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2018 (2) TMI 1631 - AT - Income TaxAddition u/s 145A on account of CENVAT credit - Held that - The assertions made on behalf of the assessee that assessee has consistently followed exclusive method of accounting with due certification by the tax auditor for recording the inventory which is subject matter of dispute in valuation. We also notice the plea of the assessee that adopting inclusive method of accounting will not alter the resultant profits and such change of accounting will be a revenue neutral exercise over a period of time. We also notice that similar issue raised against the assessee in its own case for AY 2009-10 was also reversed by the CIT(A). Thus we concur with the view taken by the CIT(A). It is not gain saying that unutilized CENVAT credit only represents the availability of excise credit at the disposal of the assessee at the end of the year eligible to be set of against future liability Therefore, apparently the unutilized CENVAT credit cannot be adopted for the purposes of valuation of inventories in sphere of s.145A of the Act. - Decided in favour of assessee.
Issues:
1. Addition of unutilized CENVAT credit under section 145A of the Income Tax Act. 2. Validity of the CIT(A)'s decision in deleting the addition made by the Assessing Officer. Issue 1: Addition of unutilized CENVAT credit under section 145A of the Income Tax Act: The Revenue contested the deletion of the addition of ?1,02,17,252 made by the Assessing Officer under section 145A of the Act concerning the unutilized CENVAT credit. The Assessing Officer concluded that the unutilized CENVAT credit should be included in the closing stock valuation as per section 145A. However, the CIT(A) decided in favor of the assessee, citing various case laws and legal propositions. The CIT(A) emphasized that the unutilized CENVAT credit, being a revenue-neutral exercise, should not impact the total profit. The CIT(A) referred to past judgments and held that the addition made by the Assessing Officer should be deleted, following the decisions of the jurisdictional High Court and various case laws. The Tribunal concurred with the CIT(A)'s view, stating that the unutilized CENVAT credit does not affect the valuation of inventories under section 145A. The Tribunal also noted that the issue was covered in favor of the assessee by a judgment of the Gujarat High Court. Issue 2: Validity of the CIT(A)'s decision in deleting the addition made by the Assessing Officer: The CIT(A) based the decision to delete the addition on the grounds that the unutilized CENVAT credit was a revenue-neutral exercise and should not affect the total profit. The CIT(A) considered various case laws and legal propositions to support the deletion of the addition. The Tribunal, after considering the arguments presented by both parties, upheld the CIT(A)'s decision. The Tribunal noted that the assessee consistently followed an exclusive method of accounting, and the change to an inclusive method would not impact profits. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the Revenue's appeal based on judicial precedent, including a judgment of the Gujarat High Court. The Cross Objection filed by the assessee was also dismissed as the Revenue's appeal was rejected. In conclusion, the Tribunal upheld the CIT(A)'s decision to delete the addition of unutilized CENVAT credit under section 145A of the Income Tax Act, citing legal propositions, past judgments, and the revenue-neutral nature of the exercise. The Revenue's appeal was dismissed, and the Cross Objection filed by the assessee was rendered infructuous and dismissed as well.
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