DCIT, New Delhi V. M/s Metro Tyres Ltd., New Delhi

ITA 3315/DEL/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53141 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2006-2007
• Appeal Filed On: 22-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S NEGI
• Assessee Lawyers: S C VASUDEVA; SACHIN VA SUDEVA CAS
• Keywords: Opportunity of being heard; Principle of natural justice; Period of limitation; Additional evidence; Onus to prove
• Section: 14A; 37; 28

Judgement Text

ITA NOS. 3315 & 3531/DEL/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 3315/DEL/2011 A.Y. : 2006-07 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-6(1), ROOM NO. 413, C.R. BUILDING, NEW DELHI VS. M/S METRO TYRES LTD., 101, JYOTI BHAWAN, A-25, 26, 27, DR. MUKERJEE NAGAR, COMMERCIAL COMPLEX, DELHI 110 009 (PAN/GIR NO. : AAACM 3394A) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) AND ITA NO. 3531/DEL/2011 A.Y. 2006-07 M/S METRO TYRES LTD., VS. ADDL. COMMISSIONER OF INCO ME TAX, 101, JYOTI BHAWAN, A-25, 26, 27, RANGE-6, NEW DEL HI DR. MUKERJEE NAGAR, COMMERCIAL COMPLEX, DELHI 110 009 (PAN/GIR NO. : AAACM 3394A) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSEESSEE BY : S H. S.C. VASUDEVA AND SH. SACHIN VASUDEVA, CAS DEPARTMENT BY : SH. R.S. NEGI, SR. D.R. ORDER ORDER ORDER ORDER PER PER PER PER SHAMIM YAHYA : AM SHAMIM YAHYA : AM SHAMIM YAHYA : AM SHAMIM YAHYA : AM THESE ARE THE CROSS APPEALS BY THE REVENUE AND AS SESSEE DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 25.2.2011 AND PERTAIN TO ASSESSMENT YEAR 2006-07. REVENUES APPEAL REVENUES APPEAL REVENUES APPEAL REVENUES APPEALS SS S ITA NOS. 3315 & 3531/DEL/2011 2 2. THE ISSUES RAISED IN THE REVENUES APPEAL READ A S UNDER:- 1. THE ORDER OF LD. COMMISSIONER OF INCOME TAX (A PPEALS) IS ERRONEOUS AND CONTRARY TO FACTS AND LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HA S ERRED IN RESTRICTING THE ADDITION MADE U/S. 41(1) TO ` 2,71,928/- AS AGAINST ` 12,55,481/- MADE BY THE ASSE SSING OFFICER. 2.1 LD. COMMISSIONER OF INCOME TAX (APPEALS) IGNORED T HE FINDING RECORDED BY THE ASSESSING OFFICER AND TH E FACTS THAT THE ASSESSEE DID NOT FILE THE REQUIRED EVIDENC E TO SUBSTANTIATE DURING THE ASSESSMENT PROCEEDINGS. 3. LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN ACCEPTING THE ADDITIONAL EVIDENCES WITHOUT FOLLOWI NG THE PROCEDURE LAID DOWN BY THE LAW. 4. THE APPELLANT CRAVES LEAVE TO ADD, TO ALTER, O R AMEND ANY GROUNDS OF APPEAL RAISED ABOVE AT THE TIME OF HEARI NG. ASSESSEES APPEAL ASSESSEES APPEAL ASSESSEES APPEAL ASSESSEES APPEAL 3. THE ISSUES RAISED IN THE ASSESSEES APPEAL READ AS UNDER:- 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT JUSTIFIED ON THE FACTS AND CIRCUMSTANCES OF THE CAS E IN CONFIRMING THE DISALLOWANCE OF ` 12,37,911/- UNDER S ECTION 14A OF THE ACT AS PER RULE 8D OF INCOME TAX RULES, 1962 ON THE ALLEGED CONTENTION THAT THE SAID EXPENSE HAS B EEN INCURRED FOR EARNING DIVIDEND INCOME. ITA NOS. 3315 & 3531/DEL/2011 3 2. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT JUSTIFIED IN SUSTAINING THE ADDITION OF ` 2,71,928/- OUT OF THE ADDITION OF ` 12,55,482/- MADE BY THE ASSESSING OFFI CER UNDER SECTION 41(1) OF THE ACT ON THE ALLEGED CONTE NTION THAT THE NO TRANSACTION HAS TAKEN PLACE TILL DATE AND THAT BALANCES ARE OUTSTANDING FOR VERY LONG TIME WITIOUT ANY INTENTION OF PAYMENT ON THE PART OF THE APPELLANT O R ANY PART OF THE CREDITOR TO RECOVER THE SAME. 3. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT JUSTIFIED IN SUSTAINING THE ADDITION OF ` 11,26,643/ - BEING THE AMOUNT OF CLAIMS WRITTEN OFF AND ` 2,63,006/- BEING T HE AMOUNT OF MISCELLANEOUS BALANCES WRITTEN OFF ON THE ALLEGED CONTENTION THAT NO DOCUMENTARY EVIDENCE WAS PRODUCED IN RELATION TO SUCH CLAIMS / BALANCES. THE APPELLANT HAD FURNISHED THE REQUISITE DETAILS AND EXPLANATIONS AND THE ALLEGATION OF THE LD. COMMISSION ER OF INCOME TAX (APPEALS) IS NOT BASED ON EVIDENCE ON RE CORD. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND AN D / OR ALTER THE GROUNDS AT A LATER STAGE. 4. APROPOS ISSUE PERTAINING TO DISALLOWANCE U/S. 14 A :- ON THIS ISSUE ASSESSING OFFICER NOTED THAT THE PE RUSAL OF COMPUTATION OF INCOME FOR THE YEAR UNDER SHOWS THAT THE ASSESSEE COMPANY HAS EARNED DIVIDEND INCOME OF ` 38,50,708/- WHICH IS EXEMPT FROM TAX DURING THE YEAR. ASSESSING OFFICER OPINE D THAT AS PER THE PROVISIONS OF SECTION 14A EXPENDITURE INCURRED IN R ELATION TO INCOME ITA NOS. 3315 & 3531/DEL/2011 4 WHICH DOES NOT FORM PART OF TOTAL INCOME, IS NOT AN ALLOWABLE EXPENDITURE. ON QUERY IN THIS REGARD ASSESSEE SUBMI TTED THAT NO EXPENDITURE WAS INCURRED FOR EARNING THE SAID INCOME . ASSESSING OFFICER WAS NOT SATISFIED WITH THIS REPLY. HE HE LD THAT IT WAS PRACTICALLY NOT POSSIBLE THAT THE ASSESSEE WOULD NO T HAVE INCURRED ANY EXPENDITURE FOR EARNING DIVIDEND INCOME. THE ASSES SING OFFICER WORKED OUT THE DISALLOWANCE IN THIS REGARD ON THE B ASIS OF RULE 8D AND DISALLOWED A SUM OF ` 12,37,911/-. 5. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) NOTED THAT ACTION OF THE ASSESSING OFFICE R IN INVOKING RULE 8D IS NOT UPHELD YET, THE DISALLOWANCE OF ` 12,37,91 1/- U/S 14A IS SUSTAINED ON THE BASIS OF THE REASONS ON ESTIMATE BA SIS. 6. AGAINST THIS ORDER THE ASSESSEE IS IN APPEAL BEF ORE US. 7. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. WE FIND THAT HONBLE MUMBAI HIGH COURT IN THE CASE OF GODREJ BOYCE MFG. CO. LTD. VS. DCIT IN ITA NO. 626 OF 2010 234 CTR 1 H AS OVERRULED THE ITAT DECISION OF DAGA CAPITAL MANAGEMENT (SUPRA) AN D HELD THAT RULE 8D HAS BEEN NOTIFIED ON 24.3.2008 AND WILL BE APPLIC ABLE ONLY FROM ASSESSMENT YEAR 2008-09. HENCE, THE PRESENT YEAR IS A.Y. 2006-07 AND RULE 8D IS CLEARLY NOT APPLICABLE. ACCORDINGLY, T HIS ISSUE IS REMITTED TO ITA NOS. 3315 & 3531/DEL/2011 5 THE FILE OF THE ASSESSING OFFICER TO CONSIDER THE SAME AFRESH, IN LIGHT OF THE ABOVE RULING. NEEDLESS TO ADD THAT THE ASSE SSEE SHOULD BE GIVEN ADEQUATE OPPORTUNITY OF BEING HEARD. 8. APPROPOS ISSUE PERTAINING TO UNCLAIMED BALANCES. IN THE COURSE OF ASSESSMENT PROCEEDINGS ASSESSING O FFICER ASKED THE ASSESSEE TO FURNISH THE DETAILS OF SUNDRY CREDI TORS WHERE THERE IS NO TRANSACTION OR MOVEMENT FOR THE LAST THREE YE ARS. IN RESPONSE THERETO THE ASSESSEE FURNISHED THE FOLLOWING DETAI LS:- NAME OF THE PARTY NAME OF THE PARTY NAME OF THE PARTY NAME OF THE PARTY STATION STATION STATION STATION AMOUNT AMOUNT AMOUNT AMOUNT M/S ARUN KUMAR & CO. CHANDIGARH 80633.55 M/S ACCURA VALVES NASHIK 80710.00 M/S SHANTI SALES CORPORATION BIKANER 91189.78 M/S BAYER INDIA LTD. CHANDIGARH 84840.00 M/S KK BUILDING MATERIAL STORE LUDHIANA 51898.00 M/S HT SALES CORPORATION LUDHIANA 52227.00 M/S MICRON TOOLS AND TECHNOLOGY LUDHIANA 66477.00 M/S JCT LTD. STEEL DIVISION HOSHIARPUR 54556.00 M/S PAUL AND COMPANY LUDHIANA 692950.49 TOTAL TOTAL TOTAL TOTAL 1255481.82 1255481.82 1255481.82 1255481.82 8.1 ASSESSING OFFICER WAS OF THE OPINION THAT PRO VISION OF SECTION 41(1) ARE ATTRACTED IN THIS CASE. HE OBSERVED TH AT ASSESSEE HAS NOT PAID THESE CREDITORS AND THEY HAVE REMAINED AS SUCH FOR LAST THREE YEARS. ASSESSING OFFICER FURTHER OBSERVED THAT T HE PERIOD OF LIMITATION UNDER LIMITATION ACT TO ENFORCE SUCH CLAIMS IS WITHIN A PERIOD OF THREE YEARS. HE OPINED THAT THE CREDITORS OF T HE ASSESSEE COMPANY CANNOT ENFORCE THIS LIABILITY AND THUS THE LIABILIT Y OF ASSESSEE HAS BEEN ITA NOS. 3315 & 3531/DEL/2011 6 REMITTED. ACCORDINGLY, ASSESSING OFFICER ADDED A SUM OF ` 12,55,482/- U/S 41(1) OF THE IT ACT. 9. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) NOTED THAT ASSESSEE WAS ASKED TO FURNISH THE COPY OF THE ACCOUNT OF THE PARTIES WITH WHOM THE TRANSACTION WE RE MADE IN THE SUBSEQUENT YEARS I.E. AFTER THE CLOSE OF THE ACCOUN TING YEAR. ASSESSEE SUBMITTED THE LEDGER ACCOUNT OF SUCH FIVE PARTIES A S UNDER:- NAME OF THE PARTY NAME OF THE PARTY NAME OF THE PARTY NAME OF THE PARTY AMOUNT AMOUNT AMOUNT AMOUNT M/S ACCURA VALVES 80710.00 M/S SHANTI SALES CORPORATION 91189.78 M/S HT SALES CORPORATION 52227.00 M/S MICRON TOOLS AND TECHNOLOGY 66477.00 M/S PAUL AND COMPANY 692950.49 TOTA L : TOTAL : TOTAL : TOTAL : 9,83,554.27 9,83,554.27 9,83,554.27 9,83,554.27 IT WAS FURTHER SUBMITTED THAT NO TRANSACTION TOOK P LACE WITH THE REMAINING PARTIES AS MENTIONED BELOW:- NAME OF THE PARTY NAME OF THE PARTY NAME OF THE PARTY NAME OF THE PARTY AMOUNT AMOUNT AMOUNT AMOUNT YEAR SINCE YEAR SINCE YEAR SINCE YEAR SINCE OUTSTANDING OUTSTANDING OUTSTANDING OUTSTANDING M/S ARUN KUMAR & CO. 80633.55 1999 M/S BAYER INDIA LTD. 84840.00 1999 M/S KK BUILDING MATERIAL STORE 51898.00 1999 M/S JCT LTD. STEEL DIVISION 54556.00 2000 2,71,927.55 2,71,927.55 2,71,927.55 2,71,927.55 10. UPON CONSIDERATION OF THE ABOVE, LD. COMMISSIONER OF INCOME TAX (APPEALS) REFERRED THE DECISION OF THE TRIBUNA L IN THE CASE OF ACIT VS. HARPAL SINGH CHADHA IN ITA NO. 5363/DEL/2004 WHE RE FACTS WERE SIMILAR. LD. COMMISSIONER OF INCOME TAX (APPEALS) P ROCEEDED TO HOLD THAT THE ADDITION OF ` 9,83,554/- PERTAINING TO PAR TIES WITH WHOM ITA NOS. 3315 & 3531/DEL/2011 7 SUBSEQUENT TRANSACTIONS ARE TAKEN PLACE NEED TO BE DELETED. HOWEVER, WHERE NO TRANSACTION TOOK PLACE TILL DATE AND THE BALANCES WERE OUTSTANDING FROM MORE THAN 10 YEARS AMOUNTING TO ` 2,71,928/-, LD. COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED T HE ADDITION. 11. AGAINST THE ABOVE ORDER THE REVENUE AND ASSESSE E ARE IN APPEAL BEFORE US. 12. WE HAVE HEARD THE RIVAL CONTENTION IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. WE FIND THAT IDENTICAL ISSUE WAS CONSIDERED BY THIS TRIBUNAL IN THE CASE OF DCIT VS . C.M.Y.K. PRINTECH LTD. (2011) 53 DTR (DEL) (TRIBUNAL) 59. THE TRIBUN AL HAS HELD AS UNDER:- WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF BO TH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECOR D. WE FIND THAT THERE IS NO RULE THAT LIABILITY OUTSTANDI NG FOR MORE THAN THREE YEARS NEED NOT BE PAID AND THE SAME BECOME S INCOME OF THE ASSESSEE. DECISION OF HONBLE APEX COURT RELIED UPON BY THE ASSESSING OFFICER WAS ON DIFFER ENT FACTS. IN THAT CASE, THE CLAIM OF DEPOSITS BY THE CUSTOMERS HAD BECOME BARRED BY LIMITATION AND THE ASSESSEE ITSELF HAS TREATED THE MONEY AS ITS OWN MONEY AND TAKEN THE AMOUNT TO P&L A/C. IN THAT CONTEXT, HONBLE APEX COU RT HAS HELD THAT THE AMOUNT WAS ASSESSABLE AS INCOME. HERE IT IS NOT THE CASE THAT ASSESSING OFFICER HAS ISSUED SUM MONS TO THE CREDITORS AND HAS OBTAINED INFORMATION THAT THE SE AMOUNTS WERE NO LONGER PAYABLE. ASSESSEES CASE IS THAT DUE TO CASH CRUNCH, IT HAS NOT BEEN ABLE TO CLEAR O FF SOME CREDITORS AND THE ASSESSEE IS EVALUATING THE AMOUNT ITA NOS. 3315 & 3531/DEL/2011 8 ACTUALLY PAYABLE AND WRITING BACK AS AND WHEN IT BE COMES EVIDENT THAT THE AMOUNT IS NO LONGER PAYABLE. UNDE R SUCH CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE O RDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IN THIS REGARD AND ACCORDINGLY WE CONFIRM THE SAME. 12.1 WE FIND THAT RATIO OF THE ABOVE DECISION CAN BE APPLIED IN THE PRESENT CASE ALSO. THE ASSESSING OFFICERS PRESUMPTION THAT AFTER THREE YEARS A LOAN WILL NOT BE PAYABLE IS TOTALLY DEVOID OF COGENCY. IT IS NOT THE CASE THAT THE ASSESSING OFFICER HAS ISS UED SUMMONS TO THE CREDITORS FOR OBTAINING INFORMATION IN THIS REGA RD AND FOUND THAT THESE AMOUNTS WERE NO LONGER PAYABLE. NO ENQUIRY H AS BEEN CONDUCTED BY THE REVENUE TO FIND OUT THE STATUS OF THE LOAN/CREDIT. UNDER THE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, THE ADDITION IN THIS REGARD CAN NOT BE SUSTAINED. IN OUR CONSIDERED O PINION, THE ENTIRE AMOUNT IS LIABLE TO BE DELETED. ACCORDINGLY, BOTH REVENUE AND ASSESSEES APPEAL ARE DISMISSED ON THIS ISSUE. 13. APROPOS TO GROUND NO. 3 PERTAINING TO ADDITIO N OF ` 11,26,643/- BEING THE AMOUNT OF CLAIMS WRITTEN OFF AND ` 2,63,006 /- BEING THE AMOUNT OF MISCELLANEOUS BALANCES WRITTEN OFF. 14. ON THIS ISSUE THE ASSESSING OFFICER DISALLOWE D THE CLAIM OF THE ASSESSEE BY MAKING THE FOLLOWING OBSERVATION IN THE ASSESSMENT ORDER. I) THE CLAIM HAS TO BE WHOLLY AND EXCLUSIVELY FOR T HE PURPOSE OF BUSINESS ONLY THEN IT IS ALLOWABLE AS BUSINESS EXPE NSE. II) BURDEN OF PROOF IS ON ASSESSEE - IN ORDER TO CLAIM THAT AN EXPENDITURE FALLS UNDER SECTION 37(1). THE BURDEN O F PROVING THE NECESSARY FACTS IN THAT CONNECTION IS ON THE ASSESS EE. THE ASSESSEE IS ITA NOS. 3315 & 3531/DEL/2011 9 UNDER A PRIMARY OBLIGATION TO SUBSTANTIATE ITS CLAIM OF EXPENSES BEFORE THE SAME COULD BE ALLOWED. THE VIEW IS FULLY SUPPORT ED BY JUDGMENT IN THE CASE OF C.I.T. V. CALCUTTA AGENCY LTD. (1951) 1 9 1191 (SC), LAKSHIMARATAN COTTON MILLS CO. LTD. V. CIT (1969) 73 ITR 634 (SC), DALMIA JAIN & CO. LTD. V. CRT (1958) 33 , ITR 294(PAT .), DEY'S MEDICAL STORES MFG. (P) LTD. V. CIT (1986) 162 ITR 630 (CAL.) , LIBERTY CINEMA V. CIT (1964) 52 ITR 153 CAL. AND HOTZ TRUST V. CIT ( 1952) 21 ITR 149 (PUN.). III) BEFORE ANY EXPENSE IS ALLOWED THE ASSESSEE M UST DISCLOSE PURPOSE. IT CANNOT BE DISPUTED THAT BEFORE AN ASSES SEE CAN BECOME ENTITLED TO AN ALLOWANCE UNDER SECTION 37(1), HE MUS T SATISFY THE ASSESSING OFFICER OF THE PURPOSE FOR WHICH THE AMOUN T IS SPENT. THE VIEW IS' FULLY SUPPORTED BY JUDGMENT IN THE CASE OF CIT V. SHAHIBAG ENTERPRENEURS (P) LTD. (1955) 215 ITR 810 (GUJ.). IV) MERE PRODUCTION OF COPY OF ACCOUNT IN SUPPORT O F THE CLAIM FOR DEDUCTION OF THE EXPENDITURE WOULD NOT PROVE TH E CLAIM MADE BY THE ASSESSEE. IT IS HIS DUTY TO PROVE PAYMENT ESPECI ALLY WHEN THERE ARE DOUBTS ABOUT THE GENUINENESS THEREOF. CIT VS. CHAND RAVILAS HOTEL (1987) 164 ITR 102 (GUJ.). V) IT IS FOR THE TAXPAYER TO ESTABLISH BY EVIDENC E THAT A PARTICULAR ALLOWANCE IS JUSTIFIED. THE LAW DOES NOT PRESCRIBE ANY QUANTITATIVE TEST TO FIND OUT WHETHER THE ONUS IN A PARTICULAR CASE HAS BEEN DULY DISCHARGED. A DECISION OF THE FACT-FINDIN G AUTHORITY IS CONCLUSIVE AND BINDING. ASSAM PESTICIDES & AGRO CHEMIC ALS VS.CIT (1997) 227 ITR 46 (GUJ.). VI) AS THE APPELLANT WAS NOT ABLE TO FILE THE REQ UISITE PROOF THE LD. ASSESSING OFFICER DISALLOWED THE LOSS ON INSURA NCE CLAIMS .. ITA NOS. 3315 & 3531/DEL/2011 10 DURING THE APPELLATE PROCEEDINGS, THE APPELLANT FIL ED BRANCH WISE DETAILS OF LOSS ON ACCOUNT OF INSURANCE CLAIMS. IT WAS CONTENDED THAT OUT OF RS. 15,31,194/- AN AMOUNT OF RS. 12,68,192/- REPRESENTS THE DIFFERENCE IN CLAIMS ACTUALLY RECEIVED AND THE VARI OUS CLAIMS LODGED BY THE APPELLANT COMPANY WITH THE INSURANCE COMPANIES F OR LOSS OF STOCK ETC. THE BALANCE OF RS. 2,63,006/- REPRESENTS THE MI SCELLANEOUS BALANCES WRITTEN OFF IN NORMAL COURSE OF BUSINESS. IT WAS FURTHER CONTENDED THAT THE AMOUNT SO WRITTEN OFF WAS DULY AL LOWABLE UNDER THE PROVISIONS OF SECTION 37 READ WITH SECTION 28 OF TH E ACT. 14.1 CONSIDERING THE ABOVE, LD. COMMISSIONER OF INCOM E TAX (APPEALS) HELD AS UNDER :- I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT , THE FINDINGS OF THE A.O. AND THE FACTS ON RECORD. IN ORDER TO V ERIFY THE CLAIM OF THE APPELLANT, DURING THE APPELLATE PROCEEDINGS THE ID. ARS WERE REQUESTED TO FURNISH DOCUMENTARY EVIDENCES TO ESTABL ISH THE CLAIM OF DEDUCTION OF RS. 15,31,194/-. IN RESPONSE T O THE ABOVE, VIDE ORDER SHEET NOTING DATED 25.11.2010, THE LD. ARS STATED THAT THEY WERE FORGOING THEIR CLAIM FOR RELIEF ON ACCOUNT OF INSURANCE CLAIMS IN RESPECT OF ALL OTHER BRANCHES EXCEPT FOR C HENNAI AND SURAT. THEY SOUGHT 10 DAYS TIME TO FURNISH SUPPORTI NG EVIDENCES AS REGARDS THE CLAIMS PERTAINING TO THE SAID TWO BRA NCHES WITH THE CONDITION THAT FAILING THE COMPLIANCE THE CASE C AN BE DECIDED ON THE BASIS OF THE MATERIAL ON RECORD. CONSIDERING THE REQUEST OF THE ARS, THE CASE WAS ADJOURNED TILL 6.12.2010. ON 6 .12.2010, ALTHOUGH THE ID. ARS FILED AN EVEN DATED LETTER FUR NISHING CERTAIN OTHER DETAILS BUT THEY DID NOT FURNISH ANY EVIDENCE FOR THE AMOUNT OF CLAIM LODGED WITH THE INSURANCE COMPANIES. H OWEVER, ITA NOS. 3315 & 3531/DEL/2011 11 IN VIEW OF NATURAL JUSTICE ANOTHER OPPORTUNITY WAS PROVIDED TO THE APPELLANT AND ON THE REQUEST OF THE LD. A.RS TH E HEARING WAS ADJOURNED TILL 8.12.2010 ON WHICH DATE NONE APPEARED . THEREAFTER, ONCE AGAIN IN VIEW OF NATURAL JUSTICE F URTHER OPPORTUNITIES WERE PROVIDED TO THE APPELLANT TO EST ABLISH THE CLAIM OF DEDUCTION OF RS.15,31,194/- HOWEVER, THE AP PELLANT COULD NOT FURNISH ANY DOCUMENTARY EVIDENCE EITHER IN SUPPORT OF THE CLAIM LODGED WITH THE INSURANCE COMPANIES OR FOR THE AMOUNT CLAIMED AS DEDUCTION. UNDER THESE CIRCUMSTANCES, WHEN THE APPELLANT HAS N OT BEEN ABLE TO ESTABLISH THE CLAIM OF DEDUCTION EITHER DURING THE ASSESSMENT PROCEEDING OR EVEN SUBSEQUENTLY DURING T HE APPELLATE PROCEEDINGS BEFORE ME, THE DEDUCTION AS CL AIMED CAN NOT BE ALLOWED. THE RELIANCE OF THE AO ON VARIOUS C ASE LAWS AS PER THE ASSESSMENT ORDER HAS BEEN FOUND TO BE WELL P LACED. THE APPELLANT HAS NOT EXPLAINED AS TO HOW THE DECISION DO NOT APPLY TO ITS CASE. AS MENTIONED EARLIER, VIDE ORDER SHEET NOTING DATED 25.11.2010, THE ID. ARS HAD FORGONE THE CLAIM OF DE DUCTION PERTAINING TO ALL OTHER BRANCHES EXCEPT FOR CHENNAI AND SURAT. THE CLAIM PERTAINING TO SUCH OTHER BRANCHES ADD UP -TO ` 1,41,549/-. IN RESPECT OF THE CHENNAI AND SURAT BRANCHES DESPITE REPEATED OPPORTUNITIES NO DOCUMENTARY EVIDEN CE WHAT- SO-EVER HAS BEEN FURNISHED TO ESTABLISH THE CLAIM. H ENCE, THE SAME TOTALING TO RS.11,26,643/- CAN NOT BE ALLOWED. LIKEWISE. NO DETAILS / EVIDENCES AS REGARDS THE MISCELLANEOUS BA LANCES WRITTEN OFF AMOUNTING TO RS. 2,63,006/- HAVE BEEN FURNISHED EITHER DURING THE ASSESSMENT PROCEEDINGS OR DURING THE APPELLATE PROCEEDINGS. THUS, DEDUCTION ON ACCOUNT OF THE SAME ALSO CAN NOT BE ALLOWED. ITA NOS. 3315 & 3531/DEL/2011 12 CONSEQUENTLY, THE ADDITION OF RS.15,31,194/- MADE BY THE ID. AO IS CONFIRMED AND THE GROUND NO. 4 IS DISMISSED. 15. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APP EAL BEFORE US. 16. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. LD. COUNSEL O F THE ASSESSEE SUBMITTED THAT HE SHALL BE PRESSING ONLY FOR THE C LAIM OF CHENNAI AND SURAT. THE ASSESSEES SUBMISSIONS IN THIS REGARD AR E AS UNDER:- DETAILS OF AMOUNTS WRITTEN OFF ON PAGES 53 TO 55 OF THE PAPER BOOK. LOSS ON CLAIMS IS IN RESPECT OF FLOOD LOSS AT CHENNA I AND SURAT WHICH WORKS OUT AT ` 11,26,643/-. FOLLOWING DETAILS FILED WITH LD. COMMISSIONER OF INC OME TAX (APPEALS) AS EVIDENCE FOR THE CLAIM. A. CHENNAI A) LETTER TO DIVISION MANAGER REGARDING THE LOSS DUE TO FLOODS AND FOR DEPUTING SURVEYOR (PAGE 56 OF PAPER BOOK.) B) NEWS PAPER REPORTS REGARDING THE FLOOD IN CHENNAI. (PAGES. 57 AND 58 OF PAPER BOOK.) C) INTER-OFFICE CORRESPONDENCE REGARDING THE CLAIM (PAGES 59 OF THE PAPER BOOK.) D) LETTER DATED 28.10.2005 TO DIVISIONAL MANAGER, UNITED INDIA INSURANCE FOR DEPUTING OF SURVEYOR. E) LETTER DATED 22 ND FEBRUARY, 2006 BY SENIOR MANAGER (F&A) TO DIVISIONAL MANAGER, UNITED INDIA INSURANCE CO. LTD. STATING THAT THE ITA NOS. 3315 & 3531/DEL/2011 13 APPELLANT HAS NO OBJECTION IF THE CHEQUE IS MADE IN THE NAME OF SBI, LUDHINA. THE LETTER GIVERS DETAIL OF AMOUNT AND CHEQUE NUMBER WHICH WAS RECEIVED (PAGE 61 OF PAPER BOOK). F) LETTER DATED 22 ND FEBRUARY, 2006 REITERATING THE ABOVE POSITION. THIS IS IN INTERNAL NOTE WITH REGARD TO SETTLEMENT OF CLAIM WHICH ALSO GIVES THE DETAILS OF QUANTUM OF LOSS (PAGE 62 OF PAPER BOOK). G) DETAILS OF DAMAGED STOCK AND SALVAGE VALUE AND CLAIM RECEIVED (PAGE 63 OF PAPER BOOK). H) COPY OF BANK ACCOUNT SHOWING CREDIT OF CHEQUE IN THE ACCOUNT OF THE APPELLANT (PAGE 64 OF THE PAPER BOOK). B. SURAT A) DETAILS OF DAMAGED STOCK (PAGE 65-66 OF PAPER BOOK). B) COPY OF LETTER DATED 27.10.2004 FROM SURVEYOR M/S RAKESH NARULA AND CO., BARODA (PAGES 67 68 OF PAPER BOOK). C) COPIES OF INTER-OFFICE CORRESPONDENCE AND LETTER TO SURVEYOR DATED 4 TH MARCH, 2005 (PAGES 69-70 OF PAPER BOOK). D) COPY OF CLAIM DISBURSEMENT VOUCHER FROM UNITED INDIA INSURANCE CO. LTD. FOR ` 13,54,220/- (PAGE 71 OF PAPER BOOK). ITA NOS. 3315 & 3531/DEL/2011 14 E) COPY OF SURVEYORS REPORT. (PAGE 72 OF PAPER BOOK) TO PROVE SALVAGE VALUE (REFER PAGE 54 OF PAPER BOOK). F) COPY OF ACCOUNT IN THE BOOKS OF ACCOUNT OF APPELLANT REGARDING THE AMOUNT OF ` 15,01,846/- (PAGE 73 OF PAPER BOOK AS ALSO PAGE 54 OF PAPER BOOK). - MOOT QUESTION TO DECIDE IS WHETHER THE LOSS WAS INCURRED BY THE APPELLANT. THIS ANSWER TO THIS IS EVIDENT FROM THE DOCUMENTS FILED. THE QUANTUM IS BASED ON THE BOOKS OF ACCOUNT AND THE AMOUNTS RECEIVED FROM INSURANCE COMPANY. - RELIANCE ON THE ABOVE DOCUMENTS WITH REGARD TO THE CHENNAI AND SURAT CLAIM. - RELIANCE IN RESPECT OF ` 2,54,879/- ON THE AMOUNT OF LOSS RECORDED IN THE BOOKS OF ACCOUNT WHICH HAVE BEEN FOUND TO BE CORRECT. THESE HAVE DULY BEEN AUDITED AND TAX AUDIT REPORT HAS ALSO BEEN FILED. - RELIANCE IN RESPECT OF ADVANCES TO STAFF WRITTEN OFF ALLOWABLE IN VIEW OF THE DECISIONS IN THE CASE OF C.I.T. VS. TRIVENI ENGINEERING AND INDUSTRIES LTD. (8 TAXMANN.COM 135) (DELHI) (2010). ITA NOS. 3315 & 3531/DEL/2011 15 - RELIANCE PLACED ON WRITTEN SUBMISSION AND THE DECISIONS QUOTED THEREIN. (PAGES 6-7 OF PAPER BOOK.) - RELIANCE ON LETTER DATED 6.12.2010 ADDRESSED TO LD. COMMISSIONER OF INCOME TAX (APPEALS). (PAGES 12 AND 13 OF PAPER BOOK.) - LOSS OF STOCK IN TRADE IS A TRADING LOSS ALLOWABL E UNDER SECTION 28 ITSELF ON ORDINARY PRINCIPLES AS HELD BY APEX COURT DECISION IN 86 ITR 607 AND 15 ITR 155 (PATNA). THESE DECISIONS WERE QUOTED BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AND COPIES THEREOF WERE FILED WITH HIM. ALSO REFER TO C.I.T. VS. NAINITAL BANK LTD. (55 IT R 707) WHEREIN TRADING LOSS ALLOWED UNDER SECTION 10(1) OF 1922 ACT WHICH IS IN PARAMATERIA TO SECTION 28(I) OF THE PRESENT ACT. LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAN D RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 16.1 WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AN D PERUSED THE RECORDS. WE FIND THAT ASSESSING OFFICER AND LD. COMMISSIONER OF ITA NOS. 3315 & 3531/DEL/2011 16 INCOME TAX (APPEALS) HAS HELD THAT ASSESSEE HAS NO T FURNISHED RELEVANT DOCUMENTS IN SUPPORT OF THE CLAIM. HOWEV ER, IT IS THE CLAIM OF THE ASSESSEE THAT ADEQUATE DOCUMENTARY EVIDENCE WERE FURNISHED IN THIS REGARD. 16.2 UPON CAREFUL CONSIDERATION, WE ARE OF THE OPIN ION, THE MATTER NEEDS TO BE REMITTED TO THE FILE OF THE ASSESSING OF FICER TO CONSIDER THE ISSUE AFRESH, IN LIGHT OF THE ASSESSEES SUBMISSIONS AS ABOVE. 17. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED AND APPEAL FILED BY THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 24/11/2011. SD/ SD/ SD/ SD/- -- - SD/ SD/ SD/ SD/- -- - [ [[ [A.D. JAIN] A.D. JAIN] A.D. JAIN] A.D. JAIN] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 24/11/2011 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES