Principal Commissioner Of Income Tax 3 v. Waves Food Pvt. Ltd

IN THE HIGH COURT OF GUJARAT AT AHMEDABADR/TAX APPEAL NO. 271 of 2019 ==========================================================PRINCIPAL COMMISSIONER OF INCOME TAX 3 VersusWAVES FOOD PVT. LTD. ========================================================== Appearance:MRS MAUNA M BHATT(174) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALAand HONOURABLE MR.JUSTICE A.C. RAO Date : 15/07/2019 ORAL ORDER (PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) 1This Tax Appeal under Section 260A of the Income Tax Act, 1961 (for short, “the Act, 1961”) is at the instance of the Revenue and is directed against the order passed by the Income Tax Appellate Tribunal, “D” Bench, Ahmedabad dated 15[th] November 2018 in the ITA No.352/Ahd/2014 for the assessment year 2008-09. 2The Revenue has proposed the following question of law: “Whether the Appellate Tribunal has erred in law and on facts in upholding the order of CIT(A) in deleting the addition made by the Assessing Officer for Rs.1,71,69,560/- on account of loss shown in the Gross Profit?” 3The Tribunal, in its impugned order, observed as under: “26.We have heard the rival contentions and perused the materials available on record. In the instant case, we note that the assessee has made sales to parties at a price lower than the purchase price of the books. Therefore, the asssessee has incurred a gross loss in its trading account. The assessee claimed that the goods were sold at agreed price despite the fact, the cost of raw material has increased. As such, the assessee did not increase the corresponding sale price. 26.1It is a fact on record that no prudent businessperson will sell the goods at losses. However, in case the assessee has committed to supply goods at an agreed price without having any escalation clause in the agreement then the assessee is duty bound to supply the goods at the same rate, despite the fact the price of raw material cost has increased. Thus, whatever loss has been incurred is eligible as it arises in the course of the business of the assessee. However, the onus lies on the assessee to prove that the assessee was under the obligation to supply the goods at a price agreed with its parties. 26.2 The revenue alleges that there is not supporting evidence substantiate the assessee claims that the goods were sold at the agreed price which is lesser than the cost of purchase. However, we note that the assessee has furnished the copies of the sales bill to the AO as evident from the finding of the ld. CIT-A which has also not been proved wrong by the ld. DR. In case the AO had any doubt about the sale price charged from the parties, then he could have verified the same from the parties, but he failed to do so. 26.3The AO also observed that no prudent businessperson would sell the goods at a price less than the cost. Indeed the observation of the AO appears to be correct, but there was no evidence brought on record to prove the submission of the assessee wrong, i.e. the sale was made at loss. There was also no allegation that the assessee has sold the goods at a higher value but declared the same at a lesser value in the books. Thus in the absence of documentary evidence, we are not inclined to agree with the finding of the AO/arguments of the ld. DR. Accordingly we conclude that the AO has made the addition on the basis of surmise and conjuncture. Thus we do not find any infirmity in the order of ld. CIT-A and accordingly we decline to interfere. Hence, the ground of appeal of the Revenue is dismissed.” 4Thus, it appears from the materials on record that the Appellate Tribunal concurred with the findings recorded by the CIT(A) and took the view that there was evidence to substantiate the claim of the 4Thus, it appears from the materials on record that the Appellate Tribunal concurred with the findings recorded by the CIT(A) and took the view that there was evidence to substantiate the claim of the assessee that he had to sell his goods at the agreed price which was lesser than the cost of purchase. There is a finding of fact arrived at by the two Revenue authorities that the assessee was able to furnish copies of the sales bill and nothing was found suspicious about the transaction. There is a concurrent finding recorded by the two Revenue authorities that there is nothing to indicate that the assessee had sold the goods at a higher value, but had deliberately declared the same at a lesser value in the books. 5In view of the concurrent findings arrived at by the two revenue authorities, we are not inclined to disturb the same. There is no perversity in the factual findings recorded by the Revenue authorities. 6In the result, this appeal, therefore, fails and is hereby dismissed. (J. B. PARDIWALA, J) CHANDRESH (A. C. RAO, J)