Ganpati Foods Bye Pass, Patran V. The Asstt Commissioner of Income Tax, Sangrur

ITA 1405/CHANDI/2016

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8625 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 16-12-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Notional interest

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, A, CHANDIGARH , . '.., # $, %& BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ./ ITA NO. 7/CHD/2017 / ASSESSMENT YEAR : 2013-14 THE ACIT, CIRCLE, SANGRUR M/S GANPATI FOODS, BYE PASS ROAD, PATRAN ./PAN NO: AAHFG6152G / APPELLANT /RESPONDENT ./ ITA NO. 1405/CHD/2016 / ASSESSMENT YEAR : 2013-14 M/S GANPATI FOODS, BYE PASS ROAD, PATRAN THE ACIT, CIRCLE, SANGRRUR ./PAN NO: AAHFG6152G / APPELLANT /RESPONDENT ! /ASSESSEE BY : SMT.CHANDRAKANTA, SR.DR ' ! / REVENUE BY : SH. DEEPAK AGGARWAL, ADVOCATE # $ % /DATE OF HEARING : 13.12.2018 &'() % / DATE OF PRONOUNCEMENT : 13.12. 2018 %'/ ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE CAPTIONED ARE THE CROSS APPEALS, ONE BY THE ASS ESSEE AND OTHER BY THE REVENUE AGAINST THE ORDER DATED 26.10.2016 OF THE COMMISSIONER OF INCOME TAX (APPEALS), PATIALA [HEREINAFTER REFERRED TO AS CIT(A)]. 2. THERE IS ONE COMMON GROUND IN BOTH THE APPEALS R ELATING TO ESTIMATION OF GROSS PROFIT (GP) FOR THE PURPOSE OF TAXATION FROM THE BUSINESS ACTIVITY OF THE ASSESSEE. THE ASSESSING OF FICER REJECTED THE BOOKS ITA NOS. 7/CHD/2017 & 1405/CHD/2016- M/S GANPATI FOODS, PATARAN 2 OF ACCOUNT OF THE ASSESSEE FOR THE YEAR UNDER CONS IDERATION OBSERVING THAT THERE WAS A VARIATION IN ELECTRIC CONSUMPTION VIZ A VIZ PRODUCTION OF THE ASSESSEE. THERE WERE SOME INSTANCES NOTICED BY THE ASSESSING OFFICER OF VALUING THE CLOSING STOCK AT A HIGHER RATE AND FURT HER THE ASSESSING OFFICER ALSO FOUND DISCREPANCY IN RELATION TO CERTAIN EXPEN DITURE INCURRED BY THE ASSESSEE ON PURCHASE OF CERTAIN ITEMS. SINCE THE AS SESSEE COULD NOT FURNISH THE RELIABLE EVIDENCES AND CONVINCING EXPLANATION I N THIS RESPECT, HE THEREFORE, ESTIMATED THE OF GP RATE OF THE ASSESSEE @ 16.62% OF THE TURN OVER ON THE BASIS OF GP RATE AS DECLARED BY THE ASS ESSEE IN THE SUBSEQUENT ASSESSMENT YEAR. 3. BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED TH AT THE GP RATIO DIFFERS FROM YEAR TO YEAR. THE ASSESSEE GAVE EXPLAN ATION ALSO REGARDING VARIATION IN THE ELECTRICITY CONSUMPTION, VALUATION OF THE CLOSING STOCK ETC. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND ALSO CONSIDERING THE PAST GP RATE DECLARED BY THE ASSES SEE ESTIMATED THE GP AT 12%. NOW, BOTH THE ASSESSEE AND REVENUE HAVE COME UP IN APPEAL AGITATING THE ABOVE FINDINGS OF THE CIT(A). 4. THE PLEA OF THE DEPARTMENT IS THAT THE LD. CIT(A ) SHOULD NOT HAVE DISTURBED / REDUCED THE GP RATE ESTIMATED BY THE A SSESSING OFFICER AT 16.62 % OF THE TOTAL TURN OVER, WHEREAS, THE PLEA OF THE COUNSEL FOR THE ASSESSEE IS THAT CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, T HE LD. CIT(A) SHOULD HAVE ESTIMATED THE GP AT A MUCH LOWER RATE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAV E ALSO GONE THROUGH THE RECORD. WE HAVE GONE THROUGH THE GP RATES OF T HE ASSESSEE IN THE PAST ITA NOS. 7/CHD/2017 & 1405/CHD/2016- M/S GANPATI FOODS, PATARAN 3 AND SUBSEQUENT YEARS. IN THE IMMEDIATELY SUBSEQUENT ASSESSMENT YEAR, GP RATE SHOWN BY THE ASSESSEE WAS AT 14.23%, WHEREAS, IN THE IMMEDIATELY PRECEDING YEAR, THE GP RATE WAS AT RS. 8.96%. DURI NG THE YEAR THE ASSESSEE DECLARED GP RATE A 11.65% WHICH WAS REJECTED BY THE ASSESSING OFFICER. CONSIDERING THE VARIATION IN THE GP RATE AND THE EX PLANATION OF THE ASSESSEE THAT PRODUCTION IN A MONTH CANNOT BE ENT IRELY ATTRIBUTABLE TO THE CONSUMPTION OF THE ELECTRICITY BUT THERE ARE VARIOU S OTHER FACTS INVOLVED WHICH HAVE EFFECT ON THE PRODUCTION AND FURTHER THA T THE ASSESSEE IS NOT ONLY ENGAGED IN THE RICE PRODUCTION MILLING OF ITS OWN BUT ALSO IS INVOLVED IN RICE MILLING FOR THE GOVERNMENT AGENCIES FOR WHI CH THE ELECTRICITY IS ALSO CONSUMED AND THAT ALL THE RICE PRODUCTION CA NNOT BE CONSIDERED PRODUCTION OF THE ASSESSEE, BUT THE ASSESSEE WAS O NLY EARNING COMMISSION INCOME THERE UPON AND FURTHER CONSIDERING THE OVERA LL FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW, THAT THE INTERE ST OF JUSTICE WILL BE SERVED IF THE GP RATE FOR THE YEAR UNDER CONSIDERAT ION IS DIRECTED TO BE TAKEN AT 12.50%. WE ORDER ACCORDINGLY, 6. APART FROM THE ABOVE ISSUE, THE ASSESSEE HAS T AKEN / AGITATED THE CONFIRMATION ON ADDITION OF RS. 2,04,000/- ON ACCOU NT OF NON-CHARGING OF INTEREST FROM UN-RELATED PARTIES. THE LD. COUNSEL FOR THE ASSESSEE HAS DEMONSTRATED BEFORE US THAT THE AFORESAID MEAGER AM OUNT OF RS. 2.04 LACS WAS ADVANCED BY THE ASSESSEE OUT OF HIS OWN FUNDS A ND NO INTEREST BEARING FUNDS WERE USED FOR THE AFORESAID ADVANCES. HENCE, THERE WAS NO JUSTIFICATION FOR COMPUTING THE NOTIONAL INTEREST B Y THE ASSESSING OFFICER. THE LD. DR HAS ALSO NOT DISPUTED THAT THE ASSESSE E WAS POSSESSED OF OWN SUFFICIENT OWN FUNDS TO MAKE THE AFORESAID ADVANCES . IN VIEW OF THIS, WE DO NOT FIND ANY JUSTIFICATION ON THE PART OF THE LO WER AUTHORITIES IN MAKING ITA NOS. 7/CHD/2017 & 1405/CHD/2016- M/S GANPATI FOODS, PATARAN 4 THE AFORESAID DISALLOWANCE OF RS. 2.04 LACS ON ACCO UNT OF DISALLOWANCE OF INTEREST OUT OF EXPENDITURE. THIS GROUND OF THE AP PEAL OF THE ASSESSEE IS HEREBY ALLOWED. NO OTHER GROUND IS PRESSED OR ARGU ED. 7. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A ND ASSESSEE ARE TREATED AS PARTLY ALLOWED. ORDER DICTATED AND PRONOUNCED IN THE OPEN COURT IMM EDIATELY ON COMPLETION OF HEARING ON 13.12.2018. SD/- SD/- ( ' . . , # $ / B.R.R. KUMAR) %& / ACCOUNTANT MEMBER ( / SANJAY GARG ) / JUDICIAL MEMBER DATED : 13. 12.2018 .. '+ ,- .- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. # / / CIT 4. # / ( )/ THE CIT(A) 5. -01 2 , % 2 , 34516 / DR, ITAT, CHANDIGARH 6. 15 7$ / GUARD FILE '+ # / BY ORDER, 8 ' / ASSISTANT REGISTRAR