2014 (7) TMI 245 - AT - Income Tax

Proceedings u/s 263 of the Act - Condonation of delay for appeal before CIT(A) Delay of 771 days Assessee contended that the appeal could not be filed in time as the papers had been misplaced by one of the office staff and the same could be traced out with a delay of 771 days - Held that - The order u/s 263 was passed on 19.04.2011 and subsequently, assessee also appeared before the AO who has passed assessment order on 26.12.2011 - it cannot be stated that assessee is not aware about the 263 proceedings and misplacement of papers by one of the office staff cannot be accepted as a genuine explanation and it could be one of the reason given seeking condonation of delay even though the actual reason may be that assessee did not want to challenge the order when it was passed, therefore, the condonation of delay cannot be granted Decided against Assessee. Reassessment proceedings - reopening after 4 years - Held that - there is no evidence on record that assessee has furnished the necessary information. In fact, change of accounting policy in A.Y. 2005-06 itself not on record. - even though assessment was reopened after 4 years, on the facts of the case, A.O. is well within the jurisdiction to reopen the assessment - Decided against the assessee. Double deduction of expenses towards excise duty the amount added to the closing stock by the assessee as well as debited to profit & loss account as expense Held that - Under the provisions of section 43B, excise duty paid is allowable as deduction if it is paid on or before the relevant due dates out of the outstanding amounts at the end year - in the computation of income the assessee has to add the amount outstanding at the end of the year and then should claim the amount as deduction - As explained in A.Y. 2005-06, assessee has added amount of ₹ 1,43,47,164/- as amount of addition to the closing stock as the assessee was following the exclusive method earlier - Because of change in method of accounting, the closing stock value has gone up by that amount. In order to neutralise the same, the same amount was also claimed in P & L account as debit to the P & L account under the Head Manufacturing & Direct Expenses - the effect of increase of closing stock was neutralised by debiting to the P & L account - the problem came only in the computation of income. The amount of ₹ 1,43,47,164/- was not paid at the end of 31.03.2005, the amount should be added back in the computation and out of this amount, any amount actually paid should be claimed as deduction - whether the amount of ₹ 1,38,77,013/- was out of the amount of ₹ 1,43,47,164/- added in the P & L account to the closing stock or a further amount of which was not part of the above amount - The explanation was that the amount added to the closing stock is not the amount claimed in the computation of income - This aspect requires examination by the AO by verifying the relevant Registers and payment of excise duty by obtaining the necessary details from the assessee company in all the years under consideration from A.Y. 2005-06 to 2007- 08 - the amounts furnished in the tables and the amounts claimed as deduction u/s 43B require verification thus, the matter is remitted back to the AO for fresh adjudication. Tax Effect - Relying upon CIT vs. Nagri Mills Co. Ltd. 1957 (9) TMI 30 - Bombay High Court assessee argued that it does not have any tax effect cannot be accepted as each year being a self-contained unit tax of the particular year is payable with reference to income of that year, as computed in terms of the Act - AO is directed to determine the income as per the provisions of the Act by examining the issue Decided in favour of Assessee.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Reopening of assessment under Section 147.
3. Double deduction of excise duty under Section 43B.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:

The assessee filed an appeal against the order passed under Section 263 with a delay of 771 days, citing misplacement of papers by office staff as the reason. The Tribunal found no merit in the condonation petition, noting that the assessee was aware of the proceedings and participated in them, and the explanation provided was not genuine. Consequently, the appeal was dismissed due to the delay and lack of merit.

2. Reopening of Assessment under Section 147:

The assessee contended that the reopening of assessments for A.Ys. 2005-06 and 2006-07 was invalid due to a lack of tangible material and being based on audit objections. The Tribunal examined the issue and found no evidence that the reopening was solely based on audit objections. The Tribunal upheld the reopening, stating that the original assessments did not examine the issue of excise duty payments, and the assessee failed to disclose all material facts during the original assessment proceedings. The Tribunal agreed with the CIT(A) that the reopening was valid as the Assessing Officer (A.O.) had jurisdiction to reopen the assessments under Section 147.

3. Double Deduction of Excise Duty under Section 43B:

The main issue on merits was whether the assessee claimed a double deduction of excise duty. The assessee argued that the excise duty included in the closing stock was debited to the Profit & Loss (P&L) account, and the same amount was claimed under Section 43B on payment basis, without resulting in a double deduction. The Tribunal found that the issue required further verification by the A.O. to determine if the amounts claimed were correctly accounted for and not claimed twice. The Tribunal directed the A.O. to re-examine the complete claim of excise duty and its effect in various assessment years, ensuring that any disallowable amounts under Section 43B are correctly identified. The orders of the A.O. and CIT(A) were set aside on this issue, and the matter was restored to the A.O. for fresh examination.

Conclusion:

The appeal regarding the condonation of delay was dismissed due to lack of merit. The reopening of assessments under Section 147 was upheld as valid. The issue of double deduction of excise duty under Section 43B was remanded to the A.O. for re-examination and verification. The appeals on the merits were allowed for statistical purposes, and the appeal against the order under Section 263 was dismissed.