ITO, New Delhi V. M/s. Saksham Dairy India Ltd., New Delhi

ITA 3801/DEL/2010

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7762 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 24-05-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 09-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIMA BERNWAL
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G, NEW DELHI BEFORE SHRI R. S. SYAL, ACCOUNTANT MEMBER AND SHRI C. M. GARG, JUDICIAL MEMBER I.T.A. NO.3801/DEL/2010 (ASSESSMENT YEAR 2006-07) ITO, WARD 7(2), VS. M/S. SAKSHAM DAIRY INDIA LTD., NEW DELHI 307, AGGARWAL SHOPPING ARCADE, C U BLOCK, PITAMPURA, NEW DELHI- 110 048 GIR / PAN : AAFCS6648L (APPELLANT) (RESPONDENT) APPELLANT BY :MS. ANIMA BERNWAL, SR. DR RESPONDENT BY :SHRI SANJAY AGGARWAL, CA MS. APOORVA BHARADWAJ, CA DATE OF HEARING: 24.05.2016 DATE OF PRONOUNCEMENT: 25.05.2016 ORDER PER R. S. SYAL, AM: THIS APPEAL BY THE REVENUE ARISES OUT OF THE ORDER PASSED BY THE CIT(A) X, NEW DELHI, ON 19.05.2010 IN RELATI ON TO THE ASSESSMENT YEAR 2006-07. 2 I.T.A.NO.3801/DEL/2010 2. THE FIRST GROUND OF THE APPEAL IS AGAINST THE REDUCTION IN THE ADDITION ON ACCOUNT OF NET PROFIT. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS IN THE BUSINESS OF MARKETING D AIRY PRODUCTS. PURCHASES TO THE TUNE OF RS.3.10 CRORE WERE SHOWN A S AGAINST RS.53.54 LAC FOR THE IMMEDIATELY PRECEDING YEAR. S IMILARLY, SALES FOR THE YEAR UNDER CONSIDERATION WERE SHOWN A T RS.3.64 CRORE WITH THE CORRESPONDING FIGURE OF SALE DURING THE PRECEDING YEAR AT RS.86.30 LACS. IN THE LIKE MANNER, THE NET PROFIT FOR THE YEAR WAS SHOWN AT RS.1,30,831/- AS AGAINST PRECEDIN G YEARS PROFIT OF RS.1,18,321/-. ON BEING CALLED UPON TO E XPLAIN AS TO WHY THE NET PROFIT DID NOT INCREASE IN TANDEM WITH THE INCREASE IN SALES BY 4.5 TIMES, THE ASSESSEE SUBMITTED THAT THE PURCHASE PRICE OF THE MILK DEPENDS UPON FAT AND SNF (SOLIDS NOT FA T) CONTENTS IN THE MILK. IT WAS EXPLAINED THAT IF MILK OF 6% F AT & 9% SNF COST RS.12 PER LITRE, THE PRICE PER FAT UNIT IS RS. 1/- (6 FAT + 2/3 RD OF 9 SNF = 12 FAT UNITS). IT WAS FURTHER EXPLAINED TH AT SNF BELOW 8.5 MEANS THAT SUPPLIER HAS MIXED WATER. THAT IS H OW THE ASSESSEE TRIED TO JUSTIFY ITS LOW PROFIT RATE. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO SUBSTANTIATE ITS SUBMISSIO NS WITH CERTAIN DETAILS AS ENUMERATED AT PAGE 3 OF THE ASSESSMENT O RDER. NO SUCH INFORMATION WAS SUBMITTED BY THE ASSESSEE. THE ASS ESSEE ADMITTED THAT NO PURCHASE REGISTER WAS MAINTAINED B Y IT. THE ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 145(3) AND 3 I.T.A.NO.3801/DEL/2010 REJECTED THE BOOKS OF ACCOUNT. BY APPLYING NET PRO FIT RATE OF 10% ON THE AMOUNT OF GROSS SALES, THE AO CALCULATED THE AMOUNT OF NET PROFIT FROM SALES AT RS.36,40,973/-. THE LD . CIT(A) GOT CONVINCED WITH THE EXPLANATION FURNISHED BY THE ASS ESSEE AND ACCORDINGLY DIRECTED THAT THE NET PROFIT RATE OF 1. 37% BE APPLIED AS AGAINST 0.36% DECLARED BY THE ASSESSEE AND 10% D ETERMINED BY THE ASSESSING OFFICER. THE REVENUE IS AGGRIEVED AGAINST REDUCTION IN THE ADDITION. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. IT IS EVIDENT FROM THE ASSESSMENT ORDER THAT THE ASSESSEE FAILED TO PRODUC E NECESSARY BOOKS OF ACCOUNTS AND ALSO ADMITTED THAT NO PURCHAS E REGISTER WAS MAINTAINED BY THE ASSESSEE COMPANY. AS PER TH E ASSESSEES OWN SUBMISSIONS, PURCHASE ASPECT IS VERY RELEVANT B ECAUSE THE PURCHASE PRICE OF MILK DEPENDS UPON FAT AND SNF CON TENTS IN THE MILK. IN VIEW OF NON MAINTENANCE OF PURCHASE REGIS TER AND THE OTHER REASONS DISCUSSED IN THE ASSESSMENT ORDER, WE ARE SATISFIED THAT THE ASSESSING OFFICER WAS RIGHT IN REJECTING T HE BOOKS OF ACCOUNTS OF THE ASSESSEE AND THEN RESORTING TO THE PROVISIONS OF SECTION 145(3) OF THE ACT. 4. HAVING HELD THAT THE PROVISIONS OF SECTION 145(3 ) WERE RIGHTLY APPLIED, THE NEXT QUESTION ARISES ABOUT THE ESTIMATION OF A 4 I.T.A.NO.3801/DEL/2010 PROFIT FROM THE SALES EFFECTED BY THE ASSESSEE. TH E ASSESSING OFFICER HAS APPLIED 10% NET PROFIT RATE ON THE GROS S AMOUNT OF SALES AND NO BASIS WHATSOEVER HAS BEEN GIVEN TO SUP PORT THE APPLICATION OF SUCH A PROFIT RATE. AFTER REJECTING BOOKS OF ACCOUNT, THE AO IS REQUIRED TO PROCEED IN SOME RATI ONAL MANNER TO ESTIMATE THE PROFIT. IT IS NOT PERMISSIBLE TO PI CK UP ANY AD HOC RATE OF NET PROFIT FOR APPLICATION WITHOUT ANY BASI S. IN THE ABSENCE OF ANY OTHER SPECIAL FEATURE, THE PROFIT RATE OF EA RLIER YEARS CONSTITUTES A GOOD BASIS FOR ADOPTION. THE LD. CIT( A) HAS NOTED ON PAGE 18 OF HIS ORDER THAT IN THE EARLIER YEARS, NET PROFIT RATE WAS RANGING BETWEEN 1.37% TO 1.95%, AND FOR THE SUB SEQUENT ASSESSMENT YEAR, THE ASSESSEE FILED ITS RETURN DECL ARING NET PROFIT @ 1.25%. IN OUR CONSIDERED OPINION, THE APPLICATION OF NET PROFIT RATE, IN THE GIVEN CIRCUMSTANCES, @ 1.37% IS PERFEC TLY IN ORDER. WE, THEREFORE, UPHOLD THE IMPUGNED ORDER TO THIS EX TENT. 5. THE ONLY OTHER GROUND IS AGAINST THE DELETION OF ADDITION OF RS.1,29,95,727/- MADE BY THE ASSESSING OFFICER AS U NEXPLAINED CASH DEPOSITS. THE FACTS APROPOS THIS GROUND ARE T HAT THE ASSESSING OFFICER FOUND CASH DEPOSITS IN THE ASSESS EES BANK ACCOUNT AMOUNTING TO RS.1,29,95,727/-, DETAIL OF WH ICH IS AS UNDER : - 5 I.T.A.NO.3801/DEL/2010 BANK ACCOUNT NUMBER. TOTAL CASH DEPOSITS HDFC BANK GWALIOR 1922050000012 RS.27,00,450/- HDFC BANK GWALIOR 4592560000014 RS.12,15,500/- CORPORATION BANK, GWALIOR CA/01/000016 RS.15,43,300 /- BANK OF BARODA, HATHRAS 10041015 RS.75,36,477/- 6. HE OBSERVED THAT THE ASSESSEE HAD MADE NEGLIGIBL E CASH SALES AND IT WAS CLAIMED THAT THE MILK WAS SOLD TO INSTITUTIONAL PARTIES, NAMELY, M/S. S M MILKOES, M/S. VRS FOODS LTD. M/S. STERLING INDIA AGRO LTD. AND M/S. BHOLEY BABA ONLY. TREATING THE ENTIRE CASH DEPOSITS IN THE BANKS AMOUNTING TO RS.1.29 CRORE AS UNEXPLAINED, THE ASSESSING OFFICER MADE ADDITION FOR THE SAME. THE LD. CIT(A) DELETED THE ADDITION. 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL PLACED ON RECORD, IT IS OBSERVED THAT THE CALCULATION OF TOTAL CASH DEPOSITS IN THE BANK ACCO UNTS BY THE ASSESSING OFFICER AT RS.1.29 CRORE IS INCORRECT, IN ASMUCH AS THE INSPECTOR OF INCOME-TAX IN THE COURSE OF REMAND PRO CEEDINGS FOUND TOTAL CASH DEPOSITS IN VARIOUS BANK ACCOUNTS OF THE ASSESSEE AT RS.95,48,145 ONLY, DETAILED AS UNDER : - 6 I.T.A.NO.3801/DEL/2010 S.NO. NAME OF THE BANK/BRANCH CASH DEPOSITED 01.04.2005 TO 31.03.2006 1 HDFC GWALIOR (MP) ACCOUNT NO.1922050000012 238515 0 2 BANK OF BARODA SHIVPURI MP, A/C NO.100579 2499850 3 HDFC PALWAL (HARYANA) A/C NO.45925600000014 12399 50 4 BANK OF BARODA HATHRUS A/C NO.10041015 1829895 5 CORPORATION BANK GWALIOR A/C NO. CA/01/000016 159 3300 TOTAL CASH DEPOSITED 9548145 8. THE ABOVE CALCULATION OF CASH DEPOSITED DURING T HE YEAR AT RS.95.48 LACS HAS NOT BEEN CONTROVERTED BY THE LD. D.R. WE, THEREFORE, PROCEED WITH THE PRESUMPTION THAT THE CA SH DEPOSITED BY THE ASSESSEE IN ITS BANK ACCOUNT IS ONLY RS.95.4 8 LACS AND NOT RS.1.29 CRORES AS NOTED BY THE ASSESSING OFFICER. THE ASSESSEE MADE TOTAL SALES AMOUNTING TO RS.3.64 CRORE, OUT OF WHICH SALE AMOUNTING TO RS.2.46 CRORE WERE MADE ON CREDIT TO T HREE MAJOR BUYERS AS HAS BEEN MENTIONED IN PARA 8.1 OF THE LD. CIT(A)S ORDER. IF THIS AMOUNT OF CREDIT SALES IS EXCLUDED F ROM THE TOTAL SALES OF RS.3.64 CRORE, WE GET A FIGURE OF RS.1.18 CRORE, REPRESENTING THE AMOUNT OF CASH SALES MADE BY THE A SSESSEE. SINCE THIS AMOUNT OF CASH SALES AT RS.1.18 CRORES I S HIGHER THAN THE AMOUNT OF CASH DEPOSITED IN THE BANK TO THE TUN E OF RS.95.48 LAC, THERE CAN BE NO REASON TO TREAT THE CASH DEPOS ITS IN THE BANK 7 I.T.A.NO.3801/DEL/2010 AS UNEXPLAINED. WE, THEREFORE APPROVE THE VIEW TAK EN BY THE LD. CIT(A) ON THIS SCORE. 9. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH MAY, 2016. SD./- SD./- (C. M. GARG) (R. S. SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 25.05. 2016 SP. COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY. BY ORDER (ITAT, NEW DELHI) 8 I.T.A.NO.3801/DEL/2010 S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 24/5 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR 25/5/16 SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS 25/5/16 SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 25/5 SR. PS/PS 7 FILE SENT TO BENCH CLERK 1/6/16 SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER *