ACIT, Meerut V. M/s. SBEC Sugar Ltd., Baghpat

ITA 6642/DEL/2014

• Counselvise Citation: 664220114 RSA 2014
• Duration Of Justice: 1 year(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2009-2010
• Appeal Filed On: 08-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHEODAN SINGH BHADORIA
• Assessee Lawyers: P S KASHYAP F

Judgement Text

ITA NO 6642 & 6643/DEL/2014 ACIT V SBEC SUGAR LIMITED A.Y. 2009 - 10 & 2010 - 11 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCHES, NEW DELHI (CIRCUIT BENCH AT MEERUT) BEFORE S HRI I.C . SUDHIR, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 6642 & 6643/DEL./2014 ASSTT. YEAR: 2009 - 10 & 2010 - 11 A.C.I.T., VS. SBEC SUGAR LTD., CIRCLE - 1, MEERUT. VILL - LOYAN MALAKPUR, BAGHPAT. [PAN: AAECS7222B] (APPELLANT) (RESPONDENT) APPELLANT BY : SH.SHEODAN SINGH BHADORIA, SR DR RESPONDENT BY : SH. P.S. KASHYAP, F.C.A. DATE OF HEARING : 16.12.2015 DA TE OF PRONOUNCEMENT : 22 .12.2015 ORDER PER PRASHANT MAHARISHI, ACCOUNTANT MEMBER: 01 . THE REVENUE AGAINST THE ORDER OF CIT (A) , MEERUT DATED 18.09.2014FILED TWO APPEALS APPEAL NO. 6642 & 6643/ D/2014 FOR RESPECTIVE ASSESSMENT YEAR 2009 - 10 AND 2010 - 11. ITA NO 6642/DEL/2014 02 . THE MAIN GROUND OF APPEAL RAISED BY THE REVENUE IS THAT THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION ON ACCOUNT OF SALE OF PRESS CAKE MADE BY THE AO AMOUNTING TO RS.1,03,93,436/ - AND RS.88,94,400/ - IN A.Y. 2009 - 10 AND A.Y. 2010 - 1 1 RESPECTIVELY. FURTHER IN ITA NO. 6642/DEL./2014 FOR A.Y. 2009 - 10, THE REVENUE HAS RAISED FURTHER GRO U ND OF APPEAL AGAINST DELETION OF ADDITION OF RS.21,44,974/ - ON ACCOUNT OF SUNDRY CREDITORS. 03 . WE FIRST CONSIDER THE GROUND NO. 1 OF THE APPEAL OF REVENUE FOR A.Y. 2009 - 10 IN ITA NO 6642/DEL/2014 . 04 . A SSESSEE IS A COMPANY,WHICH IS ENGAGED IN THE BUSINESS OF PRODUCTION AND TRADING OF SUGAR. DURING THE ASSESSMENT PROCEEDINGS , AO PERUSED COMPARATIVE CHART OF SUGARCANE CR USHED, SUGAR PRODUCE D , BY - PRODUCT S GENERATED OF THE ASSESSEE WITH TWO COMPARABLE CASES, NAMELY BAGHPAT COOPERATIVE SUGAR MILLS LTD. AND M/S. RAMALA SAHKARI CHINI MILLS LTD. HE FOUND THAT FOR A. Y. 2009 - 10 ASSESSEE HAS GENERATED 303458 QUINTALS OF PRESS CAKE DURING THE YEAR COMPARED TO 169991 QUINTALS OF PRESS CAKE IN 2 2 THE CASE OF M/S. RAMALA SAHKARI CHINI MILLS LTD. AND 106457 QUINTALS IN THE CASE OF BAGHPAT COOPERATIVE SUGAR MILLS LTD. HE FURTHER NOTICED THAT ASSESSEE HAS NOT SHOWN ANYSALES OF PRESS CAKE WHEREAS OTHER TWO COMPARABLES QUOTED, HAVE SOLD PRESS CAKE @ RS.34.25 PER QUINTAL.THEREFORE , AO ASKED FOR THE INFORMATION FROM THE ASSESSEE ABOUT SALE OF PRESS CAKE. BEFORE AO, ASSESSEE SUBMITTED THAT PRESS CAKE IS NOT SOLD BY THE ASSESSEE BUT IS DISTRIBUTED TO FARMERS WHO ARE USING IT AS MANURE. ASSESSEE FURTHER SUBMITTED THAT OTHER TWO COMPARABLES ARE GOVERNMENT ORGANIZATIONS AND THEREFORE, THEIR POLICIES CANNOT BE COMPARED WITH THAT OF ASSESSEE . A SSESSEE ALSOS TATED THAT ITS GROSS PROFIT AND NET PROFIT ARE COMPARATIVE LY BETTER THAN THOSE COMPANIES ARE . HOWEVER, REJECTING THE CONTENTION OF THE ASSESSEE, THE ASSESSING OFFICER MADE AN ADDITION OFRS.1,03,93,436/ - ASSUMING THAT 3% OF TOTAL SUGARCANE CONSUMED IS THE OUTPUT OF PRESS CAKE AND ADOPTED AVERAGE SELLING PRICE OF R S.34.25 PER QUINTAL. 05 . ON APPEAL, CIT ( A) DELETED THE ADDITION HOLDING THAT ASSESSEE IS HAVING PROGRESSIVE GROSS PROFIT AND NET PROFIT RATE AND HAS PRACTICE OF NOT SELLING THIS PRODUCT, BUT PROVIDING IT TO FARMERS AS MANURE. HE WAS ALSO OF VIEWTHAT AO HAS FAI LED TO ESTABLISH THAT ANY INCOME IS ACCRUING IN THE HANDS OF ASSESSEE BECAUSE OF SALE OF PRESS CAKE. THEREFORE , REVENUE IS IN APPEAL BEFORE US. 06 . L D. DR SUBMITTED THAT COMPARABLE CASES CITED BY ASSESSING OFFICER PROVE THAT THERE IS A GENERATION OF PRESS CAKE IN THEMANUFACTURING PROCESS OF THE COMPANY. HE FURTHER SUBMITTED THAT IT IS UNBELIEVABLE T HAT ASSESSEE W OULD GIVE SUCH A HUGE QUANTITY OF MATERIAL, WHERE THE SALE COULD BE MADE, TO THE FARMERS FREE OF COST WHERE IT HAS INCURRED HUGE LOSS AND VEHEMENTLY SUPPORTED THE ORDER OF ASSESSING OFFICER. 07 . ON OTHER HAND , LD . AR OF THE ASSESSEE SUBMITTED THAT ASSESSEE IS A LISTED COMPANY CARRYING ON THIS BUSINESS AND IT HAS NEVER SOLD PRESS CAKE, BUT ALWAYS GIVE N IT TO FARMERS FREE OF COST WHO USES IT AS MANURE . HIS MAIN CONTENTION WAS THAT ASSESSEE HAS MAINTAINED REGULAR BOOKS OF ACCOUNT WHICH AR E DULY AUDITED UNDER THE INCOME TAX ACT AS WELL AS UNDER THE COMPANIES ACT AND FURTHER THE MANUFACTURING ACTIVITY AND THE QUANTITY IS SUBJECT TO VERIFICATION BY EXCISE AUTHORITIES AND IN ABSENCE OF ANY DEFECT IN BOOKS OF ACCOUNTS AND ANY DIRECT EVIDENCE OF UNACCOUNTED SALE OF PRESS MUD , BOOK RESULTS SHOWN BY ASSESSEE CANNOT BE REJECTED. HE FURTHER SUBMITTED THAT FINANCIAL RESULTS OF THE ASSESSEE SHOWED BETTER PERFORMANCE COMPARED TO OTHER PARTIES STATED BY AO . THEREFORE, HIS CONTENTION WAS THAT THE ADDITION HAS BEEN RIGHTLY DELETED BY THE LD. CIT ( A). 3 3 08 . W E HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE REASONING GIVEN BY THE CIT ( A) FOR DELETING THE ADDITION. THE ASSESSEE IS MANUFACTURER OF SUGAR AND NECESSARILY PRESS CAKE IS THE WASTE, WHICH GENERATE S OUT OF MANUFACTURING OF SUGAR. THE FI RM OF CHARTERED ACCOUNTANTS AUDITS THE BOOKS OF ACCOUNTS OF THE COMPANY UNDER THE APPLICABLE LAW S AND FURTHER, THE QUANTITATIVE DETAILS ARE SUBJECTED TO VERIFICATION BY EXCISE AND VAT AUTHORITIES. IT IS UNDISPUTED THAT NEITHER THE AUDITOR NOR THE OTHER AUT HORITIES HAVE POINTED ANY DEFECTS IN THE QUANTITATIVE DETAILS MAINTAINED BY THE ASSESSEE. FURTHER, THE AO HAS NOT CONTROVERTED THE FACT WITH ANY EVIDENCE THAT PRESS CAKE IS NOT GIVEN BY ASSESSEETO FARMERS AS MANURE. AS A SSESSEE IS MANUFACTURER OF SUGAR,IT IS IMPORTANT THAT WHAT IS THE YIELD OF SUGAR IN COMPARISON WITH OT HER COMPARABLES NOTED BY THE AO AS HIGHER THE YIELD OF SUGAR, HIGHER THE PROFIT OF THE COMPANY. ON ANALYSIS, WE FOUND THAT FOR A.Y. 2 009 - 10 AND 2010 - 11, YIELD OF SUGAR IN CASE OF ASSESSEE IS HIGHER THAN THE OTHER TWO COMPARABLES, NAMELY BAGHPAT SUGAR MILLS AND RAMALA SAHKARI CHINI MILLS LTD. FOR THE ASSESSMENT YEAR 2009 - 10 , YIELD OF ASSESSEE OF SUGAR IS 8.78% COMPARED TO 8.43% AND 8.67% OF THE OTHER COMPANIES . FOR A.Y. 2010 - 11, THE ASSESSEE HAS IMPROVED THE YIELD OF SUGAR OF 8.83% COMPARED TO 8.77% AND 8.34% OF OTHER COMPARABLES. IT SHOWS THAT ASSESSEE HAS EARNED HIGHER RECOVERY OF PRIME PRODUCT MANUFACTURED BY IT. FURTHER, DURING ASSESSMENT PROCEEDINGS , ASSES SEE HAS SUBMITTED COMPLETE DETAILS OF PRODUCTION , YIELD AND PRODUCED BOOKS OF ACCOUNT S BEFORE THE ASSESSING OFFICER. ON VERIFICATION OF THEM, NO DEFECTS WERE FOUND BY AO . THE ASSESSING OFFICER COULD ALSO FIND NO DIRECT EVIDENCE THAT ASSESSEE HAS EARNED ANY INCOME FROM SALE OF PRESS CAKE AND IT IS NOT RECORDED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. IN ABSENCE OF ANY EVIDENCE THAT THE STATEMENT OF THEASSESSEE STATING THAT PRESS MUD IS GIVEN TO THE FARMERS AS MANURE IS FALSE, IT CANNOT BE REJECTED. IT IS ALSO NOT THE CASE OF THE ASSESSING OFFICER CONTROVERTING THE FACT THAT THE PRESS CAKE COULD BE USED AS MANURE. PERHAPS IT MAY BE THE STARTING POINT OF ANY FURTHER ENQUIRY TO BE MADE BY AO WHEN HE FINDS THAT PRESS MUD IS GENERATED IN MANUFACTURING PROCESS OF SUGAR WHICH IS NOT SOLD AS OTHERS. MERELY REJECTING THE EXPLANATION OF THE ASSESSEE WITHOUT ANY POSITIVE EVIDENCE, THE ADDITION HAS BEEN MADE FOR SALE OF PRESS MUD OUTSIDE THE BOOKS OF ACCOUNTS. THEREFORE, IN VIEW OF ABSENCE OF ANY EVIDENCE AGAINST THE ASSESSEE THAT IT HAS SOLD THE PRESS CAKE OUTSIDE THE BOOKS OF ACCOUNT WHEN IT IS SHOWING COMPARATIVELY BETTER FINANCIAL RESULTS THAN THE OTH ER COMPARABLES STATED BY THE AO NO ADDITION CAN BE MADE. THEREFORE, WE 4 4 CONFIRM THE ORDER OF THE CIT ( A) DELETING THE ADDITION OF RS. 1,03,93,436/ - OF UNACCOUNTED SALES OF PRESS MUD CAKE AND GROUND NO. 1 OF APPEAL FOR A.Y. 2009 - 10 IS DISMISSED. 09 . GROUND NO. 2 OF APPEAL IS AGAINST THE DELETION OF ADDITION OF RS. 21,44,974/ - ON ACCOUNT OF SUNDRY CREDITORS. THE ASSESSING OFFICER HAS MADE ADDITION OF SUNDRY CREDITORS HOLDING THAT ASSESSEE WAS ASKED TO EXPLAIN THE DETAILS OF OUTSTANDING CREDITORS FOR MORE THAN ONE YEAR AMOUNTING TO RS.10,54,351/ - . IN THE BODY OF ORDE R WHERE THE ADDITION IS MADE, THE ASSESSING OFFICER HAS DISCUSSED THE SUM OF RS.10,54,351/ - , HOWEVER, HE HAS MADE THE ADDITION OFRS.21,44,974/ - . THE CIT ( A) HAS DELETED THIS ADDITION AND THEREFORE, THE REVENUE IS IN APPEAL. 10 . BEFORE US, THE LD. DR RELIED O N THE ORDER OF THE AO. 11 . L D. AR SUBMITTED THAT ASSESSING OFFICER HAS CUT PASTE THIS FIGURE FROM BALANCE SHEET OF SOME OTHER ENTITY AND MADE ADDITION IN THE HANDS OF THE ASSESSEE. FOR THIS, HE SUBMITTED THE COPIES OF THE BALANCE SHEET OF THE ASSESSEE WHERE NO FIGURE OF RS.21,44,994/ - COULD BE NOTICED UNDER THE SCHEDULES OF SUNDRY CREDITORS. H E STATED THAT THE ADDITIONS ARE NOT RELATED TO THE ACCOUNTS O F THE ASSESSEE AND THEREFORE RIGHTLY DELETED BY CIT (A). 12 . WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. IT IS APPARENT THAT THE AO IS DISCUSSING THE FIGURE OF RS.10,54,000/ - ON ACCOUNT OF OLD SUNDRY CREDITORS, HOWEVER , ON VERIFICATION OF ACCOUNTS OF THE COMPANY WITH THE FIGURES STATED BY AO, IT WAS FOUND THAT THESE FIGURES ARE NOT PERTAINING TO THE ACCOU NTS OF ASSESSEE. ON QUERY TO LD. DR, HE ALSO COULD NOT EXPLAIN WHEREFROM THE FIGURES ARE TAKEN BY AO AND IF ANY LIST IS AVAILABLE EITHER WITH AO OR WITH ASSESSEE OF SUCH CREDITORS . LD AR ALSO CLARIFIED THAT SCHEDULE OF CURRENT LIABILITIES SHOWS THE DIFFERENT FIGURES WHICH ARE NOT AT ALL MATCHING WITH THE FIGURES GIVEN IN ASSESSMENT ORDER FOR SUBSTANTIATING THIS ARGUMENT HE TOOK US TO ALL THE FIGURES STATED IN THE SCHEDULE F OF THE BALANCE SHEET. ON VERIFICATION, WE COULD NOT FIND ANY SUCH FIGURE OF SUNDRY CREDITORS FOR WHICH ADDITION IS MADE. THEREFORE, WE DELETE THE ADDITION OF RS 21 , 44,994 / - ON ACCOUNT OF SUNDRY CREDITORS. WE CONFIRM THE ORDER OF CIT (A) ON THIS ISSUE AND DISMISS GROUND NO. 2 OF THE APPEAL. ITA NO 664 3 /DEL/2014 5 5 13 . THE MAIN GROUND OF APPEAL RAISED BY THE REVENUE IS THAT THE LD. CIT ( A) HAS ERRED IN DELETING THE ADDITION ON ACCOUNT OF SALE OF PRESS CAKE MADE BY THE AO AMOUNTING TO RS. 88,94,400/ - WHICH IS IDENTICAL, TO GROUND NO 1 DECIDED IN IT A NO 6642/DEL/2014 , EXCEPT THE AMOUNT OF ADDITION. AS WE HAVE ALREADY ADJUDICATED GROUND NO 1 OF THAT APPEAL, WE ALSO DISMISS THIS GROUND OF THE APPEAL OF REVENUE CONFIRMING ORDER OF LD CIT (A) IN DELETING THE ADDITION OF RS. 88,94,400/ - OF UNACCOUNTED SAL E OF PRESS MUD. 14 . IN THE RESULT, APPEAL OF 6642 & 6643/DEL/2014 OF REVENUE IS DISMISSED . O R D E R I S P R O N O U N C E D I N T H E O P E N C O U R T O N 2 2 . 1 2 . 2 0 1 5 . - S D / - - S D / - (I.C. SUDHIR) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 2 . 1 2 . 2 0 1 5 . *AKS/ - COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT ( A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT. REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI