2013 (11) TMI 1544 - AT - Income Tax

Disallowing adjustment U/s.145(A) - As in the closing stock of current year, excise duty of ₹ 4,64,949/- is not included also excise duty of ₹ 4,03,662/- is not included in the opening stock of the current assessment year - Held that - The Hon ble High Court of Delhi in the case of CIT vs. Mahavir Aluminium Ltd. reported at (2007 (11) TMI 41 - HIGH COURT OF DELHI) has held that whenever any adjustment is made in the valuation of stock, this will effect both; opening as well as closing stock. In the present case also, the AO has not taken into consideration the opening as well as closing stock. Therefore, respectfully following the aforesaid decision, we hereby direct the AO to restrict the addition to ₹ 61,387/- and delete a sum of ₹ 4,03,662/-, Thus, this ground of assessee s appeal is allowed to that extent

Summary

Issues:
Disallowance of adjustment under section 145A of Rs. 4,64,949 without considering facts.

Analysis:
The case involved an appeal by the Assessee against the order of the Ld. Commissioner of Income Tax(Appeals) dated 17/05/2010 for Assessment Year 2005-06. The primary issue was the disallowance of an adjustment under section 145A of Rs. 4,64,949. The Assessing Officer had made various additions during scrutiny assessment, including disallowances and adjustments. The Assessee contested the disallowance of Rs. 4,64,949 under section 145A before the Ld. CIT(A), who partially sustained the addition. The Assessee then appealed to the ITAT against this decision.

The Assessee's counsel argued that the AO erred in disallowing the amount under section 145A without considering relevant facts. It was contended that the excise duty was not included in both the opening and closing stock, following a consistent policy from previous assessment years. The counsel relied on case laws to support the argument that adjustments in stock valuation should affect both opening and closing stock. On the other hand, the Senior DR supported the orders of the authorities below.

Upon review, the ITAT found that the Ld. CIT(A) had dismissed the Assessee's appeal based on section 145A, without considering the case laws presented by the Assessee's counsel. Referring to a decision by the Hon'ble High Court of Delhi, the ITAT directed the AO to restrict the addition to Rs. 61,387 and delete a sum of Rs. 4,03,662 from the disallowance. Consequently, the ITAT allowed the Assessee's appeal to that extent and directed the adjustment accordingly.

In conclusion, the ITAT allowed the Assessee's appeal by directing the AO to restrict the addition under section 145A and delete a portion of the disallowance, based on the principles of stock valuation adjustments affecting both opening and closing stock.