MONOHILL (INIDA) P. LTD, MUMBAI V. DCIT 2(2), MUMBAI

ITA 2986/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62223 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 12-04-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 15-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M RAJAN
• Section: 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F,MUMBAI BEFORE SHRI B. RAMAKOTAIAH (AM) & SHRI VIJAY PAL R AO (JM) I.T.A. NOS. 2986 & 2987/MUM/2010 (A.Y. 2005-06) M/S. MONOHILL (INDIA) PVT. LTD., CUTCH CASTLE, 1 ST FLOOR, OPERA HOUSE, MUMBAI-400 004. PAN: AABCM0266C. VS. INCOME-TAX OFFICER, WARD 2(2)(3), AAYKAR BHAVAN, M.K. ROAD, MUMBAI-400 020. APPELLANT RESPONDENT DEPARTMENT BY SHRI BIREN GABHAWALA. ASSESSEE BY SHRI M. RAJAN. DATE OF HEARING 12-04-2012 DATE OF PRONOUNCEMENT 20-04-2012 O R D E R PER B. RAMAKOTAIAH, AM : THESE ARE APPEALS BY ASSESSEE UNDER SECTIONS 143( 3) AND 271(1)(C) OF THE ACT FOR THE ASSESSMENT YEAR 2005- 06 AGAINST THE ITA NOS.2986 & 2987/MUM/2010 MONOHILL (I) P.LTD. 2 ORDERS OF COMMISSIONER OF INCOME-TAX (APPEALS)-5, M UMBAI, DATED 28-01-2010. 2. THE REVENUE HAS RAISED A PRELIMINARY OBJECTION T HAT THE APPEALS WERE TIME-BARRED AS THE ASSESSEE HAS MENTIO NED THE SERVICE OF THE ORDERS ON 08-04-2010 AND FILED APPEA LS ON 15-04- 2010. IT WAS THE REVENUES CONTENTION THAT THE ORDE RS WERE DISPATCHED BY THE CIT(A) ON 12-02-2010. THEREFORE, THE APPEALS WERE TIME-BARRED. THE ASSESSEE FILED A PETITION AN D RELEVANT DATA TO INDICATE THAT EVEN THE CIT(A)S ORDERS WERE DISP ATCHED ON 12- 02-2010, THE SAME WERE NOT SERVED ON THE ASSESSEE AND WHEN THE RPAD WAS RETURNED TO THE OFFICE OF THE CIT(A) WITH A REMARK NOT KNOWN, THE ASSESSEE COLLECTED THE ORDERS FROM THE OFFICE OF THE CIT(A) ON 08-04-2010 AND PREPARED THE APPEALS IMMED IATELY ON 15-04-2010. THERE IS NO DELAY INVOLVED IN THESE APP EALS. WE HAVE EXAMINED THE RECORD AND FOUND THAT EVEN THOUGH THE CIT(A) SENT THE ORDERS BY REGD. POST, BY THE ACKNOWLEDGEMENT OF THE POSTAL DEPARTMENT DATED 16-02-2010, THE ORDERS WERE NOT SE RVED AND RETURNED TO THE OFFICE OF THE CIT(A) AS THE ADDRESS WAS NOT KNOWN. THEREFORE, TILL 16-02-2010, THE ORDERS WERE NOT SER VED ON THE ASSESSEE. ACCORDING TO THE ASSESSEE, THE ORDERS WER E COLLECTED ON 08-04-2010 AND THE APPEALS WERE PREFERRED ON 15-04- 2010. ITA NOS.2986 & 2987/MUM/2010 MONOHILL (I) P.LTD. 3 LOOKING AT THE ABOVE FACTS, WE ARE OF THE OPINION T HAT THE APPEALS WERE IN TIME AND, THEREFORE, THE REVENUES OBJECTIO N IS REJECTED. ITA NO.2987/MUM/2010: 3. IN THIS APPEAL, THE ASSESSEE IS CONTESTING TWO I SSUES. ISSUE NO. 1, ON WHICH GROUNDS WERE RAISED, IS WITH REFERE NCE TO ADDITION OF RS.1,38,10,972/- MADE BY THE AO REJECTING THE CL AIM OF WRITE OFF OF OPENING STOCK OF TYRES AND TUBES. THE FACTS LEADING TO THE ABOVE ISSUE ARE THAT THE ASSESSEE CLAIMED LOSS OF R S.80,24,266/-. THE AO NOTICED THAT THE ASSESSEE HAD WRITTEN OFF O PENING STOCK OF RS.1,38,10,972/-. IT WAS THE AOS CONTENTION THAT T HE ASSESSEE WAS ASKED TO FILE A COPY OF AGREEMENT MADE WITH M/S . MONOHILL (UK) FROM WHOM THE GOODS WERE PURCHASED AND TO PROD UCE THE AGREEMENT BETWEEN M/S. HANKOOK TYRES & TUBES HAD WI TH M/S. MONOHILL (UK) AND SUBSEQUENT COMPENSATION, IF ANY, RECEIVED OR RECEIVABLE FROM EITHER OF THE COMPANIES. THE ASSESS EES SUBMISSION WAS THAT THEY HAVE IMPORTED GOODS OF TYR ES AND TUBES FROM UK THROUGH M/S. MONOHILL (UK) WHO PURCHASED TH EM FROM THE MANUFACTURERS M/S. HANKOOK TYRES & TUBES (UK) I N EARLIER YEARS. THESE TYRES & TUBES WERE DISTRIBUTED TO VARI OUS ITA NOS.2986 & 2987/MUM/2010 MONOHILL (I) P.LTD. 4 CONSIGNMENT AGENTS WHICH WERE NOT SOLD FOR A NUMBER OF YEARS. EVEN THE PRODUCTS WHICH WERE SOLD IN EARLIER YEARS AFTER THE IMPORT, WERE GIVING PROBLEMS AND THERE WERE NUMBER OF COMPLAINTS ABOUT THE PRODUCTS. IT WAS THE CONTENT ION THAT THE ASSESSEE WAS SHOWING THE ENTIRE STOCK IN THE BOOKS OF ACCOUNT AT COST VALUE FOR THE YEAR ENDING MARCH 2003, MARCH 20 04 AND HAS WRITTEN OFF IN THE BOOKS OF ACCOUNT AS ON MARCH 200 5. IN SUPPORT OF ITS CONTENTION, THE ASSESSEE FILED PHOTOCOPY OF LETTER ADDRESSED BY THE ASSESSEE TO M/S. MONOHILL LTD. (UK) AND THEI R REPLY AND PLACED ON RECORD A COPY OF THE ASSESSMENT ORDER OF ADDL. COMMISSIONER OF COMMERCIAL TAXES, BANGALORE, DATED 13-04-2005 FOR FINANCIAL YEAR 01-04-2001 TO 31-03-2002 AND ANO THER ORDER FOR THE PERIOD 01-04-2002 TO 31-03-2003. IT WAS THE CONTENTION THAT AFTER THE IMPORT OF THE GOODS THROUGH M/S. MON OHILL (UK), THE ASSESSEE COULD NOT SELL THE PRODUCTS DUE TO COMPLAI NTS FROM VARIOUS CUSTOMERS WHO PURCHASED THE GOODS EARLIER A ND THE STOCK WAS AVAILABLE WITH VARIOUS CONSIGNEES UNSOLD. IN VI EW OF THIS, WITH THE PERMISSION OF THE COMMERCIAL TAX AUTHORITIES, T HE ENTIRE STOCK WAS DESTROYED AND SO IN THE BOOKS OF ACCOUNT THE ST OCK WAS WRITTEN OFF. IT WAS FURTHER CONTENDED THAT AN AMOUN T OF RS.59,41,605/- PAYABLE TO M/S.MONOHILL (UK) CONSEQU ENT TO THE ITA NOS.2986 & 2987/MUM/2010 MONOHILL (I) P.LTD. 5 IMPORTS WAS NOT DISCHARGED AND THIS AMOUNT OF LIABI LITY WAS WRITTEN OFF TO THE PROFIT & LOSS ACCOUNT AS A CREDI T. THE ASSESSEE CONTENDED THAT SINCE THE STOCK WAS NOT UTILIZABLE AND ITS LIFE SPAN WAS OVER AND AS THERE WAS NO RE-SALE VALUE, ENTIRE STOCK WAS DESTROYED AND THERE IS NO SCRAP VALUE ALSO. THE AO, HOWEVER, DID NOT ACCEPT THE CLAIM AND MADE THE DISALLOWANCE ON T HE REASON THAT THE ASSESSEE HAS NOT FURNISHED THE DETAILS CA LLED FOR VIDE THE ORDER SHEET ENTRY DATED 15-10-2007. 4. BEFORE THE CIT(A), IT WAS SUBMITTED THAT THERE I S NO AGREEMENT BETWEEN M/S.HANKOOK TYRES & TUBES AND M/S . MONOHILL (UK) AT THE TIME OF PURCHASE WAY BACK IN 2 001 AND FURTHER THE ASSESSEE HAS NOT RECEIVED ANY COMPENSAT ION OR SCRAP VALUE FROM ANY OTHER PERSON OR ORGANIZATION AND THE ENTIRE STOCK WAS DESTROYED WITH THE CONSENT OF COMMERCIAL TAX AU THORITIES WHO STATED THE FACTS IN THEIR ORDERS. THE CIT(A), H OWEVER, AFFIRMED THE ORDER OF THE AO ON THE SAME REASON THAT THE AS SESSEE DID NOT COMPLY WITH THE DIRECTIONS OF THE AO FOR FURNISHIN G NECESSARY DETAILS. IN THE COURSE OF THE APPELLATE PROCEEDINGS BEFORE THE CIT(A), THE ASSESSEE MADE AN ALTERNATE CLAIM THAT S INCE THE LIABILITY OF PURCHASE TO THE EXTENT OF RS.59,41,605 /- WAS WRITTEN OFF AND ADDED IN P& L ACCOUNT OF THE COMPANY, THE W RITE OFF TO ITA NOS.2986 & 2987/MUM/2010 MONOHILL (I) P.LTD. 6 THAT EXTENT AT LEAST SHOULD HAVE BEEN ALLOWED. THIS ALTERNATE CONTENTION WAS ALSO REJECTED BY THE CIT(A). HENCE T HE ASSESSEE IS AGGRIEVED. 5. IT WAS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO THE PAPER BOOK, RECORD AND FACTS PLACE D BEFORE THE AUTHORITIES THAT THE ASSESSEE HAD IMPORTED TYRES & TUBES FROM UK AND DID BUSINESS IN THEIR TYRES & TUBLES DIVISION I N BANGALORE, WHEREAS THE MUMBAI UNIT DEALS IN DISTRIBUTION OF FI LMS. IN THE COURSE OF THE BUSINESS IN KARNATAKA, THE ASSESSEE I MPORTED GOODS AND SOLD. SOME STOCKS TO THE EXTENT OF RS.1,38,10, 972/- WERE LYING WITH VARIOUS CONSIGNMENT AGENTS AND IN BANGAL ORE UNSOLD. SINCE THE LIFE OF SUCH PRODUCTS IS ONLY 3 YEARS AND EVEN WHEN THESE GOODS WERE SOLD THERE WERE COMPLAINTS FROM CU STOMERS ON THE QUALITY OF THE PRODUCTS, THE ASSESSEE COULD NOT SELL ANY OF THE STOCKS LYING WITH THEM. THEREFORE, WITH THE CONSENT OF THE COMMERCIAL TAX AUTHORITIES WHO INSPECTED, HAD DESTR OYED THE GOODS AND ACCORDINGLY WRITTEN OFF THE SAME. IN SUPP ORT OF ITS CONTENTION, THE ASSESSEE FILED ASSESSMENT ORDERS FR OM THE COMMERCIAL TAX AUTHORITIES ACCEPTING THE ASSESSEES CONTENTION AND PERMITTING DESTROYAL OF THE GOODS. IT WAS HIS SUBMISSION THAT ITA NOS.2986 & 2987/MUM/2010 MONOHILL (I) P.LTD. 7 THE ASSESSEE GENUINELY SUFFERED LOSSES AND PRESENTL Y IN THE PROCESS OF WINDING UP AND BOTH THE LOWER AUTHORITIE S DID NOT ACCEPT THE ASSESSEES CONTENTION. HE FURTHER REFERR ED TO THE FACT THAT BY THE LETTER FROM M/S. MONOHILL (UK), THE ASS ESSEE WROTE BACK AN AMOUNT OF RS.59,41,605/- IN THE PROFIT & LO SS ACCOUNT. IT WAS HIS CONTENTION THAT WHILE ACCEPTING THE WRITE B ACK, THE AO AND THE CIT(A) DID NOT ALLOW THE WRITTEN OFF STOCK AND FURTHER CONTENDED THAT THE ALTERNATE PLEA TO RESTRICT THE L OSS AT LEAST TO THAT AMOUNT ALSO WAS NOT ACCEPTED. 6. THE LD. DR, HOWEVER, REITERATED THE ARGUMENTS BE FORE THE AO AND THE CIT(A) TO SUBMIT THAT THE ASSESSEE HAS NOT FURNISHED THE DETAILS AND, THEREFORE, THE CLAIM CANNOT BE ACCEPTE D. 7. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE RE CORD. AS SEEN FROM THE ORDERS OF THE COMMERCIAL TAX AUTHORIT IES, THERE IS NO DISPUTE TO THE FACT THAT THE GOODS IMPORTED AND DISTRIBUTED TO VARIOUS CONSIGNEES WERE UNSOLD FOR A LONGER PERIOD AND WERE ULTIMATELY DESTROYED. THE ORDER OF THE ADDL. DY. CO MMISSIONER OF COMMERCIAL TAXES DATED 26-05-2005 HAS THE FOLLOWING FACTS AS STATED IN THE SAID ORDER : ITA NOS.2986 & 2987/MUM/2010 MONOHILL (I) P.LTD. 8 IT WAS VERIFIED AND FOUND THAT THE PURCHASES DECLARED BY THE COMPANY ARE SUPPORTED BY PURCHASE BILLS AND THE TEST CHECK OF PURCHASE BILLS HAS REVEALED THAT THE SAME ARE ACCOUNTED IN THE BOOKS. THE COMPANY HAS SOLD TYRES & TUBES ONLY LOCALLY. THE DETAILS OF SALES EFFECTED BY THE COMPANY DURING THE ASSESSMENT PERIOD IN QUESTION ARE AS DETAILED ABOVE. SALES DECLARED ARE SUPPORTED BY SALE BILLS AND TEST CHECK HAS REVEALED THAT THE SAME ARE ACCOUNTED IN THE BOOKS. IT IS NOTICED THAT THE COMPANY HAS COLLECTED A SUM OF RS.37619.00 TOWARDS KST & RST ON ITS LOCAL TAXABLE SALES BY SEPARATELY CHARGING IN THE SALE BILLS. ONE OF THE DIRECTORS OF THE COMPANY HAS REPRESENTED TO THIS OFFICE VIDE THEIR LETTER DTD. 2 0- 03-2005 THAT DUE TO HEAVY LOSS INCURRED BY THE COMPANY IN ITS BUSINESS, THEY HAVE STOPPED THE BUSINESS ACTIVITIES FROM 6-3-2003 AND HAVE REQUESTED THIS OFFICE TO CANCEL THE RCS GRANTED TO THEM FROM THE DEPARTMENT UNDER KST, CST AND IT ACTS WHICH HAVE ALREADY BEEN SUBMITTED TO THE DEPARTMENT. THE CIT OF THIS OFFICE WHO WAS DIRECTED TO CONDUCT ENQUIRY INTO THIS CLOSURE PETITION HAS SUBMITTED TO THIS OFFICE VIDE HIS REPORT DTD; 28-5-2005 THAT THE ENQUIRY CONDUCTED BY HIM INTO THE CLOSURE PETITION OF THE COMPANY HAS CONFIRMED THE FACT THAT DUE TO HEAVY LOSS IN THE BUSINESS ACTIVITIES CARRIED OUT BY THE COMPANY, THE COMPANY HAS CLOSED DOWN ITS BUSINESS ACTIVITIES WITH EFFECT FROM 6-3-2003 AND HAS RECOMMENDED FOR THE CANCELLATION OF RC GRANTED TO THE COMPANY UNDER KST AND CST ACT. FURTHER, ON MAKING ENQUIRIES WITH REGARD TO STOCK OF GOODS HELD BY THE COMPANY AS ITS ITA NOS.2986 & 2987/MUM/2010 MONOHILL (I) P.LTD. 9 HEAD OFFICE IN BANGALORE AND WITH THE CONSIGNMENT AGENTS OUTSIDE THE STATE, THE PAH SUBMITTED THAT TYRES AND TUBES HELD IN THE CLOSING STOCK OF THE COMPANY HAD ALL BEEN DAMAGED DUE TO IMPROPER STORAGE CONDITIONS AND THEY WERE UNSUITABLE AND UNSAFE FOR USE BY THE INDIAN VEHICLES. FURTHER, THE COMPANY M/S. HANKOOK TYRES AND TUBES HAD ADVISED THE ASSESSEE COMPANY TO DESTROY THE TYRES AND TUBES SUPPLIED BY THEM AS THEY WERE NOT SAFE AND SUITABLE FOR USE BEYOND 3 YEARS AFTER MANUFACTURE. FURTHER, THE COMPANY HAD RECEIVED NUMEROUS COMPLAINTS FROM A NUMBER OF DEALERS THROUGH WHOM THESE TYRES WERE SENT FOR SALES. HENCE, THE COMPANY WAS FORCED TO DESTROY THE STOCK OF GOODS HELD IN ITS STOCK. ACCORDINGLY, THE COMPANY HAS DESTROYED THE STOCK HELD AT THE HEAD OFFICE AND HAS ALSO ADVISED THE COMMISSION AGENTS TO DESTROY THE STOCK HELD WITH THEM. THE P.A.H. HAS FURNISHED CORRESPONDANCES ENTERED INTO WITH THE COMMISSION AGENTS OUTSIDE THE STATE AND WITH THE COMPANY WHICH HAD SUPPLIED THE GOODS TO THEM IN SUPPORT OF HIS SUBMISSION. AFTER EXAMINING ALL THE RELEVANT ASPECTS OF THE CASE, I HEREBY ORDER CANCELLATION OF RCS GRANTED TO THE COMPANY UNDER KST/CST AND KTPTCE ACT WITH EFFECT FROM 06-03-2003 AS CAN BE SEEN FROM THE ABOVE, FOR THE YEAR ENDING 31-3-2003, THE ASSESSEE HAD SALES TO THE EXTENT OF RS.6,36,914/- A ND RS.5,99,295/- UNDER KST ACT AND RS.40,822/- UNDER C ST ACT. FURTHER, THE ORDER ALSO INDICATES THAT CLOSING STOC K WAS AVAILABLE AS CLAIMED IN THE BOOKS OF ACCOUNT AS ON 31-3-2003. THE SAME ITA NOS.2986 & 2987/MUM/2010 MONOHILL (I) P.LTD. 10 STOCK WAS SHOWN IN THE BALANCE-SHEET AS ON 31-3-200 3 AND 31-3- 2004 IN THE BOOKS OF ACCOUNT. IT IS ALSO ON RECORD THAT ON A REPRESENTATION MADE BY THE COMPANY THE COMMERCIAL T AX AUTHORITIES EXAMINED AND GAVE AN ORDER THAT THE COM PANY HAS DESTROYED THE STOCK HELD AT THE HEAD OFFICE AND ADV ISED THE CONSIGNMENT AGENTS TO DESTROY THE STOCK. THESE ASP ECTS WERE EXAMINED ON THE BASIS OF THE CORRESPONDENCE ENTERED INTO WITH CONSIGNMENT AGENTS OUTSIDE THE STATE AND AFTER EXA MINATION THE DY. COMMISSIONER OF COMMERCIAL TAXES CANCELLED THE REGISTRATION W.E.F. 06-03-2003 OF THE RCS GRANTED TO THE COMPANY . ONCE THESE ASPECTS WERE ACCEPTED BY THE STATUTORY AUTHORITIES I.E. THE COMMERCIAL TAX AUTHORITIES, WE ARE UNABLE TO UNDERS TAND WHY THE REVENUE COULD NOT ACCEPT THESE FACTS. WHEN THE ASSESSEE SUBMITS THAT THERE ARE NO AGREEMENTS WITH M/S.HANKO OK TYRES & TUBES AND M/S. MONOHILL (UK) AND FROM SUCH COMPANY NO COMPENSATION WAS RECEIVED, INSISTENCE ON NON-EXISTI NG DETAILS WITH EVIDENCE BY THE AO CANNOT BE ACCEPTED. WE ARE UNABLE TO UNDERSTAND HOW A NEGATIVE FACT CAN BE PROVED WHEN T HE ASSESSEE SUBMITS THAT THEY HAVE IMPORTED THE GOODS AND THE S AME COULD NOT SOLD IN SO MANY YEARS AND WITH THE CONSENT OF C OMMERCIAL TAX AUTHORITIES DESTROYED THE GOODS, THE FACT OF W HICH WAS ITA NOS.2986 & 2987/MUM/2010 MONOHILL (I) P.LTD. 11 ACCEPTED BY THE OTHER AUTHORITY. THE BOOKS OF ACCOU NT ALSO REPRESENTS THE SAME SITUATION. IN THESE CIRCUMSTANC ES, WE ARE OF THE OPINION THAT THE ASSESSEES CLAIM IS GENUINE AN D ALLOWABLE. 8. WE WERE ALSO SURPRISED THAT THE LD. CIT(A) DID N OT EVEN CONSIDER THE ALTERNATIVE PLEA RAISED BY THE ASSESSE E THAT THE VALUE TO THE EXTENT OF RS.59,41,605/-, THE LIABILITY PAYA BLE TO M/S.MONOHILL (UK), WAS NOT DISCHARGED AS THE SAID C OMPANY ACCEPTED ASSESSEES REQUEST AND THE ASSESSEE ACCOR DINGLY WROTE BACK THE LIABILITY IN THE BOOKS OF ACCOUNT WHILE CL AIMING THE LOSS OF STOCK. WHEN THESE ASPECTS WERE CLEARLY VISIBLE F ROM THE PROFIT & LOSS ACCOUNT AS WELL AS FROM THE SUBMISSIONS MADE B Y THE ASSESSEE, THE CIT(A)S OBSERVATION THAT THERE WERE NO DETAILS TO SHOW THAT THE ASSESSEE WAS UNDER INSTRUCTIONS BY TH E FOREIGN PARTY TO WRITE OFF THE LIABILITY IS DEVOID OF ANY M ERIT. IT IS ON RECORD THAT ASSESSEE WROTE BACK THE AMOUNT IN THE PROFIT & LOSS ACCOUNT AND OFFERED FOR TAXATION. WE ARE NOT IN A POSITION TO ACCEPT THE FALLACIOUS ARGUMENTS RAISED BY THE AO OR THE CIT(A) IN DENYING THE GENUINE CLAIM OF THE ASSESSEE. THEREFORE, WE UP HOLD THE GROUNDS RAISED BY THE ASSESSEE AND DIRECT THE AO TO ALLOW THE LOSS OF STOCK AS CLAIMED. THE GROUNDS ARE ACCORDINGLY AL LOWED. ITA NOS.2986 & 2987/MUM/2010 MONOHILL (I) P.LTD. 12 9. THE SECOND ISSUE RAISED BY THE ASSESSEE IS WITH REFERENCE TO DISALLOWANCE OF 50% OF THE EXPENDITURE ON THE REASO N THAT THE ASSESSEE DOES NOT HAVE ANY BUSINESS ACTIVITY. THE A SSESSEE HAS BUSINESS ACTIVITIES DURING YEAR, RECEIVED ROYALTY A MOUNT OF RS.1,87,500/- FROM FILMS DIVISION AND THERE ARE VAR IOUS CREDITS LIKE INTEREST ETC. IN THE PROFIT & LOSS ACCOUNT. TH E CLAIM OF EXPENDITURE IS ONLY RS.1,64,828/-. THE AO DISALLOWE D AN AMOUNT OF RS.82,000/- I.E. 50% OF THE EXPENDITURE. SINCE T HE ASSESSEE HAS BEEN IN THE BUSINESS DURING THE YEAR AND HAS OTHER INCOME AND CLAIMED A MEAGRE AMOUNT OF RS.1,64,828/- AS EXPENDI TURE, WHICH IS JUST ENOUGH EVEN FOR MAINTAINING ITS CORPORATE IDENTITY, WE ARE OF THE OPINION THAT DISALLOWING 50% OF THE AMOUNT I S NOT WARRANTED AND IS ARBITRARY. WE NOTICE THAT THE REAS ON FOR DISALLOWANCE BY THE AO WAS THAT THERE WAS NO BUSINE SS ACTIVITY, WHEREAS THE CIT(A) CONFIRMED ON THE REASON THAT DET AILS HAVE NOT BEEN FURNISHED BEFORE THE AO. THUS, IT INDICATE THA T THE REASON FOR DISALLOWANCE IS NOT JUSTIFIABLE. WE ARE OF THE OPIN ION THAT ASSESSEE DESERVES TO SUCCEED ON THIS GROUND RAISED. WE DIREC T THE AO TO ALLOW THE EXPENDITURE AS CLAIMED. THIS GROUND IS AL SO ALLOWED. 10. IN THE RESULT, THE APPEAL IS ALLOWED. ITA NOS.2986 & 2987/MUM/2010 MONOHILL (I) P.LTD. 13 ITA NO.2986/MUM/2010: 11. THIS IS AN APPEAL ON THE PENALTY LEVIED BY THE AO ON THE DISALLOWANCE OF THE CLAIM OF STOCK WRITTEN OFF IN T HE BOOKS OF ACCOUNT. EVEN BEFORE THE APPELLATE PROCEEDINGS WERE COMPLETED, THE AO LEVIED THE PENALTY AND THE CIT(A) CONFIRMED THE SAME ALONG WITH THE APPEAL ON QUANTUM. SINCE THE ASSESSE ES APPEAL ON QUANTUM WAS ALLOWED IN THE ABOVE APPEAL IN ITA NO.2987/MUM/2010, THERE IS NO REASON FOR LEVY OF PE NALTY AS THE BASIS FOR LEVY OF PENALTY WAS DISALLOWANCE OF THE C LAIM WHICH WAS ALLOWED THEREIN. IN VIEW OF THE ABOVE, THE PENALTY LEVIED U/S.271(1)(C), ON THE DISALLOWANCE OF THE CLAIM MAD E BY THE ASSESSEE, IS HEREBY CANCELLED. APPEAL ALLOWED. 12. IN THE RESULT, BOTH APPEALS ARE ALLOWED. ORDER PRONOUNCED ON THE 20TH DAY OF APRIL, 2012. SD/- SD/- (VIJAY PAL RAO) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 20TH APRIL ,2012. NG: COPY TO : ITA NOS.2986 & 2987/MUM/2010 MONOHILL (I) P.LTD. 14 1. ASSESSEE. 2.DEPARTMENT. 3 CIT(A)-5,MUMBAI. 4 CIT-2,MUMBAI. 5.DR,F BENCH,MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER, ASST. REGISTRAR, ITAT, MUM BAI. ITA NOS.2986 & 2987/MUM/2010 MONOHILL (I) P.LTD. 15 DETAILS DATE INITIALS DESIGNAT ION 1. DRAFT DICTATED ON 12-04-2012 SR.PS/ 2. DRAFT PLACED BEFORE AUTHOR 13-04-2012 SR.PS/ 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/ AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 17-4-2012 SR.PS/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO THE AR 10. DATE OF DISPATCH OF ORDER