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TMI Blog2019 (1) TMI 1207X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the assessee for granting deduction in terms of section 32(1)(iii) and directed Id. Assessing Officer to grant depreciation on such fixed asset. 4. The above grounds are independent and without prejudice to one another. 2. The brief facts of the case are that the assessee filed return of income on 29.11.2006 vide acknowledgement No. 90227344. Later on, return was revised on 15.12.2006. In the original return, the assessee declared nil income and claimed carry forward business loss of Rs. 9,26,794/- and short term capital loss of Rs. 26,35,659/-. The return was selected for scrutiny and statutory notices were issued to the assessee. In the assessment proceedings, the assessee had shown business loss of Rs. 9,26,794/- and short term capital loss of Rs. 26,35,659/- and same was stated to be carried forward. The Assessing Officer noticed that the assessee had not filed return of income as prescribed u/s. 139(1). Therefore, in view of section 139(3) of the IT Act, the business loss and short term capital loss cannot be allowed to be carried forward. He further noticed from the trading account that the opening stock as on 01.04.2005 was at Rs. 2,63,72,865/-, the purchases wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... size to fit them in jewellery the intrinsic value or resalable value of these stones is lost to a great extent. However, in normal sale this value is recovered by the manufacture due to demand of the design. In present case, the items were manufactured 10-12 years ago and most of them were for export. At the time of sale in 2005 there was no market for this jewellery and the company would recover only the metal value as this was a distress sale. The position will be clear from the enclosed chart which give the details of metal part in the items sold and realization towards metal value. The increase in the value of Gold over the period of purchase and sale is approx 40% which has been fully recovered as evidenced from the chart enclosed. You can see that Assessee has not incurred any loss on metal value and the loss is on the components of cost." 3. The assessee could not substantiate the loss incurred on the sale of stock. The assessee was given opportunity for production of account books and supporting bills. The assessee submitted cash memos/bills and cash book, but he did not furnish the stock register. The Assessing Officer observed many discrepancies in the bills produce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther section 32(1)(iii) also provides for deduction of any deficiency in the realizable value of any depreciable assets sold, discarded demolished or destroyed during the year. If for a while, your contention that no assets were sold is considered to be true, there is no denial from the fact that these asses have been discarded and written off by the Assessee and thus the deficiency of Rs. 26,35,660/- is fully allowable to the Assessee u/s. 32(1)(iii_ as well. We would now like to claim the deficiency of Rs. 26,35,660/- u/s. 32(1)(iii) and to this extent the return may be deemed to have been revised." On 16.12.2008, books of account and supporting bills and vouchers were produced. However, no supporting evidence with regard to the sale of plant and machinery could be brought on record by the assessee. On 15.12.2008, the assessee filed revised computation and claimed discarded assets as loss u/s. 32(1)(iii). The Assessing Officer noticed that the assessee has not filed revised return u/s. 139(5) of the Act. Therefore, he followed the decision of Hon'ble Supreme Court in the case of Goetze India Ltd. vs. CIT, 284 ITR 323. Ultimately, the Assessing Officer observed that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the funds had to be raised. The proceedings for recovery and prosecution had reached to the final compelling point where the deposits to the provident fund department had to be made in the specific time allotted to the Company. 4.1 Also with regards to the pending loans case of the company with Bank of Baroda, a certain amount had to be deposited with the Bank to show their honest and good intentions, efforts and desire to clear the case in a convenient manner for the company and to prove to the concerned authorities of their case being that of a genuinely aggrieved party of loss and problems in business that led to the current situation and not that of any wrong intentions or manipulated malafide conduct. 4.2 This was a distress sale of the ready stock i.e. ready pieces of jewellery lying with the Company manufactured 10-12 years ago. The whole stock lying at the showroom of the Company was sold in the month of July, 2005 at the best possible prices. 5. Justification of loss on sale of stock: The Sale of stock was only of the ready manufactured pieces lying with the Company since last 10-12 years. 5.1 The loss on sale of stock was basically due to the fact of getting ver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SIDC to Bank of Baroda is enclosed at page 87 of PB. 5.5 The Factory stock was taken over by Bank of Baroda and it was not returned back to the Assessee. The sales made during the Financial Year 2005-06 were all cash sale and names and addresses of the customers were not available with the Assessee. 5.6 The Act does not specify or require for the assessee to keep any record of the name of the Parties or their addresses in case of Cash Sales. All sales are duly recorded in the books as has been verified by AO from the cash book and the ledgers produced by assessee company. 5.7 The loss on sale of Stock is justified because (explained at page 90 to 92 of PB).: a) Cost of sale comprised of following components: - i) Low karat of gold - 8k, 14k & 18k. ii) Diamonds. iii) Colored gemstones. iv) Wastage on manufacturing. v) Labour charge for manufacturing// b) Gold had been sold at market rate. c) Diamonds and colored gemstones were: - i) Very small size - not suitable for Indian market. ii) Very old cut - not in demand iii) Low quality - the factory was for bulk production and used to buy low quality for large quantity exports only. This quality is not demande ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the Financial Year 2005-06. WDV of these assets as per Income Tax Act was Rs. 26,88,660/- as on 01.04.2005. Therefore, there is a short term capital loss of Rs. 26,35,660/- (fixed asset Schedule at page 3 of PB). The name and addresses of the junk dealers were not available with the assessee. Books of account along with vouchers were also produced in assessment proceedings. 6.3 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 had also outlived their useful life of 10 years. These assets were sold to individual small time junk dealers for a sum of Rs. 53,000/- during the financial year 2005-06. W.D.V. of these assets as per Income Tax Act was Rs. 26,88,660/- as on 01.04.2005. Therefore, there was a short term Capital Loss of Rs. 26,35,660/-. As this sale was made in cash, the Assessee does not have the name and address of the purchasers. However, non-availability of the name and address of purchasers is no basis to disallow the Capital Loss. 6.4 Even assuming, as held by the AO that the sale of Plant & Machinery was not genuine, the AO is bound to give the assessee the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er authorities have examined this issue in detail. In this regard the finding reached by the ld. CIT(A) reads as under : 4.3.1. Ground no. 4 of appeal is directed against disallowing the Capital Loss of Rs. 26,35,660/- on Sales of Assets made by the Assessee. The assessee has shown loss on sale of fixed assets amounting to Rs. 13,80,740/- which was added back in the computation of income. However, short term capital loss of Rs. 26,35,659/- was claimed therein and was carried forward. In view of the sec 139(3) of the IT Act the claim of cam' forward of short term capital loss of Rs. 26,35,659/- is denied by the AO. On merits of the case assessee was asked by the AO to give the computation of loss on sale of assets giving the name, address and PAN of the parties to whom the plant & machinery was sold. In response the assessee submitted that the fixed assets lying in scrap like condition, were sold to junk dealers for a sum of Rs. 53,000/-. WDV of these assets as per IT Act was Rs. 26.88,660/- as on 01.04.2005. Therefore, there is a short term capital loss of Rs. 26,35,660/-. The names, addresses and PAN of the purchasers are not available with the assessee. AO observed that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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