M/S. MILAN MITHAI, Burhanpur V. THE ACIT, Khandwa

ITA 280/IND/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5936 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 28-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S S DESHPANDE

Judgement Text

MILAN MITHAI ITA NO.280/IND/2015 1 IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, INDORE BEFORE SHRI N.S. SAINI, HONBLE ACCOUNTANT MEMBER ITA NO. 280/IND/2015 A.Y.2010-11 MILAN MITHAI BURHANPUR PAN AACPM 0248E ::: APPELLANT VS ASSTT. COMMR. OF INCOME TAX KHANDWA ::: RESPONDENT APPELLANT BY SHRI S.S. DESHPANDE RESPONDENT BY SHRI RAJIV JAIN DATE OF HEARING 1 2 . 7 .2016 DATE OF PRONOUNCEMENT 1 2 .7 .2016 O R D E R THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 30.1.2015 OF THE LEARNED CIT(A)-II, INDOR E. 2. IN GROUND NO. 1 THE GRIEVANCE OF THE ASSESSEE IS T HAT THE LEARNED CIT(A) ERRED IN REDUCING THE GP RATE FRO M MILAN MITHAI ITA NO.280/IND/2015 2 12.8% ADOPTED BY THE ASSESSING OFFICER TO 12% AND NOT ACCEPTING THE GROSS PROFIT SHOWN BY THE ASSESSEE AND THEREBY CONFIRMING THE ADDITION OF RS.5,14,747/- TO THE TOTAL INCOME OF THE ASSESSEE. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFIC ER OBSERVED THAT THERE WAS FALL IN THE GROSS PROFIT IN COMPARISON TO THE IMMEDIATELY PRECEDING YEAR, THERE WAS NON-MAINTENANCE OF PURCHASE BILLS, THE ASSESSEE MAINTAINED SELF MADE VOUCHERS, NO SALES RECORD WAS MAINTAINED AND NO STOCK REGISTER WAS MAINTAINED FOR MAJOR RAW MATERIALS AND NO SALE BILLS WERE ISSUED. HE REJECT ED THE BOOK RESULTS OF THE ASSESSEE AND ADOPTED THE GROSS PR OFIT RATE OF 12.8% ON THE BASIS OF GROSS PROFIT OF 12.84% SHOWN IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR 2009-10 AND MADE THE ADDITION OFRS.7,53,798/-. 4. ON APPEAL, THE LEARNED CIT(A) RESTRICTED THE GROSS PROFIT TO 12% IN PLACE OF 12.8% THEREBY SUSTAINING AN MILAN MITHAI ITA NO.280/IND/2015 3 ADDITION OF RS.5,14,747/- TO THE TOTAL INCOME OF THE ASSESSEE. 5. BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US . THE LEARNED AR SUBMITTED THAT IN THE ASSESSMENT YEAR 2008-09 THE ASSESSEE HAD SHOWN TURNOVER OF RS.1.91 CRORES AND GROSS PROFIT OF RS.36.33 LACS AND THE GP WO RKED OUT TO 19.03%. IN THE ASSESSMENT YEAR 2009-10 THE ASSESSEE HAD SHOWN TURNOVER OF RS.2.58 CRORES AND THE GP AT RS.33.14 LACS AND THE GROSS PROFIT WORKED OUT TO 1 2.8%. HE SUBMITTED THAT IN THE PRESENT APPEAL THE ASSESSEE HAS SHOWN RS.2.99 CRORES TURNOVER AND GROSS PROFIT AT RS. 30.75 LACS AND GP AT 10.28%. HE ARGUED THAT FOR THE ASSESSMENT YEAR 2009-10 12.85% GROSS PROFIT WAS ACCEPTED BY THE DEPARTMENT AS AGAINST 19.03% GP SHOWN IN THE ASSESSMENT YEAR 2008-09. HE SUBMITTED THAT IN THE YEA R UNDER CONSIDERATION THERE WAS INCREASE IN SALE BY APPROXIMATELY RS. 4 CRORES AND THE GROSS PROFIT WAS LO WER MILAN MITHAI ITA NO.280/IND/2015 4 BY 2.6% AS COMPARED TO THE IMMEDIATELY PRECEDING YEAR 2009-10. HENCE IT WAS HIS SUBMISSION THAT DUE TO INCR EASE IN PRICE OF RAW MATERIAL AND OTHER RELEVANT FACTORS, PE CULIAR TO THIS LINE OF BUSINESS, THE GROSS PROFIT MARGINALLY FELL BY 2.6% AND THE SAME WAS REASONABLE IN COMPARISON TO THE EARLIER YEARS AND, THEREFORE, THERE WAS NO JUSTIFICATI ON IN REJECTING THE BOOK RESULTS OF THE ASSESSEE AND TO ES TIMATE THE GROSS PROFIT AT 12%. 6. ON THE OTHER HAND, THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 7. ON CONSIDERATION OF THE RIVAL SUBMISSIONS AND PERUSING THE ORDERS OF THE AUTHORITIES BELOW AND THE MATERIAL ON RECORD, I FIND THAT THE ASSESSING OFFICER HAS REJECTED THE BOOK RESULTS OF THE ASSESSEE ON THE GRO UND THAT THE ASSESSEE HAS NOT MAINTAINED STOCK REGISTER, THE ASSESSEE IS NOT MAINTAINING BILLS FOR PURCHASE OF MILK FROM MANDI, IN CASE OF PURCHASE OF GHEE THE VOUCHERS ARE SE LF MILAN MITHAI ITA NO.280/IND/2015 5 MADE AND THE ASSESSEE IS NOT MAINTAINING 100% BILLS FOR SALE. THEREFORE, HE ADOPTED THE GROSS PROFIT RATE SHOW N BY THE ASSESSEE IN THE IMMEDIATELY PRECEDING ASSESSMENT Y EAR 2009-10 WHICH WAS 12.84% AND ESTIMATED THE GROSS PROF IT OF THE ASSESSEE AT 12.8% OF ITS TURNOVER AND MADE THE ADDITION OF RS.7,53,798/- WHICH WAS REDUCED TO 12% RAT E OF GROSS PROFIT BY THE LEARNED CIT(A) AND THE ADDITIO N WAS SUSTAINED AT RS.5,14,747/-. WE FIND THAT IT IS NOT IN DISPUTE THAT THE TURNOVER OF THE YEAR UNDER APPEAL WAS RS.2.99 CRORES IN PLACE OF RS.2.58 CRORES IN THE IMM EDIATELY PRECEDING ASSESSMENT YEAR 2009-10. FURTHER, THE GROS S PROFIT SHOWN IN THE ASSESSMENT YEAR 2009-10 WAS 12.8 4% WHEREAS IN THE PRESENT YEAR IT WAS 10.28%. STILL FUR THER WE OBSERVED THAT FOR THE ASSESSMENT YEAR 2008-09 THE TURNOVER OF THE ASSESSEE WAS RS.1.91 CRORES AND THE G P RATE SHOWN WAS 19.03% WHEN THE TURNOVER INCREASED IN T HE ASSESSMENT YEAR 2009-10 TO RS.2.58 CRORES. THE GP RATE MILAN MITHAI ITA NO.280/IND/2015 6 SHOWN WAS 12.84% . THUS, WHEN THERE WAS INCREASE IN TURNOVER BY RS.32 LACS, THE GP RATE SHOWN AT 12.84% IN PLACE OF 19.03% SHOWN IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR WAS ACCEPTED BY THE DEPARTMENT. WE FIN D THAT IN THE ASSESSMENT YEAR 2010-11 THE TURNOVER INCREASED BY RS.40 LACS APPROXIMATELY AND THE GROSS PROF IT SHOWN AT 10.28% IN PLACE OF 12.84% SHOWN IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR 2009-10 HAS NOT BEEN ACCEPTED BY THE DEPARTMENT, DOES NOT STAND TO REASON. WE OBSERVE THAT NO MATERIAL WAS BROUGHT ON RECOR D EITHER BY THE ASSESSING OFFICER OR THE LEARNED CIT( A) TO SUBSTANTIATE THAT WHICH OF THE SALE VOUCHERS OR PURCHASE VOUCHERS SPECIFICALLY WERE NOT MAINTAINED BY THE ASSESS EE. BY MAKING A SWEEPING REMARK THAT ALL SALE BILLS AND PURCHASE BILLS ARE NOT MAINTAINED BY THE ASSESSEE OR THAT IN SOME CASES PURCHASES ARE MADE BY SELF MADE VOUCHERS, DOES NOT ENTITLE THE ASSESSING OFFICER TO REJECT TH E BOOK MILAN MITHAI ITA NO.280/IND/2015 7 RESULTS OF THE ASSESSEE AND MAKE THE ADDITION TO THE TO TAL INCOME OF THE ASSESSEE. THEREFORE, FOR THE FOREGOIN G REASONS, I SET ASIDE THE ORDERS OF THE AUTHORITIES BE LOW AND DELETE THE ADDITION OF RS.5,14,747/- AND ALLOW THIS GR OUND OF APPEAL. 8. IN GROUND NOS. 3 AND 4 THE ASSESSEES GRIEVANCE IS THAT THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWAN CE OF INTEREST EXPENSES OF RS.8,23,804/-. 9. I HAVE HEARD THE RIVAL SUBMISSIONS. IN THE INSTANT C ASE, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS DEBI TED RS.9,53,446/- ON ACCOUNT OF INTEREST EXPENDITURE AND THAT THE ASSESSEE HAD ADVANCED INTEREST FREE LOANS OF RS.43.6 0 LACS TO ITS SISTER CONCERN AND RS.29.20 LACS TO OTHER S INCLUDING FAMILY MEMBERS. THEREFORE, THE ASSESSING O FFICER DISALLOWED RS.8,23,801/- OUT OF INTEREST EXPENDITURE BY CALCULATING THE INTEREST EXPENDITURE ON INTEREST FREE ADVANCE @ 12%. MILAN MITHAI ITA NO.280/IND/2015 8 10. ON APPEAL, THE LEARNED CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 11. THE LEARNED COUNSEL FOR THE ASSESSEE ARGUED THAT IT WILL BE SEEN FROM THE BALANCE SHEET FILED AT PAGE 23 OF THE PAPER BOOK THAT THE ASSESSEE HAD CURRENT CAPITALOFRS.97.89 LACS AND THE ASSESSEE HAS ADVANCED RS.77 LACS TO SISTER CONCER N AND OTHERS WITHOUT CHARGING ANY INTEREST. IT WAS, THER EFORE, HIS SUBMISSION THAT THE INTEREST FREE ADVANCE WAS MADE OUT OF INTEREST FREE OWN FUNDS AVAILABLE BY WAY OF CURREN T ACCOUNT WHICH WAS RS.97.89 LACS AND HENCE NO DISALLOWANCE OF INTEREST EXPENDITURE IS CALLED FOR. 12. ON THE OTHER HAND, THE LEARNED DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 13. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUS ING THE MATERIAL AVAILABLE ON RECORD, I FIND THAT THE ASSESSI NG OFFICER DISALLOWED INTEREST EXPENDITURE ON INTEREST FREE ADVANCE OFRS.77 LACS TO SISTER CONCERN AND OTHERS BY TH E MILAN MITHAI ITA NO.280/IND/2015 9 ASSESSEE BY APPLYING INTEREST RATE OF 12% AND MADE ADDITION OFRS.8,23,801/- WHICH WAS CONFIRMED IN APPEAL. THE ASSESSEE HAS POINTED OUT FROM THE AUDITED BALANCE SHEET FILED AT PAGE 23 OF THE PAPER BOOK FILED BEFORE US THAT IT HAD INTEREST FREE FUNDS IN THE FORM OF CURRENT C APITAL OFRS.97.89 LACS AND CLAIMED THAT THE INTEREST FREE ADVANC E OF RS.77 LACS WAS MADE OUT OF INTEREST FREE FUNDS AVAILA BLE WITH THE ASSESSEE AND, THEREFORE, THE ASSESSING OFFIC ER WAS NOT JUSTIFIED IN DISALLOWING INTEREST EXPENDITURE OF RS.8,23,801/-. I FIND THAT THE EXPLANATION OF THE ASSES SEE IS A PLAUSIBLE ONE. HON'BLE SUPREME COURT IN THE CASE O F MUNJAL SALES CORPORATION (2008) 298 ITR 298 (SC) HAS HE LD THAT SINCE THE OPENING BALANCE OF THE PROFITS OF THE ASSESSEE FIRM AS ON 1.4.1994 WAS RS.1.91 CRORES AND THE PROFITS WERE SUFFICIENT TO COVER THE LOAN GIVEN TO A SISTER CONCERN OF RS. 5 LACS ONLY, THE APPELLATE TRIBUNAL OUG HT TO HAVE HELD THAT THE LOAN GIVEN WAS FROM THE ASSESSEES OW N MILAN MITHAI ITA NO.280/IND/2015 10 FUNDS. RESPECTFULLY FOLLOWING THE SAID DECISION OF THE HON'BLE SUPREME COURT, WE SET ASIDE THE ORDERS OF TH E ORDERS OF THE AUTHORITIES BELOW AND DELETE THE DISALLO WANCE OF INTEREST EXPENDITURE OF RS.8,23,801/- AND ALLOW TH E GROUND OF APPEAL OF THE ASSESSEE. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. PRONOUNCED IN OPEN COURT ON 12 TH JULY, 2016 SD/- (N.S. SAINI) ACCOUNTANT MEMBER 12 TH JULY, 2016 DN/- MILAN MITHAI ITA NO.280/IND/2015 11