The ITO., Indore v. M/s. Manohar Sweet,, Indore

ITA 569/IND/2009 | 2006-2007
Pronouncement Date: 31-01-2011 | Result: Dismissed

Appeal Details

RSA Number 56922714 RSA 2009
Assessee PAN AAFFM4058E
Bench Indore
Appeal Number ITA 569/IND/2009
Duration Of Justice 1 year(s) 1 month(s) 17 day(s)
Appellant The ITO., Indore
Respondent M/s. Manohar Sweet,, Indore
Appeal Type Income Tax Appeal
Pronouncement Date 31-01-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 31-01-2011
Date Of Final Hearing 09-12-2010
Next Hearing Date 09-12-2010
Assessment Year 2006-2007
Appeal Filed On 14-12-2009
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI R.C. SHARMA ACCOUNTANT MEMBER ITA NOS.555 & 556/IND/2009 A.YS. 2005-06 & 2006-07 M/S. MANOHAR SWEETS 2 JAWAHAR MARG INDORE PAN AAFFM 4058 E APPELLANT VS ITO-4(2) INDORE RESPONDENT AND ITA NOS.568 & 569/IND/2009 A.YS. 2005-06 & 2006-07 ITO-4(2) INDORE APPELLANT VS M/S. MANOHAR SWEETS 2 JAWAHAR MARG INDORE PAN AAFFM 4058 E RESPONDENT APPELLANT BY : SHRI AKSHAT SINGHAI CA RESPONDENT BY : SHRI PRADEEP KUMAR MITRA SR. DR O R D E R PER JOGINDER SINGH JUDICIAL MEMBER THESE CROSS-APPEALS ARE BY THE ASSESSEE AS WELL AS BY THE REVENUE AGAINST THE COMMON ORDER OF THE LEARNED CIT (A)-II INDORE 2 DATED 15.9.2009. THE ASSESSEE HAS RAISED THE FOLLOW ING COMMON GROUNDS:- I. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE ESTIMATED SAL ES AT RS. 210 LACS (A.Y. 2005-06) & RS. 250 LACS (A.Y. 2006-07) AS AGAINST DISCLOSED SALES OF RS. 186.97 L ACS (A.Y. 2005-06) & RS.227.68 LACS AND G.P. @ 36% (A.YS. 2005-06 & 2006-07) & THEREBY CONFIRMING ADDITION OF RS. 13.74 610/- (A.Y.2005-06) & RS.15 80 930/- (A.Y. 2006-07) TO THE TRADING RESULT S RESPECTIVELY. II. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN APPROVING THE A.O.S ACTION IN INVOKING PROVISIONS OF SECTION 145(3) FOR BOTH THE ASSESSMENT YEARS. III. THAT THE ORDER IS ILLEGAL AND WRONG. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN ITA NO.568/IND/2009 (A.Y. 2005-06): I. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IS CONTRARY TO THE FACTS AND L AW. II. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN SUSTAINING ADDITION OF ONLY RS.13 74 610/- AS AGAINST ADDITION OF RS.71 49 560/ - MADE BY THE A.O. BY ADOPTING THE G.P. RATE AT 38.5% ON ESTIMATED SALES OF RS.2.10 CRORE. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN ITA NO.569/IND/2009 (A.Y. 2006-07): 3 I. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IS CONTRARY TO THE FACTS AND L AW. II. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN SUSTAINING ADDITION OF ONLY RS.15 80 930/- AS AGAINST ADDITION OF RS.36 56 994/ - MADE BY THE A.O. BY APPLYING PROVISION OF SECTION 145(3) OF THE I.T. ACT. 2. DURING HEARING OF THESE APPEALS WE HAVE HEARD S HRI AKSHAT SINGHAI LD. COUNSEL FOR THE ASSESSEE AND SHRI PRADEEP KUMAR MITRA LEARNED SR. DR. THE ASSESSEE MOVED APPLICATION FOR ADJOURNMENT ON 21.1.2011 BUT AT THE TIME OF HEARING THE SAME WAS WITHDRAWN THEREFORE THE APPLICATION OF THE ASSESSEE IS DISMISSED AS WIT HDRAWN. FIRST WE SHALL TAKE UP APPEALS OF THE ASSESSEE (ITA NOS.555 & 556/IND/2009) WHEREIN THE FIRST COMMON GROUND RAISED IS THAT THE LD. FIRST APPELLATE AUTHORITY ERRED IN CONFIRMING THE ESTIMATED SALES A GAINST THE DISCLOSED SALES AND CONFIRMING THE CONSEQUENT ADDITION OF RS. 13 74 610/- AND RS.15 80 930/- RESPECTIVELY TO THE TRADING RESULT S. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT THE EST IMATION IS EXCESSIVE ARBITRARY AND ILLEGAL AS NO BASIS FOR THE SAME WAS ADOPTED BY THE LD. CIT(A). ON THE OTHER HAND THE LD. SR. DR DEFENDED THE IMPUGNED ORDER BY CONTENDING THAT THE STAND OF THE LD. CIT(A) IS Q UITE JUSTIFIED THOUGH THE REVENUE HAS ALSO CHALLENGED THE ESTIMATION OF G.P. IN ITS APPEALS. 4 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL AVAILABLE ON RECORD. THE BRIEF FACTS ARE THAT THE ASSESSEE FIRM DEALS IN PREPARATION OF SWEETS AND NAMKEEN SOLD THROUGH RETAIL COUNTERS AND IS A REPUTED FOOD JOINT AT BHOPAL. THE CASE OF THE ASSESSEE WAS SELEC TED FOR SCRUTINY THEREFORE THE NOTICE WAS SERVED UPON THE ASSESSEE WHICH WAS CHALLENGED BEFORE THE HON'BLE HIGH COURT. BEFORE T HE ASSESSING OFFICER THE ASSESSEE WAS ASKED TO PRODUCE SALE BILLS AND SA LE SLIPS FOR FY 2004- 05 ISSUED TO THE CUSTOMERS IN RESPECT OF CASH SALES /CREDIT SALES. ONLY CREDIT SALE BILLS WERE PRODUCED. AS PER THE REVENUE CERTAIN SLIPS WERE IMPOUNDED DURING THE SURVEY WHICH WERE ONLY PRODUC ED THEREFORE THE ASSESSEE COULD HAVE PROVED THE SANCTITY OF SALES. A S PER THE ASSESSING OFFICER THE SALES COULD NOT BE PROVED WITH ANY EVI DENCE INSPITE OF REPEATED REQUESTS MADE BY HIM. THE ASSESSEE WAS ALS O HAVING REGISTREX MACHINE SO REGISTERING RETAIL SALES AT TH E COUNTER. THE STAND OF THE ASSESSEE WAS THAT EACH AND EVERY MINUTE DETAILS ARE NOT BEING RECORDED IN THE BOOKS OF THE ASSESSEE. IN THE ABSE NCE OF SUCH DETAILS THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE PRO VISIONS OF SECTION 145(3) OF THE ACT SHOULD NOT BE APPLIED. IN ITS REP LY THE STAND OF THE ASSESSEE WAS THAT IN THIS LINE OF BUSINESS WHERE THE ASSESSEE FIRM IS CHURNING OUT MORE THAN 100 ITEMS AT ANY GIVEN TIME IT IS EXTREMELY DIFFICULT TO PROVIDE ITEMWISE DETAILS YIELD AND WA STAGE. ADMITTEDLY THE 5 STOCK REGISTER WAS NOT PRODUCED WITH THE BOOKS AND THE CASH SALES WERE NOT EVIDENCED AND ALSO THERE WERE NO DETAILS OF PRO DUCTION. HOWEVER YIELD AND WASTAGES WERE PRODUCED DURING SURVEY WHIC H IS INDICATIVE OF THE FACT THAT THE ASSESSEE WAS MAINTAINING THESE DE TAILS CONSEQUENTLY THE PROVISIONS OF SECTION 145(3) OF THE ACT WERE AP PLIED. THE LEARNED ASSESSING OFFICER ANALYSED THE PREPARATION OF MAWA SWEETS OTHER SWEETS SWEETS MADE FROM GHEE DRY FRUITS LIKE KAJU AND BADAM NAMKEEN AND ESTIMATED THE TOTAL SALES AT RS.2 58 46 173/- OUT OF WHICH THE SALES TO THE TUNE OF RS. 1 86 96 613/- WERE ALR EADY DISCLOSED IN THE RETURN THUS THE DIFFERENCE OF RS.71 49 560/- WAS AD DED TO THE TOTAL INCOME OF THE ASSESSEE. THE INCOME OF THE ASSESSEE WAS FINALLY ASSESSED AT RS.75 54 280/-. LIKEWISE FOR THE ASSES SMENT YEAR 2006-07 THE INCOME WAS ASSESSED AT RS.46 21 865/-. THE ASSE SSMENT BY APPLYING THE CONVERSION FACTOR WAS COMPLETED WHICH IS SUMMARIZED AS UNDER :- A.Y. 2005-06 S.NO. VARIETY OF SWEETS CONVERSION FACTOR A.Y.2005-06 SALES ESTIMATED (RS.) A.Y. 2005-06 1 MAWA SWEETS 4.69 49 35 057 2 MILK BENGALI AND OTHER SWEETS 3.05 28 05 677 3 SWEETS MADE FROM GHREE 4.88 28 05 677 4 SWEETS MADE FROM DRY FRUITS 2.12 20 50 794 6 A. KAJU B. BADAM 2.26 2 93 761 5 NAMKEENS 3.00 14 34 141 TOTAL 2 58 46 173 A.Y. 2005-06 S.NO. VARIETY OF SWEETS CONVERSION FACTOR A.Y.2006-07 SALES ESTIMATED (RS.) A.Y. 2006-07 1 MAWA SWEETS 2.56 26 57 246 2 MILK BENGALI AND OTHER SWEETS 3.20 1 40 84 588 3 SWEETS MADE FROM GHREE 4.09 46 23 508 4 SWEETS MADE FROM DRY FRUITS C. KAJU D. BADAM 1.92 2.56 29 14 212 5 82 039 5 NAMKEENS 3.00 15 45 615 TOTAL 2 64 25 268 THE LEARNED ASSESSING OFFICER ADDED THE DIFFERENCE AMOUNT OF SALES DISCLOSED BY THE ASSESSEE AND ESTIMATED BY HIM. BEF ORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DETAILED WRITT EN SUBMISSIONS WERE FURNISHED BY THE ASSESSEE CONTRADICTING THE FI NDINGS RECORDED IN THE ASSESSMENT ORDER ALONG WITH COMPARATIVE STATEME NT OF SALES WHICH WERE FORWARDED TO THE LEARNED ASSESSING OFFICER FOR REMAND REPORT. IN TURN THE LEARNED ASSESSING OFFICER ALSO FURNISHED A DETAILED REPLY WHICH WAS CONFRONTED TO THE ASSESSEE WHICH HAS BEEN ANALY SED AT PAGE 6 7 ONWARDS OF THE IMPUGNED ORDER. BOTH THE REPLIES OF THE ASSESSEE AS WELL AS OF THE LEARNED ASSESSING OFFICER WERE EXAMI NED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND ULTIMATELY HE UPHELD THE REJECTION OF BOOKS OF ACCOUNTS BY INVOKING THE PROV ISIONS OF SECTION 143(3) OF THE ACT AND PARTLY ALLOWED APPEALS OF THE ASSESSEE SUSTAINING THE ADDITION OF RS.13 74 610/- AND RS.15 80 930/- R ESPECTIVELY WHICH IS UNDER CHALLENGE BEFORE THIS TRIBUNAL. 4. IT IS SEEN THAT WHILE COMING TO A PARTICULAR CON CLUSION THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS EX AMINED THE CONVERSION FACTOR AND THE RESULTANT SALES WHICH AS PER HIM WERE NOT PROPER BY ENUMERATING CERTAIN IMPORTANT FACTORS WHI CH ARE AS UNDER :- I. SAME INGREDIENTS/RAW MATERIALS I.E. MAWA AND DR Y FRUITS ARE UTILISED IN PREPARATION OF VARIOUS SWEETS AND NEI THER MAWA IS CONFINED TO PREPARATION OF PURE MAWA SWEETS NOR A RE THE DRY FRUITS CONFINED TO THE USAGE IN DRY FRUIT SWEETS AS IS OBVIOUS AND IS COMMON KNOWLEDGE. II SO IS THE POSITION ABOUT GHEE AND OIL IS BY AND LARGE USED FOR ALMOST ALL THE PREPARATIONS EXCEPT BENGALI SWEETS IN VARYING QUANTITY AND PROPORTION. III. MILK AS HAS BEEN RIGHTLY POINTED OUT BY THE AP PELLANT IS AGAIN USED IN SWEET PREPARATIONS BESIDES BEING CONVERTED INTO DAHI AND LASSI AS WELL FOR PREPARATION OF TEA AND COFFEE FOR STAFF MEMBERS AND IT CANNOT BE SUMMARILY HELD THAT THE EN TIRE MILK SO PURCHASED IS SOLD OR UTILISED FOR PREPARATION OF CHHENA OR KHOA AND FINALLY UTILISED IN PREPARATION OF BENGALI SWEETS. IV. THEN THERE ARE OTHER OBVIOUS FACTORS LIKE SWEET S BEING OFFERED TO CUSTOMERS FOR TASTING PURPOSES SHORTAGE IN MAWA DUE TO MOISTURE FACTOR WASTAGE OF RAW MATERIAL IN THE SWE ET PREPARATION PROCESS INVOLVING HEATING AS WELL CLEAN ING. SO ALSO WHEN SWEETS ARE SOLD OVER THE COUNTER IN DIF FERENT WEIGHTS RANGING FROM 100 200 GMS TO 1-5 KG IT HA S TO BE BORNE IN MIND THAT THE WEIGHT CANNOT BE VERY PRECIS E AND ACCURATE AND FOR BUILDING UP REPUTATION THE APPELL ANT CANNOT 8 RESORT TO DELIVERY OF UNDER-WEIGHT GOODS AND SMALL DIFFERENCE IN WEIGHT IN VARIOUS SALES TRANSACTIONS IN A DAY W OULD ADD TO A SIGNIFICANT QUANTITY AT THE END OF THE DAY. V. FINALLY IT HAS ALSO TO BE BORNE IN MIND AS THE A.O. HAS ADMITTED THAT THE APPELLANT HAS BUILT UP A REPUTATI ON FOR ITSELF IN THE MATTER OF QUALITY OF PRODUCTS AND ACCORDINGLY S OME OF THE FINAL PRODUCTS BEING DESTROYED ON ACCOUNT OF SUCH P REPARATION NOT COMING UPTO THE MARK ALSO CANNOT BE ENTIRELY RU LED OUT. SO ALSO THE FACT THAT SOME OF THE SWEET PREPARATION WHICH ARE NOT SOLD NEEDS TO BE DESTROYED ON ACCOUNT OF SOURIN G OR OTHER NATURAL FACTORS AFTER BRIEF PERIOD OF SELF LIFE OF SUCH SWEETS HAS TO BE AGAIN BORNE IN MIND. VI. LASTLY SOME PART OF OTHER PREPARATION BEING CO NSUMED BY THE EMPLOYEES OF THE ORGANIZATION HAS ALSO TO BE TAKEN INTO CONSIDERATION WHILE ESTIMATING SALES. IN THE LIGHT OF THE ABOVE THE LD. FIRST APPELLATE AUTHORITY ESTIMATED THE SALES AT RS.2.10 CRORES AND RS.2.50 CRORES FOR RESP ECTIVE ASSESSMENT YEARS AGAINST DISCLOSED SALES OF RS.186.97 LACS AND RS. 227.68 LACS. THE ASSESSEE DISCLOSED GROSS PROFIT AT 41% ON THE S ALES OF RS.75.52 LACS (ASSESSMENT YEAR 1996-97) 37.25% AND 39.2% FO R THE ASSESSMENT YEAR 1997-98. THE LEARNED LD. FIRST APPELLATE AUTH ORITY HAS ALREADY CONSIDERED THE EARLIER DECISION OF THE TRIBUNAL WHI LE ACCEPTING THE TRADING RESULTS CONSEQUENTLY HE ADOPTED THE GROSS PROFIT RATE OF 36% ON THE SALES BY FURTHER PLACING RELIANCE UPON THE DECI SION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF BRIJLAL MA NILAL & COMPANY VS. CIT (92 ITR 287). IF THE TOTALITY OF FACTS IS ANALYSED WE FIND THAT THE LEARNED LD. FIRST APPELLATE AUTHORITY HAS ADOPTED A PRACTIC AL AND REASONABLE APPROACH IN COMING TO A PARTICULAR CONCLUSION BY EX AMINING THE CLAIM OF THE ASSESSEE ALONG WITH THE STAND OF THE LEARNED AS SESSING OFFICER 9 THEREFORE ALREADY A REASONABLE VIEW HAS BEEN TAKEN THEREFORE NO INTERFERENCE IS REQUIRED CONSEQUENTLY THE ORDER O F THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS UPHELD. 5. SO FAR AS THE APPEALS OF THE REVENUE ARE CONCERN ED SINCE WE HAVE UPHELD THE ACTION OF THE LEARNED COMMISSION ER OF INCOME TAX (APPEALS) BY DISMISSING THE APPEALS OF THE ASSESSEE THEREFORE THERE IS NO MERIT IN THE APPEALS OF THE REVENUE CONSEQUENTL Y THE SAME ARE DISMISSED. 6. FINALLY THE APPEALS OF THE ASSESSEE AS WELL AS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT IN THE PRESENCE OF L EARNED COUNSEL OF BOTH SIDES AT THE CONCLUSION OF HEARING ON 24.1.2011. (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 31.1.2011 COPY TO: APPELLANT RESPONDENT CIT CIT(A) DR G UARD FILE !VYAS!