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TMI Blog2017 (2) TMI 730X X X X Extracts X X X X X X X X Extracts X X X X ..... ia which are required to be followed for preparing financial statements as per the Companies Act. It is not disputed that as per the provisions of section 145A of the Act opening and closing stocks should be inclusive of taxes but due to the type of business and variety of stocks, assessee is unable to do so. However, it is a fact that there is no negative impact on the revenue as both the opening and closing stocks are valued exclusive of taxes and, therefore, closing stock for the year under appeal which is excluding of taxes will become opening stock for next year. In the case of Voltamp Transformers Ltd. vs. CIT (2008 (4) TMI 518 - Gujarat High Court ) has held that Assessing Officer has got very limited powers to change valuation of closing stock which is part of accounting policy. He cannot change method of accounting regularly followed by the assessee without valid reasons. We also observe that during the course of assessment proceedings as well as appellate proceedings it was submitted by assessee that it was paying excise duty on concessional rate and was not taking any benefit of CENVAT which itself is a plausible explanation which remains uncontroverted. Since CENVAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, set aside the order of ld. CIT(A) and delete the addition - Decided in favour of assessee. - ITA No. 1602/Ahd/2013 - - - Dated:- 13-2-2017 - Shri Rajpal Yadav, JM and Shri Manish Borad, AM. For The Appellant : Shri James Kurien, Sr.DR For The Respondent : Shri Aseem Thakker, AR ORDER PER BENCH . This appeal of Revenue for Asst. Year 2009-10 and the Cross Objection of the assessee are directed against the order of ld. CIT(A)- XI, Ahmedabad, dated 31.03.2013 vide order No.CIT(A)-XI/374/ACITCir. 5/11-12, arising out of the order u/s 143(3) of the IT Act, 1961 (in short the Act) framed on 22.12.2011 by ACIT, Circle-5, Ahmedabad. 2. Briefly stated facts of the case as culled out from the records are that assessee is a limited company engaged in the business of manufacturing of vitrified tiles. Return of income for Asst. Year 2009-10 was filed on 22/09/2009 declaring total income of ₹ 1,32,75,260/- and book profit of ₹ 4,82,76,833/-. Tax was paid as per MAT on the profits u/s 115JB of the Act. Case was selected for scrutiny assessment and notice u/s 143(2) of the Act was issued on 28.10.2011 and duly served on the assessee. Necessary details ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of section 145A of the Act which mandates that for the purpose of valuation of closing stock, all taxes paid or incurred to bring the goods to the place of location are to be included which the assessee has admittedly not done. It was submitted by assessee before ld. Assessing Officer that assessee is purchasing goods from within the State and outside the State and manufacturing goods.VAT credit is claimed on goods purchased from within the State and in some other categories of goods CST has been paid. On account of these reasons it is not possible to bifurcate each and every item because they are jointly manufactured the goods. It is also contended that system of valuing the stock excluding tax has been consistently adopted and there will be no negative effect on the revenue as the opening stock is also valued net of tax. Ld. Assessing Officer was not convinced with the submissions and after adding the duties and taxes paid on the items in the closing stock addition of ₹ 31,84,930/- was made and closing stock was valued at ₹ 243,413,742/- as against closing stock of ₹ 240,228,812/- shown by the assessee. 7. In the appeal before first appellate autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rival contentions and perused the material on record and gone through the decisions relied on by the ld. AR. Through this ground Revenue is aggrieved with the order of ld. CIT(A) deleting the addition of ₹ 31,84,930/- made by ld. Assessing Officer u/s 145A of the Act for not valuing the closing stock inclusive of taxes. We observe that assessee is in the business of manufacturing of vitrified tiles. In the process of manufacturing assessee purchases goods from within the State and outside the State due to which VAT credit is available for VAT paid goods purchased from within the State and Central Sales Tax is paid from outside State goods which are included in the purchases itself. Assessee is also covered under the Excise Act and was enjoying concessional rate of excise duty to be leviable on the goods manufactured. Closing stocks of the assessee constitutes raw material, packing material, consumable stores purchased from within and outside the State, semi finished and finished goods. All these categories of closing stock out of which some are inclusive of taxes and some are exclusive of taxes and, therefore, assessee is consistently following the system of valuing the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so perused various case laws relied upon by the appellant. Taking the entirety of facts and position of few in view, I am inclined to agree with the submissions of Ld. A.fr for the following reasons:- (a) The A.O. has not commented on the accounting policies followed by the appellant. The policy of valuation of closing stock is consistently followed by the appellant in the previous years as well as in the succeeding years. The Hon'ble Gujarat High Court in the case of Voltamp Transformers Ltd. v/s. CIT (2008) reported on 217 CTR 254 has held that A.O. has got very limited powers to change valuation of closing stock which is part of accounting policy. The A. O. cannot change method of accounting regularly followed by the assessee without valid reasons. - (b) Hon'ble Supreme Court in the case of Chainrup Sampatram (1953) reported on 24 ITR 481 has clearly held that profits does not arise out of valuation of closing stock and situs of its arising or accruing where the valuation is made and valuation of unsold stock is necessary part of the process of determining trading results but it can in no sense be regarded as source of such profit . (c) It is clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of the Ld. A.R. In view of above, addition of ₹ 31.84.930/- is ordered to be deleted. This ground of appeal is allowed. 11.4 We further observe that similar issue came up before the Coordinate Bench in the case of ACIT vs. Puneet Industries Pvt. Ltd. (supra) wherein the Co-ordinate wherein Co-ordinate Bench followed the judgment of Hon. Supreme Court in the case of CIT vs. Indo Nippon Chemicals Co. Ltd. (2003) 261 ITR 275 (SC) and the Bench dismissed the appeal of Revenue by observing as under :- 3. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The issue in the present case is with respect to inclusion of unutilized CENVAT credit to the closing stock. We find that Id.CIT(A) while deleting the addition has given a finding that the assessee was following exclusive method of accounting and the CENVAT was not debited or credited to the Profit Loss account and the aforesaid method has been consistently followed by the assessee in earlier and succeeding years. We further find that the Hon'ble Apex Court in the case of CIT vs. Indo Nippon Chemicals Co.Ltd. reported at (2003) 261 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18. Brief facts relating to this ground are that the assessee which is undisputedly eligible for claiming deduction u/s 80IB of the Act and it claimed ₹ 54,36,002/- in the return of income. However, this deduction was revised to 65,58,922/- during the course of assessment proceedings along with revised computation of deduction supported by certificate of Chartered Accountant. Ld. Assessing Officer denied the additional deduction by following the judgment of Hon. Supreme Court in the case of M/s Goetze India Ltd.157 Taxman 1 (SC) by observing that assessee was not entitled to additional deduction as assessee has not filed a revised return of income. Against the order of ld. Assessing Officer, assessee raised ground before ld. CIT(A) which was allowed by ld. CIT(A). 19. Aggrieved, Revenue is now in appeal before the Tribunal. 20. Ld. DR supported the order of Assessing Officer. 21. On the other hand, ld. AR submitted that there is no dispute that the assessee is entitled to deduction u/s 80IB of the Act ₹ 54,36,002/- claimed by the assessee. There is no new claim rather the claim made u/s 80IB was revised and a correct claim of deduction u/s 80IB in accordance w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arly in this case of assessee claimed a deduction u/s 80IB of the Act in the return of income so there is no new claim made during the course of assessment proceedings but it is just a correct claim which has been put forward with due supporting before ld. Assessing Officer and the same should have been allowed to the assessee. 22.1 We observe that ld. CIT(A) has allowed assessee s claim of additional deduction of ₹ 11,22,920/- in a right perspective by observing as follows :- 10.3 I have carefully considered the rival contentions. It is seen that in the original return the appellant has claimed deduction u/s,80IB of ₹ 54,36,002/-. This deduction was revised to ₹ 65,58,922/- during the assessment proceedings. The appellant has filed the report of Chartered Accountant as required by the provisions of sec.80IB along with its application dated 22.8.2009 for revising the claim of deduction u7s.80IB. The A.O. had not accepted the revised claim of deduction u7s.80IB in view the ratio of Goetz India Ltd. 157 Taxman 1 (SC). The above facts make it very clear that the revised claim of deduction u7s.80IB was rejected on technical grounds. The facts available on recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has erred in confirming the disallowance made by the Assessing Officer of ₹ 44,220/- u/s.43B of the I. T. Act, 1961 for the alleged unpaid Professional tax till the due date of filing of the re turn of income. 4. The learned Commissioner of Income Tax (Appeals) has erred in confirming the disallowance of ₹ 25,457/- out of addition of ₹ 7,63,060/- made by the Assessing Officer u/s.43B of the I. T. Act, 1961 for the unpaid Sales Tax liability. 5. The learned Commissioner of Income Tax (Appeals) has erred in confirming the addition of ₹ 3,41,228/ - made by the Assessing Officer for the alleged un-reconciled Credit differences. The Respondent craves leave to add, alter, amend or modify any of the grounds of Cross Objections on or before the date of hearing. 26. At the outset ld. counsel for the assessee requested for not pressing ground nos. 1 to 4. We accept the request and dismiss these grounds as not pressed. 27. Ground no.5 reads as under :- 1. The learned Commissioner of Income Tax (Appeals) has erred in confirming the addition of ₹ 3,41,228/ - made by the Assessing Officer for the alleged un-reconciled Credit differences. 28. Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bjection before us. Ld. counsel submitted that books of assessee are audited u/s 44AB of the Act and ld. Assessing Officer has not rejected the books of account nor has rejected the Tax Audit Report. The difference in the balance sheet with the alleged 7 parties was only on account of credit notes issued by the assessee and such notes are not found in the accounts of the opposite party the assessee cannot be faulted for the same. Further no enquiry has been made with respect to these parties for not recording credit notes. There is no allegation by the Revenue that assessee has understated the sales, overstated the purchases or inflated the expenditure, as the same are fully supported by bills and vouchers which have been duly verified by the ld. Assessing Officer. Therefore, ld. Assessing Officer is in gross error in making the impugned addition of ₹ 3,41,228/-. 32. On the other hand, ld. DR followed the orders of both the lower authorities. 33. We have heard the rival contentions, perused record. Assessee has raised the cross objection against the order of ld. CIT(A) for confirming the addition of ₹ 3,41,228/- for alleged unreconciled credit differences of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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