INCOME TAX ACT, 1961

Section 145

Accounting method - Computation of profit - Addition to closing stock towards unutilized CENVAT credit under section 145A -

AO made addition to closing stock towards unutilized CENVAT credit under section 145A. Assessee pointed out that the said amount represents unutilized CENVAT/VAT credit at the end of the relevant financial year and AO had wrongly invoked provisions of section 145A to enhance the value of closing stock by the aforesaid amount. It was submitted that assessee company is consistently following 'exclusive method' of accounting in this regard and thus, non-inclusion of excise duty and other duties etc., in closing stock and correspondingly in purchases as well as sales would not eventually impact the resultant profits. CIT(A) had decided the issue against the assessee on the ground that required reconciliation between the financial accounts as per inclusive method and exclusive method was not furnished. Held: The availability of CENVAT credit was dependent on the extent of utilization of credit against the liability arising to an assessee on goods manufactured and has no co-relation to the closing stock. Excise Duty component on closing stock is thus required to ascertained independently as per quantum of stock. No justification in the action of the CIT(A) in dismissing the plea of assessee altogether on point. CIT(A) ought to have given a reasonable opportunity to assessee for substantiating its claim that method of accounting followed by assessee does not impinge upon provisions of section 145A. Therefore, matter was remanded back to AO for suitable verification of facts afresh.

REFERRED : Asstt. CIT v. Lubi Electronics ITA No. 2197/Ahd/2016 Order, dated 18-2-2019 : 2019 TaxPub(DT) 3498 (Ahd-Trib).

FAVOUR : Matter remanded.

A.Y. : 2012-13

INCOME TAX ACT, 1961

Section 145

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