9911796707
TMI Blog2010 (11) TMI 984X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) for AYs 2001-02, 2002-03, 2004-05 and 2005-06 and the assessee's cross objections are for AYs 2001-02, 2002-03, 2004-05. All these appeals which involve common dispute were consolidated and heard together and are being disposed of by this order. 2. The assessee is engaged in the business of manufacture and trading of medical consumables and diagnostic equipment for use by health care professional, medical research institutions and general public. The assessee was incorporated in January 1996 under the Companies Act 1956 and from the AY 1996-97 it is in the same business and first time for the AY 2001-02 the AO went through the Profit and loss account and found that the assessee has debited a sum of ₹ 2,74,22,000 as 'provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt and has also filed the details of such slow moving items of stock as on 31.3.2001 in pages 25 to 29. Similar details are also filed for other years. Relying upon these papers, it was submitted that the assessee's method of accounting be accepted. These submissions were not accepted by the AO and were accepted by the CIT(A) and the revenue is aggrieved. In AY 2002-03 also, the CIT(A) passed a similar order and the department has accepted that part of the order and has only disputed the findings of the CIT(A) with regard to the proceedings u/s 147 of the I.T.Act. Ld. DR vehemently supported the findings of the AO. According to him, there is no basis for making these provisions and the provisions are only based on certain arbitrary assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee is in the business of pharmaceutical products where strict supervision of the quality has to be ensured and these products are mostly surgical needles and medical consumable and if such fast moving items are not sold for a considerably lengthy period. It can be safely said that they have lost their consumable acceptability over a period of time, may be due to advent of new products. After all, as long as the assessee acted in a bona fide manner and has appreciated the business realities in which he is placed, the same should be accepted. The assessee has a foolproof method of identification of slow moving or dead stock and has put the realizable value for the purpose of valuing the same. In fact, the principle of valuation is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f opinion and not based upon any reasons which led him to believe that the income has escaped assessment. The Hon'ble Supreme Court of India has rightly pointed out the concept of change of opinion as inbuilt test to check abuse of power by the AO. The reasons must have a live link with the formation of the belief. In our view, such a live link is absent for these years as the AO was provided with all the details which are necessary to decide the issue and the AO accepted the assessee's contention at the first instance and there are no tangible reasons or material which came subsequent to the framing of the assessment u/s 143(3) of the Act which supplies him the necessary reasons to believe that certain incomes have escaped assessment. We t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount or amounts set aside as provision for diminution in the value of any asset." 9. The assessee in this case as is clear from the impugned orders has made the provision @ 4% of the sale value, as the provision for liabilities in respect of after sales warranty offered to the customers. The assessee has also supplied detailed working of the warranty provisions made. The warranty provision was created in the year of sale which according to the assessee is clearly based on some scientific and reasonable basis and now we will examine whether the same can be disallowed as an amount or amount set aside as provision for diminution in the value of an asset which can alone be the subject matter of increase to the book profit in terms of cl ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
