTER ALIA, ON THE FOLLOWING GROUNDS:- 1. THAT THE ORDER OF THE LD. CIT (APPEALS) BAREILLY IS ERRONEOUS IN LAW AND ON FACTS AS THE A.O. HAS RIGHTLY DISALLOWED RS.59,60,316/- AS EMPLOYER'S CONTRIBUTION TO P.P. OF EMPLOYEES ON THE GROUND THAT ASSESSMENT ORDER DO NOT INDICATE ANY MATERIAL EVIDENCE TO. REBUT THE CLAIM OF THE ASSESSEE FOR PAYMENT. THE A.O. DISALLOWED THE SAME DUE TO PAYMENT BEYOND THE TIME PRESCRIBED UNDER THE PROVISION OF I.T. ACT, 1961 AS WELL AS PROVIDENT FUND ACT. THE LD. CIT(A) HAS IGNORED THE FACTS AND CIRCUMSTANCES NARRATED BY THE AO IN THE ASSESSMENT ORDER PASSED U/S.143(3) OF I T ACT. 1961. 2. THAT THE LD. CIT (APPEALS) HAS WRONGLY DELETED THE ADDITIONS OF RS.33,79,849/-AS DISALLOWANCE U/S 43B FOR PURCHASE TAX ON ACCOUNT OF LATE PAYMENT .DURING THE ASSESSMENT PROCEEDINGS THE :- 2 -: ASSESSEE SUBMITTED 'THAT THE AMOUNT OF RS.33,79,849/- HAS ALREADY BEEN DISALLOWED BY THE ASSESSEE ITSELF AND SAME IS ADDED BACK IN COMPUTATION OF INCOME FOR THE PERIOD UNDER CONSIDERATION. THEREFORE THE DECISION OF LD. CIT(A) IS NOT ACCEPTED . 3 THAT THE LD. CIT (APPEALS) HAS WRONGLY DELETED THE ADDITION OF RS.4,03,21,627/- AS ADDITION OF EXCISE DUTY TO THE VALUE OF THE CLOSING STOCK IN THE INSTANT CASE, NO EXCISE DUTY HAS BEEN COMPUTED AND INCLUDED AGAINST THE CLOSING STOCK AND THEREAFTER IN TRADING ACCOUNT. THE A.O. ADDED BACK THIS 'AMOUNT WHICH WAS EXCLUDED BY THE ASSESSEE FROM THE CLOSING STOCK. THE LD. CIT(A) HAS NOT APPRECIATED THE OPINION TAKEN BY THE A.O. 4 THE LD. CIT (A) HAS WRONGLY DELETED THE ADDITIONS OF RS.7,45,642- ON ACCOUNT OF THE VALUATION OF FREE SUGAR. THE ASSESSEE SUPPRESSED THE VALUATION OF CLOSING STOCK INCLUDING EXCISE DUTY OF RS.7,45,642/- BY APPLYING LOWER RATE OF CLOSING STOCK. THIS AFFECTED THE G.P.& N.P. THE LD. CIT (A) HAS NOT KNOWN THE OPINION TAKEN BY THE A.O. AND WRONGLY DELETED THE ADDITION. 5 THAT THE ORDER OF THE LD. CIT(A) BEING ERRONEOUS IN LAW AND ON FACTS MAY BE CANCELLED AND THE ORDER OF THE A.O. MAY BE RESTORED. 2. APROPOS GROUND NO.1, IT IS SUBMITTED ON BEHALF OF THE ASSESSEE THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE, AS THE PAYMENT OF EMPLOYEES CONTRIBUTION TO PROVIDENT FUND OF THE EMPLOYEES WAS MADE BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME. THE ASSESSING OFFICER HAS DISALLOWED THE SAID PAYMENT BY INVOKING THE PROVISIONS OF SECTION 43B OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED IN SHORT THE ACT') ON THE GROUND THAT THE PAYMENTS WERE NOT MADE BEFORE THE DUE DATE; WHEREAS BEFORE THE LD. CIT(A) ASSESSEE HAS FILED RELEVANT EVIDENCE TO PROVE THAT THE PAYMENTS OF PROVIDENT FUND WERE MADE BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME. BEING CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE, :- 3 -: THE LD. CIT(A) HAS DELETED THE ADDITION. THE RELEVANT OBSERVATIONS OF THE LD. CIT(A) ARE EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE:- I HAVE CONSIDERED THE ISSUE, IT IS SEEN FROM THE ORDER OF THE AO THAT THE AO HAS MADE THE BASIS OF DISALLOWANCE, ANNEXURE E AND EL OF THE AUDIT REPORT. THE COPY OF THIS REPORT AS FILED IN APPEAL BEFORE ME SHOWS THAT THAT THE MODE OF PAYMENT WAS SHOWN AS DRAFT/ CHEQUES. ALL THE DRAFT AND CHEQUES ARE ISSUED WELL BEFORE THE DUE DATE FOR FILING THE RETURN OF INCOME. THE RETURN IN QUESTION WAS FILED ON 19.9.2008 AS MENTIONED IN ANNEXURE E AND E-1 SHOWS THAT THE PAYMENTS MENTIONED IN ANNEXURE E WERE PAID THROUGH DRAFT AND THE LAST DRAFT IS DATED 20.04.2008. SIMILARLY AS PER ANNEXURE LAST CHEQUE IS DATED 20.04.2008. THE PROVISIONS OF SECTION 43 B CLEARLY MANDATE THAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY IN RELATION TO ANY SUM WHICH IS ACTUALLY PAID BY THE ASSESSEE ON OR BEFORE THE DUE DATE APPLICABLE IN HIS CASE FOR FURNISHING THE RETURN OF INCOME UNDER SUB-SECTION (1) OF SECTION 139 IN RESPECT OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED AS AFORESAID AND THE EVIDENCE OF SUCH PAYMENT IS FURNISHED BY THE ASSESSEE ALONGWITH SUCH RETURN. A CAREFULLY PERUSAL OF THE ASSESSMENT ORDER DO NOT INDICATE ANY MATERIAL EVIDENCE TO REBUT THE CLAIM OF THE APPELLANT FOR PAYMENT. IN THE FACTS AND CIRCUMSTANCES OF THE CASE I HAVE NO OPTION BUT TO DELETED THE DISALLOWANCE MADE BY THE AO. 3. SINCE THE LD. D.R. COULD NOT POINT OUT ANY FAULT IN THE ORDER OF THE LD. CIT(A), WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) ON THIS ISSUE, AS IT HAS BEEN CLEARLY ESTABLISHED THAT THE PAYMENT OF PROVIDENT FUND CONTRIBUTION WAS MADE BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME, THEREFORE, THE SAME IS ALLOWABLE UNDER SECTION 43B OF THE ACT. WE ACCORDINGLY CONFIRM THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. 4. APROPOS GROUND NO.2, SIMILAR ARGUMENT WAS RAISED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE PAYMENT OF PURCHASE TAX WAS ALSO MADE BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME. ON PERUSAL OF THE ORDERS OF :- 4 -: THE LOWER AUTHORITIES, WE FIND THAT THE ASSESSING OFFICER HAS DISALLOWED THE PAYMENT FOR WANT OF PROPER EVIDENCE WITH REGARD TO THE PAYMENT OF PURCHASE TAX BEFORE DUE DATE OF FILING OF THE RETURN OF INCOME. BEFORE THE LD. CIT(A), THE RELEVANT EVIDENCE WAS FILED TO ESTABLISH THAT THE PAYMENTS WERE MADE BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME. DURING THE COURSE OF HEARING OF THIS APPEAL, THE LD. D.R. COULD NOT DISPUTE THE FACTUAL ASPECT. SINCE THE PAYMENTS WERE MADE BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME, THE SAME IS ALLOWABLE UNDER SECTION 43B OF THE ACT. ACCORDINGLY, THE ORDER OF THE LD. CIT(A) ON THIS ISSUE IS CONFIRMED. 5. APROPOS GROUND NO.3, IT IS NOTICED THAT THE ASSESSING OFFICER HAS NOTED ON EXAMINATION OF SCHEDULE L, WHICH CONTAIN THE VALUATION OF CLOSING STOCK MADE BY THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR, THAT THE ASSESSEE HAS DETERMINED THE VALUATION OF GOODS AT RS.57,60,23,250/-, EXCLUDING THE EXCISE DUTY. A QUERY WAS RAISED BY THE ASSESSING OFFICER BY ISSUING SHOW CAUSE NOTICE AND IN RESPONSE THERETO A REPLY WAS FILED AND ON PERUSAL OF THE SAME, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE HAS NOT INCLUDED ANY AMOUNT OF EXCISE DUTY IN CLOSING STOCK. HE ACCORDINGLY REVALUED THE CLOSING STOCK INCLUDING THE EXCISE DUTY AND MADE ADDITION OF THE EXCISE DUTY HAVING INVOKED THE PROVISIONS OF SECTION 145A OF THE ACT, ACCORDING TO WHICH WHILE VALUING THE PURCHASE AND SALE OF GOODS AND INVENTORY FOR THE PURPOSES OF DETERMINING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION, THE AMOUNT OF ANY TAX, DUTY, CESS OR FEE (BY WHATEVER NAME CALLED) ACTUALLY PAID OR INCURRED BY THE ASSESSEE IS TO BE INCLUDED. THE ASSESSING OFFICER FURTHER OBSERVED THAT SINCE EXCISE DUTY HAS BEEN INCURRED ON THE MANUFACTURING OF THE GOODS, THE SAME SHOULD HAVE BEEN INCLUDED IN THE CLOSING STOCK AS PER PROVISIONS OF SECTION 145A(A) OF THE ACT. 6. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WITH THE SUBMISSION THAT THE ASSESSEE HAS NOT CLAIMED ANY EXPENDITURE ON ACCOUNT :- 5 -: OF PAYMENT OF EXCISE DUTY, THEREFORE, THE SAME CANNOT BE INCLUDED IN THE VALUATION OF CLOSING STOCK. THE LD. CIT(A) RE-EXAMINED THE CLAIM OF THE ASSESSEE IN THE LIGHT OF HIS CONTENTIONS AND HAS FINALLY DELETED THE ADDITION IN THE LIGHT OF THE JUDGMENTS OF THE HON'BLE MADRAS HIGH COURT REPORTED IN 267 ITR 600 AND 243 ITR 502 AND THE JUDGMENT OF THE HON'BLE APEX COURT IN THE CASE OF CHAINRUP SAMPATRAM, 24 ITR 481(SC) AND HINDUSTAN ZINC LTD., 291 ITR 391 (SC). 7. AGGRIEVED, THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL WITH THE SUBMISSION THAT THE CLOSING STOCKS ARE TO BE COMPUTED AS PER PROVISIONS OF SECTION 145A OF THE ACT AND EXCISE DUTY INCURRED SHOULD BE INCLUDED IN THE VALUATION OF CLOSING STOCK. THE JUDGMENTS REFERRED TO BY THE LD. CIT(A) ARE THE JUDGMENTS RENDERED BEFORE INTRODUCTION OF SECTION 145A OF THE ACT. THE LD. D.R. HAS FURTHER CONTENDED THAT SECTION 145A OF THE ACT WAS INTRODUCED BY THE FINANCE (NO.2) ACT, 1998 W.E.F. 1.4.1999 WHEREAS THE JUDGMENTS REFERRED TO BY THE ASSESSEE RELATE TO THE ASSESSMENT YEAR PRIOR TO THE AMENDMENT, THEREFORE, THE SCOPE OF SECTION 145A OF THE ACT WAS NEVER EXAMINED EITHER BY THE HON'BLE HIGH COURTS OR THE APEX COURT. THE LD. D.R. HAS FURTHER CONTENDED THAT THE CLOSING STOCKS ARE TO BE COMPUTED AS PER PROVISIONS OF THE LAW AND THE EXPENSES ON ACCOUNT OF EXCISE DUTY CAN ONLY BE ALLOWED AS PER PROVISIONS OF SECTION 43B OF THE ACT, ACCORDING TO WHICH IF THE PAYMENT IS MADE BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME, THE SAME WOULD BE ALLOWED AS PER SECTION 43B OF THE ACT. BUT IT DOES NOT MEAN THAT IF THE EXPENDITURES ARE NOT ALLOWABLE IN THE IMPUGNED ASSESSMENT YEAR ON ACCOUNT OF NON-PAYMENT BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME, THE STOCK CANNOT BE VALUED AS PER PROVISIONS OF SECTION 145A OF THE ACT. THE LD. D.R. HAS FURTHER CONTENDED THAT THE ASSESSING OFFICER HAS VALUED THE CLOSING STOCK AS PER PROVISIONS OF SECTION 145A OF THE ACT AND INCLUDED THE EXCISE DUTY COMPUTED ON THE STOCKS MANUFACTURED IN THE FACTORY OF THE ASSESSEE. :- 6 -: 8. THE LD. COUNSEL FOR THE ASSESSEE, BESIDES PLACING RELIANCE UPON THE ORDER OF THE LD. CIT(A), HAS CONTENDED THAT SINCE HE HAS NOT CLAIMED ANY EXPENDITURE ON ACCOUNT OF PAYMENT OF EXCISE DUTY, THE SAME CANNOT BE INCLUDED IN THE CLOSING STOCK. HE HAS ALSO PLACED RELIANCE UPON THE FOLLOWING JUDGMENTS:- 1. CIT VS. DYNAVISION LTD., 348 ITR 380(SC). 2. CIT VS. TORRENT CABLES LTD., 354 ITR 163(SC). 3. ORDER OF THE TRIBUNAL IN THE CASE OF KISAN SAHKARI CHINI MILLS LTD., SHAHJAHANPUR VS. ACIT, I.T.A. NO. 490/LUC/2006. 4. ORDER OF THE TRIBUNAL IN THE CASE OF KISAN SAHKARI CHINI MILLS LTD., PURANPUR VS. DCIT, I.T.A. NO. 99/LUC/2009. 9. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AUTHORITIES AND THE JUDGEMENTS REFERRED TO BY THE PARTIES AND THE RELEVANT PROVISIONS OF THE ACT IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT IN THOSE CASES REFERRED TO BY THE ASSESSEE SCOPE OF PROVISIONS OF SECTION 145A OF THE ACT WAS NOT EXAMINED BY THE HON'BLE HIGH COURT OR THE TRIBUNAL. 10. IN THE CASE OF CIT VS. DYNAVISION LTD. (SUPRA), THE RELEVANT ASSESSMENT YEAR IS 1987-88 WHEREAS THE PROVISIONS OF SECTION 145A OF THE ACT WAS INTRODUCED W.E.F. 1.4.1999. THEREFORE, THERE WAS NO OCCASION FOR THE HON'BLE SUPREME COURT TO EXAMINE THE SCOPE OF SECTION 145A OF THE ACT. SIMILAR IS THE POSITION IN THE CASE OF CIT VS. TORRENT CABLES LTD. (SUPRA) WHERE THE ASSESSMENT YEAR INVOLVED IS 1995-96. IN THE AFORESAID ORDERS OF THE TRIBUNAL, THOUGH THE ASSESSMENT YEAR INVOLVED WAS AFTER INTRODUCTION OF THE PROVISIONS OF SECTION 145A OF THE ACT, BUT THE SCOPE OF SECTION 145A OF THE ACT WAS NEVER EXAMINED BY THE TRIBUNAL. THEREFORE, NO ASSISTANCE CAN BE DRAWN IN FAVOUR OF THE ASSESSEE FROM THE AFORESAID JUDGMENTS/ORDERS REFERRED TO BY THE ASSESSEE. AS PER PROVISIONS OF SECTION 145A OF THE ACT, THE AMOUNT OF ANY TAX, DUTY, CESS OR FEE (BY WHATEVER :- 7 -: NAME CALLED) ACTUALLY PAID OR INCURRED BY THE ASSESSEE TO BRING THE GOODS TO THE PLACE OF ITS LOCATION AND CONDITION AS ON THE DATE OF VALUATION ARE TO BE INCLUDED IN THE VALUATION OF CLOSING STOCK. FOR THE SAKE OF REFERENCE, WE EXTRACT THE PROVISIONS OF SECTION 145A OF THE ACT AS UNDER:- SECTION 145A. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN SECTION 145, (A) THE VALUATION OF PURCHASE AND SALE OF GOODS AND INVENTORY FOR THE PURPOSES OF DETERMINING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION SHALL BE (I) IN ACCORDANCE WITH THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE ; AND (II) FURTHER ADJUSTED TO INCLUDE THE AMOUNT OF ANY TAX, DUTY, CESS OR FEE (BY WHATEVER NAME CALLED) ACTUALLY PAID OR INCURRED BY THE ASSESSEE TO BRING THE GOODS TO THE PLACE OF ITS LOCATION AND CONDITION AS ON THE DATE OF VALUATION. FOR THE PURPOSES OF THIS SECTION, ANY TAX, DUTY, CESS OR FEE (BY WHATEVER NAME CALLED) UNDER ANY LAW FOR THE TIME BEING IN FORCE, SHALL INCLUDE ALL SUCH PAYMENT NOTWITHSTANDING ANY RIGHT ARISING AS A CONSEQUENCE TO SUCH PAYMENT. 11. AS PER SUB-CLAUSE (II) OF CLAUSE (A) OF SECTION 145A OF THE ACT, EXCISE DUTY ACTUALLY PAID OR INCURRED BY THE ASSESSEE IS TO BE INCLUDED IN THE VALUATION OF CLOSING STOCK. EXCISE DUTY ALWAYS INCURRED ON MANUFACTURING OF GOODS, THOUGH IT IS TO BE PAID AT THE TIME OF MOVEMENT OF THE GOODS OUTSIDE THE FACTORY. BUT SINCE LIABILITY OF PAYMENT OF EXCISE DUTY HAS BEEN INCURRED ON THE PRODUCTION OF THE GOODS, THE SAME IS TO BE INCLUDED IN THE CLOSING STOCK. IT IS TOTALLY IRRELEVANT WHETHER THE SAME WAS CLAIMED TO BE EXPENDITURE IN THE PROFIT AND LOSS ACCOUNT BY THE ASSESSEE. AS PER PROVISIONS OF SECTION 43B OF THE ACT, THE EXPENDITURE ON ACCOUNT OF EXCISE DUTY CAN ONLY BE ALLOWED IF IT IS PAID BEFORE THE DUE DATE OF FILING OF THE :- 8 -: RETURN OF INCOME. THEREFORE, WE FIND NO FORCE IN THE ARGUMENTS OF THE LD. COUNSEL FOR THE ASSESSEE THAT THIS AMOUNT OF EXCISE DUTY CANNOT BE INCLUDED IN THE VALUATION OF CLOSING STOCK, AS IT WAS NOT CLAIMED AS EXPENDITURE IN THE IMPUGNED ASSESSMENT YEAR. THEREFORE, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER HAS CORRECTLY INCLUDED THE EXCISE DUTY IN THE VALUATION OF CLOSING STOCK. WE, THEREFORE, UPHOLD THE ORDER OF THE ASSESSING OFFICER AFTER SETTING ASIDE THE ORDER OF THE LD. CIT(A), AS HE HAS NOT ADJUDICATED THE ISSUE PROPERLY IN THE LIGHT OF THE PROVISIONS OF SECTION 145A OF THE ACT. ACCORDINGLY, THE ORDER OF THE LD. CIT(A) IS SET ASIDE AND THAT OF THE ASSESSING OFFICER IS RESTORED. 12. APROPOS GROUND NO.4, THE LD. CIT(A) HAS DELETED THE ADDITION RELYING UPON HIS FINDINGS WITH RESPECT TO GROUND NO.3. SINCE WE HAVE TAKEN A VIEW THAT THE CLOSING STOCK IS TO BE VALUED AS PER PROVISIONS OF SECTION 145A OF THE ACT, THE COMPONENT OF EXCISE DUTY IS TO BE INCLUDED IN THE VALUATION OF CLOSING STOCK. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE FOR THE REASONS DISCUSSED WHILE ADJUDICATING GROUND NO.3 AND RESTORE THAT OF THE ASSESSING OFFICER. 13. GROUND NO.5 IS GENERAL IN NATURE AND HENCE NO INDEPENDENT ADJUDICATION IS CALLED FOR. 14. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTIONED PAGE. SD/- SD/- [A. K. GARODIA] [SUNIL KUMAR YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 11 TH MARCH, 2015 JJ:2402 :- 9 -: COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR