SAYLI IRON & STEEL CO. P.LTD, MUMBAI V. DCIT CEN CIR 10, MUMBAI

ITA 8628/MUM/2011

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3510 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 25-04-2016
• Assessment Year: 2002-2003
• Appeal Filed On: 22-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 43B; 142(1)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUM BAI BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO.8628/MUM/11 ( / ASSESSMENT YEAR: 2002-03) SAYLI IRON & STEEL CO. PVT. LTD. 103, STEEL CENTRE, AHMEDABAD STREET, MASJID BUNDER(WEST) MUMBAI - 400009 / VS. DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 10 MUMBAI ./ ./ PAN/GIR NO. : AAECS4042F ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 25.04.2016 !' /DATE OF PRONOUNCEMENT: 17.08.2015 #$ / O R D E R PER AMARJIT SINGH, JM: THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 30.10.2012 PASSED BY THE COMMISSIONER OF INCO ME TAX (APPEALS) 2, MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO THE A.Y.2002-03. ASSESSEE BY: NONE DEPARTMENT BY: SHRI ABHISHEK MESHRAM ITA NO.8628/M/11 A.Y. 2002-03 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING ADDITION OF RS.9,20,421.00 (RUPEES NINE LACS TWENTY THOUSAND FOUR HUNDRED AND TWENTY ONE ONLY) TO THE VALUATION OF CLOSING STOCK ON A/C. OF UNUTILIZED MODVAT CREDI T, KEEPING IN VIEW THE PROVISIONS OF SECTION 145A OF T HE INCOME TAX ACT, 1961, WITHOUT ENQUIRING INTO THE FACTS AND CIRCUMSTANCES OF THE CASE AND PROVISIONS OF THE INCOME TAX ACT, 1961 AND RULES THEREUNDER. 2. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN MAKING ADDITION OF RS.11,654.00 (RUPEES ELEVEN THOUSAND SIX HUNDRED & FIFTY FOUR ONLY) U/S.2(24)(X) R.W.S.36(I)(VA) OF THE INCOME TAX ACT, 1961, OUT OF CONTRIBUTION RECEIVED FROM EMPLOYEE WITHOUT ENQUIRING INTO THE FACTS AND CIRCUMSTANCES OF THE CASE AND PROVISIONS OF THE INCOME TAX ACT, 1961 AND RULE THEREUNDER. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED HI RETURN OF INCOME ON 29.10.2002 DECLARING TOTAL LOSS TO THE TU NE OF RS.-55,76,340/-. THE RETURN OF INCOME WAS ACCOMPANIED WITH AUDIT REP ORT IN FORM NO.3CA AND 3CD. THE SAID RETURN OF INCOME WAS PROCESSED U /S.143(1) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT). THEREA FTER THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S.143(2) OF THE ACT WAS ISSUED AND SERVED UPON THE ASSESSEE. THEREAFTER, NOTICES U/S.143(2) AND 142(1) OF THE ACT ALONG WITH THE QUESTIONNAIRE WERE ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE ENGAGE IN THE BUSINESS OF MANUFACTURIN G AND TRADING OF STRUCTURAL & M.S. STEEL PRODUCTS. AT THE TIME OF E XAMINATION OF DOCUMENTS IT WAS NOTICE THAT THE ASSESSEE HAS UNUTILIZED MODE VAT CREDIT OF RS.9,20,421. ITA NO.8628/M/11 A.Y. 2002-03 3 THEREFORE AFTER ISSUANCE OF THE NOTICE TO THE ASSES SEE THE ASSESSING OFFICER ADDED THE SAID UNUTILIZED MODEVAT TO THE TUNE OF RS .9,20,421 /-TO THE INCOME OF ASSESSEE. IT WAS ALSO FOUND THAT THE ASS ESSEE DELAYED IN PAYMENT TO THE CONTRIBUTION RECEIVED FROM THE EMPLOYEE TO THE TUNE OF RS.11,654/- THEREFORE THE SAID AMOUNT WAS TREATED AS TAXABLE U/ S.2(24)(X) AND ADDED TO THE INCOME OF THE ASSESSEE. FEELING AGGRIEVED THE ASSESSEE FILED THE APPEAL BEFORE THE CIT(A) WHO CONFIRMED THE SAID ORDER THER EFORE THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. HOWEVER THE ISSUE NO.1:- 4. THE ASSESSEE HAS CHALLENGED THE CONFIRMATION OF THE ADDITION TO THE TUNE OF RS.9,20,421/- TO THE VALUATION OF CLOSING S TOCK ON ACCOUNT OF UNUTILIZED MODVAT CREDIT. THE LEARNED REPRESENTATI VE OF THE ASSESSEE HAS ARGUED THAT THE VALUE OF MODEVAT CREDIT UNUTILIZED AT THE CLOSE OF THE ACCOUNTING PERIOD TO THE EXTENT OF RS.9,20,421/- IS NOT LIABLE TO BE ADDED IN THE CLOSING STOCK IN VIEW OF THE LAW SETTLED BY HON BLE DELHI HIGH COURT IN CASE CIT V/S. MAHAVIR ALLUMINUM LTD. [2008] 297 IT R 77 AND BY HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T V/S. MAHALAXMI GLASS WORKS PVT. LTD. [2009] 318 ITR 116 (BOM.). HOWEVER , ON THE OTHER HAND LEARNED REPRESENTATIVE OF THE DEPARTMENT HAS REFUTE D THE SAID CONTENTIONS AND RELIED UPON THE FINDING OF THE CIT(A) IN QUEST ION. BY GIVING THE CAREFUL THOUGHT TO THE CONTENTION RAISED BY THE LEA RNED REPRESENTATIVE OF THE PARTIES AND PERUSING THE RECORD CAREFULLY, IT CAME INTO NOTICE THAT THE CIT(A) HAS DECIDED THE CASE BY RELYING UPON THE CAS E OF WEST COAST PAPER ITA NO.8628/M/11 A.Y. 2002-03 4 MILLS REPORTED IN 103 ITD 19. LD REPRESENTATIVE OF ASSESSEE IS RELAYING ON THE LAW SETTLED IN CIT V/S. MAHALAXMI GLASS WORKS P VT. LTD.(SUPRA) AND BY RELYING ON DECISION OF CIT V/S. MAHAVIR ALLUMIN UM LTD.(SUPRA). WHEREIN IT HAS BEEN HELD THAT IF THERE IS A CHANGE IN VALUATION OF CLOSING STOCK IN ONE END, THERE MUST NECESSARILY BE A CORRE SPONDING CHANGE AT THE OTHER END OTHERWISE THE TRUE PROFIT WOULD NOT BE RE FLECTED. IN VIEW OF THE SAID LAW WE HOLD THAT IF THE CLOSING STOCK TO BE IN CREASED ON ACCOUNT OF UNUTILIZED MODVAT CREDIT THE CORRESPONDING OPENING STOCK OF THAT YEAR IS ALSO TO BE INCREASED AS THE DEPARTMENT HAS NOT DISP UTED THE FACT THAT THE PURCHASES HAVE BEEN DEBITED EXCLUSIVE OF THE EXCISE DUTY ELEMENT I.E. BY ADOPTING NET METHOD OF PURCHASING. IF THE VALUE OF CLOSING STOCK IS INCREASED BY THE MODVAT THE PURCHASE SHOULD ALSO BE INCREASED BY THE SIMILAR AMOUNT. ACCORDINGLY THIS ISSUE HAS BEEN SQ UARELY COVERED BY THE ABOVE SAID LAW. THEREFORE, WE SET ASIDE THE FINDIN G OF THE CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO DELETE TH IS ADDITION. ISSUE NO.2:- 5. UNDER THIS ISSUE NO.2 THE ASSESSEE HAS CHALLENGE D THE CONFIRMATION OF ADDITION TO THE TUNE OF RS.11,654/- U/S.2(24)(X) R. W.S. 36(I)(VA) OF THE ACT OUT OF CONTRIBUTION RECEIVED FROM EMPLOYEE. THE L EARNED REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THIS ISSUE HAS BEEN DE CIDED IN VIEW OF LAW SETTLED BY THE HONBLE SUPREME COURT IN THE CASE O F CIT V/S. ALOM EXTRUSION LTD. 319 ITR 306 AND BY THE SUBSEQUENT DE CISION OF ITAT IN CASE OF MS/ PINKPEN PVT. LTD. VS. CIT IN ITA NO.684 7/M/08 DATED ITA NO.8628/M/11 A.Y. 2002-03 5 28.08.2010. THE FINDING OF THE SAID JUDGEMENT IS H EREBY REPRODUCED BELOW:- 10. THE NEXT ISSUE IS DISALLOWANCE OF EMPLOYEES CO NTRIBUTION TO PF AND ESIC OF RS.43,721/-. THE SHORT CONTROVERSY BEFORE US IS IN RESPECT OF THE PAYMENT OF THE EMPLOYEES CONTR IBUTION TO P.F. / E.S.I.C. BEYOND THE GRACE PERIOD WHICH WAS R ELATING TO THE MONTH OF FEBRUARY. THE LD. COUNSEL RELIED ON T HE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F CIT V/S. ALOM EXTRUSION LTD., 319 ITR 306. THE A.O. MADE TH E DISALLOWANCE U/S.36(1)(VA) AS HE WAS OF THE OPINION THAT THE EMPLOYEES CONTRIBUTION TO PF/ESIC EVEN IF MADE BEFO RE FILING OF THE RETUN OF INCOME IS NOT COVERED U/S.43 B OF THE I.T.ACT. IN THE CASE OF ALOM EXTRUSION LTD. (SUPRA ), THE ISSUE BEFORE THEIR LORDSHIP WAS WHETHER THE OMISSION OF S ECOND PROVISO TO SECTION 43B OF THE I.T.ACT 1961 BY THE F INANCE ACT 2003 OPERATED RETROSPECTIVELY W.E.F. 1.2.2004 OR WH ETHER IT OPERATED RETROSPECTIVELY W.E.F. 1.4.1988. IN THE S AID CASE ALSO, THE ISSUE WAS CONCERNING THE CONTRIBUTION PAYABLE B Y THE EMPLOYER TO THE P.F./SUPERANNUATION FUND OR ANY OTH ER FUND OF WELFARE OF THE EMPLOYEES. IN OUR OPINION, NOW T HE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DEC ISION OF HONBLE SUPREME COURT IN THE CASE OF ALOM EXTRUSION LTD. ITA NO.8628/M/11 A.Y. 2002-03 6 (SUPRA). WE, THEREFORE, ALLOW THE GROUND TAKEN BY THE ASSESSEE AND DELETE THE ADDITION. 6. IN VIEW OF THE ABOVE MENTIONED LAW IT IS QUITE C LEAR THAT IF THE ASSESSEE HAS PAID THE EMPLOYERS AS WELL AS EMPLOYE ES CONTRIBUTION ON OR BEFORE THE DUE DATE OF RETURN OF INCOME THEN THE SA ME SHOULD BE ALLOWED. THE ASSESSING OFFICER IS DIRECTED TO VERIFY FROM TH E DETAILS AVAILABLE ON RECORD AND ACCORDINGLY ALLOW THE CLAIM. ACCORDINGL Y, THE ASSESSEES APPEAL IS ALLOWED. 7. IN THE RESULT APPEAL FILED BY THE ASSESSEE IS HEREBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH AUGUST , 2016. SD/- SD/- (D.KARUNAKARA RAO) (AMARJIT SINGH) # / ACCOUNTANT MEMBER %& # /JUDICIAL MEMBER ' ( MUMBAI; )# DATED : 17 TH AUGUST,2016 MP MP MP MP ! '#$% &%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. * ( ) / THE CIT(A)- 4. * / CIT 5. -./ &&01 , 01' , ' ( / DR, ITAT, MUMBAI 6. /34 5 / GUARD FILE. ' / BY ORDER, - & //TRUE COPY// (/') * (DY./ASSTT. REGISTRAR) , ' ( / ITAT, MUMBAI