2016 (3) TMI 1196 - HC - Income Tax

Inclusion of Modvat in opening stock in the light of Section 145A - Held that - We find that the impugned order of the Tribunal after holding that Section 145A of the Act which was brought into effect on 1st April 1999 holds it would have application while determining the income chargeable to tax for the Assessment Year 1999-2000. In the above view the impugned order of the Tribunal set aside the order of the Commissioner of Income Tax (Appeals) at the instance of the Revenue and restored the issue to the Assessing Officer for de novo adjudication in accordance with the provisions of Section 145A of the Act. The grievance of the Revenue that for earlier Assessment Years i.e. Assessment Years 1997-98 and 1998-99 the Tribunal had deleted Modvat from the valuation of closing stock. Therefore it is obliged on the principle of consistency to have not directed the inclusion of Modvat in the valuation of opening stock. This submission completely overlooks the change in law with effect from 1st April 1999 due to introduction of Section 145A in the Act. In the above view no occasion to invoke the principle of consistency can arise. Thus there is no merit in the above submission.

Summary

Issues:
Challenge to order of the Income Tax Appellate Tribunal for Assessment Year 1999-2000 regarding inclusion of Modvat in opening stock in light of Section 145A of the Income Tax Act.

Analysis:
The appeal challenges the order of the Income Tax Appellate Tribunal for Assessment Year 1999-2000. The main question raised is whether the Tribunal was justified in including Modvat in the opening stock, considering the application of Section 145A of the Income Tax Act. The Tribunal's decision was based on the introduction of Section 145A on 1st April, 1999, which affects the determination of income chargeable to tax for the relevant assessment year.

The Tribunal set aside the Commissioner of Income Tax (Appeals) order and referred the issue back to the Assessing Officer for fresh consideration in accordance with Section 145A. The Tribunal relied on previous court decisions to support its stance that any change in closing stock due to Section 145A must be reflected in the opening stock of the same year. The argument of the Revenue regarding consistency in treatment of Modvat in opening stock for earlier assessment years was dismissed, emphasizing the change in law with the introduction of Section 145A.

Ultimately, the court found no substantial question of law for consideration in this case and dismissed the appeal without any costs. The judgment highlights the importance of adhering to the provisions of the Income Tax Act, especially when new sections like 145A come into effect, impacting the valuation of stock for tax purposes.