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TMI Blog2015 (8) TMI 1086X X X X Extracts X X X X X X X X Extracts X X X X ..... local market. Considering the peculiar circumstances it revalued the inventory. In our opinion the Assessing Officer/first appellate authority should have made further enquires in this regard. We find that in the case of Alfa Laval India Ltd. v. Deputy CIT [2003 (9) TMI 43 - BOMBAY High Court ] had held that in the subsequent assessment year the goods in question were sold at the lesser price than shown in the closing stock. We find that the Assessing Officer had not carried out any exercise in this regard. In our opinion, in the interest of justice, the matter should be restored back to the file of the Assessing Officer for fresh adjudication. - Decided in favour of assessee for statistical purposes. Disallowance made under section 14A - FAA deleted addition - Held that:- Assessing Officer had invoked the provisions of section 14A of the Act without understanding the real nature of the transactions. The assessee had not shown any income under the head exempt income under Chapter III of the Act for which it had claimed incurring of expenditure. Until and unless both these conditions are fulfilled provisions of section 14A cannot and should not be invoked. The first appellate au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, alter, amend or delete any of the grounds as and when advised. I. T. A. No. 1495/Mum/2008 The Assessing Officer has raised the following grounds of appeal : 1. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in holding that the interest of ₹ 26,44,597 relating to borrowed funds, invested in assets generating income not includible in gross total income, could not be disallowed under section 14A of the Income-tax Act, 1961 on the ground that the assessee had not earned such income during the year. 2. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in deleting the addition of ₹ 54,56,353 on account of cessation of liability under section 41 of the Income-tax Act without appreciating the findings of the Assessing Officer that the liability was outstanding for a long time and there was no movement in transaction. I. T. A. No. 1859/Mum/2008 : The assessee, engaged in the business of manufacturing textile machinery, filed its return of income on November 24, 2003 declaring loss of ₹ 3,44,59,980. The Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee had furnished the details about the encashment/ surrender of foreign exchange before both the lower authorities. Page No.64 onwards evidence the encashment/surrender of foreign exchange. The Assessing Officer or the first appellate authority had not doubted the foreign tours undertaken by the employees of the assessee-company. After considering the material on record, specially page Nos. 65 to 96 and the judgment of Krishnonics Ltd. [2009] 308 ITR (AT) 8 (Ahd), we are of the opinion that the addition upheld by the first appellate authority was not based on facts available on the record. The assessee had filed all the details before the Assessing Officer. Therefore, reversing the order of the first appellate authority, we decide ground No. 1 in favour of the assessee. 3. Next ground of appeal is about disallowance of diminution in value of inventories of work-in-progress amounting to ₹ 1,95,00,000. During the assessment proceedings, the Assessing Officer found that in the notes on accounts in Schedule 17 the assessee had mentioned that work-in-progress (WIP) included the revaluated figures. The assessee contended that work- in-progress had been revaluated after technic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e have heard the rival submissions and perused the material before us. We find that the assessee had filed explanation/reconciliation of opening and closing stock along with the details of work-in-progress which included jobs undertaken by it for customers (page No. 59 of paper book). We find that the assessee had stated that the customers had not fulfilled the commitments and had not taken deliveries of the machinery, that it obtained technical evaluation regarding the valuation of the material and accordingly stocks had been carried at net realisable value. Vide its letter dated January 30, 2006 (pages 61 and 62 of the paper book), the assessee had made submission in this regard. We find that in the case of Alfa Laval India Ltd. v. Deputy CIT [2004] 266 ITR 418 (Bom) in the almost identical circumstances, the hon'ble Bombay High Court had held that the assessee was entitled to value the closing stock at market value or at cost whichever was lower, that the assessee had proved that goods were sold at the lesser price in the subsequent year as compared to the revalued price. In our opinion, there was no change in the method of valuing the stock and therefore the assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred an appeal before the first appellate authority. Before him, it was argued that from the analysis of Schedule 3 of the balance-sheet, the details of working capital loan and hire purchase loan it was clear that the assessee had utilised loan amounts for making investment in shares, that it had used its reserve funds for purchasing shares. After considering the facts of the case and submission made by the assessee, he held that the disallowance of ₹ 26,44,597 was made on the ground that the assessee had made investment of ₹ 4.09 crores in two sister concerns while an amount of ₹ 1.37 crores had been paid interest, that the Assessing Officer had considered the investment in sister concern as to be covered under section 14A, that the Assessing Officer erred in invoking provisions of section 14A, that the assessee did not have any income during the year which was not forming part of the total income, that a deduction was allowable under section 37 of the Act, if the expenditure was not capital or personal in nature and has not been incurred fully and exclusively for the purpose of business, that section 14A made an exception in respect of income if it was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he balances shown as payable, that as per the provisions of section 41 of the Act, when the liability ceased to exist the same could not be allowed, that the liability shown by the assessee was no more payable, that creditors were shown since so many years, that the assessee also failed to file the correspondence made with the creditors, that it was not possible to consider the liability as payable. Finally, he made an addition of ₹ 54.56 lakhs. 5.1. In the appellate proceedings, the assessee submitted that it had not received any payments or intimation from the creditors that their credit balances were forfeited by them, that merely because of credit balances remained unpaid for three years the same could not be added as income of the assessee, that the Assessing Officer had not proved that the credit balance outstanding had been taken into computing the total income in earlier year or that the assessee had obtained in cash or in any other manner whatsoever any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission on cessation thereof, that the Assessing Officer did not give any such findings but merely stat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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