Appeal details
Counselvise Citation
[2011] 134 COUNSELVISE.COM (IT) 8047 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 1 month(s) 26 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
16-03-2011
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
C
Next Hearing Date
09-02-2011
Assessment Year
2004-2005
Appeal Filed On
21-01-2009
Judgement Text
1 ITA NO. 461 & 849/MUM/2009 (ASST YEAR 2004-05) IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI MUMBAI MUMBAI MUMBAI C C C C BENCH BENCH BENCH BENCH MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI BEFORE BEFORE BEFORE BEFORE SHRI R V EASWAR, SHRI R V EASWAR, SHRI R V EASWAR, SHRI R V EASWAR, PRESIDENT & PRESIDENT & PRESIDENT & PRESIDENT & SHRI R K PANDA, AM SHRI R K PANDA, AM SHRI R K PANDA, AM SHRI R K PANDA, AM ITA NO. ITA NO. ITA NO. ITA NO. 461 & 849/MUM/2009 (ASST YEAR 2004-05) OWENS CORNING INDIA LTD ALPHA BUILDING - 7THFLOOR HIRANANDANI GARDENS, POWANI MUMBAI 76 VS THE INCOME TAX OFFICER RANGE 7(1)(1), MUMBAI ( (( (APPELLANT APPELLANT APPELLANT APPELLANT) )) ) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) PAN NO. PAN NO. PAN NO. PAN NO.AAACO1739M AAACO1739M AAACO1739M AAACO1739M ITA NO. ITA NO. ITA NO. ITA NO. 849/MUM/2009 (ASST YEAR 2004-05) THE INCOME TAX OFFICER RANGE 7(1)(1), MUMBAI VS OWENS CORNING INDIA LTD ALPHA BUILDING - 7THFLOOR HIRANANDANI GARDENS, POWANI MUMBAI 76 (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY SHRI JD MISTRY/MISHANT THAKKAR REVENUE BY SHRI AJIT KUMAR SINHA PER R K PANDA, AM PER R K PANDA, AM PER R K PANDA, AM PER R K PANDA, AM THESE ARE CROSS APPEALS THE FIRST ONE FILED BY THE ASSESSEE AND THE SECOND ONE FILED BY THE REVENUE AND ARE DIRECTED AGAINST T HE ORDER DATED 12.11.2008 OF THE CIT(A)-VII, MUMBAI RELATING TO ASSESSMENT YEAR 2004-05. FOR THE SAKE OF 2 ITA NO. 461 & 849/MUM/2009 (ASST YEAR 2004-05) CONVENIENCE, THESE WERE HEARD TOGETHER AND ARE BEIN G DISPOSED OF BY THIS COMMON ORDER. ITA NO. 461/MUM/200 ITA NO. 461/MUM/200 ITA NO. 461/MUM/200 ITA NO. 461/MUM/2009( BY THE ASSESSEE) 9( BY THE ASSESSEE) 9( BY THE ASSESSEE) 9( BY THE ASSESSEE) 2 IN GROUNDS OF APPEAL NO.1, THE ASSESSEE HAS CHALL ENGED THE ORDER OF THE CIT(A) IN CONFIRMING THE ADDITION OF RS. 82,62,488/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UN-AVAILED MODVAT CREDIT. 2.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE COMPANY IS ENGAGED IN THE MANUFACTURE OF GLASS FIBRE PRODUCTS FOR USE IN COMPOSITES. IT IS ALSO ENGAGED IN TRADING OF GLASS FIBRE PRODUCTS. DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED FROM THE TAX AUDIT REPO RT THAT THE ASSESSEE IS FOLLOWING THE EXCLUSIVE METHOD OF ACCOUNTING FOR EX CISE DUTY. THE AUDITORS HAVE STATED THAT MODVAT CREDIT ON RAW MATERIALS PURCHASE D IS EXCLUDED FROM THE PURCHASES AND THE EXCISE DUTY IS ACCOUNTED FOR AT T HE TIME OF REMOVAL OF GOODS FROM THE FACTORY. IT WAS FURTHER MENTIONED THAT MO DVAT CREDIT OF RS. 2,35,50,477/- WAS ADDED TO THE CLOSING STOCK IN THE PRECEDING ASSESSMENT YEAR, THE OPENING STOCK FOR THE YEAR UNDER CONSIDERATION WOULD BE HIGHER BY RS. 2,35,50,477/- AND THE CLOSING STOCK FOR THE YEAR UN DER CONSIDERATION WOULD BE HIGHER BY RS. 1,52,87,989/- RESULTING INTO REDUC TION IN THE PROFITS TO THE TUNE OF RS. 82,62,488/-. THIS EFFECT WAS ALSO SHOWN IN THE COMPUTATION OF INCOME. THE ASSESSING OFFICER SPECIFICALLY ASKED THE ASSESSEE VIDE HIS LETTER DATED 11.8.2006 TO FURNISH THE DETAILS OF UN-AVAILED MODVAT CREDIT. DUE TO NON FILING OF SUCH DETAILS BY THE SPECIFIED DATE, THE ASSESSING OFFICE R FURTHER GAVE A NUMBER OF 3 ITA NO. 461 & 849/MUM/2009 (ASST YEAR 2004-05) OPPORTUNITIES. IN ABSENCE OF DOCUMENTARY EVIDENCE/ DETAILS FILED BY THE ASSESSEE TO SUBSTANTIATE THE REDUCTION IN THE PROFITS TO THE TUNE OF RS. 82,52,488/-, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSE SSEE. 3 IN APPEAL, THE CIT(A) CONFIRMED THE ACTION OF THE AO FOR WHICH THE ASSESSEE IS IN APPEAL HERE BEFORE THE TRIBUNAL. 4 THE LD COUNSEL FOR THE ASSESSEE, REFERRING TO THE STATEMENT OF TOTAL INCOME, A COPY OF WHICH IS PLACED AT PAGE 67 OF THE PAPER B OOK, DREW THE ATTENTION OF THE BENCH TO THE CLOSING MODVAT CREDIT BALANCE OF RS. 15,287,989/- AND THE OPENING MODVAT CREDIT BALANCE OF RS. 23,550,477/-. REFERRI NG TO THE DETAILS OF MODVAT CREDIT AVAILED OR UTILIZED DURING THE YEAR ENDED ON 31.3.2004, WHICH IS THE ATTACHMENT-8 TO THE AUDIT REPORT AND A COPY OF WHI CH IS PLACED AT PAGE 31 OF THE PAPER BOOK, HE SUBMITTED THAT OPENING AND CLOSING MODVAT CREDIT AS STATED IN THE COMPUTATION OF INCOME ARE ALREADY THERE IN THE AUDIT REPORT. 4.1 REFERRING TO CLAUSE (B) OF THE TAX AUDIT REPORT , COPY OF WHICH IS PLACED AT PAGE 29 OF THE PEAR BOOK, HE DREW THE ATTENTION OF THE BENCH TO THE NOTES GIVEN BY THE AUDITORS. HE SUBMITTED THAT SINCE ALL THESE DETAILS WERE FILED ALONG WITH THE RETURN OF INCOME WHICH ARE ALREADY AVAILABLE B EFORE THE ASSESSING OFFICER, HE SHOULD HAVE ALLOWED THE CLAIM OF THE ASSESSEE. HE SUBMITTED THAT MOST OF THE RECORDS, IN THE MEANTIME WERE DESTROYED DUE TO FLOOD. 4 ITA NO. 461 & 849/MUM/2009 (ASST YEAR 2004-05) 4.2 IN HIS ALTERNATE CONTENTION, HE SUBMITTED THAT THE MATTER SHOULD BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER FOR FRE SH ADJUDICATION. 4.3 THE LD DR, ON THE OTHER HAND, SUBMITTED THAT TH E ASSESSEE HAS NOT FURNISHED MANY OF THE DETAILS AS ASKED BY THE ASSESSING OFFICER FOR CLAIMING OF UN-AVAILED MODVAT CREDIT. HE SUBMITTED THAT EVEN BEFORE THE CIT(A) THE ASSESSEE FAILED TO FURNI SH SUCH DETAILS. HE SUBMITTED THAT NO PLEA WAS MADE BEFORE THE ASSESSING OFFICER OR CIT(A) THAT MOST OF THE RECORDS WERE DESTROYED BY FLOOD. THEREFORE, THE AD DITIONAL EVIDENCE FILED BY THE ASSESSEE BEFORE THE TRIBUNAL FOR DESTRUCTION OF DOC UMENTS DUE TO FLOOD SHOULD NOT BE ACCEPTED. HE SUBMITTED THAT DESPITE SO MANY OPPORTUNITIES GIVEN BY THE ASSESSING OFFICER, THE ASSESSEE NEVER PRODUCED THOS E DETAILS. THE DETAILS OF MODVAT CREDIT AVAILABLE OR UTILIZED DURING THE YEAR , COPY OF WHICH IS PLACED AT PAGE 31 OF THE PAPER BOOK, IS NOT A CREDIBLE DOCUME NTARY EVIDENCE SO AS TO ALLOW THE CLAIM OF THE ASSESSEE. HE HOWEVER, SUBMI TTED THAT HE HAS NO OBJECTION, IF THE MATTER IS RESTORED TO THE FILE OF THE ASSESSING OFFICER. 5 WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BO TH THE PARTIES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND TH E CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. THERE IS NO DISPU TE TO THE FACT THAT THE ASSESSEE HAS CLAIMED UN-UTILIZED MODVAT CREDIT OF RS. 82,62, 488/-. WE FIND THE ASSESSING OFFICER DISALLOWED THE SAME IN ABSENCE OF ANY DOCU MENTARY EVIDENCE FILED BY 5 ITA NO. 461 & 849/MUM/2009 (ASST YEAR 2004-05) THE ASSESSEE IN RESPECT OF SUCH CLAIM. IT IS THE S UBMISSION OF THE LD COUNSEL FOR THE ASSESSEE THAT ALL THE DETAILS WERE ALREADY THER E IN THE AUDIT REPORT AND IN THE COMPUTATION STATEMENT ATTACHED WITH THE RETURN OF INCOME. IT IS THE SUBMISSION OF THE LD DR THAT THE ASSESSEE, DESPITE BEING GIVEN SUFFICIENT NUMBER OF OPPORTUNITIES, FAILED TO DISCHARGE THE ONUS CAST O N IT BY PRODUCING DOCUMENTARY EVIDENCE IN RESPECT OF THE MODVAT CREDIT AVAILED. IT IS THE SUBMISSION OF THE LD COUNSEL FOR THE ASSESSEE THAT IF AN OPPORTUNITY IS GIVEN, HE WILL SUBSTANTIATE THE CLAIM OF THE ASSESSEE BY FILING EXCISE RECORDS AND OTHER RELATED DOCUMENTS. 6 CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMS TANCES OF THE CASE AND IN THE INTEREST OF JUSTICE, WE DEEM IT PROPER TO RESTO RE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO GIVE ONE MORE OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE ITS CLAIM OF UN-AVAILED MO DVAT CREDIT. THE ASSESSING OFFICER SHALL DECIDE THE ISSUE AFRESH AND IN ACCORD ANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOL D AND DIRECT ACCORDINGLY. THE GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWE D FOR STATISTICAL PURPOSE. 7 IN GROUNDS OF APPEAL NO.2, THE ASSESSEE HAS CHALL ENGED THE ORDER OF THE CIT(A) IN CONFIRMING THE DISALLOWANCE OF AMORTIZATI ON OF THE PREMIUM PAID FOR THE LEASEHOLD LAND AMOUNTING TO RS. 20,16,264/- 7.1 THE LD COUNSEL FOR THE ASSESSEE, AT THE OUTSET, REFERRING TO THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2001-02 SUBMITTED THAT 6 ITA NO. 461 & 849/MUM/2009 (ASST YEAR 2004-05) THIS ISSUE STANDS DECIDED AGAINST THE ASSESSEE WHER E THE TRIBUNAL, FOLLOWING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN TH E CASE OF MUKUND LTD REPORTED IN 106 ITD 23 HAS DISMISSED THE GROUND RAISED BY TH E ASSESSEE. HE HOWEVER, SUBMITTED THAT IN THE CASE OF DCIT VS SUN PHARMACEU TICALS REPORTED IN 24 DTR 262 SIMILAR ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. 8 AFTER HEARING BOTH THE SIDES AND IN VIEW OF THE DECISION OF THE TRIBUNAL IN ASSESSES OWN CASE IN THE IMMEDIATELY PRECEDING ASS ESSMENT YEAR ON THE SAME ISSUE WE HOLD THAT THE CIT(A) IS JUSTIFIED IN CONFI RMING THE DISALLOWANCE OF AMORTIZATION OF THE PREMIUM PAID FOR LEASEHOLD LAND AMOUNTING TO RS. 20,16,264/-. THE GROUND RAISED BY THE ASSESSEE IS A CCORDINGLY DISMISSED. 9 GROUNDS OF APPEAL NO.3 RELATING TO DISALLOWANCE ON ACCOUNT OF EXIM INTEREST AMOUNTING TO RS. 93,085/- WAS NOT PRESSED BY THE LD COUNSEL FOR THE ASSESSEE FOR WHICH THE LD DR HAS NO OBJECTION. ACCO RDINGLY, THIS GROUND IS DISMISSED AS NOT PRESSED. 10 IN GROUNDS OF APPEAL NO.4, THE ASSESSEE HAS CHAL LENGED THE ORDER OF THE CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS. 1,20,0 0,000/- ON ACCOUNT OF INVENTORY WRITTEN OFF. 7 ITA NO. 461 & 849/MUM/2009 (ASST YEAR 2004-05) 10.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASS ESSING OFFICER, ON PERUSAL OF THE P&L ACCOUNT AND THE DETAILS FILED BY THE ASSESSEE, NOTED THAT THE ASSESSEE COMPANY HAS WRITTEN OFF AN AMOUNT OF RS. 1,20,00,00 0/- ON ACCOUNT OF OBSOLETE STORES AND SPARES INVENTORY WRITTEN OFF UNDER THE H EAD MANUFACTURING AND TRADING EXPENSES. ON BEING QUESTIONED BY THE ASSES SING OFFICER TO FILE THE DETAILS OF THE INVENTORY WRITTEN OFF, THE ASSESSEE FILED A LIST OF THE STORES AND SPARES INVENTORY WRITTEN OFF. IN ABSENCE OF PRODUC TION OF OTHER DETAILS AS TO WHY THE INVENTORY HAS BEEN WRITTEN OFF AND NOTING THAT THE LIST CONTAINS CERTAIN ITEMS WHICH CANNOT BECOME OBSOLETE, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE. 11 IN APPEAL, THE CIT(A) CONFIRMED THE ACTION OF TH E ASSESSING OFFICER ON THE GROUND THAT THE ASSESSEE HAS FAILED TO FURNISH ANY REASON FOR TREATING THE STORES AND SPARES AS OBSOLETE, AND HAS TO BE WRITTEN OFF E VEN DURING THE APPELLATE PROCEEDINGS. AGGRIEVED WITH SUCH ORDER OF THE CIT( A), THE ASSESSEE IS IN APPEAL HERE BEFORE US. 12 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE PARTIES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND TH E CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND THE ASSES SING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESS EE FAILED TO FURNISH ANY REASON FOR TREATING THE STORES AND SPARES AS OBSOLE TE AND FIT TO BE WRITTEN OFF. WE FIND, THE ASSESSEE BEFORE US HAS FILED A CHART SHOWING ITEM WISE STORES AND 8 ITA NO. 461 & 849/MUM/2009 (ASST YEAR 2004-05) SPARES AND ALSO A WRITE UP JUSTIFYING THE REASONS FOR SUCH WRITTEN OFF AS ADDITIONAL EVIDENCE. 13 AFTER HEARING BOTH THE PARTIES, THE ADDITIONAL E VIDENCE FILED BY THE ASSESSEE JUSTIFYING THE WRITTEN OFF OF ITEM WISE STORES AND SPARES, IS ADMITTED. 13.1 ADMITTEDLY, THE REASONS FOR SUCH WRITE OFF WAS NOT AVAILABLE BEFORE THE ASSESSING OFFICER OR BEFORE THE CIT(A) AND FILED FO R THE FIRST TIME BEFORE US. WE, THEREFORE, IN THE INTEREST OF JUSTICE, DEEM IT PROP ER TO RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO GO THROUGH THE REASONS GIVEN BY THE ASSESSEE JUSTIFYING THE WRITE OFF OF STORES AND SPARES. THE ASSESSING OFFICER SHALL DECIDE THE ISSUE AFRESH AND IN ACCORDANCE WITH LAW AFTER G IVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDING LY. THIS GROUND OF THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PUR POSE. 14 GROUNDS OF APPEAL NO 5 RELATES TO ADHOC DISALLOW ANCE OF EXPENSES. SINCE THIS GROUND HAS GOT BEARING WITH THE GROUNDS OF APP EAL NOS 2 & 3 BY THE REVENUE, THIS GROUND IS BEING DECIDED ALONG WITH GROUNDS O F APPEAL NO2 & 3 OF THE REVENUE. 15 GROUNDS OF APPEAL NO.6 RELATES TO DISALLOWANCE O F SET OFF OF LOSS IN COMPUTING BOOK PROFIT U/S 115JB. 9 ITA NO. 461 & 849/MUM/2009 (ASST YEAR 2004-05) 15.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASS ESSING OFFICER, ON PERUSAL OF THE FORM NO.29B FILED ALONG WITH THE RETURN OF INCOME, NOTED THAT THE ASSESSEE COMPANY HAS COMPUTED THE TAX PAYABLE U/S 115JB OF T HE I T ACT AMOUNTING TO RS. 82,50,802/-. HE NOTED THAT THE ASSESSEE, WHILE WORKING OUT THE BOOK PROFIT HAS COMMITTED THE FOLLOWING MISTAKE: I) THE ASSESSEE COMPANY HAS COMPUTED THE CUMULATIVE BROUGHT FORWARD BUSINESS LOSS AND CUMULATIVE DEPRECIATION FOR ALL T HE PRECEDING YEARS AND THAN THE LESSER OF THE TWO I.E. CUMULATIVE BUSINESS LOSS HAS BEEN CONSIDERED FOR SETTING OFF THE SAME AGAINST THE NET PROFIT AS PER P&L ACCOUNT. II) WHILE SETTING OFF THE NET PROFIT OF AY 2001-02 AND 2003-04, THE ASSESSEE COMPANY HAS SET OFF THE PROPORTIONATE BUSINESS INCO ME AND PROPORTIONATE DEPRECIATION AGAINST THE BROUGHT FORWARD LOSS AND B ROUGHT FORWARD DEPRECIATION. THE PROPORTION BEING THE RATIO OF BRO UGHT FORWARD LOSS TO TOTAL LOSS. III) THE ASSESSEE COMPANY HAS NOT INCREASED THE BOO K PROFIT BY THE AMOUNT OF PROVISIONS DEBITED TO THE P&L A/C 15.2 THE ASSESSING OFFICER CONSIDERED THE LOWER OF THE BUSINESS LOSS AND THE DEPRECIATION FOR EACH OF THE EARLIER YEARS AND THER EAFTER ADDED ALL SUCH LOWER AMOUNTS TO ARRIVE AT THE FIGURE OF SET OFF. THE ASS ESSING OFFICER FURTHER NOTED THAT FROM ASSESSMENT YEAR 2003-04 THE ASSESSEE COMPANY H AS COMPUTED THE BOOK PROFIT BY CONSIDERING THE LOWER OF BUSINESS LOSS OR DEPRECIATION FOR EACH YEAR AS STATED ABOVE, AND AFTER SETTING OFF THE PROFIT FOR AY 2003-04 THE ASSESSEE COMPANY HAS ARRIVED AT AN AMOUNT OF RS. 10.87,20,00 0/- WHICH IS CARRIED FORWARD FOR SET OFF IN FUTURE YEARS. HOWEVER, WHILE COMPUTI NG THE BOOK PROFIT FOR AY 2004- 05, THE ASSESSEE COMPANY HAS SET OFF AN AMOUNT OF R S. 22,20,04,000/- INSTEAD OF 10 ITA NO. 461 & 849/MUM/2009 (ASST YEAR 2004-05) SETTING OF RS. 10,87,20,000/-. THE ASSESSEE COMPANY HAS RECOMPUTED THE AMOUNT OF BUSINESS LOSS TO BE REDUCED FROM THE BOOK PROFIT FOR AY 2004-05 BY REDUCING THE PROPORTIONATE BUSINESS INCOME AND DEPR ECIATION FOR AY 2001-02 AND 2003-04 FROM THE BROUGHT FORWARD LOSS AND UNABSORBE D DEPRECIATION. ACCORDING TO THE ASSESSING OFFICER, SUCH A COMPUTATION, AS DO NE BY THE ASSESSEE COMPANY HAS NO LEGAL SANCTITY. THE ASSESSEE COMPANY HAS SIM PLY TWISTED THE COMPUTATION OF FIGURES OF BROUGHT FORWARD LOSS AND UNABSORBED D EPRECATION SO AS TO INCREASE THE AMOUNT OF SET OFF AVAILABLE. HE, ACCORDINGLY CA ME TO THE CONCLUSION THAT THE BOOK PROFIT ARRIVED AT OF THE EARLIER YEAR IS INCO RRECT AND CALCULATED SUCH PROFIT AT RS.24,95,50,976/-. 16 IN APPEAL, THE CIT(A) CONFIRMED THE ACTION OF TH E ASSESSING OFFICER ON THE GROUND THAT THE ASSESSEE WAS NOT ABLE TO PROVE AS TO HOW THE CALCULATION MADE BY THE AO IS INCORRECT. AGGRIEVED WITH SUCH ORDER O F THE CIT(A), THE ASSESSEE IS IN APPEAL HERE BEFORE US. 17 THE LD COUNSEL FOR THE ASSESSEE, REFERRING TO TH E DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF AMLINE TEXTILE S P LTD VS ITO REPORTED IN 27 SOT 152 (MUM) SUBMITTED THAT THE LOWER OF THE SOLIT ARY FIGURES OF THE UNABSORBED DEPRECIATION OR LOSS BROUGHT FORWARD FOR ALL THE EARLIER YEARS TAKEN TOGETHER WAS TO BE REDUCED FOR THE PURPOSE OF COMPU TING BOOK PROFIT U/S 115JB OF THE I T ACT. THEREFORE, COMPUTATION MADE BY THE ASS ESSEE WAS CORRECT AND THE ORDER OF THE CIT(A) SHOULD BE SET ASIDE ON THIS ISS UE. 11 ITA NO. 461 & 849/MUM/2009 (ASST YEAR 2004-05) 17.1 REFERRING TO PAGE 60 OF THE PAPER BOOK, WHICH IS THE COMPUTATION OF BOOK PROFIT U/S 115JB, HE DREW THE ATTENTION OF THE BENC H TO THE COMPUTATION MADE BY THE ASSESSEE AND SUBMITTED THAT THE SAME IS CORRECT . 17.2 THE LD DR, ON THE OTHER HAND, FAIRLY CONCEDED THAT THIS ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE TRIBUNAL CITED BY THE LD COUNSEL FOR THE ASSESSEE. 18 AFTER CONSIDERING THE RIVAL SUBMISSIONS MADE BY BOTH THE PARTIES, AND RELYING ON THE DECISION OF THE TRIBUNAL IN THE CASE OF AMLINE TEXTILES P LTD.,(SUPRA), WE HOLD THAT AGGREGATE AMOUNT OF UNA BSORBED DEPRECATION OR BROUGHT FORWARD LOSSES OF THE YEARS TAKEN TOGETHER WHICH LOSSES WAS TO BE REDUCED FOR THE PURPOSE OF COMPUTING BOOK PROFIT U/ S 115JB. IT CANNOT BE CONSIDERED ON A YEAR TO YEAR BASIS. THE GROUND RAIS ED BY THE ASSESSEE IS ACCORDINGLY ALLOWED. 19 IN GROUNDS OF APPEAL NOS 7 TO 9, THE ASSESSEE HA S CHALLENGED THE ORDER OF THE CIT(A) IN CONFIRMING THE ACTION OF THE AO IN AD DING A SUM OF RS. 48,41,084/- BEING PROVISION FOR GRATUITY; A SUM OF RS. 15,98,32 6/- BEING PROVISION FOR LEAVE ENCASHMENT AND A SUM OF RS. 2,25,00,000/- BEING P ROVISION FOR DOUBTFUL DEBTS WHILE COMPUTING BOOK PROFIT FOR THE PURPOSE OF SEC 115JB OF THE I T ACT. 12 ITA NO. 461 & 849/MUM/2009 (ASST YEAR 2004-05) 19.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASS ESSING OFFICER WHILE COMPUTING THE BOOK PROFIT MADE AN ADDITION OF RS. 48,41,084/ - CLAIMED BY THE ASSESSEE AS PROVISION FOR GRATUITY, RS. 15,98,436/ BEING PROV ISION FOR LEAVE ENCASHMENT AND A SUM OF RS. 2,25,00,000/- BEING PROVISION FOR DOUB TFUL DEBTS. 19.2 IN APPEAL, THE CIT(A), FOLLOWING HIS DECISION FOR AY 2001-02 UPHELD THE ACTION OF THE AO BY HOLDING AS UNDER: 8.4 IT IS NOTED THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE VIDE THE CIT(A)S ORDER DATED 24.9.2004 IN THE AY 2001-0 2 WHERE IT WAS HELD: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE A ND THE SUBMISSIONS MADE BY THE COUNSEL OF THE APPELLANT. I N MY CONSIDERED OPINION, THE AO IS JUSTIFIED IN REJECTIN G THE CLAIM OF THE APPELLANT. ONE OF THE CONDITIONS LAID DOWN BY T HE HONBLE SUPREME COURT IN THE CASE OF BHARAT EARTH MOVERS LT D (BEML) VS CIT 245 ITR 428 IS THAT THE LIABILITY SHOULD BE WORKED OUT ON THE BASIS OF A SCIENTIFIC METHOD THAT IS, CALCUL ATION MADE BY AN ACTUARY. IN THE PRESENT CASE, THE APPELLANT H AS NOT QUANTIFIED THE LIABILITY ON THE BASIS OF ANY SUCH A CTUARIAL VALUATION. FURTHER, THE APPELLANT FAILS TO SUBMIT A NY DOCUMENTARY EVIDENCE WHICH LEGALLY ENTITLES ITS EMP LOYEES TO GET LEAVE ENCASHMENT. IN ABSENCE OF THE FULFILMENT OF THESE BASIS CONDITIONS, GROUND OF APPEAL NO.4 IS REJECTED . 8.5 THE APPELLANT HAS NEITHER FURNISHED ANY ACTUARI AL REPORT NOR PROVED THAT THESE ARE NOT CONTINGENT LIABILITIES. T HEREFORE, THE SAME IS TREATED AS UNASCERTAINED LIABILITY. 8.6 IN VIEW OF THE ABOVE, THE AOS ACTION OF ADDING THE PROVISIONS FOR GRATUITY, LEAVE ENCASHMENT AND DOUBTFUL DEBTS IS CO NFIRMED AND THESE GROUNDS ARE DISMISSED.: 13 ITA NO. 461 & 849/MUM/2009 (ASST YEAR 2004-05) 20 AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASS ESSEE IS IN APPEAL HERE BEFORE US. 21 THE LD COUNSEL FOR THE ASSESSEE, REFERRING TO TH E SIGNIFICANT ACCOUNTING POLICIES ATTACHED TO THE AUDIT REPORT, DREW THE ATT ENTION OF THE BENCH TO CLAUSE (V), COPY OF WHICH IS PLACED AT PAGE 25 OF THE PAPE R BOOK WHICH READS AS UNDER: CONTRIBUTIONS TO PROVIDENT FUND ARE DEPOSITED WITH REGIONAL PROVIDENT FUND COMMISSIONER AND CONTRIBUTION TO GROUP GRATUI TY-CUM-LIFE INSURANCE AND SUPERANNUATION SCHEME ARE FUNDED WITH THE LIFE INSURANCE CORPORATION OF INDIA. LIABILITY FOR GRATUITY AND LE AVE ENCASHMENT IS PROVIDED ON THE BASIS OF ACTUARIAL VALUATION. 21.1 REFERRING TO THE SAME, HE SUBMITTED THAT IT I S CRYSTAL CLEAR FROM THE NOTE THAT LIABILITY FOR GRATUITY AND LEAVE ENCASHMENT IS PROVIDED ON THE BASIS OF ACTUARIAL VALUATION. HE SUBMITTED THAT IN THE EARLI ER YEARS, THE APPEAL OF THE ASSESSEE WAS DISMISSED SOLELY ON THE GROUND THAT TH E ASSESSEE HAS NOT QUANTIFIED THE LOSS ON THE BASIS OF SUCH ACTUARIAL VALUATION. HOWEVER, SINCE DURING THIS YEAR, QUANTIFICATION HAS BEEN MADE ON T HE BASIS OF ACTUARIAL VALUATION; THEREFORE, IN VIEW OF THE DECISION OF TH E HONBLE SUPREME COURT IN THE CASE OF BEML (SUPRA), THE LIABILITY FOR GRATUITY AN D LEAVE ENCASHMENT CANNOT BE CONSIDERED AS UNASCERTAINED LIABILITY AND CANNOT BE ADDED FOR THE PURPOSE OF CALCULATING THE BOOK PROFIT. 14 ITA NO. 461 & 849/MUM/2009 (ASST YEAR 2004-05) 22 SO FAR AS THE ISSUE RELATING TO DOUBTFUL DEBTS I S CONCERNED, HE SUBMITTED THAT BECAUSE OF THE RETROSPECTIVE AMENDMENT TO THE ACT, THIS ISSUE IS AGAINST THE ASSESSEE. 22.1 THE LD DR, ON THE OTHER HAND DREW THE ATTENTIO N OF THE BENCH TO PARA 9 OF THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE DE CIDED IN ITA NO.8939/MUM/2004 FOR ASSESSMENT YEAR 2001-02 AND SU BMITTED THE WHILE DISPOSING THE GROUND OF THE REVENUE THE TRIBUNAL HE LD THAT THE ASSESSEE HAS NOT FILED ANY DOCUMENTARY OR MATERIAL SUPPORTING ITS CL AIM THAT THE PROVISION IS BASED ON THE DEFINITE LIABILITY. HE, ACCORDINGLY SUPPORTE D THE ORDER OF THE CIT(A). 23 WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE PARTIES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSI DERED THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2001-02. WE FIND IN THE ASSESSMENT YEAR 2001-02, THE TRIBUNAL UPHELD THE O RDER OF THE CIT(A) ON THE GROUND THAT THE LIABILITY ON ACCOUNT OF PROVISION F OR GRATUITY AND LEAVE ENCASHMENT WAS NOT WORKED OUT ON THE BASIS OF SCIE NTIFIC METHOD I.E. CALCULATION MADE BY AN ACTUARY AND NO DOCUMENTARY EVIDENCE WAS FILED TO SUPPORT THAT THE PROVISION IS BASED ON DEFINITE LIABILITY. HOWEVER, WE FIND, THE PROVISION MADE IN THE IMPUGNED YEAR IS DIFFERENT. THE AUDITORS IN THE IR AUDIT REPORT HAVE ALREADY MENTIONED THAT THE LIABILITY FOR GRATUITY AND LEAVE ENCASHMENT IS PROVIDED ON THE BASIS OF ACTUARIAL VALUATION (PAGE 25 OF THE PAPER BOOK). THE SUBMISSION OF THE 15 ITA NO. 461 & 849/MUM/2009 (ASST YEAR 2004-05) LD COUNSEL FOR THE ASSESSEE THAT THE NOTE OF THE AU DITORS HAS NOT BEEN PROVED TO BE FALSE OR UNTRUE COULD NOT BE CONTROVERTED BY THE LD DR. .. . THEREFORE, FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF BEML (SUPRA) PROVISION FOR GRATUITY AND LEAVE ENCASHMENT HAVING BEEN MADE ON THE BASIS OF ACTUARIAL VALUATION CANNOT BE ADDED WHILE COMPUTING THE BOOK PROFIT FOR THE PURPOSE OF SEC. 115JB OF THE ACT. THEREFORE, GROUNDS OF APPEA L NO.7 & 8 BY THE ASSESSEE ARE ALLOWED. 23.1 SO FAR AS THE ISSUE RELATING TO ADDITION OF RS . 2,25,00,000/- ON ACCOUNT OF DOUBTFUL DEBTS FOR COMPUTING THE BOOK PROFIT FOR TH E PURPOSE OF SEC. 115JB IS CONCERNED, THE SAME HAS TO BE UPHELD IN VIEW OF THE RETROSPECTIVE AMENDMENT TO THE ACT. THEREFORE, GROUND NO.9 IS DISMISSED. ITA NO.849/MUM/2009( BY THE REVENUE) 24 GROUNDS OF APPEAL NO.1 BY THE REVENUE READS AS U NDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN DELETING THE DISALLOWANCE OF DEPREC IATION OF RS. 45,96,328/- ON ELECTRIC FEEDER LINES IGNORING THE FACT THAT THE ASSESSEE WAS NOT THE OWNER OF THE FEEDER LINES AS ALSO THE TITLE OF THE FEEDER LINES VESTS WITH THE MSEB. 24.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASS ESSING OFFICER OBSERVED FROM THE DEPRECIATION CHART AND THE NOTES APPENDED TO I T THAT IN THE BLOCK OF PLANT & MACHINERY THE ASSESSEE COMPANY HAS INCLUDED AN AM OUNT OF RS. 4,35,80,000/- PAID TO MSEB FOR PROVIDING ELECTRIC FEEDER LINES TO THE COMPANYS PLANT. IT IS 16 ITA NO. 461 & 849/MUM/2009 (ASST YEAR 2004-05) FURTHER MENTIONED THAT THE TITLE OF THE FEEDER LINE S (THE ASSETS) VESTS WITH MSEB AND THE ASSESSEE COMPANY HAS CLAIMED DEPRECIATION A S IT HAS EXCLUSIVE RIGHT OF USE OF THE ELECTRIC FEEDER LINES. ACCORDING TO TH E ASSESSING OFFICER , SINCE THE OWNERSHIP OF THE ELECTRIC FEEDER LINES DO NOT VEST WITH THE ASSESSEE COMPANY, CLAIM OF DEPRECIATION OVER THE SAME CONTRAVENES THE CONDITIONS LAID DOWN IN SEC. 32(1) OF THE I T ACT. HE, THEREFORE, ASKED THE ASS ESSEE COMPANY TO SHOW CAUSE AS TO WHY THE DEPRECIATION CLAIMED ON THE ELECTRIC FEEDER LINES SHOULD NOT BE DISALLOWED. HE ALSO ASKED THE ASSESSEE COMPANY TO FILE A COPY OF THE AGREEMENT ENTERED INTO WITH MSEB FOR PROVIDING THE FEEDER LIN ES AND THE INSURANCE DOCUMENTS IN RESPECT OF THE SAME. HE FURTHER ASKED THE ASSESSEE COMPANY TO SUBMIT THE TREATMENT OF THE FEEDER LINES AND THE DE PRECIATION CHARGED THEREON AS PER THE COMPANIES ACT. 24.2 RELYING ON A COUPLE OF DECISIONS AND THE ORDER OF THE CIT(A) FOR ASSESSMENT YEAR 2001-02, IT WAS EXPLAINED BY THE A SSESSEE COMPANY THAT IT HAS CORRECTLY CLAIMED THE DEPRECIATION. HOWEVER, TH E ASSESSING OFFICER REJECTED THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE. HE NOTED THAT IN THE INSTANT CASE THE FEEDER LINES ARE IN THE NAME OF MSEB AND THE OWNERSHIP OVER THEM VESTS WITH MSEB. FURTHER, THE UPKEEP AND MAINTENANC E OF THE FEEDER LINES HAS ALSO TO BE CARRIED OUT BY MSEB. THE ASSESSEE COMPA NY HAS BORNE A PART OF THE COST FOR INSTALLATION OF THE FEEDER LINES ON WHICH IT IS CLAIMING DEPRECIATION. THE ASSESSEE COMPANY DOES NOT ENJOY THE OWNERSHIP OF TH E FEEDER LINES. NEITHER THE FEEDER LINES ARE IN EXCLUSIVE POSSESSION OF THE ASS ESSEE COMPANY. THE ASSESSEE COMPANY IS ONLY ENTITLED TO AN EXCLUSIVE AND UNINTE RRUPTED SUPPLY OF ELECTRICITY 17 ITA NO. 461 & 849/MUM/2009 (ASST YEAR 2004-05) FROM SUCH FEEDER LINES. THEREFORE, DEPRECIATION ON THE SAME IS NOT ALLOWABLE IN THE HANDS OF THE ASSESSEE COMPANY. FOR THIS PROPOS ITION, THE ASSESSING OFFICER RELIED ON THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS INDIAN EXPLOSIVES LTD REPORTED IN 204 ITR 593 WHERE IN IT WAS HELD THAT WHERE THE ASSESSEE HAS RIGHT TO USE THE RAILWAY SIDING BUILT BY THE RAILWAYS ON THE LAND TRANSFERRED BY THE ASSESSEE, THE ASSESSEE CANNOT BE SAID TO BE THE OWNER OF THE RAILWAY SIDING SO AS TO CLAIM DEPRECIATION. HE FUR THER NOTED THAT THE ORDER OF THE CIT(A) GIVING RELIEF TO THE ASSESSEE FOR THE ASS ESSMENT YEAR 2001-02 HAS NOT BEEN ACCEPTED BY THE REVENUE AND THE SECOND APPEAL FILED BEFORE THE TRIBUNAL IS PENDING. HE, ACCORDINGLY, DISALLOWED THE DEPRECI ATION OF RS. 45,96,328/- CLAIMED BY THE ASSESSEE ON THE FEEDER LINES. 25 IN APPEAL, THE D CIT(A), FOLLOWING HIS ORDER FOR THE ASSESSMENT YEAR 2001- 02, DIRECTED THE ASSESSING OFFICER TO DELETE THE D ISALLOWANCE OF DEPRECIATION OF RS. 45,96,328/-. 26 AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE REV ENUE IS IN APPEAL HERE BEFORE US. 27 THE LD DR STRONGLY RELIED ON THE ORDER OF THE AS SESSING OFFICER . THE LD COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, RELIE D ON THE ORDER OF THE CIT(A) AND THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CAS E FOR ASSESSMENT YEAR 2001- 02. HE ALSO RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MYSORE MINERALS LTD VS CIT REPORTED IN 239 ITR 775. 18 ITA NO. 461 & 849/MUM/2009 (ASST YEAR 2004-05) 28 WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE PARTIES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND TH E CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSI DERED THE VARIOUS DECISIONS CITED BY BOTH THE PARTIES BEFORE US. WE FIND IDENTI CAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSM ENT YEAR 2001-02. WE FIND THE TRIBUNAL, AFTER CONSIDERING VARIOUS DECISIONS, DISMISSED THE GROUND RAISED BY THE REVENUE BY HOLDING AS UNDER: HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDERE D THEIR RIVAL CONTENTIONS, WE FIND THAT THE ASSESSEE COMPANY WAS INCORPORATED ON 1 ST JULY 1995 AND STARTED INSTALLING PLANT AND MACHINER Y DURING THE FY 97-98 AND THE AMOUNT OF RS. 4,35,80,000/- WAS PAID FOR PR OVIDING ELECTRIC FEEDER LINE TO THE COMPANYS PLANT DURING FY 96-97. THUS, IT IS EVIDENT THAT THIS EXPENDITURE HAS BEEN INCURRED PRIOR TO COMMENCEMENT OF BUSINESS. THE PUBJAB & HARYANA HIGH COURT IN THE CASE OF SANGRUR VANASPATI MILLS LTD, CITED SUPRA HAS HELD THAT THE EXPENDITURE INCURRED BY THE ASSESSEE ON THE COST OF POWER LINE FOR INDEPENDENT FEEDER, INCURRED PRIOR TO COMMENCEMENT OF PRODUCTION HAS TO BE TREATED AS PAR T OF PLANT AND MACHINERY BEING NECESSARY FOR COMMENCEMENT OF PRODU CTION AND HAS TO BE CAPITALIZED. FOR COMING TO THIS CONCLUSION THE H IGH COURT RELIED UPON THE DECISIONS OF THE SUPREME COURT IN THE CASE OF C HALLAPALLI SUGARS LTD VS CIT (98 ITR 167) AND TRAVANCORE COCHIN CHEMICALS LTD VS CIT(106 ITR 900). FACTS AND CIRCUMSTANCES BEING IDENTICAL IN TH E CASE BEFORE US, RESPECTFULLY FOLLOWING THE DECISION OF THE PUBJAB & HARYANA HIGH COURT IN THE CASE OF SANGRUR VANASPATI MILLS LTD CITED SUPRA , THIS GROUND OF APPEAL OF THE REVENUE IS REJECTED. 28.1 SINCE THE FACTS OF THE CURRENT YEAR ARE IDENTI CAL TO THE FACTS FOR THE ASSESSMENT YEAR 2001-02; THEREFORE, RESPECTFULLY F OLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE AND IN ABSENCE OF A NY DISTINGUISHABLE FEATURE BROUGHT BEFORE US BY THE LD DR, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 19 ITA NO. 461 & 849/MUM/2009 (ASST YEAR 2004-05) 29 GROUNDS OF APPEAL 2 & 3 BY THE REVENUE AND THE G ROUNDS OF APPEAL NO.5 BY THE ASSESSEE RELATE TO PART RELIEF GIVEN BY THE CIT(A) ON ACCOUNT OF MANUFACTURING AND TRADING EXPENSES AND OTHER EXPEN SES. 29.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSE SSING OFFICER NOTED THAT IN SPITE OF NUMBER OF OPPORTUNITIES GRANTED, THE ASSESSEE FA ILED TO FILE THE DETAILS CALLED FOR. THE ASSESSEE COMPANY HAS FILED ONLY A BROAD B REAKUP OF CERTAIN EXPENSES. THE ASSESSEE COMPANY HAS ALSO FAILED TO FILE THE DE TAILS OF PURCHASES, MANUFACTURING EXPENSES AND OTHER GENERAL EXPENSES E TC. HE NOTED FROM THE TAX AUDIT REPORT THAT AGAINST THE CLAUSE 17(E)(1) W HICH REPRESENTS THE EXPENDITURE BY WAY OF PENALTY OR FINE FOR VIOLATION OF ANY LAW FOR THE TIME BEING IN FORCE, THE AUDITORS HAVE MENTIONED THAT THE SCOPE OF EXPENDITURE IN THIS ITEM, IS SUCH THAT IT IS NOT CAPABLE OF BEING IDENT IFIED AND/OR QUANTIFIED WITH REASONABLE ACCURACY, HAVING REGARD TO THE VOLUME OF DISBURSEMENT AS ALSO THE PLETHORA OF LAWS, RULES AND REGULATIONS IN INDIA. 28.1 IN VIEW OF THE ABOVE, THE ASSESSING OFFICER OB SERVED THAT THE AUDITORS HAVE NOT QUANTIFIED THE EXPENSES INCURRED BY WAY OF FINE/PENALTY. SINCE THE ASSESSEE FAILED TO SUBMIT THE DETAILS CALLED FOR, T HE ALLOWABILITY OF VARIOUS EXPENSES DEBITED TO P&L ACCOUNT CANNOT BE VERIFIED. HE NOTED THAT THE TOTAL EXPENDITURE INCURRED BY THE ASSESSEE UNDER THE HEAD S MANUFACTURE AND TRADING EXPENSES AND OTHER EXPENSES IS RS. 1,08,26,45,00 0/- AND RS. 31,14,25,000/- 20 ITA NO. 461 & 849/MUM/2009 (ASST YEAR 2004-05) RESPECTIVELY. HE, THEREFORE, DISALLOWED AN AMOUNT OF RS. 6,97,03,500/- ON ADHOC BASIS BEING 5% OF MANUFACTURING AND TRADING EXPENSE S AND OTHER EXPENSES. 29 IN APPEAL, IT WAS SUBMITTED THAT DISALLOWANCE OF EXPENSES @ 5% OF THE TOTAL CLAIM WAS HIGHLY UNJUSTIFIED BECAUSE THE AUD ITORS HAVE NOT DOUBTED ANY CLAIM MADE BY THE ASSESSEE. IT WAS SUBMITTED THAT EITHER THE ASSESSEE ITSELF OR THE ASSESSING OFFICER UNDER OTHER HEAD HAS ALREAD Y DISALLOWED THE PROVISION FOR DOUBTFUL DEBTS OF RS. 2,25,00,000/-; OBSOLETE STORE S WRITTEN OFF OF RS. 1,20,00,000/- AND FROM EXCISE DUTY ON FINISHED GOOD S OF RS. 1,28,74,000/-. THEREFORE, THE DISALLOWANCE MADE BY THE ASSESSING O FFICER IS MISCONCEIVED. 30 BASED ON THE ARGUMENTS OFFERED BY THE ASSESSEE, THE CIT(A) NOTED THAT THE ASSESSEE HAS NOT EXPLAINED EITHER BEFORE THE A SSESSING OFFICER OR EVEN BEFORE HIM AS TO WHY THE TAX AUDITORS HAVE FAILED TO QUANTIFY THE EXPENDITURE INCURRED IN THE NATURE OF PENALTY OR FINE AND ALSO WHY THE ASSESSEE DID NOT FURNISH COMPLETE DETAILS ABOUT THE EXPENSES MENTION ED ABOVE. THEREFORE, THE ASSESSEE HAS NOT DISCHARGED ITS ONUS TO SUBSTANTIAT E THE CLAIMS MADE AS ABOVE. HE, HOWEVER, NOTED THAT THE CLAIMS SUCH AS PROVISIO N FOR DOUBTFUL DEBTS, EXCISE DUTY ON FINISHED GOODS, INSURANCE, POWER AND FUEL, LEASE RENTALS, RENT, RATES AND TAXES, EXCHANGE GAIN/LOSS AND ANY EXPENDITURE OF SI MILAR NATURE CANNOT BE DISALLOWED @ 5%. SUCH CLAIMS HAVE TO BE EITHER ALLO WED OR DISALLOWED IN TOTO. FURTHER, ACCORDING TO HIM, DISALLOWANCE, WHICH HAS ALREADY BEEN MADE UNDER 21 ITA NO. 461 & 849/MUM/2009 (ASST YEAR 2004-05) SEPARATE HEADS, CANNOT BE RECONSIDERED FOR MAKING A NOTHER DISALLOWANCE ON AD- HOC BASIS. 30.1 CONSIDERING THE TOTALITY OF THE FACTS OF THE C ASE, HE CONSIDERED FAIR AND REASONABLE TO RESTRICT THE DISALLOWANCE TO 5% OF TH E CLAIMS UNDER THE FOLLOWING HEADS ONLY. I) MISCELLANEOUS EXPENSES 1,84,35,000/- II) COMMISSION 83,27,000/- III) OTHER GENERAL EXPENSES 3,39,02,000/- IV) LEGAL AND PROFESSIONAL FEES 74,60,000/- V) COMMISSION 4,51,64,000/ - VI) OTHER MANUFACTURING EXPENSES 1,65,59,000/- TOTAL TOTAL TOTAL TOTAL 12,98,47,000/ 12,98,47,000/ 12,98,47,000/ 12,98,47,000/- -- - THUS, THE CIT(A) SUSTAINED AN AMOUNT OF RS. 64,92 ,350/-. 31 AGGRIEVED WITH SUCH PART RELIEF GIVEN BY THE CIT (A), BOTH THE PARTIES ARE IN APPEAL HERE BEFORE US. 32 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE PARTIES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND TH E CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSI DERED THE VARIOUS DECISIONS CITED BEFORE US. ADMITTEDLY, THE ASSESSEE, DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAS NOT FURNISHED THE FULL DETAILS AS C ALLED FOR BY THE ASSESSING OFFICER. FROM THE REPLY GIVEN BY THE ASSESSEE, DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS, COPIES OF WHICH ARE PLACED IN THE PAPE R BOOK, WE FIND IN NONE OF THE SUBMISSIONS, THE ASSESSEE HAS GIVEN ANY CLEAR CUT R EPLY. GIVING ONLY DETAILS OF OTHER EXPENSES AS PER APPENDIX B SUBMITTED TO THE A SSESSING OFFICER ON 22 ITA NO. 461 & 849/MUM/2009 (ASST YEAR 2004-05) 26.12.2006, WITHOUT SUPPORTING DOCUMENTS, IS NOT SU FFICIENT FOR CLAIMING THE DEDUCTION. IT IS THE SETTLED PROPOSITION OF LAW TH AT FOR CLAIMING ANY EXPENSE; ONUS IS ALWAYS ON THE ASSESSEE TO SUBSTANTIATE WITH EVIDENCE TO THE SATISFACTION OF THE ASSESSING OFFICER THAT SUCH EXPENDITURE IS W HOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. HOWEVER, IN THE INSTANT CASE, THE ASSESSEE ADMITTEDLY HAS NOT DISCHARGED THE ONUS CAST ON IT. THEREFORE, THE CONTENTION OF THE ASSESSEE THAT THE ENTIRE EXPENSES SHOULD HAVE BEEN ALLOWED BY THE CIT(A() IS NOT CORRECT. AT THE SAME TIME, THE DISALLOWANCE OF 5% ON ADHOC BASI S BY THE ASSESSING OFFICER ON EXPENSES SUCH AS PROVISION FOR DOUBTFUL DEBTS, E XCISE DUTY ON FINISHED GOODS, INSURANCE, POWER AND FUEL, LEASE RENTALS, RENT, RAT ES AND TAXES, EXCHANGE GAIN/LOSS ETC., CANNOT BE DISALLOWED @ 5% ON ADHOC BASIS. THE CIT(A) HAS CORRECTLY HELD THAT SUCH CLAIMS HAVE TO BE EITHER ALLOWED OR DISALLOWED IN TOTO. 33.1 HOWEVER, IN ABSENCE OF FULL SUPPORTING DETAILS IN CASE OF EXPENSES SUCH AS MISCELLANEOUS EXPANSE, COMMISSION, GENERAL EXPENSES , LEGAL AND PROFESSIONAL FEES AND OTHER MANUFACTURING EXPENSES ETC., LEAKAGE OF REVENUE IS POSSIBLE. IN ABSENCE OF FURNISHING OF FULL DETAILS BEFORE THE AS SESSING OFFICER, IN OUR OPINION THE ORDER OF THE CIT(A) RESTRICTING THE DISALLOWAN CE TO 5% ON THE ABOVE ITEMS IS JUSTIFIED. IN THIS VIEW OF THE MATTER, THE ORDER O F THE CIT(A) ON THIS ISSUE IS UPHELD. GROUNDS OF APPEAL NOS 2 & 3 BY THE REVENUE AND THE GROUNDS OF APPEAL NO.5 BY THE ASSESSEE ARE DISMISSED 23 ITA NO. 461 & 849/MUM/2009 (ASST YEAR 2004-05) 34 IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED WHEREAS THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON THE 16 TH , DAY OF MAR 2011. SD/- SD/- ( (( ( R V EASWAR R V EASWAR R V EASWAR R V EASWAR ) )) ) PRESIDENT ( (( ( R K PANDA R K PANDA R K PANDA R K PANDA ) )) ) ACCOUNTANT MEMBER PLACE: MUMBAI : DATED: 16 TH , MAR 2011 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI
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