Bagga Distilleries Hyderabad (P) Limited, Hyderabad V. Asst.CIT, Central Circle, Hyderabad

MA 16/HYD/2013

• Counselvise Citation: [2013] 124 COUNSELVISE.COM (IT) 0253 (ITAT-HYDERABAD)
• Duration Of Justice: 3 month(s) 15 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 30-04-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 15-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M H NAIK
• Assessee Lawyers: S RAMA RAO
• Keywords: Cost of acquisition; Block assessment
• Section: 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER MA NO. 16/HYD/2013 IN ITA NO. 712/HYD/2006 (ASSESSMENT YEAR 2002-03) M/S. BAGGA DISTILLERIES HYDERABAD PVT. LTD. (FORMERLY M/S. GEMINI DISTILLERIES (HYD) PVT. LTD.) HYDERABAD PAN: AACCB3837H VS. ASS. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE, HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SHRI S. RAMA RAO RESPONDENT BY: SHRI M.H. NAIK DATE OF HEARING: 22 .0 3 .201 3 DATE OF PRONOUNCEMENT: 30.04.2013 O R D E R PER CHANDRA POOJARI, AM: THIS MISCELLANEOUS APPLICATION BY THE ASSESSEE IS ARISING OUT OF THE ORDER OF THE TRIBUNAL DATED 16.03.2012 IN IT A NO. 712/HYD/2006. 2. THE LEARNED AR SUBMITTED THAT THE ASSESSEE RAISED T HE GROUND IN THIS APPEAL WITH REGARD TO DISALLOWANCE O F COST OF PURCHASE OF BOTTLES BY THE CIT(A) BY AN AMOUNT OF R S. 1,51,52,102. THE CIT(A) WHILE DISPOSING THE APPEAL OBSERVED AS F OLLOWS: 'AFTER DULY CONSIDERING THE SUBMISSIONS OF THE APPELLANT, I DO NOT FIND ANY FORCE THEREIN AS THE S AME ARE NOT SUBSTANTIATED BY ANY EVIDENCE. THE BOTTLES SUPPLIED BY OTHER SUPPLIERS WERE ALSO CLEANED, SEGREGATED AND DELIVERED 'TO THE FACTORY GODOWNS. THERE IS NO REASON WHY THE APPELLANT SHOULD INCUR HIGHER EXPENDITURE FOR THE SIMILAR GOODS ON THE PURCHASES MADE FROM CERTAIN SUPPLIERS. THE APPELLAN T HAD NOT DISPUTED THAT THE AVERAGE MARKET PRICE OF 1 80 ML. BOTTLE WAS RS. 1.50 PER BOTTLE. THE SAME WAS MA. NO. 16/HYD/2013 M/S. BAGGA DISTILLERIES HYDERABAD PVT. LTD. (FORMERLY M/S. GEMINI DISTILLERIES (HYD) PVT. LTD. ==================================== 2 ADMITTED DURING THE BLOCK ASSESSMENT PROCEEDINGS AN D UPHELD BY THE LD. CIT(A) IN HIS APPELLATE ORDER DAT ED 1.11.2004. AS MENTIONED ABOVE, WHILE THE IDENTITY AND GENUINENESS OF PURCHASES MADE FROM M/S. PARVATHI BOTTLE TRADERS COULD NOT BE PROVED BY THE APPELLANT , IT ALSO COULD NOT JUSTIFY THE PURCHASE OF BOTTLES @ RS . 1.90 PER BOTTLE FROM M/S. SURANAYEEKA BOTTLES AND M/S SUDHAMAYEE BOTTLES PVT. LTD., WHO SUPPLIED THE SIMI LAR BOTTLES TO ALL OTHER PARTIES AT AN AVERAGE PRICE OF RS. 1.50 PER BOTTLE. AFTER CONSIDERING ALL THESE FACTS AND CIRCUMSTANCES, THE AVERAGE PURCHASE PRICE OF 180 ML. BOTTLE IS ADOPTED @ RS. 1.50 PER BOTTLE. THE DISALLOWANCE OF EXCESS PAYMENT OF RS. 1,51,52,101/- (FOR THE PERIOD FROM 1.4.2001 TO 3.1.2002) AND OF R S. 41,76,000/- (FOR THE PERIOD FROM 4.1.2002 TO 31.3.2 002) IS, ACCORDINGLY, UPHELD. THE ASSESSED INCOME IS ENHANCED TO THE EXTENT OF RS. 1,51,52,101/-' 3. ON APPEAL AGAINST THE ORDER OF THE CIT(A), THE TRIB UNAL GIVEN A FINDING THAT THE RATE OF BOTTLES HAS TO BE ADOPTE D AT RS. 1.80 PER BOTTLE IN PLACE OF RS. 1.50 ADOPTED BY THE LOWER AU THORITIES. WHILE GIVING SUCH DIRECTION, THE TRIBUNAL MENTIONED THAT THE EARLIER ORDER IN IT(SS)A NO. 133/HYD/2004 DATED 11.4.2008 W AS BEING FOLLOWED. 4. THE LEARNED AR SUBMITTED THAT THERE ARE TWO KINDS O F PURCHASES OF BOTTLES MADE BY THE ASSESSEE FOR THE P URPOSE OF ARRIVING AT THE DISALLOWANCE. FIRST ONE IS PURCHAS ES FROM THE CONCERNS IN WHICH THE ASSESSEE IS INTERESTED AND TH E SECOND ONE IS PURCHASE FROM OUTSIDERS. IN THE BLOCK PERIOD ASSE SSMENT MADE U/S. 158BD OF THE ACT VIDE ORDER DATED 30.1.2004, T HE ASSESSING OFFICER ARRIVED AT THE DISALLOWANCE FROM OUT OF THE SUPPLIES MADE FROM THE CONCERNS IN WHICH THE ASSESSEE IS INTEREST ED AND ALSO FROM OTHER SUPPLIERS RECKONING THE RATE OF THE BOTT LES PURCHASED AT RS. 1.50 PER BOTTLE. DIFFERENT ADDITIONS WERE MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. MA. NO. 16/HYD/2013 M/S. BAGGA DISTILLERIES HYDERABAD PVT. LTD. (FORMERLY M/S. GEMINI DISTILLERIES (HYD) PVT. LTD. ==================================== 3 5. ON APPEAL, THE LEARNED CIT(A) CONFIRMED THE DISALLO WANCE MADE IN RESPECT OF THE PURCHASES MADE FROM THE CONC ERNS IN WHICH THE ASSESSEE IS INTERESTED AND DELETED THE AD DITION IN RESPECT OF THE PURCHASES MADE FROM OUTSIDERS. BOTH THE ASSESSEE AND THE DEPARTMENT FILED APPEALS BEFORE THE TRIBUNA L AGAINST SUCH ORDER OF THE CIT (A). THE TRIBUNAL IN ITS ORDER IN IT(SS)A NO. 133/HYD/2004 DATED 11.04.2008 DIRECTED THE ASSESSIN G OFFICER TO ADOPT A RATE OF RS. 1.80 PER BOTTLE IN PLACE OF RS. 1.50 PER BOTTLE IN RESPECT OF THE BOTTLES PURCHASED FROM CONCERNS IN W HICH THE PETITIONER IS INTERESTED. HOWEVER, IN RESPECT OF TH E PURCHASES EFFECTED FROM OUTSIDERS, THE DEPARTMENTAL APPEAL WA S DISMISSED HOLDING THAT NO ADDITION CAN BE MADE. THE OBSERVATI ONS OF THE TRIBUNAL (IN THE ASSESSEE'S APPEAL) WITH REGARD TO THE PURCHASES FROM CONCERNS IN WHICH THE ASSESSEE IS INTERESTED A RE AS UNDER: WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AND T HE MATERIAL ON RECORD. HERE, WE HAVE FOUND QUITE A NUM BER OF GLITCHES IN THE FINDING OF THE ASSESSING OFFICER . THE ALLEGATION IS THAT THE ASSESSEE HAS INFLATED ITS PURCHASES BY PAYING HIGHER PRICES FOR BOTTLES TO TH E CONNECTED CONCERNS. THIS ALLEGATION IS PRIMARILY BA SED ON THE COST SHEET FOUND IN THE COURSE OF SEARCH WHI CH IS IN RESPECT OF 180 ML BOTTLE AND AS PER WHICH THE CO ST OF EACH BOTTLE IS SHOWN TO BE RS. 1.33. BASED ON THIS EVIDENCE, THE ASSESSING OFFICER COMPARED THE RATES OF BOTTLES SUPPLIED BY THE CONNECTED CONCERNS ON THE O NE HAND AND BY OUTSIDE PARTIES ON THE OTHER. OF COURSE , BESIDES THE ABOVE COST SHEET NO OTHER MATERIAL HAS BEEN FOUND IN THE COURSE OF SEARCH, BUT CONSIDERING THE DEFINITION OF 'UNDISCLOSED INCOME' GIVEN IN SEC. 15 8B(B} OF THE ACT, THERE MAY BE SOME CASE FOR THE DEPARTME NT TO MAKE THE ADDITION. BUT THEN, AS MENTIONED ABOVE, THERE ARE MANY GLITCHES IN THE FINDINGS OF THE ASSE SSING OFFICER WHICH MAY NOT JUSTIFY THE QUANTUM OF ADDITI ON MADE BY HIM, THOUGH THE COST SHEET CANNOT BE CONSIDERED TO BE SACROSANCT, YET IT CANNOT BE TOTAL LY IGNORED AND THE SAME CAN BE CONNECTED TO A CERTAIN EXTENT WITH THE ENTRIES IN THE BOOKS OF ACCOUNT TO FIND OUT WHETHER ANY EXPENDITURE CLAIMED BY THE ASSESSEE MA. NO. 16/HYD/2013 M/S. BAGGA DISTILLERIES HYDERABAD PVT. LTD. (FORMERLY M/S. GEMINI DISTILLERIES (HYD) PVT. LTD. ==================================== 4 IS FALSE. BE THAT AS IT MAY, THE ALLEGATION REMAINS THAT THE ASSESSEE HAS INFLATED ITS PURCHASE BY PAYING HI GHER RATES TO THE CONNECTED CONCERNS. HOWEVER, THIS IS N OT THE WHOLE TRUTH. THERE ARE INSTANCES WHERE THE ASSESSEE HAS PAID LESSER RATES TO CONNECTED CONCERN S AS COMPARED WITH THE RATES PAID TO OUTSIDERS. THE D ATA REPRODUCED ON PAGE-17 OF THE ORDER OF THE CIT(A} REVEALS THAT IN CASE OF 180 ML BOTTLES, THE ASSESSE E HAD PAID RS 1.76 TO MOHAN BREWERIES AND DISTILLERIES, A N OUTSIDE PARTY AS COMPARED TO M. K. ENTERPRISES, A CONNECTED CONCERN. HERE THE DIFFERENCE. IS ONLY OF 12 PAISE AND THE ASSESSING OFFICER HAS NOT OBJECTED TO IT. IN CASE OF 750 ML BOTTLES, DURING FINANCIAL YEAR 19 97- 98, THE ASSESSEE PAID A HIGHER PRICE OF RS 5.85 PER BOTTLE TO SHRI SURYA GLASSWARE, AN OUTSIDE PARTY AS COMPARED TO RS 2 PAID TO VIGNESWARA ENTERPRISES, A CONNECTED CONCERN IN RESPECT OF 375 ML BOTTLES. IN FINANCIAL YEAR 1999-2000, IN CASE OF 180 ML BOTTLES , THE MAXIMUM PRICE PAID WAS RS 2.05 TO VICTORY GLASS, AN OUTSIDE PARTY AS COMPARED TO ALL OTHER CONNECTED CONCERNS. IN CASE OF 750 ML BOTTLES ALSO, THE PRICE PAID TO VIGNESHWARA ENTERPRISES. THUS, CONSIDERING THESE DATA AS ALSO THE FACT THAT NO CONCRETE EVIDENCE HAS BEEN FOUND OF PURCHASES BEING INFLATED, IN OUR VIEW , THERE IS HARDLY ANY CASE TO SUSTAIN THE ADDITION MA DE BY THE ASSESSING OFFICER. THERE IS NO CONCRETE FIND ING ABOUT THE QUALITY OF BOTTLES SUPPLIED BY THE VARIOU S SUPPLIER, NO MATERIAL TO ASCERTAIN WHETHER THE BOTT LES SUPPLIED BY OUTSIDE PARITIES WAS INCLUSIVE OF FREIG HT AND OTHER CHARGES OR OTHERWISE AND SO ON. THE AVERMENT OF THE ASSESSING OFFICER THAT THE LIQUOR PRODUCED BY THE ASSESSEE IS OF LOW QUALITY MEANT FO R LOWER INCOME GROUP OF CONSUMERS DOES NOT THROW ANY LIGHT ON THE FRAGILITY OF THE BOTTLES. THEREFORE, I N OUR VIEW, THE RATE OF RS 1.50 ADOPTED BY THE ASSESSING OFFICER FOR 180 ML BOTTLES IS NOT JUSTIFIED. EARLIE R, WE DID MAKE A MENTION THAT THERE MAY BE SOME JUSTIFICATION S FOR THE DEPARTMENT TO MAKE SOME ADDITION, BOTH IN V IEW OF THE DEFINITION OF 'UNDISCLOSED INCOME' AND ALSO FOR THE REASON THAT THE ASSESSEE DID NOT PROVIDE PROPER EXPLANATION FOR PAYING HIGHER PRICES IN SOME CASES TO THE CONNECTED CONCERNS. THIS LAPSE, IT IT CAN BE SO CALLED, HAS TO BE WEIGHED AGAINST THE FACT THAT BOO KS OF ACCOUNT HAVE NOT BEEN REJECTED, BOOKS RESULTS ARE N OT REJECTED AND PURCHASE VOUCHERS ARE NOT FAULTED WITH . THEREFORE CONSIDERING ALL THESE SURROUNDING FACTORS , WE DIRECT THE ASSESSING OFFICER TO ADOPT RS 1.80 PER B OTTLE MA. NO. 16/HYD/2013 M/S. BAGGA DISTILLERIES HYDERABAD PVT. LTD. (FORMERLY M/S. GEMINI DISTILLERIES (HYD) PVT. LTD. ==================================== 5 IN PLACE OF RS 1.50 ADOPTED BY HIM AND REWORK THE DISALLOWANCE ACCORDINGLY. 6. WHILE DECIDING THE DEPARTMENTAL APPEAL VIDE ORDER I N IT(SS)A NO. 39/HYD/05 DATED 11.4.2008 , IT WAS HELD THAT NO ADDITION CAN BE MADE IN RESPECT OF THE PURCHASES MADE FROM OUTSI DERS. THE OBSERVATIONS OF THE TRIBUNAL ARE AS UNDER: 'FIRSTLY, THOUGH THE ASSESSING OFFICER HAS POINTED OUT A DIFFERENCE IN PURCHASES IN RESPECT OF ONE PARTY, TH ERE IS NO INDICATION IN HIS ORDER AS TO WHETHER HE FURTHER PROBED INTO THE MATTER OR NOT, WHICH HE IS SUPPOSED TO DO. MERELY SEEKING THE DIFFERENCE HE HAS DRAWN AN ADVERSE INFERENCE AGAINST THE ASSESSEE. SECONDLY, I T MAY NOT BE PROPER TO SAY THAT THE CIT(A) HAS DELETE D THE ADDITION ON TECHNICAL GROUND. THE CIT(A) HAS DELETED THE ADDITION ON A LEGAL GROUND I.E. IN ACCORDANCE WITH THE STATUTORY PROVISIONS. TRANSACTI ONS WHICH ARE ENTERED IN THE REGULAR BOOKS OF ACCOUNT A ND AGAINST WHICH THERE IS NO INCRIMINATING MATERIAL, S UCH TRANSACTIONS CANNOT FORM THE BASIS OF 'UNDISCLOSED INCOME'. THEREFORE, WE SEE NO SUBSTANCE IN THE APPE AL OF THE DEPARTMENT AND HENCE REJECT THE SAME'. 7. IN THE PRESENT APPEAL, THE ENHANCEMENT EFFECTED BY THE CIT(A) IS RELATABLE TO THE PURCHASES FROM OUTSIDE PARTIES, THEREFORE, THE TRIBUNAL WHILE FOLLOWING THE DECISIO N OF THE TRIBUNAL AS EXTRACTED ABOVE OUGHT TO HAVE DELETED THE ENTIRE ADDITION. HOWEVER, THE TRIBUNAL DIRECTED TO ADOPT A RATE OF R S. 1.80 PS. PER BOTTLE WHICH IS APPLICABLE FOR THE PURCHASES EFFECT ED FROM THE CLOSELY HELD CONCERNS. 8. ON THE OTHER HAND, THE LEARNED DR RELIED ON THE ORD ER OF THE TRIBUNAL. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. THE TRIBUNAL IN ITS ORDER DATED 16 TH MARCH, 2012 GIVEN A FINDING THAT PURCHASE COST OF 180 ML BOTTLES HAS TO BE CONSIDERED AT RS. 1.80 PER BOTTLE. THIS IS RATE APPLICABLE FO R THE BOTTLES MA. NO. 16/HYD/2013 M/S. BAGGA DISTILLERIES HYDERABAD PVT. LTD. (FORMERLY M/S. GEMINI DISTILLERIES (HYD) PVT. LTD. ==================================== 6 PURCHASED FROM THE CONCERNS IN WHICH THE ASSESSEE I S INTERESTED. AS SUCH THERE IS MISTAKE IN THE FINDING GIVEN BY TH E TRIBUNAL. IN OUR OPINION, THOUGH THE TRIBUNAL FOLLOWED ITS EARLI ER ORDER IN IT(SS)A NO. 39/HYD/2005 (DEPARTMENT APPEAL), IT WOU LD HAVE DELETED THE ENTIRE ADDITION, AS IN IT(SS)A NO. 39/H YD/2005 AS THE TRIBUNAL HAD GIVEN A FINDING THAT NO ADDITION IS PO SSIBLE AS THERE IS NO INCRIMINATING MATERIAL TO SUSTAIN THE ADDITIO N. FOR CLARITY, WE REPRODUCE OBSERVATIONS OF THE TRIBUNAL HEREIN BE LOW: 'FIRSTLY, THOUGH THE ASSESSING OFFICER HAS POINTED OUT A DIFFERENCE IN PURCHASES IN RESPECT OF ONE PARTY, TH ERE IS NO INDICATION IN HIS ORDER AS TO WHETHER HE FURTHER PROBED INTO THE MATTER OR NOT, WHICH HE IS SUPPOSED TO DO. MERELY SEEKING THE DIFFERENCE HE HAS DRAWN AN ADVERSE INFERENCE AGAINST THE ASSESSEE. SECONDLY, I T MAY NOT BE PROPER TO SAY THAT THE CIT(A) HAS DELETE D THE ADDITION ON TECHNICAL GROUND. THE CIT(A) HAS DELETED THE ADDITION ON A LEGAL GROUND I.E. IN ACCORDANCE WITH THE STATUTORY PROVISIONS. TRANSACTI ONS WHICH ARE ENTERED IN THE REGULAR BOOKS OF ACCOUNT A ND AGAINST WHICH THERE IS NO INCRIMINATING MATERIAL, S UCH TRANSACTIONS CANNOT FORM THE BASIS OF 'UNDISCLOSED INCOME'. THEREFORE, WE SEE NO SUBSTANCE IN THE APPE AL OF THE DEPARTMENT AND HENCE REJECT THE SAME'. 10. IN VIEW OF THE ABOVE DISCUSSION, WE ORDER ACCORDING LY. 11. IN THE RESULT, THE MA BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH APRIL, 2013 SD/ - (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 30 TH APRIL, 2012 TPRAO MA. NO. 16/HYD/2013 M/S. BAGGA DISTILLERIES HYDERABAD PVT. LTD. (FORMERLY M/S. GEMINI DISTILLERIES (HYD) PVT. LTD. ==================================== 7 COPY FORWARDED TO: 1. M/S. BAGGA DISTILLERIES HYDERABAD PVT. LTD. (FORMER LY M/S. GEMINI DISTILLERIES (HYD) PVT. LTD.), C/O. SHRI S. RAMA RAO, ADVOCATE, 102, SHRIYA'S ELEGANCE, D. NO. 3-6-643, S T. NO. 9, HIMAYATHNAGAR, HYDERABAD 2. ASSISTANT COMMISSIONER OF INCOME - TAX, CENTRAL CIRCLE - 1, SHAKKAR BHAVAN, HYDERABAD. 3. THE CIT(A) - I, HYDERABAD 4. THE CIT (CENTRAL) HYDERABAD. 5. THE DR A BENCH, ITAT, HYDERABAD