ERUM TRADERS ( PROP AFZAL RAMZANALI DEVJANI), MUMBAI V. DCIT CIR 17(1), MUMBAI

ITA 6183/MUM/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5669 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 22-01-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 07-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E B ENCH, MUMBAI , , ! '#$ , % & BEFORE SHRI VIJAY PAL RAO , JM AND SHRI N.K. BIL LAIYA, AM ./ I.T.A. NO.6183/MUM/2011 ( ' ' ' ' / ASSESSMENT YEAR : 2007-08 ERUM TRADERS, (PROP. AFZAL RAMZANALI DEVJANI), SHOP NO. 26, BYCULLA RAILWAY COMPOUND NARSINGHA RAO BYCULLA RAILWAY STATION, BYCULLA (E), MUMBAI-400 027 / VS. THE DCIT, CIR. 17(1), MUMBAI ( % ./ ) ./ PAN/GIR NO. : AABPD 7409H ( (* / APPELLANT ) .. ( +,(* / RESPONDENT ) (* - / APPELLANT BY: SHRI VIJAY MEHTA +,(* . - / RESPONDENT BY: SHRI SANJIV JAIN . /0% / DATE OF HEARING : 22.01.2014 12' . /0% / DATE OF PRONOUNCEMENT:31.01.2014 3 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-29, MUMBAI DT.08.06.2011 PERTAINING TO A.Y. 2007-08. ITA NO. 6183/M/2011 2 2. THE ASSESSEE HAS RAISED FIVE SUBSTANTIVE GROUN DS OF APPEAL. THE ENTIRE GRIEVANCE OF THE ASSESSEE REVOLVES AROUND TH E ISSUE OF ALLOWABILITY OF LOSS. WHETHER THE LOSS IS TO BE ALLOWED IN THE YEAR UNDER CONSIDERATION OR THE LOSS PERTAINS TO THE EARLIER ASSESSMENT YEAR . 3. THE UNDISPUTED FACTS ARE THAT THE ASSESSEE ASKED M/S. SWASTIK IMPEX FOR GARLIC IMPORT FROM CHINA PURSUANT TO THE AGREEMENT WITH THE ASSESSEE. THE ASSESSEE PAID RS. 13.75 LAKHS TO M/S . SWASTIK IMPEX AS ADVANCE FOR THE IMPORT OF GARLIC. THE GOODS ORDERE D BY M/S. SWASTIK IMPEX FOR AND ON BEHALF OF THE ASSESSEE WERE SHIPPE D FROM CHINA. THE ASSESSEE PAID ANOTHER RS. 1.25 LAKHS TO M/S. SWASTI K IMPEX FOR CLEARING AND FORWARDING EXPENSES AND FOR CUSTOMS CLEARANCE. HOWEVER, DUE TO CHANGE IN GOVERNMENT POLICY A BAN WAS IMPOSED ON IM PORT OF GARLIC FROM CHINA BECAUSE OF WHICH GOODS COULD NOT BE CLEA RED BY M/S. SWASTIK IMPEX. HOWEVER, UNDER THE SAID GOVT. POLICY, THE I MPORTER WAS ALLOWED TO RE-EXPORT GOODS ON PAYMENT OF FINE AND PENALTY. SINCE THE PENALTY LEVIED WAS EXCESSIVE AND NOT JUSTIFIED, THEREFORE A N APPEAL WAS FILED BY M/S. SWASTIK IMPEX BEFORE THE COMMISSIONER OF CUSTO MS (APPEAL) WHO UPHELD THE REDEMPTION FEE AND DELETED THE PENALTY L EVIED. THE SAID ORDER OF THE COMMISSIONER OF CUSTOMS (APPEALS) WAS PASSED IN THE MONTH OF FEBRUARY, 2006. THEREAFTER M/S. SWASTIK IMPEX PAID THE REDEMPTION FINE AND IN THE MONTH OF APRIL, 2006 RE-EXPORTED PART OF GARLIC CONSIGNMENT IMPORTED FROM CHINA. THE AO DISALLOWED THE CLAIM O F LOSS BY THE ASSESSEE ON THE GROUND THAT THE OWNERSHIP OF THE GO ODS NEVER PASSED TO THE ASSESSEE AT THE TIME OF IMPORT OR AT A LATER DA TE AND THE PAYMENT MADE TO M/S. SWASTIK IMPEX WAS MERELY AN ADVANCE AND IN ANY CASE THE LOSS OCCURRED ONLY ON 2006-07. ITA NO. 6183/M/2011 3 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A) AND REITERATED THE FACTS RELATING TO THE IMPORT OF GARL IC THROUGH M/S. SWASTIK IMPEX AND THE CIRCUMSTANCES ARISING AFTER THE IMPOR T RESULTING FROM GOVERNMENTS BAN. AFTER CONSIDERING THE SUBMISSION S AND THE FACTS OF THE CASE, THE LD. CIT(A) OBSERVED THAT THE CLAIM OF LOS S OF RS. 15,00,000/- IS NOT RELATABLE TO THE YEAR UNDER CONSIDERATION. THE LD. CIT(A) FURTHER OBSERVED THAT THE MATERIAL WAS IMPORTED AT THE INST ANCE OF THE ASSESSEE BY M/S. SWASTIK IMPEX DURING THE FINANCIAL YEAR 2005-0 6. THE LOSS, IF ANY, BECAUSE OF PERISHABLE NATURE OF THE GOODS AND DUE T O DIMINUTION IN VALUE OCCURRED IN THE FINANCIAL YEAR 2005-06. ACCORDING TO THE LD. CIT(A), THIS LOSS HAS TO BE ALLOWED ONLY IN FINANCIAL YEAR 2005 -06 RELEVANT TO A.Y. 2006-07 AND NOT IN THE YEAR UNDER CONSIDERATION AND ACCORDINGLY CONFIRMED THE DISALLOWANCE OF RS. 15,00,000/-. 5. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. T HE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE WAS MAKING EVERY EFFORT TO GET THE GARLIC RE-EXPORTED. IT IS THE SAY OF THE LD. C OUNSEL THAT THE ASSESSEE WAS IN CONSTANT DELIBERATION WITH M/S. SWASTIK IMP EX. SINCE THE GOODS WERE STUCK UP DUE TO THE BAN IMPOSED BY THE GOVERNM ENT AND HEAVY PENALTY AND FINE LEVIED, M/S. SWASTIK IMPEX WAS IN APPEAL BEFORE THE COMMISSIONER OF CUSTOMS (APPEALS) AND ONLY AFTER RE CEIVING THE APPELLATE ORDER M/S. SWASTIK IMPEX COULD RE-EXPORT PART OF THE CONSIGNMENT ON 18.4.2006. THEREFORE, THE LOSS CRYS TALLIZED DURING THE YEAR UNDER CONSIDERATION AND SHOULD BE ALLOWED ACC ORDINGLY. 6. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE FINDINGS OF THE LOWER AUTHORITIES. ITA NO. 6183/M/2011 4 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAR EFULLY PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE RELEVAN T MATERIAL EVIDENCE BROUGHT ON RECORD AND REFERRED TO. IT IS AN UNDISP UTED AND ACCEPTED FACT THAT THE ASSESSEE HAD SHOWN THE VALUE OF GARLIC IMP ORT AS ITS STOCK IN HAND IN THE BALANCE SHEET FOR THE YEAR ENDING 31.3.2006, AND DUE TO COMPELLING CIRCUMSTANCES LIKE BAN BY THE GOVT. OF INDIA, FORC ED RE-EXPORT, HEAVY PENALTY AND FINE, DIFFERENCES AROSE BETWEEN THE ASS ESSEE AND M/S. SWASTIK IMPEX THROUGH WHOM THE ASSESSEE HAD IMPORTED THE GA RLIC FROM CHINA. THE ADVANCE OF RS. 15,00,000/- HAS BEEN FOUND DULY RECORDED IN THE BOOKS OF ACCOUNT AND HAS ALSO BEEN ACKNOWLEDGED AS SUCH BY THE REVENUE AUTHORITIES. IN OUR CONSIDERED VIEW, ONCE THE FACT OF RECORDING THE PURCHASE TRANSACTIONS IN THE BOOKS HAVE BEEN AC CEPTED BY THE REVENUE AUTHORITIES, WE DO NOT FIND ANY REASON WHY THE LOSS SHOULD NOT BE ALLOWED AS A BUSINESS LOSS. 7.1. SO FAR AS THE YEAR OF ALLOWABILITY IS CONCERNE D, IT IS ALSO AN UNDISPUTED FACT THAT THE LOSS HAS CRYSTALLIZED DURI NG THE YEAR UNDER CONSIDERATION, THEREFORE IT SHOULD BE ALLOWED IN TH E IMPUGNED YEAR ITSELF . THE AO IS ACCORDINGLY DIRECTED TO ALLOW THE CLAIM O F LOSS OF RS. 1500000.00 DURING THE YEAR UNDER CONSIDERATION. 8. THE OTHER GRIEVANCES OF THE ASSESSEE RELATES TO THE DISALLOWANCE OF THE CLAIM OF LOSS OF RS. 2,26,200/-. ITA NO. 6183/M/2011 5 9. FACTS ON RECORD AND ALSO THE ORDER OF THE LD. CI T(A) SHOW THAT THE ASSESSEE HAS OFFERED THE SAME AS INCOME FOR THE ASS ESSMENT YEAR 2009-10 AS THE CESSATION OF LIABILITY, HOWEVER, SINCE WE HA VE NOT ALLOWED LOSS OF RS. 2,76,000/- IN THE IMPUGNED YEAR, THE AO IS DIRE CTED NOT TO TREAT THE SAME AS INCOME IN A.Y. 2009-10. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.1.2014 . 3 . 2' % 4 56 31.1.2014 2 . 7 SD/- SD/- (VIJAY PAL RAO ) (N.K. BILLAIYA) /JUDICIAL MEMBER % / ACCOUNTANT MEMBER MUMBAI; 5 DATED 31.1.2014 . . ./ RJ , SR. PS 3 3 3 3 . .. . +/ +/ +/ +/ 8 '/ 8 '/ 8 '/ 8 '/ / COPY OF THE ORDER FORWARDED TO : 1. (* / THE APPELLANT 2. +,(* / THE RESPONDENT. 3. 9 ( ) / THE CIT(A)- 4. 9 / CIT 5. :7 +/ , , / DR, ITAT, MUMBAI 6. 7; < / GUARD FILE. 3 3 3 3 / BY ORDER, ,/ +/ //TRUE COPY// = == = / > > > > (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI