Berst Choice, CHENNAI V. DCIT, CHENNAI

ITA 1766/CHNY/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8779 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 23-06-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 20-06-2014
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Unexplained investment; Depreciation; Revised return; Revenue expenditure
• Section: 32; 263; 132

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI . . . , . !' , # $ % [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NOS.1766, 1767 & 1768/MDS/2014 / ASSESSMENT YEARS : 2007-08, 2008-09 & 2009-10 M/S BEST CHOICE 176F, TRIVANDRUM ROAD TIRUNELVELI 627 003 VS. THE DY. COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE IV(1) CHENNAI [PAN AAHFB 7067 M] ( &' / APPELLANT) ( ()&' /RESPONDENT) ./ I.T.A.NO.1879/MDS/2014 / ASSESSMENT YEAR : 2009-10 THE DY. C OMMISSIONER OF INCOME-TAX CENTRAL CIRCLE IV(1) CHENNAI VS. M/S BEST CHOICE 176F, TRIVANDRUM ROAD TIRUNELVELI 627 003 ( &' / APPELLANT) ( ()&' /RESPONDENT) ASSESSEE BY : SHRI R. VIJAYARAGHAVAN, ADVOCATE DEPARTMENT BY : SHRI P. R ADHAKRISHNAN, JCIT / DATE OF HEARING : 23 - 0 6 - 2016 / DATE OF PRONOUNCEMENT : 05 - 0 8 - 2016 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER THE ASSESSEE FILED APPEALS FOR ASSESSMENT YEARS 2007-08, 2008-09 AND 2009-10 AGAINST THE RESPECTIVE ORDERS O F THE ITA NO. 1766/14 ETC :- 2 -: COMMISSIONER OF INCOME-TAX (APPEALS), CHENNAI. THE REVENUE HAS ALSO FILED APPEAL FOR ASSESSMENT YEAR 2009-10. SINC E COMMON ISSUE ARISES FOR CONSIDERATION IN ALL THE APPEALS, WE HEA RD THEM TOGETHER AND DISPOSING OF THE SAME BY THIS COMMON ORDER. 2. THE FIRST COMMON ISSUE INVOLVED IN ALL THE ASSESSE ES APPEALS IS WITH REGARD TO VALUATION OF CLOSING STOC K. 3. SHRI R. VIJAYARAGHAVAN, LD. COUNSEL FOR THE ASSESSE E SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE BUSI NESS OF TEXTILES. THERE WAS A SEARCH OPERATION IN THE BUSINESS PREMIS ES OF M/S RMKV & SONS U/S 132 OF THE ACT ON 18.2.2009. SEVERAL INC RIMINATING MATERIAL PERTAINING TO THE ASSESSEE WAS FOUND AND SEIZED. THE LD. COUNSEL FURTHER SUBMITTED THAT THE ASSESSEE VALUED THE CLO SING STOCK AT THE COST OR MARKET/REALIZABLE VALUE WHICHEVER IS LESS. THIS METHOD WAS FOLLOWED REGULARLY. THE ASSESSEE IN FACT, VALUING THE CLOSING STOCK WHICH COULD NOT BE SOLD FOR YEARS TOGETHER EITHER A T 25% OR 50% OF THE COST. THIS BEING THE MARKET/REALIZABLE VALUE. THE LD. COUNSEL FURTHER SUBMITTED THAT BEFORE THE DATE OF SEARCH, T HE ASSESSEE HAS FILED THE RETURN OF INCOME ON THE BASIS OF THE AUDI T REPORT. SINCE THE RETURN WAS FILED ON THE BASIS OF THE AUDIT REPORT, THE SAME CANNOT BE SO LIGHTLY REJECTED UNLESS THERE IS A CONTRARY MATE RIAL AVAILABLE ON RECORD. IN THE ABSENCE OF ANY MATERIAL TO SUGGEST THAT THE VALUATION ITA NO. 1766/14 ETC :- 3 -: MADE BY THE ASSESSEE IS NOT CORRECT, ACCORDING TO THE LD. COUNSEL, THE ASSESSING OFFICER IS NOT JUSTIFIED IN DISALLOWING T HE CLAIM OF THE ASSESSEE. DEPENDING UPON THE GOODS REMAIN UNSOLD, THE ASSESSEE ESTIMATED THE REALIZABLE VALUE AS MARKET VALUE ON T HE BASIS OF ITS EXPERIENCE IN THE BUSINESS. THIS CANNOT BE DOUBTED BY THE ASSESSING OFFICER. THE LD. COUNSEL FURTHER SUBMITTED THAT FA SHION AND TECHNOLOGY ARE CHANGING VERY FAST IN THE TEXTILE BUSINESS, THE REFORE, THE ASSESSEE HAS TO NECESSARILY CHANGE THE FASHION ACCORDING TO THE DESIRE OF THE CUSTOMERS. IF THE TEXTILE GOODS COULD NOT BE SOLD FOR ONE YEAR OR MORE THAN ONE YEAR, THE CUSTOMERS MAY NOT LIKE THE GOODS BECAUSE OF THE CHANGE IN FASHION, THEREFORE, THE ASSESSEE HAS TO CLEAR THE GOODS BY GIVING DISCOUNT. BY CONSIDERING THE NATURE OF THE BUSINESS, THE ASSESSEE ESTIMATED THE NET REALIZABLE VALUE AS MARK ET VALUE FOR THE PURPOSE OF VALUING THE CLOSING STOCK. THE LD. COUN SEL FURTHER SUBMITTED THAT SIMILAR ISSUE WAS CONSIDERED BY THIS TRIBUNAL IN THE CASE OF RM.K. VISVANATHA PILLAI & SONS IN I.T.A.NOS.1784 TO 1787/MDS/2014 AND THIS TRIBUNAL BY AN ORDER DATED 1.6.2016 ALLOWE D THE CLAIM OF THE ASSESSEE. THEREFORE, THE CIT(A) IS NOT JUSTIFIED I N CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER. 4. ON THE CONTRARY, SHRI P. RADHAKRISHNAN, LD. DEPARTM ENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSING OFFICER FOUND THAT THE ITA NO. 1766/14 ETC :- 4 -: SAMPLE PRESENTED BY THE ASSESSEE CANNOT BE ACCEPT ABLE AND RANDOM SAMPLE MAY NOT REFLECT THE STOCK OF THE ASSESSEE. THE POLICY OF MAKING PROVISION @ 25%, 50% OR AT ` 100/- WAS ADOPTED BY ALL THE FIRMS OF THE ASSESSEE-COMPANY GROUP TRADING IN DIFF ERENT PRODUCT LINE LIKE SILK SAREES, READYMADE GARMENTS, SUITING, SHI RTING, MATCHING BLOUSES, HOSIERIES ETC. WHEN THE PRODUCT RANGE WAS SO WIDE, THE PARAMETER ADOPTED BY THE ASSESSEE FOR VALUING THE STOCK CANNOT BE CONSIDERED TO BE REPRESENTING THE REALIZABLE VALUE. THE CLAIM OF THE ASSESSEE THAT SILK SAREES WOULD FETCH ONLY ` 100/- AT THE END OF THE THREE YEARS IS NOT CONVINCING. PLACING RELIANCE ON THE ORDER OF THIS TRIBUNAL IN I.T.A.NOS.1769 TO 1772/MDS/2014 DATED 2 8.8.2015 IN THE CASE OF SHRI N. VISWANATH, THE LD. DR SUBMITTED THA T THIS TRIBUNAL FOUND THAT THE VALUATION MADE BY THE ASSESSEE IS N OT CORRECT. THEREFORE, ACCORDING TO THE LD. DR, THE CIT(A) HAS RIGHTLY CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER IN ALL T HE THREE YEARS. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THI S BENCH OF THE TRIBUNAL IN THE CASE OF M/S RM.K. VISVANATHA PILLAI & SONS (SUPRA) HAS EXAMINED THIS ISSUE ELABORATELY AND FOUND THAT THE ASSESSEE WAS VALUING THE CLOSING STOCK AT THE COST OR REALIZABLE VALUE WHICHEVER IS LESS REGULARLY. IF THE STOCK WAS REMAINED UNSOLD FO R ONE YEAR, THE ITA NO. 1766/14 ETC :- 5 -: ASSESSEE ESTIMATED THE REALIZABLE VALUE AT 25% OF T HE COST AND THE IF THE SAME WAS REMAINED UNSOLD FOR TWO YEARS, THE ASS E ESTIMATED THE REALIZABLE VALUE AT 50% OF THE COST. IN CASE THE S TOCK REMAINED UNSOLD FOR MORE THAN THREE YEARS, THE ASSESSEE ESTIMATED THE SAME AT ` 100/- OR THE NET REALIZABLE VALUE WHICHEVER IS LESS . IT IS NOT IN DISPUTE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF RE ADYMADE GARMENTS AND TEXTILES. ADMITTEDLY, FASHION IN TEXTILE IS C HANGING DAY BY DAY IN THE TEXTILE INDUSTRY AND THE ASSESSEE IS REQUIRED TO KEEP THE STOCK IN TUNE WITH THE CHANGING FASHION AND TECHNOLOGY. IF THE FASHION IS CHANGED OLD FASHION MAY NOT BE LIKED BY THE CUSTOME RS WHO ARE COMING TO THE SHOWROOM. IN FACT, THIS TRIBUNAL HAS OBSERVED AS FOLLOWS IN THE CASE OF M/S RM. K.VISVANATHA PILLAI & SONS (SUPRA): 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE ADMITTEDLY ENGAGED IN THE R ETAIL BUSINESS OF TEXTILE AT CHENNAI AND TIRUNELVELI. TH E ASSESSEE IS VALUING THE CLOSING STOCK DEPENDING UPO N THE STOCK WHICH REMAINS UNSOLD. THE CASE OF THE ASSES SEE IS THAT IF THE STOCK REMAINS UNSOLD FOR ONE YEAR, THE SAME WAS VALUED @ 25% OF THE COST OR THE NET REALIZABLE VALUE WHICHEVER IS LESS. SIMILARLY, IF THE STOCK REMAINS UNSOLD FOR MORE THAN TWO YEARS, THE SAME WAS VALUED @ 50% OF THE COST OR THE NET REALIZABLE VALUE WHICHEVER IS L ESS. IN CASE THE STOCKS REMAINS UNSOLD FOR MORE THAN THREE YEARS, THE ASSESSEE IS VALUING AT ` 100/- OR THE NET REALIZABLE VALUE WHICHEVER IS LESS. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF READYMADE GARMENTS AND OTHER TEXTILE PRODUCTS. IT IS NOT IN DISPUTE THAT THE ITA NO. 1766/14 ETC :- 6 -: FASHION IS CHANGING VERY FAST AND THE ASSESSEE HAS TO STOCK THE LATEST FASHION TEXTILES SO AS TO MEET THE EXPECTATION OF THE CUSTOMERS. THE ONLY OBJECTION O F THE REVENUE APPEARS TO BE THAT THE ASSESSEE IS VALUING THE SILK SAREES AT ` 100/-. THE LOWER AUTHORITIES HAVE NOT CLASSIFIED THE NATURE OF THE SILK SAREES. THE SILK PRODUCT CONTAINS VARIOUS VARIETIES. SOME OF THE SILK SAREES MAY CONTAIN PURE ZARI AND SOME OF THE SILK SAREES MAY C ONTAIN ARTIFICIAL ZARI. APART FROM PURE SILK, ART SILK AL SO AVAILABLE IN THE MARKET, HENCE, THE VALUATION MAY DIFFER FROM PRODUCT TO PRODUCT. THE SILK SAREES MANUFACTURED I N ONE PARTICULAR YEAR MAY NOT BE LIKED BY THE PEOPLE AFTE R THREE OR FOUR YEARS. THEREFORE, THE ASSESSEE HAS TO NECESSARILY VALUE THE STOCK IF IT REMAINS UNSOLD FO R MORE THAN THREE YEARS AT THE NET REALIZABLE VALUE OR A V ALUE WHICH COULD BE ESTIMATED ON ADHOC BASIS. IN THIS C ASE, THE ASSESSEE HAS ESTIMATED THE SAME AT ` 100/- OR NET REALIZABLE VALUE IN RESPECT OF THE STOCKS WHICH REM AINS TO BE UNSOLD FOR MORE THAN THREE YEARS. THE ASSESSING OFFICER HAS ALSO FOUND THAT IT IS NOT POSSIBLE TO I DENTIFY THE GOODS REMAINED UNSOLD IN THE SHOWROOM OF THE ASSESSEE. THE FACT REMAINS THAT EACH AND EVERY PRO DUCT OF THE ASSESSEE WAS ALLOTTED BY-NUMBER AND IT CAN B E IDENTIFIED WITH REFERENCE TO THE BY-NUMBER. THEREF ORE, IF THE REVENUE AUTHORITIES WANTED TO IDENTIFY THE G OODS REMAINED UNSOLD FOR MORE THAN ONE YEAR, TWO YEARS O R THREE YEARS AS THE CASE MAY BE, IT CAN BE VERIFIED AND IDENTIFIED BY REFERRING TO BY-NUMBERS. HENCE, THE ASSESSING OFFICER CANNOT DOUBT THE VALUATION MADE B Y THE ASSESSEE. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT IN VIEW OF THE NATURE OF BUSINESS UNDERTAKEN B Y THE ASSESSEE AND THE CHANGE OF FASHION YEAR BY YEAR, TH E GOODS REMAIN UNSOLD NEEDS TO BE VALUED EITHER AT CO ST OR NET REALIZABLE VALUE WHICHEVER IS LOWER. SINCE THE ASSESSEE HAS TAKEN THE NET REALIZABLE VALUE FOR VAL UING THE CLOSING STOCK, THE ASSESSING OFFICER IS NOT JUS TIFIED IN MAKING THE ADDITION. IT IS ALSO NOT IN DISPUTE T HAT THE ITA NO. 1766/14 ETC :- 7 -: ASSESSEE HAS OFFERED FOR TAXATION THE DIFFERENCE BETWEEN THE ACTUAL SALE PRICE AND THE NET REALIZAB LE VALUE ESTIMATED BY THE ASSESSEE FOR VALUATION OF CLOSING STOCK. THEREFORE, THE REVENUE CANNOT HAVE ANY GRIEVANCE ON THE METHOD OF VALUATION ADOPTED BY THE ASSESSEE. IN V IEW OF THE ABOVE, WE ARE UNABLE TO UPHOLD THE ORDERS OF TH E LOWER AUTHORITIES AND ACCORDINGLY, THE SAME ARE SET ASIDE. THE ASSESSING OFFICER IS DIRECTED TO DELETE THE DISALLOWANCE TO THE EXTENT OF ` 1,23,66,170/- FOR ASSESSMENT YEAR 2007-08, ` 2,36,95,104/- FOR ASSESSMENT YEAR 2008-09 AND ` 1,88,75,698/- FOR ASSESSMENT YEAR 2009-10. 6. THIS TRIBUNAL HAS DELETED SIMILAR ADDITION MADE BY THE ASSESSING OFFICER TOWARDS VALUATION OF CLOSING STOC K. 7. WE HAVE GONE THROUGH THE DECISION OF ANOTHER BENC H OF THIS TRIBUNAL IN THE CASE OF SHRI N. VISWANATH (SUP RA). THIS TRIBUNAL DISBELIEVED THE CLAIM OF THE ASSESSEE ON THE GROUN D THAT THE REDUCTION OF VALUE METHOD WAS NOT FOLLOWED YEAR BY YEAR. THI S TRIBUNAL FOUND THAT THERE IS NO CONSISTENCY METHOD FOLLOWED BY THE ASSESSEE FOR VALUING THE CLOSING STOCK. THIS TRIBUNAL HAS NOT T AKEN INTO CONSIDERATION THE CHANGE IN FASHION AND TECHNOLOGY IN THE TEXTILE INDUSTRY. THE METHOD OF VALUATION ADOPTED BY THE ASSESSEE CONTINUOUSLY FOR YEARS TOGETHER WAS ALSO NOT BROUGH T TO THE NOTICE OF THE BENCH. WHEN THE NATURE OF BUSINESS AND CHANGE OF FASHION WERE NOT CONSIDERED, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ITA NO. 1766/14 ETC :- 8 -: FINDING OF THE TRIBUNAL IN THE CASE OF SHRI N. VISW ANATH (SUPRA) MAY NOT BE APPLICABLE TO THE FACTS OF THIS CASE. 8. IN THE CASE OF M/S RM. K. VISVANATHA PILLAI & SONS, THIS TRIBUNAL EXAMINED THE FACTS ELABORATELY WITH REGARD TO THE NATURE OF THE BUSINESS AND THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE AND FOUND THAT THE ASSESSEE HAS RIGHTLY VALUED THE CLOSING STOCK. THEREFORE, BY FOLLOWING THE ORDER OF THIS TRIBUNAL IN THE CASE OF M/S RM. K.VISVANATHA PILLAI & SONS(SUPRA), THE ADDITION MADE BY THE ASSESSING OFFICER TOWARDS VALUATION OF CLOSING STOC K TO THE EXTENT OF ` 18,96,303/- FOR ASSESSMENT YEAR 2007-08, ` 2,09,47,157/- FOR ASSESSMENT YEAR 2008-09 AND ` 46,46,855/- FOR ASSESSMENT YEAR 2009-10 IS DELETED. 9. THE NEXT COMMON ISSUE IN ALL THE APPEALS OF THE AS SESSEE IS WITH REGARD TO DISALLOWANCE OF CONTRIBUTION TOWARDS LIC GRATUITY FUND. 10. SHRI R. VIJAYARAGHAVAN, LD. COUNSEL FOR THE ASSESSE E SUBMITTED THA THE ASSESSEE CONTRIBUTED TO LIC GRAT UITY FUND WHICH WAS NOT APPROVED BY THE CIT DURING THE YEAR UNDER C ONSIDERATION. PLACING RELIANCE ON THE JUDGMENT OF THE APEX COURT IN THE CASE OF M/S TEXTOOL COMPANY LTD IN CIVIL APPEAL NO.447 OF 2003, DATED 9.9.2009, THE LD. COUNSEL SUBMITTED THAT WHEN THE MONEY GONE OUT OF THE HANDS ITA NO. 1766/14 ETC :- 9 -: OF THE ASSESSEE IRRECOVERABLY, THE CLAIM OF THE A SSESSEE HAS TO BE ALLOWED EVEN THOUGH THE LIC GRATUITY FUND WAS NOT A PPROVED BY THE CIT. SIMILAR VIEW WAS TAKEN BY THIS TRIBUNAL IN TH E CASE OF M/S RM. K. VISVANATHA PILLAI & SONS (SUPRA). 11. ON THE CONTRARY, SHRI P. RADHAKRISHNAN, LD. DR SUBM ITTED THAT THE LIC GRATUITY FUND, TO WHICH THE ASSESSEE HAS CONTRIBUTION WAS NOT APPROVED BY THE CIT DURING THE YEAR UNDER C ONSIDERATION. FOR THE PURPOSE OF ALLOWING THE CLAIM OF THE ASSESSEE, THE ASSESSEE HAS TO NECESSARILY OBTAIN THE APPROVAL OF THE CIT. SIN CE THE CIT HAS NOT GRANTED APPROVED DURING THE YEAR UNDER CONSIDERATIO N, THE CIT(A) HAS RIGHTLY CONFIRMED THE DISALLOWANCE MADE BY THE ASSE SSING OFFICER. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. TH E CONTRIBUTION WAS MADE TO GRATUITY FUND OF LIC. IT IS NOT IN DISPUTE THAT THE AMOUNT PAID CANNOT BE GOT BACK BY THE ASSESSEE. IN OTHER WORDS , THE MONEY HAS GONE OUT OF THE HANDS IRRECOVERABLY. THEREFORE, AS HELD BY THE APEX COURT IN THE CASE OF TEXTOOL COMPANY LTD.(SUPRA), T HE CLAIM MADE BY THE ASSESSEE IS ALLOWABLE SINCE ADMITTEDLY, THE PA YMENT WAS MADE BY THE ASSESSEE. THEREFORE, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ADDITION MADE BY THE ASSESSING OFFICE R TO THE EXTENT OF ` 3,08,477/- FOR ASSESSMENT YEAR 2007-08, ` 1,35,136/- FOR ASSESSMENT ITA NO. 1766/14 ETC :- 10 -: YEAR 2008-09 AND ` 2,28,948/- FOR ASSESSMENT YEAR 2009-10 IS DELETED. 13. THE NEXT COMMON ISSUE OF ASSESSEES APPEALS FOR ASSESSMENT YEARS 2008-09 AND 2009-10 IS WITH REGARD TO DISALLOWANCE OF DEPRECIATION ON ADDITIONS TO FIXED ASSETS. 14. SHRI R. VIJAYARAGHAVAN, LD. COUNSEL FOR THE ASSESSE E SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE CLAIMED DEPRECIATION ON THE ADDITION TO FIXED ASSET S. FOR ASSESSMENT YEAR 2008-09, THE TOTAL ADDITION AS PER DEPRECIATIO N TABLE WAS ` 7,29,62,778/- UNDER THE BLOCK PLANT AND MACHINERY . THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE ON TH E GROUND THAT THE ASSESSEE COULD NOT SUBSTANTIATE THE ADDITION MADE D URING THE YEAR UNDER CONSIDERATION. THE ENTIRE AMOUNT TO THE EXTEN T OF ` 7,29,62,778/- IS NOT IN DISPUTE. THE ASSESSING OFF ICER DISALLOWED ONLY ADDITION TO THE EXTENT OF ` 3,32,736/-. THE LD. COUNSEL SUBMITTED THAT THE ASSESSING OFFICER HAS NOT VERIFIED THE CLAIM OF THE ASSESSEE TOWARDS PURCHASE OF ELECTRICAL EQUIPMENTS TO THE EX TENT OF ` 13,406/- EVEN IN THE REMAND PROCEEDINGS. THEREFORE, THE ASS ESSING OFFICER IS NOT JUSTIFIED IN DISALLOWING THE CLAIM OF THE ASSE SSEE. ITA NO. 1766/14 ETC :- 11 -: 15. ON THE CONTRARY, SHRI P. RADHAKRISHNAN, LD. DR SUBM ITTED THAT THE ASSESSEE HAS NOT FURNISHED THE DETAILS OF ADDITION MADE TO THE PLANT AND MACHINERY. IN THE ABSENCE OF ANY MAT ERIAL TO SUBSTANTIATE THE CLAIM OF ADDITION TO THE PLANT AND MACHINERY, THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED THE CLAIM OF THE ASSESSEE AND THE CIT(A) HAS ALSO RIGHTLY CONFIRMED THE SAME. 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE CLAIMED DEPRECIATION ON THE ADDITION TO PLANT AND MACHINERY . THE ASSESSEE CLAIMED BEFORE THE ASSESSING OFFICER THAT PLANT AND MACHINERY TO THE EXTENT OF ` 40,29,712/- WAS ADDED. AIR CONDITIONER TO THE EXT ENT OF ` 3,93,356/- WAS ALSO ADDED TO THE EXISTING BLOCK OF ASSET. ELECTRICAL EQUIPMENT TO THE EXTENT OF ` 13,406/- WAS ALSO INCLUDED IN THE BLOCK OF ASSET DURING THE YEAR UNDER CONSIDERATION. THE ASS ESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE @ 7.5% ON THE ADDITION OF ` 44,36,474/-. WHEN THE ASSESSEE FILED THE DETAILS OF THE PLANT AND MACHINERY, THIS TRIBUNAL IS OF THE CONSIDERED OPIN ION THAT THERE IS NO REASON FOR DISALLOWING THE CLAIM OF DEPRECIATION. IT IS NOT IN DISPUTE THAT THE PLANT AND MACHINERY, AIR CONDITIONER, ELEC TRICAL EQUIPMENT ARE ELIGIBLE FOR DEPRECIATION. THE ASSESSEE CLAIMED D EPRECIATION ONLY @ 7.5%. THE RATE OF DEPRECIATION CLAIMED BY THE ASS ESSEE IS NOT IN ITA NO. 1766/14 ETC :- 12 -: DISPUTE. IN THOSE CIRCUMSTANCES, DISALLOWING THE C LAIM OF THE ASSESSEE IS NOT JUSTIFIED. ACCORDINGLY, THE ORDERS OF THE L OWER AUTHORITIES ARE SET ASIDE AND THE ADDITION MADE BY THE ASSESSING OFFICE R FOR ASSESSMENT YEAR 2008-09 TO THE EXTENT OF ` 3,32,736/- AND ` 4,10,373/- FOR ASSESSMENT YEAR 2009-10 IS DELETED. 17. IN THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2008- 09, THE NEXT ISSUE IS WITH REGARD TO ADDITION OF ` 1,11,30,290/- ON ACCOUNT OF PURCHASES INCLUDED IN CLOSING STOCK BUT NOT ACCOUNT ED. 18. SHRI R. VIJAYARAGHAVAN, LD. COUNSEL FOR THE ASSESSE E SUBMITTED THAT THE PURCHASES MADE DURING THE YEAR W ERE RECEIVED BY THE ASSESSEE AND THE SAME WERE ALSO TAKEN INTO CON SIDERATION FOR VALUATION OF CLOSING STOCK ON THE BASIS OF PHYSICAL VERIFICATION OF THE STOCKS. HOWEVER, THE ASSESSEE HAS NOT RECEIVED TH E ORIGINAL INVOICES FROM THE VENDORS. THEREFORE, THE SAME WAS NOT ACCO UNTED IN THE PURCHASE ACCOUNT AS ON 31.3.2008. AFTER RECEIPT OF INVOICES FROM THE VENDORS, THE SAME WERE ACCOUNTED IN THE SUBSEQUENT YEAR. WHEN THE ASSESSEE CAME TO KNOW THIS DEFECT, A REVISED RETURN WAS FILED IMMEDIATELY INCLUDING THE ENTIRE PURCHASES MADE IN THE ASSESSMENT YEAR 2008-09. CONSEQUENTLY, THE PURCHASES ACCOUNTE D FOR ASSESSMENT YEAR 2009-10 WERE ALSO REDUCED. THE ASSESSING OFFI CER REJECTED THE CLAIM OF THE ASSESSEE FOR BOTH THE ASSESSMENT YEAR S. ACCORDING TO THE ITA NO. 1766/14 ETC :- 13 -: LD. COUNSEL, WHEN THE ASSESSEE PHYSICALLY RECEIVED THE GOODS IN ASSESSMENT YEAR 2008-09 AND RECEIVED THE INVOICES I N ASSESSMENT YEAR 2009-10, THE SAME CAN BE ACCOUNTED IN ANY ONE OF TH E ASSESSMENT YEARS. HOWEVER, THE ASSESSING OFFICER MADE THE ADD ITION FOR BOTH THE ASSESSMENT YEARS 2008-09 AND 2009-10. AS PER THE R EVISED RETURN FILED BY THE ASSESSEE, ACCORDING TO THE LD. COUNSE L, THE PURCHASES ARE DULY REFLECTED IN ASSESSMENT YEAR 2008-09, THEREFOR E, THE ADDITION MADE BY THE ASSESSING OFFICER IS NOT JUSTIFIED. 19. ON THE CONTRARY, SHRI P. RADHAKRISHNAN, LD. DR SUBM ITTED THAT THE ASSESSEE FILED THE REVISED RETURN ON 25.1 .2010 SHOWING INCOME OF ` 1,28,68,736/- AS AGAINST ` 2,39,99,026/- DECLARED IN THE ORIGINAL RETURN. THE ASSESSEE CLAIMED DEDUCTION O F ` 1,11,30,290/- ON ACCOUNT OF PURCHASES MADE BUT NOT ACCOUNTED DURING THE YEAR UNDER CONSIDERATION. ACCORDING TO THE LD. DR, THERE WAS NO FOOLPROOF METHOD TO VERIFY THE PURCHASES MADE BY THE ASSESSEE TO TH E EXTENT OF ` 1,11,30,290/-. THEREFORE, THE ASSESSING OFFICER HA S RIGHTLY MADE THE ADDITION WHICH WAS CONFIRMED BY THE CIT(A). 20. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. TH E ASSESSING OFFICER MADE ADDITION OF ` 1,11,30,290/- TOWARDS CLOSING STOCK BEING THE DIFFERENCE BETWEEN THE BOOKS OF ACCOUNT AND THE RET URN ORIGINALLY FILED. ITA NO. 1766/14 ETC :- 14 -: THE ASSESSEE NOW CLAIMS THAT THE INVOICES TOWARDS PURCHASES TO THE EXTENT OF ` 1,11,30,290/- WERE RECEIVED IN THE SUBSEQUENT ASSE SSMENT YEAR AND IT WAS RECORDED FOR THE ASSESSMENT YEAR 20 09-10. SINCE THE ENTRY WAS MADE IN ASSESSMENT YEAR 2009-10, THE SAME WAS NOT ENTERED IN ASSESSMENT YEAR 2008-09 INITIALLY. THER EFORE, IT IS OBVIOUS THAT THERE WAS AN OMISSION TO RECORD THE PURCHASES DURING THE YEAR UNDER CONSIDERATION EVEN THOUGH PHYSICALLY GOODS WE RE RECEIVED BY THE ASSESSEE. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT WHEN THE ASSESSEE HAS PURCHASED THE GOODS AND RECEIVED THE SAME DURING THE YEAR UNDER CONSIDERATION, THE SAME OUGHT TO HAV E BEEN ENTERED IN THE BOOKS OF ACCOUNT DURING THE YEAR UNDER CONSIDER ATION. REALIZING THE MISTAKE, THE ASSESSEE HAS FILED A REVISED RETUR N INCLUDING THE PURCHASES OF ` 1,11,30,290/-. THE CIT(A) REJECTED THE ASSESSEE S PLEA ON THE BASIS OF THE REDUCTION IN GROSS PROFIT RATE. WHEN THE ASSESSEE HAS ENTERED THE PURCHASES IN THE BOOKS OF ACCOUNT A ND PLACED MATERIAL EVIDENCE FOR RECEIPT OF GOODS PHYSICALLY, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER I S NOT JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE ON THE BASIS O F THE GROSS PROFIT RATIO. GROSS PROFIT CANNOT BE A FIXED FIGURE FOR E VERY YEAR. THE GROSS PROFIT MAY VARY DEPENDING UPON VARIOUS CIRCUMSTANCE S. WHEN THE ASSESSEE WAS MAINTAINING BOOKS OF ACCOUNT, THIS TR IBUNAL IS OF THE CONSIDERED OPINION THAT THE GROSS PROFIT REFLECTED IN THE BOOKS OF ITA NO. 1766/14 ETC :- 15 -: ACCOUNT HAS TO BE TAKEN INTO CONSIDERATION. IF THE GROSS PROFIT GOES DOWN AFTER CONSIDERING THE PURCHASES TO THE EXTENT OF ` 1,11,30,290/-, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT MER ELY BECAUSE THE GROSS PROFIT GONE DOWN, THAT CANNOT BE A REASON FOR MAKING THE ADDITION. IT IS NORMAL PRACTICE IN TEXTILE BUSINES S THAT THE GOODS WILL BE DISPATCHED IMMEDIATELY ON PLACING ORDERS AND THE IN VOICES WILL BE SET SUBSEQUENTLY. WHEN THE ASSESSEE RECEIVED THE INVO ICES SUBSEQUENTLY, THE SAME OUGHT TO HAVE BEEN ENTERED IN THE BOOKS OF ACCOUNT DURING THE YEAR UNDER CONSIDERATION. UNFORTUNATELY, THAT WAS NOT DONE. HOWEVER, AFTER REALIZING THE MISTAKE, THE ASSESSEE HAS RECORDED THE SAME IN THE BOOKS OF ACCOUNT AND FILED A REVISED RE TURN. CONSEQUENTLY, THE ASSESSEE HAS ALSO MADE A CLAIM I N ASSESSMENT YEAR 2009-10 TO REDUCE THE SO CALLED PURCHASES WHICH WER E WRONGLY ENTERED. WHEN THIS IS THE POSITION, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER OUGHT TO HAVE AC CEPTED THE REVISED RETURN FILED BY THE ASSESSEE. IN VIEW OF THE AB OVE, WE ARE UNABLE TO UPHOLD HE ORDERS OF THE AUTHORITIES BELOW. ACCORDI NGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ADDITIO N MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE ASSESSING OF FICER TO THE EXTENT OF ` 1,11,30,290/- IS DELETED. ITA NO. 1766/14 ETC :- 16 -: 21. THE NEXT ISSUE IN ASSESSEES APPEAL FOR ASSESSMENT YEAR 2008-09 IS DISALLOWANCE OF EXPENDITURE OF ` 9,19,923/-. 22. DURING THE COURSE OF HEARING, SHRI R. VIJAYARAGHAVA N, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESS EE IS NOT PRESSING THIS GROUND. THE LD. DR HAS NO OBJECTION TO DISMIS S THE GROUND AS NOT PRESSED. IN VIEW OF THE ABOVE, THE GROUND WITH REG ARD TO DISALLOWANCE OF EXPENDITURE TO THE EXTENT OF ` 9,19,923/- IS DISMISSED AS NOT PRESSED. 23. THE NEXT ISSUE IN ASSESSEES APPEAL FOR ASSESSMEN T YEAR 2009-10 IS DISALLOWANCE OF LEASE COMMITMENT CHARGE S OF ` 20 LAKHS AND DONATIONS OF ` 6,00,366/-. 24. SHRI R. VIJAYARAGHAVAN, LD. COUNSEL FOR THE ASSESSE E SUBMITTED THAT THE ASSESSEE HAS PAID LEASE COMMITM ENT CHARGES OF HINDU RELIGIOUS & CHARITABLE ENDOWMENT DEPARTMENT ( HR&CE). THE SAME WAS DISALLOWED BY THE ASSESSING OFFICER ON THE GROUND THAT IT IS A DONATION. ACCORDING TO THE LD. COUNSEL, THE PAYME NT WAS MADE TO VARIOUS TEMPLES AS DIRECTED BY THE HR&CE FOR THE PU RPOSE OF OBTAINING A LAND ADJACENT TO THE BUSINESS PREMISES OF THE ASS ESSEE. THE LD. COUNSEL FURTHER SUBMITTED THAT THE VACANT LAND ADJA CENT TO THE ASSESSEES PREMISES WAS TAKEN ON LEASE BY THE ASSE SSEE FOR USING THE ITA NO. 1766/14 ETC :- 17 -: SAME AS CAR PARK. IF THE LAND WAS NOT TAKEN ON LEA SE, THE ASSESSEES BUSINESS WOULD HAVE AFFECTED VERY BADLY, THEREFORE, THE ACQUISITION OF LEASE HOLDING RIGHT OVER THE LAND WAS FOR THE BUSIN ESS INTEREST OF THE ASSESSEE. MERELY BECAUSE THE PAYMENT WAS SHOWN AS DONATION IN THE BOOKS OF ACCOUNT, ACCORDING TO THE LD. COUNSEL, THE SAME CANNOT BE DISALLOWED. THE LD. COUNSEL SUBMITTED THAT SIMILAR ISSUE WAS DECIDED BY THIS TRIBUNAL IN THE CASE OF M/S RM. K. VISVANAT HA PILLAI & SONS (SUPRA) AND THE ADDITION MADE BY THE ASSESSING OFFI CER WAS DELETED. THEREFORE, THE SAID ORDER MAY BE FOLLOWED IN THE PR ESENT CASE ALSO. 25. ON THE CONTRARY, SHRI P. RADHAKRISHNAN, LD. DR SUBM ITTED THAT THE ASSESSEE HAS MADE CLAIM BY WAY OF LEASE C OMMITMENT CHARGES TO THE EXTENT OF ` 1 CRORE IN THE NAME OF SEVEN TEMPLES. ACCORDING TO THE LD. DR, THE ASSESSING OFFICER, AFT ER VERIFICATION OF THE BOOKS OF ACCOUNT, FUND THAT THE ASSESSEE HAS PAID ` 20 LAKHS TO M/S ARULMIGU PARASAKTHI EDUCATIONAL SOCIETY, KUTRALAM, AS DONATION. THE ASSESSEE CLARIFIED BEFORE THE ASSESSING OFFICER THA T THE PAYMENT OF LEASE COMMITMENT CHARGES WAS AS PER THE DIRECTION O F THE HR&CE. THE ASSESSEE ALSO CLARIFIED THAT ORIGINALLY THE PA YMENTS WERE MADE BY THE ASSESSEE-FIRM. THE ASSESSEE HAS ALSO CLARIFIE D BEFORE THE ASSESSING OFFICER THAT THE PAYMENT WAS MADE FOR THE PURPOSE OF GETTING THE LEASE OF THE LAND ADJACENT TO THE ASSE SSEES SHOWROOM AT ITA NO. 1766/14 ETC :- 18 -: TIRUNELVELI, THEREFORE, THE LEASE COMMITMENT CHARGE S ARE FOR BUSINESS PURPOSES. REFERRING TO THE ASSESSMENT ORDER THE L D. DR POINTED OUT 69.2 CENTS OF LAND BELONGS TO VARIOUS TEMPLES AND I T WAS UNDER THE CULTIVATION OF ONE SHRI GOPAL. ON THE DEMISE OF SH RI GOPAL, HIS LEGAL HEIRS TRANSFERRED THE TENANCY RIGHTS OVER THE LAND IN FAVOUR OF SHRI K. MAHESH, WHO IS THE PARTNER OF THE ASSESSEE-FIRM FO R A CONSIDERATION OF ` 2,43,000/-. THE ACTUAL CONSIDERATION PAID BY SHRI K. MAHESH WAS ` 10,50,000/- FOR WHICH EVIDENCE WAS FOUND DURING THE COURSE OF SEARCH OPERATION. THE DOCUMENT EXECUTED BY THE LEGAL HEIR S OF SHRI GOPAL CLEARLY INDICATES THAT THE LAND WAS LET OUT TO SHRI K. MAHESH IN HIS INDIVIDUAL CAPACITY, THEREFORE, THE PAYMENT OF LEAS E COMMITMENT CHARGES CLAIMED BY THE ASSESSEE CANNOT BE ALLOWED. 26. SIMILARLY, 82 CENTS OF LAND WAS UNDER CULTIVATION OF ONE SHRI VELU. ON HIS DEMISE, HIS LEGAL HEIRS EXECUTED A LE ASE DEED IN FAVOUR OF SHRI K. MAHESH FOR A CONSIDERATION OF ` 35 LAKHS. EVEN THOUGH THE CONSIDERATION FOR LEASE WAS PAID BY THE ASSESSEE-F IRM FROM ITS BANK ACCOUNT, THE PAYMENT WAS IN FACT DEBITED IN THE CUR RENT ACCOUNT OF SHRI K. MAHESH IN THE BOOKS OF ACCOUNT AS ADVANCE O F MONEY. THEREFORE, FOR ALL PRACTICAL PURPOSES, THE LEASEHOL D LAND HAS TO BE TREATED AS INDIVIDUAL LAND OF THE ASSESSEE. HENCE , THE LEASE ITA NO. 1766/14 ETC :- 19 -: COMMITMENT CHARGES CANNOT BE ALLOWED AS BUSINESS EX PENDITURE WHILE COMPUTING THE TAXABLE INCOME. 27. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT SIMILAR ISSUE CAME UP BEFORE THIS TRIBUNAL IN THE CASE OF M /S RM.K. VISVANATHA PILLAI & SONS (SUPRA). IN FACT, THE TRIBUNAL HAS D ECIDED THE ISSUE BY OBSERVING AS UNDER: 43. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE LAND IN QUESTION BELONGS TO VARIOUS TEMPLE S WHICH ARE UNDER THE CONTROL OF HR&CE. AFTER DEATH OF THE ORI GINAL TENANTS, ONE SHRI K. MAHESH, WHO IS THE PARTNER OF THE ASSE SSEE-FIRM OBTAINED LEASE OF THE ABOVESIAD AGRICULTURAL LANDS. HOWEVER, HR&CE HAS CHALLENGED THE CORRECTNESS OF THE LEASE D EED EXECUTED BY THE LEGAL HEIRS OF THE ERSTWHILE TENANTS. FROM THE MATERIAL AVAILABLE ON RECRD, IT APPEARS THAT THE ASSESSEE A PPROACHED HR&CE AGAIN AND ON PAYMENT OF DONATION TO VARIOUS T EMPLES, THE HR&CE AGREED TO GIVE THE LAND ON LEASE TO THE ASSE SSEE-FIRM. HR&CE BY AN ORDER DATED 31.5.2008 DIRECTED SHRI K. MAHESH, PARTNER OF THE ASSESSEE-FIRM, TO PAY DONATION TO V ARIOUS TEMPLES. ACCORDINGLY, DONATIONS WERE PAID FROM THE ACCOUNT O F THE ASSESSEE-FIRM AND AFTER RECEIVING DONATION BY THE R ESPECTIVE TEMPLES, THE EXECUTIVE OFFICER EXECUTED THE LEASE D EED IN FAVOUR OF SHRI K. MAHESH. THEREFORE, IT IS OBVIOUS THAT T HE ASSESSEE-FIRM MADE THE PAYMENTS IN THE FORM OF DONATION AS PER TH E DIRECTION OF HR&CE FOR OBTAINING THE LEASE HOLD LANDS. EVEN THO UGH INITIALLY THE LEASE DEED WAS EXECUTED BY SHRI K. MAHESH AND T HE LEGAL HEIRS OF THE ERSTWHILE TENANTS, THE LEASE WAS SUBSE QUENTLY TAKEN FROM THE TEMPLES DIRECTLY CONSEQUENT TO THE ORDER O F THE HR&CE DEPARTMENT. THEREFORE, THIS TRIBUNAL IS OF THE CO NSIDERED OPINION THAT THE LEASE COMMITMENT CHARGES WHICH WAS DISCLOS ED AS DONATION IN THE BOOKS OF ACCOUNT IS FOR THE PURPOSE OF OBTAINING LEASE HOLDING INTEREST OF THE LAND IN QUESTION. SI NCE THE DONATION WAS MADE AS PER THE DIRECTION OF HR&CE FOR THE PURP OSE OF OBTAINING LEASE OF THE LAND FOR BUSINESS PURPOSE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE PAYMENT IS REVEN UE IN NATURE. ITA NO. 1766/14 ETC :- 20 -: THEREFORE, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADD ITION MADE TOWARDS LEASE COMMITMENT CHARGES TO THE EXTENT OF ` 14,58,362/-. 28. IN VIEW OF THE ABOVE ORDER OF THIS TRIBUNAL, THE EN TIRE AMOUNT OF ` 20,00,000/- AND THE DONATION OF ` 6,00,366/- HAS TO BE ALLOWED AS REVENUE EXPENDITURE. ACCORDINGLY, THE O RDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION TOWARDS LEASE COMMITMENT CHARGES AND DONATION. 29. THE NEXT ISSUE IN ASSESSEES APPEAL FOR ASSESSMEN T YEAR 2009-10 IS ADDITION ON ACCOUNT OF STOCK DISCREPANCY TO THE EXTENT OF ` 80,44,072/-. 30. SHRI R. VIJAYARAGHAVAN, LD. COUNSEL FOR THE ASSESSE E SUBMITTED THAT THE ASSESSEE EXPLAINED BEFORE THE R EVENUE AUTHORITIES DURING THE COURSE OF SEARCH OPERATION THE METHODOL OGY OF STOCK TAKING BY THE ASSESSEES GROUP OF CONCERNS. REFERRING TO THE ASSESSMENT ORDER, THE LD. COUNSEL SUBMITTED THAT GOODS PURCHA SED CAN BE TRACKED THROUGH THE SYSTEM OF BY NUMBERS TILL THE SAME ARE FINALLY SOLD BY THE ASSESSEE. THE LD. COUNSEL FURTHER SUBMITTED THAT TH E ASSESSEE EXPLAINED BEFORE THE ASSESSING OFFICER THAT SOME OF THE OLD GOODS PURCHASED PRIOR TO THE DATE OF SEARCH AND LYING IN STOCK ON THE DATE OF SEARCH WERE SOLD SUBSEQUENTLY. HOWEVER, THE SAME W AS NOT REFLECTED IN THE LIST OF INVENTORY TAKEN BY THE SEARCH PARTY. SIMILARLY, SOME OF ITA NO. 1766/14 ETC :- 21 -: THE ITEMS WHICH WERE PURCHASED PRIOR TO THE DATE OF SEARCH AND SOLD DURING THE INTERVENING PERIOD BEFORE THE DATE OF SE ARCH, WERE TAKEN BY THE ASSESSEE AS CLOSING STOCK AS ON 31.3.2009. TH IS WAS OMITTED BY THE SEARCH PARTY IN THE INVENTORY TAKEN BY THEM. T HE ASSESSEE HAS ALSO EXPLAINED BEFORE THE ASSESSING OFFICER THAT TH E ADVANTAGE OF ASSIGNING BY-NUMBERS TO EACH AND EVERY PRODUCT IS T O IDENTIFY THE JOURNEY OF THE GOODS FROM THE DATE OF PURCHASE TILL IT WAS FINALLY SOLD. THEREFORE, THE INVENTORY PREPARED BY THE SEARCH PAR TY SUFFERS FROM VARIOUS INFIRMITIES. THE DISCREPANCY POINTED OUT B Y THE ASSESSING OFFICER IS NOT CORRECT. THE LD. COUNSEL FURTHER SU BMITTED THAT THE ASSESSEE REQUESTED THE COPY OF THE INVENTORY TAKEN BY THE REVENUE AUTHORITIES BEFORE PASSING THE ASSESSMENT ORDER. H OWEVER, THIS WAS NOT PROVIDED TO THE ASSESSEE AND WITHOUT GIVING AN Y OPPORTUNITY, THE ASSESSING OFFICER PASSED THE ASSESSMENT ORDER. 31. ON THE CONTRARY, SHRI P. RADHAKRISHANAN , LD. DR SU BMITTED THAT DURING THE COURSE OF SEARCH OPERATION, THE REV ENUE AUTHORITIES TOOK PHYSICAL INVENTORY OF THE STOCK FOUND IN THE B USINESS PREMISES AT CHENNAI AND TIRUNELVELI. THE INVENTORY WAS COMPARE D WITH THE BOOKS OF ACCOUNT AND FOUND VARIANCE IN THE INVENTORY AS P ER THE BOOKS OF ACCOUNT AND PHYSICAL INVENTORY TAKEN BY THE REVENUE AUTHORITIES. THE MANAGING PARTNER, SHRI SHIVA KUMAR WAS ALSO EXAMINE D DURING THE ITA NO. 1766/14 ETC :- 22 -: COURSE OF SEARCH OPERATION. HE ADMITTED THAT THERE WAS AN ERROR IN THE VALUATION OF SOME OF THE PRODUCTS. THEREFORE, THE DEFICIENT STOCK FOUND DURING THE COURSE OF SEARCH OPERATION WAS TRE ATED AS UNACCOUNTED SALES OUTSIDE THE BOOKS OF ACCOUNT. TH E INVESTMENT MADE BY THE ASSESSEE FOR PURCHASING THE STOCK SOL D OUTSIDE THE BOOKS WAS TREATED AS UNEXPLAINED INVESTMENT IN THE STOCK. THEREFORE, THE ASSESSING OFFICER MADE ADDITION OF ` 21,05,178/- TOWARDS UNRECORDED SALES AND ` 39,43,833/- AS UNEXPLAINED INVESTMENT. 32. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. FRO M THE ORDER OF THE CIT(A) IT APPEARS THAT THE CIT(A) CALLED FOR THE RE MAND REPORT FROM THE ASSESSING OFFICER. FURTHER, IT APPEARS THAT THE ASSESSEE REQUESTED FOR THE COPIES OF THE DETAILS OF THE PHYSICAL INVENTORY TAKEN BY THE SEARCH PARTY FOR VERIFICATION AND RECONCILIATION. THIS WA S APPARENTLY NOT PROVIDED TO THE ASSESSEE. IT IS NOT IN DISPUTE TH AT STOCK OF THE ASSESSEE CAN BE IDENTIFIED BY UNIQUE NUMBER PROVIDE D. THEREFORE, WHEN THE ASSESSEE PURCHASES AN ITEM FROM THE DATE O F PURCHASE TILL THE DATE OF SALE, IT CAN BE TRACKED THROUGH THE SYS TEM AND CAN BE IDENTIFIED HOW THE PRODUCT TRAVELLED FROM ONE PLACE TO ANOTHER TILL IT WAS FINALLY DISPOSED OF BY SALE OR OTHERWISE. THE ASSESSING OFFICER APPEARS TO HAVE FOUND THAT THE ITEMS COULD NOT BE V ERIFIED DUE TO ITA NO. 1766/14 ETC :- 23 -: VARIOUS FACTORS. THE ASSESSING OFFICER HAS NOT POI NTED OUT ANY SINGLE FACT WHICH PREVENTED HIM FROM VERIFYING OR TRACKING THE SYSTEM TO FIND OUT HOW THE STOCK PURCHASED BY THE ASSESSEE TRAVEL LED FROM THE DATE OF PURCHASE TILL THE DATE OF SALE. MOREOVER THE UN SOLD STOCK FOR MORE THAN ONE YEAR, TWO YEARS AND THREE YEARS AS THE CAS E MAY BE, IS AVAILABLE IN THE STOCK WHICH WAS NOT REFLECTED IN T HE PHYSICAL INVENTORY TAKEN BY THE REVENUE AUTHORITIES. THE ASSESSING OF FICER HIMSELF ADMITS THAT HE COULD NOT IDENTIFY THE STOCK WITH RE FERENCE TO BY- NUMBER PROVIDED BY THE ASSESSEE. IF THE ASSESSING OFFICER COULD NOT IDENTIFY THE STOCK WITH REFERENCE TO BY-NUMBER ALLO TTED BY THE ASSESSEE, THIS TRIBUNAL IS OF THE CONSIDERED OPINI ON THAT THE INVENTORY TAKEN BY THE REVENUE MAY NOT REFLECT THE CORRECT P OSITION OF CLOSING STOCK. WHEN THE ASSESSEE IS MAINTAINING STOCKS SY STEMATICALLY BY ALLOCATING BY-NUMBER AND ALSO PROVIDING A SYSTEM OF TRACKING THROUGH THE COMPUTER, THIS TRIBUNAL IS OF THE CONSIDERED O PINION THAT THE AUTHORITIES BELOW OUGHT TO HAVE EXAMINED THE METHOD ADOPTED BY THE ASSESSEE IN A DETAILED MANNER AND AN OPPORTUNITY SH ALL BE GIVEN TO THE ASSESSEE TO EXPLAIN HOW THE METHOD WORKS. HOWEVER, WITHOUT CONSIDERING ALL THESE FACTORS, THE ASSESSING OFFICE R SIMPLY CAME TO THE CONCLUSION THAT THERE WAS A DISCREPANCY. THIS TRI BUNAL IS OF THE CONSIDERED OPINION THAT THE DISCREPANCY WAS DUE TO STOCKS REMAIN UNSOLD FOR MORE THAN ONE YEAR AND THE ASSESSEE VAL UED THE SAME AT ITA NO. 1766/14 ETC :- 24 -: THE NET REALIZABLE VALUE OR COST WHICHEVER IS LESS, THEREFORE, THE CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHO RITIES ARE SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION. 33. NOW, COMING TO REVENUES APPEAL I.T.A.NO.1879/MDS/2 014 FOR ASSESSMENT YEAR 2009-10, THE ONLY ISSUE ARISES FOR CONSIDERATION IS DISALLOWANCE OF ` 1,15,73,736/- TOWARDS RENOVATION OF THE BUILDING. 34. SHRI P. RADHAKRISHNAN, LD. DR SUBMITTED THAT THE A SSESSEE CLAIMED EXPENDITURE INCURRED IN THE BUILDING TAKEN ON LEASE. ACCORDING TO THE LD. DR, THE EXPENDITURE INCURRED BY THE ASSE SSEE IN RENOVATION/REPAIR OF THE BUILDING HAS TO BE CAPITAL IZED AND THE ASSESSEE AT THE BEST IS ENTITLED FOR DEPRECIATION. REFERRING TO EXPLANATION 1 SEC. 32 OF THE ACT, THE LD. DR SUBMIT TED THAT THE ASSESSEE AT THE BEST CAN CLAIM DEPRECIATION AND DEF INITELY IT CANNOT BE ALLOWED AS REVENUE EXPENDITURE. THEREFORE, THE CIT (A) IS NOT JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE. 35. ON THE CONTRARY, SHRI R. VIJAYARAGHAVAN, LD. COUNSE L FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS TAKEN THE BUILDING ON LEASE FOR THE PURPOSE OF ESTABLISHING A NEW SHOWROOM. TH E ASSESSEE INCURRED EXPENDITURE IN INTERIOR DECORATION, FLOORI NG AND OTHER ITA NO. 1766/14 ETC :- 25 -: MISCELLANEOUS WORK. THE EXPENDITURE INCURRED BY TH E ASSESSEE WAS CLAIMED AS REVENUE EXPENDITURE. THE CIT(A) BY PLAC ING RELIANCE ON THE ORDER OF THIS TRIBUNAL IN I.T.A.NO.1460 & 2164/ MDS/2007 IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2003-04, A LLOWED THE CLAIM OF THE ASSESSEE. THE CIT(A) HAS ALSO PLACED HIS R ELIANCE ON THE JUDGMENT OF THE MADRAS HIGH CURT IN HARI VIGNESH MO TORS PVT. LTD, 282 ITR 338. THE LD. COUNSEL SUBMITTED THAT SIMILAR IS SUE CAME UP BEFORE THIS TRIBUNAL IN THE CASE OF ASSESSEES GROUP CONC ERNS, M/S RM.K. VISVANATHA PILLAI & SONS(SUPRA) AND M/S RM. K.V. T EXTILES IN I.T.A.NO.1874/MDS/2014 DATED 1.6.2016, AND THE TRI BUNAL FOUND THAT THE EXPENDITURE IS REVENUE IN NATURE AND CONFIRMED THE ORDER OF THE CIT(A) DELETING THE ADDITION MADE BY THE ASSESSING OFFICER. ACCORDING TO THE LD. COUNSEL, THE CIT(A) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE. 36. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. IT I S NOT IN DISPUTE THAT THE ASSESSEE INCURRED THE EXPENDITURE FOR INTERIOR DECORATION, TEMPORARY WOODEN PARTITION, FLOORING ETC. ON IDENT ICAL SET OF FACTS, IN THE CASE OF ASSESSEES GROUP CONCERN, M/S RM. K. V ISVANATHA PILLAI & SONS (SUPRA), THIS TRIBUNAL HAS IN FACT, OBSERVED A S UNDER: ITA NO. 1766/14 ETC :- 26 -: 37. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE EXPENDITURE WAS INCURRED FOR EXPANSION OF THE EXIST ING BUSINESS. IN THE COURSE OF BUSINESS ACTIVITY, THE ASSESSEE I NTENDED TO ESTABLISH ANOTHER SHOWROOM IN THE LEASED PREMISES, THEREFORE, THE PREMISES WAS TAKEN ON LEASE FOR A PERIOD OF 20 YEAR S AND THE ASSESSEE INCURRED EXPENDITURE FOR MAKING THE BUILDI NG FIT FOR ESTABLISHING A SHOWROOM. THE QUESTION ARISES FOR C ONSIDERATION IS WHETHER THE ASSESSEE CAN CLAIM THE EXPENDITURE AS REVENUE IN NATURE? THIS ISSUE WAS SPECIFICALLY CONSIDERED BY THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2002-0 3 WHEN THE ASSESSEE CHALLENGED THE ORDER OF THE ADMINISTRATIVE COMMISSIONER U/S 263 OF THE ACT. THIS TRIBUNAL FOUND THAT THE S IMILAR EXPENDITURE CAN BE ALLOWED AS REVENUE IN NATURE. S INCE THE CO- ORDINATE BENCH HAS ALREADY OPINED THAT THE EXPENDIT URE IS REVENUE EXPENDITURE AND MERELY BECAUSE THE REVENUE S APPEAL AGAINST THE ORDER OF THIS TRIBUNAL IS PENDING BEFOR E THE HIGH COURT, THIS BENCH CANNOT TAKE A DIFFERENT VIEW. MO REOVER, THE KERALA HIGH COURT IN THE CASE OF JOY ALUKKAS INDIA PVT. LTD VS ACIT, 282 CTR 551, HAD AN OCCASION TO CONSIDER AN I DENTICAL ISSUE. IN THE CASE BEFORE THE KERALA HIGH COURT TH E ASSESSEE TOOK A PREMISES ON LEASE AND INCURRED EXPENDITURE FOR R ENOVATION. THE OBJECT OF THE ASSESSEE WAS TO ESTABLISH A SHOWR OOM IN THE COURSE OF ITS BUSINESS ACTIVITY. THE KERALA HIGH C OURT, AFTER CONSIDERING THE RELEVANT CASE LAWS ON THE SUBJECT, FOUND THAT THE SIMILAR EXPENDITURE IS REVENUE IN NATURE. IN VIEW OF THE ABOVE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE W ITH THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY, THE SAME IS CONF IRMED. 37. SIMILAR VIEW WAS ALSO TAKEN IN THE CASE OF M/S RM.K .V. TEXTILES(SUPRA). IN VIEW OF THE ABOVE, THIS TRIBUN AL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A)AND ACCORDINGLY, THE SAME IS CONFIRMED. 38. IN THE RESULT, THE APPEALS OF THE ASSESSEE I.T.A.N OS. 1766 & 1768/MDS/2014 ARE ALLOWED AND I.T.A.NO.1767/MDS/201 4 IS PARTLY ALLOWED. REVENUES APPEAL I.T.A.NO.1879/MDS/2014 IS DISMISSED. ITA NO. 1766/14 ETC :- 27 -: ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH AUGUST, 2016, AT CHENNAI. SD/- SD/- ( . !' ) (A. MOHAN ALANKAMONY) # / ACCOUNTANT MEMBER ( . . . ) ) (N.R.S. GANESAN) / JUDICIAL MEMBER / CHENNAI ! / DATED: 5 TH AUGUST, 2016 RD !' # $% &% / COPY TO: 1 . '( / APPELLANT 4. ) / CIT 2. #*'( / RESPONDENT 5. %+, # - / DR 3. ) () / CIT(A) 6. ,/ 0 / GF