Asstt. Commissioner of Income Tax, Kanpur V. M/s Banarsi Misthan Bhandar Pvt. Ltd., Kanpur

ITA 665/LKW/2013

• Counselvise Citation: 66523714 RSA 2013
• Duration Of Justice: 1 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 27-03-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 09-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PUNIT KUMAR
• Assessee Lawyers: P K KAPOOR

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO. 665 & 666 /LKW/201 3 ASSESSMENT YEAR: 2008 - 09 & 2009 - 10 A.C.I.T., CENTRAL CIRCLE - II, KANPUR. VS. M/S BANARSI MISTHAN BHANDAR PVT. LTD. 26/72, BIRHANA ROAD, KANPUR. PAN:AAACB5675R (APPELLANT) (RESPONDENT) CO NO. 46 & 47 /LKW/201 3 (IN ITA NO. 665 & 666 /LKW/201 3) ASSESSMENT YEAR: 2008 - 09 & 2009 - 10 M/S BANARSI MISTHAN BHANDAR PVT. LTD. , 26/72, BIRHANA ROAD, KANPUR. PAN:AAACB5675R VS. A.C.I.T., CENTRAL CIRCLE - II, KANPUR. (APPELLANT) (RESPONDENT) REVENUE BY SHRI PUNIT KUMAR, SR. DR ASSESSEE BY SHRI P. K. KAPOOR, C.A. DATE OF HEARING 27 /03/2015 DATE OF PRONOUNCEMENT 2 8 /04/2015 O R D E R PER A. K. GARODIA, A.M. BOTH THESE A PPEALS ARE FILED BY THE R EVENUE AND THE CROSS OBJECTIONS ARE FILED BY THE ASSESSEE WHICH ARE DIRECTED AGAINST T WO SEPARATE ORDERS OF LEARNED CIT (A) - I, KANPUR BOTH D ATED 07 .0 6 .201 3 FOR ASSESSMENT YEAR 2008 - 09 & 2009 - 10. 2 2. FIRST, WE TAKE UP THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2008 - 09 I.E. I.T.A. NO.665/LKW/2013. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. THAT LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.26 / 46,280/ - BY ADOPTING A G.P. RATE OF 36% INSTEAD OF 23% SHOWN IN BOOKS WHICH WAS RIGHTLY REJECTED AS PER SECTION 145(3) OF THE I . T. ACT DUE TO DISCREPANCY FOUND IN THE BOOKS OF ACCOUNT ON THE BASE OF STATEMENTS MADE BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 2. THAT CIT(A) HAS ERRED IN IGNORING THE DISCREPANCY IN THE BOOKS OF ACCOUNTS AND STOCK VALUATION DONE ON THE BASIS OF PHYSICAL VERIFICATION. 3. THAT CIT(A) HAS ERRED IN LAW AND FACTS IN IGNORING THE PROVISIONS OF THE I.T. ACT AND GIVING HIS FINAL VERDICT ON THE BASIS OF COMMON SENSE AND HIS FAILURE TO COMPREHEND AS MENTIONED IN THE ORDER. 4. THAT LD. CIT (A) WAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.26,46,280/ - WITHOUT REALIZING THE FACT THAT AS TO HOW G.P. RATE OF 24% SHOWN IN THE IMMEDIATELY PRECEDING YEAR AT A TURNOVER OF RS.1,95,05,820 / - SHOULD BE FOLLOWED IN THE SUBSEQUENT YEARS ALSO. 5. THAT THE ORDER OF THE LD. CIT (A) BEING ERRONEOUS IN LAW AND ON FACTS NEEDS TO BE VACATED AND THE ORDER OF THE A.O. BE RESTORED. 3. LEARNED D. R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A. R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THE ISSUE IN DISPUTE R EGARDING GROSS PROFIT ADDITION MADE BY THE ASSESSING OFFICER WAS DECIDED BY LEARNED CIT(A) IN FAVOUR OF THE ASSESSEE AS PER PARA 4.3.1 AND 4.3.2 OF HIS ORDER, WHICH ARE REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE: - 3 4.3.1 THE A.O. HAD MADE AN ADDITION OF RS.26,46,280/ - BY VARYING THE G.P RATE FROM 24% TO 36%. FOR MAKING SUCH VARIATION, THE A.O. HAS RELIED ON CERTAIN DISCREPANCIES LIKE EXCESSIVE CONSUMPTION OF ABOUT 660 BOXES OF 1 KG. CAPACITY AND ALSO ON THE FACT THAT THE VALUE OF CLOSING STOCK OF SWEETS AND OTHERS WAS AT LOWER RATE/KG AS COMPARED TO THE AVERAGE RATE/KG VALUE OF OPENING STOCK I TEMS. THE APPELLANT HAS GIVEN DETAILED SUBMISSIONS (WHICH HAS BEEN REPRODUCED ABOVE) EXPLAINING THE ALLEGED DISCREPANCIES. ON PERUSAL OF THE DETAILS, I FIND THAT THE SO CALLED DISCREPANCY IN VALUATION OF CLOSING STOCK AS COMPARED TO THAT IN THE OPENING STOCK IS - ILL FOUNDED AS IT IS NOT THE CASE THAT THE ASSESSEE HAD ONLY ONE ITEM OF SWEET IN ITS OPENING STOCK OR THE CLOSING STOCK. IT HAS AS MANY AS 20 I TEMS IN ITS OPENING STOCK & CLOSING STOCK AND ALL OF WHICH HAVE VARYING RATES. THUS COMPARING THE AVERAGE RATE/KG, OF OPENING STOCK WITH THAT OF CLOSING STOCK IS LIKE COMPARING ORANGES WITH APPLES. THE VERY THOUGHT PROCESS OF THE A.O. IN THIS REGARD IS ERR ONEOUS & MISCONCEIVED. IN THIS VIEW OF THE MATTER, THIS DISCREPANCY AS ALLEGED BY THE A.O. IS IN FACT NO DISCREPANCY. 4.2.1 FURTHER, AS PER THE DETAILS GIVEN, IT IS SEEN THAT THE TOTAL NUMBER OF BOXES SHOWN TO HAVE BEEN CONSUMED DURING THE YEAR IS 1,31,867 WHILE 788 BOXES HAVE BEEN SHOWN (BY THE ASSESSEE) AS WASTAGE/DAMAGE. THE A.O. PROBABLY ACCEPTED ONLY 192 BOXES TO BE DAMAGED/WASTED AND INFERRED THAT 596 BOXES WERE OVER CONSUMED. FROM THE DETAILS GIVEN, IT IS SEEN THAT 788 BOXES COME TO A MERE 0 . 6% OF THE TOTAL CONSUMPTION OF BOXES DURING THE YEAR. THIS PERCENTAGE OF WASTAGE/DAMAGE SEEMS TO BE QUITE REASONABLE & THEREFORE, NO ADVERSE INFERENCE COULD POSSIBLY BE DRAWN FROM SUCH DEFICIENCY ALONE. THE A.O. HAS APPLIED HIGHER G . P. RATE AFTER REJECTING THE BOOKS BASED ON THESE ALLEGED DEFICIENCIES/DISCREPANCIES . AS DISCUSSED ABOVE, IN REALITY, THERE ARE NO SUCH DEFECTS/DISCREPANCIES . FURTHER, THE A.O. HAS NOT CHALLENGED THE CONSUMPTION O F RAW MATERIAL OR THE YIELD OF THE PRODUCTS. FOR MAKING ANY VARIAT ION IN THE RATE OF G.P., THE ONUS WAS ON THE A.O. TO DEMONSTRATE SERIOUS DEFICIENCIES IN THE BOOKS OF THE ASSESSEE AND ALSO JUSTIFY AS TO WHY THE G.P. RATE SHOULD BE ESTIMATED @36% INSTEAD OF 24% AS HAD BEEN REPORTED BY THE ASSESSEE. THE A .O . HAS FAILED TO DO SO. IN THIS VIEW OF THE MATTER, THE G.P RATE VARIATION MADE BY THE A.O. IS ARBITRARY & UNJUSTIFIED AND, THEREFORE, CANNOT BE SUSTAINED. THE ADDITION MADE BY THE A.O, IN THIS REGARD IS DELETED. 4 4.1 FROM THE ABOVE PARAS FROM THE ORDER OF CIT(A), WE FIN D THAT ONE OF THE BASIS ADOPTED BY THE ASSESSING OFFICER FOR REJECTING BOOK RESULT WAS THAT THE AVERAGE PRICE OF OPENING STOCK AND CLOSING STOCK IS DIFFERENT. ON THIS ASPECT, CIT(A) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE ON THE BASIS THAT THIS OB JECTION OF THE ASSESSING OFFICER IS ILL FOUNDED BECAUSE IT IS NOT THE CASE THAT THE ASSESSEE HAD ONLY ONE ITEM OF SWEET IN ITS OPENING AND THE CLOSING STOCK. HE HAS GIVEN A FINDING THAT THE ASSESSEE HAS AS MANY AS 20 ITEMS IN ITS OPENING STOCK AND CLOSING STOCK AND ALL OF WHICH HAVE VARYING RATES AND THEREFORE, THE AVERAGE PER KG. RATE CANNOT BE COMPARED AND IF IT IS COMPARED, IT WILL BE LIKE COMPARING ORANGES WITH APPLES. WE FIND NO INFIRMITY IN THIS FINDING OF CIT(A) AND THEREFORE, ON THIS ASPECT , WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A). 5. THE SECOND OBJECTION OF THE ASSESSING OFFICER WAS THAT THE ASSESSEE HAS SHOWN CONSUMPTION OF 1,31,867 BOXES AND THE ASSESSEE HAS ALSO SHOWN 788 BOXES AS WASTAGE/DAMAGE BUT THE ASSESSING OFFICER ACCEPTED ONLY 192 BOXES TO BE WASTAGE/DAMAGE AND INFERRED THAT 596 BOXES WERE OVER CONSUMED. THE CIT(A) HAS NOTED THAT THE WASTAGE/DAMAGE SHOWN BY THE ASS ESSEE COMES TO 0.6% OF TOTAL CONSUMPTION OF BOXES DURING THE YEAR, WHICH IS VERY MUCH REASONABLE. THEREAFTER, THE CIT(A) HAS CONCLUDED THAT THE ASSESSING OFFICER HAS REJECTED THE BOOKS OF ACCOUNT AND ADOPTED THE GROSS PROFIT RATE ON THESE ALLEGED DEFICIEN CIES/DISCREPANCIES AND THEREFORE, THE ACTION OF THE ASSESSING OFFICER IS NOT JUSTIFIED. CONSIDERING THE FACTS OF THE PRESENT CASE AND IN VIEW OF ABOVE DISCUSSION, WE FIND THAT BOTH THE BASIS ADOPTED BY ASSESSING OFFICER FOR REJECTING BOOK RESULT AND ADOPT ING HIGHER GROSS PROFIT IS WITHOUT ANY BASIS AND THEREFORE, WE DECLINE TO INTERFERE IN THE ORDER OF CIT(A). 6. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. 5 7. NOW WE TAKE UP THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2009 - 10 I.E. I.T.A. NO.666/LKW/2013. THE GROUNDS ARE AS UNDER: 1. THAT LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.35,24,868/ - BY ADOPTING A G.P. RATE OF 36% INSTEAD OF 23% SHOWN IN BOOKS WHICH WAS RIGHTLY REJECTED AS PER SECTION 145(3 ) OF THE IT. ACT DUE TO DISCREPANCY FOUND IN THE BOOKS OF ACCOUNT DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 2. THAT CIT(A) HAS ERRED IN IGNORING THE DISCREPANCY IN THE BOOKS OF ACCOUNTS AND STOCK VALUATION DONE ON THE BASIS OF PHYSICAL VERIFICATION. 3. THAT CIT(A) HAS ERRED IN LAW AND FACTS IN IGNORING THE PROVISIONS OF THE I . T. ACT AND GIVING HIS FINAL VERDICT ON THE BASIS OF COMMON SENSE AND HIS FAILURE TO COMPREHEND AS MENTIONED IN PARA 5.3.4 OF THE ORDER. 4. THAT THE ORDER OF THE LD. CIT (A) BEING ERRONEOUS IN LAW AND ON FACTS NEEDS TO BE VACATED AND THE ORDER OF THE A.O. BE RESTORED, AND HIS FAILURE TO COMPREHEND AS MENTIONED IN PARA . 8. IN THIS YEAR ALSO , LEARNED D. R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A. R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). BOTH THE SIDES AGREED THAT THE FACTS AND DISPUTE ARE IDENTICAL TO ASSESSMENT YEAR 2008 - 09 AND THEREFORE, IN THIS YEAR ALSO, THE ISSUE MAY BE DECIDED ON SIMILAR LINE AS PER DECISION IN ASSESSMENT YEAR 2008 - 09. IN ASSESSMENT YEAR 2008 - 09, WE HAVE CONFIRMED THE ORDER OF CIT(A) BECAUSE BOTH THE BASIS TAKEN BY THE ASSESSING OFFICER FOR REJECTING BOOK RESULT AND ADOPTING HIGH ER GROSS PROFIT WERE ILL FOUNDED. IN THIS YEAR ALSO, THE ASSESSING OFFICER HAS ADOPTED THE SAME BASIS AND THEREFORE, IN LINE WITH OUR ORDER FOR ASSESSMENT YEAR 2008 - 09, WE DECLINE TO INTERFERE IN THE ORDER OF CIT(A) IN THE PRESENT YEAR ALSO . 9. IN THE RE SULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. 6 10. NOW WE TAKE UP THE CROSS OBJECTIONS IN BOTH THESE YEARS I.E. 2008 - 09 AND 2009 - 2010. AS PER THE CROSS OBJECTION S OF THE ASSESSEE, WE FIND THAT THESE CROSS OBJECTIONS ARE MERELY IN SUPPORT OF THE ORDER S OF CIT(A) AND SINCE WE HAVE UPHELD THE ORDER S OF CIT(A), THE CROSS OBJECTIONS FILED BY THE ASSESSEE HAVE BECOME INFRUCTUOUS AND ARE ACCORDINGLY DISMISSED. 11. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE AND BOTH THE CROSS OBJECTIONS OF THE ASSESSEE AR E DISMISSED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDI CIAL MEMBER ACCOUNTANT MEMBER DATED: 2 8 /04/2015 *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR