DCIT, New Delhi V. M/s Sylvania & Laxman Pvt. Ltd., New Delhi

ITA 5034/DEL/2010

• Counselvise Citation: 503420114 RSA 2010
• Duration Of Justice: 5 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-11-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 05-11-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 16-11-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH G BENCH G BENCH G BENCH G : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT G.D. AGRAWAL, VICE PRESIDENT G.D. AGRAWAL, VICE PRESIDENT G.D. AGRAWAL, VICE PRESIDENT AND AND AND AND SHRI ABY T. VARKEY SHRI ABY T. VARKEY SHRI ABY T. VARKEY SHRI ABY T. VARKEY, JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER ITA NO ITA NO ITA NO ITA NO . .. . 5034/DEL/2010 5034/DEL/2010 5034/DEL/2010 5034/DEL/2010 ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : 2005 2005 2005 2005 - -- - 06 0606 06 DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -7(1), 7(1), 7(1), 7(1), NEW DEL NEW DEL NEW DEL NEW DELHI. HI.HI. HI. VS. VS. VS. VS. M/S SYLVANIA & LAXMAN PVT.LTD., M/S SYLVANIA & LAXMAN PVT.LTD., M/S SYLVANIA & LAXMAN PVT.LTD., M/S SYLVANIA & LAXMAN PVT.LTD., B BB B- -- -57, SWAMI NAGAR, 57, SWAMI NAGAR, 57, SWAMI NAGAR, 57, SWAMI NAGAR, NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. PAN : AAACS6862P. PAN : AAACS6862P. PAN : AAACS6862P. PAN : AAACS6862P. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI B.R.R. KUMAR, SENIOR DR. RESPONDENT BY : SHRI MANPREET SINGH BAGGA, SHRI AMIT ARORA & SHRI SURAJ NANGIA, CAS. DATE OF HEARING : 05.11.2015 05.11.2015 05.11.2015 05.11.2015 DATE OF PRONOUNCEMENT : 17.11.2015 17.11.2015 17.11.2015 17.11.2015 ORDER ORDER ORDER ORDER PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP : :: :- -- - THIS APPEAL BY THE REVENUE FOR THE ASSESSMENT YEAR 2005-06 IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-X, NEW DELHI DATED 11 TH AUGUST, 2010. 2. THE ONLY GROUND RAISED IN THIS APPEAL BY THE REV ENUE READS AS UNDER:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN LAW AS WELL AS ON MERITS IN DELETING THE A DDITION OF RS.1,07,83,935/- MADE BY AO ON ACCOUNT OF PILFERAGE/OBSOLETE INVENTORIES. 3. AT THE TIME OF HEARING BEFORE US, THE LEARNED DR POINTED OUT THAT THE ASSESSEE HAS CLAIMED THE DEDUCTION FOR PILFERAG E/OBSOLETE INVENTORIES ON THE GROUND THAT ITS BUSINESS PREMISE S WERE TEMPORARILY ITA-5034/DEL/2010 2 SUSPENDED IN APRIL, 1996 AND THE OFFICE BLOCK OF TH E ASSESSEE, COST SECTION AND STORE ROOM IN THE PREMISES OF THE COMPA NY WERE SEALED ON 26 TH AUGUST, 1996. THE PREMISES WERE DE-SEALED CONSEQU ENT TO THE ORDER OF HONBLE HIGH COURT DATED 5 TH NOVEMBER, 2002. HE, THEREFORE, SUBMITTED THAT EVEN IF ANY LOSS WAS INCURRED DUE TO PILFERAGE/OBSOLENCE OF STOCK, IT WOULD ARISE IN THE ASSESSMENT YEAR 200 3-04 AND NOT IN THE YEAR UNDER APPEAL I.E. 2005-06. HE FURTHER SUBMITT ED THAT IN SUPPORT OF THE PILFERAGE, THE ASSESSEE CLAIMED TO HAVE FILE D THE COPY OF FIR. IN THE FIR, THE ASSESSEE HAS MENTIONED THE THEFT OF CE RTAIN ITEMS LIKE OFFICE EQUIPMENT, COMPUTERS, AIR CONDITIONERS, TYPE WRITERS ETC. BUT, THERE IS NO MENTION OF THE THEFT OF STOCK OF FINISH ED GOODS OR RAW MATERIAL OR OTHER THINGS IN RESPECT OF WHICH THE AS SESSEE IS CLAIMING LOSS. LEARNED DR FURTHER SUBMITTED THAT THE ASSESS EE DID NOT FURNISH ANY DETAILS IN RESPECT OF EITHER THE PILFERAGE OR O BSOLENCE. THE ASSESSEE DID NOT EVEN SPECIFY WHICH ITEM HAS BEEN S TOLEN AND WHICH PART OF LOSS IS FOR OBSOLENCE. HE, THEREFORE, SUBM ITTED THAT THE ORDER OF LEARNED CIT(A) SHOULD BE REVERSED AND THAT OF THE A SSESSING OFFICER MAY BE RESTORED. 4. LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, STATED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSE SSEE BY THE DECISION OF ITAT DELHI G BENCH IN THE CASE OF M/S SUPER OI L SEALS INDIA LTD. VIDE ITA NO.1766/DEL/2011. HE ALSO RELIED UPON THE DECI SION OF CIT(A) AND POINTED OUT THAT THE PHYSICAL VERIFICATION OF THE I NVENTORIES WAS COMPLETED IN THE ACCOUNTING YEAR RELEVANT TO THE AS SESSMENT YEAR UNDER CONSIDERATION AND WHEN THE INVENTORIES WERE P REPARED, IT WAS FOUND THAT CERTAIN ITEMS HAVE BECOME OBSOLETE AND U NSERVICEABLE. IN VIEW OF THE AFORESAID, THE INVENTORIES HAVE BEEN WR ITTEN OFF IN THE YEAR IN QUESTION. HE, THEREFORE, SUBMITTED THAT THE ORD ER OF LEARNED CIT(A) SHOULD BE SUSTAINED. ITA-5034/DEL/2010 3 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAV E PERUSED THE RELEVANT MATERIAL PLACED BEFORE US. LEARNED COUNSE L FOR THE ASSESSEE HAS RELIED UPON THE DECISION OF ITAT IN THE CASE OF M/S SUPER OIL SEALS INDIA LTD. (SUPRA) WHEREIN THE ISSUE BEFORE THE ITA T WAS WITH REGARD TO ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT O F OBSOLENCE OF STOCK. LEARNED CIT(A) HAD DELETED THE ADDITION AND WHEN THE MATTER REACHED TO THE ITAT, IT SUSTAINED THE ORDER OF LEAR NED CIT(A) WITH THE FOLLOWING FINDING:- 5. AFTER HEARING THE REVENUE, WE FIND THAT THERE I S NO MERIT IN THE APPEAL OF THE REVENUE. THE ASSESSEE I S FREE TO VALUE THE STOCK AS PER THE MARKET VALUE OF THE STOC K OR COST OF THE STOCK, WHICHEVER IS LESS. THE ASSESSEE HAS OPTION TO VALUE THE STOCKS AS PER THE MARKET RATE AND ASSESSE E HAS DONE SO. THEREFORE, WE FIND NO MERIT IN THE GROUND OF APPEAL TAKEN BY THE REVENUE AND THE SAME STANDS DISMISSED. 6. AFTER CONSIDERING THE FACTS OF THE CASE AND ARGU MENTS OF BOTH THE SIDES, WE FIND THAT THE ONLY ISSUE BEFORE THE ITAT WAS ALLOWABILITY OF LOSS ON ACCOUNT OF OBSOLENCE. THERE IS NO DISPUTE WITH REGARD TO THE LEGAL PROPOSITION LAID DOWN BY THE ITAT THAT THE AS SESSEE IS FREE TO VALUE THE STOCK AS PER THE MARKET VALUE OF THE STOC K OR COST OF THE STOCK, WHICHEVER IS LOW. HOWEVER, IN THE YEAR UNDE R CONSIDERATION, THE ISSUE UNDER CONSIDERATION IS FIRST WITH REGARD TO T HE YEAR OF LOSS AND SECONDLY, WHETHER THE LOSS WAS ACTUALLY INCURRED. BOTH THESE ISSUES WERE NOT BEFORE THE ITAT IN THE CASE OF M/S SUPER O IL SEALS INDIA LTD. (SUPRA) AND, THEREFORE, THE ABOVE DECISION OF ITAT WOULD HAVE NO APPLICATION TO THE CASE UNDER APPEAL BEFORE US. 7. REVERTING TO THE FACTS OF THE ASSESSEES CASE, W E FIND THAT THE ASSESSEE HAS CLAIMED THE LOSS ON ACCOUNT OF PILFERA GE/OBSOLETE INVENTORIES. IT WAS EXPLAINED BY THE ASSESSEE THAT THE PILFERAGE/OBSOLENCE OF STOCK TOOK PLACE ON ACCOUNT OF SEALING OF THE ASSESSEES PREMISES. HOWEVER, WE FIND THAT THE PRE MISES OF THE ITA-5034/DEL/2010 4 ASSESSEE WERE DE-SEALED DURING THE ACCOUNTING YEAR RELEVANT TO ASSESSMENT YEAR 2003-04. THEREFORE, IF ANY LOSS WA S INCURRED ON ACCOUNT OF PILFERAGE/OBSOLETE INVENTORIES DUE TO SE ALING OF THE ASSESSEES PREMISES, IT CAME TO THE KNOWLEDGE OF TH E ASSESSEE ON THE DE-SEALING OF THE PREMISES WHICH WAS ADMITTEDLY DUR ING THE ACCOUNTING YEAR RELEVANT TO ASSESSMENT YEAR 2003-04. IF THE A SSESSEE CHOSE NOT TO PREPARE THE INVENTORY FOR A PERIOD OF TWO YEARS, THE INCURRING OF THE LOSS CANNOT BE POSTPONED. THEREFORE, IN OUR OPINIO N, THE LOSS, IF ANY, ON ACCOUNT OF OBSOLENCE/PILFERAGE OF THE GOODS CLAI MED TO HAVE BEEN INCURRED BY THE ASSESSEE DUE TO SEALING OF ITS PREM ISES, COULD HAVE BEEN CLAIMED IN THE ASSESSMENT YEAR 2003-04 AND NOT IN THE YEAR UNDER CONSIDERATION. LEARNED DR HAS ALSO POINTED O UT THAT THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE WITH REGARD TO PILFERAGE OF THE STOCK. THE ONLY EVIDENCE PRODUCED IN SUPPORT O F THE CLAIM IS THE FIR WHICH MENTIONS THE THEFT OF CERTAIN ITEMS LIKE OFFICE EQUIPMENT, COMPUTERS, AIR CONDITIONERS, TYPEWRITERS ETC. BUT T HERE IS NO MENTION OF THE PILFERAGE OF THE INVENTORY. NO OTHER EVIDENCE FOR PILFERAGE OF THE STOCK IS PRODUCED. THE ASSESSEE DID NOT EVEN PRODU CE THE LIST OF THE ITEMS WHICH HAVE BEEN STOLEN. THE CLAIM OF THE ASS ESSEE IS OF GENERAL NATURE WITHOUT SPECIFYING WHICH ITEM IS PILFERED AN D WHICH ITEM HAS BECOME OBSOLETE. IN VIEW OF THE ABOVE, IN OUR OPIN ION, LEARNED CIT(A) WAS NOT JUSTIFIED IN ALLOWING THE LOSS CLAIMED TO H AVE BEEN INCURRED BY THE ASSESSEE ON ACCOUNT OF PILFERAGE/OBSOLENCE OF T HE INVENTORY. THE ORDER OF LEARNED CIT(A) ON THIS POINT IS REVERSED A ND THAT OF THE ASSESSING OFFICER IS RESTORED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED. DECISION PRONOUNCED IN THE OPEN COURT ON 17.11.2015 . SD/- SD/- (ABY T. VARKEY (ABY T. VARKEY (ABY T. VARKEY (ABY T. VARKEY ) )) ) ( (( ( G.D. AGRAWAL G.D. AGRAWAL G.D. AGRAWAL G.D. AGRAWAL ) )) ) JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VK. ITA-5034/DEL/2010 5 COPY FORWARDED TO: - 1. APPELLANT : DEPUTY COMMISSIONER OF INCOME TA X, DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -7 77 7(1), NEW DELHI. (1), NEW DELHI. (1), NEW DELHI. (1), NEW DELHI. 2. RESPONDENT : M/S SYLVANIA & LAXMAN PVT.LTD., M/S SYLVANIA & LAXMAN PVT.LTD., M/S SYLVANIA & LAXMAN PVT.LTD., M/S SYLVANIA & LAXMAN PVT.LTD., B BB B- -- -57, SWAMI NAGAR, NEW DELHI. 57, SWAMI NAGAR, NEW DELHI. 57, SWAMI NAGAR, NEW DELHI. 57, SWAMI NAGAR, NEW DELHI. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR