M/s Lakshmi Energy & Foods Ltd., Chandigarh V. ACIT, Chandigarh

ITA 347/CHANDI/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95722 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 7 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 20-07-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 28-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUSHIL VERMAN
• Keywords: Tax effect
• Section: 143(3); 80IB; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NO. 347/CHD/2013 ASSESSMENT YEAR: 2006-07 LAKSHMI ENERGY & FOODS LTD., VS THE ACIT, SCO 18-19, SECTOR 9-D, CENTRAL CIRCLE-I. CHANDIGARH. CHANDIGARH. PAN: AAACL3147J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUDHIR SEHGA L RESPONDENT BY : SHRI SUSHIL VERMAN DATE OF HEARING : 29.10.2015 DATE OF PRONOUNCEMENT : 27.11.2015 O R D E R PER BHAVNESH SAINI,JM THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS) CENTRAL, GURGAON DATED 23.01.2013 FOR ASSESSMENT YEAR 2006-07, CHALLENGING THE ORDER OF LD. CIT(APPEALS) IN UPHOLDING THE DISALLOW ANCE OF LOSS SUSTAINED IN SALE OF WHEAT AMOUNTING TO RS. 8,01,94,845/-. IT IS ALSO CLAIMED IN THE GROUND OF APPEAL THAT AUTHORITIES BELOW ARE NOT JUSTIFIED IN NOT CAR RYING OUT DIRECTIONS GIVEN BY ITAT WHILE SETTING ASIDE TH E ORDER OF THE ASSESSING OFFICER. 2 2. BRIEFLY THE FACTS OF THE CASE ARE THAT IN THIS C ASE ASSESSMENT UNDER SECTION 143(3)/153A OF THE ACT WAS COMPLETED AT RS. 42,82,36,985/- ON 30.12.2008. ADDITION OF RS. 18,21,20,035/- WAS MADE ON ACCOUNT OF LOSS CLAIMED BY THE ASSESSEE IN RESPECT OF LIFTING OF WHEAT BY M/S PEC LTD. THE ASSESSEE FILED APPEAL BE FORE LD. CIT(APPEALS)-I LUDHIANA AGAINST THE QUANTUM OF ADDITION OF RS. 18.21 CR MADE BY ASSESSING OFFICER. THE LD. CIT(APPEALS) VIDE ORDER DATED 27.10.2009 DISMIS SED THE APPEAL OF THE ASSESSEE. THE ASSESSEE PREFERRED APPEAL BEFORE THE APPELLATE TRIBUNAL, WHO VIDE ORDE R DATED 26.03.2010 RESTORED THE MATTER BACK TO THE FI LE OF ASSESSING OFFICER FOR FRESH ADJUDICATION. IN PURSU ANCE OF THE ORDER OF THE TRIBUNAL, THE ASSESSING OFFICER ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE TO FILE TH E INFORMATION REGARDING THE MATTER IN ISSUE I.E.; (I) TO FURNISH SUPPORTING DOCUMENTS PROVING THAT DAMAGED WHEAT WAS ACTUALLY SHIFTED TO KANDLA PORT UNDER CUSTODIANSHIP OF M/S RISHI SHIPPING LINE CHA APPOINTED BY M/S PEC LTD. AND DOCUMENTARY EVIDENCE THAT DAMAGED WHEAT WAS ACTUALLY EXPORTED BY M/S PEC LTD. II) FURNISH DOCUMENTARY EVIDENCE OF LEGAL REMEDY INITIATED OF CHEATING AGAINST OFFICIALS OF M/S PEC LTD. OR ANY FIR LODGED IN THE MATTER. 3 III) EXPLAIN IF THE LOSS WAS DETERMINED DURING THE ASSESSMENT YEAR UNDER APPEAL, IF NOT, PLEASE STATE WHEN WAS LOSS DETERMINED. IV) ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND LOSS COULD BE CLAIMED IN THE YEAR IN WHICH THE LOSS WAS DETERMINED. THEREFORE, EXPLAIN AS TO WHY LOSS IS ALLOWABLE IN ASSESSMENT YEAR UNDER APPEAL. 3. THE ASSESSING OFFICER CALLED FOR INFORMATION UND ER SECTION 133(6) ON CERTAIN POINTS FROM M/S PEC LTD. M/S PEC LTD. VIDE THEIR LETTER DATED 10.12.2010 PROVIDE D THE SAID INFORMATION. IT WAS INFORMED BY M/S PEC LTD. THAT TOTAL AMOUNT REALIZED ON SALE OF WHEAT WAS RS. 13,08,56,913/-. THE AMOUNT OF LOSS CLAIMED BY ASSESSEE WAS NOT INTIMATED BY M/S PEC LTD. AND IT W AS STATED THAT THIS IS TO BE ANSWERED BY THE ASSESSEE. IT WAS ALSO INFORMED THAT ASSESSEE HAS FILED LEGAL CAS E BEFORE HON'BLE PUNJAB & HARYANA HIGH COURT. 4. THE ASSESSEE SUBMITTED BEFORE ASSESSING OFFICER THAT ASSESSEE COMPANY HAS FILED COMPLAINT WITH HON' BLE PRIME MINISTER OF INDIA AND MATTER IS PENDING. IT WAS ALSO STATED THAT M/S PEC LTD. HAVE PAID A SUM OF RS . 8.5 CR AND OFFERED ANOTHER RS. 1.91 CR WHICH HAS NO T BEEN ACCEPTED BY THE ASSESSEE. IT WAS CONTENDED TH AT ASSESSEE'S ACCOUNTS ARE MAINTAINED ON MERCANTILE BA SIS AND WHEN LIABILITIES DENIED BY M/S PEC LTD., ASSESS EE IS 4 JUSTIFIED IN CLAIMING THE LOSS. THE ASSESSEE HAS A LSO TAKEN ALTERNATE PLEA THAT IN THE PERIOD RELEVANT FO R ASSESSMENT YEAR 2007-08, AMOUNT OF RS. 18.42 CR WAS SHOWN AS INCOME. THE FACT REMAINS THAT WHILE THE L OSS CLAIMED FOR THE ABOVE ASSESSMENT YEAR WAS SQUARED U P BY OFFERING THE SAME AS INCOME FOR ASSESSMENT YEAR 2007-08, WHILE THE FACT AS PER COPIES OF THE ACCOUN T IS THAT AN AMOUNT OF RS. 8.01 CR STILL OUTSTANDING AGA INST M/S PEC LTD. WHICH IS IRRECOVERABLE. IT WAS, THERE FORE, REQUESTED THAT NO ADVERSE INFERENCE MAY BE DRAWN AS THE RATE OF TAX IS SAME FOR ASSESSMENT YEAR UNDER A PPEAL I.E. 2006-07 AND ASSESSMENT YEAR 2007-08. IT WAS, THEREFORE, SUBMITTED THAT IF THE AMOUNT IS ADDED IN ASSESSMENT YEAR UNDER APPEAL, THE CORRESPONDING INCOME SHOWN IN THE SUBSEQUENT ASSESSMENT YEAR 2007 - 08 MAY BE REDUCED FROM THE INCOME OF THAT YEAR AND LOSS OF RS. 8,01,94,845/- MAY BE ALLOWED IN SUBSEQUENT ASSESSMENT YEAR 2007-08. 5. THE ASSESSING OFFICER, CONSIDERING THE ACCOUNTS OF THE ASSESSEE AND EXPLANATION NOTED THAT THE COMPANY HAS DEBITED RS. 18.42 CR AND CREDITED RS. 10.41 CR. IN THE LEDGER ACCOUNT OF M/S PEC LTD., AN AMOUNT OF RS . 8.01 CR HAS BEEN SHOWN AS DEBIT BALANCE. THUS, NO LOSS IS CLAIMED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND ACCORDINGLY THE LIABILITY OF LOSS IS NOT CRYSTALLIZ ED IN ASSESSMENT YEAR UNDER APPEAL AND ACCORDINGLY, LOSS 5 CLAIMED BY ASSESSEE WAS NOT ALLOWED AND ADDITION OF RS. 18,21,20,035/- WAS MADE AGAINST THE ASSESSEE. 6. THE AFORESAID ADDITION WAS CHALLENGED BEFORE LD. CIT(APPEALS) AND IT WAS EXPLAINED THAT AS PER THE DOCUMENTS ON RECORD, THE LOSS WAS INCURRED WHEN THE LIABILITY WAS DENIED BY M/S PEC LTD. THE ASSESSEE COULD NOT MAKE RECOVERY OF THE SAME THEREFORE, FILE D A COMPLAINT BEFORE THE HON'BLE PRIME MINISTER OF INDI A AND ULTIMATELY, THE ASSESSEE DID NOT GET THE AMOUNT IN QUESTION. THE ASSESSEE MAINTAINED ACCOUNTS ON MERCANTILE BASIS. THE SUPPLY OF WHEAT, ITS EXPORT AND LOSS SUSTAINED ARE THE ADMITTED FACTS BY NOW. SINC E M/S PEC LTD. DENIED ITS LIABILITY, THEREFORE NO DIS PUTE WAS LEFT. THE LD. CIT(APPEALS), HOWEVER, DID NOT A CCEPT CONTENTION OF THE ASSESSEE AND DISMISSED THE APPEAL OF THE ASSESSEE ON THE REASON THAT QUANTUM OF LOSS HAD NOT CRYSTALLIZED DURING THE YEAR BECAUSE ASSESSEE HAVE NOT DEBITED ANY LOSS IN THE BOOKS OF ACCOUNT. 7. THE ASSESSEE IS IN APPEAL. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER MADE ADDITION OF RS. 18,21,20,035/- HOWEVER, HE HAS RESTRICTED THE ADDITION IN APPEAL TO RS. 8,01,94,84 5/- BECAUSE THE OTHER AMOUNTS WERE THE ADVANCE RECEIVED FROM M/S PEC LTD. AND THE BALANCE AMOUNT OF RS. 1. 91 CR WHICH WAS OFFERED BY M/S PEC LTD. AT THE CLOSE O F THE FINANCIAL YEAR. 6 8. THE ASSESSEE HAS ALSO FILED ADDITIONAL GROUND OF APPEAL WHICH READS AS UNDER : THAT THE APPELLANTS CLAIM FOR DEDUCTION UNDER SECTION 80IB(11A) BE ALLOWED SINCE THE APPELLANT QUALIFIES AND FULFILLS ALL THE CONDITIONS FOR THE SAID DEDUCTION AS PER ORDER OF ITAT CHANDIGARH BENCH. 9. THE LD. COUNSEL FOR THE ASSESSEE REFERRED TO ORD ER OF ITAT CHANDIGARH BENCH IN THE CASE OF THE SAME ASSES SEE DATED 26.02.2014 FOR ASSESSMENT YEAR 2008-09 AND 2009-10 IN ITA NO. 250/2013 AND OTHERS. THE LD. COUNSEL FOR THE ASSESSEE REFERRED TO PARA 57, 58, 6 8 AND 69 OF THE AFORESAID ORDER AND SUBMITTED THAT THE TRIBUNAL IN THESE PARAS OBSERVED THAT ASSESSMENT YE AR 2006-07 IN APPEAL MAY BE TAKEN TO BE THE FIRST YEAR OF THE NEW PROJECT FOR THE PURPOSE OF CLAIMING DEDUCTI ON UNDER SECTION 80IB(11A). HE HAS SUBMITTED THAT THE TRIBUNAL IN THESE PARAS HAS CONCLUDED THAT ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IB(11A) BECA USE THE ASSESSEE STARTED INTEGRATED BUSINESS OF HANDLIN G, STORAGE AND TRANSPORTATION OF FOODGRAINS IN FINANCI AL YEAR 2005-06 I.E. ASSESSMENT YEAR 2006-07. THE LD. COUNSEL FOR THE ASSESSEE, HOWEVER, FAIRLY STATED TH AT THE TRIBUNAL DID NOT ALLOWED DEDUCTION IN ASSESSMENT YE AR 2008-09 VIDE ORDER DATED 26.02.2014 BECAUSE THE RET URN OF INCOME WAS FILED LATE. THE LD. COUNSEL FOR THE ASSESSEE, THEREFORE, SUBMITTED THAT SINCE THIS ISSU E ARISE FROM THE EARLIER ORDER DATED 26.02.2014, 7 ADDITIONAL GROUND MAY BE ADMITTED AND RELIED UPON DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F NTPC LTD. 229 ITR 383. 10. ON THE OTHER HAND, LD. DR SUBMITTED THAT THIS I SSUE IS NOT ARISING OUT OF THE IMPUGNED ORDERS AND NO AU DIT REPORT WAS FILED BEFORE ASSESSING OFFICER AND ADMIT TEDLY THE RETURN OF INCOME IN ASSESSMENT YEAR UNDER APPEA L IS ALSO LATE, THEREFORE, ONCE ASSESSEE IS NOT ENTITLED FOR RELIEF AS CLAIMED FOR IN THE ADDITIONAL GROUND OF A PPEAL, THEREFORE, THERE IS NO NEED TO ADMIT THE ADDITIONAL GROUND OF APPEAL. 11. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE A RE OF THE VIEW THAT ADDITIONAL GROUND NEED NOT TO BE ADMITTED AT THIS STAGE. THE LD. COUNSEL FOR THE AS SESSEE HEAVILY RELIED UPON ORDER OF THE TRIBUNAL DATED 26.02.2014 (SUPRA) IN WHICH CERTAIN OBSERVATIONS HA VE BEEN GIVEN THAT ASSESSMENT YEAR 2006-07 UNDER APPEA L MAY BE TAKEN TO BE THE FIRST YEAR OF THE NEW PROJEC T SO AS TO CLAIM DEDUCTION UNDER SECTION 80IB OF THE INC OME TAX ACT. THE SIMILAR CLAIM OF ASSESSEE WAS, HOWEVE R, REJECTED BY THE SAME JUDGEMENT BECAUSE THE RETURN O F INCOME WAS FILED LATE. ADMITTEDLY, IN THE ASSESSME NT YEAR UNDER APPEAL ALSO, THE RETURN OF INCOME HAS BE EN FILED LATE AND AS SUCH, ASSESSEE WOULD NOT BE ENTIT LED FOR DEDUCTION UNDER SECTION 80IB OF THE ACT. THERE FORE, PRIMA-FACIE THERE IS NO NEED TO ADMIT THE ADDITIONA L GROUND OF APPEAL. CONSIDERING THE ABOVE DISCUSSION , WE 8 ARE NOT INCLINED TO ADMIT THE ADDITIONAL GROUND OF APPEAL. THE REQUEST OF ASSESSEE FOR ADMISSION OF ADDITIONAL GROUND OF APPEAL IS ACCORDINGLY, REJECTE D. 12. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PARTIES ON MERIT. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW AND REFERRED TO VARIOUS CORRESPONDENCE AND AGREEMENT IN QUESTION TO SHOW THAT ASSESSEE HAS SHI FTED WHEAT TO KANDLA PORT THROUGH THE AGENT OF M/S PEC L TD. WHICH WAS EXPORTED BY M/S PEC LTD. AND IN THAT WAY, THE ASSESSEE HAS SUFFERED LOSS FOR WHICH, COMPLAINT WAS ALSO MADE TO THE HON'BLE PRIME MINISTER OF INDIA. HE HAS SUBMITTED THAT ASSESSEE WAS GIVEN ADVANCE OF RS . 8.50 CR. AND M/S PEC LTD. OFFERED A SUM OF RS. 1.91 CR. IN ASSESSMENT YEAR UNDER APPEAL TOTALING TO RS. 10. 41 CR. THEREFORE, AS AGAINST CLAIM OF ASSESSEE OF RS. 18.21 CR., THE ASSESSEE SUFFERED LOSS ON ACCOUNT OF WHEAT EXPORTED THROUGH M/S PEC LTD. HE HAS SUBMITTED THAT SINCE LIABILITY OF RS. 8.01 CR WAS DENIED BY M/S PE C LTD. IN ASSESSMENT YEAR UNDER APPEAL, THEREFORE, LIABILITY HAS CRYSTALLIZED IN ASSESSMENT YEAR UNDER APPEAL AND ASSESSEE IS ENTITLED FOR DEDUCTION IN ASSESSMENT YEAR UNDER APPEAL. HE HAS SUBMITTED THA T EVEN IN SUBSEQUENT ASSESSMENT YEAR 2007-08, ASSESSE E HAS MADE A SIMILAR CLAIM BUT IT WAS REJECTED BY THE ASSESSING OFFICER. HE HAS SUBMITTED THAT ASSESSEE HAS BOOKED THE LOSS IN COMPUTATION OF INCOME IN ASSESSM ENT 9 YEAR UNDER APPEAL. THE ASSESSEE IS FOLLOWING MERCA NTILE SYSTEM OF ACCOUNTING, THEREFORE, LOSS IN THIS YEAR CANNOT BE DISPUTED. HE HAS SUBMITTED THAT TAX LIABILITY O F THE ASSESSEE IS SAME IN ASSESSMENT YEAR UNDER APPEAL AS WELL AS IN SUBSEQUENT ASSESSMENT YEAR, THEREFORE, REVENUE IS NOT GOING TO LOOSE ANYTHING AND AS SUCH, CLAIM OF ASSESSEE MAY BE ALLOWED IN ASSESSMENT YEAR UNDER APPEAL. HE HAS RELIED UPON FOLLOWING DECISIO NS : 1. KEDAR NATH JUTE MANUFACTURING CO. LTD. V CIT 82 ITR 363 2. CIT V SOUTHERN CABLES & ENGINEERING WORKS 289 ITR 167 3. CIT V SUGAR DEALERS 100 ITR 424 13. ON THE OTHER HAND, LD. DR RELIED UPON ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT LIABILITY HAS NOT CRYSTALLIZED IN ASSESSMENT YEAR UNDER APPEAL. THE CASE LAWS RELIED UPON BY ASSESSEE ARE NOT APPLICABLE TO THE FACTS OF THE CASE AND RELIED UPON DECISION IN THE C ASE OF SWADESHI COTTON MILLS 53 ITR 134 AND ALEMBIC CHEMIC AL WORKS LTD. VS. DCIT 266 ITR 47. 14. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. PB-54 IS A LETTER WRITTEN BY ASSESSING OFFICER TO M/S PEC LTD. CALLIN G FOR INFORMATION UNDER SECTION 133(6) VIDE LETTER DATED 26.11.2010 IN WHICH THE ASSESSING OFFICER ASKED FOR COPY OF THE AGREEMENT IN QUESTION DATED 11.08.2004, 10 QUANTITY OF WHEAT LIFTED FROM ASSESSEE BY M/S PEC L TD. AND COST THEREOF, QUANTITY OF WHEAT EXPORTED BY M/S PEC LTD. AND COST THEREOF, QUANTITY OF WHAT SOLD BY M/S PEC LTD., AMOUNT PAID/PAYABLE TO THE ASSESSEE ON THIS ACCOUNT, AMOUNT OF LOSS CLAIMED BY ASSESSEE AND WHETHER THE ISSUE HAS BEEN SETTLED BY M/S PEC LTD. PB- 56 IS THE REPLY DATED 10.12.2010 BY M/S PEC LTD. TO THE ASSESSING OFFICER WITH REGARD TO EXPORT OF THE WHEA T DONE BY M/S PEC LTD. ON BEHALF OF THE ASSESSEE AND POINT-WISE REPLY WAS SUBMITTED. COPY OF THE AGREEM ENT WITH ASSESSEE WAS SUPPLIED. QUANTITY OF WHEAT LIFT ED FROM ASSESSEE BY M/S PEC LTD. AND COST WAS INTIMATE D. THE QUANTITY RECEIVED AT KANDLA PORT AND BREAK-UP W AS INTIMATED. THE COST WAS NOT EXPLAINED AS COST OF W HEAT WAS NOT FIXED. HOWEVER, M/S PEC LTD. RELEASED AN ADVANCED PAYMENT @ RS. 2750/- PER MT. THE COST OF THE SAID WHEAT WAS DEPENDING ON REALIZATION OF EXPORT PROCEEDS UNDER LETTER OF CREDIT MINUS SERVICE CHARG ES OF M/S PEC LTD. THE QUANTITY OF WHEAT EXPORTED BY M/S PEC LTD. AND THE AMOUNT REALIZED WAS RS. 13.05 CR. THE QUANTITY OF WHEAT SOLD BY M/S PEC LTD. IN DOMES TIC MARKET EXPLAINED. THE AMOUNT PAID TO ASSESSEE WAS RS.8.69 CR AND FURTHER THE LOSS CLAIMED BY ASSESSEE WAS TO BE ANSWERED BY THE ASSESSEE HIMSELF. 14I) PB- 62 IS THE AGREEMENT BETWEEN ASSESSEE AND M/S PEC LTD. DATED 11.08.2004 IN WHICH IT WAS AGREE D THAT M/S PEC LTD. WILL PAY ON ACCOUNT TO THE ASSESS EE @ 11 RS. 5500 PMT UPTO 50% OF THE RECEIPTED QUANTITY BY M/S PEC LTD. AT GANDHI NAGAR/KANDLA PORT. THE BALANCE PAYMENT SHALL BE REALIZED TO THE ASSESSEE AFTER REALIZATION OF THE EXPORT PROCEEDS UNDER I/C AFTER DEDUCTING SERVICE CHARGES ETC. BY M/S PEC LTD. PB-4 9 IS LETTER DATED 05.03.2007 BY MINISTRY OF COMMERCE & INDUSTRY, DEPARTMENT OF COMMERCE ADDRESSED TO THE ASSESSEE ON ACCOUNT OF COMPLAINT MADE BY ASSESSEE T O HON'BLE PRIME MINISTER OF INDIA ON 01.06.2006 IN WH ICH THE MINISTRY OF COMMERCE & INDUSTRY INTIMATED THE ASSESSEE THAT THE DISPUTE BETWEEN ASSESSEE AND M/S PEC LTD. IS OF COMMERCIAL NATURE AND LETTER OF M/S PEC LTD. DATED 29.06.2006 WAS ATTACHED WITH THE SAME RE PLY AND ASSESSEE WAS REQUESTED TO SETTLE THE DISPUTE WI TH M/S PEC LTD. THE LETTER DATED 29.06.2006 ISSUED BY M/S PEC LTD. TO THE MINISTRY OF COMMERCE & INDUSTRY IS FILED AT PAGE 50 OF THE PAPER BOOK WITH TRUE TRANSL ATION IN WHICH M/S PEC LTD. INTIMATED THE MINISTRY OF COMMERCE & INDUSTRY THAT ASSESSEE APPROACHED M/S PEC LTD. FOR EXPORT OF THE WHEAT WHICH THE ASSESSEE HAD OBTAINED THROUGH AUCTION FROM STATE AGENCIES IN PUN JAB. IT WAS DONE THROUGH AGREEMENT DATED 11.08.2004 AND AS PER AGREEMENT, M/S PEC LTD. WAS TO EXPORT THE QUANTITIES PROVIDED BY THE ASSESSEE AT FIXED MARGIN WHILE ENTIRE PROFIT AND LOSS TO THE ACCOUNT OF ASSE SSEE. THE ASSESSEE, AT THE TIME OF AGREEMENT, WAS CONFIDE NT OF SUBSIDY WHICH WAS TO BE ANNOUNCED BY THE GOVERNMENT ON EXPORT OF THE WHEAT WHICH WAS NOT ULTIMATELY 12 ANNOUNCED BY THE GOVERNMENT. THE INTERNATIONAL PRIC E OF WHEAT AT THAT TIME REMAINED LOW WHICH DID NOT MEET THE EXPECTATION OF THE ASSESSEE. THE EXPORTS WERE MADE AFTER SIX MONTHS OF THEIR BEING STORED AT KANDLA WH ICH LED TO DETERIORATION OF THE WHEAT MAKING IT TOTAL U NFIT FOR EXPORT. AFTER FINALIZATION OF THE ACCOUNTS, ASSESS EE WAS OFFERED THE BALANCE AMOUNT OF RS. 1.91 CR DUE TO TH EM BUT ASSESSEE REFUSED TO ACCEPT. 15. THE REPLY OF THE ASSESSEE BEFORE ASSESSING OFFI CER IS FILED AT PAGE 58 OF THE PAPER BOOK DATED 12.12.2 010 IN WHICH THE ASSESSEE EXPLAINED THAT IN ASSESSMENT YEAR 2007-08, AN AMOUNT OF RS.18.42 WAS SHOWN AS INCOME AND ASSESSEE MAINTAINED ACCOUNTS ON MERCANTILE BASI S, THEREFORE, SINCE LIABILITY WAS DENIED BY M/S PEC LT D. IN ASSESSMENT YEAR UNDER APPEAL, THEREFORE, ASSESSEE CORRECTLY CLAIMED THE LOSS IN ASSESSMENT YEAR UNDER APPEAL. PB-60 SHOWS LOSS OF RS. 18.42 CR WHICH WAS ADDED IN THE COMPUTATION OF INCOME FOR ASSESSMENT Y EAR 2007-08. PB-1 IS THE COMPUTATION OF INCOME FILED W ITH THE RETURN OF INCOME FOR ASSESSMENT YEAR UNDER APPE AL I.E. 206-07 IN WHICH THE ASSESSEE HAS CLAIMED LOSS AGAINST STOCK OF THE WHEAT IN A SUM OF RS. 18,42,94,845/-. THEREFORE, THE ASSESSEE BOOKED THE LOSS IN ASSESSMENT YEAR UNDER APPEAL AS PER MERCANTILE SYSTEM OF ACCOUNTING. THE ASSESSEE FILED RETURN OF INCOME ON 26.03.2007, AFTER LETTER DATED 05.03.2007 13 RECEIVED FROM DEPARTMENT OF COMMERCE, MINISTRY OF COMMERCE & INDUSTRY. 16. THE ASSESSEE ALSO PLACED ON RECORD LETTER DATED 11.03.2005 ISSUED BY M/S PEC LTD. TO THE ASSESSEE I N WHICH ASSESSEE WAS INTIMATED OF THE MATTER IN ISSUE WITH REFERENCE TO THE EXPORT OF THE WHEAT THROUGH M /S PEC LTD. VIDE AGREEMENT DATED 11.08.2004 AND IT WAS INTIMATED THAT THE MAJOR QUANTITY OUT OF THE TOTAL STOCK HAS SINCE BEEN EXPORTED, THEREFORE, ASSESSEE WAS REQUESTED TO ATTEND THEIR OFFICE AT DELHI FOR FINAL IZATION OF THE ACCOUNTS/STOCK. 16(I) THE ASSESSEE HAS ALSO PLACED ON RECORD LETT ER DATED 06.08.2005 WRITTEN BY ASSESSEE TO M/S PEC LTD . FOR SETTLEMENT OF THE DUES IN RESPONSE TO THE LETTE R DATED 11.03.205 IN WHICH THE ASSESSEE HAS REFERRED TO THE IR DISCUSSION WITH THEM HELD IN MARCH/APRIL,2005 AND T HE ASSESSEE REQUESTED M/S PEC LTD. TO RELEASE THE TOTA L PAYMENT OF RS. 18.42 CR WITHIN A WEEK FROM THE RECE IPT OF THIS LETTER. THE ASSESSEE ALSO PLACED ON RECORD LETTER DATED 01.06.2006 ADDRESSED TO HON'BLE PRIME MINISTE R OF INDIA REGARDING HUGE LOSS SUFFERED BY ASSESSEE ON E XPORT OF WHEAT THROUGH M/S PEC LTD. AND CHEATING AND FRAU D BY THE OFFICIALS OF THE M/S PEC LTD. THE ENTIRE FA CTS OF EXPORTS WERE NARRATED IN THIS LETTER THROUGH M/S PE C LTD. AND IT WAS HIGHLIGHTED THAT THE OFFICIALS OF T HE M/S PEC LTD. HAVE CHEATED THE ASSESSEE BY TAKING KICK-B ACK IN THE TRANSACTION BECAUSE THE ASSESSEE HAS NOW BEE N 14 OFFERED A LESSER PRICE AS AGAINST THE HIGHER PRICE AGREED AT THE TIME OF EXPORT. THE ASSESSEE ASKED FOR CIVI L AND CRIMINAL ACTION IN THE MATTER AGAINST THE OFFICIALS OF M/S PEC LTD. 16(II) THESE FACTS CLEARLY PROVE AND INDICATE THAT AMOUNT WAS IRRECOVERABLE IN ASSESSMENT YEAR 2006-07 , SINCE THE SUPPLY HAD CONCLUDED IN THE BEGINNING OF ASSESSMENT YEAR 2006-07, THEREFORE, LOSS HAD CRYSTALLIZED DURING ASSESSMENT YEAR 2006-07 WHICH W AS, THEREFORE, RIGHTLY TAKEN INTO THE COMPUTATION OF IN COME FILED BY ASSESSEE ALONGWITH RETURN OF INCOME. IT M AY BE NOTED HERE THAT ULTIMATELY WHEN THE M/S PEC LTD. OFFERED BALANCE AMOUNT OF R. 1.91 CR TO THE ASSESSE E AS PER THEIR ACCOUNTS SETTLED IN ASSESSMENT YEAR UNDER APPEAL, THE AMOUNT WAS ALSO NOT REALIZED. THEREFOR E, ASSESSEE HAD TO TAKE RECOURSE IN FILING WRIT PETITI ON BEFORE HON'BLE DELHI HIGH COURT AND VIDE ORDER DATE D 03.11.2014, THE BALANCE AMOUNT DETERMINED EARLIER W AS RELEASED TO THE ASSESSEE. 17. CONSIDERING THE ABOVE FACTS AND MATERIAL ON REC ORD, IT IS CLEAR THAT ASSESSING OFFICER DID NOT DISPUTE LOSS SUFFERED BY ASSESSEE ON ACCOUNT OF EXPORT OF WHEAT MADE THROUGH M/S PEC LTD. AND THE AGENT. IT IS ALSO NOT IN DISPUTE THAT THE WHEAT WAS ACTUALLY SHIFTED TO KAND LA PORT THROUGH THE AGENT WHICH WAS EXPORTED BY M/S PE C LTD. ON BEHALF OF THE ASSESSEE. THE ITAT CHANDIGAR H BENCH ALSO, WHILE REMANDING THE MATTER EARLIER HAD 15 CONSIDERED THIS ISSUE AND OBSERVED THAT FINDINGS OF AUTHORITIES BELOW ARE INCORRECT WITH REGARD TO EXPO RTS MADE BY THE ASSESSEE THROUGH M/S PEC LTD. THEREFOR E, THE FACTS AND CIRCUMSTANCES AND MATERIAL ON RECORD CLEARLY JUSTIFY THE SUBMISSIONS OF THE ASSESSEE THA T ACTUALLY WHEAT WAS SHIFTED TO M/S PEC LTD. WHO IN T URN HAVE EXPORTED THE SAME AND REALIZED THE LESSER AMOU NT. M/S PEC LTD. ALSO IN THEIR REPLY UNDER SECTION 133( 6) INTIMATED THE ASSESSING OFFICER ABOUT THE WHEAT SUPPLIED BY ASSESSEE AND EXPORTED AND THE AMOUNT REALIZED WAS RS.13.05 CR. THEREFORE, AS AGAINST TH E CLAIM OF ASSESSEE OF RS. 18.42 CR, THE LESSER AMOUN T WAS REALIZED BY M/S PEC LTD. AS SUCH, ASSESSEE HAS BEE N ABLE TO PROVE THAT IN ASSESSMENT YEAR UNDER APPEAL, ASSESSEE HAS SUFFERED LOSS ON ACCOUNT OF EXPORT OF THE WHEAT THROUGH M/S PEC LTD. PB-52 IS REPLY OF M/S P EC LTD. TO MINISTRY OF COMMERCE & INDUSTRY WHICH SHOWS THAT AMOUNTS SETTLED PRIOR TO THIS REPLY MEANING THEREBY, BEFORE CLOSE OF FINANCIAL YEAR ON 31.03.20 06. THEREFORE, CONSIDERING THE AVERMENTS CONTAINED IN T HE LETTER OF M/S PEC LTD. DATED 11.03.2005 FOR SETTLEM ENTS OF ACCOUNT (SUPRA), REPRESENTATION OF THE ASSESSEE DATED 06.08.2005 (SUPRA) DEMANDING RELEASE OF TOTAL AMOUN T OF RS. 18.42 CR WITHIN ONE WEEK FROM RECEIPT OF THIS L ETTER AND LETTER DATED 29.06.2006 WRITTEN BY M/S PEC LTD. TO MINISTRY OF COMMERCE & INDUSTRY, MAKES IT CLEAR THA T WHEAT SUPPLIED BY ASSESSEE WAS EXPORTED AT LESSER P RICE BY M/S PEC LTD. THE ASSESSEE'S ACCOUNTS WERE SETTL ED 16 BY M/S PEC LTD. BY OFFERING SMALL AMOUNT (RS.1.91 C R IN FINANCIAL YEAR 2005-06 AGAINST TOTAL CLAIM OF ASSES SEE OF RS. 18.24 CR) WHICH WAS REFUSED TO ACCEPT BY ASSESS EE AND TOOK ACTION AGAINST M/S PEC LTD. BUT DID NOT SUCCEED. THEREFORE, ON MERCANTILE SYSTEM OF ACCOUN TING MAINTAINED BY ASSESSEE, ASSESSEE SUFFERED LOSS AGAI NST STOCK/EXPORT OF WHEAT IN ASSESSMENT YEAR UNDER APPE AL AND THE QUANTUM OF LOSS HAS CRYSTALLIZED DURING THE ASSESSMENT YEAR UNDER APPEAL I.E. 2006-07. 18. HON'BLE SUPREME COURT IN THE CASE OF KEDAR NATH JUTE MANUFACTURING CO. LTD. 82 ITR 363 HELD AS UNDE R : STATUTORY LIABILITY FOR SALES-TAX INCURRED BY ISSUE OF NOTICE BY THE AUTHORITIES IS DEDUCTIBLE NOTWITHSTANDING THE FACT THAT THE LIABILITY IS DISPUTED BY THE ASSESSEE AND NO PROVISION FOR THE SAME HAS BEEN MADE IN THE ACCOUNTS, WHICH IS MAINTAINED AS PER MERCANTILE SYSTEM. 19. HON'BLE KERALA HIGH COURT IN THE CASE OF SOUTHE RN CABLES & ENGINEERING WORKS 289 ITR 167 HELD AS UNDE R: ELECTRICITY BOARD HAVING MADE A DEDUCTION TOWARDS PENALTY FROM ASSESSEE'S BILLS FOR DELAYED SUPPLIES RE LATING TO ACCOUNTING YEAR 1989-90, LIABILITY ACCRUED DURIN G THE ACCOUNTING PERIOD 1989-90 RELEVANT TO ASST. YR. 199 0-91 AND SINCE THE ASSESSEE IS FOLLOWING MERCANTILE SYSTE M OF ACCOUNTING, IT OUGHT TO HAVE CLAIMED DEDUCTION THER EOF IN THAT YEAR ITSELF IRRESPECTIVE OF THE FACT THAT THE ASSESSEE WAS MAKING EFFORTS TO GET THE PENALTY WAIVED AND KSE B REFUNDED CERTAIN SUM TO THE ASSESSEE IN THE LATER YE AR. 17 20. HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF SUG AR DEALERS 100 ITR 424 HELD AS UNDER : FOREFEITURE OF SECURITY FOR INABILITY TO COMPLY WITH STIPULATED TERMS OF A PURCHASE CONTRACT WAS ATTRIBU TABLE TO BUSINESS AND LOSS OCCURRED TO ASSESSEE AT THE TIME WHEN FOREFEITURE TOOK PLACE THOUGH ASSESSEE SUBSEQUENTLY CONTESTED HIS LIABILITY AND TOOK PROCEEDINGS FOR RECOV ERY OF SECURITY. THEREFORE, CLAIM OF ASSESSEE OF CLAIMING LOSS ON AC COUNT OF EXPORT OF THE WHEAT IS JUSTIFIED IN ASSESSMENT Y EAR UNDER APPEAL. 21. IT MAY ALSO BE NOTED HERE THAT THE ASSESSING OF FICER DID NOT ALLOW THE SIMILAR LOSS IN SUBSEQUENT ASSESS MENT YEAR 2007-08 IN ORDER DATED 143(3) OF THE ACT DATED 30.12.2010, DESPITE THE ASSESSEE HAS ADDED LOSS ON STOCK OF RS. 18.42 CR IN THE COMPUTATION OF INCOME FILED FOR ASSESSMENT YEAR 2007-08. IT MAY ALSO BE NOTED HERE THAT IN ASSESSMENT YEAR UNDER APPEAL I.E. 2006-07, THE ASSESSEE FILED RETURN OF INCOME DECLARING INCOME OF RS. 24.61 CR AND IN ASSESSMENT YEAR 2007-08, THE ASSESS EE DECLARED TOTAL INCOME OF RS. 42.79 CR. AND THE ASSE SSEE ADDED RS. 18.42 CR IN THE INCOME FOR ASSESSMENT YEA R 2007-08 BUT NO BENEFIT HAVE BEEN GIVEN BY THE ASSES SING OFFICER. IT IS, THEREFORE, CLEAR THAT EVEN IN THE PRESENT CASE, THE RATE OF TAX REMAINED THE SAME IN THE ASSESSMENT YEAR UNDER APPEAL I.E. 2006-07 AND 2007- 08 18 AND REVENUE IS NOT GOING TO LOOSE ANYTHING EVEN IF THE LOSS AND DEDUCTION IS ALLOWED IN ASSESSMENT YEAR UN DER APPEAL 2006-07. 22. HON'BLE PUNJAB & HARYANA HIGH COURT IN ITS RECE NT UNREPORTED DECISION IN THE CASE OF CIT V VEE GEE INDUSTRIAL ENTERPRISES IN ITA NO. 187 OF 2014 DATED 28.07.2015 FOLLOWING THE JUDGEMENT OF DELHI HIGH CO URT IN THE CASE OF DINESH KUMAR GOYAL 331 ITR 10 AND DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CI T V EXCEL INDUSTRIES LTD. 358 ITR 295 HELD AS UNDER : 8. IT WAS CONCEDED THAT EVEN IN THE PRESENT CASE, THE RATE OF TAX REMAINED THE SAME IN BOTH THE ASSESSMENT YEARS I.E. 2005-06 AND 2007- 08. FOLLOWING THE ABOVE JUDGMENT OF THE HON'BLE SUP REME COURT, IT MUST BE HELD THAT THE DISPUTE RAISED BY THE REVENUE IS ESSENTIALLY ACADEMIC. THE ISSUE MAY HAVE SOME TAX EFFECT IN THA T IF THE DEPARTMENT IS CORRECT AND THE AMOUNT OUGHT TO HAVE BEEN BROUGH T TO TAX TWO YEARS EARLIER, THERE WOULD BE LOSS OF INTEREST FOR TWO YE ARS ON THE AMOUNT OF 31,10,000/-. THE DEPARTMENT HAS NOT RAISED THE CLAI M IN THAT REGARD. WE DO NOT WISH TO EXPRESS ANY OPINION AS TO THE RIG HT OF THE DEPARTMENT TO CLAIM INTEREST. 9. IN THE CIRCUMSTANCES, THE QUESTIONS OF LAW, THEREFO RE, ARE DECIDED IN FAVOUR OF THE ASSESSEE. THE APPEAL, IS, THEREFORE, DISMISSED. 23. CONSIDERING THE ABOVE DISCUSSION AND MATERIAL O N RECORD, WE ARE OF THE VIEW THAT ASSESSEE HAS SUFFER ED GENUINE LOSS ON ACCOUNT OF EXPORT OF WHEAT THROUGH M/S PEC LTD. WHICH LOSS HAS CRYSTALLIZED DURING THE ASSESSMENT YEAR UNDER APPEAL. THEREFORE, AUTHORITI ES BELOW WERE NOT JUSTIFIED IN DECLINING TO ALLOW DEDU CTION 19 OF THE SAME. WE, ACCORDINGLY, SET ASIDE THE ORDERS OF AUTHORITIES BELOW AND DELETE THE ADDITION OF RS. 8,01,94,845/- ON ACCOUNT OF DISALLOWANCE OF LOSS SUSTAINED IN SALE OF WHEAT. 24. IN THE RESULT, APPEAL OF THE ASSESSEE ON THIS I SSUE IS ALLOWED. 25. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (ANNAPURNA MEHROTRA) (BHAVNESH SAI NI) ACCOUNTANT MEMBER JUDICIAL MEMBE R DATED: 27 TH NOVEMBER,2015. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT CHANDIGARH