Asst. CIT, Circle-3, Nanded V. Shri Anilkumar Bhagirath Kalantri, Latur

ITA 2094/PUN/2012

• Counselvise Citation: 209424514 RSA 2012
• Duration Of Justice: 1 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 29-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L PATHADE
• Keywords: Fair market value
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.2094/PN/2012 A.Y. 2009-10 ASST. CIT, CIRCLE-3, NANDED APPELLANT VS. SHRI ANILKUMAR BHAGIRATH KALANTRI, 18A, ANIL FOOD INDUSTRIES, C/O B. RATHUNATH KALANTRI, MARKET YARD, LATUR 413512 PAN: ADYPK3836B RESPONDENT APPELLANT BY : SHRI P.L. P ATHADE RESPONDENT BY : SHRI M.K . KULKARNI DATE OF HEARING: 05.12.2013 DATE OF ORDER : 27.12.2013 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEAL), [SHORT CIT( A)] AURANGABAD, DATED 28.08.2012 FOR A.Y. 2009-10 ON TH E FOLLOWING GROUNDS. 1. THE CIT (A), AURANGABAD HAS ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER, ON ACCOUNT OF EXCESS PURCHASE PRICE PAID TO THE SISTER CONCERN, A T RS.2,00,13,556/- IGNORING THE FACTS AND CIRCUMSTANC ES OF THE CASE. 2. THE CIT (A), AURANGABAD HAS ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER, ON ACCOUNT OF UNDER 2 VALUATION OF STOCK, AT RS. 9,70,821/- IGNORING THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE CIT (A), AURANGABAD HAS ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER, ON ACCOUNT OIL EXPENDITURE AT RS. 4,42,074/- IGNORING THE FACTS AN D CIRCUMSTANCES OF THE CASE. 4. THE ORDER OF THE A.O. BE RESTORED AND THE CIT (A), AURANGABAD BE VACATED. 5. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER A NY GROUNDS OF APPEAL. 2. THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUS INESS OF MANUFACTURING OF TOOR DAL AND ALLIED PRODUCTS. ASS ESSEE HAS FILED RETURN OF INCOME ON 25.09.2009 DECLARING TOTA L INCOME OF RS.21,74,640/-. ASSESSING OFFICER HAS ASSESSED THE INCOME AT RS.2,37,08,103/- BY MAKING ADDITIONS OF RS.2,15,33, 463/-. THE DETAILS OF ADDITIONS ARE AS UNDER: DISALLOWANCE U/S 40A(2)(B) TOWARDS ALLEGED EXCESSIVE PURCHASE EXPENSES RS.2,00,13,556/- ALLEGED UNDER VALUATION OF CLOSING STOCK RS. 9,70,821/- ADHOC DISALLOWANCE @20% OF OIL EXPENSES RS. 4 ,42,074/- ADHOC ADDITION @15% OUT OF DRYING WAGES RS. 1 ,07,012/- ---------------------- TOTAL RS.2,15,33,463/- ---------------------- 2.1 MATTER WAS CARRIED BEFORE FIRST APPELLATE AUTHO RITY ON ALL ABOVE ACCOUNTS. WITH REGARD TO ADDITION OF RS.2,00 ,13,556/- ON ACCOUNT OF DISALLOWANCE U/S.40A(2)(B), THE ASSESSIN G OFFICER HAS NOTICED THAT THE ASSESSEE HAS PURCHASED SUBSTANTIAL TOOR FROM SISTER CONCERN M/S. B. RAGHUNATH KALANTRI TO THE EX TENT OF 49,037.21 QNTLS. AT AVERAGE EFFECTIVE RATE OF RS.3, 169.18 PER QUINTAL FOR BASIC VALUE OF RS.L5,54,22,351/-. THE A SSESSING OFFICER HAS ALSO NOTICED THAT THE TOOR DAL PURCHASE D FROM OTHER PARTIES WAS 9704.66 QNTLS. AT THE AVERAGE EFFECTIVE RATE OF 3 RS.2,761.35 PER QUINTAL FOR BASIC VALUE OF RS.2,67, 97,717/-. THE ASSESSING OFFICER HAS WORKED OUT THE PURCHASED RATE DIFFERENCE PER QUINTAL OF TOOR PURCHASED OF RS.408.13. THE ASS ESSING OFFICER HAS WORKED OUT EXCESSIVE EXPENDITURE IN RES PECT OF TOOR PURCHASED FROM SISTER CONCERN AT RS.2,00,13,556/- ( RS.408.13 X 49,037.21 QNTLS.). THE ASSESSING OFFICER HAS REJECT ED THE DETAILED SUBMISSION FILED ON BEHALF OF ASSESSEE AND MADE ADD ITION BY OBSERVING AS UNDER: 'I GONE THROUGH THE EXPLANATION FILED BY THE ASSESSEE AND FOUND THAT ALL THROUGH THE EXPLANATION THE ASSESSEE HAS DISCUSSED ABOUT THE PROFITABILITY OF M/S. B. RAGHUN ATH KALANTRI AND THE REASON FOR EXCESS PAYMENT FOR PURC HASE OF MATERIAL FROM M/S. B. RAGHUNATH KALANTRI IS NOT CLE ARLY EXPLAINED. IN VIEW OF THIS, AND AFTER EXAMINING THE DETAIL THE EXPLANATION FILED BY THE ASSESSEE IS NOT ACCEPTED. IT IS CLEAR FROM THE ABOVE PARAS THAT THE ASSESSEE HAS MADE PUR CHASES FROM THE SISTER CONCERN I.E. M/S. B. RAGHUNATH KALA NTRI IN COMPARISON TO THE PURCHASES MADE FROM THE OTHERS IN THE MARKET DURING THE SAME PERIOD. THEREFORE AN AMOUNT OF RS.2,00,13,556/- AS EXPLAINED IN THE ABOVE PARAS IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THIS ADDITION IS MADE U/S.40A(2)(B).' 2.2 IN APPEAL CIT(A) HAVING CONSIDERED THE SUBMISSI ONS PUT FORWARD ON BEHALF OF ASSESSEE, HAS GRANTED RELIEF T O THE ASSESSEE, THE SAME HAS BEEN OPPOSED BEFORE US. LEARNED DEPAR TMENTAL REPRESENTATIVE OPPOSED THE DELETION OF ADDITION, IN TER ALIA SUBMITTED THAT THE CONCERNED CIT(A) ERRED IN DELETI NG THE ADDITION MADE BY ASSESSING OFFICE ON ACCOUNT OF EXC ESSIVE PRICE PAID TO SISTER CONCERN AT RS.2,13,556/- INCLUDING T HE FACTS AND CIRCUMSTANCES OF THE CASE. ACCORDINGLY, ORDER OF T HE CIT(A) BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTOR ED. ON OTHER HAND, LEARNED AUTHORIZED REPRESENTATIVE SUPPORTED T HE ORDER OF CIT(A). 2.3 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND M ATERIAL ON RECORD, WE FIND THAT ASSESSING OFFICER HAS MADE ADD ITION U/S. 4 40A(2)(B) BY TAKING AVERAGE RATE OF TOOR PURCHASED DURING THE YEAR FROM SISTER CONCERN AND FROM OTHER CONCERNS. ASSESSING OFFICER HAS NOT CONSIDERED THE RATE OF PURCHASE FRO M SISTER CONCERN ON THE DATE OF PURCHASE AND DATE OF PURCHAS E FROM OTHER PARTIES ON THE SAME DATE OF PURCHASE. THE STAND OF THE ASSESSEE THAT THERE IS NO MUCH DIFFERENCE BETWEEN SAID RATE IF CONSIDERED ON THE SAME DATE. IT WAS ALSO POINTED OUT ON BEHAL F OF ASSESSEE THAT ON SAME DAY ON VARIOUS OCCASIONS THE PURCHASE RATE FROM OUTSIDE PARTIES IS MORE THAN PURCHASE RATE FROM SIS TER CONCERN. IT WAS ALSO POINTED OUT THAT PRICE OF TOOR WAS ON L OWER SIDE WHEN THE SAME WAS PURCHASED FROM OUTSIDE PARTIES MAINLY DURING APRIL, MAY, JUNE & DECEMBER, 2008 AND IN OTHER MONT HS WHEN THE GOODS WERE PURCHASED FROM SISTER CONCERNS, THE RATE OF PURCHASE WAS ON HIGHER SIDE. IN VIEW OF ABOVE, ASS ESSEES STAND HAS BEEN THAT ASSESSING OFFICER WAS NOT JUSTIFIED I N CONSIDERING AVERAGE RATE OF PURCHASE FOR THE YEAR UNDER APPEAL WHILE MAKING ADDITION U/S.40A(2)(B). THE ADDITION U/S 40A(2) CAN BE MADE ONLY IF THE EXPENDITURE CLAIMED IS EXCESSIVE HAVING REGA RD TO THE FAIR MARKET VALUE OF THE GOODS. THE ASSESSEE HAS FILED P URCHASE RATE OF TOOR DURING THE 12 MONTHS IN THE YEAR UNDER APPE AL DULY CERTIFIED BY KRUSHI UTPANNA BAZAR SAMITI, LATUR IN SUPPORT OF THE CONTENTION THAT THE TOOR PURCHASED BY THE ASSESSEE DURING THE VARIOUS MONTHS IN THE YEAR UNDER APPEAL IS AT MARKE T VALUE AND NOT AT EXCESSIVE RATE. THE ASSESSEE ALSO FILED AVE RAGE RATE OF TOOR PURCHASED DURING THE YEAR UNDER APPEAL BY VARIOUS O THER CONCERNS SITUATED AT LATUR WHICH HAS ALSO ESTABLISH ED THAT THE ASSESSEE HAS PURCHASED TOOR FROM SISTER CONCERN AT MARKET PRICE. 2.4 THE ASSESSING OFFICER SHOULD HAVE SCRUTINIZED T HE REASONABLENESS OF EXPENDITURE WITH REGARD TO THE PR OVISIONS OF SEC. 40A(2)(A). THE SISTER CONCERN FROM WHOM TOOR HAS BEEN PURCHASED BY ASSESSEE EARNED PROFIT @ 2%. THE ASSE SSEE HAS CLAIMED THAT THE TOOR WAS NOT PURCHASED AT EXCESSIV E PRICE AS 5 COMPARED TO PREVAILING MARKET PRICE AT RELEVANT POI NT OF TIME. IT WAS ALSO POINTED OUT THAT IN A.Y.2005-06, THE ASSES SMENT WAS COMPLETED U/S 143(3) AND IN THE SAID YEAR IT WAS SU BMITTED TO THE ASSESSING OFFICER IN THE SCRUTINY ASSESSMENT THAT N O DISALLOWANCE TO BE MADE U/S.40A(2)(B) IN RESPECT OF PURCHASES FROM SISTER CONCERN AS THE PROFIT EARNED BY SISTER CONCERN ON SALE TO THE ASSESSEE IS @ 3% AND THE ASSESSING OFFICER H AS ACCEPTED THE ABOVE CONTENTION AND HAS NOT MADE ANY ADDITION U/S 40A(2)(B) OF THE ACT. IT WAS ALSO BROUGHT TO THE K NOWLEDGE OF CIT(A) THAT ASSESSMENT OF THE SISTER CONCERN M/S B. RAGHUNATH KALANTRI HAS BEEN COMPLETED U/S 143(3) FOR A.Y.2009 - 10 AT RS.11,02,590/- AND NO MAJOR DISCREPANCY HAS B EEN FOUND BY THE ASSESSING OFFICER IN THE ASSESSMENT. THIS ESTABLISHES THAT THE SISTER CONCERN M/S B.RAGHUNATH KALANTRI HA S NOT CHARGED EXCESSIVE PRICE OF TOOR OF RS.2,00,13,556/- AS ALLEGED BY THE ASSESSING OFFICER WHILE ASSESSING INCOME OF THE ASSESSEE. IT WAS ALSO POINTED THAT THE ADDITION MADE BY THE ASSE SSING OFFICER CONSIDERING AVERAGE PURCHASE PRICE FOR THE YEAR UND ER APPEAL AND THAT TOO WITHOUT CONSIDERING THE QUALITY OF THE GOO DS PURCHASED IS NOT JUSTIFIED. IN VIEW OF ABOVE, ASSESSEE HAS ESTABLISHED THAT EXPENDITURE ON PURCHASE OF TOOR FROM SISTER CONCERN WAS NOT EXCESSIVE OR UNREASONABLE HAVING REGARD TO THE FAIR MARKET VALUE OF THE SAME. ACCORDINGLY, CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION IN QUESTION. THIS REASONED FINDING OF THE CIT(A) NEED NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 3. NEXT ISSUE IS WITH REGARD TO ADDITION OF RS.9,70 ,821/- MADE BY ASSESSING OFFICER ON ACCOUNT OF UNDER VALUATION OF STOCK ON TOOR DAL. THE ASSESSING OFFICER NOTICED THAT ASSES SEE HAS SHOWN THE VALUE OF CLOSING STOCK OF TOOR DAL OF 2189 QNTL S. AT RS.66,58,000/- @ RS.3,041.50 PER QUINTAL. HE ALSO OBSERVED THAT IN THE MONTH OF MARCH THE ASSESSEE HAS PURCHAS ED TOOR OF 2459 QUINTALS @RS.3,485/- PER QUINTAL. THE ASSESSIN G OFFICER 6 HAS THEREFORE WORKED OUT THE DIFFERENCE AS UNDER VA LUATION OF STOCK AT RS.443.50 PER QUINTAL. THE ASSESSING OFFIC ER HAS ACCORDINGLY WORKED OUT THE UNDER VALUATION OF STOCK AT RS.9,70,821/- (RS.443.50 X 2189 QUINTAL). THE ASSES SING OFFICER HAS MADE THE ADDITION VIDE PARA-11 OF THE ASSESSMEN T ORDER, WHICH READS AS UNDER. 'I GONE THROUGH THE EXPLANATION FILED BY ASSESSEE A ND FOUND THAT IT IS UNACCEPTABLE. THE ASSESSEE WAS FOLLOWING FIRST IN FIRST OUT METHOD IN STOCK VALUATION. IF FIFO METHOD IS FOLLOWED THE PURCHASES MADE DURING THE LAT 2-3 DAYS REMAIN A S STOCK. AS PER THE STOCK SHOWN BY THE ASSESSEE 2189 QUINTAL S REMAIN STOCK PURCHASED DURING THE LAST DAYS OF THE MARCH- 2009. THE AVERAGE PRICE FOR LAST PURCHASES (2549) W ORKS OUT TO RS.3485/-, HENCE THE RATE SHOWN BY THE ASSESSEE AT RS.3041.50 IS LESS BY RS.443.50/-. AS CAN BE SEEN F ROM THE ABOVE IT IS CLEAR THAT THE ASSESSEE HAS SUPPRESSED CLOSING STOCK TO REDUCE THE PROFIT. THEREFORE, RS.9,70,821/ - (443.50 X 2189) IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF STOCK UNDER VALUATION.' 3.1 THE MATTER WAS CARRIED BEFORE FIRST APPELLATE A UTHORITY, WHEREIN HAVING CONSIDERED THE SUBMISSIONS ON BEHALF OF ASSESSEE, CIT(A) GRANTED THE RELIEF TO THE ASSESSEE . SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF LEARNED DEPARTM ENTAL REPRESENTATIVE. ON OTHER HAND, LEARNED AUTHORIZED REPRESENTATIVE SUPPORTED THE ORDER OF CIT(A) ON THE ISSUE. 3.2 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND M ATERIAL ON RECORD, WE FIND THAT ASSESSING OFFICER HAS CONSIDER ED THE VALUE OF STOCK AT AVERAGE PRICE OF GOODS PURCHASED DURING MA RCH, 2009. THE ASSESSING OFFICER HAS ASSUMED THAT THE ASSESSEE HAS FOLLOWED FIFO METHOD OF VALUATION OF CLOSING STOCK. WHILE THE STAND OF THE ASSESSEE HAS BEEN THAT HE HAS NOT FOLL OWED FIFO METHOD BUT HAS CONSIDERED THE ACTUAL GOODS IN STOCK AND QUALITY OF THE SAME AND ACCORDINGLY VALUED THE SAME BY FOLL OWING ACTUAL COST OR MARKET VALUE WHICHEVER IS LESS. THIS CONTE NTION OF THE ASSESSEE HAD SUPPORT OF THE TAX AUDIT REPORT. IN TH E TAX AUDIT 7 REPORT, IT HAS BEEN MENTIONED IN ANNEXURE TO FORM-B CD THAT RAW MATERIAL AND FINISHED GOODS PURCHASED WERE VALUED A T COST OR MARKET VALUE WHICHEVER IS LESS AND FINISHED GOODS M ANUFACTURED WERE VALUED AT MARKET VALUE I.E. ESTIMATED NET REAL IZABLE VALUE. THE ALLEGED UNDER VALUATION OF STOCK SHOULD RESULT INTO HIGHER PROFIT TO THE SAME EXTENT IN THE SUBSEQUENT YEARS A S OBSERVED BY CIT(A). IN VIEW OF THE ABOVE, CIT(A) DELETED THE AD DITION IN QUESTION. THIS REASONED FACTUAL FINDING OF THE CIT (A) NEED NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 4. NEXT ISSUE IS WITH REGARD TO ADDITION OF RS.4,42 ,074/- BEING DISALLOWANCE OF OIL EXPENDITURE MADE BY ASSESSING O FFICER IN PARA 12 OF ASSESSMENT ORDER STATING AS UNDER: 'IN RESPECT OF THE OIL EXPENDITURE THE ASSESSEE SIM PLY STATED THE EXPENDITURE IS SUPPORTED BY BILLS. DURING THE C OURSE OF SCRUTINY PROCEEDINGS ON VERIFICATION OF BILL TO BIL L, IT IS SEEN THAT BILLS ARE NOT PROPERLY MAINTAINED. SOME OF THE BILLS ARE WITHOUT DATE AND ON SOME BILLS RECEIVERS' SIGNATURE IS NOT FOUND. HENCE 20% OF THE EXPENDITURE IS DISALLOWED A ND ADDED TO THE TOTAL INCOME. 20% OF RS.22,10,368/-WOR KS OUT TO RS.4,42,074/-.' 4.1 THE MATTER WAS CARRIED BEFORE FIRST APPELLATE A UTHORITY, WHEREIN HAVING CONSIDERED THE SUBMISSIONS ON BEHALF OF ASSESSEE, CIT(A) GRANTED THE RELIEF TO THE ASSESSEE . SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF LEARNED DEPARTM ENTAL REPRESENTATIVE WHO SUPPORTED THE ORDER OF ASSESSING OFFICER WHILE LEARNED AUTHORIZED REPRESENTATIVE SUPPORTED T HE ORDER OF CIT(A) ON THE ISSUE. 4.2 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND M ATERIAL ON RECORD, WE FIND THAT ASSESSEE HAS MAINTAINED REGULA R BOOKS OF ACCOUNTS IN THE COURSE OF HIS BUSINESS AND HAS ALSO GOT THEM AUDITED. THE ASSESSEE HAS POINTED OUT THAT ALL THE BILLS AS SUPPLIED BY THE SUPPLIERS OF OIL HAVE BEEN KEPT ON RECORD AND THE 8 PAYMENT HAS BEEN MADE BY BANK CHEQUES. THE ASSESSI NG OFFICER HAS MADE ADHOC DISALLOWANCE WITHOUT FALSIFYING SPEC IFIC ENTRY OF EXPENDITURE. IN VIEW OF THE ABOVE, CIT(A) HAS ROUGH LY DELETED ADHOC ADDITION OF RS.4,42,074/-. THIS REASONED FIN DING OF THE CIT(A) NEED NO INTERFERENCE FROM OUR SIDE. WE UPHO LD THE SAME. 5. IN THE RESULT, APPEAL FILED BY REVENUE IS DISMIS SED. PRONOUNCED IN THE OPEN COURT ON THIS THE DAY 27 TH OF DECEMBER, 2013. SD/- SD/- (R.K. PANDA) (SHAILENDRA KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 27 TH DECEMBER 2013 GCVSR COPY TO:- 1) DEPARTMENT 2) ASSESSEE 3) THE CIT(A), AURANGABAD 4) THE CIT, AURANGABAD 5) THE DR, A BENCH, I.T.A.T., PUNE. 6) GUARD FILE BY ORDER //TRUE COPY// SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE