Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, CHANDIGARH
Before: SMT. DIVA SINGH, JM & Dr. B.R.R.KUMAR, AM
आदेश/ORDER
PER DIVA SINGH
The present appeal filed by the Revenue assailing the correctness of the order 25.01.2018 of CIT(A) Chandigarh pertaining to 2013-14 assessment year on the following grounds : (i) Whether on the facts and circumstances of the case, the Ld. CIT(A) has not erred in deleting the addition of Rs. 1,74,99,101/- made by the AO by invoking the provisions of section 145? (ii) Whether on the facts and circumstances of the case, the Ld. CIT(A) has not erred in deleting the addition of Rs. 1,74,99, 101/- made by the AO on account of following the inclusive method for accounting for the purpose of determining income as required u/s 145A of the Act, 1961. 2. The relevant facts of the case are that the AO considering the fact that the assessee is engaged in the business of manufacture of commercial vehicles required the assessee to show cause as to why the closing Work in Progress of Rs.14,01,61,000/- be not loaded with excise duty of 12.485 % (including R&D Cess @ 0.125% and Edu. Cess @ 3%). Considering the reply filed, the AO held it to be not acceptable on the following grounds : 4.1 The reply of the assessee has been considered but is not acceptable. The assessee is required to follow an inclusive method for the purposes of determining its income for income tax purposes. After going through the notes to accounts it is
ITA 441/CHD/2018 A.Y. 2013-14 Page 2 of 4
observed that excise duty is included in valuation of finished goods only. However, for the purposes of valuation of work-in-progress, the excise duty was not being taken into consideration. As per the provisions of section 145A(a)(ii)/ work in progress has to be increased by adding the excise duty applicable [i.e. @ 12.485% (including R&D Cess @ 0.125% and EduCess @ 3%) on work-in-progress of Rs.14,01,61,000/-], amounting to Rs.1,74,99,101/-. The assessee has claimed that it is following the same accounting policy consistently. However, this claim is not acceptable as when a particular provision is there in the Income Tax Act for accounting treatment to be given to certain claim/expenditures in the Profit & Loss Account, the assessee is required to follow it and it is mandatory for the assessee to even change the method being followed by it, if so required as per the provisions of the enacted law. The issue has been discussed in detail in various cases decided by the Hon'ble ITAT, a few of which are as follows:- • West Coast Paper Mills Ltd. vs. ACIT, ITAT Mumbai-I Bench,103 1TD 19 (Mumbai) dated 3.4.2006_ • J.B.Chemicals and Pharmaceuticals Ltd. vs. Addl.CIT ITAT Mumbai 'B'Bench (2006) 10 SOT 362(Mumbai) dated 24.4.2006 • ACIT vs. S.P.Fabricators (P) Ltd. ITAT, Mumbai I Bench (2006) 10 SOT 652 (Mumbai) dated 3.4.2006 • Croyodon Chemical Works Ltd. vs. ACIT ITAT Mumbai 'C Bench (2007) 11 SOT 295 (Mumbai) dated 24.5.2006 4.2 The closing stock has been loaded with excise duty due to the reason that whatever constitutes the closing stock has come from the raw material consumed, on which excise duty is charged. The assessee gets the credit for the excise duty paid on raw material in the form of modvat/cenvat credit and it can set off its liability of excise duty on sales against it. The amount of excise duty shown in the sales and debited to profit and loss account has not been considered in the above calculations as it will not be having any effect for the purposes of profit after considering provisions of Section 145A. 4.3 This issue had been taken up for scrutiny in the last Assessment in the case i.e. for the assessment year 2012-13 as well and valuation of work in progress was reassessed after loading the element of excise duty at the prevalent rate. Therefore, taking into account the foregoing discussion and in keeping with judicial consistency, the income of the assessee is hereby increased by an amount of Rs. 1,74,99,101/- on account of under valuation of closing Work in progress. Since the assessee has concealed the particulars of its income by following exclusive method of accounting, penalty proceedings u/s 271(l)(c) are initiated for furnishing of inaccurate particulars of income. 4.4 In the light of the above discussion, the income is computed as under: Returned Income as per assessee Rs. 32,87,04,510/-. Additions: Excise duty added in W.I.P as Rs. 1,74,99,101/- discussed in the order Assessed Income Rs.34,62,03,611/- Assessed under section 143(3) r.w.s. 144C at Rs.34,62,03,611 /-and tax be determined on the same. As per 115JB the book profit is assessed at Rs. 48/49/15,364/. Issue requisite documents. Penalty proceedings under section 271(l)(c) are initiated separately for furnishing inaccurate particulars of income. 3. The assessee carried the issue in appeal before the CIT(A) who relying upon the decision taken in 2005-06 to 2012-13 assessment year by his predecessor, allowed the appeal of the assessee holding as under :
6.1 Similar addition was made in preceding years AY 2005-06 to 2012-13 and the said addition has been consistently deleted by my predecessors in appeal. As the facts in this year are same as in the said earlier years, the addition made of Rs. 1,74,99,101/- by the AO is deleted. Grounds of appeal Nos. 1 and 2 are allowed.”
ITA 441/CHD/2018 A.Y. 2013-14 Page 3 of 4
The ld. Sr.DR relies upon assessment order.
Ld. AR inviting attention to the order dated 14.05.2018 in ITA 79/CHD/2009 and others submitted that identical issue came up for consideration before the ITAT in 2005-06 assessment year wherein the departmental appeal on the said ground was dismissed. The said view, it was submitted, has been followed over the years right from 2007-08, 2009- 10, 2010-11, 2011-12 to 2012-13 assessment years. Accordingly, it was his submission that the issue is covered in favour of the assessee.
We have heard the rival submissions and perused the material on record. It is seen that the Co-ordinate Bench in its consolidated order dated 14.05.2018 considering the departmental appeal in ITA 112/CHD/2009 for 2005-06 assessment year considered the issue in ground No. 3 raised by the revenue in the following manner : “27. Vide ground No.3, the Revenue has agitated the action of the CIT(A) in deleting the addition of Rs. 89,81,813/- made by the Assessing officer by invoking the provisions of section145A by loading excise duty on closing stock of work in progress. 28. The brief facts of the case are that during assessment proceedings, the Assessing officer noted that the assessee had failed to include excise duty for the purpose of valuation of closing stock of work in progress which was in violation of the provisions of section 145A of the Act. The Ld. CIT(A), however, deleted the impugned additions made by the Assessing officer relying on the decision of the Hon'ble Jurisdictional Punjab & Haryana High Court in the case of Nahar Spinning Mills Ltd. reported in 172 taxman 1. 29. Before us, Ld. Counsel for the assessee, at the outset,has submitted that firstly adjustment made u/s 145A of the Act are tax neutral and would not have any impact on trading account of the assessee, that whether the assessee has been following the exclusive method of accounting or inclusive method of accounting, the GP in the trading account would remain the same. The Ld. Counselhas further pleaded that in the case hand, the Assessing officer did not make any adjustment on account of MODVAT credit but has made addition on account hypothetical amount of excise duty calculated @ 16.32% of the amount of closing work-in-progress. The Ld. counsel has further submitted that asper the provisions of section 145A, the amount of duty actually paid or incurred only is includible for the purpose of valuation of inventory and purchases and sales. That there was no excise duty payable by the assessee on the work in progress.That the excise duty, otherwise, is payable on the manufactured goods and that too when such goods are moved out of factory. Thus, the question of levy of excise duty on the work in progress did not arise at all. The Ld. counsel has further submitted that even otherwise, if the aforesaid amount is to be added to the purchases / closing stock by virtue of section 145A of the Act, even then the said amount would be separately deductible while computing the taxable income u/s 43B of the Act as the assessee has paid the entire duties of tax before the due date of filing of the return of income for the year under consideration. The Ld. Counsel in this respect has relied on the decision of the Hon'ble Delhi High Court in the case of CIT Vs. Purolator India Ltd. ITA 999/2007, wherein, the Delhi High Court has held that where due to adjustments either by following inclusive method or exclusive method of accounting, it would not make any impact on the profit and loss and it will not effect the income of the assessee, no additions are warranted. 30. We have considered the rival contentions. In the case in hand, the assessee has not paid any excise duty on the closing work in progress and hence there was no question of loading any excise duty on estimation basis. Even otherwise, if the value of the excise duty has to be included in the closing stock then the value of excise duty has also 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 stock and closing stock. Reliance in this respect is placed on the decision of the Delhi High Court in the case of ‘Purolator India Ltd.’ (supra) and of the Allahabad
ITA 441/CHD/2018 A.Y. 2013-14 Page 4 of 4
High Court in the case of ‘CIT Vs. SangamStructurals Ltd.’ (2013) 35 taxman.com 148 (All.) In view of this, we do not find any justification in making the aforesaid addition. We, therefore, uphold the decision of the CIT(A) in deleting the addition on this issue. In the result, the appeal of the Revenue is hereby dismissed.” 7. It is seen that the said view was confirmed in 2007-08 assessment year wherein in ITA 25/CHD/2012 identical departmental ground was dismissed. Similar is the position from 2009-10 to 2012-13 assessment year wherein in ITA 1086/CHD/2014, ITA 1212/CHD/2016, ITA 575/CHD/2017 the departmental appeals on identical grounds were dismissed following the view taken in 2005-06 assessment year. In the absence of any contrary submission on fact or position of law, appeal of the Revenue is dismissed. Said order was pronounced in the Open Court at the time of hearing itself. 8. In the result, appeal of the Revenue is dismissed. Order pronounced in the Open Court on 03.10. 2018.
Sd/- Sd/- ( डा. बी.आर.आर. कुमार) (�दवा �संह ) (Dr. B.R.R. KUMAR) (DIVA SINGH) लेखा सद�य/ Accountant Member �या�यक सद�य/Judicial Member “पूनम” आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : अपीलाथ�/ The Appellant - 1. ��यथ�/ The Respondent - 2. आयकर आयु�त/ CIT 3. आयकर आयु�त (अपील)/ The CIT(A) 4. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 5. गाड� फाईल/ Guard File 6.
आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar