ITO, Ward-1(3), Kolkata, Kolkata V. M/s GKW Ltd., Kolkata

ITA 432/KOL/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4621 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 11-07-2016
• Assessment Year: 1998-1999
• Appeal Filed On: 19-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G MALLIKARJUNA
• Keywords: Depreciation; Business expenditure; Corroborative evidences
• Section: 43B; 143(3); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 432 / KOL / 2012 ASSESSMENT YEAR :1998-99 ITO WARD-1(3), ROOM NO. 1A, 4 TH FLOOR, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SUQUARE, KOLKATA-700 069 V/S . M/S GKW LTD., CENTRAL PLAZA, 2/6 SARAT BOSE ROAD, OFFICE SPACE NO. 406, 4THFLOOR, KOLKATA-20 [ PAN NO. AABCG 0671 K ] /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI G. MALLIKARJUNA, CIT-DR /BY RESPONDENT SHRI VIJAY SHAH, FCA /DATE OF HEARING 11-07-2016 /DATE OF PRONOUNCEMENT 24-08-2016 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE REVENUE IS ARISING OUT OF ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-XII, KOLKATA IN APPEAL NO.312/ XX/CIR-11/09-10 DATED 12.12.2011. ASSESSMENT WAS FRAMED BY JCIT, SP ECIAL RANGE-14, KOLKATA U/S 143(3) OF THE INCOME TAX ACT, 1961 (HER EINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 28.03.2001 FOR ASSESSMEN T YEAR 1998-99. 2. VARIOUS GROUNDS RAISED BY THE REVENUE PER ITS AP PEAL OUT OF WHICH GROUND NO.5 IS GENERAL IN NATURE AND DOES NOT REQUIRE SEPARATE ORDER. REMAINING GROUNDS ARE REPRODUCED BELOW:- 1. THAT THE LD. CIT(APPEALS)-I, KOLKATA WAS NOT JUS TIFIED IN ALLOWING THE CARRIED FORW4ARD THE LOSS OF RS.29,09,04,771/- ITA NO.432/KOL/2012 A.Y. 1998-9 9 ITO WD-1(3), KOL. VS. M/S GKW LTD. PAGE 2 2. THAT THE LD. CIT(APPEALS)-I, KOLKATA WAS NOT JUS TIFIED IN DELETING DISALLOWANCE OF RS.4,02,31,000/- ON ACCOUNT OF CLO SING STOCK IN TERMS OF SECTION 145A OF THE ACT. 3. THAT THE LD. CIT(APPEALS)-I, KOLKATA WAS NOT JUS TIFIED IN DELETING THE DISALLOWANCE OF RS.74,46,597/- ON ACCOUNT OF EARLI ER YEARS LIABILITIES NOT SUPPORTED BY DOCUMENTS. 4. THAT THE LD. CIT(APPEALS)-I, KOLKATA WAS NOT JUS TIFIED IN DELETING DISALLOWANCE OF DEPRECIATION AMOUNTING TO RS.12,48, 826/- ON ADDITIONS MADE DURING THE YEAR ON FIXED ASSETS. SHRI VIJAY SHAH, LD. AUTHORIZED REPRESENTATIVE APPE ARED ON BEHALF OF ASSESSEE AND LD. G. MALLIKARJUNA, LD. DEPARTMENTAL REPRESENTATIVE APPEARED ON BEHALF OF REVENUE. 3. THE BRIEFLY STATED FACTS GIVING RISE TO THIS APP EAL ARE THAT THE ASSESSEE IN THE PRESENT CASE IS A LIMITED COMPANY AND ENGAGE D IN THE ENGINEERING BUSINESS. THE ASSESSEE, FOR THE YEAR UNDER CONSIDER ATION, HAS FILED ITS RETURN OF INCOME ON DATED 30.11.1998 DECLARING A LOSS OF R S.29,25,79,481/-. THEREAFTER THE CASE WAS SELECTED FOR SCRUTINY AND A CCORDINGLY NOTICES UNDER SECTION 143(2) R.W.S142(1) OF THE ACT WERE ISSUED. THE ASSESSMENT WAS FRAMED BY THE AO UNDER SECTION 143(3) OF THE ACT AF TER MAKING CERTAIN ADDITIONS/ DISALLOWANCES AT NIL. 4. THE FIRST ISSUE RAISED BY REVENUE IN THIS APPEAL IS THAT THE LEARNED CIT(A) ERRED IN ALLOWING THE CARRIED FORWARD LOSS O F RS. 29,09,04,771/-. 4.1 THE ASSESSEE, FOR THE YEAR UNDER CONSIDERATION HAS FILED ITS RETURN OF INCOME SHOWING THE LOSSES FOR THE AMOUNT AS STATED ABOVE. THE ASSESSEE ALSO SUBMITTED THAT THE LOSSES ARE ARISING BECAUSE THERE IS A LOCKOUT IN THE FACTORY WHICH RESULTED SUSPENSION OF THE WORK. THE ASSESSEE ALSO FAILED TO PRODUCE THE BOOKS OF ACCOUNTS AND OTHER DOCUMENTS A T THE TIME OF ASSESSMENT. THEREFORE THE AO DISALLOWED THE CLAIM F OR THE LOSSES OF THE ASSESSEE AND FRAME THE ASSESSMENT AT NIL INCOME AND SUBSEQUENTLY THE LOSS WAS NOT ALLOWED TO BE CARRIED FORWARD. ITA NO.432/KOL/2012 A.Y. 1998-9 9 ITO WD-1(3), KOL. VS. M/S GKW LTD. PAGE 3 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LD. C IT(A) WHEREAS ASSESSEE SUBMITTED THAT AO HAS RAISED TOTAL TEN QUE RIES DURING THE COURSE OF ASSESSMENT PROCEEDINGS OUT OF WHICH EIGHT QUERIES WERE REPLIED TO THE AO. REMAINING TWO QUERIES, WERE NOT REPLIED AS THE BUSI NESS OF ASSESSEE WAS UNDER SUSPENSION DUE TO LOCK-OUT IN THE FACTORY PRE MISES. THE ASSESSEE- COMPANY WAS DECLARED AS SICK COMPANY BY BIFR VIDE I TS ORDER DATED 02.04.2002 AND IT WAS ON THE VERGE OF COMPLETE SHUT -DOWN. THE LOSS CLAIMED IN RETURN OF INCOME WAS PERTAINING TO THE CURRENT Y EAR AND NOT THE EARLIER YEARS. THE MAJOR REASON FOR THE LOSSES IS DUE TO I NCURRENCE OF EXPENSES AND DECLINE IN SALES. THE EXPENSES CLAIMED BY ASSESSEE IN THE YEAR UNDER CONSIDERATION ARE MORE OR LESS SAME IN COMPARISON T O THE LAST THREE YEARS. LD. CIT(A) OBSERVED THAT MOST OF THE DETAILS WERE SUBMI TTED BEFORE AO AT THE TIME OF ASSESSMENT EXCEPT A FEW OF THE DETAILS WHICH COU LD NOT SUBMIT ON ACCOUNT OF LOCK-OUT IN THE FACTORY. IT WAS ALSO OBSERVED FR OM THE AUDIT REPORT OF THE ASSESSEE THAT IT IS NOT A QUALIFIED REPORT AND AS P ER THE REPORT THE BOOKS OF ACCOUNT OF ASSESSEE ARE SHOWING ARE TRUE AND FAIR S TATE-OF-AFFAIRS OF THE BUSINESS OF ASSESSEE. ACCORDINGLY, LD. CIT(A) DELET ED THE ADDITION MADE BY AO FOR THE ENTIRE AMOUNT EXCEPT THE SALES TAX LIABI LITY, PAYMENTS MADE TO CLUB AND PROVISION FOR DOUBTFUL DEBT AGGREGATING TO RS.1 5,54,518/-. BEING AGGRIEVED BY THE ORDER OF LEARNED CIT(A), REV ENUE IS IN APPEAL BEFORE US. 6. BEFORE US LD. DR RELIED ON THE ORDER OF AO, WHER EAS LD. AR BEFORE US SUBMITTED PAPER BOOK WHICH IS RUNNING FROM PAGES 1 TO 160 AND SUBMITTED THAT LOSS IS ARISING ON ACCOUNT OF EXPENSES CLAIMED IN THE CURRENT YEAR. THE LOSS CLAIMED BY ASSESSEE PERTAINS TO THE CURRENT YE AR AND IT IS NOT CARRIED FORWARD FROM EARLIER YEAR. LD. AR IN SUPPORT OF ITS CLAIM DREW OUR ATTENTION ON PAGES FROM 31 TO 41 OF THE PAPER BOOK WHERE THE COM PUTATION OF INCOME WAS PLACED. LD. AR ALSO SUBMITTED THAT THE EXPENSES CLA IMED BY ASSESSEE ARE APPROXIMATELY SAME AS CLAIMED IN LAST THREE YEARS. LD. AR IN SUPPORT OF ITS ITA NO.432/KOL/2012 A.Y. 1998-9 9 ITO WD-1(3), KOL. VS. M/S GKW LTD. PAGE 4 CLAIM HAS SUBMITTED THE STATEMENT OF EXPENSES FOR T HE LAST THREE YEARS WHICH ARE PLACED ON PAGE 132 OF THE PAPER BOOK. LD.AR FUR THER ALSO FILED AUDITED ANNUAL ACCOUNT FOR THE YEAR ENDED 31.03.1998 WHICH IS PLACED PAGES 1 TO 37 OF THE PAPER BOOK. LD. AR ALSO RELIED ON THE ORDER OF LD. CIT(A). 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE AFORESAID D ISCUSSION, WE FIND THAT THE AO HAS DISALLOWED ALL THE EXPENSES ON THE GROUND TH AT SUFFICIENT DETAILS WERE NOT FURNISHED AT THE TIME OF ASSESSMENT. HOWEVER, L D. CIT(A) DELETED THE ADDITION MADE BY AO IN ENTIRETY WITH A FEW EXCEPTIO NS. FROM THE FACTS OF THE CASE, WE FIND THAT ASSESSEE FAILED TO SUBMIT ITS SU PPORTING EVIDENCE AT THE TIME OF ASSESSMENT AS THE FACTORY WAS UNDER LOCK-OU T WHICH HAS NOT BEEN DOUBTED. IN SUCH CIRCUMSTANCES, WE FIND THAT AO SHO ULD HAVE VERIFIED/COMPARED THE EXPENSES FROM THE EXTERNAL SO URCES AND FROM THE HISTORY OF ASSESSEE. BUT AO FAILED TO DO SO AND HAS DISALLOWED ALL THE EXPENSES. IN OUR CONSIDERED VIEW ACTION TAKEN BY AO FOR MAKING THE DISALLOWANCE FOR ALL THE EXPENSES DO NOT HOLD GOOD. THE AO HAS NOT BROUGHT ANY DEFECT IN THE AUDIT REPORT AND THE EXPENSES CLA IMED BY ASSESSEE IN COMPARISON TO THE EARLIER YEARS. IN THIS CONNECTION , VARIOUS COURTS HAVE DECIDED THE ISSUE IN FAVOUR OF ASSESSEE, SOME OF TH E CITED CASE LAW REPRODUCED BELOW:- A) CIT VS. RANICHERRA TEA CO. LTD. (1994) 207 ITR 979 (CAL) WHEREIN IT HAS BEEN HELD THAT THE AO WAS NOT JUSTIFIED IN REJE CTING THE LOSS RETURN FILED BY THE ASSESSEE IN TOT WITHOUT EXAMINING THE AUDIT PROFIT AND LOSS ACCOUNT, BALANCE-SHEET AND OTHER STATEMENTS ACCOMPA NYING THE RETURN. B) ITO VS. PERFECTO ELECTRICALS ( ITA NO.1175/KOL/2011 DATED 29.01.2014 WHERE THE TRIBUNAL HAS HELD THAT IN A CASE WHERE AO HAS NOT FOLLOWED THE PROCEDURE LAID OUT U/S. 144 TO MAKE BEST JUDGME NT ASSESSMENT BUT HAS COMPLETED THE ASSESSMENT U/S. 143(3), HE COULD ALLOW OR REJECT CLAIMS ONLY AFTER CONSIDERING EVIDENCE AS WELL AS R ELEVANT MATERIAL AVAILABLE WITH HIM. WHEN AUDITED ACCOUNTS AND TAX A UDIT REPORT HAVE ITA NO.432/KOL/2012 A.Y. 1998-9 9 ITO WD-1(3), KOL. VS. M/S GKW LTD. PAGE 5 BEEN FILED AND AUDITORS HAVE CERTIFIED THAT THE ASS ESSEE HAD MAINTAINED PROPER BOOKS OF ACCOUNTS, DISALLOWANCES COULD NOT B E MADE ARBITRARILY IGNORING RULES OF JUSTICE AND EQUITY. C) ALCLAD FABRICATION (P) LTD. VS. DCIT ( ITA NO. 1383/KOL/2012 DATED 09.06.2015) IT HAS BEEN HELD THAT IT IS A SETTLED P RINCIPLE OF LAW THAT TRADING RESULTS DECLARED BY THE ASSESSEE CANNOT BE DISTURBED WITHOUT POINTING OUT ANY SPECIFIC DEFECT OR WITHOUT INVOKIN G THE PROVISION OF SEC. 145(3). IN CASE BEST JUDGMENT ASSESSMENT AS PROVIDE D IN SEC. 145(3) HAS NOT BEEN RESTORED TO BY THE AO, DISALLOWANCES C OULD NOT BE MADE ON ESTIMATE BASIS. WE HAVE ALSO FOUND THAT AO HAS PASSED A VAGUE AND N ON-SPEAKING ORDER BY NOT DISCLOSING MANNER OR METHOD OF COMPUTATION FROM WHICH HE HAS DETERMINED THE TOTAL INCOME AS NIL. SUCH AN ORDER H AS BEEN MADE ON THE BASIS OF PURE GUESS AND BARE SUSPICION WITHOUT REFE RENCE TO ANY EVIDENCE OR MATERIAL. IN THIS CONNECTION, WE RELY ON THE JUDGME NT OF HONBLE SUPREME COURT IN THE CASE OF DHAKESHWARI COTTON MILLS LTD. VS. CIT (1954) 26 ITR 775 (SC) WHERE THE HONBLE COURT HAS HELD THAT WHILE PA SSING AN ORDER, THE AO SHOULD HAVE DISCLOSED TO THE ASSESSEE THE MATERIAL ON WHICH IT IS GOING TO FOUND ITS ESTIMATE AND THEN AFFORD THE ASSESSEE FUL L OPPORTUNITY TO MEET THE SUBSTANCE OF ANY PRIVATE INQUIRIES MADE BY THE AO I F IT IS INTENDED TO MAKE THE ESTIMATE ON THE FOOT OF THOSE ENQUIRIES. FURTHER RE LIANCE OF HONBLE SUPREME COURT IN THE CASE OF STATE OF ORISSA VS. MAHARAJA SHRI B.P.SINGH DEO (1970) 76 ITR 690 (SC) HAS HELD THAT ASSESSMENT MADE BY A SSESSING AUTHORITIES MUST BE BASED ON SOME RELEVANT MATERIAL AND UNRELIA BILIT9Y OF MATERIAL PLACED BEFORE THEM DOES NOT MEAN THAT THEY CAN PROCEED TO LEVY WHATEVER TAX THEY MAY LEVY. SIMILAR VIEW HAS ALSO BEEN TAKEN IN THE C ASE OF BRIJ BHUSHAN LAL PARDUMAN KUMAR VS. CIT (1978) 115 ITR 524 (SAC) WHERE THE HONBLE APEX COURT HELD THAT ESTIMATION OF INCOME MUST NOT BE CA PRICIOUS BUT SHOULD HAVE A REASONABLE NEXUS TO THE AVAILABLE MATERIAL AND THE CIRCUMSTANCES OF THE CASE. WE ALSO FIND THAT ASSESSEE HAS FILED STATUTORY AUDI T REPORT UNDER THE ITA NO.432/KOL/2012 A.Y. 1998-9 9 ITO WD-1(3), KOL. VS. M/S GKW LTD. PAGE 6 COMPANIES ACT, 1956 AND TAX AUDIT REPORT U/S. 44AB OF THE ACT ALONG WITH THE RETURN OF INCOME. EVEN THOUGH THE ASSESSEE WAS ACIN G GENUINE HARDSHIP DUE TO LOCK OUT AND WAS CONSTRAINED FROM GIVING DETAILS , THE ASSESSEE HAS PRODUCED MOST OF THE INFORMATION AS REQUIRED BY THE AO. HOWEVER, THE AO DISREGARDING SUCH SUBMISSIONS PASSED AN ARBITRARY O RDER ON THE CONTENTION THAT BOOKS OF ACCOUNTS AND OTHER DETAILS COULD NOT BE EXAMINED. IN THIS REGARD, THE COORDINATE BENCH IN THE CASE OF ACIT VS. SITALAMATA RICE MILL PVT. LTD. ( ITA NO. 2317/KOL/2013 DATED 01.01.2015) HAS HELD THAT WHERE IT WAS NOT POSSIBLE FOR ASSESSEE TO PRODUCE BOOKS OF ACCOUNTS SINCE THE SAME WAS IN POSSESSIONS OF THE LENDING BANK, DISREGARD OF THE A SSESSEES AUDITED ACCOUNTS IS NOT JUSTIFIED AND AUDITORS REPORT SHOU LD BE RELIED UPON AS EVIDENCE. IN THIS CASE, RELIANCE ALSO PLACED IN TH E CASE OF ACIT VS. JAY ENGINEERING WORKS LTD. (1978) 113 ITR 389 (DEL) WHEREIN IT HAS BEEN HELD THAT INCOME TAX AUTHORITIES COULD RELY ON THE REPOR T OF THE AUDITORS IF DETAILED INFORMATION OF THE CLAIMS WERE NOT AVAILABLE. IN TH E ASSESSEE CASE, THE AUDITOR HAS CARRIED OUT HIS AUDIT AND IN THE AUDIT REPORT G IVEN HIS OPINIONS WHICH INDICATES THAT ASSESSEE-COMPANY DID MAINTAIN PROPER BOOKS OF ACCOUNTS WHICH REFLECT TRUE & FAIR VIEW . RESPECTFULLY FOLLOWING THE AFORESAID JUDGMENTS OF V ARIOUS HONBLE COURTS AND THE DECISION OF THE CO-ORDINATE BENCH WE FIND NO RE ASON TO INTERFERE IN THE ORDER OF LD. CIT(A). WE HOLD ACCORDINGLY. THIS GROU ND OF REVENUES APPEAL IS DISMISSED. 8. SECOND ISSUE RAISED BY THE REVENUE IN THIS APPEA L IS THAT THE LD CIT(A) ERRED IN DELETING THE DISALLOWANCE MADE BY THE AO F OR RS. 4,02,31,000/- ON ACCOUNT OF CLOSING STOCK U/S 145A OF THE ACT. 9. THE ASSESSEE HAS NOT INCLUDED THE AMOUNT OF EXCI SE DUTY AND CUSTOM DUTY PAYABLE ON THE CLOSING STOCK OF THE FINISHED G OODS. ACCORDINGLY THE AO ITA NO.432/KOL/2012 A.Y. 1998-9 9 ITO WD-1(3), KOL. VS. M/S GKW LTD. PAGE 7 ENHANCED THE VALUE OF THE CLOSING STOCK BY THE AMOU NT OF EXCISE AND CUSTOM DUTY I.E. RS.4,02,31,000/-. 10. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LD. CIT(A) WHO DELETED THE ADDITION MADE BY AO BY OBSERVING AS UNDER:- THE APPELLANT ALSO SUBMITTED THAT THE ABOVE DISAL LOWANCE IS UNWARRANTED EVEN ON MERITS AS THE APPELLANT HAS DULY MADE THE P AYMENT OF ABOVE EXCISE DUTY REFERABLE TO THE CLOSING STOCK ON OR BEFORE TH E DATE OF FILING OF RETURN OF INCOME AND HENCE THE SAME IS ALLOWABLE U/S. 43B OF THE ACT. THE APPELLANT ALSO FURNISHED COPY OF CERTIFICATE ISSUED BY THE C HARTERED ACCOUNTANT DATED 27.11.1998 FILED ALONG WITH THE RETURN OF INCOME CE RTIFYING THE PAYMENT OF EXCISE DUTY BEFORE THE DUE DATE OF FILING THE RETUR N OF INCOME. BEING AGGRIEVED BY THE ORDER OF LEARNED CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 11. BEFORE US BOTH THE PARTIES RELIED ON THE ORDERS OF AUTHORITIES BELOW AS FAVOURABLE TO THEM. WE HAVE HEARD THE RIVAL CONTENT IONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT T HE OUTSET, WE FIND THAT SEC. 145A OF THE ACT WAS INSERTED BY FINANCE ACT 1998 WI TH EFFECT FROM 1 ST APRIL, 1999. THE YEAR BEFORE US IS ENDING 31 ST MARCH, 1998 THEREFORE THE PROVISION OF SEC.145A OF THE ACT ARE NOT APPLICABLE TO THE ASSES SEE FOR THE YEAR UNDER CONSIDERATION. IN THIS CONNECTION, WE ARE RELYING I N THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. BERGER PAINTS (INDIA) LTD. (2002) 254 ITR 503 (CAL) THE HEAD-NOTE READS AS UND ER:- ACCOUNTSVALUATION OF STOCKMODVAT CREDITAMOUNT RE PRESENTING MODVAT CREDIT IS NOT TO BE ADDED IN THE VALUATION OF STOCK SEC. 145A IS NOT RETROSPECTIVE IN NATURE COLLECTOR OF CENTRAL EXCISE VS. DAI ICHI KARKARIA L TD. (1999) 156 CTR (SC) 172 : 1999 (112) ELT 353 (SC) A PPLIED RESPECTFULLY FOLLOWING THE JUDGMENT OF HONBLE JURI SDICTIONAL HIGH COURT IN THE CASE OF BERGER PAINTS (INDIA) LTD. (SUPRA) WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A). WE HOLD ACCORDINGLY. ITA NO.432/KOL/2012 A.Y. 1998-9 9 ITO WD-1(3), KOL. VS. M/S GKW LTD. PAGE 8 12. THIRD ISSUE RAISED BY THE REVENUE IN THIS APPEA L IS THAT THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCE MADE BY T HE AO FOR RS. 74,46,597/- ON ACCOUNT OF EARLIER YEAR LIABILITIES NOT SUPPORTE D BY DOCUMENTS. 13. THE ASSESSEE IN ITS COMPUTATION OF INCOME HAS C LAIMED THE DEDUCTION FOR AN AMOUNT OF RS.74,46,597/- REPRESENTING THE AM OUNT OF FUEL SURCHARGES. THE ASSESSEE CLAIMED THAT THESE LIABILITIES PERTAIN TO THE ASSESSMENT YEARS 1993-94 TO 1995-96 BUT AROSE IN THE CURRENT YEAR IN PURSUANCE TO THE ORDER OF THE HIGH COURT. THESE LIABILITIES ARE IN ADDITION T O THE AMOUNT WHICH WAS PAID TO CREDITORS FOR THE COMPANY. THE ASSESSEE COULD NO T SUBMIT THE NECESSARY DETAILS WITH REGARD TO THE FUEL SURCHARGE EXPENSE E XCEPT THE COPY OF THE HIGH COURT IN THE ASSESSMENT PROCEEDINGS. IN THE ABSENCE OF DOCUMENTARY EVIDENCE, THE AO COULD NOT VERIFY THE CLAIM OF THE ASSESSEE AND THE SAME WASNT ALLOWED IN THE COMPUTATION OF INCOME. 14. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LD. CIT(A) WHO DELETED THE ADDITION MADE BY AO BY OBSERVING AS UNDER:- I HAVE GONE THROUGH THE SUBMISSIONS AND THE DETAILS FILED BY THE APPELLANT. ON PERUSAL OF THE DOCUMENTS ON RECORD IT COULD BE N OTED THAT THE AO HAD ASKED FOR AN EXPLANATION AS TO WHY THE ABOVE AMOUNT HAS BEEN CLAIMED SEPARATELY ALTHOUGH THE SAME IS ALREADY DEBITED TO P&L ACCOUNT. TO THE ABOVE, QUERY THE APPELLANT HAD FILED REPLY JUSTIFYI NG THE CLAIM IN THE COMPUTATION ON THE CONTENTION THAT THE ABOVE AMOUNT HAS BEEN DEBITED TO P&L ACCOUNT BELOW THE LINE WHEREAS THE COMPUTATION HAS BEEN STARTED FROM THE PROFIT/LOSS BEFORE DEBITING THE SAID SUM. NEITH ER THE AO ASKED FOR JUSTIFICATION OF THE ABOVE EXPENDITURE ON MERIT NOR THE APPELLANT FILED ANY DOCUMENTS RELATING THERETO BEFORE THE AO. THE A/R O F THE APPELLANT SUBMITTED DURING THE COURSE OF HEARING THAT SINCE THE ABOVE D ETAILS WERE NEVER ASKED BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THERE IS NO VIOLATION OF RULE 46A IN TERMS OF CLAUSE (D) TO RULE 46A(1). 5.5 ON PERUSAL OF THE DETAILS FILED BY THE APPELLAN T IT COULD BE NOTED THAT THE ABOVE LIABILITY ALTHOUGH PERTAINING TO EARLIER YEAR S WAS DULY CRYSTALLIZED DURING THE YEAR AS THE SAME WAS ALSO PAID ALONG WITH THE C URRENT YEARS BILLS. THE APPELLANT HAS PRODUCED NOTIFICATION ISSUED BY CESC ALSO WHICH PROVIDED FOR THE RECOVERY OF THE ABOVE AMOUNT IN THE SAID MANNER . SINCE THE ABOVE EXPENDITURE HAS BEEN DULY PAID DURING THE YEAR UNDE R CONSIDERATION AND THE SAME HAS ALSO BEEN DEBITED TO PROFIT & LOSS ACCOUNT FOR THE CURRENT YEAR FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING, THE APPELLANT IS ENTITLED TO ITA NO.432/KOL/2012 A.Y. 1998-9 9 ITO WD-1(3), KOL. VS. M/S GKW LTD. PAGE 9 DEDUCTION OF THE SAID AMOUNT IN COMPUTING TOTAL INC OME FOR THE YEAR UNDER CONSIDERATION. FURTHER, THERE IS NO QUESTION OF CLA IM OF THE SAID AMOUNT IN EARLIER YEARS AS THE LIABILITY NEVER ACCRUED DURING THE SAID YEARS. I, THEREFORE, DIRECT THE AO TO DELETE THE DISALLOWANCE MADE ON AC COUNT OF ARREAR FUEL SURCHARGE AMOUNTING TO RS.74,46,597/- AND GROUND NO .5 OF THE APPELLANT IS THUS ALLOWED. BEING AGGRIEVED BY THE ORDER OF LEARNED CIT(A), REV ENUE IS IN APPEAL BEFORE US. 15. LD DR BEFORE US SUBMITTED THAT THE RELIEF HAS B EEN GIVEN BY LD. CIT(A) WITHOUT TAKING THE REMAND REPORT FROM AO. THEREFORE , IT SHOULD BE RESTORED BACK TO THE FILE OF AO FOR FURTHER VERIFICATION. ON THE OTHER HAND, LD. AR SUBMITTED THAT FUEL SURCHARGE RATE WAS FINALIZED BY CESC FOR THE EARLIER YEARS IN THE YEAR UNDER CONSIDERATION. IN SUPPORT OF ITS CLAIM, LD. AR HAS SUBMITTED THE NOTIFICATION WHICH IS PLACED ON PAGE 145 OF THE PAPER BOOK AND HE RELIED ON THE ORDER OF LD. CIT(A) 16. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE FOREGOING D ISCUSSION, WE FIND THAT THERE WAS A LITIGATION ON ACCOUNT OF FUEL SURCHARGE WHICH WAS SETTLED IN THE YEAR UNDER CONSIDERATION. IN OUR CONSIDERED VIEW, T HE LIABILITY FOR FUEL SURCHARGE WAS CRYSTALLIZED IN THE CURRENT YEAR, THE REFORE, THE SAME WAS ACCOUNTED FOR IN THE BOOKS OF ACCOUNT OF ASSESSEE. THEREFORE, THIS EXPENSE WAS CLAIMED IN THE YEAR UNDER DISPUTE. IN THIS CONN ECTION, WE RELY IN THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. SWADESHI COTTON AND FLOUR MILLS PRIVATE LTD. (1964) 53 ITR 134 (SC) BUSINESS EXPENDITUREBONUSYEAR OF ALLOWABILITY WHE N MERCANTILE SYSTEM IS FOLLOWED BY ASSESSEECLAIM FOR PROFIT BONUS FOR EARLIER YEAR WAS SETTLED BY AN AWARD OF THE INDUSTRIAL TRIBUNAL IN A LATER YEAR LIABILITY AROSE IN THE YEAR IN WHICH CLAIM SETTLED BY WAY OF AN AWARDACCOUNTS OF EARLIER YEAR COULD NOT BE REOPENED AS CONTENDED BY REVENUEBONUS LIABILITY WA S ALLOWABLE AS DEDUCTION IN THE YEAR IN WHICH THE SAME WAS SETTLED ITA NO.432/KOL/2012 A.Y. 1998-9 9 ITO WD-1(3), KOL. VS. M/S GKW LTD. PAGE 10 RESPECTFULLY THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF SWADESHI COTTON AND FLOUR MILLS PVT. LTD. (SUPRA) WE UPHOLD THE ORDER OF LD. CIT(A). THIS GROUND OF REVENUE IS DISMISSED. 17. FOURTH ISSUE RAISED BY THE REVENUE IN THIS APPE AL IS THAT THE LD CIT(A) ERRED IN DELETING THE DISALLOWANCE OF DEPRECIATION MADE BY THE AO FOR RS. 12,48,826/- ON THE ADDITIONS OF FIXED ASSETS MADE D URING THE YEAR. 18. THE ASSESSEE DURING THE YEAR PURCHASED NEW PLAN T & MACHINERY AND OTHER ASSETS AND CLAIMED THE DEPRECIATION ON THE NE W PLANT & MACHINERY. HOWEVER, THE ASSESSEE FAILED TO FURNISH THE DOCUMEN TARY EVIDENCE IN SUPPORT OF THE PURCHASER OF NEW PLANT AND MACHINERY AND OTH ER ASSETS AT THE TIME OF ASSESSMENT. IN THE ABSENCE OF DOCUMENTARY EVIDENCE THE IN SUPPORT OF THE PURCHASES OF FIXED ASSETS, THE DEPRECIATION FOR RS. 12,48,826/- CLAIMED BY THE ASSESSEE ON THE NEW ASSETS WASNT ALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 19. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LD. CIT(A) WHO DELETED THE ADDITION MADE BY AO BY OBSERVING AS UNDER: 6.4 I HAVE GONE THROUGH THE ABOVE SUBMISSIONS OF T HE APPELLANT AND I AM OF THE VIEW THAT SINCE THE ACCOUNTS AND SUPPORTING EVI DENCES ARE SUBJECT TO SCRUTINY BY THE STATUTORY AUDITORS AND ALSO THE FAC TORY WAS UNDER LOCKOUT, THE CLAIM OF THE APPELLANT WITH REGARD TO DEPRECIATION CANNOT BE DENIED IN THE INTEREST OF JUSTICE. THE APPELLANT HAS DULY SUBMITT ED VARIOUS BILLS IN RESPECT OF THE BOLT & NUT DIVISION. POWMEX STEELS DIVISION AND SCREW & FASTENER DIVISION VIDE LETTER DATED 26-03-2001. FURTHER, TH E APPELLANT HAS DULY FILED DETAILS OF ALL ADDITIONS ALONG WITH RECONCILIATION OF SUCH ADDITIONS WITH THE AUDITED ACCOUNTS. THE ABOVE EVIDENCES AND DETAILS A RE SUFFICIENT TO ALLOW THE CLAIM OF THE APPELLANT FOR DEPRECIATION ON ADDITION S TO FIXED ASSETS ACQUIRED DURING THE YEAR. I THEREFORE DIRECT THE AO TO ALLOW THE DEPRECATION AMOUNTING TO RS.12,48,826/- AS WELL AND HENCE THE AGGREGATE C LAIM FOR DEPRECIATION AMOUNTING TO RS.9,20,23,154/- AS CLAIMED IN THE RET URN AT INCOME NEEDS TO BE ALLOWED IN THE INTEREST OF JUSTICE AND NO DISALLOWA NCE ON THIS ACCOUNT IS CALLED FOR. HENCE, GROUND NO. 6 OF APPELLANT IS ALLOWED. BEING AGGRIEVED BY THE ORDER OF LEARNED CIT(A), THE REVENUE IS IN APPEAL BEFORE US. ITA NO.432/KOL/2012 A.Y. 1998-9 9 ITO WD-1(3), KOL. VS. M/S GKW LTD. PAGE 11 20. BOTH PARTIES BEFORE US RELIED ON THE ORDERS OF AUTHORITIES BELOW AS FAVOURABLE TO THEM. WE HAVE HEARD THE RIVAL CONTENT IONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN T HE INSTANT CASE, THE AO MADE THE ADDITION ON THE GROUND THAT ASSESSEE FAILE D TO PRODUCE THE SUPPORTING EVIDENCE FOR THE FIXED ASSETS. HOWEVER, LD. CIT(A) DELETED THE SAME BY OBSERVING THAT THERE IS NO DEFECT IN THE AU DITED ACCOUNTS SUBMITTED ALONG WITH RECONCILIATION. THE REASON FOR NON-SUBM ISSION OF THE BILLS WAS EXPLAINED THAT THERE WAS LOCK-OUT IN THE FACTORY PR EMISES OF ASSESSEE. WE FIND UNDER SUCH CIRCUMSTANCES, THE AO NEEDS TO HAVE RELI ANCE ON THE EXTERNAL DOCUMENTS SUCH AS AUDIT REPORT AND HISTORY OF THE A SSESSEE. IN THE INSTANT CASE, AO DID NOT POINT OUT ANY DEFECT IN THE AUDITE D FINANCIAL STATEMENT. THEREFORE, IN OUR CONSIDERED VIEW, WE DO NOT FIND A NY INFIRMITY IN THE ORDER OF LD. CIT(A). WE UPHOLD ACCORDINGLY. THIS GROUND OF R EVENUE IS DISMISSED. 21. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 24/ 08/2016 SD/- SD/- ( !') ( !') (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP $!% &- 24 / 08 /201 6 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-ITO WARD-1(3), ROOM NO. 11A, 4 TH FLOOR, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQU ARE, KOLKATA-69 2. /RESPONDENT-GKW LTD., CENTRAL PLAZA2/6 SARAT BOSE ROAD, OFFICE SPACE NO. 406, 4 TH FLOOR, KOLKATA-20 3. %.%/0 1 1 2 / CONCERNED CIT KOLKATA 4. 1 1 2- / CIT (A) KOLKATA 5. 567 /0, 1 /0 , / DR, ITAT, KOLKATA 6. 7:; <= / GUARD FILE. BY ORDER/ 1! , / % 1 /0 ,