ITO, New Delhi V. M/s Aradhana Drink & Beverages (P) Ltd, New Delhi

ITA 4472/DEL/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3031 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 16-05-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 26-07-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAVI JAIN
• Keywords: Depreciation; Principle of natural justice; Period of limitation; Additional evidence; Cost of acquisition; Assessment record; Onus to prove; Time period of passing order
• Section: 143(3); 147; 263; 144; 154; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SH. I.C.SUDHIR, JUDICIAL MEMB ER AND SH.ANADEE NATH MISSHRA, ACCOUNTANT MEMBER I.T.A .NO.-2427/DEL/2011 (ASSESSMENT YEAR-2007-08) ARADHANA FOODS & JUICES PVT LTD., 3B, DLF CORPORATE PARK, S BLOCK, QUTAB ENCLAVE, DLF PHASE-III, GURGAON-122002. PAN-AAFCA4917L ( APPELLANT) VS ITO, WARD-2(1), C.R.BUILDING, NEW DELHI. (RESPONDENT) I.T.A .NO.-2340/DEL/2011 (ASSESSMENT YEAR-2007-08) ITO, WARD-2(1), ROOM NO.-381, C.R.BUILDING, NEW DELHI. ( APPELLANT) VS ARADHANA FOODS & JUICES PVT. LTD., FLAT NO.54, LOWER GROUND FLOOR, WORLD TRADE CENTRE, BARAKHAMBA ROAD, NEW DELHI-110001. PAN-AAFCA4917L (RESPONDENT) I.T.A .NO.-3921/DEL/2013 (ASSESSMENT YEAR-2008-09) ARADHANA FOODS & JUICES (P) LTD., NO.54, LOWER GROUND FLOOR, WORLD TRADE CENTRE, BARAKHAMBA ROAD, NEW DELHI-110001. PAN-AAFCA4917L ( APPELLANT) VS ITO, WARD-2(1), NEW DELHI. (RESPONDENT) I.T.A .NO.-3497/DEL/2013 (ASSESSMENT YEAR-2008-09) ITO, WARD-2(1), NEW DELHI. ( APPELLANT) VS ARADHANA FOODS & JUICES PVT. LTD., 54, LGF, WORLD TRADE CENTRE, BARAKHAMBA ROAD, NEW DELHI-110001. PAN-AAFCA4917L (RESPONDENT) PAGE 2 OF 30 I.T.A .NO.-3590/DEL/2013 (ASSESSMENT YEAR-2009-10) DCIT, CIRCLE-2(1), ROOM NO.-398D, C.R. BUILDING, NEW DELHI. ( APPELLANT) VS ARADHANA FOODS & JUICES ( P ) LTD., NO.54, LOWER GROUND FLOOR, WORLD TRADE CENTRE, BARAKHAMBA ROAD, NEW DELHI-110001. PAN-AAFCA4917L (RESPONDENT) I.T.A .NO.-3923/DEL/2013 (ASSESSMENT YEAR-2009-10) ARADHANA FOODS & JUICES (P) LTD., NO.54, LOWER GROUND FLOOR, WORLD TRADE CENTRE, BARAKHAMBA ROAD, NEW DELHI-110001. PAN-AAFCA4917L ( APPELLANT) VS ITO, WARD-2(1), NEW DELHI. (RESPONDENT) I.T.A .NO.-4472/DEL/2013 (ASSESSMENT YEAR-2008-09) ITO, WARD-2(1), NEW DELHI. ( APPELLANT) VS ARADHANA DRINK & BEVERAGES (P.) LTD., 54, LOWER GROUND FLOOR, WORLD TRADE CENTRE, NEW DELHI-110001. PAN-AAECA4452H (RESPONDENT) I.T.A .NO.-4706/DEL/2013 (ASSESSMENT YEAR-2008-09) ARADHANA DRINKS & BEVERAGES PVT. LTD., NO.54, LOWER GROUND FLOOR, WORLD TRADE CENTRE, BARAKHAMBA ROAD, NEW DELHI-110001. PAN-AAECA4452H ( APPELLANT) VS ITO, WARD-2(1), C.R.BUILDING, NEW DELHI. (RESPONDENT) I.T.A .NO.-3922/DEL/2013 (ASSESSMENT YEAR-2009-10) ARADHANA DRINKS & BEVERAGES PVT. LTD., NO.54, LOWER GROUND FLOOR, WORLD TRADE CENTRE, BARAKHAMBA ROAD, NEW DELHI-110001. PAN-AAECA4452H ( APPELLANT) VS ITO, WARD-2(1), NEW DELHI. (RESPONDENT) PAGE 3 OF 30 I.T.A .NO.-3588/DEL/2013 (ASSESSMENT YEAR-2009-10) DCIT, CIRCLE-2(1), ROOM NO.-398D, C.R.BUILDING, NEW DELHI ( APPELLANT) VS ARADHANA DRINKS & BEVERAGES (P)LTD., NO.54, LOWER GROUND FLOOR, WORLD TRADE CENTRE, BARAKHAMBA ROAD, NEW DELHI-110001. PAN-AAECA4452H (RESPONDENT) ASSESSEE BY SH.C.S.AGGARWAL, SR.ADV., SH. VISHAL KALRA, ADV., SH. AMIT BABLANI, CA & SH.YOGESH PARWAL, CA REVENUE BY SH. RAVI JAIN, CIT (DR) ORDER PER ANADEE NATH MISSHRA, ACCOUNTANT MEMBER (A) AS MANY OF THE DISPUTED ISSUES IN THESE APPEALS AR E SIMILAR/INTER-CONNECTED, THESE TEN APPEALS ARE BEIN G DISPOSED OFF THROUGH THIS CONSOLIDATED ORDER FOR THE SAKE OF CON VENIENCE. GROUNDS OF APPEAL ARE AS UNDER RESPECTIVELY:- I.T.A .NO.-2427/DEL/2011 (ASSESSMENT YEAR-2007-08) (ARADHANA FOODS & JUICES PVT LTD. VS ITO) 1. THE COMMISSIONER OF INCOME TAX APPEALS-V, NEW DELH I, (HEREINAFTER REFERRED TO AS THE CIT(A)) HAS ERRED ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, IN UPHOLDING THE AD-HOC DISALL OWANCE OF RS.2,90,86,700, BEING 10 PER CENT OF THE TOTAL ADMI NISTRATIVE EXPENDITURE OF RS.29,08,67,000 MADE BY THE ASSESSIN G OFFICER (HEREINAFTER REFERRED TO AS AO) ALLEGING THE SAME TO BE UNVERIFIED, UNREASONABLE, AND EXCESSIVE WITHOUT BRINGING ANYTHI NG ON RECORD IN SUPPORT THEREOF. 2. THE CIT(A) HAS ERRED ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, IN NOT COMPLETELY DELETING THE ADHOC DISALLOWA NCE MADE BY THE PAGE 4 OF 30 AO AND IN LIMITING THE SAME TO 10 PER CENT OF THE T OTAL ADMINISTRATIVE EXPENDITURE. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, VARY, OMI T, SUBSTITUTE OR AMEND THE ABOVE GROUNDS OF APPEAL AT ANY TIME BEFOR E OR AT THE TIME OF HEARING OF THE APPEAL. I.T.A .NO.-2340/DEL/2011 (ASSESSMENT YEAR-2007-08) (ITO VS ARADHANA FOODS & JUICES PVT LTD.) 1. LD.CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELET ING ADDITION OF RS.10,61,30,515/- ON A/C OF PURCHASES FROM RELATED PARTIES; RESTRICTING DISALLOWANCE OUT OF OPERATING EXPENSES FROM 30% (RS.8,72,60,100/-) TO 10% (RS.2,90,86,700/-); DELET ING ADDITION OF RS.2,45,00,000/- OUT OF UNVERIFIED EXPENSES IN FIX ED ASSETS; AND RS.36,75,000/- OUT OF DEPRECIATION. THE ASSESSEE F AILED TO PRODUCE BOOKS OF ACCOUNTS AND ALSO SUPPORTING BILLS/ VOUCHE RS IN SUPPORT OF ITS CLAIMS. 2. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RI GHT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. I.T.A .NO.-3921/DEL/2013 (ASSESSMENT YEAR-2008-09) (ARADHANA FOODS & JUICES PVT LTD. VS ITO) 1. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN UP HOLDING THE ORDER DATED 27.12.2010 OF THE ASSESSING OFFICER ASSESSING LOSS AT RS.15,32,12,229 AS AGAINST LOSS OF RS.20,12,26,168 RETURNED BY THE APPELLANT. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) MERELY RELYING ON THE ORDER OF THE PREDECESSOR, HAS ERRED IN UPHOLDING THE AD HOC DISALLOWANCE OF RS.3,58,31,000 BEING TEN PERCE NT OF THE TOTAL OPERATING EXPENDITURE OF RS.35,83,10,100 MADE BY TH E ASSESSING OFFICER ALLEGING THAT THE SAME TO BE UNVERIFIED, UN REASONABLE AND EXCESSIVE WITHOUT BRINGING ANYTHING ON RECORD IN SU PPORT THEREOF. EACH OF THE ABOVE GROUNDS IS WITHOUT PREJUDICE AND INDEPENDENT OF EACH OTHER. THE APPELLANT CRAVES LEAVE TO ADD, ALT ER, VARY, OMIT, SUBSTITUTE OR AMEND THE ABOVE GROUNDS OF APPEAL, AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. PAGE 5 OF 30 I.T.A .NO.-3497/DEL/2013 (ASSESSMENT YEAR-2008-09) (ITO VS ARADHANA FOODS & JUICES PVT LTD.) 1. THE LEARNED CIT(APPEALS) HAS ERRED IN FACTS AND IN LAW IN CONSIDERING THE PLASTIC CRATES UNDER THE HEAD BOTT LES AND SHELLS ELIGIBLE FOR DEPRECIATION @ 50%. 2. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIG HT TO AMEND, MODIFY, ALTER, AND OR FOREGO ANY GROUND (S) OF APPEAL AT AN Y TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. I.T.A .NO.-3590/DEL/2013 (ASSESSMENT YEAR-2009-10) (DCIT VS ARADHANA FOODS & JUICES PVT LTD.) 1. THE LD.CIT(A) HAD ERRED ON FACTS AND IN LAW IN CONSIDERING THE PLASTIC CRATES UNDER THE HEARD BOTTLES AND SHELLS ELIGIBLE FOR DEPRECIATION @ 50%. 2. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIG HT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. I.T.A .NO.-3923/DEL/2013 (ASSESSMENT YEAR-2009-10) (ARADHANA FOODS & JUICES PVT LTD. VS ITO) 1. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN UP HOLDING THE ORDER DATED 25.11.2011 OF THE ASSESSING OFFICER ASSESSING LOSS AT RS.25,73,73,687/-, AS AGAINST LOSS OF RS.32,12,88,1 40 RETURNED BY THE APPELLANT. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE CIT(A) MERELY RELYING ON THE ORDER FOR IMMEDIATELY PRECEDING ASSE SSMENT YEAR, HAS ERRED IN UPHOLDING THE AD HOC DISALLOWANCE OF RS.5, 49,95,700, BEING TEN PERCENT OF THE TOTAL OPERATING EXPENDITURE OF R S.54,99,57,000, MADE BY THE ASSESSING OFFICER ALLEGING THE SAME TO BE UNVERIFIED, AND EXCESSIVE WITHOUT BRINGING ANYTHING ON RECORD I N SUPPORT THEREOF. EACH OF THE ABOVE GROUNDS IS WITHOUT PREJUDICE AND INDEPENDENT OF EACH OTHER. THE APPELLANT CRAVES LEAVE TO ADD, ALT ER, VARY, OMIT, SUBSTITUTE OR AMEND THE ABOVE GROUNDS OF APPEAL, AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. PAGE 6 OF 30 I.T.A .NO.-4472/DEL/2013 (ASSESSMENT YEAR-2008-09) (ITO VS ARADHANA DRINKS & BEVERAGES PVT LTD. ) 1. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AS WELL AS IN THE LAW THE LEARNED CIT(APPEALS) HAS ERRED IN ALLOWING DEPR ECIATION ON PLASTIC CRATES @ 50% AS AGAINST 15% ALLOWED BY AO. 2. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RI GHT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. I.T.A .NO.-4706/DEL/2013 (ASSESSMENT YEAR-2008-09) (ARADHANA DRINKS & BEVERAGES PVT LTD. V S ITO) 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN UPHOLDING THE ADHOC DISALLOWANCE OF RS.2,60,61,0 00, BEING TEN PERCENT OF THE TOTAL OPERATING EXPENDITURE OF RS.26 ,06,10,000, MADE BY THE ASSESSING OFFICER ALLEGING THE SAME TO BE UN VERIFIED, UNREASONABLE, AND EXCESSIVE WITHOUT BRINGING ANYTHI NG ON RECORD IN SUPPORT THEREOF. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A IN UPHOLDING THE AD-HOC DISALLOWANCE HAS ERRED IN M ERELY RELIED UPON THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-V IN APPELLANTS CASE FOR ASSESSMENT YEAR 2009-2010, WITHOUT ADJUDIC ATING THE SUBMISSION FILED ON MERITS. EACH OF THE ABOVE GROUNDS IS WITHOUT PREJUDICE AND INDEPENDENT OF EACH OTHER. THE APPELLANT CRAVES LEAVE TO ADD, ALT ER, VARY, OMIT, SUBSTITUTE OR AMEND THE ABOVE GROUNDS OF APPEAL, AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. I.T.A .NO.-3922/DEL/2013 (ASSESSMENT YEAR-2009-10) (ARADHANA DRINKS & BEVERAGES PVT LTD. VS IT O) 1. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN UP HOLDING THE ORDER DATED 25.11.2011 OF THE ASSESSING OFFICER LOSS AT R S.7,80,83,600, AS AGAINST LOSS OF RS.11,24,55,740 RETURNED BY THE APP ELLANT. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN UPHOLDING THE AD HOC DISALLOWANCE OF RS.3,08,93, 900, BEING TEN PER CENT OF THE TOTAL OPERATING EXPENDITURE OF RS.3 0,89,39,000, MADE BY THE ASSESSING OFFICER ALLEGING THE SAME TO BE UN VERIFIED, UNREASONABLE, AND EXCESSIVE WITHOUT BRINGING ANYTHI NG ON RECORD IN SUPPORT THEREOF. PAGE 7 OF 30 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A HAS ERRED IN MERELY RELYING UPON THE ORDER IN THE C ASE OF ARADHANA FOODS & JUICES PRIVATE LIMITED, WITHOUT APPRECIATIN G THAT THE FACTS IN THE INSTANT CASE ARE DIFFERENT FROM THE FACTS OF TH AT CASE AND BOTH THE ENTITIES ARE DISTINCT/SEPARATE LEGAL ENTITIES. EACH OF THE ABOVE GROUNDS IS WITHOUT PREJUDICE AND INDEPENDENT OF EACH OTHER. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, V ARY, OMIT, SUBSTITUTE OR AMEND THE ABOVE GROUNDS OF APPEAL, AT ANY TIME BEFO RE OR AT THE TIME OF HEARING OF THE APPEAL. ADDITIONAL GROUNDS:- 1. THAT ON THE FACTS AND THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD.CIT(A), WHILE CONFIRMING THE DISALLOWANCE HAS FA ILED TO APPRECIATE THAT THE APPELLANT HAD DULY PRODUCED BOOKS OF ACCOU NTS IN SUPPORT OF EXPENDITURE INCURRED UNDER THE HEAD OPERATING EXPEN SES AMOUNTING TO RS.308,939,000. IN VIEW OF THE DECISION OF THE HONBLE SUPREME COUR T IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS CIT (229 ITR 383) AS ALSO THE DECISION IN THE CASE OF JUTE CORPORATION OF INDIA VS CIT (187 ITR 6 88) AND THE DISCRETION VESTED IN YOUR HONOURS UNDER RULE 11 OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963, THE ADDITIONAL GROUNDS OF AP PEAL CALLS FOR BEING ADMITTED AND ADJUDICATED ON MERITS. THE APPELLANT TRUSTS THAT THE REQUEST SHALL BE ACCE DED TO. I.T.A .NO.-3588/DEL/2013 (ASSESSMENT YEAR-2009-10) (DCIT VS ARADHANA DRINKS & BEVERAGES PVT LTD.) 1. THE LD.CIT(A) HAD ERRED ON FACTS AND IN LAW IN CONSIDERING THE PLASTIC CRATES UNDER THE HEARD BOTTLES AND SHELLS ELIGIBLE FOR DEPRECIATION @ 50%. 2. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIG HT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. (B) IN THE CASE OF ARADHANA FOODS & JUICES PVT.LTD., I N AY 2007- 08, ASSESSMENT ORDER DATED 13.12.2009 WAS PASSED BY THE ASSESSING OFFICER (IN SHORT AO) U/S 143(3) OF I.T .ACT, 1961 (IN SHORT PAGE 8 OF 30 ACT). IN THIS ASSESSMENT ORDER, TOTAL INCOME WAS ASSESSED AT RS.7,22,86,175/- AS AGAINST LOSS OF RS.14,92,79,440 /- AS PER RETURNED FILED BY THE ASSESSEE. THE FOLLOWING ADDI TIONS WERE MADE BY THE AO: DISALLOWANCE ON ACCOUNT OF UNVERIFIED PURCHASES RS.10,61,30,515/- FROM RELATED PARTIES DISALLOWANCE OUT OF OPERATING EXPENSES RS. 8,72, 60,100/- DISALLOWANCE OUT OF UNVERIFIED FIXED ASSETS RS. 2 ,45,00,000/- DISALLOWANCE OUT OF DEPRECIATION RS. 36,75,0 00/- (B.1) THE ASSESSEE FILED APPEAL AGAINST THE AFORESAID A SSESSMENT ORDER BEFORE LD. COMMISSIONER OF INCOME TAX(APPEALS ) [IN SHORT CIT(A)] WHICH WAS DISPOSED OFF VIDE APPELLATE ORD ER DATED 21.02.2011. LD.CIT(A) DELETED THE AFORESAID ADDITI ON OF RS.10,61,30,515/-. NEXT, THE DISALLOWANCE OF RS.8,7 2,60,100/- MADE BY THE AO OUT OF OPERATING EXPENDITURE @ 30% OF TO TAL CLAIM OF RS.29,08,67,000/- WAS CONSIDERED BY THE LD.CIT(A) T O BE EXCESSIVE AND DISALLOWANCE WAS SUSTAINED BY THE LD.CIT(A) ONL Y TO THE EXTENT OF 10% OUT OF THE TOTAL CLAIM RS.29,08,67,000/-. FU RTHER, THE AFORESAID ADDITION OF RS.2,45,00,000/- WAS DELETED BY THE LD.CIT(A) AND FURTHERMORE THE LD.CIT(A) ALSO DELETED THE AFOR ESAID DISALLOWANCE OF RS.36,75,000/-. THE ASSESSEE AND R EVENUE, BOTH ARE IN APPEAL AGAINST THE AFORESAID ORDER DATED 21 .02.2011 OF LD.CIT(A). IN THE ASSESSEES APPEAL, THE GROUND HA S BEEN TAKEN PAGE 9 OF 30 AGAINST ORDER OF LD.CIT(A) WHEREBY DISALLOWANCE OF THE AMOUNT OF RS.2,90,86,700/- BEING 10% OF THE AFORESAID RS.29,0 8,67,000/- WAS UPHELD BY THE LD.CIT(A). IN REVENUES APPEAL, GROU ND HAS BEEN TAKEN AGAINST ORDER OF LD.CIT(A) IN DELETING ADDITI ON OF RS.10,61,30,515/- ON A/C OF PURCHASES FROM RELATED PARTIES; RESTRICTING DISALLOWANCE OUT OF OPERATING EXPENSES FROM 30% (RS.8,72,60,100/-) TO 10% (RS.2,90,86,700/-); DELET ING ADDITION OF RS.2,45,00,000/- OUT OF UNVERIFIED EXPENSES IN FIX ED ASSETS; AND RS.36,75,000/- OUT OF DEPRECIATION. DURING APPELLA TE PROCEEDINGS IN ITAT, THE ASSESSEE FILED PAPER BOOKS IN TWO VOLUMES CONSISTING OF 465 PAGES. BESIDES, THE ASSESSEE FILED ANOTHER COMP ILATION OF CASE LAWS CONSISTING OF 153 PAGES. THE ASSESSEE ALSO FI LED SYNOPSIS IN BRIEF CONSISTING OF 34 PAGES FOR A.Y. 2007-08. A T THE TIME OF HEARING BEFORE US, LD.CIT DEPARTMENTAL REPRESENTATI VE (IN SHORT DR) SUPPORTED THE ORDER OF THE AO. HE DREW OUR A TTENTION TO THE FACT THAT ALTHOUGH DETAILS CALLED FOR WERE SUBMITTE D BY THE ASSESSEE TO THE AO, IT IS UNDISPUTED THAT BOOKS OF ACCOUNTS WERE NOT PRODUCED DURING THE COURSE OF ASSESSMENT PROCEEDING S. READING FROM THE ORDER SHEET OF THE ASSESSMENT RECORD, HE H IGHLIGHTED THAT THE ASSESSEE WAS ASKED TO PRODUCE BOOKS OF ACCOUNTS VIDE ORDER SHEET NOTING DATED 03.12.2009 AND THIS REQUIREMENT WAS REPEATED ON 14.12.2009 AND AGAIN ON 21.12.2009. FINAL HEARIN G WAS PAGE 10 OF 30 CONDUCTED ON 24.12.2009, BUT EVEN TILL THEN THE ASS ESSEE FAILED TO PRODUCE THE BOOKS OF ACCOUNTS, HE STATED, AND THE A SSESSMENT WAS EVENTUALLY COMPLETED ON 30.12.2009. THE LD.CIT DR FURTHER SUBMITTED THAT AS THE ASSESSEE HAD FAILED TO PRODUC E THE BOOKS OF ACCOUNTS, THE AO WAS UNABLE TO MAKE THE NECESSARY VERIFICATION/INQUIRY/INVESTIGATION, ETC.; AND HAD T O COMPLETE THE ASSESSMENT ON THE BASIS OF AVAILABLE MATERIALS. LD. CIT DR SUPPORTED ALL THE ADDITIONS MADE BY THE AO, AND FOR THIS PURP OSE, RELIED ON THE ASSESSMENT ORDER. SPECIFICALLY, AS FAR AS DISALLOWA NCE OF RS.10,61,30,515/- IS CONCERNED, HE SUPPORTED THE RE ASONING OF THE AO AND RELIED ON THE FOLLOWING PORTION OF THE ASSE SSMENT ORDER: 3.2. PERUSAL OF FORM 3CD (ENCLOSURE 15-ACCOUNTING RATIO) SHOWS THAT ALTHOUGH GROSS PROFIT FOR THE YEAR UNDER CONSIDERAT ION IS 12.6% NET PROFIT IS AS LOW AS (-) 26.8%. STOCK-IN-TRADE VIS--VIS TURN OVER RATIO IS ALSO 0.01% ONLY. PERUSAL OF CLAUSE 28(1) AND 28(B) OF FORM 3C D (ENCLOSURE 14) AND P&L ACCOUNT SHOWS THAT DURING THE YEAR UNDER CONSI DERATION ASSESSEE HAS PRODUCED 38,08,105 CASES OF AERATED/NON-AERATED PRO DUCT AT RS.14,73,59,000/- (RAW MATERIAL CONSUMED-RS.12,96,6 3,000/-) & PACKING MATERIAL RS.1,76,96,000/-). IT ALSO SHOWS THAT ASS ESSEE HAS PURCHASED 13,36,787 CASES FOR RESALE AT RS.18,37,31,000/-. T HUS, WHILE THE MANUFACTURING COST PER CASE HAS BEEN SHOWN AT RS.38 ,70/- PURCHASE COST PER CASE FOR RESALE HAS BEEN SHOWN AT RS.137.44/- I.E. 355% MORE THAN THE MANUFACTURING COST. IT IS PERTINENT TO MENTIO N HERE THAT THE ASSESSEE COMPANY HAS PURCHASED GOODS WORTH RS.11,53,60,000/- AND PAGE 11 OF 30 RS.9,75,53,000/- FROM ITS STEP-UP HOLDING COMPANY AND FELLOW SUBSIDIARIES RESPECTIVELY. SINCE, THE BOOKS OF AC COUNTS WERE NOT PRODUCED TRANSACTIONS WITH THESE RELATED PARTIES COULD NOT B E EXAMINED. MANUFACTURING COST OF RS.38.7 PER CASE VIS--VIS PU RCHASE COST OF RS.137.44/- PER CASE (PARTICULARLY FROM RELATED PAR TIES) IS NOTHING BUT A COLORABLE DEVICE USED BY ASSESSEE TO REDUCE ITS TAX ABILITY. IN VIEW OF THE AFORESAID FACTS, IT IS HELD THAT PURCHASE COST OF 1 3,36,787 CASES FOR RESALE IS HIGHLY INFLATED AND BOGUS. AFTER DUE CONSIDERATION , IT IS ESTIMATED THAT PURCHASE COST PER CASE IS 50% MORE THAN THE MANUFAC TURING COST. ACCORDINGLY, COST OF 13,36,787 CASES PURCHASED FOR RESALE IS COMPUTED AT RS.7,76,00,485/- I.E. @ RS.58.05/- PER CASE. THERE FORE, A SUM OF RS.10,61,30,515/- (RS.18,37,31,000/-(-) RS.7,76,00, 485/-) IS DISALLOWED OUT OF RS.18,37,31,000/- DEBITED AS PURCHASE FOR R ESALE AND ADDED TO THE INCOME OF THE ASSESSEE FOR THE RELEVANT ASSESSMENT YEAR 2007-08. (B.1.1) REGARDING DISALLOWANCE OF RS.8,72,60,100/- BEING 30 % OF RS.29,08,67,000/- CLAIMED BY THE ASSESSEE AS OPERAT ING EXPENSES, THE LD.CIT DR SUPPORTED THE ORDER OF THE AO AND REL IED ON THE FOLLOWING PORTION OF THE ASSESSMENT ORDER: 3.3. ASSESSEE HAS DEBITED 'OPERATING EXPENSES' OF RS. 29,08,67,000/~ IN THE P & L ACCOUNT. IN VIEW OF THE FACT THAT ASSESSE E'S AREA OF OPERATION IS CONFINED TO THE STATE OF ANDHRA PRADESH AND DURING THE ENTIRE YEAR ONLY 51,08,482 CASES HAVE BEEN SOLD, THE ABOVE SAID OPER ATING EXPENSES WHICH COMES TO RS. 56.93/- PER CASE IS APPARENTLY EXCESSI VE, UNREASONABLE AND UNJUSTIFIED. SINCE, BOOKS OF ACCOUNTS HAVE ALSO NOT BEEN PRODUCED DURING PAGE 12 OF 30 THE ASSESSMENT PROCEEDINGS A SUM OF RS.8,72,60,100/ - I.E. @ 30% OF THE SAID EXPENSES IS DISALLOWED BEING UNVERIFIED, UNREA SONABLE AND EXCESSIVE AND ADDED TO THE INCOME OF THE ASSESSEE FOR THE REL EVANT ASSESSMENT YEAR 2007-08. (B.1.2) REGARDING DISALLOWANCES OF RS.2,45,00,000/- AND RS.36,75,000/- THE LD.CIT DR SUPPORTED THE ORDER OF THE AO AND RELIED ON THE FOLLOWING PORTION OF THE ASSESSMENT O RDER:- 3.4. AN ADDITION OF RS. 24,58,35,000/- HAVE BEEN M ADE IN FIXED ASSETS. IT IS OBSERVED THAT BOTTLES AND TETRA PACKS OF RS. 6,0 5,53,607/- WAS PURCHASED DURING THE RELEVANT ASSESSMENT YEAR AND D EPRECIATION @ 50% HAS BEEN CLAIMED THEREON. VIDE NOTICE U/S 142 (1) D ATED 10.12.2009 ASSESSEE WAS SPECIFICALLY ASKED TO FURNISH DETAILS OF VISICOOLERS / BOTTLES / TETRA PACKS. HOWEVER, NO SUCH DETAILS WAS FURNISHED . INSTEAD, VIDE REPLY DATED 21.12.2009 ASSESSEE SUBMITTED AS UNDER: ' ..IT IS RESPECTFULLY SUBMITTED THAT THE VISICOOLE RS ARE KEPT WITH ASSESSEE'S RETAILERS / DEALERS SHOPS FOR KEEPING AS SESSEE'S PRODUCTS COOL IN ALL SEASONS. THE DETAILS OF DISTRIBUTORS / DEALERS HAVE ALREADY BEEN PROVIDED IN OUR REPLY TO QUERY NO. 2. FURTHER, COPIES OF VOUCHERS FOR PURCHASE OF VISICOOLERS ARE ENCLOSED ON SAMPLE BASIS AT PAGE NO. 28 TO 42. THE MAIN SUPPLIES OF VISICOOLERS ARE M/S VOLTAS LTD. & WESTERN AIR-CONDITIONING AND REFRIGERATION PVT. LTD ...' THUS, THE DETAILS OF VISICOOLERS WERE NOT PROVIDED. NO DETAILS WHAT SO EVER WERE PROVIDED IN RESPECT OF BOTTLES/TETRA PACK S. SINCE, BOOKS OF ACCOUNTS ALONG WITH BILL, VOUCHERS, IN RESPECT OF T HE SAID ADDITION IN PAGE 13 OF 30 FIXED ASSETS HAVE NOT BEEN FURNISHED A SUM OF RS. 2,45,00,000/- IS DISALLOWED OUT OF SAID ADDITION IN FIXED ASSETS ON ACCOUNT OF BEING UNVERIFIED EXPENSES AND ADDED TO THE INCOME OF TH E ASSESSEE FOR THE RELEVANT ASSESSMENT YEAR 2007-08. DEPRECIATION @ 15% THEREON I.E. RS.36,75,000/- IS ALSO DISALLOWED ACCORDINGLY. (B.2) THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY OPPOSE D ALL THE ADDITIONS MADE BY THE AO. HE DREW OUR ATTENTION TO PARAGRAPH 2 OF THE ASSESSMENT ORDER WHEREIN THE AO HAD NOTED THAT NECESSARY DETAILS WERE CALLED FOR AND WERE SUBMITTED FROM TIM E TO TIME AS PER ORDER SHEET ENTRIES. THUS, HE CONTENDED THAT EVEN THOUGH BOOKS OF ACCOUNTS WERE NOT PRODUCED DURING THE COURSE OF ASS ESSMENT PROCEEDINGS, NECESSARY DETAILS WERE SUBMITTED FROM TIME TO TIME. HE FURTHER SUBMITTED THAT THE AO DID NOT FIND ANY DISC REPANCY IN SUCH DETAILS. HE ALSO PLEADED THAT BOOKS OF ACCOUNTS CO ULD NOT BE PRODUCED BECAUSE OF CIRCUMSTANCES BEYOND THE CONTRO L OF THE ASSESSEE AS THERE WAS TURMOIL, POLITICAL DISPUTE AN D UNREST IN TELANGANA. HOWEVER, HE ADMITTED THAT BOOKS OF ACCO UNTS WERE OTHERWISE AVAILABLE AND EVEN TILL NOW CONTINUE TO B E SAFELY AVAILABLE; AND SUBMITTED THAT THE ONLY REASON WHY THESE WERE N OT PRODUCED BEFORE THE AO WAS BECAUSE THESE COULD NOT BE TRANSP ORTED FROM TELANGANA (WHERE BUSINESS WAS BEING CONDUCTED) TO D ELHI (WHERE THE ASSESSMENT JURISDICTION OF THE ASSESSEE EXISTED) DU E TO TURMOIL, PAGE 14 OF 30 POLITICAL DISPUTE AND UNREST IN TELANGANA. THE LD. COUNSEL ALSO EXPRESSED DISPLEASURE THAT THE CASE WAS ASSIGNED O N 29.10.2009 TO THE AO WHO FINALLY COMPLETED THE ASSESSMENT, WHEN T HE AO HAD ONLY ABOUT TWO MONTHS AVAILABLE IN THE LIMITATION PERIOD . THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE FACT THAT THE ASSESSMENT WAS COMPLETED BY THE AO NOT U/S 144 OF T HE ACT BUT U/S 143(3) OF THE ACT. HE ALSO MADE DETAILED SUBMISSION S ON THE MERITS OF EACH SPECIFIC DISALLOWANCE/ADDITION MADE BY THE AO; AND FOR THIS PURPOSE RELIED ON THE AFORESAID PAPER BOOKS AND SYN OPSIS IN BRIEF FILED DURING APPELLATE PROCEEDINGS IN ITAT, WHILE A LSO EXPLAINING THE SAME ORALLY AT THE TIME OF HEARING BEFORE US. HE A LSO DREW OUR ATTENTION TO SOME DECIDED PRECEDENTS. (B.3) WE HAVE HEARD BOTH SIDES ATTENTIVELY AND PATIENTLY . WE HAVE PERUSED ALL THE MATERIALS ON RECORD AND WE HAVE ALS O CONSIDERED VARIOUS CASE LAWS AND PRECEDENTS BROUGHT TO OUR ATT ENTION. THE PROVISIONS U/S 144 OF THE ACT ENABLE THE AO TO MAKE THE ASSESSMENT TO THE BEST OF HIS JUDGEMENT. IN COMPARISON WITH S ECTION 143(3) OF THE ACT, THE AO HAS GREATER POWERS AND DISCRETION U /S 144 OF THE ACT AND THE ASSESSEE IS MORE VULNERABLE TO ADVERSE CONC LUSIONS BY THE AO IF THE ASSESSMENT IS COMPLETED U/S 144 OF THE AC T THAN IF THE ASSESSMENT IS COMPLETED U/S 143(3) OF THE ACT. THI S IS SO, BECAUSE PAGE 15 OF 30 SECTION 144 OF THE ACT AUTHORIZES THE AO TO MAKE TH E ASSESSMENT TO THE BEST OF HIS JUDGEMENT. AS FAR AS THE ASSESSEE I S CONCERNED, THE PROVISIONS U/S 143(3) OF THE ACT ARE THUS MORE BEN EFICIAL AND PROVISIONS U/S 144 OF ACT ARE HARSHER. IF PROVISIONS MORE BENEFICIAL TO THE ASSESSEE ARE INVOKED BY THE REVEN UE, INSTEAD OF HARSHER PROVISIONS, IT MAY IN CERTAIN SITUATIONS ; SUBJECT TO OTHER PRESCRIBED CONDITIONS UNDER LAW, IF ANY, BEIN G SATISFIED; CREATE A SITUATION FIT FOR REMEDIAL MEASURE(S) BY R EVENUE UNDER VARIOUS STATUTORY PROVISIONS, SUCH AS REVIEW U/S 26 3 OF THE ACT, OR RE-OPENING U/S 147 OF THE ACT, OR RECTIFICATION U/S 154 OF THE ACT, ETC.; BUT THE ASSESSEE CANNOT HAVE ANY LEGITIM ATE GRIEVANCE IF PROVISIONS MORE BENEFICIAL TO THE ASSESSEE ARE I NVOKED BY THE REVENUE, INSTEAD OF HARSHER PROVISIONS. THEREFORE, IN THE PRESENT CASE BEFORE US, THE ASSESSEE CANNOT HAVE A LEGITIM ATE GRIEVANCE IF THE HARSHER PROVISIONS U/S 144 OF THE ACT WERE NOT INVOKED BY THE AO TO MAKE THE ASSESSMENT AND INSTEAD, THE ASSESSME NT WAS MADE UNDER MORE BENEFICIAL PROVISION UNDER SECTION 143(3 ) OF THE ACT. MERELY BECAUSE ADDITIONS HAVE BEEN MADE IN ASSESSME NT CONCLUDED U/S 143(3) OF ACT AND NOT U/S 144 OF ACT, IT CANNOT BE SAID THAT THE ADDITIONS ARE UNSUSTAINABLE. WHETHER THE ADDITIONS ARE PARTLY OR WHOLLY SUSTAINABLE OR NOT A ND IF YES; THEN, THE EXTENT TO WHICH THE ADDITIONS ARE SUSTAIN ABLE DEPENDS PAGE 16 OF 30 ALSO ON MERITS AND NOT MERELY ON WHETHER THE ASSESS MENT IS CONCLUDED U/S 143(3) OF ACT OR U/S 144 OF ACT. ALSO, IF THE JURISDICTION OF THE CASE IS TRANSFERRED UNDER STATU TORY PROVISIONS OF INCOME TAX ACT (AS CONTAINED IN SECTIONS 120 TO 129 OF THE ACT), THE ASSESSEE AGAIN CANNOT HAVE ANY LEGITIMATE GRIEVANCE. IN THE PRESENT CASE, NO INFIRMITY, ILLEGALITY OR MI STAKE HAS BEEN BROUGHT TO OUR ATTENTION BY OR ON BEHALF OF THE ASS ESSEE IN THE TRANSFER OF THE ASSESSMENT JURISDICTION TO THE AO W HO COMPLETED THIS ASSESSMENT FOR A.Y. 2007-08. THEREFORE, IN OUR VIE W, THE FACT OF ASSIGNMENT OF THE CASE TO THE AO WHO FINALLY COMPLE TED THE CASE, DOES NOT ADVANCE THE CASE OF THE ASSESSEE IN ANY MANNER WHATSOEVER . NEXT, THE FACT THAT BOOKS OF ACCOUNTS WERE NOT PRODUCED BY THE ASSESSEE BEFORE THE AO, IS NOT IN D ISPUTE. EVEN THOUGH, AS ADMITTED BY THE AO IN THE ASSESSMENT ORD ER ITSELF, NECESSARY DETAILS WERE CALLED FOR AND WERE SUBMITTE D BY THE ASSESSEE, IT DOES NOT IMPLY THAT THE AO CANNOT REQU IRE THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOUNTS ALONGWITH SUPPORTI NG BILLS/VOUCHERS/OTHER EVIDENCES FOR FURTHER VERIFICA TION/ INQUIRY/INVESTIGATION ETC. IT IS NOT THE CASE OF T HE ASSESSEE THAT THE AO HAD NO AUTHORITY TO REQUIRE THE ASSESSEE TO PROD UCE BOOKS OF ACCOUNTS, ETC. WE ALSO FIND THAT THE ASSESSMENT OR DER WAS PASSED ON 30.12.2009, ALMOST AT THE END OF THE LIMITATION PERIOD ENDING ON PAGE 17 OF 30 (31.12.2009) AND IT WAS NOT FEASIBLE FOR THE AO TO PROVIDE ANY FURTHER OPPORTUNITY TO THE ASSESSEE. THE ASSESSEE M AY HAVE BEEN PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE BO OKS OF ACCOUNTS ETC. BEFORE THE AO WHICH THE ASSESSEE WAS CALLED UP ON BY THE AO TO PRODUCE DURING THE ASSESSMENT PROCEEDINGS; IN VIEW OF TURMOIL, POLITICAL DISPUTE AND UNREST IN TELANGANA. IN VIEW OF CLAUSE (B) OF RULE 46A(1) OF INCOME TAX RULES, 1962, THE ASSESSEE COULD HAVE, IN THAT SITUATION, PRODUCED THE BOOKS OF ACCOUNTS ETC . BEFORE THE LD.CIT(A) AS ADDITIONAL EVIDENCE, DURING APPELLATE PROCEEDINGS BEFORE THE LD.CIT(A). HOWEVER, FROM THE PERUSAL OF THE IM PUGNED APPELLATE ORDER DATED 21.02.2011 OF LD.CIT(A), THERE IS NO IN DICATION THAT THE ASSESSEE PRODUCED THESE ADDITIONAL EVIDENCES (THE B OOKS OF ACCOUNTS, ETC.) BEFORE THE LD.CIT(A); OR THAT, THE LD.CIT(A) DIRECTED THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOUNTS, ETC. UNDER RULE 46A(4) OF INCOME TAX RULES, 1962. THUS, WE FIND TH AT THE REVENUE WAS DEPRIVED OF THE OPPORTUNITY TO MAKE FURTHER VERIFICATION/INQUIRY/INVESTIGATION, ETC. BECAUSE OF THE FAILURE OF THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOUNTS, ETC. BEFORE THE AO AS WELL AS BEFORE THE LD.CIT(A) AND FURTHER BECA USE OF THE FAILURE OF THE LD.CIT(A) TO CAUSE THE PRODUCTION OF BOOKS OF ACCOUNTS, ETC. EVEN DURING APPELLATE PROCEEDINGS IN ITAT, THE ASSESSEE HAS NOT OFFERED TO PRODUCE THE BOOKS OF AC COUNTS, ETC.; PAGE 18 OF 30 ALTHOUGH IT WAS STATED AT THE TIME OF HEARING BEFO RE US, BY LD. COUNSEL FOR THE ASSESSEE, THAT THE SAME ARE AVAILAB LE WITH THE ASSESSEE. REVENUE HAS THE AUTHORITY TO MAKE VERIFICATIONS/INQUIRIES/INVESTIGATIONS ETC. IN ACCO RDANCE WITH LAW AND THE ASSESSEE NEEDS TO COMPLY WITH THE LAWFU L REQUIREMENTS PRESCRIBED IN THAT REGARD BY THE REVEN UE AUTHORITIES. THIS AUTHORITY HAS NOT BEEN FULLY HONOURED IN THI S CASE BECAUSE OF FAILURE OF THE ASSESSEE TO PRODUCE THE B OOKS OF ACCOUNTS, ETC AND BECAUSE OF THE FAILURE OF THE LD.CIT(A) TO EXERCISE THE PROVISIONS UNDER RULE 46A(4) OF INCOME TAX RULES, 1 962; AS DISCUSSED EARLIER. WHEN AN ASSESSEE DOES NOT FULLY HONOUR THE LAWFUL AUTHORITY OF REVENUE, OR WHEN LAWFUL REQUIRE MENTS PRESCRIBED BY REVENUE AUTHORITIES ARE NOT FULLY COM PLIED WITH; THE ASSESSEE CANNOT CLAIM A LENIENT VIEW AS A MATTE R OF RIGHT, AND THE ASSESSEE MUST FACE ITS CONSEQUENCES AS PER LAW. THE NATURE, EXTENT AND SEVERITY OF THE CONSEQUENCES WIL L DEPEND ON THE FACTS, CIRCUMSTANCES AND STATUTORY PROVISIONS. FOR COMING TO THIS CONCLUSION, WE TAKE STRENGTH FROM SECTION 114 OF IN DIAN EVIDENCE ACT,1872 WHEREIN IT IS PROVIDED: THE COURT MAY PRESUME THE EXISTENCE OF ANY FACT WHICH IT THINKS LIKELY TO HAV E HAPPENED, REGARD BEING HAD TO THE COMMON COURSE OF NATURAL EV ENTS, HUMAN CONDUCT AND PUBLIC AND PRIVATE BUSINESS, IN T HEIR PAGE 19 OF 30 RELATION TO THE FACTS OF THE PARTICULAR CASE. AMONG THE ILLUSTRATIONS GIVEN U/S 114 OF INDIAN EVIDENCE ACT, 1872 IS INCLUDED ILLUSTRATIONS (G) WHEREIN IT IS PROVIDED: THAT EVIDENCE WHICH COULD BE AND IS NOT PRODUCED WOULD, IF PRODUCED, BE UNFAV OURABLE TO THE PERSON WHO WITHHOLDS IT. IN THE FACTS AND CIRCUMSTANCES OF THIS CASE AND IN VIEW OF THE STATUTORY PROVISIONS, THEREFORE, WE SET ASIDE THE APPELLATE ORDER OF THE LD.CIT(A) AND ALSO THE ASSESSMENT ORDER; AND WE RESTORE THE MATTERS TO THE FILE OF TH E AO FOR MAKING DENOVO ASSESSMENT AS PER LAW, AFTER MAKING FURTHER VERIFICATION/INQUIRY/INVESTIGATION, ETC. IS ACCORDA NCE WITH LAW. THE AO IS DIRECTED TO PROVIDE OPPORTUNITY TO THE ASSESS EE FOR COMPLYING WITH THE STATUTORY REQUIREMENTS AND THE ASSESSEE IS DIRECTED TO COMPLY WITH THE STATUTORY REQUIREMENTS, DURING THE PROCEEDINGS FOR MAKING DENOVO ASSESSMENT. AS WE ARE SETTING ASIDE THE ISSUES IN DISPUTE TO THE FILE OF THE AO FOR DENOVO ASSESSMENT , WE ARE PRESENTLY NOT EXPRESSING ANY OPINION ON THE MERITS AND QUANTA M OF THE VARIOUS ADDITIONS MADE BY THE AO IN A.Y. 2007-08. THE CROSS- APPEALS FILED BY THE ASSESSEE AND THE REVENUE FOR A .Y. 2007-08 (IN ITA NOS.2427/DEL/2011 AND 2340/DEL/2011) AND THE GR OUNDS OF APPEAL CONTAINED THEREIN ARE BEING HEREBY DISPOSED OFF IN ACCORDANCE WITH OUR ORDER, DIRECTIONS AND OBSERVATI ONS AS AFORESAID. PAGE 20 OF 30 (C) IN ITA NO.3921/DEL/2013 FOR A.Y.2008-09, THE ASSESS EE HAS, IN GROUND NO.2 APPEALED AGAINST DISALLOWANCE OF RS.3, 58,31,000/- OUT OF OPERATING EXPENSES @ 10 % OF TOTAL CLAIM OF RS.3 5,83,10,100/- AND IN THE CONNECTED GROUND NO.1, M/S ARADHANA FOOD S AND JUICES PVT. LTD. HAS APPEALED AGAINST ASSESSMENT OF LOSS AT RS.15,32,12,229/- AS AGAINST RETURNED LOSS OF RS.20 ,12,26,168/-. SIMILARLY IN ITA NO.3923/DEL/2013 FOR A.Y. 2009-10, M/S ARADHANA FOODS AND JUICES PVT. LTD. HAS APPEALED AGAINST DI SALLOWANCE OF RS.5,49,95,700/- OUT OF OPERATING EXPENSES @ 10 % O F TOTAL CLAIM OF RS.54,99,56,519/- AND IN THE CONNECTED GROUND NO.1, THE ASSESSEE HAS APPEALED AGAINST ASSESSMENT OF LOSS AT RS.25,73 ,73,687/- AS AGAINST RETURNED LOSS OF RS.32,12,88,140/-. IN ITA NO.4706/DEL/2013 FOR A.Y. 2008-09 AND IN ITA NO.392 2/DEL/2013 FOR A.Y. 2009-10, M/S. ARADHANA DRINKS AND BEVERAGE S PVT.LTD. HAS FILED APPEAL AND IN BOTH THE APPEALS GROUND NO.2 OF THE APPEAL IS AGAINST THE DISALLOWANCE @ 10% MADE BY THE AO OUT O F ASSESSEES CLAIM OF OPERATING EXPENDITURE. GROUND NO.1 OF AP PEAL IN BOTH THESE APPEALS FILED BY M/S. ARADHANA DRINKS AND BEV ERAGES PVT.LTD. IS CONNECTED WITH GROUND NO.2 AND IS SPECIFICALLY A GAINST ASSESSMENT OF LOSS AT A FIGURE LOWER THAN THE LOSS RETURNED BY THE ASSESSEE. IN ITA NO.3922/DEL/2013, M/S. ARADHANA D RINKS AND BEVERAGES PVT.LTD. HAS CONTENDED IN GROUND NO.3 THA T THE FACTS IN PAGE 21 OF 30 THE CASE OF M/S. ARADHANA DRINKS AND BEVERAGES PVT. LTD. ARE DIFFERENT FROM FACTS IN THE CASE OF M/S ARADHANA F OODS AND JUICES PVT.LTD. IN ITA NO.3922/DEL/2013, M/S. ARADHANA DR INKS AND BEVERAGES PVT.LTD. HAS ALSO TAKEN AN ADDITIONAL GRO UND WHEREIN IT IS CONTENDED THAT THE ASSESSEE HAD DULY PRODUCED BOOKS OF ACCOUNTS IN SUPPORT OF EXPENDITURE INCURRED UNDER THE HEAD OPERATING EXPENSES. THE CORE ISSUE IN ALL THE GROUNDS OF AP PEAL IN THE AFORESAID FOUR APPEALS (IN ITA NO.3921/DEL/2013; I TA NO. 3923/DEL/2013; ITA NO. 3922/DEL/2013; ITA NO. 4706 /DEL/2013) FILED BY THE AFORESAID TWO ASSESSEES (M/S ARADHANA FOODS AND JUICES PVT.LTD. AND M/S. ARADHANA DRINKS AND BEVERAGES PVT.LTD.) IS THE DISALLOWANCE @ 10% OUT OF ASSESSEE S CLAIM OF OPERATING EXPENSES. FOR THE SAKE OF CONVENIENCE, TH ESE GROUNDS IN THE AFORESAID FOUR APPEALS ARE TAKEN UP TOGETHER. IN THE ASSESSMENT PROCEEDINGS FOR A.Y. 2008-09 AND 2009-10 BOTH THE A FORESAID ASSESSEES WERE REQUIRED BY THE AO TO PRODUCE BOOKS OF ACCOUNTS, BILLS AND VOUCHERS FOR VERIFICATION. HOWEVER, FOR A.Y 2008-09 BOOKS WERE PRODUCED BY BOTH THE AFORESAID ASSESSEES BEFOR E THE AO ONLY ON SAMPLE BASIS AND THAT ALSO ON 24.12.2010 TOWARDS THE END OF THE LIMITATION PERIOD. FOR A.Y. 2009-10, BOTH THE AFORE SAID ASSESSEES HAVE CONTENDED THAT THEY HAD PRODUCED BOOKS OF ACC OUNTS BEFORE THE AO BUT THIS CONTENTION IS CONTRARY TO THE OBSER VATION OF THE AO, PAGE 22 OF 30 WHICH WAS NOT REVERSED BY THE LD.CIT(A). IN THE ASS ESSMENT ORDER FOR A.Y. 2009-10 FOR BOTH THE AFORESAID TWO ASSESSEES, THE AO HAS OBSERVED: ..THE ASSESSEE VIDE REPLY DATED 25.11.2011 HAS CONTENDED THAT THE BOOKS OF ACCOUNTS WERE PRODUCED ON 25.08.2011 WHICH IS INCORRECT AND BASELESS. ASSESSEE NEVER PR ODUCED THE BOOKS OF ACCOUNT NOR WAS REQUIRED TO DO SO ON OR BEFORE 2 5.08.2011. ALSO, BOTH THE AFORESAID TWO ASSESSEES FAILED TO PRODUCE ANY EVIDENCE DURING APPELLATE PROCEEDINGS IN ITAT TO SUPPORT THE CONTENTION THAT BOOKS OF ACCOUNTS WERE INDEED PRODUCED BEFORE THE A O DURING ASSESSMENT PROCEEDINGS. BURDEN OF PROOF IS ON THE A SSESSEES TO PROVE THAT BOOKS OF ACCOUNTS WERE PRODUCED ON 25.08 .2011. HOWEVER, THE ASSESSEES HAVE FAILED TO PROVIDE ANY E VIDENCE AND HAS THUS HAVE FAILED TO DISCHARGE THE BURDEN OF PROOF. IN THE ABSENCE OF ANY EVIDENCE TO THE CONTRARY, THE OBSERVATION OF TH E AO THAT THE BOOKS OF ACCOUNTS, ETC. WERE NOT PRODUCED BY THE AF ORESAID TWO ASSESSEES DURING ASSESSMENT PROCEEDINGS FOR A.Y. 20 09-10, IS HEREBY ACCEPTED. IN ANY CASE, EVEN ASSUMING THAT TH E ASSESSEE HAD ALREADY PRODUCED BOOKS OF ACCOUNTS, ETC. EARLIER, T HE FACT REMAINS THAT THE ASSESSEES WERE DUTY BOUND TO PRODUCE BOOKS OF ACCOUNTS, ETC. ONE MORE TIME IF THE AO REQUIRED THE ASSESSEE TO DO SO. THEREFORE, WE FIND NO MERIT IN CONTENTION OF THE AF ORESAID TWO ASSESSEES THAT BOOKS OF ACCOUNTS WERE PRODUCED ON 2 5.08.2011. THE PAGE 23 OF 30 AO MADE A DISALLOWANCE @ 10% OUT OF OPERATING EXPEN SES IN THE CASE OF BOTH THE AFORESAID ASSESSEES AND FOR BOTH A .Y. 2008-09 AND 2009-10. THESE DISALLOWANCES WERE CONFIRMED BY THE LD.CIT(A). DURING THE APPELLATE PROCEEDINGS IN ITAT, BOTH THE AFORESAID ASSESSEES FILED SYNOPSIS IN BRIEF WHEREIN IT WAS SUBMITTED THAT IT WAS OF NO CONSEQUENCE THAT THE ASSESSEE HAD NOT PRO DUCED COMPLETE BOOKS OF ACCOUNTS OR THAT BOOKS OF ACCOUNTS WERE PR ODUCED ONLY ON SAMPLE BASIS. LD. COUNSEL CONTENDED THAT THE ASSES SEE HAD FURNISHED ALL DETAILS AS WERE CALLED FOR BY THE AO AND THAT THE AO HAD NOT DRAWN ANY ADVERSE INFERENCE ON THE BASIS OF DETAILS FILED BY THE ASSESSEE OR ON THE BASIS OF BOOKS OF ACCOUNTS P RODUCED BY THE ASSESSEE ON SAMPLE BASIS. DETAILED SUBMISSIONS WERE MADE ON BEHALF OF BOTH THE AFORESAID ASSESSEES ON THE MERIT S OF THE DISALLOWANCES MADE BY THE AO AND CONFIRMED BY THE L D.CIT(A) IN THE SYNOPSIS IN BRIEF. FURTHER, AT THE TIME OF HEARI NG BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE MADE EMPHATIC ORAL SU BMISSIONS ON MERITS OF THE ADDITIONS, RELYING ON SYNOPSIS IN BR IEF FILED DURING APPELLATE PROCEEDINGS IN ITAT, HE ALSO DREW OUR ATT ENTION TO CERTAIN DECIDED PRECEDENTS. THE LD.CIT DR RELIED ON THE O RDERS OF THE AO AND LD. CIT(A). WE HAVE HEARD BOTH SIDES PATIENTLY AND ATTENTIVELY. WE HAVE ALSO PERUSED THE MATERIALS ON RECORD. WE F URTHER HAVE CONSIDERED THE PRECEDENTS BROUGHT TO OUR ATTENTION. IF THE ASSESSEE PAGE 24 OF 30 DOES NOT PRODUCE BOOKS OF ACCOUNTS, ETC. WHEN REQUI RED BY THE AO, OR IF THE ASSESSEE PRODUCES BOOKS OF ACCOUNTS, ETC. ONLY ON SAMPLE BASIS INSTEAD OF PRODUCING THE ENTIRE BOOKS OF ACCO UNTS, ETC.; REVENUE IS DEPRIVED OF THE OPPORTUNITY TO MAKE FURT HER VERIFICATION/ INQUIRY/INVESTIGATION, ETC. IN THE FACTS AND CIRCU MSTANCES OF THESE FOUR APPEALS BEFORE US, AS NOTICED BY US EARLIER, B OTH THE AFORESAID ASSESSEES FAILED TO PRODUCE THE BOOKS OF ACCOUNTS, ETC. FOR A.Y. 2009-10 AND FURTHER, BOTH THE AFORESAID ASSESSEES P RODUCED BOOKS OF ACCOUNTS, ETC. FOR A.Y. 2008-09 ON SAMPLE BASIS ONLY BUT NOT THE ENTIRE BOOKS OF ACCOUNTS, ETC. EVEN DURING APPELLAT E PROCEEDINGS, BOTH THE AFORESAID ASSESSEES FAILED TO PRODUCE THE ENTIRE BOOKS OF ACCOUNTS, ETC. FOR A.Y.2008-09 AND 2009-10. MOREOV ER, THE LD.CIT(A) ALSO FAILED TO EXERCISE PROVISIONS UNDER RULE 46A(4) OF I.T.RULES, 1962 AND DID NOT REQUIRE THE ASSESSEE TO PRODUCE ENTIRE BOOKS OF ACCOUNTS, ETC. WE HAVE ALREADY HELD EARLIE R IN THIS ORDER THAT REVENUE HAS THE AUTHORITY TO MAKE VERIFICATIONS/INQUIRIES/INVESTIGATIONS ETC. IN ACCO RDANCE WITH LAW AND THE ASSESSEE NEEDS TO COMPLY WITH THE LAWFUL RE QUIREMENTS PRESCRIBED IN THAT REGARD BY THE REVENUE AUTHORITIE S. THIS AUTHORITY HAS NOT BEEN FULLY HONOURED IN THIS CASE BECAUSE OF FAILURE OF THE ASSESSEE TO PRODUCE THE ENTIRE BOOKS OF ACCOUNTS, E TC AND BECAUSE OF THE FAILURE OF THE LD.CIT(A) TO EXERCISE THE PROVIS IONS UNDER RULE PAGE 25 OF 30 46A(4) OF INCOME TAX RULES, 1962. WE HAVE ALSO ALR EADY HELD EARLIER IN THIS ORDER THAT WHEN AN ASSESSEE DOES NOT FULLY HONOUR THE LAWFUL AUTHORITY OF REVENUE, OR WHEN LAWFUL REQUIREMENTS P RESCRIBED BY REVENUE AUTHORITIES ARE NOT FULLY COMPLIED WITH, TH E ASSESSEE CANNOT CLAIM A LENIENT VIEW AS A MATTER OF RIGHT, AND THE ASSESSEE MUST FACE ITS CONSEQUENCE AS PER LAW AND FURTHER THAT THE NAT URE, EXTENT AND SEVERITY OF THE CONSEQUENCES WILL DEPEND ON THE FAC TS, CIRCUMSTANCES AND STATUTORY PROVISIONS. IN THE FACTS AND CIRCUMS TANCES OF THESE CASES AND IN VIEW OF THE STATUTORY PROVISIONS, THER EFORE, WE SET ASIDE THE APPELLATE ORDERS OF THE LD.CIT(A) AND THE ASSES SMENT ORDERS OF THE AO IN THE CASE OF BOTH THE AFORESAID ASSESSEES AND FOR BOTH ASSESSMENT YEARS 2008-09 AND 2009-10; AND THE MATTE RS ARE RESTORED TO THE FILE OF THE AO WITH THE DIRECTION T O MAKE DENOVO ASSESSMENTS AS PER LAW, AFTER MAKING FURTHER VERIFICATION/INQUIRY/INVESTIGATION, ETC. IN ACCORDA NCE WITH LAW. THE AO IS DIRECTED TO PROVIDE OPPORTUNITY TO THE AFORES AID TWO ASSESSEES FOR COMPLYING WITH THE STATUTORY REQUIREMENTS AND B OTH THE AFORESAID ASSESSEES ARE DIRECTED TO COMPLY WITH THE STATUTORY REQUIREMENTS PRESCRIBED BY THE AO, DURING THE PROCE EDINGS FOR MAKING DENOVO ASSESSMENTS FOR BOTH ASSESSMENT YEARS 2008-09 AND 2009-10. AS WE ARE SETTING ASIDE THE MATTERS TO TH E FILE OF THE AO FOR DENOVO ASSESSMENT, WE ARE PRESENTLY NOT EXPRESSING ANY OPINION ON PAGE 26 OF 30 THE MERITS AND QUANTUM OF THE ADDITIONS MADE BY TH E AO. MOREOVER, AS WE ARE SETTING ASIDE THE MATTERS TO TH E FILE OF THE AO FOR DENOVO ASSESSMENT, GROUND NO.3 OF APPEAL IN ITA NO.3922/DEL/2013 FILED BY M/S ARADHANA DRINKS & BEV ERAGES PVT.LTD. FOR A.Y.2009-10 BECOMES PURELY ACADEMIC IN NATURE AT PRESENT AND HENCE, IT IS NOT BEING ADJUDICATED PRES ENTLY. THE AFORESAID FOUR APPEALS FILED BY THE AFORESAID TWO A SSESSEES FOR A.Y. 2008-09 AND 2009-10 (IN ITA NOS.3921 & 3923/DEL/201 3 AND ITA NO.4706/DEL/2013 AND 3922/DEL/2013) AND THE GROUNDS OF APPEAL CONTAINED THEREIN ARE BEING HEREBY DISPOSED OFF IN ACCORDANCE WITH OUR ORDER AND DIRECTIONS AND OBSERVATIONS AS AFORES AID. (D) THE REVENUE HAS FILED APPEALS IN ITA NOS.3497 AND 3590/DEL/2013 FOR A.Y. 2008-09 AND 2009-10 RESPECTI VELY IN THE CASE OF ARADHANA FOODS AND JUICES PVT. LTD. AGAINST THE RESPECTIVE ORDERS OF LD.CIT(A). THE REVENUE HAS ALSO FILED APP EALS IN ITA NOS.4472 AND 3588/DEL/2013 FOR A.Y. 2008-09 AND 200 9-10 IN THE CASE OF ARADHANA DRINKS AND BEVERAGES PVT.LTD. AGAI NST THE RESPECTIVE ORDERS OF LD.CIT(A). IN THESE APPEALS, THE ONLY DISPUTED ISSUE IS THE RATE OF DEPRECIATION FOR THE PLASTIC C RATES. AS COMMON ISSUE IS INVOLVED, THESE APPEALS ARE TAKEN UP TOGET HER FOR THE SAKE OF CONVENIENCE. THE TWO ASSESSEES CLAIMED DEPRECIATIO N @ 50% ON THE PAGE 27 OF 30 GROUND THAT CRATES FALL UNDER THE BLOCK (III)(4) OF PART A OF NEW APPENDIX I TO RULE 5 OF INCOME TAX RULES, 1962 R.W. S 32 OF ACT. THIS BLOCK OF ASSETS IS NAMED AS CONTAINERS MADE O F GLASS OR PLASTIC USED AS RE-FILLS IN THE PART A OF NEW APPENDIX I TO RULE 5 OF INCOME TAX RULES, 1962. HOWEVER, THE AO EXPRESSED THE VIEW THAT CRATE IS SIMPLY A SQUARE CONTAINER DIVIDED INTO S ECTIONS FOR HOLDING BOTTLES AND IT IS USED TO KEEP THE BOTTLES SAFE AND STANDING IN THE FACTORY, SHOPS AND WHILE TRANSPORTATION. ACCORDING TO THE AO, CRATES CANNOT BE SAID AND CATEGORIZED AS CONTAINER MADE O F GLASS OR PLASTICS USED AS REFILLS AS USED IN APPENDIX-I OF THE INCOME TAX RULES, 1962 AND ACCORDINGLY, THE AO TREATED CRATES AS PLANT AND MACHINERY ELIGIBLE FOR DEPRECIATION @ 15% INSTEAD O F @ 50% CLAIMED BY THE AFORESAID TWO ASSESSEES. THE AO ALLOWED DEPR ECIATION ON CRATES @ 15% ONLY AND THE CLAIM OF DEPRECIATION IN EXCESS OF 15% WAS DISALLOWED. THE LD.CIT(A) AGREED WITH THE VIEW ADVANCED BY THE TWO ASSESSEES AND DELETED THE DISALLOWANCE MADE BY THE AO OUT OF DEPRECIATION CLAIMED BY THE ASSESSEE ON CRATES. TH E LD.CIT(A) OBSERVED THAT CRATES ARE MADE OF PLASTIC AND USED A S REFILLS AND DIRECTED THE AO TO ALLOW DEPRECIATION @ 50%. AT TH E TIME OF HEARING BEFORE US, THE LD.CIT DR RELIED ON THE ASSESSMENT O RDERS PASSED BY THE AO. THE LD. COUNSEL FOR THE ASSESSEE ON THE OT HER HAND RELIED ON THE DECISION OF DCIT, CIRCLE-1 VS SRI SARVARAYA SUGARS LTD. IN ITA PAGE 28 OF 30 NOS.395 AND 396/VIZAG/2012 VIDE ORDER DATED 31.05.2016 (ITAT, VISAKHAPATNAM). HE FURTHER RELIED ON SYNOPSIS IN BRIEF FILED DURING THE APPELLATE PROCEEDINGS. DETAILED WRITTEN SUBMISSIONS HAVE BEEN MADE IN SYNOPSIS IN BRIEF, WHEREIN THE BOTTLING PROCESS IS EXPLAINED IN DETAIL, AND IT IS CONTENDED THAT CR ATES, ALONGWITH BOTTLES, CONSTITUTE INTEGRATED ASSETS. AT THE END OF SYNOPSIS IN BRIEF, THE SUMMARY OF VARIOUS CONTENTIONS OF THE A SSESSEES IS PROVIDED, AND THE FOLLOWING POINTS HAVE BEEN RAISED : PRINCIPLES OF NATURAL JUSTICE HAVE NOT BEEN OBSERVE D REQUIREMENT OF PASSING A SPEAKING ORDER HAS NOT BEE N FULFILLED DISALLOWANCE OUT OF CLAIM OF DEPRECIATION ON CRATES IS ARBITRARY CRATES QUALIFY AS CONTAINERS MADE OF PLASTIC AND U SED AS REFILLS AND FALL WITHIN THE CLASSIFICATION OF B OTTLES AND SHELLS; THEREFORE, BOTH THE BOTTLES AND CRATES ARE INTEGRAT ED TOOLS USED AS CONTAINERS IN THE PROCESS OF FILLING/ REFILLING AND SUBSEQUENT DELIVERY THEREOF IN THE ASSESSEES BUSINESS CRATES ARE A PART OF THE BLOCK OF ASSETS NAMELY, BO TTLES AND SHELLS, AND HAVE LOST THEIR INDIVIDUAL IDENTITY PAGE 29 OF 30 THE DEPRECIATION HAS BEEN REGULARLY FOLLOWED BY THE ASSESSEE AND THE LD.AO HAS ACCEPTED THE CLAIM IN PREVIOUS YEARS DISALLOWANCE OF A HIGHER RATE OF DEPRECIATION AND GRANTING A LOWER RATE OF DEPRECATION IS JUST A TIMI NG ISSUE. (D.1) WE FIND FROM THE PERUSAL OF ORDERS OF THE AO AND TH E LD.CIT(A) THAT THE ABOVE-MENTIONED POINTS AS WELL AS THE BOTT LING PROCESS HAVE NOT BEEN FULLY CONSIDERED BY THEM. WE ARE OF THE V IEW THAT THE AFORESAID POINTS AS WELL AS BOTTLING PROCESS NEED T O BE FIRST CONSIDERED AT LOWER LEVEL AS IT REQUIRES CLEAR UNDE RSTANDING OF FACTUAL ASPECTS HAVING REGARD TO BOTTLING PROCESS, MARKETING, AND RELATED BUSINESS ASPECTS. WE HAVE, IN ANY CASE, SE T ASIDE THE APPELLATE ORDERS PASSED BY LD.CIT(A) AND ASSESSMENT ORDERS PASSED BY THE AO FOR BOTH THE AFORESAID ASSESSEES FOR BOTH A.Y. 2008-09 AND 2009-10 AND WE HAVE ALREADY RESTORED THE MATTER S TO THE FILE OF THE AO FOR DENOVO ASSESSMENT. WE HEREBY DIRECT THE AO TO RE- EXAMINE THE MATTER REGARDING RATE OF DEPRECIATION O N CRATES, DURING THE PROCEEDINGS FOR MAKING DENOVO ASSESSMENTS AND T O PASS FRESH ORDER AS PER LAW ON THIS MATTER IN THE DENOVO ASSES SMENT ORDERS. THE AO IS DIRECTED TO PROVIDE OPPORTUNITY TO THE AS SESSEE DURING THE PAGE 30 OF 30 PROCEEDINGS FOR MAKING DENOVO ASSESSMENT BEFORE PAS SING FRESH ORDER. THESE FOUR APPEALS ARE DISPOSED OFF IN ACCO RDANCE WITH OUR ORDER, DIRECTIONS AND OBSERVATIONS AS AFORESAID. (E) IN THE RESULT, ALL THE TEN APPEALS FILED BY THE ASS ESSEE AND THE REVENUE, ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE S. ORDER PRONOUNCED IN OPEN COURT ON 05.06.2017. SD/- SD/- (I.C.SUDHIR) (A NADEE NATH MISSHRA) JUDICIAL MEMBER ACCO UNTANT MEMBER DATE:- 05.06.2017 *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR, ITAT NEW DELHI