* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 10th December, 2013
+ ITA 464/2013
CIT IV ..... Appellant
Through Mr. Kamal Sawhney, Sr.
GLOBAL GREEN COMPANY LTD ..... Respondent
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE SANJEEV SACHDEVA
SANJIV KHANNA, J. (ORAL)
The relevant orders have been filed by the appellant. We are
inclined to condone delay of 99 days in re-filing of the appeal.
Application for condonation of delay in refiling being
C.M.No.15143/2013 is accordingly disposed of.
2. This appeal by the Revenue under Section 260A of the Income
Tax Act, 1961 (Act) impugns order passed by the Income Tax
Appellate Tribunal (for short, the tribunal) deleting penalty under
Section 271 (1)(c) of the Act in relation to assessment year 2001-02.
3. Learned counsel for the appellant submits that there is
contradiction between the findings in the impugned order and the order
passed by the tribunal in the quantum proceedings. Further, the
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tribunal has erred in holding that the assessee has been able to
discharge onus under Explanation 1 to Section 271(1)(c) of the Act.
4. The respondent-assessee was engaged in the business of
processing and export of packaged food products like pickle, gherkin,
baby corn etc. It had also entered into an agreement for growing
vegetables, mushrooms etc. For the assessment year 2001-02, the
respondent-assessee had filed return of income on 31st October, 2001
declaring loss of Rs.20,66,59,696/-. Subsequently, the loss was revised
to Rs.16,51,59,697/-. In the profit and loss account, the respondent-
assessee had made provision for Rs. 59,43,008/- on account of non-
saleable and damaged goods. The Assessing Officer did not allow the
debit entry observing that the respondent-assessee did not produce
evidence for writing off the said amount in the books and at the same
time observed that the entry was nothing but a provision for decrease
in the value of assessee's assets. He accordingly held that this amount
was not an allowable expenditure and was added back. The said
finding was affirmed by the Commissioner (Appeals), who observed
that the amount was only a provision in the books.
5. The tribunal in the quantum proceedings held that nothing had
been brought on record to show on what basis items in question were
considered as non-saleable or damaged. The assessee had not
produced material with regard to the expiry date etc. It was further
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recorded that the assessee had not written off value of the stocks and
had simply made a provision. There was no rational basis for the said
provision, such as expert opinion etc.
6. In the impugned order, the tribunal has rightly held that the
findings in the quantum order though relevant, but cannot be the sole
basis for imposing penalty as the assessee has right to produce
evidence and discharge onus under Explanation 1 to Section 271(1)(c)
and seek exoneration from imposition of penalty. Before the tribunal,
the respondent-assessee had stated and established that they were
engaged in the business of food processing and packaging, for exports.
Food items were perishable in nature and had expiry date beyond
which they could not be sold and, therefore, the non-saleable/expired
stock needed to be discarded. Reference was made to Food Products
Order (FPO) 1955, Section 3 of the Essential Commodities Act, 1955,
Food Safety and Standards Act, 2006, etc. Products manufactured by
the respondent-assessee were mainly exported to the USA and,
therefore, compliance of FDA regulations, one of the most stringent
requirements, was required. Details of items, which were written off,
were set out, explained and elucidated. The items included caps and
cartons which had became unusable due to change in customer's
specifications, change in brand name or difference in quantities etc.
Details and particulars of items were made available and ascertained.
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Tribunal has noticed that the respondent assessee was eligible for
deduction under Section 10B of the Act and, therefore, there was no
cause or reason for the assessee to deliberately write off saleable goods
which could be exported in the books of accounts as non-saleable.
7. Tribunal in the impugned order has referred to the observation of
the Assessing Officer on decrease in value of assessee's assets and
observed that if there was decrease in the value of assets, the closing
stock has to be valued at market price and not necessarily at cost price.
The assessee had filed before the tribunal stock summary which
contained necessary/relevant details. It is recorded that these details
were not filed during the course of assessment proceedings.
8. In view of the factual findings recorded by the tribunal,
accepting the explanation furnished by the assessee, we do not think
that any substantial question of law arises for consideration. The said
findings are factual. The appeal is dismissed.
SANJIV KHANNA, J.
SANJEEV SACHDEVA, J.
DECEMBER 10, 2013
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