DCIT, New Delhi V. M/s Vintron Informatics Ltd., New Delhi

ITA 5759/DEL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53187 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 12-09-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 16-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: REENA S PURI
• Assessee Lawyers: SATISH KHOSLA
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH H DELHI ] BEFORE MS. DIVA SINGH, JM AND SHRI K. D. RA NJAN, AM I. T. APPEAL NO. 5759 (DEL) OF 2010 ASSESSMENT YEAR : 2004-05. DY. COMMISSIONER OF INCOME-TAX, M/S. VINTR ON INFORMATICS LTD., C I R C L E : 17 (1), VS. F90/1A , OKHLA INDUSTRIAL AREA, PHASE : I, N E W D E L H I. N E W D E L H I 110 020. P A N / G I R NO. AAA CV 1596 K. ( APPELLANT ) ( R ESPONDENT ) ASSESSEE BY : SHRI SATISH KHOSLA, ADV.; DEPARTMENT BY : MS. REENA S. PURI [CI T] D. R.; O R D E R. PER K. D. RANJAN, AM : THIS APPEAL BY THE REVENUE FOR ASSESSMENT YEAR 200 4-05 ARISES OUT OF ORDER OF THE LD. CIT (APPEALS)-XIX, NEW DELHI. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS FOLLOWS :- 1. THE LD. CIT (APPEALS) HAS ERRED ON FACTS AND IN LAW BY DELETING THE DISALLOWANCE OF CLAIM OF LOSS OF RS.4,18,42,531/- O N THE BASIS OF THE TRADING RESULTS AND GROSS PROFIT FOR EARLIER YEARS WITHOUT DECIDING ON MERITS THE FACTS OF THE YEAR UNDER CONSIDERATION AND BY IGNORING THAT : - (I) THE ASSESSEE COULD NOT PRODUCE DURING THE ASSESSMEN T PROCEEDINGS THE BILLS AND VOUCHERS RELATING TO SALES, PURCHASES AND OTHER EXPENSES CLAIMED DESPITE AMPLE OPPORTUNITY; 2 I. T. APPEAL NO. 5759 (DEL) OF 2010 (II) THE ASSESSEE COULD NOT PRODUCE DURING THE ASSESSMEN T PROCEEDINGS THE BOOKS OF ACCOUNTS DESPITE AMPLE OPPORTUNITY; 2. THE LD. CIT (APPEALS) HAS ERRED ON FAC TS AND IN LAW BY DELETING THE DISALLOWANCE OF EXPENSES OF RS.25,00,000/- BY OBSER VING THAT NO DISALLOWANCE OF EXPENDITURE WAS MADE IN THE EARLIER ASSESSMENT YEAR S WITHOUT DECIDING ON MERITS THE FACTS OF THE YEAR UNDER CONSIDERATION AND BY IG NORING THAT :- (I) THE ASSESSEE COULD NOT PRODUCE DURING THE ASSE SSMENT PROCEEDINGS ANY EVIDENCE IN SUPPORT OF THE EXPENSES CLAIMED DES PITE AMPLE OPPORTUNITY; (II) THE ASSESSEE COULD NOT PRODUCE DURING THE ASS ESSMENT PROCEEDINGS THE BOOKS OF ACCOUNTS DESPITE AMPLE OPPORTUNITY. 3. THE FIRST ISSUE FOR OUR CONSIDERATION RELATES TO DELETING THE DISALLOWANCE OF CLAIM OF LOSS OF RS.4,18,42,531/- ON THE BASIS OF TRADING RESULTS AND GROSS PROFITS FOR EARLIER YEARS. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSING OFF ICER NOTED THAT THE GP RATE WAS MINUS 110.14 PER CENT AGAINST GP RATE OF MINUS 7.43 PER CENT AND 4.9 1 PER CENT SHOWN IN AY 2003-04 AND 2002- 03. IN RESPONSE TO A QUERY RAISED BY THE ASSESSING OFFICER IT WAS SUBMITTED THAT THE ASSESSEE HAD BROUGHT FORWARD DEAD STOCK OF RS.3,16,37,307/- FROM PREVIOUS YEAR WHICH WAS UNFIT FOR USE IN THE MANUFACTURE. OUT OF THIS DEAD STOCK THE ASSESS EE SOLD COMPONENTS WORTH RS.2,83,53,361/- JUST FOR RS.32,35,320/- RESULTING IN A LOSS OF RS.2 ,51,18,041/-. THE ASSESSEE ALSO FILED DETAILS OF SALE OF DEAD STOCK. ON PERUSAL OF THE DETAILS THE AO NOTICED THAT THE ASSESSEE HAD SOLD THAT SAID DEAD STOCK AT THROUGH AWAY PRICES AS COMPARED TO TH E VALUE OF THE OPENING STOCK. IN THIS REGARD THE ASSESSEE WAS ASKED TO FURNISH COPIES OF BILLS F OR PURCHASE OF THE SAID DEAD STOCK IN ORDER TO VERIFY THE VALUATION OF OPENING OF THE DEAD STOCK A ND SALE OF DEAD STOCK ALONG WITH COMPLETE BOOKS OF ACCOUNTS INCLUDING ALL BILLS / VOUCHERS IN RESPECT OF EXPENSES CLAIMED TO SUBSTANTIATE LOSS OF RS.4,18,42,531/-. THE ASSESSEE DID NOT FIL E ANY REPLY. THE AO, THEREFORE, CONCLUDED THAT THE ASSESSEE HAD FAILED TO EXPLAIN THE FALL IN THE GP RATE AND ALSO HAD FAILED TO PRODUCE COPY OF PURCHASE AND SALE BILLS OF DEAD STOCK / BOOKS OF AC COUNTS. THE AO, THEREFORE, DISALLOWED THE LOSS INCURRED BY THE ASSESSEE AT RS.4,18,42,531/-. 4. BEFORE THE LD. CIT (APPEALS) IT WAS SUBMITTED TH AT THE RETURN OF INCOME FOR AY 2003-04 WAS ACCEPTED BY THE AO AT A LOSS OF RS.10,16,99,240 /- BY THE SAME ASSESSING OFFICER, WHO HAS 3 I. T. APPEAL NO. 5759 (DEL) OF 2010 MADE THE ASSESSMENT FOR THE YEAR UNDER CONSIDERATIO N. THE AO HAD ACCEPTED STOCKS AS DECLARED BY THE ASSESSEE IN AY 2003-04 AND VERIFIED THE VALU ATION OF THE DEAD STOCK. IN THE PREVIOUS ASSESSMENT YEAR THE INVENTORY LIST OF DEAD STOCK WA S AT RS.9,16,37,308/-. DURING THIS YEAR THE SALE WAS MADE OUT OF THIS DEAD STOCK. THE AO WHILE FRAMING THE ASSESSMENT HAD IGNORED THE FACT AND PASSED THE ORDER ON THE GROUND THAT THE ASSESSE E HAD FAILED TO PRODUCE COPY OF PURCHASE BILLS OF DEAD STOCK AND BOOKS OF ACCOUNTS AND MADE ADDITI ON ON AD-HOC BASIS. THE STOCK OF ASSESSEE COMPANY WAS RECONCILED. IN VIEW OF ABOVE FACTS THE ASSESSEE ARGUED THAT THE ADDITION MADE ON AD-HOC BASIS SHOULD BE DELETED. THE LD. CIT (A) CO NSIDERED THE SUBMISSIONS MADE BY THE ASSESSEE. HE OBSERVED THAT ASSESSMENTS FOR A.YS. 2002-03 AND 2003-04 WERE COMPLETED UNDER SECTION 143(3) AND RETURNED LOSSES WERE ACCEPTED. THE LD. CIT (A) OBSERVED THAT THE AO HAD NOT DISPUTED THE SALE OF DEAD STOCK. THE ASSESSEE HAD FURNISHED NECESSARY DETAILS IN THE COURSE OF ASSESSMENT PROCEEDINGS. THE OBSERVATIONS OF THE AO THAT DETAILS WERE NOT FURNISHED WAS NOT IN PROPER PERSPECTIVE. THE ASSESSEE HAD BEEN INCURRIN G LOSSES WHICH WERE EVIDENT FROM THE ASSESSMENT ORDERS FOR VARIOUS ASSESSMENT YEARS, WHI CH HAVE BEEN BROUGHT ON RECORD. THE GP RATE DECLARED BY THE ASSESSEE HAD BEEN ACCEPTED IN EARLIER YEARS. THE LD. CIT (A), THEREFORE, CONCLUDED THAT THE TRADING RESULT OF THE ASSESSEE C OULD NOT BE REJECTED WITHOUT BRINGING ANY SPECIFIC DEFECTS IN THE DETAILS FURNISHED BY THE AS SESSEE. 5. BEFORE US THE LD. SR. DR SUBMITTED THAT THE ASSE SSEE IS ENGAGED IN THE MANUFACTURING OF COMPUTERS. THE CONTENTION OF THE ASSESSEE IS THAT THE STOCK BECAME OBSOLETE AND, THEREFORE, LOSS WAS INCURRED. HE SUBMITTED THAT THE AO HAS NOT EXA MINED THE MATTER AND, THEREFORE, THE ISSUE SHOULD BE SET ASIDE TO THE FILE OF THE AO. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE VALUE OF DEAD STOCK HAD NOT BEEN DISPUTED. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAD SOLD DEAD STOCK WORTH RS.2,83,53,361/- FOR RS.32,35 ,320/- WHICH RESULTED IN LOSS OF RS.2,51,18,041/-. THE OPENING STOCK OF RS.23,01,10, 096/- INCLUDED DEAD STOCK OF RS.9,16,37,307/-. THE ASSESSEE HAD FILED MONTH-WIS E AND PARTY-WISE SALES AND PURCHASE DETAILS. THE STOCK WAS SOLD IN LOTS AS IS WHERE IS BASIS. A S REGARDS NON-APPEARANCE, THE CASE WAS FIXED FOR HEARING ON 18 TH NOVEMBER, WHICH WAS A SATURDAY. THE ASSESSEE APPE ARED ON 20 TH NOVEMBER, 2006, BUT NO HEARINGS WERE MADE. SINCE THE ASSESSE E WAS NOT HEARD ON 20 TH NOVEMBER, 2006, THE ASSESSEE WAS EXPECTING FRESH NOTICE. HOWEVER, THE AO PROCEEDED TO COMPLETE ASSESSMENT. 4 I. T. APPEAL NO. 5759 (DEL) OF 2010 THEREFORE, ADEQUATE OPPORTUNITY WAS NOT GIVEN. IN REPLY, THE LD. SR. DR SUBMITTED THAT THE ASSESSEE WAS GIVEN SEVERAL OPPORTUNITIES OF BEING H EARD. THEREFORE, THE ASSESSEE CANNOT CLAIM THAT ADEQUATE OPPORTUNITY WAS NOT GIVEN. 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THERE IS NO DISPUTE ABOUT THE FACT THAT OPENING STOCK AS ON 1/04/2003 WAS AT RS.23,012,10,096/- WHICH INCLUDED DEAD STOCK OF RS.9,16,37,307/-. THE ASSES SEE SOLD DEAD STOCK WORTH RS.2,83,53,361/- FOR RS.32,35,320/-. THE AO HAS NOT DISPUTED THE SA LE OF DEAD STOCK. THE ASSESSEE HAD SUFFERED LOSS OF RS.2,51,18,041/- ON ACCOUNT OF SALE OF DEAD STOCK. THEREFORE, OUT OF THE LOSS OF RS.4,18,82,251/- THIS IS LOSS SUFFERED ON ACCOUNT O F SALE OF DEAD STOCK. THE AO WHILE REJECTING THE CLAIM OF LOSS SUFFERED BY THE ASSESSEE HAD NOT FOUND ANY DEFECT IN THE VALUATION OF CLOSING STOCK. HE HAS NOT BROUGHT ANY MATERIAL ON RECORD T O PROVE THAT THE LOSS INCURRED BY THE ASSESSEE WAS NOT JUSTIFIED. IN AY 2003-04 THE AO COMPLETED ASSESSMENT UNDER SECTION 143(3) ACCEPTING LOSS OF RS.10,16,99,250/-. THEREFORE, THE DEAD STO CK INCLUDED IN THE CLOSING STOCK WHICH BECAME PART OF THE OPENING STOCK FOR THE YEAR UNDER CONSID ERATION WAS ACCEPTED BY THE AO AS CORRECT. AS REGARDS THE CONTENTION OF THE AO THAT THE ASSESSEE HAD NOT APPEARED ON 18/11/2006, WE FIND THAT THE ASSESSEE WHILE GIVING REPLY TO PENALTY PROCEEDI NGS INITIATED UNDER SECTION 271(1)(C) VIDE HIS LETTER DATED 23 RD JANUARY, 2007 HAS CLARIFIED THE ISSUE BY POINTING OUT THAT 18 TH NOVEMBER, 2006 WAS A HOLIDAY [SATURDAY]. WE ALSO FIND THAT THE AS SESSEE HAD SUFFERED LOSS YEAR AFTER YEAR AND HAD FILED PETITION BEFORE BIFR, WHICH HAS ALSO BEEN DISPOSED OF BY THEM. THE ASSESSEE HAD ALSO FILED COPY OF SALE BILLS ENCLOSING THE LIST OF ITEM S SOLD, WHICH RESULTED IN LOSS. FROM THESE FACTS, IN OUR CONSIDERED OPINION, THE LD. CIT (A) HAS RIGH TLY COME TO THE CONCLUSION THAT THE TRADING RESULTS OF THE ASSESSEE COULD NOT BE REJECTED WITHO UT BRINGING ANY SPECIFIC DEFECTS IN THE DETAILS FURNISHED BY THE ASSESSEE. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD. CIT (A) DELETING THE ADDITION. 7. THE NEXT ISSUE FOR CONSIDERATION RELATES TO DELE TING THE ADDITION OF RS.25 LAKHS MADE ON AD-HOC BASIS. THE AO WHILE COMPLETING THE ASSESSME NT HAS OBSERVED THAT THE ASSESSEE HAD NOT PRODUCED BOOKS OF ACCOUNTS AND VOUCHERS FOR EXPENSE S CLAIMED. HE, THEREFORE, DISALLOWED 5 I. T. APPEAL NO. 5759 (DEL) OF 2010 EXPENSES OF RS.25 LAKHS ON AD-HOC BASIS. ON APPEAL IT WAS SUBMITTED THAT THE ASSESSEE HAS INCURRED AN EXPENDITURE OF RS.2,48,02,718/- UNDER V ARIOUS HEADS IN THE COURSE OF BUSINESS. THE ASSESSING OFFICER DISALLOWED RS.25 LAKHS OUT OF SAI D AMOUNT FOR WANT OF EVIDENCE. THE ASSESSEE FILED VARIOUS DETAILS BEFORE THE ASSESSING OFFICER VIDE LETTER DATED 25 TH AUGUST, 2006. THE ASSESSING OFFICER WITHOUT VERIFYING THE DETAILS FUR NISHED HAD MADE AD-HOC DISALLOWANCE. THE LD. CIT (APPEALS) HELD THAT DISALLOWANCE MADE ON AD-HOC BASIS COULD NOT BE SUSTAINED. HE ALSO OBSERVED THAT IN EARLIER YEARS NO DISALLOWANCE UNDE R THIS HEAD WAS MADE. ACCORDINGLY, NO ADDITION COULD BE MADE ON AD-HOC BASIS. 8. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. FROM THE ASSESSMENT ORDER AS WELL AS THE ORDER OF THE LD . CIT (APPEALS) WE FIND THAT THE AO HAD DISALLOWED RS.25 LAKHS ON AD-HOC BASIS WITHOUT POIN TING OUT A PARTICULAR EXPENDITURE, WHICH WAS NOT GENUINE OR THE DETAILS WHEREOF WERE NOT AVAILAB LE OR WAS NOT SUPPORTED BY PROPER VOUCHERS. THEREFORE, IN OUR CONSIDERED OPINION, AD-HOC DISALL OWANCE WITHOUT POINTING OUT PARTICULAR EXPENSES CANNOT BE MADE. ACCORDINGLY, WE DO NOT F IND ANY INFIRMITY IN THE ORDER PASSED BY THE LD. CIT (APPEALS) DELETING THE ADDITION OF RS.25 LA KHS. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON : 18 TH NOVEMBER, 2011. SD/- SD/- [ DIVA SINGH ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 18 TH NOVEMBER, 2011 . * MEHTA * 6 I. T. APPEAL NO. 5759 (DEL) OF 2010 COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 2. RESPONDENT. 3. CIT, 4. CIT (APPEALS), 5. DR, ITAT, NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR, ITAT. 7 I. T. APPEAL NO. 5759 (DEL) OF 2010