Inclusion of ‘closing amount of Modvat’ in closing stock without modifying figures of purchases, sales & opening stock not justified

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IN THE ITAT MUMBAI BENCH ‘D’

R.R. Kabel Ltd.

v.

Additional Commissioner of Income-tax, 7(2), Mumbai

IT APPEAL NOS. 1292 & 2106 (MUM.) OF 2011

[ASSESSMENT YEAR 2007-08]

MAY 2, 2012

 

AO observed that the assessee has not included the excise duty in the valuation of closing stock. Under the provisions of section 145A of the Act, the assessee should include the excise duty component of purchase price of raw material while valuing closing stock of raw material, Work-in-Progress (WIP) and finished goods. The assessee claimed that non-inclusion of the same will have no effect on its profits. The AO while rejecting the claim of the assessee applied the provisions of section 145A of the Act and discussed the issue at length at pages 2 to 13 of the assessment order and added Rs. 1,13,19,681/-, Rs. 283,50,504/-, Rs. 4,48,190/-, and Rs. 2,00,000/- to the total income of the assessee.

We have carefully considered the submissions of the rival parties and perused the material available on record. We find that there is no dispute that the A.O. while making the addition of Rs. 1,13,19,681/-, interalia, observed that the similar addition was made in A.Y. 2006-07 and the ld. CIT(A) has granted relief against which the Department has filed appeal before the Tribunal. We further find that it is also not in dispute that the Tribunal on the appeal filed by the Revenue has upheld the order of the ld. CIT(A) in deleting the addition made by the A.O. vide finding recorded in paragraph 22 of its order dated 11.01.2012 (supra) wherein it has been held as under:-

“22. In the absence of any distinguishing feature brought on record by the Revenue, we respectfully following the consistent view of the Tribunal and keeping in view that the assessee is following consistent method of accounting and there is no change in accounting system followed by the assessee in the year under consideration, we hold that the ld. CIT(A) was fully justified in deleting the addition of Rs. 11,08,904/- made by the AO u/s 145A of the Act. The grounds taken by the Revenue are therefore rejected.”

In the absence of any contrary material placed on record by the Revenue, we respectfully following the order of the Tribunal (supra) and the consistent view of the Tribunal and also keeping in view that the assessee is following consistent method of accounting and there is no change in system of accounting followed by the assessee in the year under consideration, we hold that the Ld. CIT(A) was fully justified in deleting the addition of Rs. 1,13,19,681/-.