2017 (1) TMI 1029 - HC - Income Tax

Additions towards receipt of excise duty - non-crediting of Excise Duty Receivable to the P & L Account - avoiding the provisions of Section 43B - Held that - The Tribunal has considered the matter at length and has clearly come to the conclusion that the excise duty, which was received by the assessee, was passed on by the assessee to the Government Department and, therefore, the excise duty, recovered by it, would not constitute any income to the assessee itself in order to invite the imposition of any tax. This Court in the case of Commissioner of Income Tax Vs. M/S United Engineering (P) Ltd. 2013 (12) TMI 1315 - ALLAHABAD HIGH COURT , wherein also this Court came to the conclusion that the excise duty, which was received by the assessee, was passed on to the Government Department and, therefore, ultimately resulted in non-accrual of any income to the assessee and no addition could be made on that behalf. - Decided in favour of the assessee and against the Department.

Issues:
1. Interpretation of powers under Section 154 of the Income Tax Act.
2. Treatment of excise duty as part of trading receipt for income inclusion.
3. Applicability of Section 154 and consideration of correct profits and gains.
4. Non-crediting of Excise Duty Receivable to the P & L Account.
5. Rectification of mistakes under Section 154 related to existing decisions.
6. Crediting all receipts/sales including excise duty to P & L Account for transparency.
7. Consideration of provisions of Section 43B for tax claims.
8. Non-crediting and debiting of Excise Duty in the P & L Account.

Analysis:

1. The first issue revolves around the powers provided under Section 154 of the Income Tax Act, questioning the ITAT's justification in giving relief to the assessee while ignoring these powers. The Tribunal's interpretation was challenged, emphasizing the authority's wide powers to amend any order. The contention was whether the ITAT curbed legislative powers by providing relief to the assessee.

2. The second issue concerns the treatment of excise duty as part of trading receipt for income inclusion. The ITAT was questioned for ignoring the well-settled law that excise duty should be included in income regardless of the accounting method followed by the assessee.

3. The third issue pertains to the applicability of Section 154 and the consideration of correct profits and gains. The ITAT's decision in upholding the CIT (A)'s denial of Section 154 provisions was challenged, citing the Supreme Court's ruling that the AO should ensure correct profits and gains are deduced from the accounts maintained.

4. The fourth issue addresses the non-crediting of Excise Duty Receivable to the P & L Account. The ITAT's confirmation of the CIT (Appeals) action without considering this non-crediting as a rectifiable mistake was questioned.

5. The fifth issue focuses on the rectification of mistakes under Section 154 related to existing decisions. The ITAT's decision to ignore the existing Supreme Court decision was challenged, emphasizing that the mistake should have been rectified under Section 154 of the Act.

6. The sixth issue involves crediting all receipts/sales, including excise duty, to the P & L Account for transparency in financial accounts. The ITAT's decision in upholding the CIT (A) without appreciating this transparency aspect was questioned.

7. The seventh issue concerns the consideration of provisions of Section 43B for tax claims. The ITAT's decision was challenged for not considering this provision, which allows tax claims if certain conditions are met.

8. The eighth issue addresses the non-crediting and debiting of Excise Duty in the P & L Account. The ITAT's decision in upholding the CIT (A) without considering this non-crediting and debiting, leading to the avoidance of Section 43B provisions, was questioned.

In conclusion, the High Court dismissed the appeal in favor of the assessee, citing precedents and legal interpretations that supported the non-inclusion of excise duty as income due to it being passed on to the Government Department. The judgment highlighted the importance of legal precedents and settled laws in resolving tax-related disputes.

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