2014 (7) TMI 331

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.... return of income for A.Y. 05-06 on 24.10.2005 declaring total income of Rs. Nil. The assessment was finalized under section 143(3) on 12.11.2007. The case was thereafter reopened by issuing notice under section 148 and thereafter the assessment was framed under section 143(3) read with section 147 vide order dated 29.03.2010 and the total income was determined at Rs. 13,24,090/-. Aggrieved by the order of A.O, Assessee carried the matter before CIT(A). CIT(A) vide order dated 25.01.2011 granted substantial relief to the Assessee. Aggrieved by the order of CIT(A), the Revenue is now in appeal before us and has raised the following grounds. 1. The ld. CIT(A) erred on law and on facts is deleting addition of Rs. 13,24,091/- made on account....

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....s not reflected in the Profit and Loss account and thus the profit was reduced to the extent of unutilized credit. He was therefore of the view that the accounting method adopted by the Assessee was in contravention to Section 145A of the Act. He accordingly considered the unutilized CENVAT credit of Rs. 13,24,091/- and added to the income of the Assessee. Aggrieved by the order of A.O, Assessee carried the matter before CIT(A). CIT(A) decided the issue in favour of Assessee by holding as under:- 3.3 In the instant case it is seen that the appellant was only following inclusive method of accounting in the earlier accounting year. During the current year the appellant has changed the method of accounting and has started following the excl....

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.... stock. The appellant relied on the decision of the Supreme Court in the case of CIT v. Indo Nippon Chemicals Co. Ltd. reported in 245 ITR 275 (SC) wherein the Supreme Court held that whether the assessee followed the gross method or the net method the result would be the same. The above contention of the appellant is not correct. At that time the issue before the Supreme Court was pertaining to the A.Y. prior to A.Y. 1999-2000 when section 145A was not on the statute. The honorable Supreme Court in the case of CIT v. British paints reported in 188 ITR 44(SC) has held that excluding certain expenses results in distortion of the value of closing stock and has the effect of shifting profit from one year to another. 3.3(ii) As far as the op....

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....ttached to this order. 3.3(v) The details mentioned in the chart have been verified. It is seen that the net impact of change in the method of accounting in this case is showing profits lower by Rs. 24,709/-. In view of the above the addition made by the A.O is reduced to Rs. 24,709/-. 6. Aggrieved by the order of CIT(A), Revenue is now in appeal before us. Before us ld. D.R. relied on the order of A.O on the other hand ld. A.R. supported the order of A.O and further submitted that CIT(A) after considering the working noted that the net impact of change in the method of accounting resulted in showing lower profit of Rs. 24,709/- and the same was accordingly confirmed by CIT(A). Assessee has not preferred any appeal against the orde....