IN THE HIGH COURT OF DELHI AT NEW DELHI
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ITA 448/2013
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COMMISSIONE OF INCOME TAX (C) ? III ..... Appellant
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Through: Mr.N.P.Sahni, Advocate
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versus
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M/S JINDAL PHOTO LTD. ..... Respondent
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Through: None.
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CORAM:
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HON'BLE MR. JUSTICE SANJIV KHANNA
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HON'BLE MR. JUSTICE SANJEEV SACHDEVA
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O R D E R
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07.10.2013
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1. Findings under challenge are factual.
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2. The first issue relates to bad debts of Rs.1,24,04,361/-. The
assessing officer had primarily proceeded on the basis that in the books
of account, bad debts of Rs.2,51,34,258/- had been recorded but there was
no provision or entry with regard to bad debts for previous years. The
appellate authorities have held to the contrary.
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3. The finding of the Commissioner of Income Tax (Appeals) is that
Rs.1,24,04,361/- relate to earlier assessment years, i.e., 2003-04, 2004-
05 and 2005-06. The break up of the said amount is mentioned. The
amounts were disallowed or added back in the said years by the respondent
assessee themselves and were written back in the profit and loss account.
After examining the factual matrix, the Commissioner (Appeals) accepted
the stand of the assessee that the amounts were written off in the profit
and loss account for this year. It was not a wrong claim.
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4. The revenue had filed second appeal before the Tribunal and it was
the duty of the revenue to place the relevant record/documents before the
Tribunal or plead in case remand report or investigation was required.
The said contentions should have been argued before the Tribunal. The
order of the Tribunal does not indicate that any such contention was
raised or argued.
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5. Factually, the learned counsel for the appellant has not been able
to show to us that the said finding is perverse and the Tribunal is
factually incorrect. No document and paper to the contrary has been
placed on record.
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6. The second issue is in relation to the difference between the last
year?s closing stock and the present year?s opening stock. The assessee
had explained the difference before the assessing officer, who simply
recorded in one line that the explanation was not good enough.
Commissioner (Appeals) examined the issue in detail and has recorded
that the difference of Rs.9,15,25,575/- between last year?s closing stock
and this year?s opening stock stands fully explained, in the following
words:
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?6.1 I have considered the written and oral submissions made on behalf
of the appellant, the findings of the Assessing Officer and the facts on
record. I have also perused the audited accounts of the appellant for
the year under consideration. The perusal of schedule ?O? (relating to
materials consumed, manufacturing and other operating expenses ) to the
audited accounts for the relevant assessment year reveals that the
opening stock of raw-material consumed is shown to the extent of
Rs.27,73,94,598/- instead of Rs.18,58,65,023/- shown as closing stock for
financial year 2004-05. The Assessing Officer was in principle correct
to hold that there should not be any difference between the closing stock
of Financial year 2004-05 and the opening stock of Financial year 2005-06
which is the year under consideration. As there was a difference of
Rs.9,15,25,575/- between the two, the Assessing office made the addition
to that extent. However, the assessee had explained the reason for the
above-mentioned accounting discrepancy. In this regard, the certificate
dated 24.11.2010 issued by the auditors pointing out the mistake in
accounting of Rs.9,15,25,575/- was furnished before the Assessing Officer
as well as before the undersigned wherein it was clarified that ?in the
financial statements for the said year, opening stock of raw material in
transit had been added twice end (sick) reduced from the current year
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purchases erroneously as a result of which opening stock of raw material had increased and purchases for the current year had been reduced by
Rs.9,15,25,575/-. The error being compensatory in nature, does not
effect the profitability of the company for that year. Accordingly, the
accounts of the company reflect the true and fair view as per our audit
report dated 04.09.2006.?
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6.2. The perusal of Schedule ?F?(relating to inventories to the audited
account for the relevant assessment year also reveals that an amount of
Rs.9,15,25,575/- was shown as raw materials-in-transit as at 31-03-2005
which was also included in the closing stock ck of raw materials shown to
the extent of Rs.18,58,65,023/- as at 31.03.2005. It has been explained
by the appellant that the aforementioned amount of Rs.9,15,25,575/- was
erroneously reduced from the total purchases of the relevant previous
year by the accountant under the mistaken belief that the said amount was
included in the purchases of the year under consideration instead of
purchases of the preceding year. As a consequence, the accountant
correspondingly increased the amount of opening stock by the amount of
Rs.9,15,25,575/-. Accordingly, the amount of opening stock of raw
materials as at 31-03-2006 after the aforesaid addition aggregated to
Rs.27,73,94,598 (Rs.18,58,65,023 + Rs.9,15,29,575). After having
considered the totality of the facts and circumstances of the case, the
explanation of the appellant is found to be correct. As the deduction on
account of purchases for the relevant previous year was claimed short by
an amount of Rs.9,15,25,575/-, the same was neutralized by a
corresponding increase in the value of opening stock of raw materials.
In these circumstances, it can be safely concluded that the revenue
effect of the accounting treatment of the aforesaid amount of
Rs.9,15,25,575/- was zero. In other words, if the value of opening stock
is to be reduced, the amount of purchases is to be correspondingly
increased, which would not remit in addition to the net taxable income of
the appellant company. Hence, I am of the considered view that no excess
deduction has been claimed by the appellant resulting in any income
escaping assessment. Hence, the addition of Rs.9,15,25,575/- on account
of excess expenditure is directed to be deleted. As a result, Grounds of
appeal No.3 to 3.3 are allowed.?
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7. Commissioner (appeals) has further noticed that the revenue effect
of the said adjustment of Rs.9,15,25,575/- was nil or zero. The revenue
preferred an appeal before the Tribunal against the said finding but was
not able to controvert or deny the said facts as found and elucidated by
the First Appellate Authority. Again, the finding of the Tribunal is
purely factual and it is not shown to us that the said finding is
perverse or incorrect. Along with the present appeal no documents or
papers including profit and loss account or balance sheet etc. have been
filed to show that the findings are incorrect.
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8. Appeal is dismissed in limine.
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SANJIV KHANNA, J
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SANJEEV SACHDEVA, J
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OCTOBER 07, 2013/sv
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$ 34
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