2012 (8) TMI 521 - AT - Income Tax

Addition u/s 68 on account of share application money and cash creditors - assessee requested for one more opportunity with a promise to furnish the details relating to the identity, creditworthiness and genuineness of the transactions regarding cash creditors as well as share application money - Held that - In the interest of justice, we set aside all the grounds raised in the appeal to the file of the AO with a direction to adjudicate the same afresh - Decided in favor of assessee for statistical purposes. Valuation of Closing stock - addition - inclusion of Excise Duty in valuation - AO contended that liability to excise duty was an ascertained liability not eligible for deduction u/s 43B - Held that - CIT(A) rightly observed that even if such excise duty as is payable on the uncleared goods is added under the provisions of section 145A and payment of excise duty in respect of such enhanced value of closing stock is not allowed as per sec. 43B, such unilateral treatment would throw out unrealistic picture of the profits during the year. No infirmity found in the order of the CIT(A) directing the AO to delete the addition - Decided against Revenue

Summary

Issues:
1. Sustainability of addition u/s 68 of the Income-tax Act for share application money and cash creditors.
2. Excise duty on closing stock valuation.

Analysis:
1. Sustainability of Addition u/s 68:
The case involved cross-appeals against the CIT(A)'s order for the assessment year 2006-07. The Assessing Officer had made additions under section 68 of the Act for share application money and cash creditors due to lack of details and confirmation letters. The CIT(A) upheld the additions citing insufficient information about the sources of funds. The Tribunal noted that the assessee had filed confirmations and details during the first appellate proceedings, leading to a remand report. The Tribunal directed the Assessing Officer to conduct verifications and examine the genuineness of the transactions, emphasizing the need for the assessee to substantiate claims regarding the identity, creditworthiness, and genuineness of the transactions.

2. Excise Duty on Closing Stock Valuation:
The revenue's appeal concerned the addition of excise duty on the closing stock of finished goods. The Assessing Officer disallowed the excise duty claimed under section 43B, estimating it at 18%. The CIT(A) directed the deletion of the estimated excise duty, citing relevant case laws. The Tribunal upheld the CIT(A)'s decision, noting that the excise duty paid before the due date of filing the return of income should be allowed as per section 43B. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the revenue's appeal.

In conclusion, the Tribunal allowed the assessee's appeal for statistical purposes and dismissed the revenue's appeal. The judgment emphasized the importance of substantiating claims and complying with legal provisions regarding additions under section 68 and excise duty deductions.