DCIT, Najibabad V. M/s. Kisan Sehkari Chinni Mills Ltd., Najibabad

ITA 3168/DEL/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6631 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 18-10-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 20-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: UMESH CHAND DUBEY
• Assessee Lawyers: S K ARORA
• Keywords: Additional evidence; Revised return; Revenue expenditure
• Section: 143(3)

Judgement Text

1 ITA NOS. 3168, 3169, 31 70/DEL/2013 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D NEW DELHI BEFORE SHRI R. S. SYAL, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JU DICIAL MEMBER I.T.A .NO.3170 /DEL/20 13(A.Y 2006-07) I.T.A .NO.3168 /DEL/2013(A.Y 2 007-08) I.T.A .NO.3169 /DEL/2013(A.Y 2009-10) DCIT CIRCLE-NAJIBABAD NAJIBABAD (APPELLANT) VS KISAN SEHKARI CHINNI MILLS LTD. SNEH ROAD NAJIBABAD AAAAK1634P (RESPONDENT) APPELLANT BY SHRI UMESH CHAND DUBEY, SR. DR RESPONDENT BY SH. S. K. ARORA, CA ORDER PER SUCHITRA KAMBLE, JM THESE APPEALS ARE FILED BY THE REVENUE AGAINST THE ORDER DATED 1/3/2013 PASSED BY CIT(A), BAREILY, FOR ASSESSMENT YEAR 2006 -07, 2007-08 & 2009-10 RESPECTIVELY. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- (ITA NO. 3170/DEL/2013 (A.Y 2006-07) 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD.CIT(A) HAS ERRED IN FACT IN AND IN LAW IN DELETING THE ADDITION OF RS.1 ,15,67,425/- ON THE GROUND THAT SUCH ADDITIONS HAD NOT BEEN MADE IN THE EARLIER YEARS. DATE OF HEARING 18.10.2016 DATE OF PRONOUNCEMENT 21.11.2016 2 ITA NOS. 3168, 3169, 31 70/DEL/2013 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D.CIT(A) HAS ERRED IN FACT IN AND IN LAW IN DELETING THE ADDITION OF RS.1 ,15,67,425/- WITHOUT APPRECIATING THAT THE PRINCIPLE OF RES-JUDICATA DOE S NOT APPLY TO INCOME TAX PROCEEDINGS. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D.CIT(A) HAS ERRED IN FACT IN AND IN LAW IN DELETING THE ADDITION OF RS.1 ,15,67,425/- WITHOUT APPRECIATING THE FACT THAT, THE ASSESSEE HAD FAILED TO PRODUCES THE VOUCHERS IN RESPECT OF CERTAIN EXPENSES DEBITED TO STORE CONSUMED A/C UNDER THE HEAD REPAIR & MAINTENANCE SPECIFICALLY POINTED OUT BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. 4. ANY OTHER GROUNDS RAISED DURING THE PROCEEDINGS OF APPEAL . 3. THE GROUNDS OF APPEAL ARE AS UNDER:- (ITA NO. 3168/DEL/2013 (A.Y 2007-08) 1. IN THE FACTS AND CIRCUMSTANCES OF THE CAS E THE LD. CIT (A) HAS ERRED IN FACT IN AND IN LAW IN ALLOWING RELIEF TO THE ASS ESSEE BY DELETING THE ADDITION OF RS. 14, 47,180/- RIGHTLY MADE BY THE AS SESSING OFFICER BY ENHANCING THE VALUE OF CLOSING STOCK OF FREE SUGAR FOR SUGAR SEASON 2005- 06 BY APPLYING THE PREVAILING MARKET PRICE OF FREE SUGAR FOR THE PREVIOUS YEAR RELEVANT TO A.Y. 2007-08. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT (A) HAS ERRED IN FACT IN AND IN LAW IN ALLOWING RELIEF TO THE AS SESSEE BY DELETING THE ADDITION OF RS.14,47,180/- RIGHTLY MADE BY THE AO B Y ENHANCING THE VALUE OF CLOSING STOCK OF FREE SUGAR FOR SUGAR SEASON 200 5-06 WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS NOT FOL LOWED IT OWN DECLARED METHOD OF VALUATION OF OPENING AND CLOSING STOCK WH ICH IS AT COST PRICE OF RESPECTIVE YEAR OR PREVAILING MARKET PRICE WHICHEVE R IS LOWER. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT (A) HAS ERRED IN FACT IN AND IN LAW IN DELETING THE ADDITION OF R S. 11, 54,439/- AND RS. 15, 55,853 ON ACCOUNT OF DISALLOWANCE OUT OF REPAIR & MAINTENANCE OF FACTORY BUILDING AND TREATING THE SAME TO BE CAPITA L IN NATURE AND DELETING THE ADDITION OF RS. 7, 06,366/- ON ACCOUNT OF DISAL LOWANCE OUT OF REPAIR & MAINTENANCE OF PLANT & MACHINERY AND TREATING THE S AME TO BE CAPITAL IN NATURE WITHOUT APPRECIATING THAT THE PRINCIPLE OF R ES-JUDICATA DOES NOT APPLY TO INCOME TAX PROCEEDINGS. 3 ITA NOS. 3168, 3169, 31 70/DEL/2013 4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D. CIT (A) HAS ERRED IN FACT IN AND IN LAW IN DELETING THE ADDITION OF R S. 11, 54,439/- AN$ RS. 15, 55,853 ON ACCOUNT OF DISALLOWANCE OUT OF REPAIR & MAINTENANCE OF FACTORY BUILDING AND TREATING THE SAME TO BE CAPITA L IN NATURE AND DELETING THE ADDITION OF RS. 7, 06,366/- ON ACCOUNT OF DISAL LOWANCE OUT OF REPAIR & MAINTENANCE OF PLANT & MACHINERY AND TREATING THE S AME TO BE CAPITAL IN NATURE WITHOUT APPRECIATING THE FACT THAT THE EXPEN SES HAVE BEEN INCURRED TO CREATE ASSETS OF ENDURING NATURE AND NOT MERE RE PAIRS OF EXISTING ASSETS. 5. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D. CIT (A) HAS ERRED IN FACT IN AND IN LAW IN DELETING THE ADDITION OF R S. 11, 54,439/- AND RS. 15, 55,853 ON ACCOUNT OF DISALLOWANCE OUT OF REPAIR & MAINTENANCE OF FACTORY BUILDING AND TREATING THE SAME TO BE CAPITA L IN NATURE AND DELETING THE ADDITION OF RS. 7, 06,366/- ON ACCOUNT OF DISAL LOWANCE OUT OF REPAIR & MAINTENANCE OF PLANT & MACHINERY AND TREATING THE S AME TO BE CAPITAL IN NATURE BY ACCEPTING ADDITIONAL EVIDENCE IN FORM OF REPAIR CERTIFICATES ISSUED BY ASSESSEES OWN EMPLOYEES WITHOUT GIVING O PPORTUNITY OF REBUTTAL TO THE ASSESSING OFFICER IN VIOLATION OF RULE 46 A OF I.T. RULES, 1961. 6. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D. CIT (A) HAS ERRED IN FACT IN AND IN LAW IN DELETING THE ADDITION OF R S. 11, 54,439/- AND RS. 15, 55,853 ON ACCOUNT OF DISALLOWANCE OUT OF REPAIR & MAINTENANCE OF FACTORY BUILDING AND TREATING THE SAME TO BE CAPITA L IN NATURE AND DELETING THE ADDITION OF RS. 7, 06,366/- ON ACCOUNT OF DISAL LOWANCE OUT OF REPAIR & MAINTENANCE OF PLANT & MACHINERY AND TREATING THE S AME TO BE CAPITAL IN NATURE WITHOUT GIVING SPECIFIC COMMENTS FOR THE SAM E. 7. ANY OTHER GROUNDS RAISED DURING THE PROCEEDINGS OF APPEAL. 4. THE GROUNDS OF APPEAL ARE AS UNDER:- (ITA NO. 3169/DEL/2013 (A.Y 2009-10) 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D. CIT(A) HAS ERRED IN FACT IN AND IN LAW IN ALLOWING RELIEF TO THE ASS ESSEE BY DELETING THE ADDITIONS OF RS. 41,54,153/- RIGHTLY MADE BY THE AS SESSING OFFICER BY ENHANCING THE VALUE OF CLOSING STOCK OF FREE SUGAR FOR SUGAR SEASON 2006- 07 BY APPLYING THE COST PRICE FOR THE SEASON 2006-0 7 AS DECLARED BY THE ASSESSEE I.E. 1449.40 PER QUINTAL AS IT WAS LESSER THAN THE PREVAILING MARKET PRICE OF FREE SUGAR IN A.Y. 2009-10 AT RS. 1 885/-. 4 ITA NOS. 3168, 3169, 31 70/DEL/2013 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN FACT IN AND IN LAW IN ALLOWING RELIEF TO THE ASS ESSEE BY DELETING THE ADDITION OF RS. 41,53,153/- RIGHTLY MADE BY THE AO BY ENHANCING THE VALUE OF CLOSING STOCK OF FREE SUGAR FOR SUGAR SEAS ON 2006-07 WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS NOT FOL LOWED IT OWN DECLARED METHOD OF VALUATION OF OPENING AND CLOSING STOCK WH ICH IS AT COST PRICE OF RESPECTIVE YEAR OR PREVAILING MARKET PRICE WHICHEVE R IS LOWER. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D. CIT(A) HAS ERRED IN FACT IN AND IN LAW IN ALLOWING RELIEF TO THE ASS ESSEE BY DELETING THE ADDITION OF RS. 41,53,153/- RIGHTLY MADE BY THE AO BY ENHANCING THE VALUE OF CLOSING STOCK OF FREE SUGAR FOR SUGAR SEAS ON 2006-07 BY ACCEPTING, WITHOUT ANY BASIS, THE PLEA OF THE ASSESSEE THAT TH E STOCK OF FREE SUGAR OF SUGAR SEASON 2006-07 WAS IN FACT PRODUCED IN THE MO NTH OF APRIL AND MAY, 2007 HENCE, ITS VALUE WAS LIABLE TO BE COMPUTE D BY APPLYING THE RAT OF COST OF PRODUCTION OF F.Y. 2007-08. 4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D. CIT(A) HAS ERRED IN TREATING THE SUM OF RS. 1,13,018/- TRANSFERRED T O MOLASSES FUND AS REVENUE EXPENDITURE WHEREAS THE AO HAS RIGHTLY DISA LLOWED THE SAME AS TRANSFER OF A SUM TO ANY FUND CANNOT BE TREATED AS REVENUE EXPENDITURE. 5. ANY OTHER GROUNDS RAISED DURING THE PROCEEDINGS OF APPEAL. 5. ITA. NO. 3170/DEL/2013 (A.Y 2006-07) 5.1 THE ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y . 2006-07 DECLARING A TOTAL INCOME OF RS. 21, 15. 41,141 /- IN THE STATUS OF AOP (COOPERATIVE SOCIETY) ON 19/10/2006. THE SAME WAS PROCESSED U/S 143 (1) ON 28/03/2007 DETERMINING A REFUND OF RS. 7, 08,953/-. A REVISED RETURN OF INCOME WAS FURNISHED ON 13/03/2008 DECLARING A TOTA L INCOME OF RS. 21, 43,62,622/-. THE ASSESSEE DERIVES INCOME FROM THE B USINESS OF MANUFACTURING & TRADING OF SUGAR AND ITS BYE-PRODUC T. REGULAR ASSESSMENT WAS COMPLETED U/S 143 (3) OF THE I.T. ACT ON 11/12/ 2008 ON A TOTAL INCOME OF RS. 23, 04, 73,101/- IN THE STATUS OF AOP (COOPE RATIVE SOCIETY). 5.2 THE ASSESSEE FILED AN APPEAL BEFORE CIT (A), BA REILLY WHO VIDE ORDER DATED 01/03/2013 ALLOWED THE APPEAL OF THE ASSESSEE . THE CIT(A) HELD THAT 5 ITA NOS. 3168, 3169, 31 70/DEL/2013 THE ASSESSING OFFICER MADE THE ADDITIONS WITHOUT PR OPERLY UNDERSTANDING THE MERCANTILE SYSTEM OF ACCOUNTING AND FRAMED THE ASSESSMENT ORDER. THE CIT(A) FURTHER HELD THAT THE ASSESSING OFFICER HAS NOT TAKEN NOTE OF AUDITORS NOTE AT SERIAL NO. 9 WHICH RELATES TO CONTINGENT LI ABILITY AND NOT ACTUAL LIABILITY FOR WHICH GOODS/SERVICES HAS BEEN RECEIVE D BY THE MILL SOCIETY. AS REGARDS THE DISALLOWANCE OF REPAIR AND MAINTENANCE EXPENSES TO THE EXTENT OF CERTAIN SPECIFIC EXPENSES DEBITED TO STORE CONSU MED ACCOUNT, THE CIT(A) HELD THAT THE ASSESSING OFFICER MADE THE ADDITION B Y PICK AND CHOOSE OF SIX VOUCHERS FOR STORE CONSUMPTION OUT OF MAJOR JOB WIT HOUT CALLING FOR ANY SPECIFIC DETAILS, PIN POINTING ANY DEFECTS IN ANY O F THE VOUCHERS PASSED FOR STORE CONSUMPTION. THE CIT(A) FURTHER HELD THAT TH E ASSESSING OFFICER FAILED TO PROPERLY UNDERSTOOD THE METHOD OF PASSING THE ST ORES CONSUMPTION VOUCHERS WHEREAS THE SAME HAS BEEN DISCUSSED IN DET AIL WITH HIM DURING THE COURSE OF HEARING ON 01.12.2008. THE DETAILS OF PLANT & MACHINERY REPAIR PASSED THROUGH STORES CONSUMPTION MENTIONING NAME OF ITEM REPAIR/REPLACED, PLACE WHERE REPLACED/REPAIRED, NAM E OF PARTY FROM WHOM THE MACHINERY ITEM HAS BEEN PURCHASED ALONG WITH TH E COPY OF THE JOURNAL VOUCHERS, BILLS, CASH MEMO, MATERIAL RECEIPT & OTHE R DETAILS WAS ENCLOSED FOR VERIFICATION THAT ALL THE EXPENSES FOR WHICH VO UCHERS FOR REPAIR & MAINTENANCE OF PLANT THROUGH STORE CONSUMPTION (MAJ OR JOB) HAS BEEN PASSED WERE FULLY VERIFIABLE. THE CIT(A) OBSERVED T HAT THE ASSESSEE IS MAINTAINING A STORE DEPARTMENT THROUGH WHICH ALL TH E STORES REQUIRED IN THE MILL FROM TIME TO TIME WERE STORED AS THE FACTORY W AS LOCATED IN A REMOTE AREA. AS AND WHEN ANY ITEM IS REQUIRED FROM THE STO RE THE VARIOUS DEPARTMENTS FUNCTIONING IN THE FACTORY ISSUES A REQ UISITION SLIP TO THE STORE DEPARTMENT FOR ISSUE OF DESIRED MATERIAL. ON THE BA SIS OF STORE REQUISITION SLIP THE MATERIAL WAS ISSUED TO VARIOUS DEPARTMENTS FROM TIME TO TIME & CONSUMPTION VOUCHER FOR THE SAME IS PASSED FROM TIM E TO TIME GENERALLY AT MONTHLY INTERVALS. THIS IS THE FIRST YEAR WHEN THE ASSESSING OFFICER MADE THE DISALLOWANCE BY MENTIONING THAT THE VOUCHERS PA SSED THROUGH STORES CONSUMPTION WERE NOT VERIFIABLE WHEREAS THE SAME WA S ACCEPTED BY THE 6 ITA NOS. 3168, 3169, 31 70/DEL/2013 ASSESSING OFFICER IN RESPECT OF ALL THE EXPENSES DE BITED UNDER THE HEAD REPAIR AND MAINTENANCE OF PLANT & MACHINERY IN LAST ASSESSMENT YEAR 2005-06. 5.3 THE LD. DR SUBMITTED THAT THE CIT(A) ERRED IN G IVING FINDING WHICH IS CONTRARY TO THE RECORDS AVAILABLE BEFORE THE ASSESS ING OFFICER. THE LD. DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. 5.4 THE LD. AR SUBMITTED THAT THE CIT(A) HAS RIGHTL Y ALLOWED THE APPEAL OF THE ASSESSEE ON BOTH THE ISSUES AS THE AVAILABLE RE CORD CLEARLY REVEALS THE EXPENSES INCURRED BY THE ASSESSEE ARE VERIFIABLE FR OM THE RECORDS. THE EARLIER ASSESSMENT YEAR THE ASSESSING OFFICER HAS A LLOWED THE SAID EXPENSES AND THERE IS NO CHANGE IN THE ACCOUNTING S YSTEM BY THE ASSESSEE IN THE PRESENT ASSESSMENT YEAR. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. 6.1 AS RELATES TO THE FIRST ISSUE RELATING TO DISAL LOWANCE OUT OF PROVISION/LIABILITY FOR EXPENSES DEBITED TO PROFIT AND LOSS ACCOUNT TO THE EXTENT OF RS. 45,43,054/-, ASSESSING OFFICER HAS NO T TAKEN NOTE OF AUDITORS NOTE AT SERIAL NO. 9 WHICH RELATES TO CONTINGENT LI ABILITY AND NOT ACTUAL LIABILITY FOR WHICH GOODS/SERVICES HAS BEEN RECEIVE D BY THE MILL SOCIETY. THUS THE CIT(A) HAS RIGHTLY DELETED THE SAID ADDITI ON MADE BY THE ASSESSING OFFICER. 6.2 AS RELATES TO SECOND ISSUE RELATING TO THE DISA LLOWANCE OF REPAIR AND MAINTENANCE EXPENSES TO THE EXTENT OF CERTAIN SPECI FIC EXPENSES DEBITED TO STORE CONSUMED ACCOUNT, THE ASSESSEE IS MAINTAINING A STORE DEPARTMENT THROUGH WHICH ALL THE STORES REQUIRED IN THE MILL F ROM TIME TO TIME WERE STORED AS THE FACTORY WAS LOCATED IN A REMOTE AREA. AS AND WHEN ANY ITEM IS REQUIRED FROM THE STORE THE VARIOUS DEPARTMENTS FUN CTIONING IN THE FACTORY ISSUES A REQUISITION SLIP TO THE STORE DEPARTMENT F OR ISSUE OF DESIRED MATERIAL. ON THE BASIS OF STORE REQUISITION SLIP TH E MATERIAL WAS ISSUED TO 7 ITA NOS. 3168, 3169, 31 70/DEL/2013 VARIOUS DEPARTMENTS FROM TIME TO TIME & CONSUMPTION VOUCHER FOR THE SAME IS PASSED FROM TIME TO TIME GENERALLY AT MONTH LY INTERVALS. THIS IS THE FIRST YEAR WHEN THE ASSESSING OFFICER MADE THE DISA LLOWANCE BY MENTIONING THAT THE VOUCHERS PASSED THROUGH STORES CONSUMPTION WERE NOT VERIFIABLE WHEREAS THE SAME WAS ACCEPTED BY THE ASSESSING OFFI CER IN RESPECT OF ALL THE EXPENSES DEBITED UNDER THE HEAD REPAIR AND MAIN TENANCE OF PLANT & MACHINERY IN EARLIER ASSESSMENT YEAR 2005-06. THUS THE CIT(A) HAS RIGHTLY DELETED THE SAID ADDITIONS AFTER VERIFYING THE RECO RDS. 7. IN RESULT, THE APPEAL OF THE REVENUE IN ITA NO. 3170/DEL/2013 (A.Y. 2006-07) IS DISMISSED. 8. ITA NO. 3168/DEL/2013 (A.Y 2007-08) 8.1 THE ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y . 2007-08 DECLARING A TOTAL INCOME OF RS.5,69,53,167/- IN THE STATUS OF AOP (CO OPERATIVE SOCIETY) ON 26/10/2007. THE SAME WAS PROCESSED U/S 143 (1) ON 1 9/11/2007 DETERMINING A REFUND OF RS. 30, 94,407/-. THE ASSESSEE DERIVES INCOME FROM THE BUSINESS OF MANUFACTURING & TRADING OF SUGAR AND ITS BYE-PRODUC T. REGULAR ASSESSMENT WAS COMPLETED U/S 143 (3) OF THE I.T. ACT ON 22/12/ 2009 ON A TOTAL INCOME OF RS. 6, 16, 89,800/- IN THE STATUS OF AOP (COOPERATI VE SOCIETY). 8.2 THE ASSESSEE FILED AN APPEAL BEFORE CIT (A), BA REILLY WHO VIDE ORDER DATED 01/03/2013 ALLOWED THE APPEAL OF THE ASSESSEE. AS R EGARDS TO ADDITION OF RS. 14,47,180/- ON ACCOUNT OF UNDERVALUATION OF CLOSING STOCK OF FREE SALE SUGAR FOR SUGAR SEASON 2005-06, THE CIT (A) HELD THAT THE MET HOD OF VALUATION OF CLOSING STOCK OF FREE SUGAR AT COST PRICE OR MARKET PRICE W HICHEVER IS LOWER, WAS FOLLOWED DURING THE YEAR BY THE ASSESSEE WITHOUT AN Y CHANGE AND THE SAME METHOD WAS ALWAYS ACCEPTED BY THE DEPARTMENT IN THE PAST YEARS ALSO. THE MARKET PRICE OF STOCK OF FREE SUGAR FOR SEASON 2005 -06 IS RS. 1340.00 WHICH WAS LESS THAN ITS COST PRICE OF RS. 1443.60. ACCORD INGLY THE STOCK VALUED AT RS. 8 ITA NOS. 3168, 3169, 31 70/DEL/2013 1340.00 PER QTLS. BY THE ASSESSEE. THE CIT(A) DELET ED THE SAID ADDITION. THIS WAS WORKED OUT BY VALUING FREE SUGAR FOR SEASON 200 5-06 BY ADOPTING THE PREVAILING MARKET PRICE OF FREE SUGAR IN A.Y. 2007- 08 AT RS. 1375 PER QUINTAL AS DECLARED BY THE ASSESSEE AS IT WAS LESSER THAN THE DECLARED COST PRICE OF FREE SUGAR FOR SEASON 2005-06 I.E. RS. 1443.60 PER QUINT AL. THE CIT (A) ACCEPTED THE PLEA OF THE ASSESSEE AND DELETED THE ADDITION. 8.3 AS RELATES TO SECOND ISSUE RELATING TO ADDITION OF RS. 11,54,439/- ON ACCOUNT OF DISALLOWANCE OUT OF REPAIR & MAINTENANCE OF FACTORY BUILDING AND TREATING THE SAME TO BE CAPITAL IN NATURE BY THE AS SESSING OFFICER, THE CIT (A) ACCEPTED THE PLEA OF THE ASSESSEE AND DELETED THE A DDITION BY FOLLOWING THE ORDER OF THE EARLIER ASSESSMENT YEAR 2000-01 IN ASS ESSEES OWN CASE PASSED BY THE ITAT, NEW DELHI. 8.4 AS REGARDS TO THIRD ISSUE IN RESPECT OF ADDITIO N OF RS. 15,55,853/- ON ACCOUNT OF DISALLOWANCE OUT OF REPAIR & MAINTENANCE OF FACTORY BUILDING AND TREATING THE SAME TO BE CAPITAL IN NATURE BY THE AS SESSING OFFICER. THE CIT (A) ACCEPTED THE PLEA OF THE ASSESSEE AND DELETED THE A DDITION BY FOLLOWING THE ORDER OF THE EARLIER ASSESSMENT YEAR 2000-01 IN ASS ESSEES OWN CASE PASSED BY THE ITAT, NEW DELHI. 8.5 IN RESPECT OF THE FOURTH ISSUE AS TO ADDITION O F RS. 7,06,366/- ON ACCOUNT OF DISALLOWANCE OUT OF REPAIR & MAINTENANCE OF PLAN T & MACHINERY AND TREATING THE SAME TO BE CAPITAL IN NATURE BY THE ASSESSING O FFICER. THE CIT (A) ACCEPTED THE PLEA OF THE ASSESSEE AND DELETED THE ADDITION B Y RELYING UPON BY FOLLOWING THE ORDER OF THE EARLIER ASSESSMENT YEAR 2000-01 IN ASSESSEES OWN CASE PASSED BY THE ITAT, NEW DELHI. 8.6 THE LD. DR RELIED UPON THE ORDER OF THE ASSESSI NG OFFICER. THE LD. DR COULD NOT CONTROVERT THE FINDING GIVEN IN THE ITAT ORDER DATED 04.05.2007 FOR A.Y. 2001-02. 8.7 THE LD. AR RELIED UPON THE ORDER OF THE CIT(A) AND ALSO SUBMITTED THAT 9 ITA NOS. 3168, 3169, 31 70/DEL/2013 THE ISSUES DISCUSSED HEREIN ARE COVERED BY THE ITAT , NEW DELHI ORDER DATED 04.05.2007 IN ITA NO. 3634/DEL/2004 FOR A.Y. 2001-0 2 IN ASSESSEES OWN CASE. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. 9.1 AS REGARDS TO ADDITION OF RS. 14,47,180/- ON AC COUNT OF UNDERVALUATION OF CLOSING STOCK OF FREE SALE SUGAR FOR SUGAR SEASON 2005-06, THE CIT (A) HELD THAT THE METHOD OF VALUATION OF CL OSING STOCK OF FREE SUGAR AT COST PRICE OR MARKET PRICE WHICHEVER IS LOWER, WAS FOLLOWED DURING THE YEAR BY THE ASSESSEE WITHOUT ANY CHANGE AND THE SAME MET HOD WAS ALWAYS ACCEPTED BY THE DEPARTMENT IN THE PAST YEARS ALSO. THE MARKET PRICE OF STOCK OF FREE SUGAR FOR SEASON 2005-06 IS RS. 1340.00 WHI CH WAS LESS THAN ITS COST PRICE OF RS. 1443.60. ACCORDINGLY THE STOCK VALUED AT RS. 1340.00 PER QTLS. BY THE ASSESSEE. THE CIT(A) DELETED THE SAID ADDITI ON. THIS WAS WORKED OUT BY VALUING FREE SUGAR FOR SEASON 2005-06 BY ADOPTIN G THE PREVAILING MARKET PRICE OF FREE SUGAR IN A.Y. 2007-08 AT RS. 1375 PER QUINTAL AS DECLARED BY THE ASSESSEE AS IT WAS LESSER THAN THE DECLARED COS T PRICE OF FREE SUGAR FOR SEASON 2005-06 I.E. RS. 1443.60 PER QUINTAL. THESE FINDING OF THE CIT(A) ARE CORRECT AND DOES NOT REQUIRE ANY INTERFERENCE. 9.2 AS RELATES TO SECOND, THIRD AND FOURTH ISSUES, THE SAME ARE COVERED BY THE ITAT, NEW DELHI ORDER DATED 04.05.2007 IN ITA N O. 3634/DEL/2004 FOR A.Y. 2001-02 IN ASSESSEES OWN CASE. THE SAME COULD NOT BE CONTRADICTED BY THE LD. DR. HENCE THERE IS NO NEED OF INTERFERENCE IN CIT(A)S ORDER. 9.3 IN RESULT, THE APPEAL OF THE REVENUE ITA NO. 31 68/DEL/2013 (A.Y. 2007- 08) IS DISMISSED. 10 ITA NOS. 3168, 3169, 3 170/DEL/2013 10. ITA NO. 3169/DEL/2013 (A.Y 2009-10) 10.1 THE RETURN OF INCOME FOR A.Y 2009-10 WAS FILED BY THE ASSESSEE DECLARING A TOTAL INCOME OF RS.1,04,63,108/-. ASSESSMENT U/S 143(3) WAS COMPLETED ON TOTAL INCOME OF RS.1,92,78,600/-. 10.2 THE ASSESSEE FILED AN APPEAL BEFORE THE CIT (A ) BAREILLY. THE CIT(A) VIDE ORDER DATED 01/03/2013 GRANTED SUBSTANTIAL RELIEF T O THE ASSESSEE AND PARTLY ALLOWED THE APPEAL. 10.3. THE LD. DR RELIED ON THE ORDER OF THE ASSESSI NG OFFICER AND SUBMITTED THAT THE CIT(A) HAS NOT AT ALL APPLIED ITS MIND. 10.4. THE LD. AR RELIED UPON THE ORDER OF THE CIT(A ). 11. WE HAVE PERUSED ALL THE RECORDS AND HEARD BOTH THE SIDES. 11.1 AS RELATES ISSUE RELATING TO THE ADDITION OF R S. 41,54,153/- IN THE CLOSING STOCK OF FREE SUGAR. THE ASSESSING OFFICER ENHANCED THE VALUE OF CLOSING STOCK OF FREE SUGAR PRODUCED DURING THE YEA R 2006-07 BY A SUM OF RS. 37,93,882/- BY APPLYING THE RATE OF COST OF PRO DUCTION AT RS. 1449.40 PER QUINTAL INSTEAD OF RS. 1355.35 PER QUINTAL APPL IED BY THE ASSESSEE. THE ASSESSEE IS FOLLOWING THE METHOD OF THE VALUATION O F CLOSING STOCK OF FREE SUGAR AT COST PRICE OR MARKET PRICE WHICHEVER IS LO WER SINCE INCEPTION WHICH HAS BEEN FOLLOWED DURING THE YEAR WITHOUT ANY CHANG E. THE ASSESSEE HAS 40339 ATL. OF FREE SUGAR AS ON 31.03.2009 OUT OF SU GAR PRODUCED IN THE FINANCIAL YEAR 2007-08 IN THE MONTH OF APRIL & MAY 2007. THE ASSESSEE FILED COPY OF RT 7 C & RT 8 C IN SUPPORT OF THE CLA IM THAT THE PRODUCTION OF 88260 QTLS. SUGAR HAS BEEN MADE IN MONTH OF APRIL & MAY 2007. THE COST PRICE OF SUGAR PRODUCED IN THE FINANCIAL YEAR IS RS . 1355.35 AND THE MARKET PRICE OF SALE OF SUGAR AS ON THE LAST SALE CLOSE OF THE YEAR RS. 1885.00. THE COST OF PRODUCTION OF RS. 1355.35 BEING LOWER THAN THE MARKET PRICE. THE ASSESSEE HAS VALUED THE STOCK OF FREE SUGAR OF 4033 9 QTL. @ 1355.35 PER QTL. 11 ITA NOS. 3168, 3169, 3 170/DEL/2013 SUGAR BEING EXCISABLE COMMODITY THE DAY BY DAY CONT ROL IS EXERCISE BY THE EXCISE DEPARTMENT AND NO DEFECT WAS POINTED OUT REG ARDING THE EXCISE DUTY. THE ASSESSING OFFICER HAS CONFUSED BETWEEN THE SUGA R YEAR AND THE FINANCIAL YEAR OF PRODUCTION. THOUGH THE STOCK PERT AINED TO SUGAR YEAR 2006-07 YEAR YET BECAUSE IT WAS PRODUCED IN FINANCI AL YEAR 2007-08 HENCE THE RATE OF COST OF PRODUCTION OF F.Y. 2007-08 WOUL D BE APPLIED TO VALUE THE STOCK. THUS THE CIT(A) IS RIGHT IN DELETING THE SAI D ADDITION. 11.2 FURTHER, THE AO HAD ALSO ADDED A SUM OF RS.3,6 0,271/- BEING THE ELEMENT OF EDUCATION CESS AND HIGHER EDUCATION CESS ON EXCISE DUTY WHILE VALUING THE STOCK. HOWEVER, THE CIT (A) DELETED THI S ADDITION ALSO. THE A.O ADDED A SUM OF RS.3,79,243/- BEING THE DIFFERENCE I N EDUCATION CESS AND HIGHER EDUCATION CESS ON EXCISE DUTY ON VALUE OF ST OCK OF FREE SUGAR WHICH COMES TO RS. 8,53,918/- BUT SINCE THE ASSESSEE HAD PAID RS. 5,74,675/- BEFORE DUE DATE OF FILING OF RETURN, ONLY THE DIFFE RENCE WAS ADDED. THE CIT (A) DIRECTED THE AO TO CHECK THE ARITHMETICAL ERROR IN WORKING OUT THE DIFFERENCE (8,53,918/- 5,74,675/-) AND ALSO TO ALLOW BENEFIT O F SIMILAR ADDITION MADE IS IMMEDIATELY PRECEDING YEAR IF THE SAME HAS BEEN SUS TAINED IN APPEAL. 11.3 AS RELATES TO NOT ALLOWING TRANSFER OF RS. 1,1 3,018/- TO MOLASSES RESERVE FUND WHICH IS A REVENUE EXPENDITURE, THE AS SESSEE MADE SUBMISSION BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE THE CIT(A) THAT THE AMOUNT WAS TRANSFERRED TO MOLASSES RESERVE FUND AS PER PROVISION OF U.P. SHEERA NIYANTRAN (SANSHODHAN) ADHYADESH 1964 NOTIFI CATION NO. 678-E- 2/XIII-75 DATED 4.5.89 FOR CREATING STORAGE FACILIT IES. THE AMOUNT TRANSFERRED TO MOLASSES RESERVE FUND HAS TO BE UTIL IZED FOR PROVISION AND MAINTENANCE OF ADEQUATE STORAGE FACILITIES FOR MOLA SSES AS PER INSTRUCTION TO BE ISSUED FROM TIME TO TIME AND THE FUND SHOULD BE KEPT SEPARATELY IN THE BANK ACCOUNT. THE MILL SOCIETY WOULD NOT UTILIZE TH E AMOUNT IN THE FUND FOR ANY OTHER PURPOSE. THUS IT IS REVENUE EXPENDITURE. THE SAME WAS ALLOWED BY CIT(A) IN ASSESSEES OWN APPEAL FOR A.Y. 2002-03 AND A.Y. 2004-2005. 12 ITA NOS. 3168, 3169, 3 170/DEL/2013 THEREFORE, THERE IS NO NEED TO INTERFERE THE FINDIN GS OF THE CIT(A). 12. IN RESULT, APPEALS OF THE REVENUE ARE DISMISSED . THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 21 ST OF NOVEMBER, 2016. SD/- SD/- (R.S. SYAL) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDI CIAL MEMBER DATED: 21/11/2016 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT R EGISTRAR ITAT NEW DELHI DATE 1. DRAFT DICTATED ON 18.10.2016 PS 2. DRAFT PLACED BEFORE AUTHOR 18.10.2016 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .2016 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE 2 1 .11.2016 PS/PS 13 ITA NOS. 3168, 3169, 3 170/DEL/2013 SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 2 1 .11.2016 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.