2016 (10) TMI 694

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....ase was reopened u/s.147 of the Act and the notice u/s.148 of the Act was issued and served on assessee on 23/10/2012. The case was selected for scrutiny and thereafter assessment was re-framed u/s.143(3) r.w.s.147 of the Act vide order dated 16/01/2013 and the total income was determined at Rs. 2,71,74,210/-. Aggrieved by the order of the Assessing Officer(AO) assessee carried the matter before the ld.CIT(A), who vide order dated 29/07/2013 (in Appeal No.CIT(A)-VIII/ITO/Wd.4(4)/79/12-13) decided the issue in favour of assessee. Aggrieved by the order of ld.CIT(A), Revenue is now in appeal before us and has raised following ground:- 1. The Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs. 1,12,23,462/- made to the closing stock on account of CENVAT credit as mandated by the provisions of Sec.145A of the IT Act. 3. On perusing the accounts and other details furnished by the assessee AO noticed that the purchases, sales and closing stock were accounted net of excise duty by following the exclusive method of accounting and the unutilised balance of CENVAT credit as at the end of the year was Rs. 1,12,23,462/-. AO was of the view that the aforesaid amount sh....

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....t has been complying with the provisions of section 145A by enclosing an annexure in 3CD report. According to the report the effect of including excise duty in the valuation of closing the stock is revenue neutral. The appellant has been following this practice since last several years. It has furnished before me 3CD report of preceding three years and it is noted that the annexure complying with the provisions of section 145A was enclosed for all these years and as per the annexure the impact of including Excise duty is profit neutral. The appellant has rightly relied on the judgement of honourable High Court of Gujarat in the case of Narmada Chematur Petrochemicals Ltd (327 ITR 369) which has been followed in several decisions by honourable ITAT Ahmedabad. It has been consistently held by various authorities that if the appellant has demonstrated that the effect of including excise duty is profit neutral no addition can be made. It is also been held by several judicial forums that unutilised CENVAT credit cannot be treated as profit of the appellant. Honourable ITAT Bench of Ahmedabad in a decision in the case of Alpanil Industreis Vs. ACIT in ITA No.169/Ahd/2005 and 170/Ahd/2....

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....er, the Learned Commissioner of Income Tax(Appeals) found the difference at Rs. 80/-. According to the Learned Commissioner of Income Tax(Appeals) in the inclusive method in the illustration, the assessee's profit worked out to Rs. 380/- whereas in the exclusive method, the assessee's profit comes to Rs. 300/-. Thus, there was a difference of Rs. 80/- in the profit. We on a closer look at the illustration find that the difference has occurred due to an error by the Learned Commissioner of Income Tax(Appeals) in not considering the excise duty expenditure of the assessee. It was observed from the illustration that assessee has collected excise duty of Rs. 180/- by utilizing the raw material on which excise duty ofRS.100/- was paid to the Government. Thus, the assessee was liable to pay a further excise duty of Rs. 80/- to the Government. When the expenditure of Rs. 80/- is taken into account in the illustration, given for inclusive method then the profit as per inclusive method also works out to Rs. 300/- which is exactly the same as per exclusive method. Further, the Learned Commissioner of Income Tax(Appeals) in the illustration cited in his order has not accounted for the....

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....nt not deposited with the government before the due date of furnishing of return will be added to the income of the assessee in view of provision of Section 43B of the Act. In view of the discussion made hereinabove, in our considered opinion, there will be no effect in the taxable profit of the assessee by including the amount of excise duty paid on purchases in the value of closing stock of raw material, whether as raw material or as forming part of work-in progress or finished goods. We therefore, set aside the orders of the lower authorities on this issue in both the year under appeal and allow the grounds of appeal of the assessee." The above findings of the jurisdictional bench of ITAT are clear and, therefore, no addition on account of unutilised CENVAT / MODVAT credit can be made to the income of the appellant. Respectfully following the prevailing judicial opinion, it is held that no addition on this ground can be made. The addition of Rs. 66,17,145/- is also directed to be deleted. The ground of appeal is accordingly allowed. In the result the total addition of Rs. 1,12,23,462/- is directed to be deleted. The ground of appeal is accordingly allowed. 4. Aggrieved ....