2014 (1) TMI 83 - AT - Income Tax

Undervaluation of closing stock - Held that - Following CIT v. Loknete Balasaheb Desai S.S.K. Ltd. 2011 (6) TMI 48 - BOMBAY HIGH COURT - The goods manufactured have not been sold during the year under consideration nor have been cleared from assessee s premises - Central excise liability cannot be said to have been incurred on such unsold manufactured goods lying in stock and consequently the addition of excise duty made by the Assessing Officer was rightly deleted by the learned CIT(A) - Decided against Revenue. Employees contribution to provident fund - Held that - Following CIT v. Aimil Ltd. 2009 (12) TMI 38 - DELHI HIGH COURT - The assessee had made the payment before the due date of filing of the return - If the employees contribution is not deposited by the due date prescribed under the relevant Acts and is deposited late, the employer not only pays interest on delayed payment but can incur penalties also, for which specific provisions are made in the Provident Fund Act as well as the ESI Act - As the Income Tax Act is concerned, the assessee can get the benefit if the actual payment is made before the return is filed - Decided against Revenue.

Summary

Issues:
1. Undervaluation of closing stock
2. Disallowance of payment of employee's contribution to provident fund

Undervaluation of Closing Stock:
The appeal by the Revenue challenged the deletion of an addition of Rs.21,57,572 on account of undervaluation of closing stock. The Assessing Officer contended that excise duty should be included in the cost of stock as per Section 145A of the Act. However, the CIT(A) deleted the addition based on the assessee's accounting method and previous Tribunal decisions. The Tribunal upheld the CIT(A)'s decision, citing the purpose of crediting unsold stock and the absence of excise duty liability on unsold goods. Case laws, including judgments by the Hon'ble Apex Court and Bombay High Court, supported the decision to reject the Revenue's appeal on this issue.

Disallowance of Payment of Employee's Contribution to Provident Fund:
The dispute in this issue revolved around the disallowance of Rs.1,86,782 for late payment of employees' provident fund contribution, despite being paid before the due date of filing the income tax return. The CIT(A) relied on judgments by the Hon'ble Delhi High Court and the Hon'ble Apex Court to delete the disallowance. The Tribunal found no reason to interfere with the CIT(A)'s order, as it was in line with the legal precedents cited. Consequently, the grounds related to this issue were also rejected.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on both issues. The judgment provided detailed analysis, referencing relevant legal provisions and case laws to support the conclusions reached.