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Income Tax Appellate Tribunal, CUTTACK BENCH CUTTACK
Before: SHRI C.M. GARG, JM & SHRI L.P. SAHU, AM
आयकर अपीऱीय अधिकरण, कटक न्यायपीठ,कटक IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI C.M. GARG, JM & SHRI L.P. SAHU, AM आयकर अपीऱ सं./ITA No.169/CTK/2019 (नििाारण वषा / Assessment Year :2014-2015) Ashoka Ispat Udyog, Vs. Pr. CIT, Sambalpur At-Uditnagar, PO-Rourkela, Dist-Sundargarh(Odisha) स्थायी लेखा सं./PANNo. : AACFA 3178 P (अऩीलाथी /Appellant) (प्रत्यथी / Respondent) .. ननधाारिती की ओर से /Assessee by : Shri Dinesh Kumar Agarwal, Advocate िाजस्व की ओर से /Revenue by : Shri S.M.Keshkamat, CITDR
सुनवाई की तािीख / Date of Hearing : 06/11/2019 घोषणा की तािीख/Date of Pronouncement : 13/11/2019 आदेश / O R D E R Per L.P.Sahu, AM:
This appeal has been filed by the assessee against the order of Commissioner of Income Tax, Sambalpur, dated 28.03.2019 for the assessment year 2014-2015 on the following grounds :- “1. The addition of Notional Provision of Excise duty on Closing Stock of Finished goods (which is not the actual liability arised as on 31.03.2014) of Rs.25,73,921/- by Pr. CIT is completely wrong and unjustified.” 2. Brief facts of the case are that the assessee filed return of income on 30.09.2014 declaring income at Rs.16,92,180/- . Later on the case was selected for scrutiny and the AO after disallowing Rs.94,561/- on account of freight & transportation charges, income tax demand & TDs
2 ITA No.169/CTK/2019 demand and penalty in electricity charges completed the assessment
on 29.09.2016. Later on the Pr.CIT, Sambalpur called the assessment
record and observed that the AO has not examined the provisions of
Excise Duty of closing stock of finished goods debited into profit and
loss account which has been shown as an outstanding liabilities in the
balance sheet in the Schedule -7. He also noted that there is no any
comments in the tax audit report filed by the assessee in Form No.3CD
regarding payment u/s.43B of the Act. Accordingly, the Pr. CIT invoked
his revisionary powers available u/s.263 of the Act holding that there is
an error/omission in the order passed by the AO and directed to revise
the assessment order framed by the AO after disallowing the sum of
Rs.25,73,921/-.
Feeling aggrieved from the order of Pr. CIT, the assessee
appealed before the Income Tax Appellate Tribunal.
Ld. AR filed his written synopsis which read as under :-
There is only one ground in this appeal challenging Pr. CIT(A)'s order u/s. 263 of the Act enhancing the income assessed u/s. 143(3) by Rs. 25,73,921/- 2.(a) The Assessee followed the method of provision of excise duty on closing stock every Year on the last date of the year i.e. on 31st march. And the same is being reversed in next year on the 1st day of the year i.e. 1st April. Here provision is made in both side of profit & loss A/c. The Income is increased by increasing the value of closing stock with the provision amount. And at the same time expenses is also increased by debiting the same amount in the trading & manufacturing account. Hence this do not have any effect in profit of the assessee, in other words we can say that the assessee has actually not claimed this provision as expenses in profit & loss A/c. This method is being consistently followed by the assessee over past years.
3 ITA No.169/CTK/2019
(b) Upto the AY 2014-15, U/s 145 of the Income Tax Act, 1956, Accounting Standard-1 relating to disclosure of accounting policies was applicable. This standard specifies that concept of consistency has to be followed. The assessee has consistently follows this method. Hence as notified by the CBDT, the standard has to be followed. This fact is not considered by the Ld. Commissioner of Income Tax.
(c) While Valuing the stock, the same method has to be followed for valuing the opening stock and closing stock, the assessee can't have two method. This is as per judgement of [1993] 200 ITR 496 (GAU.) HIGH COURT OF GAUAHATI Commissioner of Income-tax v. Doom Dooma India Ltd.
Sec. 43B of the Act applies only to those deduction, which are otherwise allowable, claimed in computing income referred u/s. 28 of the Act (i.e. business income) which were not actually paid on or before the due date of filing of return u/s. 139.
While computing business income assessee has Actually not claimed any amount of Rs. 25,73,921/- (as explained in Point no 2(a) above) by debiting to Profit & Loss Account as is evident from Recast of Profit & Loss A/c after reducing the provision of Excise duty from both opening stock & Closing Stock of Finished Goods. From the recast Profit & Loss A/c along with recast schedule (9) of Finished Goods and Recasted Trading & Manufacturing Expenses A/c Scheduled (11), it is clear that net profit (as shown in Audited Profit & Loss A/c) Rs. 34,93,470.35 do not changes, even after we excluding all the provision of excise duty from Finished goods. (Enclosure No-1). We have also attached copies of Audited Profit 6: Loss A/c, Schedule-9 fit Schedule-11 for Comparison purpose (Enclosure No-2).
The Audited Profit & Loss A/c which clearly shows the " Provision of Excise Duty on Finished Goods " in schedule-9 and schedule-11 to the part of P £t L A/c. These were submitted along with income tax return and the copy was also given to A.O. during hearing. In the reply of dt 21.03.2019 against show cause notice u/s 263 of Income Tax Act also it was clearly mentioned that the above provision of Excise Duty do not have any effect in the profit & Loss A/c, hence section 43B is not applicable.
As the provision of Excise Duty of Rs.25,73,921/- has not been claimed as expenditure, question of addition u/s. 43B cannot arise.
The Provision of Excise duty of Rs. 25,73,921/- on Finished Goods of dt 31.03.2014 (A/Y 14-15) was reversed in the books of a/c by Credit P & L A/c on dt 01.04.2014 (in A/Y 15-16). So the liability of provision of Excise Duty on Finished Goods account becomes Nil in the book after dt 01.04.2014. And Actual Excise duty was paid on this closing stock of Finished goods (along with sale of Finished
4 ITA No.169/CTK/2019 Goods of April 14) in April 2014 which is Rs.48,37,392/- as per point No-8 Below 8. The Actual Liability to pay Excise duty is arise only at the time of despatch of finished goods. The finished goods lying in the stock on 31.03.2014 (in A/Y 14-15) were sold / despatched in April 2014 (i.e. AY 15-16) and excise duty on the same goods (along with sale of April 14 Finished goods) were adjusted against Input Credit on Purchases/Paid of total Rs.48,37,392/- The necessary copies of sales Ledger, stock Register, Excise ledger (as Per Books) and Excise Return (form ER-1, Cenvat Utilised Register, Excise Duty Payment challan) for April 2014 are enclosed with this as enclosure No. 3 & 4. 9. As the Excise duty on the Finished Goods actually Paid/Adjusted in April 14 (as per the due date of Excise duty Act), hence the addition U/s.43B is completely Wrong. To Sum Up The Ld. Pr. CIT has not gone through the practice being consistently followed since past and such provision is part both of opening stock Rs. 33,39,513/- and closing stock Rs.25,73,921/- .Further he has not verified the actual payment of Excise duty in April 2014 against finished goods of dt .31.03.2014 (Sold in April 2014). Hence he is wrong in addition of Rs. 25,73,921/- U/s. 43B of I.T Act. Thus, question of increasing assessed income does not arise.
On the other hand, ld. DR relied on the order of Pr. CIT and
submitted that the order of AO is erroneous and prejudicial to the
interest of revenue on account of fact that how and why if the profit is
neutral after making provision by the assessee, he has made provisions
and debited into profit and loss account which has not been examined
by the AO. Therefore, the Pr. CIT has rightly invoked his revisionary
powers.
After hearing both the sides and perusing the entire material
available on record, we observe from the trading profit and loss
5 ITA No.169/CTK/2019 account submitted by the assessee, he has made provision on excise
duty from the closing stock of finished goods and showing it as a
liability in the balance sheet. From the statements of the assessee that
there is no effect in the profit and loss account, it is notable that if there
is no effect in the profit and loss account after making provisions and
showing as liability in the balance sheet then why the assessee is
making provisions in his profit and loss account. The reason for making
provision could not be explained by the assessee. In this regard, he just
submitted that the provisions have been made at the end of the year
and it is reversed in the opening of next financial year. While going
through the assessment order passed by the AO, the AO has not
examined this issue as to what for the reason for making provisions
and showing it as a liability and reversed it into the opening of the next
financial year. This issue should have examined by the AO, however, he
did not do so. After considering the totality of facts and circumstances
of the case, the ld.Pr. CIT has rightly invoked his revisonary powers
u/s.263 of the Act. Accordingly, we do not see any good reason to
interfere with the findings recorded by the Pr. CIT in directing the AO
to modify the scrutiny assessment order by disallowing sum of
Rs.25,73,921/- which had been debited towards “provision of excise
duty on closing stock of finished goods” u/s.43B of the Act. Hence, we
uphold the same and dismiss the ground of appeal of the assessee.
6 ITA No.169/CTK/2019 12. In the result, appeal of the assessee is dismissed. Order pronounced in the open court on 13/11/2019. Sd/- Sd/- (C.M.GARG) (L.P.SAHU) न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER कटक Cuttack; ददनांक Dated 13/11/2019 Prakash Kumar Mishra, Sr.P.S. आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : अऩीलाथी / The Appellant- 1. Ashoka Ispat Udyog, At-Uditnagar, PO-Rourkela, Dist-Sundargarh(Odisha) प्रत्यथी / The Respondent- 2. Pr. CIT, Sambalpur आयकि आयुक्त(अऩील) / The CIT(A), 3. आयकि आयुक्त / CIT 4. ववभागीय प्रनतननधध, आयकि अऩीलीय अधधकिण, कटक / DR, ITAT, 5. Cuttack गार्ा पाईल / Guard file. 6. सत्यावऩत प्रनत //True Copy// आदेशािुसार/ BY ORDER,
(Senior Private Secretary) ITAT Cuttack Bench, Cuttack