Income-tax Officer Ward -1, Nanded V. M/s. Kirti Solvex Ltd, Latur

ITA 519/PUN/2021

AI Insights

This case involves a series of cross appeals by various companies under the Kirti group and the Revenue, concerning the assessment orders for the assessment years 2013-14 and 2014-15. The primary issues revolved around the additions made to the income of the companies under sections 40A(2)(b) and 40A(3) of the Income Tax Act, 1961, and the rejection of their books of account. The Assessing Officer had made significant additions to the income declared by the companies, citing discrepancies in purchases from related parties and unregistered dealers (URD), and issues with cash payments. The CIT(A) upheld some of these additions while deleting others, leading to the appeals before the Tribunal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 137107 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-01-2023
• Appeal Filed By: Department
• Order Result: PartlyAllowed
• Bench Allotted: A
• Next Hearing Date: 03-01-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 17-10-2021
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Assessment record
• Section: 40A(3); 143(3); 145(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI S. S. VISWANETHRA RAVI, JUDICIAL MEMBER Sl. No. ITA No. Name of Appellant Name of Respondent Asst. Year 1 429/PUN/2021 M/s. Kirti Agrotech Ltd., 79-C, Market Yard, Latur- 413512. PAN : AACCK3945M ACIT, Central Circle-2, Nashik. 2014-15 2 430/PUN/2021 M/s. Kirti Foods Ltd. 79-C, Market Yard, Latur- 413512. PAN : AABCK5376K ACIT, Central Circle-2, Nashik. 2014-15 3-4 431/PUN/2021 432/PUN/2021 M/s. Kirti Solvex Ltd. 79-C, Market Yard, Latur- 413512. PAN : AAACK7419E ACIT, Central Circle-2, Nashik. 2013-14 2014-15 5 433/PUN/2021 M/s. Kirti Agrovet Ltd. 79-C, Market Yard, Latur- 413512. PAN : AACCK6480D ACIT, Central Circle-2, Nashik. 2014-15 6 434/PUN/2021 M/s. Kirti Dal Mills Ltd. 79-C, Market Yard, Latur- 413512. PAN : AAACK7418F ACIT, Central Circle-2, Nashik. 2014-15 7 436/PUN/2021 ITO, Ward-1, Nanded. M/s. Kirti Agrovet Ltd. 79-C, Market Yard, Latur- 413512. PAN : AACCK6480D 2014-15 8 515/PUN/2021 ACIT, Central Circle-2, Nashik. M/s. Kirti Foods Ltd. 79-C, Market Yard, Latur- 413512. PAN : AABCK5376K 2014-15 9 516/PUN/2021 ACIT, Central Circle-2, Nashik. M/s. Kirti Dal Mills Ltd. 79-C, Market Yard, Latur- 413512. PAN : AAACK7418F 2014-15 2 10-11 517/PUN/2021 518/PUN/2021 ITO, Ward-1, Nanded. M/s. Kirti Agrotech Ltd., 79-C, Market Yard, Latur- 413512. PAN : AACCK3945M 2013-14 2014-15 12 519/PUN/2021 ITO, Ward-1, Nanded. M/s. Kirti Solvex Ltd. 79-C, Market Yard, Latur- 413512. PAN : AAACK7419E 2014-15 आदेश / ORDER PER BENCH : These bunch of cross appeals preferred by the different assessees as well as by the Revenue for the various assessment years mentioned in the caption emanates from the orders of the Learned Commissioner of Income Tax (Appeals) as per the respective grounds of appeal on record. 2. Since the identical facts and common issues are involved in all the above twelve cross appeals of the different assessees as well as of the Revenue, we proceed to dispose of the same by this common order. 3. For the sake of convenience and clarity, the facts relevant to the appeal of the assessee in ITA No.429/PUN/2021 and the cross Assessee by : None Revenue by : Shri Ramnath P. Murkunde Date of hearing : 04.01.2023 Date of pronouncement : 06.01.2023 3 appeal of the Revenue in ITA No.518/PUN/2021 for the assessment year 2014-15 respectively are stated herein. 4. Briefly, the facts of the case are that the assessee is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of running oil mills and refinery units. The Return of Income for the assessment year 2014-15 was filed on 23.11.2014 disclosing total income of Rs.1,39,35,760/-. Against the said return of income, the assessment was completed by the Asstt. Commissioner of Income Tax, Central Circle-2, Nashik (‘the Assessing Officer’) vide order dated 30.12.2016 passed u/s 143(3) r.w.s. 144 of the Income Tax Act, 1961 (‘the Act’) at a total income of Rs.5,68,94,186/-. While doing so, the Assessing Officer made addition of Rs.3,13,92,964/- u/s 40A(2)(b) in respect of purchases made from related parties by holding that the purchase value is 5% over and above purchases made from the traders/registered dealers. The Assessing Officer also made a disallowance of Rs.1,07,92,765/- being 10% of the purchase expenses. The Assessing Officer also made disallowance on account of cash payment in excess u/s 40A(3) of Rs.7,72,697/-. In the process, the Assessing Officer also rejected the books of account on the ground that the assessee company had indulged in making purchases through bogus brokers, who had not confirmed the transactions or non-existing. The 4 Assessing Officer also found many discrepancies like in valuation closing stock and account and proceeded with making the disallowances as stated above. 5. Being aggrieved by the above order of assessment, an appeal was filed before the ld. CIT(A), who vide impugned order confirmed the rejection of books of account. However, the ld. CIT(A) deleted the addition made u/s 40A(2)(b) by holding that the assessee had not purchased Soya Refined Oil from its sister concerns and the comparison made by the Assessing Officer is not correct. The ld. CIT(A) also deleted the addition on account of purchase expenses. The ld. CIT(A) also granted part relief to the addition made u/s 40A(3) of the Act. 6. Being aggrieved by that part of the order of the ld. CIT(A), which is against the assessee, the assessee is in appeal in ITA No.429/PUN/2021 for A.Y. 2014-15. Being aggrieved by that part of the order of the ld. CIT(A), which is against the Revenue, the Revenue is in cross appeal in ITA No.518/PUN/2021 for A.Y. 2014-15. 7. Now, we shall take up the Revenue appeal in ITA No.518/PUN/2021 for A.Y. 2014-15. ITA No.518/PUN/2021, A.Y. 2014-15 – By Revenue : 8. The Revenue raised the following grounds of appeal :- 5 “01. Whether on the facts and in the circumstances of the case and in Law, the Ld. CIT(A) has erred in deleting the addition of Rs. 1,07,92,765/- made by the AO on account of URD purchases ignoring the fact that the purchase rate was verified by the AO from independent sources? 02. Whether on the facts and in the circumstances of the case and in Law, the Ld. CIT(A) has erred in deleting the addition of Rs.3,13,92,964/- made by the AO on account of Purchases from related parties u/s 40A(2)(b) of the I.T. Act, ignoring the fact that AO has examined the purchases from related parties and analyzed the purchase rates in open market for holding that the purchases made from the related parties were made at the rates higher than the prevailing market rates? 03. Whether on the facts and in the circumstances of the case and in Law, the Ld. CIT(A) has erred by ignoring the fact that the major purchases during the year are URD purchases and the payment to the parties is usually done by cash mode and URD purchases are not supported by pukka bills and are higher than the price for purchases from Traders/ Registered Dealers? 04. Whether on the facts and in the circumstances of the case and in Law, the Ld. CIT(A) has erred in deciding the above issues in favour of the assessee not appreciating the fact that the assessee has not followed the accounting standards and method of accounting properly and regularly and therefore, the AO was justified in rejecting the books of account of the assessee by invoking the provisions of section 145(3) of the Act? 05. The order of the AO may be restored and that of the CIT(A) be vacated. 06. The appellant craves leave to add, amend or alter any ground of appeal.” 9. We find that the ld. CIT(A) had granted relief in respect of addition made u/s 40A(2)(b) by considering a new material which was not part of the assessment record and the ld. CIT(A) had not brought on record as what is the fair market value of goods purchased from related parties. Similarly, the ld. CIT(A) deleted the addition u/s 40A(3) as well as disallowance of 10% of purchase expenses on ad-hoc basis. Further, the ld. CIT(A) while upholding 6 the rejection of books of account had not examined the issue whether it was open to make separate disallowance without estimating the profits. In the circumstances, we are of the considered opinion that the matter requires remand to the ld. CIT(A) to decide the issue in appeal in proper perspective after affording reasonable opportunity of being heard to the Assessing Officer as well as the assessee. 10. In the result, the appeal filed by the Revenue in ITA No.518/PUN/2021 for A.Y. 2014-15 stands partly allowed for statistical purposes. ITA No.429/PUN/2021, A.Y. 2014-15 – BY Assessee : 11. Since, we remanded the entire proceedings to the file of the ld. CIT(A), the grounds of appeal raised by the assessee in the present appeal becomes irrelevant and matter stands remitted back to the file of the ld. CIT(A) for de novo adjudication in accordance with law after affording reasonable opportunity of being heard to the assessee. 12. In the result, the appeal filed by the assessee in ITA No.429/PUN/2021 for A.Y. 2014-15 stands partly allowed for statistical purposes. 7 ITA Nos.430 to 434/PUN/2021, A.Ys. 2013-14 & 2014-15 – By Assessee 13. Since the facts and issues involved in remaining five appeals of the different assessee are identical, therefore, our decision in ITA No.429/PUN/2021 for A.Y. 2014-15 shall apply mutatis mutandis to the remaining five appeals of the different assessee in ITA Nos.430 to 434/PUN/2021 for A.Ys. 2013-14 & 2014-15 respectively. Accordingly, the remaining five appeals of the different assessees in ITA Nos.430 to 434/PUN/2021 for A.Ys. 2013-14 & 2014-15 stands partly allowed for statistical purposes. ITA No.436/PUN/2021, ITA Nos.515 to 517 & 519/PUN/2021, A.Ys. 2013-14 & 2014-15 – By Revenue : 14. Since the facts and issues involved in remaining five appeals of the Revenue are identical, therefore, our decision in ITA No.518/PUN/2021 for A.Y. 2014-15 shall apply mutatis mutandis to the remaining five appeals of the Revenue in ITA No.436/PUN/2021, ITA Nos.515 to 517 & 519/PUN/2021 for A.Ys. 2013-14 & 2014-15 respectively. Accordingly, the remaining five appeals of the Revenue in ITA No.436/PUN/2021, ITA Nos.515 to 517 & 519/PUN/2021 for A.Ys. 2013-14 & 2014-15 stands partly allowed for statistical purposes. 8 15. To sum up, all the above twelve cross appeals filed by the different assessees as well as by the Revenue stands partly allowed for statistical purposes. Order pronounced on this 06 th day of January, 2023. Sd/- Sd/- (S. S. VISWANETHRA RAVI) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 06 th January, 2023. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A)-12, Pune. 4. The Pr. CIT (Central), Nagpur. 5. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “A” बᱶच, पुणे / DR, ITAT, “A” Bench, Pune. 6. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.