Income Tax Appellate Tribunal - Delhi
Ito, New Delhi vs Aradhana Drink & Beverages (P) Ltd, New ... on 5 June, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'A' NEW DELHI
BEFORE SH. I.C.SUDHIR, JUDICIAL MEMBER
AND
SH.ANADEE NATH MISSHRA, ACCOUNTANT MEMBER
I.T.A .No.-2427/Del/2011
(ASSESSMENT YEAR-2007-08)
Aradhana Foods & Juices Pvt Ltd., Vs ITO,
3B, DLF Corporate Park, S Block, Ward-2(1),
Qutab Enclave, DLF Phase-III, C.R.Building,
Gurgaon-122002. New Delhi.
PAN-AAFCA4917L
(APPELLANT) (RESPONDENT)
I.T.A .No.-2340/Del/2011
(ASSESSMENT YEAR-2007-08)
ITO, Vs Aradhana Foods & Juices Pvt. Ltd.,
Ward-2(1), Room Flat No.54, Lower Ground Floor,
No.-381, World Trade Centre, Barakhamba
C.R.Building, Road, New Delhi-110001.
New Delhi. PAN-AAFCA4917L
(APPELLANT) (RESPONDENT)
I.T.A .No.-3921/Del/2013
(ASSESSMENT YEAR-2008-09)
Aradhana Foods & Juices (P) Ltd., Vs ITO,
No.54, Lower Ground Floor, World Ward-2(1),
Trade Centre, Barakhamba Road, New Delhi.
New Delhi-110001.
PAN-AAFCA4917L
(APPELLANT) (RESPONDENT)
I.T.A .No.-3497/Del/2013
(ASSESSMENT YEAR-2008-09)
ITO, Vs Aradhana Foods & Juices Pvt. Ltd.,
Ward-2(1), 54, LGF, World Trade Centre,
New Delhi. Barakhamba Road, New Delhi-110001.
PAN-AAFCA4917L
(APPELLANT) (RESPONDENT)
Page 2 of 30
I.T.A .No.-3590/Del/2013
(ASSESSMENT YEAR-2009-10)
DCIT, Vs Aradhana Foods & Juices (P) Ltd.,
Circle-2(1), Room No.54, Lower Ground Floor, World
No.-398D, C.R. Trade Centre, Barakhamba Road,
Building, New New Delhi-110001.
Delhi. PAN-AAFCA4917L
(APPELLANT) (RESPONDENT)
I.T.A .No.-3923/Del/2013
(ASSESSMENT YEAR-2009-10)
Aradhana Foods & Juices (P) Ltd., Vs ITO,
No.54, Lower Ground Floor, World Ward-2(1),
Trade Centre, Barakhamba Road, New Delhi.
New Delhi-110001.
PAN-AAFCA4917L
(APPELLANT) (RESPONDENT)
I.T.A .No.-4472/Del/2013
(ASSESSMENT YEAR-2008-09)
ITO, Vs Aradhana Drink & Beverages (P.) Ltd.,
Ward-2(1), 54, Lower Ground Floor, World Trade
New Delhi. Centre, New Delhi-110001.
PAN-AAECA4452H
(APPELLANT) (RESPONDENT)
I.T.A .No.-4706/Del/2013
(ASSESSMENT YEAR-2008-09)
Aradhana Drinks & Beverages Pvt. Ltd., Vs ITO,
No.54, Lower Ground Floor, World Ward-2(1),
Trade Centre, Barakhamba Road, C.R.Building,
New Delhi-110001. New Delhi.
PAN-AAECA4452H
(APPELLANT) (RESPONDENT)
I.T.A .No.-3922/Del/2013
(ASSESSMENT YEAR-2009-10)
Aradhana Drinks & Beverages Pvt. Ltd., Vs ITO,
No.54, Lower Ground Floor, World Ward-2(1),
Trade Centre, Barakhamba Road, New Delhi.
New Delhi-110001.
PAN-AAECA4452H
(APPELLANT) (RESPONDENT)
Page 3 of 30
I.T.A .No.-3588/Del/2013
(ASSESSMENT YEAR-2009-10)
DCIT, Vs Aradhana Drinks & Beverages (P)Ltd.,
Circle-2(1), Room No.54, Lower Ground Floor, World
No.-398D, Trade Centre, Barakhamba Road,
C.R.Building, New Delhi-110001.
New Delhi PAN-AAECA4452H
(APPELLANT) (RESPONDENT)
Assessee by Sh.C.S.Aggarwal, Sr.Adv.,
Sh. Vishal Kalra, Adv.,
Sh. Amit Bablani, CA &
Sh.Yogesh Parwal, CA
Revenue by Sh. Ravi Jain, CIT (DR)
ORDER
PER ANADEE NATH MISSHRA, ACCOUNTANT MEMBER
(A) As many of the disputed issues in these appeals are similar/inter-connected, these ten appeals are being disposed off through this consolidated order for the sake of convenience. Grounds of appeal are as under respectively:-
I.T.A .No.-2427/Del/2011 (ASSESSMENT YEAR-2007-08) (Aradhana Foods & Juices Pvt Ltd. vs ITO)
1. "The Commissioner of Income Tax Appeals-V, New Delhi, (hereinafter referred to as "the CIT(A)') has erred on facts and circumstances of the case and in law, in upholding the ad-hoc disallowance of Rs.2,90,86,700, being 10 per cent of the total administrative expenditure of Rs.29,08,67,000 made by the Assessing Officer (hereinafter referred to as "AO") alleging the same to be unverified, unreasonable, and excessive without bringing anything on record in support thereof.
2. The CIT(A) has erred on facts and circumstances of the case and in law, in not completely deleting the adhoc disallowance made by the Page 4 of 30 AO and in limiting the same to 10 per cent of the total administrative expenditure.
The Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal at any time before or at the time of hearing of the appeal."
I.T.A .No.-2340/Del/2011 (ASSESSMENT YEAR-2007-08) (ITO vs Aradhana Foods & Juices Pvt Ltd.)
1. Ld.CIT(A) has erred on facts and in law in deleting addition of Rs.10,61,30,515/- on a/c of purchases from related parties; restricting disallowance out of operating expenses from 30% (Rs.8,72,60,100/-) to 10% (Rs.2,90,86,700/-); deleting addition of Rs.2,45,00,000/- out of unverified expenses in 'fixed assets'; and Rs.36,75,000/- out of depreciation. The assessee failed to produce books of accounts and also supporting bills/ vouchers in support of its claims.
2. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal."
I.T.A .No.-3921/Del/2013 (ASSESSMENT YEAR-2008-09) (Aradhana Foods & Juices Pvt Ltd. vs ITO)
1. "That the CIT(A) erred on facts and in law in upholding the order dated 27.12.2010 of the assessing officer assessing loss at Rs.15,32,12,229 as against loss of Rs.20,12,26,168 returned by the Appellant.
2. That on the facts and circumstances of the case, the CIT(A) merely relying on the order of the predecessor, has erred in upholding the ad hoc disallowance of Rs.3,58,31,000 being ten percent of the total operating expenditure of Rs.35,83,10,100 made by the Assessing Officer alleging that the same to be unverified, unreasonable and excessive without bringing anything on record in support thereof. Each of the above grounds is without prejudice and independent of each other. The Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at the time of hearing of the appeal.
Page 5 of 30
I.T.A .No.-3497/Del/2013 (ASSESSMENT YEAR-2008-09) (ITO vs Aradhana Foods & Juices Pvt Ltd.)
1. "The learned CIT(Appeals) has erred in facts and in law in considering the plastic crates under the head 'Bottles and Shells' eligible for depreciation @ 50%.
2. The appellant craves leave for reserving the right to amend, modify, alter, and or forego any ground (s) of appeal at any time before or during the hearing of this appeal."
I.T.A .No.-3590/Del/2013 (ASSESSMENT YEAR-2009-10) (DCIT vs Aradhana Foods & Juices Pvt Ltd.)
1. "The Ld.CIT(A) had erred on facts and in law in considering the plastic crates under the heard "Bottles and Shells" eligible for depreciation @ 50%.
2. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal."
I.T.A .No.-3923/Del/2013 (ASSESSMENT YEAR-2009-10) (Aradhana Foods & Juices Pvt Ltd. vs ITO)
1. "That the CIT(A) erred on facts and in law in upholding the order dated 25.11.2011 of the assessing officer assessing loss at Rs.25,73,73,687/-, as against loss of Rs.32,12,88,140 returned by the Appellant.
2. That on the facts and circumstances of the case, the CIT(A) merely relying on the order for immediately preceding assessment year, has erred in upholding the ad hoc disallowance of Rs.5,49,95,700, being ten percent of the total operating expenditure of Rs.54,99,57,000, made by the Assessing Officer alleging the same to be unverified, and excessive without bringing anything on record in support thereof. Each of the above grounds is without prejudice and independent of each other. The appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at the time of hearing of the appeal."
Page 6 of 30
I.T.A .No.-4472/Del/2013 (ASSESSMENT YEAR-2008-09) (ITO vs Aradhana Drinks & Beverages Pvt Ltd.)
1. "On the facts and the circumstances of the case as well as in the law the learned CIT(Appeals) has erred in allowing depreciation on plastic crates @ 50% as against 15% allowed by AO.
2. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal."
I.T.A .No.-4706/Del/2013 (ASSESSMENT YEAR-2008-09) (Aradhana Drinks & Beverages Pvt Ltd. vs ITO)
1. That on the facts and circumstances of the case, the CIT(A) has erred in upholding the adhoc disallowance of Rs.2,60,61,000, being ten percent of the total operating expenditure of Rs.26,06,10,000, made by the Assessing Officer alleging the same to be unverified, unreasonable, and excessive without bringing anything on record in support thereof.
2. That on the facts and circumstances of the case and in law, the CIT(A in upholding the ad-hoc disallowance has erred in merely relied upon the order of Commissioner of Income Tax (Appeals)-V in Appellant's case for assessment year 2009-2010, without adjudicating the submission filed on merits.
Each of the above grounds is without prejudice and independent of each other. The appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at the time of hearing of the appeal."
I.T.A .No.-3922/Del/2013 (ASSESSMENT YEAR-2009-10) (Aradhana Drinks & Beverages Pvt Ltd. vs ITO)
1. "That the CIT(A) erred on facts and in law in upholding the order dated 25.11.2011 of the assessing officer loss at Rs.7,80,83,600, as against loss of Rs.11,24,55,740 returned by the Appellant.
2. That on the facts and circumstances of the case, the CIT(A) has erred in upholding the ad hoc disallowance of Rs.3,08,93,900, being ten per cent of the total operating expenditure of Rs.30,89,39,000, made by the Assessing Officer alleging the same to be unverified, unreasonable, and excessive without bringing anything on record in support thereof.
Page 7 of 30
3. That on the facts and circumstances of the case and in law, the CIT(A has erred in merely relying upon the order in the case of Aradhana Foods & Juices Private Limited, without appreciating that the facts in the instant case are different from the facts of that case and both the entities are distinct/separate legal entities. Each of the above grounds is without prejudice and independent of each other. The Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at the time of hearing of the appeal."
Additional Grounds:-
1. "That on the facts and the circumstances of the case and in law the Ld.CIT(A), while confirming the disallowance has failed to appreciate that the Appellant had duly produced books of accounts in support of expenditure incurred under the head operating expenses amounting to Rs.308,939,000.
In view of the decision of the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. vs CIT (229 ITR 383) as also the decision in the case of Jute Corporation of India vs CIT (187 ITR 688) and the discretion vested in your Honours under Rule 11 of the Income tax (Appellate Tribunal) Rules, 1963, the additional grounds of appeal calls for being admitted and adjudicated on merits.
The Appellant trusts that the request shall be acceded to."
I.T.A .No.-3588/Del/2013 (ASSESSMENT YEAR-2009-10) (DCIT vs Aradhana Drinks & Beverages Pvt Ltd.)
1. "The Ld.CIT(A) had erred on facts and in law in considering the plastic crates under the heard "Bottles and Shells" eligible for depreciation @ 50%.
2. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal."
(B) In the case of Aradhana Foods & Juices Pvt.Ltd., in AY 2007- 08, assessment order dated 13.12.2009 was passed by the Assessing Officer (in short "AO") u/s 143(3) of I.T.Act, 1961 (in short Page 8 of 30 "Act"). In this assessment order, total income was assessed at Rs.7,22,86,175/- as against loss of Rs.14,92,79,440/- as per returned filed by the assessee. The following additions were made by the AO:
disallowance on account of "unverified purchases" Rs.10,61,30,515/- from related parties disallowance out of "operating expenses" Rs. 8,72,60,100/- disallowance out of unverified "fixed assets" Rs. 2,45,00,000/- disallowance out of "depreciation" Rs. 36,75,000/- (B.1) The assessee filed appeal against the aforesaid assessment order before Ld. Commissioner of Income Tax(Appeals) [in short "CIT(A)"] which was disposed off vide appellate order dated 21.02.2011. Ld.CIT(A) deleted the aforesaid addition of Rs.10,61,30,515/-. Next, the disallowance of Rs.8,72,60,100/- made by the AO out of operating expenditure @ 30% of total claim of Rs.29,08,67,000/- was considered by the Ld.CIT(A) to be excessive and disallowance was sustained by the Ld.CIT(A) only to the extent of 10% out of the total claim Rs.29,08,67,000/-. Further, the aforesaid addition of Rs.2,45,00,000/- was deleted by the Ld.CIT(A) and furthermore the Ld.CIT(A) also deleted the aforesaid disallowance of Rs.36,75,000/-. The assessee and Revenue, both are in appeal against the aforesaid order dated 21.02.2011 of Ld.CIT(A). In the assessee's appeal, the ground has been taken Page 9 of 30 against order of Ld.CIT(A) whereby disallowance of the amount of Rs.2,90,86,700/- being 10% of the aforesaid Rs.29,08,67,000/- was upheld by the Ld.CIT(A). In Revenue's appeal, ground has been taken against order of Ld.CIT(A) in deleting addition of Rs.10,61,30,515/- on a/c of purchases from related parties;
restricting disallowance out of operating expenses from 30% (Rs.8,72,60,100/-) to 10% (Rs.2,90,86,700/-); deleting addition of Rs.2,45,00,000/- out of unverified expenses in 'fixed assets'; and Rs.36,75,000/- out of depreciation. During appellate proceedings in ITAT, the assessee filed Paper Books in two Volumes consisting of 465 pages. Besides, the assessee filed another compilation of case laws consisting of 153 pages. The assessee also filed "Synopsis in Brief" consisting of 34 pages for A.Y. 2007-08. At the time of hearing before us, Ld.CIT Departmental Representative (in short "DR") supported the order of the AO. He drew our attention to the fact that although details called for were submitted by the assessee to the AO, it is undisputed that books of accounts were not produced during the course of assessment proceedings. Reading from the order sheet of the assessment record, he highlighted that the assessee was asked to produce books of accounts vide order sheet noting dated 03.12.2009 and this requirement was repeated on 14.12.2009 and again on 21.12.2009. Final hearing was Page 10 of 30 conducted on 24.12.2009, but even till then the assessee failed to produce the books of accounts, he stated, and the assessment was eventually completed on 30.12.2009. The Ld.CIT DR further submitted that as the assessee had failed to produce the books of accounts, the AO was unable to make the necessary verification/inquiry/investigation, etc.; and had to complete the assessment on the basis of available materials. Ld.CIT DR supported all the additions made by the AO, and for this purpose, relied on the assessment order. Specifically, as far as disallowance of Rs.10,61,30,515/- is concerned, he supported the reasoning of the AO and relied on the following portion of the assessment order:
"3.2. Perusal of Form 3CD (enclosure 15-accounting ratio) shows that although gross profit for the year under consideration is 12.6% net profit is as low as (-) 26.8%. Stock-in-trade vis-à-vis turn over ratio is also 0.01% only. Perusal of Clause 28(1) and 28(b) of Form 3CD (Enclosure 14) and P&L Account shows that during the year under consideration assessee has produced 38,08,105 cases of aerated/non-aerated product at Rs.14,73,59,000/- (raw material consumed-Rs.12,96,63,000/-) & packing material Rs.1,76,96,000/-). It also shows that assessee has purchased 13,36,787 cases for resale at Rs.18,37,31,000/-. Thus, while the manufacturing cost per case has been shown at Rs.38,70/- "purchase cost"
per case for 'resale' has been shown at Rs.137.44/- i.e. 355% more than the manufacturing cost. It is pertinent to mention here that the assessee company has purchased goods worth Rs.11,53,60,000/- and Page 11 of 30 Rs.9,75,53,000/- from its "step-up Holding company" and "Fellow Subsidiaries" respectively. Since, the books of accounts were not produced transactions with these related parties could not be examined. Manufacturing cost of Rs.38.7 per case vis-à-vis purchase cost of Rs.137.44/- per case (particularly from related parties) is nothing but a colorable device used by assessee to reduce its taxability. In view of the aforesaid facts, it is held that purchase cost of 13,36,787 cases for resale is highly inflated and bogus. After due consideration, it is estimated that purchase cost per case is 50% more than the manufacturing cost. Accordingly, cost of 13,36,787 cases "purchased for resale" is computed at Rs.7,76,00,485/- i.e. @ Rs.58.05/- per case. Therefore, a sum of Rs.10,61,30,515/- (Rs.18,37,31,000/-(-) Rs.7,76,00,485/-) is disallowed out of Rs.18,37,31,000/- debited as "purchase for resale" and added to the income of the assessee for the relevant assessment year 2007-08." (B.1.1) Regarding disallowance of Rs.8,72,60,100/- being 30% of Rs.29,08,67,000/- claimed by the assessee as operating expenses, the Ld.CIT DR supported the order of the AO and relied on the following portion of the assessment order:
"3.3. Assessee has debited "operating expenses" of Rs. 29,08,67,000/~ in the P & L account. In view of the fact that assessee's area of operation is confined to the state of Andhra Pradesh and during the entire year only 51,08,482 cases have been sold, the above said operating expenses which comes to Rs. 56.93/- per case is apparently excessive, unreasonable and unjustified. Since, books of accounts have also not been produced during Page 12 of 30 the assessment proceedings a sum of Rs.8,72,60,100/- i.e. @ 30% of the said expenses is disallowed being unverified, unreasonable and excessive and added to the income of the assessee for the relevant assessment year 2007-08."
(B.1.2) Regarding disallowances of Rs.2,45,00,000/- and Rs.36,75,000/- the Ld.CIT DR supported the order of the AO and relied on the following portion of the assessment order:-
"3.4. An addition of Rs. 24,58,35,000/- have been made in fixed assets. It is observed that bottles and tetra packs of Rs. 6,05,53,607/- was purchased during the relevant assessment year and depreciation @ 50% has been claimed thereon. Vide notice u/s 142 (1) dated 10.12.2009 assessee was specifically asked to furnish details of visicoolers / bottles / tetra packs. However, no such details was furnished. Instead, vide reply dated 21.12.2009 assessee submitted as under:
" ..It is respectfully submitted that the visicoolers are kept with assessee's retailers / dealers shops for keeping assessee's products cool in all seasons. The details of distributors / dealers have already been provided in our reply to query no. 2. Further, copies of vouchers for purchase of visicoolers are enclosed on sample basis at page no. 28 to 42. The main supplies of visicoolers are M/s Voltas Ltd. & Western Air-conditioning and Refrigeration Pvt. Ltd..."
Thus, the details of visicoolers were not provided. No details what so ever were provided in respect of bottles/tetra packs. Since, books of accounts along with bill, vouchers, in respect of the said addition in Page 13 of 30 "fixed assets" have not been furnished a sum of Rs.2,45,00,000/- is disallowed out of said addition in fixed assets on account of being "unverified expenses" and added to the income of the assessee for the relevant assessment year 2007-08. Depreciation @ 15% thereon i.e. Rs.36,75,000/- is also disallowed accordingly." (B.2) The Ld. Counsel for the assessee vehemently opposed all the additions made by the AO. He drew our attention to paragraph 2 of the assessment order wherein the AO had noted that necessary details were called for and were submitted from time to time as per order sheet entries. Thus, he contended that even though books of accounts were not produced during the course of assessment proceedings, necessary details were submitted from time to time. He further submitted that the AO did not find any discrepancy in such details. He also pleaded that books of accounts could not be produced because of circumstances beyond the control of the assessee as there was turmoil, political dispute and unrest in Telangana. However, he admitted that books of accounts were otherwise available and even till now continue to be safely available; and submitted that the only reason why these were not produced before the AO was because these could not be transported from Telangana (where business was being conducted) to Delhi (where the assessment jurisdiction of the assessee existed) due to turmoil, Page 14 of 30 political dispute and unrest in Telangana. The Ld. Counsel also expressed displeasure that the case was assigned on 29.10.2009 to the AO who finally completed the assessment, when the AO had only about two months available in the limitation period. The Ld. Counsel for the assessee drew our attention to the fact that the assessment was completed by the AO not u/s 144 of the Act but u/s 143(3) of the Act. He also made detailed submissions on the merits of each specific disallowance/addition made by the AO; and for this purpose relied on the aforesaid Paper Books and Synopsis in Brief filed during appellate proceedings in ITAT, while also explaining the same orally at the time of hearing before us. He also drew our attention to some decided precedents.
(B.3) We have heard both sides attentively and patiently. We have perused all the materials on record and we have also considered various case laws and precedents brought to our attention. The provisions u/s 144 of the Act enable the AO to make the assessment to the best of his judgement. In comparison with section 143(3) of the Act, the AO has greater powers and discretion u/s 144 of the Act and the assessee is more vulnerable to adverse conclusions by the AO if the assessment is completed u/s 144 of the Act than if the assessment is completed u/s 143(3) of the Act. This is so, because Page 15 of 30 section 144 of the Act authorizes the AO to make the assessment to the best of his judgement. As far as the assessee is concerned, the provisions u/s 143(3) of the Act are thus more beneficial and provisions u/s 144 of Act are harsher. If provisions more beneficial to the assessee are invoked by the Revenue, instead of harsher provisions, it may in certain situations; subject to other prescribed conditions under law, if any, being satisfied; create a situation fit for remedial measure(s) by Revenue under various statutory provisions, such as review u/s 263 of the Act, or re-opening u/s 147 of the Act, or rectification u/s 154 of the Act, etc.; but the assessee cannot have any legitimate grievance if provisions more beneficial to the assessee are invoked by the Revenue, instead of harsher provisions. Therefore, in the present case before us, the assessee cannot have a legitimate grievance if the harsher provisions u/s 144 of the Act were not invoked by the AO to make the assessment and instead, the assessment was made under more beneficial provision under section 143(3) of the Act. Merely because additions have been made in assessment concluded u/s 143(3) of Act and not u/s 144 of Act, it cannot be said that the additions are unsustainable. Whether the additions are partly or wholly sustainable or not and if yes; then, the extent to which the additions are sustainable depends Page 16 of 30 also on merits and not merely on whether the assessment is concluded u/s 143(3) of Act or u/s 144 of Act. Also, if the jurisdiction of the case is transferred under statutory provisions of Income Tax Act (as contained in sections 120 to 129 of the Act), the assessee again cannot have any legitimate grievance. In the present case, no infirmity, illegality or mistake has been brought to our attention by or on behalf of the assessee in the transfer of the assessment jurisdiction to the AO who completed this assessment for A.Y. 2007-08. Therefore, in our view, the fact of assignment of the case to the AO who finally completed the case, does not advance the case of the assessee in any manner whatsoever. Next, the fact that books of accounts were not produced by the assessee before the AO, is not in dispute. Even though, as admitted by the AO in the assessment order itself, necessary details were called for and were submitted by the assessee, it does not imply that the AO cannot require the assessee to produce the books of accounts alongwith supporting bills/vouchers/other evidences for further verification/ inquiry/investigation etc. It is not the case of the assessee that the AO had no authority to require the assessee to produce books of accounts, etc. We also find that the assessment order was passed on 30.12.2009, almost at the end of the limitation period ending on Page 17 of 30 (31.12.2009) and it was not feasible for the AO to provide any further opportunity to the assessee. The assessee may have been prevented by sufficient cause from producing the books of accounts etc. before the AO which the assessee was called upon by the AO to produce during the assessment proceedings; in view of turmoil, political dispute and unrest in Telangana. In view of clause (b) of Rule 46A(1) of Income Tax Rules, 1962, the assessee could have, in that situation, produced the books of accounts etc. before the Ld.CIT(A) as additional evidence, during appellate proceedings before the Ld.CIT(A). However, from the perusal of the impugned appellate order dated 21.02.2011 of Ld.CIT(A), there is no indication that the assessee produced these additional evidences (the books of accounts, etc.) before the Ld.CIT(A); or that, the Ld.CIT(A) directed the assessee to produce the books of accounts, etc. under Rule 46A(4) of Income tax Rules, 1962. Thus, we find that the Revenue was deprived of the opportunity to make further verification/inquiry/investigation, etc. because of the failure of the assessee to produce the books of accounts, etc. before the AO as well as before the Ld.CIT(A) and further because of the failure of the Ld.CIT(A) to cause the production of books of accounts, etc. Even during appellate proceedings in ITAT, the assessee has not offered to produce the books of accounts, etc.; Page 18 of 30 although it was stated at the time of hearing before us, by Ld. Counsel for the assessee, that the same are available with the assessee. Revenue has the authority to make verifications/inquiries/investigations etc. in accordance with law and the assessee needs to comply with the lawful requirements prescribed in that regard by the Revenue authorities. This authority has not been fully honoured in this case because of failure of the assessee to produce the books of accounts, etc and because of the failure of the Ld.CIT(A) to exercise the provisions under Rule 46A(4) of Income Tax Rules, 1962; as discussed earlier. When an assessee does not fully honour the lawful authority of Revenue, or when lawful requirements prescribed by Revenue authorities are not fully complied with; the assessee cannot claim a lenient view as a matter of right, and the assessee must face its consequences as per law. The nature, extent and severity of the consequences will depend on the facts, circumstances and statutory provisions. For coming to this conclusion, we take strength from section 114 of Indian Evidence Act,1872 wherein it is provided: "The Court may presume the existence of any fact which it thinks likely to have happened, regard being had to the common course of natural events, human conduct and public and private business, in their Page 19 of 30 relation to the facts of the particular case." Among the illustrations given u/s 114 of Indian Evidence Act, 1872 is included illustrations (g) wherein it is provided: "that evidence which could be and is not produced would, if produced, be unfavourable to the person who withholds it." In the facts and circumstances of this case and in view of the statutory provisions, therefore, we set aside the appellate order of the Ld.CIT(A) and also the assessment order; and we restore the matters to the file of the AO for making denovo assessment as per law, after making further verification/inquiry/investigation, etc. is accordance with law. The AO is directed to provide opportunity to the assessee for complying with the statutory requirements and the assessee is directed to comply with the statutory requirements, during the proceedings for making denovo assessment. As we are setting aside the issues in dispute to the file of the AO for denovo assessment, we are presently not expressing any opinion on the merits and quantam of the various additions made by the AO in A.Y. 2007-08. The cross- appeals filed by the assessee and the Revenue for A.Y. 2007-08 (in ITA Nos.2427/Del/2011 and 2340/Del/2011) and the grounds of appeal contained therein are being hereby disposed off in accordance with our order, directions and observations as aforesaid. Page 20 of 30 (C) In ITA No.3921/Del/2013 for A.Y.2008-09, the assessee has, in Ground No.2 appealed against disallowance of Rs.3,58,31,000/- out of operating expenses @ 10 % of total claim of Rs.35,83,10,100/- and in the connected Ground No.1, M/s Aradhana Foods and Juices Pvt. Ltd. has appealed against assessment of loss at Rs.15,32,12,229/- as against returned loss of Rs.20,12,26,168/-. Similarly in ITA No.3923/Del/2013 for A.Y. 2009-10, M/s Aradhana Foods and Juices Pvt. Ltd. has appealed against disallowance of Rs.5,49,95,700/- out of operating expenses @ 10 % of total claim of Rs.54,99,56,519/- and in the connected Ground No.1, the assessee has appealed against assessment of loss at Rs.25,73,73,687/- as against returned loss of Rs.32,12,88,140/-. In ITA No.4706/Del/2013 for A.Y. 2008-09 and in ITA No.3922/Del/2013 for A.Y. 2009-10, M/s. Aradhana Drinks and Beverages Pvt.Ltd. has filed appeal and in both the appeals Ground No.2 of the appeal is against the disallowance @ 10% made by the AO out of assessee's claim of operating expenditure. Ground No.1 of appeal in both these appeals filed by M/s. Aradhana Drinks and Beverages Pvt.Ltd. is connected with Ground No.2 and is specifically against assessment of loss at a figure lower than the loss returned by the assessee. In ITA No.3922/Del/2013, M/s. Aradhana Drinks and Beverages Pvt.Ltd. has contended in Ground No.3 that the facts in Page 21 of 30 the case of M/s. Aradhana Drinks and Beverages Pvt.Ltd. are different from facts in the case of M/s Aradhana Foods and Juices Pvt.Ltd. In ITA No.3922/Del/2013, M/s. Aradhana Drinks and Beverages Pvt.Ltd. has also taken an additional ground wherein it is contended that the assessee had duly produced books of accounts in support of expenditure incurred under the head 'operating expenses'. The core issue in all the grounds of appeal in the aforesaid four appeals (in ITA No.3921/Del/2013; ITA No. 3923/Del/2013; ITA No. 3922/Del/2013; ITA No. 4706/Del/2013) filed by the aforesaid two assessees (M/s Aradhana Foods and Juices Pvt.Ltd. and M/s. Aradhana Drinks and Beverages Pvt.Ltd.) is the disallowance @ 10% out of assessee's claim of operating expenses. For the sake of convenience, these grounds in the aforesaid four appeals are taken up together. In the assessment proceedings for A.Y. 2008-09 and 2009-10 both the aforesaid assessees were required by the AO to produce books of accounts, bills and vouchers for verification. However, for A.Y 2008-09 books were produced by both the aforesaid assessees before the AO only on sample basis and that also on 24.12.2010 towards the end of the limitation period. For A.Y. 2009-10, both the aforesaid assessees have contended that they had produced books of accounts before the AO but this contention is contrary to the observation of the AO, Page 22 of 30 which was not reversed by the Ld.CIT(A). In the assessment order for A.Y. 2009-10 for both the aforesaid two assessees, the AO has observed: "........The assessee vide reply dated 25.11.2011 has contended that the books of accounts were produced on 25.08.2011 which is incorrect and baseless. Assessee never produced the books of account nor was required to do so on or before 25.08.2011." Also, both the aforesaid two assessees failed to produce any evidence during appellate proceedings in ITAT to support the contention that books of accounts were indeed produced before the AO during assessment proceedings. Burden of proof is on the assessees to prove that books of accounts were produced on 25.08.2011. However, the assessees have failed to provide any evidence and has thus have failed to discharge the burden of proof. In the absence of any evidence to the contrary, the observation of the AO that the books of accounts, etc. were not produced by the aforesaid two assessees during assessment proceedings for A.Y. 2009-10, is hereby accepted. In any case, even assuming that the assessee had already produced books of accounts, etc. earlier, the fact remains that the assessees were duty bound to produce books of accounts, etc. one more time if the AO required the assessee to do so. Therefore, we find no merit in contention of the aforesaid two assessees that books of accounts were produced on 25.08.2011. The Page 23 of 30 AO made a disallowance @ 10% out of operating expenses in the case of both the aforesaid assessees and for both A.Y. 2008-09 and 2009-10. These disallowances were confirmed by the Ld.CIT(A). During the appellate proceedings in ITAT, both the aforesaid assessees filed "Synopsis in Brief" wherein it was submitted that it was of no consequence that the assessee had not produced complete books of accounts or that books of accounts were produced only on sample basis. Ld. Counsel contended that the assessee had furnished all details as were called for by the AO and that the AO had not drawn any adverse inference on the basis of details filed by the assessee or on the basis of books of accounts produced by the assessee on sample basis. Detailed submissions were made on behalf of both the aforesaid assessees on the merits of the disallowances made by the AO and confirmed by the Ld.CIT(A) in the "Synopsis in Brief". Further, at the time of hearing before us, the Ld. Counsel for the assessee made emphatic oral submissions on merits of the additions, relying on "Synopsis in Brief" filed during appellate proceedings in ITAT, he also drew our attention to certain decided precedents. The Ld.CIT DR relied on the orders of the AO and Ld. CIT(A). We have heard both sides patiently and attentively. We have also perused the materials on record. We further have considered the precedents brought to our attention. If the assessee Page 24 of 30 does not produce books of accounts, etc. when required by the AO, or if the assessee produces books of accounts, etc. only on sample basis instead of producing the entire books of accounts, etc.; Revenue is deprived of the opportunity to make further verification/ inquiry/investigation, etc. In the facts and circumstances of these four appeals before us, as noticed by us earlier, both the aforesaid assessees failed to produce the books of accounts, etc. for A.Y. 2009-10 and further, both the aforesaid assessees produced books of accounts, etc. for A.Y. 2008-09 on sample basis only but not the entire books of accounts, etc. Even during appellate proceedings, both the aforesaid assessees failed to produce the entire books of accounts, etc. for A.Y.2008-09 and 2009-10. Moreover, the Ld.CIT(A) also failed to exercise provisions under Rule 46A(4) of I.T.Rules, 1962 and did not require the assessee to produce entire books of accounts, etc. We have already held earlier in this order that Revenue has the authority to make verifications/inquiries/investigations etc. in accordance with law and the assessee needs to comply with the lawful requirements prescribed in that regard by the Revenue authorities. This authority has not been fully honoured in this case because of failure of the assessee to produce the entire books of accounts, etc and because of the failure of the Ld.CIT(A) to exercise the provisions under Rule Page 25 of 30 46A(4) of Income Tax Rules, 1962. We have also already held earlier in this order that when an assessee does not fully honour the lawful authority of Revenue, or when lawful requirements prescribed by Revenue authorities are not fully complied with, the assessee cannot claim a lenient view as a matter of right, and the assessee must face its consequence as per law and further that the nature, extent and severity of the consequences will depend on the facts, circumstances and statutory provisions. In the facts and circumstances of these cases and in view of the statutory provisions, therefore, we set aside the appellate orders of the Ld.CIT(A) and the assessment orders of the AO in the case of both the aforesaid assessees and for both assessment years 2008-09 and 2009-10; and the matters are restored to the file of the AO with the direction to make denovo assessments as per law, after making further verification/inquiry/investigation, etc. in accordance with law. The AO is directed to provide opportunity to the aforesaid two assessees for complying with the statutory requirements and both the aforesaid assessees are directed to comply with the statutory requirements prescribed by the AO, during the proceedings for making denovo assessments for both assessment years 2008-09 and 2009-10. As we are setting aside the matters to the file of the AO for denovo assessment, we are presently not expressing any opinion on Page 26 of 30 the merits and quantum of the additions made by the AO. Moreover, as we are setting aside the matters to the file of the AO for denovo assessment, Ground No.3 of appeal in ITA No.3922/Del/2013 filed by M/s Aradhana Drinks & Beverages Pvt.Ltd. for A.Y.2009-10 becomes purely academic in nature at present and hence, it is not being adjudicated presently. The aforesaid four appeals filed by the aforesaid two assessees for A.Y. 2008-09 and 2009-10 (in ITA Nos.3921 & 3923/Del/2013 and ITA No.4706/Del/2013 and 3922/Del/2013) and the grounds of appeal contained therein are being hereby disposed off in accordance with our order and directions and observations as aforesaid. (D) The Revenue has filed appeals in ITA Nos.3497 and 3590/Del/2013 for A.Y. 2008-09 and 2009-10 respectively in the case of Aradhana Foods and Juices Pvt. Ltd. against the respective orders of Ld.CIT(A). The Revenue has also filed appeals in ITA Nos.4472 and 3588/Del/2013 for A.Y. 2008-09 and 2009-10 in the case of Aradhana Drinks and Beverages Pvt.Ltd. against the respective orders of Ld.CIT(A). In these appeals, the only disputed issue is the rate of depreciation for the plastic crates. As common issue is involved, these appeals are taken up together for the sake of convenience. The two assessees claimed depreciation @ 50% on the Page 27 of 30 ground that crates fall under the block (III)(4) of PART A of NEW APPENDIX I to Rule 5 of Income Tax Rules, 1962 r.w.s 32 of Act. This block of assets is named as "Containers made of glass or plastic used as re-fills" in the PART A of NEW APPENDIX I to Rule 5 of Income Tax Rules, 1962. However, the AO expressed the view that 'Crate' is simply a square container divided into sections for holding bottles and it is used to keep the bottles safe and standing in the factory, shops and while transportation. According to the AO, crates cannot be said and categorized as "Container made of Glass or Plastics used as refills" as used in appendix-I of the Income Tax Rules, 1962 and accordingly, the AO treated crates as plant and machinery eligible for depreciation @ 15% instead of @ 50% claimed by the aforesaid two assessees. The AO allowed depreciation on crates @ 15% only and the claim of depreciation in excess of 15% was disallowed. The Ld.CIT(A) agreed with the view advanced by the two assessees and deleted the disallowance made by the AO out of depreciation claimed by the assessee on crates. The Ld.CIT(A) observed that crates are made of plastic and used as refills and directed the AO to allow depreciation @ 50%. At the time of hearing before us, the Ld.CIT DR relied on the assessment orders passed by the AO. The Ld. Counsel for the assessee on the other hand relied on the decision of DCIT, Circle-1 vs Sri Sarvaraya Sugars Ltd. in ITA Page 28 of 30 Nos.395 and 396/Vizag/2012 vide order dated 31.05.2016 (ITAT, Visakhapatnam). He further relied on "Synopsis in Brief" filed during the appellate proceedings. Detailed written submissions have been made in "Synopsis in Brief", wherein the bottling process is explained in detail, and it is contended that crates, alongwith bottles, constitute integrated assets. At the end of "Synopsis in Brief", the summary of various contentions of the assessees is provided, and the following points have been raised:
• Principles of natural justice have not been observed • Requirement of passing a speaking order has not been fulfilled • Disallowance out of claim of depreciation on crates is arbitrary • 'crates qualify as containers made of plastic and used as refills and fall within the classification of 'bottles and shells';
• Therefore, both the bottles and crates are integrated tools used as containers in the process of filling/refilling and subsequent delivery thereof in the assessee's business • Crates are a part of the block of assets namely, bottles and shells, and have lost their individual identity Page 29 of 30 • The depreciation has been regularly followed by the assessee and the Ld.AO has accepted the claim in previous years • Disallowance of a higher rate of depreciation and granting a lower rate of deprecation is just a timing issue.
(D.1) We find from the perusal of orders of the AO and the Ld.CIT(A) that the above-mentioned points as well as the bottling process have not been fully considered by them. We are of the view that the aforesaid points as well as bottling process need to be first considered at lower level as it requires clear understanding of factual aspects having regard to bottling process, marketing, and related business aspects. We have, in any case, set aside the appellate orders passed by Ld.CIT(A) and assessment orders passed by the AO for both the aforesaid assessees for both A.Y. 2008-09 and 2009-10 and we have already restored the matters to the file of the AO for denovo assessment. We hereby direct the AO to re- examine the matter regarding rate of depreciation on crates, during the proceedings for making denovo assessments and to pass fresh order as per law on this matter in the denovo assessment orders. The AO is directed to provide opportunity to the assessee during the Page 30 of 30 proceedings for making denovo assessment before passing fresh order. These four appeals are disposed off in accordance with our order, directions and observations as aforesaid. (E) In the result, all the ten appeals filed by the assessee and the Revenue, are partly allowed for statistical purposes.
Order pronounced in open court on 05.06.2017.
Sd/- Sd/-
(I.C.SUDHIR) (ANADEE NATH MISSHRA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Date:- 05.06.2017
*Amit Kumar*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR,
ITAT NEW DELHI