M/s Guru Teg Bahadur Cold Storage & Ice Factory Pvt. Ltd., Rajpura V. ITO, Rajpura

ITA 464/CHANDI/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7783 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 11-07-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 04-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE MS.SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 464/CHD/2011 ASSESSMENT YEAR: 2007-08 M/S GURU TEG BAHADUR COLD V ITO, WARD STORAGE & ICE FACTORY P.LTD., RAJPURA. RAJPURA. PAN: AABCG-3384P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ROHIT GOEL RESPONDENT : SMT. JAISHREE SHARMA DATE OF HEARING : 11.07.2012 DATE OF PRONOUNCEMENT : 26.07.2012 ORDER PER MEHAR SINGH, AM THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTE D AGAINST THE ORDER DATED 08.03.2011 PASSED BY THE LD . CIT(A) U/S 250(6) OF THE INCOME-TAX ACT,1961 (IN SHORT 'TH E ACT'). 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS OF APPEAL: 1. THAT THE LD. CIT(A), THE 1 ST APPELLATE AUTHORITY HAS ERRED IN HOLDING THAT THE LD. AO HAS RIGHTLY REJECT ED THE BOOKS OF ACCOUNT AS MAINTAINED BY THE APPELLANT ASSESSEE INVOKING THE PROVISIONS OF SECTION 145(3) OF THE INCOME TAX, 1961. 2. THAT THE LD. CIT(A), THE 1 ST APPELLATE AUTHORITY HAS ERRED IN UPHOLDING THE ADDITION OF RS. 10,68,860/- MADE BY THE LD. AO, NOT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE PLACED BEFORE HIM. 2 3. THAT THE ORDER PASSED BY THE LD. CIT(A) U/S 250(6 ) OF THE INCOME TAX ACT, 1961DISMISSING THE APPEAL OF THE ASSESSEE IS AGAINST THE TRUE FACTS & CIRCUMSTANCES OF THE CASE IN AS MUCH AS, IS BAD IN LAW. 4. THAT THE APPELLANT CRAVES FOR PERMISSION TO ADD, DELETE OR AMEND THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF APPEAL. 3. IN GROUND NO.1, THE ASSESSEE CONTENDED THAT CIT( A) ERRED IN HOLDING THAT THE AO HAS RIGHTLY REJECTED T HE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE U/S 145(3) OF THE ACT. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, LD. 'AR' CONTENDED THAT THE DEFECTS POINTED OUT BY THE AO DO ES NOT WARRANT REJECTION OF BOOKS OF ACCOUNT OF THE ASSESS EE. 4. LD. 'DR', ON THE OTHER HAND, PLACED RELIANCE ON THE ORDER PASSED BY THE AO AND CIT(A). 5. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS, FACTS OF THE CASE AND THE RELEVANT RECORD. THE BRIEF FAC TS OF THE CASE ARE THAT THE ASSESSEE APPELLANT FILED RETURN O F INCOME, DECLARING NIL INCOME ON 31.03.2008. DURING THE C OURSE OF ASSESSMENT PROCEEDINGS, THE AO, FOUND THAT THE BALA NCE SHEET FILED BY THE APPELLANT WITH THE RETURN OF INC OME WAS SIGNED BY THE DIRECTOR OF THE COMPANY AND THE SAME WAS NOT AUDITED BY THE CHARTERED ACCOUNTANT. THE APPELLANT BEING A PRIVATE LIMITED COMPANY WAS STATUTORILY REQUIRED TO GET ITS ACCOUNTS AUDITED AS PER THE COMPANIES ACT 1956. ALS O THE COMPANY HAD DEFAULTED IN FILING OF BALANCE SHEET WI TH THE 3 ROC. FROM THE UNAUDITED BALANCE SHEET THE A.O. POIN TED OUT THE DISCREPANCIES NAMELY; A) THE GROSS. RECEIPT S WERE SHOWN AT RS. 12,44,744/- WHEREAS SUNDRY DEBTORS WER E SHOWN AT RS.57,52,920/- AGAINST THE EARLIER YEAR'S FIGURES OF GROSS RECEIPTS OF RS. I2,31,080/- AND SUNDRY DEBTOR S OF RS. 53,13,O33/-; B) THE APPELLANT HAD AVAILED OF A TERM LOAN FROM M/S PFC SHOWING A BALANCE OF RS. 57,42,9O4/- A S ON 31.3.2007 AND THIS BALANCE REMAINED OUTSTANDING SIN CE 31.3.2004. ON INQUIRIES FROM M/S PFC THE OUTSTANDIN G BALANCE SHOWN AGAINST THE APPELLANT AS OR 31.3.2007 WAS RS. 1,O3,37,O58/-. THE APPELLANT HAD STOPPED PAYING THE INSTALLMENTS TO PFC; C) THE UNSECURED LOANS OF RS. 47,16,5OO/- WERE LYING DORMANT SINCE THE YEAR 1999- 2000 AND NO REPAYMENT HAD BEEN MADE OR INTEREST HAD BEEN CHARGED; D) THE APPELLANT HAD BEEN PENALIZED BY THE ELECTRICITY DEPARTMENT FOR THEFT OF ELECTRICITY. AL SO THE APPELLANT HAD SHOWN RECEIPTS FROM STORAGE OF BAGS F OR WHICH PAYMENTS OF RS. 4O/- PER 50 KG BAG WERE MADE. HOWEV ER, THE APPELLANT COULD NOT GIVE PROPER DETAILS OF UNSE CURED LOANS ETC. THE INWARD AND OUTWARD REGISTERS OF THE COLD STORAGE COULD NOT BE PRODUCED TO SHOW THE NUMBER OF BAGS ENTERING THE COLD STORAGE AND HOW MANY HAD BEEN TAK EN OUT. THE DEBTOR'S BALANCES HAD BEEN SHOWN AS OUTSTANDING SINCE LONG. THE APPELLANT COULD NOT PRODUCE DETAILS OF SU CH DEBTORS ALONGWITH THEIR ADDRESSES AND OTHER PARTICU LARS. THE A.O. WAS OF THE OPINION THAT THE APPELLANT HAD MADE SOME UNDISCLOSED INVESTMENT FOR WHICH THE FIGURES RECORD ED IN THE BOOKS OF ACCOUNT WERE EITHER FICTITIOUS OR BASED ON 4 ESTIMATES. THE DIRECTOR HAD PRODUCED SH. MANJIT SIN GH S/O SH. AMAR SINGH FROM WHOM AN AMOUNT OF RS. 1,60,000/ -WAS SHOWN AS UNSECURED LOAN SINCE THE LAST TEN YEARS. H E HAD STATED THAT HIS FATHER HAD POSSIBLY GIVEN THE LOAN AND FOR WHICH NO INTEREST WAS CHARGED. IN ANOTHER CASE, SH. GURMEET SINGH S/O GURNAM SINGH WAS PRODUCED, WHO AL SO STATED THAT HE HAD GIVEN A LOAN OF RS. 1,80,000/- W ITHOUT INTEREST SOME TEN YEARS BACK. NO OTHER PERSON WAS P RODUCED BY THE APPELLANT IN WHOSE NAMES THE UNSECURED LOANS HAD BEEN SHOWN. THESE LOANS WERE RANGING FROM RS. 50000 /-TO RS. 2,56,500/- IN THE NAME OF DIFFERENT PERSONS FOR DIFFERENT YEARS. NO REPAYMENT HAD BEEN RECEIVED NOR INTEREST CREDITED/ PAID. IN VIEW OF ALL THIS THE A.O. REJECT ED THE BOOKS OF ACCOUNT BY RESORTING TO SECTION 145(3) AND PROCE EDED TO ESTIMATE THE INCOME U/S 144. 6. BEFORE THE CIT(A),IT WAS CONTENDED BY THE APPELL ANT THAT THE ACCOUNTS WERE DULY AUDITED BY THE CHARTERE D ACCOUNTANT, WHO VERIFIED THE BALANCE SHEET, PROFIT & LOSS ACCOUNT AND OTHER ANNEXURES, AS PER BOOKS. THE NON - PAYMENT OF INTEREST OF THE CREDITORS, CANNOT BE MAD E A GROUND FOR REJECTION OF BOOKS OF ACCOUNT. IT WAS S TATED THAT APPELLANT IS BASICALLY AGRICULTURIST AND DOES NOT H AVE THE KNOWLEDGE OF ACCOUNTANCY. IN-WARD AND OUT-WARD REG ISTERS WERE MAINTAINED BY THE MUNSHI AT THE COLD STORAGE AND HE HAD NO BACKGROUND OF ACCOUNTANCY. LD. CIT(A), RECOR DED A FINDING ON APPRECIATION OF THE FACTUAL MATRIX OF TH E CASE, SUBMISSIONS MADE BY THE ASSESSEE AND REMAND REPORT FILED BY THE AO. LD. CIT(A), RECORDED A FINDING THAT IT IS CLEAR 5 THAT APPELLANT HAS NOT MAINTAINED BOOKS OF ACCOUNT AND OTHER RELEVANT DOCUMENTS, AS ARE REQUIRED UNDER THE ACT. HE HAS ADMITTED THAT NO IN-WARD OR OUT-WARD STOCK REGI STERS HAVE BEEN MAINTAINED FOR THE STORAGE. LD. CIT(A) R EFERRED TO THE DECISION OF THE HON'BLE SUPREME COURT IN THE CA SE OF CIT V BRITISH PAINTS INDIA LTD. (1997) 188 ITR 44 (S.C) AND HELD THAT ABSENCE OF STOCK REGISTER IS RELEVANT AND MATE RIAL GROUND FOR REJECTION OF BOOKS OF ACCOUNT. HE WAS O F THE OPINION THAT THE BOOKS OF ACCOUNT ARE NOT MAINTAINE D IN A PROPER FORM AND THEREFORE, NO CORRECT AND TRUE PROF ITS CAN BE ASCERTAINED. IN VIEW OF THIS, LD. CIT(A) OBSERVE D THAT AO, HAS RIGHTLY REJECTED THE BOOKS OF ACCOUNT, MAINTAIN ED BY THE APPELLANT AND RIGHTLY MADE THE ESTIMATE OF INCOME, FOR THE PURPOSE OF ADDITION U/S 144 OF THE ACT. 6(I) A BARE PERUSAL OF THE SUBMISSION AND THE FINDI NGS OF THE AO, AS WELL AS THAT OF THE CIT(A), CLEARLY REVE ALS THAT THE BOOKS OF ACCOUNT CAN NOT BE SAID TO BE COMPLETE OR CORRECT, HENCE, THE REJECTION OF THE SAME BY THE AO AND UPHO LDING OF THE SAME BY CIT(A), CANNOT BE FAULTED WITH. THEREF ORE, THIS GROUND OF APPEAL IS DISMISSED AND FINDINGS OF THE C IT(A) ARE UPHELD. 7. IN GROUND NO.2, ASSESSEE CONTENDED THAT CIT(A) E RRED IN UPHOLDING THE ADDITION OF RS.10,68,860/- MADE BY THE AO, WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCE S OF THE CASE. 8. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS, FACTS OF THE CASE AND THE RELEVANT RECORD. THE AO, BY CA LCULATING 6 REVENUE, ON THE BASIS OF 90% OF NET SANCTIONED CAPA CITY, ARRIVED AT A TAXABLE INCOME AT RS.10,68,860/- AND ACCORDINGLY, MADE THE ADDITION. IN THE COURSE OF A SSESSMENT PROCEEDINGS, THE AO, CONFRONTED THE APPELLANT WITH REGARD TO INFORMATION RECEIVED FROM NHD GURGAON, REGARDING TH E CAPACITY OF THE COLD STORAGE BEING 3382.8 MT WITH M ULTI- CHAMBER EXPANSION. THE AO, CALCULATED THE STORAGE CAPACITY OF COLD-STORAGE AT 67656 BAGS OF 50KG EACH. THE AO , FURTHER CALCULATED THE HIRE CHARGES AT RS.40 PER BAG AND FU RTHER OBSERVED THAT IF THE COLD STORAGE WORKS AT 90% OF I TS CAPACITY, HIRE CHARGES SHOULD BE RS.27,06,240/-. TH E APPELLANT IN ITS REPLY STATED THAT THE INSTALLED CA PACITY OF SUCH PLANT WAS 45000 BAGS AND IT WAS FURTHER CONTEN DED THAT THE UNIT WAS LOCATED FAR AWAY FROM THE POTATO GROWING BELT. ON AVERAGE, THE CAPACITY UTILIZATION FOR SUC H A PLANT WAS 34000 TO 36000 BAGS, FOR WHICH A STORAGE RATE O F RS.30/- TO RS.40/- PER BAG WAS RECEIVED. THUS, TOTA L RECEIPTS WERE OF RS.12,44,724/-. LD. CIT(A), ON APP RECIATION OF THE SUBMISSION FILED BEFORE HIM, HELD THAT CALCU LATION MADE BY THE AO, WITH REGARD TO NUMBER OF BAGS AT 90 % OF CAPACITY UTILIZATION, IS IN ORDER AND ESTIMATION OF STORAGE CHARGES AT RS.40/- PER BAG IS QUITE REASONABLE. TH EREFORE, ADDITION OF RS.10,68,860/- IS UPHELD. 9. LD. 'AR', IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, SUBMITTED THAT THE COMPUTATION OF THE ESTIMATED INCOME IS BASED ON SURMISES AND CONJECTUR ES, WITHOUT HAVING ANY REGARD TO THE SUBMISSION MADE BY THE ASSESSEE APPELLANT. LD. 'AR' REFERRED TO THE SUBMI SSION 7 MADE BY HIM BEFORE THE CIT(A). THE RELEVANT PART IS REPRODUCED HEREUNDER : THE ASSESSEE MAY FURTHER SUBMIT THAT TOTAL LOAD OF ELECTRICITY UTILIZED BY THE ASSESSEE WHICH INCLUDED ONE MOTOR (HEAVY DUT Y /HIGH SPEED AMONIA COMPRESSOR) OF 40 HP AND ONE WATER PUMP OF / ONE HP, WAS 39.71 KW. IT IS AMPLY CLEAR THAT ONLY ONE COMPRESSOR OF 4 0 HP WITH TWO CYLINDERS WAS INSTALLED AT THE COLD STORAGE. ; REP ORT OF THE SURPRISE INSPECTION OF THE XEN, ENFORCEMENT PSEB, PATIALA ON 23.10.2006, THAT IS VERY MUCH DURING THE PREVIOUS YEAR ENDED ON 31.03.2 007, IS SUBMITTED FOR THE PERUSAL OF YOUR KIND HONOUR, WHEREAS HD AMONIA COMPRESSOR OF 40HP COULD BEAR LOAD OF COOLING 35,000 TO 40,000 BAGS OF 50 KG POTATOES. PHOTOCOPY OF QUOTATION DATED 05.01.2011 FORM M/S S.S. KALSI ENGINEERING WORKS, PATIALA IS SUBMITTED. A REPORT O F M/S NEER ENTERPRISES PVT LTD, INDIA DOWN LOADED FROM THE WEB SITE: HTML://WWW. NEERENTERPRISES. COM/HIGH_ SPEED_ COMPRESSOR HTML A LSO SUPPORT THAT WITH ONE COMPRESSOR OF 40 HP MAXIMUM 10,0007- POTATO BAG S CAN ONLY BE COOLED. COPY ENCLOSED. IT MAY BE SUBMITTED THAT THE INQUIRIES CONDUCTED WE RE NEVER CONFRONTED TO THE ASSESSEE. WHAT SORT OF ENQUIRIES WERE MADE BY THE LD. A.O. FORM THE ELECTRICITY DEPARTMENT, THE LD. A.O. WOULD ALSO HAVE ENQUIRIES ABOUT THE ELECTRICITY LOAD UTILIZED BY THE ASSESSEE COLD STORAGE. THE LD. A.O. ONLY STRESSED ON THE STORAGE CAPACITY OF THE C OLD STORAGE ON THE BASIS OF THE LETTER FROM THE NATIONAL HORTICULTURE BOARD, MI NISTRY OF AGRICULTURE, GURGAON, BUT DID NOT APPLY THE DECIDING FACTOR, THE ELECTRICITY LOAD UTILIZED BY THE ASSESSEE, ENQUIRIES MADE FROM THE ELECTRICIT Y BOARD ALSO REFERRED TO THE INSTALLATION OF ONE HEAVY DUTY AMMONIA COMPR ESSOR SET OF 40 BHP. HAD THE INQUIRIES CONDUCTED BY THE LD. A.O. FO RM THE ELECTRICITY DEPARTMENT CONFRONTED, THE ASSESSEE COULD SUBMIT BE FORE THE LD. A.O. THAT THE COOLING CAPACITY OF ONE 40 BHP-HEAVY DUTY AMMON IA COMPRESSOR SET, COULD NOT HAVE COOLED MORE THAN 40,000 BAGS TO ITS MAXIMUM. THE LD. A.O. DID NOT OPT TO CONFRONT THE ENQUIRIES CONDUCTED FRO M THE ELECTRICITY DEPARTMENT AND ALLOW THE ASSESSEE ANY OPPORTUNITY T O EXPLAIN HIS CASE WITH RESPECT TO THE ELECTRICITY LOAD WHICH IS A DECIDING FACTOR IN THE CASE OF THE ASSESSEE. IT IS, THEREFORE, SUBMITTED, THAT THE COM MENTS OF THE LD. A.O. ARE MISPLACED.' 8 10. HAVING REGARD TO THE ABOVE DISCUSSIONS AND SUBM ISSION MADE BY THE APPELLANT BEFORE THE CIT(A), WE ARE OF THE OPINION THAT HAVING REGARD TO THE CAPACITY AND THE CHARGES REFERRED TO BY THE APPELLANT, BEFORE THE AO, AND SU BMISSION FILED BEFORE CIT(A), IT WOULD BE FAIR AND REASONABL E TO UPHLD THE ADDITION TO THE TUNE OF RS.4,00,000/-, WITH A V IEW TO MEET THE ENDS OF JUSTICE. ACCORDINGLY, GROUND OF A PPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 11. GROUND NOS. 3 & 4 ARE GENERAL IN NATURE AND NEE D NO SEPARATE ADJUDICATION, HENCE, THE SAME ARE DISMISSE D. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH JULY,2012. SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 26 TH JULY,2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH