Income Tax Appellate Tribunal - Hyderabad
M/S Abhishek Transtel Limited,, ... vs Assessee on 20 June, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES "B" : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA.No.1201/Hyd/2013 Assessment Year 2007-2008 M/s. Abhishek Transtel Limited (Formerly Known as M/s. Abhishek Steels Ltd.,) Hyderabad PAN AACCA-9140-Q vs. DCIT, Circle 1(1) Hyderabad. (Appellant) (Respondent) ITA.Nos. 1778, 1779 & 1780/Hyd/2013 Assessment Years 2005-06, 2006-07 & 2007-08 M/s. Abhishek Transtel Limited (Formerly Known as M/s. Abhishek Steels Ltd.,) Hyderabad PAN AACCA-9140-Q vs. DCIT, Circle 1(1) Hyderabad. (Appellant) (Respondent) For Assessee Mr. P. Muralimohan Rao For Revenue Mr. D. Sudhakar Rao Date of Hearing 22.04.2014 Date of Pronouncement 20.06.2014 ORDER PER B. RAMAKOTAIAH, A.M.
These four appeals pertain to assessment years 2005-06, 2006-07 and 2007-08. Three appeals out of this pertain to quantum assessments, whereas, ITA.No.1201/Hyd/2013 pertain to the order under section 263 passed by the CIT. Since, these appeals are on similar issue and on similar facts and inter-related, these are heard together and decided by this common order.
2. Briefly stated, assessee is engaged in the business of manufacturing and trading of iron and steel products and was formally known as Abhishek Steels Limited. Assessee filed returns of income and inter alia claimed expenditure towards excise duty in the years. For the A.Y. 2007-08 Ld. CIT noticed that assessee has claimed excise duty in the P & L account and also further claimed in computation of income thereby, there was double deduction. Therefore, he initiated proceedings under section 263 and set aside assessment to the A.O. for proper verification as he was of the opinion that the claims have not been examined in the assessment completed under section 143(3) originally. Consequent to that, A.O. made the assessment in A.Y. 2007-08 and reopened assessments for A.Ys. 2005-06 and 2006-07. Assessee has come in appeal on three quantum appeals and also filed appeal against the order passed under section 263, belatedly by 771 days. In the petition filed for condonation of delay, it was submitted that the appeal could not be filed in time as the papers had been misplaced by one of the office staff and the same could be traced out only on 12.08.2013 with a delay of 771 days.
3. We have heard the Ld. Counsel and the Ld. D.R. on the condonation petition filed for admitting the appeal ITA.No.1201/Hyd/2013.
4. First of all, there is no merit in the condonation petition filed as the affidavit cannot be taken as correct one. The order under section 263 was passed on 19.04.2011 and subsequently, assessee also appeared before the A.O. who has passed assessment order on 26.12.2011. This order was subject matter of appeal before the Ld. CIT(A) and Ld. CIT(A) also heard, as seen from the order, from March, 2013 onwards. Therefore, it cannot be stated that assessee is not aware about the 263 proceedings and misplacement of papers by one of the office staff cannot be accepted as a genuine explanation and it could be one of the reason given seeking condonation of delay even though the actual reason may be that assessee did not want to challenge the order when it was passed, therefore, the condonation of delay cannot be granted. Even otherwise, as seen from the order of 263, the Ld. CIT has only set aside for verification and did not give any direction to do in a particular method. It is a fact that A.O. did not examine the issue at the time of completion of assessment under 143(3) earlier. For the reasons being stated in the quantum appeal, we are of the opinion that the issue require verification by the A.O. Therefore, order of CIT setting aside the assessment for verification is to be upheld. Therefore, on the reason of delay in filing appeal, the same is not maintainable and even otherwise also, there is no merit in assessee's appeal. Therefore, ITA.No.1201/Hyd/2013 of the assessee stands dismissed.
5. Before considering the merits, one more issue is to be considered in A.Ys. 2005-06 and 2006-07 is the issue of reopening of assessment. In these years also, assessments were originally completed under section 143(3) of the I.T. Act, 1961. Later the assessments were reopened under section 147 and assessments were completed making disallowance. It was the contention that there was no tangible material which was brought on record to issue notice under section 148. Assessee relied on the following judgments for the above proposition.
(i) CIT vs. M/s. Kelvinator of India Ltd., (2010) 187 Taxman 312 (SC).
(ii) ITO vs. Object Connect India P. Ltd. in ITA.No.1278/Hyd/2011
(iii) The Prudential Coop Urban Bank Ltd. vs. ACIT in ITA. No. 508/Hyd/2010
(iv) ITO vs. R.K. Real Estates in ITA.No.874/Hyd/2013
6. Even though it was contended that the assessments were reopened on the basis of audit objection and relied on the decision of Indian and Eastern Newspapers Society vs. CIT 119 ITR 996 (SC), the decision in this case cannot be applied, as there is no indication on record that assessments were reopened consequent to audit objection. Nowhere in the order it was mentioned that cases were reopened on the basis of audit objection and assessee has also not placed the satisfaction recorded, which was communicated to the assessee, so that this aspect can be examined. Just because, it was contended that the reopening is on the basis of audit objection, we cannot rely on the case law alone without examining the facts. Therefore, this contention of the Ld. Counsel cannot be accepted. The major contention raised by the Ld. Counsel is with reference to the fact that the proceedings were initiated after a period of 4 years from the end of relevant A.Y. It was contended that no notice under section 148 of the Act can be issued after a period of 4 years from the end of relevant A.Y. unless there is failure on the part of the assessee to disclose fully and truly all the material facts during the course of original assessment proceedings. Ld. Counsel relied on the following case law.
(i) NYK Line (India) Ltd. vs. DCIT (2012) 68 DTR 90 (Bom.) (HC)
(ii) Sound Casting (P) Ltd. vs. DCIT (2012) 250 CTR 119 (Bom.)
(iii) Smt. Raj Rani Gulati vs. Union of India (2010) 329 ITR 370 (All.)
(iv) Malabar Industrial Corp vs. CIT (2000) 243 ITR 82 (SC)
(v) Spectra Shares & Scrips (P.) Ltd. vs. CIT-III, Hyderabad (2013) 36 Taxmann.com 348 (AP)
7. Learned D.R. however, reiterated the arguments of the A.O. and Ld. CIT(A) in this regard.
8. We have considered the issue and examined the rival contentions. A.O. in his order opined that assessee's plea cannot be accepted as the assessee has not raised the objection immediately after the notice was issued. This argument of the A.O. cannot be accepted as the assessee can raise the objection at any point of time in the course of assessment proceedings. However, the argument that assessee has furnished all the information to the A.O. and the A.O. has no jurisdiction to reopen the assessment after the lapse of 4 years, cannot be accepted on the simple reason that in spite of furnishing information in the re-assessment proceedings, the issue is not yet clear as set out by us in the later part of this order. Therefore, since the assessee has not furnished any information at the time of original assessment, A.O. is well within his jurisdiction to reopen the assessment under the provisions of section 147 of the Act. The Ld. CIT(A) on the same issue has decided as under :
"5. The information on record is carefully examined. All the technical objections raised by the appellant have absolutely no merit for the reasons given below:
5.1. In the original scrutiny assessment, the issue of excise Duty payments was not examined at all. The assessment records were perused and it is found that the Assessing Officer has never examined this issue. Accordingly it cannot be said that there was a change of opinion as the opinion was never formed in the original assessment. The principle of change of opinion is applicable only where the Assessing Officer applied his mind and taken a conscious decision on the issue. It is not applicable to the issue where the Assessing Officer did not address himself to the issue as held in the case of Consolidated Photo & Finvest Ltd. vs. ACIT 281 ITR 394 (Del). 5.2. The second technical ground taken by the appellant is that the Assessing Officer cannot reopen the issue based on Revenue Audit objection. This is again an incorrect proposition. If the Assessing Officer does not agree to Audit objection, but still issues notice u/s.148, such reopening is invalid. However, if the Assessing Officer believes that the objection raised by the Audit is correct and then issues the notice for reopening the assessment, such notice is perfectly in order. In the instant case, Assessing Officer agreed with audit objection and then issued notice u/s.148. 5.3. The next technical ground taken by the appellant is that the Assessing Officer did not pass any speaking order on objections raised by it against reassessment. This ground again has no merit as the Assessing Officer has clearly answered all the objections raised by the assessee in his re-assessment order itself. Whether he disposes off the objections by a separate order or they are taken care of in the reassessment order itself, is only a matter of procedure and not a matter of merit. 5.4. Regarding the fourth technical ground raised by the appellant, that there was no failure on the part of the assessee to reopen the assessment beyond 4 years, it is to be mentioned that as per Explanation (1) to section 147, mere production of books of accounts from which the Assessing Officer with due diligence would have discovered the mistake does not amount to disclosure of all material facts. Accordingly even this ground does not hold good for the assessee. Further, the Explanation (2) to section 147 reads as under :
Explanation 2 - For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :-
(c) where an assessment has been made, but -
(i) income chargeable to tax has been under assessed";
9. We agree with the above opinion of the Ld. CIT(A) as there is no evidence on record that assessee has furnished the necessary information. In fact, change of accounting policy in A.Y. 2005-06 itself not on record. Therefore, A.O. could not form any opinion at that point of time as this issue was not examined at all. Therefore, we are of the opinion that even though assessment was reopened after 4 years, on the facts of the case, A.O. is well within the jurisdiction to reopen the assessment as necessary information was not placed on record by the assessee at the time of original assessment. The case law relied upon by the assessee does not help. The proceedings under section 147 are therefore confirmed. Grounds raised by the assessee on this issue are accordingly, rejected.
10. Coming to the three appeals ITA.No.1778, 1779, 1780/Hyd/2013 the issue on merit is common. Ld. CIT in his order under section 263 noticed that assessee has claimed an amount of Rs.1,97,02,642/- debited to P & L account and the same amount was also added to the closing stock by the assessee and the treatment does not have any effect on P & L account. However, assessee also claimed deduction of Rs.1,96,92,048/- under section 43B. For claiming any amount under section 43B on payment basis, the amount should be outstanding at the end of the year. Since the amount claimed in P & L account was not added back in the computation of income and further assessee claimed almost equal amount in its computation, the Ld. CIT directed the A.O. to examine this issue. Thereafter, A.O. not only examined the payments in A.Y. 2007-08 but also reopened the assessment in earlier years to examine similar claims. Therefore, in all the three years, the issue requires examination.
11. After examining the A.O's order and the Ld. CIT(A) order in the course of present proceedings, we have asked the assessee counsel to furnish the treatment of excise duty in the books of accounts of the assessee which was submitted as under :
"Treatment of Excise Duty for the A.Ys. 2004-05 to 2008-09 :
Till AY 2004-05 the following treatment was given by the appellant company in respect of Expenditure towards Excise Duty: The Excise Duty on closing stock is neither included in the closing stock nor is debited to the P & L A/c for the year ending 31.03.04. The assessee company has claimed the excise duty expenditure in the profit and loss account for the year ending 31.03.04 as under: Particulars Amount (Rs.) Excise Duty Expenditure XXX Less: CENVAT Input Credit XX Net Expenditure Debited to Profit and Loss Account XXX
2. It is submitted that the appellant company has followed the following accounting system in respect of the Excise Duty for the AYs 2005-06 to 2007-08 as under :
a. The appellant company has included the amount of excise duty payable on closing stock in the closing stock and correspondingly this amount was debited in the profit & loss account for the AYs 2005-06 to 2007-08 as under :
Asst Year ED included in closing stock and correspondingly included under the head Manufacturing & Director Expenses in the P & L A/c. (Rs.) 2005-06 1,43,47,164 2006-07 1,04,27,774 2007-08 1,97,02,642 b. The amount of the Excise Duty payable on closing stock was paid before due date of filing of ROI the same was deducted from the amount of net profit while calculating the returned income as under : Asst Year Amount deducted in computation 2005-06 1,38,7,013 2006-07 1,03,70,019 2007-08 1,96,92,048 c. The appellant company has claimed the excise duty in respect of Sales after in the profit and loss account as under: Particulars Amount (Rs.) Excise Duty Expenditure XXX Less: CENVAT Input Credit XX Net Expenditure Debited to Profit and Loss Account XXX While calculating the 'Excise Duty Expenditure' for the subsequent AY the appellant company has reduced the amounts from the Own Finished Goods Sales (Excise Duty) A/c. and Scrap Sales APGST (Excise Duty) A/c to the extent of Excise duty payable on closing stock as the same was deducted in the earlier year computation and the balance amount was debited to the profit and loss account in the respective assessment year as under: A.Y. Claimed in computation (Rs.) Reduced from own FG sales (ED) A/c in the subsequent AY (Rs.) Reduced from scrap sales APGST (ED) A/c in the subsequent AY (Rs.) Total Rs.
Actual amount to be debited to P & L A/c.
Net Expenditure debited to Profit & Loss A/c. In the subsequent A.Y. (Rs.) 2005-06 1387013 A.Y. 2006-07 12672631 1204382 13877013 27462343 13585330 2006-07 10370019 A.Y. 2007-08 10370019 0 10370019 14542249 4172230 2007-08 19692048 A.Y. 2007-08 18237335 1454713 19692048 30052326 10360278 As can be seen from the above table, the appellant company has not claimed the amount of excise duty in the profit and loss account to the extent of what is claimed in the computation of the earlier assessment years.
3. In this connection, it is submitted that the appellant company has claimed the deduction in respect of the excise duty payable on closing stock only once in computation of income and has not debited the equivalent amount in the profit and loss account of the subsequent assessment year.
4. This treatment of accounting was continued by the appellant company in the AY 2008-09 also".
12. A.O. disallowed the amount which was claimed in the return of income under section 43B, stating that it amounts to double claim. AO's opinion as extracted in para 5.3 of the assessment order in A.Y. 2005-06 is as under :
"5.3 Further incorrectness of the claim can be judged from the fact that in the A.Y. 2004-05, there was no such claim. For the first time, the assessee claimed the deduction in the adjusted computation of income in the AY 2005-06. In such case, it amounts to change in method of accounting. Assuming but admitting that there was change in method of accounting of income, such change of method of accounting was not a bonafide one and solely motivated with a desire of reduction of tax liability and hence rejected. In any case, this fact was neither notified in the annual account nor in the. Tax Audit Report thus the argument was not proved. Further more, the deduction as claimed if allowed in the AY 2005-06 would lead anomalous situation of allowing the deduction relatable to the Excise Duty on closing stock twice i.e., in the AY 2004-05 and also in the AY 2005-06. Seen from any angle the it is a double claim and could not allowed".
13. Before the Ld. CIT(A), assessee submitted the same table and clarifications and explained the matter to the Ld. CIT(A). However, Ld. CIT(A) rejected the same and also enhanced in A.Y. 2005-06 by stating as under :
"6.2. The information on record is carefully considered. At the outset the figures given by the appellant are inconsistent. Therefore, not reliable. If the appellant's version is correct, the figures mentioned in Table-l should tally with the figures mentioned in the last column of Table-3. Therefore, the information submitted by the appellant cannot be relied upon. Further, the Authorized Representative was asked to give details of stock valuation and how the excise duty was accounted for in books of accounts. However, such details were not furnished. Therefore, the allowability of excise duty should be restricted to the extent it is paid as per section 43B. For A.Y. 2005-06, the amount debited to P & L A/c. was Rs.l,43,47,164/-. Whereas the amount paid before the due date of filing of return of income was Rs.l,38,77,014/-. The difference of Rs.4,70,150/- is to be disallowed u/s.43B. Further, the entire deduction claimed of Rs.l,38,77,014/- in the computation of income towards excise duty was to be disallowed as it amounts to double deduction. Therefore, the total amount to be disallowed is Rs.l,43,47,164/-. Hence, the disallowance made by the Assessing Officer is enhanced by Rs.4,70,150/- and therefore, the assessee's Grounds of appeal on this issue are dismissed".
14. Ld. Counsel explained the method of accounting to submit that assessee who is following different method of accounting up to A.Y. 2004-05 has changed the method of accounting from A.Y. 2005-06. It was submitted that assessee has not claimed any double deduction, as the amount added in the closing stock was only debited in the P & L account. Therefore, there is no effect in the P & L account. What was claimed in the computation was the excise duty paid over and above the amount added in closing stock on payment basis and therefore, there is no double claim. Ld. Counsel placed on record original P & L account and revised P & L account in order to explain this working as under :
ASSESSMENT YEAR 2006-07 Actual P&L of Abhishek Transtel Limited 31.03.2006 Particulars Amount Income Sales & Operating Receipts 1,00,95,33,213 Other Income 2,16,81,016 Increase (Decrease) in stock
-1,97,01,449 1,01,15,12,780 Expenses Material Consumed/ Dealt 83,58,29,160 Manufacturing / Direct Expenses 4,61,16,306 Payment to employees and other benefits 22,53,536 Admin & Selling Exp 1,18,58,933 Interest & Financial Charges 2,85,24,028 Excise Duty 1,35,85,330 Depreciation 2,21,33,386 96,03,00,679 Profit (Loss) for the year 5,12,12,101 Rescheduled P&L of Abhishek Transtel Limited 31.03.2006 Particulars Amount Income Sales & Operating Receipts 1,00,95,33,213 Other Income 2,16,81,016 Increase (Decrease) in stock [(-1,97,01,449) + 1,38,77,013]
-58,24,436 1,02,53,89,793 Expenses Material Consumedy Dealt 83,58,29,160 Manufacturing 1 Direct Expenses 4,61,16,306 Payment to employees and other benefits 22,53,536 Admin & Selling Exp 1,18,58,933 Interest & Financial Charges 2,85,24,028 Excise Duty (1,35,85,330 + 1,38,77,013) 2,74,62,343 Depreciation 2,21,33,386 97,41,77,692 Profit (Loss) for the year 5,12,12,101 Here, opening stock is reduced by excise duty of Rs.1,38,77,013/- and Actual excise duty of Rs.2,74,62,343/- is debited in P & L. ASSESSMENT YEAR 2007-2008 Actual P&L of Abhishek Transtel Limited 31.03.2007 Particulars Amount Income Sales & Operating Receipts 1,16,18,62,075 Other Income 1,38,73,939 Increase (Decrease) in stock 6,52,70,830 1,24,10,06,844 Expenses Material Consumed/ Dealt 1,11,78,14,172 Manufacturing / Direct Expenses 3,47,26,866 Payment to employees and other benefits 25,11,511 Admin & Selling Exp 1,02,46,685 Interest & Financial Charges 2,00,75,806 Excise Duty 41,72,230 Depreciation 64,53,891 Rescheduled P&L of Abhishek Transtel Limited 31.03.2007 Particulars Amount Income Sales & Operating Receipts 1,16,18,62,075 Other Income 1,38,73,939 Increase (Decrease) in stock [6,52,70,830 + 1,03,70,019] 7,56,40,849 1,25,13,76,863 Expenses Material Consumedl Dealt 1,11,78,14,172 Manufacturing 1 Direct Expenses 3,47,26,866 Payment to employees and other benefits 25,11,511 Admin & Selling Exp 1,02,46,685 Interest & Financial Charges 2,00,75,806 Excise Dutv ( 41,72,230+ 1,03,70,019) 1,45,42,249 Depreciation 64,53,891 1,20,63,71,180 Profit (Loss) for the year 4,50,05,683 Here, opening stock is reduced by excise duty of Rs.1,03,70,019/- and Actual excise duty of Rs.1,45,42,249/- is debited in P & L. ASSESSMENT YEAR 2008-2009 Actual P&L of Abhishek Transtel Limited 31.03.2008 Particulars Amount Income Sales & Operating Receipts 38,75,36,251 Other lncome 1,58,82,403 Increase (Decrease) in stock
-13,67,28,780 26,66,89,874 Expenses Material Consumed/ Dealt 17,22,17,085 Manufacturing / Direct Expenses 1,27,85,593 Payment to employees and other benefits 23,31,920 Admin & Selling Exp 2,18,74,490 Interest & Financial Charges 2,62,90,190 Excise Duty 1,03,60,278 Depreciation 20,50,084 24,79,09,640 Profit (Loss) for the year 1,87,80,234 Rescheduled P&L of Abhishek Transtel Limited 31.03.2008 Particulars Amount Income Sales & Operating Receipts 38,75,36,251 Other Income 1,58,82,403 Increase (Decrease) in stock [(-13,67,28,780)+1,96,92,048)
-11,70,36,732 28,63,81,922 Expenses Material Consumed/ Dealt 17,22,17,085 Manufacturing / Direct Expenses 1,27,85,593 Payment to employees and other benefits 23,31,920 Admin & Selling Exp 2,18,74,490 Interest & Financial Charges 2,62,90,190 Excise Duty (10360278 + 19692048) 3,00,52,326 Depreciation 20,50,084 26,76,01,688 Profit (Loss) for the year 1,87,80,234 Here, opening stock is reduced by excise duty of Rs.1,96,92,048/ - and Actual excise duty of Rs. 3,00,52,326/ - is debited in P & L.
15. It was the submission that over a period of 4 years all the amounts are claimed only once and there is no double claim. Ld. Counsel also relied on the judgment of the Hon'ble High Court of Bombay in the case of CIT vs. Nagri Mills Co. Ltd., 33 ITR 681 to submit that as to the year in which a deduction is allowable may be material when the rate of tax chargeable on assessee in two different years is different. But in the case of income of a company where tax is at uniform rate, it should be of no consequence to the department if a claim is made in one year or in other year. It was the submission that over a period the amounts are correctly claimed and therefore, no addition need to be made.
16. Learned D.R. however, relied on the orders of the authorities to submit that assessee has claimed double deduction in all the years. Therefore, the orders are to be sustained.
17. We have considered the issue. In spite of clarification given by the Ld. Counsel, we are still unable to come to any conclusion on this issue for the simple reason that the revised P & L account for financial year 31.03.2005 was not placed before us, which indicates that in A.Y. 2005-06 there may be a double claim in view of the changing method of accounting. Under the provisions of section 43B, excise duty paid is allowable as deduction if it is paid on or before the relevant due dates out of the outstanding amounts at the end year. However in the computation of income the assessee has to add the amount outstanding at the end of the year and then should claim the amount as deduction. As explained in A.Y. 2005-06, assessee has added amount of Rs.1,43,47,164/- as amount of addition to the closing stock as the assessee was following the exclusive method earlier. Because of change in method of accounting, the closing stock value has gone up by that amount. In order to neutralise the same, the same amount was also claimed in P & L account as debit to the P & L account under the Head "Manufacturing & Direct Expenses". Therefore, the effect of increase of closing stock was neutralised by debiting to the P & L account. However, the problem came only in the computation of income. Since the amount of Rs.1,43,47,164/- was not paid at the end of 31.03.2005, the amount should be added back in the computation and out of this amount, any amount actually paid should be claimed as deduction. The issue which lacks clarity is whether the amount of Rs.1,38,77,013/- was out of the amount of Rs.1,43,47,164/- added in the P & L account to the closing stock or a further amount of which was not part of the above amount. The explanation was that the amount added to the closing stock is not the amount claimed in the computation of income. This aspect requires examination by the A.O. by verifying the relevant Registers and payment of excise duty by obtaining the necessary details from the assessee company in all the years under consideration from A.Y. 2005-06 to 2007-08 pending before us. Since the amounts furnished in the tables and the amounts claimed as deduction under section 43B require verification, we are of the opinion that this issue requires re-examination by the A.O. The A.O. is directed to examine the complete claim of excise duty and its effect in various assessment years so that necessary amounts if any, disallowable can be disallowed under section 43B or can be allowed as claimed by the assessee under section 43B. For this purpose, orders of A.O. and Ld. CIT(A) on this issue are set aside and issue is restored to the file of A.O. for fresh examination on facts. A.O. is directed to keep explanation given by the assessee in mind and seek necessary clarification if required.
18. Assessee-company relied on the judgment of Hon'ble Bombay High Court in the case of CIT vs. Nagri Mills Co. Ltd. (1958) 33 ITR 681 (Bom.) (HC) wherein the Hon'ble High Court has held as under:
"We have often wondered why the Income-tax authorities, in a matter such as this where the deduction is obviously a permissible deduction under the Income-tax Act, raise disputes as to the year in which the deduction should be allowed. The question as to the year in which a deduction is allowable may be material when the rate of tax chargeable on the assessee in two different years is different; but in the case of income of a company, tax is attracted at a uniform rate, and whether the deduction in respect of bonus was granted in the assessment year 1952-53 or in the assessment year corresponding to the accounting year 1952, that is in the assessment year 1953-54, should be a matter of no consequence to the Department; and one should have thought that the Department would not fritter away its energies in fighting matters of this kind. But, obviously, judging from the references that come up to us every now and then, the Department appears to delight in raising points of the character which do not affect the taxability of the assessee or the tax that the Department is likely to collect from him whether in one year or the other."
19. While agreeing with the principles laid down by the Hon'ble High Court, we are also guided by the judgment of Hon'ble Supreme Court in the case of CIT vs. British Paints India Ltd., (1991) 188 ITR 44 (SC) wherein it was held as under :
"21. Any system of accounting which excludes, for the valuation of the stock-in-trade, all costs other than the cost of raw materials for the goods-in-process and finished products, is likely to result in a distorted picture of the true state of the business for the purpose of computing the chargeable income. Such a system may produce a comparatively lower valuation of the opening stock and the closing stock, thus showing a comparatively low difference between the two. In a period of rising turnover and rising prices, the system adopted by the assessee, as found by the Tribunal, is apt to diminish the assessment of the taxable profit of a year. The profit of one year is likely to be shifted to another year which is an incorrect method of computing profits and gains for the purpose of assessment. Each year being a self- contained unit, and the taxes of a particular year being payable with reference to the income of that year, as computed in terms of the Act, the method adopted by the assessee has been found to be such that income cannot properly be deduced therefrom. It is, therefore, not only the right but the duty of the Assessing Officer to act in exercise of his statutory power, as he has done in the instant case, for determining what, in his opinion, is the correct taxable income."
20. Therefore, assessee's arguments that it does not have any tax effect cannot be accepted as each year being a self-contained unit tax of the particular year is payable with reference to income of that year, as computed in terms of the Act. A.O. is directed to determine the income as per the provisions of the Act by examining the issue as directed above. Accordingly, grounds are allowed for statistical purposes.
21. In the result, ITA.No.1778, 1779 and 1780/Hyd/2013 of the assessee are allowed for statistical purposes and ITA.No.1201/Hyd/2013 of the assessee is dismissed.
Order pronounced in the open Court on 20.06.2014.
Sd/- Sd/-
(SAKTIJIT DEY) (B.RAMAKOTAIAH)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, Dated 20th June, 2014
VBP/-
Copy to
1. M/s. Abhishek Transtel Limited (Formerly Known as M/s.
Abhishek Steels Ltd.,), F.No.304, Minerva Complex, SD
Road, Secunderabad.
2. DCIT, Circle 1(1) Hyderabad.
3. CIT-1, 3rd Floor Annexe, Aayakar Bhavan, Basheerbagh,
Hyderabad - 500 004.
4. CIT(A)-I1, Hyderabad
5. CIT-1, Hyderabad
5. D.R. "B" Bench, ITAT, Hyderabad.
PAGE \* MERGEFORMAT 20
ITA.No.1201/Hyd/2013,
1778, 1779 & 1780/Hyd/2013
M/s. Abhishek Transtel Ltd., Hyderabad