The Income Tax Appellate Tribunal ( ITAT ) in Mumbai has directed re-adjudication regarding the addition of Rs. 207 crores on increase in the value of closing stock by the Piramal Enterprises.
In the given case, the company argued that the Commissioner of Income Tax (Appeals) [CIT (A)] erred in instructing the Assessing Officer (AO) to re-compute the closing stock by not only including the closing balance of unutilized MODVAT credit but also incorporating the MODVAT credit on purchases and sales.
The AO, in recalculating the closing stock value, added Rs. 2,07,14,000 of net unutilized MODVAT credit to the closing stock. It is noted that this identical issue had already been decided in favour of the assessee in previous assessment years: 2003-04, 2004-05, 2009-10, and 2010-11.
The ITAT observed that the AO, in the assessment order, stated that the Tax Auditor had noted the assessee’s adherence to the EXCLUSIVE method of accounting for MODVAT concerning inventory, purchases, and consumption.
Furthermore, during the assessment proceedings, the assessee, as a precautionary measure, asserted that the amount added to the closing stock in A.Y. 2001-02, amounting to Rs. 86.56 lakhs, should be included as part of the opening stock in A.Y. 2002-03. The AO accepted this claim by increasing the opening stock by Rs. 86.56 lakhs, resulting in a net addition on account of unutilized MODVAT credit of Rs. 66,27,443. The CIT (A) upheld this action by the AO.
The two-member bench, consisting of S. Rifaur Rahman (Accountant Member) and Kuldip Singh (Judicial Member), citing the precedent, remanded back to be decided in accordance with the directions issued by the ITAT in the assessee’s own case for A.Y. 2009-10.
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