2014 (8) TMI 1204 - AT - Income Tax

Stay application - disallowance relating to write off of stock under valuation of closing stock - HELD THAT - From the submissions of the assessee there appears to be a prima facie case in favour of the assessee, so far the addition in respect of write off of inventory is concerned. However, the said observations are not conclusive and the final conclusion will be dependant on the material and evidences which will be considered at the time of disposal of the appeal - interest of justice will be well served, if, the demand in question is stayed subject to deposit of ₹ 10 lakhs by the assessee with the Revenue Authorities in two installments i.e. ₹ 5,00,000/- by 15th September 2014 and further installment of ₹ 5,00,000/- by 15th October 2014, as a part of the amount sought to be recovered from the assessee. Before parting with the order it is pertinent to mention here that our observations made above, while disposing of the present stay application, will not have any bearing at the time of final disposal of the case.

Summary

Issues:
Stay of demand of tax, interest, and recovery of refund issued.

Analysis:
The assessee, a pharmaceutical products manufacturer, filed its return of income declaring a total loss. The Assessing Officer (AO) made additions/disallowances leading to a revised assessed income. The AO denied set off of carry forward losses against income under "Capital Gain" in a reopened assessment. In appeal, the CIT(A) granted relief on one issue but confirmed additions on others. The assessee appealed to the Tribunal seeking a stay of demand.

The assessee contended that inventory worth &8377; 2,51,00,000 had expired and was unfit for consumption, supported by a certificate from the Commissioner of Excise. The assessee argued that if successful in this appeal, the entire tax demand would be reduced to Nil. The AR emphasized a strong prima facie case and potential irreparable loss if the demand was not stayed. The Revenue argued that the tax demand was justified.

The Tribunal noted the assessee's claim that the expired inventory was unfit for consumption and had lost its value. The Commissioner of Excise also confirmed the products were unfit for human consumption. The Tribunal found a prima facie case in favor of the assessee regarding the write-off of inventory. However, the final decision would depend on evidence presented during the appeal. Considering the circumstances, the Tribunal granted a stay on the demand subject to the assessee depositing &8377; 10 lakhs in two installments with the Revenue Authorities.

The Tribunal allowed the assessee's application for a stay of demand, emphasizing that their observations during the stay application would not impact the final case disposal. The order was pronounced in open court on 22.08.2014.