The Jodhani Exports, Surat V. The ACIT.,Range-9, Surat

CO 41/AHD/2009

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 6313 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 6 month(s) 3 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 09-09-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 02-09-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 06-03-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Assessee Lawyers: S N SOPARKAR
• Keywords: Capital asset; Speculation loss; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, D BENCH, AHMEDABAD BEFORE SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO. 536/ AHD/2009 (ASSESSMENT YEAR 2005-06) ACIT, CIRCLE 9, SURAT VS. M/S. JODHANI EXPORTS, F-2, JAYBHAVANI KRUPA, BACHKANIWALA COMPOUND, B/H SARDAR COMPLEX, VARACHHA ROAD, SURAT C.O. NO.41/AHD/2009 IN I.T.A.NO. 536/AHD/2009 (ASSESSMENT YEAR 2005-06) M/S. JODHANI EXPORTS, VS. ACIT, CIRCLE 9, F-2, JAYBHAVANI KRUPA, SURAT BACHKANIWALA COMPOUND, B/H SARDAR COMPLEX, VARACHHA ROAD, SURAT PAN/GIR NO. : AACFJ0272B (APPELLANT) .. (RESPONDENT) DEPARTMENT BY: SHRI D C SHARMA, SR. DR ASSESSEE BY: SHRI S N SOPARKAR, AR DATE OF HEARING: 02.09.2011 DATE OF PRONOUNCEMENT: 09.09.2011 O R D E R PER SHRI A. K. GARODIA, AM:- I.T.A.NO.536 /AHD/2009 C.O.NO.41/AHD/2009 2 THIS IS REVENUES APPEAL AND THE CROSS OBJECTION I S FILED BY THE ASSESSEE AND BOTH ARE DIRECTED AGAINST THE ORDER OF LD. CIT(A) V, SURAT DATED 25.11.2008 FOR THE ASSESSMENT YEAR 2005-06. 2. FIRST, WE TAKE UP THE APPEAL FILED BY THE REVENU E. THE GROUND NO.1 OF THE APPEAL IS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. C.I.T.(A) HAS ERRED IN DELETING THE ADDITION OF RS.30,01,005/- MADE BY THE A.O. ON ACCOUNT OF LO W G.P. AFTER REJECTING THE BOOK RESULTS OF THE ASSESSEE, WITHOUT APPRECIATING THE FACTS OF THE CASE. 3. THE BRIEF FACTS REGARDING THIS ISSUE TILL THE AS SESSMENT STAGE ARE NOTED BY LD. CIT(A) ON PAGE 2 & 3 OF HIS ORDER WHIC H ARE REPRODUCED BELOW: BRIEFLY STATED FACTS ARE, DURING THE ASSESSMENT PROCEEDINGS THE AO SERVED THAT THE APPELLANT FIRM HAD SHOWN GRO SS PROFIT MARGIN AT 7.75% DURING THE YEAR UNDER CONSIDERATION WHICH WAS LESS THAN THE ONE SHOWN IN PRECEDING PREVIOUS Y EARS. THE AO ALSO AFTER COMPARING THE GROSS PROFIT MARGINS OF EARLIER THREE YEARS HAS OBSERVED THAT THE APPELLANT FORM HA D SYSTEMATICALLY REDUCED G P MARGIN YEAR AFTER YEARS TO EVADE THE TAX. I.E GROSS PROFIT MARGIN IN THE A.Y. 2001-0 2 WAS 11.95% AS AGAINST 7.75% SHOWN IN THE YEAR UNDER CONSIDERATION. THUS TO VERIFY THE GENUINENESS OF SU CH REDUCTION THE APPELLANT WAS ASKED TO PRODUCE DAY TO DAY QUALITATIVE AND QUANTITATIVE DETAILS OF DIAMONDS PR ODUCED BY THE APPELLANT FIRM. HOWEVER ACCORDING TO THE AO THE APPELLANT HAD FAILED TO DO SO. ACCORDING TO THE AO THE APPELL ANT WAS PURCHASING ROUGH DIAMONDS WHICH WERE THEN SENT FOR VARIOUS PROCESS. FIRST OF THE PROCESS INVOLVE PHYSICAL VER IFICATION OF DIAMONDS WHERE THE SAME ARE SEGREGATED AS MAKEABLE AND REJECTION DIAMONDS. THIS PROCESS IS PURELY BASED ON THE JUDGEMENT OF THE ASSESSEE AND THAT THERE IS NO INDE PENDENT VERIFICATION POSSIBLE TO VERIFY SUCH SEGREGATION. T HUS ACCORDING TO THE AO THIS IS THE FIRST PLACE WHERE T HE ASSESSEE COULD MANIPULATE THE PRODUCTION. FURTHER ACCORDING TO THE AO I.T.A.NO.536 /AHD/2009 C.O.NO.41/AHD/2009 3 THE PRICE OF THE DIAMOND DEPENDS OF FOUR C'S VIZ. C OLOUR, CUT, CARAT AND CLARITY. SINCE THE PRICE VARIES EXPONENTI ALLY WITH THESE FACTORS I.E WHERE PRICE OF 0.10 CARAT DIAMOND IS SAY 50QO/- THE PRICE OF 0.20 CARAT DIAMOND WOULD NOT BE SIMPLE MULTIPLIER OF 2 W.R.T. RS.5000/- BUT THE SAME WOULD HE MUCH MORE AND THAT PRICE OF ONE CARAT DIAMOND WOULD NOT BE SIMPLY RS.!IO,000/- BUT WOULD RUN IN NUMBER OF TIMES THAT OF SUCH PRICE AS CALCULATED BY SIMPLE MULTIPLIER. THUS ACCO RDING TO THE AO UNLESS THE ASSESSEE HAS MAINTAINED STOCK RECORDS SHOWING SUCH BIFURCATIONS IT WOULD NOT-.BE POSSIBLE TO DEDU CE THE CORRECT INCOME OF THE UNDERTAKING. IT WAS IN THIS P ERSPECTIVE THE APPELLANT WAS ASKED TO GIVE DETAILS WITH PARTIC ULARS OF EACH QUALITY OF DIAMONDS AND ITS SIZE AND CARATS SO PROD UCED. HOWEVER THE APPELLANT HAD SHOWN ITS INABILITY TO GI VE SUCH DETAILS AS ACCORDING TO THE APPELLANT THE SAME WAS NOT PRACTICABLE. FURTHER ACCORDING TO THE AO FROM THE D ETAILS FILED BY THE APPELLANT IT WAS OBSERVED THAT THE APPELLANT HAD NOT GIVEN BASIS AND PROCESS OF VALUATION OF CLOSING STO CK WITH REGARDS TO QUALITY AND QUANTITY WITH DOCUMENTARY EV IDENCE TO PROVE THE SAME. THE AO ALSO OBSERVED THAT THE APPEL LANT HAD PAID WAGES TO KARIGARS AT VARIOUS FACTORIES ( SIX I N NUMBERS) HOWEVER NO DOCUMENTARY PROOF OF SUCH PAYMENT WAS PR ODUCED IN TERMS OF REGISTERS, ATTENDANCE SHEETS, BASIS OF PAYMENTS TO SUCH WORKERS. FURTHER IT WAS ALSO OBSERVED THAT YIE LD OUT OF ROUGH DIAMONDS RECEIVED FROM ALL THE SIX FACTORIES WORKED OUT TO 27% WHICH WAS MOST UNLIKELY IN THE TRADE THE APP ELLANT FIRM IS IN. IN THIS REGARD THE APPELLANT HAD NOT GIVEN A NY COGENT EVIDENCE IN THIS REGARD. FURTHER THE APPELLANT FIRM HAD ALSO INCURRED LOSS IN FORWARD CONTRACTS ON US $ 81,00,00 07- WHICH WAS NOT RECORDED IN BOOKS OF ACCOUNTS SEPARATELY. T HUS CONSIDERING THE FACTS THAT THE APPELLANT HAD SOLD V ARIOUS DIAMONDS ON THE BASIS OF QUALITY, CUTS AND CARATS O F THE DIAMONDS IT HAD FAILED TO PRODUCE DETAILS IN RESPEC T OF ITS PRODUCTION AND ACCORDINGLY THE AO REJECTED THE BOOK RESULT KEEPING IN MIND FALL IN G P MARGIN, ABSENCE OF QUAL ITY AND QUANTITY WISE STOCK AND PRODUCTION RECORDS AND NON MAINTENANCE OF LABOUR RECORDS. AND CONSEQUENTLY HE HAS ESTIMATED THE GROSS PROFIT MARGIN AT 8.25% AS AGAIN ST 7.75% SHOWN APPELLANT AND ACCORDINGLY HE HAS MADE AN ADDI TION OF RS.30,01,005/-. I.T.A.NO.536 /AHD/2009 C.O.NO.41/AHD/2009 4 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CIT(A). IT WAS HELD BY THE LD. CIT(A) THAT REJ ECTION OF BOOKS OF ACCOUNTS IS NOT PROPER BECAUSE FOR REJECTION OF BOO KS OF ACCOUNT, THERE SHOULD BE SOMETHING MORE THAN LOWER MARGIN OF GP BR OUGHT OUT ON RECORD WHICH INDICATES THAT BOOK RESULTS DO NOT REF LECT TRUE PICTURE OF INCOME. A CLEAR FINDING IS GIVEN BY THE CIT(A) THA T HE DID NOT FIND ANY SPECIFIC INFIRMITY IN THE BOOKS OF ACCOUNTS. REGAR DING FALL IN GP, IT IS NOTED BY THE CIT(A) THAT HE ASSESSEE HAS SUFFERED L OSSES ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION WHICH SHOULD NOT BE BR USHED ASIDE WHILE COMPUTING THE GP MARGIN SINCE SUCH FLUCTUATION IS P ART AND PARCEL OF SALES REALIZATION. HE DELETED THE GP ADDITION. NO W, THE REVENUE IS IN APPEAL BEFORE US. 5. LD. D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT OR DER WHEREAS LD. A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF LD. CIT(A). IT IS ALSO SUBMITTED BY HIM THAT IN ASSESSMENT YEAR 2004-05 AL SO, GP ADDITION WAS MADE BY THE A.O. AND THE SAME WAS DELETED BY LD. CI T(A) AND THE ORDER OF CIT(A) IN THAT YEAR WAS CONFIRMED BY THE TRIBUNA L IN I.T.A.NO. 3645/AHD/2007 DATED 31.12.2010. HE SUBMITTED A COP Y OF THIS TRIBUNAL ORDER. IT IS POINTED OUT THAT IN THAT YEAR, THE GP REPORTED BY THE ASSESSEE WAS 8.12% AND THE A.O. ADOPTED GP @ 8.37% AND MADE AN ADDITION OF RS.61,84,485/- AND THE ADDITION WAS DELETED BY LD. CIT(A) AND ALSO BY THE TRIBUNAL. IT IS SUBMITTED THAT IN THE PRESENT YEAR, THE ISSUE INVOLVED IS COVERED IN FAVOUR OF THE ASSESSEE BY THIS TRIBUNAL ORDER IN ASSESSEES OWN CASE. I.T.A.NO.536 /AHD/2009 C.O.NO.41/AHD/2009 5 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED T HE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW AND THE TRIBUNAL ORDER IN THE ASSESSEES OWN CASE. IN THAT YEAR, THE GP REPORTED BY THE ASSESSEE WAS 8.12% BUT THE A.O. ADOPTED GP @ 8.37% AND MADE ADDITION OF RS.61,84,485/-. IN THE PRESENT YEAR, G P REPORTED BY THE ASSESSEE IS 7.75% AND THE A.O. HAS ADOPTED GP @ 8.2 5% AND MADE ADDITION OF RS.30,01,005/-. ONE OF THE REASONS GIV EN BY THE LD. CIT(A) FOR DELETING THE GP ADDITION IS THAT THIS FALL IN G P RATE HAS BEEN SHOWN FOR THIS REASON THAT THE ASSESSEE HAS SUFFERED LOSSES O N ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION. AS PER GROUND 2 RAISED BEFOR E US, WE FIND THAT SUCH FOREIGN EXCHANGE FLUCTUATION LOSS SUFFERED BY THE A SSESSEE IS OF RS.31,04,232/- WHICH IS VERY SUBSTANTIAL AND THIS I S MORE THAN THE GP ADDITION MADE BY THE A.O. THIS FOREIGN EXCHANGE FL UCTUATION LOSS ITSELF EXCEEDED THE ADDITION MADE BY THE A.O. ON ACCOUNT O F LOW G.P. AND HENCE, FALL IN G.P. IS TO BE ACCEPTED AS EXPLAINED. SO, THE ENTIRE GP ADDITION MADE BY THE A.O. IS REQUIRED TO BE DELETED BECAUSE FALL IN GP TO THIS EXTENT STANDS EXPLAINED. CONSIDERING ALL THESE FACTS, WE DECLINE TO INTERFERE IN THE ORDER OF LD. CIT(A). GROUND NO.1 IS REJECTED. 7. GROUND NO.2 IS AS UNDER: 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE ID. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.31 , 04,232/- MADE BY THE A.O. ON ACCOUNT OF LOSS ON FOR WARD CONTRACT CANCELLATION TREATED AS SPECULATIVE LOSS, WITHOUT APPRECIATING THE FACTS OF THE CASE. I.T.A.NO.536 /AHD/2009 C.O.NO.41/AHD/2009 6 8. LD. D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT OR DER WHEREAS LD. A.R. OF THE ASSESSEE SPORTED THE ORDER OF LD. C IT(A). IT IS ALSO SUBMITTED BY HIM THAT IN A RECENT JUDGMENT DATED 23 .08.2011, RENDERED IN THE CASE OF CIT VS FRIENDS AND FRIENDS SHIPPING PVT. LTD. IN TAX APPEAL NO.251 OF 2010, IT HAS BEEN HELD BY HONBLE GUJARAT HIGH COURT I.E. THE JURISDICTIONAL HIGH COURT THAT WHEN THE A SSESSEE IS NOT A DEALER IN FOREIGN EXCHANGE AND FOR THE PURPOSE OF HEDGING THE LOSS DUE TO THE FLUCTUATION IN FOREIGN EXCHANGE RATES WHILE IMPLEME NTING THE EXPORT CONTRACTS IF THE ASSESSEE ENTERED INTO FORWARD CONT RACT WITH THE BANK AND IF SUCH CONTRACTS ARE REQUIRED TO BE CANCELLED AND THE ASSESSEE IS REQUIRED TO PAY SOME CHARGES TO THE BANK, THE SAME IS ALLOWA BLE AS EXPENDITURE OF BUSINESS AND IT CANNOT BE CONSIDERED AS SPECULATION LOSS AS TO COVER UNDER SUB-SECTION (5) OF SECTION 43 OF THE INCOME T AX. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED T HE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHO RITIES BELOW. WE FIND THAT IT IS NOTED BY THE LD. CIT(A) ON PAGE 9 O F HIS ORDER THAT THERE IS NO FINDING THAT ENTERING INTO FOREIGN EXCHANGE CONT ACT WAS THE BUSINESS OF THE ASSESSEE. IT IS ALSO NOTED BY HIM THAT THIS WAS ONLY INCIDENTAL PART OF BUSINESS OPERATION OF HAVING THE EXPORT AND IMPO RT OF GOODS BY THE ASSESSEE AND THE ASSESSEE WAS NOT DEALER IN FOREIGN EXCHANGE CONTRACT AS SUCH. THE ASSESSEE IN THE PRESENT CASE IS EXPORTER AND HENCE, THE FACTS IN THE PRESENT CASE ARE SIMILAR TO THE FACTS IN THE CA SE OF FRIENDS & FRIENDS SHIPPING PVT. LTD. (SUPRA). SO, THE ISSUE INVOLVED IN THE PRESENT CASE IS COVERED IN FAVOUR OF THE ASSESSEE BY THIS JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF FRIENDS & FRIENDS SHIPPIN G PVT. LTD. (SUPRA) I.T.A.NO.536 /AHD/2009 C.O.NO.41/AHD/2009 7 AND BY RESPECTFULLY FOLLOWING THE SAME, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. GROUND NO.2 OF THE REVENUE IS ALSO R EJECTED. 10. GROUND NO.3 OF THE REVENUES APPEAL IS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. C.I.T.(A) HAS ERRED IN DELETING THE ADDITION OF RS.4,77,240/- MADE BY THE A.O. ON ACCOUNT OF MACHINERY PURCHASES CONSIDERED AS CAPITAL EXPENDITURE, WITHOUT APPRECIATING THE FACTS OF THE CASE. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE CIT(A) BE S ET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 11. THE FACTS OF THE CASE TILL THE ASSESSMENT STAGE REGARDING THIS ISSUE ARE NOTED BY LD. CIT(A) IN PAGE 10 OF HIS ORDER, WH ICH ARE REPRODUCED BELOW: NEXT GROUND OF APPEAL RELATES TO DISALLOWANCE OF EXPENSES AMOUNTING TO RS.545418/- BEING EXPENSES CL AIMED AS REPAIRS AND MAINTENANCE EXPENSES BY TREATING THE SA ME AS CAPITAL EXPENDITURE. DURING THE ASSESSMENT PROCEEDINGS THE AO OBSERVED T HAT THE APPELLANT HAD PURCHASED ONE CNC MACHINE FROM SA HJANAND TECHNOLOGIES DAMAN AND HAD INCURRED RS.1000/- ON TR ANSPORT CHARGES. AND HAD PAID SUM OF RS.20978/- AS OCTROI C HARGES. THE ENTIRE EXPENSES WERE CLAIMED AS REVENUE EXPENSES. I N RESPONSE TO QUERY RAISED AS TO WHY SUCH EXPENSES SHOULD NOT BE TREATED AS CAPITAL EXPENSES, IT WAS SUBMITTED THAT THE PURCHAS ES WERE PARTS FOR REPLACEMENT OF DAMAGED MACHINE AND SINCE THE SA ME WAS AGAINST REPLACEMENT OF OLD DAMAGED PARTS IT WAS CLA IMED AS REVENUE EXPENSES. HOWEVER ACCORDING TO THE AO EXPEN SES WERE INCURRED FOR PURCHASE OF NEW MACHINE AND THEREFORE THE SAME COULD NOT BE TREATED AS REPLACEMENT OF PARTS BUT WA S CAPITAL ASSET SO ACQUIRED AND HENCE HE TREATED SUCH EXPANSES AS C APITAL EXPENSES AS AGAINST REVENUE EXPENSES CLAIMED BY THE AO AND DISALLOWED THE SAME. I.T.A.NO.536 /AHD/2009 C.O.NO.41/AHD/2009 8 12. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R IN APPEAL BEFORE CIT(A). LD. CIT(A) DECIDED THIS ISSUE IN FAVOUR O F THE ASSESSEE ON THIS BASIS THAT THE ASSESSEE HAD INCURRED THESE EXPENSES IN REPLACING THE PARTS OF THE MACHINE AND HENCE, ALLOWABLE AS REVENUE EXPE NDITURE. NOW, THE REVENUE IS IN APPEAL BEFORE US. 13. LD. D.R. OF THE REVENUE SUPPORTED THE ASSESSMEN T ORDER. IT IS ALSO SUBMITTED BY HIM THAT IT IS NOTED BY THE A.O. ON PA GE 17 OF THE ASSESSMENT ORDER IN PARA 11 THAT THE ITEM PURCHASED IS A COMPLETE NEW MACHINE AND NOT ONLY THE PARTS OF THE MACHINE BUT L D. CIT(A) HAS DELETED THIS DISALLOWANCE ON THIS BASIS THAT IT IS ONLY THE PART OF A MACHINE WITHOUT GIVING ANY BASIS OF THIS OBSERVATION. 14. AS AGAINST THIS, IT WAS SUBMITTED BY THE LD. A. R. OF THE ASSESSEE THAT THE MATTER MAY BE RESTORED BACK TO THE FILE OF THE A.O. FOR A FRESH DECISION AFTER EXAMINING THIS ASPECT AS TO WHETHER THE ITEMS PURCHASED BY SPENDING RS.5,45,418/- IS A COMPLETE MACHINE OR ONL Y PART OF THE MACHINE. IT WAS ALSO SUBMITTED THAT IN CASE IT IS FOUND THAT THE ITEMS PURCHASED IS A COMPLETE MACHINE THEN ALSO THE INSUR ANCE CLAIM RECEIVED BY THE ASSESSEE SHOULD BE ADJUSTED AND ONLY NET AMO UNT SHOULD BE DISALLOWED BECAUSE THE ASSESSEE DECLARED THE INSURA NCE RECEIPT AS REVENUE INCOME. 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT THE ADDITION WAS MADE BY THE A.O. ON THIS BASI S THAT THIS EXPENDITURE WAS INCURRED BY THE ASSESSEE ON PURCHASING A COMPLE TE NEW MACHINE BUT THE ADDITION HAS BEEN DELETED BY THE LD. CIT(A) ON THIS BASIS THAT THIS IS I.T.A.NO.536 /AHD/2009 C.O.NO.41/AHD/2009 9 ON ACCOUNT OF A PART OF THE MACHINE BUT THERE IS NO MENTION BY THE LD. CIT(A) AS TO WHICH PART OF WHICH MACHINE WAS PURCH ASED. HENCE, THE ORDER OF LD. CIT(A) ON THIS ISSUE IS NOT SUSTAINABL E. WE, THEREFORE, SET SIDE THE ORDER OF LD. CIT(A) ON THIS ISSUE AND REST ORE THE MATTER BACK TO THE FILE OF THE A.O. FOR A FRESH DECISION. THE ASS ESSEE HAS TO BRING THE FACTS ON RECORD BEFORE THE A.O. TO SUBSTANTIATE THE CLAIM THAT THE ITEMS PURCHASED IS NOT A COMPLETE MACHINE BUT ONLY A PART OF THE MACHINE. THE ASSESSEE HAS TO EXPLAIN WHICH PART WAS PURCHASED OF WHICH MACHINE. IF IT IS FOUND THAT ONLY PART OF THE MACHINE WAS PURCH ASED AS REPLACEMENT, NO DISALLOWANCE IS CALLED FOR BUT IF A NEW COMPLETE MACHINE HAS BEEN PURCHASED, THEN THE SAME IS NOT ALLOWABLE AS REVENU E EXPENDITURE AND IT HAS TO BE CAPITALIZED. WITH THESE OBSERVATIONS, WE DIRECT THE A.O. TO DECIDE THIS ISSUE AFRESH AFTER PROVIDING ADEQUATE O PPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE A.O. SHOULD EXAMINE THI S ASPECT ALSO THAT HOW MUCH INSURANCE CLAIM WAS RECEIVED FOR DAMAGE TO THE RELEVANT MACHINE & WHETHER IT WAS REDUCED FROM WDV OR OFFERED AS REV ENUE INCOME. IF IT IS FOUND THAT INSURANCE RECEIPT ON ACCOUNT OF THE R ELEVANT MACHINE ARE OFFERED AS REVENUE INCOME AND PURCHASE OF RS.5,45,4 18/- IS A COMPLETE MACHINE REQUIRED TO BE CAPITALIZED THEN ONLY NET AM OUNT SHOULD BE DISALLOWED AND CAPITALIZED. GROUND NO.3 IS ALLOWED FOR STATISTICAL PURPOSES. 16. IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 17. NOW, WE TAKE UP THE CROSS OBJECTION FILED BY THE A SSESSEE. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: I.T.A.NO.536 /AHD/2009 C.O.NO.41/AHD/2009 10 1. THE LEARNED ASSESSING OFFICER (ACIT. CIRCLE - 9, SURAT) HAS ERRED IN CONTESTING THE ORDER OF THE LEARNED CIT(A) - V. SURAT IN GRANTING RELIEF OF RS.30,01.005/-ON ACCOUNT OF G. P . ADDITION, WHICH HAD BEEN ADDED BY THE LEARNED ASSESSING OFFIC ER (ADDITIONAL CIT, RANGE - 9. SURAT) AT HIS OWN ESTIM ATION AND ASSUMPTION. 2. THE LEARNED ASSESSING OFFICER (ACIT, CIRCLE - 9, SURAT) HAS ERRED IN CONTESTING THE ORDER OF THE LEARNED CIT(A) - V, SURAT IN GRANTING RELIEF OF RS.31.04.232/-ON ACCOUNT OF LOSS ON FORWARD CONTRACT CANCELLATION . WHICH HAD BEEN ADDED BY THE LEARNED ASSESSING OFFICER (ADDITIONAL CIT. RANGE - 9. SURAT ) BY CONSIDERING THEM IT AS SPECULATIVE LOSS. 3. THE LEARNED ASSESSING OFFICER (ACIT, CIRCLE - 9, SURAT) HAS ERRED IN CONTESTING THE ORDER OF THE LEARNED (TT(A) - V. SURAT IN GRANTING RELIEF OF RS.4,77,240,- ON ACCOUNT OF REPA IRS, REPLACEMENT & MAINTENANCE OF DAMAGED MACHINERY, WHICH HAD BEEN ADDED BY THE LEARNED ASSESSING OFFICER (ADDITIONAL CIT, RANG E - 9, SURAT) BY CONSIDERING THEM AS CAPITAL EXPENDITURE. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AM END ANY GROUND OF CROSS-OBJECTION. 18. IT WAS SUBMITTED BY THE LD. A.R. THAT GROUNDS N O.1 & 2 OF THE C.O. ARE MERELY IN SUPPORT OF THE ORDER OF LD. CIT(A). BOTH THESE ISSUES HAVE BEEN DECIDED BY US IN FAVOUR OF THE ASSESSEE WHILE DECIDING THE APPEAL OF THE REVENUE AND HENCE, GROUNDS NO.1 & 2 OF THE C.O. ARE INFRUCTUOUS AND ARE REJECTED AS INFRUCTUOUS. 19. REGARDING GROUND NO.3, OF THE C.O. IT WAS SUBMI TTED BY THE LD. A.R. THAT THIS IS CONNECTED WITH GROUND NO.3 OF THE REVENUES APPEAL AND HENCE THE SAME SHOULD ALSO BE RESTORED BACK TO THE FILE OF THE A.O. WE FIND THAT WE HAVE ALREADY RESTORED BACK THIS ISSUE WHILE DECIDING GROUND NO.3 OF THE REVENUES APPEAL, AND THE A.O. HAS BEEN DIRECTED FOR NOT I.T.A.NO.536 /AHD/2009 C.O.NO.41/AHD/2009 11 MAKING AN ADDITION IF THE ASSESSEE ESTABLISHES THAT ONLY PART OF A MACHINE WAS REPLACED. SINCE THIS GROUND OF THE C.O. IS INT ERCONNECTED WITH THE GROUND NO.3 OF THE REVENUES APPEAL, WE ARE OF THE CONSIDERED OPINION THAT THE ISSUE OF GROUND NO.3 OF THE C.O. IS ALSO I N SUPPORT OF THE ORDER OF CIT(A) AND THIS ISSUE HAS ALREADY BEEN RESTORE BACK BY US TO THE FILE OF THE A.O. FOR A FRESH DECISION WHILE DECIDING GROUND NO.3 OF THE REVENUES APPEAL AND HENCE, THIS GROUND OF THE C.O. IS ALSO I NFRUCTUOUS AND DISMISSED ACCORDINGLY. 20. IN THE RESULT, C.O. OF THE ASSESSEE IS DISMISSE D. 21. IN THE COMBINED RESULT, THE APPEAL OF THE REVEN UE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE AND THE C.O. IS DISMISSED. 22. ORDER PRONOUNCED IN THE OPEN COURT ON 09 TH SEP., 2011. SD./- SD./- (MUKUL KUMAR SHRAWAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED : 09.09. 2011 SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD I.T.A.NO.536 /AHD/2009 C.O.NO.41/AHD/2009 12 1. DATE OF DICTATION 5/9 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 07/09.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 07/09 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 09.09.11 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S. 09.09 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 09.09.2011 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. ..