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Income Tax Appellate Tribunal, MUMBAI BENCHES “A”, MUMBAI
आदेश / O R D E R
Per Joginder Singh (Judicial Member) The assessee is aggrieved by the impugned order dated 11/03/2011 of the ld. First Appellate Authority, Mumbai.
During hearing of this appeal, Shri Vijay Mehta, ld. counsel for the assessee, did not press the addition with respect to Rs.26,92,010/-, made by the Assessing Officer and confirmed by the ld. Commissioner of Income Tax (Appeals). The ld. DR, Shri Aarshi Prasad, had no objection to the request of the assessee, therefore, this ground of the assessee is dismissed as not pressed.
2.1. The only ground/part of the ground, agitated by the ld. counsel for the assessee is with respect to upholding the addition of Rs.56,83,114/- made u/s 145A of the Income Tax Act, 1961 (hereinafter the Act). The crux of argument advanced on behalf of the assessee is that the assessee company was following exclusive method of accounting of recording the excise duty and thus the opening stock has to be adjusted. The ld. counsel invited our attention to various pages of the assessment order as well as impugned order. It was also pleaded that during last year, identical working was given effect by the ld. Assessing Officer by deciding the same in favour of the assessee. On the other hand, the ld. DR, though defended the addition but did not controvert that identically in the last year, effect was given to the working of the assessee.
2.2. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee company is engaged in the business of manufacturing of textile fabric coating, laminated woven and knitted fabric, declared nil income in the original return and worked out the book profit of Rs.2,89,07834/-, while completing the assessment u/s 143(3) of the Act vide assessment order dated 14/12/2007. Subsequently, the case was reopened with the issuance of notice u/s 148 of the Act dated 17/02/2009, to which the assessee filed return of income on 23/03/2009 along with letter dated 22/12/2009 asking the Assessing Officer to furnish the reasons of reopening the assessment u/s 147 of the Act. During the relevant period, the assessee company was following the exclusive method of accounting of recording of excise duty. The ld. Assessing Officer asked the assessee as to why adjustment should not be made according to section 145A of the Act by following inclusive method of accounting. This proposition of the ld. Assessing Officer was opposed by the assessee. The ld. Assessing Officer did not accept the plea of the assessee and made the addition of Rs.56,83,114/-, being the difference between the modvat on the closing inventory as on 31/03/2004 and modvat on opening inventory as on 01/04/2004. On appeal, the ld. Commissioner of Income Tax (Appeals) affirmed the stand of the ld. Assessing Officer, which is under challenge before this Tribunal.
2.3. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, we find that in para 4 of the reasons for reopening the assessment u/s 147 of the Act, it has been mentioned as under:-
“4. On going through the Tax Audit Report filed as per Annexure-2 to Tax Audit Report, the assessee has submitted that adjustment to the closing stock as per section 145A is Rs.(-)1900369/-. It may be mentioned that the assessee follows exclusive methods for valuation of inventory whereas as per section 145A inclusive methods needs to be follow. Hence the assessee has given the adjustments required to be made on account of valuation of inventory and has made the adjustments so computed in the computation of income filed with the return………………..”
2.4. If the aforesaid observation of the ld. Assessing Officer is analyzed, clearly it is oozes out that the aforesaid observation is based upon tax audit report filed by the assessee itself and the assessee was following exclusive method of valuation of inventory. The assessee also filed computation of income along with the return, wherein, the figure of Rs.58,39,250/- has been mentioned as modvat on opening stock in financial year 2004-05 and further the amount of Rs.56,83,114/- has been shown as excise duty on closing stock of finish goods. The amount of Rs.1,56,176/- has been added as modvat on closing stock, thus, the figures, furnished by the assessee exactly matches (Rs.56,83,114+1,56,176 = Rs.58,39,290/-) as per computation of last year. Thus, the proposed addition of Rs.56,83,114/- is not warranted as opening stock has to be adjusted.
2.5. Section 145A of the Act was inserted by the Finance (No.2) Act of 1998, with effect from 01/04/1999 with a view to put an end to the point of litigation as to whether, the value of closing stock of the inputs, work in progress and finished goods must necessarily include the element for which MODVAT credit is available. As per sub-section (a) to section 145A of the Act, the valuation of purchase and sale of goods and inventory for the purposes of determining the income chargeable under the head “profit & gains of business or profession” shall be (i) in accordance with the method of accounting regularly employed by the assessee and (ii) further adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred by the assessee to bring the goods to the place of its location and condition as on the date of valuation. The scope and effect of section 145A have been elaborated in Departmental Circular no. 772, dated 23/12/1998. In view of the clear cut provision applicable to the assessment year in question, we find merit in the argument of the ld. counsel for the assessee, thus, the addition so made is deleted.
Finally, the appeal of the assessee is partly allowed.
This Order was pronounced in the open court in the presence of ld. representatives from both sides at the conclusion of the hearing on 08/02/2016.
Sd/- Sd/- (G.S. Pannu) (Joginder Singh) लेखा सद�य / ACCOUNTANT MEMBER �या�यक सद�य / JUDICIAL MEMBER मुंबई Mumbai; �दनांक Dated : 09/02/2016 f{x~{tÜ? P.S/.�न.स. आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. आयकर आयु�त(अपील) / The CIT, Mumbai. 4. आयकर आयु�त / CIT(A)- , Mumbai 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड� फाईल / Guard file.