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Income Tax Appellate Tribunal, ‘’ A’’BENCH, AHMEDABAD
Before: SHRI RAJPAL YADAV & SHRI WASEEM AHMED
आदेश/O R D E R
PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal hasbeen filed at the instance of the Revenue against the order of the LearnedCommissioner of Income Tax(Appeals)-11, Ahmedabad,dated 20/02/2018 (in short “Ld.CIT(A)”) arising in the matter of assessment order passed under s.143(3)r.w.s. 263 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2006- 2007.
The only issue raised by the Revenue is that the ''Ld.CIT (A)'' erred by deleting the addition made by the AO for Rs.3,80,07,933/- for the adjustment made in the section 145A of the Act.
The fact in fact brief are that the assessee in the present case is a private limited company and engaged in the business of ship breaking. The AO during the Assessment Proceedings found that the assessee has shown unutilized CENVAT credit amounting to Rs.3,80,07,933/- in its balance sheet as on 31/03/2006. As per the AO the amount of unutilized CENVAT credit was to be included in the value of closing stock in pursuance to the provision of section 145A of the Act but the same has not been done so. Accordingly AO was of the view that the assessee has shown less income by Rs.3,80,07,933/- by not including unutilized CENVAT credit in the value of closing stock shown as on 31/03/2006. Thus the AO added the same to the total income of the assessee.
Aggrieved assessee preferred an appeal to the ''Ld.CIT (A)'' who deleted the addition made by the AO by observing as under. “ it is found that the appellant is maintaining exclusive method of valuation of inventories and it is maintained for several years and it is revenue neutral. If additions are made in the closing stock, that will increase the opening stock of the next year and therefore, next year’s profit will be reduced by the same amount. The appellant’s case has been found squarely covered by the several judgments of Hon’ble ITAT, Ahmedabad. The case laws are as under: i) M/s.G.H. Industries V/s ACIT in Hon’ble ITAT ‘D’ Bench order dated 12.2.2016. ii) ACIT v/s Puneet Industries P Ltd. in ITA No.1443/Ahd/2012-A.Y. 2006- 07-Hon’ble ITAT ‘A’ Bench order dated 10.06.2016. Keeping in view the above mentioned binding judgements, the addition made by the AO are not justified, hence, are deleted. This ground of appeal is allowed.”
Aggrieved by the order of the ''Ld.CIT (A)'' the Revenue is in appeal before us.
Both the Ld. DR and the A.R before us vehemently supported the order of the authorities below as favorable to them.
We have heard the rival contentions of both the parties and perused the materials available on record. The provisions of section 145A of the Act mandate to follow the exclusive method of accounting which requires to record the transaction of purchase, sales of the stock after including taxes incurred in relation to purchase/sales of goods. But in the case on hand we find that the assessee has not included such taxes in the amount of purchases, sales and closing stock. However, we note that if such taxes are included in the opening stock, purchase, sales and closing stock then there will not be any difference in the total income declared by the assessee. It is because such exercise is tax neutral in the given facts and the circumstances.
6.1 We also find that the same plea was also taken by the assessee before the AO as evident below. “Without prejudice to the above, it is further stated that the MODVAT/CENVAT balances as appearing in the books of accounts and shown as assets in the balance sheet have not been claimed by way of expenditure while drawing our the P &L A/C. As a consequence of this the question of including the same while valuing the closing stocks does not arise. The question of including the CENVAT/MODVAT in the closing stock would arise only when the same has been claimed by way of expenses and debited to the Trading /Profit & Loss account and not otherwise. We are enclosing a chart which indicates the profit both when the inclusive and exclusive method of accounting has been followed. The perusal of the chart clearly reveals that there is no difference in the profit arising to the assessee company irrespective of the accounting system followed.”
6.2 We also find that the assessee has placed a chart in the paper book which is placed on page 1 depicting the profit under both the method of accounting i.e. inclusive and exclusive method of accounting as provided u/s145A of the Act. On perusal of the chart there is no difference in the profit declared by the assessee except a minor difference of Rs.5091/- only.
6.3 We also find that the ITAT in the case of ACIT Vs Puneet Industries Pvt. Ltd. bearing vide order dated 10/06/2016, in identical facts and circumstances has decided the issue in favor of the assessee by observing as under:
“3. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The issue in the present case is with respect to inclusion of unutilized CENVAT credit to the closing stock. We find that Id.CIT(A) while deleting the addition has given a finding that the assessee was following exclusive method of accounting and the CENVAT was not debited or credited to the Profit & Loss account and the aforesaid method has been consistently followed by the assessee in earlier and succeeding years. We further find that the Hon'ble Apex Court in the case of CIT vs. Indo Nippon Chemicals Co. Ltd. reported at (2003) 261 ITR 275 (SC) observed that unavailed MOD VAT credit cannot be construed as income and there is no liability to pay tax on such unavailed MODVAT credit. Further, before us, Revenue has not brought any contrary binding decision in its support. In view of the aforesaid facts, we do not see any reason to interfere with the order of the ld.CIT(A). Thus, the ground of Revenue is dismissed.”
In view of the above, we note that there is no infirmity in the order of the ''Ld.CIT (A)''. Thus no interference is called for in the order of ld. CIT-A. Hence, the ground of appeal of the Revenue is dismissed.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the Court on 20/10/2020 at Ahmedabad.