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Income-Tax Officer Versus M/s Murli Fabrics

2015 (5) TMI 180 - ITAT AHMEDABAD

Disallowance of unutilized MODVAT/CENVAT Credit - unutilized MODVAT/CENVAT credit was required to be included in the total income of the assessee - Failure to substantiate the reason for not doing do - Held that:- Assessing Officer had taken debit balance entry of MODVAT/CENVAT credit, as credit balance. Assessee is debiting its purchases and crediting sales, inclusive of MODVAT and is also following the method of valuing its closing stock with the MODVAT amount. Balance appearing in the MODVAT .....

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payment on manufactured cloth from the MODVAT account, assessee has not been able to set off the above receivable account against any payment of excise duty under the MODVAT scheme. The purchases which have been debited in the P & L account alongwith MODVAT account and appearing in the closing stock are also with MODVAT account. Thus, no adjustment u/s. 145 was required to be made. Accordingly, CIT(A) was justified in deleting addition of ₹ 14,32,533 - MODVAT credit was an irreversible cr .....

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has been filed by Revenue against the order of Commissioner of Income Tax (Appeals)-II, Surat, dated 30.06.2011 for A.Y. 2005-06 on the following grounds. "1. On the facts and circumstance of the case and in law, the Ld. CIT(A)-II, Surat, has erred in deleting the addition of ₹ 14,32,533/- towards unutilized MODVAT/CENVAT without noting the facts that unutilized MODVAT/CENVAT credit was required to be included in the total income of the assessee and the assessee failed to substantiate .....

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and therefore, added the same after rejecting the objection on behalf of assessee. 2.1 Matter was carried before the First Appellate Authority, wherein various contentions were raised on behalf of assessee and having considered the same CIT(A) has deleted the addition. 2.2 Same has been opposed before us on behalf of Revenue inter alia submitted that CIT(A) erred in deleting addition of ₹ 14,32,533/- towards unutilized MODVAT/CENVAT credit without noting the facts that unutilized MODVAT/CE .....

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) be upheld. 2.3 After going through rival submissions and material on record, we find that Assessing Officer had taken debit balance entry of MODVAT/CENVAT credit, as credit balance. Assessee is debiting its purchases and crediting sales, inclusive of MODVAT and is also following the method of valuing its closing stock with the MODVAT amount. Balance appearing in the MODVAT receivable under account was on account of fact that while excise duty on purchases of input (yarn) was 12%, which was ava .....

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