TaxTMI 
TaxTMI 
2017 (9) TMI 964
X X X X Extracts X X X X
X X X X Extracts X X X X
....etermined the taxable income of the assessee at Rs. 11,63,17,900/-. On scrutiny of the assessment record, the ld.Pr.Commissioner has formed opinion that the assessee had unutilized MODVAT credit amounting to Rs. 52,31,918/- As per section 145A of the Act, this unutilized CENVAT credit should form part of closing stock. Omission at the end of the AO not to treat this unutilized CENVAT credit as a part of closing stock rendered his order erroneous which is prejudicial to the interest of the Revenue. 3. Similarly, he observed that the assessee had made payment to PF, EPF and superannuation gratuity fund amounting to Rs. 15,58,850/-. According to the CIT this contribution was not made towards an approved gratuity fund created by the assessee, and therefore, it ought to have been disallowed. Omission on the part of the AO not to conduct an inquiry and allowing these amount has resulted his order as erroneous, which is prejudicial to the interest of the Revenue. Armed with these two reasons, the ld.Commissioner had issued a show cause notice under section 263 of the Income Tax Act. In response to the show cause notice, the assessee has made an elaborate submissions which has been reprod....
X X X X Extracts X X X X
X X X X Extracts X X X X
....having no impact on the net profit of the assessee company. 19. With respect to unutilized CENVAT credit of Rs. 35,59,038/-, we submit that the Assesses Company is following the exclusive method of accounting for accounting of CENVAT credit in its books of accounts. The CENVAT duty paid on purchases of Raw material is debited to CENVAT credit receivable (Inputs) Account, as and when the CENVAT Credit is actually utilized against the payment of excise duty account and CENVAT credit receivable account is credited. The purchase cost of inputs is net of specified duty on Inputs. Therefore Inputs consumed and the inventories of Inputs are valued on the basis of purchase cost net of specified duly on inputs. The debit balance in CENVAT Credit receivable (Inputs) Account is shown on the asset side under the head "Advances". 20. Further we submit that the assesses has already offered the unutilized CENVAT credit of Rs. 35,59,038/- to tax by reducing the said amount from the cost of total purchase and services debited to profit and loss account. Accordingly the unutilized CENVAT credit of Rs. 35,59,038/- was already taxed under the Act. Your office may note that purchases and services....
X X X X Extracts X X X X
X X X X Extracts X X X X
....de order dated 29.12.2016. He placed on record copy of the CIT(A)'s order. He pointed out that the ld.CIT(A) has followed order passed by his predecessor in the Asstt.Year 2010-11, and directed the AO to carry out same exercise as was directed in the Asstt.Year 2010-11. He pointed out that the appeal for the Asstt.Year 2010-11 was decided vide order dated 1.12.2014 i.e. much prior to the action taken by the ld.Commissioner under section 263. This order was also brought to the notice of the ld.Commissioner and he was appraised that there was no prejudice to the Revenue on this issue. Similarly, he pointed out that as far as second point is concerned, the assessee has pointed out to the ld.Commssioner that out of total sum of Rs. 15,58,850/- only Rs. 1,88,670.0 was contributed towards gratuity fund. Direction has been issued by the ld.Commissioner for reconsideration of the issues qua this amount. Similar issue arose in the Asstt.Year 2010-11 wherein a sum of Rs. 1,56,612/- was disallowed by the ld. AO on account of payment made by the assessee towards unapproved gratuity funds. The ld.Commisisoner has held that the contribution given to LIC which was a recognized gratuity fund, and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rses permissible under law or where two views are possible and the AO has taken one view with which the CIT does not agree. If cannot be treated as an erroneous order, unless the view taken by the AO is unsustainable under law (vi) If while making the assessment, the AO examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determine the income, the CIT, while exercising his power under s 263 is not permitted to substitute his estimate of income in place of the income estimated by the AO. (vii) The AO exercises quasi-judicial power vested in his and if he exercises such power in accordance with law and arrive at a conclusion, such conclusion cannot be termed to be erroneous simply because the CIT does not fee stratified with the conclusion. (viii) The CIT, before exercising his jurisdiction under s. 263 must have material on record to arrive at a satisfaction. (ix) If the AO has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the AO allows the claim on being satisfied with the explanation of the assessee, the decision ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... This amount was not claimed as deduction. The assessee already paid tax on this amount. The ld.Commissioner did not dispute it. With regard to the balance Rs. 35,59,038/-, it was contended by the assessee that when it had purchased raw-material, the same is debited to profit & loss account without including therein the amount CENVAT available as credit. Thus, according to the assessee, it has not claimed as deduction as a part of purchases. It is separately debited to CENVAT credit receivable account. If that was the situation, which has been verified in the Asstt.Year 2010-11 by the ld.CIT(A) vide order dated 1.12.2014 what was the occasion for the ld.Commissioner to relegate this issue to the AO without verifying the details on merit. The AO has passed the assessment order in pursuance of 263 order which was challenged in appeal before the ld.CIT(A) and the ld.CIT(A) has followed order of the predecessor in the Asstt.Year 2010-11 dated 1.12.2014. Had the ld.Commissioner applied his mind and looked into the issue on merit, atleast this unnecessary exercise should have been avoided. As far as second issue is concerned, a conclusive finding have been recorded by the ld.CIT(A) in th....