ACIT RG 10(3), MUMBAI v. MAHESH AGRI EXIM P. LTD, MUMBAI

ITA 1900/MUM/2009 | 2005-2006
Pronouncement Date: 30-09-2010 | Result: Allowed

Appeal Details

RSA Number 190019914 RSA 2009
Assessee PAN RUARY2005T
Bench Mumbai
Appeal Number ITA 1900/MUM/2009
Duration Of Justice 1 year(s) 6 month(s) 4 day(s)
Appellant ACIT RG 10(3), MUMBAI
Respondent MAHESH AGRI EXIM P. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2010
Appeal Filed By Department
Order Result Allowed
Bench Allotted B
Tribunal Order Date 30-09-2010
Date Of Final Hearing 24-08-2010
Next Hearing Date 24-08-2010
Assessment Year 2005-2006
Appeal Filed On 26-03-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B MUMBAI BEFORE SHRI R.K.PANDA ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO JUDICIAL MEMBER ITA NO. 1900/MUM/2009 (ASSESSMENT YEAR: 2005-06) ACIT RANGE 10(3) 451 AAYAKAR BHAVAN 4 TH FL M K MARG MUMBAI-400020 APPELLANT VS MAHESH AGRI EXIM P LTD 805/806 CORPORATE CENTRE NIRMAL LIFESTYLE LBS MARG MULUND(W) MUMBAI-400080 PAN:AABCO970D .RESPOND ENT ASSESSEE BY : SHRI N M SURANA REVENUE BY : SHRI HARI GOVIND SINGH O R D E R PER VIJAY PAL RAO JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER DATED 16.1.2009 OF CIT(A)-X MUMBAI FOR THE ASSESSM ENT YEAR 2005-06 2. ONLY GROUND RAISED BY THE REVENUE IN THIS APPEAL IS REPRODUCED BELOW: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW THE LD. CIT(A) ERRED IN DELETING TH E ADDITION MADE ON ACCOUNT OF GROSS PROFIT MADE BY TH E AO IGNORING THE FACTS THAT THERE IS A FAILURE ON T HE PART OF THE ASSESSEE TO SUBSTANTIATE GROSS PROFIT SHOWN IN THE RETURN OF INCOME ITA NO. 1900/MUM/200 (ASSESSMENT YEAR: 2005-06) 2 3. THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINES S OF EXPORT OF GOODS SUCH AS ORANGE GROUND NUT BOILED RICE ETC. DURING THE SCRUTINY ASSESSMENT PROCEEDINGS THE A O NOTICED THAT THE ASSESSEE HAS SHOWN GP AT THE RATE OF 4.5% WHICH IS LESS THAT THE GP FOR THE EARLIER YEARS. THE AO O BSERVED THAT THE INCOME SHOWN BY THE ASSESSEE AT ` 18 89 533/- INCLUDES THE INCOME BY WAY OF INTEREST OF ` 9 16 923/-. THEREFORE NET PROFITS EXCLUDING OTHER INCOME COMES TO ` 9 72 610/- WHICH IS ONLY 0.17% OF THE TOTAL SALES INCLUDING THE DEPB SALES. IF DEPB SALES ARE EXCLUDED THERE WILL BE SUBSTANTIAL LOSS NOT ONLY FROM THE EXPORT SALES BUT ALSO AGAINST THE L OCAL SALES. THE AO OBSERVED THAT THE INCENTIVE RECEIVABLE AGAIN ST VISHESH KRISHI YOGNA OF ` .1.56 CRORES AND INCREASE IN DEBP CLOSING STOCK OF RS.10 LAKHS IS ALSO INCLUDED IN T HE SAID PROFIT. THE ASSESSEE EXPLAINED BEFORE THE AO THAT IT WAS OPERATING ON NO PROFIT NO LOSS BASIS. THE AO DID NOT FIND ANY MERIT IN THE SUBMISSIONS OF THE ASSESSEE ON THE GROUND THAT RUNNING BUSINESS WITHOUT MAKING THE PROFIT IS AGAINST COMM ON BUSINESS PRACTICE. THE ASSESSEE WAS ASKED TO FURNIS H PARTY- WISE DETAILS OF PURCHASES AND ALSO CONFIRMATION FRO M THE LORRY RECEIPT GIVING THE EVIDENCE OF TRANSPORTATION OF G OODS OF SUCH GOODS. HOWEVER NO SUCH DETAILS WERE FURNISHED BY THE ASSESSEE EXCEPT LORRY RECEIPT OF ONE PARTY HARIO M TRADERS AND INCOMPLETE ADDRESS OF SOME OF THE PARTIES. TH E AO WAS ITA NO. 1900/MUM/200 (ASSESSMENT YEAR: 2005-06) 3 OF THE VIEW THAT TWO PURCHASES BY THE ASSESSEE ARE NOT SUBJECT TO VERIFICATION. HE HAS FURTHER POINTED OUT THAT T HE MAXIMUM PURCHASE WERE MADE BY THE ASSESSEE IN THE MONTH OF FEBRUARY 2005 TO THE TUNE OF ` 7.63 CRORES. THEREFORE FOR SAMPLE VERIFICATION THE ASSESSEE WAS REQUIRED TO G IVE CONSIGNMENT WISE DETAILS OF TRADE PURCHASE CLEARIN G AND FORWARDING EXPENSES FOR THE MONTH OF FEBRUARY. THE ASSESSEE DID NOT FURNISH ANY DETAILS BEFORE THE AO. THE A O FURTHER ASKED THE ASSESSEE TO GIVE THE DETAILS OF WAREHOUSI NG CHARGES BY MENTIONING QUANTITY AND STORES BUT THE ASSESSEE DID NOT FURNISH. VIDE LETTER DATED 5.12.2007 THE AO AGAI N ASKED THE ASSESSEE TO GIVE COMPARATIVE EXPORT SALES AND GP N ET PROFIT COMPARATIVE LOCAL SALES GROSS PROFIT AND NET PROFI T FROM THE YEAR IN WHICH 100% DEDUCTION UNDER SECTION 80HHC W AS AVAILABLE. THE ASSESSEE HAS GIVEN THE FIGURES ONLY FOR TWO YEARS I.E. ASSESSMENT YEAR 2000-01 AND 2005-06 AND NOT FOR THE INTERVENING YEARS. THE AO OBSERVED THAT THE FA LL IN THE GP FROM 6.17 % IN THE ASSESSMENT YEAR 2000-01 TO 4. 05 IN ASSESSMENT YEAR 2005-06 ON EXPORT SALES AND FROM 6 .63% TO 5.52% ON THE LOCAL SALES HAS NOT BEEN EXPLAINED EX CEPT A GENERAL EXPLANATION OF INCREASE IN COMPUTATION. AC CORDINGLY THE AO REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE GP AT 4.50% AS AGAINST 4.05% SHOWN IN THE RETURN OF IN COME. ACCORDINGLY THE ADDITION OF RS.28 89 139/- WAS MA DE TO THE TOTAL INCOME OF THE ASSESSEE. ITA NO. 1900/MUM/200 (ASSESSMENT YEAR: 2005-06) 4 4. ON APPEAL THE CIT(A) DELETED THE ADDITION BY O BSERVING THAT FOR THE ASSESSMENT YEAR 2004-05 THE GP RATE SH OWN BY THE ASSESSES WAS 3.59% AND THE SAME WAS ACCEPTED. 5. BEFORE US THE LEARNED DR HAS SUBMITTED THAT TH E ASSESSEE HAS FAILED TO PRODUCE THE RELEVANT RECORD EVIDENCE AND DETAILS TO PROVE THE GENUINENESS OF THE PARTIES AS WELL AS PURCHASES MADE BY THE ASSESSEE. THE ASSESSEE HAS EV EN NOT PRODUCED THE DETAILS REGARDING THE PARTIES BY PRODU CING THEIR ADDRESS CONSIGNMENT DETAILS OF FORWARDING EXPENSES WAREHOUSING EXPENSES AND COMPARATIVE DETAILS OF SAL E GP NET PROFIT IN RESPECT OF EXPORT AND LOCAL SALES. W HEN THE ASSESSEE FAILED TO PRODUCE THE RELEVANT RECORD THE AO WAS HAVING NO OPTION BUT TO REJECT THE BOOKS OF ACCOUN T AND ESTIMATE THE GP RATIO ON THE BASIS OF AVAILABLE R ECORD OF EARLIER YEARS. HE HAS FURTHER POINTED OUT THAT THE CIT(A) ACCEPTED THE SUBMISSIONS WITHOUT GIVING ANY FINDIN G ON THE RECORD WHICH WAS TO BE PRODUCED BY THE ASSESSEE. THEREFORE IN THE ABSENCE OF RELEVANT RECORD THE FINDINGS OF T HE LEARNED CIT(A) IS NOT SUSTAINABLE. 6. ON THE OTHER HAND THE LEARNED AR OF THE ASSESSE E HAS SUBMITTED THAT THE ENTIRE RECORD WAS EXAMINED BY TH E CIT(A) IN PRESENCE OF THE AO DURING THE APPELLATE PROCEED INGS. HE HAS FURTHER CONTENDED THAT THE ASSESSEE FILED THE PROFIT AND LOSS ACCOUNT DULY AUDITED UNDER SECTION 44AB OF TH E ACT. ITA NO. 1900/MUM/200 (ASSESSMENT YEAR: 2005-06) 5 THE AO DID NOT FIND ANY DEFECT IN THE ACCOUNT OF TH E ASSESSEE AND HAS PROCEEDED WRONGLY IN ESTIMATION OF GP RATI O WHICH IS ARBITRARY AND BASED ON GUESS WORK. THE ASSESSEE FILED DETAILS AND DOCUMENTS DURING THE COURSE OF ASSESSM ENT PROCEEDINGS BEFORE THE AO WHICH WAS DULY VERIFIED BY THE AO. DURING THE APPELLATE PROCEEDINGS THE RECORD FILED BY THE ASSESSEE WAS EXAMINED BY THE AO AND NO OBJECTION WHATSOEVER OR OTHER DISCREPANCY WAS FOUND IN THE RE CORD BY THE AO. THEREFORE THE ENTIRE RECORD WAS EXAMINED AND VERIFIED DURING THE APPELLANT PROCEEDINGS BEFORE TH E CIT(A) AND ACCORDINGLY THE CIT(A) HAS DELETED THE ADDITI ON. HE HAS FURTHER CONTENDED THAT THE GP IS NOT A CRITERIA FO R DOING THE BUSINESS AND IT MAY VARY FROM TIME TO TIME IN EACH CASE AND IN EACH TRANSACTION. EVEN IN THE DECLINE IN THE GP CANNOT BE THE BASIS FOR REJECTION OF THE BOOKS OF ACCOUNT. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND REL EVANT RECORD. IT IS EVIDENT FROM THE ASSESSMENT ORDER TH AT THE AO ASKED THE ASSESSEE TO FURNISH THE DETAILS AND RECOR D REGARDING THE PURCHASES IN RESPECT OF AGRI TRADE EXPORT TRADI NG ANKITA TRADING CO. BABAMANI BHANDAR JAIPUR ROAD BHANU TRADERS LALITA ENTERPRISE MAA BAGWATI STORES MAHALAXMI TRADING CO. MAA VAISHNAV TRADING CO ETC. THE AO ALSO ASKE D THE ASSESSEE TO FURNISH THE CONFIRMATION OF LORRY RECEI PT BY GIVING THE EVIDENCE OF TRANSPORTATION OF GOODS IN SUCH CA SES. THE ITA NO. 1900/MUM/200 (ASSESSMENT YEAR: 2005-06) 6 ASSESSEE DID NOT FURNISH THE DETAILS CALLED FOR BY THE AO. EVEN FOR SAMPLE VERIFICATION THE CONSIGNMENT-WISE D ETAILS FROM THE LORRIES AND FORWARDING EXPENSES FOR THE MONTH O F FEBRUARY 2005 WAS NOT FURNISHED. THEREFORE THE AO WAS NOT IN A POSITION TO VERIFY THE RECORD FOR ASCERTAINING THE GENUINENESS OF THE PURCHASES AS CLAIMED BY THE ASSESSEE. ON AP PEAL THE CIT(A) HAS TAKEN INTO CONSIDERATION THE DETAILS FUR NISHED BY THE ASSESSEE IN RESPECT OF ONLY ONE PARTY I.E M/S H ARIOM TRADERS. WE NOTE THAT THE AO HAS ALSO RECORDED I N THE ASSESSMENT ORDER THAT THE ASSESSEE HAS FURNISHED DE TAILS REGARDING ONLY ONE PARTY OUT OF THE VARIOUS PARTIE S AS POINTED OUT BY THE AO. THE CIT(A) HAS ACCEPTED THE CONTEN TION OF THE ASSESSEE THAT SINCE MAIN PURCHASES OF THE ASSESSEE ARE OF SEASONAL SEEDS/GRAINS WHICH ARE HARVESTED IN THE MO NTH OF FEBRUARY THEREFORE THE REASONS OF HIGHER PURCHASE DURING THAT MONTH WAS DUE TO THE HARVESTING MONTH. THERE IS NO MENTION IN THE IMPUGNED ORDER WHETHER THE RECORDS W AS EXAMINED BY THE CIT(A) DURING THE APPELLATE PROCE EDINGS AND THAT TOO IN THE PRESENCE OF THE AO AS CLAIMED BY THE LEARNED AR OF THE ASSESSEE. THE CIT(A) HAS GIVEN ITS FINDIN GS ONLY ON THE BASIS OF SUBMISSIONS MADE BY THE ASSESSEE AND NOT ON THE BASIS OF THE EXAMINATION OF THE RECORD. NO DOU BT THAT ACCOUNT CANNOT BE REJECTED SOLELY ON THE BASIS O F DECLINE IN THE GP RATE. BUT IN THE CASE IN HAND THE ASSESSE E HAS NOT PRODUCED ANY DETAILS AND RECORD/EVIDENCE FOR VERIF ICATION OF ITA NO. 1900/MUM/200 (ASSESSMENT YEAR: 2005-06) 7 THE PURCHASE MADE BY THE ASSESSEE IN THE MONTH OF FEBRUARY. THUS WE ARE OF THE VIEW THAT IN ABSENCE OF VERIF ICATION OF THE RELEVANT RECORD THE ASSESSEE HAS FAILED TO DISCHAR GE HIS OBLIGATION/ ONUS TO PROVE THE GENUINENESS OF THE TR ANSACTION . ACCORDINGLY IN THE INTEREST OF JUSTICE AND FAIR PL AY WE SET ASIDE THE ORDER OF THE CIT(A) AND REMIT THIS ISSU E TO THE RECORD OF THE AO FOR DECIDING THE ISSUE OF PURCHA SES AFRESH ON THE BASIS OF RELEVANT RECORD TO BE FILED BY THE ASSESSEE. IF THE ASSESSEE FAILED TO PRODUCE THE RELEVANT RECORD THEN THE AO IS AT LIBERTY TO PROCEED WITH AND TAKE APPROPRI ATE ACTION AS PER LAW. 8. IN THE RESULT THE APPEAL FILED BY THE REVENUE A LLOWED FOR STATISTICAL PURPOSES. . PRONOUNCED IN THE OPEN COURT ON 30.09.2010 SD SD (R.K.PANDA) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED 30 TH SEP 2010 SRL:13910 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR ITAT MUMBAI