Income Tax Appellate Tribunal - Ahmedabad
Rasranjan Food Products Pvt. Ltd.,, ... vs Department Of Income Tax on 2 February, 2015
आयकर अपील
य अ धकरण, अहमदाबाद यायपीठ 'A' अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL
"A" BENCH, AHMEDABAD
BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER
AND SHRI N.S. SAINI, ACCOUNTANT MEMBER
आयकर अपील सं./ ITA No. 1131/Ahd/2011
नधा रण वष /Assessment Year: 2007-08
Rasranjan Food Products P.Ltd. ITO, Ward-5(3)
Rasranjan Complex Vs Ahmedabad.
Nr. Vijay Char Rasta
Ahmedabad.
PAN : AABCR 8986 Q
आयकर अपील सं./ ITA No. 1392/Ahd/2011
नधा रण वष /Assessment Year: 2007-08
DCIT, Ward-5 Rasranjan Food Products P.Ltd.
Ahmedabad. Vs Rasranjan Complex
Nr. Vijay Char Rasta
Ahmedabad.
अपीलाथ!/ (Appellant) "#यथ!/ (Respondent)
Assessee(s) by : Shri G.C. Pipara
Revenue by : Shri Dinesh Singh, Sr.DR
सन
ु वाई क तार ख/ Dateof Hearing : 21/01/2015
घोषणा क तार ख / Date of Pronouncement: 02/02/2015
आदे श/O R D E R
PER N.S. SAINI, ACCOUNTANT MEMBER: These are cross appeals
by the assessee and the Revenue against the order of the Commissioner of Income-Tax (Appeals)-XI, Ahmedabad dated 8.3.2011.
2. The Ground no.1 of the appeal of the assessee is as under:
"1. The ld.CIT(A) has erred in confirming the estimation of sales at Rs.3.75 crores as against sales as per books of Rs.3,45,32,261/-. In view of facts and submissions filed, the ITA No.1131/Ahd/2011-2 2 ld.CIT() ought to have accepted the sales as per books of accounts."
The ground no.1 of the appeal of the Revenue is as under:
"1. The ld.CIT(A) has erred in law and on facts in estimating the sales at Rs.3.75 crores as against Rs.5 crores estimated by the AO."
3. The brief facts of the case are that the AO made addition by observing as under:
"1. The assessee was asked to submit month-wise as well as item-wise breakup of purchase and consumption of raw materials, production, sales of finished goods and closing stock, for year under consideration. In response to the query raised, the assessee company, vide submission dated 09.12.2009, has submitted only the month-wise break-up of purchase and sales.
2. During the course of assessment proceedings, vide order sheet entry dated 23.11.2009, the assessee was specifically asked to show cause as to why the sales should not be estimated on the same line of estimation made in earlier years as the assessee has not furnished any stock register, sales register, etc.
3. The above submission of the assessee has duly been considered, but the same is not found convincing. The assessee has disclosed total turnover of Rs.3,45,32,261/- during the year as against Rs.3,52,48,694/- shown in the immediately preceding assessment year.
4. It is noticed that in the F.Y. 2000-2001, relevant to A.Y. 2001- 02, the assessee was having only two outlets at Ahmedabad, one at Vijay Cross Roads, and another at Ahmedabad domestic airport. With these two outlets and a small number of franchisees, the assessee has shown total sales of Rs. 3,51,41,387/- in that particular year.
5. The sales shown by the assessee during the year is significantly on lower side and the turnover is not keeping pace with the above factors like expansion of business, increase in sale price, opening of fast food centers, etc. It is further observed that constantly for the last five to six years, the assessee is showing its turnover almost static which is evident from the chart given below:ITA No.1131/Ahd/2011-2 3
A.Y. Turnover
2002-03 Rs.3,56,98,780
2003-04 Rs.3,38,00,414
2004-05 Rs.3,87,62,741
2005-06 Rs.3,79,31,575
2006-07 Rs.3,52,48,694
4.5. Inspite of repeated requests to furnish the basic details such as month- wise consumption of raw material, production, sales tax returns for comparison of actual production and sales, etc. the assessee could not furnish any of the details. No regular books are maintained by the assessee to record the cash sales made by it, despite the fact that a major portion of the business is carried out through cash sales. In view of these facts, the book result or the books of accounts maintained by the assessee are not reliable and it is not possible to correctly verify or determine the profit from these books of accounts. The figures shown in the books of accounts are not supported by any substantiating documents. It is further seen that, even though the turnover has decreased as compared to immediately preceding assessment year, i.e. A.Y.2006-07, the expenses under the following heads have shown significant increase:-
Expenses head A.Y.2006-07 A.Y.2007-08 Cold storage rent 25320 79341 Power supply charges 1887088 2014104 Coal & Fuel expenses 110285 153008 Advertisement 347870 896505 Packing materials & utilities 488794 735748 Decoration charges 154200 220580
4.6. As discussed above, the assessee is not maintaining any item-wise as well as quantity-wise details of purchases, consumption, production, sales, etc. Vide submission dated 09.12.2009, the assessee has expressed its inability to provide the above details. Hence, in absence of records showing complete details of production, consumption, stock, sales, cost working of major items, etc., no proper examination of the-book results shown by-the assessee could be carried out. It is stated that the assessee is intentionally not maintaining the basic details of its business, so as to not permit the AO to arrive at the correct picture of its business. Considering these facts, it is held that the sales disclosed by the assessee is not found acceptable and therefore, I am constrained to estimate the total sales of Rs.5 crores, by rejecting books of accounts u/s.145A of the IT Act. As regards assessee's ITA No.1131/Ahd/2011-2 4 contention that the CIT(A) as well as the Hon'ble ITAT had accepted the assessee's contention in this regard and had deleted the addition made on account of estimation of turnover, it is stated that a part of the additions so made have been confirmed in appeal. As regards the ITAT's action in deleting certain part of the addition, the department has not accepted the decision of Hon'ble ITAT and appeal to Hon'ble High Court has been filed."
4. On appeal, the CIT(A) partly allowed the appeal by observing as under:
"4.3 I have considered the submissions of the A.R. of the appellant and observations of the Assessing Officer in the assessment order. I have also gone through the finding of my predecessor in earlier years and the orders of the Hon'ble ITAT for the earlier years. I have also gone through my own findings on similar issue for A.Y.2006-07. The following picture emerges on this issue from the earlier year's orders:
A.Y. Sales as per Sales Sales as per Sales
books estimated CIT(A) estimated
by AO by ITAT
2001-02 3.51 4.0 4.00 3.75
2002-03 3.56 5.0 5.00 3.75
2003-04 3.38 5.0 3.38 3.75
2004-05 3.87 5.5 3.87 4.25
2005-06 3.79 6.0 3.79 4.25
2006-07 3.52 5.0 3.75
It is seen that during the year under appeal, the sales shown by the appellant company are Rs.3.45 crores. On comparison of the same with the above chart, the sale during the year is almost in the range of sales shown by the appellant during the A.Ys. 2001- 02 to 2003-04 i.e. Rs.3.28 crores to Rs.3.56 crores. For the said A.Ys., estimate made by the Hon'ble ITAT was at Rs.3.75 crores. The sales during the year under consideration are in the same range of sales during the previous year i.e. A.Y.2006-07 at Rs. 3.52 crores. For that year sales were estimated by me at Rs.3.75 crores vide appellate order dated 22/03/2010. Keeping in view the estimate made by me and the Tribunal in earlier years, I am of the considered opinion that it is reasonable to estimate the sales at ITA No.1131/Ahd/2011-2 5 Rs.3.75 crores as against the sales of the appellant company as per books of Rs.3,45,32,261/-. The 2nd Ground of Appeal is thus partly allowed.
Coming to the issue of estimation of G.P., I have carefully considered the facts of the case and have gone through the assessment order as well as my own findings en similar issue for A.Y.2006-07 and the orders of the Hon'ble ITAT of earlier years. The A.O. has consistently estimated the GP @ 32% in all the earlier years right from A.Y. 2001-02 to 2006-07. My predecessor restricted the said GP to 31% for A.Y. 2003-04 to A.Y. 2005-06. On facts of the case, I have restricted the G.P. for A.Y.2006-07 at 29%. That since during the year under dispute, the appellant has shown a better GP of 29.65% compared to earlier year, I see no reason for estimation of G.P. Keeping in view the said fact, the A.O. is directed to accept the GP rate of 29.65%. Accordingly, the Ground of Appeal No. 3 stands allowed
5. The DR supported the order of the AO.
6. The AR submitted that in the earlier Asstt.Years 2001-02 and 2003-04, materials were found during the course of search, which showed that the assessee has suppressed its turnover, and therefore, the turnover of the assessee was estimated by the AO. In the present year in appeal, there is no such material for estimating sales of the assessee.
7. We have considered rival submissions and perused the orders of the lower authorities and material available on record. In the instant case, the assessee has shown sales at Rs.3,45,32,261/-in its return of income. The AO after rejecting the book results of the assessee estimated its sales at Rs.5.00 crores. On appeal, the CIT(A) after taking into consideration the sales accepted by the Tribunal, in the case of the assessee in the immediately preceding year at Rs.3.75 crores estimated the sales of the assessee of the year under consideration at Rs.3.75 lakhs. Against the order of the CIT(A), both the parties are in appeal before us.
ITA No.1131/Ahd/2011-2 68. The AR contended before us that the CIT(A) was not justified in estimating the sales at Rs.3.75 crores on the basis of the estimation made in the preceding year, because, in the preceding year, the sales as per the books of accounts was Rs.3,52,48,694/-, whereas the sales as per the books of accounts in the year under consideration was reduced to Rs.3,45,32,261/-.
9. On the other hand, the DR argued that the CIT(A) has not taken into consideration findings of the AO that in financial year 2000-01 relevant to the Asstt.Year 2001-02, the assessee was having only two outlets at Ahmedabad one at Vijay Cross Roads, and other at Ahmedabad domestic airport. With these two outlets and a small number of franchisees, the assessee has shown a total sales at Rs.3,51,41,387/- in that particular year. As compared to Asstt.Year 2001-02, during the year under consideration, with three outlets at Ahmedabad as well as distributorship at Kalol and Gandhinagar, the assessee is showing sales of only Rs.3,45,32,261/-, while estimating the sales of the assessee of the year, when compared with sales of the preceding year.
10. We find that the assessee has not disputed the fact that one more outlet was opened during the year under consideration as well as distributorship was given for Kalol and Gandhinagar during the year under consideration. The assessee could not give any cogent reason as to why its sales were lesser than the sales of the preceding year, when one more outlets was opened and two franchisees were added by the assessee. Further, the CIT(A) has estimated the sales only on the basis of the sales of the preceding year without considering the change of the fact of the year under consideration to the extent of opening of one more outlets and giving two distributorship - one at Kalol and other at Gandhinagar. In the above facts and circumstances of the case, in our considered view, the AO is fully justified in estimating the turnover of ITA No.1131/Ahd/2011-2 7 the assessee at Rs.5.00 crores (Rupees Five Crores). We, therefore, set aside the order of the CIT(A) on this issue and restore the order of the AO on this issue, and thus, this ground of the appeal of the Revenue is allowed and that of the assessee is dismissed.
11. The Ground no.2 of the appeal of the assessee is as under:
"2. The ld.CIT(A) has erred in law and on facts in confirming the addition of Rs.1,24,270/- on account of disallowance u/s.40(a)(ia) of the At on account of non-deduction of TDS on the payment made for packing material to two parties by mechanically following the decision taken by him in the case of the appellant in A.Y.2006-07 without independent consideration and appreciation of the facts and legal position. In view of facts and submissions filed coupled with legal position, the impugned addition of Rs.1,24,2760/- requires to be deleted."
12. Brief facts of the case are that the AO disallowed deduction for expenditure incurred on packing material of Rs.1,24,270/- on the ground that no TDS was deducted from the payment made by invoking provisions of section 40(a)(ia) of the Act.
13. On appeal, the CIT(A) confirmed the disallowance on the ground that in the preceding Asstt.Year 2006-07, the issue was decided by him against the assessee vide his order dated 22.3.2010. The AR of the assessee submitted that in the preceding Asstt.,Year 2006-07 the Tribunal vide its order dated 19.4.2013 in ITA No.1794/Ahd/2010 and CO No.188/Ahd/2010 in the case of the assessee itself has deleted similar disallowance.
14. The DR agreed with the submissions of the AR.
15. We find that the Tribunal Asstt.Year 2006-07 while vacating the disallowance held as under:
"17. We have heard the rival submissions and perused the materials on record. The assessee before us submitted that the purchases aggregating to Rs.1,90,661/- is on account of plastic ITA No.1131/Ahd/2011-2 8 trays, cups, spoons and plastic dishes etc. which did not carry the logo of the assessee and were in the nature of purchases. The purchases were of standardized material available in market. These submissions of the assessee could not be controverted by the Revenue by bringing any material evidence on record. We are, therefore, of the view that the purchases made by the assessee from the aforesaid three parties cannot be considered as being a case of contract which would require deduction of TDS u/s 194C of the Act and, therefore, no disallowance u/s 40(a) (ia) of the Act is called for. We, therefore, direct the AO to delete the addition made on this count. This ground of assessee's Cross Objection is allowed."
Facts being identical, respectfully following the precedent, we delete the disallowance of Rs.1,24,270/-made on account of packing material. This ground of the assessee is allowed.
16. The Ground no.3 of the appeal of the assessee is as under:
"3. The ld.CIT(A) has erred in law and on facts in confirming the addition of Rs.18,602/- on account of late remittance of employees contribution to PF without proper consideration and appreciation of facts of the case as well as settled legal position. That keeping in view the ratio laid down by various courts of law including the Hon'ble Supreme Court as cited by the appellant in the submissions filed before the learned CIT(A), since the entire payment having been made during the year and before the due date of filing the return of income, no disallowance is warranted. Accordingly, the impugned addition of Rs.18,602/- requires to be deleted."
17. Brief facts of the case are that the AO disallowed Rs.18,602/- on account of employees' contribution to PF as the same were not deposited within the stipulated date as per the provisions of section 36(1)(va) and 2(24)(x) of the Act.
18. On appeal, the CIT(A) confirmed the disallowance.
19. Before us, the AR of the assessee submitted that the issue now stands covered against the assessee by the decision of the Hon'ble Gujarat High Court in the case of Commissioner of Income-tax-II Vs. ITA No.1131/Ahd/2011-2 9 Gujarat State Road Transport Corporation, (2014) 366 ITR 170 (Guj) wherein it was held that employees' contribution to provident fund and/or state insurance fund not credited by the assessee to the accounts of the employees in relevant funds within the due dates as specified in section 36(1)(va) of the Act, the amounts are not deductible. Respectfully following the above decision of the Hon'ble Gujarat High Court, we dismiss the ground of appeal of the assessee.
20. The ground no.2 of the Revenue's appeal is as under:
"2. The ld.CIT(A) has erred in law and on facts in adopting GP rate of 29.65% as against 32% adopted by the AO, and restricting the GP addition of Rs.57,61,691/- to Rs.8,79,935/-"
21. The AO observed that the assessee has shown GP @29.65% on total turnover of Rs.3,45,32,261/- in the immediately preceding assessment year i.e. A.Y.2006-07, the assessee has shown GP @ 26.21% on total turnover of Rs.3,52,48,694/- as against which the GP was estimated at 32% in the assessment made u/s.143(3) of the Act. Further, observation and findings of the AO are as under:
"5.1. During the course of assessment proceedings, vide order sheet entry dated 23.11.2009, the assessee was asked to show cause as to why the GP should not be estimated at 32%, which was adopted in earlier assessment years also. In this regard, the assessee has filed its submission on 09.12.2009, contending as under:-
Coming to the estimation of gross profit of 32% as against gross profit as per books of accounts at 29.65%, it is stated that the correct amount of gross profit has been shown at it is not possible to maintain the same gross profit year after year. Looking to the nature of business in our line of trade, the gross profit shown is correct based on books of accounts, evidence and the relevant details has already been furnished and therefore, there is no base for even estimating the gross profit rate."
5.2. The submission of the assessee is considered, but not found acceptable. During the course of assessment proceedings, though ITA No.1131/Ahd/2011-2 10 the assessee has been specifically asked; to give details of month-wise consumption of raw material and production, sales tax returns for comparison of actual production and sales, the same have not been .provided by the assessee. All these facts point towards deliberate omission on the part of the assessee so as not to enable the AO to find out the correct GP for the year under, consideration. In the circumstances, I am left with no other alternative but to follow the methodology adopted in earlier assessment years, for working out the GP for the year under consideration. Reliance is placed on the" decision of Orissa High Court in the case of Ratanlal Omprakash Vs. CIT - 132 ITR 640, wherein it has been held that GP can be determined on the past history of the case records.
5.3. Accordingly, the gross profit of the assessee at the enhanced sale of Rs.5 crores 32% is worked out at Rs. 1,60,00,000/-. As against this, the assessee has shown gross profit of Rs.1,02,38,309/-. Therefore, an addition of Rs.57,61,691/- is made to the income of the assessee. Penalty proceedings u/s.271(1)(c) of the Act are initiated for concealing the particulars of income/furnishing inaccurate particulars of income."
22. On appeal, the CIT(A) held that the AO has consistently estimated the GP at 32% in all the earlier years starting from Asstt.Year 2001-02 to 2006-07. He observed that his predecessor restricted the said GP to 31% for A.Y.2003-04 to 2005-06. He observed that on the facts of the case, he had restricted the GP for A.Y.2006-07 at 29%. Since during the year under consideration, the assessee had shown better GP at 29.65% compared to earlier years, he held that there was no reason for estimation of GP, hence, the CIT(A) directed the AO to accept GP rate at 29.65% in instead of 32% estimated by the AO.
23. The DR relied on the order of the AO, whereas, the AR of the assessee submitted that in A.Y.2006-07, the Tribunal in the case of assessee itself has estimated the GP at 29%.
24. After considering the rival submissions, we find that as no distinguishing facts have been pointed out during the year by the DR, we, respectfully following the order of the Tribunal for Asstt.Year 2006- ITA No.1131/Ahd/2011-2 11 07, estimate the GP of the assessee at 29%. Thus, this ground of the appeal of the Revenue is dismissed.
25. The ground no.3 of the Revenue's appeal is as under:
"3. The ld.CIT(A) has erred in law and on facts in deleting the addition of Rs.19,319/- being prior period sales-tax expenses."
26. Brief facts of the case are that the AO disallowed the sales tax expenses of Rs.19,319/- on the ground that it pertained to earlier years, and the assessee could not furnish evidence to substantiate that the same pertains to the year under consideration.
27. On appeal, the CIT(A) deleted the disallowance by observing that on going through the evidences filed by the assessee, it is seen that sales-tax was determined on assessment of preceding Asstt.Year 2006- 07 vide order passed in October, 2006 i.e. during the year under dispute i.e. Asstt.Year 2007-08, and therefore, it is not in dispute that the liability for the said sales tax got crystalized during Asstt.Year 2007-
08.
28. The DR supported the order of the AO.
29. We find that the DR could not point out any specific error in the findings of the CIT(A). He also could not controvert the findings of the CIT(A) by bringing any positive material on record to show that the liability for sales tax had not crystallized during the year under consideration. We, therefore, do not find any good reason to interfere with the order of the CIT(A) on this issue, which is confirmed, and the ground of the appeal of the Revenue is dismissed.
30. The ground no.4 of the Revenue's appeal is as under:
"4. The ld.CIT(A) has erred in law and on facts in deleting the disallowance of Rs.1,35,776/- being depreciation on motor vehicle."ITA No.1131/Ahd/2011-2 12
31. Brief facts of the case are that the AO disallowed Rs.1,35,776/- being depreciation on opening WDV of motor vehicle purchased in earlier years on the ground that the vehicle was purchased in the name of director, and accordingly, the ownership of the vehicle does not belong to the company, and therefore, no depreciation is allowable.
32. On appeal, the CIT(A) observed that identical issue arose in earlier years, and following the decision of his predecessor as well as himself in assessee's own case for earlier Asstt.Year 2004-05 to 2006- 07, directed the AO to allow depreciation.
33. The DR relied on the order of the AO.
34. We find that the finding of the CIT(A) in allowing depreciation on vehicles purchased in the name of director was confirmed in appeal by the Tribunal in the Asstt.Year 2006-07 in ITA No.1794/Ahd/2010 and Co No.188/Ahd/2010 vide order dated 19.4.2013. Therefore, respectfully following the same, we dismiss this ground of appeal of the Revenue.
35. The ground no.5 of the Revenue's appeal is as under:
"2. The ld.CIT(A) has erred in law and on facts in deleting the disallowance of Rs.1,21,432/- out of expenses u/s.40A(3)."
36. Brief facts of the case are that the AO observed that the assessee has made cash payment for various bills aggregating to Rs.6,07,164/- to Torrent Power AEC Ltd. which was in violation of provisions of section 40A(3) of the Act. Since the assessee had not furnished any explanation, he disallowed 20% out of the said amount which works to Rs.1,21,432/-.
37. On appeal, the CIT(A) deleted the disallowance by observing that as the book results of the assessee was rejected, and the AO estimated the sales and GP ratio, no separate addition was warranted. The CIT(A) further observed that the assessee has furnished evidence that at the ITA No.1131/Ahd/2011-2 13 first instance, the payments were made through account payee cheques, which were dishonoured and to avoid disconnection of the electricity, which would have resulted in huge losses in view of nature of business of the assessee, i.e. the business of manufacturing of food items and sweets, which require continuous flow of electricity, as any failure of power supply or disconnection thereof would result in contamination of food and sweets in absence of proper refrigeration, the assessee was compelled to take the payment of the bills immediately in cash to avoid disconnection by the electricity company. Therefore, the assessee had reasonable cause for making the payment of electricity bills in cash.
38. The DR relied on the order of the AO.
39. We find that no specific error in the order on the CIT(A) could be pointed out by the DR. In the absence of the same, we do not find any good reason to interfere with the order of the CIT(A) on this issue, which is confirmed, and the ground of the appeal of the Revenue is dismissed.
40. In the result, both the appeals of the assessee and the Revenue are partly allowed.
Order pronounced in the Court on Monday, the 2nd February, 2015 at Ahmedabad.
Sd/- Sd/- (SHAILENDRA KUMAR YADAV) ( N.S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 02/02/2015