Gujarat High Court
The Principal Commissioner Of Income ... vs M/S B B Tradelink Agro Pvt. Ltd on 11 September, 2023
Author: Biren Vaishnav
Bench: Biren Vaishnav, Bhargav D. Karia
NEUTRAL CITATION
C/TAXAP/431/2023 ORDER DATED: 11/09/2023
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 431 of 2023
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THE PRINCIPAL COMMISSIONER OF INCOME TAX 3
Versus
M/S B B TRADELINK AGRO PVT. LTD.
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Appearance:
MRS KALPANA K RAVAL(1046) for the Appellant(s) No. 1
for the Opponent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE BIREN VAISHNAV
and
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
Date : 11/09/2023
ORAL ORDER
(PER : HONOURABLE MR. JUSTICE BIREN VAISHNAV) 1 This Tax Appeal under section 260-A of the Income Tax Act, 1961, has been filed against the order dated 30.12.2022 of the Income Tax Appellate Tribunal in ITA No. 55/Ahd/2018 for Assessment Year 2012-13.
2 The following substantial question of law is raised in this appeal:
"(A) Whether on the facts and circumstances of the case and in law, the Appellate Tribunal has erred in upholding the decision of Ld.CIT(A) restricting the G.P@2% and confirming addition of Rs.1,68,32,458/-
against the addition of Rs.5,38,26,869/- without considering that assessee himself has shown GP of Page 1 of 8 Downloaded on : Sat Sep 16 16:44:38 IST 2023 NEUTRAL CITATION C/TAXAP/431/2023 ORDER DATED: 11/09/2023 undefined 3.25% in the immediately succeeding Financial year 2013-2014?"
3 The facts in brief are as under:
3.1 It is the case of the appellant - revenue, that a search action under section 132 of the Income Tax Act, 1961, was carried out in the group cases of Agrawal Group on 27.09.2012. Notice under section 153A of the Income Tax Act was issued on 05.04.2013 and in response to the notice issued u/s.153A, the assessee filed return on 06.05.2014, declaring total income of Rs.61,52,540/- (Original return income u/s 139 is Rs.61,28,000/-). Order u/s. 143(3) r/w Section 153A of the Income Tax Act, 1961, was passed on 30.03.2015. 3.2 It is further the case of the appellant-revenue that during the assessment proceedings, the Assessing Officer found the discrepancies in the books of accounts maintained by the assessee and rejected the books of account u/s. 145(3) of the Act and estimated gross profit of the assessee @4% on the sales turnover. The Assessing Page 2 of 8 Downloaded on : Sat Sep 16 16:44:38 IST 2023 NEUTRAL CITATION C/TAXAP/431/2023 ORDER DATED: 11/09/2023 undefined Officer has observed that the assessee is in the business of agricultural commodities like castor seed, guar, etc., and showing gross profit @1.09% in the books of accounts for the Assessment Year 2012-13 and 3.25% in the Assessment Year 2013-14. The Assessing Officer, further observed that the assessee showed purchase of Rs.118.54 crores from (Unregistered Dealer) out of the total purchases of Rs.182.95 crores during the Assessment Year 2012-13. Accordingly, the addition of Rs.5,38,26,869/- , being the difference between gross profit shown by the assessee and computed @4% of sales as per the trading results declared by the assessee. 3.3 Being aggrieved, the assessee filed an appeal before the Ld. CIT(A) and the Ld.CIT(A) considered the submissions of the assessee namely the rejection of books of account and estimation of gross profit @4%. After considering various details and records, CIT(A) estimated the gross profit as a reasonable one. Thus, out of the total addition of Rs.5,38,26,868/- made by the Assessing Page 3 of 8 Downloaded on : Sat Sep 16 16:44:38 IST 2023 NEUTRAL CITATION C/TAXAP/431/2023 ORDER DATED: 11/09/2023 undefined Officer, Ld.CIT(A) vide combined order for the Assessment Year 2012-13 & 2013-14 dated 05.12.2017, partly allowed the appeal of the assessee. 3.4 The revenue filed an appeal before the Appellate Tribunal for restricting the addition made by the Assessing Officer on account of G.P to Rs.1,68,32,458/- as against the addition of Rs.5,38,26,869/-. The Appellate Tribunal vide para 6 and 6.1 of the order confirmed the order passed by the Ld.CIT(A) and dismissed the appeal filed by the revenue.
3.5 The Tribunal, concurring with the findings of the CIT(A) held that a reasonable gross profit of the assessee @2% did not require any interference. The Tribunal confirmed the order of the CIT(A) which also produced the relevant paragraphs of the CIT(A), which read as under:
"4.7 Considering the facts mentioned herein above, it is observed that AO has rejected books of account and estimated gross profit @4% on observations discussed afore. It is observed that though the Page 4 of 8 Downloaded on : Sat Sep 16 16:44:38 IST 2023 NEUTRAL CITATION C/TAXAP/431/2023 ORDER DATED: 11/09/2023 undefined appellant had produced farmers for verification, complete details regarding quality of goods, signature of farmers on purchase of vouchers along with the fact that each group concern is showing different gross profit even though they are dealing in similar agricultural produces. The contetion of the AO that purchase bills maintained by the appellant are self-serving vouchers if considered in strict sense, as there is no signature of sellers on these bills or other any other receipts in lieu of making payment to sellers against purchases claimed to be made from them supports the view of the AO that the appellant has not prepared books of account correctly. But in the totally of circumstances the AO was not on a very sound footing in rejecting such books of account under Section 145(3) of the Act.
4.8 So far as estimation of gross profit at the rate 4% is concerned, AO has not given any comparable instances wherein similar firms have earned such profit. The AO has referred to profitability shown by four group concernes being Kedarnath Agri Tradelink Limited (one year), BB Trade Link Agro Pvt. Limited (2 years) Kedarnath Corporation (5 years) and Mahaveer Trading Company (5 years) and he found that BB Trade Link Agro Pvt Limited has shown GP @3.25% only in one year i.e. 2013-14. IL is observed that Kedarnath Corporation and Mahaveer Trading Company are showing profit in the range of 1% to 2% hence the AO was incorrect in choosing base rate of GP at the rate 3.25% (even though finally he estimated 4% for entire group) only on the ground that higher profit is shown by such concerns and same was reasonable. Considering the agricultural produce trading activity, estimation of gross @4% is significantly higher and cannot be considered as correct rate more particularly when no correct comparable third party evidences are brought on record.
Page 5 of 8 Downloaded on : Sat Sep 16 16:44:38 IST 2023NEUTRAL CITATION C/TAXAP/431/2023 ORDER DATED: 11/09/2023 undefined It is observed that Kedarnath Agri Tradelink Pvt. Limited has shown profit @1.41% in A.Y. 2015-16 and the AO has accepted such profit while passing the Assessment Order under section 143(3) of the Act on 29th September, 2017. It is also observed that Shri Rajeshkumar B. Agrawal-HUF, one of the group concerns Appellant has shown gross profit @1.76% in A.Y 2014-15 and on similar facts, the AO has passed an order under Section 143(3) of the Act on 19th December, 2016 estimating gross profit @2% as reasonable profit and observed as under:
"Now the question arises that what amount of profit should be estimated. It seen that in the applications before the Hon'ble Income Tax Settlement Commission, Mumbai, the Karta of this Assessee HUF, in his own individual case had offered 2% gross profit and hence, it being the same line of business, this is accepted as most reasonable percentage. Accordingly, Rs.2,98,44,681/- is taken as Gross Profit @2% of sales as against Rs.2,62,63,320/- shown by Assessee."
It can be seen from above order that Mr.Rajesh B. Agrawal, who has filed settlement petition for search carried out in his case along with the appellant, has offered income considering gross profit @ 2% before Hon'ble Settlement Commission and same was accepted. Even the AO in the case of Rajesh B. Agrawal-HUF (Prop: Mahaveer Trading Company) for A.Y. 2014-15 has considered gross profit @2% as reasonable profit. Considering the order passed by the Hon'ble Settlement Commission as well as subsequent order passed by the AO, it appears appropriate that reasonable gross profit for entire Group required to be estimated should be @2% for all the Assessment Years. It is observed that as the appellant has already shown gross profit @3.25% in Assessment Year 2013-14, addition made by the AO for Rs.87,66,182/- is ordered to be deleted. Further, Page 6 of 8 Downloaded on : Sat Sep 16 16:44:38 IST 2023 NEUTRAL CITATION C/TAXAP/431/2023 ORDER DATED: 11/09/2023 undefined in A.Y. 2012-13, AO has made addition of Rs.5,38,26,869/- based upon estimation of gross profit @4% and after considering reasonable gross profit at the rate of 2%, addition of Rs.1,68,32,458/- is confirmed out of total addition of Rs.5,38,26,869/- made by the AO. These grounds of appeal are partly allowed."
3.6 The Tribunal, has held as under:
"6 We have given our thoughtful consideration and perused the materials available on record. It is seen from the Ld. CIT(A)s order that Kedarnath Agri tredelink Pvt. Ltd. (Assessee in IT(SS)A No. 54/Ahd/ 2018) has shown gross profit @1.41% in the assessment year 2015-16 and the A.O. has accepted such profit while passing the Assessment Order dated 29.09.2017 u/s. 143(3) of the Act. It is also observed that Shri rajeshkumar B. Agrawal (HUF), one of the group concerns of the assessee has shown gross profit @1.76% in the Assessment Year 2014-15 and on similar set of facts passed the Assessment Order u/s. 143(3) on 19.12.2016 wherein the Assessing Officer estimated the gross profit @2% as reasonable profit observing that the Income Tax Settlement Commission in Rajeshkumar B. Agrawal individual case had offered 2% gross profit on the same line of business, which has been accepted as most reasonable percentage by the Hon'ble Settlement Commission.
6.1 Considering the order passed by the Hon'ble Settlement Commission as well as the subsequent orders passed by the Assessing Officer for the later assessment years. It is appropriate that a reasonable gross profit for entire Group required to be estimated for all the Assessment Years. The gross profit @2% as determined by the Ld.CIT(A) does not require any interference since he followed the same Page 7 of 8 Downloaded on : Sat Sep 16 16:44:38 IST 2023 NEUTRAL CITATION C/TAXAP/431/2023 ORDER DATED: 11/09/2023 undefined gross profit declared before Settlement Commission. Further the Ld. D.R. could not produce before us to enhance the estimation from 2% gross profit to 4% with necessary documents and evidences. In the absence of the same, we have no hesitation in confirming the order passed by the Ld. CIT(A). Thus the grounds raised by the Revenue are devoid of merits, hence the same are rejected."
4 Based on the estimated gross profit for the group and looking to the subsequent assessment orders passed by the Assessing Officer for the later assessment years, the Tribunal confirmed the order of the CIT(A).
5 The concurrent findings of the authorities therefore do not involve any substantial question of law and the appeal is held to be without any merit. The Appeal is accordingly dismissed with no orders as to costs.
(BIREN VAISHNAV, J) (BHARGAV D. KARIA, J) BIMAL Page 8 of 8 Downloaded on : Sat Sep 16 16:44:38 IST 2023