2017 (9) TMI 1753 - AT - Income Tax

Disallowance of unutilized CENVAT Credit - assessee had followed exclusive method of accounting in contravention of the provisions of Section 145A - Held that - In favour of the assessee by the decision dated 31.08.2016 of the Co-ordinate Bench of this Tribunal in the case of ITO vs. Mamata Brampton Engg. Pvt. Ltd. 2016 (10) TMI 694 - ITAT AHMEDABAD Before us Revenue has neither controverted the finding of CIT(A) nor has placed any contrary binding decision in its support. We further find that the Hon ble Apex Court in the case of Indo Nippo Chemicals 2003 (1) TMI 8 - SUPREME COURT has held that unavailed MODVAT credit cannot be construed as income and there is no liability to pay tax on such unavailed MODVAT credit. We find no reason to interfere with the order of the ld.CIT(A). Thus this ground of Revenue is dismissed.

Summary

Issues:
Challenge to correctness of order of learned CIT(A)-1, Ahmedabad regarding assessment under Section 143(3) r.w.s. 263 of the Income-tax Act, 1961 for the assessment year 2006-07.

Analysis:
The Assessing Officer appealed against the order of the learned CIT(A)-1, Ahmedabad dated 09.01.2015, concerning the assessment under Section 143(3) r.w.s. 263 of the Income-tax Act, 1961 for the assessment year 2006-07. The specific grievance raised in the appeal was related to the deletion of an addition of ?1,15,69,034/- made on account of disallowance of unutilized CENVAT Credit. The appellant contended that the assessee had followed an exclusive method of accounting, contrary to the provisions of Section 145A. During the hearing, both parties agreed that the issue was covered in favor of the assessee by a decision of the Co-ordinate Bench of the Tribunal in another case. The Tribunal in the referenced case had observed that the assessee followed an exclusive method of accounting where excise duty was not included in the valuation of stock and raw materials. The Tribunal further noted that the inclusion of excise duty in the valuation of closing stock did not affect the profit and was revenue-neutral. The Tribunal also referred to a decision of the Hon'ble Gujarat High Court and the Supreme Court's ruling on MODVAT credit. Consequently, the Tribunal in the present case upheld the decision of the CIT(A) based on the precedent set by the Co-ordinate Bench, dismissing the appeal of the Revenue.

Conclusion:
The Tribunal confirmed the order of the learned CIT(A) and dismissed the appeal of the Revenue. The decision was based on the findings that the assessee's method of accounting was in compliance with Section 145A of the Income-tax Act, and the treatment of unutilized CENVAT Credit did not impact the profit in a manner that required intervention. The judgment highlighted the importance of following established legal precedents and upholding consistent interpretations of tax laws.