9911796707
TMI Blog2022 (11) TMI 244X X X X Extracts X X X X X X X X Extracts X X X X ..... - u/s 115JB as against Rs. 51008.45 lakhs. Despite the figures available on record, the Assessing Officer failed to examine the short computation of income u/s 115JB of the Act. Similarly, the Miscellaneous losses and provisions for bad and doubtful debt of Rs.24.55 crores includes Rs.15,03,01,740/- towards obsolete stores etc., and Rs.3434340 towards loss on sale of scarp. However, the Assessing Officer failed to examine the issue properly since the assessee is having scarp a/c separately and therefore, the obsolescence of store a/c should have been transferred to the scarp a/c and scarp receipts thereof, if any, should have been offered to tax. Since the Assessing Officer in the instant case has not examined the vital issues properly, therefore, the order passed by the Assessing Officer, in our opinion, has become erroneous as well as prejudicial to the interest of the revenue. Therefore, CIT, in our opinion, has rightly invoked the jurisdiction u/s 263 of the I.T. Act. The various decisions relied upon by the learned Counsel for the assessee, in the instant case, are distinguishable and not applicable to the facts of the present case since the Assessing Officer in the instant ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure - HELD THAT:- CIT (A) sustained the addition. We do not find any infirmity in the order of the learned CIT (A) on this issue. As mentioned earlier, the assessee has made a provision towards obsolescence of stores and as mentioned by us in the preceding paragraphs, provision cannot be allowed as an expenditure especially when the assessee was unable to show us as to whether such provision was quantified in a scientific basis or not - whether there is any reversal of entry on account of increase or decrease in the provision in the subsequent years was also not shown by the assessee. Under these circumstances, we do not find any infirmity in the order of the CIT (A) on this issue and the ground raised by the assessee is dismissed. - ITA Nos.236/Hyd/2016 & ITA 75/Hyd/2018 - - - Dated:- 2-11-2022 - Shri R.K. Panda, Accountant Member AND Shri Laliet Kumar, Judicial Member For the Assessee : Shri M.Chandramouleswara Rao, C.A For the Revenue : Shri Jeevan Lal Lavidiya, CIT (DR) ORDER PER R.K. PANDA, A.M ITA No.236/Hyd/2016 filed by the assessee is directed against the order dated 18.12.2014 passed u/s 263 by the learned CIT-1 Hyderabad relating to A.Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losses and provisions'. This amount includes Rs.15,03,01,740/- and Rs.3,43,45,409/-towards, obsolescence of stores etc. and 'loss on sale of scarp respectively. As the assessee is having the scarp account separately, the obsolescence of store account needs to be transferred to scarp account and scarp receipts thereof, if any needs to be offered to tax. 3.2. He, therefore, issued a show-cause notice to the assessee asking as to why the order passed by the Assessing Officer should not be set aside in terms of section 263 of the I.T. Act. The assessee in its reply filed the following submissions which has been reproduced by the learned CIT in his order which reads as under: 1. The provision for bad and doubtful debts for Rs. 87,30,955/- is debited to the P L accounts due to nonreceipts of the following amounts: a. Water charges receivable from Kothagudem Municipality since 1999 amounted to Rs.40,98,138/-. b) Amount receivable toward reimbursement of salaries of the staff counted against the Government posts of Rs. 37,27,682/- from the Government for the period from 01.02.1999 to 31.03.2004. c) Bill of cost for an amount of Rs. 9,05,135 from various compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned Commissioner of Income Tax has erroneous in assuming the jurisdiction U/s.263 on issues which were raised by the Assessing Officer during the assessment proceedings and due examination was made in passing the assessment order. 3. On the facts and in the circumstances of the case, the Ld. CIT has erred in passing revisionary order U/s.263 of the Act on the following issues alleging that, the assessing officer has failed to verify the correctness of the claims made by the Assessee: i. Provisions of Rs.87,30,955/- are not allowable expenditure under Income Tax Act. ii. Book profit for the purpose of computation U/s.115JB is required to be considered at Rs..51008.45 lakhs as per P L A/c. (being above the line) as against Rs.28866.02 lakhs (down the line). Apart from the above, provisions debited in the P L A/c of Rs.87,30,955/- are also to considered required to be added to the net profit for determination of the book profit iii. As the assessee is having the scarp account separately, the obsolescence of store account needs to be transferred to scarp account and scarp receipts thereof, if any needs to be offered to tax. He is not justified in order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax. 7. Referring to page 80 of the Paper Book, the learned Counsel for the assessee drew the attention of the Bench to the Profit Loss A/c for the year ended on 31.3.2010 and submitted that the prior period item at Rs. 892.77 lakhs was credited to the P L A/c and accordingly net profit of Rs.28866.02 lakhs has been declared. He submitted that the assessee has filed the full details before the Assessing Officer and therefore, the learned CIT is not justified in invoking the provisions of section 263 of the I.T. Act. So far as the allegation of the learned CIT that the Assessing Officer has not examined the details called for by him, he submitted that the assessee has no control over the manner of writing of the order by the Assessing Officer. Relying on various decisions, he submitted that the order passed by the Assessing Officer is not erroneous and therefore, the twin conditions are not satisfied for invoking the jurisdiction u/s 263 of the I.T. Act, 1961. He accordingly submitted that the grounds raised by the assessee should be allowed and the order passed by the CIT u/s 263 be quashed. 8. The learned DR, on the other hand, while supporting the orders of the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the details in the assessment order, the same cannot make the order erroneous so as to invoke the provisions of section 263 of the I.T. Act. 10. We do not find any merit in the arguments advanced by the learned Counsel for the assessee. It is an admitted fact that the assessee has debited an amount of Rs.24.55 crores in the P L A/c towards miscellaneous losses and provisions written off which include Rs.87,30,955/- towards provisions for bad and doubtful debts. Although the assessee has given the details of miscellaneous losses and provisions written off at Rs.24.55 crores as per page 10 of the Paper Book, however, the Assessing Officer failed to consider the provisions for bad and doubtful debts at Rs.87,30,955/- included in Rs.24.55 crores since any provision for bad and doubtful debts cannot be allowed as an expenditure. Similarly, in the computation of income statement u/s 115JB, the assessee has taken the book profit at Rs.28866.02 lakhs and arrived at the income of Rs.484,74,65,032/- u/s 115JB as against Rs. 51008.45 lakhs. Despite the figures available on record, the Assessing Officer failed to examine the short computation of income u/s 115JB of the Act. Similarly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax (Appeals) has erred in dismissing the claim of the Appellant in relation to the loss on obsolescence of stores for an amount of Rs.15,03,01,740/- stating that 'provision on obsolescence of stores' is a provision and not justified to claim as allowable deduction. 5. On the facts and in the circumstances of the case, the Learned Commissioner of Income Tax (Appeals) has erred in partly allowing the claim of the Appellant in relation to adopting Profit before prior period items as Book profit u/s 115JB instead of Net Profit in the Profit and loss account prepared in compliance with section 211(2) of the Companies Act, 1956. The Learned Commissioner of Income Tax (Appeals) ought to have considered the Net Profit after prior period items and extraordinary items in the computation of 'Book Profit's as per the provisions of section 115JB of the Income Tax Act, 1961. 6. Such other ground/grounds that may be urged during the course of hearing of the appeal. 12. Grounds 1 6 are being general in nature are dismissed. 13. Ground No.5 was not pressed by the learned Counsel for the assessee for which the learned DR has no objection. Accordingly, Ground No.5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not satisfied with the arguments advanced by the assessee and upheld the disallowance made by the Assessing Officer by observing as under: 5.3 The submissions of the appellant have been carefully examined. It is no doubt that the appellant has made provision for Bad and Doubtful debts. Asper the Accounting principles, this is just a 'provision' not actually incurred. Also, the appellant has also not justified reasons for going receivable bad, as to why the municipality a Governmental Authority, has not paid, nor the Government of Andhra Pradesh not paid. It is pertinent to note that a municipality or Government of Andhra Pradesh has not issued any order or certification that these payments will not be made in future. This is to say that the payers have not confirmed that these amounts have become bad. The appellant has also not submitted the confirmations issued by them to the respective Governmental agencies, to show that these amounts is no longer payable by them. Suo-moto disallowance and proclaiming bad debts is not justifiable. As these receipts are from the Governmental agencies there might be a delay but absolute non-payment by the Governmental agencies canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the learned CIT (A) on this issue. A perusal of the order passed by the learned CIT (A) for the A.Y 2011-12 shows that similar addition made by the Assessing Officer was sustained by him at Rs.64.35 crores towards provision for bad and doubtful debts and the learned Counsel for the assessee admitted that the assessee has accepted the same and has not filed any appeal. Further, any provision for bad and doubtful debt debited to P L A/c is not an allowable expenditure. In this view of the matter, we do not find any infirmity in the order of the learned CIT (A) on this issue. Accordingly, the same is upheld and the ground raised by the assessee is dismissed. 24. Ground No.3 relates to the addition on account of loss on sale of scrap at Rs.3,43,45,409/-. Facts of the case, in brief, are that the Assessing Officer during the assessment proceedings noticed that the assessee debited Rs.3,43,45,409/-towards loss on sale of scrap under the head Misc. Losses and Provisions . As the assessee is having the scrap a/c separately, hence the same is not an allowable expenditure. The assessee submitted that the profit on sale of scrap and loss on sale of scrap both are business income and e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue raised by the appellant that there is a loss on sale of scrap. The appellant submitted that these scraps are part of their unused plant machinery. That is to say, these have already been subjected to depreciation before sale. The appellant has not submitted any calculation as to the 'cost' of this scrap. Unless appellant/internal audit values the scrap there cannot be any loss or gain. There is no confirmation as to now the sale was made through auction or otherwise. As per Form 3CD report in col No.12(a) dated 25.09.2010 by M/s. Jawar Associates, CA, Hyderabad the report referred as: 12 (a). Method of valuation of closing stock in the previous year: 2. Scrap is valued at realizable value. Since the scrap is valued at 'sellable value', there cannot be a loss. Hence, there is strength in the argument of the Assessing Officer. Appellant has shown loss from scrap is much more than the profit which cannot be possible in light of audit report. In background to the 3CD report, there cannot be loss as the valuation is at the sellable/market rate. It is pertinent to understand that the sale of scrap is not basic business of the appellant. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stores. 31. Facts of the case, in brief, are that during the assessment proceedings, the Assessing Officer noticed that the assessee debited Rs.15,03,01,740/- towards obsolescence of stores, etc., under the head Misc.Losses and Provisions . As the assessee is having the scrap account separately, he held that the same is not an allowable expenditure. The assessee submitted that profit on sale of scrap and loss on sale of scrap both are business income and expenses respectively. However, the Assessing Officer rejected the explanation and disallowed Rs.15,03,01,740/- towards obsolescence of stores etc. 32. Before the learned CIT (A) it was submitted that the accounting systems and policies followed have been accepted by the Revenue for the earlier years and the same accounting system and policies were followed even during the A.Y 2010-11. There is no change in maintenance of accounts. The assessee further submitted that during the relevant previous year, the provision on obsolescence of stores of Rs.1503.01 lakhs was disclosed in Schedule 18 Administration and general expenses under the head Misc. Losses and provisions in the amount of Rs.2455.00 lakhs. The assessee furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
