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Showing contexts for: 145a in Dy. Commissioner Of Income Tax, Lucknow vs M/S U.P Asbestos Ltd., Lucknow on 15 March, 2019Matching Fragments
2. The facts of the case are that for the assessment year 2014- 15, the assessee filed its return of income declaring a loss of Rs.8,89,14,624/-. The assessee filed revised return of income declaring loss of Rs.9,16,08,656/-. The assessment was completed by the Assessing Officer on a total loss of Rs.6,23,97,655/-. The Assessing Officer, while making the addition of Rs.2,92,11,000/-, on account of valuation of closing stock, held as follows:-
"In view of above discussion, it is clear that the assessee was required to prepare/re-cast the accounts on gross basis or required by section 145A, which the assessee failed to do so. The assessee's contention that it has no effect on the P & L account of the company is not correct. Further, the effect of addition in closing stock is not given in opening stock as assessee preferred appeal against the order of Assessing Officer in earlier assessment year. The assessee is stating that as there is liability of Rs.2,92,11,000/- on account of excise duty accrued but not due on stock of finished goods as on 31-03-2014, the same amount is not included in valuation of finished goods. The assessee's contention is not acceptable. As already discussed above, the assessee has to re-cast its accounts as required under section 145A. The excise duty liability of Rs.2,92,11,000/- on closing stock of finished goods is only deductible if it is paid on or before the due date of filing of the return as required under section 43B of the Act.
4. Aggrieved, the Department is in appeal.
5. The ld. D.R. has contended that the ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.2,92,11,000/- made on account of valuation of closing stock, ignoring the provisions of section 145A of the Income-tax Act, 1961, which clearly lays down that the excise duty shall mandatorily be included in the closing stock. It was further contended that the ld. CIT(A) was not justified in deleting the addition by ignoring the fact that the assessee's method of accounting is not in accordance with the method of valuation prescribed under section 145A of the Act and the assessee has not added taxes and duties in purchase, sales or valuation on closing stock, and hence, the method of accounting, even though consistently followed, does not disclose the true income of the assessee.
22. This is the position so far as regards the Excises Act and the Excise Rules. However, the Assessing Officer has invoked the provisions of section 145A of the I.T. Act and has held that the assessee has failed to re-cast its accounts in accordance with this section.
23. Section 145A of the Act inserted by the Finance (No.2) Act, 1998 with effect from 1/4/1999 reads as follows:
"145A Method of accounting in certain cases - Notwithstanding anything to the contrary contained in section 145, the valuation of purchase and sale of goods and inventory for the purposes of determining the income chargeable under the head "Profits and gains of business or profession"
24. The expression 'incurred by the assessee' in Section 145A(a) of the Act is followed by the words 'to bring the goods to the place of its location and condition as on the date of valuation.' Thus, the expression 'incurred by the assessee' relates to the liability determined as tax, duty, cess or fee payable in bringing the goods to the place of its location and condition of the goods. The Explanation to section 145A(a) of the Act makes it further clear that the income chargeable under the head 'profits and gains of business' shall be adjusted by the amount paid as tax, duty, cess or fee. Therefore, the expression 'incurred' in section 145A(a) of the Act must be construed to mean the liability actually incurred by the assessee. Where the excisable goods are manufactured and are lying in stock on the last day of the accounting year, whether the manufacturer has incurred liability to pay excise duty on the manufactured goods is the question. In the instant case, the liability of Rs.2,92,11,000/- on account of excise duty has accrued, but has not become due on the finished goods as on 31.03.2014. In other words, the manufacturer (assessee) has not incurred the liability to pay excise duty on the manufactured goods and the said excise duty has not been debited in the profit and loss account, having accrued, but not become due.