DCIT 10(2)(1), MUMBAI vs. LYKA EXPORTS P.LTD, MUMBAI

आदेश / O R D E R Per Joginder Singh (Judicial Member) The Revenue is aggrieved by the impugned order dated 16/01/2015 of the Ld. First Appellate Authority, Mumbai, allowing loss of Rs.1,21,83,407/- by holding that the similar nature of expenses was allowed in earlier year without appreciating that the allowance of similar expenses in earlier years cannot be the basis for subsequent year, without determining their allowability.

2.1. We have considered the submissions of Ld. DR and perused the material available on record. Before coming to any conclusion, we are reproducing hereunder the relevant portion and the factual finding recorded by Ld. Commissioner of Income Tax (Appeal) for ready reference and analysis:-

“1.3.1. I have carefully considered the submissions and contention of the Ld. AR of the appellant and also carefully gone through the facts and records. It is seen from the statement of income filed by the appellant along with the return of income that the appellant is entitled to carry forward business loss and unabsorbed depreciation loss for the assessment year 1997-1998 to 2004-2005 amounting to Rs.3,89,93,910. It is a matter of record that the appellant did not file any documents which were required by the Ld.AO during the course of the assessment proceedings but the same were submitted by the appellant during the course of the appellate proceedings. My learned predecessor sent the same for examination/verification by the Ld.AO as according to him they constitute additional evidences. However, till date no remand report is received, matter being too old is now taken up on its own merit treating that Ld. AO has no objection for the admission of the additional evidence. It is seen from the assessment order that the Ld.AO during the course of assessment proceeding observed that the unsecured loans of the appellant had increased and it failed to produce the persons and prove the creditworthiness of the loan creditors for the year under consideration. However, .a bare perusal of the audited balance sheet which was filed by the appellant along with the return as. indicated by the Ld.AO in his order, it can be seen that the unsecured loan had in fact decreased during the period under consideration from Rs.2,32,70,,001/- to Rs. 1,23,03,955/-. Therefore there is no merit in the argument of the Ld.AO that the unsecured loans have increased and it is for want of verification of the unsecured loan that he had disallowed the loss of the appellant. Further a bare. perusal of the profit and loss account of the appellant revealed that the expenses on account of operation and other expenses has in fact decreased as compared to last year and so is the local sales, which has drastically fallen. down ..from Rs.8,93,29,540/- to Rs.4,01,44,620/-. The nature of expenses revealed that the same expenses were claimed by the appellant in the year under consideration except the provisions for doubtful debts(Rs.1,25,48,871); provisions for diminution in the value, of assets(Rs.11,81,750); loss of misappropriation of stock(Rs.349,657), difference in the exchange fluctuation(Rs.6,38,945) and sundry balances written off (Rs.13,01,814). Further, I find that in the previous year the Ld.A0 has accepted the other claims of the expenses by the appellant and had made no addition. The appellant in the computation of income had disallowed several expenses, which are not even otherwise allowable such as gratuity provisions, donation, provisions for doubtful - debts, provision for diminution in the. Value of investment and disallowances as per the provision of section 43B and 36, in all amounting to Rs.1,57,01,732/- out of the total claim of Rs.4,41,39,903/- which means clearly 35.57% of the entire expenses. was suo moto disallowed by the appellant reducing the loss to Rs.1,51,43,270/- as against the loss shown as per profit and loss account of Rs. 4,07,8.0,823/- do not find any reason other than the non submissions' ,of the details which prompted the. Ld. A0 to disallow the expenses. It was stated by•the learned AR of the appellant that it had requested the Ld.A0 to give time upto 1st week of December 2006 when the details as called for would be submitted to the Ld.A0. However, without giving any time the Ld.A0 passed the order on 29-11-2006. Therefore, it is not a case where the details are not available with the appellant or the appellant was claiming expenses except the one discussed for the first time and there has been an unusual increase in the expenses but a simple case where the details were not furnished and in. earlier year the similar type of expenses were claimed and in fact allowed by the Ld.A0. find that on a perusal of the expenses, the expenses ..on. account of loss. of misappropriation of stock (Rs.3,19,657), difference in the exchange fluctuation (Rs.6,38,945) and sundry balances written off (Rs.13,01,814) are also not allowable as the appellant had not given any evidence for the claim of the same. 'Thus a further disallowances is warranted of the amount of Rs. 22,60,416/- and the current year loss should be assessed at Rf.1,21,83,407/- as against Rs.1,51,43,270/- determined by the appellant. Looking' to the past history of the appellant it can be seen that the appellant is incurring losses on year to year basis and also the fact that the appellant has not accepted/ renewed any fixed deposit as The limit for further renewal/ acceptance of the fix deposits has exhausted. Looking to the facts of the appellant case and the previous history, I do not find the action of the Ld.AO in rejecting the losses claimed by the appellant in earlier year as not allowable. However, the appellant's loss as claimed by it in the current year is reduced as per the discussion above. The Id. AO is directed to determine the loss accordingly and allow the brought forward of losses of the current year and the other years accordingly. This ground of appeal is accordingly partly allowed.

2.2. The facts in brief are that the assessee is engaged in the business of trading in animal healthcare products. During the year under consideration, the assessee declared loss of Rs.1,51,43,265/-. During scrutiny proceedings, the Ld. DCIT issued notice u/s 142(1) of the Income Tax Act, 1961 (hereinafter the Act), dated 19/07/2006 asking the assessee to furnish certain details, mentioned therein. To which, the assessee responded and filed the details on 26/09/2006. The Ld. Assessing Officer made the addition on the plea that details called for by him on 16/11/2006 were not furnished, therefore, he disallowed the claimed loss of Rs.1,51,43,265/-. On appeal before the Ld. Commissioner of Income Tax (Appeal), it is noted that during appellate proceedings, the assessee filed the details, which were sent to the file of the Assessing Officer for remand report. However, the Ld. Assessing Officer filed no reply to the remand report as is evident from para 1.21. of the impugned order. There is a factual finding in the impugned order that the audited balance sheet was examined by him, which indicates that unsecured loans has in fact decreased during the period under consideration from Rs.2,32,70,001/- to Rs.1,23,03,955/-. The nature of expenses revealed that same expenses were claimed by the assessee in the year under consideration except the provision for doubtful debt (Rs.1,25,48,871/-). We find that the Ld. Commissioner of Income Tax (Appeal) has elaborately discussed the factual matrix and observed that details were duly available on record for which the assessee was claiming expenses. We find no infirmity in the direction of the Ld. Commissioner of Income Tax (Appeal) to determine the loss accordingly and to allow the brought forward losses of the current year and other years accordingly. No contrary facts were brought to our notice by the Revenue, therefore, we affirmed the conclusion drawn in the impugned order, resultantly, the appeal of the Revenue is dismissed.

Finally, the appeal of the Revenue is dismissed.

This order was pronounced in the open in the presence of ld. DR at the conclusion of the hearing on 18/04/2017.