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The ACIT, Circle-5 And Dy. CIT Circle3 (1) (1) , Ahmedabad Versus Prima Automation (I) Pvt. Ltd.

2017 (12) TMI 296 - ITAT AHMEDABAD

Addition in respect of under valuation of closing stock - Held that:- While it is the case of the Revenue that CENVAT credit of ₹ 59,30,117/- represents the part of the closing stock of the assessee in terms of section 145A of the Act, it is the case of the assessee, on the other hand, that the action of assessee is revenue neutral and there is no infringement of s.145A in essence. In this regard, we notice that the issue is no longer res integra and adjudicated in favour of the assessee i .....

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IT(A). The aforesaid view finds support from plethora of decisions including judgement of Hon’ble Bombay High Court in the case of CIT vs. Pruthvi Brokers & Shareholders Pvt.Ltd. [2012 (7) TMI 158 - BOMBAY HIGH COURT]. - We are not inclined at this stage to go into the merits of the claim of depreciation allowance. We set aside and restore the issue to the file of the AO for its de novo examination with a direction to allow the depreciation allowances in accordance with law regardless of its .....

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DIA - AM: The captioned appeals have been filed by the Revenue for Assessment Years (AYs) 2009-10 & 2010-11 against the separate orders of the Commissioner of Income Tax(Appeals)-XI, Ahmedabad [CIT(A) in short] dated 07/05/2012 & 10/09/2014 respectively in the matter of assessment orders passed under s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ). The assessee has also field Cross Objection No.195/Ahd/2012 relevant to AY 2009-10 as captioned above. 2. Both the .....

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raw-material lying in the closing stock in violation of Section 145A of the Act. The CENVAT amount attributable to closing stock of raw-material stands at ₹ 59,30,117/-. The AO accordingly added the aforesaid amount to the value of closing stock with reference to section 145A of the Act. Consequently, the taxable income to the assessee stood increased by the aforesaid amount. 6. In the first appeal, the CIT(A) however found merit in the contention of the assessee and deleted the aforesaid .....

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ock of the assessee in terms of section 145A of the Act, it is the case of the assessee, on the other hand, that the action of assessee is revenue neutral and there is no infringement of s.145A in essence. In this regard, we notice that the issue is no longer res integra and adjudicated in favour of the assessee in its own case in the preceding AY 2008-09 on similar facts. The relevant operative para of the order of the Coordinate Bench in ITA No.971/Ahd/2012(supra) order dated 24/05/2016 is rep .....

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be added to the value of the closing stock in view of the provisions of Section 145A of the Act. Assessee filed a detailed reply explaining that it is maintaining exclusive system of accounting in so far as CENVAT is concerned. It was explained that the CENVAT paid on purchases is debited in a separate account and not considered in the purchases and, therefore, it is not claimed as expenditure. It was further explained that even the opening stock is devoid of CENVAT, therefore, any adjustments .....

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ecisions, the ld. CIT(A) held as under:- 7.2 I have carefully considered the rival submissions. I have also perused various case laws relied upon by the appellant. On this issue I am inclined to agree with the submissions of the Id. A.R. for the following reasons :- (1) The appellant is following exclusive method of accounting. According to this method of accounting payment and receipt of CENVAT is a balance sheet item and it is not debited or credited in the P & L A/c. In this regard I am i .....

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years as well as in the succeeding years. The Hon'ble Gujarat High Court in the case of Voltamp Transformers Ltd. v/s. CIT (2008) reported on 217 CTR 254 has held that A.O. has got very limited powers to change valuation of closing stock. The A.O. cannot change method of accounting regularly followed by the assessee without valid reasons. (3) Hon'ble Supreme Court in the case of Chainrup Sampatram (1953) reported on 24 ITR 481 has clearly held that profits does not arise out of valuatio .....

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ofits which is brought forward is not real one. In such cases, the real profits of a particular year cannot be ascertained by merely raising value of closing stock, not taking into consideration the similar valuation of opening stock. As per the ratio of this case, enhancing the value of closing stock without giving corresponding effect to the valuation of opening stock is not proper. In view of the above facts, I am not convinced about the maintainability of addition of ₹ 51,59,563/- in v .....

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Having regard to the aforesaid view of the Coordinate Bench already taken in assessee s own case, we decline to interfere with the order of CIT(A). 11. In the result, Revenue s appeals in ITA No.1717/Ahd/2012 for AY 2009-10 & ITA No.3392/Ahd/2014 for Ay 2010-11 are dismissed. 12. Now we shall turn to Assessee s Cross Objection in CO No.195/Ahd/2012 (in Revenue s ITA No.1717/Ahd/2012) relevant to AY 2009-10. 13. The grounds of Cross Objection raised by the assessee read as under:- 1. The ld.C .....

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acts and submissions filed, the ld.CIT(A) ought to have allowed the depreciation claim of the appellant.\ 2.1. The learned CIT(A) further erred in not appreciating the fact that as per Explanation 5 of Section 32 of the Act, whether or not the assessee has claimed the deduction in respect of depreciation in computing his total income is immaterial and the same is allowable irrespective of such claim. 14. Ground No.1 was not pressed and therefore dismissed. 15. Ground No.2 concerns claims of depr .....

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t. The CIT(A) as well as the Tribunal has the power to make such enquiries as it thinks fit. The tax authorities are under duty to ensure that no tax which is not legitimately due from the assessee gets collected owing to mistake on the part of the assessee. The Revenue is under duty and obligation to act in a fair and non-partisan manner. The power available to the AO cannot be exercised in the manner which is most beneficial to the Revenue and consequently most adverse to the assessee by takin .....

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