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2017 (2) TMI 730 - ITAT AHMEDABAD

2017 (2) TMI 730 - ITAT AHMEDABAD - TMI - Addition u/s 145A - Assessee is valuing closing stock after excluding the tax, duty and cess etc. and thus violating the provisions of section 145A - Held that:- In the process of manufacturing assessee purchases goods from within the State and outside the State due to which VAT credit is available for VAT paid goods purchased from within the State and Central Sales Tax is paid from outside State goods which are included in the purchases itself. Assessee .....

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d closing stocks exclusive of taxes. Further assessee is applying the Accounting Standards framed by the Institute of Chartered Accountants of India which are required to be followed for preparing financial statements as per the Companies Act. It is not disputed that as per the provisions of section 145A of the Act opening and closing stocks should be inclusive of taxes but due to the type of business and variety of stocks, assessee is unable to do so. However, it is a fact that there is no nega .....

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llowed by the assessee without valid reasons. We also observe that during the course of assessment proceedings as well as appellate proceedings it was submitted by assessee that it was paying excise duty on concessional rate and was not taking any benefit of CENVAT which itself is a plausible explanation which remains uncontroverted. Since CENVAT is not available to the assessee then the enhancing the value of semi finished and finished goods in the closing are not warranted. - Decided in favour .....

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ution fo PF is deposited after the due date then assessee will not be entitled to deduction against the income. Accordingly, this ground of the Revenue is allowed. - Additional deduction claimed u/s.80lB - Held that:- Assessing Officer has not objected to the revised quantum of deduction claimed by assessee at ₹ 65.58,922/- which as per assessee was the correct and legitimate amount as per the provisions of section 80IB of the Act. Ld. Assessing Officer has merely disallowed the claim .....

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rting before ld. Assessing Officer and the same should have been allowed to the assessee. CIT(A) has rightly allowed the revised claim of assessee u/s 80IB of the Act at ₹ 65,58,922/-. We therefore, find no reason to interfere with the order of ld. CIT(A). We uphold the same. This ground of Revenue is dismissed.- Decided in favour of assessee. - Addition for alleged unreconciled credit differences - Held that:- As wherein regular books of accounts are maintained and the same are not re .....

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Respondent : Shri Aseem Thakker, AR ORDER PER BENCH. This appeal of Revenue for Asst. Year 2009-10 and the Cross Objection of the assessee are directed against the order of ld. CIT(A)- XI, Ahmedabad, dated 31.03.2013 vide order No.CIT(A)-XI/374/ACITCir. 5/11-12, arising out of the order u/s 143(3) of the IT Act, 1961 (in short the Act) framed on 22.12.2011 by ACIT, Circle-5, Ahmedabad. 2. Briefly stated facts of the case as culled out from the records are that assessee is a limited company enga .....

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statements, Tax Audit Report and enclosures. The assessment was completed assessing the income at ₹ 1,78,79,354/- after making additions of 46,04,094/- on account of following :- Preliminary Expenses (Para.3) 113068 Adjustment u/s 145A(Para.4) 3184930 Employees contribution to PF (Para 5) 9278 Sticky Creditors (Para.6) 148310 Outstanding Professional Tax (para.7) 44220 Outstanding Sales Tax (Para.8) 63060 Un-reconciled Credit differences (Para.9) 341228 46,04,094 3. Aggrieved, assessee we .....

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mployees contribution to the Provident Fund. . . . iii) The CIT(A) has erred in law and on facts in allowing the additional deduction claimed u/s.80lB of ₹ 11,22,920/- of ; the vAssessee which was rejected by the A.O. in the assessment order. ...... iv) On the facts and circumstances of the case, the Ld. Commissioner of Income tax (A) ought to have upheld the order of the Assessing Officer. v) It is, therefore, prayed that the order of the Ld. Commissioner of Income tax (A) may be set-asid .....

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r the purpose of valuation of closing stock, all taxes paid or incurred to bring the goods to the place of location are to be included which the assessee has admittedly not done. It was submitted by assessee before ld. Assessing Officer that assessee is purchasing goods from within the State and outside the State and manufacturing goods.VAT credit is claimed on goods purchased from within the State and in some other categories of goods CST has been paid. On account of these reasons it is not pos .....

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377; 243,413,742/- as against closing stock of ₹ 240,228,812/- shown by the assessee. 7. In the appeal before first appellate authority the impugned addition was deleted. 8. Before the Tribunal, ld. Departmental Representative (DR) submitted that assessee should have adhered to the provisions of section 145A of the Act including the taxes, cess, duties on the goods forming part of closing stock and, therefore, ld. Assessing Officer has rightly made the addition. 9. On the other hand, ld. A .....

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ation has been done under the compliance of Accounting Standards prescribed by the Institute of Chartered Accounts of India which are to be followed for preparing financial statement as per the Companies Act. Stocks are valued excluding tax and duties. However, in any case it would not have any impact on the total income of the assessee company as all VAT credit purchases are debited to purchases exclusive of taxes and opening stocks have also been valued excluding taxes. 10. Ld. AR further subm .....

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tly verified the fact with various suppliers by issuance of letters u/s 133(6) of the Act. Reliance was placed on the decision of the Co-ordinate Bench in the case of ACIT(OSD) Circle-5, Ahmedabad vs. Puneet Industries Pvt. Ltd. in ITA No.1443/Ahd/2012 for Asst. Year 2006-07 dated 10.06.2016 and another decision of the Co-ordinate Bench in the case of ACIT, Circle-1, Surat vs. M/s Kirant Industries Pvt. Ltd. in ITA No.1450/Ahd/2012 & CO No.135/Ahd/2012 for Asst. Year 2005-06 vide order dated .....

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rom within the State and outside the State due to which VAT credit is available for VAT paid goods purchased from within the State and Central Sales Tax is paid from outside State goods which are included in the purchases itself. Assessee is also covered under the Excise Act and was enjoying concessional rate of excise duty to be leviable on the goods manufactured. Closing stocks of the assessee constitutes raw material, packing material, consumable stores purchased from within and outside the S .....

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that as per the provisions of section 145A of the Act opening and closing stocks should be inclusive of taxes but due to the type of business and variety of stocks, assessee is unable to do so. However, it is a fact that there is no negative impact on the revenue as both the opening and closing stocks are valued exclusive of taxes and, therefore, closing stock for the year under appeal which is excluding of taxes will become opening stock for next year. 11.1 We further observe that Hon. Jurisdi .....

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arising or accruing where the valuation is made and valuation of unsold stock is necessary part of the process of determining trading results but it can in no sense be regarded as source of such profit. 11.2 We also observe that during the course of assessment proceedings as well as appellate proceedings it was submitted by assessee that it was paying excise duty on concessional rate and was not taking any benefit of CENVAT which itself is a plausible explanation which remains uncontroverted. S .....

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f this order is reproduced as under ;- '7.2 / have carefully considered the rival submissions. I have also perused various case laws relied upon by the appellant. Taking the entirety of facts and position of few in view, I am inclined to agree with the submissions of Ld. A.fr for the following reasons:- (a) The A.O. has not commented on the accounting policies followed by the appellant. The policy of valuation of closing stock is consistently followed by the appellant in the previous years a .....

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does not arise out of valuation of closing stock and situs of its arising or accruing where the valuation is made and valuation of unsold stock is necessary part of the process of determining trading results but it can in no sense be regarded as source of such profit. (c) It is clearly held in the case of CIT v/s. Ahmedabad New Cotton Mills reported at 4 ITC 245 that when the opening and closing stock of business are both undervalued, if the method of alteration of both valuation is not adopted, .....

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ings submitted that it was paying excise duty at a . concessional rate and accordingly it was not entitled to take benefit of CENVAT credit This is d plausible explanation given by the appellant which remain uncontroverted. In my considered view, since CENVAT benefit is not available to the appellant, accordingly the value of raw material, semi finished goods and finished goods on account of CENVAT in the closing stock is not warranted. (e) The appellant has also submitted during the appellate: .....

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there is justification for making assumption that excise duty was paid on raw material and stores and packing material and making a corresponding enhancement in the valuation of raw material and stores and packing items in the closing stock is not tenable. In view of the above facts, I am not convinced about the maintainability of addition of ₹ 41,97,900/- in valuation of closing stock. The A. O. is directed to delete addition of ₹ 41,97,900/-. This ground of appeal is allowed." .....

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dgment of Hon. Supreme Court in the case of CIT vs. Indo Nippon Chemicals Co. Ltd. (2003) 261 ITR 275 (SC) and the Bench dismissed the appeal of Revenue by observing as under :- 3. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The issue in the present case is with respect to inclusion of unutilized CENVAT credit to the closing stock. We find that Id.CIT(A) while deleting the addition has given a finding that th .....

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VAT credit. Further, before us, Revenue has not brought any contrary binding decision in its support. In view of the aforesaid facts, we do not see any reason to interfere with the order of the Id.CIT(A). Thus, the ground of Revenue is dismissed. 12. Respectfully following the decision of Co-ordinate Bench and in the totality of facts and circumstances of the case and our discussion in the preceding paragraph, we are of the view that no addition of ₹ 31,84,930/- was called for u/s 145A of .....

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n. Jurisdictional High Court in the case of CIT vs. Gujarat State Road Transport Corporation (GSRTC) 366 ITR 170 (Guj) wherein held that the employees contribution to PF if paid beyond due date it should be disallowed as the assessee was not entitled to its deduction against the income referred in section 28 of the Act. 15. Ld. AR could not controvert the submissions made by ld. DR. 16. We have heard the rival contentions and perused the material placed before us. The issue raised in this ground .....

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Revenue reads as under :- iii) The CIT(A) has erred in law and on facts in allowing the additional deduction claimed u/s.80lB of ₹ 11,22,920/- of ; the Assessee which was rejected by the A.O. in the assessment order. 18. Brief facts relating to this ground are that the assessee which is undisputedly eligible for claiming deduction u/s 80IB of the Act and it claimed ₹ 54,36,002/- in the return of income. However, this deduction was revised to 65,58,922/- during the course of assessme .....

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(A). 19. Aggrieved, Revenue is now in appeal before the Tribunal. 20. Ld. DR supported the order of Assessing Officer. 21. On the other hand, ld. AR submitted that there is no dispute that the assessee is entitled to deduction u/s 80IB of the Act ₹ 54,36,002/- claimed by the assessee. There is no new claim rather the claim made u/s 80IB was revised and a correct claim of deduction u/s 80IB in accordance with the provisions of the Act was made. It is significant to mention that ld. Assessin .....

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tted that the Hon. Supreme Court in numerous decisions including Ramlal and Ors. Vs. Rewa Coalfields Ltd., AIR 1962 SC 361, The State of West Bengal vs. The Administrator, Howrah Municipality and Ors., AIR 1972 SC 749 and Babumal Raichand Oswal vs. Laxmibai R. Torte, AIR 1975 SC, 1297 stated that the State authorities should not raise technical pleas if the citizens have a lawful right and the lawful right is being denied to them merely on technical grounds. The State authorities cannot adopt th .....

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e of assessment proceedings duly supported by necessary calculation and report of Chartered Account. Ld. Assessing Officer denied the additional deduction by taking a view that assessee should have revised the return which has not been done so. We further observe that ld. Assessing Officer has not objected to the revised quantum of deduction claimed by assessee at ₹ 65.58,922/- which as per assessee was the correct and legitimate amount as per the provisions of section 80IB of the Act. Ld. .....

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ect claim which has been put forward with due supporting before ld. Assessing Officer and the same should have been allowed to the assessee. 22.1 We observe that ld. CIT(A) has allowed assessee s claim of additional deduction of ₹ 11,22,920/- in a right perspective by observing as follows :- 10.3 I have carefully considered the rival contentions. It is seen that in the original return the appellant has claimed deduction u/s,80IB of ₹ 54,36,002/-. This deduction was revised to ₹ .....

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ecord clearly indicate that the appellant has made claim for deduction u7s.80IB in the original return and it was revised during the assessment proceedings. Since the appellant has not made a fresh claim of deduction u/s.80IB during the assessment proceedings, accordingly, I am of the considered opinion that ratio of Goetz India Ltd. (supra) will not be applicable. Secondly, the Hon'ble Supreme Court in Goetz India Ltd. (supra) had curtailed the powers of the Assessing Authority, however, po .....

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rightly placed reliance on S.R. Koshti vs. CIT 276 ITR 165 (Guj.). In view of above, I am of the considered opinion that the ratio of Goetz India Ltd. (Supra) will fist be attracted in this case and accordingly, the A.O. is directed to accept the revised deduction claimed u/s.80IB of ₹ 65,58,922/-. This ground of appeal is allowed. 23. We are therefore, of the view that ld. CIT(A) has rightly allowed the revised claim of assessee u/s 80IB of the Act at ₹ 65,58,922/-. We therefore, f .....

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ital expenditures which has been claimed by the Respondent u/s.35D of the I.T.Act,1961. 2. The learned Commissioner of Income Tax (Appeals) has erred in confirming the addition of ₹ 1,48,310/- made by the Assessing Officer u/s.41(l) of the I.T. Act, 1961 on account of outstanding Creditors in the name of Option Engineering. 3. The learned Commissioner of Income Tax (Appeals) has erred in confirming the disallowance made by the Assessing Officer of ₹ 44,220/- u/s.43B of the I. T. Act, .....

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leged un-reconciled Credit differences. The Respondent craves leave to add, alter, amend or modify any of the grounds of Cross Objections on or before the date of hearing. 26. At the outset ld. counsel for the assessee requested for not pressing ground nos. 1 to 4. We accept the request and dismiss these grounds as not pressed. 27. Ground no.5 reads as under :- 1. The learned Commissioner of Income Tax (Appeals) has erred in confirming the addition of ₹ 3,41,228/ - made by the Assessing Of .....

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7; 3,41,228/- which was primarily due to the fact that the assessee has issued credit notes for outstanding which did not find place in the account of the other party and, therefore, ₹ 3,41,228/- was added to the income of assessee. 30. Appeal against this addition before ld. CIT(A) could not bring any relief as it was dismissed by ld. CIT(A) observing as follows :- 9.2 I have carefully considered the rival contention?,. It is seen that the appellant during the year under consideration had .....

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The books of accounts are duly audited and the auditors had not made any adverse observation. Taking entirety of facts in view, I am not inclined to agree with the contentions of Ld. A.R. The facts available on record clearly indicate that all the parties to whom credit notes were issued has not accounted for these credit notes. The only logical inference that can be derived from this fact is that the appellant has issued these credit notes for his internal use and the parties from whom purchase .....

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ooks of assessee are audited u/s 44AB of the Act and ld. Assessing Officer has not rejected the books of account nor has rejected the Tax Audit Report. The difference in the balance sheet with the alleged 7 parties was only on account of credit notes issued by the assessee and such notes are not found in the accounts of the opposite party the assessee cannot be faulted for the same. Further no enquiry has been made with respect to these parties for not recording credit notes. There is no allegat .....

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s objection against the order of ld. CIT(A) for confirming the addition of ₹ 3,41,228/- for alleged unreconciled credit differences of ₹ 3,41,228/-. We find that the difference of ₹ 3,41,228/- arose in respect of following 7 parties :- Sr No. Name of party Difference 1 Gayatri Tading Company -85965 2 Kanak Tiles Sanitary -166172 3 Shanti Suri Securities Pvt Ltd. -61595 4 Shrinat Mining Works -15548 5 Granito marketing -9999 6 Panchratna Marbles -1309 7 Ratanlal & Co. Ghazia .....

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so been accepted by him. Assessee is registered under the Excise as well as VAT and statutorily required to file monthly/quarterly statement and all these facts are not disputed. Issuing of credit notes is a normal business activity and arose on account of defective material, change of rates etc. and is a ongoing process. Even from going through the amount of difference which in the case of Panchratna Marbles is ₹ 1309/-, Granito Marketing ₹ 9999/-, Gayatri Trading Co.85965/- and oth .....

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