ACIT Circle 2, Madurai V. Shri Ramalinga Mills Limited, Aruppukottai

ITA 1899/CHNY/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5001 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 04-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAILENDRA MAMIDI PR

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: CHENNAI , . , ! BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER , AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.1899/MDS/2017 /ASSESSMENT YEAR: 2009-10 THE ASST. COMMISSIONER OF INCOME- TAX, CORPORATE CIRCLE-2, MADURAI-625 002. VS. M/S.SHRI RAMALINGA MILLS LTD., 212, RAMASAMY NAGAR, ARUPPUKOTTAI-626 159. [PAN: AADCS 8769 A] ( % /APPELLANT) ( &'% /RESPONDENT) CROSS - OBJECTION NO. 143 /MDS/20 17 /ASSESSMENT YEAR: 2009-10 M/S.SHRI RAMALINGA MILLS LTD., 212, RAMASAMY NAGAR, ARUPPUKOTTAI-626 159. [PAN: AADCS 8769 A] VS. THE ASST. COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-2, MADURAI-625 002. ( % /APPELLANT) ( &'% /RESPONDENT) ASSESSEE BY : NONE DEPARTMENT BY : MR.SAILENDRA MAMIDI, PR.CIT ) /DATE OF HEARING : 16.01.2018 ) /DATE OF PRONOUNCEMENT : 16.01.2018 / O R D E R PER GEORGE MATHAN , JUDICIAL MEMBER : ITA NO.1899/MDS/2017 IS AN APPEAL FILED BY THE REV ENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S)-1, MADURAI, IN ITA NO.348/2011-12 DATED 15.05.2017 FOR THE AY 2009-10 AND CO ITA NO.1899/MDS/2017 & CO NO.143/MDS/2017 :- 2 -: NO.143/MDS/2017 IS A CROSS-OBJECTION FILED BY THE A SSESSEE IN ITA NO.1899/MDS/2017. 2. MR. SAILENDRA MAMIDI, PR.CIT, REPRESENTED ON BEH ALF OF THE REVENUE AND NONE REPRESENTED ON BEHALF OF THE ASSESSEE. 3. IT WAS SUBMITTED BY THE LD.DR THAT THE ONLY ISSU E IN THE REVENUES APPEAL WAS AGAINST THE ACTION OF THE LD.CIT(A) IN D ELETING THE ADDITION MADE TOWARDS THE EXCESS PURCHASE PRICE PAID FOR GIN NED COTTON. IT WAS A SUBMISSION THAT IN THE COURSE OF THE ASSESSMENT, TH E AO HAD EXAMINED A SAMPLE OF 43 TRANSACTIONS FOR PURCHASE OF GINNED CO TTON. THE LD.DR DREW OUR ATTENTION TO PAGE NOS.3 & 4 OF THE ASSESSMENT O RDER. IT WAS A SUBMISSION THAT OUT OF THE 43 SAMPLE PURCHASES EXAM INED, IT WAS NOTICED THAT THE ASSESSEE HAS MADE 14 PURCHASES AT THE PRIC E LESSER THAN AVERAGE MONTHLY PRICE FIXED BY THE COTTON ASSOCIATION OF IN DIA, MUMBAI AND IN RESPECT OF THE REMAINING 29 PURCHASES, THE PURCHASE PRICE PAID BY THE ASSESSEE WAS IN EXCESS OF THE AVERAGE MONTHLY PRICE ANNOUNCED BY THE COTTON ASSOCIATION OF INDIA, MUMBAI. CONSEQUENTLY, THE AO HAD ARRIVED AT PERCENTAGE SAMPLE OF 3.167% AND HAD EXTRAPOLATED TH E SAID EXCESS PRICE IN RESPECT OF THE 29 PURCHASE SAMPLES TO THE WHOLE OF THE PURCHASES MADE BY THE ASSESSEE AND THUS COMPUTED THE EXCESS PURCHA SE PRICE PAID BY THE ASSESSEE AND HAD MADE AN ADDITION. IT WAS A SUBMIS SION THAT THE LD.CIT(A) ON THE GROUND THAT NO SPECIFIC DEFECTS HA D BEEN PIN POINTED BY THE AO IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE A SSESSEE AS ALSO ON THE ITA NO.1899/MDS/2017 & CO NO.143/MDS/2017 :- 3 -: GROUND THAT EVEN IN THE REMAND PROCEEDINGS, THE AO WAS UNABLE TO PROVE THE PURCHASES WERE MADE BY THE ASSESSEE, ARE NOT GE NUINE AND HAD DELETED THE ADDITION. THE LD.DR VEHEMENTLY SUPPORT ED THE ORDER OF THE AO. IT WAS A SUBMISSION THAT THE ORDER OF THE LD.C IT(A) WAS LIABLE TO BE REVERSED. IN RESPECT OF THE CROSS-OBJECTION, IT WA S SUBMITTED BY THE LD.DR THAT THE SAME IS IN SUPPORT OF THE ORDER OF T HE LD.CIT(A). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE ASSESSMENT ORDER CLEARLY SHOWS THAT OTHER THAN MAKI NG AN ESTIMATED ADDITION, THE AO HAS NOT VERIFIED THE PURCHASES THO UGH HE HAS TAKEN 43 SAMPLES. THE ASSESSEES BUSINESS IS AT ARUPPUKOTTA I, TAMIL NADU. THE COTTON ASSOCIATION OF INDIA, MUMBAI, ADMITTEDLY, PR OVIDES THE AVERAGE PURCHASE PRICE IN RESPECT OF THE GINNED COTTON. T HE AO HAS NOT BEEN ABLE TO SPECIFICALLY POINT OUT AS TO HOW OR TO WHOM THE ASSESSEE HAS PAID THE EXCESS PRICE. IN FACT, OUT OF THE 43 SAMPLES, 11 C ASES HAVE BEEN FOUND WHERE THE PURCHASE PRICE IS LESSER THAN THE AVERAGE MONTHLY PRICE ANNOUNCED BY THE COTTON ASSOCIATION OF INDIA, MUMBA I. FURTHER, THE DIFFERENTIAL IN THE PURCHASE PRICE AS RECORDED BY T HE ASSESSEE AND THE AVERAGE PRICE AS SPECIFIED BY THE COTTON ASSOCIATIO N OF INDIA, MUMBAI, IN RESPECT OF THE SAID SAMPLES WHERE THE EXCESS IS FOU ND IS ONLY 3.167%, THIS ADMITTEDLY, IS A VERY SMALL VARIATION. A PERU SAL OF THE ORDER OF THE LD.CIT(A) MORE SPECIFICALLY AT PAGE NOS.8 TO 10 IN PARA NOS.4.2 & 4.3 SHOWS THAT REMAND REPORT HAD BEEN CALLED FOR FROM T HE AO AND EVEN AFTER FOUR YEARS, THE AO COULD NOT PROVE THAT THE PURCHAS ES MADE BY THE ITA NO.1899/MDS/2017 & CO NO.143/MDS/2017 :- 4 -: ASSESSEE WERE NOT GENUINE NOR WAS ABLE TO UNEARTH A NY ADVERSE MATERIAL AGAINST THE ASSESSEE REGARDING THE EXCESS PURCHASE PRICE OF COTTON. IN FACT, A PERUSAL OF THE CROSS-OBJECTION FILED BY THE ASSESSEE SHOWS THAT THE ASSESSEE HAS REFERRED TO ANOTHER DECISION OF THE CO -ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S.TAMIL NADU JAIBHARATH M ILLS LTD., AND M/S.SHRI GOVINDARAJA MILLS (P) LTD., IN ITA NOS. 7 & 8/MDS/2 016 DATED 13.04.2016. IN THE SAID DECISION, THE CO-ORDINATE BENCH OF THIS TRIBUNAL, ON IDENTICAL CIRCUMSTANCES REPRESENTING THE IDENTICAL METHODOLOG Y ADOPTED BY THE AO HAS HELD AS FOLLOWS: 6. NOW COMING TO THE EXCESS PURCHASE PRICE PAID FOR GINNED COTTON, THE LD. D.R. SUBMITTED THAT THE ASSESSING OFFICER HAS TAKEN 55 NUMBERS ON R ANDOM BASIS FOR EXAMINATION. THE PRICE PAID BY THE ASSESSEES WAS COMPARED WITH AVERA GE MONTHLY PRICE ANNOUNCED BY THE CAI. OUT OF 55 PURCHASES MADE, FOR 19 PURCHASES, THE ASSESSEES HAVE PURCHASED AT A PRICE LESS THAN THE AVERAGE MONTHLY PRICE OF CAI. FOR REM AINING 36 PURCHASES, THE PRICE PAID BY THE ASSESSEES WAS EXCESS OF PRICE ANNOUNCED BY CAI. THEREFORE, THE EXCESS PRICE PAID BY THE ASSESSEES FOR 36 PURCHASES WAS TAKEN AS INCOME OF THE ASSESSEE. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. DE PARTMENTAL REPRESENTATIVES AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD, INCLUDING THE WRITTEN SUBMISSION FILED BY THE ASSESSEE. ADMITTEDLY, THE ASSESSEES ARE MAINTAI NING BOOKS OF ACCOUNT. THE CAI FIXED A RATE FOR PURCHASE OF COTTON BY TAKING THE CONDITION PREVAILING IN A PARTICULAR LOCALITY. HOWEVER, THE PRICE OF THE COTTON WOULD VARY DEPENDI NG UPON THE MOISTURE CONDITION AND THE QUALITY. THE ASSESSEES HAVE PURCHASED SOME OF THE C OTTON AT CAI RATE AND THE ASSESSEES HAVE ALSO PURCHASED SOME OF THE COTTON AT LESSER TH AN THE PRICE FIXED BY CAI. IN SOME OF THE PURCHASES, THE RATES WERE HIGHER THAN THE RATE FIXED BY CAI. THESE ARE ALL THE PRICES PAID BY THE ASSESSEES IN PURCHASING THE RAW MATERIA L. THE PURCHASE IS NOT IN DISPUTE. THE FACT THAT THE BOOKS OF ACCOUNT MAINTAINED BY THE AS SESSEES IS NOT IN DISPUTE. THE ASSESSING OFFICER HAS NOT TAKEN ANY PAIN TO EXAMINE THE VENDOR S AND FARMERS FROM WHOM THE COTTON WAS PURCHASED BY THE ASSESSEES. SIMPLY BY PLACING R ELIANCE ON THE RATE FIXED BY CAI, THE ASSESSING OFFICER FOUND THAT THE ASSESSEES HAVE PAID EXCESS PRICE. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE RATE FIXED BY THE CAI I S ONLY A GUIDELINE RATE FOR PURCHASING THE COTTON. THE GUIDELINE RATE WOULD VARY DEPENDING UPO N THE QUALITY AND OTHER FACTORS WHICH IS RELEVANT IN PURCHASING THE COTTON. THE ASSESSEES HA VE, IN SOME CASES, PAID PRICE LESSER THAN WHAT WAS FIXED BY CAI. IT MEANS THAT THE QUALI TY OF COTTON PURCHASED BY THE ASSESSEES IN SUCH CASES IS NOT NORMAL. IN SOME CASES, THE ASS ESSEES HAVE ADMITTEDLY PAID LITTLE MORE THAN WHAT WAS FIXED BY THE CAI. THEREFORE, IT MEANS THAT THE QUALITY OF COTTON MAY BE ABOVE THE AVERAGE OR NORMAL. THESE ARE THE ITEMS WH ICH HAVE TO BE DECIDED BY THE BUSINESSMAN AND THE ASSESSING OFFICER CANNOT STEP IN TO THE SHOES OF BUSINESSMAN AND EXPECT THAT THE ASSESSEE HAS TO PURCHASE A PARTICU LAR MATERIAL FOR A PARTICULAR COST. IN THE ABSENCE OF REGULARITY MECHANISM GOVERNING THE VENDO RS AND FARMERS SELLING THE MATERIAL/COTTON AT A PRICE OVER AND ABOVE THE RATE F IXED BY CAI, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER IS NOT JUSTIFIED IN MAKING THE ADDITION ON THE BASIS OF THE RATE FIXED BY CAI. THE RATE FIXED BY C AI IS ONLY A GUIDELINE AND THERE IS NO RESTRICTION FOR THE ASSESSEES TO PURCHASE COTTON EI THER AT LESSER OR HIGHER RATE THAN THE ONE FIXED BY THE CAI. IN THOSE CIRCUMSTANCES, THE CIT(A PPEALS) HAS RIGHTLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDERS OF THE LOWER AUTHORITY AND ACCORDINGLY THE S AME IS CONFIRMED. ITA NO.1899/MDS/2017 & CO NO.143/MDS/2017 :- 5 -: 8. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE DISMISSED. 5. THIS BEING SO, RESPECTFULLY FOLLOWING THE DECISI ON OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S.TAMIL NAD U JAIBHARATH MILLS LTD., AND M/S.SHRI GOVINDARAJA MILLS (P) LTD., REFERRED T O SUPRA, ON IDENTICAL FINDINGS, THE FINDINGS OF THE LD.CIT(A) ON THIS ISS UE STANDS CONFIRMED. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED AND THE CROSS-OBJECTION BEING IN SUPPORT OF THE ORDER O F THE LD.CIT(A) AND AS WE HAVE ALREADY CONFIRMED THE ORDER OF THE LD.CIT(A ), THE CROSS-OBJECTION STANDS DISMISSED AS INFRUCTUOUS. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE A ND THE CROSS- OBJECTION FILED BY THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON JANUARY 16, 2018 AT CHENNAI. SD/- SD/- ( . ) ( A. MOHAN ALANKAMONY ) /ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) /JUDICIAL MEMBER /CHENNAI, / /DATED: JANUARY 16, 2018. TLN ) &01 21 /COPY TO: 1. % /APPELLANT 4. 3 /CIT 2. &'% /RESPONDENT 5. 1 & /DR 3. 3 ( ) /CIT(A) 6. /GF