ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2, KOTA V. M/S SHIV AGREVO LTD., BARAN

ITA 684/JPR/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1996 (ITAT-JAIPUR)
• Duration Of Justice: 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 01-09-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K C GUPTA
• Assessee Lawyers: MD MAHENDRA GARGIEA
• Keywords: Rejection of books of accounts; Proportionate interest

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 684/JP/2017 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2013-14 THE ACIT, CIRCLE-2, KOTA. CUKE VS. M/S SHIV AGREVO LTD. JHALAWAR ROAD, KALMANDA, BARAN(RAJ). LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AACCS 7224 F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : MD. MAHENDRA GARGIEA (ADV.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI K.C. GUPTA (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 01/03/2018 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 07/03/2018 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF DATED 12.06.2017 OF CIT(A), KOTA FOR A.Y. 2013-14. THE RE VENUE HAS RAISED THE FOLLOWING GROUNDS:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE CIT (A) HAS ERRED IN:- I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE TRADING ADDITI ON OF RS. 60,22,485/- WHETHER THE ASSESSEE HAS DECLARED MORE G.P. IN THE PREVIOUS YEAR IN COMPARISON TO THIS YEAR. ITA NO.684/JP/2017 ACIT VS. M/S SHIV AGREVO LTD. 2 II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE MORE INTEREST PAID OF RS. 1360558/- IN COMPARISON TO RECEIVED INTEREST ON ADV ANCE MONEY. III) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE INTEREST ADDIT ION AMOUNT OF RS. 3038814/- U/S 36(1)(III) WHERE INTEREST FREE LO AN WAS PROVIDED TO SHIV HEALTH FOOD LTD. 2. GROUND NO. 1 IS REGARDING THE TRADING ADDITION M ADE BY THE AO WAS DELETED BY LD. CIT(A). THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF SOLVEX PLANT WITH REFINERY AND PUNGENT PLANT. DURING THE ASSESSMENT PROCEEDINGS, THE AO REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE BY INVOKING THE PROVISIONS OF SECTION 145( 3) OF THE ACT. THE AO HAS DETERMINED THE INCOME OF THE ASSESSEE BY APP LYING G.P. RATE 6.385% AND ACCORDINGLY, THE ADDITION OF RS. 72,22,4 85/- WAS MADE. ON APPEAL, THE LD. CIT(A) THOUGH UPHELD THE REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) HOWEVER, RESTRICTING THE ADDITION OF RS. 12,00,000/- AS AGAINST RS. 72,22,485/- MADE BY THE AO. 3. WE HAVE HEARD LD. DR AS WELL AS LD. AR AND CONSI DERED THE RELEVANT MATERIAL ON RECORD THE AO HAS COMPUTED THE WEIGHTED AVERAGE G.P. RATE AS PER TURNOVER OF THE ASSESSEE INSTEAD O F APPLYING THE AVERAGE OF GP RATE DECLARED BY THE ASSESSEE IN THE PAST YEARS WHICH IS ACCEPTED OR THE GP RATE ATTAINED FINALITY. THE LD. CIT(A) RESTRICTED THE ITA NO.684/JP/2017 ACIT VS. M/S SHIV AGREVO LTD. 3 ADDITION BY TAKING AN ADHOC LUMP SUM DISALLOWANCE O F RS. 12 LACS INSTEAD OF APPLYING ANY REASONABLE AND PROPER BASIS . THE LD. AR OF THE ASSESSEE HAS RELIED UPON THE DECISION OF THIS TRIBU NAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2011-12 HOWEVER, WE FI ND THAT THE TRIBUNAL FOR THE YEAR A.Y. 2011-12 HAS NOT GONE INT O ISSUE OF REASONABLE AND PROPER ESTIMATE BY APPLYING THE AVERAGE G.P. R ATE OF THE PAST HISTORY OF THE ASSESSEE AS HELD BY THE HONBLE JURI SDICTION HIGH COURT IN CASE OF CIT VS. GUPTA K.N. CONSTRUCTION CO. 116 DTR 377 AS WELL AS OTHER DECISIONS ON THIS POINT WHEREIN IT HAS BEEN H ELD THAT THE BEST GUIDE IN THE CASES OF FAIR ESTIMATION IS PAST HISTO RY OF GP RATE DECLARED BY THE ASSESSEE. 4. ON THE OTHER HAND LD. DR HAS STRONGLY RELIED UPO N THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE AO APP LYING WEIGHTED AVERAGE GP RATE WHICH IS MORE PROPER. WE FIND THAT EXCEPT FOR THE ASSESSMENT YEARS 2009-10 AND 2011-12 FOR OTHER ASSE SSMENT YEARS 2008-09 AND 2010-11 THE GP RATE DECLARED BY THE ASS ESSEE WAS ACCEPTED BY THE AO. FOR THE ASSESSMENT YEAR 2009-10 THE G.P. RATE WAS ADOPTED AT 5.30% AS AGAINST THE GP RATE DECLARED BY THE ASSESSEE AT 5.13%. FOR THE ASSESSMENT YEAR 2011-12 THE ASSESSEE DECLARED GP RATE 4.09% AND THE TRIBUNAL HAS ESTIMATED GP RATE OF 4.2 0%. THEREFORE, THE ITA NO.684/JP/2017 ACIT VS. M/S SHIV AGREVO LTD. 4 G.P. WHICH HAS ATTAINED FINALITY SHALL BE CONSIDER FOR TAKING THE AVERAGE OF G.P. THE INCOME OF THE ASSESSEE SHALL BE COMPUTE D ON THE BASIS OF THE AVERAGE G.P. RATE DECLARED AND ATTAINED FINALIT Y FOR THE LAST 5 YEARS WHICH IS AS UNDER:- A.Y. GP RATE 2008-09 5.34% 2009-10 5.30% 2010-11 2.43% 2011-12 4.20% 2012-13 6.996% 5 YEARS AVERAGE 4.8532 THE GP RATE DECLARED BY THE ASSESSEE FOR THE YEAR U NDER CONSIDERATION IS 6.056%. THEREFORE,IF WE COMPARE THE AVERAGE G.P. OF PAST HISTORY WITH THE G.P. DECLARED FOR THE YEAR UNDER CONSIDERA TION THE G.P. FOR THE YEAR UNDER CONSIDERATION IS MORE THAN THE AVERAGE F IGURE OF GP AND THEREFORE, EVEN IF THE BOOKS OF ACCOUNTS OF THE ASS ESSEE ARE REJECTED IT MAY NOT NECESSARY BY LEAD TO ANY ADDITION TO THE TO TAL INCOME OF THE ASSESSEE. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. ITA NO.684/JP/2017 ACIT VS. M/S SHIV AGREVO LTD. 5 5. GROUND NO. 2 AND 3 ARE REGARDING DISALLOWANCE OF INTEREST ON ACCOUNT OF CHARGING SHORT INTEREST OR INTEREST FREE LOAN TO THE SISTER CONCERNS. THE ASSESSING OFFICER HAS MADE A PROPORTI ONATE DISALLOWANCE ON ACCOUNT OF INTEREST EXPENDITURE ON THE GROUND TH AT THE ASSESSEE HAS GIVEN LOAN TO ITS SISTER CONCERNS BY CHARGING SHORT INTEREST IN COMPARISON TO THE INTEREST PAID BY THE ASSESSEE AS WELL AS THE LOAN GIVEN TO THE SISTER CONCERNS FREE OF INTEREST. THE LD. CIT(A) DELETED THE DISALLOWANCE MADE BY THE AO BY HOLDING THAT THE ASS ESSEES OWN FUND ARE SUFFICIENT FOR ADVANCING MONEY TO THE SISTER CO NCERNS. 6. WE HAVE HEARD LD. DR AS LD. AR AND CONSIDERED TH E RELEVANT MATERIAL ON RECORD. THE LD. DR HAS RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT WHEN THE ASSES SEE HAS FAILED TO ESTABLISH THE NEXUS BETWEEN THE INTEREST FREE FUND AVAILABLE WITH THE ASSESSEE AND ADVANCE GIVEN TO THE ASSOCIATED CONCER NS THE DISALLOWANCE OF PROPORTIONATE INTEREST IS JUSTIFIED . 7. ON THE OTHER, LD. AR HAS RELIED UPON THE ORDER O F THIS TRIBUNAL FOR THE ASSESSMENT YEAR 2011-12 AND SUBMITTED THAT AN I DENTICAL ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSES SEE. THE LD. AR HAS ALSO RELIED UPON THE VARIOUS DECISIONS AS UNDER:- ITA NO.684/JP/2017 ACIT VS. M/S SHIV AGREVO LTD. 6 ACIT VS. M/S SHIV AGREVO ALTD. IN ITA NO. 453/JP/20 16 DATED 11.05.2017. ACIT VS. RAM KISHAN VERMA 143 TTJ 1. CIT VS. RAM KISHAN VERMA 132 DTR 107. MUNJAL SALES CORPORATION VS. CIT 298 ITR 298. 8. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD WE ARE OF THE VIEW THAT AS FAR A S THE PRINCIPLE LAID DOWN IN THE VARIOUS DECISIONS AS RELIED UPON BY THE LD. AR THERE IS NO QUARREL THAT IF THE ASSESSEES OWN FUNDS IS MORE SU FFICIENT TO ADVANCE THE INTEREST FREE LOAN TO THE SISTER CONCERNS THEN NO DISALLOWANCE IS CALLED FOR ON ACCOUNT OF INTEREST EXPENDITURE. THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2011-12 HAD UPHELD THE ORDER OF THE LD. CIT(A) ON THE GROUND THAT THE ASSESSEES OWN FU NDS ARE SUFFICIENT FOR GIVING THE LOAN ADVANCES TO THE SISTER CONCERNS THEREFORE, TO THE EXTENT OF LOAN AND ADVANCES GIVEN IN THE EARLIER YE ARS THE ISSUE IS COVERED BY THE DECISION OF THIS TRIBUNAL IN ASSESSE ES OWN CASE FOR A.Y. 2011-12. HOWEVER, WE FIND THAT DURING THE YEAR UNDE R CONSIDERATION THE ASSESSEE HAS GIVEN FRESH LOAN AND ADVANCES TO THE T UNE OF RS. 9.7 CROES. THEREFORE, TO THE EXTENT OF THE LOAN AND ADV ANCES GIVEN DURING THE YEAR UNDER CONSIDERATION THE AVAILABILITY OF AS SESSEES OWN FUNDS IS REQUIRED TO BE EXAMINED. WE NOTE THAT AS PER THE BA LANCE SHEET AS ON ITA NO.684/JP/2017 ACIT VS. M/S SHIV AGREVO LTD. 7 31.03.2013 AT PAGE 19 OF THE PAPER BOOK THE ASSETS AND LIABILITIES REVEALS THAT DURING THE YEAR UNDER CONSIDERATION TH E ASSESSEE HAS ADDED FIXED ASSET OF ABOUT RS. 1 CRORE AND FURTHER THERE IS AN INCREASE OF TRADE DEBTOR FROM RS. 2.27 CRORES TO RS. 4.08 CR ORES. THE CURRENT LIABILITIES SHOW THAT THE BORROWING ARE ONLY FOR TH E SHORT TERM AND THEREFORE, ARE NOT MEANT FOR ACQUIRING THE FIXED AS SET. THUS THE AVAILABILITY OF THE ASSESSEES OWN FUND IS REQUIRED TO BE EXAMINED AND VERIFIED BY CONSIDERING ALL THE FACTS. NEITHER THE AO NOR THE LD. CIT(A) HAS GONE ONLY THE FACTUAL ASPECT OF THE ISSUE. THE LD. CIT(A) HAS JUST TAKEN INTO CONSIDERATION THE BALANCE OF SHARE CAPIT AL AND RESERVED FUND WITHOUT EXAMINING THE APPLICATION OF THE FUND DURIN G THE YEAR UNDER CONSIDERATION OTHER THAN THE LOAN AND ADVANCES GIVE N TO THE SISTER CONCERNS. THE ASSESSEE IS ALSO REQUIRED TO FILED TH E PROPER FUND/CASH FLOW STATEMENT TO SHOW THAT THE AVAILABILITY OF THE ASSESSEES OWN FUNDS FOR FRESH LOAN AND ADVANCES GIVEN DURING THE YEAR T O THE TUNE OF RS. 9.7 CRORES. ACCORDINGLY IN THE FACTS AND CIRCUMSTANCES OF THE CASE WE SET ASIDE THIS ISSUE TO THE RECORD OF THE AO TO EXAMINE THE AVAILABILITY OF THE ASSESSEES OWN FUND TO THE EXTENT OF THE LOAN A ND ADVANCES GIVEN TO THE SISTER CONCERNS DURING THE YEAR UNDER CONSID ERATION. ITA NO.684/JP/2017 ACIT VS. M/S SHIV AGREVO LTD. 8 IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES ORDER PRONOUNCED IN THE OPEN COURT ON 07/03/2018. SD/- SD/- FOE FLAG ;KNO FOT; IKY JKO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 07/03/2018. * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- ACIT, CIRCLE-2, KOTA. 2. IZR;FKHZ@ THE RESPONDENT- M/S SHIV AGREVO LTD., BARAN. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 684/JP/2017} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR