PR COMMISSIONER OF INCOME TAX - DELHI 04 vs. NIKON SYSTEMS PVT LTD

In an appeal preferred by the respondent/assessee, the Commissioner of Income Tax (Appeals) [in short, “CIT(A)”] confirmed the addition made by the AO. 8.1. Significantly, the CIT(A) observed that no evidence had been submitted by the respondent/assessee as regards destruction of goods on account of fire. 8.2. In this context, the CIT(A) also alluded to the fact that no FIR had been filed. The CIT(A) also buttressed its conclusion by noting that the concerned insurance company had not finalised the claim preferred by the respondent/assessee. 9. Given this backdrop, the respondent/assessee preferred an appeal with the Tribunal. The Tribunal, as noted above, reversed the view taken by the CIT(A) and AO. 10. It is relevant to note that the Tribunal adverted to the assertions made on behalf of the respondent/assessee that the incident of fire took place on 05.12.2014 and an FIR was lodged on 15.12.2014. 11. Furthermore, the Tribunal also had regard to the judgement relied of the respondent/assessee that the destruction of stock-in-trade resulted a revenue loss. [See Motamal Jethamal v. Commissioner of Income-Tax,

Furthermore, according to Mr Menon, the loss, if any, that had occurred, was a contingent loss. 14. We have carefully perused the record. According to us, the stand taken by Mr Menon is not in consonance with the record. 15. As indicated hereinabove, notices were issued to the respondent/assessee under Section 143(2) and 142(1) of the Act. The notice issued under Section 142(1) of the Act was accompanied by a questionnaire. 16. The appellant/revenue, for some strange reason, has not placed on record either the notice or the questionnaire to indicate whether a question was raised with regard to the fire incident. 17. Furthermore, the record also shows, something which is a part of the assessment order, that at the hearing held by the AO on 06.11.2017, the respondent/assessee was called upon to show cause the statutory provision under which it had claimed loss due to fire and why a loss claimed should not be disallowed. 18. The said hearing was followed by a final show cause notice, which was issued on 21.11.2017, whereby hearing was fixed by the AO on 27.11.2017. 19. Admittedly, the assessee filed a reply dated 27.11.2017 wherein the following was asserted: “The assessee company stocks have been insured against Fire from national Insurance Co. Ltd. The entire loss of stock worth Rs. 5.25 Cr. Was shown as extra ordinary item/ Exceptional item in Statement of Profit and Loss. The assessee company is vigorously following the insurance company for recouping the losses. We enclosed the following correspondence made with the insurance company : - Letter dated 26.06.2017 written by the assessee to the Chairman and Managing Director of National Insurance Co. Ltd complaining the Divisional Office not settling the claim. Digitally Signed By:TARUN RANA Signing Date:29.12.2023 19:09:59 Signature Not Verified

Besides, the record also discloses, something which is not disputed by Mr Menon, that a notice under Section 133(6) of the Act was issued to the concerned insurance company, which had responded via reply dated 01.11.2017 indicating that the claim was “under process”. 21. As would be evident from the record, the AO did not, at any point in time, raise a doubt as to the occurrence of the fire incident. The doubt which the AO entertained was whether the loss constituted an ascertained liability or a contingent loss. 22. The insurance company also, in its reply to the notice issued under Section 133(6) of the Act (which was given nearly three years after the fire incident), did not raise the concern that the CIT(A) raised in his order i.e., that no evidence was produced with regard to the occurrence of fire. 22.1. Mr Menon has picked this part of the order to propound a submission, which, according to us, on a correct appreciation of the record, is clearly not seem tenable. 23. It appears that the CIT(A) entertained a doubt only because the claim for ascertaining the loss was being processed by the concerned insurance company. The CIT(A)‟s assertion that the respondent/assessee had not seriously pursued the insurance claim is belied by the correspondence Digitally Signed By:TARUN RANA Signing Date:29.12.2023 19:09:59 Signature Not Verified

The Tribunal, therefore, came to a correct conclusion that the addition made by the AO was not sustainable. 28. In our view, no substantial question of law arises for our consideration. The appeal is, accordingly, dismissed.