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Assistant Commissioner of Income-tax Versus Sitalamata Oil Mill Pvt. Ltd. And Vice-Versa

2016 (7) TMI 453 - ITAT KOLKATA

Determination of Profit rate - @ 10% by CIT(A) as against 42.48% determined by AO - books of accounts not produced - Held that:- We find that the accounts of the assessee were duly audited and no adverse inference was drawn by the auditor. The books of accounts could not be produced before the ld. AO as the assessee’s unit had been taken over by the lending institution. The entire unit including its assets and the books of accounts were in the possession of the bank. The ld. AO was duly aware of .....

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law cannot compel a man to perform an act which he cannot possibly perform would come to the rescue of the assessee. - Adoption of preceding year’s gross profit would only result in absurdity as rightly pointed out by the ld. CITA. We find that the assessee had declared profit at 8.42% in its return based on audited data. We find under these circumstances, the revenue had to place the complete reliance on the audited financial statements for the purpose of determination of total income. The .....

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re partly allowed. - I.T.A No. 2318/Kol/2013, C. O. No.106/Kol/2014 - Dated:- 8-7-2016 - Shri M. Balaganesh, AM And Shri S. S. Viswanethra Ravi, JM For the Revenue: Shri G. Mallikarjuna, CIT, DR For the Assessee/Cross Objector : Shri Somnath Ghosh, Advocate ORDER Per Shri M. Balaganesh, AM This appeal by revenue and Cross Objection by assessee are arising out of order of CIT(A)-XXXVI, Kolkata vide Appeal No. 235/CIT(A)-XXXVI/Kol/R-2,Mid/2012- 13 dated 19.06.2013. Assessment was framed by JCIT, R .....

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sue are that the assessee is a private limited company engaged in the business of manufacturing edible oil. The assessee filed its return of income u/s. 139(1) of the Act for the assessment year under dispute on 27.09.2009 disclosing a total income of ₹ 59,05,533/-. During the course of the assessment proceedings, the Ld. Assessing Officer desired the assessee to furnish documents and evidence in support of its return filed by issuing notice u/s. 142(1) of the Act. However, such notice cou .....

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assessee were in the custody of the creditor bank, the Ld. AO issued summons u/s. 131(1) of the Act to it directing them to produce the same. However, the creditor bank also failed to comply with the relevant requisition of the Ld. AO in respect of the assessee. The assessee had actually disclosed gross profit at 8.42%. The ld. AO proceeded to complete the assessment by determining the gross profit at 42.48% which was the profit declared in the preceding assessment year by the assessee. The ld. .....

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did not dispute the turnover shown by the appellant or the other incidental expenditure incurred for effecting such turnover to the extent of ₹ 23,55,85,195/-. Therefore, it can be said that the turnover and expenditure incurred during the assessment year under dispute were not doubted by the AO. His only grievance was that the rate of G.P. in the concerned assessment year was low in comparison to the immediately earlier assessment year. He has not even discussed anything in the assessment .....

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ss profit has to be sacrificed to an extent. The turnover for the assessment year under dispute was to the tune of ₹ 23,55,85,195/-, which was more than 7 times in comparison to earlier year's figure of only ₹ 3,45,33,965/- and the quantum of gross profit rose to Rs.l,98,38,326/- during the year under consideration in comparison to earlier year's G.P. in the sum of ₹ 1,46,71,246/-. Therefore, applying such proposition to the facts of the instant case, the fall in G.P. r .....

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ver, in such circumstances, although the submission of the A/R is plausible about low rate of G.P. in the impugned assessment year in comparison to immediately earlier assessment year, but the undisputed facts remain that the books of accounts were not available to the AO and the items of expenditure could not be verified. The entire thing is based on estimate. It is well-settled in the case of Kachwala Gems vs. JCIT (2006) 288 ITR 10 (SC) that in a best judgment assessment, there is always a ce .....

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huge turnover and higher quantum of gross profit in comparison to earlier assessment year, in my considered opinion, it would meet the ends of justice if the rate of G.P. for the assessment year under dispute on the turnover shown and accepted by the AO is taken @ 10%. I, therefore, direct the AO to take G.P. @ 10% on the admitted turnover instead and place of 8.15% disclosed by the appellant and determine the income accordingly. Ground No. 1 and 3 is partly allowed to the above extent. 5. Aggri .....

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ssing the ex-parte order. Ld. C.I.T (A) has erred in concluding that this estimation made by the AO was without any basis. The AO was compelled to pass ex-parte order u/s.144 of the I. T. Act, 1961 due to non-cooperation of the assessee and adopted the G.P rate which was disclosed by the assessee itself during the financial year 2007-08. The assessee had also raised cross objections before us on the following grounds :- 1. FOR THAT the Ld. Commissioner of Income Tax (Appeals) XXXVI, Kolkata fail .....

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he Ld. Joint Commissioner of Income Tax, Range 1, Midnapore for estimation of Gross Profit by unwarranted application of s. 145(3) of the Income Tax Act, 1961 while taking into account the figures in the trading account in the impugned books and the failure of non estimation of Net Profit in such circumstances is based on extraneous considerations not germane to the issue in dispute which is wholly illegal, illegitimate and infirm in law. 3. FOR THAT the specious action of the Ld. Commissioner o .....

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tory notices could not be served on the assessee in view of the possession taken over by the creditor of the assessee i.e Punjab National Bank. Even the summons issued u/s 131 of the Act to the Bank calling for books of accounts of the assessee and other details were not replied by the Bank. Under these circumstances, the ld. AO went by the past history of the assessee wherein it had started the business in the immediately preceding asst year wherein gross profit of 42.48% was earned by the asse .....

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e had increased by 7 times during the year under appeal as compared to the immediately preceding asst year and for which purpose, the assessee had to obviously compromise on the gross profit margins. In any case, the gross profit determined by the ld. AO was more than 5 times of the declared amount without offering any clinching proof in this respect. This only results in absurdity and it is practically not possible to earn this much of profit in the industry in which assessee was involved. He f .....

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ee s unit had been taken over by the lending institution. The entire unit including its assets and the books of accounts were in the possession of the bank. The ld. AO was duly aware of this fact and accordingly had also issued summons u/s 131 of the Act to the bank but despite that they have not produced the books of accounts. In such a situation, in our opinion, adverse inference cannot be drawn against the assessee on the ground that books of accounts were not produced by the assessee. We fin .....

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held that :- The Income-tax Officer and certain other authority functioning under the Income-tax Act have a dual character. They are both agencies of investigation made into the incomes of assessees and they are also quasi- judicial authorities assessing the liabilities of the assessees to payment of income-tax. Under section 142(2) of the Act the Incometax Officer may make such enquiry as he considers necessary for the purpose of obtaining full information in respect of the income or loss of an .....

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cer not being a court can rely upon material which may not be strictly evidence admissible under the Indian Evidence Act for the purpose of making an order of assessment. Courts often take judicial notice of certain facts which need not be proved, while administrative and quasi-judicial authorities can take "official notice" of wider varieties of facts which need not be proved before them. Thus, not only in respect of the relevancy but also in respect of proof the material which can be .....

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account maintained in regular course of business without such a formal proof. In the present case, the relevant books of account in which detailed information as to the expenses which were claimed as deductions for the assessment years 1962-63 and 1963- 64 are destroyed by fire in November, 1962. Under the Indian Evidence Act secondary evidence of the contents of these account books would have to be adduced if they were to be used to prove any fact. The external auditors of the assessee-companie .....

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company and whether the company's balance-sheets and profit and loss accounts were in agreement with the books of account and returns. Under section 209 of the Companies Act, the assesseecompany was required to maintain proper books of account with reference to the receipts and expenditure taking place in the business of the assessees. The account books maintained by them must be such as to give a true and fair view of the state of affairs of the companies. The question arises, therefore, wh .....

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by the statute to find out if the deductions claimed by the assessees in their balance-sheets and profit and loss accounts were supported by the relevant entries in their account books, the auditors must have done so and must have found that the account books supported the claims for deductions, when the deductions were disallowed, by the Income-tax Officer on the ground that detailed information regarding them was not available, justice was not done to the assessees. It was not possible for the .....

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ed and does not, therefore, call for reference. Point No. 2 The Tribunal has stated that, though, ordinarily, the adjustments relating to expenses should have been made by the assessees in the accounts of the year to which the adjustments relate and not in a subsequent year, it is often inevitable that such adjustments relating to earlier years have to be made in subsequent years. This is specially so, when the business, as of the assessees, is of giant proportions and the branches are farflung. .....

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ence meaning thereby that it was based on relevant material which can be considered in the income-tax proceedings. The applications are, therefore, dismissed. 8.1. It is an admitted fact that the assessee was engaged in the business of manufacturing edible oil. In pursuance of its activities, it had raised a huge loan of ₹ 1,78,36,065/- as cash credit facility and ₹ 1,16,19,863/- on account of term loan from Punjab National Bank, Midnapore Branch. In fact, the aggregate amount of sec .....

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. The sharp declining trend in the gross profit ratio in edible oil industry is to be accepted in the previous year relevant to the asst year under appeal in an area infected with Maoist menace from which there was no respite. The labour deployed was under their thumb and it was futile to exhort them to stick to maintain productivity. As a result, huge inputs resulted in low outputs which made earnings so low as to make it impossible to service the loans with the ultimate result that the credit .....

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raise turnover and keep competition at bay so as to achieve the benefit in the long run. In the process, the gross profit has to be squeezed so that reference to an earlier year involving far less turnover would only result in absurdity. The turnover of the assessee for the preceding year was only ₹ 3,45,33,965/- whereas for the impugned assessment year it was ₹ 23,55,85,195/-. It was argued before the ld. CITA that the assessee had to increase its sales by undercutting the market p .....

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