TMI Blog2010 (11) TMI 691X X X X Extracts X X X X X X X X Extracts X X X X ..... storage loss. This is an incidental loss in the import and storage of assessee's trading business and without any reason the CIT(A) has rejected, eventhough the assessee's books of account indicate that there was excess stock as far as Degummed Soya Bean Oil is concerned and shortage of RBD Palmolein - Held that the assessee's claim on account of transit and storage loss of net amount at Rs.11,35,089/- also was an eligible loss. Reopening assessment - Held that there is fall in net realisable value and loss due to transit has not been placed on record and this cannot be noticed unless the A.O. exercise little more effort - Since the A.O. neither enquired about the valuation, eventhough purchase of goods from sister concern has been referred to Transfer Pricing Officer, are of the opinion that the A.O. has not found any opinion at the time of completion of original assessment with reference to closing stock valuation and accordingly reopening on the issue of closing stock valuation is justified. - ITA No. 381/Mum/2010 - - - Dated:- 24-11-2010 - D. Manmohan, B. Ramakotaiah, JJ. V. Mohan for the Appellant Anurag Prasad for the Respondent ORDER B. Ramakot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued at Rs.13,21,61,949/-. In valuing closing stock of Soyabean Oil excess stock found was considered in valuation. As can be seen from the above, as against the cost of import of RBD Palmolein oil of Rs.13,90,05,970/-, the closing stock came to be valued at Rs.13,21,61,949/-, thus absorbing in the Profit and Loss Account, loss of Rs.68,44,021/-. This amount was disallowed in the reopened assessment. 4. We have heard the learned counsel and the learned D.R. Written submissions and paper book were also on record. 5. The original assessment in this case has been completed by the A.O. on 29.09.2004 after referring the matter to the Additional CIT, Transfer Pricing under the Transfer Pricing guidelines, accepted the business loss after certain disallowances of Rs.249126 at (-)Rs.2,16,87,404/-. The same was reopened under section 148 by recording reasons and issuing notice on 23.03.2007 and in the reassessment proceedings the A.O. disallowed the claim of loss to the extent of Rs.68,44,021/- stated to be undervaluation of stock and accordingly the total income was determined at Rs.1,48,43,383/-. The assessee is contesting the issue of reopening as well as the issue of merits of di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, it has also been held that adequacy or sufficiency of reason to believe cannot be called in question. It is sufficient if there was some information or material for making such belief. In the case under consideration, the A.O. formed his belief on the basis of information available in the tax audit report. It has been held in various decisions that the information/material should prima facie prove the escapement of income. In the case of Jaibharat Maruti Ltd. (180 Taxman 192), the Hon'ble Delhi High Court held that the stage of issue of notice u/s. 148, only aspect could be examined is whether there was relevant material before the A.O. based on which a reasonable person could have formed requisite belief that income chargeable to tax escaped assessment. It was further held that at this stage, one is not concerned whether material would conclusively prove escapement. In the facts of case under consideration, the A.O. was having material before him which pima facie shown that closing stock was under valued without any acceptable satisfactory and the explanation given by the appellant in the tax audit report was not self explanatory. The reason given by the appellant in the tax au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the A.O. in initiating proceedings u/s. 147 is hereby confirmed. This ground of appeal is dismissed." 6. The learned counsel contesting the above submitted that the assessee's case was scrutinized originally and the A.O. had accepted the loss at the tome of original assessment and accordingly there was a change of opinion which following the judgement of the Hon'ble Supreme Court in the case of Kelvinator India Ltd. 320 ITR 561 and subsequent decision of the jurisdictional High Court in the case of Asteroids Trading and Investments (P) Ltd. vs. DCIT 308 ITR 190 and the decision of the Hon'ble Bombay High Court in the case of IOT Infrastructure and Energy Services Ltd. vs. ACIT dated 21.06.2010, the reopening is bad in law. The learned counsel also relied on various statements filed before the A.O. at the time of original assessment to submit that valuation of stock was done on the basis of physical verification and survey certificate issued by a third party surveyor and there was excess stock of 21.04 MT of Degummed Soya Bean Oil and shortage of 37.39 MT of RBD Palmolein and these facts were stated in the notes to account in Schedule 14 of the annual report and these facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e P and L Account as sales during the year. The purchase cost was Rs.26,205/- and sale price was Rs.26,635/- and closing stock was valued at Rs.26,440/-. As far as RBD Palmolein was concerned, this was only imported and there were no sales during the year. The import was shown at 4441.75 M.T. whereas the closing stock was shown at 4403.97 M.T. with a note that there was a shortage of stock on physical verification. These goods are purchased for trading only and as the assessee had no storage facilities these were kept with a third party and storage charges were claimed in the P and L Account. The closing stock verification was done by the surveyors M/s. Stewart Surveyors and Assayers Pvt. Ltd. at Kakinada on 31.03.2002. The valuation as on 31.03.2002 of closing stock was furnished by M/s. Murji Meghan Services Pvt. Ltd. Accordingly the assessee claimed the closing stock valuation on the basis of the physical stock available and rate of the same as on the valuation date. Thus there was loss due to fall in the net realisation value of RBD Palmolein of Rs.57,08,932/- and due to loss on account of transit and storage loss at Rs.11,35,089/- totalling to Rs.68,44,021/- Assessee has shown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jected the whole of the issue without analysing how much of the loss was due to fall in realisable value. We are of the opinion that to the extent of fall in the net realisable value assessee's claim is correct. 12. Now with reference to the loss on account of transit and storage loss, the A.O. has not dealt with this aspect at all and the CIT(A), when these facts are brought to his notice rejected them stating that the assessee has not given the full details. As already stated the assessee is only a trader and has imported goods of RBD Palmolein which was not sold during the year at all and Degummed Soya Bean Oil was partly sold during the year. Since the assessee does not have any storage facilities it has kept at Kakinada, Mumbai and a third party surveyor has surveyed the stock by physical verification and another party has furnished the realizable value. On the basis of these, the assessee made adjustments in the accounts on account of transit and storage loss. This is an incidental loss in the import and storage of assessee's trading business and without any reason the CIT(A) has rejected, eventhough the assessee's books of account indicate that there was excess stock as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was an expenditure in the amount of Rs.1.12 crores incurred during the construction period, which was write down. In the Tax Audit Report under Section 44AB, the assessee disclosed in Item 17 amounts debited to the Profit and Loss account. Sub paragraph (a) of Item 17 deals with expenditure of a capital nature. While furnishing a break up under this item, the assessee disclosed that an amount of Rs.1.12 crores was a write down in the value of assets. This was stated to exclude an amount of Rs.29.23 lakhs which, according to the assessee, was a "write down in the value of slow/non moving inventory valued at estimated realizable value being considered as not in the nature of capital expenditure". Therefore, a plain reading of item 17 of the Tax Audit Report shows that the assessee disclosed that an amount of 29.23 lakhs was not in the nature of capital expenditure and represented a write off on account of slow or non moving inventory which was valued as its estimated realizable value. The AO has purported to reopen the assessment on the ground that the assessee had debited a provision amounting to Rs.1.41 cores on account of diminution in the value of assets. This, according to the A ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
