2013 (7) TMI 1161 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance of Social Forestry Expenses.
2. Disallowance of Prior Period Expenditure.
3. Addition u/s 145A of IT Act.
4. Disallowance of PF Contribution u/s 36(1)(va).
5. Addition due to lower yield and G.P. ratio.
6. Setoff of unabsorbed depreciation.
7. Unexplained creditors.

Summary:

1. Disallowance of Social Forestry Expenses:
The assessee's appeal against the disallowance of Rs. 4,09,000/- incurred on Social Forestry was dismissed. The AO disallowed the expenditure, and the CIT(A) followed the Tribunal's past decision, which the ITAT affirmed. The ITAT held that this issue stood covered by several decisions of the Tribunal, and thus, there was no fallacy in the judgment of the CIT(A).

2. Disallowance of Prior Period Expenditure:
The AO disallowed Rs. 4,15,728/- as prior period expenditure, which was affirmed by the CIT(A). The ITAT upheld this decision, stating that since the assessee followed the mercantile system of accounting, prior period expenses should not be claimed during the current year.

3. Addition u/s 145A of IT Act:
The AO added Rs. 14,76,199/- due to the non-reflection of Excise Duty and unutilized MODVAT/CANVAT in the closing stock. The CIT(A) and the ITAT upheld this addition, following past Tribunal orders. The ITAT clarified that the valuation of closing stock should be consistent with the opening stock of the subsequent year.

4. Disallowance of PF Contribution u/s 36(1)(va):
The AO disallowed Rs. 14,707/- due to late payment of PF contributions. The CIT(A) upheld the disallowance, and the ITAT restored the matter to the AO to ascertain the due and actual payment dates to apply the law laid down by the Supreme Court.

5. Addition due to lower yield and G.P. ratio:
The AO added Rs. 4,24,00,000/- due to a lower yield and G.P. ratio in the CPM unit. The CIT(A) affirmed this addition, but the ITAT deleted it, following the Tribunal's decision for A.Y. 2008-09. The ITAT held that the addition could not be justified merely on the basis of a fall in yield and that the method adopted by the Revenue was incorrect.

6. Setoff of unabsorbed depreciation:
The ITAT directed the AO to allow the setoff of unabsorbed depreciation up to A.Y. 2000-01 based on the records available with the assessee, as it is a matter of record of the Revenue Department.

7. Unexplained creditors:
The AO added Rs. 5,14,850/- as unexplained creditors, which the CIT(A) deleted. The ITAT upheld the CIT(A)'s decision, following the Tribunal's past orders for A.Y. 2006-07 and 2007-08, stating that the provisions of Section 41(1) could not be invoked as the liability was not written back in the books.

Conclusion:
Both the appeals filed by the Revenue and the assessee were partly allowed.