Asstt. Commissioner of Income Tax-6, Kanpur V. M/s J.K Cotton Spg. & Wvg. Mills Co. Ltd., Kanpur

ITA 40/LKW/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78605 (ITAT-LUCKNOW)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 20-06-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 20-01-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R K RAM
• Assessee Lawyers: P K KAPOOR
• Section: 68

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.40/LKW/2014 ASSESSMENT YEAR:2009 - 10 A.C.I.T. - 6, KANPUR. VS. M/S J. K. COTTON SPG. & WVG. MILLS CO. LTD., KAMLA TOWER, KANPUR. PAN:AAACJ3417B (APPELLANT) (RESPONDENT) APPELLANT BY SHRI R. K. RAM, D. R. RESPONDENT BY SHRI P. K. KAPOOR, C.A. DATE OF HEARING 20/06/2014 DATE OF PRONOUNCEMENT 0 4 /07/2014 O R D E R PER A. K. GARODIA, A.M. THIS IS REVENUES APPEAL DIRECTED AGAINST THE ORDER PASSED BY LEARNED CIT (A) - II, KANPUR DATED 11/10/2013 FOR ASSESSMENT YEAR 2009 - 2010. 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: 1. THE C I T(A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE RELIEF OF RS.91,71,019/ - WITHOUT A PPRECIATING THE FACTS THAT IT WAS ONLY THE PRESUMPTION OF THE BOARD OF THE COMPANY, THAT THE GOODS LYING IN THE CONTROL OF THE CUSTOMS DEPARTMENT AT MUMBAI MIGHT HAVE DETERIORATED IN ITS QUALITY AND LOST THEIR ECONOMIC UTILITY. 2. THE CIT(A) HAS ERRED IN LA W AND ON FACTS IN ALLOWING THE RELIEF OF RS.91,71,019/ - WITHOUT APPRECIATING THE FACTS THAT THE ASS E SSEE HAS NOT FILED ANY DOCUMENTARY EVIDENCE BEFORE THE A O REGARDING ACCEPTANCE OF THE CONTENTION OF THE ASSESSEE BY COMMISSIONER OF CUSTOMS , MUMBAI EXCEPT 2 A SIMPLE REQUEST LETTER ADDRESSED TO THE COMMISSIONER, CUSTOMS . 3. THE ORDER OF THE CIT(A), KANPUR BEING ERRONEOUS, UNJUST AND BAD IN LAW BE VACATED AND THE ORDER OF THE AO BE RESTORED. 4. THAT THE APPELLANT CRAVES LEAVE TO MODIFY ANY OF THE GROUNDS OF APPEAL OR TAKE ADDIT IO NAL GROUND DURING THE PENDENCY OF THIS APPEAL. 3. BRIEF FACTS OF THE CASE TILL THE ASSESSMENT STAGE ARE NOTED BY CIT(A) IN PARA 1 OF HIS ORDER ON PAGE NO. 2 AND THE SAME IS REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE : 1. THE DISALLOWANCE MADE BY THE A.O. IN THE ASSESSMENT ORDER AT PARA 10 AT PAGE 4 & 5 WITH THE FOLLOWING REASONS : - 'THE ASSESSEE COMPANY HAD SUBMITTED THAT GOODS WERE IMPORTED IN THE YEAR 1988 AND 1989 AS STORED IN BONDED WAREHOUSE FOR MORE THAN 20 YEARS MIGHT HAVE DETERIORATE ITS QUALITY AND LOST MORE THAN 20 YEARS, MIGHT HAVE DETERIORATE ITS QUALITY AND LOST THEIR EC ONOMIC UTILITY AND AS PER BOARD DECISION, THE SAME IS WRITTEN OFF DURING THE YEAR. HE HAS ALSO FILED A LETTER ADDRESSED TO THE COMMISSIONER OF CUSTOMS, MUMBAI DATED 10 TH MARCH, 2009 INFORMING THEM THAT THE GOODS STORED IN THE BONDED WAREHOUSE ARE LYING WITH THEM FOR MORE THAN TWENTY YEARS AND THE GOODS LOST THEIR ECONOMIC UTILITY, HENCE, REQUESTED THE COMMISSIONER OF CUSTOMS TO RELINQUISHMENT OF TITLE ON THE GOODS U/S 68 OF THE CUSTOMS ACT, 1962'. THE CONTENTION OF THE ASSESSEE COMPANY IS NOT ACCEPTABLE , IN VIEW OF THE FACT THAT I T IS SIMPLE A REQUEST LETTER MADE BY THE COMPANY TO THE COMMISSIONER OF CUSTOMS, MUMBAI RIND NO DOCUMENTARY EVIDENCE HAS BEEN PRODUCED BEFORE ME THAT THE COMMISSIONER OF C USTOMS. MERELY BY MAKING A REQUEST WILL NOT BE TREATED TH E RELINQUISHMENT OF TITLE OF THE A SS E SSEE COMPANY. 3 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A), WHO HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT RENDERED IN THE CASE OF ZENITH STEEL PIPES LTD. (NO. 2) VS COMMISSIONER OF INCOME - TAX AS REPORTED IN [1990] 186 ITR 594 (BOM) . NOW THE REVENUE IS IN APPEAL BEFORE US. 5. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF CIT(A). HE PLACED RELIANCE ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS: (I) ZENITH STEEL PIPES LTD. (NO. 2) VS COMMISSIONER OF INCOME - TAX [1990] 186 ITR 594 (BOM) (II) CHAINRUP SAMPATRAM VS COMMISSIONER OF INCOME - TAX [1953] 24 ITR 481 (SC) (III) COMMISSIONER OF INCOME - TAX VS HARYANA SHEET GLASS LTD. [2009] 318 ITR 173 (DEL) 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND THE JUDGMENTS CITED BY LEARNED A.R. OF THE ASSESSEE. WE FIND THAT THIS IS THE OBJECTION OF THE ASSESSING OFFICER THAT A SIMPLE REQUEST MADE BY THE ASSESSEE COMPANY BY WAY OF LETTER TO COMMISSIONER OF CUSTOMS, BOMBAY WHICH IS NOT ACCEPT ED BY T HE COMMISSIONER OF CUSTOMS, BOMBAY TILL 2012 IS A MERE REQUEST AND IT CANNOT BE TREAT ED RELINQUISHMENT OF TITLE OF THE ASSESSEE COMPANY. ON THIS BASIS, HE DISALLOWED THE CLAIM OF THE ASSESSEE. THE CLAIM OF THE ASSESSEE WAS ALLOWED BY CIT(A) ON THE BASIS THAT IT IS FOR THE ASSESSEE TO DECIDE WHETHER IT WAS IN THE INTEREST OF THE ASSESSEE TO CLEAR THE GOODS OR NOT AS IT WOULD HAVE AMOUNTED TO WASTE OF MONEY BY INCREASING FURTHER EXPENDITURE BY WAY OF WHARFAGE, DEMURRAGE ETC. HE HAS FOLLOWED THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT RENDERED IN THE CASE OF ZENITH STEEL PIPES LTD. (NO. 2) VS COMMISSIONER OF INCOME - TAX (SUPRA). IN THIS CASE, THE CONSIGNMENT WAS NOT BEING TRACED FOR A SUFFICIENTLY LONG TIME AND IT WAS 4 TRACED ONLY AS A RESULT OF THE EFFORTS MADE BY THE ASSESSEES AGENTS, TO WHOM THE ASSESSEE HAD TO PAY CERTAIN FEES. IN SPITE OF THIS, THE ASSESSEE DID NOT TAKE THE DELIVERY OF RUSTED GOODS AND SAME WERE WRITTEN OFF. LOSS AS WELL AS FESS PAID TO AGENTS WERE DISALLOWED BY THE A.O. BUT WAS HELD TO BE ALLOWABLE AS PER HON'BLE BOMBAY HIGH COURT. IN THAT CASE , THERE WAS CERTAINTY T HAT THE GOODS WERE RUSTED AND THEREFORE, THE ASSESSEE DID NOT TAKE DELIVERY OF THE SAME. IN THE PRESENT CASE, THERE IS NO SUCH CERTAINTY BECAUSE IN THE PRESENT CASE, THE ASSESSEE HAS MADE A REQUEST TO COMMISSIONER OF CUSTOMS, BOMBAY AS PER LETTER DATED 10 /03/2009 IN WHICH IT HAS BEEN STATED BY THE ASSESSEE THAT SINCE THE GOODS STORED IN THE BONDED WAREHOUSE FOR MORE THAN 20 YEARS MIGHT HAVE ROTTEN AND LOST THEIR ECONOMIC UTILITY, THE ASSESSEE APPLIED FOR RELINQUISHMENT OF THEIR RIGHTS IN THE SAID GOODS UND ER PROVISO TO SECTION 68 OF THE CUSTOMS ACT, 1962. AS PER THIS LETTER, THE ASSESSEE REQUESTED TO GRANT PERMISSION AND TO TAKE CHARGE OF THE ABANDONED GOODS. BEFORE US, LEARNED A.R. OF THE ASSESSEE HAS PRODUCED A LETTER DATED 16/05/2012 RECEIVED BY THE AS SESSEE FROM THE COMMISSIONER OF CUSTOMS , CENTRAL EXCISE AND SERVICE TAX , KANPUR IN WHICH IT WAS STATED THAT THE COMMISSIONER HAS ACCEPTED THE REQUEST OF THE ASSESSEE REGARDING RELINQUISHMENT AS PER LETTER DATED 16/02/2009 AND SUBSEQUENT LETTERS DATED 01/03 /2012 AND 29/03/2012. IN THIS LETTER, IT IS ALSO STATED BY COMMISSIONER OF CUSTOMS THAT THE ASSESSEE HAS ALSO ENCLOSED ORDERS OF BIFR & AAIFR. THE COPIES OF THESE ORDERS OF BIFR & AAIFR HAVE NOT BEEN BROUGHT ON RECORD BEFORE US. IN OUR CONSIDERED OPINIO N, EVEN THIS ACCEPTANCE OF THE ASSESSEES REQUEST REGARDING RELINQUISHMENT OF ITS RIGHT WERE IN LINE WITH THE ORDER OF BIFR & AAIFR AS PER WHICH IT IS STATED BY COMMISSIONER OF CUSTOMS THAT THE CLAIM OF THE DEPARTMENT WILL PREVAIL ON THE GOODS PUT IN GODOW N. HENCE, IN OUR CONSIDERED OPINION, THE RELINQUISHMENT OF ASSESSEES RIGHT AND ITS ACCEPTANCE IS ON THE BASIS OF THESE ORDERS OF BIFR & AAIFR AND IT IS CLEAR THAT THESE ORDERS ARE SUBMITTED TO COMMISSIONER OF CUSTOMS AS PER SUBSEQUENT LETTERS OF THE ASSE SSEE DATED 01/03/2012 AND 5 29/03/2012 . NEITHER THESE TWO LETTER NOR THESE ORDERS OF BIFR & AAIFR HAVE BEEN BROUGHT ON RECORD BEFORE US. MOREOVER, AS PER THIS LETTER OF COMMISSIONER OF CUSTOMS DATED 16/05/2012, THEY HAVE AGREED IN THESE TERMS THAT TILL THE DATE THE GOODS ARE NOT DISPOSED OF BY WAY OF AUCTION OR SHIFTING FROM BONDED WAREHOUSE , THEY WILL NOT CHARGE ANY RENT ETC. HENCE, EVEN AS PER THIS LETTER , THEY HAVE WAIVED THE CHARGING OF RENT ONLY AND IT IS NOT CLEAR AS TO WHETHER THE RELINQUISHMENT OF THE ASSESSEES RIGHT HAS BEEN ACCEPTED OR NOT AND WHETHER THEY HAVE WAIVED THE CUSTOMS DUTY OR NOT. IN CASE , THE SALE PROCEEDS ON ACCOUNT OF AUCTION OF THO SE GOODS IS ADJUSTED AGAINST CUSTOMS DUTY PAYABLE BY THE ASSESSEE COMPANY THEN THE SALE PROCEEDS OF SUCH GOODS LYING WITH BONDED WAREHOUSE HAS TO BE CONSIDERED AS SALE OF GOODS AND PAYMENT OF CUSTOMS DUTY IS ALLOWABLE AS EXPENDITURE BUT IN THE YEAR OF PAYM ENT OF SUCH CUSTOMS DUTY IN VIEW OF THE SECTION 4 3B . IN ANY CASE , THE DEDUCTION CLAIMED BY THE ASSESSEE IN THE PRESENT YEAR IN RESPECT OF WRITE OFF OF VALUE OF GOODS IS NOT ALLOWABLE IN THE PRESENT YEAR AND THE SAME SHOULD BE CONSIDERED IN THE LIGHT OF OR DER OF BIFR & AAIFR IN THE YEAR IN WHICH THE ASSESSEES REQUEST FOR RELINQUISHMENT OF RIGHT HAS BEEN ULTIMATELY ACCEPTED BY THE COMMISSIONER OF CUSTOMS OR IN THE YEAR OF ACTUAL AUCTION OR SHIFTING FROM BONDED WAREHOUSE AS THE CASE MAY BE. 7. NOW WE CONSI DER THE APPLICABILITY OF REMAINING TWO JUDGMENTS CITED BY LEARNED A.R. OF THE ASSESSEE. 7.1 THE NEXT JUDGMENT CITED BY LEARNED A.R. OF THE ASSESSEE IS THE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF CHAINRUP SAMPATRAM VS COMMISSIONER OF INCOME - TAX (SUPRA). IN THIS CASE , IT WAS HELD THAT CLOSING STOCK IS TO BE VALUED AT COST OR MARKET PRICE, WHICHEVER IS LOWER. THERE IS NO QUARREL ON THIS PROPOSITION THAT THE CLOSING STOCK IS TO BE VALUED AT COST OR MARKET PRICE, WHICHEVER IS LOWER. IN THE PRE SENT CASE, THIS IS NOT THE CASE OF THE ASSESSEE THAT THE MARKET PRICE OF THE STOCK IN QUESTION IS NIL AND 6 THEREFORE, IT WAS RECORDED AT NIL VALUE. THE ASSESSEE HAS WRITTEN OFF THE VALUE OF CLOSING STOCK, WHICH WAS LYING IN BONDED WAREHOUSE OF CUSTOMS. AS PER THE LETTER OF COMMISSIONER OF CUSTOMS DATED 16/05/2012 ALSO, IT IS STATED BY COMMISSIONER THAT THE GOODS ARE TO BE AUCTIONED OR TO BE SHIFTED FROM THE BONDED WAREHOUSE AND TILL THEN, NO RENT WILL BE CHARGED . HENCE, IT APPEARS THAT EVEN ON THE DATE OF THIS LETTER I.E. 16 TH MAY, 2012, THE MARKET VALUE OF THE GOODS WAS NOT NIL. HENCE, IN OUR CONSIDERED OPINION , AS PER THIS JUDGMENT ALSO, THE ASSESSEE DOES NOT GET ANY HELP. 7.2 THE THIRD DECISION CITED BY LEARNED A.R. OF THE ASSESSEE IS THE JUDGMENT OF HON'BLE DELHI HIGH COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOME - TAX VS HARYANA SHEET GLASS LTD. (SUPRA). THIS JUDGMENT IS WITH REGARD TO THE DOCTRINE OF RELATION BACK. IN THAT CASE , THERE WAS SOME IRREGULARITY IN THE ORIGINAL RETURN OF INCOME BEC AUSE THE SIGNATURE WAS AFFIXED BY COMPANY SECRETARY WHO IS NOT AUTHORIZED TO SIGN THE RETURN. UNDER THESE FACTS, IT WAS HELD THAT THIS IS CURABLE AND WHEN THE IRREGULARITY IS CURED, THE DOCTRINE OF RELATION BACK WILL APPLY. IN THE PRESENT CASE, THE DISPU TE IS NOT REGARDING ANY DOCTRINE OF RELATION BACK BECAUSE THE DISPUTE IS AS TO WHETHER THE VALUE OF CLOSING STOCK HAS GONE DOWN TO NIL AND IN FACT , THIS IS NOT THE CLAIM THAT THE VALUE OF CLOSING STOCK IS NIL. EVEN IF THE VALUE CLOSING STOCK BECOMES NIL I N SUBSEQUENT YEAR , THEN ALSO , IT CANNOT BE SAID THAT THE VALUE OF CLOSING STOCK OF SAME GOODS MUST BE NIL IN EARLIER YEAR ALSO. HENCE, IN THE FACTS OF THE PRESENT CASE, THIS JUDGMENT IS NOT RELEVANT AT ALL. 7.3 AS PER ABOVE DISCUSSION, WE FIND THAT THE JUDGMENTS CITED BY THE ASSESSEE ARE NOT RENDER ING ANY HELP TO THE ASSESSEE. WE HAVE ALSO SEEN THAT THE CLAIM OF THE ASSESSEE REGARDING WRITE OFF OF VALUE OF STOCK LYING IN BONDED WAREHOUSE IS NOT ACCEPTABLE BECAUSE EVEN AS PER LETTER DATED 16 TH MAY, 2012, WRITTEN BY COMMISSIONER OF CUSTOMS TO THE ASSESSEE, THE GOODS LYING WITH CUSTOMS DEPARTMENT IS STILL TO BE AUCTIONED AND AS PER THIS LETTER , THEY ARE 7 MERELY AFFIRMING THAT THEY WILL NOT CHARGE ANY RENT BUT THERE IS NO AFFIRMATION REGARDING NON RECOVERY OF CUSTOMS DUTY AND IT APPEARS THAT BY AUCTIONING THE GOODS, THE AMOUNT REALIZED WILL BE ADJUSTED AGAINST THE CLAIM OF THE DEPARTMENT ON ACCOUNT OF CUSTOMS DUTY. THE COMMISSIONER OF CUSTOMS HAS ALSO REFERRED TO THE ORDERS OF BIFR & AAIFR, WHICH A RE NOT BROUGHT ON RECORD BEFORE US AND THEREFORE, THIS ORDER OF CIT(A) IS NOT SUSTAINABLE . WE REVERSE THE SAME AND RESTORE THE ASSESSMENT ORDER. 8. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS ALLOWED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 0 4 /07/2014. *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR