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DCIT, Circle-2, Surat Versus M/s. Balvant Lallubhai Rotliwala

2016 (3) TMI 444 - ITAT AHMEDABAD

Addition made on account of adjustment due to deviation u/s 145A - accounting entry made for adjustment of element of excise duty in the closing stock u/s 145A - Held that:- Since the payment of excise duty on grey cloth had to be made w.e.f. 01.4.2003, the assessee had to make adjustment on account of valuation of grey cloth as at the end of the year. Assessee carried out this exercise in the computation of income, wherein the assessee made addition of ₹ 35,16,309/- u/s 145A of the Act. T .....

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ise duty paid on the same.

In the computation of income 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. 04.10.20 .....

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ideration. Thus, there is no confusion that whatever is added to the closing stock in any year, automatically becomes the opening stock in the next year, and it is precisely what the assessee has done u/s 145A of the Act, as far as the amount of ₹ 35,16,309/- is concerned. CIT(A) rightly deleted the addition - Decided against revenue

Whether any excise duty is deemed to be added to the closing stock of the assessee? - Held that:- When because of surrender of excise registration .....

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8377; 1,03,82,028/- and not ₹ 1,38,98,337/-. The action of the Assessing Officer in adding back the amount of ₹ 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 discussion, the CIT(A) was justified in deleting the amount of ₹ 35,16,309/- made by the Assessing Officer u/s 145A of the Act.- Decided against revenue - ITA No. 1885/Ahd/2011 - Dated:- 1-2-2016 - SHRI SHAILENDRA KUMAR YADAV, J .....

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16,309/- 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 fa .....

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y making adjustment u/s 145A of the Act, which is not permissible, as even the guidance note on tax audit report u/s 44AB of the Act, provides that there is no effect on closing stock u/s 145A of the Act. In response to aforesaid notice, the assessee sought reasons for reopening of the assessment, which was duly provided by the Assessing Officer vide letter dtd.29.062010. Subsequently, the Assessing Officer issued notice u/s 142(1) of the Act, alongwith questionnaire. After due consideration of .....

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equired to be made to the profits declared, why adjustment of ₹ 35,16,309/- by way of deduction, may not be disallowed. In response to the said show cause, the assessee submitted that it was following exclusive method of accounting for valuation of stock and 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 .....

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duty paid on clearance of goods has been paid by utilization of Cenvat Credit availed account and payment of duty through PLA. It was thus stated that the firm has discharged liability of payment of excise duty by availing Cenvat Credit and by payment through TR-6 challan which was verifiable from the quarterly ER-3 forms submitted to the Excise department. The assessee's claim, therefore, was that since the total amount of excise duty has been paid before filing of return of income, the sa .....

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d system accounting, and it was only on account of change in law that the effect of Cenvat has been taken till the date of surrender of license. The Assessing Officer did not accept the above submission of the assessee on the ground that the firm was neither following exclusive method, nor inclusive method in accounting for the taxes paid and has itself admitted that it was following hybrid method which is not prescribed in any accounting standards, whereas with the introduction of section 145A .....

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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 the assessee has squared up the notional book entry, which has resulted due to his own method of accounting and does not qualify the laid down accounting standards. He has finally concluded that the impact of deviation as per sec .....

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re raised on behalf of the assessee and having considered the same, the CIT(A) granted relief to the assessee which has been opposed before us by the Revenue inter alia submitting that the CIT(A) erred in deleting the addition of ₹ 35,16,309/- made on account of adjustment due to deviation u/s 145A of the Income-tax Act and the CIT(A) also erred in deleting the books adjustment u/s 145A of the Act. Accordingly, the Departmental Representative pleaded that the order of the CIT(A) may be set .....

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. 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 asses .....

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ssessment year 2004-05. Therefore, in the assessment year 2004-05, the assessee followed the same method of accounting it had been following over the years. However, since the payment of excise duty on grey cloth had to be made w.e.f. 01.4.2003, the assessee had to make adjustment on account of valuation of grey cloth as at the end of the year. Assessee carried out this exercise in the computation of income, wherein the assessee made addition of ₹ 35,16,309/- u/s 145A of the Act. The asses .....

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duty paid on the same. In the computation of income 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 .....

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there is no confusion that whatever is added to the closing stock in any year, automatically becomes the opening stock in the next year, and it is precisely what the assessee has done u/s 145A of the Act, as far as the amount of ₹ 35,16,309/- is concerned. 5. In view of above discussed, we are not inclined to interfere with the findings of the CIT(A) who has rightly deleted the addition of ₹ 35,16,309/- and the same is upheld. 6. Next issue is with regard to whether any excise duty .....

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