2006 (1) TMI 189 - AT - Income Tax

Tribunal upholds CIT(A)'s decisions on addition deletion & excise duty refund for deduction

Assistant Commissioner Of Income-Tax. Versus Dharambal Prem Chand Limited.

The Tribunal upheld the CIT(A)'s decisions on both issues. The deletion of the addition of Rs. 2,12,12,644 was justified due to lack of new evidence and ... Refund Of Excise Duty Issues Involved:1. Deletion of addition of Rs. 2,12,12,644 on account of sale of silver outside the books of account.2. Deduction under Section 80-IB on account of income from Agartala unit due to refund of excise duty amounting to Rs. 2,61,92,386.Issue-wise Detailed Analysis:1. Deletion of Addition of Rs. 2,12,12,644 on Account of Sale of Silver Outside the Books of AccountThe Department challenged the deletion of an addition of Rs. 2,12,12,644, which was based on the presumption that the assessee sold silver outside the books of account. The AO inferred this from a test report by Shri Ram Institute of Industrial Research, which suggested that the total consumption of silver should have been 8,460,089 kg, against the actual consumption of 11,179 kg shown by the assessee. This led to an assumed excess consumption of 2,718.91 kg, valued at Rs. 7801.89 per kg, treated as income outside the books.The CIT(A) deleted the addition, following the order of earlier years. The Tribunal upheld this decision, noting that similar issues in previous years had been resolved in favor of the assessee. The Tribunal emphasized that the AO did not follow the principles of natural justice, as the test report was not clear, and the assessee's request for a larger sample was denied. The Tribunal found no new facts or material presented by the Revenue to justify interfering with the CIT(A)'s decision.2. Deduction Under Section 80-IB on Account of Income from Agartala Unit Due to Refund of Excise DutyThe appellant company had a unit at Agartala, which was exempt from excise duty for the year under consideration. The excise duty paid was refunded monthly, and the refund was credited to the P&L account. The AO argued that the refund should not be included in the income for the purpose of deduction under Section 80-IB, as it would result in a loss if excluded.The CIT(A) found that the net effect of debiting the excise duty and crediting the refund in the P&L account was nil, justifying the inclusion of the refund in the income for deduction purposes. The Tribunal upheld this view, stating that the refund was not an additional income but merely a return of the amount paid under the scheme. The Tribunal referenced several precedents, including decisions from the Supreme Court and various High Courts, which supported the notion that such refunds are integral to the manufacturing process and should be considered part of the business income.The Tribunal concluded that the CIT(A)'s decision was not perverse and found no merit in the Revenue's appeal, thereby dismissing it.Conclusion:The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on both issues. The deletion of the addition of Rs. 2,12,12,644 was justified due to the lack of new evidence and adherence to natural justice principles. The inclusion of the excise duty refund in the income for deduction under Section 80-IB was also upheld, as it was found to be an integral part of the manufacturing process and not an additional income.