M/s. Radharam Sohanlal, Kolkata V. ITO, Ward - 45(2), Kolkata, Kolkata

ITA 2120/KOL/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1251 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 26-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAILEN SAMADDAR
• Assessee Lawyers: MIRAJ D. SHAH
• Keywords: Capital asset converted into stock in trade
• Section: 45(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH SMC, KOLKATA [BEFORE SHRI P.M. JAGTAP, AM] I.T.A. NO. 2120/KOL/2017 ASSESSMENT YEAR: 2007-08 M/S. RADHARAM SOHANLAL........................................APPELLANT 3, MALLICK STREET, KOLKATA 700 007 [PAN: AADFR 4202 E] I.T.O. WARD 45(2) KOLKATA,...........................RESPONDENT 3, GOVERNMENT PLACE (WEST), KOLKATA 700 001 APPEARANCES BY: SHRI MIRAJ D SHAH, ADVOCATE APPEARING ON BEHALF OF THE ASSESSEE. SHRI SAILEN SAMADDAR, ADDL. CIT APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : MARCH 21, 2018 DATE OF PRONOUNCING THE ORDER : MARCH 23, 2018 ORDER PER P.M. JAGTAP, AM THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(APPEALS) 13, KOLKATA DATED 18.07.2017 AND IN THE SOLITARY GROUND RAISED THEREIN, THE ASSESSEE HAS CHALLENGED THE ACTION OF THE LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS. 3,64,422/- MADE BY THE A.O. BEING 50% OF THE LOSS CLAIMED BY THE ASSESSEE ON ACCOUNT OF GOODS DAMAGED IN FLOOD. 2. THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSHIP WHICH IS ENGAGED IN THE BUSINESS OF TRADING OF BOTANICAL ITEMS AND MUSICAL INSTRUMENT. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 24.10.2007 DECLARING A LOSS OF RS. 2,03,194/-. IN THE PROFIT AND LOOS ACCOUNT FILED ALONG WITH THE SAID RETURN, A SUM OF RS. 2 I.T.A. NO. 2120/KOL/2017 ASSESSMENT YEAR: 2007-08 RADHARAM SOHANLAL 7,28,843/- WAS DEBITED BY THE ASSESSEE ON ACCOUNT OF STOCK LOST BY FLOOD. IN THIS REGARD, IT WAS EXPLAINED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE THE A.O. THAT GOODS OF THE VALUE OF RS. 9,36,108/- HAD BEEN DAMAGED DUE TO HEAVY RAINFALL AND FLOOD DURING THE PERIOD FROM 19.10.2005 TO 27.10.2005. IT WAS SUBMITTED THAT THE ASSESSEE HOWEVER COULD RECOVER THE INSURANCE CLAIM OF RS. 2,07,265/- ONLY AND THE BALANCE AMOUNT OF RS. 7,28,843/- WAS ACCORDINGLY DEBITED TO THE PROFIT AND LOSS ACCOUNT AS STOCK LOST BY FLOOD. THIS EXPLANATION OF THE ASSESSEE WAS NOT ACCEPTED FULLY BY THE A.O. FOR THE FOLLOWING REASONS GIVEN IN ASSESSMENT ORDER: 1. THAT THERE IS NO IN OUT REGISTER OR STOCK REGISTER MAINTAIN BY THE ASSESSEE TO SUBSTANTIATE ITS CLAIM THAT THE STOCK OF THE ABOVE GOODS WERE KEPT THERE. EVEN NO TRANSPORT DETAILS ARE ALSO AVAILABLE TO ESTABLISH ASSESSEES CLAIM THAT THE STOCK OF SAID QUANTITY / AMOUNT WERE TRANSPORTED THERE. 2. THAT ALTHOUGH CLAIM WAS FILED FOR TOTAL AMOUNT OF RS. 9,36,108.75 ONLY RS. 2,07,265/- WAS GRANTED TO THE ASSESSEE. BUT THE ASSESSEE DID NOT ABLE TO FILE THE SETTLEMENT LETTERS/INTIMATION BY THE INSURER AGAINST THE ABOVE CLAIM, WHICH INDICATES THAT THERE MUST BE SOME DEFICIENCY IN THE MATTER OF CLAIM OF LOSS. 3. THAT THE ASSESSEE DID NOT ABLE TO FURNISH ANY DETAILS OF SALES OR TREATMENT OF THE ABOVE MENTIONED DAMAGED GOODS. HE DID NOT ABLE TO MENTION AS TO WHETHER THE DAMAGED GOODS WERE SOLD IN CHEAPER RATE OR AS TO HOW IT WAS DISPOSED. 4. THAT AS PER CLAIM FORM, THE STOCK IS HYPOTHECATED BEFORE INDIAN OVERSEAS BANK, INDIA EXCHANGE PLACE BRANCH, KOLKATA. BUT THERE ARE NO DETAILS OR EVIDENCE OR DOCUMENTS FROM THE BANKING AUTHORITY IN THIS MATTER, SINCE THE BANKING AUTHORITY GRANTED CREDIT LIMIT ON THE BASIS OF THE STOCK. 3 I.T.A. NO. 2120/KOL/2017 ASSESSMENT YEAR: 2007-08 RADHARAM SOHANLAL FOR THE REASONS GIVEN ABOVE THE ASSESSING OFFICER HELD THAT THE QUANTUM OF LOSS CLAIMED BY THE ASSESSEE WAS NOT FULLY ESTABLISHED AND ACCORDINGLY THE SAME WAS DISALLOWED BY HIM TO THE EXTENT OF RS. 3,64,422/- BEING 50% OF THE TOTAL CLAIM. ON APPEAL, THE LD. CIT(A) CONFIRMED THE SAID DISALLOWANCE MADE BY THE A.O. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 3. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ALTHOUGH THE LEARNED DR HAS STRONGLY RELIED ON THE ORDERS OF THE AUTHORITIES BELOW INCLUDING ESPECIALLY THE REASONS GIVEN BY THE A.O. IN THE ASSESSMENT ORDER FOR DISALLOWING THE CLAIM OF THE ASSESSEE TO THE EXTENT OF 50% IN SUPPORT OF THE REVENUES CASE, IT IS OBSERVED THAT THE FOLLOWING EXPLANATION WAS OFFERED BY THE ASSESSEE IN WRITING BEFORE THE LD. CIT(A) IN RESPECT OF SPECIFIC OBJECTIONS RAISED BY THE A.O. 4 I.T.A. NO. 2120/KOL/2017 ASSESSMENT YEAR: 2007-08 RADHARAM SOHANLAL AFTER GOING THROUGH THE EXPLANATION OFFERED BY THE ASSESSEE AS ABOVE, I FIND THAT ALL THE OBJECTIONS RAISED BY THE A.O. WHILE DISALLOWING THE 5 I.T.A. NO. 2120/KOL/2017 ASSESSMENT YEAR: 2007-08 RADHARAM SOHANLAL CLAIM OF THE ASSESSEE TO THE EXTENT OF 50% WERE SATISFACTORILY MET BY THE ASSESSEE. THE REASONS THAT MADE THE ASSESSEE TO ACCEPT THE LOW AMOUNT OF INSURANCE CLAIM WERE DULY EXPLAINED BY THE ASSESSEE AND IT WAS ALSO CLARIFIED BY THE ASSESSEE THAT THE CONCERNED GOODS DAMAGED IN THE FLOOD BEING PERISHABLE IN NATURE HAD NO SALVAGE VALUE. AT THE TIME OF HEARING BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS ALSO REFERRED TO THE STOCK STATEMENT AS ON 31.09.2005 SUBMITTED TO THE BANK (COPY AT PAGE 20 AND 21 OF THE PAPER BOOK) TO SHOW THAT THE STOCK OF RS. 23.66 LACS WAS LYING WITH THE ASSESSEE JUST BEFORE THE HEAVY RAINFALL AND SUBSEQUENT FLOOD FROM 19.10.2005 TO 27.10.2005. HE HAS ALSO INVITED MY ATTENTION TO THE RELEVANT DOCUMENTARY EVIDENCE PLACED AT PAGE NO 23 AND 24 OF THE PAPER BOOK TO SHOW THAT INSURANCE CLAIM OF RS. 9,36,108/- WAS MADE BY THE ASSESSEE FOR THE GOODS DAMAGED IN THE FLOOD. HE HAS ALSO INVITED MY ATTENTION TO THE TRADING ACCOUNT OF THE ASSESSEE FOR THE YEAR ENDED ON31.03.2006 TO SHOW THAT THE VALUE OF STOCK LOST IN FLOOD WAS DULY SHOWN BY THE ASSESSEE AT RS. 9,36,108/- IN THE CREDIT SIDE OF THE TRADING ACCOUNT. KEEPING IN VIEW THIS DOCUMENTARY EVIDENCE PLACED ON RECORD BY THE ASSESSEE AND HAVING REGARD TO THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE LD. CIT(A) AND REITERATED BEFORE THE TRIBUNAL CLARIFYING SATISFACTORILY THE OBJECTIONS RAISED BY THE A.O., I AM OF THE VIEW THAT THE DISALLOWANCE OF 50% MADE BY THE A.O. ON ACCOUNT OF ASSESSEES CLAIM FOR GOODS LOST IN THE FLOOD WAS NOT SUSTAINABLE AND THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE SAME. IN THAT VIEW OF THE MATTER, I DELETE THE SAID DISALLOWANCE MADE BY THE A.O. AND CONFIRMED BY THE CIT(A) AND ALLOW THIS APPEAL OF THE ASSESSEE. 6 I.T.A. NO. 2120/KOL/2017 ASSESSMENT YEAR: 2007-08 RADHARAM SOHANLAL 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD MARCH, 2018. SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER DATED: 23/03/2018 BISWAJIT, SR. PS COPY OF ORDER FORWARDED TO: 1. RADHARAM SOHANLAL, 3, MALLICK STREET, KOLKATA 700 007. 2. ITO WARD 45(2), 3, GOVERNMENT PLACE (WEST), KOLKATA 01. 3. THE CIT(A) 4. THE CIT 5. DR TRUE COPY, BY ORDER, SR. P.S. / H.O.O. ITAT, KOLKATA