DCIT Circle 1(1), Jabalpur V. M/s. Sharad Traders,

ITA 8/JAB/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87487 (ITAT-JABALPUR)
• Duration Of Justice: 2 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 04-02-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 11-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHISHEK SHUKLA
• Assessee Lawyers: POONAM JAIN
• Section: 143(3)

Judgement Text

I.T.A. NO. 08/JAB/2013 ASSESSMENT YEAR 2007-08 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL JABALPUR BENCH, JABALPUR [CORAM: I C SUDHIR JM AND PRAMOD KUMAR AM] I.T.A. NO. 08/JAB/2013 ASSESSMENT YEAR: 2007-08 A.C.I.T., CIRCLE 1(1), .APPELLANT JABALPUR. VS. M/S SHARAD TRADERS, .RESPO NDENT GAYA DATT WARD, STATIONGANJ, NARSINGPUR (MP). [PAN:AAQFS 3021 D ] APPEARANCES BY: ABHISHEK SHUKLA FOR THE APPELLANT POONAM JAIN FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING: 4 TH FEBRUARY, 2015 DATE OF PRONOUNCING THE ORDER: 31 ST MARCH, 2015 O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HA S CHALLENGED CORRECTNESS OF ORDER DATED 28 TH FEBRUARY 2012 PASSED BY THE LEARNED CIT(A), IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX A CT, 1961, FOR THE ASSESSMENT YEAR 2010-11, ON THE FOLLOWING GROUND: 1. ON FACTS AND CIRCUMSTANCES, LD. CIT (A) HAS ERR ED IN OVERLOOKING THE FACT THAT IN A COMPETITIVE BUSINESS, THE MODE OF MA RKETING AND BUSINESS ARE ALMOST IDENTICAL. HENCE, APPEAL MAY BE FILED ON THE ISSUE OF SHORTAGE OF YIELD. I.T.A. NO. 08/JAB/2013 ASSESSMENT YEAR 2007-08 PAGE 2 OF 4 2. THE RELEVANT MATERIAL FACTS AS CULLED OUT FROM M ATERIAL BEFORE US ARE AS FOLLOWS. THE ASSESSEE IS A PARTNERSHIP FIRM DERIVIN G INCOME FROM BUSINESS OF TRADING IN GRAINS AND RUNNING A DAL MILL. DURING TH E COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE NET PROFIT DISCLOSED BY THE ASSESSEE IS TOO LOW. IT WAS IN THIS BACKDROP THAT T HE ASSESSING OFFICER PROBED THE MATTER FURTHER. HE WAS OF THE VIEW THAT WHEN RESULT S SHOWN BY THE ASSESSEE ARE CONTRASTED WITH THE RESULTS SHOWN BY ANOTHER ASSESS EE ASSESSED BY THE SAME ASSESSING OFFICER, NAMELY GOVIND DAL MILLS, THE BO OKS OF ASSESSEE HAS BECOME (SIC) UNRELIABLE. HE THEN PROCEEDED TO OBSERVE THA T IN VIEW OF THESE FACTS AND CIRCUMSTANCES, THE CASE IS BEING ASSESSED AS BELOW BY MAKING SUITABLE ADJUSTMENTS TO THE INCOME OF THE ASSESSEE. THE ASS ESSING OFFICER NOTED THAT WHILE THE ASSESSEE HAS SHOWN DAL PRODUCTION AT 80.9 8% OF THE DAL ENTERED IN MILLING, AND BYE PRODUCT AND SHORTAGE WAS SHOWN AT 17.98% AND 1.04% RESPECTIVELY, THE CORRESPONDING FIGURES IN THE CASE OF GOVIND DAL MILL ARE SHOWN AS 84.56%, 15.19% AND 0.25% RESPECTIVELY. THE ASSES SING OFFICER PROCEEDED TO ADOPT THE YIELD RESULTS, IN PERCENTAGE TERMS AND AS DISCLOSED BY GOVIND DAL MILL, AS ACCEPTABLE NORMS AND COMPUTED PRODUCTION AND WAS TAGE FIGURES ON THAT BASIS. THE VARIATION IN THE CASE OF THE ASSESSEE WA S TREATED AS UNACCOUNTED SALES. ACCORDINGLY, AN ADDITION OF RS.33,39,616 WAS MADE TO THE INCOME RETURNED BY THE ASSESSEE. WHILE DOING SO, THE ASSESSING OFFI CER FURTHER OBSERVED THAT, THIS ADDITION HAS BEEN MADE AFTER OVERLOOKING VERY HIGH PACKING EXPENSES BY THE ASSESSEE @ 2.18% AND MANUFACTURING EXPENSES @ 2 .12% IN COMPARISON TO 0.92% AND 0.95% RESPECTIVELY IN THE CASE OF GOVIND DAL MILL. AGGRIEVED BY THE ADDITION SO MADE BY THE ASSESSING OFFICER, ASSESSEE CARRIED THE MATTER IN APPEAL I.T.A. NO. 08/JAB/2013 ASSESSMENT YEAR 2007-08 PAGE 3 OF 4 BEFORE THE CIT(A) WHO REVERSED THE ACTION OF THE AS SESSING OFFICER OBSERVING AS FOLLOWS : DECISION (GROUND NO. 1): I HAVE PERUSED THE MATERIAL ON RECO RD AND SUBMISSION OF THE COUNSEL CAREFULLY. I FIND THAT TH E AO HAS NOT ELABORATED IN THE ORDER OR IN THE REMAND REPORT THE LOCATION AND THE PRODUCTION PROCESS OF THE COMPARABLE CASE M/S GOVIND DAL MILL. AS THE APP ELLANT IS IN THE BUSINESS OF MILLING OF DAL, THE LOCATION WOULD AFFECT THE RA W MATERIAL (BATRI DAL) PROCURED. THE APPELLANT HAS ALSO CONTENDED THAT IT WORKS THROUGHOUT THE RAINY SEASON IN TWO SHIFTS. THIS WOULD DEFINITELY A FFECT THE MOISTURE CONTENT IN THE DAL. IT HAS ALSO BEEN CONTENDED THAT THE APP ELLANT HAS A TWO STEP DRYING PROCESS AND ALSO USES THE DRYING PROCESS ON ITS FINISHED PRODUCTS WHICH WOULD AUTOMATICALLY REDUCE THE WEIGHT OF THE FINISHED PRODUCTS. THE PROCESS OF PRODUCTION OF THE APPELLANT HAS NOT BEEN REFUTED BY THE AO. THE PROCESS OF PRODUCTION OF M/S. GOVIND DAL MILL HAS N OT BEEN DETAILED BY THE AO. THUS, AS BOTH THE LOCATION AND PRODUCTION PROCE SS OF M/S GOVIND DAL MILL HAS NOT BEEN BROUGHT OUT IN EITHER THE ASSESSMENT O RDER OR THE REMAND REPORT, I FIND THAT IT CANNOT BE TREATED AS A COMPA RABLE CASE. THE AO HAS BEEN UNABLE TO SHOW THAT DESPITE THE ANOMALIES POINTED O UT BY THE APPELLANT IN THE BOOKS OF ACCOUNTS OF M/S. GOVIND DAL MILL, ITS TRAD ING RESULTS COULD BE RELIED UPON TO MAKE IT A COMPARABLE CASE. THE FACT THAT A SHORTAGE OF 2.10% FOR A. YR. 05-06 HAS BEEN ACCEPTED BY THE AO U/S. 143(3) C ANNOT BE IGNORED. IN VIEW OF THE ABOVE, THE ADDITION MADE BY THE AO OF RS.33, 39,616.00 ON ACCOUNT OF SHORTAGE OF YIELD TREATING THE SAME AS UNACCOUNTED SALE OF DAL CANNOT BE SUSTAINED. HENCE, THE ADDITION STANDS DELETED. THIS GROUND OF APPEAL IS ALLOWED. 3. THE ASSESSING OFFICER IS AGGRIEVED OF THE RELIEF SO GIVEN BY THE CIT(A) AND IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF T HE APPLICABLE LEGAL POSITION. 5. WE FIND THAT THE ASSESSING OFFICER HAD SIMPLY DI SREGARDED THE BOOK RESULTS ON THE BASIS OF BETTER RESULTS SHOWN BY A S IMILARLY PLACED ASSESSEE. THIS APPROACH, IN OUR HUMBLE UNDERSTANDING, IS WHOLLY DE VOID OF ANY LEGALLY SUSTAINABLE MERITS PARTICULARLY WHEN NO DEFECTS IN THE BOOKS OF ACCOUNTS ARE I.T.A. NO. 08/JAB/2013 ASSESSMENT YEAR 2007-08 PAGE 4 OF 4 EVEN ALLEGED BY THE ASSESSING OFFICER. THE FACT OF A SIMILARLY PLACED ASSESSEE SHOWING BETTER RESULTS CAN AT BEST BE A STARTING PO INT FOR FURTHER DETAILED VERIFICATION, BUT SUCH A FACT, BY ITSELF, CAN NEVER BE REASON ENOUGH FOR REJECTION OF THE BOOKS OF ACCOUNTS. IN ANY EVENT, EVEN ON MER ITS, LEARNED CIT(A)S REASONING FOR DELETING THE ADDITION APPEALS TO US. THE YIELD ESSENTIALLY DEPENDS ON THE MANUFACTURING PROCESS EMPLOYED, MOISTURE CON TENTS IN THE INPUTS AND OTHER VARIABLES AND CAN NEVER BE STATIC IN ALL SITU ATIONS. THE STAND OF THE ASSESSING OFFICER IS BASED ON SWEEPING GENERALIZATI ON. 6. FOR THE REASONS SET OUT ABOVE, WE SEE NO REASONS TO INTERFERE IN THE MATTER. THE RELIEF GRANTED BY THE CIT(A) IS CONFIRM ED . 7. IN THE RESULT, APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT TODAY ON 31 ST MARCH, 2015. SD/- SD/- I C SUDHIR PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: THE 31 ST DAY OF MARCH, 2015 *AKS/- COPIES 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 JABALPUR BENCH, JABALPUR