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Astt. CIT-24(1), C-13, Room No.503, Prayakshakar Bhavan, Bandra (E) Mumbai-400 051. Vs. Astt. CIT-24(1), C-13, Room No.503, Prayakshakar Bhavan, Bandra (E) mumbai-400 051.
October, 01st 2015
           ,      ,   
         Before S/Sh. Rajendra,Accountant Member & Shaktijit Dey,Judicial Member
  /.ITA No.4501/Mum/2013, /Assessment Year-2008-09
        Astt. CIT-24(1), C-13, Room              M/s. N.R. Jasani
        No.503, Prayakshakar Bhavan,             139/G, Agarwal Indl. Estate
        Bandra (E) Mumbai-400 051.           Vs S.V. Road, Jogeshwari (W)
                                                 Mumbai-400 102.
                                                 PAN:AAAFN 1478 K
                ( /Appellant)                       (  / Respondent)
                    /Assessee by                   :Shri K. Gopal
                     / Revenue by                 :Shri Santosh Mankoskar-Sr.AR
                     / Date of Hearing                         : 30 - 09 -2015
                      / Date of Pronouncement                  : 30 -09-2015
                    , 1961   254(1)     
                    Order u/s.254(1)of the Income-tax Act,1961(Act)
Challenging the order dated 25.03.2013 of CIT(A)-34,Mumbai,the Assessing Officer(AO)has
raised following grounds of appeal:
     "1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in
     deleting the addition of Rs. 15,35,292/- made by the AC on account of non-inclusion method of
     MODVAT credit adopted by the assessee when the method adopted leads to double benefits to
     the assessee, firstly by excluding of excise duty from the value of sales and secondly by
     reducing the value of stock to the extent of MODVAT credit.
       The appellant prays that the order of CIT(A) be set aside and matte may be decided
     according to law. The appellant craves leave to amend 0 alter any ground or add a new
     ground which may be necessary".
Assessee-firm,engage in the business of manufacturing of modular furniture,filed its return of
income on 29.09.2008,admitting taxable income of Rs.2.05Crores.The AO completed the
assessment on 29.12.2007,u/s.143(3) of the Act, determining income of the assessee at Rs.2,
2.Effective ground of appeal is about deleting the addition of Rs.15.35 lakhs made by the AO on account of MODVAT credit.During the assessment proceedings, the AO found that the assessee had shown closing stock of Rs.2.19 Crores,that the assessee was following non inclusive method of Modvat credit.He directed the assessee to file explanation in that regard. After considering the submissions of the assessee,he held that non inclusive method would result in decrease in taxable income.He re-worked out the value of the closing stock by including the excise duty quoted on the total as well as the value of Modvat credit included in the cost of raw material and the value of Modvat credit on purchases.Thus,he added the unutilized Modvat Credit at the end of the year and included element of Modvat credit on the purchases made.He finally arrived at a difference of Rs.15,35,292/- and treating it `suppre - ssion in value of the closing stock'added the sum to the income of the assessee. 3.Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate Authority(FAA).Before him it was contended the method of valuation of closing stock was followed year after year and was accepted by the department as a proper method and it reflected the correct profit,that no change or alteration could be made by the AO,that 4501/13NRJ-08-09 there would no difference in the taxable income even if the assessee would follow inclusive method.The assessee filed reworked statement of Modvat credit before the FAA.After considering the assessment order and the submissions of the assessee,he held that the issue was squarely covered by the decision of the Hon'ble Supreme Court delivered in the case of Indo Nippon Chemicals(261ITR275).He further held that when addition was made to closing stock corresponding adjustment was to be made to opening stock,that if addition was to be made to closing stock corresponding adjustment had to be made to opening stock,that the exercise would be revenue neutral,that the department had accepted the method of valuation of closing stock for last so many years.Finally,he deleted the addition made by the AO. 4.Before us,Departmental Representative(DR)supported the order of the AO.The Authorised Representative(AR)relied upon the order of the FAA and stated that in the subsequent years while completing the assessments u/s.143(3)of the Act,the AO had accepted the same method of valuation,that following the principle of consistency the order the AO should not have made the addition. 5.We have heard the rival submissions and perused the material before us.We find that the assessee was following the exclusive method of Modvat Credit while valuing the closing stock from AY.1995-96,that the the earlier and subsequent years have accepted the method while completing the assessment u/s. 143(3) of the Act, that the AO had not given any reason for not following the method for the year under appeal, that the FAA had given a categorical finding of fact that whole exercise was revenue neutral in nature.We find that in the case of Indo Nippon Chemical (supra) the Hon'ble Supreme Court has held as under : "It is not open to the Assessing Officer to treat outgoings as income under section 145 of the Income-tax Act, 1961. Whatever method the Assessing Officer adopts after invoking section 145, it has to be consistent with accepted principles of accountancy....(i)that merely because the Modvat credit was an irreversible credit available to manufacturers upon purchase of duty-paid raw material, that would not amount to income which was liable to be taxed under the Act : income was not generated to the extent of the Modvat credit on unconsumed raw material ;(ii) that it was not permissible for the Assessing Officer to adopt the "gross method" for valuation of raw materials at the time of purchase and the "net method" for valuation of stock on hand. Respectfully,following the above judgment of the Hon'ble Apex Court we are of the opinion that the order of the FAA does not suffer from any legal infirmity. Therefore, confirming his order we decide the effective ground of appeal against the AO. As a result,appeal filed by AO stands dismissed Order pronounced in the open court on 30th,September,2015. 30..,2015 Sd/- Sd/- ( / Shaktijit Dey) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /Mumbai, /Date: 30.09.2015 ...Jv.Sr.PS. /Copy of the Order forwarded to : 1.Appellant / 2. Respondent / 3.The concerned CIT(A)/ , 4.The concerned CIT / 2 4501/13NRJ-08-09 5.DR " B" Bench, ITAT, Mumbai / , ,.. . 6.Guard File/ //True Copy// / BY ORDER, / Dy./Asst. Registrar , /ITAT, Mumbai. 3
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