S.P.Mani and Mohan Dairy, Erode V. ACIT, Erode

ITA 1810/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8802 (ITAT-CHENNAI)
• Duration Of Justice: 1 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 13-07-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 15-06-2016
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: N C RAVIKRISHNAN
• Keywords: Cost of acquisition
• Section: 133A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI , . ! , ' !# $ [ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ] ./ I.T.A.NO.1810/MDS/2016 / ASSESSMENT YEAR : 2012-13 M/S S.P. MANI AND MOHAN DAIRY 84, JEEVAANTHAM STREET KOLLAMPALAYAM ERODE 638 002 VS. THE ASSTT. COMMISSION ER OF INCOME-TAX CIRCLE I, ERODE [PAN AAKFS 5133 J] ( %& / APPELLANT) ( '(%& /RESPONDENT) / APPELLANT BY : SHRI N.C RAVIKRISHNAN, ADVOCATE /RESPONDENT BY : SHRI A.V SREEKANTH, JCIT / DATE OF HEARING : 13 - 07 - 2015 / DATE OF PRONOUNCEMENT : 05 - 08 - 2016 ) / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE IS AGAINST THE OR DER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-3, COIMBATORE DATED 28.3.2016 FOR ASSESSMENT YEAR 2012-13. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 02. THE ORDER OF THE COMMISSIONER OF INCOME TA X (APPEALS) IN UPHOLDING THE ADDITIONS MADE ON CREDITORS FOR THE C URRENT YEAR IN RESPECT OF THE CREDITORS DETAILS FOUND AT THE TIME OF SURVEY IN THE SUBSEQUENT ASSESSMENT YEAR I.E., FY 2013-14, TO ARR IVE AT A BELIEF ITA NO. 1810/16 :- 2 -: THAT THE SAME MODUS OPERANDI HAS BEEN FOLLOWED IN T HE EARLIER YEAR IN GENERATION OF UNACCOUNTED CASH IS NOT WARRA NTED. 03. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOLDING THE DISALLOWANCE BY THE LEARNED ASSESSING OFFICER THAT, DESPITE THE HUGE VOLUME OF TRANSACTIONS, THE APPELL ANT WOULD BE ABLE TO GIVE ALL THE DETAILS CALLED FOR IN SHORT NO TICE. HOWEVER, THE ADDITIONS BASED ON THE STATEMENTS DURING THE SURVEY IN SUBSEQUENT YEAR CANNOT BE THE BASIS OF ADDITION ON SURMISES. 04 . THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO H AVE APPRECIATED THE FACT THAT A STATEMENT GIVEN AT THE TIME OF SURVEY U/S 133A CANNOT BE A BASIS FOR MAKING AN ADDITION A S HELD BY THE HONORABLE MADRAS HIGH COURT IN THE CASE OF ''C1T VS. KADAR KHAN SON. 3. FACTS OF THE CASE ARE THAT AT THE TIME OF ASSESSMEN T, THE ASSESSING OFFICER OBSERVED THAT THERE WAS OUTSTANDI NG BALANCE TOWARDS PAYMENT OF PURCHASE OF MILK AT ` 10,92,59,222/31 AS ON 31.3.2012 AS AGAINST THE OPENING BALANCE AS ON 1.4. 2011 OF ` 4,33,62,85 AS ON 1.4.2011. FURTHER, THERE WAS A SU RVEY U/S 133A OF THE ACT AT THE BUSINESS PREMISES OF THE ASSESSEE O N 6.11.2013. IN RESPONSE TO QUESTION NO.24, THE PARTNER OF THE ASS ESSEE-FIRM, SHRI RAMASAMY STATED THAT THE ASSESSEE HAS BOOSTED UP THE CREDITORS AND AGREED TO OFFER A SUM OF ` 2 CRORES AS ADDITIONAL INCOME AND PAY TAXES THEREON. FURTHER, EVEN AFTER GIVING SUFFICIE NT OPPORTUNITY TO THE ASSESSEE, THE ASSESSEE HAS NOT FURNISHED THE DETAI LS OF MILK SUPPLIERS AND THEREFORE, THE CREDITORS CANNOT BE VERIFIED AT THE END OF THE ASSESSING OFFICER. THE ASSESSEE FILED A LETTER DA TED 19.11.2013 AFTER THE SURVEY BEFORE THE DDIT STATING THAT NON-GENUIN E CREDITORS LIST (MILK SUPPLIERS) FOR FINANCIAL YEAR 2012-13 WAS `1,48,15,000/- AND ITA NO. 1810/16 :- 3 -: FROM 1.4.2013 TO 6.11.2013 WAS ` 2,05,98,000/- AND AGREED TO ADMIT THE INCOME IN THE RESPECTIVE PERIODS VIDE THE IR SWORN STATEMENT GIVEN BEFORE THE REVENUE AUTHORITIES. THE ASSESSE E HAS OFFERED CERTAIN WRONG FIGURES AGAINST EACH COLLECTION AGENT AS BOGUS CREDITOR. THE ASSESSEE HAS NOT EXPLAINED HOW THIS IS WORKED OUT OR THE NAMES OF THE ACTUAL CREDITORS WERE NOT FILED. THE ASSES SING OFFICER AFTER GOING THROUGH THE ABOVE STATEMENT ASSESSED THE OVER STATED PURCHASE PRICE OF THE MILK AT ` 2/- PER LITRE. IN OTHER WORDS, THE ASSESSEE PURCHASED TOTAL MILK WORTH ` 1,17,41,76,667/- AND THE INCREASE IN CREDITORS WORKS OUT TO 5.61% OF THE PURCHASES. IN OTHER WORDS, ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE H AS INFLATED THE PURCHASE COST OF MILK AT AROUND 5% OF THE TOTAL PUR CHASE. THUS, HE ESTIMATED THE INFLATED PURCHASES BY THE ASSESSEE A T ` 5,87,08,833/- AGAINST WHICH THE ASSESSEE WENT IN APPEAL BEFORE T HE CIT(A). THE CIT(A) OBSERVED THAT SUBSEQUENT SURVEY DURING THE FINANCIAL YEAR 2013-14 REVEALS THE MODUS OPERANDI OF GENERATION OF UNACCOUNTED CASH BY INFLATING THE PURCHASE COST OF MILK. AS SU CH, THERE IS NO EVIDENCE OF PROVING THE CREDITS STANDING IN THE NAM E OF DIFFERENT PARTIES AND THE ASSESSEE HAS NOT FURNISHED ANY CON FIRMATION FROM VARIOUS CREDITORS. THUS HE CONFIRMED THE ABOVE ADD ITION AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE US. ITA NO. 1810/16 :- 4 -: 4. THE LD. AR SUBMITTED THAT THE ASSESSING OFFICER NEV ER DISPUTED THE BOOKS OF ACCOUNT OF THE ASSESSEE AS N OT RELIABLE OR VERIFIABLE, THEREFORE, ACCEPTED THE BOOKS OF ACCOUN T AS CORRECT. THE ASSESSING OFFICER PRECLUDED FROM ESTIMATING THE INC OME OF THE ASSESSEE BY HOLDING THAT PURCHASE WAS INFLATED WITH OUT REJECTING THE BOOKS OF ACCOUNT. ACCORDING TO THE LD. AR, THE AS SESSEE PURCHASES MILK IN SMALL QUANTITY FROM LARGE NUMBER OF FARMERS AND THE ASSESSEE WAS MAKING PAYMENTS TO THE MILK VENDORS ON WEEKLY B ASIS AND IT IS NOT POSSIBLE TO PROCURE CONFIRMATION LETTERS FROM SUCH LARGE NUMBER OF MILK SUPPLIERS AND THEY ARE ILLITERATE VILLAGE PEOPLE WH O ARE NOT HAVING ANY KNOWLEDGE OF ACCOUNTS AND THEY CANNOT CONFIRM WHAT IS THE AMOUNT OUTSTANDING FROM THE HANDS OF THE ASSESSEE AND THE ASSESSEE HAS TO MAINTAIN THE BOOKS OF ACCOUNT AND PAY THE MONEY TO THEM. FURTHER, HE SUBMITTED THAT THE SURVEY CONDUCTED AFTER THE CL OSE OF THE FINANCIAL YEAR WHICH IS ON 6.11.2013 CANNOT BE RELIED UP ON F OR THE PURPOSE OF ASSESSMENT OF ASSESSMENT YEAR 2012-13 WHEREAS THE P REVIOUS YEAR ENDED ON 31.3.2012. FURTHER HE SUBMITTED THAT THER E IS A JURISDICTIONAL HIGH COURT JUDGMENT IN THE CASE OF CIT VS S. KHADER KHAN SON, 300 ITR 157 WHEREIN HELD THAT SEC. 133A DOES NOT EMPOWE R ANY INCOME TAX AUTHORITY TO EXAMINE ANY PERSON ON OATH, HENCE, SUCH STATEMENT HAS NO EVIDENTIARY VALUE AND ANY ADMISSION MADE DUR ING SUCH STATEMENT GIVEN BY ITSELF BE MADE THE BASIS FOR ADD ITION. HE ALSO ITA NO. 1810/16 :- 5 -: SUBMITTED THAT THE SAID JUDGMENT WAS ALSO CONFIRMED BY THE SUPREME COURT IN 352 ITR 480. ACCORDING TO HIM WHEN THE SU RVEY CONDUCTED DURING THE FINANCIAL YEAR 2011-12 CANNOT BE RELIED UPON FOR THE PURPOSE OF ASSESSMENT MADE THE SURVEY STATEMENT C OLLECTED AFTER THE CLOSE OF THE ASSESSMENT YEAR COULD NOT BE RELIE D UPON FOR THE PURPOSE OF EARLIER ASSESSMENT. DE HORSE TO THE ABO VE, HE SUBMITTED THAT EVEN IF ONE COMPARE THE GROSS PROFIT RATE OF T HE ASSESSEE FOR THE EARLIER ASSESSMENT YEAR WHICH IS AT PAR, THERE IS N O QUESTION OF ANY ESTIMATION OF INFLATED PURCHASE COST TOWARDS MILK P URCHASES. THE LD. REPRESENTATIVE SUBMITTED THAT THE DETAILS OF THE GR OSS PROFIT RATE FOR HE EARLIER TWO ASSESSMENT YEARS AND SUBSEQUENT TO TWO ASSESSMENT YEARS. 5. ON THE OTHER HAND, THE LD. DR ARGUED THAT IN THIS C ASE, THE ASSESSING OFFICER MADE DETAILED ENQUIRY AND HAD GIV EN ELABORATE REASONS OR MAKING ADDITION TOWARDS INFLATED PURCHAS E COST OF MILK. THE ASSESSING OFFICER ESTABLISHED THAT THE ASSESSE E IS IN THE HABIT OF INFLATING THE PURCHASE COST OF MILK. THIS WAS ALSO EVIDENCED BY THE SWORN STATEMENT RECORDED BY THE INCOME TAX AUTHORIT IES U/S 133A OF THE ACT ON 6.11.2013. HE FURTHER SUBMITTED THAT IN SPITE OF GIVING AMPLE OPPORTUNITY TO THE ASSESSEE, THE ASSESSEE F AILED TO SUBMIT ANY CONFIRMATION LETTER FROM THE MILK VENDORS. THAT BE ING SO, THE ASSESSEE SHOULD HAVE ACCEPTED THE DECLARATION MADE BY THE ASSESSEE ITA NO. 1810/16 :- 6 -: DURING THE COURSE OF SURVEY. THE GROSS PROFIT RATE OF THE PRESENT ASSESSMENT YEAR IS AT PAR WITH EARLIER ASSESSMENT Y EARS CANNOT BE A CONCLUSIVE EVIDENCE REGARDING THE GENUINENESS OF TH E CREDITORS APPEARING IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE ASSESSEE IN THIS CASE IS IN THE HABIT OF INTRODUCING BOGUS CRED ITORS IN THE BOOKS OF ACCOUNT, THEREFORE, NO EVIDENTIARY VALUE COULD BE G IVEN TO THE ARGUMENT OF THE ASSESSEE. HE FINALLY RELIED ON TH E ORDERS OF THE LOWER AUTHORITIES. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALSO PERUSED THE MATERIAL ON RECORD. ADMITTEDLY, SURVEY U/S 13 3A OF THE ACT WAS CARRIED OUT BY THE DEPARTMENT ON 6.11.2013. THE PR EVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR WAS ENDED ON 31.3.2 012. IN OTHER WORDS, THE RELEVANT FINANCIAL YEAR FOR THIS ASSESSM ENT YEAR IS 2011-12. THE SURVEY CONDUCTED U/S 133A WAS NOT RESULTED IN UNEARTHING ANY EVIDENCE RELATING TO INFLATION OF PURCHASE COST OF MILK FOR THE RELEVANT ASSESSMENT YEAR. FURTHER, THE ASSESSING OFFICER MA DE ESTIMATION OF INFLATED PURCHASE ON THE REASON THAT THE ASSESSEE HAS NOT FURNISHED THE CONFIRMATION LETTERS FROM THE CREDITORS. THE ASSESSEE PLEADED BEFORE THE ASSESSING OFFICER THAT THERE ARE LARGE N UMBER OF MILK VENDORS WHO WERE FORM VILLAGES AND THEY EXACTLY NOT MAINTAINED ANY BOOKS OF ACCOUNT TO SHOW THAT WHAT EXACT AMOUNT WAS OUTSTANDING TO THEM FOR THE SUPPLY OF MILK. THE ASSESSEE HAS CAT EGORICALLY STATED ITA NO. 1810/16 :- 7 -: THAT IT IS MAINTAINING COLLECTION CENTRES AND PAYME NTS ARE MADE TO THE FARMERS FROM THERE. THERE IS NO THIRD PARTY EVIDEN CE TOWARDS PURCHASE COST OF MILK LEGALLY. PAYMENTS WERE MADE ON THE BA SIS OF OWN VOUCHERS WHICH ARE MAINTAINED BY THE ASSESSEE. TH OUGH THE ASSESSING OFFICER ESTIMATED THE INFLATION OF PURCHA SE, HE WAS NOT ABLE TO CO-RELATE THOSE INFLATION OF PURCHASES DURING TH E ASSESSMENT YEAR UNDER CONSIDERATION. THUS, THE ESTIMATED INFLATION OF PURCHASES IS BASED ON THE SUBSEQUENT YEARS FIGURES. IN OUR OPI NION, THE INFORMATION GATHERED SUBSEQUENT TO THE ASSESSMENT Y EAR UNDER CONSIDERATION CANNOT BE BASIS FOR ESTIMATION OF INF LATION OF PURCHASES FOR THE EARLIER ASSESSMENT YEAR. DE HORSE, WITHOUT PREJUDICE TO THE FACT THAT EVEN THE STATEMENT RECORDED DURING THE CO URSE OF SURVEY HAVE NO EVIDENTIARY VALUE. ANY ADMISSION DURING SU CH STATEMENT CANNOT BY ITSELF BE BASIS FOR ADDITION. BEING SO, IN OUR OPINION, THE ADDITION ON THE BASIS OF STATEMENT COLLECTED DURING SURVEY CANNOT BE BASIS FOR ADDITION. 7. BEFORE US, THE ASSESSEE PRODUCED DETAILS OF SALES, PURCHASE, GROSS PROFIT FOR THESE ASSESSMENT YEARS AS UNDER: A.Y 2010-11 2011-12 2012-13 2013-14 2014-15 G.P. RATIO 15.42 14.95 14.03 17.14 17.03 8. AS SEEN FROM THE ABOVE, THERE IS A DECLINE IN GROSS PROFIT RATE AS COMPARED TO ASSESSMENT YEAR 2010-11, 2011-12. T HE ASSESSEE IS ITA NO. 1810/16 :- 8 -: NOT ABLE TO EXPLAIN DECLINE ON THE GROSS PROFIT AT 14.03% AS COMPARED TO EARLIER ASSESSMENT YEARS. IN OUR OPINION, TO SE TTLE THE DISPUTE, IT IS APPROPRIATE TO TAKE AVERAGE GROSS PROFIT RATE OF AS SESSMENT YEARS 2010-11, 2011-12 AND 2012-13 AND TO ESTIMATE THE IN COME OF THE ASSESSEE ON THE BASIS OF AVERAGE GROSS PROFIT RATE OF LAST TWO ASSESSMENT YEARS SINCE THE PAST HISTORY IS THE BES T YARDSTICK TO ESTIMATE THE INCOME. ACCORDINGLY, WE DIRECT THE AS SESSING OFFICER TO RECOMPUTE THE INCOME OF THE ASSESSEE BY APPLYING T HE AVERAGE GROSS PROFIT RATE OF IMMEDIATE EARLIER TWO ASSESSMENT YEA RS ALONGWITH PRESENT ASSESSMENT YEAR AND DECIDE THE ISSUE AFRESH . THE ASSESSEE SHALL PROVIDE DETAILS OF GROSS PROFIT RATE OF ALL T HE TWO IMMEDIATE EARLIER ASSESSMENT YEARS TO THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL CONSIDER THE SAME AND DECIDE THE ISSU E IN ACCORDANCE WITH OUR FINDINGS AS ABOVE. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH AUGUST 2016, AT CHENNAI. SD/- SD/- ( . ! ) (G. PAVAN KUMAR) ' / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER !' / CHENNAI #$ / DATED: 5 TH AUGUST, 2016 RD ITA NO. 1810/16 :- 9 -: $%&& '(&)( / COPY TO: & 1 . / APPELLANT 4. & * / CIT 2. / RESPONDENT 5. (+,& - / DR 3. & *&./ / CIT(A) 6. ,0&1 / GF