AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2021 (10) TMI 1202
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....-08 The A.O., while making the assessment order u/s.153A, has discussed the various additions made in para 4, 5, 6 and 7 of the assessment order. From the perusal of the above said paras, it is observed as under :- (i) in para 4, addition of Rs. 22,80,195/- has been made on the basis of the order of Addl. CIT (TP)-I(2), Mumbai dated 24.12.2014 making ALP adjustment of the said amount on interest charged on loans given to A.Es. On this issue, an addition of Rs. 28, 65,408/- was made to the total income of the appellant in light of the order of the TPO-II(2), Mumbai dated 31.05.2010. In the second order dated 24.12.2014, the TPO has worked out total adjustment on account of interest to be charged from Associated Enterprises at Rs. 51,48,603/- and has computed the additional adjustment of Rs. 22,80,195/- after considering the adjustment of Rs. 28,68,408/- on the basis of first TPO order dated 31.05.2010. The TPO and the A.O. have not referred to any incriminating material on the basis of which a higher adjustment on account of interest to be charged from Associated Enterprises at Rs,51,48,603/-has been worked out, as against the adjustment of Rs. 28,68,408/- on the basis of first ....
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.... search. From above discussion, I am of the considered opinion that except for the addition on account of scrap sale, the other three additions discussed above are not based on any incriminating material found in the course of search. Therefore, relying on the decision of the ITAT Mumbai Special Bench and the jurisdictional High Court in the case of All Cargo Global Logistics Ltd. (supra), it is held that the following additions, made in the order u/s.153A of the Act, are without jurisdiction and the same are deleted. 2008-09 The submissions of the Learned Counsel have been carefully considered. As already discussed the original return of income for AY 2008-09 was filed by the assessee on 25.06.2009 declaring total income of Rs. 6,37,28,944/- and book profit of Rs. 36,03,03,386/-. A search and seizure action u/s 132 of the IT Act was conducted on the group on 29.08.2011. Consequent to the search, notice u/s 153A was issued to the assessee on 30.04.2013. Assessment u/s 143(3) r.w.s. 153A of the IT Act was completed on 31.03.2016. The AO has confirmed that this is not an abated assessment. In case of an unabated assessment the Hon'ble ITAT Special Bench, Mumbai in the case ....
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....her three additions which are additions on account of ALP adjustment, disallowance of deduction u/s. 10B and disallowance of exceptional items written off, are not based on any incriminating material found during the search, in view of the judgments of the jurisdictional ITAT and jurisdictional High Court referred to supra, the additions made by the AO cannot be sustained. The AO has directed to delete these additions. 2009-10 The submissions of the Learned Counsel have been carefully considered. As already discussed the original return of income for AY 2009-10 was filed by the assessee on 30.09.2009 declaring total income of Rs. 9,13,41,226/- and book profit of Rs. 30,28,01,935/-. A search and seizure action u/s 132 of the IT Act was conducted on the group on 29.08.2011. Consequent to the search, notice u/s 153A was issued to the assessee on 30.04.2013. Assessment u/s. 143(3) r.w.s. 153A of the IT Act was completed on 31.03.2016. The AO has confirmed that this is not an abated assessment. In case of an unabated assessment the Hon'ble ITAT Special Bench, Mumbai in the case of All Cargo Global Logistics Ltd. Vs DCIT 33 CHH 0294 (Mum) held "in respect of non-abated assessment....
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....the creditworthiness of the company was not proved by the assessee and made an addition of Rs. 8,97,50,000/- u/s. 68 of the IT Act. It is seen that this addition has been made on the basis of the return filed by the assessee and has no relevance/connection to the search conducted or any incriminating material found during the search. 7.5 As all the three additions which are addition on account of ALP adjustment, disallowance of deduction u/s. 10B and disallowance of share capital written off, are not based on any incriminating material found during the search, in view of the judgments of the jurisdictional ITAT and jurisdictional High Court referred to supra, the additions made by the AO cannot be sustained. The AO is directed to delete these additions." 4. Against the above order the Revenue has filed appeal before us. 5. We have heard both the parties and perused the records. It is not disputed by the revenue that on the aforesaid items of addition, no incriminating material was found during search. Assessment order under section 143(3) was already passed for assessment year 2007-08 prior to the search and notice. The period for issuing notice under section 143(2) was also ov....
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....d has valued the same at cost so as to include cost in accordance with AS-2. As the opening balance of inventory valuation as on 1st April, 2009 was at trade price less estimated margins, the impact thereof was in the current year's Profit & Loss a/c. However due to this change the company wanted to show this amount of extra ordinary expense in Profit & Loss account separately and the same was not recurring in nature, the company reduced the value of excess of cost and its Trade Price less margin valuation from the Opening Balance of inventory and the same was shown as exceptional item in the financial statements. There is no impact on profitability during the year as Rs. 3741.29 lacs were reduced from the current year's consumption and the same was shown as an exceptional item in the financial statements. Assessee has submitted the stock valuation statement as on 31.03.2009 in support of its claim. Assessee's submission is considered but found to be not acceptable because there is no clarity in the explanation regarding the impact on revenue or profitability. It is inferred from the assessee's submission that due to the change of valuation of Stock during the yea....
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....eration. Assessee's A.R. was asked to explain the same. Assessee in its submission dated 08.03.2016 has stated that M/s Lyka Labs was the debtor of the assessee. As they were not in a position to pay the amount due to the assessee, the debtors amount was converted into debentures. Finally the company did not pay any amount to the assessee as it became defunct. Due to this reason the assessee wrote off this investment from the books of accounts. Assessee has included the investment write off under the head debtors written off and debited it to the P & L account as exceptional item. Assessee has not furnished any details regarding the names and addresses of the C&Fs and C&As, no details regarding when the materials were sent to them on consignment and in which year these sales were included in the income by the assessee. Assessee has also not furnished any details on what efforts were made to collect the amounts outstanding against these debtors. In absence of these basic details the assessee's claim of bad debt is not allowable as per Section 36(l)(vii) subject to section 36(2) of the I.T. Act. The relevant portion of the Section is as under: "The deduction provided for ....
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.... Counsel for the appellant submitted all these details by way of additional evidences. He had given the names and addresses of the debtors along with the details of the invoices raised date wise and copies of the ledger accounts of all the debtors. In spite of all this, in the remand report the AO stated that the assessee has not submitted ledger accounts of the entities and also that the assessee failed to demonstrate how the deduction claimed as bad debts has actually become bad. It is clear that the ledger accounts and sales invoices along with a detailed chart has been furnished by the assessee which demonstrates that he debts have been offered as income in the earlier years. As for the AO's contention that the assessee has not demonstrated how the debts have become bad or efforts taken for recovery, it is clarified that the Income Tax Act does not mandate any such demonstration. It is for the assessee to decide whether that debt has become bad or not. The only condition is that the debt which was being written off should have been taken into account in computing the income of the assessee for any previous year. The CBDT circular No. 12/2016 dated 30.05.2016 states that "th....
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.... the inventories to their present location and condition. Accordingly, for AY 2010-11, the assessee has valued its inventories as per AS-2. Due to this change, the valuation of closing stock as on 31.03,2010 was not on the same and comparable with the value of opening stock as on 01.04.2009; the concept of matching principle was violated. In order to bring out the effect of this change in the method of accounting, the assessee had reduced the effect which is Rs. 37.41 crores from the consumption which would decrease valuation of opening stock and increase the profit. In order to negate this effect the assessee had debited the same amount i.e. Rs. 37.41 crores to the P&L account as exceptional items written off. Thus there is no effect on the P&L account. The assessee had not tinkered with the opening stock. The assessee has reduced the value of opening stock by a sum of Rs. 3741.29 Lakhs (which is a credit effect increasing the income) and has simultaneously debited the P&L account by the same amount as exceptional items written off to neutralize the effect. Therefore, there is no effect to the P&L account as could be seen from the Note No.4 given by the auditors in the Notes to ac....
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.... items: a. Changed the method of valuation of finished goods lying at marketing units: i. Hitherto the company was valuing its inventory of finished goods lying at marketing units at Trade Price i.e. (Transfer Price) minus estimated margins. ii. During the year the company has changed the method of valuation of products lying at marketing units and has valued the same at cost so as to include cost in accordance with AS-2 issued by the ICAI. The impact of the change of method of valuation of stock as per AS-2 of Rs. 3741.29 lakhs has been shown under the head of exceptional items." 11. We have carefully heard both the parties and perused the records. Apropos issue of Sundry debtors written off :- 12. We note that learned CIT(A) has given a finding that the assessee has submitted additional evidence for which learned CIT(A) has duly asked for the remand report from Assessing Officer and assessee rejoinder also. Learned CIT(A) has noted that the names and addresses of the sundry debtors along with the details of the invoices raised, date wise, and copies of the ledger accounts of all the debtors were submitted. That despite all these submission in the remand report the AO s....
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.... stock valuation in accordance with change in the method for closing stock valuation has arrived at a figure Rs. 3741.29 crores. But the entry passed in this regard has not affected the profit computed by the assessee. Hence, the Assessing Officer has erred in tinkering with the figures here. The Assessing Officer has observed that he has not able to comprehend the assessee's explanation. According to his understanding due to change of valuation of stock during the year, the value of opening stock had increased by Rs. 3741.29 lakhs and the same was reduced from the current year's consumption. Hence, as per the Assessing Officer further debiting the same amount in the profit and loss account under exceptional item has resulted in excess claim of expenses thereby reducing the taxable profit to that extent. Further Assessing Officer stated that the adjustment made in the consumption has also not been explained. However, as per the facts narrated by learned CIT(A) and explanation given by the assessee, the change in the method of accounting does not affect the profit by the amount of Rs. 3741.29 lacks. In order to bring out the effect of the change in the method of accounting the asses....