THE ITO, WARD-3(2)(7),, AHMEDABAD vs. SHRI KIRITBHAI NAROTTAMDAS PATEL,, AHMEDABAD

PER PRADIP KUMAR KEDIA - AM:

The captioned appeal has been filed at the instance of the Revenue against the order of the CIT(A)-3, Ahmedabad (‘CIT(A)’ in short), dated 4th August, 2016 arising in the assessment order dated 26.03.2015 passed by the Assessing Officer (AO) under s. 143(3) of

ITA No. 2676/Ahd/16 [ITO vs. Shri Kiritbhai N. Patel] A.Y. 2012-13 - 2 -

the Income Tax Act, 1961 (the Act) concerning assessment year 2012-

13.

Assessee, we have carefully examined the issue. While it is the case

of the Revenue that the element of excise duty and VAT amounting to

Rs.38,74,927/- represents part of the closing stock of the assessee in

terms of Section 145A of the Act, it is the case of the assessee on the

other hand that Section 145A has no application to the facts of the

case. It is further case of the assessee that the assessee follows

exclusive method of accounting for valuation of inventory and

therefore, entire exercise would be taxed neutral. It is the case of the

assessee that on account of the exclusive method of accounting, the

excise duty and VAT is excluded at the threshold and accounted for

separately as a balance sheet item. Thus, when the purchase cost does

not include the excise duty and VAT etc. and consequently do not

form part of the profit & loss account, there is no warrant to include

such duty and costs in the closing stock. It is the case of the assessee

that when seen in perspective, accounting method adopted by the

assessee is revenue neutral and does not make any impact on the

profitability of the concern per se. In the backdrop of facts noted

above, we do not see any error in the conclusion drawn by the CIT(A).

In essence, there will be no infringement of Section 145A where the

action of assessee is revenue neutral. In this regard, the CIT(A)

ITA No. 2676/Ahd/16 [ITO vs. Shri Kiritbhai N. Patel] A.Y. 2012-13 - 3 -

observed that the issue is no longer res integra and adjudicated the

issue in favour of the assessee placing reliance upon several decisions

of the co-ordinate bench of Tribunal as listed in the order of the

CIT(A). The conclusion of CIT(A) is on legally sound footing. In

these circumstances, we decline to interfere with the order of the

CIT(A).

This Order pronounced in Open Court on 17/07/2018

Sd/- Sd/- (MADHUMITA ROY) (PRADIP KUMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad: Dated 17/07/2018 True Copy S. K. SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से,

उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद ।