The ACIT, Circle-3(1), Visakhapatnam v. M/s Dolphin Milk Products Pvt Ltd., Vizianagaram

ITA 252/VIZ/2009 | 2005-2006
Pronouncement Date: 24-09-2010 | Result: Dismissed

Appeal Details

RSA Number 25225314 RSA 2009
Assessee PAN AAACD6023D
Bench Visakhapatnam
Appeal Number ITA 252/VIZ/2009
Duration Of Justice 1 year(s) 4 month(s) 11 day(s)
Appellant The ACIT, Circle-3(1), Visakhapatnam
Respondent M/s Dolphin Milk Products Pvt Ltd., Vizianagaram
Appeal Type Income Tax Appeal
Pronouncement Date 24-09-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 24-09-2010
Date Of Final Hearing 08-09-2010
Next Hearing Date 08-09-2010
Assessment Year 2005-2006
Appeal Filed On 13-05-2009
Judgment Text
ITA NO.252 OF 09 DOLPHIN MILK PRODUCTS P LTD VISAKHA PATNAM PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NO.252/VIZAG/2009 ASSESSMENT YEAR: 2005 - 06 ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-3(1) VISAKHAPATNAM VS. DOLPHIN MILK PRODUCTS PVT. LTD. VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO:AAACD 6023 D APPELLANT BY: SHRI SUBRATA SARKAR CIT(DR) RESPONDENT BY: SHRI G.V.N. HARI CA ORDER PER SHRI B. R. BASKARAN ACCOUNTANT MEMBER: THE APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 23-02-2009 PASSED BY LEARNED CIT(A) VISAKHAPATNAM AND IT RELATES TO THE ASSESSMENT YEAR 2005-06. 2. THE REVENUE IS ASSAILING THE DECISION OF THE LEA RNED CIT (A) ON THE FOLLOWING TWO ISSUES: A) WHETHER LEARNED CIT (A) IS JUSTIFIED IN DELETING THE DISALLOWANCE OF RS.23 46 550/- RELATING TO THE PURC HASE OF MILK FROM M/S SRI KRISHNA DAIRY WHICH WAS TREAT ED BY THE ASSESSING OFFICER AS BOGUS PURCHASES. B) WHETHER THE LEARNED CIT (A) IS JUSTIFIED IN CANC ELING THE REJECTION OF BOOKS OF ACCOUNT AND CONSEQUENTLY CANCELING THE ESTIMATE OF INCOME. 3. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSING COMPANY IS ENGAGED IN THE BUSINESS OF PURCHASE PRO CESSING AND SALE OF MILK AND MILK PRODUCTS. DURING THE YEAR UNDER CO NSIDERATION THE ASSESSEE COMPANY HAD PURCHASED MILK WORTH RS.25 56 550/- FROM M/S SRI KRISHNA DIARY A PROPRIETARY CONCERN OF THE MAN AGING DIRECTOR OF THE ASSESSEE COMPANY. THE REVENUE CARRIED OUT A SU RVEY OPERATION ITA NO.252 OF 09 DOLPHIN MILK PRODUCTS P LTD VISAKHA PATNAM PAGE 2 OF 5 ON THE ASSESSEE ON 27-10-2004 AND IT WAS NOTICED TH AT THE IN-HOUSE MILK PRODUCTION CAPACITY OF M/S SRI KRISHNA DAIRY D URING THE FINANCIAL YEAR 2004-05 UPTO THE DATE OF SURVEY WAS RS.2 10 00 0/-. ACCORDINGLY THE ASSESSING OFFICER FELT THAT THE SAID CONCERN CO ULD NOT HAVE SUPPLIED THE MILK WORTH TO THE EXTENT OF RS.25 56 5 50/- TO THE ASSESSEE COMPANY. ACCORDINGLY HE TREATED THE DIFFE RENTIAL AMOUNT OF RS.23 46 550/- (RS.25 56 550 RS.2 10 000) AS BOGU S PURCHASES IN THE HANDS OF THE ASSESSEE COMPANY AND DISALLOWED TH E SAME. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE COMPANY WAS DIRECTED TO SUBMIT THE STOCK REGISTER MAINTAINED BY IT. HOWEVER THE ASSESSEE COMPANY DID NOT SUBMIT THE SAME WITH THE P LEA THAT THE SAME WERE MISPLACED. IT WAS EXPLAINED THAT THE ENTI RE BUSINESS OF THE ASSESSEE COMPANY WAS LEASED OUT TO M/S VENKATA RAYA MILK PRODUCTS W.E.F. 1-10-2007 AND HENCE THE OFFICE OF T HE ASSESSEE COMPANY WAS SHIFTED AND IN THAT PROCESS THE STOCK R EGISTERS WERE MISPLACED. HOWEVER THE ASSESSING OFFICER WAS NOT C ONVINCED WITH THE SAID EXPLANATIONS AND ACCORDINGLY REJECTED THE BOOK S OF ACCOUNT OF THE ASSESSEE COMPANY AND ESTIMATED THE INCOME. WHILE ES TIMATING THE INCOME THE ASSESSING OFFICER DISALLOWED THE ENTIRE CLAIM OF LOSS OF RS.80 54 949/- RETURNED BY THE ASSESSEE. HOWEVER S INCE THE PURCHASES FROM M/S SRI KRISHNA DAIRY HAD ALREADY BE EN DISALLOWED TO THE EXTENT OF RS.23 46 550/ THE BALANCE LOSS OF RS .57 08 399/- (RS.80 54 949 RS. 23 46 550) WAS DISALLOWED. IN THE RESULT THE TOTAL INCOME OF THE ASSESSEE WAS DETERMINED AT NIL I NCOME. IN THE APPEAL PREFERRED BY THE ASSESSEE THE LEARNED CIT ( A) DELETED THE DISALLOWANCE OF BOGUS PURCHASES OF RS.23 46 550/- A ND ALSO REVERSED THE DECISION OF THE ASSESSING OFFICER WITH REGARD T O THE REJECTION OF BOOKS OF ACCOUNT AND CONSEQUENT ESTIMATION OF INCOM E. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFUL LY PERUSED THE RECORD. WITH REGARD TO THE FIRST ISSUE RELATING TO THE DISALLOWANCE OF BOGUS PURCHASES IT WAS BROUGHT TO OUR NOTICE THAT AN IDENTICAL DISALLOWANCE MADE IN THE ASSESSMENT YEAR 2002-03 IN THE ASSESSEES ITA NO.252 OF 09 DOLPHIN MILK PRODUCTS P LTD VISAKHA PATNAM PAGE 3 OF 5 OWN CASE WAS DELETED BY THIS BENCH VIDE ITS ORDER DATED 14-09-2009 IN ITA NO.39/VIZAG/2006. WE HAVE GONE THROUGH THE ORDER OF THE TRIBUNAL REFERRED SUPRA AND WE EXTRACT BELOW THE OP ERATIVE PORTION OF THE SAID ORDER. 6. THE LEARNED COUNSEL FOR THE ASSESSEES BESIDES P LACING HEAVY RELIANCE UPON THE ORDER OF THE CIT (A) HAS SU BMITTED THAT NOTHING HAS BEEN BROUGHT OUT BY THE REVENUE TO PROVE THAT THE PURCHASES MADE FROM SRIKRISHNA DAIRY WAS BOGUS. HE HAS SIMPLY DRAWN AN INFERENCE WITHOUT ANY BASIS. MOREOV ER THE INDIVIDUAL ASSESSMENT OF M/S. SRIKRISHNA DAIRY WAS FRAMED BY THE A.O AND IN THAT ASSESSMENT THE EXISTENCE OF TH E BUSINESS OF M/S. SRIKRISHNA DAIRY WAS NOT DOUBTED. MOREOVER THE SALES MADE BY THE ASSESSEES AND THE STOCKS AVAILABLE AT T HE END OF THE FINANCIAL YEAR WAS NOT DOUBTED BY THE REVENUE A UTHORITIES. SINCE THE SALES ARE ACCEPTED HOW THE PURCHASES CAN BE DOUBTED BY THE REVENUE. 7. HAVING HEARD THE RIVAL SUBMISSIONS AND FORM A CA REFUL PERUSAL OF THE RECORD WE FIND THAT CIT (A) HAS ADJ UDICATED THE IMPUGNED ISSUE IN DETAIL IN HIS ORDER AND WE FIND N O INFIRMITY THEREIN. AGREEING WITH THE FINDING OF CIT (A) THAT SINCE THE ASSESSING OFFICER HAS NOT QUESTIONED THE SALES OR T HE STOCK HOW CAN HE DOUBT THE PURCHASES MADE BY THE ASSESSEE WITHOUT BRINGING ANYTHING IN RECORD WE CONFIRM THE ORDER O F THE CIT (A). DURING THE YEAR UNDER CONSIDERATION THE ASSESSING OFFICER HAS DISALLOWED THE PURCHASES CITING THE SAME REASONS THAT WERE GIVEN I N SUPPORT OF THE SIMILAR DISALLOWANCE MADE IN THE ASSESSMENT YEAR 2004-05. ANOTHER REASON SIGHTED BY THE ASSESSING OFFICER IS THAT THE ASSESSEE HAS F AILED TO PRODUCE THE STOCK REGISTER. THE ISSUE WITH REGARD TO THE STOCK REGIS TER IS BEING ADDRESSED IN THE SUBSEQUENT PART OF THIS ORDER. WE NOTICE THAT THE LEARNED CIT(A) HAS FOLLOWED HIS DECISION IN OTHER YEARS VIZ. 2003-04 2004-05 AND 2006-07 ON THE SIMILAR ISSUE. IT WAS NOT SHOWN TO US BY THE RE VENUE THAT THE TRIBUNAL HAS TAKEN A CONTRARY VIEW IN THE ABOVE SAID YEARS. SINCE THE DECISION RENDERED BY THE LEARNED CIT(A) IS IN ACCORDANCE WIT H THE DECISION RENDERED BY THIS BENCH IN THE ASSESSEES OWN CASE FOR THE AS SESSMENT YEAR 2002-03 AND SINCE IT WAS NOT SHOWN TO US THAT THE FACTS AND CIRCUMSTANCES IS DIFFERENT DURING THE YEAR UNDER CONSIDERATION WE DO NOT FIN D ANY REASON TO INTERFERE WITH THE DECISION OF LEARNED CIT(A) ON THIS ISSUE. ITA NO.252 OF 09 DOLPHIN MILK PRODUCTS P LTD VISAKHA PATNAM PAGE 4 OF 5 5. THE NEXT ISSUE RELATES TO THE REJECTION OF BOOKS OF ACCOUNT AND ESTIMATION OF INCOME ON ACCOUNT OF NON-PRODUCTION O F STOCK REGISTER. AS STATED EARLIER THE ASSESSING OFFICER DID NOT ACCEP T THE EXPLANATIONS OF THE ASSESSEE THAT THE STOCK REGISTERS WERE MISPLACED IN THE PROCESS OF SHIFTING OF ITS OFFICE. IN THIS REGARD IT IS PERTINENT TO EXTR ACT THE OBSERVATIONS OF THE LEARNED CIT (A) BELOW: 4.2 IN SO FAR AS THE REJECTION OF BOOKS OF ACCOUNT IS CONCERNED THE ASSESSING OFFICER HAS REJECTED THE SAME SIMPLY BECAUSE THE STOCK REGISTER WAS NOT PRODUCED FOR VERIFICATION IN COURSE OF THE ASSESSMENT PROCEEDINGS. THE APPELLANT COMPANYS PLE A IS THAT THE SAME COULD NOT BE PRODUCED BECAUSE OF ITS MISPL ACEMENT AND NEVERTHELESS THE FACT THAT IT WAS MAINTAINED I S EVIDENT FROM THE TAX AUDIT REPORT. IN THE TAX AUDIT REPORT F ILED ALONG WITH THE RETURN OF INCOME IT HAS BEEN STATED THAT THE A PPELLANT COMPANY HAD MAINTAINED STOCK RECORDS AND THE SAME W AS EXAMINED BY THE TAX AUDITOR. FURTHER IN THE TAX AU DIT REPORT THE FULL QUANTITATIVE DETAILS OF THE OPENING STOCK OF MILK ETC. PURCHASES DURING THE YEAR CONSUMPTION DURING THE Y EAR SALES DURING THE YEAR AND THE CLOSING STOCK WAS FURNISHED . THEREFORE THERE IS A STRONG PRESUMPTION THAT THE APPELLANT HA D MAINTAINED THE STOCK REGISTER. UNDER SEC.34 OF THE INDIAN EVID ENCE ACT ACCOUNT BOOKS MAINTAINED IN THE REGULAR COURSE OF B USINESS ARE EVIDENCE AFTER THE RELEVANT ENTRIES ARE PROVED BY O RAL EVIDENCE OR ARE ADMITTED. IN THE INSTANT CASE THE RELEVANT BOOKS OF ACCOUNT IN WHICH THE DETAILS OF STOCKS WERE MAINTAI NED WAS MISPLACED AS CLAIMED BY THE APPELLANT COMPANY. UNDE R THE INDIAN EVIDENCE ACT SECONDARY EVIDENCE OF THE CONTE NTS OF THESE BOOKS OF ACCOUNT WOULD HAVE TO BE ADDUCED IF THEY WERE TO BE USED TO PROVE ANY FACT. IN THIS CONTEXT THE T AX AUDIT REPORT PREPARED ON THE BASIS OF BOOKS OF ACCOUNT MA INTAINED BY THE APPELLANT COMPANY BY A QUALIFIED CHARTERED ACCO UNTANT CONSTITUTE THE SECONDARY EVIDENCE. THE QUESTION ARI SES THEREFORE WHETHER THE REPORTS OF THE AUDITORS COUL D BE SAID TO BE MATERIAL ON WHICH RELIANCE COULD BE PLACED BY THE INCOME TAX AUTHORITIES. UNLIKE THE PROOF REQUIRED OF SUCH REPORTS AS ALSO OF THE ACCOUNT BOOKS UNDER THE INDIAN EVIDENCE ACT IT IS QUITE COMPETENT FOR THE INCOME TAX AUTHORITIES NOT ONLY TO ACCEPT THE AUDITORS REPORT BUT ALSO TO DRAW A PROP ER INFERENCE FROM THE SAME. HENCE THE TAX AUDITORS OBSERVATION THAT STOCK RECORDS WERE MAINTAINED WHICH WERE EXAMINED AND ON THE BASIS OF SUCH STOCK RECORDS QUANTITATIVE DETAILS O F PURCHASES SALES ETC. HAVE BEEN FURNISHED CANNOT BE IGNORED. MOREOVER NON-PRODUCTION OF STOCK REGISTER CANNOT BE THE BASI S FOR REJECTION OF BOOKS OF ACCOUNTS. HENCE THE ASSESSING OFFICER IS NOT CORRECT IN REJECTING THE BOOKS OF ACCOUNT AND E STIMATING THE ITA NO.252 OF 09 DOLPHIN MILK PRODUCTS P LTD VISAKHA PATNAM PAGE 5 OF 5 INCOME AT NIL BY IGNORING THE LOSSES. THE SAID DECI SION OF THE ASSESSING OFFICER IS HEREBY DELETED. THE PERTINENT POINT IS THAT THE ASSESSING OFFICER D ID NOT BRING ANY MATERIAL TO REJECT THE EXPLANATION OF THE ASSESSEE THAT HE STOC K REGISTERS WERE MISPLACED. THE FACT THAT THE TAX AUDIT REPORT FURNISHED BY THE ASSESSEE CONTAINED THE QUANTITY DETAILS WAS ALSO IGNORED BY THE A.O. FURT HER WE NOTICE THAT THE LEARNED CIT(A) HAS ANALYSED THE ISSUE IN A PROPER P ERSPECTIVE AND WE DO NOT FIND ANY INFIRMITY IN THE DECISION REACHED BY LEARN ED CIT(A). ACCORDINGLY WE UPHOLD THE ORDER OF LEARNED CIT(A) ON THIS ISSUE AL SO. 7. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMI SSED. PRONOUNCED IN THE OPEN COURT ON 27 TH SEPTEMBER 2010. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMB ER PVV/SPS VISAKHAPATNAM DATE:27-09-2010 COPY TO 1 THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-3 (1) VISAKHAPATNAM 2 M/S DOLPHIN MILK PRODUCTS PVT. LTD. D.NO.50-40-8 P&T COLONY SEETHAMMADHARA VISAKHAPATNAM 3 4. THE CIT 1 VISAKHAPATNAM THE CIT(A) VISAKHAPATNAM 5 THE DR ITAT VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM