The Asstt. Commissioner of Income-tax, Bathinda V. M/s. Pure Foods Ltd, Abohar

ITA 308/ASR/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9644 (ITAT-AMRITSAR)
• Duration Of Justice: 3 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 14-06-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 09-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHAWANI SHANKAR
• Assessee Lawyers: P N ARORA; PARSHOTAM K SINGAL ADVS
• Keywords: Rejection of books of accounts; Depreciation
• Section: 133(6); 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A NOS.307 & 308(ASR)/2013 ASSESSMENT YEARS: 2008-09 & 2009-10 ASST. CIT, CIRCLE-II, BATHINDA. VS. M/S. PURE FOODS LTD., ABOHAR PAN:AAACP7910R (APPELLANT) (RESPONDENT) APPELLANT BY: SH. BHAWANI SHANKAR (DR ) RESPONDENT BY: SH. P.N. ARORA & SH. PARSHOTAM K. SINGAL (ADVS.) DATE OF HEARING: 13.06.2016 DATE OF PRONO UNCEMENT: 01.08.2016 ORDER PER T. S. KAPOOR (AM): THESE ARE TWO APPEALS FILED BY REVENUE AGAINST THE SEPARATE ORDERS OF LEARNED CIT(A), BATHINDA, BOTH DATED 27.02.2013 FOR ASST YEARS: 2008- 09 & 2009-10 RESPECTIVELY. 2. THE REVENUE IN THESE APPEALS IS AGGRIEVED WITH T HE ACTION OF LEARNED CIT(A), WHEREBY HE HAD DELETED AN ADDITION MADE BY ASSESSING OFFICER ON ACCOUNT OF PURCHASE OF RAW MATERIAL REQU IRED FOR PRODUCTION OF FINISHED GOODS AS SOLD BY IT OUT SIDE THE BOOKS OF ACCOUNTS. 3. THE BRIEF FACTS OF THE CASE AS NOTED IN THE ASSE SSMENT ORDER ARE THAT ASSESSEE IS A COMPANY AND DERIVES INCOME FROM BUSINESS OF MANUFACTURING OF EDIBLE OIL AND VANASPATI GHEE ETC. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBTAI NED AN INFORMATION ITA NOS.307 & 308 (ASR)/2013 ASST. YEARS: 2008-09 & 2009-10 2 U/S 133(6) OF THE ACT FROM STATE BANK OF PATIALA, A BHOR BRANCH AND OBTAINED COPY OF BALANCE SHEET DULY SIGNED BY A CHA RTERED ACCOUNTANT. THE ASSESSING OFFICER OBSERVED THAT IN THE BALANCE SHEET AND P&L ACCOUNT SUBMITTED BEFORE STATE BANK OF PATIALA, THE ASSESSEE HAD DECLARED MORE SALES AS COMPARED TO THE FIGURES SUBM ITTED TO DEPARTMENT, THEREFORE, ON THE BASIS OF DIFFERENCES OF SALES THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED THE PR OFIT EARNED ON SALES MADE OUTSIDE THE BOOKS OF ACCOUNTS. 4. AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE LEARN ED CIT(A) AND SUBMITTED VARIOUS SUBMISSIONS. THE LEARNED CIT(A) R ECORDED SIMILAR FINDINGS WHILE DELETING THE ADDITIONS IN BOTH YEARS . THE LEARNED AR BEFORE LEARNED CIT(A) SUBMITTED THAT THE BALANCE SHEET AND AUDIT REPORT SUBMITTED BEFORE BANK AUTHORITIES WAS PREPARED TO O BTAIN HIGHER BANK FACILITIES WHEREAS AUDIT REPORT, BALANCE SHEETS & P &L ACCOUNTS FILED BEFORE THE DEPARTMENT WAS A CORRECT BALANCE SHEET S UPPORTED BY BOOKS OF ACCOUNT, VOUCHERS AND OTHER RELEVANT MATERIALS. THE LEARNED CIT(A) HAS RECORDED HIS FINDINGS AS DETAILED BELOW. DURING THE APPELLATE PROCEEDINGS THE A/R OF THE AS SESSEE APPELLANT FILED WRITTEN SUBMISSION AND MADE THE ARGUMENTS THAT AUDI T REPORT DATED 30.08.2008 IS ONLY THE REPORT SUBMITTED TO THE BANK OF OBTAINING HIGHER BANK FACILITY WHEREAS THE AUDIT REPORT DATED 01.09.2008 IS THE CORRECT BALANCE SHEET SUPPORTED BY THE BOOKS OF ACCOUNTS, VOUCHERS AND OTHER RELEVANT MATERIAL. AFTER GOING THROUGH THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE AR OF THE ASSESSEE APPELLANT, I A M OF THE VIEW THAT BEFORE ADJUDICATING THE GROUNDS OF APPEAL TAKEN BY THE ASS ESSEE APPELLANT FIRST I MUST FIND OUT WHETHER THE AUDIT REPORT FILED BY THE ASSESSEE COMPANY DATED 30.08.2008 TO THE BANKING AUTHORITY IS THE CORRECT AUDIT REPORT OR THE AUDIT REPORT DATED 01-09-2008 AS FILED TO THE INCOME TAX DEPARTMENT OR THE OTHER GOVERNMENT AGENCIES IS THE CORRECT ONE. THEREFORE, I CAREFULLY GONE THROUGH ITA NOS.307 & 308 (ASR)/2013 ASST. YEARS: 2008-09 & 2009-10 3 BOTH THE AUDIT REPORTS AND AFTER COMPARING THE BOTH , IT IS FOUND THAT THERE ARE 14 SCHEDULES IN BOTH THE AUDIT REPORTS I.E. THE ONE SUBMITTED TO THE BANK AND THE OTHER SUBMITTED TO THE INCOME TAX DEPARTMENT OR OTHER GOVERNMENT AGENCIES. THE COMPARISON OF VARIOUS SCHEDULES ARE A S UNDER:- I) SCHEDULE 8 TO 14 ARE ON ACCOUNT OF PROFIT AND LOSS ACCOUNT. AS PER THESE SCHEDULES PROFIT AS PER BOTH THE AUDITED REPO RTS IS SAME BUT IF IT IS COMPUTED AFTER TAKING INTO CONSIDERATION THE DEP RECIATION AS PER INCOME TAX LAW THEN THE NET TAXABLE PROFIT AS PER A UDIT REPORT SUBMITTED TO THE BANK COMES TO RS. 4467053/- AGAINS T PROFIT AS DECLARED TO THE INCOME TAX DEPARTMENT AS PER AUDIT REPORT SUBMITTED TO THE DEPARTMENT COMES TO RS. 9887056/-. THEREFORE , THE TAXABLE INCOME AS PER AUDIT REPORT SUBMITTED TO THE BANK IS ON THE LOWER SIDE AND THE AUDIT REPORT ON THE BASIS OF WHICH RETURN H AS BEEN FILED IS ON THE HIGHER SIDE. IN OTHER WORDS THE INCOME AS PER A UDIT REPORT SUBMITTED TO THE INCOME TAX DEPARTMENT IS MORE THAN THE AUDIT REPORT SUBMITTED TO THE BANK. II) SCHEDULE 1 IS HAVING DETAIL OF SHARE CAPITAL AND TH ERE IS NO DIFFERENCE ON THIS ACCOUNT IN BOTH THE AUDIT REPORTS. III) SCHEDULE 2 IS DETAILS OF RESERVE AND SURPLUS WHICH CONTAINS PROFIT AND LOSS ACCOUNT, CENTRAL SUBSIDY, GENERAL RESERVE, PRO VISION FOR DEPRECIATION AND SHARE PREMIUM ACCOUNT. CENTRAL SUB SIDY AND SHARE PREMIUM IS SAME IN BOTH THE BALANCE SHEETS. PROVISI ONS OF DEPRECIATION HAS BEEN SHOWN ONLY IN THE BALANCE SHE ET SUBMITTED TO THE BANK AS THE DEPRECIATION CLAIMED HAS NOT BEEN D EDUCTED FROM THE BLOCK OF ASSETS WHEREAS THE DEPRECIATION A S PER BALANCE SHEET SUBMITTED TO THE DEPARTMENT HAS BEEN DEDUCTED FROM THE BLOCK OF ASSETS. THEREFORE, IN OTHER WORDS IT CAN BE PRES UMED THAT THERE IS NO DIFFERENCE ON THIS ACCOUNT. THERE IS NO CHANGE I N THE GENERAL RESERVE DURING THE YEAR IF COMPARED WITH THE EARLIE R YEARS FIGURES AND INCREASE IN PROFIT IN BOTH THE BALANCE SHEETS IS SA ME IF COMPARED WITH THE EARLIER BALANCE SHEETS AS SUBMITTED TO THE BANK AND TO THE INCOME TAX DEPARTMENT. IV) SCHEDULE 3 IS DETAILS OF SECURED LOANS. THE SECURED LOANS AS PER AUDIT REPORT SUBMITTED TO THE BANK HAS BEEN SHOWN AT RS.4 5444934/-. THE FIGURE IS MUCH LOWER THAN THE ACTUAL SECURED LOANS AS PER AUDIT REPORT SUBMITTED TO THE INCOME TAX DEPARTMENT AMOUNTING TO RS.530782047/. DURING THE ASSESSMENT PROCEEDINGS TH E ASSESSEE APPELLANT HAS FILED ALL THE RELEVANT CERTIFICATES A ND MATERIAL FROM THE CONCERNED BANKING AUTHORITIES TO PROVE THE SECURED LOAN WHICH HAS BEEN FOUND AS CORRECT. ON FURTHER EXAMINATION, I OB SERVED THAT SOME OF THE SECURED LOANS HAS BEEN SHOWN UNDER SCHEDULE 7 OF THE AUDIT REPORT SUBMITTED TO THE BANK. IN SCHEDULE 7, THE TR ADE AND SUNDRY CREDITOR HAS BEEN SHOWN AS PER AUDIT REPORT SUBMITT ED TO THE BANK AT RS. 27944400/- WHEREAS THE ACTUAL TRADE AND SUNDRY CREDITORS ARE RS. 139387482/- AS PER AUDIT REPORT SUBMITTED TO TH E INCOME TAX DEPARTMENT AND NECESSARY COPIES OF ACCOUNT OF THE C REDITORS AND DETAIL FURNISHED ARE FOUND BY THE ASSESSING OFFICER AS CORRECT. ITA NOS.307 & 308 (ASR)/2013 ASST. YEARS: 2008-09 & 2009-10 4 SCHEDULE 4 IS DETAILS OF UNSECURED LOANS, AS PER AU DIT REPORT SUBMITTED TO THE BANK SHOWS A LIABILITY OF RS.81443 081/- AGAINST NIL IN THE AUDIT REPORT SUBMITTED TO THE INCOME TAX DEP ARTMENT BUT AFTER COMPARING THE SCHEDULE 3, 4 AND 7, I OBSERVED THAT THE ONE HEAD OF THE LIABILITIES WHETHER ON ACCOUNT OF SECURED/UNSEC URED AND TRADE CREDITORS HAS BEEN ADJUSTED AGAINST EACH OTHER SO A S TO MEET THE REQUIREMENTS OF BANK FOR RAISING HIGHER FUNDS. OTHE RWISE THE COMPANY WAS HAVING MUCH MORE LIABILITIES AS PAYABLE AS EXPLAINED DURING THE ASSESSMENT PROCEEDINGS AND NOTHING HAS B EEN FOUND AS INCORRECT AT THE TIME OF ASSESSMENT. ALL THE LIABIL ITIES HAS BEEN ACCEPTED AS CORRECT AFTER COMPARING WITH THE BOOKS OF ACCOUNTS PRODUCED AND EXAMINED BY THE AO. V) SCHEDULE 5 IS ON ACCOUNT OF FIXED ASSETS. ON EXAMIN ATION OF THIS SCHEDULE, I OBSERVED THAT DURING THE YEAR ADDITION IN THIS SCHEDULE AS PER AUDIT REPORT SUBMITTED TO THE BANK IS OF RS.550 89555/- AGAINST RS.55221083/- AS PER AUDIT REPORT ON THE BASIS OF W HICH RETURN HAS BEEN FILED. IN OTHER WORDS THE ASSESSEE INCURRED MO RE INVESTMENT THE SOURCE OF WHICH HAS DULY BEEN EXPLAINED BY THE ASSE SSEE BY PRODUCING BOOKS OF ACCOUNTS AND OTHER MATERIAL DURI NG THE ASSESSMENT PROCEEDINGS AND NO DEFECT HAS BEEN POINT ED OUT BY THE AO ON THIS ACCOUNT. VI) SCHEDULE 6 IS DETAILS OF CURRENT ASSETS, LOANS & AD VANCES. AS PER THIS SCHEDULE THE ASSETS ARE MUCH MORE THAN AS DECLARED TO THE BANK AS PER AUDIT REPORT SUBMITTED TO BANK. FOR EXAMPLE THE STOCK AS PER BOOKS RS. 340453859/- AGAINST STOCK DECLARED TO THE BANK AT RS. 334953859/-. SUNDRY DEBTORS AS PER BOOKS ARE OF RS. 178565948/- AGAINST RS. 35199099/- DECLARED TO THE BANK. THERE IS NO DIFFERENCE IN CASH IN HAND OR BANK BALANCES ETC. THEREFORE THE ONLY CONCLUSION WHICH CAN BE DRAWN FR OM THE ABOVE STATED FACTS AND FIGURES OF BOTH THE BALANCE SHEETS AS COMPARED ABOVE IS THAT THE FACTS AND FIGURES AS DISCLOSED TO THE BANK AS PER AUDIT R EPORT DATED 30-08-2008 IS NOT THE CORRECT BALANCE SHEET/AUDIT REPORT BUT ONLY A PIECE OF PAPER NOT SUPPORTED BY ANY PAPER OR BOOKS OF ACCOUNTS JUST FI LED AS PER REQUIREMENT OF THE BANKING AUTHORITY WHEREAS THE AUDIT REPORT DATE D 01-09-2008 IS THE CORRECT BALANCE SHEET SUPPORTED BY THE BOOKS OF ACC OUNTS, VOUCHERS AND OTHER RELEVANT RECORD WHICH WERE PRODUCED BEFORE THE AO A ND NO DEFECT HAS BEEN FOUND BY HIM AT THE TIME OF ASSESSMENT. THIS FINDIN G ALSO GET A SUPPORT THAT IF THE ASSESSMENT HAS TO BE FRAMED ON THE BASIS OF AUD IT REPORT FILED TO THE BANKING AUTHORITY BY IGNORING THE BALANCE SHEET ON THE BASIS OF WHICH RETURN HAS BEEN FILED THAN THE INCOME SHOULD HAVE BEEN ASS ESSED ON A MUCH LOWER FIGURE OF RS.4467053/- AGAINST RETURNED INCOME OF R S.9887056/-.DURING THE ASSESSMENT PROCEEDINGS, THE AO HAS MADE THE ASSESSM ENT ON THE BASIS OF BOTH THE AUDIT REPORTS FIRST HE COMPUTED THE INCOME ON THE BASIS OF AUDIT REPORT ENCLOSED WITH THE RETURN OF INCOME AND THERE AFTER TAKING INCOME FIGURES OF THE AUDIT REPORT SUBMITTED TO THE BANK AND IGNOR ING THE EXPENDITURE FIGURES OF THE AUDIT REPORT, MADE AN FURTHER ADDITION IN TH E INCOME ALREADY ASSESSED ON THE BASIS OF AUDIT REPORT DATED 01-09-2008 WHERE AS IT IS A SETTLED LAW IF THE DOCUMENTS HAS TO BE CONSIDERED FOR MAKING AN AS SESSMENT IGNORING THE ITA NOS.307 & 308 (ASR)/2013 ASST. YEARS: 2008-09 & 2009-10 5 BOOKS OF ACCOUNTS THEN THE SAME SHOULD HAVE BEEN CO NSIDERED AS A WHOLE, IT IS NOT PERMISSIBLE TO ACCEPT A PART AND IGNORE THE REST OF THE DOCUMENTS. RELIANCE IS PLACED ON THE FOLLOWING CASES LAW:- GLASS LINES EQUIPMENTS CO. LTD. VS. CIT 253 ITR 454 (GUJ.) KAMAL KUMAR SAHARIA VS. COMMISSIONER OF INCOME TAX 216 ITR 217 (GAUHATI). THEREFORE, IN VIEW OF THE DECISION OF THE HONBLE GUJARAT AND GAU HATI HIGH COURTS AND OTHER JUDGMENTS AS RELIED UPON BY THE A/R OF THE ASSESSEE APPELLANT I HOLD THAT AO IS NOT CORRECT IN MAKING ADDITION OF RS. 94556900/- ON THE BASIS OF AUDIT REPORT SUBMITTED TO THE BANK AND I DIRECT THE AO TO DELETE THE ADDITION OF RS94556900/- MADE U/S 69 OF THE INCOME TAX ACT ALON GWITH ADDITION ON ACCOUNT OF GP. WE FIND THAT LEARNED CIT(A) HAS COMPARED FIGURES IN BOTH SETS OF BALANCE SHEETS AND P&L ACCOUNTS AND HAS OBSERVED THAT INCOME DECLA RED BY ASSESSEE AS PER DOCUMENTS FILED WITH DEPARTMENT WAS MUCH MORE THAN THE FIGURES AS PER DOCUMENTS FILED WITH THE BANK. SIMILARLY HE HAS OBS ERVED THAT ASSESSING OFFICER TOOK THE FIGURES OF PROFITS AS PER DOCUMENTS FILED WITH THE RETURN OF INCOME AND TOOK BALANCE FIGURES FROM OTHER SET OF DOCUMENTS WH ICH WAS NOT AS PER LAW. THE LEARNED CIT(A) HAS RIGHTLY ARRIVED AT THE CONCLUSIO N THAT THE BALANCE SHEET FILED WITH BANK WAS ONLY TO OBTAIN HIGHER LIMITS AND WAS NOT SUPPORTED BY ANY MATERIAL WHEREAS THE BALANCE SHEET FILED WITH RETUR N OF INCOME WAS SUPPORTED WITH RELEVANT BOOKS OF ACCOUNTS AND VOUCHERS. WE FIND THAT LEARNED CIT(A) HAS PASSED AN EXHAUSTIVE AND SPEAKING ORDER AND WE DO NOT FIND ANY INFIRMITY IN THE SAID ORDER. 5. IN VIEW OF THE ABOVE, THE APPEALS FILED BY THE R EVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 01 .08.2016. SD/- SD/- (A.D. JAIN) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTA NT MEMBER DATED: 01.08.2016. /PK/ PS. ITA NOS.307 & 308 (ASR)/2013 ASST. YEARS: 2008-09 & 2009-10 6 COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER