The Income Tax Officer, Ward-3(1), Vijayawada V. M/s. Agri Gold Multi Products Producer Company Limited, Vijayawada

ITA 605/VIZ/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 1140 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 16-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income
• Section: 68; 144; 142(1); 143(2); 73; 13; 145(3)

Judgement Text

आयकर अपीलीयअधिकरण, धिशाखापटणम पीठ, धिशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM श्री द ु व्वूरु आर एल रेड्डी, न्याधयक सदस्य एिं श्री एस बालाकृ ष्णन, लेखा सदस्य के समक्ष BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकर अपील सं./ I.T.A. No.605/Viz/2019 (ननधधारण वर्ा / Assessment Year :2014-15) The Income Tax Officer, Ward-3(1), Vijayawada. Vs. M/s. Agri Gold Multi Products Producer Company Ltd., Vijayawada. PAN: AALCA 6917 D (अपीलधथी/ Appellant) (प्रत्यथी/ Respondent) अपीलधथी की ओर से/ Appellant by : No Representation प्रत्यधथी की ओर से / Respondent by : Sri M.N Murthy Naik, CIT-DR सुनवधई की तधरीख / Date of Hearing : 12/05/2022 घोर्णध की तधरीख/Date of Pronouncement : 26/05/2022 O R D E R PER S. BALAKRISHNAN, Accountant Member : This appeal is filed by the Revenue against the order of the Ld. CIT(A), Vijayawada in appeal No. 10016/CIT(A)/VJA/17-18, dated 26/07/2019 emanating from the order of the Ld. AO passed U/s. 144 of the IT Act, 1961 dated 28/12/2016. 2. The assessee a company filed its return of income for AY 2014-15 on 28/11/2014 declaring total income of Rs. 1,01,570/-. 2 The case was selected for scrutiny under CASS and statutory notices U/s. 143(2) and 142(1) were issued and served on the assessee. The assessment was completed U/s. 144 of the Act where the AO rejected the books of account U/s. 145(3) and estimated the income from business @ 2.5% of the turnover. In addition, the Ld. AO also made addition U/s. 68 of the Act with respect to trade payables and other long term liabilities. 3. Aggrieved by the order of the Ld. AO, the assessee filed an appeal before the Ld.CIT(A). Before the Ld. CIT(A), the Ld AR argued that since the income is estimated no addition U/s. 68 of the Act can be made by the AO. The Ld.AR also submitted the PBT / Turnover ratio of similar companies as detailed in Para 13 of order of CIT(A), is in the average of 0.50% of the turnover. The Ld. CIT(A) considering the submissions made by the Ld. AR partly allowed the appeal by estimating the profit ratio @ 0.50% of the turnover and held that the addition of trade payables made U/s. 68 is not sustainable. However, the Ld. CIT(A) upheld the order of the Ld. AO with respect to addition of long term liabilities U/s. 68 of the Act. In arriving at the conclusion as above, the Ld. CIT(A) relied on various judgments as detailed in his order. 3 Aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before us by raising the following grounds: 1. “The Ld. CIT(A) is not justified in allowing the appeal without taking into account the f acts and merits of the case. 2. The Ld. CIT(A) f ailed to appreciate that the assessee f ailed to prove that the trade creditors relate to the current AY or emanate f rom the business transactions relating to the current AY. 3. As the assessee f ailed to prove that the creditors relate to the current AY, there is no bar to make addition wrt unproved / non-existing tade creditors even in the case of estimation of business income, for the current AY. 4. The Ld. CIT(A) f ailed to appreciate that the rejection of book results and estimation of income on percentage basis, relate to the current AY, whereas the brought forward trade creditors relate to the book results / book prof it of the earlier AY. 5. Any other ground that may be urged at the time of hearing.” 4. Before us there was no representation on behalf of the assessee. At the outset, the Ld. DR mentioned that there is a delay of 2 days in filing the appeal before the Tribunal and the explained that this delay is due to procedural delay in getting the authorization u/s. 253 of the Act. We have considered the reasons adduced by the Revenue for belated filing of the appeal before the Tribunal and condone the delay and proceed to adjudicate the appeal on merits. On merits, the Ld. DR supported the order of the Ld. AO and argued that the estimation of profit @ 2.5% of the turnover is reasonable. The Ld. DR also explained 4 that since the Directors of the Company are in judicial custody, there was no representation for the assessee. The Ld. DR also forcibly argued that reducing the profit percentage to 0.50% of the turnover by the Ld. CIT(A) is without any merit. The Ld. DR also argued that even in the case of estimation of income by rejection of books of accounts addition made by the AO with respect to creditors and other long term liabilities which is a result of outstanding balance and in the instant case the assessee has failed to submit any evidence regarding the genuinity of the creditors and other long term liabilities. 5. We have heard the Ld. DR and proceed to adjudicate the appeal based on the submissions available before us. We find that the representative for the assessee has submitted comparable profit ratios before Ld.CIT(A), as detailed in para 13 of the order of the Ld. CIT(A). The Ld.CIT(A) also extracted the profit ratios of comparable cases in para 18 and find that the Arithmetic Mean of the rate of profit of the comparable cases works out to 0.47% and accordingly estimated the business income of the assessee @ 0.50% of the turnover. We also note from the submissions made by the assessee that the profit ratio 5 on an average works out to 0.50% of the turnover and hence, we find no infirmity in the order of the Ld. CIT(A). 6. With regard to grounds No. 2, 3 and 4, we find from the order of the Ld. CIT(A) that the assessee has relied on various judicial pronouncements viz., (i) CIT vs. Bahubali Neminath Muttin (2016)j 73 Taxmann.com 100 (ii) Indwell constructions vs. CIT (1998) 232 ITR 776 (AP) (iii) CIT vs. Amman Steel and Allied Industries [2015] 377 ITR 568 7. Placing reliance on the aforesaid decisions, the Ld. CIT(A) having regard to the ratio laid down in the judicial pronouncements held that no addition is warranted in respect of unexplained creditors since the business income of the assessee is estimated @ 0.50% of the turnover consequent to rejection of books of account. Judicially following the cases relied on by the assessee, we find no infirmity in the order of the Ld. CIT(A) and hence no interference is required on these grounds. 8. In the result, appeal of the Revenue is dismissed. 6 Pronounced in the open Court on the 26 th May, 2022. Sd/- Sd/- (द ु व्वूरु आर.एल रेड्डी) (एस बालाकृ ष्णन) (DUVVURU RL REDDY) (S.BALAKRISHNAN) न्याधयकसदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER Dated : 26.05.2022 OKK - SPS आदेश की प्रनतनलनप अग्रेनर्त/Copy of the order forwarded to:- 1. ननधधाऩरती/ The Assessee – M/s. Agri Gold Multi Products Producer Company Limited, D.No. 32-26-126/11, 2 nd Floor, Agri Gold Milk House, Opp. BSNL Office, Eluru Road, Vijayawada, Andhra Pradesh. 2. रधजस्व/The Revenue –Income Tax Officer, Ward-3(1), 3 rd Floor, CR Buildings, M.G. Road, Vijayawada, Andhra Pradesh – 520002. 3. The Principal Commissioner of Income Tax, Vijayawada. 4. आयकर आयुक्त (अपील)/ The Commissioner of Income Tax (Appeals), Vijayawada. 5. नवभधगीय प्रनतनननध, आयकर अपीलीय अनधकरण, नवशधखधपटणम/ DR, ITAT, Visakhapatnam 6. गधर्ा फ़धईल / Guard file आदेशधनुसधर / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam