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Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
आदेश आदेश / ORDER आदेश आदेश
PER D. KARUNAKARA RAO, AM :
This appeal is filed by the assessee against the order of CIT(A)-1, Aurangabad, dated 27-11-2015 for the Assessment Year 2011-12.
Grounds raised by the assessee are extracted as under :
“1. On the facts and in the circumstances of the case and in law the Lower Authorities have erred in making the addition of Rs.1,48,31,113/- on account of excise duty on closing stock by disregarding appellant’s contention. 2. On the facts and in the circumstances of the case and in law the Lower Authorities have erred in making the disallowance of Rs.31,43,714/- on account of delay in payment of Provident Fund and Employees State Insurance Corporation Contribution dues recovered from employee’s salary by disregarding appellant’s contention in this regard.”
Briefly stated relevant facts are that the assessee is a Cooperative
Society and filed the return of income on 30-09-2011 declaring total income
of Rs.11,78,665/-. At the end of the assessment proceedings u/s.143(3) of
the Act, the assessed income of the assessee is determined at
Rs.1,68,56,950/-. In the assessment, AO made couple of additions relating
to addition of Excise Duty of RS.1,48,31,113/- to the closing stock and the
second addition is with reference to the disallowances made in connection
with the payment of Employees Contribution to Provident Fund and
Employees State Insurance Corporation (in short ‘ESIC’).
Relevant facts on these issues include that the assessee while filing
the return of income along with the Audit Report. The Auditors qualified,
in Column 12(b) of the Audit Report quantified the Excise Duty of closing
stock amounting to Rs.2,58,71,232/-. Out of that, Rs.1,10,40,119/- was
offered to tax in computing the total income leaving the balance of
Rs.1,48,31,113/-. As per the discussion given in Para No.4 of the
assessment order, AO proceeded to add the said sum of Rs.1,48,31,113/-.
On this issue, during the First Appellate proceedings, on considering the
submission of the assessee, CIT(A) relied on the said statement of the
auditors in Audit Report and proceeded to confirm the addition of
Rs.1,48,31,113/-.
Regarding the other addition of Rs.31,43,714/-, AO disallowed the
said claim stating that the said payments were made beyond the permitted
due dates specified for payment of Employees Contribution to the Provident
Fund and ESIC. The dates are provided in the tabular form in Para No.6 of
the assessment order. The date of filing the return of income as on 30-09-
2011 and the actual date of payments are much prior to the filing of return
of income. Despite the same, CIT(A) confirmed the addition made by the
AO relying on the judgment of Gujarat High Court in the case of Gujarat
State Road Transport Corporation 41 taxmann.com 100. CIT(A) also
commented on the said judgment too.
Aggrieved with the decision of CIT(A) on both the issues, the assessee
is in appeal before us with the grounds extracted above.
Regarding the issue of Excise Duty raised in Ground No.1, Ld.
Counsel brought our attention to judgment of Bombay High Court in the
case of CIT Vs. Loknete Balasaheb Desai S.S.K. Ltd. 339 ITR 0288,
judgment of Allahabad High Court in the case of CIT Vs. Sangam
Structurals Ltd. 35 taxmann.com 448 (Allahabad) and judgment of Delhi
High Court in the case of CIT Vs. SVP Industries Ltd. 50 taxmann.com 229
(Delhi) and read out the conclusions of the said judgments. When the issue
relating to the verification of facts and the applicability of the said decisions
was questioned, Ld. Counsel for the assessee submitted that for the limited
purpose the matter may be remitted to the file of AO.
We heard both the parties and perused the orders of the Revenue and
the decisions cited before us. Accrual of Excise Duty on the stock and the
point of such accrual is the issue. Assessee claims that the same do not
accrue on the stock in trade as the same has not left the godown/premises
where the stock in trade is stored. Relevant legal propositions from the
judgments relied on by the Ld. Counsel for the assessee are extracted here
as under for the sake of completeness :
CIT Vs. Loknete Balasaheb Desai S.S.K. Ltd.
Conclusion : Excide duty liability crystallises on the date of clearance of excisable goods and not on the date of manufacture, and therefore, excise liability was not incurred by assessee in respect of unsold sugar lying in stock and could not be included in the value of closing stock of sugar.
CIT Vs. Sangam Structurals Ltd.
If the value of the excise duty has to be included in the closing stock then the value of excise duty has to be included in the opening stock and in that event there would be no difference in the result of the value of the opening and closing stock.
CIT Vs. SVP Industries Ltd.
The Hon’ble High Court held that Excise duty is being payable at the time of removal of goods and not at the time of manufacture, duty would be payable only at the time of unbonding. Thus, the High Court confirmed the order of the Tribunal deleting the addition.
From the above propositions laid down by the various High courts, it
is evident that the point at which the Excise Duty is levied is only when the
goods are cleared from the factory premises and, therefore, levy of Excise
Duty does not arise so long as the finished products are kept in the closing
stock. Therefore, we find prima-facie it is a case where the impugned
closing stock has never left the factory premises. In any case, it is a matter
of fact that requires examination of accounts by the AO. As requested by
the Ld. Counsel for the assessee, the issue is remanded to the file of AO for
examination of facts and passing of a speaking order. AO is directed to give
reasonable opportunity of being heard to the assessee. Accordingly,
Ground No.1 is allowed for statistical purposes.
Regarding the second issue of allowability of payments to Employees
Contribution to PF and ESIC, it is undisputed fact that the assessee filed
the return of income on 30-09-2011 and the payments to the said funds
were made by the assessee well before due date of filing the return of
income. Considering the undisputed facts, we are of the view that the
decision of CIT(A) is required to be reversed. Thus, Ground No.2 raised by
the assessee is allowed.
In the result, appeal of the assessee is partly allowed for statistical purposes.
Order pronounced on this 26th day of March, 2018.
Sd/- Sd/- (SUSHMA CHOWLA) (D.KARUNAKARA RAO) �ाियक सद� / JUDICIAL MEMBER लेखा सद� / ACCOUNTANT MEMBER पुणे / Pune; �दनांक Dated : 26th March, 2018. Satish
आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to : अ�ेिषत
अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. आयकर आयु�(अपील) / The CIT(A)-1, Aurangabad 3. आयकर आयु� / The CIT-1, Aurangabad 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “ए” / 5. DR ‘A’, ITAT, Pune; गाड� फाईल / Guard file. 6.
आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार
स�यािपत �ित //True Copy// //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune