M/s Orbit Bearings India Pvt Ltd, RAJKOT-GUJARAT v. The Assistant Commissioner of Income Tax, Circle 5, RAJKOT-GUJARAT

ITA 22/RJT/2011 | 2000-2001
Pronouncement Date: 09-09-2011 | Result: Partly Allowed

Appeal Details

RSA Number 2224914 RSA 2011
Assessee PAN AAACO2476K
Bench Rajkot
Appeal Number ITA 22/RJT/2011
Duration Of Justice 7 month(s) 8 day(s)
Appellant M/s Orbit Bearings India Pvt Ltd, RAJKOT-GUJARAT
Respondent The Assistant Commissioner of Income Tax, Circle 5, RAJKOT-GUJARAT
Appeal Type Income Tax Appeal
Pronouncement Date 09-09-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 09-09-2011
Date Of Final Hearing 05-09-2011
Next Hearing Date 05-09-2011
Assessment Year 2000-2001
Appeal Filed On 31-01-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH RAJKOT BEFORE SHRI A.L. GEHLOT (AM) AND SHRI N.R.S. GANESA N (JM) I.T.A. NO.22/RJT/2011 (ASSESSMENT YEAR 2000-01) ORBIT BEARINGS INDIA PVT LTD VS ACIT CIR.5 PLOT NO.2313 GIDC RAJKOT KALAWAD ROAD METODA PO KHIRASHRA VIA RAJKOT-3 PAN : AAACO2476K (APPELLANT) (RESPONDENT) DATE OF HEARING : 05-09-2011 DATE OF PRONOUNCEMENT : 09-09-2011 APPELLANT BY : SHRI JC RANPURA RESPONDENT BY: SHRI MK SINGH O R D E R PER AL GEHLOT AM THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF CIT(A)- I V RAJKOT DATED 28-10-2010 PERTAINING TO ASSESSMEN T YEAR 2000-01. 2. THE EFFECTIVE GROUNDS RAISED IN THE APPEAL ARE R EPRODUCED BELOW: 2.0 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S)-IV RAJKOT [CIT(A)] ERRED ON FACTS AS ALSO IN LAW AND I N DISMISSING THE GROUND OF APPEAL RELATED TO THE INITIATION OF A CTION U/S 147 OF THE ACT. THE PROCEEDINGS INITIATED U/S 147 OF T HE ACT AND ISSUE OF NOTICE U/S 148 ARE BAD IN LAW AND DESERVES TO BE 1QUASHE3D MAY KINDLY BE QUASHED. 3.0 THE LEARNED CIT(A) ERRED ON FACTS AS ALSO IN LA W IN CONFIRMING THE DISALLOWANCE OF RS.10 000/- MADE ON ACCOUNT ITA NO.28/RJT/2011 2 OF PAYMENT OF ALLEGED EXCISE PENALTY. THE PAYMENT BEING COMPENSATORY IN NATURE MAY KINDLY BE DIRECTED TO BE DELETED. 4. THE LEARNED CIT(A) ERRED ON FACTS AS ALSO IN LAW IN SUSTAINING THE ADDITION OF RS.2 63 705/- MADE ON ACCOUNT OF ALLEGED NON INCLUSION OF EXCISE DUTY IN THE VALUATION OF CLOSING STOCK. THE ADDITION SUSTAINED IS IN TOTAL DISREGARDS TO THE SUBMISSION OF THE APPELLANT AND UNJUSTIFIED ON FACTS AS ALSO IN LAW AND MAY KINDLY BE DELETED. 2. THE LEARNED AR HAS NOT PRESSED GROUND NO.2 PERTA INING TO INITIATION OF ACTION U/S 147 OF THE ACT. THEREFORE THE SAME IS DISMISSED AS NOT PRESSED. GROUND NO.1 IS GENERAL IN NATURE AND REQUIRES NO FI NDING. 3. THE BRIEF FACTS OF THE SECOND EFFECTIVE GROUND A RE THAT THE ASSESSING OFFICER MADE ADDITION OF RS.10 000 ON ACCOUNT OF CL AIM OF THE ASSESSEE IN RESPECT OF EXCISE PENALTY. THE ADDITION MADE BY TH E ASSESSING OFFICER HAS BEEN CONFIRMED BY THE CIT(A). THE ASSESSEE DID NOT FURNISH SUFFICIENT EVIDENCE TO SHOW THAT THIS AMOUNT OF RS.10 000 PAID WAS COMPENSATORY IN NATURE AND NOT PENAL IN NATURE. IN THE ABSENCE OF SUCH MATERIAL WE UPHOLD THE ORDER OF CIT(A). 4. THE NEXT EFFECTIVE GROUND IS IN RESPECT OF ADDIT ION OF RS.2 63 705 ON ACCOUNT OF EXCISE DUTY. THE ASSESSING OFFICER MADE THE ADDITION ON THE GROUND THAT THE ASSESSEE DID NOT INCLUDE THE EXCISE DUTY OF RS.2 63 705 IN VALUATION OF THE CLOSING STOCK. THE ADDITION MADE BY THE ASSESSING OFFICER HAS BEEN CONFIRMED BY THE CIT(A). ITA NO.28/RJT/2011 3 5. THE LD.AR SUBMITTED THAT THE ASSESSEE COMPANY HA S BEEN REGULARLY APPLYING THE METHOD OF VALUATION YEAR TO YEAR. HE FURTHER SUBMITTED THAT AS PER THE GUIDELINES ISSUED BY ICAI THE ASSESSEE HAS GIVEN EFFECT TO THE EXCISE DUTY IN VALUATION OF THE CLOSING STOCK. THE LD.AR SUBMITTED THAT AS PER THE SAID GUIDELINES OF THE ICAI THE NET EFFECT ON THE PROFIT OF SUCH EFFECT OF THE EXCISE DUTY TO THE VALUATION OF THE CLOSING STOCK IS NIL. IT IS ALSO THE SUBMISSION OF THE LD.AR BY RELYING UPON THE JUDGMEN T OF THE JURISDICTIONAL HIGH COURT IN CASE OF ACIT VS NARMADA CHEMATUR PET ROCHEMICALS LTD 327 ITR 369 (GUJ) (GUJ) THAT UNDER THE SCHEME OF TH E EXCISE DUTY THE ASSESSEE INCURS LIABILITY TO PAY EXCISE DUTY ONLY U PON BOTH THE EVENTS TAKING PLACE NAMELY MANUFACTURE OF EXCISABLE GOODS AND REMOVAL OF EXCISABLE GOODS; EXCISE DUTY IS NOT THEREFORE INCLU DIBLE IN VALUATION OF CLOSING STOCK. THE LD.AR HAS ALSO RELIED UPON THE JUDGMENT OF THE MADRAS HIGH COURT IN THE CASE OF CIT VS INDIA PISTONS LTD 320 ITR 257 (MAD) AND ALLAHABAD HIGH COURT IN THE CASE OF DHAMPUR SUGAR M ILLS LTD VS ACIT & ORS 330 ITR 72 (ALL). 6. THE LD.DR ON THE OTHER HAND RELIED UPON THE OR DER OF CIT(A). 7. WE HAVE HEARD THE LD.REPRESENTATIVES OF THE PART IES RECORD PERUSED. THE ASSESSING OFFICER AND CIT(A) DID NOT POINT OUT ANY SPECIFIC SECTION ITA NO.28/RJT/2011 4 UNDER WHICH SECTION HE MADE THE ADDITION. FROM THE FACTS OF THE CASE IT APPEARS THAT THE ASSESSING OFFICER WANTS TO MAKE AD DITION U/S 145A OF THE ACT. SECTION 145A HAS BEEN INSERTED BY THE FINANCE (NO.2) ACT 1998 WEF 01-05-1999 APPLICABLE FROM ASSESSMENT YEAR 1999-200 0. SECTION 145A REQUIRES THAT THE VALUATION OF PURCHASE AND SALE OF GOODS AND INVENTORY FOR THE PURPOSE OF DETERMINING THE INCOME CHARGEABLE UN DER HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION SHALL BE IN ACCORD ANCE WITH THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE AND F URTHER TO INCLUDE THE AMOUNT OF ANY TAX DUTY CESS OR FEES PAID OR INCUR RED BY THE ASSESSEE TO BRING THE GOODS TO THE PLACE OF ITS LOCATION AND CO NDITION AS ON THE DATE OF VALUATION AS APPLICABLE TO THE RELEVANT YEAR UNDER CONSIDERATION I.E. ASSESSMENT YEAR 2000-01. WE FIND THAT THE ASSESSEE HAS GIVEN THE EFFECT TO THE EXCISE DUTY TO THE CLOSING STOCK AS PER THE GUIDELINES OF ICAI. THE AO HAS FAILED TO POINT OUT THAT THERE IS VIOLATION OF PROVISIONS OF SECTION 145A THAT EXCISE DUTY WHICH HAS BEEN ACTUALLY PAID OR INCURRED BY THE ASSESSEE BUT OF WHICH EFFECT HAS NOT BEEN GIVEN TO THE CLOSING STOCK. IT IS RELEVANT TO MENTION THAT MERELY BECAUSE THE EXCISE DUTY AMOUNT IS APPEARING IN THE BALANCE-SHEET DOES NOT NECESSARILY TO BE INCLUDED IN THE VALUATION OF CLOSING STOCK UNLESS THE EXCISE DUTY W AS PAID OR INCURRED RELEVANT TO THE CLOSING STOCK. UNDER THE SCHEME OF THE EXCISE DUTY THE ASSESSEE INCURS LIABILITY TO PAY EXCISE DUTY ONLY U PON BOTH THE EVENTS TAKING PLACE VIZ. MANUFACTURE OF EXCISABLE GOODS A ND REMOVAL OF EXCISABLE ITA NO.28/RJT/2011 5 GOODS. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE ASSESSEE HAS PAID OR INCURRED EXCISE DUTY ON THE INVENTORY. THE REFORE WE ARE OF THE CONSIDERED OPINION THAT NO ADDITION IS WARRANTED PA RTICULARLY WHEN THE ASSESSEE HAS GIVEN EFFECT TO THE EXCISE DUTY TO THE VALUATION OF THE CLOSING STOCK IN ACCORDANCE WITH GUIDELINES OF ICAI. AS A RESULT THE GROUND OF THE ASSESSEE SUCCEEDS. 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09-09-2011. SD/- SD/- (N.R.S. GANESAN) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER RAJKOT DT : 09 TH SEPTEMBER 2011 PK/- COPY TO: 1. ASSESSEE 2. REVENUE 3. THE CIT(A)-IV RAJKOT 4. THE CIT-III RAJKOT 5. THE DR I.T.A.T. RAJKOT (TRUE COPY) BY ORDER ASSTT.REGISTRAR ITAT RAJKOT