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TMI Blog2024 (7) TMI 1374X X X X Extracts X X X X X X X X Extracts X X X X ..... not affording an opportunity for personal hearing before passing the impugned order. 3. That on facts and circumstances of the case and in law, the Ld. CIT(A) has erred in confirming that the total income of the Appellant is taxable at a higher tax slab of 30 percent when the total turnover / gross receipts of the Appellant did not exceed INR 250 Crores in FY 2016-17. 4. That on facts and in circumstances of the case and in law, the Ld. CIT(A) has erred in including the Excise duty, amounting to INR 28,93,19,463, as a part of the total turnover/gross receipts referred in Paragraph E of Part-I of the First Schedule of the Finance (No.2) Act, 2019. 5. That on the facts and in circumstances of the case and in law, the Ld. CIT(A) has erred in directing the Ld. AO to levy interest under Section 234C of the Income-tax Act, 1961. 6. That on the facts and in circumstances of the case and in law, the Ld. CIT(A) has erred in not allowing consequential interest on refund due under Section 244A of the Income-tax Act, 1961. 2.1 The assessee vide letter dated 21/03/2024 has also raised the additional ground of appeal, which is reproduced as under: "2. "That on the facts and circumstan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r u/s 154 was passed dated 22/12/2021 confirming the intimation processed u/s 143(1) of the Act dated 5/2/2021. 6. The assessee carried the matter before the ld. CIT(A) against the finding of the AO u/s 154 of the Act. The assessee before the ld. CIT(A) reiterated that the turnover of the assessee for the financial year 2016-17 does not exceed Rs. 250 crores and, therefore, the tax rate applicable to it stands @ 25% as provided under the First Schedule of Finance (No. 2) Act 2019. It was also pointed out by the assessee that the turnover does not include the amount of exercise duty for determining the tax rate applicable to it. It was also contended that the opportunity of personal hearing was not offered by the AO despite making the request for the same. However, the ld. CIT(A) found that the turnover of the assessee for the year in dispute exceeds Rs. 276 crores and, therefore, the assessee is liable to pay the tax @ 30% on its income. The ld. CIT(A) also observed that the word 'turnover' has nowhere been defined u/s 2 of the Act but dictionary meaning of 'turnover' includes the amount of sales as well as amount of tax leviable on the sales. As such, the ld. CIT(A) confirmed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the materials available on record. The provisions of section 143 (1) of the Act specifies making certain adjustments while processing the return of income. The controversy before us relates to the turnover declared by the assessee whether it should be inclusive of excise duty or not and whether such adjustment can be raised by the CPC in the intimation while processing the return of income under section 143(1) of the Act so as to find the rate of tax in pursuance to First schedule of Finance (No. 2) Act 2019 which is extracted as under: Paragraph E In the case of a company,- Rates of income-tax I. In the case of a domestic company,- (i) where its total turnover or the gross receipt in the previous year 2016-17 does not exceed two hundred and fifty crore rupees; 25 per cent of the total income; (ii) other than that referred to in item (i) 30 per cent of the total income. 12.1 As per the assessee the turnover for FY 2016-17 is Rs. 226.49 crore, which is less than 250 crores excluding excise which is also not disputed by the Revenue. But it is alleged by the revenue to include the excise duty as a part of the turnover in pursuance to the provisions of section 145A of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance with the method of accounting regularly employed by the assessee and such valuation shall be further adjusted to include the amount of any tax, duty, cess or fee (by whatever name called), actually paid or incurred by the assessee to bring the goods to the place of its location and condition as on the date of valuation. 12.3 Thus, from above CBDT circular, it is transpired that the purpose of the p rovision of section 145A was limited to the extent of valuation of opening and closing inventory to find out the income under the head profit and gains from Business & Profession. 12.4 Besides the above, it is also pertinent to note that the ICAI, while issuing guidance note on tax audit report under section 44AB of the Act, relevant para 5.5, has clarified if the assessee is following inclusive method of accounting, then the same i.e. excise duty should be part of the turnover and vice-versa if the assessee follows exclusive method of accounting i.e. that the taxes such as GST, Excise duty etc. collected from customers on behalf of Government is shown under separate account and payment of the taxes to government is debited in such separate account, then the value of taxes should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the customers in the capacity of an agent only and does not give any rise to the income to the assessee. The judgement of Hon'ble Supreme Court in the case of CIT vs. Lakshmi Machine Works reported in 290 ITR 667 has directed to exclude the excise duty from the amount of turnover. However, the judgment was in the context of deduction under section 80HHC of the Act. 12.9 Besides the above, we are also conscious about the fact that the excise duty is leviable on manufacturing of the goods and the rate of the same varies based on different goods being manufactured. There can be a situation where a company manufactures goods subject to excise duty at the rate of 5% whereas another company manufacturing other goods and excise duty is applicable on the same at the rate of 25% of the sales. Thus, in a situation where both the companies having exact amount of sales but because of different rate of excise duty their turnover can be of different amount and consequentially both the companies may fall under different tax bracket i.e. 25% or 30% as the case may be which does not appear to be in consonance with the intent of Article 14 of Constitution of India. 12.10 Based on the above discus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration for working out the tax rate applicable to the assessee. The relevant extract of the order of the ld. CIT-A is reproduced as under: 5.6.1. As may be seen from the ITR 6 dated 05.07.2020, e filed for the A.Y. 2019-20 by the Appellant, the total Revenue from operations is Rs. 276,06,54,019/-[more than 250 crores. The total Revenue from operations of Rs. 276,06,54,019/-, consists of the following: Sale of Goods Rs. 264, 83,89,539/- Sale of services Rs. 10,73,50,689/- Sale of Scraps Rs. 49,13,791/- As may be seen from ttR 6 dated 05.07.2020, e filed for the A.Y.2019-20 by the Appellant, u/s deduction u/s 80HHC has been claimed. 12.13 In view of the above and after considering the facts in totality, we are of considered opinion that the adjustment made by the revenue while processing the return of income under section 143(1) of the Act in the given facts and circumstances is not sustainable being an issue of debatable nature. Hence, we set aside the finding of the Ld. CIT(A) and direct the AO to delete the addition made by him. Thus, the ground of appeal of the assessee is hereby allowed. 13. In the result, the appeal filed by the assessee is partly allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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