Pragat Agro Products Pvt. Ltd, Jalna V. Income tax Officer,

ITA 49/PUN/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9103 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 06-01-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANIL KUMAR CHAWARE
• Assessee Lawyers: SANJEEVKUMAR KABRA
• Section: 145; 144

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC , PUNE , , . , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI D. KARUNAKARA RAO , AM . / ITA NO. 4 9 /P U N/201 7 / ASSESSMENT YEAR : 20 1 0 - 1 1 PRAGAT AGRO PRODUCTS PVT. LTD., C/O SANJEEVKUMAR KABRA, 20, 1 ST FLOOR, AMBIKA MARKET, JALNA 431203 . / APPELLANT PAN: A AFCP2227E VS. THE INCOME TA X OFFICER , WARD 2 , JALNA . / RESPONDENT / APPELLANT BY : SHRI SANJEEVKUMAR KABRA / RESPONDENT BY : SHRI ANIL KUMAR CHAWARE / DATE OF HEARING : 2 2 . 0 3 .201 8 / DATE OF PRONOUNCEMENT: 26 . 0 3 .201 8 / ORDER PER SUSHMA CHOWLA, J M : THE APPEAL FILED BY ASSESSEE IS AGAINST ORDER OF CIT (A) - 1 , AURANGABAD , DATED 28 . 1 0 .20 1 6 RELATING TO ASSESSMENT YEAR 20 1 0 - 1 1 AGAINST ORDER PASSED UNDER SECTION 14 4 R.W.S. 14 7 OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND OF APPEAL: - 1. ADDITION OF RS.2366735/ - BY DISALLOWING EXPENSES SUCH AS DISCOUNTS ALLOWED, FORWARDING EXPENSES AND QUALITY DIFFERENCE. ITA NO. 4 9 /P U N/20 1 7 PRAGAT AGRO PRODUCTS PVT. LTD. 2 THE LEARNED ASSESSI NG OFFICER IS NOT JUSTIFIED IN MAKING ADDITION AT RS.3532831/ - BY DISALLOWING EXPENSES SUCH AS DISCOUNTS ALLOWED, FORWARDING EXPENSES & QUALITY DIFFERENCE AND THE LEARNED CIT(A) IS ALSO NOT JUSTIFIED IN CONFIRMING THE ADDITION AT RS.2366735/ - . THE APPELLA NT HAS MAINTAINED REGULAR BOOKS OF ACCOUNTS DULY AUDITED UNDER SEC.44AB OF I.T. ACT, 1961. THE ADDITION MADE BY THE LEARNED ASSESSING OFFICER AND CONFIRMED BY THE LEARNED CIT(A) MAY KINDLY BE DELETED. 3. THE ISSUE RAISED IN THE PRESENT APPEAL IS AGAINST DISALLOWANCE OF 35,32,831/ - BY THE ASSESSING OFFICER WHICH WAS RESTRICTED TO 23,66,735/ - BY THE CIT(A). 4. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS ENGAGED IN TRADING ACTIVITIES OF GRAINS, PULSES AND ALLIED AGRICULTURAL ACTIVITIES. THE ASSESSEE WAS A PRIV ATE LIMITED COMPANY, WHICH COMPRISED OF FOUR DIRECTORS. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD FURNISHED RETURN OF INCOME DECLARING LOSS OF ( - ) 15,32,732/ - . THE ASSESSING OFFICER HOWEVER, IN THE ASSESSMENT ORDER MENTIONS THAT THE ASSESSEE H AD NOT FILED ANY RETURN OF INCOME AND HAS TAKEN THE NET PROFIT AT NIL. THE CASE OF ASSESSEE WAS SELECTED FOR SCRUTINY. HOWEVER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT BOOKS OF ACCOUNT HAD DEFECTS. FURTHER, THE ASSE SSING OFFICER ALSO OBSERVES THAT NO CIRCUMSTANTIAL EVIDENCE FOR MOVEMENT OF GOODS WITH REGARD TO PURCHASE AND SALES WAS AVAILABLE. FURTHER, THE ASSESSEE DID NOT PRODUCE PURCHASE AND SALE BILLS FOR VERIFICATION. HOWEVER, IT MAY BE POINTED OUT THAT NO ADDI TION HAS BEEN MADE ON ACCOUNT OF PURCHASES OR SALES. THE ASSESSING OFFICER FURTHER NOTED THAT THE ASSESSEE HAD DEBITED EXPENSES UNDER THE HEAD TOOR TRADING ACCOUNT I.E. IN PROFIT AND LOSS ACCOUNT, THE ASSESSEE HAD CLAIMED DISCOUNT AND BATAV TO THE EXTEN T OF 16,92,273/ - ; FREIGHT AND FORWARDING EXPENSES OF 14,16,543/ - AND TUR CLAIM EXPENSES OF 4,24,015/ - . THE ASSESSEE WAS SPECIFICALLY ASKED TO EXPLAIN THE NATURE OF EXPENDITURE ALONG ITA NO. 4 9 /P U N/20 1 7 PRAGAT AGRO PRODUCTS PVT. LTD. 3 WITH EVIDENCES. THE ASSESSEE COULD NOT PRODUCE THE EVIDENCES. HENCE, T HE SAID EXPENSES TOTALING 35,32,831/ - WERE DISALLOWED BY THE ASSESSING OFFICER. 5. THE CIT(A) NOTES THAT THE ASSESSEE HAD SHOWN GROSS LOSS OF 13,12,385/ - IN THE TRADING OF AGRICULTURAL PRODUCTS / FOOD GRAINS AGAINST TURNOVER OF 11,83,36,799/ - . THE ASSESSEE BEFORE THE CIT(A) CITED A COMPARABLE CASE VIS - - VIS RATE OF PROFIT. THE CIT(A) WAS OF THE VIEW THAT ONUS WAS UPON THE ASSESSEE TO PRODUCE EVIDENCE AND HE HAS FAILED TO PRODUCE THE SAME WITH REGARD TO FREIGHT AND FORWARDING EXPENSES, DISCOUNT AND BATAV AND TUR CLAIM EXPENSES. IN THE ABSENCE OF THE SAME, THE CIT(A) OBSERVED THAT THE ASSESSING OFFICER WAS COMPELLED TO DISALLOW SAID EXPENSES. HOWEVER, IN THE FINAL ANALYSIS, HE HELD THAT APPLICATION OF GP RATE @ 2% ON TOTAL TURNOVER OF 11.83 CRORES AMOUNTING TO 23,66,735/ - WOULD MEET THE ENDS OF JUSTICE. HE THUS, RESTRICTED ADDITION TO 23,66,735/ - . 6. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 7. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THIS WAS THE FIRST YEAR OF OPERATIONS OF ASSESSEE AND BECAUSE OF NON - EXPERIENCE, THERE WAS LOSS IN THE CASE OF ASSESSEE. HE FURTHER POINTED OUT THAT THE ACCOUNTS OF ASSESSEE WERE AUDITED AND THE AUDIT REPORT WAS FILED DURING THE COURSE OF ASSESSMENT PROC EEDINGS. OUR ATTENTION WAS DRAWN TO THE PROFIT AND LOSS ACCOUNT PLACED AT PAGE 18 OF PAPER BOOK. HE FURTHER INVITED ATTENTION TO THE EXPENSES CLAIMED AND STRESSED THAT THE PERUSAL OF THE SAME WOULD REFLECT THAT MAJOR EXPENDITURE WAS ON ACCOUNT OF RAW MAT ERIAL CONSUMED / PURCHASED FOR RE - SALE. IN THIS REGARD, HE STATED THAT HEAD - WISE DETAILS WERE FILED OF TOOR EXPENSES WHICH ARE PLACED AT PAGES 37 TO 42 OF PAPER BOOK AND THE SAME SHOULD BE ALLOWED IN ENTIRETY. ITA NO. 4 9 /P U N/20 1 7 PRAGAT AGRO PRODUCTS PVT. LTD. 4 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE STRONGLY OBJECTED TO THE SAME AND POINTED OUT THAT THE ASSESSEE HAD FAILED TO PRODUCE THE BOOKS OF ACCOUNT BEFORE THE ASSESSING OFFICER AND EVEN SUPPORTING VOUCHERS WERE NOT PRODUCED. HENCE, THERE IS NO MERIT IN THE CLAIM OF ASSESSEE. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION CLAIMS TO HAVE MAINTAINED REGULAR BOOKS OF ACCOUNT, WHICH ACCORDING TO HIM, WERE AUDITED UNDER SECTION 44AB OF THE ACT. THE ASSESSEE IN THE STATE MENT OF FACTS FILED BEFORE THE TRIBUNAL HAS STATED THAT IT HAD INCURRED LOSS OF 15,32,732/ - AND HENCE, THE RETURN OF INCOME WAS NOT FILED. THE ASSESSEE HAS IN THE PAPER BOOK FILED, COPY OF AUDIT REPORT FOR ASSESSMENT YEAR 2010 - 11 WHICH IS DATED 28.09.2012 AND IN THE STATEMENT OF FACTS, IT IS ALSO MENTIONED THAT THE MANAGEMENT OF THE COMPANY WAS MANAGED BY THE STAFF WHO APPOINTED MR. AJEET GOLECHA, CHARTER ED ACCOUNTANT FOR AUDIT , AS ALL THE DIRECTORS WERE HAVING THEIR OWN BUSINESS. THE ASSESSEE HAD MAINTAI NED COMPUTERIZED BOOKS OF ACCOUNT, WHICH WERE CORRUPTED. THE ASSESSEE FURTHER CLAIMS THAT THIS FACT WAS NOT DISCLOSED BY STAFF OF THE COMPANY AND ALSO THE AUDITOR. IT CAME TO THE KNOWLEDGE OF THE DIRECTORS IN SEPTEMBER, 2012. THEREAFTER, THE COMPANY HAD AGAIN COMPLETED COMPUTERIZED BOOKS OF ACCOUNT FROM PURCHASE, SALE BILLS, VOUCHERS, BANK STATEMENT AND APPOINTED CA CHETAN GATTANI FOR AUDIT OF BOOKS OF ACCOUNT AND OBTAINED AUDIT REPORT. ALL THESE FACTS ARE MENTIONED IN THE STATEMENT OF FACTS. FURTHER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTES THAT THE ASSESSEE HAD ATTENDED THE HEARING ON 20.02.2015 ALONG WITH THE ACCOUNTANT OF ASSESSEE AND PRODUCED INCOMPLETE BOOKS OF ACCOUNT. FURTHER, THE ASSESSING OFFICER NOTES THAT NO CIRCUMSTANTIAL ITA NO. 4 9 /P U N/20 1 7 PRAGAT AGRO PRODUCTS PVT. LTD. 5 EVIDENCE FOR MOVEMENT OF GOODS IN REGARD TO PURCHASE AND SALE WAS AVAILABLE AND ALSO NO PURCHASE AND SALE BILLS WERE PRODUCED FOR VERIFICATION. THE ASSESSEE WAS ALSO ASKED TO GIVE PRELIMINARY EVIDENCES OF TWO TRADING ACCOUNTS IN WHICH SUBST ANTIAL EXPENSES WERE DEBITED. THE ASSESSEE FAILED TO FURNISH EVEN AN IOTA OF EVIDENCE FOR ABOVE EXPENSES INCURRED AND DEBITED AND HENCE, THE SAME WERE DISALLOWED TOTALING 35,32,831/ - . 10. THE CIT(A) AFTER TAKING NOTE OF THE FACTS AND CIRCUMSTANCES OF CASE HELD THAT THERE WAS NO TENABLE EXPLANATION IN RESPECT OF GROSS LOSS OF 13,12,385/ - IN THE TRADING OF AGRICULTURAL TRADING / FOOD GRAINS. HE WAS OF THE VIEW THAT IT WO ULD BE APPROPRIATE TO APPLY GP ON TOTAL TURNOVER, IN VIEW OF THE PROVISIONS OF SECTION 145 OF THE ACT. HE ACCORDINGLY, APPLIED GP RATE @ 2% ON THE TOTAL TURNOVER OF 11.83 CRORES AND RESTRICTED ADDITION TO 23,66,735/ - . 11. THE ASSESSEE IS AGGRIEVED B Y THE AFORESAID ADDITION IN ITS HANDS AND HAS PLEADED THAT BECAUSE OF MIS - MANAGEMENT, THE BUSINESS OF ASSESSEE HAS BEEN CLOSED DOWN AND THERE ARE NO FUNDS AND THE ASSESSEE IS HANDICAPPED. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE BEFORE US PO INTED OUT THAT THERE WERE LOSSES IN THE BUSINESS AND BECAUSE OF AFORESAID ADDITION, SUBSTANTIAL DEMAND HAS BEEN RAISED AGAINST THE ASSESSEE. IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WHERE THE ASSESSEE HAD NOT ORIGINALLY FILED ITS RETURN OF LOSS , THEN THE PLEA OF ASSESSEE THAT IT HAD INCURRED LOSSES IS NOT BACKED BY ANY EVIDENCE WHATSOEVER. THE YEAR UNDER APPEAL IS ASSESSMENT YEAR 2010 - 11 I.E. FINANCIAL YEAR 2009 - 10 AND THE ASSESSEE HAS NOT FILED ANY EVIDENCE OF THE LOSS OF THE YEAR AT 15,32,7 32/ - AS MENTIONED IN THE STATEMENT OF FACTS. EVEN THE BOOKS OF ACCOUNT EVIDENCING THE SAME WE RE NOT AVAILABLE WITH THE ASSESSEE. ON THE OTHER HAND, THE ASSESSEE HA D ADMITTEDLY COMPUTERIZED BOOKS OF ACCOUNT IN SEPTEMBER, 2012 IN WHICH THE LOSS HAS BEEN ITA NO. 4 9 /P U N/20 1 7 PRAGAT AGRO PRODUCTS PVT. LTD. 6 WO RKED OUT TO 15,32,732/ - . THE AUDITOR HAS SIGNED THE SAID ACCOUNTS ON 28.09.2012 I.E. MUCH AFTER THE DUE DATE OF SIGNING AND FILING THE AUDIT REPORT FOR THE YEAR ENDING 31.03.2010. SUCH BOOK RESULTS SHOWN BY THE ASSESSEE CANNOT BE RELIED TO COMPUTE THE INCOME IN THE HANDS OF ASSESSEE. ACCORDINGLY, WE UPHOLD THE ORDER OF CIT(A) IN APPLYING THE GP RATE TO DETERMINE THE INCOME IN THE HANDS OF ASSESSEE. THE PROVISIONS OF SECTION 145 OF THE ACT ARE SQUARELY ATTRACTED. HOWEVER, WE DIRECT THE ASSESSING OFFIC ER TO APPLY GP RATE AT 1% ON THE TOTAL TURNOVER OF 11.83 CRORES IN ORDER TO DETERMINE THE INCOME IN THE HANDS OF ASSESSEE. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, PARTLY ALLOWED. 12 . IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWE D. ORDER PRONOUNCED ON THIS 26 TH DAY OF MARCH , 201 8 . SD/ - SD/ - ( D.KARUNAKARA RAO ) (SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 26 TH MARCH , 201 8 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) - 1 , AURANGABA D ; 4. THE PR. CIT - 1 , AURANGABAD ; 5. 6. , , , - / DR SMC , ITAT, PUNE; / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVAT E SECRETARY , / ITAT, PUNE