ITO,Ward 2(1), Jalgaon V. Balaji seeds & Processing Pvt. Ltd., Jalgaon

ITA 1182/PUN/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62726 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 04-04-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 31-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK MISHRA
• Keywords: Cost of acquisition
• Section: 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE SHRI I.C. SUDHIR JUDICIAL MEMBER AND SHRI R.K. PANDA ACCOUNTANT MEMBER ITA NO. 1182/PN/2010 (ASSTT. YEAR : 2006-07 ) INCOME TAX OFFICER. WD. 2(1) ... APPELLANT B.J. MARKET, JALGAON (M.S) V. BALAJI SEEDS & PROCESSING PVT. LTD. , RESPONDENT \ D-60, MIDC AREA, AJANTHA ROAD, JALGAON PAN : AABCB 1818M APPELLANT BY : SHRI. ALOK MISHRA RESPONDENT BY : MS. DEEPA KHARE DATE OF HEARING :04-4-12 DATE OF PRONOUNCEMENT : -4-12 ORDER PER R.K. PANDA, AM THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 25 TH JUNE 2010 OF CIT(A), NASHIK, RELATING TO THE A.Y . 2006-07. 2. THE REVENUE IN THE GROUNDS OF APPEAL HAS CHALLEN GED THE ORDER OF THE CIT(A) IN DELETING THE ADDITION OF ESTIMATED G .P. AND UNRECORDED SALES MADE BY THE A.O. AMOUNTING TO RS. 15,82,209/ -. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF EXTRACTING OIL F ROM COPRA. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTE D THAT THE ELECTRICITY UNITS CONSUMED PER TONE OF COPRA CRUSHED IS COMPA RATIVELY HIGHER THAN THAT OF LAST YEAR. SIMILARLY, YIELD PERCENTAGE TO O HAS FALLEN COMPARED TO THE LAST YEAR. THE A.O NOTED THE COMPARATIVE FIGUR ES OF COPRA CRUSHED CUM ELECTRICITY UNITS CONSUMED AND YIELD PERCENTAGE IN RESPECT OF THE ITA . NO. 1182/PN/2010 BALAJI SEEDS AND PROCESSING PVT. LTD. A.Y. 2006-07 PAGE OF 8 2 CURRENT YEAR AND THE IMMEDIATELY PRECEDING YEAR, TH E DETAILS OF WHICH ARE AS UNDER : F.Y. 04-05 F.Y. 05-06 ELECTRICITY UNITS CONSUMED 128482 158664 COPRA CRUSHED PER UNIT OF ELEC. 9.74 KGS. 8.23 KGS COPRA CRUSHED 1252000 KGS 1306260 KGS OIL PRODUCED 786396 KGS. 764040 KGS OIL CAKE 370747 KGS 407760 KGS YIELD % 62.810 58.49 OIL CAKE 29.610 31.22 TOTAL OUTPUT 92.42% 89.71% THE A.O RECORDED THE STATEMENT OF SHRI. NILESH SURA TWALA, DIRECTOR OF THE ASSESSEE COMPANY U/S 131 OF THE I.T. ACT. THE A.O NOTED THAT IN RESPONSE TO QUESTION NO. 12 AS TO HOW THE AMOUNT OF DAILY OUTPUT OF CRUSHING ASCERTAINED, THE DIRECTOR HAD REPLIED THA T OUTPUT OF ONE/TWO BATCHES OF A LOT ARE VERIFIED ON ACTUAL BASIS AND S UBSEQUENTLY THE OUTPUT IN RESPECT OF THIS LOT IS ADOPTED ACCORDINGLY. FRO M THE ABOVE, A.O WAS OF THE OPINION THAT THE ASSESSEE WAS NOT ACCOUNTING FO R THE OUTPUT ON ACTUAL BASIS. SIMILARLY, ON PERUSAL OF THE CHART C ONTAINING THE MONTHLY YIELD PERCENTAGE, THE A.O NOTED THE YIELD OF OIL IS SHOWN TO BE VARYING BETWEEN 52 % TO 69%. HE OBSERVED THAT IN THE MONT H OF SEPTEMBER, THE YIELD PERCENTAGE IS 53%. ON CARRYING OUT TEST CHECK, HE NOTED THAT IN RESPECT OF OMS COPRA CRUSHED BETWEEN 11TH SEPTEMBER 2005 TO 22 ND SEPTEMBER 2005, THE YIELD PERCENTAGE WAS AROUND 34 % ONLY. ON BEING QUESTIONED BY THE A.O TO EXPLAIN THE REASONS FOR SU CH LOW YIELD WHEN THE YIELD PERCENTAGE OF MS COPRA WAS AROUND 63% IN THE SAME PERIOD, IT WAS SUBMITTED BY THE ASSESSEE THAT THE MATERIAL SENT FO R CRUSHING DURING THE AFORESAID PERIOD WAS OF INFERIOR QUALITY CONTAININ G HIGHER MOISTURE DUE RAINY SEASON. IT WAS FURTHER SUBMITTED THAT THE AB OVE STOCK WAS AFFECTED ITA . NO. 1182/PN/2010 BALAJI SEEDS AND PROCESSING PVT. LTD. A.Y. 2006-07 PAGE OF 8 3 BY RAINS WHICH AFFECTED THE QUANTUM OUTPUT ADVERSE LY AND RESULTING IN INCREASE IN LOSSES. REJECTING THE VARIOUS EXPLANA TIONS GIVEN BY THE ASSESSEE, THE A.O. REJECTED THE BOOK RESULTS AND ESTIMATED THE G.P. AT THE RATE OF 14.52% AND DETERMINED THE SUPPRESSED G .P. AT 596409/-. THE A.O. SIMILARLY DETERMINED THE UNRECORDED SALES OF OIL GENERATED ON ACCOUNT OF SUPPRESSION OF YIELD % AND DETERMINED T HE SUPPRESSED SALES AT RS.9,85,800/-. THUS HE MADE TOTAL ADDITION OF R S.15,82,209/- ON ACCOUNT OF SUPPRESSION OF G.P AND UNRECORDED SALE O F OIL GENERATED OUT OF SUPPRESSION OF YIELD. 4. BEFORE CIT(A), IT WAS SUBMITTED THAT DURING TH E YEAR THE ASSESSEE HAD PURCHASED 1415033 KGS OF RAW MATERIAL (COPRA) F OR RS. 4,30,73,867/- (NET) AS AGAINST 1262786 KGS FOR RS.4,01,84,433/- I N THE IMMEDIATELY PRECEDING YEAR, THE AVERAGE COST BEING RS.30.44 AND RS.31.82 PER KG RESPECTIVELY. IT WAS SUBMITTED THAT THE MAJOR QUANT ITY OF COPRA PURCHASED DURING THE YEAR UNDER REVIEW WAS OF THE LOW AND INF ERIOR QUALITY. THE COMPARATIVE YEAR WISE DATA OF RAW MATERIAL PURCHASE D ALONG WITH PURCHASE RATE SLAB WISE WAS SUBMITTED THE DETAILS OF WHICH ARE AS UNDER. PURCHASE COST PER KG (IN RS.) A.Y. 2006-2007 QTY % AGE (IN KG) A.Y. 2005-2006 QTY % AGE (IN KG) A.Y.2004- 2005 QTY % AGE (IN KG) A.Y. 2003- 2004 QTY % AGE (IN KG) 15-18 33900 2.40 86625 6.59 119460 1 4.26 30160 3.15 19-27 622963 44.02 387926 29.49 165563 19.77 29769 31.06 28-38 461331 32.60 503360 38.27 366728 4 3.79 32130 33.52 39 & ABOVE 296839 20.90 337462 25.66 18 5750 22.18 309330 32.27 TOTAL 1415033 100.00 1315373 100.00 837501 100.00 958490 100.00 ITA . NO. 1182/PN/2010 BALAJI SEEDS AND PROCESSING PVT. LTD. A.Y. 2006-07 PAGE OF 8 4 IT WAS SUBMITTED THAT THE ASSESSEE DURING AY 2006-0 7 HAD PURCHASED 46.42% OF ITS TOTAL PURCHASES OF LOWE R/INFERIOR QUALITY AS AGAINST 36.08%, 34.03% AND 34.21% IN AY 2005-06, 2004-2005 AND 2003-04 RESPECTIVELY FALLING IN THE PURCHASE RATE S LAB OF RS.15-18 TO 19- 27 PER KG. THUS THE INFERIOR/LOWER QUALITY OF RAW MATERIAL CONSUMED MORE POWER AND PRODUCE LOW YIELD OF OUTPUT. 4.1 . THE COMPARATIVE DATA OF RAW MATERIAL PURCHASED AND CONSUMED DURING THE DRY PERIOD/WET PERIOD AND RATE THEREOF WAS AL SO FILED BEFORE THE CIT(A) THE DETAILS OF WHICH ARE AS UNDER : PURCHASES DURING APRIL TO JUNE 05 PRICE RANGE Q UANTITY AMOUNT 15 - 18 0 0 20 - 27 187150 4739954 28 - 38 115074 3860600 39 AND ABOVE 125000 5465100 TOTAL 427224 14065654 PURCHASES DURING JAN TO MARCH 06 PRICE RANGE QUANTITY AMOUNT 15 - 18 20000 346800 20 - 27 38250 935084 28 - 38 109600 3427485 39 AND ABOVE 0 0 TOTAL 167850 4709369 4.2 IT WAS SUBMITTED THAT DUE TO THE LOW QUALITY OF RAW MATERIAL, IT TOOK MORE TIME TO EXTRACT THE OIL AND CONSUMED MORE TIM E TO CRUSH THE COPRA. IT WAS SUBMITTED THAT THE ASSESSEE MAINTAINS FULL DETA ILS OF QUANTITATIVE RECORDS. ALL SALES/PURCHASES AND EXPENSES INCLUDI NG ELECTRICITY EXPENSES ARE SUPPORTED BY BILLS AND VOUCHERS. THE ACCOUNTS AR E AUDITED AND NO DEFECTS WERE POINTED OUT BY THE AUDITORS AND THERE WAS NO CHANGE IN THE METHOD OF ACCOUNTING REGULARLY FOLLOWED BY THE ASSESSEE COMPA NY. IT WAS SUBMITTED ITA . NO. 1182/PN/2010 BALAJI SEEDS AND PROCESSING PVT. LTD. A.Y. 2006-07 PAGE OF 8 5 THAT THE A.O MERELY ON PRESUMPTION AND SURMISES RE JECTED THE BOOK RESULT WHICH IS NOT JUSTIFIED. 5. BASED ON VARIOUS DETAILS REGARDING THE ELECTRIC ITY CONSUMED AND QUALITY OF RAW MATERIAL FILED BY THE ASSESSEE, THE LD CIT( A) CALLED FOR A REMAND REPORT FROM THE A.O. THE A.O. AFTER MAKING VARIOU S ENQUIRIES SUBMITTED THE REMAND REPORT THAT LOW QUALITY OF RAW MATERIAL WAS USED DURING THE YEAR AS COMPARED TO THE IMMEDIATELY PRECEDING ASSESSMENT YE AR. BASED ON THE REMAND REPORT OF THE A.O AND SUBMISSION OF THE ASS ESSEE, THE LD CIT(A) DELETED BOTH THE ADDITION I.E. ADDITION ON ACCOUNT OF LOW G.P AND ADDITION ON ACCOUNT OF SUPPRESSED SALES BY HOLDING AS UNDER : 6. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDE R AND REMAND REPORT OF THE A.O. AS ALSO THE SUBMISSIONS OF THE A PPELLANT ON THE ISSUE UNDER APPEAL. THE A.O. CONSIDERED THE ADDITIONS MA INLY ON THE SUSPICION THAT THE CONSUMPTION OF POWER WAS VERY HIGH AND THE YIELD OF OIL AND CAKE WAS LOW COMPARED TO THE EARLIER PERIOD. THE A.O. D ID NOT ACCEPT THE APPELLANTS EXPLANATION REGARDING THE HIGHER ELECTR ICITY CONSUMPTION DUE TO LOW QUALITY OF RAW MATERIAL USED. HOWEVER, THE A.O. DECIDED TO ADOPT THE YIELD PERCENTAGE OF OIL @ 60% AND CRUSHING OF C OPRA PER UNIT OF ELECTRICITY AT 9 KGS. APPLYING HIS OWN THOUGHT/MIN D. AS CAN BE SEEN FROM THE ASSESSMENT ORDER, THE YIELD OF OIL DURING THE F.Y. 2004-2005 WAS 62.81% COMPARED TO 58.49% DURING THE PERIOD UNDER C ONSIDERATION. SIMILARLY, THE TOTAL OUTPUT IF @ 92.42% DURING THE F.Y. 2004-2005 COMPARED TO 89.71% DURING THE PERIOD UNDER CONSIDER ATION. THUS, THE A.O. ACCEPTED IN PRINCIPLE THAT THERE CANNOT BE A NY CONSTANT CONSUMPTION OF ELECTRICITY OR UNIFORM YIELD OVER TH E PERIODS. HOWEVER, THE A.O. DECIDED TO APPLY HIS OWN FORMULA REJECTING THE EXPLANATION OFFERED BY THE APPELLANT. THE A.O. ACCORDINGLY RE WORKED THE G.P. PERCENTAGE AND UNRECORDED SALES APPLYING MATHEMATIC AL FORMULA IN VIEW OF THE NEW FIGURES ESTIMATED BY HIM. THUS, THE A.O . MADE AN ADDITION OF RS.5,96,409/- ON ACCOUNT OF LOW G.P. AND RS.9,85,80 0/- ON ACCOUNT OF UNRECORDED SALES. DURING THE REMAND PROCEEDINGS, T HE APPELLANT SUBMITTED VARIOUS DETAILS REGARDING THE ELECTRICIT Y CONSUMPTION AND THE QUALITY OF RAW MATERIAL WHICH WERE FORWARDED TO THE A.O. FOR RE- ITA . NO. 1182/PN/2010 BALAJI SEEDS AND PROCESSING PVT. LTD. A.Y. 2006-07 PAGE OF 8 6 EXAMINATION OF THE SAME AND TO SUBMIT A REPORT. T HE A.O. IN HIS REPORT MADE NECESSARY ENQUIRIES AND FOUND THAT LOW QUALITY OF RAW MATERIAL WAS USED AS COMPARED TO THE IMMEDIATELY PRECEDING Y EAR. IT WAS ALSO FOUND THAT THE APPELLANT WAS MAINTAINING STOCK INV ENTORY AT THE END OF THE YEAR EVEN THOUGH THERE WAS NO DAY-TO-DAY STOCK RECORDS MAINTAINED AND THE BOOKS OF ACCOUNTS WERE AUDITED. ALSO, NO D ISCREPANCIES WERE NOTICED IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE A.O. THE A.O. ALSO FOUND OUT THAT THE APPELLANT USED PRESERVATIVE MA TERIAL BECAUSE OF LOW QUALITY OF RAW MATERIAL USED DURING THE PERIOD UNDE R CONSIDERATION AND THERE WAS NO SUCH CONSUMPTION OF THE SAID MATERIAL IN THE EARLIER YEARS. THERE IS ALSO NO DIRECT EVIDENCE ON RECORD TO SHOW THAT THE G.P. WAS SUPPRESSED AND THE APPELLANT MADE ANY UNACCOUNTED S ALES. IN VIEW OF THE FACT THAT THE APPELLANT IS ABLE TO SATISFY REAS ONABLY THAT LOW QUALITY OF RAW MATERIAL WAS USED DURING THE PERIOD UNDER CONS IDERATION, THERE WAS NO JUSTIFICATION FOR ESTIMATING ANY PARTICULAR PERC ENTAGE FOR THE PURPOSE OF ARRIVING AT THE YIELD THEREBY RE-COMPUTING THE G.P. AND UNRECORDED SALES. IN VIEW OF THIS, THE ADDITION OF RS.5,96,409/- IS D ELETED AND THE A.O IS DIRECTED ACCORDINGLY. AS REGARDS UNRECORDED SALES OF RS.9,85,800/- ARRIVED BY THE A.O. IS ALSO ON FALSE PRESUMPTION SI NCE THE FIGURE IS ARRIVED AT BY APPLYING THE MATHEMATICAL FORMULA BY ADOPTING ESTIMATED YIELD @ 60% AS PER THOUGHT AND MIND OF THE A.O. THEREFOR E, THE ADDITION OF UNRECORDED ESTIMATED BY THE A.O. AT RS.9,85,800/- S ALES ALSO DOES NOT SURVIVE AND HENCE DELETED. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE REVE NUE IS IN APPEAL BEFORE US. 6. THE LD. D.R. STRONGLY RELIED ON THE ORDER OF THE A.O. THE LD COUNSEL FOR THE ASSESSE, ON THE OTHER HAND, WHILE SUPPORTING T HE ORDER OF THE CIT(A) DREW THE ATTENTION OF THE BENCH TO THE VOLUMINOUS PAPER BOOK FILED AND SUBMITTED THAT ASSESSEE MAINTAINS PROPER RECORDS, ACCOUNTS AR E AUDITED AND NO DEFECTS WERE POINTED OUT BY THE AUDITORS. THERE IS NO EVID ENCE WITH THE A.O THAT THE ASSESSEE HAS MADE UNACCOUNTED SALES. SO FAR AS THE ADDITION ON ACCOUNT OF LOW G.P. IS CONCERNED, SHE SUBMITTED THAT THE A.O. IN THE REMAND REPORT HAS ADMITTED THAT ASSESSEE HAS USED INFERIOR QUALITY OF RAW MATERIAL. SHE ITA . NO. 1182/PN/2010 BALAJI SEEDS AND PROCESSING PVT. LTD. A.Y. 2006-07 PAGE OF 8 7 ACCORDINGLY SUBMITTED THAT ORDER OF THE CIT(A) BE UPHELD AND GROUNDS RAISED BY THE REVENUE SHOULD BE DISMISSED. 7. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE A.O AND CIT(A) AND THE PAPER BOOK FIL ED ON BEHALF OF THE ASSESSEE. WE FIND THE A.O IN THE INSTANT CASE HAS MADE THE ADDITION O N ACCOUNT OF LOW G.P. ON THE GROUND THAT THE POWER CONSUMED DURING THE YEAR WAS VERY HI GH AS COMPARED TO THE PRECEDING ASSESSMENT YEAR. SIMILARLY, DUE TO LOW YIELD OF OI L AND CAKE AS COMPARED TO THE PRECEDING ASSESSMENT YEAR, THE A.O PRESUMED THAT TH ERE IS SUPPRESSION OF SALES. THE A.O THUS MADE ADDITION OF RS. 5,96,409/- ON ACCOUNT OF LOW G.P. AND RS. 9,85,800/- ON ACCOUNT OF UNRECORDED SALES. WE FIND THAT DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS EXPLAINED THE REASONS FOR HIGHER CONSUMPTION OF POWER BEING INFERIOR QUALITY OF RAW MATERIAL. ALTHOUGH THE A.O REJEC TED THE SAME DURING THE ASSESSMENT PROCEEDINGS, HOWEVER, WE FIND THE A.O IN HIS REMA ND REPORT AFTER MAKING NECESSARY ENQUIRIES HAD REPORTED THAT LOW QUALITY OF RAW MATE RIAL WAS USED AS COMPARED TO THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. SO FAR AS T HE ISSUE RELATING TO SUPPRESSION OF SALES IS CONCERNED, WE FIND NOTHING HAS BEEN BROUGH T ON RECORD TO SUGGEST THAT ASSESSEE HAS RECEIVED ANY EXTRA MONEY OVER AND ABOVE WHAT HA S BEEN SHOWN IN THE AUDITED BOOKS OF ACCOUNT. THE LD. D.R. ALSO COULD NOT CONT ROVERT THE FINDINGS GIVEN BY THE LD CIT(A). SINCE THE CIT(A) HAS DECIDED THE ISSUE ON THE BASIS OF REMAND REPORT OF THE A.O AND SINCE THE LD. D.R. WAS UNABLE TO POINT OUT ANY MISTAKE IN THE ORDER OF THE CIT(A), THEREFORE, IN ABSENCE OF ANY CONTRARY MATERIAL BRO UGHT TO OUR NOTICE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) AND ACCORDINGL Y, UPHOLD THE SAME. THE GROUNDS BY THE REVENUE ARE ACCORDINGLY DISMISSED. 8. IN THE RESULT APPEAL FILED BY THE REVENUE IS DIS MISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 26TH APRIL, 2012. SD/- SD/- ( I.C. SUDHIR ) JUDICIAL MEMBER ( R.K. PANDA ) ACCOUNTANT MEMBER PUNE, DATED THE 26TH APRIL, 2012 ITA . NO. 1182/PN/2010 BALAJI SEEDS AND PROCESSING PVT. LTD. A.Y. 2006-07 PAGE OF 8 8 US COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT II, NASHIK 4. THE CIT(A)-II, NASHIK 5. THE D.R. A BENCH, PUNE 6. GUARD FILE /-TRUE COPY-/ BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE