2022 (2) TMI 121 - HC - Income Tax

Validity of Revision u/s 263 undertaken by CIT - excise duty liability cannot be allowed as deduction since it was not actually paid by the assessee during the relevant year - assessment order revised/modified or set aside on the ground that a certain sum of money had been debited towards excise duty of finished goods and the same amount had been shown under the head Short Term Provision in the balance sheet as on 31st March, 2012 - HELD THAT - Tribunal considered the paper book filed by the assessee and found that the assessing officer had issued a questionnaire dated 11th November, 2014 along with the notice under Section 142(1) of the Act and sought for calculation of valuation of closing stock and the relevant details were furnished by the assessee along with the letter dated 13th February, 2015 and thereafter the assessing officer having been convinced on the said working, did not make any addition or disallowance under Section 43(B) of the Act on the subject issue. We find that the Tribunal has rightly taken note of the Central Excise returns and noted that one of the units of the assessee was engaged only in job work activity and therefore, not entitled for benefit of input credit and after taking note of the sum paid on the said account, the Tribunal also found that the balance amount was adjusted with the available input credit in the respective divisions which undoubtedly would tantamount to actual payment of excise duty. Thus, we find that the Tribunal rightly granted relief to the assessee and the order does not call for any interference. Appeal filed by the revenue is dismissed and the substantial questions of law are answered against the revenue.

Summary

Issues:
1. Delay in filing the appeal
2. Interpretation of Section 43B of the Income Tax Act, 1961
3. Invocation of power under Section 263 of the Income Tax Act, 1961

Delay in filing the appeal:
The High Court of Calcutta addressed a delay of 985 days in filing the appeal. Despite the lack of a satisfactory explanation for the delay, the court exercised discretion and condoned the delay, allowing the appeal to proceed.

Interpretation of Section 43B of the Income Tax Act, 1961:
The primary issue raised in the appeal was whether the Income Tax Appellate Tribunal (ITAT) erred in not considering Section 43B of the Income Tax Act, 1961. This section stipulates that certain payments should only be claimed as expenses in the year they are paid, not when the liability is incurred. The Tribunal examined the case where excise duty of finished goods was debited but shown under "Short Term Provision" in the balance sheet. The Commissioner proposed that the remaining amount of excise duty needed to be paid back, as per the Tax Audit Report. However, the Tribunal found that the excise duty payable was constructively paid by the assessee in the next financial year but before the due date of filing the income tax return. The Tribunal also noted that the assessing officer had conducted an enquiry and did not make any addition or disallowance under Section 43B, ultimately granting relief to the assessee.

Invocation of power under Section 263 of the Income Tax Act, 1961:
The Tribunal examined whether the Principal Commissioner of Income Tax was justified in invoking power under Section 263 of the Act. The Commissioner had set aside the assessment order and directed a fresh assessment due to discrepancies in excise duty payments. The Tribunal reviewed the central excise returns and found that the excise duty payable was adjusted with available input credit, effectively constituting actual payment. It was concluded that the Tribunal rightly granted relief to the assessee, and the order did not warrant any interference.

In conclusion, the High Court dismissed the appeal filed by the revenue, answering the substantial questions of law against the revenue. The judgment provides a detailed analysis of the issues related to the interpretation of tax laws and the exercise of discretionary powers in tax matters.