TaxTMI 
TaxTMI 
2021 (3) TMI 1048
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....ereas the AO has rightly made the addition in absence of documentary proof regarding clear & verifiable evidence in support of the expenditure claimed by the assessee? 2. Whether in facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition on account of depreciation of 'Bizerba weighing scales' whereas the AO has rightly made the addition as the depreciation was claimed @ 60% on said plant and machinery instead of 15% as this was not forming part of computer and independent computers items? 2. The Brief facts of the case are that, the assessee company is engaged in the business of running super markets and filed the return of income for the A.Y 2009-10 on 25.09.2009 declaring a total loss of Rs. 128,14,82,205/-, the return of income was processed u/s 143(1) of the Act. Subsequently the case was selected for scrutiny and notice u/s 143(2) of the Act was issued. In compliance to the notice, the Ld. AR of the assessee along with company representative appeared from time to time and furnished the details and the case was discussed. The A.O on perusal of the profit and loss account find that, the assessee has debited an amount of Rs. 27,94....
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....e complete details which are required to allow the claim. Further no method/ methodology has been filed/explained with evidence for calculation/quantification and therefore any loss of stock or any asset is not deductable and made addition of Rs. 24,24,09,476/-. Similarly, the A.O. observed that the assessee has claimed depreciation on UPS and other computer peripherals @ 60% whereas depreciation allowable is only @15% as it falls under the block of plant and machinery. Therefore, the A.O disallowed the excess depreciation claim of Rs. 45,45,885/- and assessed the total loss of Rs. 103,45,26,844/- and passed the order u/s 143(3) of the Act dated 29.12.2011. 3. Aggrieved by the order, the assessee has filed an appeal with the CIT(A). In the Appellate proceedings, the Ld.CIT(A) considered the submissions and the grounds of appeal raised by the assessee. The CIT(A) dealt on the findings of the A.O in respect of shrinkage, expiry of stock write off and slow and non moving stocks, and the contentions of the assessee that they should be allowed considering the turnover of the assessee. The assessee company filed the submissions on 18.07.2017 referred at page 4 of the CIT(A) order a....
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....15% instead of 60% and prayed for allowing the Revenue appeal. 6. Contra, the Ld. AR relied on the orders of the CIT(A) and submitted that the information submitted before the CIT(A) are not new material but only the information from the books of accounts. The ld. AR further submitted that it is a common practice of stock losses on account of shrinkage, stock loss on account of expired goods write off and also the provisions for non moving stock in the accounts. The Ld.AR further emphasized on applying the various bench markings in respect of stock losses and shrinkages and the claim is comparatively lower and also made submissions on ground of appeal with respect to claim of depreciation and prayed for dismissal of the revenue appeal. 7. We heard the rival submissions and perused the material on record. The revenue has filed the appeal on the disputed issued of claim of loss on account of stock loss, diminution and higher claim of depreciation. The Ld.DR submissions are that the assessee for the first time has filed the information before the Ld.CIT(A) and the A.O was not provided the said information in the assessment proceedings. We on perusal of the Ld.CIT(A) order fin....
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....0.34% Total 21.74 2.37% 35.89 3.94% 22.97 2.41% (E) In response to other points the appellant company made the following submission vide letter dated 21st aug 2017 as reproduced below:- (a) In response to Point 1 ; in this respect we would l ike to submi t that as par t of nature of retail business the normal shrinkage and expiries are inevitable. Also the regular stock Shortages are known on regular stock taking. Company cannot lodge FIR in case of normal business losses. However, in cases where there are cases of theft, break open of locks, cash theft, etc. the FIR's has been lodged and copies of the sample FIRs lodged for theft and burglary is attached. (b) In response to Point 2 - Details of item wise inventory of opening & closing stock is attached herewith. We would like to humbly submit that Company deals in thousands of Stock Keeping Units (herein after referred as SKU's"). The losses provided in books on account of the Shrinkages etc. is thoroughly checked and verified by auditors as part of the audit process. The same losses have been disclosed as a separate line item tit duly audited signed profit and loss account. ....
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.... officials of the company. The appellant company has submitted items wise details of the expired / written off stocks is attached herewith and full item wise details of the same is available in the soft files submitted vide point No. 2 above. F. In addition to this company made the submission vide letter dated 08th Sep 2017, where it has provided following details and documents:- ('a) Certificate (enclosed with the submission) issued by the Statutory Auditors of the company certifying the loss incurred by the appellant on account of shrinkage and expired stock. The certificate mentions the details verified by the statutory auditors before certifying that such losses are in agreement with the audited financials of the Appellant. (b) Further, the appellant company also relied on the reports issued by Global Retail Theft Barometer and KPMG India which have conducted an exhaustive research on the retail industry and derived the average percentage of shrinkage borne by the retail industry for the year under consideration. The results of such research are detailed below: Global Retail Theft Barometer (GRTB): The Global Retail Theft Baromet....
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....trading form that is incidental to the business activity the same shall be allowed. Therefore the appellant prays that the AO be directed to delete the said addition of Rs. 24,24,09,476/-. 8. The assessee has submitted the voluminous details which are referred in the above paragraphs. Finally the Ld.CIT(A) considering the assessee's submissions dealt on the ground of appeal No. 1 at page 19 para 6.1 to para 6.1.8 of the order as under: 6.1.1 Vide this ground the appellant has agitated against disallowance of Rs,24,24,09,476/- on account of stock losses and diminution u/s 37 of Income Tax Act. In para 2 of assessment order the ld. A.O, had mentioned that in absence of clear & verifiable evidence in support of expenditure claimed, the same cannot be al lowed under provisions of Income Tax Act. According to the Id. A,O. stock losses and diminution debited to prof it and loss account is not the deductible item under Income Tax Act. After considering the reply of the appellant, the Ld. AO. Disallowed Rs. 24,24,09,476/- on account of shrinkage of stock losses and diminution. 6.1.2 During appellate proceedings a written submission was filed which find place in Para....
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....ring the appellant was asked to produce documentary evidence to substantiate II Thi11eappc ant has provided the following data and documents; 1. Details of looses on diminution of stock of preceding and succeeding years (submitted vide letter dated 24.07.2017 as annexure ) 2. Copies of FIR's f iled with police for theft and burglary 3. Summary of Zone wise stock report which indicates opening stock COGS, shrinkages, expiry and closing stock, (submitted vide letter dated 21.08.2017 as annexure - 2 4. The SKU Shrink wise detailed report of Opening Stock, Purchases, COGS, shrinkages, W-off / expiries loss and Closing , stock. Since the file is heavy/voluminous and containing line items of approx. 30 - 35 thousands in each sheets, the appellant company provided the same in soft copy on the pen drive. (submitted vide letter dated 21/08/2017 on pen drive) 5. Samples of invoices along with their weighted average cost of items (submitted(1 vide letter dated 21/08/2017 as Annexure 3) 6. Items wise details of the expired / written off stocks of few samples (submitted vide letter dated 21/08/2017 as Annexure 4) 7. Certificate ....
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.... not produce the corresponding details in respect of loss on account of shrinkage, loss on account of expired stock written off and the criteria followed. The assessee has not filed any documentary evidence as per the observations of the A.O. at page 3 para 3.3 of the order as under: "3.3. As can be seen from the nomenclature of expenses, these are loss of stock. The assessee stated during the assessment proceedings that once in a month, the loss presentation team checks all the stores and takes actual stock present at the store. The difference of stock found on physical verification of the store and the stock as per the books are treated as shrinkage loss. The assessee could not produce or not able to produce all the details corresponding to the loss under the head stock losses on account of shrinkage and stock losses on account of expired stocks written off and the criterion followed by the assessee is in itself not suitable for verification. The assessee is always having option of provision which he made and disallowed and could have claimed insurance on the stock loss. The said heads of expenditure cannot be allowed under the provision of income tax Act. By its mere na....
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.... CIT(A) to call for the remand report from the AO and also adequate opportunity of hearing be provided to the assessee and pass a reasonable and speaking order and allow this ground of appeal of the revenue for statistical purposes. 11. The second disputed issue the Ld.DR submitted that the CIT(A) has erred in deleting the addition on account of depreciation on weighing scales @ 60% instead of @ 15% as it does not form part of the computer items. The Ld.AR fairly accepted the submissions made by the Ld.DR and submitted that in assessee's own case for the earlier assessment year in ITA No.4086/Mum/2013 and ITA 4326/Mum/2013 dated 27.11.2017, the Honorable Tribunal has dealt on this disputed issue in the revenues appeal at page 14 para 19 & 20 of the order as under: "19. We have head rival contentions and perused the material available on record. It is evident, the dispute between the assessee and the department in respect of claim of depreciation @ 60% is on the items bizerba weighing scales, printers, router, scanner, switches etc. 20. The issue before us is whether these i tems on which the assessee has claimed depreciation @ 60% can be considered to be part o....
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....sult, the appeal filed by the revenue is partly allowed for statistical purposes. ITA No. 1653/Mum/2018, A.Y: 2011-12 16. The revenue has filed the appeal against the order of the CIT(A)-16, Mumbai passed u/s. 143(3) and 250 of the Income Tax Act, 1961. The revenue has raised the following grounds of appeal: "1. Whether in the facts and circumstances of the case in law, the Ld. CIT(A) erred in deleting the addition of Rs. 21,73,58,644/- on account of stock losses & diminution, whereas the AO has rightly made the addition in absence of documentary proof regarding clear & verif iable evidence in support of the expenditure claimed by the assessee? 2. Whether in the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition u/s 14A rwr 8D whereas the AO has rightly made the addition as assessee was having investment in share, income from which is exempt from tax? 3. Whether in the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition on account of depreciation on bizerba weighing scales whereas the AO has rightly made the addition as the depreciation was claimed @ 60% on said pla....
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....the case of Nimbus Communication Hon'ble Punjab & Haryana High Court in the case of Empire Package Pvt Ltd., (supra) the disallowance u/s 14A is restricted up to Rs. 57,539/-, the actual quantum of exempt income earned by the appellant. This ground of appellant is partly allowed. A.Y 2012-13 6.3.6 Since the appellant had not earned any exempt income during the year under consideration, therefore respectfully following the judgment of Hon'ble Delhi High Court in the case of Cheminvest Ltd., jurisdiction Tribunal in the case of Avshesh Mercantile P. Ltd and Gujarat High court in the case of Corrtech Energy P. Ltd., the addition made by the AO for an amount of Rs. 87,15,79,365/- u/s 14A is deleted and the appeal of the appellant on this ground is allowed . However, appellant had itself disallowed and amount of Rs. 13,74,31,390/-. Therefore, net relief to the appellant will be Rs. 73,41,47,975/- (Rs. 87,15,79,365/ -Rs. 13,74,31,390/-) 6.3.8. Since, the appellant had not earned any exempt income during the year under consideration and the facts are similar to earlier years i.e AY 2011-12 & 2012-13 (in case of appellant's successor Aditya Birla Ltd,) where the ....