Narendra Dixit, v. JCIT Range 27,

ITA 2669/DEL/2006 | 2002-2003
Pronouncement Date: 18-02-2010 | Result: Partly Allowed

Appeal Details

RSA Number 266920114 RSA 2006
Bench Delhi
Appeal Number ITA 2669/DEL/2006
Duration Of Justice 3 year(s) 6 month(s) 7 day(s)
Appellant Narendra Dixit,
Respondent JCIT Range 27,
Appeal Type Income Tax Appeal
Pronouncement Date 18-02-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted G
Tribunal Order Date 18-02-2010
Date Of Final Hearing 11-11-2009
Next Hearing Date 11-11-2009
Assessment Year 2002-2003
Appeal Filed On 10-08-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `G : NEW DELHI BEFORE SHRI DEEPAK R. SHAH ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN JUDICIAL MEMBER I.T.A. NO.2669/DEL/2006 ASSESSMENT YEAR : 2002-03 SHRI NARENDER DIXIT JOINT COMMISSIONER OF INCOME -TAX PROP. GOPALJEE MILK FOODS VS. RANGE-27 NEW DELH I. K-68 KIRTI NAGAR NEW DELHI. ITA NO.2537/DEL/2006 ASSESSMENT YEAR : 2002-03 ASSTT. COMMISSIONER OF INCOME-TAX SHRI NARENDER DI XIT CIRCLE 31(1) NEW DELHI. VS. PROP. M/S. GOPALJE MI LK FOODS NEW DELHI. (APPELLANTS) (RESPONDENTS) ASSESSEE BY : SHRI S.M. MATHUR CA. DEPARTMENT BY : SHRI KISHORE B. SR. DR. O R D E R PER DEEPAK R. SHAH ACCOUNTANT MEMBER THESE CROSS APPEALS BY THE ASSESSEE AND REVENUE ARE DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-XXIV NEW 2 DELHI DATED 10.05.2006 IN AN APPEAL AGAINST ASSES SMENT ORDER UNDER SECTION 143(3) OF THE INCOME-TAX ACT 1961 (THE ACT). 2. THE COMMON ISSUE IN BOTH THE APPEALS IS AGAINST ESTIMATION OF NET PROFIT. THE ASSESSEE IS A PROPRIETOR OF M/S. GOPAL JEE MILK FOODS WHEREIN HE IS CARRYING ON BUSINESS OF TRADING IN MILK AND MILK PRODUCTS. THE ASSESSEE DISCLOSED GROSS PROFIT OF RS.167.16 LACS ON THE TOT AL SALES OF RS.4514.50 LACS. THE NET PROFIT DECLARED WAS RS.2 63 997/-. THE ASS ESSING OFFICER NOTED THAT AS PER PROFIT AND LOSS ACCOUNT THE INTEREST OF RS.3 70 830/- HAS BEEN RECEIVED. IF THE SAME IS EXCLUDED THERE WILL BE NET LOSS FRO M BUSINESS ACTIVITIES. THE ASSESSEE WAS REQUIRED TO FILE JUSTIFICATION OF GROS S PROFIT AND NET PROFIT DISCLOSED. THE ASSESSEE SUBMITTED THAT FOR THE IMM EDIATELY PROCEEDING FINANCIAL YEAR THE GROSS PROFIT DECLARED WAS 3.574% WHEREAS THE G.P. DECLARED IS 3.703%. AS REGARDS LOSS IT WAS STATED THAT DUE TO LOSS OF RS.3 34 150/- BEING THE FRAUD COMMITTED ON THE ASSE SSEE WAS THE MAIN REASON. OTHERWISE THE GROSS PROFIT AND NET PROFIT FOR EARLIER YEARS IS COMPARABLE WITH THE PROFIT DECLARED FOR THE CURRENT YEAR. THE A.O. NOTED THAT THE ASSESSEE HAS PURCHASED MILK WORTH RS.43.20 CRORES AND OUT OF WHICH MILK OF RS.38.26 CRORES WAS PURCHASED FROM THE SIST ER CONCERN M/S. MILAN DAIRY FOODS (P) LTD. THE ASSESSING OFFICER ALSO NO TED THAT THE MILK WEIGHING 43.18 LAC KGS WAS PURCHASED FOR RS.493.83 LACS AT SIYANA FROM 3 LOCAL MILK VENDORS. OUT OF THIS MILK 41.50 LAC KGS . HAS BEEN SOLD IN CASH. THE ASSESSEE SUBMITTED THAT PURCHASE OF RAW MILK IS ALWAYS DONE IN CASH WHEN PURCHASED FROM VILLAGERS WHICH IS COMMON PRACT ICE PREVALENT IN THE MARKET. THE SALE IS MADE TO VARIOUS PARTIES. PURC HASE AND SALE REGISTERS ARE MAINTAINED AND QUANTITY TALLIES. THE A.O. NOTED TH AT PURCHASE AND SALE REGISTERS WERE NOT PRODUCED. PURCHASE SHEET WAS FI LED AND PURCHASE SHEET FOR THE PERIOD FROM 1.4.2001 TO 4.4.2001 WAS OBTAINED A ND PLACED ON FILE. THE SAME IS COMPUTER GENERATED SHEETS WHERE NAME OF MIL K SUPPLIER IS MENTIONED AND QUANTITY OF MILK PURCHASED ON DIFFERE NT DATES OF WEEK IS ALSO MENTIONED. THE PURCHASES ARE AT UNIFORM RATE OF RS .11.80 PER LITER THOUGH SUCH PURCHASES ARE TO BE BASED ON DIFFERENT FAT CON TENTS. HE ACCORDINGLY HELD THAT THE SALES/PURCHASES MADE AT SIYANA ARE NO T SUBJECT TO VERIFICATION AND HENCE THE BOOK RESULT IS TO BE REJECTED. THE A.O. ALSO NOTED THAT TRANSPORTATION EXPENSES O F RS.58.27 LACS HAVE BEEN CLAIMED AGAINST RS.46.16 LACS IN THE IMME DIATELY PRECEDING FINANCIAL YEAR. THIS RESULTED INTO INCREASE OF 26. 33% WHILE SALES HAVE INCREASED BY ONLY 1.59%. MAJORITY OF THE TRANSPORT ATION EXPENSES I.E. 33.73 LACS WAS PAID TO M/S. DELHI DUGDH PARIVAHAN AND ASS OCIATES. THE ASSESSEE SUBMITTED THAT INCREASE IN TRANSPORTATION EXPENSES IS ON ACCOUNT OF VARIOUS FACTORS LIKE INCREASE IN DIESEL EXPENSES CHANGE/MO DIFICATION IN THE ROUTES 4 AND PERIODICAL INCREMENT IN TRANSPORT CHARGES. THE A.O. DID NOT ACCEPT THE REASONING AND REJECTED THE BOOK RESULTS. THE A.O. THEREFORE CONCLUDED THAT NEITHER THE SALES AND PURCHASES ARE VERIFIABLE NOR THE EXPENSES CLAIMED ARE GENUINE AND CORRECT. THE GENERAL PROFIT RATE IN TH E CASES OF DAIRY IS 1% OF THE TURNOVER. HOWEVER KEEPING IN VIEW THE SUBSTAN TIAL EXPENSES ON ADVERTISEMENT NET PROFIT RATE OF .75% WAS APPLIED W HICH WAS ON THE TURNOVER ESTIMATED AT RS.45.70 LACS. 3. BEFORE THE LEARNED CIT(A) THE ASSESSEE MADE DETA ILED SUBMISSION AS TO THE NATURE OF BUSINESS AS ALSO THE PURCHASE/SALE S AND THE EXPENSES. IT WAS SUBMITTED THAT THE RESULTS FOR THE YEAR ARE BETTER THAN THE EARLIER YEAR. NO SPECIFIC DEFECT IS FOUND IN THE BOOKS OF ACCOUNT. ALL THE EXPENSES ARE FULLY VERIFIABLE WITH SUPPORTING VOUCHERS. THERE IS NO J USTIFICATION FOR ESTIMATING NET PROFIT AT 1% OF THE TURNOVER. SEVERAL COMPARAB LE CASES WERE FILED IN RESPECT OF LISTED COMPANIES. IT WAS STATED THAT EX CEPT MAHAAN FOODS LTD. ALL OTHER DAIRY COMPANIES ARE INCURRING LOSSES. EVEN I N THE CASE OF MAHAAN FOODS LTD. IT WAS SUBMITTED THAT THE NET PROFIT WAS DECLARED DUE TO INCOME OTHER THAN BUSINESS INCOME. THE LEARNED CIT(A) HEL D AS UNDER:- I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLAN T. I HAVE ALSO PERUSED THE ASSESSMENT ORDER AND THE SPEC IFIC REASONS GIVEN THEREIN BY THE A.O. TO INVOKE PROVISIONS OF S ECTION 145(3). I AM CONVINCED THAT FOR THE DEFECTS POINTE D OUT BY THE A.O. IN THE BODY OF THE ASSESSMENT ORDER IT IS NOT FEASIBLE TO 5 DETERMINE CORRECT INCOME OF THE APPELLANT ON THE BA SIS OF RECORDS MAINTAINED BY HIM. I THEREFORE UPHOLD TH E AOS ACTION TO INVOKE PROVISIONS OF SEC. 145(3) OF THE I .T. ACT 1961. HOWEVER THE ESTIMATE OF NP @ 0.75% ON THE ESTIMATE D TURNOVER OF RS.45 70 00 000/- APPEARS TO BE SLIGHTL Y HIGHER. THE A.O. HAS NOT MENTIONED ANY COMPARABLE CASE TO A DOPT NET PROFIT RATE OF 0.75%. I FIND FROM THE SUBMISSIONS OF THE APPELLANT THAT THE CASE OF MAHAAN FOODS LTD. CAN PR OVIDE THE BASIS FOR ADOPTION OF NP RATE BEING A COMPARABLE C ASE WHEREIN ON TURNOVER OF RS.64.69 CRORES NET PROFIT RATE HAS BEEN DECLARED AT 0.46%. THE APPELLANT HAS DECLARED TOTAL TURNOVE R AT RS.45 14 50 294/- AND HAS DECLARED NET PROFIT RATE OF 0.06% APPROX. THIS NET PROFIT RATE IS ARRIVED AFTER CRED ITING INTEREST AMOUNT OF RS.3 70 830/- OTHERWISE THEE WOULD HAVE BEEN LOSS. IN MY VIEW IT WILL BE REASONABLE TO ADOPT NET PROF IT RATE OF 0.5% INSTEAD OF 0.75% ON ESTIMATED SALES OF RS.45 5 0 00 000/- IN PLACE OF RS.45 70 00 000/- ESTIMATED BY THE AO. THIS WILL GIVE NET PROFIT FROM BUSINESS AT RS.22 75 000/-. T HUS THE ADDITION MADE BY THE AO AT RS.34 27 500/- IS RESTRI CTED TO RS.22 75 000/- ONLY GIVING RELIEF OF RS.11 52 500/- . AGAINST SUSTENANCE OF ADDITION THE ASSESSEE IS IN A PPEAL WHEREAS AGAINST DELETION OF ADDITION REVENUE IS IN APPEAL BEFORE US . 4. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI S.M. M ATHUR SUBMITTED THAT NONE OF THE REASONS JUSTIFIES REJECTION OF BOOKS OF ACCOUNT IN TOTO. IF PARTICULAR EXPENSES ARE NOT VERIFIABLE OR NOT FOUND TO BE BUSINESS EXPENSES SUCH EXPENSES COULD HAVE BEEN DISALLOWED BUT ENTIRE BOOK RESULTS COULD NOT HAVE BEEN REJECTED. HE INVITED OUR ATTENTION TO PA ST PERFORMANCE AND ASSESSMENT THEREOF WHICH IS EXTRACTED HEREUNDER:- 6 ASSESSMENT YEAR TURN OVER (IN LACS) GROSS PROFIT (IN LACS) % NET PROFIT (IN LACS) % ASSESSMENT ORDER U/S. 1997-98 832.80 37.55 4.51 0.44 0.05 143(3) 1998-99 1 395.76 56.35 4.04 0.85 0.06 143(3) 1999-00 2 394.62 85.33 3.56 1.86 0.08 143(1) 2000-01 3 577.58 119.04 3.33 2.17 0.06 143(1) 2001-02 4 443.78 158.82 3.57 2.45 0.06 143(3) 2002-03 4 514.50 167.16 3.70 2.63 0.06 UNDER APPEAL. HE SUBMITTED THAT EVEN THE JUSTIFICATION FOR ESTIMA TING THE TURNOVER HAS NOT BEEN GIVEN. THERE IS NO EVIDENCE TO HOLD THAT THE ASSESSEE HAS RECEIVED SALES OVER AND ABOVE THAT DECLARED. SIMILARLY OUT OF THE TOTAL PURCHASES WHEN MAJORITY OF THE PURCHASE IS PROVED WHICH ADMITTEDLY WAS FROM THE ASSOCIATED CONCERNS AND NO DISCREPANCY HAS BEEN FOUND THEREON EVEN THAT IS NOT IN ACCORDANCE WITH LAW. THE EXPENSES WERE FULLY VOUCH ED AND NECESSARY EVIDENCE WAS PRODUCED. HE ACCORDINGLY SUBMITTED TH AT THE ADDITION IS NOT JUSTIFIED. THE LEARNED DR SHRI KISHORE B SUBMITTED THAT VARIOUS DEFECTS WERE NOTICED BY THE A.O. AND HENCE THE ASSESSING OF FICER WAS JUSTIFIED IN ESTIMATING THE NET PROFIT AT .75% OF THE TURNOVER. 7 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE A SSESSING OFFICER HAS DOUBT ONLY REGARDING PURCHASES OF RS.493.83 LACS OU T OF THE TOTAL PURCHASES OF RS.4320.30 LACS. EVEN IN RESPECT OF THESE PURCH ASES COMPLETE DETAILS LIKE NAME OF SUPPLIER DATE AND THE RATE ARE AVAILABLE. MERELY BECAUSE SINGLE RATE IS APPLIED FOR ALL THE PURCHASES OF THE MONTH IT C ANNOT BE SAID THAT THERE IS ANY DEFECT IN THE BOOKS OF ACCOUNT. THERE IS COMPL ETE QUANTITY TALLY IN RESPECT OF SUCH PURCHASES. SIMILARLY IN RESPECT OF TRANSPORT CHARGES ALSO THE EXPENSES ARE FULLY VOUCHED AND SUPPORTED BY NECESSA RY EVIDENCE. MERELY BECAUSE THE PAYMENT IS TO AN ASSOCIATED CONCERN IT DOES NOT RESULT INTO REJECTION OF BOOKS OF ACCOUNT. PURCHASES IN CASH C OULD HAVE INVITED DISALLOWANCE UNDER SECTION 40A(3) AND THE PAYMENT T O ASSOCIATE CONCERN COULD HAVE RESULTED INTO DISALLOWANCE UNDER SECTION 40A(2) BUT NO OUTRIGHT REJECTION OF BOOKS OF ACCOUNT REGULARLY MAINTAINED AND THE METHOD OF ACCOUNTING BEING REGULARLY EMPLOYED. THE ACCOUNTS ARE ALSO AUDITED AS PER SECTION 44AB OF THE ACT AND NO DEFECT IS POINTED OU T EVEN BY THE AUDITORS. NEITHER THE ASSESSING OFFICER NOR THE COMMISSIONER (APPEALS) HAS JUSTIFIED THE ESTIMATION OF NET PROFIT AT .75% OR .5% RESPECT IVELY. ON THE CONTRARY THERE CANNOT BE A BETTER COMPARISON THAN THE RESULT OF THE ASSESSEE ITSELF. EVEN THE COMPARABLE CASES AS ADOPTED BY THE COMMISS IONER (APPEALS) IS NOT STRICTLY COMPARABLE IN VIEW OF THE FACT THAT M/S. M AHAAN FOODS LTD. IS A 8 DAIRY PLANT FOR PROCESSING OF SKIM MILK FOR THE MAN UFACTURE OF DAIRY WHITENER SKIMMED MILK POWDER WHILE MILK POWDER ET C. WHEREAS THE ASSESSEE IS MERELY A TRADER IN MILK. WE THEREFORE DO NOT FIND ANY JUSTIFICATION TO REJECT THE BOOK RESULTS OR TO ESTI MATE THE NET PROFIT. THE GROSS PROFIT DECLARED BY THE ASSESSEE IS BETTER THAN THAT DECLARED IN EARLIER YEAR WHICH HAS BEEN ACCEPTED BY THE REVENUE. AS REGARDS NET PROFIT AFTER THE GROSS PROFIT IS ACCEPTABLE AND SINCE THE EXPENSES A RE FOUND TO BE INCURRED IN THE COURSE OF BUSINESS AND WHOLLY AND EXCLUSIVELY F OR THE SAME IT DOES NOT RESULT INTO ESTIMATION OF NET PROFIT OTHER THAN THE BOOK RESULTS DECLARED BY THE ASSESSEE. WE THEREFORE DIRECT THE DELETION OF AD DITION AS SUSTAINED BY THE COMMISSIONER (APPEALS). 6. AS REGARDS NEXT GROUND OF APPEAL BY THE ASSESSEE THE SAME IS AGAINST ADDITION OF RS.3 LACS BY TREATING THE INCOME DECLAR ED BY THE ASSESSEE AS AGRICULTURAL INCOME AS INCOME FROM UNDISCLOSED SOUR CES WE FIND THAT THE ASSESSEE COULD NOT ESTABLISH EARNING OF SUCH AGRICU LTURAL INCOME BY PRODUCING NECESSARY EVIDENCE IN SUPPORT THEREOF. T HE ASSESSEE MERELY FILED DETAILS OF LAND HOLDING BUT NOTHING IS FILED IN RES PECT OF THE CROP PETAL EMPLOYED OR THE SALES REALIZATION THEREOF. WE THE REFORE DECLINE TO INTERFERE IN THIS REGARD. 9 7. THE NEXT GROUND OF APPEAL IS RELATING TO ADDITIO N OF RS.32 900/- AS UNEXPLAINED DEPOSIT IN THE BANK ACCOUNT. SINCE THE ASSESSEE FAILED TO PROVE THE SOURCE OF SUCH DEPOSIT THE ADDITION WAS RIGHTL Y MADE BY THE ASSESSING OFFICER. 8. NO OTHER GROUNDS ARE ARGUED OR ANY ARGUMENTS ARE ADVANCED. 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED AND THAT OF THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 18-02-2010. SD/- SD/- (GEORGE MATHAN) (DEEPAK R. SHAH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 18-02-2010. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR ITAT.