Ita/1164/2009 Of The Commissioner Of Income Tax Cochin v. M/S. Parisons Agrotech (P) Ltd

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY ,THE 29TH DAY OF OCTOBER 2018 / 7TH KARTHIKA, 1940 ITA.No. 1056 of 2009 AGAINST THE ORDER/JUDGMENT IN ITA 739/2006 of I.T.A.TRIBUNAL,COCHINBENCH APPELLANT/S: THE COMMISSIONER OF INCOME TAX(CENTRAL)COCHIN. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/S: M/S.PARISONS AGROTECH PVT.LTD., CHEROOTY ROAD, CALICUT. BY ADV. SRI.E.K.NANDAKUMAR (SR.) SRI.P.GOPINATH THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 29.10.2018, ALONGWITH ITA.1164/2009, ITA.1132/2009, ITA.1544/2009, THE COURT ON THESAME DAY DELIVERED THE FOLLOWING: IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY ,THE 29TH DAY OF OCTOBER 2018 / 7TH KARTHIKA, 1940 ITA.No. 1164 of 2009 AGAINST THE ORDER/JUDGMENT IN ITA 67/2007 of I.T.A.TRIBUNAL,COCHINBENCH DATED 05-05-2008 APPELLANT/S: THE COMMISSIONER OF INCOME TAXCOCHIN(CENTRAL), COCHIN. BY ADVS.SRI.P.K.R.MENON,SENIOR COUNSEL, GOI(TAXES)SRI.JOSE JOSEPH SC FOR INCOME TAX RESPONDENT/S: M/S. PARISONS AGROTECH (P) LTD.CHEROOTY ROAD, CALICUT. BY ADV. SRI.E.K.NANDAKUMAR (SR.) SRI.P.GOPINATH THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 29.10.2018, ALONGWITH ITA.1056/2009, ITA.1132/2009, ITA.1544/2009, THE COURT ON THESAME DAY DELIVERED THE FOLLOWING: IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY ,THE 29TH DAY OF OCTOBER 2018 / 7TH KARTHIKA, 1940 ITA.No. 1132 of 2009 AGAINST THE ORDER/JUDGMENT IN ITA 66/2007 of I.T.A.TRIBUNAL,COCHINBENCH DATED 05-05-2008 APPELLANT/S: THE COMMISSIONER OF INCOME TAX (CENTRAL), KOCHI. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/S: M/S.PARISONS AGROTECH PVT LTD CHEROOTY ROAD, CALICUT. BY ADV. SRI.E.K.NANDAKUMAR (SR.) SRI.P.GOPINATH THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 29.10.2018, ALONGWITH ITA.1056/2009, ITA.1164/2009, ITA.1544/2009, THE COURT ON THESAME DAY DELIVERED THE FOLLOWING: IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY ,THE 29TH DAY OF OCTOBER 2018 / 7TH KARTHIKA, 1940 ITA.No. 1544 of 2009 AGAINST THE ORDER/JUDGMENT IN ITA 738/2006 of I.T.A.TRIBUNAL,COCHINBENCH DATED 05-05-2008 APPELLANT/S: THE COMMISSIONER OF INCOME TAX (CENRTAL)COCHIN. BY ADV. SRI PKR MENON SR SC FOR GOI TAXES SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/S: M/S.PARISONS AGROTECH PVT.LTDCHEROOTY ROAD, CALICUT. BY ADV. SRI.E.K.NANDAKUMAR (SR.) SRI P GOPINATH OTHER PRESENT: THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 29.10.2018, ALONGWITH ITA.1056/2009, ITA.1164/2009, ITA.1132/2009, THE COURT ON THESAME DAY DELIVERED THE FOLLOWING: JUDGMENT [ ITA 1056/2009,ITA.1164/2009,ITA.1132/2009,ITA.1544/2009 ] Ashok Menon, J. The Revenue is in appeal challenging the common orderdated 05.05.2008 of the Income Tax Appellate Tribunal,Cochin Bench, in which four appeals filed by the Revenuewere dismissed; while the assesse's appeal was allowed. 2.The assessment pertaining to the years 2001-02 to2004-05 were challenged in four appeals filed by theRevenue, while there was a cross-appeal filed by theassessee pertaining to the year 2004-05. 3.The appeals arise from the assessments completedunder Section 153A of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'), except for theassessment year 2004-05, which was competed under Section143(3) of the Act. Since the issues involved were common,it was disposed of by a common order by the Tribunal. 4.The facts in brief are thus: The Revenue is in appeal challenging the common orderdated 05.05.2008 of the Income Tax Appellate Tribunal,Cochin Bench, in which four appeals filed by the Revenuewere dismissed; while the assesse's appeal was allowed. 2.The assessment pertaining to the years 2001-02 to2004-05 were challenged in four appeals filed by theRevenue, while there was a cross-appeal filed by theassessee pertaining to the year 2004-05. 3.The appeals arise from the assessments completedunder Section 153A of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'), except for theassessment year 2004-05, which was competed under Section143(3) of the Act. Since the issues involved were common,it was disposed of by a common order by the Tribunal. 4.The facts in brief are thus: The assessee company is engaged in the business ofmanufacturing and trading in edible oil (refining of crudepalm oil and palmolein). That apart, the company is alsoinvolved in the processing of hydrogenation formanufacture of Vanaspathi, out of the by-productsgenerated. 5.On 08.01.2004 a search was conducted in the business premises of the company, as well as the residenceof its Directors. Consequent to which, proceedings underSection 153A of the Act was initiated. The AssessingOfficer (A.O.) estimated the wastage during themanufacturing process at 0.65%, whereas the assessee'sclaim was 7.90% and hence additions were made for theyears 2001-02 to 2004-05 as per assessment order atAnnexure A. In appeal, these additions were deleted bythe Commissioner of Income Tax vide order at Annexure Band the said order was upheld by the Tribunal in AnnexureC common order. 6.Shortage was also claimed on transportation, which was disallowed. Moreover, unaccounted sales to M/sArafa Trading Company, Manjeri and M/s Sulekha Traders,Kanpur were also noticed by the A.O. It is observed thatthere was suppression of sale by under-invoicing of cash sales. The following questions of law, as re-framed by us, arise for consideration: i)Whether the additions made by the A.O. for thevarious years on account of excess claim of wastage was proper ? ii) Whether the shortage claimed on transportationfor the year 2002-03 to 2004-05 was appropriate? iii)Whether the findings on suppression of sale byunder-invoicing and unaccounted sale is to beupheld ? assessee. 8.Regarding the percentage of waste in the refiningprocess of palm oil and palmolein, the assessee claimed wastage at 7.90%. The A.O. on visiting the premises ofthe assessee's factory and based on the statement of theProduction Manager, who had allegedly admitted that thewastage of the oil in the bleaching process was not morethan 0.25%, made an assessment that the wastage could notbe more than 0.65%. It was found that the wastage claimedfor all the years was calculated at a higher rate andadditions made. The A.O. could not have on his ownassessment, arrived at a conclusion regarding the quantityof wastage in a technical process involved in refining thecrude palm oil or palmolein. The alleged admission of theProduction Manager also cannot be given too muchimportance to arrive at a decision regarding theassessment of wastage since it is not a statement taken onoath. The Tribunal has discussed in detail the process ofrefining the crude palm oil and palmolein, by means ofre-treatment, bleaching and deodorizing. It is onfindings on fact that the A.O's observations, wereoverturned by the First Appellate Authority and thatconfirmed by the Tribunal. The Tribunal has found that the reasoning given by the A.O. was a general one and notscientifically based. The statement given by theProduction Manager is only regarding a part of theprocess, and therefore, the additions made on account ofwastage was improper. The Tribunal was justified in notagreeing with the A.O.'s determination as to the wastage.We find no reason to interfere with the fact finding ofthe Tribunal. 9.The next question that arises for considerationis on the estimation of the shortage claimed ontransportation and the additions made by the A.O. on thebasis that there was an excess claim for the assessmentyears 2002-03 to 2004-05. The Tribunal has observed thatthe assessee is using crude palm oil transported fromMalaysia and Singapore, through ships. Every year thereis some percentage of shortage claimed by the assessee.The A.O. though noticed that the assessee relied on thecertificates issued by Marine Surveyors on loss intransportation; found the claim to be excessive for reasonof no claim was raised before the insurer. The A.O. found that the assessee has not furnished any evidence to theeffect of having made a claim with the Insurance Companyfor the alleged loss in transportation and therefore, theA.O. restricted the transport loss at 0.25% and disallowedthe excess claimed by the assessee for the assessmentyears 2002-03 and 2003-04. With respect to assessment year2004-05, the A.O. has observed that as per the MarineSurveyors Certificate, loss to the extent of 0.1% waspermissible and above the said loss, the assessee couldhave lodged a claim to the Insurance Company forreimbursement and the claim for that assessment year wasdisallowed as excess. In the order of the C.I.T.(Appeals), which has been upheld by the Tribunal, it wasobserved that the appellant not having made any insuranceclaim for the loss sustained in excess of the permissiblepercentage does not automatically lead to a presumptionthat there is excess shortage, or loss claimed by theassessee. The non-claiming of insurance amount accordingto the C.I.T. (Appeals) could be due to various reasons,including technical flaws. The A.O. had not relied on any documentary evidence to prove that the claim of theassessee in this regard is bogus. From this, it is veryclear that the A.O. arrived at a conclusion to disallowthe shortage on transportation on mere surmises, withoutany evidence. On appreciation of evidence and facts, boththe Appellate Authorities have rightly found that theadditions made by the A.O. in this regard was improper. Weare in agreement with that finding.10. The A.O. has observed that there is suppressionof sale to M/s Arafa Trading Company by under-invoicingcash sales for the assessment years 2002-03 and 2003-04.During the course of search, hard-disk of the computer wasseized. Appreciation of this issue is mainly on facts,and the C.I.T. (Appeals) deleted the entire addition madeby the A.O. for the assessment years, and it has beenupheld by the Tribunal. It is the argument of theDepartment that the assessee was duty bound to prove thatthe rates found in the seized diary were changed due tosubsequent negotiation and the assessee had utterly failedto bring on record anything on this count. The learned Counsel for the assessee would argue that the diary was inthe form of an order book and no adverse inference couldbe drawn against the assessee as the hard-disk of thecomputer was seized during the course of search. It isalso submitted that the rates of palm oil and palmoleinare different. The Tribunal has observed that the A.O.has not made any attempt to separate the quantity of thecash sales of palm oil and palmolein, but has taken anaverage rate. That could not have been done because therates are different. The diary, which was seized, is onlyan order book and additions could not have been made onthe presumption that the order book is final, andtherefore, the additions made by the A.O. was rightlyreversed by the C.I.T. (Appeals) as well as the Tribunal.11. It is the case of the Department that for theassessment years 2003-04, there was under-invoicing ofsale of Rs.5,04,957/- in respect of sales made to M/sArafa Trading Company and Rs.3,69,946/- in respect ofM/s Sulekha Traders. According to the assessee, the A.O.had taken those as alleged suppression from the entries in the oil dispatch register, wherein some of rates werestruck off and changed and new rates were entered. Theexplanation given by the assessee regarding thechanges, did not satisfy the A.O. According to theassessee, the rates changed whenever the bottom cargo,which were of inferior quality were used. The additionof Rs.8,74,903/- is made for the assessment year 2003-04in respect of such suppression of under-invoicing ofsale to M/s Arafa Trading Company and M/s SulekhaTraders. This also is a question of fact, which hasbeen dealt with in great detail by the C.I.T. (Appeals)as well as the Tribunal. It is observed that the ratesare finalised only after negotiations and at the time ofbooking, the rates are put as it is applicable to goodquality oil. Apart from the two rates pointed out bythe A.O., there is absolutely no other evidence tosubstantiate the case of under-invoicing as found by theA.O. The Tribunal has found that crude palm oil wasimported from Malaysia and Singapore, through ships andnecessarily the oil settled at the bottom is bound to be inferior than the oil at the upper level of thecontainer. It is rightly pointed out that there are noduplicate books maintained with two rates contradictingeach other and therefore the C.I.T. (Appeals) and theTribunal rightly came to the conclusion that theadditions made on this count were not appropriate. 12. The assessee's appeal before the Tribunal waspertaining to the confirmation by the CIT (Appeals) ofthe additions made by the A.O. on alleged suppression ofsales by under-invoicing sales to M/s Sulekha Traders tothe tune of Rs.1,63,346/- for the assessment year 2004-05. The Tribunal has found that this is an issueidentical to that of the Revenue's appeal for theassessment year 2003-04 and for the very same reason theaddition on account of under-invoicing was improper andtherefore the finding of the First Appellate Authoritywas overturned by the Tribunal, and rightly so. We findabsolutely no reason to interfere with the finding ofthe Tribunal. The questions framed; all arise on facts which are all answered against the Revenue, andthe I.T.Appeals are rejected. No order as to costs. Sd/- K.VINOD CHANDRANJUDGE Sd/-ASHOK MENONJUDGE APPENDIX OF ITA 1056/2009 APPELLANT'S/S ANNEXURES: ANNEXURE ATRUE COPY OF THE ASSESSMENT ORDER.ANNEXURE BTRUE COPY OF THE ORDER OF THE CIT (A).ANNEXURE CTRUE COPY OF THE ORDER OF THE ITAT.ANNEXURE D1TRUE COPY OF STATEMENT OF PRODUCTION MANAGER.ANNEXURE D2TRUE COPY OF STATEMENT OF ACCOUNTANT.ANNEXURE E1TRUE COPY OF LETTER DATED 9.3.2006.ANNEXURE E2TRUE COPY OF LETTER DATED 20.8.2005. APPENDIX OF ITA 1544/2009 APPELLANT'S/S ANNEXURES: facts which are all answered against the Revenue, andthe I.T.Appeals are rejected. No order as to costs. Sd/- K.VINOD CHANDRANJUDGE Sd/-ASHOK MENONJUDGE APPENDIX OF ITA 1056/2009 APPELLANT'S/S ANNEXURES: ANNEXURE ATRUE COPY OF THE ASSESSMENT ORDER.ANNEXURE BTRUE COPY OF THE ORDER OF THE CIT (A).ANNEXURE CTRUE COPY OF THE ORDER OF THE ITAT.ANNEXURE D1TRUE COPY OF STATEMENT OF PRODUCTION MANAGER.ANNEXURE D2TRUE COPY OF STATEMENT OF ACCOUNTANT.ANNEXURE E1TRUE COPY OF LETTER DATED 9.3.2006.ANNEXURE E2TRUE COPY OF LETTER DATED 20.8.2005. APPENDIX OF ITA 1544/2009 APPELLANT'S/S ANNEXURES: ANNEXURE ATRUE COPY OF THE ASSESSMENT ORDERANNEXURE BTRUE COPY OF THE ORDER OF THE CIT(A)ANNEXURE CCERTIFIED COPY OF THE ORDER OF THE ITATANNEXURE D1TTRUE COPY OF STATEMENT OF PRODUCTION MANAGERANNEXURE D2TRUE COPY OF STATEMENT OF ACCOUNTANTANNEXURE E1TRUE COPY OF LETTER DATED 09.03.2006ANNEXURE E2TRUE COPY OF LETTER DATED 20.08.2005. APPENDIX OF ITA 1164/2009 APPELLANT'S/S ANNEXURES: ANNEXURE ATRUE COPY OF THE ASSESSMENT ORDERANNEXURE BTRUE COPY OF THE ORDER OF THE CIT(A)ANNEXURE CCERTIFIED COPY OF THE ORDER OF THE ITATANNEXURE D1ANNEXURE D2TRUE COPY OF STATEMENT OF ACCOUNTANTANNEXURE E1TRUE COPY OF LETTER DATED 09.03.2006ANNEXURE E2TRUE COPY OF LETTER DATED 20.08.2005. TRUE COPY OF THE ORDER OF THE CIT(A)CERTIFIED COPY OF THE ORDER OF THE ITATTTRUE COPY OF STATEMENT OF PRODUCTION MANAGERTRUE COPY OF STATEMENT OF ACCOUNTANTTRUE COPY OF LETTER DATED 09.03.2006TRUE COPY OF LETTER DATED 20.08.2005. APPENDIX OF ITA 1132/2009 APPELLANT'S/S ANNEXURES: ANNEXURE AANNEXURE BANNEXURE CANNEXURE D1ANNEXURE D2ANNEXURE E1ANNEXURE E2 TRUE COPY OF THE ASSESSMENT ORDERTRUE COPY OF THE ORDER OF THE CIT(A)CERTIFIED COPY OF THE ORDER OF THE ITATTTRUE COPY OF STATEMENT OF PRODUCTION MANAGERTRUE COPY OF STATEMENT OF ACCOUNTANTTRUE COPY OF LETTER DATED 09.03.2006TRUE COPY OF LETTER DATED 20.08.2005.