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2017 (2) TMI 730 - AT - Income TaxAddition u/s 145A - Assessee is valuing closing stock after excluding the tax, duty and cess etc. and thus violating the provisions of section 145A - Held that - In the process of manufacturing assessee purchases goods from within the State and outside the State due to which VAT credit is available for VAT paid goods purchased from within the State and Central Sales Tax is paid from outside State goods which are included in the purchases itself. Assessee is also covered under the Excise Act and was enjoying concessional rate of excise duty to be leviable on the goods manufactured. Closing stocks of the assessee constitutes raw material, packing material, consumable stores purchased from within and outside the State, semi finished and finished goods. All these categories of closing stock out of which some are inclusive of taxes and some are exclusive of taxes and, therefore, assessee is consistently following the system of valuing the opening and closing stocks exclusive of taxes. Further assessee is applying the Accounting Standards framed by the Institute of Chartered Accountants of India which are required to be followed for preparing financial statements as per the Companies Act. It is not disputed that as per the provisions of section 145A of the Act opening and closing stocks should be inclusive of taxes but due to the type of business and variety of stocks, assessee is unable to do so. However, it is a fact that there is no negative impact on the revenue as both the opening and closing stocks are valued exclusive of taxes and, therefore, closing stock for the year under appeal which is excluding of taxes will become opening stock for next year. In the case of Voltamp Transformers Ltd. vs. CIT (2008 (4) TMI 518 - Gujarat High Court ) has held that Assessing Officer has got very limited powers to change valuation of closing stock which is part of accounting policy. He cannot change method of accounting regularly followed by the assessee without valid reasons. We also observe that during the course of assessment proceedings as well as appellate proceedings it was submitted by assessee that it was paying excise duty on concessional rate and was not taking any benefit of CENVAT which itself is a plausible explanation which remains uncontroverted. Since CENVAT is not available to the assessee then the enhancing the value of semi finished and finished goods in the closing are not warranted. - Decided in favour of assessee. Addition on account of late payment of employees contribution to the Provident Fund - Held that - The issue raised in this ground by Revenue against ld. CIT(A) s order deleting the addition of ₹ 9,728/- on account of late payment of employees contribution to the PF is now well settled in favour of Revenue by the judgment of Hon. Gujarat High Court in the case of CIT vs. GSRTC (2014 (1) TMI 502 - GUJARAT HIGH COURT ) wherein it has been held that if the amount of contribution fo PF is deposited after the due date then assessee will not be entitled to deduction against the income. Accordingly, this ground of the Revenue is allowed. Additional deduction claimed u/s.80lB - Held that - Assessing Officer has not objected to the revised quantum of deduction claimed by assessee at ₹ 65.58,922/- which as per assessee was the correct and legitimate amount as per the provisions of section 80IB of the Act. Ld. Assessing Officer has merely disallowed the claim for not filing revised return of income. It is an established proposition of law that the correct income of the assessee has to be assessed by the Assessing Officer and if there is a rightful claim then the same should be allowed to the assessee. More particularly in this case of assessee claimed a deduction u/s 80IB of the Act in the return of income so there is no new claim made during the course of assessment proceedings but it is just a correct claim which has been put forward with due supporting before ld. Assessing Officer and the same should have been allowed to the assessee. CIT(A) has rightly allowed the revised claim of assessee u/s 80IB of the Act at ₹ 65,58,922/-. We therefore, find no reason to interfere with the order of ld. CIT(A). We uphold the same. This ground of Revenue is dismissed.- Decided in favour of assessee. Addition for alleged unreconciled credit differences - Held that - As wherein regular books of accounts are maintained and the same are not rejected alleged difference is only on account of credit notes issued which have not been cross verified with the impugned parties and the genuineness of transactions recorded by the assessee, no addition was called for by the ld. Assessing Officer. We therefore, set aside the order of ld. CIT(A) and delete the addition - Decided in favour of assessee.
Issues Involved:
1. Addition under Section 145A of the Income Tax Act. 2. Late payment of employees' contribution to the Provident Fund. 3. Additional deduction under Section 80IB. 4. Preliminary expenses treated as capital expenditure. 5. Addition of outstanding creditors under Section 41(1). 6. Disallowance under Section 43B for unpaid professional tax. 7. Disallowance under Section 43B for unpaid sales tax liability. 8. Addition for un-reconciled credit differences. Issue-wise Detailed Analysis: 1. Addition under Section 145A: The Revenue's appeal contended that the CIT(A) erred in deleting the addition of ?31,84,930 made by the AO under Section 145A for not including taxes in the valuation of closing stock. The Tribunal observed that the assessee consistently valued both opening and closing stocks exclusive of taxes, following the Accounting Standards prescribed by the Institute of Chartered Accountants of India. The Tribunal noted that there was no negative impact on revenue as both opening and closing stocks were valued consistently. The Tribunal upheld the CIT(A)'s decision, referencing the jurisdictional High Court's ruling in Voltamp Transformers Ltd. vs. CIT and the Supreme Court's ruling in Chainrup Sampatram, and dismissed the Revenue's ground. 2. Late Payment of Employees' Contribution to the Provident Fund: The Revenue's appeal argued that the CIT(A) erred in deleting the addition of ?9,278 for late payment of employees' contribution to the Provident Fund. The Tribunal referenced the jurisdictional High Court's decision in CIT vs. Gujarat State Road Transport Corporation, which held that late payments beyond the due date should be disallowed. Consequently, the Tribunal allowed the Revenue's ground, reversing the CIT(A)'s decision. 3. Additional Deduction under Section 80IB: The Revenue's appeal challenged the CIT(A)'s decision to allow an additional deduction of ?11,22,920 under Section 80IB, which was initially denied by the AO for not filing a revised return. The Tribunal noted that the assessee was eligible for the deduction and had merely revised the quantum during assessment proceedings, supported by a Chartered Accountant's certificate. The Tribunal held that the AO should assess the correct income and allow rightful claims, referencing several Supreme Court decisions. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's ground. 4. Preliminary Expenses Treated as Capital Expenditure: The assessee's Cross Objection contested the CIT(A)'s confirmation of the disallowance of ?1,13,068 as capital expenditure. However, the assessee did not press this ground, and it was dismissed as not pressed. 5. Addition of Outstanding Creditors under Section 41(1): The assessee's Cross Objection challenged the CIT(A)'s confirmation of the addition of ?1,48,310 under Section 41(1) for outstanding creditors. The assessee did not press this ground, and it was dismissed as not pressed. 6. Disallowance under Section 43B for Unpaid Professional Tax: The assessee's Cross Objection contested the CIT(A)'s confirmation of the disallowance of ?44,220 under Section 43B for unpaid professional tax. The assessee did not press this ground, and it was dismissed as not pressed. 7. Disallowance under Section 43B for Unpaid Sales Tax Liability: The assessee's Cross Objection challenged the CIT(A)'s confirmation of the disallowance of ?25,457 out of an addition of ?7,63,060 under Section 43B for unpaid sales tax liability. The assessee did not press this ground, and it was dismissed as not pressed. 8. Addition for Un-reconciled Credit Differences: The assessee's Cross Objection contested the CIT(A)'s confirmation of the addition of ?3,41,228 for un-reconciled credit differences. The Tribunal noted that the differences were due to credit notes issued by the assessee, which were not accounted for by the other parties. The Tribunal observed that the books of accounts were audited and not rejected by the AO. The Tribunal found the differences to be minor and genuine, arising from normal business activities, and set aside the CIT(A)'s order, deleting the addition. Conclusion: The Tribunal partly allowed both the Revenue's appeal and the assessee's Cross Objection, upholding the CIT(A)'s decisions on some grounds and reversing on others. The Tribunal emphasized the importance of consistency in accounting practices and the need for the AO to assess the correct taxable income.
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