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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI D. KARUNAKARA RAO, AM & SHRI AMARJIT SINGH, JM
Assessee by: None Department by: Shri Abhishek Meshram सुनवाई क� तार�ख / Date of Hearing: 25.04.2016 घोषणा क� तार�ख /Date of Pronouncement: 17.08.2015 आदेश / O R D E R PER AMARJIT SINGH, JM:
The assessee has filed the present appeal against the order dated 30.10.2012 passed by the Commissioner of Income Tax (Appeals) 2, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2002-03.
ITA No.8628/M/11 A.Y. 2002-03
The assessee has raised the following grounds:-
“1. On the facts and the circumstances of the case, the learned CIT(A) has erred in confirming addition of Rs.9,20,421.00 (Rupees Nine lacs twenty thousand four hundred and twenty one only) to the valuation of closing stock on a/c. of unutilized modvat credit, keeping in view the provisions of section 145A of the Income Tax Act, 1961, without enquiring into the facts and circumstances of the case and provisions of the Income Tax Act, 1961 and rules thereunder.
2. On the facts and the circumstances of the case, the learned CIT(A) has erred in making addition of Rs.11,654.00 (Rupees Eleven thousand six hundred & fifty four only) u/s.2(24)(x) r.w.s.36(i)(va) of the Income Tax act, 1961, out of contribution received from employee without enquiring into the facts and circumstances of the case and provisions of the Income Tax Act, 1961 and rule thereunder.
The brief facts of the case are that the assessee filed hi return of income on 29.10.2002 declaring total loss to the tune of Rs.-55,76,340/-. The return of income was accompanied with audit report in form no.3CA and 3CD. The said return of income was processed u/s.143(1) of the Income Tax Act, 1961 ( in short “the Act”). Thereafter the case was selected for scrutiny and notice u/s.143(2) of the Act was issued and served upon the assessee. Thereafter, notices u/s.143(2) and 142(1) of the Act along with the questionnaire were issued and served upon the assessee. The assessee engage in the business of manufacturing and trading of structural & M.S. Steel products. At the time of examination of documents it was notice that the assessee has unutilized modevat credit of Rs.9,20,421.
ITA No.8628/M/11 A.Y. 2002-03 Therefore after issuance of the notice to the assessee the Assessing Officer added the said unutilized modevat to the tune of Rs.9,20,421 /-to the income of assessee. It was also found that the assessee delayed in payment to the contribution received from the employee to the tune of Rs.11,654/- therefore the said amount was treated as taxable u/s.2(24)(x) and added to the income of the assessee. Feeling aggrieved the assessee filed the appeal before the CIT(A) who confirmed the said order therefore the assessee has filed the present appeal before us. However the ISSUE NO.1:-
The assessee has challenged the confirmation of the addition to the tune of Rs.9,20,421/- to the valuation of closing stock on account of unutilized modvat credit. The learned representative of the assessee has argued that the value of modevat credit unutilized at the close of the accounting period to the extent of Rs.9,20,421/- is not liable to be added in the closing stock in view of the law settled by Hon’ble Delhi High Court in case CIT V/s. Mahavir Alluminum Ltd. [2008] 297 ITR 77 and by Hon’ble Jurisdictional High Court in the case of CIT V/s. Mahalaxmi Glass Works Pvt. Ltd. [2009] 318 ITR 116 (Bom.). However, on the other hand learned representative of the department has refuted the said contentions and relied upon the finding of the CIT(A) in question. By giving the careful thought to the contention raised by the learned representative of the parties and perusing the record carefully, it came into notice that the CIT(A) has decided the case by relying upon the case of West coast paper
ITA No.8628/M/11 A.Y. 2002-03 mills reported in 103 ITD 19. Ld representative of assessee is relaying on the law settled in CIT V/s. Mahalaxmi Glass Works Pvt. Ltd.(Supra) and by relying on decision of CIT V/s. Mahavir Alluminum Ltd.(Supra). wherein it has been held that if there is a change in valuation of closing stock in one end, there must necessarily be a corresponding change at the other end otherwise the true profit would not be reflected. In view of the said law we hold that if the closing stock to be increased on account of unutilized modvat credit the corresponding opening stock of that year is also to be increased as the department has not disputed the fact that the purchases have been debited exclusive of the excise duty element i.e. by adopting net method of purchasing. If the value of closing stock is increased by the modvat the purchase should also be increased by the similar amount. Accordingly this issue has been squarely covered by the above said law. Therefore, we set aside the finding of the CIT(A) on this issue and direct the Assessing Officer to delete this addition.
ISSUE NO.2:-
Under this issue no.2 the assessee has challenged the confirmation of addition to the tune of Rs.11,654/- u/s.2(24)(x) r.w.s. 36(i)(va) of the Act out of contribution received from employee. The learned representative of the assessee has argued that this issue has been decided in view of law settled by the Hon’ble Supreme Court in the case of CIT V/s. Alom Extrusion Ltd. 319 ITR 306 and by the subsequent decision of ITAT in case of Ms/ Pinkpen Pvt. Ltd. Vs. CIT in dated
ITA No.8628/M/11 A.Y. 2002-03 28.08.2010. The finding of the said judgement is hereby reproduced below:-
“10. The next issue is disallowance of Employees Contribution to PF and ESIC of Rs.43,721/-. The short controversy before us is in respect of the payment of the Employees Contribution to P.F. / E.S.I.C. beyond the Grace period which was relating to the month of February. The Ld. Counsel relied on the decision of the Hon’ble Supreme Court in the case of CIT V/s. Alom Extrusion Ltd., 319 ITR 306. The A.O. made the disallowance u/s.36(1)(va) as he was of the opinion that the Employees Contribution to PF/ESIC even if made before filing of the retun of income is not covered u/s.43B of the I.T.Act. In the case of Alom Extrusion Ltd. (supra), the issue before their Lordship was whether the omission of second proviso to Section 43B of the I.T.Act 1961 by the Finance Act 2003 operated retrospectively w.e.f. 1.2.2004 or whether it operated retrospectively w.e.f. 1.4.1988. In the said case also, the issue was concerning the contribution payable by the employer to the P.F./Superannuation Fund or any other Fund of welfare of the employees. In our opinion, now the issue stands covered in favour of the Assessee by the decision of Hon’ble Supreme Court in the case of Alom Extrusion Ltd.
ITA No.8628/M/11 A.Y. 2002-03
(supra). We, therefore, allow the ground taken by the assessee and delete the addition.
In view of the above mentioned law it is quite clear that if the assessee has paid the employer’s as well as employees contribution on or before the due date of return of income then the same should be allowed. The Assessing Officer is directed to verify from the details available on record and accordingly allow the claim. Accordingly, the assessee’s appeal is allowed.
In the result appeal filed by the assessee is hereby allowed.