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TMI Blog2016 (6) TMI 1263X X X X Extracts X X X X X X X X Extracts X X X X ..... D. T. Garasia (Judicial Member) And B. C. Meena (Accountant Member) For the Assessee : Manoj Fadnis, C. A. For the Department : Rajeev Varshney, CIT ORDER D. T. Garasia (Judicial Member) Appeal no. 615/Ind/2010 by the assessee for the assessment year 2006-07 is filed consequent upon the order dated 17.09.2010 passed by DRP-I and then passed by Dy. CIT, 1(1) dated 6.10.2010, whereas the appeals in I.T.A.Nos. 547, 548 738/Ind/2014 for assessment years 2005-06, 2008-09 and 2009-10 filed by the Revenue are directed against the orders of CIT(A)-I, Indore, dated 9.5.2014, 9.5.2014 and 21.08.2014 respectively. 2. The short facts of the case in I.T.A.No. 615/Ind/2010 are that the assessee is a Company and it has filed the return of income declaring total income at Nil. The AO has verified relevant books of accounts and examined by test check. The assessee s case was referred to Transfer Pricing Officer, Ahmedabad. On receipt of order u/s 92CA(3) passed by the Transfer Pricing Officer, Ahmedabad, the assessee was given opportunity and draft assessment order was framed and served on the assessee. The assessee objected to the draft assessment order and moved to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tock. Thus the working provided in tax audit report cannot be accepted. As regards the accounting standards, they cannot override the statutory provisions. As such the assessee s arguments are not accepted. The total excise duty on above items works out to ₹ 3,34,04,090/-, which is includible in the value of closing stock. While crediting the closing stock, the assessee has not included the above amount. As such, an addition of ₹ 3,34,04,090/-is made under this head. The AO was satisfied that the assessee has undervalued the closing stock to the above extent. Hence, penalty proceedings u/s 271(1)(c) of Income-tax Act, 1961, were separately initiated. As the order was passed u/s 143(3) read with Section 144C, the appeal is before us. 3. The ld. Authorized Representative for the assessee made oral arguments and also filed the synopsis. The main contention of the ld. Authorized Representative for the assessee is that the AO has only considered the excise duty on closing stock and has not given effect to the excise duty on opening stock, purchases and consumption. As per the ld. Authorized Representative for the assessee, the net effect of the adjustment under Section 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also held that if the adjustments are carried out to all the four items, then there would not be any impact on the profits of the year under consideration. That in the matter of DCIT Mumbai vs. M/s Axis Electrical Components (I) Private Limited ITA No. 4577/Mum/09(AY 2006-07) has confirmed the order of CIT(A) deleting the addition of ₹ 4,69,459/-to the closing stock made vi] s 145A on account of unutilized cenvat credit. The CIT(A) had observed that there is no impact on profit on account of adjustment of modvat credit, on the application of section 145A of the Act. That it is also submitted that the ld. AO has made an addition of ₹ 3,62,74,585/-for AY 2005-06. The ld. CIT(A) has deleted the addition for which the Department is in appeal in ITA No. 547/Ind/2014. In the present appeal, the ld. AO is not adjusting the value of the opening stock to the extent, addition is made by him in AY 2005-06. That it is also submitted that in AY 2009-10 the ld. AO has made the addition of the difference in the Excise Duty on the Opening Stock and the Closing Stock, but has not considered the adjustment to the purchases. The addition was deleted by the CIT(A) for whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of profit unless purchases and opening stock are increased by component of excise duty. We are of the view that as per Section 145A of the Income-tax Act, 1961, wherein method of valuation will be applicable not only in closing stock, but on inventory i.e. opening and closing stock as well as on both purchases and sales. Therefore, the AO is not justified in adding the excise duty in closing stock of raw materials and incidental goods. We, therefore, direct the AO to compute the total income by adding cess, duty or tax paid incurred not only in closing stock but also in purchases, opening stock, sales, wherever such excise duty is already added. The AO is directed to verify the working given by the assessee on pages 3, 4, 5, 6, 7, 8, 9 and 10 for the assessment year 2002-03 to assessment year 2009-10. The AO is directed to verify the same and pass the order accordingly. We also get support from the decision of Hon'ble Delhi High Court in the case of CIT vs. Mahavir Aluminium Limited, (2008) 297 ITR 0077, wherein it is held as under :- In the present case, there is no question of any double benefit being given to the assessee. Para 23.13 of the Guidance Note issued by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporation Bank Limited, (1988) 174 ITR 616 (Karnataka). This judgment relates to the valuation of closing stock which has to be taken as per cost or as per market price whichever was lower at any time provided the change was bona fide and followed regularly thereafter and assessee wanted to change this method, which is not permissible as per this decision. Similarly, he has also relied upon the decision of Hon'ble Bombay High Court in the case of Malmould Corporation vs. CIT, (1993) 202 ITR 789 ( Bom ) and submitted that under Section 145, the assessee can adopt the method of valuation which is to be followed regularly, but the assessee had his Will of the change of method of valuation to closing stock at cost or market price, whichever is lower in any year. But, we are of the view that this judgment relates to Section 145 and it does not refer to Section 145A, which has come into force by Finance Act, 1998, with effect from 1.4.1999 i.e. in assessment year 1999-2000. Both these judgments relate to assessment year 1975-76 and assessment year 1969-70. Therefore, it is not necessary to discuss this issue in detail and it is not applicable to the facts of this case. Therefore, w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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