DCIT, New Delhi V. M/s Exxon Mobil Lubricants P. Ltd., New Delhi

ITA 2413/DEL/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3507 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 13-07-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 11-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KRISHNA
• Assessee Lawyers: ANURAG GOEL
• Keywords: Revision of order; Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 263; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B DELHI) BEFORE SHRI A.D. JAIN AND SHRI SHAMIM YAHYA ITA NO. 2413(DEL)2011 ASSESSMENT YEAR: 2003-04 DY.COMMISSIONER OF INCOME TAX, M/S. EXXON MOBI L LUBRICANTS P.LTD., CIRCLE 11(1), NEW DELHI. V. E-20, HA UZ KHAS, NEW DELHI-16. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI KRISHNA, CIT/DR RESPONDENT BY: S/SHRI HIMANSHU SI NHA, RAMARANJAN MOHANTY, & ANURAG GOEL, CAS ORDER PER A.D. JAIN, J.M. THIS IS DEPARTMENTS APPEAL FOR THE ASSESSMENT YEAR 2003-04, TAKING THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF ` 81,99,692/- ON ACCOUNT OF DISALLOWANCE FOR PROVISION MADE FOR ADVERTISING AND PUBLICITY EXPENSES. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF ` 49,48,000/- ON ACCOUNT OF DISALLOWANCE OF THE WRITE-OFF OF INVENTORY. ITA 2413(DEL)2011 2 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN DECLARING THE ORDER PASSED U/S 143(3)/ 263/147 AS ILLEGAL. 2. APROPOS GROUND NO.1, THE AO DISALLOWED A SUM OF ` 81,99,692/- TOWARDS PROVISION FOR ADVERTISEMENT AND PUBLICITY E XPENSES IN THE REASSESSMENT PROCEEDINGS. IT WAS HELD THAT THE AS SESSEE COULD NOT PRODUCE ANY EVIDENCE TO THE EFFECT THAT THE PROVISIONS WERE CRYSTALLIZED LIABILITY. 3. THE LEARNED CIT(A) DELETED THE DISALLOWANCE. 4. THE LD. DR HAS CONTENDED THAT THE LD. CIT(A)HAS ERRED IN DELETING THE ADDITION RIGHTLY MADE BY THE AO; THAT WHILE DOING SO, THE LD. CIT(A) HAS FAILED TO CONSIDER THAT THE ASSESSEE REMAINED UNABL E TO PRODUCE ANYTHING ON RECORD TO SHOW THAT THE PROVISIONS WERE FOR CAPITAL IZED LIABILITY. 5. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTH ER HAND, HAS STRONGLY RELIED ON THE IMPUGNED ORDER. ALSO, A SHORT SYNOPS IS HAS BEEN PLACED ON RECORD AND RELIED ON. 6. IT IS SEEN THAT THE REASSESSMENT ORDER WAS PASSE D ON THE BASIS OF THE CITS ORDER DATED 28.3.2008, PASSED U/S 263 OF THE I.T. ACT. IN THAT ORDER OF THE COMMISSIONER, IT HAD BEEN HELD THAT THE PROVISI ON OF ` 81,99,692/- MADE TOWARDS ADVERTISEMENT AND PUBLICITY EXPENSES WAS AN UNASSERTED LIABILITY. HOWEVER, THE ASSESSEE APPEALED AGAINST THE CITS OR DER AND THE TRIBUNAL, VIDE ORDER DATED 2.4.09, SET ASIDE THE CITS ORDER, HOLDING THE PROVISION TO BE ITA 2413(DEL)2011 3 AN ALLOWABLE EXPENDITURE. THE RELEVANT PORTION OF THE SAID TRIBUNAL ORDER HAS BEEN REPRODUCED AT PAGE 4 OF THE IMPUGNED ORDER . THE TRIBUNAL HELD THAT THE PROVISIONS WERE MADE ON THE BASIS OF PURCH ASES MADE BY THE PARTIES, DURING THE YEAR, WHO HAD EARNED POINTS ON THE PURCH ASES AND AS PER THE SCHEME IT WAS AN ALLOWABLE EXPENDITURE AND, AS SUCH , IT COULD NOT BE SAID THAT THEY WERE UNASSERTED LIABILITY. 7. THEREFORE, THE CITS ORDER PASSED U/S 263 OF THE ACT, IT FOUND THE BASIS OF THE DISALLOWANCE IN THE REASSESSMENT ORDER , WAS ITSELF SET ASIDE BY THE TRIBUNAL. HENCE, THE LD. CIT(A) CORRECTLY DELE TED THE DISALLOWANCE, FOLLOWING THE TRIBUNAL ORDER. 8. ACCORDINGLY, GROUND NO.1 IS REJECTED. 9. COMING TO GROUND NO.2, THE AO DISALLOWED THE AMO UNT OF ` 49,48,000/- TOWARDS WRITE OFF OF INVENTORY, OBSERVI NG THAT THE ASSESSEE COULD NOT EXPLAIN AS TO WHY THE DIFFERENCE BETWEEN THE PH YSICAL STOCK AND THE BOOK STOCK HAD ARISEN. THE ASSESSEE HAD MAINTAINED THA T THE INVENTORY HAD BEEN WRITTEN OFF ON THE BASIS OF ACTUAL PHYSICAL DIFFERE NCE BETWEEN THE CLOSING STOCK IN THE ASSESSEES DEPOT AND THE CLOSING STOCK AS PER THE ASSESSEES BOOKS OF ACCOUNT. 10. THE LD. CIT(A) DELETED THIS DISALLOWANCE. ITA 2413(DEL)2011 4 11. THE LD. DR HAS CONTENDED THAT THE LD. CIT(A) HA S ILLEGALLY DELETED THE DISALLOWANCE DESPITE THE FACT THAT THE ASSESSEE HAD REMAINED UNABLE TO EXPLAIN THE REASON FOR THE DIFFERENCE BETWEEN THE P HYSICAL STOCK AND THE BOOK STOCK. 12. THE LEARNED COUNSEL FOR THE ASSESSEE, PER CONTR A, HAS PLACED RELIANCE ON THE CIT(A)S ORDER AND THE SYNOPSIS. 13. THE LD. CIT(A), WHILE DELETING THE DISALLOWANCE , TOOK INTO ACCOUNT THE ASSESSEES EXPLANATION THAT THE WRITE OFF OF THE IN VENTORY WAS DUE TO A GENUINE DISCREPANCY BETWEEN THE ACTUAL STOCK FOUND ON PHYSICAL VERIFICATION AND THAT SHOWN IN THE BOOKS OF ACCOUNT OF THE ASSES SEE. THIS REMAINS UNDISPUTED, BESIDES THE FACT THAT THE ASSESSEES AU DITORS HAD ALSO VERIFIED THE WRITE OFF. IT HAS BEEN CORRECTLY HELD THAT THE WRI TE OFF IS A TRADING LOSS ALLOWABLE U/S 28 (I) OF THE ACT. UNDISPUTEDLY, NO THING WAS BROUGHT ON RECORD BY THE AO, TO ESTABLISH THAT THE ASSESSEE HA D MADE ANY SALES OUT OF ITS BOOKS. THE CIT(A) CROSS CHECKED THE DETAILS OF TH E ASSESSEES LEDGER ACCOUNT SHOWING THE WRITE OFF OF THE INVENTORY WITH THE DETAILS SHOWING THE ITEMWISE WRITE OFF OF INVENTORY, AS SUBMITTED BY TH E ASSESSEE. THE CONSOLIDATED ITEMWISE QUANTITY OF THE STOCK AS PER THE ASSESSEES BOOKS, AND AS PER PHYSICAL VERIFICATION HAD RESULTED IN THE SH ORTAGE OF STOCK OF ` 49,47,794/-. THE FINANCIAL STATEMENT OF THE ASSES SEE REVEALED THAT THE WRITE ITA 2413(DEL)2011 5 OFF OF THE INVENTORY WAS ON A REASONABLE BASIS, AS CERTIFIED BY THE ASSESSEES AUDITORS. IT WAS, AS SUCH, THAT THE LD. CIT(A) HEL D THE INVENTORY WRITE OFF TO BE A TRADING LOSS DIRECTLY INCIDENTAL TO THE CARRYI NG ON OF THE ASSESSEES BUSINESS. 14. HENCE, GROUND NO.2 IS FOUND TO BE SANS SUB STRA TUM AND IS REJECTED. 15. SOFAR AS REGARDS GROUND NO.3, THE LD. CIT(A) HA S HELD THE REASSESSMENT ORDER TO BE ILLEGAL, ON THE BASES THAT FIRSTLY, DESPITE THE ASSESSEE HAVING ASKED FOR THEM SPECIFICALLY, THE AO HAD NOT DISCLOSED TO THE ASSESSEE THE REASONS FOR ISSUANCE OF THE REASSESSMENT NOTICE ; THAT ALL THE DETAILS WERE IN THE PROFIT AND LOSS ACCOUNT BEFORE THE AO IN THE ORIGINAL ASSESSMENT PROCEEDINGS; AND THAT IT WAS A CASE OF MERE CHANGE OF OPINION IN REOPENING THE COMPLETED ASSESSMENT. 16. THE AFORESAID CATEGORIC FINDINGS RECORDED BY TH E LD. CIT(A) REMAINED UNCONTROVERTED. NON-SUPPLY OF REASONS OF REOPENIN G OF THE COMPLETED ASSESSMENT TO THE ASSESSEE IS DETRIMENTAL TO THE RE OPENING AND RENDERS THE REOPENING PROCESS INVALID. SUPPLY OF REASONS FOR REOPENING OF THE COMPLETED ASSESSMENT TO THE ASSESSEE IS A SINE QUA NON FOR THE REOPENING PROCESS, AS HELD IN THE CASE OF GKN DRIVESHAFTS IN DIA LTD., 259 ITR 19(SC). FURTHER, SINCE UNDISPUTEDLY, ALL THE DETAIL S NECESSARY FOR THE ASSESSMENT WERE AVAILABLE WITH THE AO IN THE ORIGIN AL ASSESSMENT ITA 2413(DEL)2011 6 PROCEEDINGS, THERE WAS PER SE NO REASON TO REOPEN T HE COMPLETED ASSESSMENT. THEN, THIS ALSO LEADS TO THE NECESSARY CONCLUSION T HAT IT WAS A CASE OF A MERE CHANGE OF OPINION OF THE AO IN REOPENING THE COMPLE TED ASSESSMENT, OVER THAT OF THE AO IN THE ORIGINAL ASSESSMENT PROCEEDIN GS. 17. AS SUCH, GROUND NO.3 ALSO DOES NOT CONTAIN ANY FORCE WHATSOEVER AND IS, THEREFORE, REJECTED TOO. 18. IN THE RESULT, THE APPEAL FILED BY THE DEPARTME NT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.07.2011. SD/- SD/- (SHAMIM YAHYA) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 14.07.2011 *RM COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER DEPUTY REGISTRAR