Income Tax Appellate Tribunal - Pune
Shoba Vikram Thorat,, Ahmednagar vs Assessee on 9 December, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH 'B' PUNE
BEFORE SHRI I.C. SUDHIR, J.M. AND
SHRI D. KARUNAKARA RAO, A.M.
I.T.A. No. 1299, 1300 and 1301/PN/2011
A.Y. 2005-06, 2006-07 and 2007-08
Mrs. Shoba Vikram Thorat
Rajhans Dudh Dairy
Shramik Nagar
Pipeline road,
Ahmednagar
PAN AFEPT 7235 D .. Appellant
Vs.
I.T.O. Ward 2, Ahmednagar .. Respondent
Appellant by: Shri S.N. Doshi
Respondent by: Ms. Ann Kapthuama Sr AR
Date of hearing : 9-12-2011
Date of pronouncement: 16-12-2011
ORDER
PER D. KARUNAKARA RAO, AM
These are the three appeals by the assessee and they are directed against three separate & identically dated orders of the CIT(A)-I Pune, dated 28-2-2011 for A.Y. 2005-06, 2006-07 and 2007-08. The grounds of all these appeals are identical; but for the figures involved and the issue relates to if the AO is justified in estimating the sales price of the per litre milk. AO estimated the same @ Rs 15/- per litre for the AY 2005-06 and Rs. 16/- per litre for A.Y. 2006-07 and Rs. 18.50 per litre for A.Y. 2006-07. Considering the commonality of the issue, we proceed to dispose them in this consolidated order for the sake of convenience. For the sake of convenience, we rely on the facts relevant for the AY 2005-06 in this order and therefore, the ground raised for A.Y. 2005-06 is reproduced as under:
"On the facts and in the circumstances of the case the CIT(A) has erred in confirming the estimation of sale price of milk as made at the rate of Rs. 15/- per litre by the AO disregarding the actual sale price and in the process has erred in making the addition to the returned income."
2. Briefly stated relevant facts of the case are that the assessee filed return of income for AY 2005-06 declaring total income of Rs. 53,060/- on 24-8-2009 in response to notice u/s 148 and the same was considered by the A.O for the sake of reassessment u/s 143(3) r.w.s. 147 of the Act and the assessed income is set at Rs. 4,19,515/-. As per the information gathered by the AO during the reassessment proceedings u/s 133(6) from Sangamner Taluka Sahakari Doodh 2 ITA No. 1299 to 1301/PN/2011 Shobha V Thorat A.Y. 2005-06 to 2007-08 Utpadak and Prakria Sangh Ltd., Sangamner, (hereinafter referred to as the "said Sangh"), the rates of cow milk and toned milk is Rs. 16/- and Rs. 14/- per litre respectively. Therefore, the AO calculated the average rate of milk per litre and finally adopted Rs. 15/- per litre for the purpose of arriving at the sale price per unit of milk. Assessee, the milk distributor for the Sangh, has not maintained the books of accounts. But he filed the sales bills exhaustively. But the AO did not accept the same in absence of supporting evidences to the said sales. Thus, the AO accepted the quantitative particulars of the milk purchases account as claimed by the assessee but AO rejected the sales bills supporting the sales account furnished by the assessee in the return. Thus, AO estimated the net profit considering the milk sales so estimated considering the data of the Sangh described above. When the assessee was asked to calculate the net profit on the basis of information received from the said Sangh, the assessee submitted the following working for the AY 2005-06 vide her letter dated 24-12-2009:
Avge Milk Qty Milk Sales Milk GP Margin of Margin of
MRP sold Purchases distributor retailer
15/- 1225240 18378600 13347237 5031316 Rs.1.5/- Rs. 2.5/-
1837860 3063100
2. The assessee is a dealer for supply of milk and it buys milk from Rajhans Sahakari dudh Utpadak Sangh, Sangamner. Assessee sells milk through sub- dealers to the retailers. The assessee makes a direct sale to the retailers too. During the year, the assessee purchased 12,25,240 litres of milk from Rajhans Sahakari dudh Utpadak Sangh at the rate of Rs. 11.09 per litre and the purchase price from the supplier works out to Rs. 1,35,92,067/-. Admittedly, the assessee did not maintain books of account for the AYs 2005-06 & 2006-07. The return of income was filed on 24-8-2009 for the first time in response to notice u/s 148, claiming the applicability of the provisions of section 44AF of the Act. During the re-assessment proceedings, on finding that the books of accounts were never maintained, the AO proceeded to examine the relevant information and by invoking the provisions of section 133(6) of the Act involving the supplier and called for relevant details relating to the sales and purchases. During the proceedings, the assessee filed a revised return relying the then prepared books and also relying on the data appearing from the suppliers of milk. The assessee submitted the sales bills before the A.O. for demonstrating that the sale price per letre of milk should not be estimated as the reliable data is available in the form of the sale bill. AO examined the information submitted by the said Sangh on 21- 12-2009 and found that the rate of cow milk and toned milk was Rs. 16/- and Rs. 14/- per litre respectively. Thus, he proceeded to take the average rate of Rs. 15/- per litre of milk as the sale price of the assessee. Since the sales books 3 ITA No. 1299 to 1301/PN/2011 Shobha V Thorat A.Y. 2005-06 to 2007-08 prepared by the assessee were subsequent to the issue of notice, the AO rejected the same in absence of supporting evidence. However, the assessee questioned the proposal of the A.O. Finally, the total income of the assessee was determined at Rs. 8,79,778/- against Rs. 1,62,578/-. During the proceedings before the CIT(A), the assessee questioned the above additions in the re-assessment. At the end of the first appellate proceedings, considering the absence of proper books of accounts, the CIT(A) proceeded to confirm the A.O's decision of adopting Rs. 15/- per litre as the average sale price of milk as per the discussions given in para 6 of the impugned order.
4. Aggrieved by the same the assessee is before us with the ground that the estimating the sale price of milk at the rate of Rs. 15/- per litre for A.Y. 2005-06, Rs. 16/- per litre for A.Y. 2006-07 and Rs. 18.50 per litre for A.Y. 2006-07 is erroneous and not based on facts of the business. He has erred approving the MRP of the milk as a proper base. During the proceedings, the assessee filed a paper book furnishing not only an agreement between the supplier and the assessee but also the copies of sales bills for the years under consideration. In this regard, the learned counsel for the assessee took us through the order of re-assessment and mentioned that the A.O not only erred in estimation of the sale price but also erred in allowing some commission not incurred by the assessee. Further, the learned AR argued vehemently stating that there is no need for resorting the estimation when the sales bills are available on record. However, the learned AR argued stating that the AO did not establish that the sale bills in question are not genuine. Further, he mentioned that when the assessment is made in the spirit of provisions of section 44AF, the A.O was responsible to bring all the relevant material on record while making the best judgment providing the base for such estimation. It is not correct to make use of the information furnished by the assessee to the disadvantage of the assessee. He summed up by stating that the estimation made by the A.O suffers from patent errors. He argued mentioning that there is no sale of milk made by the assessee @ 15/- per litre or Rs. 16/- per litre or Rs. 18.5 per litre respectively for the years under consideration and it is completely incorrect.
5. On the other hand, the learned DR for the revenue argued stating that this is a case of non-maintenance of books of account and invoking the provisions of section 44AF of the Act. In such circumstances, the A.O is justified in making the best judgment considering the letter received by him from the said Sangh. During the rebuttal, the learned counsel for the assessee mentioned that the assessee has no objection if the matter is set aside to the files of the A.O for screening the sale books which were already available on the record of the A.O 4 ITA No. 1299 to 1301/PN/2011 Shobha V Thorat A.Y. 2005-06 to 2007-08 during the re-assessment proceedings and to establish the gross profit and decide the issue after proving that the sale bills in question are dependable.
6. We have heard both the parties, perused the orders of revenue authorities and the paper book filed before us. There is no dispute on facts relating to the quantum of purchases or sales of milk. It is also true that the assessee carved out relevant data and prepared the books of accounts for the first two years i.e. A.Y. 2005-06 and 2006-07 during the period of re-assessment proceedings. It is a fact that the return is not furnished based on the books of accounts. Of course, it is a fact that the sale bills were available at the time of assessment proceedings itself and assessee revised the particulars too in the light of the above referred books so prepared. It is a fact that the AO had sufficient information in the form of the sale bills to arrive at the average sales price of the milk. Despite the availability of the useful data, the A.O has merely rejected the sales bills without giving any sustainable reasons. It is not the case of the AO that the said sales bills are not credible or fake of false etc. No evidence on the files to this extent. We cannot sustain this kind of best judgment made by the AO considering the spirit of the provisions of section 144 of the Act. In our opinion, AO's line of best judgment has resulted in creation of inflated average sale price of milk per litre. It is true that the assessee has not maintained books but it is equally true that the assessee maintained sale bills in respect of all the sales of the milk and it should have been sufficient to arrive at the average sale rate per unit of milk. Why should he go for MRP? Why has not disproved the sales bills submitted to him during the assessment proceedings itself? In our opinion, AO must use all the available data including the data emanating from the sales bills submitted by the assessee before arriving at a rate per litre for sale purposes. We cannot appreciate that the data should be summarily rejected and also disproved the average MRP, applicable at the point of retailer as a basis for working out the sales price at the Sub dealer/distributor levels. The A.O should have taken measures to gather the data from the sub- dealer who are said to be on files of the Income tax Department as stated by the learned counsel at the Bar. In all probability, the purchase price of the milk at the level of the subdealers/distribors of milk must be much lower than the Rs 15/-, the estimated average sales price of the AO of this assessee. It shall mean that that the per unit sales price is not the same as that of the purchase price of the said subdealers/distribors of milk. It is an absurdity. The A.O is directed to maintain uniformity and eliminate the absurdity. For this he need to gather relevant data from the said subdealers/distributors of milk. Therefore, the best judgment assessment made by the AO not only improper but also it is full of illogicalities. Therefore, in our opinion, the matter should be set aside as 5 ITA No. 1299 to 1301/PN/2011 Shobha V Thorat A.Y. 2005-06 to 2007-08 requested by Ld counsel of the assessee to the files of the A.O for re- examination of the whole issue afresh after considering the sale bills submitted by the assessee before him and collecting data from the subdealers/distributors of the assessee. It goes without saying that the A.O should grant a reasonable opportunity of being heard to the assessee. Accordingly, the grounds raised in the first two AYs under consideration are set aside.
6. Regarding the appeal relevant for the AY 2007-08, the only difference vis avis the above earlier two AYs is that the assessee maintained the books of accounts in regular course of business and return is furnished on the basis of the said books. AO completely ignored this fact while making the assessment for that assessment year. There is discussion on rejection of books and why the books have to be rejected. The order of the is not a speaking one at all. In principle, he is carried away by the his line or manner of assessment applied for making best judgment assessment relevant for the AYs 2005-06 and 2006-07 and he has felt necessary to give the factual matrix on if the books are maintained at all for this year or what are the deficiencies of such books if maintained or whether books are to be rejected invoking the provisions of section 145A of the Act or requirement of making of the assessement within the spirit of section 144 of the Act as specified in subsection (3) of section 145A of the act. It is seen that even the CIT(A) did not improve the quality of the order of the AO making is more speaking on the requisite facts. It is settled law that the provisions of section 145A can be invoked for the specified reason mentioning therein and the A.O has not done anything in this regard while making best judgment assessment for A.Y. 2007-08. Further, it is not known as to why the unclaimed expenditure in the name of commission was allowed by the A.O for all the years. For all these reasons, we are of the opinion, that the assessment for the AY 2007-08 should also be set aside with the identical direction specified above to the file of the A.O. Accordingly, the ground raised for all the years under consideration is set aside.
7. In the result, as desired by the appellant, all the appeals of the assessee are allowed for statistical purposes.
Decision is pronounced in the open court on ___12-2011.
(I.C. SUDHIR) (D. KARUNAKARA RAO)
Judicial Member Accountant Member
Pune dated the ___ December 2011.
Ankam
6
ITA No. 1299 to 1301/PN/2011
Shobha V Thorat
A.Y. 2005-06 to 2007-08
Copy of the order forwarded to :
1. Assessee
2. Department
3. CIT(A)-I Pune
4. CIT-I Pune
5. The D.R, Pune Bench 'B'
"True copy"
By order
Senior Private Secretary
ITAT, Pune Bench, Pune