COMMISSIONE OF INCOME TAX (C) - III vs. M/S JINDAL PHOTO LTD.

IN THE HIGH COURT OF DELHI AT NEW DELHI . ITA 448/2013 . . . COMMISSIONE OF INCOME TAX (C) ? III ..... Appellant . Through: Mr.N.P.Sahni, Advocate . . . versus . . . M/S JINDAL PHOTO LTD. ..... Respondent . Through: None. . . . CORAM: . HON'BLE MR. JUSTICE SANJIV KHANNA . HON'BLE MR. JUSTICE SANJEEV SACHDEVA . O R D E R . 07.10.2013 . . . 1. Findings under challenge are factual. . 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. . 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. . 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. . 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. . 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: . ?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 . 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.? . 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.? . . . 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. . 8. Appeal is dismissed in limine. . . . . . SANJIV KHANNA, J . . . . . SANJEEV SACHDEVA, J . OCTOBER 07, 2013/sv . . . $ 34 .