Income Tax Appellate Tribunal - Kolkata
M/S. Bharati Poultry (P) Ltd, Bankura vs Acit Circle 3, Bankura, Bankura on 5 May, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH : KOLKATA
[Before Hon'ble Sri N.V.Vasudevan, JM & Sri J.Sudhakar Reddy, AM]
S.A.No.34/Kol/2017
(A/o I.T.A No. 1792/Kol/2016)
Assessment Year : 2011-12
M/s. Bharati Poultry (P)Ltd. -vs.- A.C.I.T., Circle-3,
Durgapur Bankura.
[PAN : AACCB 2814 L]
(Appellant) (Respondent)
For the Appellant : Shri Subash Agarwal, Advocate,
For the Respondent : Md. Ghayas Uddin, JCIT, Sr.DR
Date of Hearing : 05.05.2017.
Date of Pronouncement : 05.05.2017.
ORDER
Per N.V.Vasudevan, JM
This is an Application filed by the Assessee praying for grant of an order of stay of recovery of outstanding demand of a sum of Rs.1,09,62,030/-. The outstanding demand arises out of an order of CIT(A) whereby the CIT(A) confirmed the estimation of assessee's income by AO with small variation.
2. The Assessee is a company which is engaged in the business of poultry farming. The assessee filed return of income for A.Y.2011-12 declaring the total income of Rs.17,96,853/-. According to the AO the following additions would be required to be made to the total income declared by the assessee :-
Rs. Rs. Returned Income 1796853 Add:-Introduction of unaccounted money 9122385 Add:- Suppressed purchase 844262 Add:- Excess liability due to exaggerated closing stock 16231741 Add:-disallowable depreciation on factory building 1937731 Add:-Disallowable part of direct expenditure 103426 Add:-Disallowable part of indirect expenditure 871365 Add:-Disallowable bad debt 32546 2 S.A.No.34/Kol/2017 (A/o ITA No.1792/Kol/2016) M/s. Bharati Poultry (P)Ltd A.Yr.2011-12 Add:-Disallowable Donation Subscription & Gift 208369 Add:-Disallowance depreciation on Car 72561 Add:-Indirect income as returned 1831681 31256067 Assessable Income 33052920 Rounded off 33052920
3. The total income after the aforesaid addition would be 45.74% of the turn over of the assessee as reflected in the profit and loss account. The AO however instead of making individual additions as aforesaid resorted to an estimation of the total income of the assessee after rejecting the books of accounts of the assessee. The AO determined the total income of the assessee as follows :-
"Seeing the complexity of accounts pin-pointed above, any micro level addition does not appear rational, and rather, macro level addition encompassing whole of affairs of accounts and probable additions, is desirable and therefore, the taxable income of the assessee is rationally assessed @ 45.74% (The rate, which is scientifically calculated and mentioned in earlier paragraph) of turnover of Rs.7,22,67,157/- and thus the income is assessed at Rs.3,30,54.,997/-, which is rounded off to Rs.3,30,55,000/-."
4. The CIT(A) concurred with the view of the AO by primarily relying on the project report of NABARD which had worked out profitability in identical line of business at 37.93%. The CIT(A) after extracting project report of NABARD estimated the total income of the assessee as follows :-
"As per NABARD report profit of the appellant is worked out as under :-
7,31,29,416 x 37.97% = 2,77,67,239/-
(Less disclosed) = (-) 17,96,853/-
2,59,70,386/-
The appellant additional income is assessed at Rs.2,59,70,386/- and the appellant gets relief of Rs.70,82,534/-. The above income does not include income from interest and agriculture. The ground of appeal is partly allowed."
5. Aggrieved by the action of CIT(A) the assessee has filed an appeal before the Tribunal. The ld. Counsel for the assessee drew our attention to two items of defects as 2 3 S.A.No.34/Kol/2017 (A/o ITA No.1792/Kol/2016) M/s. Bharati Poultry (P)Ltd A.Yr.2011-12 pointed out by the AO for rejecting the books of accounts of the assessee viz., excess liability due to exaggerated closing stock of Rs.1,62,31.741/- and introduction of unaccounted money of Rs.91,22,385/- in the form of sales. He pointed out that if closing stock is inflated that would result in enhanced income and therefore it can never looked at as adverse to the interest of the revenue. Similarly, the declaration of more sales by the assessee would not prejudice whatsoever the interest of the revenue. According to him therefore the very basis on which the books of accounts of the assessee have been rejected is unsustainable.
6. The ld. Counsel for the assessee drew our attention to the profit percentage of the assessee declared and accepted by the Revenue from A.Y.2006-07 to 2010-11. It was in the range of 1.43% , 1.65%, 4.65%, 4.79% and 2.53% for A.Y.2006-07 to 2010-11 respectively. The addition made by the AO of 45.74% of the gross receipts was highly exaggerated and unsustainable. The ld. Counsel for the assessee pointed out that pursuant to the order of CIT(A) a sum of Rs.1,20,62,030/- was the outstanding demand and the assessee has paid a sum of Rs.11,00,000/-. The ld. Counsel prayed that he has made out a prima facie case and the balance of convenience is in favour of the assessee. The ld. Counsel for the assessee also pointed out that the assessee is suffering from fund crunch and unable to pay the outstanding demand.
7. The Ld. DR opposed the prayer for grant of order of stay and submitted that the assessee should be asked to pay the substantial amount as a condition for grant of stay.
8. We have given a very careful consideration to the rival submissions and are of the view that the rejection of books of accounts as well as estimation of income of the assessee is prima facie not in accordance with law. We however hasten to add that these observations are only for the limited purpose of disposing of this stay application. The estimation of income as well as rejection of books of accounts of the assessee does 3 4 S.A.No.34/Kol/2017 (A/o ITA No.1792/Kol/2016) M/s. Bharati Poultry (P)Ltd A.Yr.2011-12 not appear to be proper and is arbitrary. The assessee has made out a prima facie and the balance of convenience is in favour of grant of an order of stay. The assessee will be put to hardship if such outstanding demand are realized. We are however of the view that the assessee should be directed to make a further payment of Rs.,4,00,000/- towards the outstanding demand on or before 31.05.2017. The appeal of the assessee is directed to be fixed for out of turn hearing on 21.06.2017. The date of hearing was announced in the open and hence no notice of hearing will be sent to the parties. There shall be an order of stay of recovery of demand for a period of six months from this date or till the disposal of the appeal of the assessee, whichever is earlier. The stay application is accordingly allowed on the terms indicated above.
9. In the result the Stay Application of the assessee is allowed.
Order pronounced in the Court on 05.05.2017.
Sd/- Sd/- [J.Sudhakar Reddy] [ N.V.Vasudevan ] Accountant Member Judicial Member Dated : 05.05.2017.. [RG PS] Copy of the order forwarded to:
1.M/s. Bharati Poultry Pvt. Ltd., Rashtala, P.O. & Dist: Bankura, Pin-722101.
2. A.C.I.T., Circle-3, Bankura..
3. C.I.T.(A)-Durgapur 4. C.I.T.-Durgapur..
5. CIT(DR), Kolkata Benches, Kolkata.
True copy By Order Asstt.Registrar, ITAT, Kolkata Benches 4 5 S.A.No.34/Kol/2017 (A/o ITA No.1792/Kol/2016) M/s. Bharati Poultry (P)Ltd A.Yr.2011-12 5