DCIT, Hyderabad V. M/s Amrutha Varshini Diary Farms (P) Ltd, Vijayawada

ITA 948/HYD/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5915 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 09-02-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 14-08-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VASUNDHARA SINHA
• Assessee Lawyers: K M CHANDRAMOULESHWARA RAO
• Keywords: Cost of acquisition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI G.C.GUPTA, VICE PRESIDENT AND SHRI AKBER BASHA, ACCOUNTANT MEMEBR ITA NO.942/HYD/09 : ASSTT . YEAR 2005-06 ITA NO.948/HYD/09 : ASSTT . YEAR 2006-07 DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 6, HYDERABAD. V/S. M/S. AMRUTHA VARSHINI DAIRY FARMS (P) LTD., VIJAYAWADA PAN AADCA 9677 P ) (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. VASUNDHARA SINHA RESPONDENT BY : SHRI K.M.CHANDRAMOULESHWARA RAO O R D E R PER G.C.GUPTA, VICE PRESIDENT: THESE TWO APPEALS BY THE REVENUE FOR THE ASSESSMENT YEAR 2005-06 AND 2006-07 ARE DIRECTED AGAINST A COMMON ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS). SINCE IDENTICAL ISSUE S ARE INVOLVED IN BOTH THESE APPEALS, THEY ARE BEING DISPOSED OFF BY THIS COMMON ORDER. 2. GROUNDS OF APPEAL, IDENTICAL IN BOTH THESE APPEALS, READ AS UNDER- 1. THE CIT(A) ERRED IN DIRECTING THE A.O. TO DELETE TH E DISALLOWANCE MADE ON ACCOUNT OF COST OF SALES FOR THE A.Y. 2005- 06 AND 2006- 07. ITA NO.942 & 948/HYD/09 M/S. AMRUTHA VARSHINI DAIRY FARMS (P) LTD., VIJAYAWADA 2 2. THE CIT(A) ERRED IN DIRECTING THE A.O. TO RESTRICT THE DISALLOWANCE TO RS.2,00,000/- FOR THE A.Y. 2006-07 ON SELLING AN D DISTRIBUTION EXPENSES. 3. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE ASSES SEE VOLUNTARILY AGREED FOR THE DISALLOWANCES MADE BY TH E A.O. AND THE ASSESSEE HAS NO GRIEVANCE ON IT. 4. THE CIT(A) DECISION TO DELETE THE VOLUNTARILY AGRE ED ADDITIONS IS NOT PROPER IN VIEW OF THE CASE LAWS IN DURGA TIMBER WORKS VS. CIT(1971) REPORTED IN 79 ITR 63(DEL) AND BANARAS CH EMICAL FACTORY VS. CIT(1987) REPORTED IN 108 ITR 96(ALL.) 5. THE HYDERABAD ITAT, BENCH 'A' IN THE CASE OF SRI D. RAJARAO(HUF), KURNOOL VS. ITO IN ITA NO.718/HYDERABAD/2002, DATED 29-07- 2004 SQUARELY APPLICABLE TO THE FACTS OF THE CASE.' 3. THE LEARNED DEPARTMENTAL REPRESENTATIVE REFERRE D TO THE RELEVANT PARAS OF THE ASSESSMENT ORDER IN SUPPORT OF HER SUBMISSION THAT THE DISALLOWANCE OUT OF EXPENDITURE FOR PURCHASE O F MILK WAS JUSTIFIED. SHE SUBMITTED THAT THE PAYMENTS TO THE VILL AGERS WERE MADE IN CASH AND THE SAME ARE UNVERIFIABLE. LIKEWISE, MOST OF THE VOUCHERS WERE SELF-MADE ONLY. REGARDING THE DISALLOWANCE OUT OF SELLING AND DISTRIBUTION EXPENSES, SHE SUBMITTED THAT THERE IS STEEP HIKE IN THE EXPENDITURE UNDER THIS HEAD AND THE ASSESSEE HAS FAILED T O GIVE ANY PLAUSIBLE EXPLANATION FOR THE RISE IN EXPENDITURE. T HE CLAIM OF EXPENDITURE UNDER THIS HEAD IS SUPPORTED ONLY BY SELF MADE VOUCHERS AND COULD NOT BE VERIFIED. SHE SUBMITTED THAT HE CIT( A) HAS GIVEN FULL RELIEF TO THE ASSESSEE OUT OF DISALLOWANCE MADE FROM THE COST OF MILK AND HAS WRONGLY ALLOWED THE RELIEF FROM THE DISALLOWA NCE OUT OF SELLING AND DISTRIBUTION EXPENSES WITHOUT ANY VALID REASON. SH E SUBMITTED THAT THE ASSESSEE HAS ACCEPTED THE ADDITIONS IN QUESTION MA DE BY THE ASSESSING OFFICER, VIDE ITS LETTER DATED 8.3.2008 FILED B EFORE THE ASSESSING OFFICER AND THEREFORE, THE CIT(A) IS NOT JUSTIFI ED IN ENTERTAINING THE GROUNDS OF APPEAL OF THE ASSESSEE. ITA NO.942 & 948/HYD/09 M/S. AMRUTHA VARSHINI DAIRY FARMS (P) LTD., VIJAYAWADA 3 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE BELONGS TO AGRI GOLD GROUP, WHERE SEARCH ACTION U NDER S.132 OF THE ACT WAS CONDUCTED ON 24.11.2005. HE SUBMITTED TH AT THE PAYMENTS IN CASH WERE MADE FOR PURCHASES OF MILK TO VILLA GERS, WHERE BANKING FACILITIES WERE NOT AVAILABLE . MOREOVER, TH E ASSESSEE HAS MAINTAINED PROPER AND COMPLETE ACCOUNTS, WHICH WERE DULY AUDITED AND NO IRREGULARITY WAS FOUND BY THE AUDITOR. THE AS SESSEE HAS MAINTAINED EVERY MINUTE DETAIL AND HAS MAINTAINED DA Y TO DAY QUANTITATIVE DETAILS WHEREIN THE PURCHASE OF MILK FROM FARMERS OF EACH VILLAGE WERE NOTED ALONGWITH THE DETAILS OF PAYMENTS. HE SUBMITTED THAT THE LETTER DATED 8.3.2008 FILED BY THE ASSESSEE WI TH THE ASSESSING OFFICER WAS AFTER THE CLOSE OF THE ASSESSMENT PROCEEDINGS, AND WAS SIGNED BY THE CHARTERED ACCOUNTANT OF THE ASSESSEE UNDER SOME CONFUSION AND BONA FIDE MISTAKE. HE SUBMITTED THAT IMME DIATELY THEREAFTER ON 17.3.2008, THE ASSESSEE HAS FILED RETRACTI ON LETTER WITH THE DEPARTMENT, STATING THEREIN THAT THE AUTHORISED R EPRESENTATIVE OF THE ASSESSEE HAS NOT AGREED FOR THE DISALLOWANCES/ADDITION S MADE IN THE ASSESSMENT AND REQUESTED THE ASSESSING OFFICER NOT TO CON SIDER THEIR LETTER DATE 8.3.2008 IN RESPONSE TO PENALTY NOT ICE ISSUED BY THE DEPARTMENT. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFULLY. W E FIND THAT THE PLEA OF THE CIT-DEPARTMENTAL REPRESENT ATIVE THAT THE ASSESSEE HAS ACCEPTED THE ADDITIONS/DISALLOWANCES, AND THEREF ORE, THE CIT(A) SHOULD NOT HAVE ALLOWED THE RELIEF TO THE ASSE SSEE, IS UNSUSTAINABLE. WE FIND THAT THE LETTER DATED 8.3.200 8 OF THE ASSESSEE FILED WITH THE ASSESSING OFFICER WAS IN RESPONSE TO THE PENALTY NOTICE ISSUED BY THE ASSESSING OFFICER, AND WAS WRITTEN AFTER THE CLOSE OF THE ASSESSMENT PROCEEDINGS ON 24.12.2007. WE FIND THAT THE ASSE SSEE ITA NO.942 & 948/HYD/09 M/S. AMRUTHA VARSHINI DAIRY FARMS (P) LTD., VIJAYAWADA 4 HAS RETRACTED FROM THE CONTENTS OF THE LETTER DATED 8.3 .2008, VIDE ITS SUBSEQUENT LETTER DATED 17.3.2008 FILED WITH THE ASSESSI NG OFFICER. MOREOVER, WE FIND THAT THERE IS NOT EVEN A WHISPER A MOUNTING TO ANY ADMISSION ON THE PART OF THE ASSESSEE FOR THE ADDITIONS/ DISALLOWANCES MADE IN THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER. IN THESE FACTS, WE HOLD THAT THE ASSESSEE WAS WELL WITHIN IT S RIGHT TO AGITATE AGAINST THE ADDITIONS/DISALLOWANCES MADE BY THE DEPARTMENT. 6. AS REGARDS THE MERITS OF THE ADDITIONS/DISALLOWANCES MADE BY THE DEPARTMENT, WE FIND THAT THE MATERIAL FACTS O F THE CASE ARE NOT IN DISPUTE. THE ASSESSEE COMPANY WAS PROCURING MILK FROM TH E VILLAGERS, MOST OF WHOM WERE ILLITERATE AND DO NOT HA VE ANY BANK ACCOUNT. ACCORDINGLY, THE ASSESSEE HAS MADE THE PAYMENTS FOR PURCHASE OF MILK IN CASH AND THOSE PAYMENTS ARE SUPPORTED ONLY BY SELF-MADE VOUCHERS. IN THESE FACTS OF THE CASE, WE FIND T HAT THE DEPARTMENT COULD NOT VERIFY THE CORRECTNESS OF THE AMOUN TS DEBITED FOR PURCHASE OF MILK BY THE ASSESSEE, AND AS SUCH, SOME DISAL LOWANCE IS CALLED FOR. HOWEVER, CONSIDERING TOTALITY OF THE FA CTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT DISALLOWANCE AT THE RATE OF 5% OF THE PURCHASE COST OF RS.13.90 LAKHS FOR THE ASSESSMENT YEAR 2005- 06 AND RS.32.13 LAKHS FOR THE ASSESSMENT YEAR 2006-07 MAD E BY THE ASSESSING OFFICER IS ON HIGHER SIDE. WE CONSIDER THAT THE EN DS OF JUSTICE SHALL BE MET IF THE DISALLOWANCE ON ACCOUNT IS RESTR ICTED TO RS.6 LAKHS FOR THE ASSESSMENT YEAR 2005-06 AND TO RS.15 LAKHS F OR THE ASSESSMENT YEAR 2006-07. WE DIRECT ACCORDINGLY 7. REGARDING THE OTHER ISSUE OF DISALLOWANCE OF RS.20 L AKHS OUT OF SELLING AND DISTRIBUTION EXPENSES, WE FIND THAT THE SAME ARE MOSTLY SUPPORTED BY SELF-MADE VOUCHERS AND THE SAME COULD NOT BE ITA NO.942 & 948/HYD/09 M/S. AMRUTHA VARSHINI DAIRY FARMS (P) LTD., VIJAYAWADA 5 SUBJECTED TO VERIFICATION. THERE IS ALSO A HIKE IN THE EXPENDITURE UNDER THIS HEAD, WHICH IS BEYOND CORRESPONDING INCREASE IN TH E TURNOVER. CONSIDERING TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE CONSIDER THAT THE ENDS OF JUSTICE SHALL BE MET IF THE DI SALLOWANCE UNDER THIS HEAD IS RESTRICTED TO RS.10 LAKHS AS AGAINST RS.20 LAKHS MADE BY THE ASSESSING OFFICER. WE DIRECT ACCORDINGLY. 8. IN THIS VIEW OF THE MATTER, GROUNDS OF THE REVENU E FOR BOTH THE ASSESSMENT YEARS ARE PARTLY ALLOWED. 9. IN THE RESULT, REVENUE'S APPEALS ARE PARTLY ALLOWE D. ORDER PRONOUNCED IN THE COURT ON 5.3.2010 SD/- SD/- (AKBER BASHA) (G.C.GUPTA) ACCOUNTANT MEMBER VICE PRESIDENT DT/- 5TH MARCH, 2010 COPY FORWARDED TO: 1. M/S. AMRUTHA VARSHINI DAIRY FARMS (P) LTD., H.NO.40 -1-21/3, 1ST FLOOR, SURYA TOWERS, M.G.ROAD, VIJAYAWADA 2. DY. COMMISSIONER OF INCOME TAX, CENTRALCIRCLE-6, HYDERABAD. 3. COMMISSIONER OF INCOME-TAX(APPEALS)-III, HYDERABAD. 4. COMMISSIONER OF INCOME-TAX (CENTRAL), HYDERABAD. 5. THE DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S.