TMI Blog2019 (1) TMI 1207X X X X Extracts X X X X X X X X Extracts X X X X ..... ate, an assessee has to make sale of his goods. Considering the facts and circumstances of the case of the assessee, ground No. 1 of the assessee is allowed. Carry forward of short term capital loss on sale of fixed asset - Held that:- Short term capital loss was claimed by the appellant on account of sales of plant & machinery, therefore, the onus was clearly on the appellant to prove with corroborative evidence the transaction of sale to substantiate the claim of loss. In the absence of corroborative evidence, the disallowance made by the AO is fully justified. Further, the submission that deficiency is fully allowable to the assessee u/s 32(l)(iii) and to this extent the return may be deemed to have been revised, is not sustainable. Because neither the claim was made filing a valid revised return within 31.03.2008 nor it a legal claim on the facts of the case. In view of the above, the disallowance made by the A.O. is fully justified. Therefore, appeal failed on this ground. - ITA No. 1592/Del/2015 - - - Dated:- 22-1-2019 - Shri Amit Shukla, Judicial Member And Shri L.P. Sahu, Accountant Member For The Appellant : Ms. Lalita Krishnamurti, CA For The Respondent : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 1,13,94,351/- was sold for ₹ 36,63,562/-, resulting into loss of ₹ 77,10,789/-. The assessee was engaged in the business of gold jewellery. Therefore, the Assessing Officer was not satisfied that the sale of gold jewellery would have been made at loss keeping in view the rising trend of gold. Accordingly, the Assessing Officer issued show cause notice to explain and justify the losses incurred by the assessee. The assessee submitted his reply on 07.03.2008 as under : The sale of stock was only of the ready manufactured pieces lying with the company since last 10-12 years. The loss on sale of stock is basically due to the fact of getting very little reaslization of the amount spent on labour wastage and the stones set in manufactured pieces. The sale amount basically covered the market value of silver and gold along with a little value addition as on one hand the designs are totally out of fashion and the trends have undergone a sea change. Secondly, the sale being a distress sale makes an impact on the price that one can get. Also the finish on the pieces had got oxidized and was not saleable in its present state so any buyer would have to work fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified. Therefore, he added the same to the total income of the assessee. 4. He further noticed that the assessee had debited into the profit and loss account, the loss on sale of fixed assets amounting to ₹ 13,80,740/- which was duly added in the computation of income and short term capital loss of ₹ 26,35,659/- was claimed therein and was carried forward. This carry forward of short term capital loss was denied by the Assessing Officer as per section 139(3) and adjudicated the case on merits. In view of this, the Assessing Officer required certain details from the assessee, viz., name and address PAN of the parties to whom plants and machinery was sold. In response, the assessee filed written submissions on 22.04.2008 as under : The fixed assets lying with the assessee were in scrap like condition because they were not being used for last many years and were dumped. These assets were sold to junk dealers for a sum of ₹ 53,00,000/- during the financial year 2005-06. WDV of these assets as per income tax Act was ₹ 26,88,660/-. The names, addresses and PAN of the purchasers are not available with the assessee. The Assessing Officer noticed that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o, the Assessing Officer disallowed carry forward short term capital loss of ₹ 26,35,659/-. Aggrieved from the order of the Assessing Officer, the assessee appealed before the ld. CIT(A), who after considering the submissions of the assessee upheld the action of the Assessing Officer. Aggrieved, the assessee is in appeal before the Tribunal. 5. The ld. AR submitted a written synopsis which is as under : 1. Brief History: Assessee Company was incorporated to manufacture and export studded gold jewellery. It started production in the year 1992. The Company continued production till about 1998 and thereafter due to financial troubles it restricted its activities to bare minimum. 2. Point 4(j) of audit report(at page 104 of PB): The Company was carrying out the manufacturing and trading of studded gold jewelry. However, due to financial troubles the Company could not pay off the loans taken from Bank and financial Institutions. The financial institutions HSIDC and HFC took over the factory premises and most of the Plant and Machinery. Subsequently these assets were sold by HSIDC and HFC and the sale proceeds were appropriated towards their dues (explained at page 33 to 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith a little value addition as firstly on one hand the designs had become totally out of fashion and the trends had undergone a sea change. Secondly, the sale being a distress sale also makes an impact on the price that one can get. Thirdly the finish on the pieces had got oxidized and was not saleable in its present state, so any buyer would have to work further on the pieces to be able to sell it further at a better price or he would have to melt it and sell it only at the market value of the metal. Time and money being a constraint, this was the fastest and the best possible value that could be realized keeping all circumstances in mind. 5.2 The Assessee Company used to manufacture studded gold jewellery using various types of precious, semi-precious and other stones. The jewellery was lying with the Company for last 10-12 years due to reasons described earlier. In the cost of the jewellery a major part was of stones set, labour and wastage. When big sized stones are cut in small size to fit them in jewellery the intrinsic value or re-saleable value of these stones is lost to a great extent. However, in normal sale this value is recovered by the manufacturer due to demand of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... totally lost as the pieces need to be either broken or remade as: i) The designs were out dated. ii) The metal had oxidized. iii) Surface finish had no shine and full of scratches and dirt. iv) Stones were scratched and dull due to dirt collection. v) Low karat gold jewellery does not sell in India and most other countries and was also made by assessee company for sale to some specific countries. vi) Additional labour would have been required to convert the existing stones into saleable jewellery. e) Main loss is attributed to the sale of stock of masters i.e. dyes of all their designs made in 92.5% silver which was approx. 30 kg of book value of approximately ₹ 32 lakhs which was sold for ₹ 4,60,000/- (approximately ₹ 15,333/- per kg) vide bill no. 1465 (at pg 132 of PB) dated 11.07.2005 - when silver rate of 92.5% was only ₹ 9,763/- kg. even though the sale was at a rate 50% more than market rate of metal, still the loss was there, as the designs were outdated and not for the Indian market and very little could be realized towards the labour cost of it. f) Distress sale as prices of stones were further falling. Market for colored ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks of accounts. She reiterated the submissions made before the lower authorities and also submitted a paper book containing 143 pages. 6. On the other hand, the ld. DR relied on the orders of the authorities below and he submitted that the assessee was unable to substantiate the sales made at a loss. The Assessing Officer granted sufficient opportunity to the assessee for filing the requisite documents. He could file only cash book which was written without page numbers and cash memos/bills and there were many discrepancies noted by the Assessing Officer on the documents submitted by the assessee. Till completion of assessment, the assessee could not file stock register of goods. Further, in respect of short term capital loss claimed on sale of fixed assets, the assessee also could not substantiate his sales made in cash, name of the persons to whom the sales were made. Alternative claim of the assessee made u/s. 32(1)(iii) is also not acceptable. 7. After hearing both the sides and perusing the entire materials available on record, we noted that the assessee had stopped his business since long back and during the impugned year, the assessee sold some goods which were lyin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee was asked to show cause as to why in absence of the name, address and PAN of the parties, loss be not disallowed as not verifiable. In response assessee submitted that it does not have the names and addresses of the purchasers. However, non-availability of the names and address is no basis to disallow the capital loss. Section 32(1 )(iii) also provided for deduction of any deficiency in the realizable value of any depreciable assets sold, discarded, demolished or destroyed during the year. Assessee submitted that even if it is presumed that no assets were sold, as these assets have been discarded and written off, therefore, the deficiency of ₹ 26.35,660/- is fully allowable to the assessee u/s 32(l )(iii) as well. Therefore, it was submitted that to this extent the return may be deemed to have been revised. AO observed that a valid revised return for the AY 2006-07 could have been filed only upto 31.03.2008. Therefore, the revised claim made by the assessee on 15.12.2008 after expiry of limitation period is not allowable in view of the decision of Hon'ble Supreme Court in the case of Goetz India Ltd. v. CIT 284 ITR 323. Hence, the assessee's claim of loss on sal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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