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Income Tax Appellate Tribunal, BENCH ‘D’ KOLKATA
Before: Hon’ble Shri S.S.Godara, JM & Shri M.Balaganesh, AM ]
ORDER PER S.S.GODARA, JM These two Revenue’s appeals for A.Y.2007-08 and 2008-09 arise against the Learned Commissioner of Income Tax-20, Kolkata’s separate orders; both dated 27.04.2016, passed in Appeal No.1134&1089/CIT(A)-20/CC-1(3)/13-14, reversing the Assessing Officer’s action disallowing assessee’s provision made for unsaleable stock of Rs.39,94,000/- and Rs.33,97,125/-; respectively involving proceedings u/s 143(3) of the Income Tax Act, 1961 (Act).
It emerges first of all that Revenue’s instant former appeal 7 days delay in filing. The Assessing Officer has filed its condonation petition explaining reasons thereof. None appears at assessee’s behest. We thus condone the above stated delay in above former appeal. Both case are now taken up for simultaneous adjudication on merits.
Learned Departmental Representative states at the outset that the CIT(A) ‘s lead findings in assessee’s favour qua the sole issue of provision on unsaleable stock in former assessment year reads as under :-
“4. Appeal on ground no 1 is against the addition made by the AO by disallowing the provision of unsalable stock of Rs.3994000 / - and security provision of Rs.1 09756 / -. The AO has given his finding on this issue as under:
& 1970/Kol/2016 The Bisra Stone Lime Co. Ltd. A.Y.2007-08 & 2008-09 2
“Further it has been noticed that the assessee has debited provision of Rs. 3994 00 as against unsalable stock and Rs.109756/ - as provisions for security de3posit. Since no unascertained liability is allowable as expenditure, the same has been disallowed and added back to the total income".
During the appellate proceeding the AR has filed a written submission on this issue as under:
The total closing stock of mines materials include saleable and unsalable goods. The unsalable goods usually valued at nil. But both have been values at net realizable value or cost whichever is lower in terms of the declared accounting policies. For arriving the true and fair view of the profit and the asset the appellant has ascertained with valuation the amount for unsalable minerals considering high risk due to non-availability of market or no market at that time. The stock of minerals which are not immediately required for some years by public steel plants re valued at a small. value even below the market rate and "those are practically valued at a small value even below the market rate and those are practically valued at zero and charged to revenue. That means there is no impact on revenue.
The unsalable goods in some time are required by steel plants when those can be billed as per the rate determined by the appellant and the other private steel plants. Therefore these are ascertained and fully allowable. This is also in accordance with the provisions of section 145 of the Income Tax Act 1961".
I have considered the finding of the AO in the assessment order and the written submission and case laws brought on record by the AR. I think all revisions are not disallowable. It is also necessary to consider the circumstances on which the provisions were made and debited to the profit and loss account. In case, in future years such provisions have been reverted back and shown as income, in that situation merely by debiting the provisions in the profit and loss account in the year concern may not be taken as an item for making disallowance. Therefore, I think the AO’s action of disallowing provisions of unsaleable stock is not justified. Accordingly, assessee’s appeal on this issue is allowed.
Regarding provisions for security deposit of Rs.109756/- the assessee itself has submitted that this expenditure pertains to earlier assessment year and not to the present assessment year. As expenditure incurred in earlier assessment years cannot be claimed in the current assessment year as per the provisions of the I.T.Act, 1961. Accordingly, assessee’s appeal for provisions of security deposit is dismissed.”
Learned Departmental Representative vehemently contends during the course of hearing that the CIT(A) has erred in law as well as on facts in deleting the above & 1970/Kol/2016 The Bisra Stone Lime Co. Ltd. A.Y.2007-08 & 2008-09 3 provision of unsaleable stock. We find the same to be devoid of merit. It has come on record that the assessee has duly proved that the impugned stock of materials to be unsaleable as per the relevant details of the corresponding minerals. The Hon’ble apex court’s landmark decision in Bharat Earth Movers vs CIT (2000) 245 ITR 428 (SC) has settled the law that provision for ascertained liability arising in an assessment year is very much allowable although it may have to be quantified and discharged on a future date. We keep in mind the said legal proposition to hold that the assessee’s provision of unsaleable stock of minerals has been rightly made as relevant books of accounts sufficiently indicate the same to be valued at “nil ‘ price since having no prospects of immediate purchases to be made in future as per the past practice. We therefore affirm the CIT(A)’s identical findings under challenge in both the impugned assessment years.
These two Revenue’s appeals are dismissed.
Order pronounced in the Court on 22.06.2018.