2008 (2) TMI 463 - AT - Income Tax

Summary

Issues Involved:

1. Whether the CIT(A) was right in deleting the disallowance of Rs. 8,20,24,365 claimed by the assessee as deduction u/s 43B of the IT Act on account of customs duty on stock.
2. Whether s. 43B has overriding effect over s. 145A of the IT Act.
3. Whether the Tribunal committed mistakes apparent from the record in its order.

Summary:

Issue 1: Deletion of Disallowance of Rs. 8,20,24,365 Claimed as Deduction u/s 43B

The Tribunal initially held that the deduction of Rs. 8,20,24,365 on account of customs duty paid during the year is allowable to the assessee "irrespective of the fact that the same has not been included in the valuation of the closing stock by the assessee." However, the Tribunal restored the matter to the AO to ensure that the valuation is done in accordance with law, specifically considering s. 145A of the Act. The Tribunal noted that the implication of s. 145A was not correctly applied by the Departmental authorities and thus required fresh orders after considering s. 145A and affording sufficient opportunity to the assessee.

Issue 2: Overriding Effect of s. 43B Over s. 145A

The assessee contended that s. 43B has an overriding effect and thus s. 145A, introduced w.e.f. 1st April 1999, should not apply. This contention was supported by the Co-ordinate Bench's order in Maruti Udyog Ltd. vs. Dy. CIT. The Tribunal, however, did not address this contention in its order, leading to a claim of prejudice by the assessee. The Tribunal's omission to consider the binding order of the Co-ordinate Bench in Maruti Udyog Ltd. was deemed a mistake apparent from the record, as highlighted by the Supreme Court in Honda Siel Power Products Ltd. vs. CIT.

Issue 3: Mistakes Apparent from the Record

The assessee pointed out four mistakes by the Tribunal:
1. Contradictory statements regarding the inclusion of customs duty in the closing stock.
2. Failure to address the contention that s. 43B overrides s. 145A.
3. Non-following of the Co-ordinate Bench's decision in Maruti Udyog Ltd.
4. Overlooking the assessee's contention that similar claims were accepted by the IT Department in subsequent years.

The Tribunal acknowledged these mistakes, noting the contradiction in its findings regarding the inclusion of customs duty in the closing stock and the omission to consider the binding order of the Co-ordinate Bench. The Tribunal also failed to address the consistency rule, which was crucial as the Department had accepted similar claims in subsequent years. The Tribunal concluded that these omissions caused prejudice to the assessee and thus recalled its decision regarding the first ground taken by the Department, directing the Registry to post the appeal for fresh hearing on this ground.

Conclusion:

The miscellaneous application was allowed, and the Tribunal's decision on the first ground was recalled for fresh hearing, addressing the mistakes apparent from the record and ensuring that the assessee is not prejudiced by these errors.