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December, 27th 2013

                                  Date of decision: 10th December, 2013
+                        ITA 464/2013
      CIT IV                                              ..... Appellant
                         Through    Mr. Kamal           Sawhney,        Sr.
                         Standing Counsel.


      GLOBAL GREEN COMPANY LTD         ..... Respondent


      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

ITA 464/2013                                            Page 1 of 4
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
ITA 464/2013                                           Page 2 of 4
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.
ITA 464/2013                                          Page 3 of 4
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

ITA 464/2013                                            Page 4 of 4
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