TaxTMI 
TaxTMI 
2017 (7) TMI 1042
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....tal gain on sale of building, land and machinery and furniture etc. The Assessing Officer has noted that the assessee did not produce the books of accounts despite several opportunities being given. The Assessing Officer proceeded to invoke the provisions of section 144 of the Act and passed a best judgment assessment. The assessee had declared gross loss at 31.71% on sales of Rs. 14.14 crores as against the gross profit of 7.68% disclosed on the sales of Rs. 21.54 crores in the preceding year. It was the assessee's contention before the AO that the loss had occurred on account of closure of business and sale of old stock. However, the Assessing Officer estimated the loss at 20% and made an addition of Rs. 1,56,86,871/-. The Assessing Officer also disallowed the assessee's claim of bad debts of Rs. 1,43,72,485/- on the ground that the assessee had failed to discharge the onus to prove that the debts had actually become bad. The Assessing Officer also disallowed claim of short term capital loss on the sale of plant and machinery on the grounds that the block of plant and machinery did not cease to exist. Further, the Assessing Officer allowed depreciation @15% instead of 80% as was ....
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....e its claim by not supplying the necessary evidences that the machinery fulfill all the conditions laid down in Rule 5 item 8(ix) of the depreciation schedule. 4. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred on facts and in law in deleting the disallowance of Rs. 1,48,76,639/- made by the AO on account of short term capital loss claimed on block of assets (having 15% rate of depreciation) which did not cease to exist. 5. That the appellant craves for the permission to add, delete or amend the grounds of appeal before or at the time of hearing of appeal." 2.4 The grounds taken in C.O. by the assessee are as under:- "1. That the Worthy Commissioner of Income Tax (Appeals), Faridabad has erred in confirming the addition of Rs. 30 lacs as per finding given at page 20 of the order of CIT (A). 2. That the Worthy Commissioner of Income Tax (Appeals) has erred in confirming the addition of Rs. 18,18,058/- on account of bad debts as per Para 6.2 of the order. 3. That the respondent craves leave to add or amend any round of cross objections before the appeal is finally heard or disposed of." 3. Learned CIT DR submitted that the books of accou....
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.... evidences of valuation of stock and no specific defects were found by the Assessing Officer in such details. Our attention was drawn to page 3 of the assessment order wherein the Assessing Officer has observed that from the details and expenditure filed and record produced from time to time, the following discrepancies were found during the course of assessment proceedings. Ld. AR also submitted that an affidavit by Mr. Jatinder Bahl, Accountant was also on record which states that he had produced the books of accounts for the year under consideration before the Assessing Officer and that the Assessing Officer had perused the books. He also drew our attention to copies of replies dated 26.10.09, 6.11.09, 25.11.09, 11.12.09 and 21.12.09 which were filed before the Assessing Officer during the course of assessment proceedings. It was submitted that in the light of these details filed, it was very much evident that the Assessing Officer had duly examined the books of accounts and consequently, the framing of assessment u/s 144 of the Act was bad in law. Ld. AR further submitted that the fall in the gross profit ratio was due to the discontinuation of manufacturing activity and contin....
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.... CIT (A) had erred in confirming the addition of Rs. 30 lakh on account of GP as the Ld. CIT (A) had confirmed the addition on the basis that the closing stock should have been valued at 14.08 per metre instead of Rs. 9.40 per metre whereas the assessee had valued the stock of 305287 metre at Rs. 14.08 per metre and 252684 metres at Rs. 9.40 per metre. It was submitted that the Ld. CIT (A) had made an addition of Rs. 5 per metre on the entire stock of 557971 metre which was erroneous. 4.4 On the second ground taken by the assessee in the C.O. regarding sustenance of Rs. 18,18,058/- on account of bad debts, it was submitted that this comprised of interest receivable which had been booked by the assessee as its income in the previous year which was evidenced from page 162 of the paper book. It was submitted that this amount also adhered to the conditions laid down in section 36(2) of the Act that (i) the same has been booked by the assessee as its income and that (ii) the same had been entered in the books of accounts. It was submitted that since the income had been booked which had become irrecoverable, the claim of bad debt should be allowed, else the same would amount to double t....
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....sue of rejection of books of accounts. A perusal of the assessment order also shows that although the Assessing Officer has not accepted the GP loss rate at 31.71%, he has not given any reasoning for adopting the loss rate at 20%. The entire case of the Assessing Officer seems to be based on the allegation that books of accounts were not produced before him. Ld. AR has filed copy of the entire order sheet and has submitted that the order sheet does not mention that the books of accounts were not produced. It has been submitted by the Ld. AR that in view of not mentioning the specific non-production of books of accounts, it goes out in assessee's favour to prove that the books of accounts were duly produced. The Ld. AR has also contended that the details of valuation of closing stock were filed which had not been contradicted by the Assessing Officer. 6.1 On due consideration of the entire factual matrix on this issue, we do feel that irrespective of the fact as to whether the books of accounts were duly produced or not produced before the Assessing Officer, the fact remains that the valuation of closing stock has been made without categorising it in terms of specific quality or br....
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.... case of TRF Limited vs CIT reported in 322 ITR 3497 (S.C.) has held that after 1st April, 1989 it is not necessary for the assessee to establish that the debt incurred has become irrecoverable and that it is enough if the bad debt has been written off as irrecoverable in the books of accounts of the assessee. CBDT Circular no. 12/2016 dated 30th May 2016 also supports the case of the assessee. Therefore, we find no reason to interfere in the finding of the Ld. CIT (A) in deleting the disallowance of Rs. 1,25,54,427/- made on account of bad debts written off. 6.4 As far as the assessee's C.O. challenging the sustenance of Rs. 18,18,058/- on account of interest receivable is concerned, we find that the amounts have been shown as interest income receivable during earlier assessment years and as such, the assessee has already paid tax on the same. Therefore, for the purposes of section 36(2), the conditions laid down therein have duly been met by the assessee. Therefore, there is no reason as to why these amounts should not be allowed as bad debt. We accordingly set aside the order of the Ld. CIT(A) on this issue and direct the Assessing Officer to delete this addition of Rs. 18,18,0....
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....1,48,76,639/- on sale of plant and machinery. The appellant has claimed short term capital loss of Rs. 67,43,584/- and Rs. 8,75,249/- on sale of building and furniture, respectively, which is not in dispute. On the blocks of Computer, Boiler and Motor cars, the appellant has claimed depreciation as these blocks did not cease to exist despite smaller sales in the block of motor car and computer. The remaining plant and machinery have been sold for a consideration of Rs. 1,49,70,400/- against the aggregate opening WDV of Rs. 3,05,68,863/- (i.e. Rs. 2,79,96,488/- plus Rs.l 1,57,791/- plus Rs. 14,14,585/-). The AO has held that the block of plant and machinery did not cease to exist on the ground that the boiler and motor cars fell in the same block of plant and machinery eligible for 15% depreciation. The entire sale consideration of Rs. 1,49,70,400/- has, therefore, been allocated against the WDVs of Rs. 2,79,96,488/-, Rs. 11,57,791/- and Rs. 14,14,585/-, proportionately. The short term capital loss of Rs. 7,21,825/- has, however, been allowed against the WDV of Rs. 14,14,585/- as the machineries in this block were eligible for 50% rate of depreciation, being machineries purchased un....