ITO, Barnala V. M/s Krishan Cotton & Ginning Mills, Barnala

ITA 478/CHANDI/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5056 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Next Hearing Date: 27-02-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 02-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGHDR
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE MS. DIVA SINGH, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 478/CHD/2016 ASSESSMENT YEAR: 2011 -12 THE ITO, VS. M/S KRISHNA COTTON & GINNING MILLS, WARD 1, GHUNAS ROAD, TAPA, BARNALA. DISTT. BARNALA. PAN NO. AAIFK3155A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANJIT SINGH,DR RESPONDENT BY : SHRI SUDHIR SEHGAL DATE OF HEARING : 24.05.2017 DATE OF PRONOUNCEMENT : 27.07.2017 ORDER PER MS. DIVA SINGH,JM THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE ASSAILING THE CORRECTNESS OF THE ORDER DATED 23.02.2016 OF LD. CIT(APPEA LS) PATIALA PERTAINING TO 2011-12 ASSESSMENT YEAR ON THE FOLLOWING GROUNDS : 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.64,92,880/ - MADE BY THE ASSESSING OFFICER AFTER REJECTING ASSESSEE'S BOOKS OF ACCOUNT U/S 145(3) OF THE INCOME TAX ACT, 1961. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN NOT UPHOLDING THE REJECTION OF BOOKS OF AC COUNT U/S 145(3) OF THE INCOME TAX ACT, 1961, DESPITE THE FACT THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO HAS POINTED OUT CERTAIN DEFICIE NCIES IN ASSESSEE'S BOOKS. 2. THE LD.AR INVITING ATTENTION TO THE IMPUGNED ORDER SUBM ITTED THAT THE POINT AT ISSUE IN THE APPEAL IS COVERED IN FAVOUR OF T HE ASSESSEE BY VIRTUE OF THE ORDER OF THE ITAT IN THE CASE OF THE ASSES SEE ITSELF PERTAINING TO THE IMMEDIATELY PRECEDING ASSESSMENT YEAR WHEREIN ON THE SAME SET OF FACTS AND CIRCUMSTANCES, IDENTICAL APPEA L OF THE REVENUE IN ITA 706/CHD/2014 ALONGWITH CO 40/CHD/2014 H AD BEEN DISMISSED BY THE ITAT VIDE ORDER DATED 21.12.2015. COGNIZ ANCE OF THIS FACT, IT WAS SUBMITTED, HAS BEEN TAKEN BY THE CIT(A) IN THE ORDER UNDER CHALLENGE. COPY OF THIS DECISION, IT WAS SUBMITTED IS AVAILABLE IN THE PAPER BOOK PAGES 33 TO 46 FILED ON 06.09.2016. ITA 478/CHD/2016 A.Y. 2011-12 PAGE 2 OF 5 3. SINCE THE PRESENT APPEAL HAS BEEN FILED BY THE REVENU E, LD. SR.DR WAS REQUIRED TO ADDRESS THE ISSUES IN THE PRESENT APPE AL. THE LD. SR.DR RELIED UPON THE ASSESSMENT ORDER. ON QUERY, HE AGREED THAT THE ADDITION MADE IN THE EARLIER YEAR CONSIDERED BY THE ITAT WAS ON SIMILAR SET OF FACTS AND CIRCUMSTANCES. 3.1 THE LD. AR PLACED RELIANCE UPON THE IMPUGNED ORDER. 4. WE HAVE HEARD THE SUBMISSIONS AND PERUSED THE MATE RIAL AVAILABLE ON RECORD. IT IS SEEN THAT THE ASSESSEE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR AS IN THE YEAR UNDER CONSIDE RATION WAS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF C OTTON AND BINOLA AS TAKEN NOTE OF IN PARA 2 OF THE ASSESSMENT ORDE R. SIMILAR FACTUAL FINDING, IT IS NOTICED HAS BEEN MADE BY THE CO-ORDINA TE BENCH IN PARA 2 OF THE ORDER RELIED UPON. ON A PERUSAL OF PAGE 13 OF THE ASSESSMENT ORDER IN THE YEAR UNDER CONSIDERATION, IT IS N OTICED THAT THE ADDITION OF RS. 64,92,889/- WAS MADE BY THE AO ON THE FOLLO WING REASONING : IT IS PERTINENT TO MENTION HEAR THAT DURING ASSESS MENT PROCEEDINGS FOR THE IMMEDIATE PROCEEDINGS I.E. A.Y. 2010-11, GROSS PROF IT WAS ADOPTED @5% AFTER TAKING UNDER CONSIDERATION THE GP SHOWN BY THE PART IES AS MENTIONED ABOVE. KEEPING IN VIEW THE FACTS OF THE CASE, PASSED HISTO RY AND TO THE FAIR TO THE ASSESSEE GROSS PROFIT IN ASSESSEE'S IS APPLIED AT 5 %ON THE TURNOVER OF RS. 18,28,14,953/-. BY APPLYING THIS RATIO, THE GROSS P ROFIT COMES TO RS. 91,40,747/- AS AGAINST GROSS PROFIT OF RS.26,47,857/- IS DISCL OSED BY THE ASSESSEE. THEREFORE, ADDITION OF RS. 64,92,889/- IS MADE TO THE TOTAL I NCOME OF THE ASSESSEE. 4.1. IT IS SEEN THAT THE CO-ORDINATE BENCH IN REGARD TO THE PRODUCTION OF BOOKS OF ACCOUNT ON FACTS CONCLUDED THE ISSUE IN THE FO LLOWING MANNER : 8. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF B OTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND CONSIDERED TH E MATERIAL AVAILABLE ON RECORD. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE HAVE BEEN REJECTED BY THE ASSESSING OFFICE R AND THEREAFTER A GP RATE OF 5% WAS APPLIED. THERE ARE A NUMBER OF ALLEGATIONS LEVIED UPON BY THE ASSESSING OFFICER, ON THE BASIS OF WHICH, THE BOOKS WERE REJECTED. THE ASSESSEE HAS TRIED TO SATISFY THE LOWER AUTHORITIES, BOTH BE FORE THE ASSESSING OFFICER AS WELL AS THE LEARNED CIT (APPEALS) IN THIS REGARD. EVEN BEFORE US, ELABORATE SUBMISSIONS WERE MADE IN THIS REGARD. ONE OF THE M AIN CONTENTION OF THE ASSESSING OFFICER WAS THAT THE BOOKS OF ACCOUNT WER E NOT PRODUCED BEFORE HIM. HOWEVER, WE SEE THAT IN HIS ORDER AT PAGE 2, HE HIM SELF HAS MENTIONED THAT THE BOOKS OF ACCOUNT ALONGWITH THE RELEVANT DOCUMENTS W ERE ALSO PRODUCED, EXAMINED & TEST CHECKED. EVEN FROM THE COPY OF ORD ER SHEET FILED BEFORE US, THIS FACT GETS CONFIRMED. THE COMMENTS GIVEN BY THE ASS ESSING OFFICER IN HIS REMAND REPORT THAT THE BOOKS, THOUGH PRODUCED, WERE ONLY T EST CHECKED IS NOT OF ANY CONSEQUENCE. ONCE THE BOOKS WERE PRODUCED BEFORE H IM, IT WAS HIS TASK TO CHECK THEM, IN WHATEVER MANNER HE WANTS TO CHECK TH OSE. --------- ITA 478/CHD/2016 A.Y. 2011-12 PAGE 3 OF 5 9.......ANOTHER OBJECTION, THE ASSESSING OFFICER H AD, WHILE REJECTING THE BOOKS OF ACCOUNT IS THAT THE ASSESSEE HAS NOT PRODUCED TH E STOCK REGISTER. ON PERUSAL OF THE SAME REPLY DATED 18.2.2013, WE SEE THAT AT P OINT NO.3(C) THE ASSESSEE HAS STATED THAT WE ARE MAINTAINING STOCK-CUM-PRODUCTION REGISTER OF THE BINOLA, COTTON OF DIFFERENT QUALITY AND WHICH IS PRODUCED F OR YOUR VERIFICATION. IT IS QUITE CLEAR FROM THIS THAT THE STOCK REGISTER WAS I N FACT PRODUCED BEFORE THE ASSESSING OFFICER. A COPY OF THE STOCK REGISTER WA S ALSO FILED BEFORE US, WHEREBY WE OBSERVE THAT A REGISTER MAINTAINING THE OPENING BALANCE, RECEIPT AND DISPATCH QUANTITY-WISE OF EVERY ITEM WAS BEING MAIN TAINED. 11. FURTHER, THE ASSESSING OFFICER MENTIONS THAT T HE ASSESSEE HAS SHOWN CLOSING VALUE OF BINOLA WASTAGE IN VALUE AND HAD NOT FILED ANY QUANTITATIVE DETAILS OF BINOLA WASTAGE. AT THE SAME TIME, HE OBSERVES THAT IN THE DETAILS OF STOCK STATEMENT FURNISHED BY THE ASSESSEE, THERE IS NO AC COUNT OF BINOLA WASTAGE. THEREFORE, CLOSING VALUE OF BINOLA IS NOT VERIFIABL E. HERE THE ASSESSING OFFICER IS CONTRADICTING HIMSELF, HE ACCEPTS THE FACT THAT STOCK STATEMENTS HAVE BEEN FILED BY THE ASSESSEE. IN THIS REGARD, THE EXPLANATION O F THE ASSESSEE WAS THE BINOLA WASTAGE IS OBTAINED IN THE COURSE OF PRODUCTION OF COTTON AND BINOLA. AT PAGE 9 OF THE PAPER BOOK, WE SEE THAT THE QUANTITATIVE DET AILS IN THIS REGARD ARE CONTAINED. IN THIS WAY, YIELD OF FINISHED GOODS @ 99.29% AND BINOLA SHORTAGE/WASTAGE IS SHOWN TO BE MERELY 0.71%. 12 ANOTHER OBJECTION OF THE ASSESSING OFFICER WAS THAT THE ASSESSEE HAD DECLARED 2.14% GP RATE OVER A TURNOVER OF RS.11,80, 26,243/-, WHICH IS ON THE LOWER SIDE AS COMPARED TO OTHER COMPARABLE ENTITIES . IN THIS REGARD, THE ASSESSEE HAD FILED A DETAILED WORKING OF GP DECLARE D BY THESE VARIOUS CONCERNS ON THE MATCHING COST PRINCIPLE. 13. THE LAST OBJECTION OF THE ASSESSING OFFICER IS THAT THE YIELD ON COTTON IN ASSESSEES CASE IS LOWER AS COMPARED TO THE OTHERS. THE SAID AVERMENT OF THE ASSESSING OFFICER IS NOT BACKED BY ANY QUANTITATIVE ANALYSIS OR ANY OTHER DATA. THE ASSESSEE HAD FILED A CHART SHOWING COMPARATIVE YIELD OF THE COMPARABLE ENTITIES AS WELL AS ITS OWN WHICH IS PLACED AT PAPE R BOOK PAGE 46. THE COTTON YIELD OF ASSESSEE COMES TO 34.82%, WHICH THE SAME F OR COMPARABLE ENTITIES, WHICH ARE 34.87%, 25.05% AND 31.90%. THE YIELD OF BINOLA IN ASSESSEES CASE IS 64.47%, WHILE IN COMPARABLE CASES IT IS 63.20%, 63.15% AND 66.00%. 14. AFTER CONSIDERING THE MERITS OF THE CASE AS ABO VE, WE OBSERVE THAT FOR REJECTING THE BOOKS OF ACCOUNT THE ASSESSING OFFICE R RAISED MANY OBJECTIONS WHICH WERE DULY REPLIED TO BY THE ASSESSEE. THE DE TAILS WERE BEING DULY PRODUCED BY THE ASSESSEE DURING THE COURSE OF ASSES SMENT PROCEEDINGS. BUT THE ASSESSING OFFICER WITHOUT ANALYZING THE DETAILS AND EXPLANATION FILED BY THE ASSESSEE, KEPT ON REPEATING THAT THE DETAILS OR FOR THAT MATTER BOOKS OF ACCOUNT ARE NOT BEING PRODUCED BY THE ASSESSEE. WE DO NOT SEE IT AS A CORRECT APPROACH OF THE ASSESSING OFFICER. HE SHOULD HAVE GONE AHEA D AND ANALYZE THE SUBMISSIONS AND QUANTITATIVE DETAILS FILED BY THE A SSESSEE AND THEN COULD HAVE COME TO A CONCLUSION TO REJECT THE BOOKS OF ACCOUNT . IT APPEARS AS IF HE WAS PREDETERMINED TO REJECT THE BOOKS OF ACCOUNTS. WE FURTHER OBSERVE THAT THE LEARNED CIT (APPEALS), ALSO WITHOUT COMMENTING ON T HE EXPLANATION OF THE ASSESSEE, IN JUST ONE SENTENCE CONFIRMED THE REJECT ION OF BOOKS OF ACCOUNT. NOWHERE, HE HIMSELF TRIED TO PERUSE THE EXPLANATION AND EVIDENCES SUBMITTED BY THE ASSESSEE. 15 IN VIEW OF THE ABOVE, WE ARE INCLINED TO HOLD T HE ACTION OF THE ASSESSING OFFICER TO REJECT THE BOOKS OF ACCOUNT AS BAD AND D IRECT HIM TO ACCEPT THE BOOKS OF THE ASSESSEE. IN VIEW OF THE FINDING THAT THE B OOKS OF ACCOUNT OF THE ASSESSEE BE ACCEPTED, WE DO NOT FIND ANY NEED TO GO INTO THE QUESTION OF GP RATE. 4.2 IN THESE PECULIAR FACTS AND CIRCUMSTANCES, IT IS NOTED THAT THE CIT(A) CONSIDERING THE ARGUMENTS OF THE ASSESSEE AND THE ASSERTIONS OF THE ASSESSEE THAT THE FACTS AND CIRCUMSTANCES ARE ID ENTICAL IN THE YEAR UNDER CONSIDERATION AS THE FACTS CONTINUE TO REMAIN THE SAME, ITA 478/CHD/2016 A.Y. 2011-12 PAGE 4 OF 5 CONCLUDED THE ISSUE IN THE FOLLOWING MANNER : 6.4 BESIDES THE ABOVE, THE COUNSEL OF APPELLANT HA D FILED A DECISION OF THE HON'BLE ITAT, CHANDIGARH IN THE APPELLANT'S OWN CASE FOR THE A.Y. 2010-11 FOR CLAIMING RELIEF. I HAVE CONSIDERED THE REPLY OF THE APPELLANT AND REJOINDER IN THE MATTER. THE HON'BLE INCOME TAX APPELLATE TRI BUNAL, CHANDIGARH HAS ALLOWED SUITABLE RELIEF IN RESPECT OF APPELLANT'S O WN CASE IN JTA NO. 706/CHD2014 FOR THE A.Y. 2010-11. THE APPELLANT HAS CONTENDED THAT THE FACTS OF THAT YEAR ARE IDENTICAL WITH THOSE OF THE PRESENT APPEAL AND THEREFORE, SAME VIEW AS TAKEN BY THE ITAT BENCH IN THAT YEAR HAS TO BE FOLLOWED IN RESPECT OF CURRENT YEAR AS WELL. THE OB JECTION RAISED BY THE ASSESSING OFFICER WAS DULY REPLIED BY THE APPELLANT DURING THE ASSESSMENT PROCEEDINGS. THE APPROACH OF THE ASSESSING OFFICER TO REJECT THE DULY AUDITED BOOKS OF ACCOUNTS IS UNJUSTIFIED. THE ASSESSING OFF ICER HAS FAILED TO PUT UP ANY POSITIVE EVIDENCE TO SUPPORT HIS VIEW POINT MERE RA ISING DOUBTS AND SUSPICION IS NOT SUFFICIENT BUT CONCRETE POSITIVE EVIDENCE SH OULD HAVE BE BROUGHT ON RECORD BY THE AO IN REACHING THE FINAL CONCLUSION T HAT THE BOOKS OF ACCOUNTS WERE UNRELIABLE. FURTHER, THE DECISION OF HON'BLE D ELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. JAS JACK ELEGANCE EX PORTS (2010) 78 CCH 0400 DEL HC IS FULLY APPLICABLE WHICH HELD T HAT SEC. 145(3) OF ACT PROVIDES FOR ASSESSMENT IN THE MANNER PRESCRIBED IN SEC. 144 OF THE ACT, WHERE THE AO IS NOT SATISFIED ABOUT THE CORRECTNESS OR CO MPLETENESS OF THE ACCOUNTS OF THE APPELLANT, THE AO HAD NOT ESTABLISH ED ANY DEFECT IN THE ACCOUNT BOOKS MAINTAINED BY THE APPELLANT, WHICH, A DMITTEDLY, WERE PRODUCED BEFORE THE AO FOR HIS CONSIDERATION. THERE IS ALSO NO THE FINDING OF THE AO THAT THE ACCOUNTS OF THE APPELLANT WERE NOT COMPLET E. MOREOVER, THIS CASE IS FULLY COVERED BY THE FACTS OF THE CASE OF LAST YEAR , ALREADY DECIDED IN FAVOUR OF THE APPELLANT BY THE HON'BLE ITAT, CHANDI GARH. THE RELEVANT PORTION OF THE ORDER IS REPRODUCED AS UNDER : 14. AFTER CONSIDERING THE MERITS OF THE CASE AS AB OVE, WE OBSERVE THAT FOR REJECTING THE BOOKS OF ACCOUNT THE ASSESSING OF FICER RAISED MANY OBJECTIONS WHICH WERE DULY REPLIED TO BY THE A SSESSEE. THE DETAILS WERE BEING DULY PRODUCED BY THE ASSESSEE DU RING THE COURSE OF ASSESSMENT PROCEEDINGS. BUT THE ASSESSING OFFICER WITHOUT ANAL YZING THE DETAILS AND EXPLANATION FILED BY THE ASSESSEE, KEPT ON REPEATIN G THAT THE DETAILS OR FOR THAT MATTER BOOKS OF ACCOUNT ARE NOT BEING PRODUCED BY THE ASSESSEE. WE DO NOT SEE IT AS A CORRECT APPROACH OF THE ASSESSING OFFICER. HE SHOULD HAVE GONE AHEAD AND ANALYZE THE SUBMISSIONS AND QUANTITATIVE DETAILS FILED BY THE ASSESSEE AND THEN COULD HAVE COME TO A CONCLUSION TO REJECT THE BOOKS OF ACCOUNT. IT APPEA RS AS IF HE WAS PREDETERMINED TO REJECT THE BOOKS OF ACCOUNT. WE F URTHER OBSERVE THAT THE LEARNED CIT (APPEALS) ALSO WITHOUT COMMENTING O N THE EXPLANATION OF THE ASSESSEE, IN JUST ONE SENTENCE CONFIRMED THE REJECTION OF BOOKS OF ACCOUNT. NOWHERE, HE HIMSELF TRIED TO PERUSE THE EX PLANATION AND EVIDENCES SUBMITTED BY THE ASSESSEE. 15. IN VIEW OF THE ABOVE, WE ARE INCLINED TO HOLD THE ACTION OF THE ASSESSING OFFICER TO REJECT THE BOOKS OF ACCOUNT AS BAD AND DIRECT HIM TO ACCEPT THE BOOKS OF THE ASSESSEE. IN VIEW OF THE FINDING THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE BE ACCEPTED, WE DO NOT F IND ANY NEED TO GO INTO THE QUESTION OF GP RATE. ' AS POINTED OUT ABOVE, THE FACTS OF THE PRESENT APPE AL ARE ALSO IDENTICAL WITH THAT OF THE ONE DECIDED BY THE HON'B LE ITAT IN APPELLANT'S OWN CASE FOR THE A.Y. 2010-11, THE DECISION OF THE HON' BLE ITAT INTERVENING THE ACTION OF THE AO IN REJECTING THE BOOKS OF ACCOUNT ARE BAD IS RESPECTFULLY FOLLOWED IN RESPECT OF THE PRESENT APPEAL AS WELL. ACCORDINGLY THE AO IS DIRECTED TO ACCEPT THE BOOKS OF ACCOUNT OF THE APPE LLANT AS ALSO THE BOOK RESULTS. THIS GROUND OF APPEAL IS ACCEPTED AND ADDITION SO M ADE IS DELETED. 4.3. WE NOTE ON A PERUSAL OF THE RECORD THAT THE SUBMISS IONS THAT ADDITION HAS BEEN MADE ON IDENTICAL FACTS AND CIRCUMSTANC ES REMAINS ITA 478/CHD/2016 A.Y. 2011-12 PAGE 5 OF 5 UNREBUTTED ON RECORD. IT IS NOTED THAT THIS FACT HAS B EEN THE SPECIFIC REASONING TAKEN BY THE CIT(A) TO ALLOW THE APPEAL OF THE A SSESSEE. THUS, IN THE ABSENCE OF ANY CHANGE IN FACTS, CIRCUMSTANCES AND POSITIO N OF LAW, WE FIND NO GOOD REASON TO INTERFERE WITH THE ORDER. ACCORDINGLY, THE APPEAL IS DISMISSED. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH JULY,2017. SD/- SD/- (ANNAPURNA GUPTA) (DIVA S INGH) ACCOUNTANT MEMBER JUDICIAL MEMBER POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR ASSTT. REGISTRAR ITAT,CHANDIGARH.