The DCIT, Central Circle-2, Baroda V. Comed Chemicals Pvt. Ltd., Baroda

ITA 1344/AHD/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9179 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 08-03-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 06-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S L CHANDEL
• Assessee Lawyers: P K TANDON
• Keywords: Rejection of books of accounts; Depreciation; Search and seizure; Document seized; Proportionate interest; Cost of acquisition; Commercial expediency; Documents seized
• Section: 143(3); 14A; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: S H RI PRAMOD KUMAR , ACCOUNTANT MEMBER AND SHR I S. S. GODARA , JUDICIAL MEMBER THE DCIT, CENTRAL CIRCLE - 2, BARODA (APPELLANT) VS COMED CHEMICALS PVT. LTD, 3 RD FLOOR, ORIENT BUSINESS CENTRE, OPP. SURAJ PLAZA, SAYAJI GUNJ, BARODA PAN: AABCC0242N (RESPONDENT) REVENUE BY : S H RI S.L. CHANDEL , SR. D . R. ASSESSEE BY: S H RI P.K. TANDON , A.R. DATE OF HEARING : 08 - 03 - 2 016 DATE OF PRONOUNCEMENT : 11 - 03 - 2 016 / ORDER P ER : S. S. GODARA , JUDICIA L MEMBER : - THIS REVENUE S APPEAL FOR A.Y. 2007 - 08 , AR ISES FROM ORDER OF THE CIT(A) - IV, AHMEDABAD DATED 14 - 02 - 2011 IN APPEAL NO. CIT(A) - IV/192 - B/CC - 2/09 - 10 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . I T A NO . 1344 / A HD/20 11 A SSESSMENT YEAR 200 7 - 08 I. T.A NO. 1344 /AHD/20 11 A.Y. 2007 - 08 PAGE NO DCIT VS. COMED CHEMICALS PVT. LTD 2 2. THE REVE NUE S FIRST SUBSTANTIVE GROUND PLEADS THAT THE CIT(A) HAS ERRED IN LAW AND FACTS IN DELETING ADDITION OF RS. 45,81,105/ - MADE BY THE ASSESSING OFFICER IN ASSESSMENT ORDER DATED 21 - 12 - 2009 ON ACCOUNT OF INTEREST FREE LOAN TO SISTER CONCERN FROM INTEREST BEARING FUNDS. THE ASSESSEE INVESTED RS. 5 CRORES IN ITS SISTER CONCERN UNDER THE NAME AND STYLE M/S COMED PHARMACEUTICAL LTD. THE ASSESSING OFFICER SOUGHT EXPLANATION AS TO WHETHER THE SAME INVOLVED UTILIZATION OF ANY INTEREST BEARING FUNDS. THE ASSES SEE PLEADED TO HAVE INVESTED ONLY OUT OF ITS INTEREST FREE RESERVES FOR COMMERCIAL EXPEDIENCY IN ORDER TO LOOK AFTER ITS SUBSIDIARY INTEREST. IT SOUGHT TO HIGHLIGHT ITS BUSINESS INTEREST AND TO HAVE TAKEN HUGE CREDITS THEREFROM. THE ASSESSING OFFICER QUO TED ITS FAILURE IN PROVING NON - DIVERSION OF INTEREST FREE FUNDS IN THE IMPUGNED INVESTMENTS. THIS RESULTED IN INTEREST DISALLOWANCE IN QUESTION OF RS. 45,81,105/ - . 3. THE CIT(A) REVERSES ASSESSING OFFICER S FINDINGS. 5.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE LD. COUNSEL AS WELL AS THE FINDING OF THE ASSESSING OFFICER RECORDED IN THE ASSESSMENT ORDER. I HAVE ALSO CONSIDERED THE DECISIONS RELIED UPON BY THE LD. COUNSEL. THE ASSESSING OFFICER HAD NOT EXAMINED THIS ISSUE IN THE PROPER PERSPEC TIVE. THE OUTCOME OF THE DECISION IN THE CASE OF S.A. BUILDERS 288 ITR 1 (SC) IS NOT AT ALL APPLICABLE IN THE FACTS OF THIS CASE. IT WAS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF S.A. BUILDERS 288 ITR 1 (SC) THAT INTEREST ON BORROWED FUNDS CANNOT BE DISALLOWED IF THE ASSESSEE HAS ADVANCED INTEREST FREE LOAN TO SISTER CONCERN AS A MEASURE OF COMMERCIAL EXPEDIENCY. WHAT IS TO BE SEEN IS 'BUSINESS PURPOSE' AND WHAT THE SISTER CONCERN DID WITH THE MONEY ADVANCED. THIS IS NOT A CASE OF INTEREST FREE LOAN TO SISTER CONCERN. THE APPELLANT HAD MADE INVESTMENT OF RS. 500.00 LAKHS IN THE SHARE CAPITAL OF THE SUBSIDIARY COMPANY M/S CORNED PHARMACEUTICAL LTD. THE ASSESSING OFFICER HAD ALSO I. T.A NO. 1344 /AHD/20 11 A.Y. 2007 - 08 PAGE NO DCIT VS. COMED CHEMICALS PVT. LTD 3 MENTIONED IN HIS ORDER THAT THE PROVISIONS OF SEC. 14A CAN ALSO BE ATTRACT ED AS THE INVESTMENT WOULD ALSO FETCH TAX FREE INCOME BUT THE INTEREST WAS NOT DISALLOWED U/S 14A OF THE ACT. EVEN IF, IT WAS A INTEREST FREE LOAN TO SISTER CONCERN, THE CASE OF S.A, BUILDERS 288 ITR.1 (SC) WAS IN FAVOUR OF THE ASSESSEE BECAUSE IN THAT CAS E A MEASURE OF COMMERCIAL EXPEDIENCY AND BUSINESS PURPOSE WAS APPARENT. THE SISTER CONCERN IS PAYING SUBSTANTIAL INCENTIVE IN THE SHAPE OF EXTRA DISCOUNT WHICH WAS FOR RS. 57,86,650/ - IN THE A.Y. 2007 - 08 AND FOR RS. 1,58,66,599/ - FOR THE A.Y. 2008 - 09. THES E THINGS ARE PART OF RECORD OF THE ASSESSING OFFICER. THE GOODS OF THE SISTER CONCERN ARE SOLD BY THE APPELLANT COMPANY AND THE APPELLANT COMPANY MAKING PROFIT OUT OF IT AND TAXES ON SUCH PROFIT ARE PAID WHICH ARE ONLY ON ACCOUNT OF THE EXISTENCE OF SISTER CONCERN. APART FROM IT, THE SISTER CONCERN M/S CORNED PHARMACEUTICAL LTD. HAD MADE THE PAYMENT OF RS. 217.28 LAKHS TO VARIOUS PARTIES ON BEHALF OF THE APPELLANT AND NO INTEREST WAS CHARGED. THUS, IF THE INVESTMENT OF RS. 500.00 LAKHS WAS GIVEN AS AN INTER EST FREE LOAN TO SISTER CONCERN, THE SAME WAS ONLY FOR THE BUSINESS PURPOSE AND AS A MEASURE OF COMMERCIAL EXPEDIENCY. FOR APPLICATION OF THE CASE OF THE S.A. BUILDERS, THERE IS NO NECESSITY TO LOOK INTO THE AVAILABILITY OF INTEREST FREE FUNDS OR THE SOURC E AS TO FROM WHERE THE LOAN WAS GIVEN. IF THE INTEREST FREE LOANS ARE GIVEN OUT OF THE LOAN FUNDS, EVEN THEN THE INTEREST CANNOT BE DISALLOWED WHERE THE LOAN WAS GIVEN FOR THE BUSINESS PURPOSE AND AS A MEASURE OF COMMERCIAL EXPEDIENCY. THE ASSESSING OFFICE R HAD THUS NOT CORRECTLY APPLIED THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF S.A. BUILDERS 288 ITR 1 (SC). HE HAD NOT CORRECTLY HELD THAT THE APPELLANT HAD NOT DISCHARGED THE ONUS CASTED UPON THE APPELLANT COMPANY. 5.4 HOWEVER, THE INVESTMENT OF RS. 500.00 LAKHS WAS MADE BY THE APPELLANT IN THE SHARE CAPITAL OF THE SISTER CONCERN WHICH CANNOT BE HELD TO BE FOR BUSINESS PURPOSES BECAUSE INVESTMENT IN SHARE CAPITAL OF ANOTHER COMPANY CANNOT BE TERMED AS BUSINESS OF THE APPELLANT COMPANY. THE INT EREST PAYABLE ON LOAN FUNDS IS ALLOWABLE ONLY IF THE SAME IS PAID/PAYABLE FOR THE PURPOSES OF BUSINESS. THEREFORE, IF THE INVESTMENT IS OUT OF THE LOAN FUNDS, THE PROPORTIONATE INTEREST IS TO BE DISALLOWED. HOWEVER, IF THE APPELLANT HAD SUFFICIENT INTEREST FREE FUNDS, THE PROPORTIONATE INTEREST CANNOT BE DISALLOWED. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES & POWER LTD, 313 I.TR 340 (BOM.) HAD HELD THAT IF SUFFICIENT INTEREST FREE FUNDS ARE .AVAILABLE TO AN ASSESSEE TO MEET ITS INVESTM ENTS AND AT THE SAME TIME, THE ASSESSEE HAD RAISED A LOAN, IT I. T.A NO. 1344 /AHD/20 11 A.Y. 2007 - 08 PAGE NO DCIT VS. COMED CHEMICALS PVT. LTD 4 CAN BE PRESUMED THAT THE INVESTMENTS WERE FROM THE INTEREST FREE FUNDS AVAILABLE. THE ASSESSING OFFICER HAD NOT EXAMINED THIS ISSUE IN THE PROPER PERSPECTIVE. HE HAD NOT TRIED TO EXAMINE THE ISS UE PROPERLY THOUGH SUFFICIENT MATERIAL WAS AVAILABLE ON RECORD. AS PER THE AUDITED ACCOUNTS, THE LOAN FUNDS OF RS. 1711.90 LAKHS WERE AVAILABLE AS ON 31.03.2006 WHICH ROSE TO RS. 1971.32 LAKHS AS ON 31.03.2007. THUS, THERE WAS AN INCREASE OF RS. 259.42 LAK HS IN THE LOAN FUNDS. I HAVE GONE THROUGH THE DETAILS OF LOAN RAISED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. ON EXAMINATION, IT WAS NOTICED THAT DURING THE PREVIOUS YEAR RELEVANT TO THE A.Y. 2007 - 08, THE APPELLANT HAD RAISED TERM LOAN FOR R&D EQUIPMENT FROM KARNATAKA BANK, THE CLOSING BALANCE OF WHICH WAS FOR RS. 1,85,60,780/ - . THIS LOAN WAS FOR SPECIFIC PURPOSES OF R&D EQUIPMENTS AND THE SAME WAS NOT AVAILABLE TO THE ASSESSEE FOR INVESTMENT. THE ANOTHER LOAN WAS ALSO TAKEN FROM THE SAME KARN ATAKA BANK FOR CASH CREDIT LIMIT, THE CLOSING BALANCE OF WHICH WAS FOR RS, 1,94,26,221/ - . THERE IS NO INCREASE IN THE UNSECURED LOAN AND THE INCREASE MAY BE ON ACCOUNT OF ACCRUED INTEREST. THE ASSESSING OFFICER HAD NOT GIVEN ANY FINDING THAT THIS CASH CR EDIT LOAN WAS UTILIZED FOR INVESTMENT. AS REGARDS THE INTEREST FREE FUNDS, THERE WAS A INCREASE IN THE SHARE CAPITAL OF THE APPELLANT COMPANY FOR RS. 321.00 L AKHS AND THERE WAS THE CREDIT BALANCE OF AT LEAST RS. 217.28 LAKHS OF SISTER CONCERN ON ACCOUNT OF PAYMENT TO VARIOUS PARTIES ON BEHALF OF THE APPELLANT . T HERE IS A DECREASE IN THE RESERVE FUND FROM THE LAST YEAR. THUS, THE APPELLANT WAS HAVING INTEREST FREE FUNDS OF MORE THAN THE IN VESTMENT OF RS. 500.00 LAKHS. LN VIEW OF THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES & POWER LTD. 313 ITR 340 (BOM.), IT IS PRESUMED THAT THE INVESTMENT WAS FROM THE INTEREST FREE FUNDS AVAILABLE. CONSIDERING THE ABOVE DISCUSSION AND FOLLOWING THE DECISION OF THE H ON'BLE BOMBAY HIGH COU RT IN THE CASE OF RELIANCE UTILITIES & POWER LTD. 313 ITR 340 (BOM.), IT IS HELD THAT THE APPELLANT WAS HAVING SUFFICIENT INTEREST FREE FUNDS AND THE INVESTMENT OF RS. 500.00 LAKHS MADE IN THE SHARE CAPITAL OF THE SISTER CONCERN M/S CORNED PHARMACEUTICAL L TD. WAS FROM SUCH INTEREST FREE FUNDS. THE ASSESSING OFFICER WAS THUS NOT JUSTIFIED IN DISALLOWING THE PROPORTIONATE INTEREST OF RS. 45,81,105/ - . THE ADDITION MADE FOR RS, 45,81,105/ - ON ACCOUNT OF DISALLOW ING THE PROPORTIONATE INTEREST IS HEREBY DELETED. THE FOURTH GROUND OF APPEAL IS ACCORDINGLY ALLOWED. I. T.A NO. 1344 /AHD/20 11 A.Y. 2007 - 08 PAGE NO DCIT VS. COMED CHEMICALS PVT. LTD 5 4. HEARD BOTH SIDES. CASE FILE PERUSED. IT IS EVIDENT THAT THE CIT(A) FIRST OF ALL HOLDS THAT ASSESSEE S SISTER CONCERN HAS ALREADY PAID SUBSTANTIAL INCENTIVE IN THE SHAPE OF EXTRA DISCOUNT OF RS. 5 7,86,650/ - IN THE IMPUGNED ASSESSMENT YEAR FOLLOWED BY RS. 1,58,66,599/ - IN THE SUCCEEDING ASSESSMENT YEAR. COMING TO THE FACT AS TO WHETHER THE ASSESSEE INVESTED ITS INTEREST BEARING FUNDS IN ITS SISTER CONCERN OR NOT, THE LOWER APPELLATE FINDINGS UNDER CHALLENGE READ THAT THE ASSESSEE S NON - INTEREST BEARING FUNDS ARE MUCH MORE THAN THE INVESTMENTS IN QUESTION. THE CIT(A) FOLLOWS HON BLE BOMBAY HIGH COURT DECISION IN RELIANCE UTILITIES AND POWER LTD. 313 ITR 340 DRAWING PRESUMPTION OF UTILIZATION OF NON - INTEREST BEARING FUNDS IN SUCH AN EVENTUALITY. THERE CAN HARDLY BE ANY DISPUTE ON THE FORMER ASPECT THAT SIMILAR INVESTMENTS INVOLVING COMMERCIAL EXPEDIENCY BASED ON FACTS DO NOT INVITE ANY INTEREST DISALLOWANCE AS HELD IN SA BUILDERS CASE (SUPRA) . THE REVENUE DOES NOT REFER TO ANY EVIDENCE ON RECORD REBUT BOTH THESE FACTUAL FINDINGS. WE FIND NO REASON TO INTERFERE WITH THE CIT(A) S ORDER DIRECTING TO DELETE THE IMPUGNED INTEREST DISALLOWANCE OF RS. 45,81,105/ - IN QUESTION. THIS FIRST SUBSTANTIVE GROUN D FAILS. 5 . THE REVENUE S NEXT SUBSTANTIVE GROUND CHALLENGES THE CIT(A) S ORDER DELETING DISALLOWANCE OF CLAIM FOR BOGUS/EXPIRED AND DAMAGED GOODS AMOUNTING TO RS. 44,07,572/ - . BOTH PARTIES ARE IN AGREEMENT THAT TRIBUNAL S IN ASSESSMENT YEAR 2006 - 07 ITA 2642/AHD/2009 DECIDES THE VERY ISSUE IN ASSESSEE S FAVOUR AS UNDER: - I. T.A NO. 1344 /AHD/20 11 A.Y. 2007 - 08 PAGE NO DCIT VS. COMED CHEMICALS PVT. LTD 6 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF DRUGS AND PHARMACEUTICALS. THE A.O. OBSERVED THAT ON VERIFICATION OF P&L ACCOUNT, IT IS TRANSPIRED THAT THE ASSESSEE HAD DEBITED RS.7,94,441/ - UNDER THE HEAD EXPIRED GOODS . HOWEVER, FOR THE GOODS REPLACED WORTH RS.1,46,60,484/ - DOES NOT APPEAR IN THE P&L ACCOUNT. THEREFORE, THE ASSESSEE WAS ASKED TO EXPLAIN THE ACCOUNTING TREATMENT OF THE SAID RS.1,46,60,484 / - . THE APPELLANT HAD STATED THAT THE SAME HAD BEEN INCLUDED IN THE PURCHASE COST, HENCE, THE SAME WAS NO WHERE REFLECTED IN THE P&L ACCOUNT. THE A.O. FOUND THAT ACCOUNTING TREATMENT OF GOODS REFLECTED IS CONTRARY TO THE ACCOUNTING STANDARD SPECIFIED IN THE 11 TH DIVISION TO THE INCOME TAX RULE. THERE WAS A SEARCH AND SEIZURE OPERATION U/S.132 OF THE IT ACT ON 09.09.2004 ON THE PREMISES OF THE APPELLANT. THE APPELLANT FILED A SETTLEMENT PETITION BEFORE THE SETTLEMENT COMMISSION, MUMBAI. THE LD. A.O. OBS ERVED THAT THE INVESTIGATION WING DURING THE COURSE OF SEARCH HAD RECORDED STATEMENT OF SHRI KIRIT C. PATEL, PRODUCTION MANAGER IN PHARMACEUTICAL DIVISION ON 09.09.2004 AT THE FACTORY PREMISES AT SAVLI. THE A.O. REPRODUCED THE STATEMENT ON PAGE NOS. 4 & 5 AND CONCLUDED ON THE BASIS OF THIS ADMISSION MADE BY THE MANAGER THAT THE AVERAGE OF GOODS RETURN ON ACCOUNT OF DAMAGED/EXPIRED WAS 1 TO 2 %. THUS, SHE ESTIMATED GOODS DAMAGED/EXPIRED @ 2% ON SALES. THE EXCESS CLAIM EXCEEDING 2% ON SALES IS DISALLOWED A T RS.28,85,739/ - AND ADDED BACK IN THE INCOME OF THE ASSESSEE. 3. BEING AGGRIEVED BY THE ORDER OF THE A.O., THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A) WHO HAD DELETED THE ADDITION BY OBSERVING AS UNDER: 3.1 I HAVE CAREFULLY CONSIDERED THE CONTENT IONS OF LEARNED COUNSEL AS WELL AS GONE THROUGH THE RECORDS. ON PERUSAL OF ASSESSMENT ORDER, IT HAS BEEN NOTICED THAT THE ASSESSING OFFICER HAD MADE ADDITION ONLY ON THE BASIS OF STATEMENTS OF TWO EMPLOYEES OF THE APPELLANT COMPANY WHO WERE NOT LOOKING AF TER SALES/MARKETING/GOODS RETURNED/DESTROYED. IT WAS ALSO ADMITTED BY BOTH THESE EMPLOYEES THAT NO RECORD OF GOODS DESTROYED WERE MAINTAINED. THE ASSESSING OFFICER WAS REQUIRED TO INVESTIGATE FURTHER FOR DISPROVING THE CLAIM OF THE APPELLANT WAS NOT DONE IN THE PRESENT CASE. FURTHER, BOOKS WERE I. T.A NO. 1344 /AHD/20 11 A.Y. 2007 - 08 PAGE NO DCIT VS. COMED CHEMICALS PVT. LTD 7 TREATED AS AUTHENTIC SINCE THESE WERE NOT REJECTED U/S 145 BEFORE ESTIMATING THE GOODS RETURNED/DAMAGED. IT IS ALSO EVIDENT FROM THE STATEMENTS OF BOTH THESE EMPLOYEES THAT THE STATEMENTS WERE GIVEN ONLY ON THE B ASIS OF MEMORY WITHOUT REFERENCE TO ANY DOCUMENTARY EVIDENCE. HENCE, THEIR STATEMENTS WERE NOT CORROBORATED WITH DOCUMENTS/RECORDS BEFORE MAKING ANY ESTIMATE. ON THE OTHER HAND, THE APPELLANT HAD SUBMITTED BEFORE THE ASSESSING OFFICER PARTY - WISE DETAILS OF DEBIT ADVICE AND CLAIMS OF VARIOUS PARTIES. IT WAS HELD BY HON BLE ALLAHABAD HIGH COURT IN CASE OF CIT VS. SMT. USHA TRIPATHI (249 ITR 4) THAT THE ESTIMATE OF INCOME WITHOUT REFERENCE TO SEIZED DOCUMENTS COULD NOT BE UPHELD. MOREOVER, ESTIMATE IS NOT WARRANTED WITHOUT REJECTION OF BOOKS OF ACCOUNTS U/S 145 IF BOOKS OF ACCOUNTS WERE NOT PROPERLY MAINTAINED. IN THE PRESENT CASE, NO NEXUS WITH THE SEIZED MATERIAL WAS ESTABLISHED FOR MAKING THE ESTIMATE NOR BOOKS OF ACCOUNTS WERE REJECTED U/S 145. KEEPIN G IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, THE ADDITION IS HEREBY DELETED. THE SECOND GROUND OF APPEAL IS ALLOWED. 4. NOW THE REVENUE IS BEFORE US. THE LD. CIT D.R. FILED PAPER BOOK WHICH INCLUDES COPY OF STATEMENT OF SHRI SHRI KIRIT C. PA TEL, SHRI SUBHASHCHANDRA B. BHAVSAR, COPY OF LEDGER ACCOUNT AND CONFIRMATION OF M/S. SAFFROYS AND COPY OF SETTLEMENT ETC. LD. CIT D.R. VEHEMENTLY ARGUED THAT THE APPELLANT HIMSELF ADMITTED BEFORE THE SETTLEMENT COMMISSION THAT HE HAD OBTAINED BOGUS PURCHA SE/EXPENSES, BOGUS SALES AND UNACCOUNTED PURCHASE. ON THAT BASIS, HE HAD MADE DISCLOSURE OF ADDITIONAL INCOME FROM A.Y. 1999 - 2000 TO 2005 - 06. THUS, SHE REQUESTED TO CONFIRM THE ADDITION. 4.1 AT THE OUTSET, LD. COUNSEL FOR THE APPELLANT HAS DRAWN OUR ATT ENTION ON THE SETTLEMENT PETITION WHERE THE PERCENTAGE OF GOODS DAMAGED/EXPIRED VARIED FROM .75% IN 1998 - 99 TO 4.3% IN 2003 - 04. IT WAS ARGUED THAT WHEN NEW PRODUCT IS LAUNCHED, IT TAKES SOME TIME TO GET THE PRODUCT ACCEPTED BY THE MARKET AND DURING THE IN ITIAL PERIOD THE MANUFACTURERS HAVE TO MAKE AVAIL THE PRODUCT IN ALL MARKETS BUT IT GET ACCEPTED ONLY IN FEW AREAS IN FIRST INSTANCE. THESE FACTS WERE BEFORE THE A.O. AT THE TIME OF ASSESSMENT ORDER. THE DEPARTMENT IN SUBSEQUENT YEAR I.E. A.Y. 2006 - 07, 0 7 - 08 & 08 - 09 HAD ACCEPTED THE FIGURE ON ACCOUNT OF EXPIRED/DAMAGED GOODS. THE DEPARTMENT ONLY RELIED UPON THE STATEMENTS OF PERSON DEALING WITH I. T.A NO. 1344 /AHD/20 11 A.Y. 2007 - 08 PAGE NO DCIT VS. COMED CHEMICALS PVT. LTD 8 THE PRODUCTION WHO WERE NOT AWARE OF THE FACT AS DAMAGED AND EXPIRED OF GOODS WERE BEING DEALT BY THE MARKETING STAFF EVEN IN STATEMENT ALSO THE EXECUTIVE HAD ADMITTED THE PERCENTAGE OF EXPIRED GOODS 4 TO 5%. THUS, IT IS ALLOWABLE EXPENSES. HE PRAYED TO CONFIRM THE ORDER OF THE CIT(A). 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. I T IS PRACTICE IN THE PHARMACEUTICALS BUSINESS THAT SOME PRODUCTS HAVE TO BE EXPIRED OR DAMAGES AND ALL THE RETAILERS ARE NOT ABLE TO SELL THE GOODS WITHIN EXPIRY OF DATE, EVEN BRANDED GOODS SOME TIME EXPIRED. THE APPELLANT HAD SHOWN EXPIRY OF GOODS PERC ENTAGE MORE THAN 4%. DURING THE YEAR, GOODS EXPIRED WAS RS. 7,94,441/ - AND GOODS REPLACED AT RS. 1,46,60,484/ - WHICH IS 2.46%, IS REASONABLE. KEEPING IN VIEW THE PAST HISTORY OF THE ASSESSEE, THE LD. A.O. HAD NOT BROUGHT ON RECORD ANY EVIDENCE THAT THE A PPELLANT HAD MADE SALE OUTSIDE THE BOOKS. EVEN, NO EVIDENCE DURING THE COURSE OF SEARCH WERE FOUND, WHICH WAS RELEVANT TO A.Y. 2005 - 06. THE SETTLEMENT COMMISSION ALSO ACCEPTED THE ASSESSEE S DISCLOSURE OF FURTHER ANY ADDITIONAL DISCLOSURE ON THIS ISSUE. THUS, WE DO NOT FIND ANY REASON TO INTERVENE IN THE ORDER OF THE CIT(A). WE ACCORDINGLY FOLLOW LD. CO - ORDINATE BENCH FINDINGS ON THIS EXPI RED AND DAMAGED GOODS ISSUE BY FINDING NO DISTINCTION IN THE RELEVANT FACTS OF THE TWO ASSESSMENT YEARS IN QUESTION . THIS SE COND SUBSTANTIVE GROUND IS ALSO REJECTED. 6 . THE REVENUE S THIRD AND LAST SUBSTANTIVE GROUND STATES THAT THE CIT(A) HAS WRONGLY DELETED EXCESS DEPRECIATION ALLOWANCE OF RS. 1,02,270/ - OUT OF RS. 3,28,947/ - MADE BY THE ASSESSING OFFICER. THE REVENUE INVI TES OUR ATTENTION TO PAPER BOOK PAGES 81 TO 92 COMPRISING OF THE CIT(A) S ORDER FOR ASSESSMENT YEAR 2008 - 09 ALLOWING ASSESSEE S CLAIM OF DEPRECIATION @ 10% AGAINST THAT CLAIM @ 15%. BOTH PARTIES EXPRESSED AGREEMENT THAT THE SAME CAN BE FOLLOWED EVEN IN THE IMPUGNED ASSESSMENT YEAR AS WELL. WE I. T.A NO. 1344 /AHD/20 11 A.Y. 2007 - 08 PAGE NO DCIT VS. COMED CHEMICALS PVT. LTD 9 ACCORDINGLY ACCEPT THIS THIRD SUBSTANTIVE GROUND FOR STATISTICAL PURPOSES AND DIRECT THE ASSESSING OFFICER TO PASS A CONSEQUENTIAL ORDER AS IN TUNE WITH THE CIT(A) S ORDER IN SUCCEEDING ASSESSMENT YEAR BY ADOPTING JUDICIAL CONSISTENCY. 7. THIS REVENUE S IS PARTLY ACC EPTED FOR STATISTICAL PURPOSES. ORDER PR ONOUNCED IN THE OPEN C OURT ON 11 - 03 - 201 6 SD/ - SD/ - ( PRAMOD KUMAR ) ( S. S. GODARA ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 11 /03 /2016 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,