2017 (12) TMI 1562 - AT - Income Tax

Valuation of stock - Disallowance made under section 145A - Held that - assessee has been consistently accounting for the raw material and other inputs purchased as per exclusive method i.e. billed cost minus amount of input tax credits - as per section 145A the purchases would have to be adjusted for the duty/tax credits and correspondingly unconsumed stock of materials would also be valued at billed cost - parity is to be maintained - thus even if inclusive method of accounting is followed there would not have been any impact on the profit - appeal filed by revenue is dismissed - Decided in favor of assessee.

Summary

Issues: Revenue's challenge to deletion of addition under section 145A of the Income Tax Act, 1961

Detailed Analysis:

1. Issue: Correctness of the CIT(A)'s order
- The Revenue challenged the correctness of the order of CIT(A)-8, Ahmedabad dated 08.12.2014 regarding the assessment year 2011-12.

2. Issue: Addition made under section 145A of the Income Tax Act
- The Assessing Officer made an addition of &8377; 76,66,255/- as the assessee did not include the amount receivable on account of unutilised/closing balance on account of MODVAT/CENVAT credit in the value of closing stock, invoking section 145A of the Act.

3. Issue: CIT(A)'s decision on the addition
- The CIT(A) found that the assessee's accounting method, crediting MODVAT/CENVAT separately and not charging it to the Profit & Loss Account, was in line with ICAI guidelines. Therefore, the CIT(A) directed the Assessing Officer to delete the addition.

4. Issue: Appeal by the Revenue
- The Revenue, aggrieved by the CIT(A)'s decision, appealed before the Appellate Tribunal ITAT Ahmedabad. The Departmental Representative supported the Assessing Officer's findings, while the assessee's Counsel reiterated the submissions made before the lower authorities.

5. Issue: Tribunal's analysis and decision
- The Tribunal carefully considered the arguments and found merit in the assessee's contentions. It noted the consistent accounting method followed by the assessee and the impact of adjusting purchases for duty/tax credits on the valuation of unconsumed stock. The Tribunal observed that even if the inclusive method of accounting had been followed, it would not have affected the profit for the assessment year. Therefore, the Tribunal upheld the CIT(A)'s decision and dismissed the Revenue's appeal.

In conclusion, the Appellate Tribunal ITAT Ahmedabad upheld the CIT(A)'s decision to delete the addition made under section 145A of the Income Tax Act, 1961, based on the assessee's consistent accounting method and compliance with ICAI guidelines. The Tribunal found no reason to interfere with the CIT(A)'s findings, ultimately dismissing the Revenue's appeal.