9911796707
TMI Blog2011 (12) TMI 710X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the Assessing Officer on account of provision for impairment of stock. 4. The assessee company is engaged in the business of marketing of very small aperture terminals (VSATs) and provision of satellite communications services through its HUB earth station at Gurgaon. The assessee is also providing broadband, internet and other telecommunications services under various licenses obtained from the Department of Telecommunications, Government of India. The assessee company also provides high-end education programmes imparted by premier institutes in India and overseas. It filed its return of income declaring profit at ₹ 12,59,65,323/- on 1.11.2004. The return was selected for scrutiny and notice under sec. 143(2) was duly issued and served upon the assessee. 5. During the course of assessment proceedings it was noticed by the AO that the assessee had shown value of inventories after adjustment of ₹ 90,35,298/- on account of stock impaired during the year. The assessee was asked to submit the valuation of stock. From the details filed by the assessee, it was noticed by the AO that the stock was claimed to have been valued at the realizable value. The assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble rate of various items adopted by the assessee. He further pointed out that the assessee has applied ad hoc percentage of deduction to the cost price, which cannot be said to be a system recognized under the principles of law and accountancy for the purpose of valuing the inventories at net realizable value. He further submitted that merely because the assessee's claim has been allowed in the Assessment Year 2003-04, that by itself cannot be a basis to allow the same in the years under consideration unless the net realizable value adopted by the assessee is supported by any evidences and material. He further pointed out that in some of the items, even the value has been taken at `Nil', which is not at all justifiable inasmuch as there must be some value of stock even if it is sold in the market as a scrap. 9. The learned counsel for the assessee on the other hand, submitted that the assessee as per the consistent method of valuation of stock, has valued the closing stock at cost or net realizable value, whichever is lower and in some items of inventories, the net realizable value has been taken at `Nil' because of the reason that these stocks could not be sold in the market and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ective Inventory Rs.34,415,761 Rs.21,339,758 Rs.13,076,003 Against No Value Rs.248,336 - Rs.248,336 Against Scrap Rs.5,590,655 - Rs.5,590,655 Against Consumable ₹ 4,270,022 - Rs.4,270,022 Total devaluation as on 31-03-2004 Rs.104,630,091 Rs.79,397,719 Less:- Devaluation already booked till 31-03-2003 (-) Rs.66,092,399 Rs.13,305,320 Less:- Transferred towards consumable consumed during the year (-) ₹ 42,700,22 Amount charged in the year ended on 31-03-2004 on account of devaluation- Rs.9,035,298 From the aforesaid details, it is found that out of the total devaluation to stock amounting to ₹ 79,93,97,719/-, the sum of ₹ 6,60,92,399/- has been booked and claimed in the earlier years till 31-03-2003, and the sum of Rs,.42,70,022/- has been claimed under the head "Consumable consumed" during the current year, leaving a balance of devaluation of ₹ 90,35,298/- claimed in the year under consideration. In the immediate preceding Assessment Year 2003-04, the total valuation was worked out at ₹ 6,60,92,399/- out of which the sum of ₹ 5,50,43,712/- was booked and claimed till the year ended on 31-03-2002 and the balance a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... net realizable value of various items with a view to rebut the rate of net realizable value adopted by the assessee. The assessee has followed the same method in earlier years, where the assessee's claim was allowed by the A.O. The learned CIT(A) has restricted the disallowance to the extent of 50% on ad hoc basis without considering the details filed by the assessee and the consistent method adopted by the assessee in earlier years. In this view of the matter, we, therefore, find no reason to sustain any disallowance on account of devaluation in the inventory of stock due to impairment/defects in the stock lying with the assessee as at the end of year ended on 31-03-2004. We, therefore, delete the disallowance in toto, and allow the assessee's claim on this count. Thus, the ground raised by the assessee is allowed and that of the revenue is rejected. 14. Ground No.3 in revenue's appeal is directed against the learned CIT(A)'s order in deleting the addition of ₹ 5,00,00,000/- made by the A.O. on account of sales of VSAT equipment. 15. On the basis of Sales-tax Officer's order, the Assessing Officer made the addition of ₹ 5 crore to the sales of the assessee by observi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee nor any details in this regard are available with the assessee. In view of the above, the sales shown by the assessee were rejected and sales were determined by making an addition of ₹ 5 crores. The findings given in the above order are very specific which show that the assessee has made unaccounted sales during the year under consideration. In spite of being given specific opportunity in this regard, the assessee has filed to give any details / documents / evidence in support of its contention. In view of the above, it is hereby held that the assessee has made unaccounted sales of ₹ 5 crores and therefore, an addition of ₹ 5 crores is made to the income of the assessee. Since the assessee has concealed particulars of its income, penalty proceedings under section 271(1)(c) have been initiated separately." 16. On an appeal, the learned CIT(A) has deleted the addition by observing and holding as under:- 6.4 The objection raised by the AO regarding the admission of fresh evidence under Rule 46 A is not accepted, for the appellate order passed by the Jt. Commissioner of Sales Tax was subsequent to the demand raised by the Sales Tax Officer and the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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