RAM SURAT RAM (MAURYA),J. - (1.) HEARD Sri Suyash Agrawal, learned counsel for the appellant and Sri Dhananjay Awasthi, learned Senior Standing Counsel for the Revenue.
(2.) THE assessee has filed the aforementioned appeal from the order of Income Tax Appellate Tribunal, Lucknow Bench, Lucknow (Tribunal) dated 19.11.2004 passed in ITA No.591/LUC/2004. The appellant has proposed the following substantial question of law in the memo of appeal. "Whether the Tribunal was right in directing to include the Excise Duty in valuation of closing stock in the case of assessee company, which is a small Scale Unit and is not liable to pay the Excise Duty on the first clearance upto Rs.100 lacs in the financial year?" The appeal relates Assessment Year 2001 -02. The facts giving rise to the present appeal are that the assessee is engaged in the business of manufacture and sale of Industrial Knives. The assessee has filed income -tax return on 29.10.2001 showing business loss. The return was processed on 17.5.2002. Subsequently, it was taken for scrutiny and notices under Section 142(1)/143(2)(ii) of the Income -tax Act, 1961, hereinafter referred to as "the Act", were issued to the assessee. The assesee appeared before the Assessing Officer and produced its papers. The assessee claimed deduction of excess consumption of stores amounting to Rs.1,87,840/ -, depreciation of Rs.25,000/ - towards repair of plant and machinery and depreciation of Rs.3,11,600/ - for contribution towards Employees State Insurance as well as Employees Provident Fund . The Assessing Officer vide order dated 16.4.2004 made addition of Rs.1,86,840/ - for excess consumption of stores, Rs.25,000/ - for repair of plant and machinery, Rs.1,84,664/ - for Excise Duty not shown in the closing stock of finished goods and Rs.3,11,600/ - for Employees Provident Fund and Employees State Insurance contribution.
(3.) THE assessee filed an appeal from the aforesaid order. The appeal was heard by the Commissioner of Income Tax (Appeals), Bareilly, who vide order dated 18.6.2004 allowed the appeal and set aside the additions made by the Assessing Officer. Feeling aggrieved, the Revenue filed an appeal before the Tribunal from the aforesaid order and contested the appeal on two grounds ­ first excess amount of consumption of stores has been shown which is liable to be added and second excise duty was payable on the finished goods and it has not been shown in the closing stock although during the relevant assessment year the excise duty was payable accordingly an addition of Rs.1,84,664/ - for non inclusion of excise duty in the valuation of the closing stock is liable to be made. The Tribunal vide judgment and order dated 19.11.2004 has held that the depreciation claimed in the head of consumption of stores has rightly been allowed. However, it has held that since in the relevant year excise duty was payable as such excise duty was liable to be included in the closing stock in the price of the finished goods. Accordingly, the order of Assessing Officer for addition of Rs.1,84,664/ - was upheld.;