VRINDAVAN DAIRIES, Jaipur V. ADD.CIT, Jaipur

ITA 448/JPR/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5005 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 06-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S DAGUR ADD CIT DHK
• Keywords: Rejection of books of accounts
• Section: 145; 90

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO.448/JP/15 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2006-07 M/S VRINDAVAN DAIRIES, 22 PULENDER JI KA BAGH, M.D. ROAD,JAIPUR CUKE VS. THE ADD.CIT, RANGE-5, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAVFS 8130-Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI PRAVEEN SARASWAT (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.S. DAGUR(ADD. CIT ) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 03.08.2016 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 05/10/2016. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-II, JAIPUR DATED 27.03.2015 WHEREIN THE ASSESSEE HAS TA KEN FOLLOWING GROUNDS OF APPEAL: (I) THE LD. CIT(A) HAS ERRED BY CONFIRMING DISALLO WANCE OF TRADING LOSSES OF RS. 62,77,969/- MERELY TAKEN SHELTER OF PROVISIONS OF SECTION145(3) OF THE IT ACT, 1961 AND ALLEGEDLY NON MAINTENANCE OF D AY TO DAY STOCK REGISTER, INSPITE OF JUSTIFICATION & VARIOUS ABUNDA NT EVIDENCES ON RECORD. (II) THE LD. CIT(A) HAS ERRED BY CONFIRMING PARTLY DISALLOWED OF TELEPHONE EXPENSES AND CONFIRMING DISALLOWANCE OF STAFF WELF ARE EXPENSES OF RS. 8966/- AND TRAVELLING EXPENSES RS. 3021/- WHILE ALL THESE EXPENSES HAVE ITA NO. 448/JP/15 M/S VRINDAVAN DAIRIES JAIPUR VS. ADDL. CIT, RANGE -5, JAIPUR 2 BEEN CONSIDERED IN FBT ASSESSMENT AND AVAILABLE I N FBT RETURN & ASSESSMENT. 2. REGARDING GROUND NO. 1, BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAS STARTED OPERATIONS DURING THE YEAR AND IN THE BUSIN ESS OF PROCURING MILK FROM THE VILLAGERS AND AFTER PASTEURIZING AND OTHER RELA TES PROCESSES, SOLD IT IN THE MARKET TO VARIOUS RETAIL OUTLETS/MILK BOOTHS. THE ASSESSEE SUBMITTED ITS RETURN OF INCOME DECLARING NET LOSS OF RS. 1,54,14,140/- A S PER AUDITED BOOKS OF ACCOUNTS. THE BOOKS OF ACCOUNTS WERE PRODUCED BEFO RE LD. AO AND SAME WERE EXAMINED IN DETAIL, BUT THE SAME WERE REJECTED BY T HE AO BY INVOKING PROVISIONS OF SECTION 145(3) OF THE ACT AND THEREAF TER AO DISALLOWED THE WHOLE OF THE MANUFACTURING/TRADING LOSS OF RS. 62,77,969/ -. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD CIT(A) WHO HAS CONFIRMED THE ACTION OF THE AO. HENCE, THE ASSESSEE IS IN AP PEAL BEFORE US. 2.1 BEFORE WE EXAMINE THE CONTENTIONS OF THE ASSESS EE, IT WOULD BE USEFUL TO REFER TO THE FINDINGS OF THE LD. CIT(A) WHICH AR E REPRODUCED AS UNDER: I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SU BMISSION MADE. THE AR COULD NOT CONTROVERT THE FINDINGS OF THE AO. THE AO CLEARLY MENTIONED IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS NOT M AINTAINED ANY QUANTITATIVE DAY TO DAY STOCK REGISTER OF RAW MILK PURCHASES, DAILY PRODUCTION OF MILK FROM SMP, SALES THEREOF AND THE CLOSING STOCK IN QUANTITY AT THE END OF EACH DAY. THUS NO VERIFICAT ION WITH REGARD TO THE QUANTITIES CAN BE MADE IN RESPECT OF OPENING STOCK PURCHASE, SALES AND CLOSING STOCK SHOWN IN THE BOOKS OF ACCOUNT. HENCE, THE REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) IS HELD TO BE JUSTIFIE D AND THE APPELLANT HAS NOT FILED ANY WRITTEN SUBMISSION IN THIS REGARD. T HE AO FOUND CLEARLY STATED THAT IN THE ASSESSMENT ORDER THAT IN THE ABS ENCE OF ANY QUANTITATIVE DETAILS OF ANY OF ITEMS IT IS NOT POSS IBLE WHETHER OPENING STOCK MILK, RAW MILK PURCHASED, RAW MILK PRODUCED F ROM SMP ETC. ARE COMPLETELY SHOWN IN THE CONSUMPTION/SALES OR IN CL OSING STOCK. FURTHER THE VALUATION OF EACH OF THE ITEMS LYING IN CLOSI NG STOCK IS NOT VERIFIABLE. THERE IS CONTRADICTION IN VARIOUS DETAILS GIVEN AT TWO DIFFERENT OCCASIONS ITA NO. 448/JP/15 M/S VRINDAVAN DAIRIES JAIPUR VS. ADDL. CIT, RANGE -5, JAIPUR 3 WHEN THE DETAILS INITIALLY FURNISHED WERE FOUND SUI TABLE THAT NEW DETAILS WERE PREPARED AND FURNISHED WHICH WERE FAVOURABLE T O HIM. BUT THOSE DETAILS COULD NOT BE VERIFIED DUE TO NON MAINTENANC E OF DAY TO DAY STOCK RECORDS. DURING THE APPEAL HEARING THE AR FOR THE APPELLANT REITERATED THE SUBMISSION FILED BEFORE THE AO. THE APPELLANT D OES NOT EXPLAIN THE ISSUE PROPERLY. HENCE CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE THE ADDITION MADE BY THE AO IS HELD TO BE JUSTIFIED AND THE SAME IS SUSTAINED. THE APPELLANT FAILS ON THIS GROUND. 2.2 AT THE OUTSET, THE LD AR SUBMITTED THAT THE ASS ESSEE INCURRED MANUFACTURING/TRADING LOSS OF RS. 62,77,969/- AND NET LOSS OF RS. 1,58,67,382/- AS A RESULT OF FOLLOWING REASONS: 1.1 IN THE FIRST YEAR OF OPERATIONS, OPERATING STAF F OF THE PLANT WAS UN- TRAINED AND THERE WERE HIGHER LOSSES DUE TO MILK-Q UALITY REJECTIONS 1.2 ON THE PURCHASE SIDE, ASSESSEE FOUND IT DIFFICU LT TO CREATE MILK PROCUREMENT NETWORK IN NEARBY VILLAGES DUE TO A LREADY EXISTINGNETWORK OF `SARAS (STATE-OWNED MILK DAIRY) AND THEREFORE VILLAGERS/MILK SUPPLIERS WERE OFFERED HIGHER RATES ALONGWITH UPFRONT CASH PAYMENTS AS INCENTIVE WHICH ULTIMATELY RESULTED IN HIGHER COST OF RAW MI LK. 1.3 ON THE SALES SIDE, ASSESSEES BRAND (`MILK BOY ) HAD TO FACE TOUGH COMPETITION FROM THE ESTABLISHED MILK BRANDS SUCH AS `SARAS, `AMUL AND `MOTHER DAIRY ETC. WITH A VIEW TO GAIN THE MARKE T FOOTHOLD IN HIGHLY COMPETITIVE RETAIL MARKET, THE ASSESSEE HAD TO OFFER THE VARIOUS SCHEMES TO RETAIL OUTLETS WHICH INCLUDED MARKE TING OFFERS SUCH AS FREE MILK ON LIFTING CERTAIN QUANTITY, DISCOUNTS IN PRICES ON ACHIEVING MONTHLY TARGET ETC. SUCH SCHEMES AND INCENTIVES RESULTED IN LREA LIZATION OF SOLD MILK. 1.4 THERE WAS LOW UTILIZATION OF INSTALLED CAPACIT Y IN THE FIRST YEAR (AY 2006- 07) WHICH RESULTED IN THE TURNOVER OF RS. 3.79 CRO RE. AFTER STABILIZATION OF THE ITA NO. 448/JP/15 M/S VRINDAVAN DAIRIES JAIPUR VS. ADDL. CIT, RANGE -5, JAIPUR 4 OPERATIONS, THE ASSESSEE COULD ACHIEVE THE TURNOVE R OF RS. 10.85 CRORE IN THE NEXT ASSESSMENT YEAR 2007-08 AND REDUCED THE LO SSES. 2.3 REGARDING REJECTION OF THE BOOKS OF ACCOUNT BY THE AO U/S 145(3), THE LD AR HAS SUBMITTED AS UNDER: ALLEGATION BY LD. AO ( SERIAL NO. 1.1 ON PAGE NO. 2 OF THE ASSESSMENT ORDER) : 1.5 THE ASSESSEE HAS SHOWN THE PURCHASE OF RAW MILK FRO M VARIOUS VILLAGERS FOR WHICH SELF MADE VOUCHERS WERE MAINTAINED FOR PA YMENT WITHOUT MENTIONING THE COMPLETE ADDRESSES OF THE PERSONS F ROM WHOM SAID PURCHASES HAVE BEEN MADE. THE PAYMENTS OF RAW MILK PURCHASES WERE ALSO MADE I N CASH OF WHICH NO VERIFICATION COULD BE MADE FOR THE REASON THAT ASSE SSEE HAS DENIED ANY PERSONAL ATTENDANCE OF FEW OF THE SUPPLIERS FOR VER IFICATION VIDE ORDER SHEET ENTRY DATED 16/12/2008: SUBMISSION OF APPELLANT: ASSESSEE HAD FURNISHED COMPLETE DETAILS OF MILK P URCHASES INCLUDING LEDGER ACCOUNT OF MILK-VENDORS AND SUBMITTED SAMPLE VOUCH ERS OF MILK PURCHASE ON 10/11/2008 TO THE LD. AO. VILLAGERS SELLING MILK, CANNOT BE EXPECTED TO GIVE HIS PRINTED BILLS AND THEREFORE FIRM PREPARED THE `BILL CUM VOUCHER HAVING LABORATORY ANALYSIS OF MILK, IDENTITY & ADDRESS OF MILK VENDOR, SIGNATURE OF VENDOR ON REVENUE STAMP ETC. (SEE PB NO. 17 TO 26 FOR SAMPLE VOUCHER/LEDGER). LD. AO HAD LEVELED THESE `BILLS CUM VOUCHERS A S SELF-MADE. VILLAGERS WOULD, NORMALLY, NOT ACCEPT THE BANK PAY MENT OF MILK AND THEREFORE THE PAYMENT TO MILK VENDORS WAS MADE IN CASH. EVEN , THE RULE 6DD OF ITA NO. 448/JP/15 M/S VRINDAVAN DAIRIES JAIPUR VS. ADDL. CIT, RANGE -5, JAIPUR 5 INCOME TAX RULES, 1962 PERMITS THE CASH PAYMENT IN EXCESS OF RS. 20000/- PER DAY FOR DAIRY PRODUCE (INCLUDING MILK) AS UNDER: NO DISALLOWANCE UNDER SUB-SECTION (3) OF SECTION 4 0A SHALL BE MADE AND NO PAYMENT SHALL BE DEEMED TO BE THE PROFITS AND GA INS OF BUSINESS OR PROFESSION UNDER SUB-SECTION (3A) OF SECTION 40A WH ERE A PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON IN A DAY, OT HERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAY EE BANK DRAFT, EXCEEDS TWENTY THOUSAND RUPEES, WHERE THE PAYMENT IS MADE FOR THE PURCHASE OF (II) THE PRODUCE OF ANIMAL HUSBANDRY (INCLUDING LIV ESTOCK, MEAT, HIDES AND SKINS) OR DAIRY OR POULTRY FARMING; OR FURTHER, IT WAS NOT POSSIBLE FOR THE ASSESSEE TO E NSURE THE PRESENCE OF MILK VENDORS AT A SHORT NOTICE OF LD. AO ON 16/12 /2008, THAT TOO AT THE FAG END OF ASSESSMENT PROCEEDINGS, ESPECIALLY WHEN THE ASSESSEE HAD STOPPED MILK PURCHASES FROM THESE VILLAGERS AFTER 31/ 03/2007 IN VIEW OF THE HEAVY LOSSES. ALLEGATION BY LD. AO (SERIAL NO. 1.2 ON PAGE NO. 2 OF THE ASSESSMENT OR DER) : 1.6 THE ASSESSEE HAS NOT MAINTAINED ANY QUANTITATIVE DA Y TO DAY STOCK REGISTER OF RAW MILK PURCHASE, DAILY PRODUCTION OF MILK FROM SMP, SALES THEREOF AND THE CLOSING STOCK IN QUANTITY AT THE END OF EAC H DAY. THUS NO VERIFICATION WITH REGARD TO THE QUANTITIES CAN BE MADE RESPECT O F OPENING STOCK, PURCHASES, SALES AND CLOSING STOCK SHOWN IN THE BOOKS OF ACCOU NT SUBMISSION OF APPELLANT: A) THE ASSESSEE HAS MAINTAINED DAY TO DAY BOOKS O F ACCOUNTS WHICH WERE AUDITED AND THERE IS NO ADVERSE REMARK BY THE AUDI TOR. ITA NO. 448/JP/15 M/S VRINDAVAN DAIRIES JAIPUR VS. ADDL. CIT, RANGE -5, JAIPUR 6 B) LD. AO HAS ALSO NOT POINTED OUT ANY INSTANCE OF PURCHASE OR EXPENSE WHICH IS NOT VERIFIABLE, C) ASSESSEE HAD KEPT QUANTITATIVE RECORDS AND SUBMI TTED A QUANTITATIVE TALLY ON 14/10/2008(WITHOUT INCLUDING SMP MILK) AND ON 10/11/2008 (AFTER INCLUDING SMP MILK )(SEE PB NO. 27 TO 28). WITHOUT QUANTITATIVE RECORDS, HOW COULD THE ASSESSEE SUBMIT THE Q-TALLY TO THE LD. A O IN THE COURSE OF ASSESSMENT PROCEEDINGS. ALLEGATION BY LD. AO ( SERIAL NO. 1.3 ON PAGE NO. 2 OF THE ASSESSMENT O RDER) 1.7 THE ASSESSEE HAS MANUFACTURED GHEE ALSO DURING THE YEAR, FOR WHICH NO QUANTITATIVE DAY TO DAY STOCK REGISTER SHOWING OPEN ING STOCK, PURCHASE, SALES AND CLOSING STOCK HAS BEEN MAINTAINED, HENCE THE P RODUCTION OF GHEE SHOWN BY THE ASSESSEE REMAINS UNVERIFIABLE: SUBMISSION OF APPELLANT IN DAIRY BUSINESS, GHEE IS PRODUCED WHEN THE SURPL US MILK IS LEFT AFTER SUPPLY OF MILK IN ACCORDANCE WITH THE DAILY DEMAND OF MI LK. DURING THE AY 2006-07, ASSESSEE DID NOT HAVE SUCH OCCASIONS AND THEREFOR E COULD SELL THE GHEE WORTH RS. 4.59 LACS ( 3948KGS.) ONLY OUT OF THE T OTAL SALE OF RS. 379.23 LACS WHICH WORKS OUT APPROX 1% OF TOTAL SALE. GHEE FALLS UNDER THE `ESSENTIAL COMMODITIES ACT A ND QUESTION OF NO MAINTAINING QUANTITATIVE DETAILS RELATING TO THE P RODUCTION/STOCK/SALE ETC. DOES NOT ARISE. ALLEGATION BY LD. AO ( SERIAL NO. 1.4 ON PAGE NO. 2 OF THE ASSESSMENT ORDER): ITA NO. 448/JP/15 M/S VRINDAVAN DAIRIES JAIPUR VS. ADDL. CIT, RANGE -5, JAIPUR 7 1.8 THE ASSESSEE HAS MANUFACTURED CHHACH AND LASSI ALSO DURING THE YEAR FOR WHICH NO QUANTITATIVE DAY TO DAY STOCK REGISTER S HOWING OPENING STOCK, PURCHASE, SALES AND CLOSING STOCK HAD BEEN MAINTAI NED, HENCE THE PRODUCTION OF THOSE ITEMS SHOWN BY THE ASSESSEE REMAINS UNVERI FIABLE: SUBMISSION OF APPELLANT CHHACH/ LASSI ARE BY-PRODUCTS OF THE MILK PROCESSI NG WHICH ARE HIGHLY PERISHABLE IN NATURE AND SOLD ON THE SAME DAY OF P RODUCING. THEREFORE, NO MARKET PURCHASES, OR STOCKS WERE REQUIRED FOR THE SE PRODUCTS. ASSESSEE HAD SOLD 3249198 KGS. OF MILK, CHACH AND LASSI AS P ER THE DETAILS FURNISHED TO THE LD. AO ON 10/11/2008 (SEE PB NO. 27 TO 28) ALLEGATION BY LD. AO ( SERIAL NO. 1.7 ON PAGE NO. 2 OF THE ASSESSMENT ORDER): 1.9 IT IS NOTICED THAT FOR SALE OF MILK AND OTHER ITEMS ALSO THE ASSESSEE HAS MADE THE SELF MADE VOUCHERS WITHOUT MENTIONING NAME AND COMPLETE ADDRESSES OF THE BOOTH HOLDER/CUSTOMERS. FURTHER T HE COLLECTION FROM THEM ARE MOSTLY BY WAY OF CASH, HENCE, THE SALE RATE / SALE VALUE SHOWN BY THE ASSESSEE ALSO REMAINS UNVERIFIABLE. SUBMISSION OF APPELLANT: ASSESSEE HAD APPOINTED VARIOUS RETAIL BOOTHS/KIRANA SHOPS FOR SALE OF ITS PRODUCTS. DUES FROM SUCH DEBTORS (RUNNING INTO MOR E THAN 289 NOS. AS ON 31/03/2006) AMOUNTED TO RS. 26,53,749/46 AS PER AUDITED ACCOUNTS (SEE PB NO. 29 TO 34). THEREFORE THE QUESTION OF NON-AVAILABILITY OF NAME AND ADDRESSES OF THESE BOOTH-HOLDERS /CUSTO MERS DID NOT ARISE. FURTHER AS TO THE COLLECTION IN CASH FROM DEBTORS, LD AO SEEMS TO BE OBLIVIOUS OF THE PRACTICAL ASPECT THAT IN DAIRY BUSINESS, C ASH IS COLLECTED IN THE ITA NO. 448/JP/15 M/S VRINDAVAN DAIRIES JAIPUR VS. ADDL. CIT, RANGE -5, JAIPUR 8 AFTERNOON BY DELIVERY PERSONS ALONGWITH THE EMPTY MILK CRATES FOR THE NEXT MORNING SUPPLY. SUCH PRACTICE IS PREVALENT I N MOST PARTS OF INDIA. ALLEGATION BY LD. AO ( SERIAL NO. 1.8 ON PAGE NO. 2 OF THE ASSESSMENT ORDER): 1.10 IT IS NOTICED THAT IN EACH MONTH THE RAW MILK PURC HASE RATE WAS HIGHER THAN THE SALE RATE WHICH RESULTED INTO HUGE TRADING LOSS DURING THE YEAR AS PER THE DETAILS SUBMITTED BY THE ASSESSEE. SUBMISSION OF APPELLANT: ASSESSEE HAD SUBMITTED THE AVERAGE PURCHASE AND AV ERAGE SALE RATE OF THE DIFFERENT MONTHS BEFORE THE LD. AO ON 14/10/2 008 WHICH HAS BEEN REPRODUCED BY LD. AO ON PAGE NO. 3 OF HIS ASSESSMEN T ORDER: MONTH RAW MILK PURCHASE RATE PR KG. COST OF MILK PER KG. PRODUCED FROM SMP SALE RATE OF MILK PER KG. APRIL-05 12 9.55 8 NOV-05 12 10.44 12 MAR-06 12 10.33 10.5 THE OPERATIONS OF ASSESSEE COMMENCED IN APRIL, 2005 AND HAD TO GIVE FREE SAMPLES/ SCHEMES TO DISTRIBUTORS ON LIFTING THE CER TAIN QUANTITY FOR GAINING MARKET SHARE. THEREFORE, THE MILK REALIZATION WAS INITIALLY LOWER WHICH BEGAN TO IMPROVE STEADILY FROM NOVEMBER, 2005 ONWARDS. M ILK WAS PURCHASED AT THE FIXED RATE OF RS. 12/- FROM VILLAGERS AND SMP WAS P URCHASED AT THE MARKET RATES FROM GCMMF LTD.(AMUL) AND THE PRICES OF THESE ITEM S WERE BEYOND THE CONTROL OF ASSESSEE. ITA NO. 448/JP/15 M/S VRINDAVAN DAIRIES JAIPUR VS. ADDL. CIT, RANGE -5, JAIPUR 9 ALLEGATION BY LD. AO ( SERIAL NO. 1.9 ON PAGE NO. 2 OF THE ASSESSMENT ORDER): 1.11 IT IS ALSO NOTICED THAT VARIOUS QUANTITIES OF OPE NING STOCK, PURCHASES OF RAW MILK, STOCK OF RAW MATERIAL SHOWN ARE DIFFERENT IN THE TWO SEPARATE DETAILS FURNISHED BY ASSESSEE VIDE ITS LETTER DATED 14/10/2 008 AND 10/11/2008. THESE DISCREPANCIES ARE NOTED BELOW SUBMISSION OF APPELLANT ASSESSEE HAD SUBMITTED TWO QUANTITATIVE DETAILS I. E. FIRST ON 14/10/2008 AND SECOND ON 10/11/2008. BEING THE FIRST YEAR OF ASSESSMENT, ASSESSEE COULD NOT SUBMIT THE PROPER DATA ON 14/10/2008 WHI CH WAS CORRECTED AND RESUBMITTED ON 10/11/2008. HOWEVER, INSTEAD OF IGNO RING THE EARLIER CHART OF 14/10/2008, LD. AO BASED HIS REJECTION OF BOOKS OF ACCOUNTS AND DISALLOWANCE OF LOSS BY COMPARING THESE TWO CHARTS. SUMMARY OF THE CONCLUSIONS DRAWN BY LD. AO ARE AS UNDER: RAW MILK PURCHASES (KGS) SMP MILK PRODUCED (KGS) TOTAL CHART(14/10/2008) 3109170 274275 CHART(10/11/2008) 3097443 265332 SHORTAGE CALCULATED BY LD. AO 11727 8943 20670 KGS. PROCESSING AND HANDLING LOSS 99277 KGS LD. AO FINALLY CONCLUDED AT THE END OF THE PAGE NO . 4 OF HIS ASSESSMENT ORDER THAT CLOSING STOCK SHOWN BY ASSESSEE IS SHORT BY 2 1389 KGS OF MILK ( INCLUDING 20670 KGS.). ITA NO. 448/JP/15 M/S VRINDAVAN DAIRIES JAIPUR VS. ADDL. CIT, RANGE -5, JAIPUR 10 EVEN IF AO CONCLUSION IS ACCEPTED AT THE FACE VAL UE FOR ONCE, THE ADDITION BY ENHANCING CLOSING STOCK SHOULD HAD NOT EXCEEDED 224584/- (21389 KGS. MULTIPLIED BY SALES RATE OF RS. 10/50 PER KG.). BUT THE LD. AOS ACTION OF DISALLOWING GROSS LOSS OF RS. 62,77,969/- IS HIGHLY ARBITRARY, WITHOUT LOGIC AND DESERVES TO BE QUASHED. ASSESSEE HAS CLAIMED THE PROCESS LOSS OF 99277 KGS . OUT OF THE TOTAL MILK HANDLED QUANTITY OF 3362775 KGS WHICH WORKS OUT TO 2.95% AND COMPARES FAVORABLY WITH THE INDUSTRY STANDARDS. 1.12 FURTHER THE REJECTION OF BOOKS OF ACCOUNTS IS HIGHLY UNJUSTIFIED WHEN THE SUPPORTING DOCUMENTS FOR ALL EXPENSES WERE PRODUCED BEFORE THE LD. AO. APPELLANT IS FURNISHING THE DETAILS OF FOLLOWING MA JOR EXPENSES (OF MANUFACTURING ACCOUNT) FOR KIND CONSIDERATION BEFO RE THE HONBLE BENCH: NATURE OF EXPENSES AMOUNT IN RS. PAPER BOOK PAGE NO. WATER & ELECTRICITY EXPENSES 1278645/- 35 PROCESSING CHARGES 1090047/- 36 PACKING MATERIAL 2006809/- 37 TO 38 FURNACE OIL 779013/- 39 PURCHASES OF CHEMICALS 309610/- 40 ALL PURCHASES EXCEEDING RS. 1 LACS 35999069/- 41 TO 42 LD. AO HAD NOT DOUBTED THE INCURRENCE OF ABOVE EXPE NDITURE IN ANY MANNER. 1.13 NOW THE MOOT QUESTION ARISES FOR THE KIND C ONSIDERATION OF HONBLE BENCH IS THAT IF THE LD. AO WAS SO CONVINCED THAT THE BOOKS OF ACCOUNT ITA NO. 448/JP/15 M/S VRINDAVAN DAIRIES JAIPUR VS. ADDL. CIT, RANGE -5, JAIPUR 11 MAINTAINED BY THE ASSESSEE WERE NOT CORRECT AND NOT RELIABLE TO SHOW THE TRUE AND CORRECT AFFAIRS OF THE BUSINESS UNDERTAKEN BY THE APPELLANT, THEN WHAT IS THE BASIS FOR ESTIMATING NIL GROSS LOSS. AS P ER LD. AO, NO PROPER Q-TALLY OR DAY-TO-DAY STOCK REGISTER WAS MAINTAINED BY TH E ASSESSEE AND IN THE ABSENCE OF QUANTITATIVE DETAILS, IT CANNOT BE ASCER TAINED WHETHER THE GOODS MENTIONED IN THE PURCHASE BILLS WERE ACTUALLY RECEI VED OR NOT AND THE GOODS NOT CONSUMED ARE TAKEN IN THE CLOSING STOCK OR NOT. GIVEN THIS REASONING, THE LD. AO HAS DISALLOWED GR OSS LOSS (RS. 6277969/-). THE QUESTION IS WHEN THE WHOLE OF THE EXPENSES/INCOME WERE NOT VERIFIABLE AS PER OPINION OF LD. AO, THEN WHAT IS T HE BASIS FOR 100% DISALLOWANCE OF GROSS LOSS. BEING THE FIRST YEAR OF BUSINESS, THE ASSESSEE DID NOT HAVE ANY PAST HISTORY AND THE LD. AO ALSO DI D NOT BRING ANY COMPARABLE CASE ON RECORD TO JUSTIFY DETERMINING ZERO GROSS L OSS. THIS SHOWS THE CLEAR ARBITRARINESS AND LACK OF R ATIONAL, LOGICAL APPROACH AND THINKING ON PART OF LD. AO. IN THE EYES OF LAW, HER E IS NO BASIS FOR SUCH ARBITRARINESS AND ADHOC DISALLOWANCES. IN MAKING A BEST JUDGMENT, THE AO MUST NOT ACT DISHONESTLY OR VINDICTIVELY OR CAPRICI OUSLY BECAUSE HE MUST EXERCISE JUDGMENT IN THE MATTER. A BEST JUDGMENT AS SESSMENT IS NOT A PUNITIVE ASSESSMENT. IN MAKING BEST JUDGMENT ASSESSMENT, THE AO DOES NOT POSSESS ABSOLUTE ARBITRARY AUTHORITY TO ASSESS AT ANY FIGU RE HE LIKES. HE MUST BE GUIDED BY THE RULE OF JUSTICE, EQUITY AND GOOD CONSCIENCE . 1.14 BESIDES THE SO-CALLED FACTUAL DEFECTS IN THE B OOKS OF ACCOUNTS, LD. AO ALSO RELIED UPON FOLLOWING CASE LAWS OF HONBLE SUPREME COURT TO JUSTIFY THE REJECTION OF BOOKS OF ACCOUNTS OF ASSESSEE: S. CASE LAWS RELIED UPON THE BY LD. AO FACTUAL MA TRIX OF ITA NO. 448/JP/15 M/S VRINDAVAN DAIRIES JAIPUR VS. ADDL. CIT, RANGE -5, JAIPUR 12 N O. ASSESSEE VIS--VIS CASE LAW A) N. NAMASIVAYAM CHETTIAR VS. CIT(1960) ITR 579(SC) WHICH DEALS WITH A SITUATION WHERE ASSESSEE HAD FAILED TO MAINTAIN THE MANUFACTURING A/C, QUANTITATIVE TALLY, VOUCHERS ETC., AND THEREFORE AFTER COMPARING THE PROFITS OF SIMILARLY PLACED TRADERS, HIGHER RATE OF NP WAS APPLIED. ASSESSEE HAS MAINTAINED CO MPLETE BOOKS OF ACCOUNTS, Q- TALLY, VOUCHERS ETC. AND LD. AO DID NOT DISPUTE THE SAME. NO COMPARABLE GP RATE WAS BROUGHT ON RECORD BY LD. AO B) CIT VS. BRITISH PAINTS (I) LTD. 188 ITR 44 (SC) WHERE THE ASSESSEE HAD VALUED `GOODS IN PROCESS AND `FINISHED GOODS AT RAW MATERIAL COST WITHOUT ADDING THE OVERHEAD EXPENSES. NO SUCH ISSUE WAS RAISED BY LD. AO C) COMMISSIONER OF SALES TAX VS. H ESUF ALI, HM ABDUL I ALI 90 ITR SC 1973 231 WHERE SALES TAX AUTHORITIES HAD INSPECTED THE PREMISES OF ASSESS EE AND FOUND PROOF THAT THERE IS SALES OUTSIDE THE BOOKS OF ACCOUNT AND THEREFORE ESTIMATE OF UNRECORDED SALES WAS MADE FOR THE BILL BOOKS NOT EN TERED IN THE BOOKS OF ACCOUNT NO SUCH ISSUE WAS RAISED FOR ASSESSEE BY LD. AO THE FACTS AND CIRCUMSTANCES OF THE EACH OF THE CASE LAWS RELIED UPON BY LD.AO WERE SUBSTANTIALLY DIFFERENT FROM THOSE OF ASSESSEE . 1.15 ASSESSEE PLACES HIS RELIANCE ON FOLLOWING JUDG EMENTS TO SUPPORT HIS VIEW THAT ACTION OF LD. AO WAS ARBITRARY AND UNJUSTIFIED : 1.15.1 CIT VS. GOTAN LIME KHANIJ UDYOG 256 ITR 243: THE HONBLE JURISDICTIONAL HIGH COURT HELD: THE TRIBUNAL, ON APPEAL, WHILE AGREEING WITH THE C OMMISSIONE (APPEALS) THAT RECOURSE TO SECTION 145(1) WAS JUSTIFIED, CAME TO THE CONCLUSION THAT THE COMMISSIONER (APPEALS) HAD NOT GIVEN ANY JUSTIF ICATION FOR COMING TO THE CONCLUSION THAT SUSTAINING AN ADDITION OF RS. 34,000 WOULD BE JUSTIFIED. THUS, THE FINDING HAD BEEN REACHED ON TH E GROUND THAT IN THE ITA NO. 448/JP/15 M/S VRINDAVAN DAIRIES JAIPUR VS. ADDL. CIT, RANGE -5, JAIPUR 13 ABSENCE OF RECORDING ANY FINDING BY THE COMMISSIONE R (APPEALS) THAT THE EXPENSES INCURRED ON ANY ACCOUNT APPEARED TO BE UN REASONABLE OR EXCESSIVE, THE ADDITIONS SUSTAINED MERELY ON SUSPIC ION OF PILFERAGE OR LEAKAGE WERE NOT JUSTIFIED. THIS CONCLUSION WAS A FINDING OF FACT KEEPING IN VIEW THAT THE ADDITION IN THE PROFITS AND GAINS RETURNED BY THE ASSESSEE WERE NOT NECESSARY CONCOMITANT OF AN ORDE R MADE UNDER SECTION45(1) OR 145(2). AS A RESULT THERE WAS NO ER ROR IN THE ORDER OF THE TRIBUNAL IN DELETING THE ENTIRE ADDITIONS TO THE TR ADING RESULTS AFTER HOLDING THAT PROVISO TO SECTION 145 WAS APPLICABLE. 1.15.2 MALANI RAMJIVAN JAGANNATH V/S ACIT 207 CTR 19, HONBLE JURISDICTIONAL HIGH COURT OF RAJASTHAN HELD: MERE DEVIATION IN GP RATE CANNOT BE A GROUND FOR REJECTING BOOKS OF ACCOUNT, AND ENTERING IN REALM OF ESTIMATE AND GU ESSWORK. LOWER GP R RATE SHOWN IN THE BOOKS OF ACCOUNT DURING CURRENT YEAR AND FALL IN GP RATE WAS JUSTIFIED AND ALSO ADMITTED BY THE ASSESS ING OFFICER AS WELL AS CIT(A) AS WELL AS THE TRIBUNAL. THEREFORE, FALL IN GP RATE LOST ITS SIGNIFICANCE. HAVING ACCEPTED THE REASON FOR FALL IN GP RATE, NAMELY, STIFF COMPETITION IN MARKET AND ALSO THAT HUGE LOSS CAUS ED IN PARTICULAR TRANSACTION, NEITHER THE REJECTION OF BOOKS OF ACC OUNT WAS JUSTIFIED NOR RESORT TO SUBSTITUTION OF ESTIMATED GP BY RULE OF T HUMB MERELY FOR MAKING CERTAIN ADDITIONS. WE ARE, THEREFORE, OF THE OPINI ON THAT THE FINDINGS ARRIVED AT BY THE TRIBUNAL SUFFERS FROM BASIC DEFECT OF NOT A PPLYING ITS MIND TO THE EXISTING MATERIAL WHICH WERE RELEVANT AND WENT TO THE ROOT OF THE MATTER. WHEN ALL THE DATA AND ENTRIES MADE IN THE TRADING ACCOUNT WERE NOT FOUND TO BE INCORRECT IN ANY MANNER, THERE COULD NOT HAVE B EEN ANY OTHER RESULT EXCEPT WHAT HAS BEEN SHOWN BY THE ASSESSEE IN THE B OOKS OF ACCOUNT. WE ARE, THEREFORE, UNABLE TO SUSTAIN THE ORDER OF THE TRIB UNAL. ITA NO. 448/JP/15 M/S VRINDAVAN DAIRIES JAIPUR VS. ADDL. CIT, RANGE -5, JAIPUR 14 1.15.3 DHAKESWARI COTTON MILLS LTD., V/S. CIT (1954) 26 IT R 775, HONBLE SUPREME COURT CONCLUDED: THE RULE OF LAW ON THIS SUBJECT HAS BEEN WELL SET TLED THAT ESTIMATES FRAMED WITHOUT GIVING THE BASIS FOR THEIR FIXATION OR WITHOUT FURNISHING TO THE ASSESSEE THE MATERIAL ON WHICH THE RATE OF GROSS PR OFIT IS ARRIVED AT OR WITHOUT GIVING AN OPPORTUNITY TO THE ASSESSEE TO REBUT IT A RE BAD 1.15.4 MAHARAJA B P SINGH DEO 76 ITR 690, HONBLE SUPREME COURT CONCLUDED: THE MERE FACT THAT THE MATERIAL PLACED BY THE ASSE SSEE BEFORE THE ASSESSING AUTHORITIES IS UNRELIABLE DOES NOT EMPOWER THOSE AU THORITIES TO MAKE AN ARBITRARY ORDER. THE POWER TO LEVY ASSESSMENT ON TH E BASIS OF BEST JUDGMENT IS NOT AN ARBITRARY POWER; IT IS AN ASSESSMENT ON THE BASIS OF BEST JUDGMENT. IN OTHER WORDS, THAT ASSESSMENT MUST BE BASED ON SOME RELEVANT MATERIAL. IT IS NOT A POWER THAT CAN BE EXERCISED UNDER THE SWEET W ILL AND PLEASURE OF THE CONCERNED AUTHORITIES. THE SCOPE OF THAT POWER HAS BEEN EXPLAINED OVER AND OVER AGAIN BY THIS COURT. 2.3 THE LD DR IS HEARD WHO HAS VEHEMENTLY ARGUED TH E MATTER AND RELIED UPON THE ORDER OF THE LOWER AUTHORITIES. 2.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE DERIVES INCOME FROM MANUFA CTURING AND SUPPLY OF MILK AND MILK PRODUCTS. THE ASSESSEE COLLECTS RAW MILK FROM VILLAGERS, PROCESS IT AND THEREAFTER SUPPLY THE SAME TO VARIOUS DAIRY BOOTHS AND RETAIL OUTLETS IN JAIPUR AND ADJACENT AREAS. THE YEAR UNDER CONSIDE RATION IS THE FIRST YEAR OF THE OPERATION OF THE ASSESSEE WHEREIN THE ASSESSEE HAS REPORTED A TURNOVER OF RS. 3.79 CRORES AND MANUFACTURING/ TRADING LOSS OF RS. 62,77,969/-. THE AO AFTER ITA NO. 448/JP/15 M/S VRINDAVAN DAIRIES JAIPUR VS. ADDL. CIT, RANGE -5, JAIPUR 15 GOING THROUGH THE BOOKS OF ACCOUNTS AND OTHER DETAI LS SUBMITTED BY THE ASSESSEE, REJECTED THE BOOKS OF ACCOUNT HOLDING THE SAME AS NOT RELIABLE AND AND THEREAFTER HAS DISALLOWED THE WHOLE OF THE MANU FACTURING/ TRADING LOSS OF RS. 62,77,969/- WHICH HAS SUBSEQUENTLY BEEN CONFIRM ED BY THE LD. CIT(A). THE ASSESSEE HAS SUBMITTED THAT BEING THE FIRST YEAR OF ITS OPERATIONS, THE STAFF OF THE ASSESSEE WAS UNTRAINED TO HANDLE THE PROCUREME NT AND SUPPLY AND THERE WERE LOSSES ON ACCOUNT OF MILK PROCESSING AND REJE CTIONS. ON THE PURCHASE SIDE, GIVEN THE PRESENCE OF OTHER ESTABLISHED PLA YERS IN THE MARKET, VILLAGERS WERE OFFERED HIGH RATES ALONGWITH UPFRONT CASH PAY MENTS AS INCENTIVE WHICH RESULTED IN HIGHER COST OF RAW MILK. SIMILARLY, ON THE SALE SIDE, GIVEN THE MARKET DYNAMICS AND COMPETITION FROM THE ESTABLISHED BRAN DS SUCH AS SARAS, AMUL, AND MOTHER DAIRY ETC., THE ASSESSEE HAD TO OFFER VA RIOUS SCHEMES TO RETAIL OUTLETS SUCH AS FREE MILK ON LIFTING SPECIFIC QUA NTITY OF MILK, DISCOUNTS IN PRICES ON ACHIEVING MONTHLY TARGETS, ETC WHICH RESULTED IN LOWER REALIZATION OF MILK SOLD. FURTHER THERE WAS LOWER UTILIZATION OF INSTA LLED CAPACITY IN THE INSTANT YEAR. HOWEVER, THE ASSESSEE ACHIEVED THE TURNOVER OF RS. 10.85 CRORES IN THE NEXT FINANCIAL YEAR AS COMPARED TO RS. 3.79 CRORES IN THE INSTANT YEAR AFTER STABILIZATION OF ITS OPERATION AND THE LOSSES HAVE BEEN REDUCED IN THE SUBSEQUENT YEARS. REGARDING EACH OF THE CONTENTION S RAISED BY THE AO WHILE REJECTING THE BOOKS OF ACCOUNT U/S 145(3) OF THE AC T, THE ASSESSEE HAS FILED DETAILED SUBMISSIONS. REGARDING PURCHASE OF RAW MIL K FROM THE VARIOUS VILLAGES, THE ASSESSEE HAS SUBMITTED THAT COMPLETE DETAILS OF MILK PURCHASES INCLUDING LEDGER ACCOUNT OF MILK VENDORS AND SAMPLE VOUCHERS WERE SUBMITTED TO THE AO AND GIVEN THE NATURE OF PROCUREMENT WHICH HAPPENS O N A DAILY BASIS, THE PAYMENTS TO MILK VENDORS WERE MADE IN CASH WHICH IS EVEN ACCEPTED UNDER RULE 6DD OF THE IT RULES. REGARDING AOS CONTENTIO NS THAT ASSESSEE HAS NOT MAINTAINED QUANTITY WISE DAY TO DAY STOCK REGISTER , THE ASSESSEE HAS ITA NO. 448/JP/15 M/S VRINDAVAN DAIRIES JAIPUR VS. ADDL. CIT, RANGE -5, JAIPUR 16 SUBMITTED THAT IT HAS DULY KEPT QUANTITATIVE RECO RDS AND SUBMITTED BEFORE THE AO THE QUANTITATIVE TALLY ON 14.10.2008 AND THE REAFTER ON 10.11.2008. REGARDING SELF MADE VOUCHERS FOR SALE OF MILK, THE ASSESSEE HAS SUBMITTED THAT IT HAS POINTED OUT TO THE AO THAT IT HAS SOLD ITS M ILK AND MILK PRODUCTS TO A LARGE NUMBER OF MILK BOOTHS AND RETAIL OUTLETS RUNNING IN TO MORE THAN 289 NOS. AND DUES FROM SUCH DEBTORS HAVE BEEN DULY RECORDED IN T HE AUDITED FINANCIAL STATEMENT AND DETAILS HAVE BEEN SUBMITTED TO THE AO . REGARDING SALE COLLECTIONS IN CASH, THE ASSESSEE HAS SUBMITTED THA T THIS IS NORMAL INDUSTRY PRACTICE THAT THE CASH IS COLLECTED IN THE AFTERNOO N BY THE DELIVERY PERSONS ALONGWITH THE EMPTY MILK CRATES FOR THE NEXT MORNI NG SUPPLY. IN RESPECT OF CONTENTION OF THE AO REGARDING PURCHASE OF RAW MILK AT A VALUE HIGHER THAN THE SALE VALUE, IT WAS SUBMITTED THAT THE RAW MILK WAS PURCHASED AT A RATE OF RS. 12/- PER KG. FROM VILLAGES GIVING MARKET DYNAMIC AN D WITH A VIEW TO GAIN ENTRY INTO THE EXISTING NETWORK OF ESTABLISHED PLAYERS A ND THE SKIMMED MILK POWDER (SMP) WAS PURCHASED AT THE MARKET RATES FROM GCMMF LTD. REGARDING DISCREPANCY IN QUANTITATIVE TALLY REPORTE D BY THE AO IN TERMS OF THE ASSESSEE LETTER DATED 14.10.2008 AND SUBSEQUENT L ETTER DATED 10.11.2008, THE LD. AR SUBMITTED THAT THE FIRST QUANTITATIVE TALLY WHICH WAS SUBMITTED ON 14.10.2008 WAS WITHOUT INCLUDING THE DETAILS REGAR DING SMP MILK AND SUBSEQUENTLY THE ASSESSEE REALIZED THE DATA WAS NO T CORRECTLY SUBMITTED AND REVISED QUANTITATIVE TALLY INCLUDING SMP MILK WAS S UBMITTED ON 10.11.2008 AND LATER QUANTITATIVE TALLY IS DULY SUPPORTED BY THE QUANTITATIVE RECORDS MAINTAINED BY THE ASSESSEE AND THE BOOKS OF ACCOUNT S. THE AO HOWEVER, IGNORED THE LATTER TALLY SUBMITTED ON 10.11.2008 AND CONSIDERED THE EARLIER TALLY SUBMITTED ON 14.10.2008 AND ARRIVED AT A CONC LUSION WHEREBY CLOSING STOCK WAS HELD TO BE SHORT BY 21,389 KGS. IN OU R VIEW, WHERE THE ASSESSEE HAS CORRECTED ITS MISTAKE DURING THE COURSE OF ASSE SSMENT PROCEEDINGS IN ITA NO. 448/JP/15 M/S VRINDAVAN DAIRIES JAIPUR VS. ADDL. CIT, RANGE -5, JAIPUR 17 TERMS OF INCOMPLETE/INCORRECT DATA AND SUBMITTED TH E REVISED DATA WHICH IS SUPPORTED BY THE QUANTITATIVE RECORDS AND BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE, IT IS NOT CORRECT ON THE PART OF THE AO TO DISREGARD THE SAME WITHOUT ANY VALID REASONS. THE LD. AR HAS FURTHER S UBMITTED THAT EVEN IF THE CONTENTIONS OF THE AO IS ACCEPTED THAT THERE IS A S HORTAGE IN CLOSING STOCK, THE AO IS NOT JUSTIFIED IN DISALLOWING WHOLE OF THE MAN UFACTURING LOSS OF RS 62,77,969/- AS AGAINST THE VALUE OF CLOSING STOCK O F RS. 2,24,584/- IN RESPECT OF SHORTAGE OF STOCK AS DETERMINED BY THE AO. REGARDIN G THE PROCESSING AND HANDLING LOSS OF 99,277/- KGS, THE LD AR HAS SUBMIT TED THAT THE DETAILS WERE SUBMITTED AS PART OF QUANTITATIVE TALLY FILED WITH THE AO ON 10.11.2008 AND THE SAME WORKED OUT TO 2.95 %OF THE TOTAL MILK QUANTITY HANDLED BY THE ASSESSEE OF 33,62,775 KGS. AND THE SAME IS COMPARABLE TO THE ESTABLISHED INDUSTRY STANDARD OF 0.82 TO 2.6%. THE LD. AR HAS FURTHER S UBMITTED THAT THERE ARE OTHER DIRECT EXPENSES IN THE NATURE OF WATER, ELECTRICIT Y EXPENSES PROCESSING CHARGES, PACKING MATERIAL, CHEMICAL, ETC. WHICH HA VE BEEN INCURRED AND DULY SUPPORTED BY THE BOOKS OF ACCOUNTS AND THE AO HAS NOT CHALLENGED THESE EXPENSES AND IN THE ABSENCE OF THAT, THERE IS NO B ASIS FOR THE AO TO DISALLOW THE WHOLE OF THE MANUFACTURING/TRADING LOSS WHICH INCLUDES ALL THESE EXPENSES AS WELL. IN LIGHT OF ABOVE, WE ARE OF THE VIEW THA T BEING THE FIRST YEAR OF OPERATION, THERE ARE CERTAIN INHERENT CHALLENGES IN TERMS OF PROCUREMENT AND SUPPLY OF MILK AND RELATED PRODUCTS AS WELL AS PRIC ING THEREOF GIVEN THE MARKET DYNAMICS WHICH HAVE BEEN ENCOUNTERED BY THE ASSESSE E AND DULY EXPLAINED IN THE INSTANT YEAR WHICH HAS RESULTED IN MANUFACTURIN G/ TRADING LOSSES WHICH HAVE BEEN REDUCED IN THE SUBSEQUENT YEARS ONCE THE OPERATIONS HAVE BEEN STABILIZED. FURTHER THE ASSESSEE HAS SUBMITTED QU ANTITATIVE DETAILS OF MILK PROCURED AND THE SUBSEQUENT SALE OF MILK AND MILK PRODUCTS AND THE AO SHOULD HAVE CONSIDERED THE REVISED QUANTITATIVE TAL LY DULY SUBMITTED BY THE ITA NO. 448/JP/15 M/S VRINDAVAN DAIRIES JAIPUR VS. ADDL. CIT, RANGE -5, JAIPUR 18 ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING S. FURTHER THE PROCESSING AND HANDLING LOSS IS AS PER THE INDUSTRY STANDARD AND OTHER DIRECT EXPENSES NOT CHALLENGED BY THE AO ARE DULY SUPPORTED BY THE BOOK S OF ACCOUNTS. IN LIGHT OF ABOVE, WE ARE OF THE VIEW THAT THE AO WAS NOT RIGH T IN REJECTING THE BOOKS OF ACCOUNTS AND DISALLOWING THE WHOLE OF THE MANUFACTU RING/TRADING LOSS OF RS. 62,77,969/-. WE THEREFORE ALLOW THE GROUND NO. 1 OF THE ASSESSEE. 3. REGARDING GROUND NO.2 THE ASSESSEE HAS SUBMITTED THAT IT HAS PAID FBT ON TELEPHONE, STAFF WELFARE AND TRAVELLING EXPENSE S AND WHEN THE SAME HAVE BEEN CONSIDERED FOR THE PURPOSES OF FRINGE BENEFIT TAX (FBT), THE SAME ARE PROVIDED BY THE EMPLOYER TO ITS EMPLOYEES AS PART O F ITS EMPLOYMENT/CONTRACTUAL RELATIONSHIP AND THE SAME HA VE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND HAS RELIED ON THE CBDT CIRCULAR NO.8/2005 DATED 29/8/2005. WE AGREE WITH THE CONTEN TION OF THE ASSESSEE AND IN ANY CASE, THESE ARE ADHOC DISALLOWANCES. HE NCE, WE DELETE THE SAID DISALLOWANCES. THE GROUND NO. 2 OF ASSESSEE IS ALLO WED. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05/10 /2016. SD/- SD/- ( KUL BHARAT ) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 05/ 10/2016 PILLAI VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: ITA NO. 448/JP/15 M/S VRINDAVAN DAIRIES JAIPUR VS. ADDL. CIT, RANGE -5, JAIPUR 19 1. VIHYKFKHZ@ THE APPELLANT- M/S SHRI VRINDAVAN DAIRIES, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE ADDL. CIT, RANGE-5, JAIPUR 3. VK;DJ VK;QDR@ CIT II, JAIPUR 4. VK;DJ VK;QDRVIHY@ THE CIT(A)-II, JAIPUR 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 448/JP/2015) VKNS'KKUQLKJ@ BY ORDER. LGK;D IATHDKJ@ ASSISTANT. REGISTRAR