ACIT CIR 4(2), MUMBAI V. HINDUSTAN ORGANICS CHEMICALS LTD, MUMBAI

ITA 7981/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8384 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2008-2009
• Appeal Filed On: 25-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C P PATNAIK
• Assessee Lawyers: JITENDRA SINGH
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH H, MUMBAI BEFORE SHRI I.P.BANSAL,JUDICIAL MEMBER & SHRI RAJENDRA, ACCOUNTANT MEMBER ITA NO.7981/MUM/2011(A.Y.2008-09) THE ACIT, CIR. 4(2), ROOM NO.642, 6 TH FLOOR, AAYKAR BHAVAN, MK ROAD, MUMBAI - 20. (APPELLANT) VS. M/S. HINDUSTAN ORGANIC CHEMICALS LTD., HARCHANDRAI HOUSE, 81, M.K.ROAD, MARINE LINES, MUMBAI - 400 002. PAN:AAACH 2663P (RESPONDENT) APPELLANT BY : SHRI K.C.P.PATNAIK RESPONDENT BY : SHRI JITENDRA SINGH DATE OF HEARING : 07/11/2012 DATE OF PRONOUNCEMENT : 0 9/11/2012 ORDER PER I.P.BANSAL, J.M, THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DI RECTED AGAINST THE ORDER PASSED BY LD. CIT(A)-9, MUMBAI DATED 23/09/ 2011 FOR ASSESSMENT YEAR 2008-09. THE GROUNDS OF APPEAL RAISED BY THE REVENUE READ AS UNDER: 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS. 3,5 0,31,650/- MADE IN RESPECT OF BELATED PAYMENT OF EMPLOYEES CONTRIBUTION TO VA RIOUS EMPLOYEES WELFARE FUND I.E. PF, VOLUNTARY PF, ESI & GROUP SAVINGS LIN KED INSURANCE, MADE BY THE AO UNDER THE I.T. ACT, 1961. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION MADE BY TH E AO, AMOUNTING TORS.6,81,25,800/- TOWARDS CLOSING STOCK OF RAW MAT ERIAL AND SPARES U/S. 145A OF THE I.T. ACT, 1961. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE IMPUGNED ORDER OF THE LD.CIT(A) IS CONTRARY TO LAW AND CONSEQUENTLY M ERITS TO BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. ITA NO.7981/MUM/2011(A.Y.2008-09) 2 2. APROPOS GROUND NO.1, IT IS THE CASE OF THE ASSES SEE THAT THE CONTRIBUTIONS DISALLOWED WERE DEPOSITED BEFORE THE END OF THE FINANCIAL YEAR AND BEFORE THE DUE DATE OF FILING OF THE RETURN AND IT IS ALLOWABLE ACCORDING TO THE DECISION OF CIT VS. ALOM EXTRUSIONS LTD. [2009] 319 ITR 306 (SC ). THE FACT REGARDING DEPOSIT OF THE SAID AMOUNT BEFOR E THE DUE DATE OF FILING OF THE RETURN WAS SUBMITTED BEFORE THE LD. CIT(A) IN THE STATEMENT OF FACTS. THE RELEVANT PORTION OF THE AUDIT REPORT WAS ALSO FILED BEFORE US AND IT WAS NOTICED THAT ALL THESE DEPOSITS, LATEST WERE MADE BY THE ASSESSEE IN THE MONTH OF APRIL 2008. THEREFORE, IT IS CLEAR THAT ALL THE PAYMENTS HAVE BEEN MADE BY THE ASSESSEE BEFORE DUE DATE OF FILING THE RETURN. SIMILAR ISSUE HAS ALSO BEEN DECIDED IN FAVOUR OF THE ASSESSEE FOR A.Y 2006-07 AND 2007-08 VIDE ORDER DATED 26/08/2011 IN ITA NO.3683/MUM/201 0 AND ORDER DATED 13/01/2011 IN ITA NO.2201/MUM/2010, COPY OF BOTH TH ESE ORDERS HAVE BEEN PLACED ON OUR RECORD. SIMILAR CLAIM OF THE AS SESSEE HAS BEEN ALLOWED IN A.Y. 2007-08 WITH THE FOLLOWING OBSERVATION: 5. AFTER HEARING THE PARTIES AND PERUSING THE REC ORD, WE FIND THAT THE ISSUE IS COVERED BY THE DECISION OF THE ITAT IN ASSESSEE S OWN CASE FOR AY 2006-07 (SUPRA) WHEREIN THE CO-ORDINATE BENCH RESPECTFULLY FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ALOM EXTRUSION LTD. (SUPRA) ALLOWED THE CLAIM OF THE ASSESSEE. RESPECTFULLY FOLLOWING T HE DECISION OF THE COORDINATE BENCH IN ASSESSEES OWN CASE FOR AY 2006 -07(SUPRA), WE UPHOLD THE ORDER OF THE CIT(A) ON THIS COUNT AND DISMISS T HE GROUND RAISED BY THE REVENUE. 3. IN THIS VIEW OF THE SITUATION AFTER HEARING BOTH THE PARTIES WE SEE NO INFIRMITY IN THE ORDER OF LD. CIT(A) VIDE WHICH HE HAS GRANTED THE RELIEF TO THE ASSESSEE AS MENTIONED IN GROUND NO.1. GROUND NO.1 OF THE REVENUE IS DISMISSED. 4. APROPOS GROUND NO.2, IT WAS STATED TO BE COVERED BY THE EARLIER DECISION OF THE TRIBUNAL RENDERED FOR A.Y 2007-08. THE FACTS ARE STATED TO BE IDENTICAL. FOR THE SAKE OF CONVENIENCE THE RELE VANT PORTION OF THE ORDER OF ITA NO.7981/MUM/2011(A.Y.2008-09) 3 THE TRIBUNAL DATED 13/01/2011 IN ITA NO.2201/MUM/20 10 ON THE SIMILAR ISSUE IS REPRODUCED BELOW: 11. GROUND NO.3 IS DIRECTED AGAINST THE ACTION OF THE CIT(A) IN DELETING THE DISALLOWANCE OF RS.58,09,097/- U/S. 145 OF THE ACT . 12. THE AO NOTED THAT THE TAX AUDIT REPORT SHOWED T HAT THE ASSESSEE COMPANY HAD NOT CONSIDERED THE DIRECT EXPENSES WHIL E COMPUTING THE VALUE OF CLOSING STOCK. THE AO, THEREFORE, WAS OF THE VIE W THAT SUCH EXPENSES WERE REQUIRED TO BE LOADED WITH FOR VALUING THE CLOSING STOCK AND THE DIRECT EXPENSES, FREIGHT, STORAGE, ETC. WERE INCURRED ON A CCOUNT OF PURCHASE OF RAW MATERIAL. SINCE NO DETAILS OF THE DIRECT EXPENSES H AD BEEN FURNISHED, THE AO ESTIMATED THE DIRECT EXPENSES AT 2% OF THE TOTAL VA LUE OF CLOSING STOCK OF RAW MATERIALS AND STORES, WHICH RESULTED IN TO THE ADDI TION OF RS. 58,09,097/- TO THE CLOSING STOCK IN ACCORDANCE WITH THE PROVISIONS OF SECTION 145A OF THE ACT. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). 13. BEFORE THE CIT(A), THE AR OF THE ASSESSEE SUBMI TTED THAT THE AO HAD MADE ADDITION OF RS. 58,09,97/- ON ESTIMATE BASIS T OWARDS THE TRANSPORTATION COST AND OTHER DIRECT COST LIKE FREI GHT, STORAGE AS INCURRED TO CLOSING STOCK OF RAW MATERIALS AND A SPARE PARTS. H E FURTHER SUBMITTED THAT NO DETAILS WERE ASKED FOR BY THE AO. IT WAS FURTHER SUBMITTED THAT THE VALUE OF CLOSING STOCK OF RAW MATERIALS AND THE STORES WE RE RECORDED AT COST INCLUSIVE OF FREIGHT AND TRANSPORTATION. THE AR SUB MITTED THAT THE PURCHASE BOOK AND GENERAL LEDGER OF A PARTICULAR DAY REFLECT S THAT THE PURCHASE IS ACCOUNTED AT RS. 2,90,70,603/- WHICH IS INCLUSIVE O F FREIGHT OF RS. 58,850/- AND THE GENERAL LEDGER REFLECTS THAT THE CLOSING ST OCK OF RS. 11,9,27,965/- IS INCLUSIVE OF FREIGHT. IT WAS ALSO BROUGHT TO THE NO TICE OF THE CIT(A) THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE O RDER OF CIT(A) FOR AY 1999- 00, 2002-03, 2004-05 AND 2006-07. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE CIT(A) DELETED THE DISALLOWANCE MADE BY THE AO BY HOLDING AS UNDER: 4.3 I HAVE CONSIDERED THE FACT. IT IS SEEN THAT TH E APPELLANT HAS BEEN VALUING ITS CLOSING STOCK OF RAW MATERIAL INCLUSIVE OF FREIGHT CHARGES AS REFLECTED FROM THE PURCHASE DAY BOOK AND GENERAL LE DGER OF ITEM HAVING THE VALUE OF RS. 2.90 CRORE. IT IS FURTHER S EEN THAT THERE IS NO CHANGE IN THE VALUATION OF THE STOCK. I FIND THAT T HE VALUATION METHOD HAS NOT BEEN CHANGED BY THE AO IN PAST YEAR AND THA T NO ADJUSTMENT TO THIS EFFECT WAS MADE IN THE SUBSEQUENT YEAR. THE CLOSING STOCK OF PREVIOUS YEAR WOULD BE THE OPENING IS STOCK OF THE YEAR AND THEREFORE ESTIMATION OF THE STOCK IS NOT JUSTIFIED. FURTHER T HE APPELLANT IS CONSISTENTLY FOLLOWING THE SAME METHOD OF VALUATION OF CLOSING STOCK. THIS ISSUE IS ALSO COVERED IN FAVOUR OF THE APPELLA NT BY THE ORDER OF CIT(A) FOR ASSESSMENT YEARS 1999-00, 2002-03, 2004- 05 AND 2006-07 DATED 17/12/2010. IN VIEW OF THESE FACTS, THE ADDIT ION MADE BY THE AO IS DELETED. THIS GROUND OF APPEAL IS THEREFORE A LLOWED. ITA NO.7981/MUM/2011(A.Y.2008-09) 4 14. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE I S IN APPEAL BEFORE US. 15. THE LEARNED DR BESIDES RELYING UPON THE ORDER O F THE AO SUBMITTED THAT SINCE NO DETAILS OF DIRECT EXPENSES FILED BY THE AS SESSEE, THE AO ESTIMATED THE DIRECT EXPENSES AT 2% OF THE TOTAL VALUE OF CLO SING STOCK OF RAW MATERIALS AND STORES, WHICH IS PROPER AND THE SAME IS IN ACCO RDANCE WITH THE PROVISIONS OF SECTION 145 OF THE ACT. 16. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE HAS STRONGLY RELIED UPON THE ORDER OF THE CIT(A). 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS SEEN THAT SINCE NO DETAILS OF THE DIRECT EXPENSES WERE FURNISHED, THE AO ESTIMATE D THE DIRECT EXPENSES AT 2% OF THE TOTAL VALUE OF CLOSING STOCK OF RAW MATER IALS AND STORES, WHICH RESULTED IN TO THE ADDITION OF RS. 58,09,097/- TO T HE CLOSING STOCK IN ACCORDANCE WITH THE PROVISIONS OF SECTION 145A OF T HE ACT. THE CIT(A) GAVE A FINDING THAT THE APPELLANT HAS BEEN VALUING ITS CLO SING STOCK OF RAW MATERIAL INCLUSIVE OF FREIGHT CHARGES AS REFLECTED FROM THE PURCHASE DAY BOOK AND GENERAL LEDGER OF ITEM HAVING THE VALUE OF RS. 2.90 CRORE AND THERE IS NO CHANGE IN THE VALUATION OF THE STOCK. THE CIT(A) HE LD THAT THE CLOSING STOCK OF PREVIOUS YEAR WOULD BE THE OPENING IS STOCK OF THE YEAR AND THEREFORE ESTIMATION OF THE STOCK IS NOT JUSTIFIED. THE CIT(A ) FINALLY DELETED THE ADDITION FOLLOWING THE EARLIER ORDERS OF CIT(A) IN ASSESSEE S OWN CASE. 5. THE FACTS OF THE PRESENT YEAR ARE SIMILAR. THE A.O APPLIED SECTION 145A OF THE ACT. HE HAS OBSERVED THAT AUDIT REPORT HAS REVEALED THAT ASSESSEE COMPANY DID NOT CONSIDER DIRECT EXPENSES W HILE COMPUTING VALUE OF CLOSING STOCK. ACCORDING TO AO RAW MATERIAL WAS RE QUIRED TO BE LOADED WITH THE DIRECT EXPENSES LIKE FREIGHT, STORAGE ETC. INCU RRED ON ACCOUNT OF THE SAME. IN ABSENCE OF DETAILS HE ESTIMATED DIRECT EXPENSES TO THE TUNE OF 2% OF THE TOTAL VALUE OF THE CLOSING STOCK OF RAW MATERIAL AN D ACCORDINGLY ADDITION OF RS.6,81,25,800/- WAS MADE WHICH HAS BEEN DELETED BY LD. CIT(A) AS MENTIONED ABOVE. 6. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. T HE FACTS BEING IDENTICAL TO A.Y 2007-08, THEREFORE, RESPECTFULLY F OLLOWING THE DECISION OF CO- ORDINATE BENCH IN ASSESSEES OWN CASE, WE FIND NO I NFIRMITY IN THE RELIEF GIVEN BY THE LD. CIT(A). GROUND NO.2 OF THE REVENUE IS D ISMISSED. ITA NO.7981/MUM/2011(A.Y.2008-09) 5 7. NO OTHER ISSUE WAS ARGUED BEFORE US, THEREFORE, APPEAL FILED BY THE REVENUE IS DISMISSED. 8. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 9 TH DAY OF NOV. 2012 SD/- SD/- (RAJENDRA ) (I.P.BANSAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 09 TH NOV. 2012. COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.R H BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM. ITA NO.7981/MUM/2011(A.Y.2008-09) 6 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 07/11/2012 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 07/11/2012 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COME S TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER