SHRI KRISHNA FARMS,MUMBAI V. ITO - 19(3)(1), MUMBAI

ITA 3374/MUM/2025

AI Insights

The case involves Shri Krishna Farms, a partnership firm engaged in the business of dealing with milk and other products, which appealed against the order of the CIT(A) for the assessment year 2012-13. The primary contention was the CIT(A)'s decision to estimate the gross profit rate at 8% on milk sales, which the assessee argued was unjustified. The Income Tax Officer (ITO) had earlier rejected the books of account due to discrepancies in purchase and sales records and estimated a 15% profit margin, later reduced to 8% by the CIT(A). The Tribunal found no substantial basis to further reduce the estimated profit margin, citing the lack of comparable instances provided by the assessee to substantiate their claim.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 772316 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Assessment Year: 2012-2013
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SURENDRA MOHAN
• Assessee Lawyers: SUNIL HIRAWAT
• Keywords: Rejection of books of accounts
• Section: 133(6)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER ITA No. 3374/MUM/2025 (AY: 2012-13) (Physical hearing) Shri Krishna Farms Shop No. 5, Grd. Floor, 11/43, Life ScapesNilay, Kalbadevi, Mumbai – 400002. [PAN: ABQFS7424R] Vs ITO – 19(3)(1), Mumbai Piramal Chambers, Lalbaug, Parel, Mumbai – 400012. Appellant / Assessee Respondent / Revenue Assessee by Shri Sunil Hirawat CA Revenue by Shri Surendra Mohan, Sr. DR Date of Institution 13.05.2025 Date of hearing 22.07.2025 Date of pronouncement 25.08.2025 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER; 1. This appeal by assessee is directed against the order of Ld. CIT(A)/ADDL/JCIT(A)-1, Visakhapatnam dated 26.03.2025 for assessment year (AY) 2012-13. The assessee has raised following grounds of appeal: “1. On facts and in law, the Learned Commissioner of Income Tax-Appeals had erred in holding the Gross Profit rate at 8% of the milk sales. Under the facts and circumstances of the matter, the Gross Profit shown by the appellant ought to have been accepted. 2. The Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at, the time of hearing of the appeal, so as to enable the Hon'ble Income Tax Appellate Tribunal to decide this appeal according to law.” 2. Brief facts of the case are that assessee is a partnership firm and engaged in the business of dealer of milk, milk products, hardware items, computer items and hose pipes, filed its return of income for assessment year (A.Y.) Printed from counselvise.com ITA No. 3374/Mum/2025 Shri Krishna Farms 2 2012-13 on 28.09.2012 declaring income of Rs. 21,535/-. The case was selected for scrutiny through CASS. During the assessment, the assessing officer noted that in the P & L Account, the assessee has debited buffaloes food expenses of Rs. 51,81,236/-. The assessing officer in order to verify the genuineness of expenses issued notice under section 133(6) to the parties from whom the assessee has shown purchase of such cattle food. The assessing officer in para 4.1 of his order recorded that out of nine parties only five parties provided the requisite detail. After obtaining such detail, the assessing officer was of the view that substantial part of food expenses was not substantiated. The assessing officer further recorded that assessee has shown milk sale of Rs. 3.05 crores to various persons, details of which are recorded in para 5.1 of assessment order. The assessing officer further noted that major sales were to Parsi Dairy Farms and Suryoday General Stores. Parsi Dairy has shown total purchases of Rs. 84.28 lakhs, however, the assessee in its books has shown sales of Rs. 62.50 lakhs. Similarly, Suryoday General Stores has shown purchases of Rs. 2.19 lakhs but the assessee has shown sales of Rs. 1.70 lakhs. On the basis of such discrepancy, the assessing officer was of the view that assessee has suppressed the sales of milk. The assessing officer issued show cause notice as to why books of account should not be rejected under section 145(3) vide notice dated 12.03.2015. In response to such show cause notice, the assessee filed its reply dated 24.03.2015. The assessee objected such rejection of books of account. The assessee contended that they have purchased buffalo food and milk items from various persons, which may not be available after lapse of 2- Printed from counselvise.com ITA No. 3374/Mum/2025 Shri Krishna Farms 3 3 years, which cannot be made basis for rejection of books of account. The reply of assessee was not accepted by assessing officer. The assessing officer recorded that in the trading; there is gross profit of 24%, whereas in the milk sales, the assessee has shown losses. The assessee in addition to the milk is also selling cream and paneer to high profile clients. The profit margin in such sale is high. The assessee has shown turnover of Rs. 1.51 crores in milk business. The assessing officer estimated @15.00% profit on milk business and thereby added Rs. 22,70,715/- in the income of assessee. 3. Aggrieved by the addition in the assessment order, the assessee filed appeal before ld. CIT(A). Before ld. CIT(A), the assessee filed detail written submissions. The submissions of assessee are recorded twice once from page no. 4 to 11 of assessment order and after extracting / scanning of assessment order, the similar submissions are extracted again on page no. 24 to 31 and again assessment order was scanned. On the submission of assessee, a remand report was obtained from assessing officer. The remand report of assessing officer is extracted page no. 39 to 40 of impugned order. The remand report of assessing officer was obtained for the reasons that the assessee has furnished additional fact. In the remand report, the assessing officer objected to the admissions of additional fact and evidence. 4. The ld. CIT(A) on considering the submissions of assessee, contents of assessment order and the remand report, in para 6.3 of his order noted that assessing officer rejected the books of account and estimated 15% profit margin on sale of milk of Rs. 1.51 crores and thereby added Rs. 22.70 lakhs to the total income of assessee. During appeal proceedings, the assessee Printed from counselvise.com ITA No. 3374/Mum/2025 Shri Krishna Farms 4 argued that some of the parties from whom purchases and sales were made in remote areas and if the assessee proved the purchase and sales by primary evidence then provisions of section 145(3) should not be invoked. However, in the remand report, the assessing officer stated that reasonable opportunity was provided. The ld. CIT(A) on considering the submission of assessee that milk is purchased and sold in remote areas and it was difficult for assessee to furnish complete details. The ld. CIT(A) thereby restricted the gross profit @ 8.00% of total milk sale and thereby allowed part relief to the assessee. Further, aggrieved, the assessee has filed present appeal before Tribunal. 5. I have heard the submissions of learned authorised representative (ld. AR) and the learned senior departmental representative (ld. Sr. DR) for the revenue. The ld. AR of the assessee submits that assessing officer rejected the books of account of assessee only on the ground that there was certain discrepancy on account of purchase of cattle food and minor discrepancies in the sales shown by assessee and the details furnished by purchase parties. The assessing officer estimated 15.00% margin without bringing any comparable. Though, the ld. CIT(A) restricted the addition to the 8.00% of profit. 8.00% of profit on milk and milk product is on higher side. The assessee has meagre income from milk business and thereby it was closed in subsequent year. The assessee has filed audit report. Similar income involved by assessee in previous and subsequent years was accepted. The ld. AR of the assessee submits that there was no justification for estimating @ 8.00% profit on sale of milk and entire addition on estimation basis may be deleted. Printed from counselvise.com ITA No. 3374/Mum/2025 Shri Krishna Farms 5 6. On the other hand, learned senior departmental representative (ld. Sr. DR) for the revenue supported the order of lower authorities. The ld. Sr. DR submits that assessing officer filed various discrepancies in the sale and purchase of milk as well as in the cattle food. The assessing officer rejected the books of account and fairly estimated the profit though it was reduced to 8% by ld. CIT(A). The assessee is not entitled for further relief. The turnover of assessee of business milk was in crores. The assessee was selling milk products to high profile clients like Parsi Dairy and Bhajansons Dairy Farm etc. The assessee does not deserve any further relief. 7. I have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. I find that the assessing officer rejected the books of accounts / books results by pointing out various discrepancies. The rejection of books of accounts is not challenged by the assessee. Before Tribunal the assessee has only challenged the estimation of income from milk and milk product. As recorded above the assessing officer estimated such income @15.00%, which was reduced to 8.00% on total turnover of milk business. Apart from other discrepancies, the assessing officer specifically recorded that major sales were to Parsi Dairy Farms and Suryoday General Stores. Parsi Dairy has shown total purchases of Rs. 84.28 lakhs, however, the assessee in its books has shown sales of Rs. 62.50 lakhs. Similarly, Suryoday General Stores has shown purchases of Rs. 2.19 lakhs but the assessee has shown sales of Rs. 1.70 lakhs. Before Tribunal the ld AR of the assessee has not shown any comparable instances to substantiate the facts that estimation of income on milk and milk product is on higher side. Printed from counselvise.com ITA No. 3374/Mum/2025 Shri Krishna Farms 6 Hence, I do not find any justification for further reducing such estimation of income on business of milk. In the result, the grounds of appeal raised by the assessee are rejected. 8. In the result, the appeal of assessee is dismissed. Order was pronounced in the open Court on 25/08/2025. Sd/- PAWAN SINGH JUDICIAL MEMBER MUMBAI, Dated: 25/08/2025 Biswajit Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order Assistant Registrar ITAT, Mumbai Printed from counselvise.com "