DCIT-9(1)(1), Hyderabad v. M/S.TRINETHRA SUPER RETAIL PRIVATE LIMITED, MUMBAI

ITA 7186/MUM/2017 | 2010-2011
Pronouncement Date: 22-03-2021 | Result: Allowed

Appeal Details

RSA Number 718619914 RSA 2017
Assessee PAN AAACT7531Q
Bench Mumbai
Appeal Number ITA 7186/MUM/2017
Duration Of Justice 3 year(s) 3 month(s) 3 day(s)
Appellant DCIT-9(1)(1), Hyderabad
Respondent M/S.TRINETHRA SUPER RETAIL PRIVATE LIMITED, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 22-03-2021
Appeal Filed By Department
Order Result Allowed
Bench Allotted E
Tribunal Order Date 22-03-2021
Last Hearing Date 17-01-2019
First Hearing Date 14-10-2020
Assessment Year 2010-2011
Appeal Filed On 19-12-2017
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH MUMBAI BEFORE SHRI SHAMIM YAHYA ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE JUDICIAL MEMBER ITA NOS. 7186 & 7187/MUM/2017 (A.YS: 2010-11 2009-10) & ITA NO. 1653/MUM/2018 (A.Y: 2011-12) DCIT 9(1)(1) RM NO. 260A 2 ND FLOOR AAYAKAR BHAVAN MUMBAI. / VS. M/S. TRINETRA SUPER RETAIL PVT LTD. 6 TH FLOOR MIRCHANDANI BUSINESS PARK SAKINAKA ANDHERI (E) MUMBAI. ./ ./ PAN/GIR NO. : AAACT7531Q ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI SALIL MISHRA DR / RESPONDENT BY : SHRI YOGESH THAR AR / DATE OF HEARING 24/12/2021 !'# / DATE OF PRONOUNCEMENT 22/03/2021 / O R D E R PER PAVANKUMARGADALE JM: THE REVENUE HAS FILED THESE THREE APPEALS AGAINST THE SEPARATE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 16 MUMBAI PASSED U/S. 143(3) AND 250 OF THE INCOME TAX ACT 1961. SINCE THE ISSUES INVOLVED IN ALL THE APPEALS ARE IDENTICAL AND SIMIL AR ITA NO S. 7187 7186/MUM/2017 & 1653/MUM/2018 - 2 - HENCE THEY ARE CLUBBED AND HEARD TOGETHER AND CONSOLIDATED ORDER IS PASSED. FOR THE SAKE OF CONVENIENCE WE SHALL TAKE UP THE ITA NO. 7187/MUM/2017 A.Y 2009-10 AS LEAD CASE. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. WHETHER IN THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DELETING T HE ADDITION OF RS. 24 24 09 476/- ON ACCOUNT OF STOCK LOSSES & DIMINUTION WHEREAS 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 ADDITI ON 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 PA RT OF COMPUTER AND INDEPENDENT COMPUTERS ITEMS? 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE 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. A R OF ITA NO S. 7187 7186/MUM/2017 & 1653/MUM/2018 - 3 - THE ASSESSEE ALONG WITH COMPANY REPRESENTATIVE APPEARED FROM TIME TO TIME AND FURNISHED THE DETAIL S 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 92 526/- ON ACCOUNT OF STOCK LOSSES & DIMINUTION DISCLOSED UNDER THE HE AD OPERATING AND ADMINISTRATIVE EXPENSES AND CALLED FO R THE EXPLANATIONS. THE ASSESSEE HAS FILED THE SUBMISSIONS ON 19.12.2011 WITH DETAILED NOTES REFERRED AT PARA 3 OF THE ASSESSMENT ORDER. FURTHER THE ASSESSES HAS EXPLAINED THAT OUT OF THE TOTAL C LAIM OF RS. 27.94 CRORES MADE BY THE ASSESSEE (I) THE ST OCK LOSSES ON ACCOUNT OF SHRINKAGE IS RS 17.49 CRORES ( II) STOCK LOSSES ON ACCOUNT OF EXPIRED STOCK WRITE OFF IS RS.6.75CRORES AND (III) PROVISION FOR SLOW AND NON MOVING STOCKS IS RS.3.70 CRORES. WHEREAS THE PROVISION WAS MADE CONSIDERING THE BUSINESS ACTIVIT Y AND THE WRITE OFF OF STOCK IN RESPECT OF BUSINESS R ETAIL TRADE IN PARTICULAR TO FOOD AND NON FOOD PRODUCTS. THE ASSESSEE S CONTENTIONS ARE THAT IT IS ENGAGED IN THE RETAIL TRADE AND MOST OF THE PRODUCTS ARE PERISHABL E IN NATURE AND CONTAINS THE EXPIRY DATES AND PRODUCTS CANNOT BE LIQUIDATED AND FMG PRODUCTS ARE ALSO ITA NO S. 7187 7186/MUM/2017 & 1653/MUM/2018 - 4 - EXPIRED AND NEED TO BE DESTROYED AND SUCH PRODUCTS CANNOT BE SOLD TO CONSUMERS AS PER THE CONSUMER LAWS. THE COMPANY HAS INCURRED SUCH LOSS TO THE EXTENT OF RS 6.75 CRORES ON A TURNOVER OF RS.608 CRORES. THEREFORE THE LOSS IS ACTUALLY STOCK LOSS I N RELATION TO THE BUSINESS OF THE ASSESSEE COMPANY AN D TO BE ALLOWED. SIMILARLY THE ASSESSEE HAS CLAIMED SHRINKAGE OF STOCK LOSS ON ACCOUNT OF SHRINKAGE WHICH RELATES TO ACTUAL SHORTAGES FOUND AT THE TIME OF PERIODICAL INVENTORY CHECKS. THE COMPANY DEALS WITH VARIETY OF PRODUCTS AND THEY ARE PURCHASED IN BULK AND STORED IN WAREHOUSES LOCATED AT STRATEGIC LOCATIONS AND ARE DISTRIBUTED TO STORES FOR SALE FO R END USER CUSTOMERS AND THE MAJOR CONTRIBUTORS TO SHRINKAGES ARE THEFTS PILFERAGE HANDLING ERRORS BILLING DISPUTES ETC. SUCH LOSSES ARISE DIRECTLY DU E TO CARRYING ON BUSINESS AND INCIDENTAL TO THE NATURE O F BUSINESS ACTIVITY. THE A.O DEALT ON THE SUBMISSION S AND OBSERVED THAT THE NOMENCLATURE OF THE EXPENSES IS LOSS OF THE STOCK AND DUE TO DIFFERENCES IN PHYS ICAL VERIFICATION IT WILL BE TREATED AS SHRINKAGE LOSS. SINCE THE ASSESSEE COULD NOT PRODUCE OR NOT ABLE TO PRODU CE ALL THE DETAILS CORRESPONDING TO THE LOSS UNDER THE ITA NO S. 7187 7186/MUM/2017 & 1653/MUM/2018 - 5 - HEAD STOCK LOSSES ON ACCOUNT OF SHRINKAGES AND STOC K LOSSES ON ACCOUNT OF EXPIRED STOCKS WRITTEN OFF. FURTHER THE CRITERIA FOLLOWED BY THE ASSESSEE ARE N OT AVAILABLE FOR VERIFICATION. THE A.O. HAS OBSERVED T HAT THE ASSESSEE HAS NOT SUBMITTED THE COMPLETE DETAILS WHICH ARE REQUIRED TO ALLOW THE CLAIM. FURTHER NO METHOD/ METHODOLOGY HAS BEEN FILED/EXPLAINED WITH EVIDENCE FOR CALCULATION/QUANTIFICATION AND THEREFO RE ANY LOSS OF STOCK OR ANY ASSET IS NOT DEDUCTABLE A ND 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 DEPRECIATI ON CLAIM OF RS. 45 45 885/- AND ASSESSED THE TOTAL LOS S 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 A N APPEAL WITH THE CIT(A). IN THE APPELLATE PROCEEDIN GS 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 ITA NO S. 7187 7186/MUM/2017 & 1653/MUM/2018 - 6 - SHRINKAGE EXPIRY OF STOCK WRITE OFF AND SLOW AND N ON MOVING STOCKS AND THE CONTENTIONS OF THE ASSESSEE THAT THEY SHOULD BE ALLOWED CONSIDERING THE TURNOVE R OF THE ASSESSEE. THE ASSESSEE COMPANY FILED THE SUBMISSIONS ON 18.07.2017 REFERRED AT PAGE 4 OF THE CIT(A) ORDER ALONG WITH JUDICIAL DECISIONS. THE CONTENTIONS RAISED BY THE ASSESSEE ARE THAT THE A.O HAS MADE ADDITIONS WITHOUT CONSIDERING THE NATURE O F THE ASSESSEES BUSINESS AND OBSOLESCE OF STOCK LIKE PERISHABLE GOODS AND ALSO THE ASSESSEE IS OPERATING A CHAIN OF FOOD AND GROCERY RETAIL UNITS AND HYPERMARKETS AND SUCH SHRINKAGE IS ON ACCOUNT OF EMPLOYEE THEFT SHOPLIFTING AND ADMINISTRATIVE ER ROR. THOUGH THE ASSESSEE COMPANY MAINTAINS THE ADEQUATE INTERNAL CONTROLS TO MINIMIZE LOSSES AND SOME OF TH ESE STOCKS ARE NOT SALEABLE ARE TO BE WRITTEN OFF AS NO N MOVING INVENTORY. THE LD.CIT(A) CALLED FOR MORE DETAILS IN THE COURSE OF HEARING PROCEEDINGS REFER RED AT PAGE 11 PARA D OF THE ORDER. 4. IN RESPECT OF DISALLOWANCE OF DEPRECIATION ON TH E BLOCK OF ASSETS THE ASSESSEE HAS SUBMITTED THE INFORMATION THAT THE DEPRECIATION ON UPS AND ITA NO S. 7187 7186/MUM/2017 & 1653/MUM/2018 - 7 - COMPUTER PERIPHERALS HAS TO BE ALLOWED @ 60% AND THE ASSESSEE HAS SUBMITTED THE DETAILS IN RESPECT O F THE DEPRECIATION REFERRED AT PAGE 14 TO 19 OF THE ORDER. WHEREAS IN ASSESSEES OWN CASE THE CIT(A) I N EARLIER ASST YEAR 2008-09 HAS ALLOWED THE CLAIM. T HE CIT(A) CONSIDERING THE CLAIM OF THE ASSESSEE ON LOS SES HAS DEALT ON THE FACTS AND INFORMATION SUBMITTED AN D DELETED THE ADDITION. ON THE SECOND DISPUTED ISSUE THE CIT(A) RELIED ON THE EARLIER ASSESSMENT YEARS AND DELETED THE DISALLOWANCE OF DEPRECIATION AND ALLOWE D THE APPEAL. AGGRIEVED BY THE ORDER OF THE CIT(A) TH E REVENUE HAS FILED AN APPEAL WITH THE HONBLE TRIBUN AL. 5. AT THE TIME OF HEARING THE LD.DR SUBMITTED THAT THE CIT(A) HAS ERRED IN DELETING THE ADDITION ON ACCOUNT OF STOCK LOSSES AND DIMINUTION IRRESPECTIVE OF THE FACT THAT NO DOCUMENTARY PROOF IS FILED BY THE ASSESSEE BEFORE THE AO. THE LD. DR FURTHER SUBMITTE D THAT THE ASSESSEE HAS SUBMITTED THE DETAILS IN APPELLATE PROCEEDINGS AND THE A.O WAS DEPRIVED THE OPPORTUNITY TO VERIFY THE FACTS ALONG WITH EVIDENCE S. THEREFORE THE ORDER OF THE CIT(A) IS BAD IN LAW AN D THE CIT(A) HAS ALSO NOT CALLED FOR ANY COMMENTS OF THE A.O IN RESPECT OF THE EVIDENCES FILED FIRST TIME BE FORE ITA NO S. 7187 7186/MUM/2017 & 1653/MUM/2018 - 8 - THE APPELLATE AUTHORITIES. ON THE SECOND DISPUTED ISSUE THE LD.DR SUBMITTED THAT THE CIT(A) HAS ERRE D IN GRANTING RELIEF ON DEPRECIATION @ 60% ON UPS COMPUTERS AND WEIGHING SCALES IRRESPECTIVE OF THE FACT THAT IN THE ASSESSEES OWN CASE FOR THE EARLIE R ASSESSMENT YEAR THE HONBLE TRIBUNAL HAS ALLOWED TH E DEPRECIATION ON WEIGHING SCALES @ 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. TH E 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. ITA NO S. 7187 7186/MUM/2017 & 1653/MUM/2018 - 9 - 7. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE REVENUE HAS FILED THE APPE AL 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 INFORMATI ON 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 FIND THAT THE CIT(A) CONSIDERING THE SUBMISSIONS AND CLAIMS OF TH E ASSESSEE HAS CALLED FOR THE DETAILS INFORMATION A ND DOCUMENTS TO SUBSTANTIATE WITH EVIDENCES AT PAGE11 PARA D OF THE ORDER AS UNDER: D. DURING THE APPEAL HEARING THE APPELLANT WAS AS KED TO PRODUCE THE FOLLOWING DETAILS TO SUBSTANTIATE THE S AID CLAIM: (1) EVIDENCES FOR SHRINKAGE; WHETHER ANY FIR WAS LO DGED? IF YES TO PROVIDE A COPY OF THE SAME. (2) ITEM-WISE INVENTORY OF OPENING AND CLOSING STOC K DUTY CERTIFIED BY THE AUDITORS. (3) DETAILS OF EXPIRED STOCK; CORRESPONDING BILLS O F SUCH STOCK& ITEM-WISE DETAILS OF THE EXPIRED STOCK; (4) MODE OF DISPOSAL OF EXPIRED STOCK WITH EVIDENCES A ND TRANSPORT RECEIPTS. (5) DETAILS OF SUCH LOSSES IN PRECEDING AND SUCCEEDING YEARS. IN RESPONSE TO POINT NO(5) THE APPELLANT COMPANY SUBMITTED THE FOLLOWING DETAILS BY LETTER DATED 24 TH JULY 2017 . STATEMENT SHOWING PERCENTAGE OF STOCK LOSS AND DIMI NUTION OF TURNOVER (FROM FY 2007-08 TO FY 2012-13) ITA NO S. 7187 7186/MUM/2017 & 1653/MUM/2018 - 10 - PARTICULARS FY 2007-08 (AY 2008-09) FY 2007-08 (AY 2008-09) FY 2007-08 (AY 2008-09) AMOUNT (RS) % OF T/O AMOUNT (RS) % OF T/O AMOUNT (RS) % OF T/O TURNOVER 426.07 647.76 794.12 STOCK LOSS AND DIMINUTION SHRINKAGE 17.49 2.70% 15.43 1.94% EXPIRY AND DAMAGE 6.75 1.04% 13.98 1.76% SLOW AND NON MOVING ITEM 3.71 0.57% 0.04 0.00% DORMANCY TRANSIT LOSS AND OTHERS - 0.00% 0.05% 0.01% TOTAL 17.83 4.18% 27.95 4.31% 29.50 3.71% PARTICULARS FY 2007-08 (AY 2008-09) FY 2007-08 (AY 2008-09) FY 2007-08 (AY 2008-09) AMOUNT (RS) % OF T/O AMOUNT (RS) % OF T/O AMOUNT (RS) % OF T/O TURNOVER 918.85 911.59 952.25 STOCK LOSS AND DIMINUTION SHRINKAGE 12.17 1.32% 13.70 1.50% 10.40 1.09% EXPIRY AND DAMAGE 10.46 1.14% 10.63 1.17% 9.35 0.98% SLOW AND NON MOVING ITEM (0.54) -0.06% - 0.00% - 0.00% DORMANCY TRANSIT LOSS AND OTHERS (0.36) -0.04% 11.56 1.27% 3.22 0.34% TOTAL 21.74 2.37% 35.89 3.94% 22.97 2.41% ( E) IN RESPONSE TO OTHER POINTS THE APPELLANT COMPANY M ADE THE FOLLOWING SUBMISSION VIDE LETTER DATED 21 ST AUG 2017 AS REPRODUCED BELOW:- (A) IN RESPONSE TO POINT 1 ; IN THIS RESPECT WE WOU LD LIKE TO SUBMIT THAT AS PART OF NATURE OF RETAIL BUSINESS T HE NORMAL SHRINKAGE AND EXPIRIES ARE INEVITABLE. ALSO THE REG ULAR STOCK SHORTAGES ARE KNOWN ON REGULAR STOCK TAKING. COMPANY CANNOT L ODGE FIR IN CASE OF NORMAL BUSINESS LOSSES. HOWEVER IN CASES WHERE THERE ARE CASES OF THEFT BREAK OPEN OF LOCKS CASH THEFT ETC. THE FI R'S HAS BEEN LODGED ITA NO S. 7187 7186/MUM/2017 & 1653/MUM/2018 - 11 - 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 WO ULD LIKE TO HUMBLY SUBMIT THAT COMPANY DEALS IN THOUSANDS OF STOCK KEEPING UNITS (HEREIN AFTER REFERRED AS SKU'S'). TH E 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 A ND LOSS ACCOUNT. THE AUDITORS HAVE ISSUED AUDIT REPORT WITH OUT ANY QUALIFICATION. THE AUDIT IS DONE BY THE ONE OF THE MOST PRESTIGIOUS FIRM OF AUDITORS M/S DELOITTE. AUDITORS HAVE NOT PROVIDED ANY SEPARATE CERTIFICATE FOR THE INVENTORY VALUATION AND LOSSES ON ACCOUNT OF SHRINKAGE EXPIRY ETC. IN SUPPORT OF THIS POINT COMPANY ENCLOSED THE FOLLOWIN G DETAILS: I) SUMMARY OF THE ZONE WISE STOCK REPORT WHICH INDICAT ES OPENING STOCK COGS SHRINKAGES EXPIRY AND CLOSING STOCK. II) THE SKU WISE DETAILED REPORT OF OPENING STOCK PURCHASES COGS SHRINKAGES W-OFF/ EXPIRIES LOSS AND CLOSING STOCK. SINCE THE FILE IS HEAVY/VOLUMINOUS A ND CONTAINING LINE ITEMS OF APPROX. 30 - 35 THOUSANDS IN EACH SHEET WE ARE SUBMITTING THE SAME IN SOFT COPY ON THE PEN DRIVE. HOWEVER THE SAME CAN BE PRINTED AND SUBMITTED ON INSTRUCTIONS OF YOUR HONOUR. (C) IN RESPONSE TO POINT 3 - INVENTORY IS VALUED ON WEIGHTED AVERAGE COST BASIS AND SUCH DISCLOSURE IS ALSO MADE IN THE FINANCIALS VIDE POINT 'F' TO SIGNIFICANT ACCOUNTING POLICIES AND NOTES FORMING A PART OF ACCOUNTS WHICH IS REPRODUCE D BELOW FOR YOUR READY REFERENCE; 'STOCK-IN-TRADE IS VALUED AT THE LOWER OF COST AND NET REALIZABLE VALUE COST OF INVENTORIES IS COMPUTED ON A 'WEIGHTE D AVERAGE BASIS' ITA NO S. 7187 7186/MUM/2017 & 1653/MUM/2018 - 12 - INVENTORY IN THIS CASE CONSISTS OF LARGE NUMBER OF IDENTICAL PRODUCTS VALUED AT WEIGHTED AVERAGE COST (WA OF OPE NING STOCK & PURCHASES MADE DURING THE YEAR AND THINS LOSS ON ACCOUNT OF SHRINKAGE OR EXPIRY FOR A PARTICULAR PRODUCT CANNOT BE TIED / LINKED TO A PARTICULAR BILL V/AC IS SYSTEM GENERAT ED NUMBER WINCH COMPRISES MAINLY THE OPENING INVENTORY COST A ND PURCHASE COST AND VARIOUS OVERHEADS LOADED ON INVENTORY COST . IN ORDER TO SUBSTANTIATE AND FURTHER EXPLAIN SUCH: METHOD OF ARRIVING AT WEIGHTED AVERAGE COST THE APPELLANT CO MPANY HAD ATTACHED 11W SAMPLES OF INVOICES ALONG WITH THEIR W EIGHTED AVERAGE COST OF ITEMS AS REFLECTED IN THE SYSTEM. (D) IN RESPONSE TO POINT NO.4:- THE ITEMS IN STORES WHICH ARE EXPIRED AND REMAINED UNSOLD DUE TO AGEING ARE BROUGHT TO DISTRI BUTION CENTRE (DC) THROUGH THE OWNED DC VEHICLES FOR DISPOSAL HENCE THERE ARE NO INVOICES FOR TRANSPORTATION OF SUCH MATERIALS. AS FAR AS MODE OF DISPOSAL IS CONCERNED SEPARATE A RE IS DESIGNATED FOR DISPOSAL OF SUCH EXPIRED STOCK IN THE DC AND AR E DISPOSED OFF UNDER STRICT MONITORING OF THE RESPONSIBLE OFFICIAL S OF THE COMPANY. THE APPELLANT COMPANY HAS SUBMITTED ITEMS WISE DETA ILS OF THE EXPIRED / WRITTEN OFF STOCKS IS ATTACHED HEREWITH A ND 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 08 TH SEP 2017 WHERE IT HAS PROVIDED FOLLOWING DETAILS AND DOCUMENTS:- ('A) CERTIFICATE (ENCLOSED WITH THE SUBMISSION) ISSUED B Y THE STATUTORY AUDITORS OF THE COMPANY CERTIFYING THE LOSS INCURRE D BY THE APPELLANT ON ACCOUNT OF SHRINKAGE AND EXPIRED STOCK. THE CERTIFI CATE MENTIONS THE DETAILS VERIFIED BY THE STATUTORY AUDITORS BEFORE C ERTIFYING THAT SUCH LOSSES ARE IN AGREEMENT WITH THE AUDITED FINANCIALS OF THE APPELLANT. (B) FURTHER THE APPELLANT COMPANY ALSO RELIED ON T HE REPORTS ISSUED BY GLOBAL RETAIL THEFT BAROMETER AND KPMG INDIA WHI CH HAVE ITA NO S. 7187 7186/MUM/2017 & 1653/MUM/2018 - 13 - CONDUCTED AN EXHAUSTIVE RESEARCH ON THE RETAIL INDU STRY AND DERIVED THE AVERAGE PERCENTAGE OF SHRINKAGE BORNE BY THE RE TAIL INDUSTRY FOR THE YEAR UNDER CONSIDERATION. THE RESULTS OF SUCH R ESEARCH ARE DETAILED BELOW: GLOBAL RETAIL THEFT BAROMETER (GRTB): THE GLOBAL RETAIL THEFT BAROMETER IS A GLOBAL RESEARCH ON THE COST OF SHRIN K COMPRISED OF SHOPLIFTING EMPLOYEE OR SUPPLIER FRAUD AND ADMINIS TRATIVE ERRORS. THE STUDY PROVIDES DATA TO HELP RETAILERS AROUND TH E WORLD BENCHMARK THEIR PERFORMANCE AGAINST AVERAGES FOR SP ECIFIC MERCHANDISE VERTICAL MARKETS AND REGIONAL GEOGRAPH IES. THIS REPORT HAS BEEN PREPARED FROM DETAILS PROVIDED IN CONFIDEN CE BY 1 103 OF THE LARGEST RETAILERS WITH COMBINED SALES OF $873.8 BILLION REPRESENTING A CROSS-SECTION OF COUNTRIES AND RETAI L VERTICAL MARKETS. AS PER THIS REPORT INDIA HAS THE HIGHEST SHRINKAGE RATE I.E. 2.72% FOR PERIOD ENDING JUNE 2010 AND 3.20% FOR PERIOD ENDING JUNE 2009 (REPORT IS ENCLOSED WITH THE SUBMISSION). REFERENCE POINTS IN THE REPORT ARE LISTED AS UNDER: SRL PARTICULARS PG. NO. OF REPORT 1 COUNTRY WISE STATISTICS OF SHRINKAGE BORNE BY RETAIL INDUSTRY 21 2 COUNTRY WISE PERIODICAL COMPARATIVE ANALYSIS OF SHRINKAGE BORNE BY RETAIL INDUSTRY 22 3 ASIA-PACIFIC: STATISTICS SHRINKAGE RATES 2009 AND 2010 84 4 ASIA-PACIFIC: PERCENTAGE CHANGE IN SHRINKAGE EXPRESSED AS A PERCENTAGE OF SALES 85 5 CONTRIBUTION OF VARIOUS CAUSES TO THE TOTAL SHRINKAGE LOSS 87 THUS THE ABOVE STATISTICS CLEARLY CONCLUDE THAT IND IA HAS THE HIGHEST SHRINKAGE RATE AS COMPARED TO OTHER COUNTRI ES WHETHER COMPARISON IS MADE GLOBALLY OR RESTRICTED TO ASIA- PACIFIC. D. BELOW IS THE SUMMARY OF SHRINKAGE LOSS BORNE BY THE APPELLANT VIS-- VIS THE INDUSTRY STANDARD. ITA NO S. 7187 7186/MUM/2017 & 1653/MUM/2018 - 14 - AY LOSS ON STOCK (RS. CRORE) TURNOVER (RS. CRORE) PERCENTAGE OF LOSS AS REPORTED IN GRTB 2009-10 17.49 647.76 2.70 3.20% THUS FROM THE ABOVE IT CAN BE CONCLUDED THAT THE SHRINKAGE LOSS BORNE BY APPELLANT IS REASONABLE AND LESS THAN THE INDUSTRY STANDARD. A. DURING THE YEAR UNDER CONSIDERATION THE APPELLA NT COMPANY HAD INCURRED STOCK LOSSES ON ACCOUNT OF SHRINKAGE LOSS ON PROCEED OF SALE AND SLOW AND NON - MOVING STOCKS. THESE WERE PROVIDED FOR IN THE ACCOU NTS AND WHICH ARE AUDITED AND APPROVED BY THE SHAREHOLDERS. THE SAID ACCOUNTS HAVE BEEN ACCEPTED BY THE LD. AO. HAV ING ACCEPTED THE ACCOUNTS OF THE APPELLANT THE SAID AD DITION OUGHT NOT HAVE BEEN MADE. B. THUS IN VIEW OF THE ABOVE SUBMISSIONS THE APPE LLANT PRAYS THAT SINCE IT IS NOW ESTABLISHED THAT THE AFOREMENT IONED DISALLOWANCE ARE IN THE NATURE OF COMMERCIAL/TRADIN G FORM THAT IS INCIDENTAL TO THE BUSINESS ACTIVITY THE SAM E SHALL BE ALLOWED. THEREFORE THE APPELLANT PRAYS THAT THE AO BE DIRECTED TO DELETE THE SAID ADDITION OF RS. 24 24 0 9 476/-. 8. THE ASSESSEE HAS SUBMITTED THE VOLUMINOUS DETAILS WHICH ARE REFERRED IN THE ABOVE PARAGRAPHS. FINALLY THE LD.CIT(A) CONSIDERING THE ASSESSEES SUBMISSIONS DEALT ON THE GROUND OF APPEAL NO. 1 AT PAGE 19 PARA 6.1 TO PARA 6.1.8 OF THE ORDER AS UND ER: 6.1.1 VIDE THIS GROUND THE APPELLANT HAS AGITATED A GAINST DISALLOWANCE OF RS 24 24 09 476/- ON ACCOUNT OF STO CK 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 EXPEND ITURE ITA NO S. 7187 7186/MUM/2017 & 1653/MUM/2018 - 15 - CLAIMED THE SAME CANNOT BE ALLOWED UNDER PROVISION S OF INCOME TAX ACT. ACCORDING TO THE ID. A O. STOCK LOS SES AND DIMINUTION DEBITED TO PROFIT AND LOSS ACCOUNT IS NO T THE DEDUCTIBLE ITEM UNDER INCOME TAX ACT. AFTER CONSIDE RING THE REPLY OF THE APPELLANT THE LD. AO. DISALLOWED RS. 24 24 09 476/- ON ACCOUNT OF SHRINKAGE OF STOCK LOS SES AND DIMINUTION. 6.1.2 DURING APPELLATE PROCEEDINGS A WRITTEN SUBMIS SION WAS FILED WHICH FIND PLACE IN PARA 5 OF THIS ORDER. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND EVIDENCE S FILED BY THE APPELLANT DURING COURSE OF HEARINGS. IT IS NOT A DISPUTE THAT THE APPELLANT IS ENGAGED IN THE BUSINESS OF OP ERATING A CHAIN OF FOOD AND GROCERY RETAIL STORES AND THE AP PELLANT IS DEALING IN THOUSANDS OF VARIETIES OF ARTICLES VIZ FOOD AND GROCERIES FRUITS AND VEGETABLES STAPES GENERAL MERCHANDISE ETC. AND BY THE NATURE OF BUSINESS REA SONABLE LEVEL OF LOSSES ON ACCOUNT OF SHRINKAGE & EXPIRY AR E INEVITABLE AND PART AND PARCEL OF THE BUSINESS OPER ATIONS OF THE APPELLANT. IN THE WRITTEN SUBMISSION THE APPELL ANT HAS RELIED ON VARIOUS COURT CASES TO SUBSTANTIATE THAT THE LOSSES ARE ALLOWABLE U/S 37(1) AND TREATED AS INCURRED WHO LLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS. THE HO N'BLC BOMBAY HIGH COURT IN THE CASE OF INDIAN RARE EARTH LTD. (375 ITR 376) HAS DEALT IN DETAILED ALLOWABILITY OF THE LOSSES WRITE-OFF ON ACCOUNT OF NON-MOVING STORES. THE HON' BLE HIGH COURT HELD THAT WRITE-OFF CLAIMED ON THE BASIS OF DETERIORATION FOR VARIOUS MATERIALS INCLUDING RAW M ATERIALS AND IN PARTICULAR SLOW MOVING ITEMS WOULD BE ENTITL ED FOR DEDUCTION. 6.1.3 SIMILARLY THE HON'BLE JURISDICTIONAL HIGH CO URT IN CASE OF G I G DANDEKAR (202 ITR 161) HELD THAT EMBEZZLEMENT OF THE AMOUNT FROM ASSESSES CURRENT ACCOUNT WHICH WAS MAINTAINED BY IT FOR RUNNING OF ITS BUSINESS WAS IN CIDENTAL TO BUSINESS OF ASSESSEE AND WAS THEREFORE ALLOWABL E. 6.1.4 THE APPELLANT COMPANY ALSO RELIED ON HON'BLE MUMBAI TRIBUNAL IN CASE OF DCIT VS M/S PROCTER & GAMBLE HY GIENE & HEALTHCARE LTD. (ITA NO 859FMUNI/2003) WHEREIN IT W AS HELD THAT THERE IS NOTHING WRONG IN MAKING PROVISION AT THE END OF ITA NO S. 7187 7186/MUM/2017 & 1653/MUM/2018 - 16 - THE YEAR IF ASSESSEE HAS IDENTIFIED THE UNSALEABLE GOODS. THE APPELLANT HAS ALSO RELIED ON VARIOUS OTHER JUDG MENTS WHICH ARE NOT DEALT SEPARATELY FOR THE SAKE OF BREV ITY. 6.1.5 THEREFORE ON THE FACTS OF THE CASE AND LOOKI NG INTO NATURE OF THE BUSINESS I AM OF THE VIEW THAT THE LOSSES / WRITE-OFFS ON ACCOUNT OF SHRINKAGE ETC. ARE INCIDEN TAL FOR THE BUSINESS OF THE ASSESSEE AND THEREFORE DEDUCTIBLE U NDER SECTION 28 AND 37(1) OF THE INCOME-TAX ACT. 6.1.6 THE ASSESSING OFFICER ALSO CONTENDED THAT THE APPELLANT HAS NOT SUBSTANTIATED THE LOSSES AND FAILED TO PROD UCE EVIDENCE TO SUPPORT ITS CLAIM OF THEFT AND EXPIRY O F PRODUCTS. DURING THE APPEAL HEARING THE APPELLANT WAS ASKE D 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 PRECEDI NG AND SUCCEEDING YEARS (SUBMITTED VIDE LETTER DATED 24.07 .2017 AS ANNEXURE ) 2. COPIES OF FIR'S FILED WITH POLICE FOR THEFT AND BU RGLARY 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 R EPORT OF O PENING STOCK PURCHASES COGS SHRINKAGES W-OFF / EXPIRIES LOSS AND CLOSING STOCK. SINCE THE FILE IS HEAVY/VOLUMINOUS AND CONTAINING LINE I TEMS OF APPROX. 30 - 35 THOUSANDS IN EACH S HEETS THE APPELLANT C OMPANY PROVIDED THE SAME IN SOFT COPY ON THE PEN DRIVE. (SUBMITTED VIDE LETTER DATED 21/0 8/2017 ON PEN DRIVE) 5. SAMPLES OF I NVOICES ALONG WITH THEIR WEIGHTED AVERAGE COST OF ITEMS (SUBMITTED(1 VIDE LETTER DATED 21/08/2017 AS ANNEXURE 3) ITA NO S. 7187 7186/MUM/2017 & 1653/MUM/2018 - 17 - 6. ITEMS WISE DETAILS OF THE EXPIRED / WRITTEN OFF STO CKS OF FEW SAMPLES ( S UBMITTED VIDE LETTER DATED 21/08/2017 AS ANNEXURE 4) 7. CERTIFICATE ISSUED BY THE STATUTORY AUDITORS OF THE COMPANY CERTIFYING . THE LOSS INCURRED BY THE APPELLANT ON ACCOUNT OF SHRINKAGE AND EXPIRE STOC K.(ENCLOSED VIDE LETTER DATED 08/09/2017) 6.1.7 I HAVE CAREFULLY CONSIDERED THE DETAILS AND E VIDENCES SUBMITTED BY THE APPELLANT. THE APPELLANT COMPANY A LSO SUBMITTED THE REPORT ISSUED BY VARIOUS RESEARCH INS TITUTE ON PERCENTAGE OF SHRINKAGE BORNE BY THE RETAIL INDUSTR Y I.E. GLOBAL RETAIL THEFT BAROMETER (GRTB) KPMG AND ATTA CHED ARTICLES FROM PROMINENT NEWSPAPERS (ENCLOSED VIDE L ETTER DATED 08/09/2017). AS PER THE REPORT THE LOSSES SUF FERED BY THE INDIAN RETAILERS ON ACCOUNT OF SHRINKAGE IS 2.7 2% AND 2.90 % WHILE THE APPELLANT SUFFERED THE SHRINKAGE LOSS W HICH IS 1.99% OF THE SALES. IT ALSO NOTEWORTHY THAT THE LOS SES ON ACCOUNT OF SHRINKAGE ETC. IS SEPARATELY DISCLOSED UNDER THE SCHEDULE NO. 25 'OTHER EXPENSES' OF PROFIT AND LOS S ACCOUNT DULY AUDITED BY ONE OF THE BIG 4 AUDIT FIRMS. 6.1.8 AFTER CONSIDERING THE PROFIT AND LOSS ACCOUNT DETAILS SUBMITTED BY THE APPELLANT DURING THE HEARINGS AND VARIOUS EVIDENCES PLACED ON RECORDS I AM OF THE VIEW THAT THE LOSSES CLAIMED BY THE APPELLANT IS ALLOWABLE UNDER SECTION 37(1) HENCE THIS GROUND OF APPEAL IS ALLOWED. 9.ON PERUSAL OF THE INFORMATION SUBMITTED BY THE ASSESSEE THE LD.CIT(A) HAS DEALT ON THE DISPUTED ISSUES CONSIDERING THE PERCENTAGE OF SHRINKAGE AVAILABLE TO THE INDUSTRY AND OTHER FACTORS. WE FOUND THAT THE ASSESSEE COMPANY ITA NO S. 7187 7186/MUM/2017 & 1653/MUM/2018 - 18 - CONSIDERING THE TURNOVER OF RS 608 CRORES HAS CLAIMED AS SHRINKAGE &OTHER LOSSES OF RS. 24.69 CRORES IN THE BOOKS OF ACCOUNTS. THE CIT(A) SHOULD HAVE CALLED FOR THE COMMENTS OF THE A.O. ON THE VITAL ISSUES WHEN THE VOLUMINOUS INFORMATION WAS SUBMITTED BY THE ASSESSEE AND DEALT AT PARA 6.1.6 OF THE ORDER. THE CIT(A) HAS POWER U/S 251 OF THE ACT AND ARE CO-TERMINUS WITH THE AO. CONSIDERING THE FACTS AND IMPORTANCE OF THE CASE THE CIT(A) ON THE DISPUTED MATTER SHOULD HAVE CALLED FOR REMAND REPORT FROM THE ASSESSING OFFICER AS MOST OF THE FACTUAL DETAILS ARE REQUIRED TO BE TEST CHECKED AND EXAMINED. WE ON PERUSAL OF THE ASSESSMENT ORDER AT PAGE 2 PARA 3 FOUND THAT THE ASSESSEE COMPANY HAS GIVEN THE EXPLANATIONS IN RESPECT OF CLAIM OF STOCK LOSSES AND DIMINUTION. FURTHER THE A.O ON CONSIDERING THE FACTS AND DETAILS HAS CALLED FOR THE INFORMATION ON THE METHOD OF PHYSICAL VERIFICATION OF STOCKS. BUT THE ASSESSEE COULD NOT PRODUCE THE CORRESPONDING DETAILS IN RESPECT OF LOSS ON ACCOUNT OF SHRINKAGE LOSS ON ACCOUNT OF EXPIRED STOCK WRITTEN OFF AND THE ITA NO S. 7187 7186/MUM/2017 & 1653/MUM/2018 - 19 - 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 EXPEN SES THESE ARE LOSS OF STOCK. THE ASSESSEE STATED DURIN G THE ASSESSMENT PROCEEDINGS THAT ONCE IN A MONTH THE LO SS PRESENTATION TEAM CHECKS ALL THE STORES AND TAKES A CTUAL STOCK PRESENT AT THE STORE. THE DIFFERENCE OF STOCK FOUN D 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 T O 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 HA VE CLAIMED INSURANCE ON THE STOCK LOSS. THE SAID HEAD S OF EXPENDITURE CANNOT BE ALLOWED UNDER THE PROVISION O F INCOME TAX ACT. BY ITS MERE NATURE THE DESERTION INVOLVED AND AS PER THE ABOVE DISCUSSION. ANY LOSS OF STOCK OR ANY AS SET IS NOT A DEDUCTIBLE ITEM IN INCOME TAX ACT. 10. THE LD.AR IN THE COURSE OF HEARING BEFORE US HAS REFERRED TO THE PAPER BOOK EMPHASIZING ON THE SUBMISSIONS AT PAGE 40 TO 45 WHERE THE DETAILS WE RE FILED BEFORE THE LD.CIT(A) ON 24.07.2017 &21.08.201 7 ALONG WITH THE COPIES OF FIR LODGE FOR THE THEFT Z ONE WISE STOCK REPORT AND DETAILS OF STOCKS ALONG WITH ITA NO S. 7187 7186/MUM/2017 & 1653/MUM/2018 - 20 - SAMPLE ITEM WISE DETAILS OF EXPIRED AND WRITTEN OF F STOCK AND DETAILS OF PERCENTAGE OF STOCK LOSS AND DIMINUTION OF TURNOVER AND THE CERTIFICATE OF STATUTORY AUDITOR AND REPORT BY THE GLOBAL RETAIL T HEFT BAROMETER 2010. WE FIND THOUGH THE ASSESSEE COMPANY WAS MAKING OUT ITS CASE STRONGER BY FILLIN G THE SUPPORTING DETAILS BEFORE THE LD.CIT(A) BUT AS IT WAS RIGHTLY POINTED OUT BY THE LD.DR THAT THE ASSESSEE IN THE ASSESSMENT PROCEEDINGS BEFORE THE A.O. HAS NOT FILED THE SAID DETAILS NOR ANY IOTA O F INFORMATION EXCEPT MAKING A SUBMISSIONS AS REFERRED IN THE ASSESSMENT ORDER. WE FIND WHEN SUCH A HUGE DISALLOWANCES WERE MADE BY THE A.O THE LD.CIT(A) UPON CALLING FOR THE INFORMATION FROM THE ASSESSEE AND HAVING ACCEPTED THE SAME SHOULD HAVE CALLED FO R THE INFORMATION / COMMENTS FROM THE A.O. BEFORE GRANTING THE RELIEF. FURTHER IN THE CIRCUMSTANCES WHERE THE ASSESSEE DEALS IN THOUSANDS OF STOCKS OF GOODS IT IS PRACTICALLY IMPOSSIBLE TO VERIFY EACH AND EVERY ASPECT OF CLAIM OF SHRINKAGE THEFT AND EXPIR Y WRITTEN OFF. BUT THE ASSESSEE SHOULD EXPLAIN THE B ASIS AND THE CRITERIA OF CLAIM. AS RIGHTLY POINTED OUT B Y THE LD.DR THE A.O. SHOULD NOT BE DEPRIVED TO VERIFY TH E ITA NO S. 7187 7186/MUM/2017 & 1653/MUM/2018 - 21 - FACTS ON SAMPLE BASIS OR IN FULL AND MAKE ENQUIRIES AND SHALL TAKE A DECISION CONSIDERING THE ASSESSEE S PAST RECORD. WE ARE OF THE OPINION THAT THE REVENU E SHOULD BE PROVIDED A MINIMUM OPPORTUNITY TO VERIFY THE FACTS SUBMITTED BY THE ASSESSEE FOR THE FIRST T IME BEFORE THE LD.CIT(A. WE NOTICE THAT THOUGH THE INFORMATION WAS SUBMITTED FOR THE FIRST TIME BEFOR E THE APPELLATE AUTHORITY THE LD.CIT(A) HAVING ACCEP TED THE EVIDENCES SHOULD HAVE CALLED FOR THE COMMENTS O F THE A.O. ON VITAL SPECIFIC ISSUES BEFORE DECIDING T HE ASSESSEE APPEAL. WE CONSIDERING THE OVERALL FACTS CIRCUMSTANCES PROVISIONS OF LAW AND PRINCIPLES OF NATURAL JUSTICE ARE INCLINED TO PROVIDE AN OPPORTU NITY TO THE REVENUE BY RESTORING THE DISPUTED ISSUE FOR LIMITED PURPOSE TO THE FILE OF THE CIT(A) TO CALL F OR 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 STATISTICA L 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% ITA NO S. 7187 7186/MUM/2017 & 1653/MUM/2018 - 22 - 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 ASSESSEES OWN CASE FOR THE EARLIER ASSESSMENT Y EAR 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 PA GE 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 D ISPUTE BETWEEN THE ASSESSEE AND THE DEPARTMENT IN RESPECT OF CLAIM OF DEPRECIATION @ 60% IS ON THE ITEMS BIZERBA WEIGH ING SCALES PRINTERS ROUTER SCANNER SWITCHES ETC. 20. THE ISSUE BEFORE US IS WHETHER THESE ITEMS ON WHICH THE ASSESSEE HAS CLAIMED DEPRECIATION @ 60% CAN BE CONS IDERED TO BE PART OF COMPUTER. THE HONBLE DELHI HIGH COU RT IN CIT VS. BSES YAMUNA POWER LTD. (SUPRA) HAS HELD THAT C OMPUTER ACCESSORIES AND PERIPHERALS SUCH AS PRINTER ROUTE R SCANNER SWITCHES ETC. FORMED INTEGRAL PART OF COMPUTER SY STEM HENCE ENTITLED TO DEPRECIATION AT HIGHS RATE OF 60%. THE SPECIAL BENCH DECISION OF THE TRIBUNAL MUMBAI BENCH IN DA TA CRAFT INDIA LTD. HELD THAT COMPUTER SYSTEM WOULD INCLUDE ALL INPUT AND OUTPUT DEVICES. IT WAS HELD THAT EXTERNAL HARD WARE DEVICES LIKE MONITOR KEYBOARD MOUSE PRINTER ROUT ER SCANNER SWITCHES ETC. WOULD FALL UNDER THE CATEG ORY OF COMPUTER HARDWARE. THE SAME IS ALSO THE CASE WITH ROUTER AND SWITCHES. THE OTHER DECISIONS RELIED UPON BY T HE LD. AR ALSO HAVE EXPRESSED SIMILAR VIEW. AS FAR AS THE DE CISION OF M/S. DINAMATER (SUPRA) RELIED UPON BY THE LD. DR IS CONCERNED IT CANNOT BE INTERPRETED IN A MANNER TO PROPOUND THAT DEPRECIATION @ 60% IS NOT ALLOWABLE ON THE ITE MS REFERRED TO ABOVE. THE BEING THE CASE WE DO NOT FIND ANY I NFIRMITY IN ITA NO S. 7187 7186/MUM/2017 & 1653/MUM/2018 - 23 - THE ORDER OF THE CIT(A) IN ALLOWING ASSESSEES CLAI M OF DEPRECIATION ON PRINTER ROUTER SCANNER SWITCHES ETC. HOWEVER AS FAR AS THE CLAIM OF DEPRECIATION @ 60% ON BIZERBA WEIGHTING SCALES IS CONCERNED IN OUR OPINION NOTHI NG HAS BEEN ON RECORD TO DEMONSTRATE THAT THIS PARTICULAR ASSET FUNCTIONS INTEGRAL PART OF COMPUTER AND CANNOT FUNCTION INDEP ENDENTLY. A PHOTOCOPY (XEROX) MACHINE CAN ALSO BE ATTACHED TO A COMPUTER HOWEVER THAT DOES NOT ENTITLE IT FOR DEP RECIATION @ 60%. CIT(A) HAS ALLOWED ASSESSEES CLAIM OF DEPRECI ATION ON THE WEIGHING SCALES WITHOUT PROPER REASONING. THER EFORE WHILE ALLOWING ASSESSEES CLAIM OF DEPRECIATION ON PRINTER ROUTER SCANNER SWITCHES ETC. WE UPHOLD DISALLOW ANCE OF ASSESSEES CLAIM OF DEPRECIATION ON BIZERBA WEIGHIN G SCALES @ 60%. 12. WE FIND THE FACTS OF THE PRESENT CASE ARE IDENT ICAL AS ENVISAGED BY THE LD.DR. ACCORDINGLY THIS GROUND OF APPEAL OF THE REVENUE IS ALLOWED. 13. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 7186/MUM/2017 A.Y: 2010-11 14. AS THE FACTS AND CIRCUMSTANCES IN THIS APPEAL IS IDENTICAL TO ITA NO. 7187/MUM/2017 FOR THE A.Y. 2009-10 AND THE DECISION RENDERED IN ABOVE PARAGRAPHS WOULD APPLY MUTATIS MUTANDIS FOR THIS CASE ALSO. ACCORDINGLY GROUNDS OF APPEAL RAISED BY THE REVENUE ARE PARTLY ALLOWED FOR STATISTICAL PURP OSES. 15. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO S. 7187 7186/MUM/2017 & 1653/MUM/2018 - 24 - 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 C ASE IN LAW THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 21 73 58 644/- ON ACCOUNT OF STOCK LOSSES & DIMINUT ION WHEREAS THE AO HAS RIGHTLY MADE THE ADDITION IN ABS ENCE OF DOCUMENTARY PROOF REGARDING CLEAR & VERIFIABLE EVID ENCE IN SUPPORT OF THE EXPENDITURE CLAIMED BY THE ASSESSEE? 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE ADDITI ON U/S 14A RWR 8D WHEREAS THE AO HAS RIGHTLY MADE THE ADDITION AS ASSESSEE WAS HAVING INVESTMENT IN SHARE INCOME FRO M WHICH IS EXEMPT FROM TAX? 3. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE ADDITI ON ON ACCOUNT OF DEPRECIATION ON BIZERBA WEIGHING SCALES WHEREAS THE AO HAS RIGHTLY MADE THE ADDITION AS THE DEPRECIATION W AS CLAIMED @ 60% ON SAID PLANT AND MACHINERY INSTEAD OF 15% AS THIS WAS NOT FORMING PART OF COMPUTER AND INDEPENDENT CO MPUTERS ITEMS? 4. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE ADDITI ON ON ACCOUNT OF INSURANCE CLAIM RECEIVABLE WRITTEN OFF WHEREAS T HE AO HAS RIGHTLY MADE THE ADDITION AS DURING THE ASSESSMENT PROCEEDINGS ASSESSEE HAD NOT SUBMITTED ANY EXPLANA TION IN THIS REGARD? 17. WE HAVE ALREADY DEALT ON GROUND OF APPEAL NO. 1 AND NO 3 IN ABOVE PARAGRAPHS IN RESPECT OF STOCK ITA NO S. 7187 7186/MUM/2017 & 1653/MUM/2018 - 25 - LOSSES AND DIMINUTION WHERE THE DISPUTED ISSUE WAS RESTORED TO THE FILE OF THE CIT(A) WITH SPECIFIC DIRECTIONS AND IN RESPECT OF CLAIM OF DEPRECIATION ON WEIGHING SCALES THE GROUND OF APPEAL WAS ALLOWED. A S THE FACTS AND CIRCUMSTANCES IN THIS APPEAL IS IDENT ICAL TO ITA NO. 7187/MUM/2017 FOR A.Y. 2009-10 THE DECISION RENDERED IN APPEAL WOULD APPLY MUTATIS MUTANDIS FOR THIS CASE ALSO. 18. NOW WE SHALL TAKE UP GROUND OF APPEAL NOS. 2 & 4 RAISED BY THE REVENUE. THE A.O HAS MADE DISALLOWANC E UNDER SECTION 14A R.W.R. 8D OF THE ACT OF RS. 5 06 483/-AND THE LD.CIT(A) CONSIDERED THE FACTS AN D FINANCIAL STATEMENTS AND RELIED ON THE JUDICIAL DECISIONS AND DELETED THE ADDITION. 19. WHEREAS THELD.DR SUBMITTED THAT THE CIT(A) HAS ERRED IN DELETING THE ADDITION WITHOUT CONSIDERING THE PROVISIONS MANDATORY FOR DISALLOWANCE.CONTRA THE LD.AR SUBMITTED THAT IN ASSESSEES SUCCESSOR M/S ADITYA BIRLA RETAIL LTD CASE FOR THE A.Y 2011-12 & 2012-13 THE APPELLATE AUTHORITY HAS GRANTED RELIEF. THE LD. AR SUBMITTED THAT ADDITION CANNOT BE MADE U/S 14A AS THERE IS NO EXEMPTED INCOME. AT THE TIM E OF HEARING THE LD. AR SUBMITTED THAT NO EXEMPTED ITA NO S. 7187 7186/MUM/2017 & 1653/MUM/2018 - 26 - INCOME HAS BEEN RECEIVED BY THE ASSESSEE AND THEREFORE LD.CIT(A) WAS CORRECT IN DELETING THE ADDITION. 20.WE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE DEALT ON THE DISPUTED ISSUE AND OBSERVED AT PARA 6.3.7 TO 6.3.8 OF THE CIT(A) O RDER AS UNDER: 6.3.7. SIMILAR DISALLOWANCE WAS MADE BY LD. AO IN APPELLANT SUCCESSOR I.E ADITYA BIRLA RETAIL LTD. CASE FOR A. YS 2011-12 & 2012-13 AGAINST WHICH APPELLANT FILED APPEAL WHICH HAD BEEN ALREADY DECIDED. THE RELEVANT PORTION OF ORDERS AR E REPRODUCED BELOW:- A.Y 2011-12 6.3.6 SINCE THE TOTAL EXEMPT INCOME EARNED BY THE A PPELLANT WAS ONLY RS. 57 539/- THEREFORE RESPECTFUYLLY FOLLO WING THE JUDGMENT OF HONBLE JURISDICTION TRIBUNAL IN THE CA SE OF NIMBUS COMMUNICATION HONBLE PUNJAB & HARYANA HIGH COURT I N THE CASE OF EMPIRE PACKAGE PVT LTD. (SUPRA) THE DISALL OWANCE U/S 14A IS RESTRICTED UP TO RS. 57 539/- THE ACTUAL QU ANTUM 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 RESP ECTFULLY FOLLOWING THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CHEMINVEST LTD. JURISDICTION TRIBUNAL IN THE CA SE OF AVSHESH MERCANTILE P. LTD AND GUJARAT HIGH COURT IN THE CAS E OF CORRTECH ENERGY P. LTD. THE ADDITION MADE BY THE A O 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. ITA NO S. 7187 7186/MUM/2017 & 1653/MUM/2018 - 27 - 13 74 31 390/-. THEREFORE NET RELIEF TO THE APPEL LANT 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 EXEM PT INCOME DURING THE YEAR UNDER CONSIDERATION AND THE FACTS A RE SIMILAR TO EARLIER YEARS I.E AY 2011-12 & 2012-13 (IN CASE OF APPELLANTS SUCCESSOR ADITYA BIRLA LTD ) WHERE THE COMPANY HAD NOT EARNED EXEMPT INCOME. THE SAME WERE ADJUDI CATED IN FAVOUR OF APPELLANTS SUCCESSOR. THEREFORE I HAVE NO REASON TO DEVIATE FROM THE FINDINGS GIVEN BY MY PROCESSOR IN ABOVE MENTIONED CASES OF THE SUCCESSOR OR APPELLANT. IN VIEW OF THESE FACTS THE APPEAL OF THE APPELLANT ON THIS GR OUND IS ALLOWED AND THE DISALLOWANCE OF RS. 50 06 483/- MAD E BY THE AO IS DELETED. 21.WE CONSIDERING THE FACTS AND THE OBSERVATIONS FI ND THAT THE CIT(A) HAS RELIED ON THE PROVISIONS AND JUDICIAL DECISION AND DELETED THE ADDITION. ACCORDINGLY WE ARE NOT INCLINED TO INTERFERE WITH T HE ORDER OF CIT(A) ON THIS DISPUTED ISSUE AND UPHELD T HE SAME AND DISMISS THE GROUND OF APPEAL OF THE REVENU E. 22.. THE SECOND DISPUTED ISSUE THAT THE ASSESSEE HAS CLAIMED IN THE BOOKS OF ACCOUNTS THE DOUBTFUL DEBTS AND ADVANCES WRITTEN OFF THE A.O FOUND THAT OUT OF THE SAID AMOUNT OF RS. 1 22 494/- BEING INSURANCE CLAIM IS RECEIVABLE HAS BEEN WRITTEN OFF. SINCE TH ERE ARE NO EXPLANATIONS SUBMITTED THE A.O HAS MADE A N ADDITION. WHEREAS THE CIT(A) CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND OBSERVED AT PARA 6.4.2 TO 6.4.4 OF THE ORDER AND HAS ALLOWED THE CL AIM ITA NO S. 7187 7186/MUM/2017 & 1653/MUM/2018 - 28 - OF THE ASSESSEE. THE LD.DR RELIED ON THE ORDER OF T HE A.O BUT COULD NOT CONTROVERT THE OBSERVATIONS OF TH E CIT(A)WITH ANY COGENT EVIDENCE OR NEW INFORMATION. THE LD.AR SUPPORTED THE ORDERS OF THE CIT(A) AND RELIED ON THE JUDICIAL DECISIONS. ACCORDINGLY WE AR E NOT INCLINED TO INTERFERE WITH THE FINDINGS OF THE CIT( A) ON THIS DISPUTED ISSUE AND UPHELD THE SAME AND DISMIS S THE GROUND OF APPEAL OF THE REVENUE. THE REVENUE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 23. IN THE RESULT ALL THE THREE APPEALS FILED BY T HE REVENUE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE OPEN COURT ON 22.03.2021. SD/- SD/- (SHAMIM YAHYA) (PAVAN KUMAR GADALE ) ACCOUNTANT MEMBER JUDICIAL ME MBER MUMBAI DATED 22.03.2021 KRK PS ITA NO S. 7187 7186/MUM/2017 & 1653/MUM/2018 - 29 - / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & '( ) / THE CIT(A) 4. ) ( ) / CONCERNED CIT 5. -. //'( '(# & / DR ITAT MUMBAI 6. .34 5 / GUARD FILE. / BY ORDER / //TRUE COPY// 1. / ( ASST. REGISTRAR) !' # / ITAT MUMBAI