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TMI Blog2018 (1) TMI 936X X X X Extracts X X X X X X X X Extracts X X X X ..... ial year 2006-07. The Assessing Officer made the impugned addition in assessment order dated 29.01.2015 after including that the impugned liability had ceased to exist u/s.41(1) of the Act since the relevant time limitation under the Limitation Act, 1963 in Part-1, Division-I had expired much earlier. He therefore made the addition in question. 3. The CIT(A) reverses Assessing Officer's action as follows: "4.3. I have carefully considered the assessment order and submission filed by appellant. The Assessing Officer has observed that appellant has shown outstanding liability in the name of various parties for a period exceeding three years and same has not been paid off even after lapse of three years which means that liability has ceased to exist as per Part 1 of Division 1 of the Limitation Act 1963. The Assessing Officer has referred to provisions of section 41(1) of the Act and contended that where some benefit in respect of trading liability has been obtained by assesses, it shall be deemed to be profits and gains of business & profession. On the other hand, appellant has argued that as appellant has not written back above liability in its books of account and continued to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve various opportunities to assesses to furnish details of such creditors, viz., confirmation as well as creditworthiness but assessee failed to produce necessary information and details in that regard - Assessing Officer thus made an addition under section 41(1) in respect of aforesaid liabilities - On further appeal, Tribunal deleted addition on ground that assessee had continued to show admitted amounts as liabilities in its balance sheet and thus it could not be treated as a case of cessation of liabilities - Whether merely because liabilities were outstanding for last many years, it could not be inferred that said liabilities had ceased to exist - Held, yes - Whether even otherwise, since assessee had continued to show admitted amounts as liabilities in its balance sheet, Tribunal was justified in deleting impugned addition made by Assessing Officer - Held, yes [In favour of assessee]" Following the decisions of Hon'ble Gujarat High court referred supra, disallowance made Assessing Officer u/s 41(1) for Rs. 2,15,000/- is deleted. This Ground of appeal is allowed. 4. We have heard rival contentions reiterating both parties' respective stands. There is not dispute that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant carefully. In the assessment order A.O has observed that the appellant has not taken into consideration the credit of VAT of Rs. 27,99,678/- in valuing the closing stock. The provisions of Section 145A(a)(ii) of the Act stipulates that the valuation of purchase and sale of goods and inventory for the purpose of determining the income chargeable under the head profit & gains of business or profession shall be further adjusted to include the amount of any tax, duty, cess or fee actually paid or incurred by the assessee to bring the goods to the place of its location and condition as on date of valuation. The assessee has not valued the closing stock as per inclusive method as required u/s. 145A of the Act, the amount of Rs. 27,99,678/- is added to the total income of the assessee. The appellant has submitted that such duty of VAT if added to enhance the value of closing stock would result in enhanced opening stock on the first day of the next accounting period. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see had not debited any excise duty or sales-tax to the purchase account or P&L account and thus the question of including the excise duty in the value of stock does not arises at all. Further, as per provision of Section 145A, adjustment of duty tax cess etc. is not required to be made only in closing stock but also in Opening Stock Purchases and sales also which the AO has not done. Therefore, his own action is not in conformity with provision of Section 145A on which he has relied. Further, during the course of hearing, the AR also made an alternate argument that the closing stock would be opening stock in the succeeding year which would again reduce the profit in A Y 2013-14. Therefore, there would be no loss to revenue as such even if such amount is added in closing stock for AY 2012-13. The entire exercise of section 145A would be tax neutral; same has been duly shown and certified by the tax auditor in the reconciliation chart in the tax audit report. 6.5. I find that the appellant has submitted before the AO that while the entire amount of VAT realized on sales was included in the sale amount but out of entire amount of excise duty paid on purchases, only that portion ..... X X X X Extracts X X X X X X X X Extracts X X X X
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