TLT ENGINEERING (INDIA) P. LTD, MUMBAI v. ITO WD 7(3)(4), MUMBAI

ITA 6299/MUM/2009 | 2003-2004
Pronouncement Date: 30-07-2010 | Result: Partly Allowed

Appeal Details

RSA Number 629919914 RSA 2009
Assessee PAN AAACT2092G
Bench Mumbai
Appeal Number ITA 6299/MUM/2009
Duration Of Justice 7 month(s) 23 day(s)
Appellant TLT ENGINEERING (INDIA) P. LTD, MUMBAI
Respondent ITO WD 7(3)(4), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-07-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted H
Tribunal Order Date 30-07-2010
Date Of Final Hearing 28-07-2010
Next Hearing Date 28-07-2010
Assessment Year 2003-2004
Appeal Filed On 07-12-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H : MUMBAI BEFORE SHRI D.K. AGARWAL (JM) AND SHRI A.L. GEHLO T (AM) ITA NO.6299/MUM/2009 ASSESSMENT YEAR :2003-04 ITA NO.6300/MUM/2009 ASSESSMENT YEAR :2004-05 ITA NO.6301/MUM/2009 ASSESSMENT YEAR :2005-06 TLT ENGINEERING (INDIA) PVT. LTD. 204 SUMER KENDRA PANDURANG BUDHAKAR MARG WORLI MUMBAI-400 018. ..( APPELLANT ) P.A. NO. (AAACT 2092 G) VS. THE INCOME TAX OFFICER WARD-7(3)(4) AAYAKAR BHAVAN M.K. MARG MUMBAI-20. ..( RESPONDENT ) APPELLANT BY : SHRI KAPIL K. JAIN RESPONDENT BY : SHRI AM ARDEEP O R D E R PER D.K. AGARWAL (JM). THESE APPEALS PREFERRED BY THE ASSESSEE ARE DIRECTED AGAIN ST THE SEPARATE ORDERS PASSED BY THE LD. CIT(A) DATED 24.9.200 9 30.9.2009 AND 29.8.2009 FOR ASSESSMENT YEARS 2003-04 2004-05 AND 2005-06 RESPECTIVELY. SINCE FACTS ARE IDENTICAL AND ISSUES INVOLVE D ARE ITA NO.6299 6300 & 6301/M/09 A.Y:03-04 04-05 & 05-06 2 COMMON ALL THESE APPEALS ARE DISPOSED OF BY THIS COMMON O RDER FOR THE SAKE OF CONVENIENCE. 2. BRIEFLY STATED FACTS OF THE CASE EXTRACTED FROM ITA NO.6299/M/2009 FOR THE ASSESSMENT YEAR 2003-04 ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING/FABR ICATION OF INDUSTRIAL FANS AND ITS COMPONENTS OF VARIOUS CAPACITIES A ND SIZE FILED RETURN DECLARING TOTAL INCOME OF ` 48 08 080/-. HOWEVER THE ASSESSMENT WAS COMPLETED AT AN INCOME OF ` 62 11 070/- AFTER MAKING VARIOUS DISALLOWANCES AND ADDITION U/S.68 VIDE ORDER DATED 31.1.2006 PASSED U/S.143(3) OF THE INCOME TAX ACT 1961 (THE ACT). ON APPEAL THE LD. CIT(A) DISMISSED THE APPEAL. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE ASSESSEE IS IN APPEAL BEFORE US. 4. GROUND NO.1 IS AGAINST THE SUSTENANCE OF ADDITION OF ` 1 38 872/- ADDED AS UNEXPLAINED CASH CREDIT UNDER SEC.68 OF THE ACT. 5. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT ON PERUSA L OF THE DETAILS OF THE SUNDRY CREDITORS FILED BY THE ASSESSEE IT WAS OBSERVED BY THE ASSESSING OFFICER THAT THE OUTSTANDING BALANCE OF M /S. PIONEER ROAD CARRIERS WAS SHOWN AT ` 2 62 137/-. HOWEVER AS PER INFORMATION RECEIVED U/S.133(6) FROM THE SAID PARTY THE BALANCE ITA NO.6299 6300 & 6301/M/09 A.Y:03-04 04-05 & 05-06 3 OUTSTANDING AS ON 31.3.2003 AMOUNTED TO ` 1 28 265/-. THE ASSESSEE WAS ASKED TO FURNISH EXPLANATION IN RESPECT OF THE SAID DIFFERENCE. IT WAS STATED BY THE ASSESSEE THAT TWO BILLS DATED 14.3.2003 AND 15.3.2003 AGGREGATING TO ` 1 38 872/- MIGHT NOT HAVE BEEN ACCOUNTED FOR BY THE SAID PARTY AS THE PARTY MAY BE FOLLOWING CASH BASIS OF ACCOUNTING. HOWEVER ON VERIFICATION OF THE DETAILS FUR NISHED BY THE SAID PARTY M/S. PIONEER ROAD CARRIERS THE BILLS WERE ACCOUNTED ON MERCANTILE BASIS. IN THE ABSENCE OF ANY BILLS FOR VERIF ICATION THE ASSESSING OFFICER ADDED THE DIFFERENCE OF ` 1 38 872/- AS UNEXPLAINED CASH CREDIT U/S.68 OF THE ACT. ON APPEAL THE LD. CIT( A) WHILE AGREEING WITH THE VIEW OF THE ASSESSING OFFICER UPHELD THE ADDITI ON MADE BY THE ASSESSING OFFICER. 6. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFORE THE ASSESSING OFFICER FURTHER SUBMITS THAT THE SAID BILLS DATED 14.3.2 003 AND 15.3.2003 AMOUNTING TO ` 47 555/- AND ` 91 665/- ( ` 47 555/- AND ` 44 110/-) RESPECTIVELY HAVE BEEN ACCOUNTED FOR BY THE SA ID PARTY ON 1.4.2003 I.E. IN THE NEXT FINANCIAL YEAR 2003-04 AND IN SUPPORT HE ALSO PLACED ON RECORD THE COPY OF THE RECONCILIATION STATEMEN T AND LEDGER ACCOUNT OF THE PARTY ALONG WITH PHOTOCOPY OF THE BILLS APPEARING AT PAGE 1-5 OF THE ASSESSEE'S PAPER BOOK. HE THEREFORE SUBMITS THAT ITA NO.6299 6300 & 6301/M/09 A.Y:03-04 04-05 & 05-06 4 THE ADDITION MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) BE DELETED. 7. ON THE OTHER HAND THE LD. DR SUPPORTS THE ORDER OF THE ASSESSING OFFICER AND THE LD. CIT(A). 8. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RI VAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND MERIT IN THE PLEA OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE BILL OF ` 47 555/- DATED 14.3.2003 AND BILL OF ` 91 665/- ( ` 47 555/- AND ` 44 110/-) DATED 15.3.2003 WERE DULY ACCOUNTED FOR BY M/S. PIONEER ROAD CARRIERS ON 1.4.2003 IN ITS BOOKS OF ACCOUNTS. THIS BEING SO AND IN THE ABSENCE OF ANY CONTRARY MATERIAL PLACED ON RECORD BY THE REVENUE WE ARE OF THE VIEW THAT THE ASSESSEE HAS SATISFACTORILY RECONCILED THE DIF FERENCE OF ` 1 38 872/- AND ACCORDINGLY THE ADDITION MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) IS DELETED. THE GRO UND TAKEN BY THE ASSESSEE IS THEREFORE ALLOWED. 9. GROUND NO.2 IS AGAINST THE SUSTENANCE OF ADDITION OF EMPLOYER CONTRIBUTION TO PROVIDENT FUND ` 4 90 577/- AND ADMINISTRATION CHARGES ` 65 752/-. 10. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT IT WAS O BSERVED BY THE ASSESSING OFFICER THAT THE EMPLOYERS CONTRIBUTION TO PROV IDENT FUND ` ITA NO.6299 6300 & 6301/M/09 A.Y:03-04 04-05 & 05-06 5 4 90 577/- AND ADMINISTRATIVE CHARGES ` 65 752/- HAVE NOT BEEN PAID WITHIN THE DUE DATE HENCE HE ADDED THE SAME U/S.43B R.W.S. 2(24)(X) OF THE ACT. ON APPEAL THE LD. CIT(A) UPHELD THE ADD ITION MADE BY THE ASSESSING OFFICER . 11. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE SUBMITS THAT THE ABOVE AMOUNT HAS BEEN PAID BEFORE THE DUE D ATE OF FILING OF THE RETURN OF INCOME THEREFORE NO SUCH DISALLOWANCE IS CALLED FOR. 12. ON THE OTHER HAND THE LD. DR RELIED ON THE ORDE R OF THE ASSESSING OFFICER AND THE LD. CIT(A). 13. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE ARE OF THE OPINION THAT THE ISSUE INVOLVED IN THE PRESENT CASE IS NO MORE RES INT EGRA AND IS COVERED BY THE DECISION OF THE HONBLE SUPREME COURT IN CIT VS. ALOM EXTRUSIONS LTD. (2009) 319 ITR 306 (SC) WHEREIN THE IR LORDSHIPS HAVE CONSIDERED THE APPLICABILITY OF SECTION 36(1)(VA) READ WITH SECTION 2(24)(X) AS WELL AS 43B OF THE ACT AND IT HAS BEEN HEL D THAT THE AMENDMENT WAS CURATIVE IN NATURE AND APPLICABLE RETRO SPECTIVELY WITH EFFECT FROM APRIL 1 1988. WE MAY ALSO REFER TO THE ORDER OF THE TRIBUNAL IN THE CASE OF M/S. ROYAL KNITTING PRIVATE LT D. VS. ITO IN ITA NO.5428/MUM/2003 ORDER DATED 2.7.2010 FOR THE ASSESSMEN T YEAR 2001-02 IN WHICH ONE OF US JM WAS A PARTY WHEREIN F OLLOWING THE ITA NO.6299 6300 & 6301/M/09 A.Y:03-04 04-05 & 05-06 6 DECISION OF HONBLE APEX COURT THE SIMILAR DISALLOWANCE HAS BEEN DELETED. IN VIEW OF THE ABOVE LEGAL POSITION AND IN THE ABSENCE OF ANY CONTRARY MATERIAL PLACED ON RECORD BY THE REVENUE THE ADDITION OF EMPLOYERS CONTRIBUTION TO PROVIDENT FUND ` 4 90 577/- AND ADMINISTRATION CHARGES ` 65 752/- IS DELETED. THE GROUND TAKEN BY THE ASSESSEE IS THEREFORE ALLOWED. 14. GROUND NO.3 AND 5 ARE AGAINST THE SUSTENANCE OF DISA LLOWANCE OF STAFF WELFARE EXPENSES ` 46 290/- CONVEYANCE EXPENSES ` 34 460/- AND TRAVELLING EXPENSES ` 1 43 150/-. 15. IT WAS OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSE E HAS CLAIMED ` 2 31 440/- ON ACCOUNT OF STAFF WELFARE EXPENSES ` 1 72 281/- ON CONVEYANCE EXPENSES AND ` 14 31 462/- ON ACCOUNT OF TRAVELLING EXPENSES. ON BEING ASKED IT WAS STATED BY TH E ASSESSEE THAT THE STAFF WELFARE EXPENSES WERE INCURRED TOWARDS TE A COFFEE LUNCH AND SNACKS FOR STAFF ON DAY TO DAY BASIS AND IN RESPE CT OF CONVEYANCE AND TRAVELLING EXPENSES THE ASSESSEE HAS STATED TH AT THE SAME WERE INCURRED BY THE DIRECTORS AND STAFF MEMBERS TOW ARDS TRAVELLING AND LOCAL TRANSPORT. HOWEVER IN THE ABSENCE OF BILLS AND SUPPORTING VOUCHERS EXCEPT SELF SERVING VOUCHERS THE ASSESSIN G OFFICER DISALLOWED 20% I.E. ` 46 290/- OUT OF STAFF WELFARE EXPENSES 20% I.E. ` 34 460/- OUT OF CONVEYANCE EXPENSES AND 10% I.E. ` ITA NO.6299 6300 & 6301/M/09 A.Y:03-04 04-05 & 05-06 7 1 43 150/- OUT OF TRAVELLING EXPENSES. ON APPEAL T HE LD. CIT(A) UPHELD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 16. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE SUBMITS THAT THE SAID EXPENSES WERE INCURRED IN THE NORMAL COURSE OF BUSINESS AND ARE GENUINE AND ARE JUSTIFIABLE CONSIDERING THE NA TURE AND SIZE OF BUSINESS THEREFORE NO SUCH DISALLOWANCE IS CALLED FOR. I N ALTERNATIVE HE SUBMITS THAT HE HAS NO OBJECTION IF THE DISALLOWANCE I S RESTRICTED TO 10% OF STAFF WELFARE AND CONVEYANCE EXPENSES AND 5% OF T RAVELLING EXPENSES CLAIMED. 17. ON THE OTHER HAND THE LD. DR SUBMITS THAT SINCE T HE ASSESSEE HAS FAILED TO FILE PROPER EVIDENCE THE DISALLOWANCE MA DE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) BE UPHEL D. 18. AFTER HEARING THE RIVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE FIND THAT THERE IS NO DISPUTE THAT THE DISALLOWANCE WAS MADE ON ADHOC BASIS WITHOUT BRINGING A NY MATERIAL TO SHOW THE BASIS OF SUCH DISALLOWANCE EXCEPT THAT THE EXP ENSES ARE NOT FULLY SUPPORTED BY THE VOUCHERS. THIS BEING SO AND KEEPING IN VIEW THE NATURE OF THE ABOVE EXPENSES WE ARE OF TH E VIEW THAT IT WOULD BE REASONABLE TO SUSTAIN THE DISALLOWANCE AT 10% O F STAFF WELFARE AND CONVEYANCE EXPENSES AND 5% OF TRAVELLING EX PENSES CLAIMED AND ACCORDINGLY WE DIRECT THE ASSESSING OFFICER TO REDUCE THE ITA NO.6299 6300 & 6301/M/09 A.Y:03-04 04-05 & 05-06 8 DISALLOWANCE TO 50% OF THE ABOVE DISALLOWANCE. IN OTHE R WORDS THE ASSESSEE GETS A RELIEF OF ` 23 145/- OUT OF DISALLOWANCE STAFF WELFARE EXPENSES ` 17 230/- OUT OF DISALLOWANCE OF CONVEYANCE EXPENSES AND ` 71 575/- OUT OF DISALLOWANCE OF TRAVELLING EXPENSES. THE GROUNDS TAKEN BY THE ASSESSEE ARE THEREFORE PARTLY ALLOWED. 19. GROUND NO.4 IS AGAINST THE SUSTENANCE OF DISALLOWANCE AT 10% ` 59 630/- OUT OF MOTOR CAR EXPENSES ` 59 630/- OUT OF MOTOR CAR EXPENSES (PERSONAL USE) ` 41 050/- OUT OF DEPRECIATON ON MOTOR CARS AND ` 6 425/- OUT OF INTEREST ON CAR LOANS. 20. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT IT HAS B EEN OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE IS A CLOSELY HELD CO MPANY AND THE DIRECTORS HOLD MORE THAN 60% OF THE SHARES. PE RSONAL ELEMENT FOR THE USE OF MOTOR CAR CANNOT BE RULED OUT AND NO SEP ARATE LOGBOOK HAS BEEN MAINTAINED. THE ASSESSING OFFICER THEREFORE DI SALLOWED 10% ` 59 630/- OUT OF MOTOR CAR EXPENSES AND AGAIN 10% ` 59 630/- OUT OF MOTOR CAR EXPENSES FOR PERSONAL USE 10% ` 41 050/- OUT OF MOTOR CARS DEPRECIATION AND 10% ` 6 425/- OUT OF INTEREST ON CAR LOANS. ON APPEAL THE LD. CIT(A) WHILE RELYING ON THE JUDGMEN T IN NEW AMBADI ESTATES PVT. LTD. VS. STATE OF TAMILNADU (2002) 256 I TR 64(MAD.) AND ITAT MADRAS BENCH DECISION IN HAJRA PLASTIC AND METAL COMP ONENTS CO. ITA NO.6299 6300 & 6301/M/09 A.Y:03-04 04-05 & 05-06 9 LTD. ITA NO.4249/M/98 DATED 28.11.2001 UPHELD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 21. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE SUBMITS THAT THE ABOVE EXPENSES HAVE BEEN INCURRED IN THE NORM AL COURSE OF BUSINESS AND CONSIDERING THE NATURE AND SIZE OF THE BUSINE SS OF THE COMPANY THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ARBITRARY DISALLOWANCE OF 10% MADE BY THE ASSESSING OFFICER. HE THER EFORE SUBMITS THAT THE DISALLOWANCE SUSTAINED BY THE LD. CIT( A) BE DELETED. 22. ON THE OTHER HAND THE LD. DR SUBMITS THAT THE PE RSONAL USE OF THE CARS HAS NOT BEEN RULED OUT THEREFORE THE LD. CI T(A) WAS FULLY JUSTIFIED IN SUSTAINING THE DISALLOWANCE MADE BY THE ASSE SSING OFFICER. 23. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE R IVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS THE DISALLOWANCE WAS MADE B Y THE ASSESSING OFFICER ON ACCOUNT OF PERSONAL USAGE OF THE MOTOR CARS BY THE DIRECTORS OF THE COMPANY. IN SAYAJI IRON AND ENG G. CO. VS. CIT (2002) 253 ITR 749(GUJ.) IT HAS BEEN HELD THAT THE CO MPANY IS A DISTINCT ASSESSABLE ENTITY SO THAT IT CANNOT BE STATED THA T THE USE OF THE VEHICLES BY THE DIRECTORS IS PERSONAL USE OF THE COMP ANY. THE ABOVE DECISION HAS BEEN CONSISTENTLY FOLLOWED BY THE CO-OR DINATE BENCHES OF THE TRIBUNAL. RESPECTFULLY FOLLOWING THE SAI D DECISION AND ITA NO.6299 6300 & 6301/M/09 A.Y:03-04 04-05 & 05-06 10 THE CONSISTENT VIEW OF THE TRIBUNAL AND KEEPING IN VIE W THAT THERE IS NO DISPUTE THAT IT IS A CASE OF COMPANY WHICH IS A DISTINCT ASSE SSABLE ENTITY AND THE DECISION RELIED ON BY THE LD. CIT(A) P ERTAINS TO TAMIL NADU AGRICULTURAL INCOME TAX ACT 1955 AND NOT UNDER THE PROVISIONS OF THE INCOME TAX ACT AND HENCE NOT APPLICABLE WE ARE OF THE VIEW THAT THE DISALLOWANCES MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) ARE NOT SUSTAINABLE IN LAW AND ACCORDING LY THE SAME ARE DELETED. THE GROUND TAKEN BY THE ASSESSEE IS THEREFOR E ALLOWED. ITA NO.6300/M/09 (A.Y. 2004-05): 24. GROUND NO.1 IS AGAINST THE SUSTENANCE OF DISALLOWANC E OF EMPLOYEES CONTRIBUTION TO PROVIDENT FUND ` 1 36 793/-. 25. AFTER HEARING THE RIVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE FIND MERIT IN THE PLEA OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE AMOUNT OF EMPLOYEES CONTRIBUTION TO PRO VIDENT FUND WAS DEPOSITED WITHIN THE GRACE PERIOD AS UNDER. (EXTRACT ED FROM PARA 1.1 APPEARING AT PAGE-2 OF THE ORDER OF THE LD. CIT (A)):- MONTH EMPLOYEES CONTRIBUTION DATE OF PAYMENT JUNE 2003 RS.45 566/- 18.07.2003 JULY 2003 RS.46 144/- 18.08.2003 DEC. 2003 RS.45 083/- 16.01.2003 SINCE THE AMOUNT WAS PAID WITHIN THE GRACE PERIOD AN D KEEING IN VIEW THE RATIO OF DECISION IN CIT VS. ALOM EXTRUSIONS L TD. SUPRA AND ITA NO.6299 6300 & 6301/M/09 A.Y:03-04 04-05 & 05-06 11 CIT VS. AIMIL LTD. (2010) 321 ITR 508 (DEL.) WE ARE OF THE VIEW THAT THE ADDITION OF ` 1 36 793/- MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) IS NOT SUSTAINABLE IN LAW AN D ACCORDINGLY THE SAME IS DELETED. THE GROUND TAKEN BY THE ASSESSEE IS THEREFORE ALLOWED. 26. GROUND NO.2 3 AND 4 ARE AGAINST THE SUSTENANCE OF ADDITION OF MODVAT CREDIT ` 2 71 755/- AND DIRECTION OF THE LD. CIT(A) TO RECALCULATE THE SAME. 27. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT IT WAS O BSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS SHOWN AN AMOUNT OF ` 2 71 755/- IN THE BALANCE SHEET TOWARDS UNUTILISED MODV AT CREDIT FOR RAW MATERIAL. ON BEING ASKED AS TO WHY IT SHOULD NOT BE ADDED TO THE CLOSING STOCK TO REFLECT THE TRUE VALUE OF THE CLOSING STOCK IT WAS SUBMITTED BY THE ASSESSEE THAT IT IS AS PER ACCOUNTING STAN DARD LAID DOWN BY THE INSTITUTE OF CHARTERED ACCOUNTANT AND HEN CE NO ADDITION IS CALLED FOR. HOWEVER THE ASSESSING OFFICER WAS OF THE VI EW THAT ASSESSEE'S METHOD OF ACCOUNTING CAN BE ACCEPTED IF THERE IS ON E TO ONE CO-RELATION BETWEEN THE PURCHASES AND SALES. ANY TRANSACTI ON IN WHICH SUCH ONE TO ONE CORELATION COULD NOT BE MAINTAINED IT IS BUT NATURAL THAT THE EXCESS COMPONENT IN THE EXCISE DUTY PAID ON THE PURCHASE IS AVAILED AS CREDIT WHILE MAKING THE SALE WHEREAS THE ITE M IS STILL ITA NO.6299 6300 & 6301/M/09 A.Y:03-04 04-05 & 05-06 12 AVAILABLE IN THE CLOSING STOCK HENCE HE REJECTED THE A SSESSEE'S METHOD AND ADDED THE MODVAT CREDIT OF ` 2 71 755/- TO THE CLOSING STOCK AND THEREBY ADDED TO THE INCOME OF THE ASSESSEE. O N APPEAL THE LD. CIT(A) OBSERVED AND HELD AS UNDER :-[EXTRACTE D FROM PARA 2.1 PAGE 3-4 OF THE ORDER OF THE LD. CIT(A)] ACCORDINGLY IN THE LIGHT OF THE PROVISIONS U/S. 1 45A THE ASSESSEE MUST HAVE PREPARED ITS PROFIT AND LOSS ACCOUNT BY INCLUDING T HE ELEMENT OF DUTY AS UNDER; OPENING STOCK SHOWN BY THE ASSESSEE SALES + EXCISE DUTY COLLECTED BY THE ASSESSEE PURCHASE + EXCISE DUTY PAID BY THE ASSESSEE ON THESE PURCHASES ADD: CONVAT SET-OFF/UTILIZED ON MATERIALS CONSUMED. CLOSING STOCK [ADD: MODVAT ( TO BE INCLUDED IN RAW MATERIAL + EXCISE LEVIABLE ON FINISHED GOODS)] PROFIT SHOWN + * RESULTANT OF ABOVE CHANGES IT IS THEREFORE HELD AS UNDER: I)* RESULTANT CHANGE IF ANY WILL HAVE TO BE ADD ED TO THE ASSESSEES INCOME. II) THE ADDITION ON ACCOUNT OF DUTY FOLLOWING THE PROVISIONS OF SEC. 145A IS PRINCIPALLY CALLED FOR. NO ADJUSTMENT IN THE OPENI NG STOCK IS POSSIBLE AS HELD IN THE CASE OF MELMOULD CORPORATION VS. CIT 202 ITR 789 ( BOM). BESIDES TAX PROVISIONS U/S. 145A CAME INTO EFFECT FROM 1.4.98 A.Y. 2004-05 CANT BE SAID TO BE TRANSITIONAL YEAR. HENCE THE JUDGMENT OF MAHAVIR ALUMINIUM LTD. 297 ITR 77 (DEL) SHALL NOT APPLY. III) THE A.O IS DIRECTED TO VERIFY THESE FACTS AND FIGURES AND MAKE ADDITION AS PER AFORESAID DIRECTIONS. 28. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE LD. CIT(A) WHILE GIVING DIRECTION TO THE ASSE SSING OFFICER HAS ERRED ON TWO COUNTS :- ITA NO.6299 6300 & 6301/M/09 A.Y:03-04 04-05 & 05-06 13 A) ON THE CREDIT SIDE AN ADDITION HAS BEEN MADE OF CENVAT SET OFF UTILIZED ON MATERIAL CONSUMED. THIS IS NOT CORRECT AS PER THE SECTION 145A WHICH REQUIRES VALUATION OF ALL 3 ITEMS I.E. PURCHA SE SALE AND INVENTORY (BOTH OPENING AND CLOSING) INCLUSIVE OF EXCISE DUTY. FUR THER IF THE AMOUNT OF CENVAT SET-OFF / UTILIZED IS CREDITED TO THE PROFIT AND LOSS ACCOUNT IT WOULD MEAN THAT PURCHASES ARE ACCOUNTED NET OF EXCISE DUT Y. IF THAT IS SO THEN THE CIT(A) HAS RE-SORTED TO VALUATION OF ONLY 2 ITE MS I.E. SALE AND INVENTORY (ONLY CLOSING) INCLUSIVE OF EXCISE DUTY AND NOT THE VALUATION OF PURCHASES WHICH SHOULD ALSO BE AS PER SECTION 145A. B) THE VALUATION OF OPENING STOCK WOULD ALSO BE REQ UIRED TO BE SIMILARLY AND CORRESPONDINGLY ADJUSTED AS PER THE ADJUSTMENT MADE TO THE CLOSING STOCK. THIS IS MORE SO PARTICULARLY IN VIEW OF THE FACT T HAT THE CLOSING STOCK OF THE EARLIER YEAR I.E. A.Y 2003- 2004 IS ALREADY ADJUSTE D IN THE ASSESSMENT COMPLETED U/S. 143(3). OTHERWISE THIS RESULTS IN DOUBLE TAXATION. HOWEVER HE SUBMITS THAT HE HAS NO OBJECTION IF THE ISSUE IS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER IN THE LIGHT OF THE DECISION OF THE TRIBUNAL IN HAWKINS COOKERS LTD. VS. INCOME TAX OFFI CER (2008) 14 DTR (MUMBAI)(TRIB) 206. 29. ON THE OTHER HAND THE LD. DR SUPPORTS THE ORDER O F THE ASSESSING OFFICER AND THE CIT(A). 30. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE R IVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. UNDER T HE PROVISIONS OF SECTION 145A OF THE ACT ADJUSTMENTS ON ACCOUNT OF MODVAT ARE REQUIRED TO BE MADE IN RESPECT OF PURCHASES SALES AND INV ENTORY IN THE CLOSING STOCK. WE FIND THAT RECENTLY THE HONBLE JURI SDICTIONAL HIGH COURT IN CIT VS. MAHALAXMI GLASS WORKS PVT. LTD. (2009) 318 ITR 116(BOM.) WHILE AGREEING WITH THE REASONING AND FI NDING GIVEN BY THE ITA NO.6299 6300 & 6301/M/09 A.Y:03-04 04-05 & 05-06 14 HONBLE DELHI HIGH COURT IN CIT VS. MAHAVIR ALUMINIU M LTD. (2008) 297 ITR 77(DEL.) THAT TO GIVE EFFECT TO SECTION 145A IF THERE IS ANY CHANGE IN THE CLOSING STOCK AT THE END OF THE YEAR THE N THERE MUST NECESSARILY BE A CORRESPONDING ADJUSTMENT MADE IN THE OPE NING STOCK OF THAT YEAR AND THIS WOULD NOT AMOUNT TO GIVE DOUBL E BENEFIT TO THE ASSESSEE AND WOULD BE NECESSARY TO COMPUTE THE TRUE AND CORR ECT PROFIT FOR THE PURPOSE OF ASSESSMENT UPHELD THE ORDER OF THE TRIBUNAL IN DIRECTING THE ASSESSING OFFICER TO MAKE NECESSARY CORRESPON DING ADJUSTMENT IN THE OPENING STOCK OF NEXT YEAR. IN TH E ABSENCE OF ANY DISTINGUISHING FEATURE BROUGHT ON RECORD BY THE PARTIE S WE RESPECTFULLY FOLLOWING THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT SUPRA SET ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WHO SH ALL DECIDE THE SAME AFRESH IN THE LIGHT OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT AND ACCORDING TO LAW AFTER PROVIDING A REASO NABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE GROUNDS TAKEN BY THE ASSESSEE ARE THEREFORE PARTLY ALLOWED FOR STATISTICAL PURP OSES. ITA NO.6301/M/09 (A. Y. 2005-06): 31. GROUND NO.1 2 AND 3 ARE AGAINST THE SUSTENANCE OF ADDITION OF MODVAT CREDIT ` 7 59 970/- AND DIRECTION OF THE LD. CIT(A) TO RECALCULATE THE SAME. ITA NO.6299 6300 & 6301/M/09 A.Y:03-04 04-05 & 05-06 15 32. AT THE TIME OF HEARING BOTH PARTIES HAVE AGREED THAT THE FACTS OF THE ABOVE ISSUE ARE THE SAME AS FOR THE ASSESSMENT YEAR 200 4-05 THEREFORE THE PLEA TAKEN BY THEM IN THAT APPEAL MAY BE CONSIDERED WHILE DECIDING THE ISSUE UNDER CONSIDERATION. 33. AFTER HEARING THE RIVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD AND IN THE ABSENCE OF ANY OTHER CON TRARY MATERIAL PLACED ON RECORD BY THE PARTIES WE DIRECT THE ASSESSING OFF ICER TO FOLLOW OUR FINDING RECORDED IN PARA-30 OF THIS ORDER. WE HOLD AND ORDER ACCORDINGLY. THE GROUNDS TAKEN BY THE ASSESSEE ARE THEREFO RE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 34. IN THE RESULT THE ASSESSEE'S APPEAL IN ITA NO.6299/M /2009 FOR ASSESSMENT YEAR 2003-04 IS PARTLY ALLOWED AND APPEALS IN ITA NOS.6300/M/2009 AND 6301/M/2009 FOR ASSESSMENT YEARS 200 4-05 AND 2005-06 RESPECTIVELY ARE PARTLY ALLOWED FOR STATI STICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30.7.2010. SD/- SD/- (A.L. GEHLOT) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 30.7.2010. JV. ITA NO.6299 6300 & 6301/M/09 A.Y:03-04 04-05 & 05-06 16 COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT(A) CONCERNED MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI.