L & T CONSTRUCTION EQUIPMENT LTD,MUMBAI vs. JT CIT (OSD) 2(2), MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा सद"य,राजे"" के अनुसार लेखा सद"य राजे"" के अनुसार -Per Rajendra,AM: लेखा सद"य लेखा सद"य राजे"" के अनुसार राजे"" के अनुसार Challenging the orders,dated 20/03/2014 of the CIT(A)-5,Mumbai the assesse has filed the present appeal.Assessee-company,carrying on business manufacturing of construction equipments,field its return of income on 26/10/2005,declaring total income at Rs.23.13 lakhs under the normal provisions and Book Profit of Rs. 28.46 crores u/s.115JB of the Act. The Assessing Officer (AO) completed the assessment on 12/12/2008 at total income of Rs. 23.13 lakhs under normal provisions of the Act. The book profits were assessed at Rs. 28.46 crores u/s.115 JB. Brief facts: 2.Effective ground of appeal is about adjustment to be made on account of on utilised cenvat credit to the value of closing stock u/s.145A of the Act. After going through the assessment order passed by the AO, on 12/12/2008, u/s.143 (3), the CIT- 2, Mumbai observed that same was erroneous and prejudicial to the interest of revenue. A Revisionary order, u/s.263 of the Act,was passed on 13/09/2010. In his order, he observed that the AO had failed to make addition on account of cenvat credit attributable to the closing stock of raw material of Rs.10.26 crore. He directed the AO’s to redo the assessment as per law.Accordingly,the AO completed the assessment u/s.143 (3) r.w.s.263 on 14/12/2011.While completing the assessment,he made an addition of Rs.10.26 Crores to the total income on account of the centvat credit attributable to the closing stock.

3801/M/14(05-06)- L&T Construction Equipment Ltd. 3.Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate Authority(FAA).Before him,it made elaborate submissions and filed reconciliation statement about impact of exclusive method.Following chart was furnished by the assessee : Particulars Impact on book profit Increase [Rs.] Reduction [Rs.] 1.Cenvat Credit: 1.attributable to Opening 6,03,95,045 Stock not included in stock value 2.availed credit to purchase 37,80,65,808 3.attributable to closing 10,26,62,648 stock not included in stock value 4.attributable to 33,57,98,205 consumption not reduced from purchases 43,84,60,853 43,84,60,853 Net Impact NIL It was further contended that the adjustment mandated by section 145 A of the Act were revenue neutral,that the exclusive method adopted by it was as per the AS-2 issued by the ICAI,that the unutilized cenvat credit of Rs.31.03.2005,amounting to Rs. 1.29 Crores was forming part of balance with customers under the schedule Loan and Advances,that the AO had wrongly added Rs. 10.26 crores. After considering the submissions of the assessee, the FAA held that the assessee had argued that there was no impact on the profit for the year under consideration due to the method followed by it regarding cenvat credit and that the claim was not verifiable.He referred to the Annexture-3 of clause 12 to the Audit Report in Form 3CD and observed that cenvat credit attributable to consumption had been worked out at Rs. 33.57 crore, that same was the balancing figure that one would arrive at by adding the cenvat credit attributable to opening stock and purchases and reducing therefrom that attributable to closing stock, that the AO had not computed the impact correctly, that he had limited his exercise only by taking into account the cenvat credit attributable to closing stock only.He directed the assessee o recast the P&L account by inclusive method of accounting after including cenvat on sales and consumption and to work out the impact on profit.As per the FAA the assessee showed his inability to prepare such a statement.He held that section 43 would be applicable to Rs.16.88 crores (excise duty).Accordingly he prepared a chart showing the impact of cenvat on profit Cenvat attributable 33,57,98,205 Cenvat attributable to 53,72,77,536 to consumption sales Excise duty payable 16,88,17,723 3801/M/14(05-06)- L&T Construction Equipment Ltd. in cash [over and above the cenvat credit availed] Impact on profit 3,26,61,608 53,72,77,536 53,72,77,536 Finally he held that if inclusive method was applied the total profit would increase by Rs.2.36 crores and directed the AO to verify the figures.Thus the addition was reduced to Rs.3.26 crores as against Rs.10.26crores.

4.During the course of hearing before us,the Authorised Representative (AR) argued that assessee was following exclusive method with regard to cenvat credit,that the AO and the FAA had taken a wrong figure of Rs.16.88 crores for cenvat credit purposes,that the actual figure was Rs.23.22 crores, that the assessee had paid excise duties on various dates.He referred to the page no.1 to 12 of the paper book evidencing the payment of excise duty.He further stated that matter needs verification at the end of departmental authorities.The Departmental Representative (DR) left the issue to the discretion of the Bench.