TMI Blog2021 (5) TMI 657X X X X Extracts X X X X X X X X Extracts X X X X ..... rimary duty of the assessee to produce the bills/vouchers as and when required for verification in support of the claim of expenses debited into the P L A/c during the course of assessment proceedings, but, the assessee has failed to do so. After considering the totality of the facts of the case and statements recorded of Sri A. Srinagaveer, we do not find any reason to interfere with the orders of revenue authorities and, therefore, approve the 10% estimation on total turnover of the assessee. According, this grounds raised on this issue are dismissed. Enhancement of the income of the assessee by CIT u/s 251(2) - HELD THAT:- CIT(A) rejecting the submissions of the assessee, enhanced the income of the assessee by using powers u/s 251(2) of the Act. As contended by the ld. AR of the assessee that once the books of account are rejected, it is trite law that no further additions can be made from the same books of account. We find substance in the submissions of the ld. AR and case law relied on by him. Therefore, we set aside the decision of the CIT(A) in enhancing the income of the assessee and uphold the order of the AO in estimating the income of the assessee @ 10% on the tota ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings u/s 143(3) of the Income Tax Act, 1961 ; in short the Act . Since the facts and grounds are identical in these appeals, the same were clubbed and heard together and, therefore, a common order is passed for the sake of convenience. 2. The assessee has raised the following grounds of appeal in AY 2013-14, which are common in other AYs also except the quantum of additions: 1. The order of the learned Commissioner of Income Tax (Appeals) is against the law, weight of evidence and probabilities of case. 2. The learned Commissioner erred in confirming the order of the Assessing Officer, wherein, the net profit was estimated at 10% of the turnover. 3. The learned Commissioner further erred in an enhancing the income by an amount of ₹ 2,45,67,815/- by bifurcating the gross receipts of ₹ 13,91,80,000/- as revenue from operations ₹ 11,46,12,185/- and other income ₹ 2,45,67,815/-, without considering overall expenditure incurred in the business. 4. The learned Commissioner ought to have appreciated that when books of accounts are rejected to estimate the profit rate at 10% no further addition could have been from the same bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Registered office at D.No. 7 -2-4/D, Old Canteen building, IDA, Sanath Nagar, Hyderabad and workshop and office at 54-20/9-9A, Timmarsuvari Street, Srinagar Colony, Vijayawada. During the course of survey proceedings a statement was recorded from Sri A. Sriagaveer wherein it was asked to furnish the bills/vouchers in respect of purchases, other expenses like employ benefit expenses, farmer commission, farmer s welfare fund expenses etc,, but no supporting evidences were furnished. The relevant questions and answers, question No. 13 and 14 and its answers are extracted as under: Q. No. 13 please refer to the balance sheet and profit Loss account flied by you for the A.Yrs. 2013-14 to 2015-16, wherein you have shown huge fresh corn purchases and claimed huge expenditure under various heads. It is now clearly established that you are not maintaining the supporting evidences in respect of purchases made and various heads of expenditure. In the absences of any supporting evidences, the financial statements prepared and submitted by you do not reflect true profits earned by you. Consequently, the net profits shown by you are not tenable and cannot be accepted. Please comment. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which works out to R:s 4.52%. The assessee did not maintain any supporting for purchases and no bills/vouchers were maintained in support of various heads of expenditure claimed in P L account. When asked to explain the reasons for non maintenance of books of account and other documentary evidences, the assessee could not, provide any cogent reply except saying that the same are not readily traceable, 6. In view of the foregoing and in the absence of any corroborative evidences available, the books of account along with audit report and financial statements filed, have been rejected and It is proposed to estimate the net profit at certain percentage of turnover. As per the provisions of Sec. 44AD, the profit and gains of eligible business have to be computed at 8% of total turnover or gross receipts, where the. total turnover or gross receipts in the previous year does not exceed ₹ 1 Cr. In the instant case, since the turnover of the business was R$,13.91 Cr., the provisions of Sec.44AD cannot be applied. The assessee has shown a meagre profit of 4.52% on a total turnover of ₹ 13.91Cr. Since the Act has envisaged a profit of 8% for small businesses, considering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment order. The gross profit of the assessee is 56% as observed by the CIT (A) and, therefore, the AO has rightly estimated 10% of the net profit on the gross turn over and requested the Bench to uphold the same. 10. We have considered the rival submissions and perused the material on record. In his order the AO, before estimating the profits @ 10% on the total turnover, observed that as per the provisions of Sec. 44AD, the profit and gains of eligible business have to be computed at 8% of total turnover or gross receipts, where the. total turnover or gross receipts in the previous year does not exceed ₹ 1 Cr. In the instant case, since the turnover of the business was R$,13.91 Cr., the provisions of Sec.44AD cannot be applied. The assessee has shown a meager profit of 4.52% on a total turnover of ₹ 13.91Cr. Since the Act has envisaged a profit of 8% for small businesses, considering the facts and circumstances of the case and since the books of account have been rejected for the reasons discussed above, a profit @ 10% on total turnover is felt to be reasonable. The CIT(A) upheld the action of the AO. The assessee has earned more Gross Profit i.e. 56% as evident f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he CIT(A), the assessee submitted as under as per para No. 7.2 of the CIT (A) s order: The AO accepted the claim of assessee in respect of GP, rejected the expenditure part and the estimated the income at 10% of the turnover. The aggregate expenditure claimed by the appellant is ₹ 13,31,33,479/- and this is intricately connected with the gross receipts. The AO considered this aspect also and estimated the income. It is not possible to bifurcate the expenditure, part related to revenue operations and other income, and it is further submitted that the AO was conscious of this aspect while estimating the income. Therefore, the CIT(A) cannot take a different view at this stage that the other income is earned without incurring any expenditure. (ii) Once the books of account are rejected, it is trite law that no further additions can be made from the same books of account. In support of the contentions the AR relied upon the following case laws:- i. Indwell Constructions Vs CIT 232 ITR 776 (AP High Court). ii. M/s. Teja Constructions Vs ACIT 39 SOT 13 (ITAT, Hyderabad). iii. Malpani House of Stones Vs CIT, Jaipur ITA No.35/2003, dt. 04.10.2016 (Raj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... During the assessment proceedings In the above mentioned case for the A. Y.2014-15, it is noticed that the company made a fresh claim of deduction uls 80IB. The Audit report in Form No. 10CCB was prepared and uploaded by you on 30-03-2016 which was revised on 18-08-2016. In this connection, your attention Is drawn to the fact that a survey uls.133A was conducted In this case on 30-12-2015 and during the survey proceedings, it was noticed that the assessee did not maintain any books of account for the A. Yrs. 2013 - 14 to 2015-16 and for the period 01-04-2015 to 30- 12-2015, in support of purchases and sales made in respect of sweet corn which constituted 90% of assessee's business turnover. Further, no bills/vouchers were maintained in support of expenditure claimed under Various heads in the P L account for the said period. In the post survey proceedings, the director of the company Sri A.Sri Nagaveer, in his statement also confirmed the fact that no books of account were maintained. In this back ground, you are requested to explain as to how the audit report in form No.10CCB for claiming deduction u/s 80IB was issued especially when no books of account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge without any supporting documentary evidences, is nothing but a piece of paper which do not have any weight in the eyes of law. Accordingly, the assessee's fresh claim in the form of revised return claiming deduction uls 80IB is not maintainable and deserves to be rejected summarily. 14.3 On appeal, the CIT(A) confirmed the action of the AO. 14.4 Before us, the ld. AR of the assessee filed written submissions in this regard, which are as under: 2. The appellant submits that the company was incorporated on 30.3.2007. Till May 2009 it carried on the activity mostly manually without using much of the machines. 3. During the financial year 2009-10, the company ordered for supply of processing unit on a turn key basis from Raghu Marketing Agencies. Accordingly, Raghu Marketing Agencies supplied the following machinery used in the various stages of procuring, processing and packing of Sweet Corn. A copy of the invoice raised by the said concern for supply of machinery is submitted for perusal. The invoice itself is known as Turn Key supply of Corn processing Unit . The invoice raised for ₹ 1,10,31,954j- include the following machinery. (1) Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e vehicles were purchased (pages No.54 to 75 of annexures. The availability of above equipment clearly indicate that the appellant has all the necessary equipment for procurement, processing, packing and preservation of sweet corn. '5. During the previous year relevant for the assessment year 2013-14 the appellant incurred expenditure ₹ 57,16,485/- ( page No.38 of the paper book as per details of other expenses under Note- U ) towards storage freezer charges. The charges were paid at out stations where the sweet corn is preserved and sold, Similarly for the period ended 31.3.2014 and 31.3.2015, the following amounts were paid towards storage and freezer charges. a) Asst. year 2014-15 _ ₹ 57,81,232/- ( page No.85 of the paper book as per details of other expenses under Note- V ) b) Asst. year 2015-16 ( page No.128 of the paper book as per details of other expenses under Note- W ) 6. It can be seen from the above that the appellant possessed the required machinery for procurement, processing, cleaning, boiling and packing the material at the place of production. It has its own deep freezers and blast rooms at the place of production ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d thus be considered a grain. Sweet corn when harvested before maturity is usually considered a vegetable. Wikipedia Sweet corn (Zea mays convar. saccharata var. rUfiosa;l'J also called sugar corn and pole corn) is a variety of maize with a high sugar content. Sweet com is the result of a naturally occurring recessive mutation in the genes which control conversion of sugar to starch inside the ENO of the com kernel. Unlike field com varieties, which are harvested when the kernels are dry and mature (dent stage), sweet corn is picked when immature (milk stage) and prepared and eaten as a vegetable, rather than a grain. Since the process of maturation involves converting sugar to starch, sweet corn stores poorly and must be eaten Fresh, canned, or frozen, before the kernels become tough and starchy. Income Tax Act APVAT ACT According to the AP Vat Act also Sweet Corn considered as a Vegetable. Entry 18 of Schedule I of the APV AT Act, 2005 is Vegetables fruits other than those cured frozen, preserved, processed, dried, dehydrated or canned. According to the Entry 18 of schedule I of the APVAT Act, vegetables are exempted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing, preservation and packaging of fruits or vegetables or meat and meat products or poultry or marine or dairy products or from the integrated business of handling, storage and transportation of food grains, shall be hundred per cent of the profits and gains derived from such undertaking for five assessment years beginning with the initial assessment year and thereafter, twenty-five per cent (or thirty per cent where the assessee is a company) of the profits and gains derived from the operation of such business in a manner that the total period of deduction does not exceed ten consecutive assessment years and subject to fulfilment of the condition that it begins to operate such business on or after the 1st day of April, 2001 Provided that the provisions of this section shall not apply to an undertaking engaged in the business of processing, preservation and packaging of meat or meat products or poultry or marine or dairy products if it begins to operate such business before the 1st day of April, 2009. 14.8 Whether the business of the assessee falls under this section for claiming the deduction U/s 80IB (11A) or not, therefore, it has to be decided first that the cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t page 7 quoted supra, are not covered part of the turnover of the assessee. In this regard, the assessee has shown separately under two heads, one is from revenue from operations and from other income. The other income shown by the assessee are arising during the course of principal business activity of the assessee. Therefore, profit derived under these heads is also forms part of the main business of the assessee and therefore, the entire profit enhanced by the CIT(A) is not justified. In this regard, the AO has rejected the books of account of the assessee and applied 10% of the net profit on entire receipts of the assessee. In the result, the appeal of the assessee is allowed. We make it clear that the assessee will not get benefit of deduction u/s 80IB(11A) on the profits estimated @ 10% on the other income vide Note No. P of the financial statements. 15. In the result appeal of the assessee is partly allowed in above terms. 16. As the facts and grounds are identical in AYs 2014-15 and 2015-16 to that of AY 2013-14, following the decision AY 2013-14, the ground regarding estimation of income is dismissed, the ground regarding enhancement of income by the CIT(A) is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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