ITO, CHENNAI V. Paul Devaraj, CHENNAI

ITA 885/CHNY/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7580 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 22-01-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 06-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PATHLAVATH PEERYA
• Assessee Lawyers: S SRIDHAR
• Keywords: Business income; Peak credit; Cost of acquisition

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . . . , . !' , $ % BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.885/MDS/2013 ' (' / ASSESSMENT YEAR : 2009-10 THE INCOME TAX OFFICER, WARD XI(4), KANNAMMAI BUILDING, NO.611, ANNA SALAI, CHENNAI - 600 006. PAN : AGLPP 7298 N V. SHRI PAUL DEVARAJ, NO.16/7, 7 TH MAIN ROAD, THIRUVALLUVAR NAGAR, CHENNAI - 600 118. (*+/ APPELLANT) (,-*+/ RESPONDENT) *+ . / / APPELLANT BY : SH. PATHLAVATH PEERYA, CIT ,-*+ . / / RESPONDENT BY : SHRI S. SRIDHAR, ADVOCATE 0 . 1$ / DATE OF HEARING : 22.01.2016 2!( . 1$ / DATE OF PRONOUNCEMENT : 24.03.2016 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-IV, CHENNA I, DATED 27.12.2012 AND PERTAINS TO ASSESSMENT YEAR 2009-10. 2. THE FIRST GROUND OF APPEAL IS WITH REGARD TO ADD ITION OF ` 1,29,716/-. 2 I.T.A. NO.885/MDS/13 3. SH. PATHLAVATH PEERYA, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASSESSING OFFICE R MADE AN ADDITION OF ` 1,29,716/- DUE TO NEGATIVE BALANCE IN THE BOOKS OF ACCOUNT. HOWEVER, THE CIT(APPEALS) BY FOLLOWING PE AK METHOD DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. ACCORDING TO THE LD. D.R., THE DIFFERENCE BETWEEN THE UNEXPLAINE D BALANCES AND CLOSING BALANCES SHALL REPRESENT THE UNACCOUNTED PU RCHASES MADE BY THE ASSESSEE. REFERRING TO ANNEXURE-1 TO THE ASSESSMENT ORDER, THE LD. D.R. SUBMITTED THAT AS ON 17.12.2008 , THE CREDIT WAS ONLY ` 200/-. HOWEVER, THE ASSESSEE DEBITED ` 25,000/-. SIMILARLY, ON 18.12.2008, THE CREDIT WAS ` 285/- AND THE ASSESSEE AGAIN DEBITED ` 25,000/-. BECAUSE OF THE NEGATIVE BALANCES IN THE ACCOUNT, THE ASSESSING OFFICER FOUND THAT THERE WAS UNACCOUNTED PURCHASES. 4. ON THE CONTRARY, SHRI S. SRIDHAR, THE LD.COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE WORKED OUT TH E PEAK CREDIT AND FOUND THE NEGATIVE BALANCES TO THE EXTENT OF ` 1,29,716/-. ACCORDING TO THE LD. COUNSEL, THE PURCHASE INVOICES CONTAINED THE SALES AND DATES ON WHICH THE PAYMENTS WERE MADE. O N 26.03.2009, THE ASSESSEE WITHDREW A SUM OF ` 10,00,000/- FROM THE 3 I.T.A. NO.885/MDS/13 BANK AND UTILIZED THE SAME TO MAKE PAYMENT TO AGRIC ULTURISTS. THE WITHDRAWAL OF MONEY FROM THE BANK WAS SHOWN ON 26.0 3.2009. THE PAYMENTS MADE TO AGRICULTURISTS WERE NOT SEPARATELY SHOWN AS PAID ON 11.03.2009. THE ASSESSING OFFICER HAS VERIFIED THIS. SINCE THERE ARE NO MISTAKES IN ACCOUNTING THE PURCHASES, SALES AND EXPENSES, THE ASSESSING OFFICER IS NOT JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT. REFERRING TO PAGE 6 OF THE ORDER OF THE CIT(APPEALS), THE LD.COUNSEL SUBMITTED THAT THE NEG ATIVE BALANCE BY ADOPTING PEAK CREDIT COMES TO ONLY ` 1,29,716/-. THEREFORE, THE CIT(APPEALS) HAS RIGHTLY RESTRICTED THE SAME TO ` 1,29,716/-. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER FOUND THAT THERE WAS DEFICIT CASH BALANCE O F ` 10,52,899.96. THE ASSESSING OFFICER FURTHER FOUND THAT THE NEGATI VE CASH BALANCE IN THE BOOKS OF ACCOUNT IS A RESULT OF INTRODUCTION OF UNACCOUNTED MONEY IN THE BOOKS OF ACCOUNT. THE CIT(APPEALS) BY CONSIDERING THE PEAK OF DEFICIT CASH BALANCE RESTRICTED THE ADD ITION TO ` 1,29,716/- INSTEAD OF ` 10,52,899.96. THE CIT(APPEALS) HAS ALSO FOUND THAT INTRODUCTION OF UNACCOUNTED CASH IN THE BOOKS OF ACCOUNT OR THE NEGATIVE CASH BALANCE HAVE NO IMPACT ON THE PROFIT OF THE 4 I.T.A. NO.885/MDS/13 BUSINESS. NO DOUBT, THE PROFIT OF THE BUSINESS IS CALCULATED ON THE SALES, PURCHASES AND OTHER EXPENSES INCURRED DURING THE YEAR UNDER CONSIDERATION. THE QUESTION ARISES FOR CONSI DERATION IS WHETHER THE ASSESSEE HAS INTRODUCED ANY UNACCOUNTED MONEY FOR PURCHASES? IF THE ASSESSEE INTRODUCED UNACCOUNTED CASH FOR PURCHASES OR THE SALES WERE NOT RECORDED IN THE BOO KS OF ACCOUNT, THEN THIS WILL DEFINITELY HAVE IMPACT ON THE PROFIT OF THE ASSESSEE. IN THE CASE BEFORE US, THE ASSESSEE APPEARS TO HAVE PU RCHASED TURMERIC THROUGH AGRICULTURAL MARKET COMMITTEE. TH E TURMERIC BEING AN AGRICULTURAL PRODUCE, THE ASSESSEE HAS TO NECESS ARILY MAKE PAYMENT IN CASH TO THE AGRICULTURISTS. IT IS NOT T HE CASE OF THE REVENUE THAT PURCHASES AND SALES WERE NOT RECORDED IN THE BOOKS OF ACCOUNT. AS RIGHTLY SUBMITTED BY THE LD.COUNSEL FOR THE ASSESSEE, THE NEGATIVE BALANCE WAS WITHDRAWAL OF FUNDS FROM T HE BANK AND PAYMENTS WERE MADE TO AGRICULTURISTS IN CASH IN A L ATER DATE. THEREFORE, REJECTION OF BOOKS OF ACCOUNT IS NOT JUS TIFIED AT ALL. IN SUCH CIRCUMSTANCES, ADOPTING PEAK CREDIT IS THE ONL Y METHOD TO FIND OUT THE CASH BALANCE. THEREFORE, THE CIT(APPEALS) HAS RIGHTLY RESTRICTED THE NEGATIVE BALANCE TO ` 1,29,716/-. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH T HE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY, THE SAME IS CONFIR MED. 5 I.T.A. NO.885/MDS/13 6. THE NEXT GROUND OF APPEAL IS WITH REGARD TO UNEX PLAINED CREDITORS AND PURCHASES TO THE EXTENT OF ` 68,11,102/-. 7. SH. PATHLAVATH PEERYA, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASSESSING OFFICE R CALLED FOR CONFIRMATIONS IN RESPECT OF 11 CREDITORS. HOWEVER, ONLY THREE CREDITORS CONFIRMED THE CREDIT IN THE NAME OF RAJ E NTERPRISE. THE BALANCE CREDITS TO THE EXTENT OF ` 33,04,179/- WAS NOT CONFIRMED. THE ASSESSING OFFICER, AFTER CONSIDERING THE REPLY FILED BY THE ASSESSEE, FOUND THAT ALL THE 76 CLOSED CREDITORS TO WHOM CASH WAS GIVEN, THE ASSESSEE HAS NOT FURNISHED THE ADDRESS O F THE CREDITORS AND THE CONFIRMATION OF THE CREDITORS WAS ALSO NOT FURNISHED. THE ASSESSEE HAS NOT PROVED THE GENUINENESS OF THE TRAN SACTIONS OF PURCHASE. THEREFORE, THE ASSESSING OFFICER TREATED THE TRANSACTIONS OF PURCHASE TO THE EXTENT OF ` 35,06,923/- AS NON-GENUINE PURCHASES AND ` 33,04,179/- CLAIMED IN RESPECT OF CREDIT PURCHASES WAS NOT CONFIRMED. THEREFORE, THE ASSESSING OFFICER TOTALL Y ADDED A SUM OF ` 68,11,102/- TOWARDS UNPROVED PURCHASES. THE CIT(AP PEALS), HOWEVER, DELETED THE ADDITION MADE BY THE ASSESSING OFFICER ON THE GROUND THAT THE ASSESSEE WAS PURCHASING TURMERIC FR OM AGRICULTURAL MARKET COMMITTEE AND THE ENTIRE TRANSACTIONS WERE M ONITORED BY 6 I.T.A. NO.885/MDS/13 THE COMMITTEE. ACCORDINGLY, HE DELETED THE ADDITIO N. THE LD. D.R. SUBMITTED THAT IN THE ABSENCE OF ANY CONFIRMATION F ROM THE RESPECTIVE SUPPLIERS OF THE PRODUCT AND THE CREDITO RS, THE ASSESSING OFFICER HAS RIGHTLY MADE THE ADDITION. 8. ON THE CONTRARY, SHRI S. SRIDHAR, THE LD.COUNSEL FOR THE ASSESSEE, SUBMITTED THAT ALL THE PURCHASES WERE MAD E BY GOVERNMENT REGULATED MARKETS AT SALEM AND ERODE. T HE BILLS WHICH ARE IN POSSESSION OF THE REVENUE DISCLOSED TH E SAME. SINCE THE ENTIRE PURCHASES AND TRANSACTIONS HAD TO BE MAD E ONLY THROUGH AGRICULTURAL MARKET COMMITTEE, THE ASSESSING OFFICE R CANNOT CLAIM THAT THE PURCHASES WERE OUTSIDE THE BOOKS OF ACCOUN T. ACCORDING TO THE LD. COUNSEL, THE PURCHASES MADE BY THE ASSESSEE CAN BE VERIFIED THROUGH AGRICULTURAL MARKET COMMITTEE. SI NCE SUCH AN EXERCISE WAS NOT MADE BY THE ASSESSING OFFICER, THE CIT(APPEALS) HAS RIGHTLY DELETED THE ADDITION MADE BY THE ASSESS ING OFFICER. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE ASSESSEE HAS NOT FURNISHED ALL THE ADDRESSES OF THE PERSONS FROM WHOM THE PURCHASES WERE MADE. THE ASSESSEE, HOWEVE R, CLARIFIED BEFORE THE ASSESSING OFFICER THAT THE PURCHASES WER E MADE FROM 7 I.T.A. NO.885/MDS/13 GOVERNMENT REGULATED MARKET COMMITTEE. THE FACT TH AT THE TURMERIC WAS PURCHASED THROUGH REGULATED MARKETS IS NOT IN D ISPUTE. WHEN THE REGULATED MARKET COMMITTEE WAS MONITORING THE T RANSACTIONS AND PURCHASES OF TURMERIC, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER COULD HAVE VERY WELL EXA MINED THE ACTUAL PURCHASES MADE BY THE ASSESSEE AND THE DETAILS OF T HE AGRICULTURISTS. INSPITE OF THE FACT THAT THE ASSES SEE HAS DISCLOSED THE DETAILS OF THE PURCHASES OF TURMERIC AND THE FACT T HAT THE AGRICULTURAL COMMITTEE IS MONITORING THE TRANSACTIONS OF THE ASS ESSEE, THE ASSESSING OFFICER HAS NOT TAKEN ANY STEPS TO EXAMIN E THE GENUINENESS OF THE TRANSACTIONS. IN THOSE CIRCUMST ANCES, DISALLOWING THE CLAIM OF THE ASSESSEE AS NON-GENUIN E IS NOT JUSTIFIED. THEREFORE, THE CIT(APPEALS) HAS RIGHTLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. THIS TRIBU NAL DO NOT HAVE ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY, THE SAME IS CONFIRMED. 10. THE NEXT GROUND OF APPEAL IS WITH REGARD TO PUB LICITY EXPENSES OF ` 33,15,000/-. 11. SH. PATHLAVATH PEERYA, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASSESSEE HAS CLA IMED PUBLICITY 8 I.T.A. NO.885/MDS/13 EXPENSES OF ` 33,15,000/-. ACCORDING TO THE LD. D.R., THE ASSESS EE IS MANUFACTURING TURMERIC POWDER AND SUPPLYING THE SAME TO HIS OWN RELATED CONCERN, NAMELY, AACHI GROUP. THEREFORE , THERE IS NO NEED FOR THE ASSESSEE TO INCUR ANY PUBLICITY EXPENS ES. ACCORDING TO THE LD. D.R., WHEN THE PRODUCT WAS MARKETED IN THE NAME OF AACHI GROUP, THERE IS NO NECESSITY FOR THE ASSESSEE TO IN CUR ANY PUBLICITY EXPENSES. THEREFORE, THE CIT(APPEALS) IS NOT JUSTIF IED IN ALLOWING THE CLAIM OF THE ASSESSEE. 12. ON THE CONTRARY, SHRI S. SRIDHAR, THE LD.COUNSE L FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE IS MANUFACTUR ING AND SUPPLYING TURMERIC POWDER TO AACHI GROUP OF CONCERN WHO, IN TURN, MARKET THE SAME ALONG WITH THEIR OWN PRODUCT LIKE M ASALA. THE ADVERTISEMENTS ARE BASICALLY FOR THE AACHI PRODUCTS . ACCORDING TO THE LD. COUNSEL, IF THE BRAND NAME AACHI SPREADS IN TO THE MARKET, THE PRODUCT MANUFACTURED BY THE ASSESSEE, NAMELY, T URMERIC WOULD ALSO PENETRATE THE MARKET AND RESULTANTLY THE ASSES SEE WOULD BE BENEFITED BY INCREASING ITS TURNOVER. THE ADVERTIS EMENT FOR AACHI PRODUCTS WOULD DEFINITELY BENEFIT THE ASSESSEE FOR SALE OF HIS OWN PRODUCT. THE FACT IS THAT THE ASSESSEES PRODUCT WAS SOLD IN THE MARKET IN THE BRAND NAME OF AACHI. THEREFORE, INC URRING THE 9 I.T.A. NO.885/MDS/13 EXPENDITURE BY THE ASSESSEE IS ONLY FOR INCREASING THE TURNOVER OF THE ASSESSEE AND NOT FOR THE BENEFIT OF ANYBODY ELS E. MERELY BECAUSE INCIDENTALLY IT WOULD BENEFIT AACHI GROUP O F CONCERN THAT CANNOT BE A REASON FOR DISALLOWING THE CLAIM OF THE ASSESSEE. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE IS MANUFACTURING AND SELL ING TURMERIC POWDER IN THE BRAND NAME OF AACHI. AACHI GROUP IS MARKETING THE TURMERIC POWDER MANUFACTURED BY THE ASSESSEE IN THE IR OWN BRAND NAME ALONG WITH OTHER PRODUCTS MANUFACTURED BY THEM . THE CLAIM OF THE ASSESSEE IS THAT ADVERTISEMENT MADE BY THE A SSESSEE TO PROMOTE THE BRAND NAME AACHI WOULD DIRECTLY BENEF IT THE ASSESSEE IN INCREASING THE TURNOVER. THIS TRIBUNAL IS OF TH E CONSIDERED OPINION THAT WHEN THE ASSESSEE IS MANUFACTURING TUR MERIC POWDER AND MARKETING THE SAME IN THE BRAND NAME OF AACHI THROUGH AACHI GROUP, PROMOTING THE BRAND NAME AACHI IN THE MARK ET WOULD INCREASE THE MARKET SHARE OF THE ASSESSEE. THIS WO ULD DIRECTLY INCREASE THE TURNOVER IN THE MARKET. CONSEQUENTLY, THE PROFIT OF THE ASSESSEE WOULD GO UP. THEREFORE, THE EXPENDITURE I NCURRED BY THE ASSESSEE IS ONLY FOR THE BUSINESS PURPOSE. MERELY BECAUSE THE 10 I.T.A. NO.885/MDS/13 AACHI GROUP GETS INCIDENTAL BENEFIT THAT CANNOT BE A REASON TO DISALLOW THE CLAIM OF THE ASSESSEE. THEREFORE, THI S TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY, THE SAME IS CONFIRMED. 14. THE NEXT GROUND OF APPEAL IS WITH REGARD TO ENH ANCEMENT OF TURNOVER AND ESTIMATING PROFIT OF THE ASSESSEE. 15. SH. PATHLAVATH PEERYA, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASSESSING OFFICE R BY COMPARING THE PACKING MATERIAL CONSUMED BY THE ASSESSEE VIS- -VIS THE ACTUAL QUANTITY OF TURMERIC POWDER SOLD, ESTIMATED THE GRO SS PROFIT. THE ASSESSEE CLAIMED THAT 19,75,167.60 KGS OF TURMERIC POWDER WAS SOLD IN THE MARKET. HOWEVER, THE ASSESSING OFFICER CALCULATED THE PROBABLE SALE OF TURMERIC POWDER IN THE MARKET AT 3 7,90,500 KGS. THIS CALCULATION OF THE ASSESSING OFFICER WAS BASED ON THE PACKING MATERIAL CONSUMED BY THE ASSESSEE. THE ASSESSING O FFICER ACCORDINGLY ESTIMATED THE TOTAL SALES FOR THE YEAR UNDER CONSIDERATION AT ` 18,19,44,000/- AS AGAINST THE SALE DECLARED BY THE ASSESSEE AT ` 11,83,40,941/-. AFTER CONSIDERING THE TOTAL SALES, THE ASSESSING OFFICER ESTIMATED THE GROSS PROFIT ON THE ENHANCED TURNOVER AT THE RATE OF 18%. AFTER ALLOWING THE OV ERHEAD EXPENSES, 11 I.T.A. NO.885/MDS/13 THE ASSESSING OFFICER DETERMINED THE NET PROFIT AT ` 2,57,81,465/- AS AGAINST ` 11,82,054/- DECLARED BY THE ASSESSEE. ACCORDING TO THE LD. D.R., SINCE THE ASSESSEE HAS CONSUMED LARGE QUA NTITY OF PACKING MATERIAL, THE ASSESSING OFFICER HAS RIGHTLY COMPUTED THE GROSS PROFIT BY INCREASING THE TOTAL TURNOVER ON TH E BASIS OF PACKING MATERIAL CONSUMED. THEREFORE, ACCORDING TO THE LD. D.R., THE CIT(APPEALS) IS NOT CORRECT IN DELETING THE ADDITIO N MADE BY THE ASSESSING OFFICER. 16. ON THE CONTRARY, SHRI S. SRIDHAR, THE LD.COUNSE L FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSING OFFICER ENHA NCED THE TURNOVER BY COMPARING THE PACKING MATERIAL CONSUMED BY THE ASSESSEE. ACCORDING TO THE LD. COUNSEL, THERE ARE ARITHMETICAL ERRORS IN THE CALCULATION MADE BY THE ASSESSING OFF ICER. THE ASSESSING OFFICER CONSIDERED SOME OF THE SECONDARY PACKING MATERIAL AS PACKING MATERIAL CONSUMED FOR THE PURPO SE OF ESTIMATING THE PROBABLE SALES. THE ASSESSING OFFIC ER, IN FACT, ARRIVED THE SALES AT 37,90,500 KGS. THE ASSESSING OFFICER, VIDE HIS REMAND REPORT DATED 09.12.2012 CONFIRMED THAT THERE WAS AN ERROR IN THE PROBABLE SALES CALCULATED IN THE ASSESSMENT ORDER. IN FACT, THE TOTAL QUANTITY OF THE SALES IS 1,25,500 KGS. H OWEVER, THE 12 I.T.A. NO.885/MDS/13 ASSESSING OFFICER ADDED ONE MORE 0 AND TREATED TH E SAME AS 12,55,000 KGS. THIS WAS ACCEPTED BY THE ASSESSING OFFICER IN THE REMAND REPORT DATED 09.12.2012. THEREFORE, THE CAL CULATION OF THE ASSESSING OFFICER WAS INFLATED BY 11,29,500 KGS WHI CH NEED TO BE REDUCED. THE LD.COUNSEL FURTHER SUBMITTED THAT THE RE ARE TWO TYPES OF PACKING MATERIALS. CERTAIN PACKING MATERIALS WE RE USED TO PACK TURMERIC POWDER LIKE SACHETS, ETC. THEREFORE, OTHE R PACKING MATERIAL IS CALLED PRIMARY PACKING MATERIAL. THE ASSESSING OFFICER CONFUSED HIMSELF BETWEEN THE TWO TYPES OF PACKING MATERIALS USED BY THE ASSESSEE. THE ASSESSEE EXPLAINED BEFORE THE ASSESS ING OFFICER THAT ALL THE PURCHASES OF PACKING MATERIAL WERE MAD E FROM M/S PONDY PLASTIC INDUSTRIES AND M/S MICRO POLYPACK. W ITHOUT UNDERSTANDING THE BASIC DIFFERENCE BETWEEN THE SECO NDARY PACKING MATERIAL AND PRIMARY PACKING MATERIAL, THE ASSESSIN G OFFICER COMMITTED MISTAKE IN ESTIMATING THE PROBABLE SALES. THEREFORE, THE CIT(APPEALS), AFTER ANALYSING ALL THE MATERIAL FACT S, FOUND THAT NO PRUDENT BUSINESSMAN WILL ADD MORE WEIGHT TO THE PAC KING MATERIAL WHEN THE CONTENTS ARE OF LESS VALUE. THE CIT(APPEA LS) FOUND THAT THE PURCHASE COST OF PACKING MATERIAL RANGED FROM ` 72/- TO ` 180/- PER KG. WHEREAS, THE AVERAGE SALE PRICE OF TURMERI C POWDER IS ` 48/- PER KG. THEREFORE, NO PRUDENT BUSINESSMAN WOU LD INTEND TO 13 I.T.A. NO.885/MDS/13 ADD MORE WEIGHT TO THE PACKING MATERIAL. ACCORDING TO THE LD. COUNSEL, THE ASSESSEE ALWAYS TRIED TO REDUCE THE WE IGHT TO THE PACKING MATERIAL CONSUMED TO MINIMIZE THE INFLATION . THEREFORE, THE ASSESSING OFFICERS APPROACH WAS NOT CORRECT IN ADO PTING THE UNIFORM WEIGHT FOR THE SACHETS OF DIFFERENT SIZES A ND DIFFERENT WEIGHTS FOR THE SAME SIZE. THEREFORE, THE PURCHASE PRICE REMAINED THE SAME. THEREFORE, ACCORDING TO THE LD. COUNSEL, THE CIT(APPEALS) HAS RIGHTLY FOUND THAT THE ESTIMATION OF TURNOVER WAS NOT SCIENTIFIC. HENCE IT CANNOT BE TAKEN INTO CONS IDERATION FOR THE PURPOSE OF DETERMINATION OF ACTUAL SALES FOR THE YE AR UNDER CONSIDERATION. THE ESTIMATION AND ENHANCEMENT OF T URNOVER, ACCORDING TO THE LD. COUNSEL, IS IMAGINARY. THEREF ORE, THE CIT(APPEALS) HAS RIGHTLY DELETED THE ADDITION. 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER ESTIMATED THE PROBABLE SALES ON THE BASIS O F PACKING MATERIAL SAID TO BE USED BY THE ASSESSEE. THE FACT REMAINS THAT THE ASSESSEE HAS USED TWO TYPES OF PACKING MATERIAL, ON E IS SECONDARY PACKING MATERIAL AND ANOTHER IS PRIMARY PACKING MAT ERIAL. THE COST OF PACKING MATERIAL RANGED FROM ` 72/- TO ` 180/- PER KG. WHEREAS 14 I.T.A. NO.885/MDS/13 THE AVERAGE SALE PRICE OF THE TURMERIC POWDER IS ` 48/- PER KG. THEREFORE, THE CIT(APPEALS) CAME TO A CONCLUSION TH AT NO PRUDENT BUSINESSMAN WOULD ADD WEIGHT TO PACKING MATERIAL WH EN THE CONTENTS ARE OF LESSER VALUE. THE CIT(APPEALS) FUR THER FOUND THAT THERE IS AN ARITHMETICAL ERROR IN COMPUTING THE PAC KING MATERIAL. THE ASSESSING OFFICER HAS COMMITTED MISTAKE BY HIMSELF ADDING ONE MORE 0. IN FACT, THE ACTUAL SALE OF TURMERIC POW DER WAS 1,25,500 KGS. HOWEVER, THE ASSESSING OFFICER HAS TAKEN THE SAME AS 12,55,000 KGS. THE ASSESSING OFFICER CONFIRMED THE ARITHMETIC MISTAKE MADE BY HIM, IN THE REMAND REPORT DATED 09. 12.2012. THEREFORE, THE ESTIMATION OF THE ASSESSING OFFICER WITH REGARD TO SALE OF TURMERIC POWDER WAS REDUCED TO 26,61,000 KG S. AFTER ELABORATELY CONSIDERING THE QUANTITY OF PACKING MAT ERIAL, THE CIT(APPEALS) CAME TO A CONCLUSION THAT SOME OF THE PACKING MATERIAL CONSUMED DURING THE YEAR UNDER CONSIDERATI ON SHOULD NOT BE CONSIDERED FOR THE PURPOSE OF CALCULATING THE QU ANTITY OF SALES MADE DURING THE YEAR. SOME OF THE PACKING MATERIAL CONSUMED DURING THE YEAR WAS ACTUALLY USED FOR TURMERIC POWD ER MANUFACTURED AND PACKED AND WAS LYING IN THE CLOSING STOCK. THE VOLUME OF SUCH CLOSING STOCK AS ON 31.03.2009 WAS 1,15,345 KGS. T HE OPENING STOCK AS ON 01.04.2008 WAS 6,856 KGS. THEREFORE, T HE NET CLOSING 15 I.T.A. NO.885/MDS/13 STOCK OF 1,08,489 KGS SHOULD ALSO BE CONSIDERED AS THE RESULTANT OF THE PACKING MATERIAL CONSUMED DURING THE YEAR UNDER CONSIDERATION. THEREFORE, THE ASSESSING OFFICERS CALCULATION OF 3 7,90,500 KGS ACTUALLY REPRESENTS THE FINISHED PRODUCT MANUFACTUR ED BY THE ASSESSEE DURING THE FINANCIAL YEAR 2008-09. TO ARR IVE AT THE PROBABLE SALES EFFECTED DURING THE YEAR, THE NET IN CREASE IN THE CLOSING STOCK IS TO BE REDUCED FROM THE GOODS MANUF ACTURED DURING THE YEAR. IN VIEW OF THE ABOVE, THIS TRIBUNAL IS O F THE CONSIDERED OPINION THAT IN THE ABSENCE OF ANY MATERIAL ON RECO RD THAT THE ASSESSEE HAS INFLATED THE PURCHASES OR SALES, THE E STIMATION OF PROBABLE SALES ON THE BASIS OF THE PACKING MATERIAL CONSUMED BY THE ASSESSEE IS NOT JUSTIFIED. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ESTIMATION OF TOTAL SALES WITHOUT CONSIDERING THE ACTUAL PURCHASES WOULD INFLATE THE SALE, THEREFORE, THE CIT(APPEALS) HAS RIGHTLY FOUND THAT THE TOTAL TURNOVER WAS 19,75 ,167.60 KGS AS AGAINST 37,90,500 KGS ESTIMATED BY THE ASSESSING OF FICER. THEREFORE, THE CIT(APPEALS) HAS RIGHTLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. THIS TRIBUNAL DO NOT FIN D ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(APPEALS) AND AC CORDINGLY THE SAME IS CONFIRMED. 16 I.T.A. NO.885/MDS/13 18. NOW COMING TO THE ADDITION OF UNACCOUNTED PURCH ASES, SH. PATHLAVATH PEERYA, THE LD. DEPARTMENTAL REPRESENTAT IVE, SUBMITTED THAT THE ASSESSING OFFICER ENHANCED THE TURNOVER BY REDUCING GROSS PROFIT MARGIN OF 18% AS UNACCOUNTED PURCHASES. ACC ORDING TO THE LD. D.R., THE ASSESSING OFFICER, AFTER CONSIDERING THE ASSESSEES OWN RECONCILIATION STATEMENT, FOUND THAT THE ASSESS EE HAS PURCHASED TURMERIC TO THE EXTENT OF ` 14,91,94,080/-. HOWEVER, THE CIT(APPEALS) DELETED THE ADDITION MADE BY THE ASSES SING OFFICER ON THE GROUND THAT THERE WAS NO UNACCOUNTED SALES. AC CORDING TO THE LD. D.R., THE ADDITION WAS MADE ON THE BASIS OF ASS ESSEES OWN RECONCILIATION. THEREFORE, THE CIT(APPEALS) IS NOT JUSTIFIED IN DELETING THE ADDITION. 19. ON THE CONTRARY, SHRI S. SRIDHAR, THE LD. COUNS EL FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSING OFFICER HAS NOT CONSIDERED THE PURCHASES DECLARED BY THE ASSESSEE TO THE EXTEN T OF ` 11,85,30,525/-. ACCORDING TO THE LD. COUNSEL , IN THE FINANCIAL YEAR 2008-09, THE TOTAL PURCHASE MADE BY THE ASSESSEE WA S ` 9,09,84,189/- AND THE TOTAL SALES WAS ` 11,85,30,525/-. THE ASSESSING OFFICER, WHILE ARRIVING AT THE PURCHASES AT ` 14,91,94,080/- WAS OF THE OPINION THAT SALES WOULD HAVE BEEN ` 18,19,44,000/-. 17 I.T.A. NO.885/MDS/13 THESE PURCHASES INCLUDE BOTH THE PURCHASES RELATING TO THE ACTUAL TURNOVER DECLARED BY THE ASSESSEE AS WELL AS THE TU RNOVER ESTIMATED BY THE ASSESSING OFFICER. ACCORDING TO THE LD. COU NSEL, THE TURNOVER DECLARED BY THE ASSESSEE HAS TO BE REDUCED FROM THE TURNOVER ESTIMATED BY THE ASSESSING OFFICER. THUS, DETERMIN ING THE UNACCOUNTED PURCHASES, IF AT ALL ANYTHING, SHALL BE AT ` 5,82,09,891/-. THIS RECONCILIATION WAS BROUGHT TO THE NOTICE OF TH E ASSESSING OFFICER. THE ASSESSING OFFICER, HOWEVER, WITHOUT C ONSIDERING THE EXPLANATION OF THE ASSESSEE, ESTIMATED THE UNACCOUN TED SALES AT ` 14,91,94,080/- WITHOUT REDUCING THE SALES DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME. SINCE THE ENHANC ED PURCHASE WAS DELETED BY THE CIT(APPEALS), HE FOUND THAT THE ENHANCED SALES ALSO WOULD AUTOMATICALLY BECOME DELETED. THEREFORE , ACCORDING TO THE LD. COUNSEL, THE CIT(APPEALS) HAS RIGHTLY DELET ED THE ADDITION. 20. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS RIGHTLY SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE, THE ENHANCED ADDITION OF PURCHASE WAS DELETED BY THE CIT(APPEALS ), WHICH WAS CONFIRMED BY THIS TRIBUNAL IN THE EARLIER PART OF T HIS ORDER. ONCE THE ENHANCED PURCHASE WAS DELETED, THE ENHANCED ESTIMAT ION ON SALES 18 I.T.A. NO.885/MDS/13 WOULD ALSO AUTOMATICALLY GET DELETED. THEREFORE, T HIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CIT(APPEALS) HAS RI GHTLY DELETED THE ADDITION. FURTHERMORE, WHEN THE ASSESSING OFFICER ESTIMATED THE TURNOVER, IT IS OBLIGATORY ON HIS PART TO REDUCE TH E TURNOVER DECLARED BY THE ASSESSEE. ON ONE HAND THE ASSESSING OFFICER ESTIMATED THE TURNOVER AND ON THE OTHER HAND, THE TURNOVER DECLAR ED BY THE ASSESSEE WAS NOT REDUCED. THIS INFLATED THE TURNOV ER OF THE ASSESSEE ARBITRARILY. THEREFORE, THE CIT(APPEALS) HAS RIGHTLY FOUND THAT THE TURNOVER DECLARED BY THE ASSESSEE HAS TO B E REDUCED FROM THE TURNOVER ESTIMATED BY THE ASSESSING OFFICER. I N VIEW OF THE ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 21. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON 24 TH MARCH, 2016 AT CHENNAI. SD/- SD/- (. !' ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) $ / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 24 TH MARCH, 2016. KRI. 19 I.T.A. NO.885/MDS/13 . ,156 76(1 /COPY TO: 1. *+ /APPELLANT 2. ,-*+ /RESPONDENT 3. 0 81 () /CIT(A)-IV, CHENNAI-34 4. 0 81 /CIT-IX, CHENNAI 5. 69 ,1 /DR 6. :' ; /GF.