IN INCOME TAX APPELLATE TRIBUNAL, BENCH, KOLKATA Before Shri Waseem Ahmed, Accountant Member and Shri S.S.Viswanethra Ravi, Judicial Member I.T.A. No. 281/KOL/ 2014 A.Y: 2007-08 DCIT, Cir-5, Kolkata Vs. M/s. Hindustan Paper Corporation Ltd PAN: AAACH 9463K (Appellant) (Respondent) Appearances by: Shri Vijay Shankar, CIT, Sr. D.R for revenue Shri Akkal Dudhwewala, ACA, ld.AR for assessee Date of hearing : 02-08-2016 Date of pronouncement : 21-09-2016 Per Shri S.S. Viswanethra Ravi :-This appeal by Revenue is directed against order dated 12-11-2013 passed by Commissioner of Income Tax(Appeals)-VI, Kolkata for assessment year 2007-08. 2. In this appeal, Revenue has raised following grounds:- Act .3 .any o f g round s o f appeal be fore or t time o f hea ring .” . 3. At outset, Ld.AR submits that appeal filed by Revenue is arising out of same assessment order dated 22-3-2013 framed u/s. 143(3) of Act along with Cross Objection filed by assessee have been disposed off by C Bench of Tribunal by consolidated order dt. 05-11-2015 in ITA No.1692/Kol/2010 and CO No. 19/Kol/2011 respectively for assessment year 2007-08, wherein Tribunal accepted contention of assessee that writing off Rs. 656.36 was being value of identified items of obsolete and damaged stores and spares basing on Valuation Report of M/s. Bandyopadhyay & Associates, Cost Accountants. Tribunal also decided ground involving Rs. 10 lakhs and after examination of relevant facts on record, Tribunal held that amount of Rs. 10 lakhs which is remaining amount out of Rs.656.36 lakhs was debited to profit & loss account. 4. As matter stood thus, Revenue reopened assessment u/s. 147 of Act while original assessment was made u/s. 143(3) of Act. During such proceedings, AO found that assessee did not comply with procedure contemplated to value raw materials under AS-2 valuation of inventories, thereby AO added/disallowed entire amount of Rs.656.36 lakhs. ITA No. 281/Kol/14 M/s. Hindustan Paper CorprnLtd 2 5. CIT-A held that provisions for determination of stock and spare was business loss of earlier years. He also held that re-opening of assessment was also bad in law against which present appeal is filed challenging order of CIT-A by raising aforementioned grounds. 6. Heard rival submissions and perused material available on record. We find that C Bench of Kolkata Tribunal supra decided issue in favour of assessee and against revenue. Relevant portion of observations is reproduced herein below for sake of better understanding:- 2. First we take up ITA No. 1692/Kol/2010 (Revenue s appeal). first issue in this appeal of revenue is against order of CIT(A) deleting disallowance made by AO of provisions for write off of spares at Rs.10 lacs. For this, revenue has raised following ground no.1: 1. That Ld. CIT(A)-VI, Kolkata has erred in law as well as on facts of case in deleting addition on account of disallowance of provision for write off of spares of Rs.10 lacs without going into merit of case. 3. Briefly stated facts are that assessee has debited sum of Rs. 10 lac under head loss on account of diminution in value of stores and spares. AO required assessee to explain same. assessee explained vide reply dated 26.10.2009 but AO has not accepted reply of assessee and hence, he disallowed provision for write off of stores and spares as not allowable expenditure. Aggrieved, assessee preferred appeal before CIT(A), who allowed claim of assessee by relying on order of AY 2004-05 and also observing that even AO has not made any addition on same issue for AY 2006-07. For this, he observed as under: I have considered submissions of appellant and also details furnished by appellant. AO made disallowance since provision for write off of stores and spares is not allowable expenditure, stores and spares are consumable items of manufacturing business and, therefore, consumption of stores is ordinary incidence of manufacturing business. I agree ITA No. 281/Kol/14 M/s. Hindustan Paper CorprnLtd 3 with decision of CIT(A)-V, in ITA No. 262 in appellant s own case for AY 2004-05, based on which AO has not made any addition on same issue for AY 2006-07. Since facts and circumstances of present appeal are same, AO is directed to allow sum of Rs.10,00,000. This ground is allowed. Aggrieved, revenue is now in appeal before us. 4. We have heard rival submissions and gone through facts and circumstances of case. We find that assessee had written off in its Profit & Loss Account value of obsolete stores and spares amounting to Rs. 656.36 lacs. assessee deducted provision created till 31.03.2006 for amount of Rs. 646.36 lacs and remaining sum of Rs. 10 lacs was debited to profit and loss account for year ended 31.03.2007. Assessee claimed that it carries substantial inventory of raw materials, stores and spares. According to assessee, its plants are located in remote and inaccessible areas of Assam and hence these plants carry substantial inventory of raw material stores and spares. Due to heavy rains as also substantial use of water and chemicals in manufacturing process, there is high incidence of corrosion and damage. From records, we find that assessee regularly carries out physical inspection of materials, stores and ascertain diminution in value of stores and also damaged and obsolete stock. It is also fact that physical inspection is conduced both departmentally as also by external agencies. During year under consideration M/s. Bandyopadhyay & Associates, Cost Accountants, carried out valuation of spares at Nagaon and Cachar Paper Mills and identified items of obsolete and damaged stores and spares and furnished report on valuation of stores and spares. Based on valuation report that assessee written off Rs.656.36 lacs in its profit and loss account for year ended 31.03.2007. However, in respect of very same items assessee had created provision in earlier years to extent of Rs.646.36 lacs and therefore adjusting such provisions, net additional sum of Rs. 10 lacs only was debited in profit and loss account. We further find that similar write off were also made by assessee in financial year 2003-04 and 2005-06. disallowance made by AO in AY 2004-05, was deleted by CIT(A) and thereafter COD refused permission to file ITA No. 281/Kol/14 M/s. Hindustan Paper CorprnLtd 4 appeal against said appellate order. In AY 2006-07 also assessee had written off Rs.184.07 lacs. In regular assessment u/s. 143(3) for A. Y. 2006-07 same AO after due consideration of explanation and CIT(A) s order for AY 2004-05, had refrained from making any disallowance. In view of facts and circumstances of present case, We are of view that claim of assessee, writing off in its Profit & Loss Account, value of obsolete stores and spares, is genuine claim and CIT(A) has rightly allowed same. 7. In this appeal, revenue raised two grounds, one being questioning order of CIT-A in holding order passed under section 147 of act is not sustainable. It is observed that reasons recorded under section 148(2) where in AO opined that assessee shown separately in profit and loss account regarding loss on diminution of value of stores and spares to extent of Rs.656.36 lacs in year under consideration and written off with that of provision created to extent of Rs.646.36 in earlier years and in respect of remaining Rs. 10 lacs was debited to profit and loss account of relevant year under consideration. We find that original assessment was completed and passed order thereon under section 143(3) of act, wherein AO examined all relevant evidence in scrutiny proceedings and thereafter on going through assessment records which were same made available in assessment proceedings and reopening of such assessment without there being any new material on record is not permissible. 8. In respect of writing off Rs.634.36 laks, CIT-A treated same as business loss. We find that similar write off were also made by assessee in financial year 2003-04 and 2005-06. disallowance made by AO in AY 2004-05, was deleted by CIT-A and COD did not grant permission to file appeal against said appellate order. In AY ITA No. 281/Kol/14 M/s. Hindustan Paper CorprnLtd 5 2006-07 also assessee had written off Rs.184.07 lacs. AO did not make any disallowance taking into consideration explanation offered by Assessee and order of CIT-A for AY 2004-05 in assessment u/s. 143(3) for A. Y. 2006-07. Tribunal supra found that assessee had written off in its Profit & Loss Account value of obsolete stores and spares amounting to Rs. 656.36 lacs and deducted same to provision created till 31.03.2006 to amount of Rs. 646.36 lacs and remaining sum of Rs. 10 lacs was debited to profit and loss account for year ended 31.03.2007. In view of above discussion and following finding of C Bench of Tribunal, We are of view that claim of assessee, writing off in its Profit & Loss Account, value of obsolete stores and spares, is genuine claim and CIT(A) has rightly allowed same. Thus, ground no s 1and 2 raised by Revenue are dismissed. 9. In result, appeal filed by Revenue is dismissed. Order Pronounced in Open Court on 21 s t September, 2016 Sd/- Sd/- WASEEM AHMED S.S.VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 21/09/2016 ITA No. 281/Kol/14 M/s. Hindustan Paper CorprnLtd 6 Copy of order forwarded to:- 1. Appellant/Department: DCIT, Circle-5, Kolkata P-7 Chowringhee Square, 5th Floor, Room No.15, Kolkata-69. 2. Respondent/Assessee: M/s. Hindustan Paper Corporation Limited Ruby Building 75C Park Street, Kolkata-16. 3. CIT 4. CIT(A) 5. Departmental Representative 6. Guard File By order etc Assistant Registrar Income Tax Appellate Tribunal Kolkata benches, Kolkata ** PRADIP SPS ITA No. 281/Kol/14 M/s. Hindustan Paper CorprnLtd 7 DCIT , Cir-5, Kolkata v. M/s. Hindustan Paper Corporation Ltd