TMI Blog2016 (3) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... d:- 12-2-2016 - Shri Anil Chaturvedi, A. M. And Shri S. S. Godara, J.M. For the Appellant : Shri P. M. Mehta with Shri G. M. Thakor, A.R. For the Respondent : Shri Keyur Patel, Sr. D.R. ORDER Per Anil Chaturvedi, Accountant Member This appeal filed by Assessee is against the order of CIT(A)-6, Ahmedabad, dated 01.09.2011 for the assessment year 2008-09. 2. The relevant facts as culled out from the materials on record are as under: 3. The Assessee is a partnership firm stated to be engaged in the business of manufacturing and trading of ferros and non-ferros metals. Assessee filed its return of income for A.Y. 2008-09 on 12.09.2008 declaring total income at ₹ 24,80,190/-. The case was selected for scrutiny and thereafter assessment was framed u/s.143(3) of the Act vide order dated 30.11.2010 and the total income was determined at ₹ 78,96,870/-. Aggrieved by the order of Assessing Officer, Assessee carried the matter before the ld. CIT(A) who vide order dated 01.09.2011 dismissed the appeal of the assessee. Aggrieved by the order of ld. CIT(A), Assessee is now in appeal before us and has raised the grounds which were later concised and the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing Exclusive method of accounting for accounting of excise duty which is in line with the Accounting Standards issued by the Institute of Chartered Accountant was not found acceptable to the A.O. He was of the view that MODVAT credits should have been included to the value of closing stock. He, accordingly, added ₹ 54,16,674/- being the balance of MODVAT credit to the total income of the assessee. 5. Aggrieved by the order of Assessing Officer, Assessee carried the matter before the ld. CIT(A) who upheld the action of A.O. by holding as under: 3.3 I have considered the facts of the case, assessment order and appellant's submission. As per provisions of section 145A, the assessee is required to add excise duty, tax, cess etc in the raw material, in goods in process and finished goods. If the assessee is following exclusive method of accounting, then in the tax audit report, it is required to give an adjustment sheet and by all these taxes is required to be added and the deviation if any has to be added in the computation of income. The assessee has admitted that it has never followed the provisions of section 145A. It is stated that the assessee has no option ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year. The decisions of tribunals relied upon by the assessing officer and quoted in para-3.1 above, it is clear that the adjustment on account of section 145A will result in addition in first year. However in subsequent years the effect of inclusion method will be tax neutral. In the first year, the addition on account of tax and duty is to be made and the same is sustainable. Considering this and respectfully following the decisions relied upon by the assessing officer which are directly applicable to the facts of the case, the addition on account of adjustment under section 145A is confirmed. Appellant submitted that assessing officer made the addition of gross profit instead of modvat credit; in this regard AO is directed to make the addition of correct figures. 6. Aggrieved by the order of ld. CIT(A), Assessee is now in appeal before us. 6.1 Before us, ld. A.R. reiterated the submissions made before the Assessing Officer and ld. CIT(A) and further submitted that assessee is consistently following the method of accounting under which the entire amount of excise duty incurred during year for which assessee is entitled to get MODVAT credit is debited to MODVAT credit re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nate Bench of Tribunal by holding as under:- 3. We have considered the submissions of the Ld. D.R. and have gone through the material on record and the orders passed by authorities below. We find that there is submission of the assessee before the authorities below that while the entire amount of excise duty realized on sales was included in the sale amount but out of entire amount of excise duty paid on purchases, only that portion of such excise duty paid which was utilized by way of MOD VAT, had been included in the value of purchases and the balance amount of Modvat credit which could not be utilized in the present year was shown in the balance sheet as an amount receivable and this portion of Rs.l1,25,3427- was not included in the value of purchases. Ld. D.R. could not controvert these submissions of the assessee made by the assessee before the authorities below. Once it is accepted that these submissions of the assessee are correct, it means that excise duty paid but not included in the purchases was shown in the balance sheet as excise duty receivable and therefore, there cannot be a reason to make any addition in the income of the assessee because even if we include s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... closing stock at the end of the relevant accounting period had been paid in the subsequent year before_the due date of filing of the return of income and that was how the amount was available considering the fact that the assessment had been framed and the show-cause notice was issued much after the close of the accounting year; (b) The Assessing Office had not had recourse to sub-section (3) of section 145 of the Act. The assessee was following the mercantile system of accounting but it was not the case of the assessing Officer that the Assessing Officer was not in a position to deduce true profits of the year under consideration. Such duty of Central excise if added to enhance the value of closing stock would result in enhanced opening stock on the first day of the next accounting period, namely, April 1, 1997. So the next year's profits would get depressed accordingly, over a period of time the whole exercise would even out, in other words, be revenue natural. At the same time while disturbing the value of the closing stock the assessing authority could not change the method of accounting regularly employed. (c) The assessment year being 1997-98 the provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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