TaxTMI 
TaxTMI 
2015 (9) TMI 1668
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....of Rs. 47,35,034/- and storage charges of Rs. 18,30,566/- during the year. The assessee filed detailed working of interest and storage charges and it was noted that the assessee had been awarded a tender by PSWC ( Punjab State Warehousing Corporation) for sale of paddy on 29.04.2004. The assessee was required to pay the sale amount and lift paddy failing which it had to pay storage charges and interest charges to PSWC. The assessee was given waiver of storage charges till 28.06.2004 and waiver of interest till 13.06.2004. Later the assessee made the payments and lifted the commodity. It started making payments and lifting the paddy in October,2004 and continued till August,2005. It was noted that the paddy lot Nos. 12 to 15 comprising of total 9250.90 Qtls. Were paid for, as well as lifted in financial year 2004-05. Payment for these lots of paddy amounting to Rs. 2.08 crores was also made in financial year 2004-05. However, the interest for late payment and storage charges for these lots were paid in current year and has been charged to Profit & Loss Account of the current year i.e. financial year 2005-06. It was, therefore, noted that these expenses pertain to last year and shoul....
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.... filed. (ii) Further, PSWC also reduced the rate of interest from 21% to 12% and storage charges from 0.09 paise per day/per standard bag to 0.03 paise vide letter dated 18.02.2005 for the paddy crop year 2000-01. (iii) The liability crystallized only when the final agreement reached with PSWC in financial year 2005- 06. The last RO was released on dated 30.11.2005. (vi) Details were filed for the period/date to lift the paddy was extended by PSWC 7 times. The final extension being 25.07.2005. (v) Accounts were settled on 15.07.2005 when the liability towards interest and storage charges were determined by PSWC, therefore, entire liability was allowable in assessment year under appeal. The assessee relied upon decision of Allahabad High Court in the case of CIT v. Ashok Iron & Steel Rolling Mill [1993] 213 ITR 815/[1992] 63 Taxman 489 and decision of Gujrat High Court in the case of Saurashtra Cement & Chemical Industries Ltd. v. CIT [1995] 213 ITR 523/80 Taxman 61. It was also submitted that claiming of this expenditure in earlier year also would not have affected the profitability in any way. Had this amount been debited to the trading account ....
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.... that there was no dispute that the final lifting of the paddy was completed during assessment year under appeal and waiver was also granted to the assessee. The authenticity of the certificate issued by PSWC is not in dispute. Since the liability has been determined in assessment year under appeal, therefore, ld. CIT(Appeals) was justified in deleting the additions. The Hon'ble Delhi High Court in the case of CIT v. Kundan Sugar Mills Co. Ltd.[2001] 118 Taxman 73 held that, "Liability relating to earlier years - liability settled after a dispute as per orders of the State Government passed after dissolution of the assessee-firm deduction allowable." 7. The Hon'ble Gujarat High Court in the case of Saurashtra Cement & Chemicals Industries Ltd. (supra) held, "Business expenditure - year of allowability - mercantile system of accounting - liabilities allowable only in the year in which it was crystallized and determined. It cannot be disallowed merely because it related to earlier previous year." 8. Considering the facts and circumstances of the case in the light of the material on record, we do not find any error in the order of the ld. CIT(Appeals) in deleting both th....
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....orage charges were required to be paid. Further, additional cost on account of transportation, loading and unloading would have also burden the assessee. It would have resulted loss to the assessee. It was, therefore, established that payment of interest to PSWC was for commercial and business purposes. The assessee company did not have any cash credit facility or term loan facility from any bank or institution and has not claimed interest as expenditure. It was, therefore, submitted that addition was unjustified. The assessee has sufficient funds interest free. Therefore, addition may be deleted. 11. The ld. CIT(Appeals) considering submissions of the assessee, found that the amount from sister concern was receivable on account of sale transactions. On the other hand, the amount paid to PSWC pertain to lifting of the paddy lots and using warehousing facilities. Therefore, both the amounts pertain to business exigencies. Therefore, addition on account of notional interest would not stand. The ld. CIT(Appeals), accordingly deleted the addition. 12. On consideration of the rival submissions, we do not find any merit in this ground of appeal of the revenue. The assessee was to r....
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.... Officer did not accept explanation of the assessee because assessee has not submitted any evidence in support of the claim that the stock of the goods had indeed deteriorated/spoiled, no technical reason explained by assessee, abnormal fall in valuation stock not disclosed in the balance sheet and assessee has not submitted any evidence in support of the claim. The Assessing Officer, accordingly, made addition of Rs. 55,21,392/-. 17. The assessee challenged the addition before ld. CIT(Appeals) and written submission of the assessee is reproduced in the appellate order in which the assessee briefly explained that due to deterioration in the quality, these two commodities could not be sold and same were valued at the net realizable value as on 31.03.2005. The net realizable value conducted by assessee was rejected by Assessing Officer without reasons. These two commodities were stated to have been originally purchased for using as edible oil but at the time of valuation of the closing stock on 31.03.2005. They became non-edible which resulted in their valuation at the market price of non-edible oil. The closing stock of cotton seed oil and mustered seed oil were sold in March,200....
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.... sheet. Copy of the same is also filed in the Paper Book which was not sold during the assessment year under appeal. The assessee has been following consistent method of accounting for the purpose of valuation of the stock and there has been no change in the system of valuation. Copy of the Tax Audit Report is filed at page 4 of the Paper Book in which method of valuation of closing stock in respect of finished goods is "At cost or Net Realizable Value" The same method was followed in assessment year under appeal as well. There is no dispute that assessee is maintaining quantitative tally (PB-11) in which no defects have been pointed out by the Assessing Officer. All the purchase and sales are vouched and no defects in the same books of account have been pointed out. The books of account have not been rejected under section 145(3). 19(i) The assessee submitted lab report which is duly certified by the qualified technician from which it is clear that since rancidity had gone very high, therefore, the commodity become unfit for human consumption (PBs 24- 25) everything was disclosed in the Tax Audit Report. Since it was perishable item, therefore, the nature of commodity should be....
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....he addition to the value of the stock in hand has not resulted in any loss to the Revenue. The value which has been shown by the assessee has been carried forward to the next year. Thus, there is no loss of tax so far as the Revenue is concerned. In any case, the ultimate position is that the assessee has suffered loss. The assessee could have claimed the valuation of the stock on the basis of its cost. It has not been shown that the valuation shown by the assessee is less than the cost price. That being so, there is no infirmity in the view taken by the Tribunal. In view of the above, no substantial question of law arises for the consideration of the Court in this appeal. It is, accordingly, dismissed in limine." 19(ii) Decision in the case of CIT v. Satish Estate (P.) Ltd. [2014] 361 ITR 451/45 taxmann.com 479/226 Taxman 11 (Mag.)(Punj. & Har.) in which it was held as under : Civil suit was filed by M/s Amritsar Royon and Silk Mill Pvt, Limited in which assessee was impleaded as respondent No.4. There was an interim order passed by trial court which was affirmed by this Court as well. In circumstances, assessee was justified in reducing valuation of closing stock, Ass....
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....wo commodities possessed by the assessee. However, no efforts have been made to examine him with regard to genuineness of the report given by him. Therefore, there were no justifiable reasons for ld. CIT(Appeals) in not giving credence to the said report. The assessee has given same quantity of stock as purchased in the audited accounts and it is also clear from the facts of this case that when sale could not be made of this commodity in assessment year under appeal and sales have been made in March 2007, would support the contention of assessee that the quality of the commodity so purchased by assessee has deteriorated, therefore it could not be sold at the same price. The assessee has also, admittedly following the consistent method of accounting to value the closing stock and with regard to finished goods, assessee has been adopting method of valuation as "At cost or not realizable value". The method of valuation adopted by assessee has not been disputed by the authorities below. All the sales and purchases of the assessee are vouched and entered into the books of account in which no defects have been pointed out. 22(i) The Assessing Officer has also not rejected the book res....
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.... was asked to produce this party, its balance sheet showing the said loan to the assessee, copy of the bank statement explaining the source of the funds for giving loan to the assessee. The assessee submitted photo copy of the bank account of M/s Loil Impex Ltd. with Oriental Bank of Commerce, however neither the name of the accountholder, account number, nor transactions were clearly visible. The assessee did not produce the loan creditor and its PAN number or copy of the return. Therefore, Assessing Officer noted that assessee has failed to explain the source of giving loan of Rs. 85 lacs to the assessee. The Assessing Officer on examining the books of account of assessee found that assessee has shown receipts of Rs. 20 lacs each on 07.05.2004, 31.05.2004, 15.06.2004 and Rs. 25 lacs on 27.07.2004. All these amounts are stated to have been received in assessee's current account No. 2118026 in Punjab National Bank, Mohali Branch. Except these four credit entries, there is no other entry in the account of M/s Loil Impex Ltd. maintained in the books of account of the assessee. There was no opening balance and credit closing balance was Rs. 85 lacs on 31.03.2005. The Assessing Off....
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....reiterated the submissions made before authorities below and submitted that assessee has taken loan of Rs. 85 lacs from one of the group company M/s Loil Impex Ltd. which was not assessed to tax, however, all transactions were made through account payee cheques and source of the source in their case was also explained. Copy of account of creditor in the books of the assessee is filed at page 40 of the Paper Book. Copy of the account of assessee company in the books of the creditor is filed at page 41 of the Paper Book. Confirmation of the loan of the creditor is filed at page 37 of the Paper Book and copy of the bank statement of assessee company where such credit of Rs. 85 lacs has been appearing is filed at page 30 of the Paper Book. Copy of the bank statement of the creditor is submitted before Assessing Officer along with letter is filed at page 42 of the Paper Book along with copy of the bank statement PB-43. The source of the credit in the bank account of the creditor with copy of the bank account of M/s Laxmi Overseas Industries are filed at pages 45 and 46 of the Paper Book. The confirmation from M/s Nav Bharat International, who has given Rs. 90 lacs to the creditor along ....
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....tablished that the amount has been invested by a particular person, be he a partner or an individual, then the responsibility of the assessee is over. Whether that person is an income-tax payer or not and where he had brought this money from, is not the responsibility of the firm. The moment the firm gives a satisfactory explanation and produces the person who has deposited the amount, then the burden of the firm is discharged and in that case that credit entry cannot be treated to be the income of then the purposes of income tax. On a reference whether the Appellate Tribunal was justified in holding that when there was credit in the capital account of the partner in the books of the firm, the addition therefore could not be made in the case of the firm under section 68 of the Act but the same had to be considered in the case of the partner : Held, on the facts, that there was concurrent finding of both the Commissioner of Income Tax (Appeals) as well as the Tribunal that the firm had satisfactorily explained the three credit entries in the books of the firm. The addition therefore could not be made in the hands of the firm. 28(i) Hon'ble Gauhati High Court....
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....e 43 of the Paper Book which supports the explanation of the assessee that the loan on four dates have been given by the creditor to the assessee through banking channel and that in the bank account of the creditor, there were other entries appearing on prior dates which were through clearing only. There is no cash deposit in the account of the creditor. The transfer entries in the bank account of the creditor are stated to be from M/s Laxmi Overseas Industries and M/s Nav Bharat International Ltd. (supra). Copies of their confirmation and their bank accounts are filed on record. It would, therefore, prove that even the source of the source have been explained by the assessee in this case which is, however, not the requirement in law to be proved by the assessee. The copy of the bank account of the assessee is filed at page 30 of the Paper Book which pertains to Punjab National Bank, Mohali Branch in which the assessee received the loan amount in four instalments. All the loan entries are appearing in the bank account of assessee. The ld. counsel for the assessee, during the course of arguments explained that all these four cheques issued by the creditors were discounted by the ass....