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2019 (10) TMI 1124 - AT - Income TaxAddition on account of loss of sales of stock - assessee did not submit any stock statement and the bank considered the stock of the company as Nil - HELD THAT:- Assessee had physical stocks which has been carried forward from earlier years. The department has accepted the book results in the past. The assessee has enclosed annual accounts for the year ending March 2009, 2010, 2011, 2012 and 2013 wherein the stocks have been reflected constantly. AO failed to appreciate that the quantity details have been mentioned in the annual accounts from year to years that scrap salvage is always sold by weight and not by meters. That the stocks were hypothecated to bank as per the stocks statement for the month of December 2008 and no stocks statement could be furnished for the subsequent period due to closure of the factory premises. AO failed to summon the scrap dealer to verify the genuineness of sale made by the assessee. If he had done so his doubts would have been cleared and the conclusion would have been different. The AO has made the addition without rejecting the books of accounts as envisaged in section 145 of the Act. Moreover, the assessee has engaged the services of a technical expert to evaluate the status of stocks in the given situation. The expert has given his exhaustive report and concluded that stocks after 4 1/2 years will deteriorate and will hardly have any value. CIT(A) has rightly allowed the claim of the assessee and there is no reason to interfere with the same, hence, we dismiss this issue of Revenue’s appeal and affirm the order of CIT(A). Claim of depreciation - business not continuing because of illegal strike by the workers - HELD THAT:- Assessee has not close down the business but it is not going on because of illegal strike by the workers and therefore manufacturing has been stopped temporarily. It is not the case that the assets are not in use or the intention of the assessee is not to use the same. Another factor is that once, assets is forming part of block of assets and in earlier years depreciation is allowed and due to certain risks in this year, assessee is unable to carry out the manufacturing activities, depreciation cannot be disallowed. Hence, we affirm the order of CIT(A) and this issue of Revenue’s appeal is dismissed. Disallowance of various expenses for the reason that there was no manufacturing or business activity carried out by the assessee in earlier years - HELD THAT:- CIT(A) allowed the claim of the assessee on the premises that the assessee did not carry on the business because the workers of the company are went on illegal strike and therefore, the assessee business was stopped including manufacturing activity. He stated that actually, the assessee’s business is very much in place and assessee has not close down its business. It can be called a temporarily lull in the business activity and none of the expenses are in the category of disallowable items rather the same are for business expenditure. It is not the case of the AO that the expenses are not genuine or not related to business. We have gone through the facts in entirety and noted that the assessee has placed on record that the assessee has sold closing stock of goods as scrap sale in AY 2013-14. This justifies that the assessee’s business was not close down. We find that the CIT(A) has rightly allowed the claim of the assessee and we confirm the order of CIT(A).
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