TMI Blog2009 (3) TMI 1050X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Asian Paints Industrial Coatings Ltd. 60000000 4. The AO further noticed that all the interest-free loans were provided by the assessee in the earlier years and no fresh loans were advanced in the current year. The AO noticed that the assessee was incurring huge expenses on borrowings and, therefore, had these loan been recovered from the subsidiary companies, the interest expenses of the assessee would have been less. The AO disallowed interest claim of assessee at ₹ 2,62,74,000/- by applying 12% of interest. In respect of interest-free loans to Pentasia Investment India Ltd., the assessee submitted that this company has merged with the assessee company as per the High Court s order dated 27.10.2003 w.e.f. 1.4.2002. The CIT(A) following their earlier years orders for AY 2000- 01, 2001-02 and 2002-03 deleted the disallowance of interest amount related to Pentasia Investment(I) Ltd and Asian Paints Industrial Coatings Ltd. However, the CIT(A) confirmed the addition of interest amount pertaining to Technical Instruments Manufacturing Ltd. 5. The revenue is in appeal through sole ground against the action of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excluded the damaged stock for the purpose of valuation. It was also admitted that as and when such stock was sold, the sale consideration were taken into consideration. The assessee expressed his inability to disclose such sale value of damaged goods in the current year. The AO estimated the realizable value of the damaged stock at ₹ 50.00 lakhs, which was about 0.4% of the total stock. The addition made by the AO has been confirmed by the CIT(A). 12. We have heard the learned representatives of the parties and perused the record. The learned AR did not argue much on the issue. In principle we agree with the findings of the AO that stock of damaged goods should also be required to be valued at the end of the year. As regards estimation of amount of the said stock we find that there is no material available on record for estimation of a different amount of the stock than estimated by the AO. We, therefore, confirm the orders of the revenue authorities on this issue. 13. Ground No. 3 is in respect of addition of ₹ 4.70 lacs being 50% of expenditure incurred on account of presentation of gift articles. 14. The assessee claimed an amount of ₹ 9,39,208/- on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance to 10%. Thus this ground is partly allowed. 18. Ground No. 4 is in respect of addition of ₹ 98.36 lacs on account of prior period adjustments. 19. The assessee did not make any claim of ₹ 98.36 lacs on account of prior period adjustments in the return of income filed but the assessee claimed that such was pressed during the course of assessment proceedings. The AO did not allow the claim of the assessee. Before the CIT(A), the assessee submitted that the claim was made before the AO vide letter dated 28.02.2006 but the same has not been allowed. The details of sundry expenses written off submitted before the AO is reproduced from page 22 of CIT(A) s order as under:- S. No. Particulars Amount 1 Unadjusted balances in dealers a/c w/o 33,70,647 2 Unadjusted balances in deposit a/c w/o 32,73,741 3 Unadjusted balances in Agent s a/c w/o 5,97,602 3 Unadjusted Balance in Employees A/c W/o 25,94,034 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) further held that there is no evidence on record that these amounts are really irrecoverable. He accordingly, disallowed the claim of the assessaee. In this appeal, the preliminary question that falls for consideration relates to scope of powers of CIT(A) whether the CIT(A) was having power to admit assessee s claim without filing revised return of income. To properly appreciate the issue, we would like to reproduce the finding given by Hon ble Supreme Court in case of Goetz India Ltd. cited supra, reads as under:- The decision in question is that the power of the Tribunal under section 254 of the Income-tax Act, 1961, is to entertain for the first time a point of law provided the fact on the basis of which the issue of law can be raised before the Tribunal. The decision does not in any way relate to the power of the AO to entertain a claim for deduction otherwise than by filing a revised return. In the circumstances of the case, we dismiss the civil appeal. However, we make it clear that the issue in this case is limited to the power of the assessing authority and does not impinge on the power of the income-tax appellate tribunal under section 254 of the Income-tax Act, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and to add the amount of ₹ 2,30,000 to the total income of the assessee. According to the High Court, the items representing the said amount constituted new sources of income which were not the subject-matter of assessment before the Assessing Officer and, therefore, it was not open to the AAC in appeal to consider the new sources and to assess them. 21.3 On appeal to the Supreme Court, The Supreme Court has held as under:- (Pages 612 to 614) In Jute Corpn. of India Ltd.'s case (supra) this Court has referred to the earlier decision of this Court in CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225, which was also a decision of a three Judge Bench wherein the scope of section 31(3)(a) of the Indian Income-tax Act, 1922 [which was almost identical to section 251(1)(a) of the 1961 Act] was considered and it was held: If an appeal lies, section 31 of the Act describes the powers of the Appellate Assistant Commissioner in such an appeal. Under section 31(3)(a), in disposing of such an appeal, the Appellate Assistant Commissioner may, in the case of an order of assessment, conf irm, reduce, enhance or annul the assessment; under clause (b) thereof he may set asid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Larger Bench in Kanpur Coal Syndicate case [1964] 53 ITR 225 (SC) holds the field.... (p. 694) Having regard to the decision in Jute Corpn. of India Ltd.'s case (supra), it must be held that the High Court was in error in holding that the appellate power conferred on the AAC under section 251 was confined to the matter which had been considered by the ITO and the AAC exceeded his jurisdiction in making an addition of ₹ 2,30,000 on the basis of the other 10 items of hundis which had not been explained by the assessee. 21.4 In the light of the above discussion, we find that the AO has no power to admit fresh claim otherwise than revised return but appellate authorities including CIT(A) ITAT have power to admit such claim. Without prejudice to the above finding, we admit the assessee s claim which is in accordance with the judgment of the Apex Court in the case of Goetz India Ltd. (supra). In the interest of natural justice and keeping in view the ratio laid down by the Apex Court in the case of Goetze (India) Ltd., 284 ITR 323, we remit the matter back to the file of the CIT(A) with a direction to decide the issue on merit in accordance with law after provid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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