Arcotech Ltd., New Delhi V. ITO, New Delhi

ITA 2216/DEL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6855 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 25-04-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 16-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K K JAISWAL
• Assessee Lawyers: SANJAY J OSHI
• Keywords: Depreciation; Principle of natural justice; Rule of consistency
• Section: 43B; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE VICE PRESIDENT & SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO.-2216/DEL/2013 ( ASSESSMENT YEAR: 2003-04) ARCOTECH LTD. (FORMERLY SKS LTD.) C/O AMIT JOSHI & ASSOCIATES, CA, 253A/2, 4 TH FLOOR, SHAHPUR JAT, OPP. PANCHSHEEL, NEW DELHI. AAACS2437G VS ITO WARD 8(4), NEW DELHI. ASSESSEE BY SH. SANJAY JOSHI, CA REVENUE BY SH. K.K. JAISWAL, DR ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER : THE PRESENT APPEAL IS PREFERRED BY THE ASSESSEE AGA INST ORDER DATED 31.01.2013 PASSED BY THE LD. CIT (APPEALS) XI, NEW DELHI FOR AY 2003-04. DATE OF HEARING 25.04.2016 DATE OF PRONOUNCEMENT 21.07.2016 (2) 2 . THE ASSESSEE IS A LIMITED COMPANY . THE RETURN OF INCOME WAS FILED DECLARING A LOSS OF RS. 2 ,29,93,710/- HOWEVER, THE ASSESSMENT WAS COMPLETED U/S 144 OF THE INCOME TAX ACT, 1961 AT AN INCOME OF RS. 60,000/- AFTER DI SALLOWING ALL THE EXPENSES AS THE AO WAS OF THE OPINION THAT SINCE THE ASSESSEE WAS NOT CARRYING OUT BUSINESS ACTIVITIES, THE EXPENSES WERE NOT ALLOWABLE. AS PER THE RECORDS, THE TOTAL EXP ENSES CLAIMED WERE RS. 14,59,16,812/-. HOWEVER, THE COMP UTATION OF INCOME ATTACHED WITH THE RETURN OF INCOME SHOWS THAT THE NET LOSS CLAIMED DURING THE YEAR WAS ONLY RS. 2,29,93,7 10/- AS UNDER: COMPUTATION OF INCOME/LOSSES: AMOUNT IN RS. LOSS AS PER PROFIT & LOSS ACCOUNT 187730664 LESS: DEPRECIATION AS PER COMPANIES ACT 41873852 145856812 LESS: STATUTORY DUES NOT PAID 39559 145817253 ADD: DEPRECIATION AS PER INCOME TAX ACT 11428719 LESS: INTEREST ON SECURED LOAN PROVIDED 157245972 BUT NOT PAID U/S 43B 13425 2262 NET LOSS DURING THE YEAR 22993710 (3) ADD: LOSS FOR THE YEAR C/F C/F LOSS FOR THE AY 1997-98 1457842 9 C/F LOSS FOR THE AY 1998-99 193862549 C/F LOSS FOR THE AY 1999-00 355820732 C/F LOSS FOR THE AY 2000-01 112508549 C/F LOSS FOR THE AY 2001-02 136948844 C/F LOSS FOR THE AY 2002-03 2705488 0 TOTAL LOSSES CARRIED FORWARD 86376769 3 3. IN FIRST APPEAL THE LD. CIT (A) DELETED THE ENTIRE DISALLOWANCE MADE. THEREAFTER, ON AN APPEAL BY THE DEPARTMENT, THE MATTER WAS REMANDED BY THE ITAT TO T HE LD. CIT (A) FOR FRESH ADJUDICATION. THE ASSESSEE EXPRES SED ITS INABILITY TO PRODUCE ANY VOUCHERS/RECORDS/DOCUMENTS RELATING TO THE YEAR UNDER APPEAL. IT WAS THE ASSESSEES CONT ENTION THAT THE COMPANY WAS A SICK INDUSTRIAL UNIT AND THE BIFR HAD SANCTIONED A SCHEME FOR REHABILITATION WITH THE CUTO FF DATE AS 01.10.2004. HOWEVER, IN ABSENCE OF THE SUPPORTING D OCUMENTS, THE LD. CIT (A) UPHELD THE DISALLOWANCES AFTER ALLOWI NG THE DEPRECIATION CLAIMED. THE LOSS ON SALE OF INVESTMEN T OF RS. 81,75,000/- WAS ALSO NOT ALLOWED AS A DEDUCTION. TH E DETAILS OF DISALLOWANCES UPHELD BY THE LD. CIT (A) ARE AS UN DER: (4) SALARY & WAGES RS. 75,709/- MISC. & ADMINISTRATIVE EXPENSES RS. 21,88,894/- TRAVELLING & CONVEYANCE RS. 1,391/- VEHICLE RUNNING & MAINTENANCE RS. 7,330 /- AUDITORS EXPENSES RS. 7,000/- AUDIT FEES RS. 52,500/- BANK CHARGES & COMMISSION RS. 6,174/- PRELIMINARY EXP. WRITTEN OFF RS. 8,77,595/- LOSS ON SALE OF VEHICLE RS. 2,90,132/- TOTAL RS. 35,06,725/- 4. NOW THE ASSESSEE IS AGAIN BEFORE THE TRIBUNAL AND HAS RAISED THE FOLLOWING GROUNDS OF APP EAL - 1. THAT LD. CIT (A) HAS PASSED THE ORDER AGAINST THE PRINCIPLES OF NATURAL JUSTICE, WITHOUT ANY BASIS, S UO MOTO, ARBITRARILY AND IN A MECHANICAL WAY AND HENCE THE IMPUGNED ORDER NEEDS TO BE SET ASIDE. 2. THAT THE LD. CIT (A) HAS ERRED BY NOT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE AND DISALLOWED ALL THE EXPENSES I.E. SALARY AND WAGES RS. 75,709/- AND RS. 34,31,016/- ON ACCOUNT OF ADMINISTRATION, AUDIT ORS EXPENSES, VEHICLE RUNNING, BANK CHARGES, PRELIMINAR Y EXPENSES ETC. IN AN ARBITRARY MANNER AND HENCE THE IMPUGNED ORDER BEING BAD IN LAW NEEDS TO BE SET ASIDE. 3. THE ASSESSEE CRAVES LEAVE TO ADD, DELETE AND AMEND ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING . (5) 4. THE LD. AR SUBMITTED THAT PURSUANT TO THE ISSUE BEI NG RESTORED BY THE ITAT TO THE FILE OF THE LD. CIT (A) , NO REPORT WAS RECEIVED FROM THE AO AND THE ORDER U/S 250 OF TH E I.T. ACT, 1961 WAS FINALIZED BY THE LD CIT (A) GIVIN G PARTIAL RELIEF TO THE ASSESSEE IN THAT THE CLAIM OF DEPRECI ATION AMOUNTING TO RS 1,14,28,119 WAS ALLOWED AND DISALLOWANCES OF EXPENSES AMOUNTING TO RS 1,16,81,72 5 WAS UPHELD. IT WAS SUBMITTED THAT IT IS A MATTER OF R ECORD WITH THE INCOME TAX DEPARTMENT THAT IN NOV. 1996, TH E HONBLE SUPREME COURT DIRECTED THE ASSESSEE COMPANY TO CLOSE DOWN THE OPERATIONS ON GROUNDS OF POLLUTION AN D RELOCATE THE PLANT OUTSIDE THE NATIONAL CAPITAL REG ION OF DELHI. AS A RESULT THE MAIN OPERATIONS OF THE COMPA NY CAME TO A HALT W.E.F. 31 ST MARCH 1997. AT THE SAME TIME WATER TRANSPORT DIVISION ALSO SUFFERED DUE TO CANCE LLATION OF LANDING PERMIT BY MUMBAI PORT TRUST RESULTING IN COMPLETE CLOSURE OF THE COMPANY IN JUNE 1998. THE L D. (6) AR FURTHER SUBMITTED THAT THE COURT PROCESSES, NON COOPERATION OF LABOUR, AGITATIONS, NOT ALLOWING THE MANAGERIAL STAFF TO FUNCTION AS WELL AS DENIAL OF PERMISSION FROM BANKS AND FINANCIAL INSTITUTIONS TO RELOCATE THE PLANT ADDED TO THE PROBLEM AND THE NET WORTH OF THE COMPANY GOT ERODED LEADING THE COMPANY TO MA KE A REFERENCE TO BOARD OF INDUSTRIAL AND FINANCIAL RECONSTRUCTION (BIFR) UNDER THE SICK INDUSTRIAL. COMPANIES (SPECIAL PROVISIONS) ACT, 1985 (SICA). TH E HONBLE BIFR SANCTIONED THE REHABILITATION SCHEME O N 18 TH NOVEMBER 2004 AND THE ASSESSEE COMPANY RESTARTED THE MELTING DIVISION IN SEPT 2006 AND THE FULL UNIT BECAME OPERATIONAL IN MARCH 2007. DURING THE REHABILITATIO N PROCESS MOST OF THE PROFESSIONAL STAFF LEFT THE EMP LOYMENT OF THE ASSESSEE COMPANY. IT WAS SUBMITTED THAT DURIN G THE RE-ADJUDICATION PROCEEDINGS BEFORE THE LD CIT(A), A SUMMARY OF THE EXPENSES CLAIMED WAS GIVEN AND UPON T HE (7) FAILURE OF THE AO TO SUBMIT THE REMAND REPORT, THE LD. CIT(A) OUGHT TO HAVE GIVEN HIS INDEPENDENT FINDING ON EACH EXPENSE CLAIMED WHICH HAS NOT BEEN DONE. IT WAS FURTHER SUBMITTED THAT CONSIDERING THE BACKGROUND O F THE ASSESSEE AS AFORE SAID, AS THE RECORDS, VOUCHERS AN D SUPPORTING DOCUMENTS RELATING TO THIS ASSESSMENT YE AR COULD NOT BE TRACED, THE LD CIT (A), SHOULD HAVE TA KE COGNIZANCE OF THE AFFIDAVIT FILED BY THE ASSESSEE T HAT THE RECORDS ETC COULD NOT BE TRACED DUE TO THE CLOSURE AND SHIFTING OF THE FACTORY AND GIVEN A FINDING ON THE EXPENSES CLAIMED WHICH HAS NOT BEEN DONE. THE LD. AR EMPHASIZ ED THAT THE LD CIT(A) HAS LOST SIGHT OF THE FACT THAT THE ASSESSEE IS A WIDELY HELD PUBLIC LIMITED COMPANY WHOS E ACCOUNTS HAVE BEEN AUDITED AND THAT THE AUDIT REPOR T OF THE AUDITORS DOES NOT AT ANY PLACE MENTION THAT THE SAME HAS BEEN FINALIZED WITH INCOMPLETE RECORDS WHICH ONLY SHOWS THAT ALL THE RECORDS, DOCUMENTS AND VOUCHERS WE RE (8) AVAILABLE AT THE TIME OF THE AUDIT AND IT WAS ONLY A T A LATER DATE, DUE TO THE SHIFTING OF THE FACTORY THAT THE R ECORDS GOT MISPLACED AND COULD NOT BE TRACED. THE LD. AR SUBMI TTED THAT IT CAN BE PERUSED FROM THE DETAILS OF EXPENSES SUBMITTED THAT SOME OF THE EXPENSES ARE MANDATORY L IKE AUDIT FEES, PRINTING OF MEMORANDUM AND ARTICLES OF ASSOCIATION AND ANNUAL REPORTS FOR THE SHAREHOLDERS . IT WAS SUBMITTED THAT THE AUDIT HAS BEEN CONDUCTED IS APPARENT AS THE AUDITED FINANCIAL STATEMENTS FOR TH E SAID ASSESSMENT YEAR HAVE BEEN PLACED ON RECORD AND THER E SEEMS TO BE NO JUSTIFICATION IN DISALLOWANCE OF THES E STATUTORY AND MANDATORY EXPENSES. THE LD. AR SUBMIT TED THAT THE AUDIT HAS BEEN CONDUCTED ON THE BASIS OF T HE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE AND THE RE IS NO JUSTIFICATION FOR DISALLOWING THE ACCOUNTING CHAR GES OF RS. 20,000 INCURRED. IT WAS FURTHER SUBMITTED THAT I N TERMS OF THE AUDITED FINANCIAL STATEMENTS RELEVANT TO THE (9) ASSESSMENT YEAR 2003-04, THE ASSESSEE HAS AN ASSET BASE OF RS. 716.75 LACS AND ACCUMULATED LOSSES TO THE TU NE OF RS. 12,138.83 LACS AND ALL THE EXPENSES DURING THE YEAR HAVE BEEN INCURRED TO SAFEGUARD ITS ASSETS, DEFEND LITIGATIONS AGAINST THE ASSESSEE AND TO PUT FORWARD THE CASE OF THE ASSESSEE BEFORE THE VARIOUS GOVERNMENT AGENCIES FOR THE REHABILITATION PACKAGE OF THE ASSE SSEE. THE REHABILITATION PACKAGE WAS SUBSEQUENTLY SANCTION ED AND THE ASSESSEE RESTARTED ITS MANUFACTURING ACTIVI TY DURING THE FINANCIAL YEAR 2006-07. IT WAS SUBMITTED THAT IN THE LEDGER ACCOUNTS SUBMITTED RELATING TO THE LE GAL AND PROFESSIONAL CHARGES AND THE RETAINER SHIP FEES, TA X HAS BEEN DEDUCTED AT SOURCE WHEREVER APPLICABLE FROM PAYMENTS MADE TO LAWYERS AND OTHER PROFESSIONALS I. E. S.K. KOCHRA, JOSHI & ASSOCIATES, O.P. KHAITAN & CO. , ASHISH AGGARWAL & ASSOCIATES, ARJUN H. PATIL, DHRURE LILADHAR & CO AND S.K. JHUNJUNWALA. SIMILARLY ON (10) PAYMENTS INCURRED TOWARDS SECURITY EXPENSES, TAX HAS BEEN DEDUCTED AT SOURCE, WHEREVER APPLICABLE WHICH ON LY GOES TO SHOW THE GENUINENESS OF THE EXPENDITURE. THE LD. AR FURTHER SUBMITTED THAT WHILE FINALIZING THE ORDER , THE LD. CIT (A) HAS LOST SIGHT OF THE FACT THAT THE EXP ENSES SUBJECT TO DISALLOWANCE AMOUNTING IN TOTAL TO ABOUT RS 37.06 LACS FORM A VERY SMALL PORTION CONSIDERING TH E TOTAL ASSET BASE OF THE ASSESSEE AND ALSO THE ACCUMULATED LOSSES OF THE ASSESSEE AS SHOWN IN THE AUDITED FINAN CIAL STATEMENTS RELEVANT TO THE ASSESSMENT YEAR 2003-04. THE LD. AR ALSO SUBMITTED A COMPARATIVE CHART OF THE VA RIOUS EXPENSES FOR AY 2003-03, 2003-04 AND 2004-05 WHICH IS BEING REPRODUCED ON THE NEXT PAGE FOR A READY REFER ENCE. 11 COMPARISON OF EXPENSES PARTICULARS F.Y. 2001 - 02 (IN RS.) F.Y. 2002 - 03 (IN RS.) F.Y. 2003 - 04 (IN RS.) SALARY & WAGES (INCLUDING ALLOWANCES) 7,06,412 75,709 36,000 CONTRIBUTION TOWARDS ESI & EDLI 3,569 CONTRIBUTION TOWARDS EPF & FPF 6,436 STAFF WELFARE 14,341 TOTAL (RS.) 7,30,758 75,709 36,000 OTHER EXPENSES REPAIR & MAINTENANCE 13,34,727 - RENT RATES AND TAXES 22,81,083 - MISCELLANEOUS & ADMINISTRATIVE. EXPS. 37,43,448 21,88,894 7,85,468 TRAVELLING & CONVEYANCE 1,94,152 1,391 - VEHICLE RUNNING AND MAINTENANCE 3,61,223 7,330 - AUDITOR'S EXPENSES 7,000 7,000 7,355 AUDIT FEES 52,500 52,500 52,500 BANK CHARGES & COMMISSION 18,947 6,174 5,880 PRELIMINARY EXPENSES WRITTEN OFF 8,77,595 8,77,595 2,69,709 SETTLEMENT & RECONCILLATION 55,07,997 - LOSS ON SALE OF VEHICLE 1,27,930 2,90,132 TOTAL (RS.) 1,45,06,602 34,31,016 11,20,912 FINANCE CHARGES INTEREST FROM FINANCIAL INSTITUTIONS 4,46,13,877 5,66,07,590 WORKING CAPIAL LOAN 6,46,80,411 7,73,98,655 HDFC LOAN 2,05,317 2,46,017 TOTAL (RS.) 10,94,99,605 13,42,52,262 - MISC AND ADMINISTRATIVE EXPENSES INCLUDE: LEGAL AND PROFESSIONAL CHARGES 3,87,729 TDS DEDUCTED ON 2,72,729 RETAINERSHIP FEES 1,29,100 TDS DEDUCTED ON 95,000 SECURITY CHARGES 6,54,052 TDS DEDUCTED ON 6 ,54,052 ---------------- --------------- 11,70,921 10,21,821 ----------------- --------------- (12) 5. THE LD. DR SUPPORTED THE AOS ORDER AND THAT OF THE LD. CIT (A) AND SUBMITTED THAT IN VIEW OF THE INABILITY OF THE ASSESSEE TO PRODUCE THE RELEVANT RECORDS/VOUCHERS, THE ADDITIONS HAVE BEEN RIGHTLY MADE AND THE IMPUGNED O RDER DOES NOT CALL FOR ANY INTERFERENCE. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS UNDISPUTED THAT THE ASSES SEE HAS BEEN UNABLE TO PRODUCE THE RELEVANT VOUCHERS FOR TH E PURPOSE OF VERIFICATION EVEN IN THE SECOND ROUND BE FORE THE LD. CIT (A). IT IS ALSO UNDISPUTED THAT THE ASS ESSEE COMPANY HAD BECOME A SICK INDUSTRIAL UNIT AND HAS B EEN ABLE TO OBTAIN A REHABILITATION PACKAGE IN TERMS OF A SCHEME APPROVED BY THE BIFR. IT IS ALSO REMAINS UN- CONTRADICTED THAT THE LD. CIT (A) NEITHER CALLED FO R A REMAND REPORT FROM THE AO NOR QUESTIONED THE VERACI TY OF THE AFFIDAVIT REGARDING THE ASSESSEES INABILITY TO PRODUCE THE RELEVANT RECORDS/VOUCHERS BEFORE PROCEEDING TO RE- ADJUDICATE THE ISSUE OF DISALLOWANCE. IT IS TRUE THA T UNDER (13) NORMAL BUSINESS CONDITIONS, AN ASSESSEE IS REASONAB LY EXPECTED TO MAINTAIN PROPER RECORDS/VOUCHERS OF THE EXPENSES INCURRED AND PRODUCE THE SAME BEFORE THE T AX AUTHORITIES WHEN REQUIRED TO DO SO. HOWEVER, WHEN THE ASSESSEE COMPANY HAS BEEN FORCED TO SHUT DOWN ITS OPERATIONS FROM THE EXISTING LOCATION AND IS FORCED TO SHIFT TO A NEW LOCATION, THE POSSIBILITY OF SOME RECORDS B EING LOST/MISPLACED CANNOT BE RULED OUT AND FOR THIS VER Y REASON IT IS OUR CONSIDERED OPINION THAT THE AFFIDA VIT FILED BY THE ASSESEEE COMPANY BEFORE THE LD. CIT (A) CANN OT BE COMPLETELY DISREGARDED. IT IS ALSO AN UNDISPUTED FA CT THAT THE BOOKS OF ACCOUNTS WERE AUDITED AND THE RETURN O F INCOME HAS BEEN FILED ON THE BASIS OF THE AUDITED B OOKS OF ACCOUNTS. A COMPARATIVE CHART OF THE EXPENSES FOR A Y 02- 03, 03-04 AND 04-05 HAS ALSO BEEN PLACED ON RECORD WHICH HAS NOT BEEN AGITATED BY THE DEPARTMENT. A PERUSAL OF THE COMPARATIVE CHART SHOWS THAT IN THE Y EAR UNDER CONSIDERATION THE SALARY/ALLOWANCES WERE ONLY RS. 75,709/- AS COMPARED TO RS. 7,30,758/- IN THE (14) IMMEDIATELY PRECEDING YEAR. EVEN THOUGH THE COMPANY MIGHT HAVE STOPPED COMMERCIAL OPERATIONS AND MIGHT HAVE BECOME A SICK COMPANY, SOME MINIMAL EXPENDITUR E ON SALARY OF STAFF HAS TO BE INCURRED ALL THE SAME AND IN OUR OPINION, KEEPING IN MIND THE GENERAL FINANCIAL STATE OF AFFAIRS OF THE ASSESSEE COMPANY DURING THE YEAR UND ER CONSIDERATION, THE AMOUNT CANNOT BE SAID TO BE EXCE SSIVE AND WE ACCORDINGLY DIRECT THE AO TO DELETE THE SAME . AS FAR AS THE MISCELLANEOUS AND ADMINISTRATIVE EXPENSE S TO THE TUNE OF RS. 21,88,894/- ARE CONCERNED, WE FIND THAT THE ASSESSEE HAS DEDUCTED TAX AT SOURCE ON RS. 10,21,821/- ONLY AND IT IS OUR CONSIDERED OPINION T HAT THE INTEREST OF JUSTICE WILL BE SERVED IF IN THE ABSENC E OF DETAILS, THE DISALLOWANCE IS RESTRICTED TO THE AMOUN T ON WHICH TAX HAS NOT BEEN DEDUCTED AT SOURCE. WE DIRECT THE AO TO DELETE THE ADDITION OF RS. 10,21,821/- ON THI S ACCOUNT. AS FAR AS THE DISALLOWANCE OF TRAVELLING EX PENSES OF RS. 1,391/- , VEHICLE RUNNING AND MAINTENANCE EXPENSES OF RS. 7,330/- AND BANK CHARGES OF RS. 6,1 74/- (15) ARE CONCERNED, THEY ALSO APPEAR REASONABLY IN TUNE WITH THE FIGURES OF THE PRECEDING YEAR AS WELL AS THE FI NANCIAL POSITION OF THE ASSESSEE FOR THE YEAR UNDER CONSIDE RATION AND WE DIRECT THE AO TO DELETE THESE THREE ADDITION S ALSO. THE ASSESSEE HAS CLAIMED A WRITE OFF OF PRELIMINARY EXPENSES AMOUNTING TO RS. 8,77,595/- AND IT IS SEEN THAT THIS AMOUNT IS THE SAME AS THAT OF THE IMMEDIATELY PRECEDING YEAR BEING 1/10 TH OF THE TOTAL EXPENDITURE INCURRED. ON THE PRINCIPLE OF CONSISTENCY, WE DIREC T THE AO TO DELETE THIS ADDITION ALSO. THE ASSESSEE HAS C LAIMED LOSS ON SALE OF VEHICLE AMOUNTING TO RS. 2,90,132/- . AND THIS AMOUNT IS DULY APPEARING IN SCHEDULE M OF THE AUDITED PROFIT/LOSS ACCOUNT UNDER THE NOMENCLATURE LOSS ON SALE OF VEHICLE AND IT IS OUR CONSIDERED OPINI ON THAT ON FACTS NO ADVERSE INFERENCE CAN BE DRAWN AND THERE FORE, WE DIRECT THE AO TO DELETE THIS ADDITION ALSO. THE L AST DISALLOWANCE IS OF RS. 81,75,000/- ON ACCOUNT OF LOS S OF SALE OF INVESTMENT. IT IS SEEN THAT THE ASSESSEE HA D SOLD ITS HOLDING OF 15 LAC EQUITY SHARES IN SKS LTD (FAC E VALUE (16) RS. 10/- EACH) AT RS. 4.55 PER SHARE IN VIEW OF SEVE RE LIQUIDITY CRISIS WITHIN THE COMPANY. A PERUSAL OF SC HEDULE E OF THE AUDITED BALANCE SHEET SHOWS THAT THE ASSESS EES VALUE OF INVESTMENTS HAS REDUCED FROM RS. 30,500,00 0 IN AY 02-03 TO RS. 15,500,000/- IN AY 03-04. HOWEVER, IT IS SEEN THAT THE LOSS ON THE SALE OF INVESTMENTS HAS B EEN DEBITED TO THE PROFIT/LOSS ACCOUNT ALTHOUGH IT IS A CAPITAL LOSS AS THE SHARES WERE HELD AS AN INVESTMENT AND NO T AS A STOCK IN TRADE. THEREFORE, THE DISALLOWANCE HAS BE EN RIGHTLY MADE ON THIS ISSUE AND WE CONFIRM THE SAME. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 21.07.2016 SD/- SD/- (G.D. AGRAWAL) (SUDHANSHU SRIVASTAVA ) VICE PRESIDENT JUDICIAL MEMBER DATED: 21.07.2016 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI