Gujarat High Court
C.I.T.-Ii vs Hynoup on 20 July, 2011
Author: Akil Kureshi
Bench: Akil Kureshi
Gujarat High Court Case Information System
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TAXAP/190/2004 4/ 4 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX
APPEAL No. 190 of 2004
For
Approval and Signature:
HONOURABLE
MR.JUSTICE AKIL KURESHI
HONOURABLE
MS JUSTICE SONIA GOKANI
=========================================================
1
Whether
Reporters of Local Papers may be allowed to see the judgment ?
2
To be
referred to the Reporter or not ?
3
Whether
their Lordships wish to see the fair copy of the judgment ?
4
Whether
this case involves a substantial question of law as to the
interpretation of the constitution of India, 1950 or any order
made thereunder ?
5
Whether
it is to be circulated to the civil judge ?
=========================================================
C.I.T.-II
- Appellant(s)
Versus
HYNOUP
FOOD & OIL INDUSTRIES LTD. - Opponent(s)
=========================================================
Appearance
:
MR
MANISH BHATT, SR COUNSEL
for
Appellant(s) : 1,
RULE SERVED for Opponent(s) :
1,
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CORAM
:
HONOURABLE
MR.JUSTICE AKIL KURESHI
and
HONOURABLE
MS JUSTICE SONIA GOKANI
Date
: 20/07/2011
ORAL
JUDGMENT
(Per : HONOURABLE MS JUSTICE SONIA GOKANI) Brief facts of the present case are that the assessee respondent company was involved in the business of processing of raw cotton seed oil, groundnut oil, etc. The main business of the company was processing cotton seed oil and it was also engaged doing similar job work on behalf of others. For the assessment year 1993-1994, the Assessing officer estimated sale outside the books. This order came to be challenged before the CIT(Appeals) which reduced the additions made by the Assessing Officer. Against this order of CIT(Appeals), both the Revenue and assessee respondent approached the Income Tax Appellate Tribunal. The Tribunal following its earlier order in case of this very assessee passed order in favour of the the assessee and against the Revenue by its order dated 7.7.2003. The impugned judgement of the tribunal dated 7.7.2003 is in challenge before this Court by way of present appeal.
While admitting the appeal, following question of law was framed for determination of this Court :
"Whether on the facts and in the circumstances of the case, the Appellate Tribunal has substantially erred in law in deleting the disallowance made on account of process loss and suppression of production and sales made on account of satisfaction recorded by the Assessing Officer that excessive process loss was claimed by the assessee only to suppress real extent of production ?"
This Court had heard at length learned Counsel Mr Manish Bhatt, senior counsel appearing for the appellant Revenue. Though rule has been served duly, none chose to appear for and on behalf of respondent.
At the outset, it needs to be noted that against the order of the tribunal in case of this very assessee respondent for the assessment year 1990-1991, the Revenue chose to approach this Court by preferring Tax Appeal No.10/2001 where identical question of law, as raised in present tax appeal, was admitted and has been decided by this Court in favour of the assessee and against the Revenue in the following manner :
"9.
Quite apart from the above observations, we find that the tribunal had examined the materials on record which included the data of the turnover, Gross Profit rate and process loss for several years. It was found that year after year, the Gross Profit rate of the assessee company was increasing. Process loss was fluctuating between a minimum of 1.9% to maximum of 3.05%. The tribunal also observed that the product manufactured by assessee is refined cotton seed oil which is obtained from refining raw cotton seed oil which is in turn obtained from crushing cotton seed by ginning factories. Cotton seed is an agricultural commodity. The quality of cotton seed would certainly impact the raw cotton seed oil and consequently refined cotton seed oil. Quality of raw material would depend on several factors such as rainfall, quality of soil and other such factors. It was also noted that if the raw cotton seed oil is obtained from crushing of inferior quality of cotton seed, then the process loss was likely to be higher, but Gross Profit rate may go up since the assessee may have purchased the raw material at a cheaper rate. Tribunal also noted that there were instances where though process loss was high, Gross Profit rate was also high compared to other years. Tribunal noted contention of the assessee that the production recorded and maintained by the assessee were being checked and supervised by the Food and Civil Supply department of the Government. Periodic reports and returns were submitted by the assessee. No irregularities were noticed. Tribunal also relied on the report of one M/s. Vulcl laval, supplier of machinery to the assessee for manufacturing of refined cotton seed oil who had stated that process loss is typically found depending on the quality of raw cotton seed and functioning of the plant and would normally range between 2.65% to 4.20%. It can thus be seen that the tribunal based its findings on several factors and came to the conclusion that without any evidence or base the Assessing Officer could not have held that the process loss claimed by the assessee(in the present case at the rate of 3.05%) was inflated or excessive.
10. We are of the opinion that tribunal has considered the facts on record. Several relevant factors have been examined. These facts included uncertainty of the nature of business and fluctuating nature of process loss. By the very nature of things, the business of assessee depended on quality of cotton seed oil procured from the market. Such cotton seed oil depending on quality of cotton produced being an agricultural commodity, naturally quality would depend on the seeds used, the technique employed by farmers for production, soil, rainfall, irrigation and so on. In absence of any additional material, only on basis of an isolated answer by one of the Directors of the company, the Assessing Officer could not have come to the conclusion that the process loss was artificially inflated. Tribunal had also relied on certificate given by the supplier of machine who stated that typically the process loss ranges between
2.65% to 4.20%.
11. In addition to above, we also notice that in earlier years, orders passed by the tribunal were accepted by the Revenue and not carried in appeal.
12. Sum total of above discussion is that we do not find that the decision of the tribunal requires reconsideration. Question No.(1) is therefore, answered against Revenue."
As nothing is pointed out by the Revenue before this Court to take a different view than already taken in case of this very assessee, the issue proposed in the present case also is being answered in favour of the assessee and against the Revenue.
In the result, Tax Appeal is dismissed.
(Akil Kureshi,J.) (Ms. Sonia Gokani,J.) (raghu) Top