The ACIT, Circle-4(1), Visakhapatnam v. M/s Pratyusha Global Trade Pvt. Ltd., Visakhapatnam

CO 39/VIZ/2010 | 2005-2006
Pronouncement Date: 13-07-2011 | Result: Dismissed

Appeal Details

RSA Number 3925323 RSA 2010
Assessee PAN AADCP1526E
Bench Visakhapatnam
Appeal Number CO 39/VIZ/2010
Duration Of Justice 8 month(s) 15 day(s)
Appellant The ACIT, Circle-4(1), Visakhapatnam
Respondent M/s Pratyusha Global Trade Pvt. Ltd., Visakhapatnam
Appeal Type Cross Objection
Pronouncement Date 13-07-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 13-07-2011
Date Of Final Hearing 31-03-2011
Next Hearing Date 31-03-2011
Assessment Year 2005-2006
Appeal Filed On 28-10-2010
Judgment Text
ITA NO429/VIZAG/2010 & CO 39/V/2010 PRATYUSHA GLOBA L TRADE P LTD. VSKP. 1 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NO. 429 /VIZAG/ 20 10 ASSESSMENT YEAR : 2005 - 06 ACIT CIRCLE - 4(1) VISAKHAPATNAM VS. M/S. PRATYUSHA GLOBAL TRADE(P) LTD VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO.AADCP 1526E CO NO.39/VIZAG/2010 ASSESSMENT YEAR : 2005 - 06 ACIT CIRCLE - 4(1) VISAKHAPATNAM VS. M/S. PRATYUSHA GLOBAL TRADE(P) LTD VISAKHAPATNAM (AP PELLANT) (RESPONDENT) PAN NO.AADCP 1526E APPELLANT BY: SHRI TH.L. PETER CIT(DR) RESPONDENT BY: SHRI G.V.N. HARI CA ORDER PER SHRI S.K. YADAV JUDICIAL MEMBER:- THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST T HE ORDER OF THE CIT(A) ON A SOLITARY GROUND THAT CIT(A) HAS ERRED I N ESTIMATING THE GROSS PROFIT @ 36% DIRECTING THE A.O. TO REDIRECT THE DIS ALLOWANCE TO RS.12 LAKHS AS AGAINST THE ORIGINAL DISALLOWANCE OF RS.55 23 888/- . THE ASSESSEE HAS FILED THE C.O. QUESTIONING THE VALIDITY OF THE RE-OPENING OF THE ASSESSMENT ON THE GROUND THAT NOTICE ISSUED U/S 148 IS INVALID AND CO NSEQUENTLY THE ENTIRE ASSESSMENT PROCEEDING BASED ON SUCH INVALID NOTICE ARE LIABLE TO BE QUASHED AS VOID-AB-INITIO. 2. THE FACTS BORNE OUT FROM THE RECORD WITH REGARD TO THE REVENUES APPEAL ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF AQUA ITA NO429/VIZAG/2010 & CO 39/V/2010 PRATYUSHA GLOBA L TRADE P LTD. VSKP. 2 CULTURE FARMING AT ITS GROW OUT FARM AND HATCHERY A T ONGOLE DISTRICT. THE ADDITION HAS BEEN MADE ON ACCOUNT OF EXCESS CONSUMP TION OF RAW MATERIAL (FEED) AMOUNTING TO RS.55 23 888/- WHICH IS PRIMARI LY BASED ON THE STATEMENT GIVEN BY THE TECHNICAL ASSISTANT OF THE A PPELLANT COMPANY SRI SUDHAKARA RAO. DURING THE COURSE OF ASSESSMENT PRO CEEDINGS IN HIS STATEMENT RECORDED BY THE A.O. IT WAS ADMITTED BY HIM THAT THE CONSUMPTION OF RAW MATERIAL WOULD BE 1.5 TIMES TO ACHIEVE YIELD OF 1.00 MT OF FINISHED GOODS. THE A.O. THEREFORE CAME TO THE CONCLUSION T HAT TO ACHIEVE 100.41 MT OF FINISHED GOODS THE ASSESSEE OUGHT TO HAVE CONSU MED 150.00 MT OF RAW MATERIAL LIKE SEED FEED ETC. AS AGAINST THE ASSESS EES CLAIM OF CONSUMPTION OF RAW MATERIAL OF 290.65 MT WHICH IS UNREALISTIC. FU RTHER IT WAS ALSO OBSERVED BY THE A.O. THAT THE ASSESSEE COULD NOT SUBMIT EVID ENCE IN SUPPORT OF CONSUMPTION AND PURCHASE OF QUANTITY OF FEED. THUS IN THE ABSENCE OF DOCUMENTARY EVIDENCE AND ALSO GIVING DUE CREDENCE T O THE STATEMENT OF THE TECHNICAL ASSISTANT IT WAS HELD BY THE A.O. THAT T HE ASSESSEE COMPANY IS FOUND TO HAVE CLAIMED EXCESS VALUE OF CONSUMPTION O F RAW MATERIAL. THE ASSESSEE CLAIMED TO HAVE CONSUMED 290.65 MT OF FEED VALUED AT RS.114.15 LAKHS WHICH WORKED OUT TO RS.39 274/- PER MT. THUS TAKING THE AVERAGE VALUE OF FEED AT RS.39 274/- PER MT THE VALUE OF 1 40.65 MT (290.65 MT 150.00 MT I.E. ESTIMATED FIGURE ADOPTED BY THE A.O . = 140.65 MT) WHICH WORKED OUT TO RS.55 23 888/- HAS BEEN ADDED TO THE INCOME OF THE APPELLANT TOWARDS THE EXCESS CLAIM OF EXPENDITURE. 3. AGGRIEVED THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE CIT(A) AND HAS FURNISHED THE COPIES OF PURCHASE BILLS AS A N ADDITIONAL EVIDENCE ALONG WITH THE EXPLANATION THAT DUE TO SHORTAGE OF TIME IT COULD NOT BE PRODUCED BEFORE THE A.O. AS THE FACTORY OFFICE AT TANGUTUR PRAKASAM DISTRICT WAS VERY FAR FROM VISAKHAPATNAM. BESIDES THIS STATEMENT OF SHRI SUDHAKARA RAO TECHNICAL ASSISTANT WAS ALSO RETRACTED STATING THAT THE STATEMENT HAD BEEN MISINTERPRETED BY THE A.O. THIS ADDITIONAL EVIDENC E WAS CONFRONTED TO THE ASSESSING OFFICER AND REMAND REPORT WAS CALLED. TH E A.O. VIDE HIS REMAND REPORT DATED 13.3.2010 AND 7.4.2010 HAD SUBMITTED T HAT OUT OF TOTAL ITA NO429/VIZAG/2010 & CO 39/V/2010 PRATYUSHA GLOBA L TRADE P LTD. VSKP. 3 PURCHASE OF FEED SHOWN AT RS.1 14 15 000/- THE TOTA L ORIGINAL BILLS TO THE EXPENDITURE OF RS.96 56 042/- COULD BE VERIFIED AS THE ASSESSEE DID NOT PRODUCE ALL THE PURCHASE BILLS. THE ASSESSEE WAS A LSO FAILED TO PRODUCE THE PURCHASE REGISTER AND THE STOCK REGISTER TO SUBSTAN TIATE ITS CLAIM. IT WAS FURTHER REPORTED IN REMAND REPORT THAT IN THE IMMED IATE PRECEDING YEAR 2004- 05 THE CONSUMPTION OF RAW MATERIAL WAS 28.91 TONNE S AND THE PRODUCTION WAS 146.11 TONNES WHEREAS DURING THE YEAR UNDER CO NSIDERATION THE CONSUMPTION OF MATERIAL WAS 290.65 MT AND PRODUCTIO N WAS 100.41 MT. THUS ON COMPARISON OF CONSUMPTION OF RAW MATERIALS FOR A.Y. 2004-05 AND 2005-06 THE A.O. FOUND THAT THERE WAS ABNORMAL INC REASE IN THE CONSUMPTION OF RAW MATERIAL WHICH CLEARLY INDICATE THAT ASSESSEE HAS INFLATED THE EXPENDITURE ON ACCOUNT OF CONSUMPTION OF RAW MA TERIAL. 4. THE REMAND REPORT WAS CONFRONTED TO THE ASSESSEE AND THE ASSESSEE FURNISHED HIS REPLY ON EACH AND EVERY POINT OF THE REMAND REPORT. 5. THE CIT(A) RE-EXAMINED THE ENTIRE ISSUE IN THE L IGHT OF SUBMISSIONS TO THE PARTIES AND FINALLY HELD THAT IF THE GROSS PROF IT RATIO IS ESTIMATED AT 36% AS AGAINST 30% DISCLOSED BY THE ASSESSEE COMPANY IT W OULD MEET THE ENDS OF JUSTICE AS IT WORKS OUT TO APPROXIMATELY RS.12 LAKH S AS ADDITION. THE RELEVANT OBSERVATION OF THE CIT(A) ARE EXTRACTED HEREUNDER: I HAVE CAREFULLY GONE THROUGH THE ABOVE FACTS OF TH E CASE APPELLANTS SUBMISSION AS WELL AS A.OS CONTENTION. ON PERUSAL OF THE QUANTITATIVE INFORMATION OF RAW MATERIAL/FINISHED GOODS IN MT FO R THE YEAR ENDED ON 31.3.2004 AND 31.3.2005 (WHICH IS REPRODUCED AS UND ER): PARTICULARS 31.3.2004 QUANTITY MT 31.3.2005 QUANTITY MT CONSUMPTION OF RAW MATERIALS 289.1 290.65 PRODUCTION/PURCHAS ES GROW-OUT FARM (PRAWNS) 146.11 100.41 PERCENTAGE INPUT: OUTPUT 50.54% 34.55% IT CAN BE SEEN THAT THERE IS NO MAJOR VARIATION IN THE INPUT BUT THERE IS SOME VARIATION IN THE OUTPUT RATIO WHICH IS APPROXI MATELY 16% FOR WHICH IT ITA NO429/VIZAG/2010 & CO 39/V/2010 PRATYUSHA GLOBA L TRADE P LTD. VSKP. 4 HAS BEEN EXPLAINED BY THE APPELLANT THAT IN THIS LI NE OF BUSINESS I.E. AQUA FARMING THE VARIATION IN THE PRODUCTION IS NORMAL F EATURE WHICH HAS BEEN ACCEPTED IN THE SCRUTINY ASSESSMENT BY THE DEPARTME NT IN EARLIEST ASST. YEARS. IT IS FURTHER POINTED OUT THAT IN THE FINAN CIAL YEAR ENDING ON 31.3.2003 THERE WAS CONSUMPTION OF RAW MATERIAL OF 274.300 MT AND FINISHED GOODS PRODUCED WAS 85.350 MT WHICH WAS ACCEPTED BY THE DE PARTMENT IN THE SCRUTINY ASSESSMENT PASSED U/S 143(3). SIMILARLY SUCH VARIATION WAS ALSO FOUND IN THE YEAR ENDING 31.3.2002 WHEREIN AGAINST CONSUMPTION OF RAW MATERIAL (FEED) OF 269.200 MT THE PRODUCTION OF FI NISHED GOODS WAS ONLY 51.850 MT. THE APPELLANT HAS FURTHER CONTENDED THA T THE DOCUMENTARY EVIDENCE LIKE PURCHASE BILLS PARTIES NAMES MODE O F PAYMENT WHICH WERE PRODUCED DURING THE ASSESSMENT PROCEEDINGS AS WELL AS REMAND PROCEEDINGS CANNOT BE IGNORED. THE A.O. IS NOT JUSTIFIED IN MA KING ADDITION ON ESTIMATE BASIS WITHOUT INVOKING THE PROVISIONS OF SEC.145(3) OF THE INCOMETAX ACT AND MERELY ON BASIS OF A STATEMENT OF A TECHNICAL ASSIS TANT WHICH WAS RETRACTED LATER AND WITHOUT BRINGING ANY CORROBORATIVE EVIDEN CE. ON CAREFUL CONSIDERATION OF THE ABOVE FACTS OF THE CASE I FIND THAT THERE IS NO COGENT REASON OFFERED BY THE APPELLANT FOR REDUCTION OF OUTPUT DURING THE YEAR UNDER CONSIDERATION WHEN COMPARED T O THE PRECEEDING YEAR ENDED ON 31.3.2004. BESIDES THIS IT IS ALSO TO BE NOTED HERE THAT OUT OF THE TOTAL PURCHASES OF RS.1 14 15 000/- THE APPELLANT COULD PRODUCE THE PURCHASE BILLS ONLY TO THE EXTENT OF RS.96 56 042/- AND FOR THE BALANCE AMOUNT RS.17 58 958/- NO PURCHASE BILLS COULD BE PR ODUCED ALTHOUGH THE PAYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUES AN D BY DEMAND DRAFT ONLY TO THE EXTENT OF RS.11 43 150/- AS AGAINST THE PURCHASES CLAIMED BY THE APPELLANT AT RS.17 58 958/- MEANING THEREBY FOR PUR CHASE AMOUNTING TO RS.17 58 958 - 11 43 150/- = RS.6 15 808/- THE APP ELLANT COULD NEITHER FURNISH THE PURCHASE BILLS NOR THE EVIDENCE FOR PAY MENTS MADE. HOWEVER IT IS ALSO TRUE THAT THE APPELLANTS BUSINESS IS NOT O F STANDARD MANUFACTURING PROCESS WHERE INPUT OUT PUT COULD BE ACHIEVED IN A COPY BOOK STYLE SINCE IT DEPENDS ON VARIOUS FACTORS LIKE CALAMITIES CONTAMI NATION INAPPROPRIATE BREEDING AND THE LIKE AS HAS BEEN NARRATED BY THE A PPELLANT WHICH IS EVIDENT FROM THE EARLIER YEARS OUTPUT RATIO VIS--VIS CONSU MPTION OF RAW MATERIAL. SINCE THE APPELLANT HAS NOT BEEN ABLE TO EXPLAIN T HE VARIATION IN THE PRODUCTION WHICH IS APPROXIMATELY 16% BETWEEN THE Y EAR UNDER CONSIDERATION AND IMMEDIATE PRECEDING YEAR AS ALSO THERE ARE TRANSACTIONS WHICH COULD NOT BE SUPPORTED BY DIRECT EVIDENCE TH EREFORE I AM NOT INCLINED TO ACCEPT THE ARGUMENTS OF THE APPELLANT THAT ADDIT IONS MADE BY THE AO ARE DEVOID OF ANY MERIT. HOWEVER I AM ALSO NOT INCLINE D TO ACCEPT THE METHOD ADOPTED BY THE AO FOR MAKING SUCH ESTIMATED ADDITIO N SINCE WHILE MAKING SUCH ADDITIONS THE AO SHOULD HAVE ALSO CONSIDERED T HE FACTS AND FIGURES OF EARLIER YEARS SINCE THE ASSESSMENT IN SUCH EARLIER YEARS WERE ALSO MADE U/S 143(3) OF THE ACT WHERE VARIATION IN INPUT OUTPUT R ATIO WAS A PROMINENT FEATURE AND THEREFORE MERELY BASED ON COMMENTS OF E MPLOYEE WHOSE STATEMENT COULD NOT BE MADE AS A SOLE GROUND FOR SU CH ADDITION AND THEREFORE ADDITION MADE BY THE AO IS ALSO NOT IN LI NE WITH THE NATURAL JUSTICE AS WOULD HAVE BEEN DONE BY HIM BY GIVING DUE CONSID ERATION TO VARIOUS ITA NO429/VIZAG/2010 & CO 39/V/2010 PRATYUSHA GLOBA L TRADE P LTD. VSKP. 5 FACTORS AS WELL AS CONSIDERING THE EARLIER YEARS D ATA. THE ADDITION CANNOT BE SUSTAINED MERELY ON THE BASIS OF STATEMENT OF THE T ECHNICAL ASSISTANT WHICH WAS ALSO RETRACTED LATER AND IS NOT SUPPORTED BY AN Y CORROBORATIVE EVIDENCE. IF THE ADDITION OF RS.55.23 LAKHS BASED ON THE STAT EMENT OF THE TECHNICAL ASSISTANT AND WITHOUT THE CORROBORATIVE EVIDENCE IS ACCEPTED THEN THE GROSS PROFIT RATIO WOULD BE INCREASED TO 55.27% WHICH IS QUITE UNREALISTIC WHEN COMPARED TO GROSS PROFIT DISCLOSED IN THE EARLIER Y EARS WHICH IS 27% IN F.Y. 2001-02 30% IN F.Y. 2002-03 AND 29% IN 2003-04 AND ALSO ACCEPTED BY THE DEPARTMENT. THUS LOOKING TO THE OVERALL FACTS OF THE CASE AND KEEPING IN VIEW THE VARIATION IN THE OUTPUT AND ALSO FOR THE REASON THAT PURCHASE AMOUNTING TO RS.6 15 808/- THE APPELLANT COULD NEITHER PRODU CE THE PURCHASE BILLS NOR THE EVIDENCE TO THE PAYMENTS MADE I AM OF THE VIEW THAT IF THE GROSS PROFIT RATIO IS ESTIMATED AT 36% AS AGAINST 30% DISCLOSED BY THE APPELLANT COMPANY WOULD MEET BOTH THE ENDS OF JUSTICE WHICH WORKS OUT TO APPROXIMATELY RS.12 00 000/- (IN ROUND FIGURE). TH US AO IS DIRECTED RETAIN THE ADDITION AT RS.12 00 000/- AS AGAINST RS.55 23 888/- MADE BY HIM. 6. NOW THE REVENUE IS IN APPEAL BEFORE US AND THE L D. D.R. HAS PLACED A HEAVY RELIANCE UPON THE ORDER OF THE ASSESSING OFFI CER. THE LD. D.R. HAS EMPHATICALLY ARGUED THAT THE ASSESSING OFFICER HAS RIGHTLY WORKED OUT THE EXCESS RAW MATERIALS CLAIMED BY THE ASSESSEES AFTE R MAKING A DETAILED COMPARISON AND ANALYSIS OF THE DATAS FURNISHED BY T HE ASSESSEE. 7. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HA ND HAS PLACED A HEAVY RELIANCE UPON THE ORDER OF THE CIT(A). 8. HAVING GIVEN A THOUGHTFUL CONSIDERATION TO THE R IVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF THE ORDER OF THE CIT(A) WE FIND THAT THE CIT(A) HAS EXAMINED THE REMAND REPORT VIS--VIS THE COMMENTS O F THE ASSESSEE SUBMITTED ON THE REMAND REPORT AND THE MATERIAL AVA ILABLE ON RECORD AND HAS MADE A PROPER ESTIMATION OF THE EXCESS CLAIM RAISED BY THE ASSESSEES. SINCE NO SPECIFIC INFIRMITY IS POINTED OUT BY THE LD. D.R . WE FIND OURSELVES IN AGREEMENT WITH THE ORDER OF THE CIT(A). WE ACCORDI NGLY CONFIRM HIS ORDER. 9. THROUGH CROSS OBJECTIONS THE ASSESSEE HAS TRIED TO CHALLENGE THE RE- OPENING OF THE ASSESSMENT U/S 147 OF THE ACT. WE H AVE HEARD THE RIVAL ITA NO429/VIZAG/2010 & CO 39/V/2010 PRATYUSHA GLOBA L TRADE P LTD. VSKP. 6 PARTIES ON THIS ISSUE BUT WE FIND NO MERIT IN THE A SSESSEES CONTENTIONS. WE ACCORDINGLY DISMISS THE CROSS OBJECTION OF THE ASSE SSEES. 10. IN THE RESULT THE APPEAL OF THE REVENUE AS WEL L AS THE CROSS OBJECTIONS ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 13.7.2011 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM DATED 13 TH JULY 2011 COPY TO 1 ACIT CIRCLE - 4(1) VISAKHAPATNAM 2 M/S. PRATYUSHA GLOBAL TRADE (P ) LTD. PRAYUSHA HOU SE GANGULAVARI ST. VISAKHAPATNAM-1. 3 THE CI T VISAKHAPATNAM 4 THE CIT (A) VISAKHAPATNAM 5 THE DR ITAT VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM