NENSY POULTRY FARM LTD, MUMBAI V. DCIT CIR 7(1), MUMBAI

ITA 216/MUM/2012

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7889 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 29-06-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 10-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JENARDHANAN LD
• Assessee Lawyers: REEPAL TRALSHAWALA LD
• Keywords: Depreciation; Opportunity of being heard; Reasonable cause
• Section: 69C; 143(3)

Judgement Text

ITA NO.216/MUM/2012 NENSEY POULTRY FARM LIMITED ASSESSMENT YEAR-2006-07 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI . . , , BEFORE SHRI D.T. GARASIA, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.216/MUM/2012 ( / ASSESSMENT YEAR: 2006-07) NENS E Y POULTRY FARM LIMITED 28,WADALA UDYOG BHAVAN WADALA MUMBAI-400 031 / VS. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 7(1) ROOM NO.623, AAYKAR BHAVAN 6 TH FLOOR, M.K.ROAD MUMBAI-400 020 ! ./ ./PAN/GIR NO. AAACN-0075-B ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) A SSESSEE BY : REEPAL TRALSHAWALA,LD.AR RE VENUE BY : V.JENARDHANAN, LD. SR. DR / DATE OF HEARING : 23/10/2017 / DATE OF PRONOUNCEMENT : 13/12 /2017 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE CAPTIONED APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2006-07 CONTEST THE ORDER OF THE LD. COMMISSIONER O F INCOME-TAX (APPEALS)-13 [CIT(A)], MUMBAI, APPEAL NO. CIT(A)-13/DCIT-7(1)/107/08- 09 DATED 08/06/2011. THE ASSESSMENT FOR IMPUGNED AY WA S FRAMED BY LD. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-7(1) U/S 143(3) OF THE ITA NO.216/MUM/2012 NENSEY POULTRY FARM LIMITED ASSESSMENT YEAR-2006-07 2 INCOME TAX ACT ON 13/11/2008 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE LEARNED ASSISTANT COMMISSIONER OF INCOME TAX -CIRCLE 7(1), MUMBAI (AO) ERRED ON FACTS AND IN LAW IN ASSESSING THE LOS S OF THE APPELLANT AT RS.44,34,040/- AS AGAINST THE RETURNED LOSS OF RS.1 ,86,63,738/- BY MAKING DISALLOWANCE OF ENTIRE CASH PURCHASE OF RS.1,42,29, 696/- OF POULTRY PRODUCTS AS UNAPPROVED PURCHASES U/S 69C OF THE ACT. 2. THE LEARNED AO FAILED TO APPRECIATE THAT THE APP ELLANT HAD CORRECTLY OFFERED HIS INCOME AND THAT NO ADDITIONS, DISALLOWANCE OR A DJUSTMENT WAS CALLED FOR TO THE RETURNED INCOME. 3. THE LEARNED AO ERRED ON FACTS AND IN LAW IN NOT GIVING A REASONABLE AND SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE APPELL ANT. 4. THE LEARNED AO FAILED TO APPRECIATE THAT THE APP ELLANT WAS PREVENTED BY A REASONABLE AND SUFFICIENT CAUSE FROM FURNISHING ALL THE EVIDENCES AND DETAILS DURING THE COURSE OF HEARING. 5. THE APPELLANT PRAYS THAT THE DISALLOWANCES AND A DJUSTMENTS AS ABOVE MAY BE DELETED AND THE RETURNED LOSS OF RS.1,86,63,738/ - MAY BE ACCEPTED. 2. THE REGISTRY HAS NOTED THAT THE APPEAL HAS BEEN FILED WITH THE DELAY OF 118 DAYS AND THE ASSESSEE VIDE CONDONATION LETTER DATED 10/01/2012 ALONG WITH AFFIDAVIT OF THE DIRECTOR OF THE ASSESSEE COMPANY HAS PLEADED FOR CONDONATION OF THE SAME. THE DELAY HAS BEEN ATTRIBUTED TO THE ADVICE RENDERED BY THE CONCERNED CHARTERED ACCOUNTANT IN VIEW OF THE FACT THAT THE ASSESSEE HAD INCURRED HUGE LOS SES, THE POSSIBILITY OF SET-OFF OF WHICH WAS BLEAK IN THE NEAR FUTURE. THE LD. DEP ARTMENTAL REPRESENTATIVE OPPOSED THE SAME ON THE GROUND THAT THERE WAS NO REASONABLE CAUSE TO CONDONE THE DELAY. WE HAVE PERU SED THE MATERIAL ON RECORD. THE CONTENTION OF THE ASSESSEE IS SUPPOR TED BY THE AFFIDAVIT OF THE CONCERNED CHARTERED ACCOUNTANT NAMELY JAYANTKUMAR JADAVJIBHAI GANATRA WHICH LENDS PLAUSIBLE SUPPORT TO ASSESSEES CONTENT IONS. SINCE DELAY IS NOT DUE TO ANY DELIBERATE OR MALICIOUS INT ENTION ON THE PART OF THE ASSESSEE AND THE CONCERNED CHARTERED ACCOUNTANT HAS CONCEDED THE FACTS BY AN AFFIDAVIT, THE ASSESSEE COULD NOT SUFFE R DUE TO WRONG ADVICE RENDERED BY THE PROFESSIONAL. HENCE, IN THE INTERES T OF JUSTICE, WE ITA NO.216/MUM/2012 NENSEY POULTRY FARM LIMITED ASSESSMENT YEAR-2006-07 3 CONDONE THE DELAY AND PROCEED FURTHER TO DISPOSE-OF F THE SAME ON MERITS. 3.1 THE FACTS LEADING TO THE SAME ARE THAT THE ASSE SSEE BEING RESIDENT CORPORATE ASSESSEE ENGAGED IN POULTRY BUSINESS WAS ASSESSED FOR IMPUGNED AY U/S 143(3) ON 13/11/2008 AT LOSS OF RS. 44.34 LACS AS AGAINST RETURNED LOSS OF RS.186.63 LACS FILED BY TH E ASSESSEE ON 28/11/2006. THE ASSESSEE REFLECTED TURNOVER OF RS.6 15.15 LACS AND DERIVED RENTAL INCOME OF RS.11 LACS AGAINST WHICH I T DECLARED GROSS LOSS / NET LOSS OF RS.121.05 LACS & RS.194.50 LACS RESPECTIVELY. SI NCE THE DECLARED RESULTS WERE IN SHARP CONTRAST WITH RE SULT OF IMMEDIATELY PRECEDING YEAR, THE ASSESSEE WAS ASKED TO EXPLAIN D RASTIC FALL IN THE TRADING RESULT. THE ASSESSEE SUBMITTED AS UNDER:- THE POULTRY FARMING WAS VASTLY AFFECTED BY BIRD FLUE DISEASE, DURING THE YEAR 2005-2006 DUE TO OUTBREAK OF BIRD FLU IN MOST OF THE PARTS OF INDIA, FARMERS WERE COMPELLED TO CULL THE LIVE BIRDS AND/OR SELL T HE BIRDS AT A THROW AWAY PRICES, MEDICINE COST AND COST TOWARDS OTHER PRECAUTIONARY MEASURES WAS VERY HIGH, DUE TO WHICH THE SALE PRICES HAD COME DOWN FROM THE AVERAG E NORMAL RANGE OF RS.32 TO RS.40 PER KG TO RS.21 TO RS.27 PER KG, FURTHER THE MORTALITY RATE WENT UP TO 20-22% AGAINST THE NORMAL MORTALITY RATE OF 5 TO 7%. NENSEY POULTRY FARMS PVT. LTD IS HAVING A BROILER F ARM OF 250000 BIRDS AT KHATALWAD, SANJAN, GIVING PRODUCTION OF 120000 BIRDS EQUIVALEN T TO 2000 MT PER ANNUM, THE FARM WAS VERY BADLY HIT BY THE DISEASE, IT HAD LOST ALMOST 390000 BIRDS BY WAY OF MORTALITY AND CULLING APART FROM HIGHER MEDICINAL C OST AND OTHER EXPENSES TO CONTAIN THE DISEASE. AS A RESULT OF WHICH THE CONSUMPTION O F MATERIAL WENT UP TO 91% FROM 72% IN THE PREVIOUS YEAR, MAINLY DUE TO LOSS OF BIR DS AND ALSO LOWER SALES TURNOVER BY ABOUT 25%. ALL THESE FACTORS HAVE CONTRIBUTED TO THE CASH LOSS OF ABOUT RS.143 LACS AND WITH DEPRECIATION IT HAS INCURRED LOSS OF RS.195 LACS, IN ORDER TO CURTAIL THE FURTHER LOSSES, IT HAD DECIDED TO SHUT DOWN THE BRO ILER FARM OPERATIONS AND GAVE THE SAME ON RENT FROM DECEMBER 2007 ONWARDS. 3.2 HOWEVER, NOT CONVINCED WITH ASSESSEES EXPLANAT ION, LD. AO NOTED THAT THE ASSESSEE MADE CASH PURCHASES OF RS.142.30 LACS, WHICH WAS QUITE APPROXIMATE TO CASH LOSS OF RS. 143 LACS SUFF ERED BY THE ASSESSEE AND HENCE THE SAME WAS MANIPULATIVE. FINALLY, THE CASH PURCHASE OF RS.142.29 LACS AS CLAIMED BY THE ASSESS EE WAS DISALLOWED ITA NO.216/MUM/2012 NENSEY POULTRY FARM LIMITED ASSESSMENT YEAR-2006-07 4 AS UNPROVED PURCHASES AND RESULTANTLY, THE LOSS CLA IMED BY ASSESSEE WAS REDUCED TO THAT EXTENT. 4. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITHO UT ANY SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 08/06/2 011 WHERE THE ASSESSEE REITERATED THE SAID CONTENTIONS. THE LD.CI T(A) UPON CONSIDERATION OF FACTUAL MATRIX AND AFTER APPRECIAT ING THE SALES/PURCHASE SUMMARY NOTED THAT THE ASSESSEE COULD NOT PRODUCE STOCK RE CORDS AND CASH PURCHASE / SALES WERE NOT VERIFIABLE AND THERE WAS LARGE DISCREPANCY IN SALE PRICE IN CASH AND CHEQUE WITH R ESPECT TO EGGS & CHICKS BOTH. FINALLY, LD. CIT(A) UPHELD REJECTION OF BOOK S OF ACCOUNTS AND CONFIRMED THE ACTION OF LD. AO, AGAINST WHICH T HE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 5. THE LD. REPRESENTATIVE FOR ASSESSEE [AR] STRESSE D THE POINT THAT THE LOSS WAS SUFFERED BY THE ASSESSEE DUE TO OUTBRE AK OF THE DISEASE BIRD FLU, WHICH ADVERSELY AFFECTED THE PROFITS OF THE ASSESS EE. OUR ATTENTION IS DRAWN TO VARIOUS DOCUMENTS INCLUDING CORRESPONDENCES WITH BANK, NEWSPAPER CUTTINGS, DIRECTORS REPORT, TAX AU DIT REPORT ETC. AS PLACED IN THE PAPER BOOK TO SUPPORT THIS CONTENTION. PER CONTRA , LD. DR CONTENDED THAT LARGE VARIATION WAS NOTED IN SALE / PURCHASE PRICES CARRIED OUT THROUGH CASH & CHEQUE AND THE COMPLETE ONUS WAS ON ASSESSEE TO SUBSTANTIATE THE LOSSES. FURTHER, THE A SSESSEE COULD NOT RECONCILE THE QUANTITATIVE DETAILS AND VALUATION TH EREOF. 6. WE HAVE CAREFULLY HEARD THE RIVAL CONTENTIONS AN D PERUSED RELEVANT MATERIAL ON RECORD. THE PERUSAL OF VARIOUS DOCUMENT S PLACED IN THE PAPER BOOK, AS POINTED OUT BY LD. AR, LENDS CERTAIN SUPPORT TO THE CONTENTION THAT THERE WAS OUTBREAK OF BIRD FLU IN THE IMPUGNED AY, WHICH ITA NO.216/MUM/2012 NENSEY POULTRY FARM LIMITED ASSESSMENT YEAR-2006-07 5 IS EVIDENT FROM NEWSPAPER CUTTINGS, CORRESPONDENCE OF THE ASSESSEE WITH HIS BANK, MEASURES TAKEN BY RBI TO REDUCE THE LOSSES SUFFERED BY THE ENTITIES ENGAGED IN POULTRY BUSINESS. AT THE SA ME TIME, THE ONUS WAS ON ASSESSEE TO DEMONSTRATE THAT IT ACTUALLY SUFFERE D THE LOSSES AND PROFITABILITY WAS ADVERSELY AFFECTED DUE TO OUTBREA K OF BIRD FLU SINCE LD. CIT(A) HAS NOTED THAT THE ASSESSEE WAS UNABLE TO PR ODUCE STOCK REGISTER AND LARGE VARIATIONS IN SALES / PURCHASE FIGURES / RATES WERE NOTED QUA CASH AND CHEQUE TRANSACTIONS. THE QUANTITATIVE DETA ILS PROVIDED IN TAX AUDIT REPORT REVEALS THAT THE ASSESSEE SUFFERED MORTALITY OF 3.9 7 LACS LIVE & DRESSED BIRDS DURING THE YEAR BUT DESPITE THAT, THE ASSESSEE COULD NOT SUBSTANTIATE / RECONCILE THE QUANTITATIVE DETAILS AND VALUE THEREOF BEFORE LOWER AUTHORITIES. HENCE, ON FACTUAL MATRIX OF THE CASE, FINDING RIVAL CONTENTIONS TO BE OF EQUAL STRENGTH, WE REMIT THE MATTER BACK TO THE FILE OF LD. AO FOR FRESH ADJUDICATION AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE ASS ESSEE, IN TURN, IS DIRECTED TO RECONCILE AS WELL AS SUBSTANTIATE QUANT ITATIVE DETAILS, SALE / PURCHASE VALUES / RATES AND ALSO SUBSTANTIATE THE C ASH PURCHASES MADE BY HIM DURING THE YEAR. 7. RESULTANTLY, THE ASSESSEES APPEAL STANDS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH DECEMBER, 2017. SD/- SD/- (D.T. GARASIA) (MANOJ KUMAR AGGARW AL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 13.12. 2017 SR.PS:- THIRUMALESH ITA NO.216/MUM/2012 NENSEY POULTRY FARM LIMITED ASSESSMENT YEAR-2006-07 6 ! / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. , ( ) / THE CIT(A) 4. , / CIT CONCERNED 5. $'. , . , / DR, ITAT, MUMBAI 6. / / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI