M/S. RADHARAM SOHANLAL,KOLKATA vs. ITO, WARD - 45(2), KOLKATA, KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH ‘SMC’, KOLKATA [Before Shri P.M. Jagtap, AM] Assessment Year: 2007-08 M/s. Radharam Sohanlal...............................……………………………………….........Appellant 3, Mallick Street, Kolkata – 700 007 [PAN: AADFR 4202 E] I.T.O. Ward 45(2) Kolkata,...................……………………………………………........Respondent 3, Government Place (West), Kolkata – 700 001 Appearances by: Shri Miraj D Shah, Advocate appearing on behalf of the Assessee. Shri Sailen Samaddar, Addl. CIT appearing on behalf of the Revenue. Date of concluding the hearing : March 21, 2018 Date of pronouncing the order : March 23, 2018

ORDER

Per P.M. Jagtap, AM

2. The assessee in the present case is a partnership which is engaged in the business of trading of botanical items and musical instrument. The return of income for the year under consideration was filed by it on 24.10.2007 declaring a loss of Rs. 2,03,194/-. In the Profit and Loos Account filed along with the said return, a sum of Rs.

Assessment Year: 2007-08 Radharam Sohanlal 7,28,843/- was debited by the assessee on account of stock lost by flood. In this regard, it was explained by the assessee during the course of assessment proceedings before the A.O. that goods of the value of Rs. 9,36,108/- had been damaged due to heavy rainfall and flood during the period from 19.10.2005 to 27.10.2005. It was submitted that the assessee however could recover the insurance claim of Rs. 2,07,265/- only and the balance amount of Rs. 7,28,843/- was accordingly debited to the profit and loss account as stock lost by flood. This explanation of the assessee was not accepted fully by the A.O. for the following reasons given in assessment order:

“1. That there is no in out register or stock register maintain by the assessee to substantiate its claim that the stock of the above goods were kept there. Even no transport details are also available to establish assessee’s claim that the stock of said quantity / amount were transported there.

4. That as per claim form, the stock is hypothecated before Indian Overseas Bank, India Exchange Place Branch, Kolkata. But there are no details or evidence or documents from the banking authority in this matter, since the banking authority granted credit limit on the basis of the stock.”

Assessment Year: 2007-08 Radharam Sohanlal

For the reasons given above the Assessing Officer held that the quantum of loss claimed by the assessee was not fully established and accordingly the same was disallowed by him to the extent of Rs. 3,64,422/- being 50% of the total claim. On appeal, the Ld. CIT(A) confirmed the said disallowance made by the A.O. Aggrieved by the order of the Ld. CIT(A), the assessee has preferred this appeal before the Tribunal.

3. I have heard the arguments of both the sides and also perused the relevant material available on record. Although the learned DR has strongly relied on the orders of the authorities below including especially the reasons given by the A.O. in the assessment order for disallowing the claim of the assessee to the extent of 50% in support of the revenue’s case, it is observed that the following explanation was offered by the assessee in writing before the Ld. CIT(A) in respect of specific objections raised by the A.O.

Assessment Year: 2007-08 Radharam Sohanlal After going through the explanation offered by the assessee as above, I find that all the objections raised by the A.O. while disallowing the Assessment Year: 2007-08 Radharam Sohanlal claim of the assessee to the extent of 50% were satisfactorily met by the assessee. The reasons that made the assessee to accept the low amount of insurance claim were duly explained by the assessee and it was also clarified by the assessee that the concerned goods damaged in the flood being perishable in nature had no salvage value. At the time of hearing before us, the learned counsel for the assessee has also referred to the stock statement as on 31.09.2005 submitted to the bank (copy at page 20 and 21 of the Paper Book) to show that the stock of Rs. 23.66 lacs was lying with the assessee just before the heavy rainfall and subsequent flood from 19.10.2005 to 27.10.2005. He has also invited my attention to the relevant documentary evidence placed at page no 23 and 24 of the Paper Book to show that insurance claim of Rs. 9,36,108/- was made by the assessee for the goods damaged in the flood. He has also invited my attention to the trading account of the assessee for the year ended on31.03.2006 to show that the value of stock lost in flood was duly shown by the assessee at Rs. 9,36,108/- in the credit side of the trading account. Keeping in view this documentary evidence placed on record by the assessee and having regard to the submissions made by the assessee before the Ld. CIT(A) and reiterated before the Tribunal clarifying satisfactorily the objections raised by the A.O., I am of the view that the disallowance of 50% made by the A.O. on account of assessee’s claim for goods lost in the flood was not sustainable and the Ld. CIT(A) was not justified in confirming the same. In that view of the matter, I delete the said disallowance made by the A.O. and confirmed by the CIT(A) and allow this appeal of the assessee.

Assessment Year: 2007-08 Radharam Sohanlal