Rajnandini Foods Pvt.Ltd, Kolhapur V. Assistant Commissioner of Income-tax, Circle - 1, Kolhapur

ITA 1930/PUN/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5466 (ITAT-PUNE)
• Duration Of Justice: 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 21-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ARISES OUT OF PASSED
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT . / ITA NO.1930/PUN/2018 / ASSESSMENT YEAR : 2013-14 RAJNANDINI FOODS PVT. LTD., 1540, C-LAXMIPURI, PANGALLI, KOLHAPUR, MAHARASHTRA. PAN :AAECR3494E VS. ACIT, CIRCLE-1 KOLHAPUR (APPELLANT) (RESPONDENT) / ORDER PER R.S.SYAL, VP : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASSE D BY THE CIT(A)-1, KOLHAPUR ON 15-10-2018 IN RELATION TO THE AS SESSMENT YEAR 2013-14. 2. THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST THE CONFIRMA TION OF DISALLOWANCE AT RS.18,06,480/- BEING LOSSES ON GOODS D UE TO SEIZURE. APPELLANT BY SMT. DEEPA KHARE RESPONDENT BY SHRI RAJESH GAWALI DATE OF HEARING 16-05-2019 DATE OF PRONOUNCEMENT 17-05-2019 ITA NO.1930/PUN/2018 RAJNANDINI FOODS PVT. LTD., 2 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESS EE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF PAN MASALA PR ODUCTS. A SUM OF RS.18,06,480/- WAS CLAIMED AS DEDUCTION IN THE PROFIT AND LOSS ACCOUNT UNDER THE HEAD GOODS SEIZED BY POLICE. ON BEING CALLED UPON TO SUBSTANTIATE THE CLAIM, THE ASSESSEE SUBMITTED THA T PAN MASALA WAS BEING TRANSPORTED TO NASHIK TO CUSTOMER, WH ICH WAS SEIZED BY PUNE POLICE AND HANDED OVER TO FOOD AND DRU G DEPARTMENT, GOVERNMENT OF MAHARASHTRA. IN THE POLICE PANCHANAMA, IT WAS RECORDED THAT PAN MASALA WAS ADULTERATED AND HARMFUL FOR HUMAN HEALTH. INVOKING THE PROVISIONS OF EXP LANATION 1 TO SECTION 37(1) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER C ALLED `THE ACT), THE ASSESSING OFFICER (AO) MADE ADDITION OF RS.18,0 6,480/-, WHICH CAME TO BE ECHOED IN THE FIRST APPEAL. 4. I HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE RELEV ANT MATERIAL ON RECORD. IT IS SEEN THAT THE ASSESSEE IS ENGAGE D IN THE MANUFACTURING OF PAN MASALA PRODUCTS. PAN MASALA PRODUCTS WORTH RS.18,06,480/- WERE TRANSPORTED BY THE ASSESSEE TO ITS CU STOMERS WHICH WERE INTERCEPTED BY THE PUNE POLICE AND SEIZED. IT IS T HIS VALUE OF THE SEIZED PAN MASALA PRODUCTS AT RS.18.06 LAKH, W HICH WAS CLAIMED BY THE ASSESSEE AS BUSINESS LOSS. THE AO IN VOKED ITA NO.1930/PUN/2018 RAJNANDINI FOODS PVT. LTD., 3 EXPLANATION 1 TO SECTION 37(1) OF THE ACT FOR MAKING THE DISALLOWANCE. IN THIS REGARD, IT IS OBSERVED THAT THE HONB LE SUPREME COURT IN DR. T.A. QUERESHI VS. CIT (2006) 286 ITR 547 (SC) HAS HELD THAT EXPLANATION 1 TO SECTION 37(1) APPLIES TO BUSINES S EXPENSES AND NOT TO BUSINESS LOSSES. IN THAT CASE ALSO, THE ASSESSEE WAS ENGAGED IN THE MANUFACTURING AND SALE OF HEROIN WHICH WAS SEIZED. THE ASSESSEES CLAIM OF BUSINESS LOSS WAS UPHE LD BY THE HONBLE SUPREME COURT BY HOLDING THAT EXPLANATION 1 TO SECTION 37(1) IS NOT ATTRACTED TO BUSINESS LOSS. FACTS OF THE INSTA NT CASE ARE SIMILAR IN AS MUCH AS THE ASSESSEE CLAIMED BUSINESS LOSS ON ACCOUNT OF SEIZURE OF ITS STOCK IN TRADE, WHICH DOES NOT FALL WITHIN THE REALM OF EXPLANATION 1 TO SECTION 37(1) OF THE ACT. I, THEREFOR E, ORDER TO DELETE THE ADDITION. 5. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH MAY, 2019. SD/- (R.S.SYAL) / VICE PRESIDENT PUNE; DATED : 17 TH MAY, 2019 ITA NO.1930/PUN/2018 RAJNANDINI FOODS PVT. LTD., 4 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT (APPEALS)-1, KOLHAPUR 4. THE PR. CIT-1, KOLHAPUR 5. , , SMC / DR SMC, ITAT, PUNE; 6. / GUARD FILE. // TRUE COPY // / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE DATE 1. DRAFT DICTATED ON 16-05-2019 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 16-05-2019 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *