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2014 (7) TMI 331 - AT - Income TaxValuation of closing stock - Addition of unutilized CENVAT credit Contravention to Sec. 145A of the Act - Method of accounting Held that - CIT(A) while granting partial relief to Assessee has noted that Assessee was following inclusive method of accounting for valuation of stock in earlier years but had changed the method in the year under consideration by following exclusive method for valuation of stock - By changing the method of accounting, the value of opening stock, cost of goods sold and raw material and finished product lying in closing stock will have to be changed - After perusing the working due to changed method of accounting, CIT(A) confirmed the addition to the extent of ₹ 24,709 - the Revenue could not controvert the findings of CIT(A) thus, there was no reason to interfere with the order of CIT(A) Decided against Revenue.
Issues: Appeal against order of CIT(A) regarding unutilized CENVAT credit addition under section 143(3) for A.Y. 2005-06.
Analysis: Issue 1: Unutilized CENVAT credit addition The Revenue appealed against CIT(A)'s order deleting the addition of &8377; 13,24,091 on unutilized CENVAT credit. The A.O. contended that the Assessee's accounting method contravened Section 145A of the Act as CENVAT credit was not reflected in the Profit and Loss account due to following the exclusive method of accounting. However, CIT(A) ruled in favor of the Assessee, stating that the exclusive method resulted in profit shifting between years and did not reflect the correct income for the year. CIT(A) noted that post-amendment to section 145A, exclusive accounting was not permitted. The appellant's argument citing accounting standards and previous court decisions was deemed incorrect. CIT(A) reduced the addition to &8377; 24,709, considering the change in the method of accounting. The Revenue's appeal was dismissed as CIT(A)'s decision was upheld. Issue 2: Method of accounting The Assessee changed from an inclusive to an exclusive method of accounting, affecting the valuation of stock items. CIT(A) confirmed the addition of &8377; 24,709 due to this change, aligning with the principles of accounting standards and legal precedents. The Revenue's appeal challenging this decision was dismissed as the CIT(A)'s findings were deemed valid and not contested effectively by the Revenue. Conclusion The judgment favored the Assessee, upholding the CIT(A)'s decision to reduce the addition on unutilized CENVAT credit. The analysis highlighted the impact of changing accounting methods on profit calculation, emphasizing compliance with legal provisions and accounting standards. The Revenue's appeal was dismissed, affirming the CIT(A)'s order.
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