DCIT, Chandigarh V. M/s Brinsar Foods Pvt. Ltd., Chandigarh

ITA 1076/CHANDI/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80971 (ITAT-CHANDIGARH)
• Duration Of Justice: 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 26-11-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 26-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Search and seizure
• Section: 143(3); 153A; 132; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NOS. 1076 TO 1078/CHD/2013 ASSESSMENT YEARS : 2006-07 TO 2008-09 AND ITA NO.1087/CHD/2013 ASSESSMENT YEAR : 2005-06 THE D.C.I.T, VS. M/S BRINSAR FOODS PVT. LTD., CENTRAL CIRCLE II, #114, SECTOR 18-A, CHANDIGARH. CHANDIGARH. PAN: AAACB6742K AND C.O.NOS.37 TO 40/CHD/2013 ARISING OUT OF ITA NOS. 1076 TO 1078/CHD/2013 ASSESSMENT YEARS : 2006-07 TO 2008-09 M/S BRINSAR FOODS PVT. LTD., VS. THE D.C.I.T, #114, SECTOR 18-A, CENTRAL CIRCLE II, CHANDIGARH. CHANDIGARH. PAN: AAACB6742K (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI T.N.SINGLA DEPARTMENT BY : SHRI MANJIT SINGH, DR DATE OF HEARING : 30.10.2014 DATE OF PRONOUNCEMENT : 31.10.2014 O R D E R PER BENCH : THE DEPARTMENTAL APPEALS AS WELL AS THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DIRECTED AGAIN ST THE 2 COMMON ORDER OF LEARNED CIT (APPEALS),(CENTRAL), GU RGAON, DATED 27..9.2013 FOR ASSESSMENT YEARS 2005-06 TO 20 08-09. 2. THE REVENUE CHALLENGED THE DELETION OF ADDITION ON ACCOUNT OF HIGHER GROSS PROFIT RATE APPLIED BY THE ASSESSING OFFICER. 3. THE LEARNED COUNSEL FOR THE ASSESSEE, HOWEVER, D ID NOT PRESS THE CROSS OBJECTIONS AND SEEKS PERMISSION TO WITHDRAW THE SAME. IN VIEW OF THIS MATTER, ALL THE CROSS O BJECTIONS ARE DISMISSED AS WITHDRAWN. 4. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES AND PERUSED THE FINDINGS OF THE AUTHORITIES BELOW. 5. BRIEFLY, THE FACTS OF THE CASE ARE THAT IN THIS CASE SEARCH AND SEIZURE OPERATION UNDER SECTION 132 WAS CONDUCT ED ON 30.6.2010 IN CHADHA GROUP OF CASES. THE ASSESSEE FILED RETURNS UNDER SECTION 139(1) OF THE INCOME TAX ACT AND AGAIN IN RESPONSE TO NOTICE UNDER SECTION 153A OF THE INC OME TAX ACT. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF P OULTRY. THE ASSESSING OFFICER REJECTED THE BOOK RESULTS FOR NON- PRODUCTION AND APPLIED GROSS PROFIT RATE OF 20% DES PITE THE ASSESSEE RAISED THE CONTENTION THAT IT WAS MAINTAIN ING COMPLETE AND AUDITED ACCOUNTS. IT WAS ALSO CONTEN DED THAT NO INCRIMINATING MATERIAL/DOCUMENT WAS FOUND TO SHO W THAT THE PURCHASE, SALE OR ANY OTHER EXPENSES OR RECEIPT S HAVE NOT BEEN RECORDED IN THE BOOKS OF ACCOUNT. 6. THE ASSESSEE CHALLENGED THE APPLICATION OF GROSS PROFIT RATE OF 20% BEFORE THE LEARNED CIT (APPEALS) AND TH E WRITTEN 3 SUBMISSIONS OF THE ASSESSEE ARE REPRODUCED IN THE I MPUGNED ORDER, IN WHICH THE ASSESSEE BRIEFLY EXPLAINED THAT IT IS ENGAGED IN POULTRY FARMS BUSINESS AND THE ASSESSEE COMPANY WAS INCORPORATED ON 18.6.1993. THE ASSESSEE HAS B EEN MAINTAINING COMPLETE BOOKS OF ACCOUNT, COMPLETE VOU CHERS BILLS, SALARY, WAGES RECORDS, ETC. AND HAS BEEN FIL ING RETURN OF INCOME REGULARLY. IT WAS SUBMITTED THAT IN THE BU SINESS OF POULTRY THE MARGIN OF PROFITS DEPEND UPON THE CLIMA TE, HEALTH OF BIRDS, SPREADS OF ANY FLU, MARKET CONDITIONS, ET C. THE PRICES KEEPS ON CHANGING ON DAY-TO-DAY BASIS. THE ASSESSEE COMPANY HAS CLOSED ITS BUSINESS IN 2008 DUE TO DISP UTE AMONGST THE DIRECTORS OF THE COMPANY AND THE BOOKS OF ACCOUNT ON THAT DATE WERE LYING AT THE HEAD OFFICE. THESE BOOKS WERE LYING IN A COMPUTER. NOW THE REVENUE DE PARTMENT ASKED THAT THE BOOKS OF ACCOUNT TO BE PRODUCED IN T HE YEAR 2013. THE BOOKS OF ACCOUNT WERE PRODUCED IN REGUL AR ASSESSMENT BEFORE THE ASSESSING OFFICER IN THE ASSE SSMENT YEAR 2006-07 AND WERE EXAMINED AND TEST CHECKED BY THE ASSESSING OFFICER. THE ORDER UNDER SECTION 143(3 ) OF THE INCOME TAX ACT WAS PASSED ON 31.3.2008 ACCEPTING TH E GROSS PROFIT RATE OF THE ASSESSEE AT 6.5%. IT WAS ALSO EXPLAINED THAT IN ASSESSMENT YEAR 2005-06 THE GROSS PROFIT RA TE OF THE ASSESSEE WAS 11.82%, IN ASSESSMENT YEAR 2007-08, GR OSS PROFIT RATE WAS 12.06% AND IN ASSESSMENT YEAR 2008- 09 THE GROSS PROFIT RATE WAS 8.8%. NO INCRIMINATING MATE RIAL WAS FOUND AGAINST THE ASSESSEE DURING THE COURSE OF SEA RCH TO DISBELIEVE THE GROSS PROFIT AND ACCOUNTS OF THE ASS ESSEE HAVE ALREADY BEEN ACCEPTED IN ALL THE YEARS IN THE ASSES SMENTS 4 FRAMED UNDER SECTIONS 143(1) AND 143(3) OF THE INCO ME TAX ACT. IT WAS EXPLAINED THAT DUE TO ABOVE REASONS, THE PROFIT RATE WAS FLUCTUATING AT DIFFERENT TIMES AND NO COMP ARISON OF GROSS PROFIT RATE COULD BE MADE. THE ASSESSING OF FICER HAS NOT BROUGHT ANY COMPARABLE CASE ON RECORD FOR ESTIM ATING HIGHER PROFIT RATE. THEREFORE, ENHANCEMENT OF THE GROSS PROFIT RATE WAS EXCESSIVE. THE LEARNED CIT (APPEALS) CON SIDERING THE EXPLANATION OF THE ASSESSEE AND MATERIAL ON REC ORD DELETED ALL THE ADDITIONS BY APPLYING GROSS PROFIT RATE OF 20% AND ALLOWED THE APPEALS OF THE ASSESSEE. HIS FINDINGS IN PARA 6.3 ARE REPRODUCED AS UNDER :- 6.3. I HAVE CONSIDERED THE SUBMISSIONS OF THE A'SSESSE E AND THE IMPUGNED ORDER. THE ASSESSEE IS IN POULTRY BUSINESS. THE GRO UP WAS SEARCH ON 30.6.2010. NOTICE U/S 153A WAS ISSUED FOR AY 2005-06 TO AY 2011-12. APPEAL FOR AY 2005-06 TO AY 2008-09 ARE BEFORE ME. THE SUBS TANTIVE ISSUE CONTESTED IS THE SAME I.E ADDITION ON ACCOUNT OF GP. THE AO OBSE RVED THAT THE GP SHOWED GREAT FLUCTUATION FROM 6.58% TO 12.06%. HE FURTHER O BSERVED THAT IN OTHER CASE OFJIMILAIBUSMESS, THE GP DECLARED WERE IN THE RANGE OF 20% - 22%. THUS HE CAUSED THE BOOKS TO BE PRODUCED AND ON FAIL URE TO DO SO BY THE ASSESSEE, HE PROCEEDED TO APPLY THE GP RATE OF 20%. ON THE OTHER HAND THE ASSESSEE ARGUED THAT THE POUL TRY BUSINESS CLOSED IN 2008 DUE TO DISPUTE AMONGST THE DIRECTORS AND THAT THE BOOKS WERE LEFT LYING IN THE HEAD QUARTERS UNATTENDED. THE ASSESSEE A DMITTED THAT MAINTENANCE OF BOOKS WERE NO DOUBT THE RESPONSIBILIT Y OF THE MANAGEMENT, BUT THE SEARCH PARTY DID NOT FIND ANY BOOKS NOR ANY MATERIAL ADVERSE IN NATURE SO AS TO DOUBT THE BOOK RESULTS DECLARED UPTO AY 20 08- 09. IT WAS ALSO REITERATED THAT THE RETURNS FILED STOOD ACCEPTED BY THE DEPARTMENT U/S 143(1) I.R.O AY 2005-06, AY 2007-08 AND AY 2008-09 WHILE T HE ASSESSMENT FOR AY 2006-0.7 WAS COMPLETED U/S 143(3) WHEREIN THE GP RA TE OF 6.58% WAS ACCEPTED. IT WAS SUBMITTED THAT THE FALL IN GP IN AY 2008-09 WAS DUE TO CLOSURE, THE COMPANY HAVING RESORTED TO DISTRESS SALES. IT WAS AL SO CONTENDED THAT POULTRY BUSINESS DEPENDED ON CLIMATE, HEALTH OF BIRDS, MARKET ETC AND THAT THE AO 5 DID NOT ELUCIDATE THE OTHER COMPARABLE MARKET PLAYER S, HENCE TO APPLY A PARTICULAR RATE OF GP WITHOUT BEING PUT TO NOTICE WAS UN TENABLE. THE ASSESSEE HAS FILED COPIES OF ASSESSMENT ORDERS FRAMED U/S 153A FOR AY 2009-10 AND AY 2010-11 WHICH REVEAL THAT THE RE TURNED INCOME WAS ACCEPTED. TAR FOR ALL THE YEARS WERE FILED BEFORE ME. THE ACCOUNTS SHOW NOMINAL SALES IN AY 2009-10 AND NIL SALES FOR AY 2010-11. HENCE CLOSURE OF BUSINESS AS CLAIMED IS NOT IN DISPUTE. FURTHERMORE, THE CLAIM THA T THE BOOKS HAD TO BE TRACED OUT IS THEREFORE A POSSIBLE REALITY. IMPORTANT LY THAT ASSESSEE HAD BEEN FILING RETURNS FOR THE AYRS UPTO 2008-09 IS NOT IN D ISPUTE AND NEITHER THE FACT THAT FOR AY 2006-07'THE BOOK RESULTS WERE ACCEPTED U/S 143(3). THE POSITION OF ASSESSEE'S BOOK RESULTS IN DISPUTE IS AGAIN REPR ODUCED BELOW FOR EASY REFERENCE. A.Y. TURNOVER (IN RS.] GROSS PROFIT (IN RS.} GP% 2005-06 40156180 4745514 11.82% 2006-07 44594038 2937246 6.58% 2007-08 50681430 6116687 12.06% 2008-09 49728917 4378394 8.8% NO DOUBT THE GP RATE IS VARYING FOR WHICH EXPLANATIO NS HAS BEEN OFFERED BY THE ASSESSEE. THE BOOKS OF ACCOUNTS REQUISITIONED WERE NOT PRODUCED. THAT BY ITSELF CANNOT LEAD TO THE CONCLUSION THAT THE PROF ITS DECLARED WERE NOT CORRECT WHEN NO INCRIMINATING MATERIALS WERE FOUND IN THE COUR SE OF SEARCH TO SUGGEST THE SAME. THE AO HAS NOT MENTIONED THE CASES OF OTH ER POULTRY FARMS TAKEN AS COMPARABLES. COMPARISONS CAN BE DONE IF ALL PARAMETERS ARE ALIKE. HERE THESE HAVE NOT BEEN ELUCIDATED. IN THE ABOVE FOUR YEARS, TH E GP HAS NEVER BEEN MORE THAN 12.06 % SO TAKING THE RATE AT 20% IS NOT UNDERSTA NDABLE WHEN NOTHING IS ON RECORD TO SUPPORT THE SAME. AS STATED THE GP OF AY 2006-07 OF 6.58% STANDS ACCEPTED AND IN AY 2008-09 WHERE THE GP IS 8.8%, IS THE YEAR WHEN THE BUSINESS WAS CLOSING DOWN. HENCE IN THIS BACKDROP, I AM INCLINED TO HOLD THAT THE AO HAS ERRED IN APPLYING THE GP RATE OF 20% FOR RE-COMPUTING THE GROSS PROFITS FOR ALL THE FOUR YEARS UNDER APPEAL. ASSESSE E THEREFORE SUCCEEDS IN THIS GROUND OF APPEAL. 7. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES. THE LEARNED D.R. FOR THE REVENUE RELIED UPON THE 6 ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT I N THE ABSENCE OF PRODUCTION OF BOOKS OF ACCOUNT HIGHER GR OSS PROFIT RATE WAS CORRECTLY APPLIED. ON THE OTHER HAND, TH E LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW AND FILED THE COPY OF THE ASSESSMENT ORDER UNDER SECTION 143(3) OF THE INCOME TAX ACT FO R ASSESSMENT YEAR 2006-07 DATED 31.3.2008. 8. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY MERIT IN ALL THE APPEALS OF THE REVENUE. IN T HIS CASE, DESPITE SEARCH WAS CONDUCTED AGAINST THE ASSESSEES GROUP OF CASES, NO INCRIMINATING MATERIAL WAS FOUND AGAINST THE ASSESSEE TO JUSTIFY THE ENHANCEMENT OF THE GROSS PR OFIT RATE. THE ASSESSEE HAS SUBMITTED BEFORE THE AUTHORITIES B ELOW THAT IN THE ASSESSMENT YEARS UNDER APPEALS, IT HAS DECLA RED GROSS PROFIT RATE OF 11.82%, 6.58%, 12.06% AND 8.8% RESPE CTIVELY IN ASSESSMENT YEARS 2005-06 TO 2008-09. IN ASSESSMEN T YEAR 2006-07, THE ASSESSING OFFICER PASSED REGULAR ASSES SMENT ORDER UNDER SECTION 143(3) ON 31.3.2008 AND EXAMINE D THE BOOKS OF ACCOUNT AND VOUCHERS AND ACCEPTED THE RETU RNED INCOME IN THIS YEAR, THE GROSS PROFIT RATE OF THE ASSESSEE WAS 6.58%, WHICH WAS LOWER AS COMPARED TO THE PRECEDING ASSESSMENT YEAR 2005-06 AND SUBSEQUENT ASSESSMENT Y EARS 2007-08 AND 2008-09. IN OTHER YEARS, THE REVENUE DID NOT DISPUTE THE GROSS PROFIT RATE DISCLOSED BY THE ASSE SSEE WHILE PROCESSING THE RETURN UNDER SECTION 143(1) OF THE I NCOME TAX ACT. WHEN THE REVENUE DEPARTMENT IN THE CASE OF T HE SAME ASSESSEE IN REGULAR ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT FOR ASSESSMENT YEAR 2006-07 ACCEPTED THE 7 GROSS PROFIT RATE OF 6.58%, THERE WAS NO REASON TO ENHANCE THE GROSS PROFIT RATE IN OTHER ASSESSMENT YEARS BECAUSE IT WAS HIGHER AS COMPARED TO ASSESSMENT YEAR 2006-07. NO BASIS WHATSOEVER, HAVE BEEN GIVEN IN THE ASSESSMENT ORDER FOR ENHANCING THE GROSS PROFIT RATE. THE PRIVY COUNCI L IN THE CASE OF CIT VS. LAXMINARAIN BADRIDAS, 5 ITR 170 HEL D THAT THE ESTIMATE OF GROSS PROFIT RATE SHOULD BE FAIR. THE ASSESSING OFFICER SHOULD NOT ACT DISHONESTLY OR VINDICTIVELY OR CAPRICIOUSLY, HIS OWN KNOWLEDGE OF PREVIOUS RETURNS , LOCAL KNOWLEDGE, CIRCUMSTANCES OF THE ASSESSEE TO BE CONS IDERED TO ARRIVE AT A FAIR AND PROPER ESTIMATE OF INCOME. S INCE LESSER GROSS PROFIT RATE HAS ALREADY BEEN ACCEPTED IN THE CASE OF THE ASSESSEE IN REGULAR ASSESSMENT, THEREFORE, THERE WA S NO REASON TO ENHANCE GROSS PROFIT RATE TO 20% IN ALL T HE ASSESSMENT YEARS UNDER APPEAL. THE ASSESSING OFFI CER THOUGH HAS MENTIONED THAT IN SIMILAR CASES, THE GRO SS PROFIT RATE RANGES FROM 20% TO 22% BUT NO COMPARABLE CASES HAVE BEEN CITED FOR ARRIVING AT SUCH DECISION IN THE MAT TER. THE LEARNED CIT (APPEALS) ALSO NOTED THAT THOUGH COPIES OF THE ASSESSMENT ORDERS FRAMED UNDER SECTION 153A FOR SUB SEQUENT ASSESSMENT YEARS 2009-10 AND 2010-11 HAVE BEEN FILE D BEFORE HIM, WHICH REVEALED THAT THE RETURNED INCOME WAS AC CEPTED THE CLOSURE OF BUSINESS WAS NOT IN DISPUTE. THERE FORE, EVEN IF THE BOOKS OF ACCOUNT HAVE NOT BEEN PRODUCED BECA USE OF THE CLOSURE OF THE BUSINESS OF THE ASSESSEE WAY BACK IN THE YEAR 2008, THE ASSESSING OFFICER WHILE ENHANCING THE GRO SS PROFIT RATE OF THE ASSESSEE SHOULD HAVE BROUGHT SOME MATER IAL AGAINST THE ASSESSEE TO SHOW THAT THE GROSS PROFIT RATE OF 20% 8 WAS FAIR AND REASONABLE IN THE CIRCUMSTANCES OF THI S CASE. IN THE ABSENCE OF ANY MATERIAL ON RECORD AGAINST THE A SSESSEE FOR ENHANCING THE GROSS PROFIT RATE AND CONSIDERING THE HISTORY OF THE ASSESSEE IN WHICH LESSER GROSS PROFIT RATE IS A CCEPTED BY THE REVENUE DEPARTMENT, WE DO NOT FIND ANY JUSTIFIC ATION FOR THE ASSESSING OFFICER TO ENHANCE THE GROSS PROFIT R ATE OF THE ASSESSEE AS AGAINST DECLARED TO THE REVENUE DEPARTM ENT. THE LEARNED CIT (APPEALS), THEREFORE, PROPERLY APPR ECIATED THE FACTS OF THE CASE WHILE DELETING THE ADDITIONS. W E, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARN ED CIT (APPEALS) IN DELETING THE ADDITION. 9. ALL THE DEPARTMENTAL APPEALS ARE DISMISSED. 10. IN THE RESULT, ALL THE APPEALS FILED BY THE REV ENUE ARE DISMISSED AND THE CROSS OBJECTIONS FILED BY THE ASS ESSEE ARE DISMISSED AS WITHDRAWN. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF OCTOBER, 2014. SD/- SD/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 31 ST OCTOBER, 2014 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 9