DCIT, CC-XIII, Kolkata, Kolkata v. Shri Mahesh Kumar Agarwal, Kolkata

ITA 556/KOL/2011 | 2006-2007
Pronouncement Date: 28-07-2011

Appeal Details

RSA Number 55623514 RSA 2011
Assessee PAN ACMPA9291M
Bench Kolkata
Appeal Number ITA 556/KOL/2011
Duration Of Justice 3 month(s) 19 day(s)
Appellant DCIT, CC-XIII, Kolkata, Kolkata
Respondent Shri Mahesh Kumar Agarwal, Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 28-07-2011
Appeal Filed By Department
Bench Allotted C
Tribunal Order Date 28-07-2011
Assessment Year 2006-2007
Appeal Filed On 08-04-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [ . . . . . .. . ! ! ! ! ] [BEFORE HONBLE SHRI S.V. MEHROTRA AM & HONBLE SHRI MAHAVIR SINGH JM !' !' !' !' / I.T.A. NO. 556/KOL/2011 #$ %& #$ %& #$ %& #$ %&/ // / ASSESSMENT YEAR : 2006-07 DY. COMMISSIONER OF INCOME TAX -VS.- SHRI MAHESH KUMAR AGARWAL CC-XIII KOLKATA. KOLKATA [PAN : ACMPA 9291 M] [ () /APPELLANT] [ *+()/ RESPONDENT] () / FOR THE APPELLANT : /SHRI D. J. SHAH *+() / FOR THE RESPONDENT : / SHRI SUBHAS AGARWAL - /O R D E R [ . . . . . .. . ] PER S.V. MEHROTRA AM THE DEPARTMENT HAS FILED THIS APPEAL FOR ASSESSMENT YEAR 2006-07 AGAINST ORDER OF LD. CIT(A) CENTRAL-II KOLKATA DATED 31.01.2011. 2. THE ASSESSEE IN THE RELEVANT ASSESSMENT YEAR W AS ENGAGED IN MANUFACTURING AND DISTRIBUTION OF PROCESSED FOOD AND BEVERAGE. ASSESSING OFFICER NOTICED THAT ASSESSEES G.P. RATE HAD FALLEN FROM 12.14% IN ASSESSMENT YEAR 2004-05 TO 11.05% IN ASSE SSMENT YEAR 2006-07. THE ASSESSEE EXPLAINED THAT DUE TO FOLLOWING REASONS THERE WAS FALL IN G.P . RATE :- 1. QUANTITY AND WEIGHT OF UNIT WISE ITEMS BOTH IN RESPECT OF NIMKIN AND SWEETS OF THE SAME VARIETY MAY VARY FROM MANUFACTURE TO MA NUFACTURE THOUGH THE UNIT SELLING PRICE REMAIN SAME. 2. QUANTITY OF MANUFACTURE IN PARTICULAR THE QUAL ITY OF MEDIUM OF COOKING AND RAW MATERIALS MAY VARY TO A LARGE EXTENT FROM MANUF ACTURE TO MANUFACTURE WHICH GROSSLY AFFECTS THE GROSS PROFIT OF THE DIFFERENT D EALERS. TO NARRATE IN DETAIL THIS MAY BE PLACED THAT A MANUFACTURER MAY USE LOWER PRI CED RAW MATERIALS AND COOKING MEDIUM WHICH MAY GIVE HIGHER GROSS PROFIT O N SALES. BUT IN THE CASE OF THE ASSESSEE THIS IS ABSOLUTELY IMPOSSIBLE TO USE S UCH MATERIALS TO MAINTAIN ITS LONG STANDING GOOD WILL AND CREDENTIAL IN THE MIND OF THE CUSTOMERS AT LARGE. [ ITA NO. 556/KOL/2011] 2 3. SIR PRODUCTION IN HIGH QUANTITY ALSO REDUCES TH E COST OF MANUFACTURE. FOR EXAMPLE A BIG MANUFACTURER NEEDS TO ENGAGE 8/10 WOR KERS FOR MANUFACTURING OF BHUGIAS AND NIMKINS ITEMS. WHERE THE PRODUCTION QUA NTITY IS HIGHER THE PROPORTIONATE LABOUR COST DEFINITELY COMES DOWN. WH ICH HAS ALSO AN IMPACT ON THE GROSS PROFIT. 4. WASTAGE ALSO PLACES A VITAL ROLL IN THE DETERMIN ATION OF G..P. IT IS VERY COMMON THAT MORE THE PRODUCTION LOWER IS THE WASTAGE WHER EAS IN CASE OF LESS PRODUCTION THE MARGIN OF WASTAGE WILL BE HIGH. THIS IS ALSO A FACTOR WHICH AFFECTS G.P. ASSESSEE NEEDS TO EXPLAIN THIS IN SHORT AS BELOW: THE VARIOUS OVENS USED FOR MANUFACTURE NEEDS ABOUT 5 LTS. OF DIESEL TO PUT THE OVEN INTO THE CONDITION OF COOKING ITEMS. WHEN HUGE PRODUCTION IS MADE FROM THE SAME OVENS THE PERCENTAGE OF WASTAGE OF DIESEL / GAS IS REDUCED TO LARGE EXTENT WHEREAS THE SAME WASTAGE IS DONE IN CASE OF LOWER QUANTITY OF PRODUCTION. 5. NORMALLY WHEN THE TURN OVER INCREASES THERE IS A TREND OF FALL IN THE G.P. RATE. BUT IN THE ASSESSEES CASE YOU WILL FIND THAT EVEN THERE IS A RISE IN THE TURN OVER BY ABOUT 1.58% THE ASSESSEE COULD BE ABLE TO MAINTAIN THE SAME RATE OF G.P. 6. LAST BUT NOT THE LEAST THE PROCESS OF MANUFACUR ING ADOPTED BY DIFFERENT MANUFACTURES ALSO MAY AFFECT THE GROSS PROFIT RATE. ASSESSING OFFICER ON EXAMINATION OF THE ACCOUNTS O F THE ASSESSEE NOTED FOLLOWING DISCREPANCIES :- (A) ASSESSEE DID NOT MAINTAIN ANY STOCK REGISTER F OR PURCHASE; (B) THERE WAS NO RECORD FOR THE PRODUCTION OR CONSU MPTION NEITHER. (C) THE OPENING AND CLOSING STOCK WAS VALUED AT COS T AS CERTIFIED BY THE ASSESSEE THEREFORE THE ROLE OF SWEET WILL OF THE ASSESSEE C OULD NOT BE RULED OUT. (D) ASSESSEE HAD FAILED TO PRODUCE RELEVANT VOUCHER S BILLS/INVOICES IN SUPPORT OF THE CASH PURCHASES OF MILK ONE OF THE ESSENTIAL INGREDIENTS OF THE TRADE AMOUNTING TO RS.1 54 75 909/- DURING THE YEAR. (E) AS REGARDS THE SALES ASSESSING OFFICER OBSERVE D THAT ASSESSEE HAD PRODUCED COMPUTERIZED LEDGER OF SALES INTER ALIA WITHOUT A NY SUPPORTING CASH MEMO OR OTHER EVIDENCES. HE DID NOT ACCEPT THE ASSESSEES ARGUMEN T THAT IT WAS NOT POSSIBLE IN THIS BUSINESS TO ISSUE CASH MEMO TO EVERY ROUTINE AND SM ALL RETAIL SALES. THUS HE CONCLUDED THAT THE SALES SHOWN AT RS.9 7 21 390/- W AS NOT VERIFIABLE. RELYING ON THE DECISION OF HONBLE ANDHRA PRADESH H IGH COURT IN THE CASE OF CIT VS. TRANSPORT CORPORATION OF INDIA LTD. [2002] 256 ITR 701 (AP) A ND ALSO KEEPING IN VIEW OF THE AFORE-MENTIONED DISCREPANCIES HE REJECTED THE BOOKS OF ACCOUNT BY INVOKING THE PROVISION OF SECTION 145(3). HE ESTIMATED THE SALES AT RS.10 00 00 000/- AND BY APP LYING THE G.P. RATE AT 12.14% SHOWN IN [ ITA NO. 556/KOL/2011] 3 ASSESSMENT YEAR 2004-05 DETERMINED THE GROSS PROFI T AT RS.1 21 40 000/- AND THUS MADE ADDITION FOR RS.15 58 282/-. ASSESSING OFFICER FURTHER NOTICED T HAT IN THE DETAILS OF PURCHASE OF RAW MATERIAL THERE WERE CASH PURCHASES TO THE TUNE OF RS.1 54 75 909/-. CONSIDERING THE DISCREPANCIES NOTED ABOVE HE OBSERVED THAT THE POSSIBILITY OF INFLATIO N OF CASH PURCHASE TO REDUCE THE G.P. COULD NOT BE RULED OUT. HE THEREFORE DISALLOWED 10% OF THE CAS H PURCHASES AMOUNTING TO RS.15 47 590/-. SINCE ASSESSING OFFICER HAD MADE ADDITION OF RS.15 58 282 /- TO G.P. HE DID NOT MAKE SEPARATE ADDITION FOR RS.15 47 590/-. THE LD. CIT(A) ALLOWED THE ASSESSEE S APPEAL BY DELETING BOTH THE ADDITIONS MADE BY THE ASSESSING OFFICER. 3. BEING AGGRIEVED WITH THE ORDER OF LD. CIT(A) DE PARTMENT IS IN APPEAL BEFORE US. 4. GROUND NO.1 TAKEN BY THE DEPARTMENT IS AS UNDER :- THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.15 58 282/- MADE ON ACCOUNT OF LOW GROSS PROFIT WHILE HOLDING THAT ASSESSEE HAD ACCEPTED THE REJECTION OF BOOKS OF ACCOUNTS WITHOUT APPRECIATING THAT THE MATERIAL BROUGHT ON RECORD AN D FACTS EVALUATED BY THE AO IN THE ASSESSMENT ORDER. 5. HAVING HEARD BOTH THE PARTIES WE FIND THAT SIMI LAR ADDITION WAS MADE BY THE ASSESSING OFFICER AND DELETED BY LD. CIT(A) IN THE CASE OF M /S. HALDIRAM BHUJIAWALA LIMITED. WE HAVE DECIDED THE SAID APPEAL VIDE ITA NOS. 554 & 555/KOL / 2011 OBSERVING AS UNDER :- WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PAR TIES AND HAVE PERUSED THE RECORDS OF THE CASE. THE ASSESSEES BOO KS WERE REJECTED FOR THE VARIOUS REASONS GIVEN BY THE ASSESSING OFFICER AS N OTED EARLIER. THE LD. CIT(A) CONFIRMED THE FINDINGS OF THE ASSESSING OFFICER ON THIS ISSUE AND THE ASSESSEE IS NOT AGGRIEVED BY THE SAID FINDINGS. NOW THE ISSUE WHICH REMAINS FOR CONSIDERATION IS HOW TO ESTIMATE THE ASSESSEES INC OME. IT IS WELL SETTLED LAW THAT THE ASSESSING OFFICER IS REQUIRED TO ESTIMATE THE A SSESSEES INCOME ON A REASONABLE BASIS HAVING REGARD TO ALL THE DETAILS A VAILABLE WITH HIM. IN THIS REGARD WE FIND THAT AS FAR AS THE SALES RETURNED BY THE AS SESSEE IS CONCERNED SAME COULD NOT BE DISTURBED IN THE ABSENCE OF ANY EVIDENCE TO SHOW THAT THERE WAS SOME SALES OUTSIDE THE BOOKS OF ACCOUNT. THE ASSESSEE HAD MAIN TAINED ITS SALES ON COMPUTER AND THEREFORE MERE NON-ISSUANCE OF CASH MEMOS FOR EVERY ROUTINE AND SMALL DETAILS OF SALES COULD NOT BE THE BASIS FOR REJECTI ON OF TURN OVER RETUNED BY THE ASSESSEE. WE FIND OURSELVES IN COMPLETE AGREEMENT O N THIS COUNT WITH THE LD. CIT(A). NOW COMING TO THE G.P. RATE OF 15.08% APPLIED BY THE ASSESSING OFFICER AS AGAINST 14.28% RETURNED BY THE ASSESSEE WE ARE OF THE OPINION THAT SINCE THE ASSESSEES BOOK RESULTS HAD BEEN REJECTED THEREFOR E IT HAS TO BE EXAMINED AS TO WHAT EXTENT ASSESSEES G.P. RATE OF 14.287% COULD B E ACCEPTED. THE ASSESSEE HAD GIVEN AN EXPLANATION IN REGARD TO INCREASE IN THE P RICE OF COOKING GAS WHICH HAS NOT YET BEEN REBUTTED BY THE ASSESSING OFFICER. THE OTHER MAIN REASON ASSIGNED BY THE ASSESSING OFFICER FOR REJECTION OF BOOKS OF ACCOUNT THAT ASSESSEE HAD FAILED TO PRODUCE RELEVANT VOUCHERS/BILLS INVOICES IN SUPPORT OF CASH PURCHASES OF MILK. THE ASSESSING OFFICER HAS RIGHTLY OBSERVED TH AT ONUS IS ON THE ASSESSEE TO PROVE ITS CLAIM OF EXPENDITURE. HONBLE SUPREME COU RT IN THE CASE OF CIT VS. [ ITA NO. 556/KOL/2011] 4 CALCUTTA AGENCY LIMITED [1951] 19 ITR 191 (SC) HAS HELD THAT ONUS LIES ON THE ASSESSEE TO ESTABLISH ITS CLAIM. UNDER SUCH CIRCUMS TANCES WE ARE OF THE OPINION THAT IT WOULD MEET THE ENDS OF JUSTICE IF G.P. RATE IS ESTIMATED AT 14.5% AS AGAINST 15.08% DETERMINED BY ASSESSING OFFICER. WE DIRECT ACCORDINGLY. THIS GROUND OF THE DEPARTMENT IS PARTLY ALLOWED. FOR THE DETAILED REASONS GIVEN IN THE SAID APPEAL WE ESTIMATE THE G.P. AT 11.25%. HENCE THIS GROUND OF THE DEPARTMENT IS PARTLY ALLOWED. 6. AS FAR AS GROUND NO.2 IS CONCERNED SINCE WE HAV E PARTLY ALLOWED THE DEPARTMENTAL APPEAL BY ESTIMATING G.P. NO FURTHER DISALLOWANCE IS CALL ED FOR AS THE ENTIRE EFFECT OF TRADING TRANSACTIONS IS REFLECTED G.P. RATE. THIS GROUND OF THE DEPARTMENT IS ALSO PARTLY ALLOWED. 7. IN THE RESULT THE APPEAL FILED BY THE DEPARTMEN T IS PARTLY ALLOWED. - - - - . . . . / // / .# .# .# .# 0 0 0 0 1 11 1 ORDER PRONOUNCED IN THE OPEN COURT ON 28. 07. 2011. SD/- SD/- [ ! ] [ .. ] [ MAHAVIR SINGH ] [ S.V. MEHROTRA ] JUDICIAL MEMBER ACCOUNTANT MEMBER 2 / DATED : 28 TH JULY 2011. - 3 * 4 54%6 - COPY OF THE ORDER FORWARDED TO: 1. /APPELLANT- DY. COMMISSIONER OF INCOME TAX CC-XI II 18 RABINDRA SARANI PODDAR COU RT KOLKATA-700 001. 2 *+() / RESPONDENT : SHRI MAHESH KUMARAGARWAL 58 CHOWRI NGHEE ROAD KOLKATA-700 071. 3. -# / CIT 4. -# ( )/ CIT(A) 5. 0 * # / DR KOLKATA BENCHES KOLKATA [ +4 * / TRUE COPY] -#. / BY ORDER 7 / !8 /DEPUTY/ASSTT. REGISTRAR . [KKC 9: #;8 < /SR.PS]