The ACIT, Cir.-2, JAMNAGAR V. M/s. Siddiq Sea Food, PORBANDAR

ITA 321/RJT/2015

AI Insights

The case involves the Income Tax Department appealing against the decision of the CIT(Appeals) which favored M/s. Siddiq Sea Food, a company engaged in processing and exporting marine products. The dispute centered on the disallowance of excess loss claimed by the assessee due to damage to stock from a flood and subsequent power failure in Veraval during August 2007. The assessee claimed a loss of ₹ 56.44 lakh for 50,614 kg of stock, while the insurance company, based on a surveyor's report, acknowledged only ₹ 11.54 lakh. The CIT(Appeals) allowed the assessee's claim, which the Department contested, leading to this tribunal's decision.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 124065 (ITAT-RAJKOT)
• Duration Of Justice: 3 year(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-07-2018
• Appeal Filed By: Department
• Order Result: DismissedDismissed
• Bench Allotted: DB
• Next Hearing Date: 10-07-2023
• Assessment Year: 2009-2010
• Appeal Filed On: 25-06-2015
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside
• Section: 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT [CONDUCTED THROUGH VIRTUAL COURT] Before: Shri Annapurna Gupta, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member Th e ACIT, Circle-2 , Ja mnagar (Appellant) Vs M/s. Sid diq Sea Food, Fish Market, Porbandar PAN: AAK FS7327N (Resp ondent) Asses see by : Shri Divyesh So dha, Ld. A. R. Revenue by : Shri B. D. Gupta, Ld. Sr. D. R. Date of hearing : 11-07 -2023 Date of pronouncement : 26-07 -2023 आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- This Revenue’s appeal for A.Y. 2009-10, arises from order of the ld. CIT (A), Jamnagar dated 06-04-2015, in proceedings under section 250 of the Income Tax Act, 1961; in short “the Act”. 2. The Department has taken the following grounds of appeal:- ITA No. 321/Rjt/2015 Assessment Year 2009-10 I.T.A No. 321/Rjt/2015 A.Y. 2009-10 Page No ACIT vs. M/s. Siddiq Sea Food 2 “1. The learned CIT(A) erred in law and facts in deleting disallowance made on account of excess loss claimed for the damage to the stock. 2. On the basis of the facts and circumstances of the case, the learned CIT(A) ought to have upheld the order of the Assessing Officer. 3. That the revenue craves leaves to add, amend, alter or withdraw any ground of I appeal. 4. It is therefore prayed that the order of the CIT(A), Jamnagar may kindly be set aside and that of Assessing Officer be restored.” 3. The brief facts of the case are that the assessee is engaged in the business of processing and export of marine products i.e. frozen fish. During the impugned assessment year, due to heavy rain there was flood in Veraval in August 2007. As per the assessee, owing to the flood and consequent power loss, the assessee firms stock worth ₹ 56.44 lakh was destroyed (the quantity of stock destroyed was 50,614 kg). The claim for the loss was lodged with insurance company, and as per the surveyor’s report, the loss of stock worked out to ₹ 23.87 lakhs which was finally restricted by the insurance company to ₹ 11.54 lakhs on the ground that the insurance policy covers only stock loss by flood and does not cover stock loss by consequent power loss, resulting into temperature loss in cold room. Before the assessing officer, the issue for consideration was that as per the survey’s report, the total quantity destroyed was 21,397 kgs, whereas as per the assessee’s record the total quantity which was destroyed was 50,614 kg and the same was not covered in the surveyor’s report quantifying the figure of loss. Accordingly, the assessing officer added back a sum of ₹ 34,49,252/- on account of excess loss claimed by the assessee for the damage to the stock i.e. difference between the claim of loss of stock amounting to Rs. 56,44,856/-, as claimed by the assessee (with respect to loss of stock of I.T.A No. 321/Rjt/2015 A.Y. 2009-10 Page No ACIT vs. M/s. Siddiq Sea Food 3 50,614.17 kgs which was claimed to be damaged) and Rs. 21,95,604/- (being the loss of stock as assessed by the insurance surveyor). 4. In appeal, the assessee submitted that the assessing officer failed to appreciate that there was further material with the assessee, but because of critical situation prevailing at that point in time, it was not possible for the surveyor to verify the same. However, subsequently immediately when the water level reduced, the assessee had disposed of the material in the presence of health officer of Veraval-Patan Nagarpalika since further calling of surveyor was not possible for health reasons surrounding the factory area. However, in respect of stock which was destroyed / disposed of, the assessee has taken certificate from Veraval-Patan Nagarpalika dated the 20-08-2007 and the same was also submitted to the AO during the course of hearing, however, the Ld. Assessing Officer has failed to take cognizance of the same. Ld. CIT(Appeals) allowed the appeal of the assessee with the following observations: “6.1 So far as addition of Rs.34,49,252/- for excess loss claimed for the damage to stock, I am inclined to agree with the appellant’s contention on the grounds that there was flood in the Veraval during the F.Y. 2007-08, there was loss of stock due to flood and power failure which can be evident from the surveyor’s report, the appellant has stock on hand at the time of flood for 50614.17 kgs. amounting to Rs.56,44,856.90 which is justified by Surveyor’s report and certificate of Veraval-Patan Nagarpalika. Also the appellant has in the F.Y. 2007-08 in his audit report has credited the amount of Rs.56,44,856.90 in Trading Account as loss of stock due to fire and I.T.A No. 321/Rjt/2015 A.Y. 2009-10 Page No ACIT vs. M/s. Siddiq Sea Food 4 shown in Balance sheet as receivable from Insurance company in Balance sheet. The claim for loss of stock allowed by insurance company was for Rs.11,54,715/-. I don’t find any reason not to believe what the appellant has submitted with facts & figures. The facts enumerated by the appellant cannot be brushed aside without giving any acceptable reason. Hence the balance amount of loss for Rs.34,49,252/- is allowable to the appellant. Hence the addition made on this account is deleted.” 5. The Department is in appeal before us against the aforesaid relief granted by Ld. CIT(Appeals). The contentions put forth by the Department are that firstly, on perusal of the order passed by Ld. CIT(Appeals), there are certain apparent discrepancies. The Ld. CIT(Appeals) while allowing the appeal of the assessee has observed that “loss of stocks was due to fire”, which is apparently incorrect in the instant set of facts and displays non- application of mind. Secondly, the Ld. DR drew our attention to pages 22-23 of the paper book and submitted that there is variation in the signatures in the certificates issued by Veraval-Patan Nagarpalika. Therefore, the certificates filed by the assessee in support of claim of additional loss of stock cannot be relied upon owing to discrepancy in signatures and further, their veracity has not been properly tested by the Department at any stage. It was submitted by the Ld. DR that a perusal of the surveyor’s report at page 10-11 of paper book shows that apparently there is no mention of additional stock, which was claimed to have been destroyed in presence of Veraval- Patan Nagarpalika officers. It was further submitted that the second certificate at page 23 of the paper book was never produced before the insurance company for necessary verification. Therefore, the surveyor’s I.T.A No. 321/Rjt/2015 A.Y. 2009-10 Page No ACIT vs. M/s. Siddiq Sea Food 5 report does not speak of the loss of ₹ 56 lakhs, and therefore, there is no basis on which relief has been granted by Ld. CIT(Appeals) in the instant set of facts. 6. In response, the counsel for the assessee submitted that that 21,000 kg of stock was verified by the insurance surveyor, whereas balance stock amounting to 30,000 kg approximately was destroyed/disposed of in the presence of Nagarpalika officer, for which a valid certificate was issued. Further these details were also submitted before the assessing officer, which were not considered by him. Accordingly, it was submitted that looking into the instant facts, Ld. CIT(Appeals) has not erred in facts and in law in allowing the appeal of the assessee on this issue, after taking into consideration facts of the assessee’s case and evidence placed on record for his consideration. 7. We have heard the rival contentions and perused the material on record. In our considered view, the issue for consideration is that as per the surveyor’s report, the total quantity destroyed was 21,397.5 kgs (out of which 4.32 MT was disposed off in presence of the Surveyor and balance 17.07 MT was disposed off in presence the Surveyor and Health Officer of Nagarpalika). However, as per the assessee’s records, total quantity destroyed was 50,614.70 kgs, which was disallowed since as per the Ld. Assessing Officer, the same was not covered as part of the Insurance Surveyor’s Report. However, we observe that Ld. CIT(Appeals) after securitizing the necessary documents observed that the assessee had produced requisite certificates issued by Veraval- Patan Nagarpalika to the effect that the actual stock loss to the assessee was in fact 50,614.70 kgs. It I.T.A No. 321/Rjt/2015 A.Y. 2009-10 Page No ACIT vs. M/s. Siddiq Sea Food 6 is further seen that the assessee in immediately preceding financial year 2007-08 in its audit report has credited the amount of ₹ 56,44,856/- in trading account as loss stock due to flood and shown the same in Balance Sheet as “receivable” from the Insurance company. The claim of loss allowed by the Insurance company was ₹ 11,54,715/ - and the assessee has claimed the balance amount which was not settled by the Insurance company as loss on account of loss of damaged stock. Accordingly, looking into the facts of the instant case, we find no infirmity in the order of Ld. CIT(Appeals) so as to call for any interference. 8. In the result, the appeal of the Department is dismissed. Order pronounced in the open court on 26-07-2023 Sd/- Sd/- (ANNAPURNA GUPTA) (SIDHHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 26/07/2023 TRUE COPY आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order, Assistant Registrar, Income Tax Appellate Tribunal, Rajkot