The ACIT, Central Circle-1(3), Ahmedabad V. Shri Bachubhai Dudhwala Pvt.Ltd., Bhavnagar

ITA 2912/AHD/2007

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9321 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 23-11-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 06-07-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHELLY JINDAL
• Assessee Lawyers: P M MEHTA
• Keywords: Additional evidence
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD C BENCH (BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER) ITA NO.2912, 2913 AND 2914/AHD/2007 [ASSTT. YEAR : 2003-2004, 2004-2005 AND 2005-2006] ACIT, CC-1(3) AHMEDABAD. VS. BACHUBHAI DUDHWALA PVT. LTD. PLOT NO.44/45, VITHALVADI UDYOG NAGAR, BHAVNAGAR. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SHELLY JINDAL ASSESSEE BY : SHRI P.M.MEHTA O R D E R PER G.D. AGARWAL, VICE-PRESIDENT : THESE ARE THREE APPEALS BY THE REVENUE AGAINST ORDERS OF THE COMMISSIONER OF INCOM E TAX (APPEALS)-I, AHMEDABAD ARISING OUT OF THE ORDER OF THE ASSESSING OFFICER PASSED UNDER SECTION 153A(B) OF THE I.T. ACT, 1961. 2. IN ALL THESE APPEALS BY THE REVENUE, COMMON GROU NDS ARE RAISED, THEREFORE, WE SHALL HEREIN BELOW DEAL WITH GROUNDS RAISED BY THE REVENUE IN ITA NO.2912/AHD/2007 FOR ASSESSMENT YEAR 2003-2004. IN OTHER YEARS, IDENTICAL GROUNDS ARE RAISED EXCEPT MODIFICATION IN THE QUANTUM OF ADDITION MADE BY THE AO WHICH WAS DELETED BY THE CIT(A). 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE DERI VES INCOME FROM PURCHASE AND SALE OF MILK. AS ON 31-11-2004, THERE WAS SEAR CH UNDER SECTION 132 AT THE BUSINESS PREMISES OF THE ASSESSEE. DURING THE COUR SE OF SEARCH CERTAIN UNACCOUNTED PURCHASES WERE FOUND. IN RESPONSE TO T HE NOTICE UNDER SECTION 153A, THE ASSESSEE FILED THE RETURN DISCLOSING THE ADDITIONAL INCOME ON SUCH UNACCOUNTED PURCHASE AND SALES. ON THE UNACCOUNTED PURCHASE, THE ASSESSEE OFFERED INCOME AT THE RATE OF 15%. SO FAR AS ACCOU NTED SALE IS CONCERNED, THE AO NOTICED THAT FOR THE A.Y.2003-2004, THE ASSESSEE DISCLOSED GP AT THE RATE OF 12.56%. HE FOUND THAT THE AVERAGE GP DISCLOSED BY THE ASSESSEE FOR THE ITA NO.2912, 2913 AND 2914/AHD/2007 -2- A.Y.1999-2000 TO 2005-2006 WAS 14.26%. HE THEREFOR E ADOPTED THE GP RATE OF 14% BOTH ON THE ACCOUNTED SALES AS WELL AS UNACC OUNTED SALES WHICH RESULTED IN THE ADDITION OF RS.16,77,152/-. 4. ON APPEAL, BEFORE THE CIT(A), IT WAS EXPLAINED B Y THE ASSESSEE THAT TILL ASSESSMENT YEAR 2002-2003, THE ASSESSEE WAS ACCOUNT ING FOR THE DISCOUNT ALLOWED ON SALE IN THE PROFIT AND LOSS ACCOUNT. SI NCE A.Y.2003-2004, THE SAME IS ACCOUNTED FOR IN THE TRADING ACCOUNT BY WAY OF R EDUCTION IN THE SALE. THAT, IF, IN THE EARLIER YEAR ALSO DISCOUNTED IS ACCOUNTED FO R BY WAY OF REDUCTION FROM SALE, THE AVERAGE GP WOULD BE LESS THAN THE GP DISC LOSED BY THE ASSESSEE FOR A.Y.2003-2004. THE CIT(A) ACCEPTED THE ASSESSEES CONTENTION AND DELETED THE ADDITION MADE BY THE AO. THE REVENUE, AGGRIEVE D WITH THE ORDER OF THE CIT(A), IS IN APPEAL BEFORE US. 5. AT THE TIME OF HEARING BEFORE US, IT IS CONTENDE D BY THE LEARNED DR THAT BEFORE THE AO THE ASSESSEE NEVER CLAIMED THAT THERE WAS CHANGE IN THE METHOD OF ACCOUNTING FOR DISCOUNT. THUS, THE ASSESSEE RAI SED THE FRESH PLEA BEFORE THE CIT(A) AND ALSO FURNISHED ADDITIONAL EVIDENCES BEFO RE THE CIT(A) WHICH WAS ADMITTED BY HIM IN VIOLATION OF RULE 46A. IF THE C IT(A) WAS TO ADMIT THE ADDITIONAL EVIDENCE, HE SHOULD HAVE ALLOWED OPPORTU NITY TO THE AO TO EXAMINE SUCH ADDITIONAL EVIDENCE. HE THEREFORE SUBMITTED T HAT THE ORDER OF THE CIT(A) SHOULD BE REVERSED AND THAT OF THE AO MAY BE RESTOR ED. HE ALSO SUBMITTED THAT THE GP IN THE UNACCOUNTED SALE IS ALWAYS MORE THAN THE ACCOUNTED SALE AND THEREFORE THE ADDITION MADE BY THE AO WAS QUITE JUS TIFIED. 6. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTH ER HAND, STATED THAT NO FRESH ARGUMENTS WERE TAKEN BEFORE THE CIT(A) NEITHE R ANY ADDITIONAL EVIDENCE WAS FURNISHED BEFORE THE CIT(A). HE REFERRED TO TH E REPLY FURNISHED BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND POINTED OUT THAT IN PARA- 3.4 OF THE REPLY, THE ASSESSEE HAS POINTED OUT THAT TILL A.Y.2002-2003, THE ASSESSEE WAS ACCOUNTING FOR THE DISCOUNT SEPARATELY UNDER THE HEAD SELLING AND ITA NO.2912, 2913 AND 2914/AHD/2007 -3- DISTRIBUTION EXPENSES WHILE SINCE A.Y.2003-2004 THE SAME IS REDUCED FROM THE SALES. HE HAS ALSO FURNISHED THE COPY OF THE DISCO UNT ACCOUNT OF THE EARLIER YEARS. BEFORE THE CIT(A), THE ASSESSEE ONLY FURNIS HED CALCULATION I.E. IF THE DISCOUNT IS REDUCED FROM THE SALE IN THE EARLIER YE AR, WHAT WOULD BE THE ACTUAL GP RATE IN THOSE YEARS. THE ABOVE RE-CALCULATIONS WERE MADE TO MAKE RESULTS OF THE EARLIER YEARS AT PAR WITH THE A.Y.2003-2004 SO THAT THE SAME CAN BE COMPARED. AUDITED ACCOUNTS OF ALL THE EARLIER YEAR S WERE ALREADY WITH THE REVENUE AND RECALCULATION OF THE GP HAS BEEN MADE O NLY ON THE BASIS OF THE TRADING AND PROFIT & LOSS ACCOUNT OF THE EARLIER YE ARS WHICH IS AVAILABLE ON THE FILE OF THE REVENUE. HE THEREFORE SUBMITTED THAT N EITHER FRESH PLEA WAS RAISED BEFORE THE CIT(A) NOR ANY ADDITIONAL EVIDENCE WAS F URNISHED. HE ALSO POINTED OUT THAT THE AO HIMSELF HAS APPLIED THE SAME RATE O F GP ON THE ACCOUNTED AS WELL AS UNACCOUNTED SALES I.E. 14%. HE FURTHER SUB MITTED THAT THE UNACCOUNTED SALE IS NEGLIGIBLE AS COMPARED TO THE TOTAL SALE. THAT FOR THE YEAR UNDER APPEAL, TOTAL SALE WAS RS.11.67 CRORES WHILE UNACCOUNTED SA LE WAS ONLY LESS THAN RS.45 LAKHS. HE THEREFORE SUBMITTED THAT THE ORDER OF TH E CIT(A) MAY BE SUSTAINED. 7. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. THE MAIN AR GUMENTS RAISED BY THE REVENUE AS PER THE GROUND OF APPEAL AS WELL AS BY W AY OF ARGUMENTS BEFORE US WAS THAT THE ASSESSEE RAISED FRESH PLEA BEFORE THE CIT(A) AND ALSO FURNISHED ADDITIONAL EVIDENCE BEFORE HIM. HOWEVER, WE FIND T HAT THE PLEA RELATING TO ACCOUNTING FOR DISCOUNT IN A DIFFERENT MANNER FOR T HE YEAR UNDER CONSIDERATION AS COMPARED TO EARLIER YEAR, WAS RAISED BEFORE THE AO. IN PARA-3.4 OF THE ASSESSEES REPLY FURNISHED BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS READS AS UNDER: 3.4 THE ASSESSEE FURTHER STATES THAT IN ITS EARLIE R SUBMISSION, IT HAS SUBMITTED WORKING OF GROSS PROFIT RATIO FOR A.Y.199 9-2000 TO 2004-2005 WHEREBY AVERAGE GROSS PROFIT FOR SEVEN YEARS IS 14. 23% WHICH IS AS PER THE ABOVE INDUSTRY AVERAGE. THE ASSESSEE FURTHER S TATES THAT MARGINAL REDUCTION IN GROSS PROFIT RATIO FROM A.Y.2003-2004 AS COMPARED TO EARLIER YEAR IS BECAUSE FROM A.Y.2003-2004, ASSESSE E HAS BEEN SHOWING ITA NO.2912, 2913 AND 2914/AHD/2007 -4- SALES AT NET OF DISCOUNT GIVEN TO THE DISTRIBUTORS WHILE IN EARLIER YEARS, SALES WAS SHOWN AT GROSS AMOUNT & DISCOUNT WAS SEPA RATELY SHOWN AS PART OF SELLING & DISTRIBUTION EXPENSES WHICH HAS N OT BEEN CONSIDERED WHILE COMPUTING GROSS PROFIT (COPY OF DISCOUNT ACCO UNT IS ENCLOSED). FURTHER, ASSESSEE STATES THAT IN AFORESAID YEARS SA LES VALUE HAS BEEN CONSTANTLY REMAIN SAME BUT PERSONAL COST HAS BEEN P ROPORTIONATELY INCREASED WHICH HAS RESULTED INTO MARGINAL REDUCTIO N IN GROSS PROFIT RATIO IN A.Y.2003-2004 ONWARDS. LOOKING TO THE NAT URE OF INDUSTRY, ASSESSEE HAS TO MAINTAIN CERTAIN LEVEL OF TEMPERATU RE IN STORAGE TANKS FOR PRESERVING MILK AND MILK PRODUCTS IRRESPECTIVE OF SALE VALUE AND INCREASE IN POWER COST HAS ALSO LEAD TO REDUCTION I N GROSS PROFIT OF THE ASSESSEE IN LATER YEARS. EVEN DURING A.Y.1999-2000 TO 2002-2003, OTHER INCOME WAS INCLUDED AS PART OF GROSS PROFIT WORKING WHEREAS IN REMAINING YEARS, SAME WAS NOT PART OF SUCH COMPUTAT ION. AS IN THE CASE OF ASSESSEE, GROSS PROFIT RATIO HAS BEEN CONSISTENTLY MAINTAINED FOR ALL THE YEARS, THERE IS NO REASON FO R REJECTING THE BOOKS OF ACCOUNT. FROM THE ABOVE REPLY, IT IS EVIDENT THAT THE ASSESS EE CLAIMED THAT TILL ASSESSMENT YEAR 2002-2003, THE DISCOUNT WAS BEING SHOWN AS PAR T OF SELLING AND DISTRIBUTION EXPENSES, WHILE FROM A.Y.2003-2004, TH E SAME WAS REDUCED FROM SALE. BEFORE THE CIT(A), THE ASSESSEE ONLY FURNISH ED RECALCULATION OF THE GP OF THE EARLIER YEARS WHEREIN THE DISCOUNT WAS REDUCED FROM THE SALE AND THEN THE GP WAS WORKED OUT. THUS, NEITHER ANY ADDITIONAL EV IDENCE WAS FURNISHED BEFORE THE CIT(A) NOR ANY FRESH PLEA WAS RAISED BEF ORE HIM. AFTER THE REVISED WORKING, THE AVERAGE GP FOR A.Y.1999-2000 TO A.Y.20 05-2006 WAS WORKED OUT AT 11.68% AS AGAINST 12.56% DISCLOSED BY THE AS SESSEE FOR THE YEAR UNDER CONSIDERATION. NO MISTAKE IN THE REVISED WORKING O F THE GP BY THE ASSESSEE HAS BEEN POINTED OUT BY THE REVENUE. BY SUCH REVISED W ORKING, THE FIGURES OF EARLIER YEARS HAVE BEEN MADE COMPARABLE TO A.Y.2003 -2004. THE CIT(A) DELETED THE ADDITION BECAUSE THE PROFIT DISCLOSED B Y THE ASSESSEE IS BETTER THAN THE AVERAGE PROFIT FOR A.Y.1999-2000 TO 2005-2006. IN VIEW OF THESE FACTS, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE CIT(A). WE THEREFORE DISMISS THE APPEAL OF THE REVENUE FOR THE A.Y.2003-2004. ITA NO.2912, 2913 AND 2914/AHD/2007 -5- 8. THE FACTS RELATING TO THE A.Y.2004-2005 AND 2005 -2006 ARE IDENTICAL TO THE FACTS STATED IN A.Y.2003-2004. WE, THEREFORE, UPHOLD THE ORDER OF THE CIT(A) FOR ALL THREE YEARS AND DISMISS THE APPEALS FILED BY THE REVENUE. 9. IN RESULT, THE REVENUES APPEALS ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 30 TH NOVEMBER, 2010. SD/- SD/- (MUKUL KUMAR SHRAWAT) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 30-11-2010 COPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD