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Income-Tax Officer Versus Brij Fertilizers Pvt. Ltd. and Vice Versa

2016 (5) TMI 1176 - ITAT AGRA

Genuineness of the production and sale of fertilisers and the amount of subsidy received from the Government of Uttar Pradesh - Held that:- Commissioner of Income-tax (Appeals) has recorded the findings that the assessee was engaged in manufacturing and sale of fertilisers and such findings have been made based on the remand reports and the orders of the trade tax authorities and the Central Excise authorities and the Directorate of Agriculture, U. P. Government. The learned Commissioner of Inco .....

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ome-tax (Appeals). - Decided against revenue

Estimation of net profit - Held that:- We agree with the contention of the learned authorised representative that the estimation of net profit in any case should be on a reasonable basis and we find that the maximum assessed profits shown by the assessee in the earlier years is 8.42 per cent. Further, since no other reasonable basis has been given by the learned Departmental representative, we hold that the reasonable net profit rate taking .....

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cross objection filed by the assessee is directed against the order of the Commissioner of Income-tax (Appeals)-1, Agra, dated December 19, 2011. 2. Grounds of appeal raised by the Revenue are as under : "1. That the learned Commissioner of Income-tax (Appeals) has erred in law and on facts in allowing the relief to the assessee on the basis of the Meerut court judgment wherein the sales were treated as genuine and it has been held that no evidence has been found against the assessee doing .....

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s of the Assessing Officer given in the assessment order. 3. That the learned Commissioner of Income-tax (Appeals) has erred in law and on facts in directing the Assessing Officer to estimate the income of the assessee-company by computing its net profit, taking the net profit rate of 10 per cent. and applying it on its total turnover of ₹ 1,07,66,250 instead of 7.2 per cent. declared by the assessee-company, without giving any specific justification for adopting net profit rate of 10 per .....

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is required to be made because this subsidy is already included in total turnover shown by the assessee, ignoring the fact that the said subsidy is a capital receipt from the Government and credited to the assessee's profit and loss account and in no way it is part and parcel of the turnover. 5. That the order of the learned Commissioner of Income-tax (Appeals) being erroneous in law and on facts to be quashed and that of the Assessing Officer to be restored. 6. That the appellant craves le .....

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ng the purchases of raw material as unverifiable. 2. That while observing that full verification of purchases shown by the assessee-company could not be made, the learned Commissioner of Income-tax (Appeals)-I, Agra, could not point out even a single specific instance of alleged unverifiable purchase of raw material. 3. That the assessee-company has completely discharged the onus laid on it for proving the genuineness of purchases of raw material by bringing on records all humanly possible evide .....

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n unilateral inferences, thus such action of the learned Commissioner of Income-tax (Appeals)-I, Agra, is unwarranted. 5. That the book results declared by the assessee-company being properly explained and verifiable with reference to the audited books of account and other relevant records, thus these should have been accepted." 4. Brief facts relating to the case are that the assessee is engaged in the manufacturing of fertilisers. For the impugned assessment year, return showing a loss of .....

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p Rocks (P.) Ltd., Tikamgarh (M. P.). As per the assessment order, the Assessing Officer conducted enquiries and also held that the books of account were not produced for verification and the purchases and sales shown by the assessee and the expenses claimed there against were not verifiable. Therefore, the subsidy received as a result of purported manufacturing was liable to be taxed in the hands of the assessee. 5. Against the assessment so framed, an appeal was filed before the learned Commis .....

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er : "I have considered all the facts brought before me by the learned authorised representative as well as the managing director of the appellant-company and the Assessing Officer with regard to all the activities of the appellant-company relating to purchase of rock phosphate and production of fertilisers. On my direction, the Assessing Officer has tried to make verification about the purchase of raw mate rials claimed to have been used in production of fertilisers but as the matter was v .....

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could not be verified by him. However, the fact of doing production of fertilisers and its subsequent sales cannot be denied in view of the evidences collected from the Trade Tax Department as well as the Central Excise Department who have confirmed the production of fertilisers as well as their sales. Even the case filed against the appellant-company and its officials alleging fraud for showing fictitious production of fertilisers and claiming subsidy from the Government has been dismissed by .....

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of the appellant-company as per the provisions of section 145(3) but the production and sale shown by the appellant-company cannot be rejected, as the same have been recorded in the record maintained with two Government agencies, i.e., the Trade tax Department and the Central Excise Department. Even the supply of raw material has been accepted by the Meerut court. In the absence of any evidence to show that the supply of raw material to the appellant-company was false, I do not find the report o .....

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material has also been accepted but as full verification of purchase shown by the appellant-company could not be made, the amount of purchases of ₹ 56,01,802 debited by the appellant-company in its manufacturing account remained unverified and, hence, the net profit of ₹ 8,42,210 declared by the appellant-company cannot be accepted. There is no doubt that production and sales has taken place and, therefore, full figure of ₹ 1,07,66,250 including the subsidy received by the app .....

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records of the Trade Tax Department and the Excise Department, the only possibility due to non-verification of purchases and considering the findings of survey in the premises of suppliers of raw materials can be said to be that the appellant has inflated purchases by showing certain fictitious purchases of raw material and, therefore, after rejecting the books of account of the appellant under section 145(3) for not getting its purchases verified, I find that in the interest of justice, it woul .....

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al representative relied upon the findings of the Assessing Officer and contented that the survey conducted at the places of the alleged suppliers showed that they were issuing bogus bills and, hence, the assessee was not doing any actual manufacturing. He prayed that the findings of the Assessing Officer be confirmed and the order of the learned Commissioner of Income-tax (Appeals) be modified accordingly. On the other hand, the learned counsel of the assessee relied upon the findings of the le .....

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arned Commissioner of Income-tax (Appeals) has recorded the findings that the assessee was engaged in manufacturing and sale of fertilisers and such findings have been made based on the remand reports and the orders of the trade tax authorities and the Central Excise authorities and the Directorate of Agriculture, U. P. Government. The learned Commissioner of Income-tax (Appeals) has also based his findings on the order of the Meerut court in an first information report filed against the assesse .....

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counsel for the assessee could not show us as to why the purchases shown by the assessee be accepted when the supplier shown by the assessee-company were either not traceable or some were found to be not genuine when survey was conducted at the premises and the purchases remained unverifiable. In view of the same we uphold the action of the learned Commissioner of Income-tax (Appeals) in rejecting the books of the assessee under section 145(3) of the Income-tax Act, 1961. Further, the learned au .....

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