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TMI Blog2017 (6) TMI 1263X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 2,90,86,700, being 10 per cent of the total administrative expenditure of Rs. 29,08,67,000 made by the Assessing Officer (hereinafter referred to as "AO") alleging the same to be unverified, unreasonable, and excessive without bringing anything on record in support thereof. 2. The CIT(A) has erred on facts and circumstances of the case and in law, in not completely deleting the adhoc disallowance made by the AO and in limiting the same to 10 per cent of the total administrative expenditure. The Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal at any time before or at the time of hearing of the appeal." I.T.A.No.-2340/Del/2011 (ASSESSMENT YEAR-2007-08) (ITO vs Aradhana Foods & Juices Pvt Ltd.) 1. Ld.CIT(A) has erred on facts and in law in deleting addition of Rs. 10,61,30,515/- on a/c of purchases from related parties; restricting disallowance out of operating expenses from 30% (Rs.8,72,60,100/-) to 10% (Rs.2,90,86,700/-); deleting addition of Rs. 2,45,00,000/- out of unverified expenses in 'fixed assets'; and Rs. 36,75,000/- out of depreciation. The assessee failed to produce books of accounts and also supporting bills/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erely relying on the order for immediately preceding assessment year, has erred in upholding the ad hoc disallowance of Rs. 5,49,95,700, being ten percent of the total operating expenditure of Rs. 54,99,57,000, made by the Assessing Officer alleging the same to be unverified, and excessive without bringing anything on record in support thereof. Each of the above grounds is without prejudice and independent of each other. The appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at the time of hearing of the appeal." I.T.A.No.-4472/Del/2013 (ASSESSMENT YEAR-2008-09) (ITO vs Aradhana Drinks & Beverages Pvt Ltd.) 1. "On the facts and the circumstances of the case as well as in the law the learned CIT(Appeals) has erred in allowing depreciation on plastic crates @ 50% as against 15% allowed by AO. 2. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal." I.T.A.No.-4706/Del/2013 (ASSESSMENT YEAR-2008-09) (Aradhana Drinks & Beverages Pvt Ltd. vs ITO) 1. That on the facts and circumstances of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00. In view of the decision of the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. vs CIT (229 ITR 383) as also the decision in the case of Jute Corporation of India vs CIT (187 ITR 688) and the discretion vested in your Honours under Rule 11 of the Income tax (Appellate Tribunal) Rules, 1963, the additional grounds of appeal calls for being admitted and adjudicated on merits. The Appellant trusts that the request shall be acceded to." I.T.A.No.-3588/Del/2013 (ASSESSMENT YEAR-2009-10) (DCIT vs Aradhana Drinks & Beverages Pvt Ltd.) 1. "The Ld.CIT(A) had erred on facts and in law in considering the plastic crates under the heard "Bottles and Shells" eligible for depreciation @ 50%. 2. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal." (B) In the case of Aradhana Foods & Juices Pvt.Ltd., in AY 2007- 08, assessment order dated 13.12.2009 was passed by the Assessing Officer (in short "AO") u/s 143(3) of I.T.Act, 1961 (in short "Act"). In this assessment order, total income was assessed at Rs. 7,22,86,175/- as against loss of Rs. 14,92,7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs. Reading from the order sheet of the assessment record, he highlighted that the assessee was asked to produce books of accounts vide order sheet noting dated 03.12.2009 and this requirement was repeated on 14.12.2009 and again on 21.12.2009. Final hearing was conducted on 24.12.2009, but even till then the assessee failed to produce the books of accounts, he stated, and the assessment was eventually completed on 30.12.2009. The Ld.CIT DR further submitted that as the assessee had failed to produce the books of accounts, the AO was unable to make the necessary verification/inquiry/investigation, etc.; and had to complete the assessment on the basis of available materials. Ld.CIT DR supported all the additions made by the AO, and for this purpose, relied on the assessment order. Specifically, as far as disallowance of Rs. 10,61,30,515/- is concerned, he supported the reasoning of the AO and relied on the following portion of the assessment order: "3.2. Perusal of Form 3CD (enclosure 15-accounting ratio) shows that although gross profit for the year under consideration is 12.6% net profit is as low as (-) 26.8%. Stock-in-trade vis-à-vis turn over ratio is also 0.01% only. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 8,72,60,100/- i.e. @ 30% of the said expenses is disallowed being unverified, unreasonable and excessive and added to the income of the assessee for the relevant assessment year 2007-08." (B.1.2) Regarding disallowances of Rs. 2,45,00,000/- and Rs. 36,75,000/- the Ld.CIT DR supported the order of the AO and relied on the following portion of the assessment order:- "3.4. An addition of Rs. 24,58,35,000/- have been made in fixed assets. It is observed that bottles and tetra packs of Rs. 6,05,53,607/- was purchased during the relevant assessment year and depreciation @ 50% has been claimed thereon. Vide notice u/s 142 (1) dated 10.12.2009 assessee was specifically asked to furnish details of visicoolers bottles tetra packs. However, no such details was furnished. Instead, vide reply dated 21.12.2009 assessee submitted as under: "..It is respectfully submitted that the visicoolers are kept with assessee's retailers dealers shops for keeping assessee's products cool in all seasons. The details of distributors dealers have already been provided in our reply to query no. 2. Further, copies of vouchers for purchase of visicoolers are enclosed on sample basis at page no. 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same orally at the time of hearing before us. He also drew our attention to some decided precedents. (B.3) We have heard both sides attentively and patiently. We have perused all the materials on record and we have also considered various case laws and precedents brought to our attention. The provisions u/s 144 of the Act enable the AO to make the assessment to the best of his judgement. In comparison with section 143(3) of the Act, the AO has greater powers and discretion u/s 144 of the Act and the assessee is more vulnerable to adverse conclusions by the AO if the assessment is completed u/s 144 of the Act than if the assessment is completed u/s 143(3) of the Act. This is so, because section 144 of the Act authorizes the AO to make the assessment to the best of his judgement. As far as the assessee is concerned, the provisions u/s 143(3) of the Act are thus more beneficial and provisions u/s 144 of Act are harsher. If provisions more beneficial to the assessee are invoked by the Revenue, instead of harsher provisions, it may in certain situations; subject to other prescribed conditions under law, if any, being satisfied; create a situation fit for remedial measure(s) by Rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may have been prevented by sufficient cause from producing the books of accounts etc. before the AO which the assessee was called upon by the AO to produce during the assessment proceedings; in view of turmoil, political dispute and unrest in Telangana. In view of clause (b) of Rule 46A(1) of Income Tax Rules, 1962, the assessee could have, in that situation, produced the books of accounts etc. before the Ld.CIT(A) as additional evidence, during appellate proceedings before the Ld.CIT(A). However, from the perusal of the impugned appellate order dated 21.02.2011 of Ld.CIT(A), there is no indication that the assessee produced these additional evidences (the books of accounts, etc.) before the Ld.CIT(A); or that, the Ld.CIT(A) directed the assessee to produce the books of accounts, etc. under Rule 46A(4) of Income tax Rules, 1962. Thus, we find that the Revenue was deprived of the opportunity to make further verification/inquiry/investigation, etc. because of the failure of the assessee to produce the books of accounts, etc. before the AO as well as before the Ld.CIT(A) and further because of the failure of the Ld.CIT(A) to cause the production of books of accounts, etc. Even during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we are presently not expressing any opinion on the merits and quantam of the various additions made by the AO in A.Y. 2007-08. The crossappeals filed by the assessee and the Revenue for A.Y. 2007-08 (in ITA Nos.2427/Del/2011 and 2340/Del/2011) and the grounds of appeal contained therein are being hereby disposed off in accordance with our order, directions and observations as aforesaid. (C) In ITA No.3921/Del/2013 for A.Y.2008-09, the assessee has, in Ground No.2 appealed against disallowance of Rs. 3,58,31,000/- out of operating expenses @ 10 % of total claim of Rs. 35,83,10,100/- and in the connected Ground No.1, M/s Aradhana Foods and Juices Pvt. Ltd. has appealed against assessment of loss at Rs. 15,32,12,229/- as against returned loss of Rs. 20,12,26,168/-. Similarly in ITA No.3923/Del/2013 for A.Y. 2009-10, M/s Aradhana Foods and Juices Pvt. Ltd. has appealed against disallowance of Rs. 5,49,95,700/- out of operating expenses @ 10 % of total claim of Rs. 54,99,56,519/- and in the connected Ground No.1, the assessee has appealed against assessment of loss at Rs. 25,73,73,687/- as against returned loss of Rs. 32,12,88,140/-. In ITA No.4706/Del/2013 for A.Y. 2008-09 and in ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id two assessees failed to produce any evidence during appellate proceedings in ITAT to support the contention that books of accounts were indeed produced before the AO during assessment proceedings. Burden of proof is on the assessees to prove that books of accounts were produced on 25.08.2011. However, the assessees have failed to provide any evidence and has thus have failed to discharge the burden of proof. In the absence of any evidence to the contrary, the observation of the AO that the books of accounts, etc. were not produced by the aforesaid two assessees during assessment proceedings for A.Y. 2009-10, is hereby accepted. In any case, even assuming that the assessee had already produced books of accounts, etc. earlier, the fact remains that the assessees were duty bound to produce books of accounts, etc. one more time if the AO required the assessee to do so. Therefore, we find no merit in contention of the aforesaid two assessees that books of accounts were produced on 25.08.2011. The AO made a disallowance @ 10% out of operating expenses in the case of both the aforesaid assessees and for both A.Y. 2008-09 and 2009-10. These disallowances were confirmed by the Ld.CIT(A). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prescribed in that regard by the Revenue authorities. This authority has not been fully honoured in this case because of failure of the assessee to produce the entire books of accounts, etc and because of the failure of the Ld.CIT(A) to exercise the provisions under Rule 46A(4) of Income Tax Rules, 1962. We have also already held earlier in this order that when an assessee does not fully honour the lawful authority of Revenue, or when lawful requirements prescribed by Revenue authorities are not fully complied with, the assessee cannot claim a lenient view as a matter of right, and the assessee must face its consequence as per law and further that the nature, extent and severity of the consequences will depend on the facts, circumstances and statutory provisions. In the facts and circumstances of these cases and in view of the statutory provisions, therefore, we set aside the appellate orders of the Ld.CIT(A) and the assessment orders of the AO in the case of both the aforesaid assessees and for both assessment years 2008-09 and 2009-10; and the matters are restored to the file of the AO with the direction to make denovo assessments as per law, after making further verification/in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r made of Glass or Plastics used as refills" as used in appendix-I of the Income Tax Rules, 1962 and accordingly, the AO treated crates as plant and machinery eligible for depreciation @ 15% instead of @ 50% claimed by the aforesaid two assessees. The AO allowed depreciation on crates @ 15% only and the claim of depreciation in excess of 15% was disallowed. The Ld.CIT(A) agreed with the view advanced by the two assessees and deleted the disallowance made by the AO out of depreciation claimed by the assessee on crates. The Ld.CIT(A) observed that crates are made of plastic and used as refills and directed the AO to allow depreciation @ 50%. At the time of hearing before us, the Ld.CIT DR relied on the assessment orders passed by the AO. The Ld. Counsel for the assessee on the other hand relied on the decision of DCIT, Circle-1 vs Sri Sarvaraya Sugars Ltd. in ITA Nos.395 and 396/Vizag/2012 vide order dated 31.05.2016 (ITAT, Visakhapatnam). He further relied on "Synopsis in Brief" filed during the appellate proceedings. Detailed written submissions have been made in "Synopsis in Brief", wherein the bottling process is explained in detail, and it is contended that crates, alongwith bot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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