KOCH CHEMICAL TECHNOLOGY GROUP INDIA P.LTD, MUMBAI V. ADDL CIT RG 10(2), MUMBAI

ITA 7165/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0291 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 01-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PURUSHOTTAM KASHYAP
• Assessee Lawyers: NIRMIT ME H TA
• Keywords: Cost of acquisition
• Section: 143(3); 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 71 65 /MUM/201 4 ASSESSMENT YEAR: 20 10 - 1 1 KOCH CHEMICAL TECHNOLOGY GROUP INDIA P. LTD 10 FLOOR CORPORATE PARK II, SION TROMBAY R,D CHEMBUR MUMBAI 4000 71 VS. ADDL CIT RG 10 ( 2 ) AAYAKAR BHAVAN, M.K. MARG MUMBAI 400020 PAN NO. AABC K3688G (APPELLANT) (RESPONDENT) ASSESSEE BY : MR. NIRMIT MEHTA , AR REVENUE BY: MR. PURUSHOTTAM KASHYAP, DR DATE OF HEARING: 05 /06/2017 DATE OF ORDER: 14 /06/2017 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 20 10 - 1 1 . THE APPEAL IS DIRECTED AGAINST THE ORDER COMMISSIONER (APPEALS) 2 1 , MUMBAI AND ARISES OUT OF ORDER U/S 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER: 1. THE LEARNED C OMMISSIONER OF I NCOME T AX (A PPEALS ) - 2 1, MUMBAI [ THE CIT (A) ] ERRED FACT AND IN LAW IN CONFIRMING THE ACTION OF THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE - 10(2), MUMBAI ( THE AO ) IN MAKING ADDITION OF UNUTILIZED CENVAT U/S. 145A AMOUNTING TO RS. 46, 13,063/ - TO THE INCOME OF THE APPELLANT . ITA NO 7165/MUM/2014 2 2. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN ENHANCING THE VALUE OF CLOSING STOCK OF RAW MATERIAL BY THE AMOUNT OF UNUTILISED CENVAT CREDIT AMOUNTING TO RS. 46,13,063/ - . 3. WITHOUT PREJUDICE TO ABOVE, THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN NOT DIRECTING THE AO TO INCREASE THE VALUE OF OPENING STOCK OF RAW MATERIAL OF THE CURRENT YEAR. 4. THE LEARNED CIT (A) ERRED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE AO IN INITIATING PENALTY PROCEEDINGS U/S. 2 71(1)(C) OF THE INCOME TAX ACT, 1961 . 3 . BRIEFLY STATED , THE FACTS OF THE CASE ARE THAT DURING THE FY 2009 - 10 RELEVANT TO THE AY 2010 - 11 , THE ASSESSING OFFICER (AO) ASKED THE ASSESSEE TO EXPLAIN AS TO WHY DIFFERENCE OF RS. 1,62,69,903/ - SHOWN UNDER THE HEAD LOANS & ADVANCES BEING BALANCE LYING WITH THE EXCISE AUTHORITIES SHOULD NOT BE ADDED TO THE TOTAL INCOME AS PER THE PROVISION OF SECTION 145 A OF THE ACT. THE ASSESSEE HAS SUBMITTED BEFORE THE A.O. THAT IT IS FOLLOWING EXCLUSIVE METHOD OF ACCOUNTING FOR CENVAT C REDIT AND CENVAT D UTY PAID ON PURCHASES OF RAW MATERIALS IS DEBITED TO THE CENVAT C REDIT RECEIVABLE (INPUTS) ACCOUNT. THE PURCHASE COST OF INPUTS IS NE T OF SPECIFIED DUTIES ON INPUTS. THE ARGUMENT OF THE ASSESSEE IS THAT IT IS EXCLUDING THE CENVAT FROM THE OPENING STOCK, PURCHASES AND CLOSING STOCK, HENCE, NO FURTHER ADJUSTMENT IS TO BE CARRIED OUT IN ITS CASE. HOWEVER, THE A.O. WAS NOT CONVINCED WI TH THE ABOVE EXPLANATION OF THE ASSESSEE AND WORKED OUT THE CENVAT RELATABLE TO STOCKS AS UNDER: (I) CENVAT RELATABLE TO BE CLOSING STOCK OF RAW MATERIAL AS ON 31/03/2010 RS. 1,03,13,610 (II) CENVAT RELATABLE TO BE CLOSING STOCK OF RAW MATERIAL AS ON 31/03/2009 RS. 57,00,547 BALANCE RS. 46,13,063 ITA NO 7165/MUM/2014 3 THE A.O. THEREAFTER MADE A DISALLOWANCE OF RS. 46,13,063/ - U/S. 145A OF THE ACT. 4. AGGRIEVED BY THE ORDER OF THE A.O., THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A) . WE FIND THE LD. CIT(A) HAS FOLLOW ED THE ORDER OF HIS PREDECESSOR IN OFFICE FOR THE AY 2007 - 08 AND DISMISSED THE APPEAL FILED BY THE ASSESSEE. 5. BEFORE US THE LD. COUNSEL OF THE ASSESSEE RELIED ON THE ORDER OF THE ITAT K BENCH, MUMBAI IN THE CASE OF THE ASSESSEE FOR THE AY 2007 - 0 8 IN ITA NO. 8091/MUM/2011. 6. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDER OF THE LD. CIT(A) . HE MADE A REFERENCE TO THE DECISION IN THE CASE OF CIT V S. MAHALAXMI GLASS WORKS PVT. LTD. (2009) 318 ITR 116 (BOM). 7. WE HEARD THE RIVAL SUBMISSION AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE SAME ISSUE AROSE BEFORE THE COORDINATE BENCH IN THE CASE OF THE ASSESSEE FOR THE AY 2007 - 08. THE TRIBUNAL HELD AS UNDER: WE DO NOT FIND ANY JUSTIFIABLE REASON FOR SUCH DIFFERENTIAL TREATMENT. WHEN THE ASSESSEE HAS REDUCED THE CENVAT FROM THE PURCHASE VALUE OF RAW MATERIAL AND ACCOUNTED FOR THE PURCHASE VALUE IN THE BO O KS NET OF CENVAT CREDIT, THERE IS NO REASON FOR MAKING ADJUSTMENT TO THE CLOSING STOCK ONLY B Y INCLUDING THE UNUTILIZED CENVAT CREDIT. THOUGH SECTION 145A OF THE ACT PROVIDED FOR ADJUSTMENT BY INCLUDING ANY TAX, DUTY, CESS OR FEE WHILE VALUING THE PURCHASE AND SALE OF GOODS AND INVENTORY BUT AS HELD BY THE HON'BLE DELHI HIGH COURT IN CIT V S. MAHA VIR ALUMINUM LTD., (2008) 297 ITR 77 (DEL.), WHENEVER ANY ADJUSTMENT IS MADE IN THE VALUATION OF INVENTORY, IT WILL AFFECT BOTH THE OPENING STOCK AND CLOSING STOCK. IF ANY ADJUSTMENT IS REQUIRED TO BE MADE IN TERMS WITH SECTION 145A, EFFECT TO THE SAME SH OULD BE GIVEN IRRESPECTIVE OF ANY CONSEQUENCES ON THE COMPUTATION OF INCOME FOR TAX PURPOSES. THE COURT HELD FOR GIVING EFFECT TO SECTION 145A OF THE ACT, IF THERE IS CHANGE IN THE CLOSING STOCK OF THE RELEVANT PREVIOUS YEAR, THEN THERE MUST NECESSARILY B E A CORRE S PONDING ADJUSTMENT MADE IN THE OPENING STOCK AS ON THE BEGINNING OF THE RELEVANT PREVIOUS YEAR. THE ITA NO 7165/MUM/2014 4 AFORESAID VIEW OF THE HON'BLE DELHI HIGH COURT WAS ACCEPTED BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V S. MAHALAXMI GLASS WORKS PVT. LTD., ( 2009 ) 318 ITR 116 (BOM.). IN THE PRESENT CASE, SINCE THE ASSESSEE HAS NOT MADE ANY ADJUSTMENT TO THE OPENING STOCK BY INCLUDING THE CENVAT CREDIT, THERE IS NO NEED TO MAKE ADJUSTMENT TO THE CLOSING STOCK ONLY BY INCLUDING THE UNUTILISED CENVA T CREDIT. ON THE FLIP SIDE, IF ADJUSTMENT IS MADE TO THE CLOSING STOCK, THEN CORRESPONDING ADJUSTMENT HAS TO BE MADE TO THE OPENING STOCK OF RAW MATERIAL FOR THE NEXT YEAR. IN EITHER CASE, IT WILL BE REVENUE NEUTRAL. HENCE, IN OUR VIEW, THE ADJUSTMENT O F RS. 1,04,59,372/ - MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(A) IS NOT SUSTAINABLE. ACCORDINGLY, WE DELETE THE SAME. 7.1 WE FIND THAT THE RELIANCE PLACED BY THE LD. DR ON MAHALAXMI GLASS WORKS PVT. LTD . (SUPRA) HAS BEEN DISCUSSED BY THE COORDINATE BENCH AS MENTIONED AT PARA 7 HERE - IN - ABOVE. 8. FACTS BEING SIMILAR, WE FOLLOW THE ORDER OF THE COORDINATE BENCH FOR THE AY 2007 - 08 AND DELETE THE ADDITION OF RS. 46,13,063/ - MADE BY THE A.O. U/S. 145A OF THE ACT. 9. CONSEQUENTLY, THE INITIA TION OF PENALTY DOES NOT ARISE. 10 . IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14/06/2017. S D/ - (MAHAVIR SINGH) S D/ - (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 14/06/2017 RAHUL DHOKE P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT ITA NO 7165/MUM/2014 5 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI