FIXOLITE WIRE & CABLES P.LTD, MUMBAI V. ITO 6(2)(3), MUMBAI

ITA 2574/MUM/2011

• Counselvise Citation: 257419914 RSA 2011
• Duration Of Justice: 1 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 29-05-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 01-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V V SHASTRI
• Assessee Lawyers: ANIL SATHE
• Keywords: Depreciation

Judgement Text

FIXOLITE WIRES & CABLES (P) LTD. I.T.A. NO. 2574/MUM/2011 PAGE 1 O F 14 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F, MUMBAI BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER & SHRI VIVEK VARMA, JUDICIAL MEMBER I.T.A. NO. 2574/MUM/2011 ASSESSMENT YEAR: 2006-07 FIXOLITE WIRES & CABLES PVT. LTD., JOHN ROBERT COMPOUND, SEWREE FORT ROAD, SEWREE (E), MUMBAI 400 015. PAN: AAACF 1072 A VS. THE INCOME TAX OFFICER 6 (2)(3), MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : MR. ANIL SATHE. RESPONDENT BY : MR. V. V. SHASTRI. DATE OF HEARING: 29-05-2012. DATE OF PRONOUNCEMENT: 06-06-2012. O R D E R PER VIVEK VARMA, JM : THE APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORD ER OF CIT(A) 12, MUMBAI, DATED 03-01-2011 AND HAS RAISED THE FOL LOWING GROUNDS OF APPEAL: 1. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N CONFIRMING THE ACTION OF THE ASSESSING OFFICER AND TREATING THE SU M OF RS. 11,81,900/- BEING DIFFERENCE BETWEEN THE SALES AS P ER BOOKS AND SALES AS PER THE STOCK STATEMENTS SUBMITTED TO BANK AS SUPPRESSED SALE AND ADDED TO THE TOTAL INCOME OF THE APPELLANT . 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN OBSERVING THAT THE APPELLANT FAILED TO EXPLAIN ITS CASE IN THE REMAND PROCEEDINGS WHEN NO SUCH OPPORTUNITY WAS AFFORDED T O IT BY THE LEARNED ASSESSING OFFICER. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT CONSIDERING THE EXPLANATION PLACED BEFORE HER DURIN G THE APPELLANTS REPLY TO THE REMAND REPORT. FIXOLITE WIRES & CABLES (P) LTD. I.T.A. NO. 2574/MUM/2011 PAGE 2 O F 14 4. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N CONFIRMING THE ADDITION OF RS. 13,00,000/- BEING AMOUNT WRITTEN OF F IN RESPECT OF DISCARDED STOCK. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT APPRECIATING THE OPINION REPORT OF THE CHARTERED EN GINEER APPOINTED BY THE APPELLANT REGARDING THE NON-REALISABILITY OF THE STOCK 6. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N NOT APPRECIATING THE FACTS AND CONFIRMING THE DISALLOWA NCE OF DEPRECIATION TO THE EXTENT OF RS. 1,79,376/-. 7. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT CONSIDERING THE ADDITIONAL GROUND OF APPEAL BEING F AILURE TO ALLOW SET- OFF OF BROUGHT FORWARD LOSSES OF EARLIER YEARS AMOU NTING TO AGGREGATE RS. 40,12,263/-( BUSINESS LOSS RS. 20,2L,906/- AND UNABSORBED DEPREC IATION RS. 20,82,106/- ). 2. GROUNDS NO. 1, 2 AND 3 ARE BASICALLY AGAINST THE SUSTAINING THE ADDITION OF RS. 11,81,900/- BEING THE DIFFERENCE BE TWEEN THE SALES AS PER BOOKS AND SALES AS PER STOCK STATEMENTS SUBMITT ED TO BANK, HELD AS SUPPRESSED SALES. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS I N MANUFACTURING OF CABLES, PVC INSULATED WIRES AND FROM TWO UNITS, LOCATED AT NASHIK AND DAMAN. THE UNIT AT NASHIK HAD BEEN CLOSED DOWN AND THERE WAS NO MANUFACTURING ACTIVITY CARRIED ON FROM THERE, BU T IN THE UNIT AT DAMAN, THERE WAS CERTAIN MANUFACTURING ACTIVITY. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO CALLED FOR DETAILS CONCERNING STOCK, SALES AND PURCHASE AND PR ODUCTION. FROM THESE DETAILS, THE AO FOUND THAT IN THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD SHOWN SALES OF RS. 51,41,285/- AND IN THE DETAILS FILED WITH THE RETURN THE SALES SHOWN WERE AT RS. 39,85,7 84/-. ON BEING ENQUIRED, THE ASSESSEE SUBMITTED VIDE LETTER DATED 16-07-2008 THAT IT WAS THE SALE OF FIXED ASSETS WORTH OF RS. 11,81,900 /- WHICH WAS FIXOLITE WIRES & CABLES (P) LTD. I.T.A. NO. 2574/MUM/2011 PAGE 3 O F 14 ERRONEOUSLY INCLUDED IN TRADING SALES. FROM THE MON THLY STATEMENTS ON PRODUCTION AND SALE, AS GIVEN TO THE BANK, THE AO C ONCLUDED THAT THERE WAS ACTUALLY A DISCREPANCY OF RS. 11,81,900/-. THE AO HAS REPRODUCED THE TABLE, WHICH IS AS UNDER: MONTH VALUE OF CLOSING FINISHED STOCK (A) RS. VALUE OF CLOSING FINISHED STOCK (B) (RS.) TOTAL VALUE OF CLOSING STOCK AT THE END OF THE MONTH (RS.) (A+B) PRODUCTION DURING THE MONTH (METERS) SALES SHOWN DURING THE MONTH AS PER THE STATEMENTS SUBMITTED TO BANK (RS.) SALES SHOWN AS PER BOOKS OF ACCOUNTS (RS.) MAY 2005 1990789 2100000 4090789 4360 250194 250194 JUNE 2005 1806931 17000 3506931 21147 986033 986033 JULY 2005 1141056 1200000 2341056 8 1183300 1400 FROM THIS TABLE, THE AO CONCLUDED THAT IN THE MONTH OF JULY, 2005, THE SALES AS PER STATEMENT GIVEN TO THE BANK WERE AT RS . 11,83,300/- AND SALES SHOWN IS AT RS. 1400/-, WHICH IS DISPUTED AM OUNT OF RS. 11,81,900/-. THE AO CALLED FOR CLARIFICATION, THE A SSESSEE VIDE LETTER DATED 19-12-2008 SUBMITTED THAT THE DISCREPANCY ARO SE BECAUSE OF A CLERICAL ERROR, WHEREBY SALE OF MACHINERY GOT INCLU DED IN NORMAL BUSINESS SALE. THE AO DID NOT AGREE TO THE REPLY OF THE ASSESSEE, AND HELD THAT IN THE MONTH OF JULY THE CLOSING STOCK SH OULD HAVE BEEN RS. 35,33,956/-, I.E. OPENING STOCK ON 01-07-2007 AT RS . 23,41,056/- PLUS RS. 11,81,900/-. SINCE THIS WAS NOT APPEARING IN TH E BOOKS, THE AO CALLED FOR STOCK REGISTER, WHICH COULD NOT BE PRODU CED, NOR THE FIXOLITE WIRES & CABLES (P) LTD. I.T.A. NO. 2574/MUM/2011 PAGE 4 O F 14 ASSESSEE WAS ABLE TO SUBMIT ANY OTHER PROOF. THE AO , THUS CONCLUDED THAT THE SALES FIGURE GIVEN TO THE BANK AT RS. 11,8 1,900/- WERE SUPPRESSION OF SALES OUT OF ITS MANUFACTURING ACTIV ITY, AND ADDED THIS FIGURE TO THE INCOME OF THE ASSESSEE. 5. THE ASSESSEE TOOK THIS GRIEVANCE BEFORE THE CIT( A). 6. BEFORE THE CIT(A), THE ASSESSEE PLACED ITS WRITT EN SUBMISSIONS, WHEREIN IT PLACED THE COPY OF EXCISE RETURN IN ER 1 , WHICH STATES THAT RS. 11,83,300/- PERTAINS TO SALE OF CAPITAL GOODS A ND RS. 1,400/- IS THE SALE OF FINISHED GOODS. THE CIT(A) CALLED FOR THE R EMAND REPORT FROM THE AO, WHO SUBMITTED THE SAME, RELEVANT PORTION IS EXTRACTED IN THE CIT(A)S ORDER. THE AO IN THIS REPORTS SUBMITTED AS UNDER: .NOW, BEFORE YOUR GOOD SELF THE ASSESSEE HAS FIL ED TWO DOCUMENTARY EVIDENCES I.E. FORM E.R.1 WHICH IS MONTHLY RETURN O F EXCISABLE GOODS AND IS ACTUALLY A SELF ASSESSMENT MEMORANDUM SUBMITTED TO THE EXCISE RANGE OFFICER WHICH IS MERELY ACKNOWLEDGED ON FILING AND SALE INVOICE OF MACHINERY. IN RESPECT OF THE EXCISE FORM IT IS TO BE NOTED TH AT IT IS NOT A CASE WHERE THE STATEMENT IS ACTUALLY EXAMINED BEFORE BEI NG ACKNOWLEDGED BY THE EXCISE AUTHORITIES. IT IS A SELF DECLARATION FILED IN THE RANGE OFFICE AND THE ASSESSEE CAN NOT MAKE A CASE THAT THE STATEMENT MAD E BEFORE THE EXCISE DEPARTMENT IS MORE CORRECT THAN WHAT IS SUBMITTED T O THE BANK. THE CONTENTION MADE BY THE ASSESSEE THAT MORE WEIGHT HA S TO BE GIVEN TO THE EXCISE RECORD THAN THE BANK STATEMENT IS HEARSAY IN VIEW OF THE FACTS MENTIONED HEREIN ABOVE. MOREOVER, CLERICAL MISTAKES AS CONTENDED CAN NOT BE TWICE AS PRODUCTION QUANTITY ALSO DIFFERS. IN THIS REGARD IT IS WORTH MENTIONING TO NOTE THAT THE ASSESSEE HAS MERELY FILED THE INVOICE OF SALE OF MACHINERIES WIT HOUT SUPPORTING THE SAME WITH PROOF OF DELIVERY AND RECEIPT OF SALE PROCEEDS IN ANY BANK STATEMENT SO AS TO SUBSTANTIATE ITS CLAIM IN A MEANINGFUL MANNER . IN VIEW OF THE ABOVE FACTS OF THE CASE I AM OF THE HUMBLE OPINION THAT THE CONTENTION OF THE ASSESSEE ON THE ISSUE US UNTENABLE . 7. BEFORE THE CIT(A), THE ASSESSEE FURTHER PLACED O N RECORD, COPY OF GENERAL LEDGER, BANK STATEMENT, DELIVERY CHALLAN , CONSIGNMENT NOTE OF TRANSPORTER, WHICH THE CIT(A) CONSIDERED AS FRES H EVIDENCE AND REJECTED THEM BY HOLDING THAT THERE EXISTED NO REAS ON BY WHICH THE FIXOLITE WIRES & CABLES (P) LTD. I.T.A. NO. 2574/MUM/2011 PAGE 5 O F 14 APPELLANT WAS PREVENTED IN PRODUCING THEM BEFORE TH E AO. THE CIT(A) THUS, SUSTAINED THE OBSERVATION OF THE AO THAT THE DETAILS AS ASKED FOR WERE NOT SUBMITTED BEFORE THE AO. HE, THEREFORE, SU STAINED THE ADDITION. 8. AGGRIEVED, THE ASSESSEE IS BEFORE THE ITAT ON TH IS ISSUE. 9. BEFORE US THE AUTHORISED REPRESENTATIVE REITERAT ED THE SUBMISSIONS MADE BEFORE THE REVENUE AUTHORITIES AND HAS ALSO PLACED THE APB. THE A.R. POINTED OUT THAT THE ENTIRE SET O F DETAILS WERE PLACED BEFORE THE CIT(A), WHO CALLED FOR THE REMAND REPORT , THE A.R. ALSO POINTED OUT THAT FURTHER DETAILS WERE ALSO PLACED F OR HIS CONSIDERATION WHICH HE CONSIDERED TO BE FRESH EVIDENCE, TO PROVE THAT PROCEEDS OF RS. 11,81,900/- PERTAINED TO SALE OF CAPITAL MACHIN ERY THAT DETAILS PLACED BEFORE THE EXCISE DEPARTMENT COULD NOT BE IG NORED. HE, THEREFORE, SUBMITTED THAT THE ADDITION MADE BY THE AO AND SUSTAINED BY THE CIT(A) IS INCORRECT. 10. THE DR RELIED ON THE ORDER OF THE REVENUE AUTHO RITIES BUT EMPHASISED ON THE FINAL OBSERVATION OF THE CIT(A), WHEREIN THE CIT(A) HAD OBSERVED AS UNDER: . NOW BEFORE ME IN REPLY TO THE REMAND REPORT TH E APPELLANT HAS FOR VERIFYING THE SALE OF MACHINERY THE APPELLANT HAS P RODUCED A COPY OF GENERAL LEDGER, BANK STATEMENT, DELIVERY CHALLAN, CONSIGNME NT NOTE OF THE TRANSPORTER. THIS I FIND IS FRESH EVIDENCE. THE APP ELLANTS EXCUSE THAT THE ASSESSING OFFICER DID NOT REQUIRE OR ASK FOR THESE DETAILS CANNOT BE ACCEPTED. A REMAND REPORT WAS AUTHORISED MAINLY WITH THE PURP OSE OF AFFORDING THE APPELLANT AN OPPORTUNITY TO EXPLAIN AND TO ESTABLIS H ITS CASE. IT WAS FOR THE APPELLANT TO PRODUCE ALL DOCUMENTARY PRIMARY EVIDEN CE BEFORE THE ASSESSING OFFICER. THIS HAS NOT BEEN DONE AND THEREFORE FRESH EVIDENCE FILED NOW CANNOT BE ACCEPTED AS I FIND THERE EXISTED NO REASO N BY WHICH THE APPELLANT WAS PREVENTED IN PRODUCING THE SAME BEFORE THE ASSE SSING OFFICER. IT IS ALSO SEEN THE APPELLANT HAS NOT PRODUCED THE STOCK REGIS TER REQUIRED TO SHOW THAT FIXOLITE WIRES & CABLES (P) LTD. I.T.A. NO. 2574/MUM/2011 PAGE 6 O F 14 STOCK AS OPENING BALANCE OF JULY PLUS THE PRODUCTIO N MINUS SALES TALLY WITH OPENING BALANCE IN THE MONTH OF AUGUST. BESIDES, AL L AUDITED ACCOUNTS ARE SUBJECTED TO VERIFICATION BY INCOME TAX AUTHORITIES AND IT WAS WELL WITHIN THE JURISDICTION OF THE AC TO ASK THE APPELLANT TO CONF IRM CREDITS; CLAIMED. THE APPELLANT HAS FAILED TO DO SO TO THE SATISFACTION O F THE AO. UNDER THE CIRCUMSTANCES, I FIND THAT THE APPLICANTS CONTENTI ON THAT A CLERICAL ERROR HAS RESULTED IN THE DISCREPANCY NOTICED BY THE ASSESSIN G OFFICER CANNOT BE ACCEPTED. IT IS ALSO TO BE KEPT IN MIND THAT ANY S TATEMENT THAT IS SUBMITTED BEFORE THE AUTHORITY CANNOT BE DONE BY A CLERK OR A JUNIOR PERSON AND WOULD NEED THE APPROVAL OF THE SENIORS OF THE APPELLANT C OMPANY. THEREFORE BANK STATEMENT SUBMITTED CANNOT BE TAKEN TO BE A WRONG S TATEMENT REGARDING CLERICAL ERROR. HE, THEREFORE, CONCLUDED THAT THE ADDITION IS CORRE CTLY MADE. 11. WE HAVE HEARD THE ARGUMENTS OF BOTH SIDES AND P ERUSED THE MATERIAL PLACED ON RECORD. WE MUST OBSERVE THAT THE DR AT NO POINT OF TIME HAS CATEGORICALLY OBJECTED TO THE EVIDENCE PLA CED IN THE APB, WHICH INCIDENTALLY HAD BEEN REJECTED BY THE CIT(A). FROM THE EVIDENCE IN THE APB, WE FIND THAT THE ASSESSEE HAS PLACED BE FORE THE CIT(A) COPY OF ER 1 AND INVOICE OF SALE OF DG SET ALONG WI TH CERTAIN OTHER MACHINE ITEMS WORTH RS. 11,81,900/-. WE FIND FROM T HE ORDER OF THE REVENUE AUTHORITIES THAT THE AO HAD SO HEAVILY RELY UPON THE SUPPRESSION OF SALES THAT HE IGNORED THE FACTS WHIC H WERE BEFORE HIM AND ON WHICH BASIS HE PREPARED THE TABLE, THAT HAS BEEN REPRODUCED IN THE ASSESSMENT ORDER, AND THE AO HOLDS THAT DURING THE MONTH OF JULY, 2005, THERE WAS TOTAL SALE OF RS. 11,83,300/- ON PR ODUCTION OF 8 METERS OF FINISHED PRODUCTS . WE ARE UNABLE TO ACCEPT THIS ARGUMENT OF THE AO, WHEREIN HE OBSERVES, IF PRODUCTION OF 8 METER WAS TAKEN INTO ACCOUNT, THE SALES SHOULD HAVE BEEN MORE THAN RS. 11,65,875/ - . ACCORDING TO US, THE AO HAD COMPLETELY MISSED THE ENTIRE PICT URE, I.E. HOW CAN PRODUCTION OF 8 METERS OF FINISHED PRODUCTS WOULD R ESULT IN SALES GOING FIXOLITE WIRES & CABLES (P) LTD. I.T.A. NO. 2574/MUM/2011 PAGE 7 O F 14 UP BY RS. 11,65,875/-. MOREOVER THE ASSESSEE HAD PL ACED ALL THE RELEVANT MATERIAL ON RECORD, AND THE CIT(A) CALLED FOR A REMAND REPORT, WHICH ACCORDING TO US IS VERBATIM, TO THE PORTION O F ASSESSMENT ORDER. WE ARE ALSO IN TOTAL DISAGREEMENT WITH THE OBSERVAT IONS OF THE AO IN THE REMAND REPORT, WHERE HE SAYS THAT THE WEIGHTAGE OF EXCISE RECORD MORE THAN THE BANK STATEMENT IS HERESAY . WE ARE UNABLE TO ACCEPT THIS STATEMENT MADE BY THE AO, BECAUSE, A STATEMENT MADE BEFORE A STATUARY GOVERNMENT AUTHORITY CANNOT BE JUST A HERESAY , THUS WE ARE UNABLE TO ACCEPT THE VIEWS TAKEN BY THE REVENUE AUT HORITIES. HAVING HELD SO, WE ARE ALSO AWARE THAT CERTAIN DETAILS FIL ED BY THE ASSESSEE BEFORE THE CIT(A) HAD NEITHER BEEN FILED AT THE ASS ESSMENT STAGE, NOR BEFORE THE CIT(A) (BEFORE THE REMAND REPORT) NOR BE FORE THE AO AT THE REMAND STAGE. TO GIVE FAIR AND EQUITABLE CHANCE TO BOTH SIDES, WE THINK IT PROPER THAT THE ISSUE MUST BE EXAMINED BY THE AO FROM THE PERSPECTIVE OF ALL THE EVIDENCE, INCLUDING NEW AND FRESH EVIDENCE PLACED BEFORE THE CIT(A). 13. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A ) AND DIRECT THE AO TO EXAMINE THE ISSUE INVOLVED IN GROUNDS NO. 1, 2 AND 3 AFRESH, AFTER GIVING FAIR AND ADEQUATE OPPORTUNITY TO THE A SSESSEE. GROUNDS NO. 1, 2 AND 3 ARE, THEREFORE, ALLOWED FOR STATISTICAL PURPOSES. 14. GROUNDS NO 4 AND 5, PERTAIN TO ADDITION OF RS. 13,00,000/- ON ACCOUNT OF DISALLOWANCE OF AMOUNT WRITTEN OFF IN RE SPECT OF DISCARDED STOCKS. FIXOLITE WIRES & CABLES (P) LTD. I.T.A. NO. 2574/MUM/2011 PAGE 8 O F 14 15. THE ASSESSEE IN ITS ACCOUNT HAD SHOWN UNSERVICE ABLE AND UNUSABLE FINISHED STOCK AT ITS NASHIK UNIT AT RS. 1 3,00,000/-. THE AO, IN THE ASSESSMENT PROCEEDINGS ENQUIRED FROM THE ASS ESSEE VIDE LETTER DATED 10-12-2008 TO SUBSTANTIATE ON : (1) DESCRIPTION, DT. OF PRODUCTION, QUANTITY AND VALUE WISE DETAILS OF MATERIAL DISCARD ED, (2) BASIS OF REJECTION OF MATERIAL AND MODE OF DISPOSAL AND (3) THE MATERIAL DISCARDED (INSULATED WIRE AND CABLES) HAS SCRAP VALUE. IF YOUR CLAIM IS ACCEP TED FOR SAKE OF ARGUMENT, THEN WHY SCRAP VALUE IS NOT OFFERED FOR TAXATION . 16. IN REPLY, THE ASSESSEE VIDE ITS LETTER DATED 19 -12-2008, SUBMITTED AS UNDER: . THERE WERE MANY OLD ITEMS DAMAGED BY RAIN AS WE LL AS ITEMS WHICH WERE VERY OLD AND DAMAGED CONDITIONS. THESE BEING ABSOLUTE STOCKS THE SAME COULD NOT HAVE BEEN SOLD EVEN AS SC RAP THE DETAILS ARE ATTACHED HEREWITH. IT MAY PLEASE BE NOTED THAT THIS OBSOLETE STOCK FOU ND ONLY AFTER THE ENTIRE PRODUCTION ACTIVITY WAS STOPPED IN JULY 2005 AND CLEANING UP OF FACTORY WAS TAKEN UP THEREAFTER, HENCE WRITTEN OFF . THIS REPLY, OF THE ASSESSEE WAS CONSIDERED BY THE A O, BUT HE DID NOT AGREE WITH THE CONTENTIONS, ACCORDING TO HIM, THE A SSESSEE WAS MANUFACTURING PVC INSULATED WIRE CABLES, WHICH CANN OT GET DAMAGED BY RAIN, EASILY. THE AO, THEREFORE, REJECTED THE SU BMISSIONS MADE AND ADDED BACK THE STOCK WRITTEN OFF OR DISCARDED. 17. AGGRIEVED, THE ASSESSEE APPROACHED THE CIT(A), BEFORE WHOM, THE ASSESSEE REITERATED ITS SUBMISSIONS MADE BEFORE THE AO AND IN ADDITION TO THAT PLACED AND COPY OF REPORT BY THE C HARTERED ENGINEER (CE) DATED 30-06-2006. THE CIT(A) OBSERVED THAT THE ASSESSEE HAD NOT PRODUCED THE STOCK REGISTER NOR HAD IT SPECIFIE D THE MODE OF FIXOLITE WIRES & CABLES (P) LTD. I.T.A. NO. 2574/MUM/2011 PAGE 9 O F 14 DISPOSAL OF THE DISCARDED STOCK AND WHY THE REPORT OF CE WAS NOT PLACED BEFORE THE AO. THE CIT(A), THUS HELD THAT TH E ONUS TO ESTABLISH THE CLAIM LIES WITH THE ASSESSEE. THE CIT(A) OBSERV ED THAT THE MAIN DOCUMENT BEING THE STOCK REGISTER, SINCE THAT WAS N OT PRODUCED, THE CLAIM CANNOT BE HELD TO BE SUBSTANTIATED. HE, THERE FORE, SUSTAINED THE ADDITION MADE BY THE AO. 18. THE ASSESSEE, NOT SATISFIED WITH THE OBSERVATIO NS OF THE CIT(A) IS NOW BEFORE THE ITAT. 19. BEFORE US, THE A.R. OF THE ASSESSEE COMPANY SUB MITTED THE BASIC FACTS AND SUBMITTED THAT THE NASHIK UNIT WAS SHUT AND WHATEVER ACTIVITY WAS THERE, IT WAS AT DAMAN UNIT, WHICH ALS O HAD TO BE CLOSED IN THE SUBSEQUENT YEAR. AS THE UNITS WERE IN THE PROCE SS OF BEING SHUT DOWN, THE MATERIALS LYING WHICH WERE EITHER DAMAGED OR WERE OBSOLETE OR UNUSABLE HAD TO BE DISCARDED. THE A.R. REFERRED TO THE APB, THE REPORT OF CE WHO EVALUATES THE MATERIALS ON SITE AN D OPINES IN ITS ANNEXURE TO THE CERTIFICATES THAT IT IS OUR CONSIDERED OPINION THAT THE MATERIALS INSPECTED (REFER ANNEXURE ATTACHED) ON 30 TH JUNE, 2006 AT AMBAD UNIT OF M/S FIXOLITE WIRES & CABLES PVT. LTD. ARE I N NON USABLE CONDITION AND MAY BE CONSIDERED TO BE OBSOLETE AND OF NO VALUE TO THE CO. THE A.R. SUBMITTED THAT ALL THE RELEVANT DETAILS AS PLACED B EFORE THE CIT(A) CANNOT BE IGNORED FOR THE PURPOSES OF COMING TO THE CONCLUSION THAT THE DEFECTIVE MATERIALS HAD TO BE AND HAD BEEN DISC ARDED. 20. THE DR RELIED UPON THE ORDERS OF THE REVENUE AU THORITIES. FIXOLITE WIRES & CABLES (P) LTD. I.T.A. NO. 2574/MUM/2011 PAGE 10 OF 14 21. WE HAVE HEARD THE CONTENTIONS OF THE PARTIES AN D HAVE PERUSED THE MATERIAL PLACED IN THE APB. THE FACT THAT THE U NITS WERE BEING WOUND UP IS NOT IN DISPUTE BY THE REVENUE AUTHORITI ES. BESIDES THIS, THE REVENUE AUTHORITIES HAVE NOT CHALLENGED THE VERACIT Y OF THE REPORT OF THE CE. THE ONLY OBJECTION THAT THE REVENUE AUTHORI TIES HAVE RAISED IS THAT THE ASSESSEE HAS NOT SUBSTANTIATED THE METHOD OF DISPOSAL OF THE DISCARDED MATERIALS OR IF THEY ARE NOT DISPOSED OFF , WHERE HAVE THEY BEEN KEPT. KEEPING THIS IN MIND, THE BENCH ASKED TH E D.R. AS TO WHAT EFFORTS WERE MADE BY THE REVENUE AUTHORITIES TO ASC ERTAIN THE FACTUM OF DISCARDING OF THE MATERIALS, AS THE ASSESSEE HAS NEVER USED T HE TERM DISPOSAL . THE ASSESSEE HAD CLAIMED THAT THE MATERIALS HAD B EEN DISCARDED KEEPING IN VIEW THE ABOVE FACTS. CIRCUMST ANTIALLY, WE ARE INCLINED TO AGREE WITH THE SUBMISSIONS MADE BY THE A.R. AND ARE INCLINED TO ALLOW THE WRITE OFF OF RS. 13,00,000/- ON ACCOUNT OF DISCARDED MATERIAL BY GIVING BENEFIT TO THE ASSESSE E THAT THE GOODS HAVE BEEN DISCARDED FIVE YEARS BACK, THE SAME CAN NEVER BE TRACED OR EVEN FOUND AT THE PRESENT MOMENT. EVEN IN THE BO OKS THE ASSESSEE HAS TREATED THE SAME AS DISCARDED AND THEREFORE WRI TTEN THEM OFF. 22. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A ) ON THIS ISSUE AND DIRECT THE AO TO ALLOW THE CLAIM OF WRITE OFF A S DISCARDED MATERIALS AT RS. 13,00,000/-. GROUNDS NO. 4 & 5 ARE, THUS, ALLOWED. FIXOLITE WIRES & CABLES (P) LTD. I.T.A. NO. 2574/MUM/2011 PAGE 11 OF 14 23. GROUND NO. 6 IS AGAINST THE DISALLOWANCE OF DEP RECIATION AT RS. 1,79,376/-. 24. THE FACTS EMANATING FROM THE ASSESSMENT ORDER A RE THAT THE AO HAS REJECTED THE CLAIM OF DEPRECIATION CLAIMED AT N ASHIK UNIT. THE ASSESSEE HAD CLAIMED DEPRECIATION AT RS. 1,77,028/- ON FACTORY BUILDING AND RS. 2348/- ON FURNITURE AND FIXTURE. THE AO OBS ERVED THAT SINCE MANUFACTURING AND BUSINESS ACTIVITIES ARE NOT CARRI ED OUT FROM THIS FACTORY, THE CLAIM FOR DEPRECIATION IS REJECTED. 25. BEING AGGRIEVED, THE ASSESSEE APPROACHED THE CI T(A) ON THIS ISSUE, WHERE THE ASSESSEE FURNISHED DETAILS ON DEPR ECIATION CLAIMED BY THE ASSESSEE (FOR BOTH THE UNITS). THE CIT(A) RESTO RED THE ISSUE TO THE FILE OF THE AO TO VERIFY THE EXACT DEPRECIATION CLAIMED ON FACTORY BUILDING, FURNITURE AND FIXTURE ETC. AT NASHIK FROM THE RECORDS AVAILABLE WITH THEM AND DISALLOW THE SAME. 26. BEFORE US, THE A.R. SUBMITTED THAT DEPRECIATION IS COMPUTED ON THE BLOCK OF ASSETS OWNED AND USED BY THE ASSESSEE AND NOT INDIVIDUAL ASSETS AS SUCH. HE, THEREFORE, PRAYED TH AT THE DEPRECIATION, AS CLAIMED BY THE ASSESSEE HAS TO BE ALLOWED. 27. THE DR RELIED UPON THE OBSERVATIONS OF THE REVE NUE AUTHORITIES. 28. WE HAVE HEARD THE ARGUMENTS OF EITHER SIDES AND PERUSED THE MATERIAL ON RECORD AND THE ORDERS OF THE REVENUE AU THORITIES. WE FIND THAT THE CIT(A) HAS RESTORED THE ISSUE TO THE FILE OF THE AO TO COMPUTE THE DEPRECIATION CLAIMED AT NASHIK UNIT AND TO DISA LLOW THE SAME. SINCE FIXOLITE WIRES & CABLES (P) LTD. I.T.A. NO. 2574/MUM/2011 PAGE 12 OF 14 THE MATTER IS ALREADY IN THE JURISDICTION OF THE AO , WE DO NOT INTEND TO DISTURB THIS PART OF THE FINDING OF THE CIT(A), BUT WE CANNOT ENDORSE THE SECOND PART OF THE FINDING OF CIT(A), WHEREIN H E DIRECTS THE AO TO DISALLOW THE DEPRECIATION CLAIMED ON BUILDING AND F URNITURE AND FIXTURE AT NASHIK, BECAUSE FIRSTLY EVEN IF THE UNIT IS CLOS ED FOR PRODUCTION ACTIVITY, SOME ACTIVITY OR EVEN THE USAGE OF THE FA CTORY AND FURNITURE AND FIXTURE, EVEN BY THE CHOWKIDAR, WHO IS EMPLOYED TO KEEP A WATCH AND UPKEEP OF THE PREMISES WOULD BE THERE AND SECON DLY, THE ACCOUNTS ARE MAINTAINED BY THE ASSESSEE , WE, THEREFORE, ARE NOT IMPRESSED WITH THE FINDINGS OF THE CIT(A). HAVING ACCEPTED TH E JURISDICTION NOW LIES WITH THE AO, WE INTEND TO MODIFY THE DIRECTION OF THE CIT(A) BY GIVING DIRECTION TO THE AO TO ALLOW THE DEPRECIATION AS PER LAW TO THE ASSESSEE . GROUND NO. 6 IS, THUS, ALLOWED FOR STATISTICAL PURP OSES. 29. GROUND NO. 7 IS AGAINST THE NON CONSIDERATION O F ADDITIONAL GROUND OF APPEAL TAKEN BEFORE THE CIT(A) ON ACCOUNT OF CLAIM FOR ALLOWANCE OF SET OFF OF BROUGHT FORWARD LOSSES OF R S. 20,21,906/- AND BROUGHT FORWARD DEPRECIATION AT RS. 20,82,106/-, AG GREGATING TO RS. 40,12,263/-. 30. THE A.R. POINTED OUT THAT VIDE LETTER DATED 14- 12-2010, THE ASSESSEE HAD FILED ADDITIONAL GROUND OF APPEAL. THI S GROUND, THOUGH FILED WELL IN ADVANCE HAS NOT BEEN ADJUDICATED. HE, THEREFORE, PRAYED THAT THIS ISSUE HAS TO GO BACK TO THE FILE OF THE R EVENUE AUTHORITIES. FIXOLITE WIRES & CABLES (P) LTD. I.T.A. NO. 2574/MUM/2011 PAGE 13 OF 14 31. THE DR HAS NOT OBJECTED TO THE PRAYER. 32. HAVING GONE THROUGH THE LETTER DATED 14-12-2010 AND THE ADDITIONAL GROUND, WE FEEL, THAT THE ISSUE SHOULD H AVE BEEN ALLOWED BY THE AO AT THE OUTSET, BUT SINCE HE HAS NOT DONE SO, WE DIRECT THE AO, TO ALLOW THE SET OFF OF BROUGHT FORWARD LOSSES AS P ER LAW, AND RE COMPUTE THE INCOME/LOSS OF THE ASSESSEE, ACCORDINGL Y, FOR THE YEAR UNDER CONSIDERATION. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 33. ON THE INDEPENDENT FINDINGS IN ALL THE GROUNDS, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 06/06/2012. SD/- SD/- (B.RAMAKOTAIAH) ( VIVEK VARMA ) ACCOUNTNAT MEMBER JUDIC IAL MEMBER MUMBAI: 06/06/ 2012. P/-* FIXOLITE WIRES & CABLES (P) LTD. I.T.A. NO. 2574/MUM/2011 PAGE 14 OF 14