2013 (11) TMI 5 - AT - Income Tax

Addition made u/s 145A of the Income Tax Act Excise duty excluded in the closing stock Held that - Excise duty of 15.19 Crores was paid by the assessee-company before the due date of filing of return - From the working given by the assessee it is clear that treatment given by the assessee about excise duty is revenue neutral - Also perused the accounts prepared by the company following the inclusive method as well as the exclusive method - After necessary adjustments made by the assessee, in pursuance of the guidance note issued by the ICAI, there is no difference in the net result from taxation point of view Reliance has been placed on the judgment of assessee s sister concern case R.R.Kabel 2012 (7) TMI 38 - ITAT MUMBAI Decided in favor of Assessee.

Summary

Issues:
1. Additions u/s.145A for AY 2007-08
2. Additions u/s.145A for AY 2008-09

Additions u/s.145A for AY 2007-08:
The appellant challenged the orders of the CIT(A)-13 for AY 2007-08, primarily focusing on the additions made under section 145A. The Assessing Officer found that the appellant had not included excise duty in the valuation of the closing stock. The AO held that as per section 145A, excise duty should be included in the valuation of closing stock. The appellant argued that this non-inclusion would not impact its profits. The AO added an amount to the income of the appellant based on the inclusive method under section 145A. The FAA restricted the addition to a lower amount. The AR contended that the adjustments under section 145A were revenue neutral, citing past practices and guidance notes from ICAI. The ITAT, after considering the arguments and previous decisions, held that the appellant's exclusive method of accounting for Modvat Credit neutralized the tax effect, thereby allowing the appeal and reversing the FAA's order.

Additions u/s.145A for AY 2008-09:
In the case of AY 2008-09, similar grounds were raised regarding additions under section 145A. The FAA had enhanced the addition amount, but the ITAT noted that no notice was issued before this enhancement, violating section 151(2) of the Act. Despite this procedural error, the ITAT decided in favor of the appellant based on the analysis and decision made for AY 2007-08. The ITAT justified its decision by emphasizing the consistency in the appellant's accounting methods and the neutralization of tax effects, similar to the previous year. Consequently, the appeals for AYs 2006-07 and 2008-09 were allowed based on the principles applied in the AY 2007-08 case.

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