TaxTMI 
TaxTMI 
2011 (12) TMI 710
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....ddition of Rs. 90,35,298/- made by the Assessing Officer on account of provision for impairment of stock. 4. The assessee company is engaged in the business of marketing of very small aperture terminals (VSATs) and provision of satellite communications services through its HUB earth station at Gurgaon. The assessee is also providing broadband, internet and other telecommunications services under various licenses obtained from the Department of Telecommunications, Government of India. The assessee company also provides high-end education programmes imparted by premier institutes in India and overseas. It filed its return of income declaring profit at Rs. 12,59,65,323/- on 1.11.2004. The return was selected for scrutiny and notice under sec. 143(2) was duly issued and served upon the assessee. 5. During the course of assessment proceedings it was noticed by the AO that the assessee had shown value of inventories after adjustment of Rs. 90,35,298/- on account of stock impaired during the year. The assessee was asked to submit the valuation of stock. From the details filed by the assessee, it was noticed by the AO that the stock was claimed to have been valued at the realizable v....
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....pport the net realizable rate of various items adopted by the assessee. He further pointed out that the assessee has applied ad hoc percentage of deduction to the cost price, which cannot be said to be a system recognized under the principles of law and accountancy for the purpose of valuing the inventories at net realizable value. He further submitted that merely because the assessee's claim has been allowed in the Assessment Year 2003-04, that by itself cannot be a basis to allow the same in the years under consideration unless the net realizable value adopted by the assessee is supported by any evidences and material. He further pointed out that in some of the items, even the value has been taken at `Nil', which is not at all justifiable inasmuch as there must be some value of stock even if it is sold in the market as a scrap. 9. The learned counsel for the assessee on the other hand, submitted that the assessee as per the consistent method of valuation of stock, has valued the closing stock at cost or net realizable value, whichever is lower and in some items of inventories, the net realizable value has been taken at `Nil' because of the reason that these stocks could not be....
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....bsp;Rs.56,348,170 Rs.56,210,360 Against Defective Inventory Rs.34,415,761 Rs.21,339,758 Rs.13,076,003 Against No Value Rs.248,336 - Rs.248,336 Against Scrap Rs.5,590,655 - Rs.5,590,655 Against Consumable Rs. 4,270,022 - Rs.4,270,022 Total devaluation as on 31-03-2004 Rs.104,630,091 Rs.79,397,719 Less:- Devaluation already booked till 31-03-2003 (-) Rs.66,092,399 Rs.13,305,320 Less:- Transferred towards consumable consumed during the year (-) Rs. 42,700,22 Amount charged in the year ended on 31-03-2004 on account of devaluation- Rs.9,035,298 From the aforesaid details, it is found that out of the total devaluation to stock amounting to Rs. 79,93,97,719/-, the sum of Rs. 6,60,92,399/- has been booked and claimed in the earlier years till 31-03-2003, and the sum of Rs,.42,70,022/- has been claimed under the head "Consumable consumed" during the current year, leaving a balance of devaluation of Rs. 90,35,298/- cl....
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....ils of inventory with their respective net realizable value as at the end of the year. Same method was adopted in earlier years. The A.O. has not been able to point out any defect or irregularity in the details filed by the assessee. The A.O. has failed to make any enquiry to determine the net realizable value of various items with a view to rebut the rate of net realizable value adopted by the assessee. The assessee has followed the same method in earlier years, where the assessee's claim was allowed by the A.O. The learned CIT(A) has restricted the disallowance to the extent of 50% on ad hoc basis without considering the details filed by the assessee and the consistent method adopted by the assessee in earlier years. In this view of the matter, we, therefore, find no reason to sustain any disallowance on account of devaluation in the inventory of stock due to impairment/defects in the stock lying with the assessee as at the end of year ended on 31-03-2004. We, therefore, delete the disallowance in toto, and allow the assessee's claim on this count. Thus, the ground raised by the assessee is allowed and that of the revenue is rejected. 14. Ground No.3 in revenue's appeal is dir....
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....ation and supply of various goods, however, the assessee has intentionally not provided any explanation regarding the goods mentioned in the impounded loose sheets and the assessee is trying to conceal its sale made to the BSE. No entry for supply of these goods is made in the books of account maintained by the assessee nor any details in this regard are available with the assessee. In view of the above, the sales shown by the assessee were rejected and sales were determined by making an addition of Rs. 5 crores. The findings given in the above order are very specific which show that the assessee has made unaccounted sales during the year under consideration. In spite of being given specific opportunity in this regard, the assessee has filed to give any details / documents / evidence in support of its contention. In view of the above, it is hereby held that the assessee has made unaccounted sales of Rs. 5 crores and therefore, an addition of Rs. 5 crores is made to the income of the assessee. Since the assessee has concealed particulars of its income, penalty proceedings under section 271(1)(c) have been initiated separately." 16. On an appeal, the learned CIT(A) has deleted the....