TMI Blog2019 (10) TMI 1124X X X X Extracts X X X X X X X X Extracts X X X X ..... cting the books of accounts as envisaged in section 145 of the Act. Moreover, the assessee has engaged the services of a technical expert to evaluate the status of stocks in the given situation. The expert has given his exhaustive report and concluded that stocks after 4 1/2 years will deteriorate and will hardly have any value. CIT(A) has rightly allowed the claim of the assessee and there is no reason to interfere with the same, hence, we dismiss this issue of Revenue s appeal and affirm the order of CIT(A). Claim of depreciation - business not continuing because of illegal strike by the workers - HELD THAT:- Assessee has not close down the business but it is not going on because of illegal strike by the workers and therefore manufacturing has been stopped temporarily. It is not the case that the assets are not in use or the intention of the assessee is not to use the same. Another factor is that once, assets is forming part of block of assets and in earlier years depreciation is allowed and due to certain risks in this year, assessee is unable to carry out the manufacturing activities, depreciation cannot be disallowed. Hence, we affirm the order of CIT(A) and this issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny as Nil. For this Revenue has raised the following two grounds: - 1. Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition of ₹ 40,35,22,309/- on account of loss of sales without appreciating the fact that the assessee company did not submit any stock statement since December 2008 and therefore the bank considered the stock of the company at nil in absence of any detail filed by the assessee company. As the company did not submit any stock statement, bank did not inspect the stock. Further, the bank stated that there is no record as to the inspection of mortgaged properties i.e. plant and machinery. 2. Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in deleting the addition of ₹ 40,35,22,309/- on account of loss of sales appreciating that the stock of ₹ 40,68,10,503/- was sold as scrap at ₹ 32.88 lakhs benefit of reducing the income of ₹ 47,91,16,254/- on account of settlement with the banks in respect of the loans borrowed by them. The operandi is nothing but a colourable device to escape payment of taxes as held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im, the assessee has not disclosed any corresponding sale in the profit and loss account and disclosed scraps sale of ₹ 32,46,632/-. The AO was not convinced with the reply of the assessee and further noted that there is debt restructuring in the case of the assessee and therefore, the loan of working capital provided by the SBI of ₹ 47,91,16,254/- was waved off by the assessee and the assessee set off the same by deliberately claim the sale of opening stock worth ₹ 40.68 crores as scrap sale for an amount of ₹ 32.46 lacs. According to him, this created a fictitious loss of ₹ 40,35,22,309/- and by this loss entry the assessee avoided in paying tax against the exceptional income of capital loan waiver of ₹ 47,91,16,254/-. Therefore, the AO made addition by disallowing the claim of loss of stock amounting to ₹ 40,35,22,309/-. Aggrieved, assessee preferred the appeal before CIT(A). The CIT(A) allowed the claim of loss and reversed the finding of the AO by stating that the assessee s factory premises were closed as on 08.12.2008 on account of strike by workers and factory remained close for close to 4 years, since, no settlement is being ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as on 31.03.2016 Value as on 01.04.2012 Raw Materials 0 75,00,858 Work in progress 0 31,81,81,318 Finished Goods 0 7,37,94,357 Stores and Spares 0 73,33,970 Total 0 40,68,10,503 7. He argued that the valuation of stock have been done primarily on the basis of cost or no realizable value whichever is less and in that eventuality the stock was valued at ₹ 40,68,10,503/- as on 01.04.2012. He narrated the facts that the assessee is a listed company on the Bombay Stock Exchange and all the transactions are at arm s length and subject to public scrutiny. The assessee s factory had closed on 08.12.2008 on account of illegal strike by the wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preceding year at ₹ 40.86 crores. According to CIT(A), there is no basis how the old materials was valued and cost was ascertained by the parties whoever have purchased the same in the absence of these details, the AO rightly disallowed the loss and he supported the order of the AO. 10. We have heard rival contentions and gone through the facts and circumstances of the case. Before us, the learned Counsel for the assessee has given the details of stock as on 31.03.209, 31.03.2010 and 31.03.2011. He also provided the stock details for the year ending 31.03.2012 and in FY 2012-13 this stock was sold as scrap. We find that the assessee has filed complete details in respect of scrap sale invoices and filed the same in its paper book from pages 229-240. The entire detail of parties including address, sale tax registration, VAT registration, TAN number etc. are given. Even complete detail is provided to the AO including Annual Report and accounts for and from assessment year 2008-09 to 2012-13. Even this stock was accepted by the AO in earlier years starting from 31.03.2009. 11. We have gone through the case records and noted that the assessee had app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elating to the sale of scrap, the Company does not have any other independent source to determine the value of the scraps. 13. We find from the facts of the case that the assessee had physical stocks which has been carried forward from earlier years. The department has accepted the book results in the past. The assessee has enclosed annual accounts for the year ending March 2009, 2010, 2011, 2012 and 2013 wherein the stocks have been reflected constantly. The AO failed to appreciate that the quantity details have been mentioned in the annual accounts from year to years that scrap salvage is always sold by weight and not by meters. That the stocks were hypothecated to bank as per the stocks statement for the month of December 2008 and no stocks statement could be furnished for the subsequent period due to closure of the factory premises. The AO failed to summon the scrap dealer to verify the genuineness of sale made by the assessee. If he had done so his doubts would have been cleared and the conclusion would have been different. The AO has made the addition without rejecting the books of accounts as envisaged in section 145 of the Act. Moreover, the assessee has en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has not close down the business but it is not going on because of illegal strike by the workers and therefore manufacturing has been stopped temporarily. It is not the case that the assets are not in use or the intention of the assessee is not to use the same. Another factor is that once, assets is forming part of block of assets and in earlier years depreciation is allowed and due to certain risks in this year, assessee is unable to carry out the manufacturing activities, depreciation cannot be disallowed. Hence, we affirm the order of CIT(A) and this issue of Revenue s appeal is dismissed. 18. Similarly, in AYs 2012-13, 2013-14, depreciation has rightly been allowed by CIT(A). We confirm the orders of the CIT(A) in these two years also. 19. The next common issue in AYs 2011-12 and 2012-13 is as regards to the order of CIT(A) deleting the disallowance of various expenses for the reason that there was no manufacturing or business activity carried out by the assessee in earlier years. For this facts and circumstances in both the years are identical and issue is also identical. Hence, we will take up the facts from AY 2011-12 in ITA No. 3086/Mum ..... X X X X Extracts X X X X X X X X Extracts X X X X
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