2018 (12) TMI 1500 - AT - Income Tax

Revision u/s 263 - assessee had made provision for excise duty on closing stock of finished goods to the tune of ₹ 5,74,21,924/- and that as per the tax audit report of the assessee, a sum of ₹ 30,45,000/- only was paid before the due date of filing of return of income u/s 139(1) of the Act and accordingly, the remaining sum of ₹ 5,43,76,924/- ought to have been disallowed u/s 43B Held that - As per the provisions of section 145A the excise duty component on closing stock of finished goods is required to be provided for inclusion in the valuation of closing stock of finished goods thereby making it revenue neutral. The assessee sought to explain that this excise duty provision on closing stock of finished goods gets effectively adjusted with the available input credit in the subsequent year before us due date of filing of return of income under 139(1) of the Act. We find that these facts are not properly appreciated by the CIT and we hold that the Ld. CIT had erroneously invoked revisionary jurisdiction in the instant case as there is absolutely no error in the order of the AO or any prejudice that is caused to the interest of the revenue in the instant case. From the facts and evidences available on record, we hold that the assessee is entitled for deduction u/s 43B in respect of provision for excise duty on closing stock of finished goods. CIT erred in concluding that no enquiry was made with regard to this excise duty component on valuation of closing stock by the AO. We find from pages filed by the assessee before us contains questionnaire dated 11.11.2014 issued together with the notice u/s 142(1) wherein, the AO had sought for calculation of valuation of closing stock during the course of assessment proceedings. This has been duly replied by the assessee vide letter dated 13.02.2015 wherein it was subsequently brought to the notice of the AO that the finished goods are inclusive of excise duty. The entire calculation of closing stock of finished goods together with other closing stock details were also furnished as annexure III of the said letter dated 13.02.2015. AO was convinced on the said workings and the calculations given by the assessee and accordingly deemed it fit not to make any addition or disallowance u/s 43B on the impugned issue. This, in our considered opinion, cannot be termed as erroneous action on the part of the AO. Since adequate enquiries were duly made by the ld. AO in the assessment proceedings thus, there is no question of invoking revisionary jurisdiction u/s 263 of the Act by the Ld. CIT. - Decided in favour of assessee.

Summary

Issues:
1. Jurisdiction of the Ld. Administrative CIT to invoke revisional jurisdiction u/s 263 of the Income Tax Act, 1961.

Analysis:
1. The appeal pertains to the order of the Ld. CIT revising the assessment completed by the Ld. AO under section 143(3) of the Income Tax Act for the Assessment Year 2012-13. The main issue in this appeal is whether the Ld. CIT was justified in invoking revisional jurisdiction u/s 263 of the Act.

2. The Ld. CIT sought to revise the assessment on the ground that the assessee made a provision for excise duty on closing stock of finished goods, which the Ld. CIT believed should have been disallowed under section 43B of the Act. The Ld. CIT contended that the order of the Ld. AO was erroneous and prejudicial to the interest of revenue due to lack of inquiry by the Ld. AO regarding this provision. The assessee challenged this revision before the Appellate Tribunal.

3. The Appellate Tribunal analyzed the provision for excise duty on closing stock made by the assessee for various divisions and found that the excise duty provision was debited in the profit and loss account and claimed as a deduction. The Tribunal noted that the excise duty provision was effectively adjusted with available input credit in the subsequent financial year before the due date of filing the return of income under section 139(1) of the Act.

4. The Tribunal held that the Ld. CIT had erroneously invoked revisionary jurisdiction as there was no error in the Ld. AO's order or any prejudice to the revenue. The Tribunal found that the assessee was entitled to deduction u/s 43B of the Act in respect of the provision for excise duty on closing stock of finished goods. Additionally, the Tribunal noted that the Ld. AO had made adequate inquiries during the assessment proceedings, as evidenced by the questionnaire issued and the subsequent replies provided by the assessee.

5. Based on the above findings, the Appellate Tribunal quashed the revision proceedings u/s 263 of the Act initiated by the Ld. CIT, thereby allowing the grounds raised by the assessee in the appeal.

6. Consequently, the appeal of the assessee was allowed by the Appellate Tribunal, and the order was pronounced on 20.11.2018.