THE ACIT, 3(1), BHOPAL vs. M/S. NARMADA TRANSMISSION PVT. LTD., BHOPAL

Narmada Transmission ITA 215/2015 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE Before Shri Kul Bharat, Hon’ble Judicial Member and Shri Manish Borad, Hon’ble Accountant Member

ITA No. 215/Ind/2015 A.Y. 2007-08

Asstt. Commr. of Income Tax 3(1) Bhopal ::: Appellant Vs M/s Narmada Transmission Pvt.Ltd. Bhopal ::: Respondent Appellant by Shri Satish Solanki Respondent by Shri S.S. Deshpande Date of hearing 29.5.2018 Date of pronouncement 31.5.2018

O R D E R PER SHRI MANISH BORAD, AM

This appeal of the revenue relating to the

assessment years 2007-08 is directed against the order of

the Commissioner of Income Tax (Appeals)-2, Bhopal,

dated 14.1.2015 which are arising out of order u/s 143(3)

Narmada Transmission ITA 215/2015 r.w.s. 147 of Income Tax Act (in short referred as ‘Act’) Act

framed by the ACIT, 2(1), Bhopal.

“On the facts and in the circumstances of the case, the

CIT(A) has erred in –

undervalatuion of closing stock due to non-inclusion of

excise duty on the ground that A.O. has merely

rejected appellants submissions without giving any

justification on record any adverse supporting

evidence.

undervaluation of closing stock due non-inclusion of

excise duty on the ground that impugned addition is

based on audit objection which is not accepted by the

A.O. himself.”

Narmada Transmission ITA 215/2015 3. Briefly stated, the facts, as culled out from record, are

that the assessee company is engaged in the business of

manufacturing of overhead transmission lines, cables and

conductors. The income of Rs.2,24,066/- was disclosed in

the return of income filed on 31.10.2007. After being

selected for scrutiny assessment, income assessed at

Rs.8,74,180/- vide order dated 29.11.2009 framed u/s

143(3) of the Act. Subsequently, on account of the audit

objection by the audit party for the alleged undervaluation

of closing stock, not including excise duty and taxes, a

notice u/s 148 of the Act was served upon the assessee. It

was followed by notice u/s 143(2) and 142(1) of the Act for

the purpose of reassessment u/s 147 of the Act. The

Assessing Officer observed that the assessee has not

complied with the provisions of section 145A of the Act and

has failed to include excise duty of Rs. 15,57,867/- while

valuing the closing stock at the end of the year. It was

Narmada Transmission ITA 215/2015 submitted before the Assessing Officer that due taxes have

been added both in the opening and closing stock and the

assessee is basically carrying out contract work not

involving much of the manufacturing activity. However,

the Assessing Officer completed the assessment u/s 143(3)

of the Act read with section 147 of the Act assessing total

income at Rs. 24,32,047/-.

learned Commissioner of Income Tax (Appeals) and partly

succeeded as the learned Commissioner of Income Tax

(Appeals) sustained the addition only to the extent of

Rs.2,18,752/-. Thereafter, the revenue came in appeal

against the addition deleted by the learned Commissioner

of Income Tax (Appeals). This appeal of the revenue was

dismissed by the Tribunal vide order dated 21.12.2015 on

account of low tax effect vide Circular No. 21/2015 dated

10.12.2015. Thereafter, the revenue filed M.A. quoting that

Narmada Transmission ITA 215/2015 the addition was on account of audit objection and it was

covered under the exceptions of para 8 of the CBDT

Circular No. 21/2015 and the appeal was not liable to be

dismissed on account of low tax effect. This M.A. was

allowed by the Tribunal and the order of the Tribunal was

recalled and again fixed for hearing on 29.5.2018.

order of the Assessing Officer and the learned counsel for

the assessee referred to the written submissions filed

before the learned Commissioner of Income Tax (Appeals),

paper book submitted on 29.5.2018 as well as the finding

of the learned Commissioner of Income Tax (Appeals).

material available on record. The sole grievance of the

assessee revolves round against deletion of addition of

Rs.13,39,295/- on account of alleged under valuation of

closing stock due to non-inclusion of excise duty. We find 5

Narmada Transmission ITA 215/2015 that the Assessing Officer took a view that the assessee has

not complied with the provisions of section 145A and has

not included excise duty and other taxes while valuing the

closing stock. Further we find that the learned

Commissioner of Income Tax (Appeals) partly allowed the

assessee’s appeal by deleting the addition to the extent of

Rs. 13,39,295/- as against Rs. 15,57,867/- made by the

A.O. observing as under :-

“4.2 Appellant’s submissions along with assessment

order and records have been considered carefully.

Assessment records of the A.O. have also been perused.

It is seen that original assessment in case of the

appellant company has been completed u/s 143(3) vide

order dt. 29.11.2009 assessing appellant’s income at Rs.

8,74,180/- as against return income of Rs. 2,24,066/- by

disallowing appellant’s claim of set off of b/f losses of

Rs. 6,50,114/- and treating declared interest of Rs.

Narmada Transmission ITA 215/2015 2,65,994/- earned on FDRs as income from other

sources. A.O. has categorically mentioned in the said

order that various aspects of the appellant’s case has

been discssed w.r.t. written submissions and supporting

documents filed by the appellant. However, on receipt of

audit objection regarding non inclusion of excise duty of

Rs. 15,57,867/- in appellant’s declared closing stock of

Rs. 95,45,757/-, proceedings u/s 147 have been

initiated by issue of notice u/s 148 after recording

reasons therefor. The appellant has not objected to such

initiationof reassessment proceedings at any stage –

assessment as well as appeal. It has submitted details

of working of valuation of its raw material as well as

finished goods to the A.O. vide letter dt. 02.03.2012.

These details are same as submitted during appeal also.

The said working has been found certified by concerned

CA also. It is pertinent to note that as per assessment

Narmada Transmission ITA 215/2015 records, A.O. himself has not found the said audit

objection acceptable on the basis of of which notice u/s

148 been issued for A.Y. 2007-08 and impugned add

made in the assessment order under appeal. It is further

seen that stock of finished goods has been shown at

Bhopal as well as at project site. Declared value ofn

closing stock at Rs. 95,45,757/- includes excise duty of

Rs. 13,39,295/-. The quantum of excise duty works out

to Rs.15,57,867/-. The same has not been disputed by

the appellant itself. Thus, the appellant has not shown

excise duty of Rs. 2,18,572/- (Rs.15,57,867/- minus

Rs.13,39,295/-). After perusal of entire material on

record, appellant’s submissions are found partly

acceptable as A.O. also has rejected the appellant’s

submissions without giving any justification or bringing

even a single piece of adverse supporting evidence on

record. Accordingly, addition of Rs.2,18,572/- is found

Narmada Transmission ITA 215/2015 sustainable and, hereby, confirmed out of

Rs.15,57,867/- made by the A.O. for A.Y. 2007-08 u/s

147/143(3).”

auditor Joshi Vinod & Co. on 2.3.2012 giving details of

valuation of closing stock of the assessee. In the attached

sheet at pages 15 & 16 we find that the value of closing

stock has been arrived at after adding excise duty to the

basic price of goods and further adding other charges. This

system has been applied for valuing raw material as well as

finished goods and it is clearly exhibiting that the excise

duty has been included in the value of closing stock. We

find that the Assessing Officer seems to have made a guess

work just riding over the audit objection and making

addition without bring any material on record to prove that

opening and closing stock valued by the assessee company

does not contain the element of excise duty and taxes. We,

Narmada Transmission ITA 215/2015 therefore, find no reason to interfere with the findings of

the learned Commissioner of Income Tax (Appeals) and we

accordingly uphold the same.

Pronounced in open Court on 31 May, 2018.

Sd/- sd/- (KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER 31 May, 2018 Dn/- Copy to – Appellant/Respodent/Pr.CIT/CIT(A)/DR/Guard File By order Private Secretary