2015 (5) TMI 848 - AT - Income Tax

Revision u/s 263 - AO has omitted to disallow unpaid excise duty resulting in under assessment of tax - Held that - The assessee explained before the CIT that there is no fresh provision made in respect of unpaid excise duty of ₹ 35.43 lacs. Even now before us, assessee drew our attention to annexure 9 of the Balance Sheet that this amount of unpaid excise duty of ₹ 35.43 lacs pertains to earlier years and no new provision is made. Ld. Counsel for the assessee now before us also filed the copy of assessment order passed in consequence to revision order u/s. 263 of the Act wherein the AO has clearly observed after verifying the records that this excise duty of ₹ 35,43,390/- was actually outstanding balance of pre-existed unpaid excise duty relevant to AY 1997-98 out of total sum of ₹ 1,04,79,687/- which was disallowed u/s. 43B of the Act. Ld. Counsel for the assessee drew our attention to page 13 of assessee s paper book, which is copy of annexure 9 as certified by Sr. Manager, (Finance, taxation) of the assessee company and the statement showing the details in respect of sum referred to in clause (a), (c) and (d) of section 43B of the Act as required under the audit provisions. Thus unpaid excise duty pertains to earlier years and no claim for this excise duty is made, the disallowance of excise duty is not possible. The AO has taken a correct view while framing assessment and revision order passed by CIT u/s. 263 is without jurisdiction. The assessment order is neither erroneous nor prejudicial to the interest of revenue. Stock in transit - Held that - The facts are that the assessee explained from the paper book wherein the copies of Schedule 8 (inventories) of the annual accounts for the FYs 2006-07, 2007-08 and 2008-09 along with copies of journal entries relating to stores in transit for the respective years are filed. The assessee has also filed copies of ledger account of raw material and stores and spares at page 14 of the assessee s paper book where copy of schedule 12 (consumption of raw material and components including stores and spares) of the annual accounts for the FY 2007-08 relevant to AY 2008-09 are filed. We find from the arguments of Ld. Counsel of the assessee that it is consistently following this practice and there is no change in practice that the transit stock is not included in the purchases consequently value thereof was not debited in the P&L Account. In term of the above and the facts of the case, we are of the view that the assessment framed by AO in considering the inventories, i.e. stores in transit was considered and allowed, the assessment order is neither erroneous nor prejudicial to the interest of revenue. The CIT while passing revision order u/s. 263 of the Act has totally erred in revising the assessment. We quash the same. Accordingly, on both the issues the order of CIT passed u/s. 263 of the Act is quashed. - Decided in favour of assesse.

Summary

Issues Involved:
1. Maintainability of the appeal against the revision order passed by CIT u/s 263 of the Income-tax Act.
2. Whether the assessment order is erroneous and prejudicial to the interest of revenue for non-disallowance of unpaid excise duty u/s 43B.
3. Whether the assessment order is erroneous and prejudicial to the interest of revenue for not including goods in transit in the purchases.

Detailed Analysis:

1. Maintainability of the Appeal:
The preliminary objection raised by the CIT, DR was based on the decision of the Hon'ble Calcutta High Court in the case of K. P. Jain v. CIT, arguing that the appeal filed by the assessee against the revision order u/s 263 has become infructuous since the assessee participated in the assessment proceedings. The Tribunal examined the statutory right to appeal under section 253 of the Income-tax Act and referred to the decision of the Hon'ble Calcutta High Court in Indian Aluminium Co. Ltd. v. CIT, which held that the right of appeal is a substantive right and cannot be taken away unless expressly provided by statute. The Tribunal also noted that the Hon'ble Calcutta High Court in the case of K. P. Jain did not take away the right to appeal against the revision order u/s 263. Consequently, the Tribunal dismissed the preliminary objection raised by the Revenue and held that the appeal filed by the assessee is maintainable.

2. Non-disallowance of Unpaid Excise Duty u/s 43B:
The CIT noted that the assessment order was erroneous and prejudicial to the interest of revenue as the AO omitted to disallow unpaid excise duty amounting to Rs. 35.43 lakhs. The assessee explained that this amount pertained to earlier years and no new provision was made. The Tribunal observed that the unpaid excise duty of Rs. 35.43 lakhs was actually an outstanding balance from AY 1997-98, which was disallowed u/s 43B. The Tribunal concluded that the AO had taken a correct view while framing the assessment and that the revision order passed by CIT u/s 263 was without jurisdiction. Therefore, the assessment order was neither erroneous nor prejudicial to the interest of revenue.

3. Non-inclusion of Goods in Transit in Purchases:
The CIT also noted that the assessment order was erroneous and prejudicial to the interest of revenue as the AO omitted to include the value of stock in transit amounting to Rs. 1,517.16 lakhs in the purchases. The assessee explained that it consistently followed the practice of not including transit stock in purchases, and the value thereof was not debited in the P&L Account. The Tribunal reviewed the relevant schedules and journal entries and found that the assessee had consistently followed this accounting practice. The Tribunal held that the assessment order was neither erroneous nor prejudicial to the interest of revenue and quashed the revision order passed by CIT u/s 263.

Conclusion:
The Tribunal allowed the appeal of the assessee, dismissing the preliminary objection raised by the Revenue regarding the maintainability of the appeal. The Tribunal also quashed the revision order passed by CIT u/s 263, concluding that the assessment order was neither erroneous nor prejudicial to the interest of revenue on both issues of unpaid excise duty and goods in transit.