Revenue's appeal dismissed as excise duty deduction on closing stock under section 43B held legally tenable

ITAT Kolkata dismissed revenue's appeal regarding excise duty addition on closing stock. AO added back excise duty deduction claiming it was already allowed in P&L account, making further deduction under section 43B impermissible. Tribunal held assessee's treatment was legally tenable, following Berger Paints India Ltd. SC precedent and consistent with prior years' decisions. CIT(A)'s deletion of addition was upheld, supported by Exide Industries Ltd. precedent confirmed by Calcutta HC.

---

---

Issues:
Appeal by Revenue against deletion of addition of excise duty on closing stock.

Analysis:
The sole issue in the revenue's appeal was the deletion of an addition of Rs.276,12,87,066 in respect of excise duty on closing stock. The assessee, engaged in various businesses, filed its return for AY 2006-07 initially declaring a total income of Rs.3041,42,53,870, later revised to Rs.3040,47,74,966. The AO found a claim of double deduction in excise duty on closing stock, resulting in under-assessment of Rs.276,12,87,066. The AO added this amount back to the income. However, the Ld. CIT(A) deleted the addition after considering the appellant's submission and case laws. The CIT(A) noted that the assessee had been following a practice of debiting the profit and loss account by excise duty on sales, passing a contra-entry to reverse the effect of excise duty component in opening and closing stock, resulting in no net effect on the profit and loss account. The CIT(A) referred to a previous year's ruling and upheld the deletion of the addition.

The High Court's order in a related case supported the appellant's position, stating that the excise duty payment was deleted by the AO incorrectly as the method was in conformity with accounting principles and relevant tax laws. The High Court order confirmed by the Tribunal favored the appellant, leading to the deletion of the excise duty payment amounting to Rs.276,12,87,066. The revenue's appeal was dismissed.

In summary, the Tribunal found that the excise duty paid on closing stock was claimed in the revised return with proper justification and confirmation. The treatment of adding back the amount in the following year was consistent with legal principles. Previous rulings and the High Court's decision in a related case supported the appellant's position. The Tribunal upheld the CIT(A)'s decision to delete the addition, dismissing the revenue's appeal. The Cross Objection filed by the assessee was dismissed as not pressed, resulting in the dismissal of both the revenue's appeal and the assessee's Cross Objection.

---