2017 (4) TMI 611 - AT - Income Tax

Additions u/s 41(1) when the liability is no longer payable - Liability towards Excise CENVAT Credit - proof of liability exists or still payable - Held that - CIT(A) has explained the issue categorically. It was observed that the assessee was working as processing house. It used to receive goods from clients. On receipt of such goods, it debits and credits client s account in respect of process charges paid and CENVAT available corresponding to the goods received by them for processing. Any excise duty paid on behalf of the clients was debited to their account and any CENVAT credit receivable in respect of goods of clients was credited in the client s account. It is for this reason that CENVAT credit appears on the liability side and this amount was apparently payable to the parties from whom goods were received for job work. According to the ld.CIT(A) the assessee has tried to misrepresent the facts by showing it as liability towards Government. The ld.CIT(A) has rightly observed that liability is not payable and the assessee-company has failed to establish that this liability exists or still payable. After perusal of well reasoned finding of the ld.CIT(A) we see no reason to interfere in it. Hence, the appeal of the assessee is dismissed being devoid of any merit. - Decided against assessee

Summary

Issues:
Appeal against addition of excise CENVAT credit of ?12,41,027.

Analysis:
1. The assessee appealed against the addition of ?12,41,027 on account of disallowance of excise CENVAT credit. The AO contended that the CENVAT on processed goods was withdrawn from July 2006, and the assessee failed to offer CENVAT credit for taxation. The assessee argued that the credit balance was excise recovered from parties and not required to be paid to the excise department upon license surrender. The AO disallowed the CENVAT credit as income remission, adding it to the total income.

2. The assessee's appeal before the ld.CIT(A) reiterated that the balance was not passed due to oversight since 2005-06. The ld.CIT(A) noted that the CENVAT credit was receivable from the government, not a liability. The processing house used to debit and credit client accounts for excise duty paid and CENVAT credit availed. The ld.CIT(A) found that the liability was not payable to the government but to parties for job work till 2005-06. The appellant failed to establish the liability's existence or payment, leading to the confirmation of the addition.

3. The Tribunal upheld the ld.CIT(A)'s decision, emphasizing that the CENVAT credit was payable to parties for job work, not the government. The assessee's attempt to misrepresent the liability towards the government was rejected. The Tribunal found no merit in the appeal, as the liability was not proven to be payable. Therefore, the appeal was dismissed, affirming the addition of ?12,41,027 as income under section 41(1) of the Income Tax Act.

In conclusion, the Tribunal upheld the addition of excise CENVAT credit, emphasizing that the liability was towards parties for job work, not the government. The assessee's failure to prove the liability's existence or payment led to the dismissal of the appeal. The Tribunal concurred with the ld.CIT(A)'s well-reasoned findings, resulting in the confirmation of the addition and the dismissal of the appeal.