ADDL CIT RG 1(2), MUMBAI V. INDIAN RARE EARTHS LTD, MUMBAI

ITA 5492/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75508 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 17-02-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 31-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Assessee Lawyers: ARAVIND MOHAN
• Section: 260A

Judgement Text

I IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI SANJAY GARG, JM ./I.T.A. NO.5492/M/2012 ( / ASSESSMENT YEAR: 2009 - 2010 ) ADDL. CIT RANGE 1(2), R.NO.535, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 20. / VS. M/S. INDIAN RARE EARTHS LTD, ECIL BUILDING, VEER SARVARKAR MARG, PRABHADEVI, MUMBAI - 28. ./ PAN : AAACI 2799 F ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI O.P. SINGH, DR / RESPONDENT BY : SHRI ARAVIND MOHAN / DATE OF HEARING : 17.2.2014 / DATE OF PRONOUNCEMENT : 17.2.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 31.8.2012 IS AGAINST THE ORDER OF THE CIT (A) - 2, MUMBAI DATED 11.6.2012 FOR THE ASSESSMENT YEAR 2009 - 2010. 2. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUND WHICH READS AS UNDER: WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN DELETING THE ADDITION ON ACCOUNT OF LOSS ON NON - MOVING STORES? 3. AT THE OUTSET, SHRI ARVIND MOHAN, LD COUNSEL FOR THE ASSESSEE FILED COPIES OF THE TRIBUNAL IN ASSESSEES OWN CASES FOR THE AY 2001 - 02 (VIDE ITA NO.64/M/2005); AYS 2002 - 03 TO 2004 - 05 (VIDE ITA NO.5247 TO 5249/M/2007) AND AY 2007 - 08 VIDE ITA NO.7711/M/2010 A ND MENTIONED THAT THE ISSUE IN THE PRESENT APPEAL I.E., ALLOWABILITY OF LOSS DEBITED TO THE P&L ACCOUNT ON ACCOUNT OF NON - MOVING STORES , HAS BEEN THE SUBJECT MATTER OF THE APPEAL BEFORE THE TRIBUNAL OVER THE 2 ASSESSMENT YEARS MENTIONED ABOVE. FURTHER, BRIN GING OUR ATTENTION TO THE CONTENTS OF PARA 2.1 OF THE CIT (A)S ORDER IN GENERAL AND THE REFERENCE TO THE ORDER OF THE TRIBUNAL FOR THE AY 2001 - 2002 (SUPRA) IN PARTICULAR, LD COUNSEL MENTIONED THAT THE ISSUE UNDER CONSIDERATION STANDS COVERED IN FAVOUR OF THE ASSESSEE THEREFORE, THE ORDER PASSED BY THE CIT (A) IS FAIR AND DOES NOT CALL FOR ANY INTERFERENCE. 4. ON THE OTHER HAND, LD DR DUTIFULLY RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS CITED ORDERS OF THE TRIBUNAL (SUPRA). ON HEARING BOTH THE PARTIES AND ON PERUSAL OF THE CIT (A)S ORDER IN GENERAL, AND PARA 2.1 IN PARTICULAR, WE FIND THAT THE SAME IS RELEVANT HERE WHICH READS AS UNDER: 2.1..IT IS OBS ERVED THAT THIS IS A RECURRING ISSUE IN THE ASSESSEES CASE. IT HAS BEEN HELD IN THE ASSESSMENT ORDERS FOR THE AYS THAT THE DEDUCTION CLAIMED BY THE ASSESSEE IS NOT ON ANY SPECIFIC BASIS BUT AN AD - HOC CLAIM. THE ASSESSEE SIMPLY WRITES OFF 95% OF THE COST OF STORES, SPARES ETC., WHICH HAVE NOT BEEN MOVED FOR THREE YEARS. NO PHYSICAL VERIFICATION IS MADE TO ASCERTAIN WHETHER THE SAID SPARES AND STORES HAVE ACTUALLY BECOME OBSOLETE AND UNUSABLE. SUCH WRITE OFF ON A PRESUMPTIVE BASIS IS NOT AN ALLOWABLE DEDU CTION. ACCORDINGLY, ADDITION WAS MADE IN EARLIER YEARS WHICH WAS CONFIRMED IN FIRST APPEAL ALSO. HOWEVER, THE TRIBUNAL HAS GRANTED RELIEF TO THE ASSESSEE FOR AY 2001 - 02. ON CAREFUL PERUSAL OF THE TRIBUNALS ORDER FOR AY 2001 - 2002, IT IS SEEN THAT THE SAI D ORDER WAS PASSED IN VIEW OF PECULIAR FACTS RELEVANT TO THAT YEAR, AS A SUPERCYCLONE HAD OCCURRED NEAR THE FACTORY PREMISES IN OCTOBER, 1999. NEEDLESS TO SAY THAT NO SUCH NATURAL CALAM ITY HAD OCCURRED IN THE YEAR UNDER CONSIDERATION. EVEN OTHERWISE, THE TRIBUNALS ORDER FOR AY 2001 - 2002 HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND APPEAL U/S 260A HAS BEEN PREFERRED. WITH DUE RESPECT TO THE TRIBUNAL ITS ORDER IS NOT ACCEPTABLE. AS PER THE ACCEPTED METHOD OF ACCOUNTING OF BOOKS, STOCK IS TO BE VALUED AT T HE COST OR MARKET PRICE. HOWEVER, THE ASSESSEE HAS WITHOUT MAKING ANY EFFORT TO ASCERTAIN MARKET PRICE SIMPLY ASSUMED THE SAME TO BE 5% OF ITS VALUE. SUCH WRITE OFF IS NOT ON ANY SCIENTIFIC BASIS AND CANNOT BE ALLOWED AS DEDUCTION FOR AY 2006 - 2007, THE H ONBLE ITAT HAS DISMISSED REVENUES APPEAL FOR WANT OF APPROVAL OF COMMITTEE ON DISPUTES. THE MATTER IS BEING PERUSED BEFORE COD FOR GETTING APPROVAL TO APPEAL BEFORE ITAT. CONSIDERING THESE FACTS, THE DEDUCTION OF RS. 58,99,497/ - CLAIMED BY THE ASSESSEE AS LOSS ON NON - MOVING STORES WAS DISALLOWED BY THE AO . 2.2. ..ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION MADE ON THIS ISSUE. 6. FROM THE ABOVE, THE ISSUE OF ALLOWABILITY OF LOSS DEBITED TO THE P&L ACCOUNT ON ACCOUNT OF NON - MOVING STORES , IS RECURRING ISSUE IN THE ASSESSEES CASE IN THE EARLIER ASSESSMENT YEARS ALSO, WHEREIN THE CIT (A) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. BASING ON THE CONSTANT VIEW TAKEN BY THE FIRST APPELLATE AUTHORITY, CIT 3 (A) IN THE PRES ENT CASE HAS ALSO DIRECTED THE AO TO DELETE THE ADDITION. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THE ISSUE UNDER CONSIDERATION HAS RIGHTLY BEEN ADJUDICATED BY THE CIT (A) AND THE DECISION TAKEN BY HIM IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE DISMISSED . 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH FEBRUARY, 2014. S D / - S D / - (SANJAY GARG ) (D. KARUNAKARA RAO ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 17.2.2014 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI