- (1.) This appeal is at the instance of an Assessee and is directed against an order dated March 21, 2001, passed by the Income-tax Appellate Tribunal, "D" Bench, Calcutta, in appeal bearing ITA No. 327 (Kol) of 1996 for the Assessment Year 1992-93.
(2.) Being dissatisfied, the Assessee has come up with the present appeal.
(3.) The facts giving rise to filing of this appeal may be summed up thus: a) The Assessee is a private limited liability company within the meaning of the Companies Act, 1956 and carries on the business of fabrication of iron and steel structurals. b) The Assessee carries on the fabrication activity in respect of raw materials such as M.S. Angles, channels, plates, joists etc. provided to it by its customer, namely, Larsen & Toubro Ltd., on job-work basis. c) According to agreement between the Assessee and the said customer, after completion of the work, the Assessee is required to return the finished materials and unused raw material, the respective quantities of which were reconciled by the said customer. A specified percentage was allowed as process-loss depending upon the quantity of finished materials returned and in the event the Assessee did not return the entire unused raw materials, the said customer had the right to purchase the quantity not returned from the market and debit the Assessee for the same at the specified rates. d) According to the Assessee, a substantial quantity of raw materials supplied by the said customer was lost at the Assessee's factory due to several thefts which took place during the financial years 1990-91 and 1991-92. Because of the repeated thefts during the financial year 1991-92 relevant to the Assessment Year 1992-93, the Assessee took out insurance cover. e) As and when thefts were discovered, the Assessee lodged complaints with the local police station. On some occasions, according to the Assessee, persons armed with weapon entered the factory at night and took away the materials forcibly and sometimes they even hurled bomb. The Bally police station issued a notice under Section 173(2)(II) of the Code of Criminal Procedure to the Assessee confirming FQT No. 19 dated 5th March, 1994 under Section 379 of the I.P.C. Subsequent to taken out insurance cover, the Assessee also lodged claim with the insurance company although no amount was received against the claim lodged with the insurance company for the thefts which had taken place during the Assessment Year 1992-93. f) During the Assessment Year 1991-92, the Assessee had to purchase steel materials costing Rs. 8,79,765/- in order to make goods the shortfall in the quantify of raw materials required to be returned to the said customer. The said amount was claimed by the Assessee as a deduction in its income-tax assessment for the Assessment Year 1991-92. But the Assessing Officer disallowed the said claim. Being aggrieved the Assessee preferred an appeal before the Commissioner of Income-tax (Appeals) who allowed the claim of the Assessee. The Department preferred an appeal before the Tribunal against the order of the Commissioner of Income-tax (Appeals) for the Assessment Year 1991-92 and the same was pending at the time of preferring the present appeal. g) During the Assessment Year 1992-93, according to the Assessee, it had to incur a sum of Rs. 4,57,777/- in order to make good the shortfall in the quantity of raw materials required to be returned to the said customer. Out of the said amount, a sum of Rs. 2,17,905/-was allegedly incurred by the Assessee to purchase materials for return to the said customer and the said customer raised a debit note on the Assessee for the balance sum of Rs. 2,39,872/-. h) Although the Assessee in the assessment proceeding for the Assessment year 1992-93 duly submitted all the relevant documents relating to the loss of the materials, correspondence with the customer, complaints lodged with the police and the report of the police, etc. in support of its claim for deduction of the said amount of Rs. 4,57,777/- the Assessing Officer disallowed such claim. i) Being dissatisfied, the Assessee preferred an appeal before the Commissioner of Income-tax (Appeals) who by an order dated November 13, 1995 decided the same in favour of the Assessee with a direction upon the Assessing Officer to examine as to whether the debit advice of the said customer was in respect of the same items which were purchased by the Assessee by way replacement of materials of the said customer. It was directed by the said Appellate Authority that if the items were found to be the same, then the deduction of only Rs. 2,17,905/- was to be allowed and if not, then the entire amount of Rs. 4,57,777/- was to be allowed. j) The Assessing Officer thereafter made the requisite enquiry and was satisfied that the items purchased by the Assessee by way of replacement of materials of the said customer and those covered by the debit note raised by the said customer were different and accordingly allowed the entire amount of Rs. 4,57,777/-. k) Against the order dated November 13, 1995, the Revenue preferred an appeal before the Tribunal and the Tribunal by the order impugned in this appeal set aside the order passed by the Commissioner of Income-tax (Appeals) and restored the order of the Assessing Officer.;