DCIT, Mohali V. M/s Cheema Boilers Limited, Mohali

ITA 766/CHANDI/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81021 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 20-11-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 05-07-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J S NAGAR
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACCOUNTANT MEMBER ITA NO. 766/CHD/2013 ASSESSMENT YEARS : 2010-11 D.C.I.T. WARD 6(1) V CHEEMA BOILERS LTD MOHALI SCO 523-24, IST FLOOR SECTOR 70, MOHALI AABCC 4031 B (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI J.S. NAGAR RESPONDENT BY: SHRI AJAY JAI N DATE OF HEARING 20.11.2014 DATE OF PRONOUNCEMENT 26.11 .2014 O R D E R PER T.R. SOOD, A.M THIS APPEAL IS DIRECTED AGAINST THE ORDER OF LD CIT (A), CHANDIGARH DATED 25.4.2013. 2. IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLOW ING GROUNDS: 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) HAS ERRED IN ALLOWING APPEAL OF THE ASSESSEE WITHOUT APPRECIATING THE FACTS OF THE CASE. 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) HAS ERRED IN ALLOWING THE EXCLUS IVE METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE CONTRARY TO THE PROVISIONS OF SECTION 145A WHICH PROHIBITS THE SAME. 3 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITI ON MADE AS PER THE SPECIFIC PROVISIONS OF SECTION 145A RELYING UP ON THE DECISION OF HONBLE APEX COURT WHICH PERTAIN TO ASSESSMENT Y EAR 1989-90 WHEREAS THE PROVISIONS OF SECTION 145A WERE INSERT ED W.E.F. 1.4.1999. 3 AFTER HEARING BOTH THE PARTIES WE FIND THAT DURIN G ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICE D THAT OPENING AND CLOSING STOCK OF RAW MATERIAL AND WORK IN PROGRESS WERE VALUED WITHOUT INCLUSION OF EXCISE DUTY. ACCO RDING TO THE 2 ASSESSING OFFICER THIS WAS AGAINST THE MANDATE OF S EC 145A. ACCORDINGLY HE MADE ADDITION OF RS. 12,56,268/-. 4 ON APPEAL, THE LD. CIT(A) DECIDED THIS ISSUE IN F AVOUR OF THE ASSESSEE BY FOLLOWING THE ORDER OF THE TRIBUNAL . 5 BEFORE US BOTH THE PARTIES SUBMITTED THAT THIS IS SUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 1016/CHD /2012 FOR ASSESSMENT YEAR 2009-10. 7 AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND T HAT IDENTICAL ISSUE HAS BEEN DECIDED BY US VIDE PARA 6 TO 8 IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-10 VI DE ITA NO. 1016/CHD/2012. THESE PARAS READ AS UNDER: 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFU LLY. SECTION 145A OF THE ACT READS AS UNDER:- 145A. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN SECTION 145 , (A) THE VALUATION OF PURCHASE AND SALE OF GOODS A ND INVENTORY FOR THE PURPOSES OF DETERMINING THE INCOME CHARGEAB LE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSI ON SHALL BE (I) IN ACCORDANCE WITH THE METHOD OF ACCOUNTING REG ULARLY 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 VAL UATION. EXPLANATION.FOR THE PURPOSES OF THIS SECTION, AN Y 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. (B) INTEREST RECEIVED BY AN ASSESSEE ON COMPENSAT ION OR ON ENHANCED COMPENSATION, AS THE CASE MAY BE, SHALL BE DEEMED TO BE THE INCOME OF THE YEAR IN WHICH IT IS RECEIVED. 7. THE PLAIN READING OF THE ABOVE PROVISION WOULD S HOW THAT IT IS OF MANDATORY NATURE AND MANDATES THAT ANY TAX, DUTY ET C. HAD TO BE INCLUDED IN THE VALUE OF THE CLOSING STOCK. HOWEVE R, AT THE SAME TIME THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V N AHAR ALUMINUM LTD (SUPRA) HELD AS UNDER;- 3 HELD, DISMISSING THE APPEAL, THAT PARAGRAPH 23.13 OF THE GUIDANCE NOTE ON TAX AUDIT UNDER SECTION 44AB ISSUE D BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA MAD E IT CLEAR THAT WHENEVER ANY ADJUSTMENT IS MADE IN THE VALUATION OF INVENTORY, THIS WILL AFFECT BOTH THE O PENING AS WELL AS THE CLOSING STOCK. IF ANY ADJUSTMENT WAS RE QUIRED TO BE MADE BY A STATUTE, EFFECT SHOULD BE GIVEN TO IT IRRESPECTIVE OF ANY CONSEQUENCES ON THE COMPUTATION OF INCOME FOR TAX PURPOSES. SECTION 145A BEGINS WITH A NON OBSTANTE CLAUSE AND THEREFORE TO GIVE EFFECT TO SEC TION 145A, IF THERE IS A CHANGE IN THE OPENING STOCK AS ON MARCH 31, 1999, THERE MUST NECESSARILY BE A CORRESPONDING ADJUSTMENT MADE IN THE OPENING STOCK AS ON APRIL 1, 1998. THUS, THE QUESTION OF DOUBLE DEDUCTION DID NOT ARIS E SINCE NO ADJUSTMENT WAS MADE BY THE ASSESSEE IN THE PROFI T AND LOSS ACCOUNT FOR THE YEAR ENDING MARCH 31, 1998. 8. THE ABOVE CLEARLY SHOWS THAT ADJUSTMENT TO BE MA DE U/S 145A IS TO BE MADE BOTH IN RESPECT OF OPENING STOCK AS WELL AS CLOSING STOCK. THE SAME VIEW HAS BEEN TAKEN EVEN BY THE HON'BLE BO MBAY HIGH COURT IN THE CASE OF CIT VS MAHALAXMI GLASS WORKS P. LTD (SUPRA). FOLLOWING THESE DECISIONS, WE SET ASIDE THE ORDER OF LD. CIT( A) AND DIRECT THE ASSESSING OFFICER TO ADJUST THE VALUE OF OPENING A S WELL AS CLOSING STOCK AND ONLY THE NET DIFFERENCE SHOULD BE ADDED TO THE INCOME OF THE ASSESSEE. FOLLOWING THE SAME WE SET ASIDE THE ORDER OF LD. CI T(A) AND DIRECT THE ASSESSING OFFICER TO ASSESS THE VALUE OF OPENING AND CLOSING STOCK AND ONLY NET DIFFERENCE SHOULD BE ADD ED TO THE INCOME OF THE ASSESSEE. 8. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26.11.2014 SD/- SD/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 26.11.2014 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE DR 4