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TMI Blog2016 (11) TMI 1682X X X X Extracts X X X X X X X X Extracts X X X X ..... d in allowing the appeal on the ground that the reopening is not correct. AO reopened the assessment order on the ground that the assessee has utilised the amount of Modvat credit as per the audit report which did not tally with the excise duty debited to the profit and loss account - The assessee has shown excise duty payment in his return of income. AO has taken up two figures of excise duty from the return of the assessee that the excise duty of ₹ 7512186/- claimed as expenses in profit and loss account and in tax audit report Modvat credit claimed was ₹ 7743268/-. Therefore, when these two figures were picked up from the return of income and audit report filed by the assessee, it cannot be proved that the Assessing Officer has any information. Assessing Officer has, by booking the two figures, come to the conclusion that there are unaccounted sales but there is no tangible material to come to the conclusion that there is escapement of income from assessment and, therefore, the reopening of the case cannot be sustained. We find that the learned CIT(A) has verified the accounts, reconciliation statement of excise duty paid which was filed before the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of ₹ 5,30,000/- made by the A.O. on account of cash expenditure made for providing entire holding that the main ground (ground no. 2 and 2.1 above) are allowed because on these points the decision is not accepted and appeal is preferred. 3. On the facts and in the circumstances of the case, the CIT(A) erred in deleting the addition of ₹ 51,60,039/- made by the A.O. on account of supression of sales observing that the assessee has reconciled the excise duty whereas no such reconciliation was furnished before the A.O. 3. On the facts and in the circumstances of the case, the CIT(A) erred in deleting the addition of ₹ 51,60,039/- made by the A.O. on account of supression of sales because there was clearly difference in the MODVAT utilised as per audit report furnished by the assessee. 3. The effective ground is ground no. 1 and 1.1. The short facts of the case are that the assessee filed the return of income on 31st October, 2001. The case was processed u/s 143(1) of the Act on 20.12.2002. The case was reopened u/s 147 of the Act and the notice u/s 148 of the Act was issued on 22.8.2007 in response to which the assessee filed the return of income on 15th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt is again enclosed for your ready reference. 2. On perusal of the said chart you will find that assessee company had paid following amount of excise duty during the year under consideration :- Through RG-23 Part IIA (Modvat) ₹ 7639917 Through RG-23 Part IIC (Modvat) ₹ 103351 Through PLA ₹ 430531 ₹ 8173799 3. That as per the mercantile system of accounting the assessee has to make provision of excise duty on closing stock of finished goods as on 31st March of every year. 4. That as per the books of accounts provision of excise duty of finished goods as appearing in the books of accounts as on 01.04.2000 was of ₹ 732279.89. That out of the said provision of excise duty the assessee had adjusted an amount of ₹ 661612.05 towards sale of old stock during the year under consideration. Further provision of ₹ 1195921.77 was made during the year on closing stock of finsihed goods as on 31.03.2001. The whole transaction can be summarized as under :- Provision of Excise Dut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account and from this amount the AO worked out consequential concealment in turnover of ₹ 5160039/-. The appellant had filed objections which remained to be decided by the AO at the time of passing of the original assessment order on 29-12-2006. The appellant had preferred an appeal, before the Ld CIT(A) and in the appeal the assessment order was quashed by stating that the AO has not followed the decision of the Hon'ble Apex Court in the case of GKN Driveshaft (India) Limited as reported in 259 ITR 19 and Ld.CIT(A) also held that there was also no merit in the reason as recorded by the AO for reopening of the case. 4.1.1 The department has challenged the order of my predecessor before the Hon'ble ITAT. Hon'ble ITAT vide its order dt 20.10.2009 following the decision of the Hon'ble Jurisdictional High Court in the case of SICA Educational Trust as reported in 10 ITJ 05 has held that non- disposing of the objection is the curable defects and accordingly directed the AO to first dispose off the objection against reopening of assessment of the appellant and then proceed further. 4.1.2 The AO while passing the order following the direction of the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 198,393 370,000 8,798,178 Total 9,291,507 213,753 622,795 10,128,055 Duty paid/ utilised 7,639,917 103,351 430,531 8,173,799 Closing Balance 1,651,590 110,402 192,264 1,954,256 Total Excise duty payment during the year 8173799 Less:- Excise duty adjusted towards sale of old stock [ Out of opening stock of finished goods ] 661612 Excise duty charged to the Profit Loss Account 7512187 PROVISION OF CENTRAL EXCISE DUTY ON FINISHED GOODS Opening Balance 733279.89 Add;- Provision made during the year 119521.77 852801.66 Less:- Excise duty adjusted towards sale of old stock 661612.05 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zed towards the provision as made in respect of opening stock of finished goods 661,612 Excise duty debited in the Profit Loss Account 7,512,187 4.1.6 As per this reconciliation table total excise duty paid comes to ₹ 81,73,799/- including excise duty actually paid of ₹ 4,30,531/- and Modvat credit of ₹ 77,43,268/-. Out of this, a reduction is made of ₹ 6,61,612/- as the excise duty utilized towards provision in respect of opening stock of finished goods, which results into a balance figure of ₹ 75,12,187/- which was claimed as excise duty expense in profit and loss account. 4.1.7 The AO cannot pick and choose two different figures from the return of appellant itself and assume that a figure of excise duty was secretly paid. It is common sense that appellant will not conceal any excise duty payment especially when both figures are shown in the return of income. The AO picked up two figures of excise duty from the return of appellant itself, namely the excise duty of ₹ 7512186/- claimed as expense in profit and loss account and tax audit report of ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of a recent decision by Hon ble Delhi High Court in case of Orient Craft Ltd. (Appeal ITA No.555/2012, dated 12.12.2012), it was noted that AO reached the belief that there was escapment of income on going through the return of income filed by the assessee after he accepted the same u/s 143(1) without scrutiny. This is nothing but a review of earlier proceedings deprecated by Supreme Court in case of Kelvinator (Supra). Then they further noted that there is no whisper of reasons recorded of any tangible material which came to possession of AO subsequent to the issue of intimation. It reflects an arbitrary exercise of power conferred u/s 147. Relying on the aforesaid decisions as well as on the facts of the case discussed above, it is held that reopening u/s 147 was not proper in absence of any valild reason to form a belief regarding escapment of income. Therefore, Ground No. (1) of appeal is allowed. 5. During the course of hearing, the learned DR submitted that the assessee s original assessment was completed u/s 143 read with section 147 of the Act. Thereafter, the matter travelled to the Tribunal and the Tribunal allowed the appeal of the department and the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment, reasons for reopening are reproduced in the order of the learned CIT(A) as under :- Particulars Opening Balance MODVAT Credit Availed MODVAT credit utilized on clearance of finished goods/excisable Closing Balance [RG23PT IIA [Raw Material] 1,061,721 8,229,785 7,639,917 1,651,589 RG 23PT II-C [Capital Goods] 15,360 198,393 103,351 110,402 8. The Assessing Officer reopened the assessment order on the ground that the assessee has utilised the amount of Modvat credit amounting to ₹ 7743268/- as per the audit report which did not tally with the excise duty debited to the profit and loss account ₹ 7512187/-. Therefore, the Assessing Officer came to the conclusion that the assessee has debited lesser amount of ₹ 231081/- as excise duty expenses in profit and loss account and accordingly came to the conclusion that the excise duty must have been concealed and es ..... X X X X Extracts X X X X X X X X Extracts X X X X
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