Makhan Bhog Food Products (P) Ltd., Siliguri V. ACIT, Circle - 2, Siliguri, Siliguri

ITA 996/KOL/2011

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3350 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 08-07-2011
• Court: TRIBUNAL
• Department Lawyers: UDAY KR SARDAR
• Assessee Lawyers: VAR SHA JALANADVCOTATES
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KO LKATA [BEFORE SHRI MAHAVIR SINGH, JM & SHRI M. BALAGANES H, AM] I.T.A NO.996/KOL/2011 ASSESSMENT YEAR: 2006-07 MAKHAN BHOGH FOOD PRODUCTS (P) LTD. VS. ASSISTANT COMMISSIONER OF INCOME-TAX, (PAN: AADCM7981L) CIRCLE-2, SILIGURI ( APPELLANT ) ( RESPONDENT ) & I.T.A NO.943/KOL/2011 ASSESSMENT YEAR: 2006-07 ASSISTANT COMMISSIONER OF INCOME-TAX, VS. MAKHAN BHOGH FOOD PRODUCTS PVT. LTD. CIRCLE-2, SILIGURI (APPELLANT) (RESPONDENT) DATE OF HEARING: 31.12.2015 DATE OF PRONOUNCEMENT: 20.01.2016 FOR THE APPELLANT: SHRI SUBASH AGARWAL & MISS VAR SHA JALAN,ADVCOTATES FOR THE RESPONDENT: SHRI UDAY KR. SARDAR, ADDL. CIT, SR. DR ORDER PER SHRI MAHAVIR SINGH, JM: THESE CROSS APPEALS BY ASSESSEE AND REVENUE ARE ARI SING OUT OF ORDER OF CIT(A), SILIGURI VIDE APPEAL NO. 131/CIT(A)/SLG/08-09 DATED 25.03.2011. ASSESSMENT WAS FRAMED BY ADDL. CIT, RANGE-2, SILIGURI U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSME NT YEAR 2006-07 VIDE HIS ORDER DATED 29.12.2008. 2. THE ONLY COMMON ISSUE IN THESE CROSS APPEALS, OF THE ASSESSEE AND THAT OF THE REVENUE, IS AS REGARDS TO ESTIMATION OF TURNOVER AN D APPLICATION OF PROFIT RATE ON ESTIMATED TURNOVER. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE I S ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF SWEETS AND NAMKINS ETC . DURING THE ASSESSMENT YEAR THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME AT RS.1,92,035/-. THE ASSESSEE PRODUCED COMPLETE BOOKS OF ACCOUNTS, BANK STATEMENT , SALES AND PURCHASE REGISTERS AND CASH MEMOS AND OTHER SUPPORTING DOCUMENTS FOR VERIF ICATION AND EXAMINATION BEFORE THE AO. THE AO NOTED THAT THE ASSESSEE HAS DISCLOSED T OTAL TURNOVER AT RS.97,51,468 AS AGAINST THE CONSUMPTION OF RAW MATERIAL AT RS.74,86 ,654/-, THEREBY DISCLOSING GROSS PROFIT AT RS.22,66,835/- I.E. GROSS PROFIT RATE @ 2 4%. ACCORDING TO AO, THE GROSS PROFIT RATE IN THE PRECEDING YEAR I.E. FY 2004-05 RELEVANT TO AY 2005-06 WAS AT 27%. THE AO 2 ITA NO.996&943/K/2011 MAKHAN BHOG FOOD PRODUCTS (P) LTD. AY 2006-07 AFTER EXAMINING THE BOOKS OF ACCOUNT NOTED THAT THE ASSESSEE THROUGHOUT THE YEAR SOLD GOODS TO SINCLAIR HOTELS LTD., SILIGURI ON 175 DAYS IN 190 CASH MEMOS AND HE BROUGHT OUT THE COMPLETE DETAIL IN ASSESSMENT ORDER RUNNING FROM PAGE 2 TO 6. HE ALSO NOTED THAT THE ASSESSEES SHOP REMAINS OPEN FROM 8AM IN THE MO RNING TILL 9 PM IN THE EVENING EVERY DAY. THE AO ESTIMATED SALES TO 300 CUSTOMERS MINIMUM AS AGAINST THE DECLARATION MADE BY ASSESSEE AT 70 CUSTOMERS ON AN AVERAGE AND HE ALSO ESTIMATED THE AVERAGE DAILY SALE AT RS.370/- PER CASH MEMO. ACCORDINGLY, HE ES TIMATED THE UNACCOUNTED SALES AT RS.3,99,60,000/- AS UNDER: AVERAGE NOS. OF CUSTOMERS PURCHASED GOODS FROM TH E ASSESSEES SHOP IS CONSIDERED AT 300 AS DISCUSSED ABOVE. AVERAGE SALE TO EACH CUSTO MER AS PER THE ASSESSEES OWN SUBMISSION IS OF RS.370/-. THEREFORE THE DAILY AV. SALE IS ARRIVED AT RS.1,11,000/- (RS.370/- X 300). THE ASSESSEE HAS SHOWN RATE OF G .P AT 24%. TAKING INTO CONSIDERATION OF THE SAID RATE OF GP THE GROSS PROFIT OF THE ASSE SSEES BUSINESS COMES TO RS.95,90,400/-. THE ASSESSEE HAS SHOWN GROSS PROFIT OF RS.22,66,835 /-. SO, THERE IS SUPPRESSION OF TOTAL GROSS PROFIT OF RS.73,23,565/-. THIS IS ADDED TO T HE TOTAL INCOME DISCLOSED BY THE ASSESSEE. ACCORDINGLY, HE ASSESSED THE SUPPRESSED GROSS PROFI T OF RS.73,23,565/-. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO DELETE D THE ESTIMATION OF SALES BUT APPLIED PROFIT RATE I.E. NET PROFIT @ 8% ON THE TURNOVER DI SCLOSED BY THE ASSESSEE AT RS.97,51,468/- BY OBSERVING AS UNDER: HOWEVER, I AM NOT READY TO ACCEPT THE ARGUMENT OF THE AR THAT NET PROFIT RATE AS PER THE P&L A/C OF THE ASSESSEE MAY BE APPLIED TO DETERMINE THE INCOME OF THE ASSESSEE. ON A TURNOVER OF RS.97,51,468/-, THE ASSESSEE HAD SHOWN NET PROFIT OF RS.1,92,035/-. THUS, THE DISCLOSED NET PROFIT RATE WAS 1.96% ONLY WHICH IS N OT ONLY ABSURD BUT ALSO UNBELIEVABLE IN THE LINE OF BUSINESS, THE ASSESSEE IS ENGAGED. CON SIDERING THE LINE OF BUSINESS, RESULT OF THE INVESTIGATION OF THE AO AND VIEW BY THE DIFFERE NT COURTS DISCUSSED HEARING ABOVE, TO MEET THE END OF JUSTICE, THE AO IS DIRECTED TO TREA T 8% (EIGHT) OF THE TURNOVER ESTIMATED BY THE LD. AO AS INCOME OF THE ASSESSEE. AGGRIEVED AGAINST DELETION OF ESTIMATION OF SALES, REVENUE CAME IN APPEAL BEFORE US AND AGAINST ESTIMATION OF PROFIT RATE @ 8% AS AGAINST T HE DECLARED PROFIT RATE OF 1.96% BY THE ASSESSEE, THE ASSESSEE CAME IN APPEAL BEFORE US. 4. WE FIND THAT THE VERY BASIS FOR ESTIMATION OF SA LES BY THE AO IS BASED ON INCORRECT ESTIMATION. THE VERY BASIS OF HIS ESTIMATION IS ON SOME MACHINE GENERATED ORDER SLIPS, WHICH CONSIDERED AS CASH MEMOS ISSUED BY THE ASSESS EE. THE ASSESSEE HAD DIFFERENT COUNTERS FOR DIFFERENT ITEMS AND DIFFERENT SLIPS WE RE ISSUED TO A SINGLE CUSTOMER BUT FINALLY, ONE CASH MEMO IS ISSUED ON THE BASIS OF AL L THE ORDER SLIPS MANUALLY. WE FIND THAT THE AO ALSO MENTIONED THE SAME AS CASH MEMO/SA LE SLIP IN HIS ORDER. SOME OF THE 3 ITA NO.996&943/K/2011 MAKHAN BHOG FOOD PRODUCTS (P) LTD. AY 2006-07 SLIPS WERE MENTIONED AS CASH MEMOS AND SOME SLIPS W ERE WITHOUT SUCH HEADING AS NOTICED BY THE AO THAT SOME INCONSISTENCIES IN TIME OF SERIAL OF SOME CASH MEMOS WERE THERE AS FROM THOSE SLIPS IT IS FOUND THAT AT 1.09 PM SL. NO. 284 WAS ISSUED WHEREAS ON ANOTHER DATE AT 10.56 PM SL. NO. 8 WAS ISSUED. THE ASSESSEE ALSO BEFORE US ARGUED THAT THOSE WERE NOT ACTUAL CASH MEMOS BUT THE CASH MEMOS RECORDED IN THE BOOKS OF ACCOUNT WHICH WERE DULY AUDITED ARE THE ACTUAL CASH MEMOS. BEFORE US LD. COUNSEL FOR THE ASSESSEE EXPLAINED THAT IN CASE OF SALES TO HOTEL S INCLAIR SINGLE ORDER SLIP WAS ISSUED, AS IT ORDERED FOR ONE OR TWO ITEMS OF SWEETS FOR THEIR GUESTS AND SALES WERE MADE ON CREDIT AND PAYMENT WAS RECEIVED BY CHEQUE. IT WAS EXPLAIN ED THAT THE AO HAS VERIFIED THE PURCHASES OF THE ASSESSEE AND NO DISCREPANCY WHATEV ER COULD BE POINTED OUT IN CASE OF ANY SUPPLY TO ANY OF THE SUPPLIERS. WE FIND THAT T HE AO HAS NOT REJECTED THE BOOKS OF ACCOUNT NOR POINTED OUT ANY DEFECTS IN ANY OF THE V OUCHERS, DOCUMENTS OR THE BOOKS OF ACCOUNT. WE FURTHER FIND THAT THE ENTIRE BASIS OF ESTIMATION AND SALES IS JUST BASED ON ASSUMPTION, CONJECTURE AND SURMISES AND NOTHING ELS E. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE CIT(A) H AS RIGHTLY ACCEPTED THE VERSION OF THE ASSESSEE AND ACCEPTED THE SALES MADE BY THE ASSESSE E AT RS.97,51,468/- AGAINST WHICH THE ASSESSEE HAS CONSUMED RAW MATERIAL TO THE TUNE OF R S.74,86,654/-. ACCORDINGLY, THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 5. COMING TO THE ESTIMATION OF PROFIT RATE BY THE C IT(A) I.E. NET PROFIT @ 8% ON THE TOTAL TURNOVER OF THE ASSESSEE AT RS.97,51,468/-. O NCE IT IS HELD THAT THE BOOK RESULTS ARE CORRECT AND THERE IS NO DISCREPANCY IN THE BOOKS OF ACCOUNT, THE CIT CANNOT REJECT THE BOOK RESULTS WITHOUT ANY BASIS AND ESTIMATE THE PRO FIT. ONCE THE AO OR THE FIRST APPELLATE AUTHORITY I.E. THE CIT(A) HAS NOT INVOKED THE PROVISIONS OF SECTION 145(3) OF THE ACT, NONE HAS BUSINESS TO ADOPT UNFAIR APPROACH FOR ESTIMATING THE PROFIT RATE WITHOUT REJECTING THE BOOKS RESULTS. IN TERM OF THE ABOVE, WE ALLOW THE APPEAL OF ASSESSEE AND REVENUES APPEAL IS DISMISSED. 6. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED AND THAT OF REVENUE IS DISMISSED. 7. ORDER IS PRONOUNCED IN THE OPEN COURT ON 20.01.2 016. SD/- SD/- (M. BALAGANESH) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 20 TH JANUARY, 2016 JD.(SR.P.S.) 4 ITA NO.996&943/K/2011 MAKHAN BHOG FOOD PRODUCTS (P) LTD. AY 2006-07 COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT MAKHAN BHOG FOOD PRODUCTS (P) LTD., AL OLLO TOWERS, SEVOKE ROAD, SILIGURI. 2 RESPONDENT ACIT, CIRCLE-2, SILIGURI 3 . THE CIT(A), SILIGURI 4. 5. CIT , SILIGURI DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .