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TMI Blog2016 (3) TMI 444X X X X Extracts X X X X X X X X Extracts X X X X ..... made on account of adjustment due to deviation u/s 145A of the I.T. Act. 2. On the facts and circumstance of the case and in law the Ld. CIT(A) erred in deleting the books adjustment u/s 145A of the I.T. Act. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the Assessing Officer. 4. It is, therefore, prayed that the order of the CIT(A) may be set aside and that of Assessing Officer may be restored to the above extent. 2. The brief facts of the case are that the assessee is a firm, engaged in the business of manufacturing and sale of grey cloth. The original return was filed on 21.07.2005 at a total income of Rs. 1,03,76,430/- along with tax audit report u/s 44AB of the Act. The s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the amount of sales reflected in the P & L a/c was net of discount and "goods return", and the amount of sales reflected in the P & L a/c was at sale price including excise duty on clearance, and, therefore, the amount of excise duty was not deducted from sales, but was reflected on the expense side as excise duty expenses, which effectively means, the sale was shown exclusive of excise duty, however, the presentation was different, as the amount of excise duty has been shown separately, instead of netting it off from the amount of sales. The assessee further submitted that the total amount of excise duty included in purchases has been shown separately under Cenvat Credit availed account, and the total amount of excise duty paid on cleara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04.1999 onwards every assessee has to follow inclusive method of accounting, and by not mentioning the amount of excise duty paid on purchases and sales, the assessee has not given clear picture of exact amount of excise paid on purchases and collected from sales, instead it chose to show piece meal information. The Assessing Officer, accordingly, held that the surrender of excise registration on 04.10.2004, and lifting of the excise duty on textile products, has no effect of excise duty on the valuation of closing stock and, whatever the excise duty has been paid by the assessee has been accounted for in the form of Cenvat credit availed, and was utilized by setting off excise duty payable on sales. The Assessing Officer has also held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore us relates to accounting entry made for adjustment of element of excise duty in the closing stock u/s 145A of the Act. As discussed above, the assessee was engaged in the business of manufacturing and sale of grey cloth. The excise duty on sale of grey cloth, came to be levied with effect from 01.4.2003 onwards whereas, section 145A of the Act, which brought amendment that the valuation of purchase and sale of goods and Inventory for the purpose determining the income chargeable under the head profit and gains of business or profession shall be (i) in accordance with the method of accounting regularly employed by the assesses, and (ii) amount of any tax, duty, cess or fee actually paid or incurred by the assessee to bring the goods to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e filed along with the return of income for the year under consideration, the above said amount has been reduced for the purpose of adjustment u/s 145A of the Act. The Assessing Officer has considered the same as claim of deduction. The said impression of the Assessing Officer was for the reason that net effect of increasing the opening stock and the closing stock by the value of excise stock shall be nil. However, w.e.f. 04.10.2004, the assessee surrendered its excise registration, which meant that the assessee was not availing Cenvat Credit. The assessee has also enclosed Annexure-2 with the computation of income filed alongwith the return of income for the year under consideration, which is placed on record, wherein it has shown that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .e.f. 04.10.2004, no cenvat credit was available at the end of the year, the closing stock has been valued at cost or market value whichever is lower. Therefore, it was the presentation made by the assessee which gave the impression that profit has been reduced by Rs. 35,16,309/-. If the assessee had not separately carried out the above adjustment u/s 145A of the Act in the statement of income and had given the above effect in the P & L a/c., then also the business profit would have been Rs. 1,03,82,028/- and not Rs. 1,38,98,337/-. The action of the Assessing Officer in adding back the amount of Rs. 35,16,309/- means the above amount was not utilized by the assessee and remained at the end of the year was not correct. In view of the above d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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