TaxTMI 
TaxTMI 
2016 (6) TMI 1263
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....fer Pricing Officer, Ahmedabad. On receipt of order u/s 92CA(3) passed by the Transfer Pricing Officer, Ahmedabad, the assessee was given opportunity and draft assessment order was framed and served on the assessee. The assessee objected to the draft assessment order and moved to the Dispute Resolution Panel, Mumbai under Section 144C of the Income-tax Act, 1961. The Dispute Resolution Panel has approved the draft assessment order on the issue relating to the order u/s 92CA(3). As regards valuation of closing stock, the Dispute Resolution Panel directed to verify the claim of the assessee. The AO has verified and examined the assessee's final accounts, computation of income and Tax audit report. It was observed that the assessee has not incorporated the ingredient of Central Excise in the valuation of closing stock as discussed in the assessment order. The AO was of the view that the assessee's claim cannot be allowed and it is under-valuation of closing stock. Therefore, show cause notice was given. In reply to the show cause notice, the assessee submitted that as per method of accounting regularly followed by the company, in its case, inventory of finished goods is calculated inc....
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....essee is that the AO has only considered the excise duty on closing stock and has not given effect to the excise duty on opening stock, purchases and consumption. As per the ld. Authorized Representative for the assessee, the net effect of the adjustment under Section 145A is revenue neutral. In the written synopsis, it is submitted as under :- "The details of the additions made in different years is summarized at page 1 of the enclosed paper book. As directed on the last date of hearing the adjustments made u/s 145A of the Income-tax Act, 1961, for the assessment year 2002-03 to 2009-10 are enclosed. The Hon'ble Delhi High Court in the case of CIT vs. Mahavir Aluminium Limited, reported, in (2008) 214 CTR 0045, has held that to give effect to Section 145A, if there is a change in the closing stock as on 31st March, 1999, there must necessarily be a corresponding adjustment in the opening stock as on 1st April, 1998. In the above referred decision, the Hon'ble Delhi High Court has taken note of the following :- (a) Notes on clauses in Finance Bill when Section 145A of the Act was inserted where it is clearly mentioned that the inventory a....
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....de by him in AY 2005-06. That it is also submitted that in AY 2009-10 the ld. AO has made the addition of the difference in the Excise Duty on the Opening Stock and the Closing Stock, but has not considered the adjustment to the purchases. The addition was deleted by the CIT(A) for which the ld. AO is in appeal in ITA No738jIndj2014. Thus the department's stand is different in different years. That in Commissioner of Income Tax vs. Indo Nippon Chemicals Limited, the Hon'ble Bombay High Court (2000) 164 CTR 0078: (2000) 245 ITR 0384 has held that Modvat Credit is related only to the raw material consumed, the credit has direct linkage with the consumption of the raw material. The Court has held that whether the net method or the gross method is applied, the net profit remains the same. Although this decision is in relation to section 145(1) of the Act and not with respect to section 145A, nevertheless the principals enunciated are applicable to the present appeal. That it is also submitted that the Guidance Note on Tax Audit issued by the Institute of Chartered Accountants of India has also found that the adjustments made under section 145A of the ....
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....support from the decision of Hon'ble Delhi High Court in the case of CIT vs. Mahavir Aluminium Limited, (2008) 297 ITR 0077, wherein it is held as under :- "In the present case, there is no question of any double benefit being given to the assessee. Para 23.13 of the Guidance Note issued by the ICAI on tax audit under s. 44AB itself makes it clear that whenever any adjustment is made in the valuation of Inventory, this will affect both the opening as well as the closing stocks. It is also to be noted that if any adjustment is required to be made by a statute (as for example s. 145A), effect to the same should be given irrespective of any consequences on the computation of Income for tax purposes. Sec. 145A begins with a non obstante clause, and ,therefore, to give effect to s. 145A, if there is a change in the closing stock as on 31st March, 1999, there must necessarily be a corresponding adjustment made in the opening stock as on 1st April, 1998. Para 23.14 of the Guidance Note postulates that adjustment should be made in such a manner that no double deduction is claimed for the same expenditure. In the present case, the question of double deduction does not arise, si....