Income Tax Appellate Tribunal - Ahmedabad
Sunshine Silk Mills Pvt. Ltd., , Surat vs Income Tax Officer, Ward-4(3), , Surat on 13 April, 2017
आयकर अपील य अ
धकरण, अहमदाबाद यायपीठ - अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL
CAMP AT SURAT
BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER
AND
SHRI AMARJIT SINGH, ACCOUNTANT MEMBER
आयकर अपील सं./ ITA No.524/Ahd/2014
नधा रण वष /Asstt. Year: 2008-2009
Sunshine Silk Mills P.Ltd. Vs. ITO, Ward-4(3)
Gandhi Colony Surat.
Ashwani Kumar Road
Surat 395 008.
PAN ADCS 3517 L.
अपीलाथ / (Appellant) तयथ
् / (Respondent)
Assessee by : Mr.P.M. Jagasheth
Revenue by : Mr.Dharmvir Yadav, Sr.DR
सन
ु वाई क तार ख/Date of Hearing : 10/03/2017
घोषणा क तार ख /Date of Pronouncement: 13 /04/2017
आदे श/O R D E R
PER RAJPAL YADAV, JUDICIAL MEMBER:
Assessee is in appeal before the Tribunal against order of the ld.CIT(A)-II, Surat dated 9.1.2014 passed for the Asstt.Year 2008-09.
2. Solitary substantial grievance of the assessee is that the ld.CIT(A) has erred in confirming addition of Rs.12,41,027/- added by the AO on account of disallowance of excise CENVAT Credit.
3. Brief facts of the case are that the assessee has filed its return of income on 30.9.2008 declaring total income at NIL. The case of the ITA No.524/Ahd/2014 2 assessee was selected for scrutiny assessment and notice under section 143(2) was issued and served upon the assessee. On scrutiny of the accounts, it revealed that in Schedule J of balance sheet, the assessee had shown a computation for excise and CENVAT credit of Rs.12,41,027/-. According to the AO, CENVAT on processed goods are withdrawn from July, 2006 and still the assessee has not offered CENVAT credit for taxation. Therefore, a show cause notice dated 9.8.2010 was issued to the assessee. In reply to the show cause notice, the assessee has submitted a letter dated 16.8.2010. Reply of the assessee and finding of the AO read as under:
"The A.R. of the assessee vide its letter dated 16.08.2010 has replied the same which is as follows:
"The company has CENVAT credit of Rs.12,41,027/- in the balance sheet which is a. liability to the govt. of India. The firm has not yet surrendered its excise license and is a statutory obligation to the excise department. Regarding your contention of sold out machineries and closed down of unit it is humbly submitted to you that the company is working during the financial in concern and having turnover from manufacturing activity ofRs.7.18 crore and having plant and machinery worth Rs.59.06 lacs. The firm given the machineries on rent for only two months to sister concern. While it was free to avail financial benefit in the slack period. Hence the question of writing off the CENVAT credit is totally out of question."
Finding of the AO:
The reply of the assessed is duly considered but the same is not acceptable on merits. So again the assessee was asked which is as below:
In respect of Excise Credit of Rs. 12,41,027/- in the balance sheet, you have stated that it is a liability to Govt, of India. The firm has not surrendered its excise license and is a statutory to the excise department.
In this regard, I have to state that the credit balance is nothing but the excise recovered from the parties who have sent their goods for process(before July 2006) . The cenvat ITA No.524/Ahd/2014 3 on processed goods already withdrawn right from July 2006. Under the circumstances, it is your income being remission of liability on withdrawal of cenvat on processed goods. It was require to be offered for taxation in the A.Y. 2007-08. Moreover this amount/liability not require to be paid to the excise department on surrender of license also.
In response of the this letter the assessee has not offered any explanation till date. The silence on the part of the assessee only proves that the assessee has nothing to say in this matter. Moreover it is a fact once the liability to the govt, of India as said by the assessee is over then it is nothing but income of the assessee. Accordingly as discussed above the amount of Rs. 12,41,027/- of Cenvat Credit is disallowed and added to the total income of the assessee.
4. Dissatisfied with this addition, the assessee carried the matter in appeal before the ld.CIT(A). The ld.CIT(A) has also confirmed the addition by observing as under:
"7. The appellant during the course of appellate proceedings explained that though there is no balance as per excise records, the corresponding entry has not been passed by the accountant since A Y 2005-06, due to oversight as a result of which , this entry is continuing .
8. From a perusal of the above facts, it is apparent that the appellant has misrepresented the facts regarding CENVAT credit payable as payable to the Government. The CENVAT credit is receivable from Government and it appears on the asset side of the balance sheet. It does not appear on the liability side of the balance sheet. Since the appellant is a Processing House, goods of its clients are sent to the appellant for the purpose of processing.
After processing the same, the goods are returned to the clients. Since excise duty on Processing House existed till July 2006, the processing houses used to pay excise duty and avail CENVAT credit on inputs and claims set off of the same, against excise duty payable. Since the goods were received from the clients, the Processing House used to debit and credit the client "s account in respect of excise duty paid and CENVAT credit availed corresponding to goods received from them for processing. Any excise duty paid on behalf of clients was debited to their account and any CENVAT credit receivable , in respect of goods of client was credited in the client 's account. It is for this reason that the CENVAT credit I appears on the liability side and this amount was ITA No.524/Ahd/2014 4 apparently I payable to the parties from whom the goods were received for job work.
9. As regards the Excise Department the CENVAT credit availed was utilized as there is no CENVAT receivable or excise payable as per excise records. The CENVAT register filed by the appellant, during the course of appellate proceedings is placed on record.
10. The excise duty on processing was withdrawn from July 2006 and therefore, there are no further entries in this account, Apparently, this amount of Rs. 12,41,027/- was payable to the parties from whom goods for job work were received till assessment year 2005-06 and the same has hot been paid. However, when this issue was investigated, the appellant company tried to represent as if this liability is payable to the Government.
11 The appellant company was given several opportunities during the appellate proceedings to explain how this liability is payable to the Government but, no explanation was filed. The appellant could not even furnish any reconciliation statement of excise records with appellant Y books of account, which means that the interpretation of the undersigned that this amount was payable to parties whose goods received for job work basis as on 31.03.2005 is correct.
12. Since this liability is no longer payable and the appellant - company has failed to establish that this liability exists or still payable , this amount ought to have been offered for tax by the appellant, u/s 41 (1) of the Income Tax Act.
13. Considering the same, the addition made by the assessing officer is confirmed and consequently, the appeal filed is dismissed.
14. In the result, appeal stands DISMISSED."
5. With the assistance of the ld.representatives we have gone through the record carefully. The ld.counsel for the assessee reiterated his stand as was taken before the ld.Revenue authorities below. On the other hand, the ld.DR relied upon the order of the CIT(A). The ld.CIT(A) has explained the issue categorically. It was observed that the assessee was working as processing house. It used to receive goods from clients. On receipt of such goods, it debits and credits ITA No.524/Ahd/2014 5 client's account in respect of process charges paid and CENVAT available corresponding to the goods received by them for processing. Any excise duty paid on behalf of the clients was debited to their account and any CENVAT credit receivable in respect of goods of clients was credited in the client's account. It is for this reason that CENVAT credit appears on the liability side and this amount was apparently payable to the parties from whom goods were received for job work. According to the ld.CIT(A) the assessee has tried to misrepresent the facts by showing it as liability towards Government. The ld.CIT(A) has rightly observed that liability is not payable and the assessee-company has failed to establish that this liability exists or still payable. After perusal of well reasoned finding of the ld.CIT(A) we see no reason to interfere in it. Hence, the appeal of the assessee is dismissed being devoid of any merit.
6. In the result, the appeal of the assessee is dismissed.
Order pronounced in the Court on 13th April, 2017 at Ahmedabad.
Sd/- Sd/- (AMARJIT SINGH) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 13/04/2017