The ACIT, Circle-5,, Ahmedabad v. Prima Automation (I) Pvt.Ltd., Ahmedabad

ITA 1717/AHD/2012 | 2009-2010
Pronouncement Date: 23-11-2017 | Result: Dismissed

Appeal Details

RSA Number 171720514 RSA 2012
Assessee PAN AABCP6889L
Bench Ahmedabad
Appeal Number ITA 1717/AHD/2012
Duration Of Justice 5 year(s) 3 month(s) 20 day(s)
Appellant The ACIT, Circle-5,, Ahmedabad
Respondent Prima Automation (I) Pvt.Ltd., Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 23-11-2017
Appeal Filed By Department
Tags No record found
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 23-11-2017
Date Of Final Hearing 12-07-2017
Next Hearing Date 12-07-2017
First Hearing Date 12-07-2017
Assessment Year 2009-2010
Appeal Filed On 03-08-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD BEFORE SHRI KUL BHARAT JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA ACCOUNTANT MEMBER SL. NOS. ITA NO(S) ASSESSMENT YEAR (S) APPEAL(S) BY APPELLANT VS. RESPONDENT APPELLANT RESPONDENT 1. 1717/AHD/2012 2009-10 THE ACIT CIRCLE-5 AHMEDABA D PRIMA AUTOMATION (I) PVT.LTD. 501 SHAPATH COMPLEX OPP. RAJPATH CLUG GANDHIANGAR SARKEJ HIGHWAY AHMEDABAD 380 051 PAN: AABCP 6889 L 2. 3392/AHD/2014 2010-11 DY.CIT CIRCLE3(1) (1) AHMEDABAD -ASSESSEE- 3. CO195/AHD/2012 (IN ITA NO.1717/AHD/2012) 2009-10 -ASSESSEE- -REVENUE- REVENUE BY : SHRI V.K. SINGH SR.DR ASSESSEE BY : SHRI G.C. PIPARA AR / DATE OF HEARING 20/11/2017 / DATE OF PRONOUNCEMENT 23/11/2017 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEALS HAVE BEEN FILED BY THE REVEN UE FOR ASSESSMENT YEARS (AYS) 2009-10 & 2010-11 AGAINST TH E SEPARATE ORDERS OF THE COMMISSIONER OF INCOME TAX(APPEALS)-XI AHME DABAD [CIT(A) ITA NOS.1717/AHD/12 3392/AHD/14 (BY REVENUE) AND CO NO.195/AHD/12 ( BY ASSESSEE) ACIT VS. PRIMA AUTOMATION (I) P.LTD. ASST.YEARS 2009-10 & 2010-11 - 2 - IN SHORT] DATED 07/05/2012 & 10/09/2014 RESPECTIV ELY IN THE MATTER OF ASSESSMENT ORDERS PASSED UNDER S.143(3) OF THE INCO ME TAX ACT 1961 (HEREINAFTER REFERRED TO AS 'THE ACT'). THE ASSESS EE HAS ALSO FIELD CROSS OBJECTION NO.195/AHD/2012 RELEVANT TO AY 2009-10 AS CAPTIONED ABOVE. 2. BOTH THE APPEALS AND CROSS OBJECTION ARE DISPO SED OF BY THIS COMMON ORDER. 3. IN THE REVENUES APPEALS THE COMMON GROUND AGI TATED BY THE ASSESSING OFFICER (AO) IS TOWARDS DELETION OF ADDIT ION IN RESPECT OF UNDER VALUATION OF CLOSING STOCK MADE BY THE AO. 4. THE FACTS BEING COMMON WE SHALL BRIEFLY NARRATE THE FACTS CONCERNING AY 2009-10. 5. BRIEFLY STATED THE AO IN THE COURSE OF SCRUTIN Y ASSESSMENT OBSERVED THAT THE ASSESSEE HAS NOT INCLUDED THE VAL UE OF STATUTORY DUTY/LEVY TOWARDS CENVAT COMPONENT ON RAW-MATERIAL LYING IN THE CLOSING STOCK IN VIOLATION OF SECTION 145A OF THE A CT. THE CENVAT AMOUNT ATTRIBUTABLE TO CLOSING STOCK OF RAW-MATERIA L STANDS AT RS.59 30 117/-. THE AO ACCORDINGLY ADDED THE AFORE SAID AMOUNT TO THE VALUE OF CLOSING STOCK WITH REFERENCE TO SECTION 14 5A OF THE ACT. ITA NOS.1717/AHD/12 3392/AHD/14 (BY REVENUE) AND CO NO.195/AHD/12 ( BY ASSESSEE) ACIT VS. PRIMA AUTOMATION (I) P.LTD. ASST.YEARS 2009-10 & 2010-11 - 3 - CONSEQUENTLY THE TAXABLE INCOME TO THE ASSESSEE ST OOD INCREASED BY THE AFORESAID AMOUNT. 6. IN THE FIRST APPEAL THE CIT(A) HOWEVER FOUND ME RIT IN THE CONTENTION OF THE ASSESSEE AND DELETED THE AFORESA ID ADDITION. 7. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE THE T RIBUNAL. 8. THE LD.DR RELIED ON THE ASSESSMENT ORDER. THE LD .AR FOR THE ASSESSEE ON THE OTHER HAND RELIED UPON THE ORDER OF THE COORDINATE BENCH IN ITA NO./971/AHD/2012 FOR AY 2008-09 ORDER DATED 24/05/2016 AND SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF ASSESSEE. 9. WE HAVE CAREFULLY EXAMINED THE ISSUE. WHILE IT IS THE CASE OF THE REVENUE THAT CENVAT CREDIT OF RS.59 30 117/- REPRES ENTS THE PART OF THE CLOSING STOCK OF THE ASSESSEE IN TERMS OF SECTION 1 45A OF THE ACT IT IS THE CASE OF THE ASSESSEE ON THE OTHER HAND THAT THE A CTION OF ASSESSEE IS REVENUE NEUTRAL AND THERE IS NO INFRINGEMENT OF S.1 45A IN ESSENCE. IN THIS REGARD WE NOTICE THAT THE ISSUE IS NO LONGER RES INTEGRA AND ADJUDICATED IN FAVOUR OF THE ASSESSEE IN ITS OWN CASE IN THE P RECEDING AY 2008-09 ON SIMILAR FACTS. THE RELEVANT OPERATIVE PARA OF THE ORDER OF THE COORDINATE ITA NOS.1717/AHD/12 3392/AHD/14 (BY REVENUE) AND CO NO.195/AHD/12 ( BY ASSESSEE) ACIT VS. PRIMA AUTOMATION (I) P.LTD. ASST.YEARS 2009-10 & 2010-11 - 4 - BENCH IN ITA NO.971/AHD/2012(SUPRA) ORDER DATED 24/ 05/2016 IS REPRODUCED HEREUNDER:- 1. GROUND NO. 4 RELATES TO THE DELETION OF THE ADD ITION OF RS. 51 59 563/- MADE U/S. 145A OF THE ACT ON ACCOUNT OF CENVAT PAID ON RAW MA TERIAL. 1. ON PERUSAL OF THE TRADING AND PROFIT AND LOSS ACCO UNT OF THE ASSESSEE THE A.O NOTICED THAT WHILE VALUING THE CLOSING STOCK AS ON 31.03.2008 THE ASSESSEE HAS NOT INCLUDED A SUM OF RS. 51 59 563/- BEING THE CENVAT PAID ON THE RAW MATERIAL LYING IN THE CLOSING STOCK . THE A SSESSEE WAS ASKED TO EXPLAIN WHY THE SAME SHOULD NOT BE ADDED TO THE VALUE OF TH E CLOSING STOCK IN VIEW OF THE PROVISIONS OF SECTION 145A OF THE ACT. ASSESSEE FILED A DETAILED REPLY EXPLAINING THAT IT IS MAINTAINING EXCLUSIVE SYSTEM OF ACCOUNTING IN SO FAR AS CENVAT IS CONCERNED. IT WAS EXPLAINED THAT THE CENV AT PAID ON PURCHASES IS DEBITED IN A SEPARATE ACCOUNT AND NOT CONSIDERED IN THE PURCHASES AND THEREFORE IT IS NOT CLAIMED AS EXPENDITURE. IT WAS FURTHER EXPLAINED THAT EVEN THE OPENING STOCK IS DEVOID OF CENVAT THEREFORE A NY ADJUSTMENTS MADE IN THE CLOSING STOCK WOULD AUTOMATICALLY REQUIRE AN AD JUSTMENT IN THE OPENING STOCK AND THE EXERCISE WILL BE REVENUE NEUTRAL. THIS EXPLANATION OF THE ASSESSEE WAS RUBBISHED BY T HE A.O. WHO WAS OF THE FIRM BELIEF THAT THE PROVISIONS OF SECTION 145A HAV E BEEN VIOLATED AND ACCORDINGLY MADE AN ADDITION OF RS. 51 59 563/-. 2. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND REITERATED ITS CLAIM. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS AND AFTER CONSIDERING THE VARIOUS JUDICIAL DECISIONS THE LD. CIT(A) HELD AS UNDER:- 7.2 I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. I HAVE ALSO PERUSED VARIOUS CASE LAWS RELIED UPON BY THE APPELL ANT. ON THIS ISSUE I AM INCLINED TO AGREE WITH THE SUBMISSIONS OF THE ID . A.R. FOR THE FOLLOWING REASONS :- (1) THE APPELLANT IS FOLLOWING EXCLUSIVE METHOD OF ACCOUNTING. ACCORDING TO THIS METHOD OF ACCOUNTING PAYMENT AND RECEIPT OF CENVAT IS A BALANCE SHEET ITEM AND IT IS NOT DEBITE D OR CREDITED IN THE P & L A/C. IN THIS REGARD I AM INCL INED TO AGREE WITH THE CONTENTION OF THE ID. A.R. THAT AN AMOUNT OF RS. 51 59 563/- BEING CENVAT PAID ON RAW MATERIAL IS RE VENUE ITA NOS.1717/AHD/12 3392/AHD/14 (BY REVENUE) AND CO NO.195/AHD/12 ( BY ASSESSEE) ACIT VS. PRIMA AUTOMATION (I) P.LTD. ASST.YEARS 2009-10 & 2010-11 - 5 - NEUTRAL. THE APPELLANT HAS ALSO PLACED RELIANCE ON INDO NIPPON CHEMICAL CO. LTD. (2003) 261 ITR 275 (SC). I HAVE A LSO PERUSED THE OTHER CASE LAWS RELIED UPON BY THE APPE LLANT AND RATIOS OF THESE CASE LAWS ALSO SUPPORT THE CASE OF THE APPELLANT. (2) THE A.O. HAS NOT COMMENTED ON THE ACCOUNTING PO LICIES FOLLOWED BY THE APPELLANT. THE POLICY OF VALUATION OF CLOSING STOCK CONSISTENTLY FOLLOWED BY THE APPELLANT IN THE PREVIOUS YEARS AS WELL AS IN THE SUCCEEDING YEARS. THE HON'B LE GUJARAT HIGH COURT IN THE CASE OF VOLTAMP TRANSFORMERS LTD. V/S. CIT (2008) REPORTED ON 217 CTR 254 HAS HELD THAT A.O. H AS GOT VERY LIMITED POWERS TO CHANGE VALUATION OF CLOSING STOCK. THE A.O. CANNOT CHANGE METHOD OF ACCOUNTING REGULARLY F OLLOWED BY THE ASSESSEE WITHOUT VALID REASONS. (3) HON'BLE SUPREME COURT IN THE CASE OF CHAINRUP S AMPATRAM (1953) REPORTED ON 24 ITR 481 HAS CLEARLY HELD THAT PROFITS DOES NOT ARISE OUT OF VALUATION OF CLOSING STOCK AN D 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. (4) IT IS CLEARLY HELD IN THE CASE OF CIT V/S. AHME DABAD NEW COTTON MILLS REPORTED AT 4 ITC 245 THAT WHEN THE OP ENING AND CLOSING STOCK OF BUSINESS ARE BOTH UNDERVALUED IF THE METHOD OF ALTERATION OF BOTH VALUATION IS NOT ADOPTED IT IS PERFECTLY PLAIN THAT PROFITS WHICH IS BROUGHT FORWARD IS NOT REAL ONE. IN SUCH CASES THE REAL PROFITS OF A PARTICULAR YEAR C ANNOT BE ASCERTAINED BY MERELY RAISING VALUE OF CLOSING STOC K NOT TAKING INTO CONSIDERATION THE SIMILAR VALUATION OF OPENING STOCK. AS PER THE RATIO OF THIS CASE ENHANCING THE VALUE OF CLOSING STOCK WITHOUT GIVING CORRESPONDING EFFECT TO THE VALUATIO N OF OPENING STOCK IS NOT PROPER. IN VIEW OF THE ABOVE FACTS I AM NOT CONVINCED ABOU T THE MAINTAINABILITY OF ADDITION OF RS. 51 59 563/- IN V ALUATION OF CLOSING STOCK. THE A.O. IS DIRECTED TO DELETE ADDITION OF R S. 51 59 563/-. THIS GROUND OF APPEAL IS ALLOWED. 3. THE LD. D.R. COULD NOT BRING ANY DISTINGUISHING DEC ISION IN FAVOUR OF THE REVENUE WHERE AS THE FINDINGS OF THE FIRST APPELLAT E AUTHORITY ARE BASED UPON ITA NOS.1717/AHD/12 3392/AHD/14 (BY REVENUE) AND CO NO.195/AHD/12 ( BY ASSESSEE) ACIT VS. PRIMA AUTOMATION (I) P.LTD. ASST.YEARS 2009-10 & 2010-11 - 6 - THE DECISION OF THE HONBLE SUPREME COURT HONBLE HIGH COURT OF GUJARAT. THEREFORE NO INFERENCE IS CALLED FOR. GROUND NO. 4 IS ACCORDINGLY DISMISSED. 4. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS D ISMISSED. 10. HAVING REGARD TO THE AFORESAID VIEW OF THE COOR DINATE BENCH ALREADY TAKEN IN ASSESSEES OWN CASE WE DECLINE TO INTERFERE WITH THE ORDER OF CIT(A). 11. IN THE RESULT REVENUES APPEALS IN ITA NO.1717 /AHD/2012 FOR AY 2009-10 & ITA NO.3392/AHD/2014 FOR AY 2010-11 ARE DISMISSED. 12. NOW WE SHALL TURN TO ASSESSEES CROSS OBJECTION IN CO NO.195/AHD/2012 (IN REVENUES ITA NO.1717/AHD/2012) RELEVANT TO AY 2009-10. 13. THE GROUNDS OF CROSS OBJECTION RAISED BY THE AS SESSEE READ AS UNDER:- 1. THE LD.CIT(A) HAS GRIEVOUSLY ERRED IN CONFIRMIN G THE DISALLOWANCE OF RS.83 926/- MADE BY THE AO U/S.40(A)(IA) OF THE ACT WITHOUT PROPER CONSIDERATION AND APPRECIATION OF THE FACTS OF THE CASE. IN VIEW OF FACTS AND SUBMISSIONS FILED THE IMPUGNED ADDITION OUGHT TO HAVE BEEN DELETED BY THE LD.CIT(A). 2. THE LEARNED CIT(A) ERRED IN DISMISSING THE GROU ND OF APPEAL CLAIMING DEPRECIATION ON PLANT AND MACHINERY WHICH WAS INADVERTENTLY NOT CLAIMED IN THE RETURN OF INCOME ON TECHNICAL GR OUNDS. IN VIEW OF ITA NOS.1717/AHD/12 3392/AHD/14 (BY REVENUE) AND CO NO.195/AHD/12 ( BY ASSESSEE) ACIT VS. PRIMA AUTOMATION (I) P.LTD. ASST.YEARS 2009-10 & 2010-11 - 7 - FACTS AND SUBMISSIONS FILED THE LD.CIT(A) OUGHT TO HAVE ALLOWED THE DEPRECIATION CLAIM OF THE APPELLANT.\ 2.1. THE LEARNED CIT(A) FURTHER ERRED IN NOT APPRE CIATING THE FACT THAT AS PER EXPLANATION 5 OF SECTION 32 OF THE ACT WHET HER OR NOT THE ASSESSEE HAS CLAIMED THE DEDUCTION IN RESPECT OF DE PRECIATION IN COMPUTING HIS TOTAL INCOME IS IMMATERIAL AND THE SA ME IS ALLOWABLE IRRESPECTIVE OF SUCH CLAIM. 14. GROUND NO.1 WAS NOT PRESSED AND THEREFORE DISMI SSED. 15. GROUND NO.2 CONCERNS CLAIMS OF DEPRECIATION ALL OWANCES ON PLANT & MACHINERY WHICH WAS STATED TO BE NOT CLAIME D IN THE RETURN OF INCOME INADVERTENTLY. 16. WITH THE ASSISTANCE OF THE LD.AR FOR THE ASSESS EE WE NOTE THAT THE ASSESSEE HAS NOT CLAIMED DEPRECIATION ALLOWANCES ON CERTAIN PLANT & MACHINERY ENTITLED TO IT AS PER LAW. IT IS WELL SE TTLED THAT INCOME IS REQUIRED TO BE ASSESSED IN ACCORDANCE WITH THE TAXI NG STATUTE. THE APPELLATE AUTHORITY NEED NOT CONFINE ITSELF ONLY TO THE MATERIAL ON RECORD AT THE TIME OF ASSESSMENT. THE CIT(A) AS WELL AS T HE TRIBUNAL HAS THE POWER TO MAKE SUCH ENQUIRIES AS IT THINKS FIT. THE TAX AUTHORITIES ARE UNDER DUTY TO ENSURE THAT NO TAX WHICH IS NOT LEGIT IMATELY DUE FROM THE ASSESSEE GETS COLLECTED OWING TO MISTAKE ON THE PA RT OF THE ASSESSEE. THE REVENUE IS UNDER DUTY AND OBLIGATION TO ACT IN A FA IR AND NON-PARTISAN ITA NOS.1717/AHD/12 3392/AHD/14 (BY REVENUE) AND CO NO.195/AHD/12 ( BY ASSESSEE) ACIT VS. PRIMA AUTOMATION (I) P.LTD. ASST.YEARS 2009-10 & 2010-11 - 8 - MANNER. THE POWER AVAILABLE TO THE AO CANNOT BE EX ERCISED IN THE MANNER WHICH IS MOST BENEFICIAL TO THE REVENUE AND CONSEQUENTLY MOST ADVERSE TO THE ASSESSEE BY TAKING ADVANTAGE OF THE IGNORANCE OR MISTAKE ON THE PART OF THE ASSESSEE. THE ASSESSEE HAVING N OT CLAIMED THE DEPRECIATION ELIGIBLE TO IT UNDER LAW WILL NOT OP ERATE AS ESTOPPEL WHEN RELEVANT FACTS ARE AVAILABLE ON RECORD. IN THE CIR CUMSTANCES WE DO NOT SUBSCRIBE TO THE DISMISSAL OF THE CLAIM OF DEPRECIA TION ALLOWANCES STATED TO ELIGIBLE TO THE ASSESSEE BY THE CIT(A). THE AFO RESAID VIEW FINDS SUPPORT FROM PLETHORA OF DECISIONS INCLUDING JUDGEM ENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PRUTHVI BR OKERS & SHAREHOLDERS PVT.LTD. 349 ITR 336 (BOM.). WE ARE N OT INCLINED AT THIS STAGE TO GO INTO THE MERITS OF THE CLAIM OF DEPRECI ATION ALLOWANCE. WE SET ASIDE AND RESTORE THE ISSUE TO THE FILE OF THE AO FOR ITS DE NOVO EXAMINATION WITH A DIRECTION TO ALLOW THE DEPRECIAT ION ALLOWANCES IN ACCORDANCE WITH LAW REGARDLESS OF ITS NOT HAVING BE EN CLAIMED IN THE RETURN OF INCOME. THE AO HOWEVER SHALL BE ENTITLED TO MAKE SUITABLE ADJUSTMENTS/CORRECTIONS IN THE CONSEQUENTIAL CLAIM OF DEPRECIATION ALLOWANCE IN THE SUBSEQUENT YEARS AFTER VERIFICATIO N. NEEDLESS TO SAY THE ASSESSEE SHALL PLACE ALL RELEVANT MATERIAL TO THE S ATISFACTION OF THE AO FOR ALLOWABILITY OF CLAIM. THE ISSUE IS ACCORDINGLY RE STORED TO THE FILE OF THE AO IN TERMS OF DIRECTIONS NOTED ABOVE. ITA NOS.1717/AHD/12 3392/AHD/14 (BY REVENUE) AND CO NO.195/AHD/12 ( BY ASSESSEE) ACIT VS. PRIMA AUTOMATION (I) P.LTD. ASST.YEARS 2009-10 & 2010-11 - 9 - 17. IN THE RESULT CROSS OBJECTION NO.195/AHD/2012 FOR AY 2009-10 FILED BY THE ASSESSEE IS PARTLY ALLOWED. 18. IN THE COMBINED RESULT REVENUES APPEAL ARE DI SMISSED WHEREAS ASSESSEES CROSS OBJECTION IS PARTLY ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 23/11/2017 SD/- SD/- ( KUL BHARAT ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 23 / 11 /2017 .. .../ T.C. NAIR SR. PS ! ' / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT 2. '# ! / THE RESPONDENT. 3. $%$&' ( / CONCERNED CIT 4. ( ( ) / THE CIT(A)-XI AHMEDABAD 5. + -'&' &' % / DR ITAT AHMEDABAD 6. -012 / GUARD FILE. / BY ORDER #+' //TRUE COPY// / ( DY./ASSTT.REGISTRAR) / ITAT AHMEDABAD 1. DATE OF DICTATION ..20.11.17 (DICTATION-PAD 15-PA GES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 20.11.17 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.23.11.17 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 23.11.17 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER