TAVOY WORKWEAR PRIVATE LTD., MUMBAI V. ACIT-8(3), MUMBAI

CO 270/MUM/2013

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1028 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 24 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 01-07-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 22-06-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 07-11-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: B V JHAVERI
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.6228/M/2012 ASSESSMENT YEAR: 2003-04 ASSTT. COMMISSIONER OF INCOME TAX-8(3), ROOM NO.217, AAYAKAR BHAVAN, M.K. MARG, MUMBAI - 400020 VS. M/S. TAVOY WORKWEAR PVT. LTD., AGARWAL INDUSTRIAL ESTATE, 139-G(A), S.V. ROAD, JOGESHWARI (WEST), MUMBAI 400 102 PAN: AAACT 6554B (APPELLANT) (RESPONDENT) CO NO.270/M/2013 ASSESSMENT YEAR: 2003-04 M/S. TAVOY WORKWEAR PVT. LTD., AGARWAL INDUSTRIAL ESTATE, 139-G(A), S.V. ROAD, JOGESHWARI (WEST), MUMBAI 400 102 PAN: AAACT 6554B VS. ASSTT. COMMISSIONER OF INCOME TAX-8(3), ROOM NO.217, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI B.V. JHAVERI, A.R. REVENUE BY : SHRI NEIL PHILIP, D.R. DATE OF HEARING : 01.07.2015 DATE OF PRONOUNCEMENT : 01.07.2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL BY THE REVENUE AND THE CROSS OB JECTION BY THE ASSESSEE HAVE BEEN PREFERRED AGAINST THE ORDER DATE D 26.07.2012 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER R EFERRED TO AS THE CIT(A)] ITA NO.6228/M/2012 M/S. TAVOY WORKWEAR PVT. LTD. 2 RELEVANT TO ASSESSMENT YEAR 2003-04. FIRST WE TAKE UP THE APPEAL OF THE REVENUE. ITA NO.6228/M/2012 2. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF A PPEAL: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF WRITE- OFF OF RAW MATERIALS OF RS.62,77,061/- WITHOUT APPRECIATING THE FACT THAT T HE ASSESSEE HAD REDUCED THE VALUE OF STOCK TO 50% WITHOUT ANY BASIS OR JUSTIFICATION FOR THE SAME. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF WRITE-OFF OF RAW MATERIALS OF RS.62,77,061/- WITHOUT APPRECIATING THE FACT THAT T HE ASSESSEE HAD FAILED TO FURNISH COMPLETE DETAILS OF ITEMS WRITTEN OFF AND THE EXTENT TO WHICH THEY WERE WRITTEN OFF. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF WRITE- OFF OF FINISHED GOODS OF RS.13,75,429/- WITHOUT APPRECIATING THE FACT THAT T HE ASSESSEE HAD REDUCED THE VALUE OF STOCK TO 42% WITHOUT ANY BASIS OR JUSTIFICATION FOR THE SAME. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF WRITE- OFF OF FINISHED GOODS OF RS.13,75,429/- WITHOUT APPRECIATING THE FACT THAT T HE ASSESSEE HAD FAILED TO FURNISH COMPLETE DETAILS OF ITEMS WRITTEN OFF AND THE EXTENT TO WHICH THEY WERE WRITTEN OFF. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ITO/AC/DCIT BE RESTORED. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GR OUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 3. THE BRIEF FACTS OF THE CASE ARE THAT ORIGINALLY ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT ON 19.12.2005 BY TH E ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO). SUBSEQUENTLY, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A) AND ORDER DATED 07.01.2008 WA S PASSED. AGAINST THE ITA NO.6228/M/2012 M/S. TAVOY WORKWEAR PVT. LTD. 3 SAID ORDER, THE ASSESSEE HAD FILED AN APPEAL BEFORE THE TRIBUNAL. THE TRIBUNAL SET ASIDE THE MATTER WITH A DIRECTION TO ADMIT ANY NEW EVIDENCES WHICH THE ASSESSEE WOULD LIKE TO FILE. ACCORDINGLY, THE MATT ER WAS REMITTED BACK TO THE FILE OF THE AO TO GIVE REASONABLE OPPORTUNITY TO TH E ASSESSEE AND DECIDE THE ISSUE. HOWEVER, DURING THE FRESH ASSESSMENT PROCEE DINGS, THE AO, WHILE ASSESSING THE ASSESSEE, DID NOT ALLOW THE CLOSING S TOCK WRITTEN OFF IN RESPECT OF RAW MATERIALS OF RS.62,77,061/- AND THE CLOSING STO CK WRITTEN OFF IN RESPECT OF FINISHED GOODS OF RS.13,75,429/-. THE DISALLOWANCE WAS MADE ON THE BASIS THAT THE ASSESSEE FAILED TO PRODUCE ANY EVIDENCE TO SHOW THAT THE STOCK WAS UNUSABLE FOR ANY OTHER PURPOSE AND IT HAS BECOME OB SOLETE. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED APPEAL BEFORE T HE LD. CIT(A). 4. THE ASSESSEE SUBMITTED BEFORE THE LD. CIT(A) THA T IT HAD SUBMITTED A SUBMISSION OF ABOUT 67 PAGES BEFORE THE AO WHERE IN THE STATEMENTS OF THE STOCKS FOR THE LAST THREE YEARS WERE SUBMITTED, A D ETAILED CHART SHOWING THE YEAR WISE ORDERS, SALES, PURCHASES AND CLOSING STOCK FRO M A.Y. 1999-2000 ONWARDS, COPY OF THE CANCELLATION ORDER OF RG HOLDING, THE L ETTER OF ADVOCATE SHOWING CASE FILED IN THE CASE OF RG HOLDING AND VARIOUS OT HER DOCUMENTS WERE FILED. THE ASSESSEE HAD ALSO PRODUCED TILE SAMPLES OF THE RAW MATERIALS AND FINISHED GOODS SHOWING THE TYPE OF THE PRODUCT MANU FACTURED TO SHOW ITS UNIQUENESS. THE STOCK WAS IN A VERY BAD CONDITION A ND DUE TO PASSAGE OF TIME, THE STOCK HAD CHANGED COLOUR, ITS BUTTONS AND ACCESSORIES HAD RUSTED AND STOCK WAS ABSOLUTELY IN A VERY BAD CONDI TION AND CANNOT BE UTILIZED. 5. THE LD. CIT(A), AFTER CONSIDERING THE SUBMISSION S MADE BY THE ASSESSEE, DELETED THE DISALLOWANCE OBSERVING AS UNDER: I HAVE CONSIDERED THE DETAILS SUBMITTED BY THE APP ELLANT. THE APPELLANT HAS AMPLY PROVED THAT DUE TO PASSAGE OF TIME THE GARMEN TS BECOME DAMP, GETS SPOILT BY FUNGUS AND IT CHANGES ITS COLOUR. NO BUYE R WILL PURCHASE OLD CLOTH BY PAYING FULL PRICE. THE UNIQUENESS OF THE PRODUCT DUE TO INDUSTRIAL USE ITA NO.6228/M/2012 M/S. TAVOY WORKWEAR PVT. LTD. 4 AND THE DESIGN BY THE COMPANY CLEARLY ESTABLISHES T HAT THE SAID CLOTH CANNOT BE USED FOR ANY OTHER PRODUCT NOR CAN BE EASILY SOL D IN THE MARKET. THE STOCK WAS LYING FOR MORE THAN 3 YEARS WITH THE COMP ANY AND SINCE THE COMPANY HAD BECOME NPA IT WAS NOT POSSIBLE TO SELL THE GOODS IN THE MARKET WITHOUT LC FACILITY. CONSIDERING THESE FACT ORS, THE APPELLANT HAD WRITTEN OFF THE STOCK BY ABOUT 50% IN THE CASE OF R AW MATERIALS AND ABOUT 42% IN THE CASE OF FINISHED GOODS. IT IS PERTINENT TO NOTE THAT THE COMPANY HAS NOT REDUCED THE FULL VALUE OF THE STOCK AND HAS REASONABLY CONSIDERED THE VALUE AS PER THE COST OR MARKET VALUE WHICHEVER IS LESS. THE RELIANCE WAS ALSO PLACED ON THE JUDGEMENT IN THE CASE OF DCI T V INDROYAL FURNITURE CO. P. LTD. 2 ITR (TRB) 628 (COCHIN)(2010). IN THIS CASE, THE FACTS ARE SIMILAR TO THAT OF APPELLANT AND THE HON'BLE TRIBUNAL HAD T AKEN A VIEW THAT THE LOSS ASCERTAINED ON THE LAST DATE OF THE PREVIOUS YEAR I S TO BE CONSIDERED AND THE ASSESSEE IS ENTITLED TO DEDUCTION ON ACCOUNT OF REDUCTION IN VALUE OF THE STOCK. THUS, FOR ALL THESE REASONS, I HEREBY DELETE THE AD DITIONS MADE BY THE A.O. OF RS.62,77,061/- ON ACCOUNT OF RAW MATERIALS AND R S.13,75,429/- ON ACCOUNT OF FINISHED GOODS. 6. WE FIND THAT THE LD. CIT(A) HAS GIVEN A CATEGORI CAL FINDING THAT THE ASSESSEE HAS AMPLY PROVED THAT DUE TO PASSAGE OF TI ME THE GARMENTS HAD BECOME DAMP, SPOILT BY FUNGUS AND THERE WAS CHANGE IN THEIR COLOUR ALSO. THE STOCK HAD BECOME OBSOLETE AND WAS NOT IN A SALABLE CONDITION. HENCE, THE WRITING OFF OF THE STOCK BY 50% IN RESPECT OF RAW MATERIAL AND ABOUT 42% IN THE CASE OF FINISHED GOODS WAS JUSTIFIED ON THE PAR T OF THE ASSESSEE. HE, THEREAFTER, HAS OBSERVED THAT THE ASSESSEE WAS ENTI TLED TO REDUCE THE VALUE OF ASCERTAINED LOSS DUE TO THE DIMINISHED VALUE OF THE STOCK INNTHE BOOKS OF ACCOUNTS. THE FINDING GIVEN BY THE LD. CIT(A) IS W ELL REASONED AND IS BASED ON THE EVIDENCES ON THE FILE. WE DO NOT FIND ANY I NFIRMITY IN THE ABOVE ORDER OF THE LD. CIT(A). THERE IS NO MERIT IN THE APPEAL OF THE REVENUE AND THE SAME IS ACCORDINGLY DISMISSED. CO NO.270/M/2013 8. THE ASSESSEE, IN HIS CROSS OBJECTIONS, HAS CONTE NDED THAT THE ORDER OF THE AO IS BAD IN LAW. WE FIND THAT THE CROSS OBJECTION S HAVE BEEN FILED BY THE ITA NO.6228/M/2012 M/S. TAVOY WORKWEAR PVT. LTD. 5 ASSESSEE TO SUPPORT THE ORDER OF THE LD. CIT(A). T HE LD. A.R. OF THE ASSESSEE HAS NOT ADDRESSED ANY SPECIFIC ARGUMENTS RELATING T O THE CROSS OBJECTIONS AND THE SAME ARE ACCORDINGLY DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 01.07.201 5. SD/- SD/- (R.C. SHARMA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 21.10.2015. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.