Dy.Commissioner of Income Tax-6, Kanpur V. M/s Uma Foods Products Pvt. Ltd., Kanpur

ITA 332/LKW/2014

• Counselvise Citation: 33223714 RSA 2014
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 27-11-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 01-05-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Gross profit estimation; Depreciation

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.332/LKW/2014 ASSESSMENT YEAR:2004 - 05 M/S FOODS PRODUCTS PVT. LTD., HALSEY ROAD, KANPUR. PAN:AAACU2817N VS DY.C.I.T. - 6, KANPUR. (RESPONDENT) (APPELLANT) SHRI RAJNISH YADAV, D.R. APPELLANT BY NONE RESPONDENT BY 27/11/2014 DATE OF HEARING 16 /01/2015 DATE OF PRONOUNCEMENT O R D E R PER A. K. GARODIA, A.M. THIS IS REVENUES APPEAL DIRECTED AGAINST THE ORDER PASSED BY LEARNED CIT(A) - I, KANPUR DATED 06/01/2014 FOR THE ASSESSMENT YEAR 2004 - 2005. 2. THE GROUNDS RAISED BY THE REVENUE ARE AS UNDER: 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE RELIEF OF DISALLOWANCE OF RS.66,22,058/ - BY WAY OF EXTRA PROFIT APPLYING G.P. RATE OF 12% WITHOUT APPRECIATING THE FACT THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FAILED THE SUBMIT EXPLANATION WITH REGARD TO THE ABNORMAL INCREASE IN EXPENSES AS C OMPARE TO IMMEDIATE PRECEDING YEAR RELEVANT TO THE A.Y. 2004 - 05. 2. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE RELIEF OF DISALLOWANCE OF RS.66,22,058/ - BY WAY OF EXTRA PROFIT APPLYING G.P. RATE OF 12% WITHOUT APPRECIATING THE FACT THAT THE T OTAL MANUFACTURING AND SALES OF THE ASSESSEE COMPANY WAS REDUCED SUBSTANTIALLY AS COMPARED TO THE IMMEDIATE PREVIOUS YEAR AND ALSO DIE CLOSING STOCK OF THE ASSESSEE COMPANY WAS FOUND UNDERVALUED BY AN AMOUNT OF RS.4,59,686/ - . 2 3. THE CIT(A) HAS ERRED IN LA W AND ON FACTS IN ALLOWING THE RELIEF OF ADDITION OF RS.20,20,833/ - U/S. 41(1) OF THE ACT IN VIEW OF THE FACT THAT THE SUNDRY CREDITORS AMOUNTING TO RS.20,20,833/ - PERTAINING TO 21 DIFFERENT PERSONS WERE NOT VERIFIABLE DURING THE COURSE OF ASSESSMENT PROCE EDINGS. 4. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE RELIEF OF DISALLOWANCE OF DEPRECIATION OF RS.2,49,679/ - IN VIEW OF THE FACT THAT THE PLANT AND MACHINERY OF THE JAGDISHPUR UNIT WAS NOT USED DURING THE YEAR. 5. THE ORDER OF THE CIT (A), KANPUR BEING ERRONEOUS, UNJUST AND BAD IN LAW BE VACATED AND THE ORDER OF THE AO BE RESTORED. 3. NONE APPEARED ON BEHALF OF THE ASSESSEE ON THE APPOINTED DATE OF HEARING IN SPITE OF NOTICE AND HENCE, WE PROCEED TO DECIDE THIS APPEAL OF THE REVENUE EX - PA RTE QUA THE ASSESSEE. 4. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER. 5. WE HAVE CONSIDERED THE SUBMISSIONS OF LEARNED D.R. OF THE REVENUE, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. REG ARDING GROUND NO. 1 & 2, WE FIND THAT THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNT AND ADOPTED GROSS PROFIT RATE OF 12% TO ASSESS THE INCOME OF THE ASSESSEE. THE BOOKS OF ACCOUNT WERE REJECTED FOR VARIOUS REASONS AND ONE OF THE REASONS IS THAT THE ASSESSEE HAS SHOWN LOSS OF ITS JAGDISHPUR UNIT BUT AS PER THE MANUFACTURING AND PROFIT & LOSS ACCOUNT OF THIS UNIT, THERE WAS NO MANUFACTURING CARRIED OUT BY THE ASSESSEE AT THIS UNIT. THE ASSESSING OFFICER HAS ALSO NOTED THAT THE EXPENSES CLAIMED IN RASOOLABAD UNIT ARE ALSO NOT VERIFIABLE. HE HAS OBSERVED THAT DESPITE DECREASE IN PRODUCTION AND SALES, VARIOUS EXPENSES UNDER HEADING POWER AND FUEL, HANDLING CHARGES, REPAIR OF MACHINERY, MANDI TAX, GENERATOR REPAIR & MAINTENANCE, TRAVELLING EXPENSES, FREIGHT & CARTAGE OUTWARD ETC. HAVE GONE UP COMPARED TO IMMEDIATELY PRECEDING YEAR. HE HAS ALSO NOTED 3 THAT THERE IS DISCREPANCY IN THE VALUATION OF CLOSING STOCK. IN SPITE OF THESE VARIOUS REASONS GIVEN BY THE ASSESSING OFFICER FOR REJECTING THE BOOKS OF ACCOUNT, THE MATTER WAS DECIDED BY CIT(A) IN FAVOUR OF THE ASSESSEE ON THE BASIS THAT THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNT SOLELY FOR THE REASON THAT THE ASSESSEE HAS SHOWN LOWER GROSS PROFIT RATE AND NO OTHER DEFECT WAS MENTIONED IN THE ASSESSMENT ORDER. WE HAVE SEEN THAT APART FROM LOWER GROSS PROFIT , OTHER DEFECTS ARE ALSO MENTIONED IN THE ASSESSMENT ORDER BEING MISTAKE IN VALUATION OF CLOSING STOCK AND INCREASE IN VARIOUS EXPENSES IN SPITE OF DECREASE IN PRODUCTION AND SALES AND S UCH INCREASE IN EXPENSES COULD NOT BE EXPLAINED AND EXPENSES WERE UNVERIFIABLE ALSO. THESE DEFECTS COULD NOT BE EXPLAINED BY THE ASSESSEE. HENCE, ON THIS ASPECT, WE ARE OF THE CONSIDERED OPINION THAT THE ORDER OF CIT(A) IS NOT SUSTAINABLE. WE, THEREFORE, REVERSE THE ORDER OF CIT(A) AND RESTORE THAT OF THE ASSESSING OFFICER. GROUND NO. 1 & 2 ARE ALLOWED. 6. REGARDING GROUND NO. 3, WE FIND THAT IT IS NOTED BY ASSESSING OFFICER IN PARA 3.3 OF THE ASSESSMENT ORDER THAT IN THE CASE OF ONE PARTY M/S VISHNOI TRADERS, THE AMOUNT HAS ALREADY BEEN PAID BEFORE 31/03/2004. STILL THE ASSESSEE IS SHOWING A LIABILITY OF RS.1,05,500/ - IN THE NAME OF THIS PARTY. REGARDING THE REMAINING PARTIES, IT IS NOTED BY THE ASSESSING OFFICER THAT EXCEPT TWO PARTIES I.E. M/S POPULAR TRADERS AND VISHNOI TRADERS, NO OTHER PARTY IS TRACEABLE. REGARDING MAA BHAWANI TRADING COMPANY, DELTA BEARING CORPORATION AND JAI MATA DI TRADING COMPANY, IT IS NOTED BY THE ASSES SING OFFICER THAT THE NOTICES ISSUED TO THESE PARTIES HAVE BEEN RECEIVED BACK UNSERVED AND THE ASSESSEE COULD NOT PRODUCE ANY CONFIRMATION FROM THESE PARTIES. IN THE LIGHT OF THESE FACTS THAT ONE PARTY, WHICH WAS TRACEABLE I.E. VISHONI TRADERS HAS SUBMITT ED BEFORE THE ASSESSING OFFICER THAT THE ENTIRE AMOUNT WAS RECEIVED BY HIM FROM THE ASSESSEE BEFORE 31/03/2004, AND AS A RESULT, THERE WAS NO LIABILITY OUTSTANDING BUT THE ASSESSEE IS STILL SHOWING LIABILITY IN THE NAME OF THAT PARTY AND OTHER PARTIES ARE NOT TRACEABLE, THE FACTS SUGGEST THAT ALL THESE CREDITS HAVE CEASED TO EXIST AS ON 31/03/2004 AND 4 THEREFORE, THE PROVISION OF SECTION 41(1) WERE RIGHTLY INVOKED BY THE ASSESSING OFFICER IN THE FACTS OF THE PRESENT CASE BECAUSE EVEN IF THE ASSESSEE IS SHOWI NG THESE LIABILITIES IN ITS BOOKS AND BALANCE SHEET, IN THE LIGHT OF THESE FACTS THAT THE PARTY WHO COULD BE TRACED OUT HAS DENIED THE LIABILITY, THE BURDEN WAS ON THE ASSESSEE TO ESTABLISH THE EXISTENCE OF LIABILITY AND SINCE THE ASSESSEE COULD NOT DO SO, IN OUR CONSIDERED OPINION, IN THE FACTS OF THE PRESENT CASE, THE ORDER OF CIT(A) IS ALSO NOT SUSTAINABLE. WE, THEREFORE, REVERSE THE ORDER OF CIT(A) AND RESTORE THAT OF THE ASSESSING OFFICER. 7. REGARDING GROUND NO. 4, WE FIND THAT DEPRECIATION CLAIMED BY THE ASSESSEE IN RESPECT OF JAGDISHPUR UNIT WAS NOT ALLOWED BY THE ASSESSING OFFICER FOR THE REASON THAT THIS PLANT WAS NOT WORKING IN THE PRESENT YEAR. THE CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE ON THE BASIS THAT THIS PLANT WAS TEMPORARILY CLOSED AND SUBSEQUENTLY REVIVED BUT THERE IS NO MENTION THAT FROM WHICH DATE , THE PLANT WAS REVIVED. IN THE ABSENCE OF ANY SUCH FINDING ABOUT THE DATE OF REVIVAL OF JAGDISHPUR PLANT, IT CANNOT BE SAID THAT THE PLANT WAS TEMPORARILY SHUT DOWN AND NOT PERMANENTLY AND HENCE, ON THIS ISSUE ALSO, THE ORDER OF CIT(A) IS NOT SUSTAINABLE. WE, THEREFORE, REVERSE THE ORDER OF CIT(A) AND RESTORE THAT OF THE ASSESSING OFFICER. 8. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS ALLOWED. (ORDER WAS P RONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 16 /01/2015 *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1.THE APPELLANT 2.THE RESPONDENT. 3.CONCERNED CIT 4.THE CIT(A) 5.D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR