2012 (12) TMI 813 - AT - Income Tax

Appeal partially allowed, issues 1 & 2 remanded, issues 3 & 4 decided for assessee. Order pronounced 08-06-2012.

The appeal was allowed in part, with issues 1 and 2 restored to the CIT for fresh examination, and issues 3 and 4 decided in favor of the assessee. The ... Disallowance of additional depreciation u/s 32(1)(iia) – Non submission of Form 3AA - AO argued that assessee having not fulfilled the mandatory requirements of Sec. 32(1)(iia) by filing a report of the accountant in Form No.3AA before completion of the assessment proceedings - Assessee contended that the report in Form 3AA was filed before the AO on 27-11-2006 before completion of the assessment proceedings – Held that:- In view of the dispute regarding filing of form No.3AA, we think it proper to restore the matter back to the file of the CIT who shall conduct an enquiry and find out as to whether in reality the assessee has filed Form 3AA on 27-11-2006 before the AO and if it is available on record. Issue remand back to AO Unexplained income – As per TDS certificates the total amount received was Rs.59,16,285 – TDS deducted amount Rs.12,12,839 - Assessee credited only an amount of Rs.55,32,097/- to its P &L account - CIT held that the difference of Rs.3,84,188/- escaped assessment – Held that:- As concluded from the facts it is seen from the final accounts which has been submitted before us that in Schedule XII, shown royalty and service charges at Rs.55.32 lakhs and the assessee has paid an amount of Rs.3,83,158 towards service tax. Therefore claim of the assessee needed to be examined again. Remand back to AO Validity of order u/s 263 passed by CIT - Issue already subject matter before CIT(A) - Deduction u/s 80HHC – Computation of export turnover - Whether Ocean freight included/excluded for arriving at Export turnover - AO held that the said freight is not deductible from the total turnover as the said turnover does not relate to the exports – Held that:- CIT has therefore no powers to exercise his jurisdiction with regard to the issue which is already subject matter of appeal before the CIT (A) in view of the provisions contained in section 263 (1)(c). Therefore we hold that the CIT ‘s direction to the AO to recompute the deduction allowable u/s 80HHC is legally unsustainable. In favour of assessee Addition of excise duty payable on finished goods - Assessee has to prepare P&L A/c as per section 145A of the Act by taking the value of excise duty component in finished goods of closing stock - finished goods have not been removed from the manufacturing point which could have attracted levy of excise duty – Held that:- when the stock of finished goods are still lying at the manufacturing point and has not been removed to the godown, there is no question of adding excise duty following the decision in case of D & H Secheron Electrodes (P.) Ltd. (2007 (11) TMI 546 - MADHYA PRADESH HIGH COURT). A similar view was taken by this Tribunal in the assessee's own case for the assessment year 2004-05. In favour of assessee Issues Involved:1. Disallowance of additional depreciation.2. Addition of differential amount of service charges.3. Recomputing deduction under section 80HHC after excluding ocean freight.4. Addition of excise duty payable on finished goods to the closing stock.Detailed Analysis:1. Disallowance of Additional Depreciation:The CIT disallowed the claim of additional depreciation amounting to Rs.2,83,94,760/- on the grounds that the assessee did not furnish the mandatory Form 3AA as required under section 32(1)(iia) of the IT Act. The assessee contended that Form 3AA was submitted on 27-11-2006 during the assessment proceedings. The Tribunal found a dispute regarding the submission of Form 3AA and restored the matter to the CIT for verification. If the form was indeed filed on 27-11-2006, the additional depreciation cannot be disallowed. This issue was allowed for statistical purposes.2. Addition of Differential Amount of Service Charges:The CIT directed the addition of Rs.3,84,188/- as the difference between the service charges received as per TDS certificates and the amount admitted by the assessee. The assessee explained that the difference was due to service tax included in the TDS certificate but not in the credited amount. The Tribunal noted that the CIT passed the order ex parte and restored the issue to the CIT for fresh examination after affording the assessee an opportunity to be heard. This issue was allowed for statistical purposes.3. Recomputing Deduction under Section 80HHC:The CIT directed the AO to recompute the deduction under section 80HHC by excluding ocean freight of Rs.6,18,29,151/- from the export turnover. The assessee argued that the issue was already subject to appeal before the CIT(A), who directed the AO to verify the claim. The Tribunal held that the CIT cannot exercise jurisdiction under section 263 for an issue already decided in appeal, making the CIT's direction legally unsustainable. This issue was allowed in favor of the assessee.4. Addition of Excise Duty Payable on Finished Goods:The CIT directed the addition of Rs.30,02,950/- as excise duty payable on finished goods to the closing stock. The assessee contended that the finished goods were valued at cost as they were still at the manufacturing point and not removed to the godown, thus not attracting excise duty. The Tribunal supported the assessee's view, referencing similar decisions by the ITAT and the Madhya Pradesh High Court. Additionally, the assessee had paid the excise duty before filing the return. The Tribunal held that no addition could be made on this account. This issue was allowed in favor of the assessee.Conclusion:The appeal was allowed in part, with issues 1 and 2 restored to the CIT for fresh examination, and issues 3 and 4 decided in favor of the assessee. The order was pronounced on 08-06-2012.