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Income Tax Appellate Tribunal, “ D ” BENCH, AHMEDABAD
Before: SHRI KUL BHARAT & SHRI PRADIP KUMAR KEDIA
Consolidated Appeals (2)
आदेश / O R D E R
PER PRADIP KUMAR KEDIA - AM:
The captioned appeals have been filed by the Revenue for Assessment Years (AYs) 2009-10 & 2010-11 against the separate orders of the Commissioner of Income Tax(Appeals)-XI, Ahmedabad [CIT(A)
ITA Nos.1717/Ahd/12,3392/Ahd/14 (by Revenue) And CO No.195/Ahd/12 ( by assessee) ACIT vs. Prima Automation (I) P.Ltd. Asst.Years – 2009-10 & 2010-11 - 2 - in short] dated 07/05/2012 & 10/09/2014 respectively in the matter of assessment orders passed under s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"). The assessee has also field Cross Objection No.195/Ahd/2012 relevant to AY 2009-10 as captioned above.
Both the appeals and cross objection are disposed of by this common order.
In the Revenue’s appeals, the common ground agitated by the Assessing Officer (AO) is towards deletion of addition in respect of under valuation of closing stock made by the AO.
The facts being common, we shall briefly narrate the facts concerning AY 2009-10.
Briefly stated, the AO in the course of scrutiny assessment observed that the assessee has not included the value of statutory duty/levy towards CENVAT component on raw-material lying in the closing stock in violation of Section 145A of the Act. The CENVAT amount attributable to closing stock of raw-material stands at Rs.59,30,117/-. The AO accordingly added the aforesaid amount to the value of closing stock with reference to section 145A of the Act.
ITA Nos.1717/Ahd/12,3392/Ahd/14 (by Revenue) And CO No.195/Ahd/12 ( by assessee) ACIT vs. Prima Automation (I) P.Ltd. Asst.Years – 2009-10 & 2010-11 - 3 - Consequently, the taxable income to the assessee stood increased by the aforesaid amount.
In the first appeal, the CIT(A) however found merit in the contention of the assessee and deleted the aforesaid addition.
Aggrieved, the Revenue is in appeal before the Tribunal.
The Ld.DR relied on the assessment order. The Ld.AR for the assessee, on the other hand, relied upon the order of the Coordinate Bench in ITA No./971/Ahd/2012 for AY 2008-09, order dated 24/05/2016 and submitted that the issue is squarely covered in favour of assessee.
We have carefully examined the issue. While it is the case of the Revenue that CENVAT credit of Rs.59,30,117/- represents the 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 the action of assessee is revenue neutral and there is no infringement of s.145A in essence. In this regard, we notice that the issue is no longer res integra and adjudicated in favour of the assessee in its own case in the preceding AY 2008-09 on similar facts. The relevant operative para of the order of the Coordinate
ITA Nos.1717/Ahd/12,3392/Ahd/14 (by Revenue) And CO No.195/Ahd/12 ( by assessee) ACIT vs. Prima Automation (I) P.Ltd. Asst.Years – 2009-10 & 2010-11 - 4 - Bench in ITA No.971/Ahd/2012(supra) order dated 24/05/2016 is reproduced hereunder:-
“1. Ground no. 4 relates to the deletion of the addition of Rs. 51,59,563/- made u/s. 145A of the Act on account of CENVAT paid on raw material. 1. On perusal of the trading and Profit and Loss account of the assessee, the A.O noticed that while valuing the closing stock as on 31.03.2008, the assessee has not included a sum of Rs. 51,59,563/- being the CENVAT paid on the raw material lying in the closing stock . The assessee was asked to explain why the same should not be added to the value of the closing stock in view of the provisions of Section 145A of the Act. Assessee filed a detailed reply explaining that it is maintaining exclusive system of accounting in so far as CENVAT is concerned. It was explained that the CENVAT paid on purchases is debited in a separate account and not considered in the purchases and, therefore, it is not claimed as expenditure. It was further explained that even the opening stock is devoid of CENVAT, therefore, any adjustments made in the closing stock would automatically require an adjustment in the opening stock and the exercise will be revenue neutral. This explanation of the assessee was rubbished by the A.O. who was of the firm belief that the provisions of Section 145A have been violated and accordingly made an addition of Rs. 51,59,563/-. 2. Assessee carried the matter before the ld. CIT(A) and reiterated its claim. After considering the facts and the submissions and after considering the various judicial decisions, the ld. CIT(A) held as under:- 7.2 I have carefully considered the rival submissions. I have also perused various case laws relied upon by the appellant. On this issue I am inclined to agree with the submissions of the Id. A.R. for the following reasons :- (1) The appellant is following exclusive method of accounting. According to this method of accounting payment and receipt of CENVAT is a balance sheet item and it is not debited or credited in the P & L A/c. In this regard I am inclined to agree with the contention of the Id. A.R. that an amount of Rs. 51,59,563/- being CENVAT paid on raw material is revenue
ITA Nos.1717/Ahd/12,3392/Ahd/14 (by Revenue) And CO No.195/Ahd/12 ( by assessee) ACIT vs. Prima Automation (I) P.Ltd. Asst.Years – 2009-10 & 2010-11 - 5 - neutral. The appellant has also placed reliance on Indo Nippon Chemical Co. Ltd. (2003) 261 ITR 275 (SC). I have also perused the other case laws relied upon by the appellant and ratios of these case laws also support the case of the appellant. (2) The A.O. has not commented on the accounting policies followed by the appellant. The policy of valuation of closing stock consistently followed by the appellant in the previous years as well as in the succeeding years. The Hon'ble Gujarat High Court in the case of Voltamp Transformers Ltd. v/s. CIT (2008) reported on 217 CTR 254 has held that A.O. has got very limited powers to change valuation of closing stock. The A.O. cannot change method of accounting regularly followed by the assessee without valid reasons. (3) Hon'ble Supreme Court in the case of Chainrup Sampatram (1953) reported on 24 ITR 481 has clearly held that profits does not arise out of valuation of closing stock and situs of its arising or accruing where the valuation is made and valuation of unsold stock is necessary part of the process of determining trading results but it can in no sense-be regarded as source of such profit. (4) It is clearly held in the case of CIT v/s. Ahmedabad New Cotton Mills reported at 4 ITC 245 that when the opening and closing stock of business are both undervalued, if the method of alteration of both valuation is not adopted, it is perfectly plain that profits which is brought forward is not real one. In such cases, the real profits of a particular year cannot be ascertained by merely raising value of closing stock, not taking into consideration the similar valuation of opening stock. As per the ratio of this case, enhancing the value of closing stock without giving corresponding effect to the valuation of opening stock is not proper. In view of the above facts, I am not convinced about the maintainability of addition of Rs. 51,59,563/- in valuation of closing stock. The A.O. is directed to delete addition of Rs. 51,59,563/-. This ground of appeal is allowed.
The ld. D.R. could not bring any distinguishing decision in favour of the revenue where as the findings of the First Appellate Authority are based upon
ITA Nos.1717/Ahd/12,3392/Ahd/14 (by Revenue) And CO No.195/Ahd/12 ( by assessee) ACIT vs. Prima Automation (I) P.Ltd. Asst.Years – 2009-10 & 2010-11 - 6 - the decision of the Hon’ble Supreme Court, Hon’ble High Court of Gujarat. Therefore, no inference is called for. Ground no. 4 is accordingly dismissed. 4. In the result, the appeal filed by the Revenue is dismissed.”
Having regard to the aforesaid view of the Coordinate Bench already taken in assessee’s own case, we decline to interfere with the order of CIT(A).
In the result, Revenue’s appeals in ITA No.1717/Ahd/2012 for AY 2009-10 & ITA No.3392/Ahd/2014 for Ay 2010-11 are dismissed.
Now we shall turn to Assessee’s Cross Objection in CO No.195/Ahd/2012 (in Revenue’s ITA No.1717/Ahd/2012) relevant to AY 2009-10.
The grounds of Cross Objection raised by the assessee read as under:- 1. The ld.CIT(A) has grievously erred in confirming the disallowance of Rs.83,926/- made by the AO u/s.40(a)(ia) of the Act without proper consideration and appreciation of the facts of the case. In view of facts and submissions filed, the impugned addition ought to have been deleted by the ld.CIT(A).
The learned CIT(A) erred in dismissing the ground of appeal claiming depreciation on Plant and Machinery, which was inadvertently not claimed in the return of income on technical grounds. In view of
ITA Nos.1717/Ahd/12,3392/Ahd/14 (by Revenue) And CO No.195/Ahd/12 ( by assessee) ACIT vs. Prima Automation (I) P.Ltd. Asst.Years – 2009-10 & 2010-11 - 7 - facts and submissions filed, the ld.CIT(A) ought to have allowed the depreciation claim of the appellant.\ 2.1. The learned CIT(A) further erred in not appreciating the fact that as per Explanation 5 of Section 32 of the Act, whether or not the assessee has claimed the deduction in respect of depreciation in computing his total income is immaterial and the same is allowable irrespective of such claim.
Ground No.1 was not pressed and therefore dismissed.
Ground No.2 concerns claims of depreciation allowances on plant & machinery which was stated to be not claimed in the return of income inadvertently.
With the assistance of the Ld.AR for the assessee, we note that the assessee has not claimed depreciation allowances on certain plant & machinery entitled to it as per law. It is well settled that income is required to be assessed in accordance with the taxing statute. The appellate authority need not confine itself only to the material on record at the time of assessment. The CIT(A) as well as the Tribunal has the power to make such enquiries as it thinks fit. The tax authorities are under duty to ensure that no tax which is not legitimately due from the assessee gets collected owing to mistake on the part of the assessee. The Revenue is under duty and obligation to act in a fair and non-partisan
ITA Nos.1717/Ahd/12,3392/Ahd/14 (by Revenue) And CO No.195/Ahd/12 ( by assessee) ACIT vs. Prima Automation (I) P.Ltd. Asst.Years – 2009-10 & 2010-11 - 8 - manner. The power available to the AO cannot be exercised in the manner which is most beneficial to the Revenue and consequently most adverse to the assessee by taking advantage of the ignorance or mistake on the part of the assessee. The assessee having not claimed the depreciation eligible to it under law, will not operate as estoppel when relevant facts are available on record. In the circumstances, we do not subscribe to the dismissal of the claim of depreciation allowances stated to eligible to the assessee by the CIT(A). The aforesaid view finds support from plethora of decisions including judgement of Hon’ble Bombay High Court in the case of CIT vs. Pruthvi Brokers & Shareholders Pvt.Ltd. 349 ITR 336 (Bom.). We are not inclined at this stage to go into the merits of the claim of depreciation allowance. We set aside and restore the issue to the file of the AO for its de novo examination with a direction to allow the depreciation allowances in accordance with law regardless of its not having been claimed in the return of income. The AO however shall be entitled to make suitable adjustments/corrections in the consequential claim of depreciation allowance in the subsequent years after verification. Needless to say, the assessee shall place all relevant material to the satisfaction of the AO for allowability of claim. The issue is accordingly restored to the file of the AO in terms of directions noted above.
ITA Nos.1717/Ahd/12,3392/Ahd/14 (by Revenue) And CO No.195/Ahd/12 ( by assessee) ACIT vs. Prima Automation (I) P.Ltd. Asst.Years – 2009-10 & 2010-11 - 9 -
In the result, Cross Objection No.195/Ahd/2012 for AY 2009-10 filed by the assessee is partly allowed.
In the combined result, Revenue’s appeal are dismissed, whereas assessee’s Cross Objection is partly allowed. This Order pronounced in Open Court on 23/11/2017
Sd/- Sd/- ( KUL BHARAT ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 23 / 11 /2017 ट�.सी.नायर, व.�न.स./T.C. NAIR, Sr. PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-XI, Ahmedabad �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation ..20.11.17 (dictation-pad 15-pages attached at the end of this appeal-file) 2. Date on which the typed draft is placed before the Dictating Member …20.11.17 3. Other Member… 4. Date on which the approved draft comes to the Sr.P.S./P.S…………….. 5. Date on which the fair order is placed before the Dictating Member for pronouncement…… 6. Date on which the fair order comes back to the Sr.P.S./P.S…….23.11.17 7. Date on which the file goes to the Bench Clerk…………………23.11.17 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order………………