The Commissioner Of Income Tax, Patiala v. The Patiala Distt. Coop. Milk Producers’ Union Ltd

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. I.T.A. No.446 of 2009(O&M)Date of decision: 19.8.2009 The Commissioner of Income Tax, Patiala. -----Appellant Vs. The Patiala Distt. Coop. Milk Producers’ Union Ltd. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOELHON'BLE MRS. JUSTICE DAYA CHAUDHARY Present:-Mr. Rajesh Katoch, Standing Counselfor the Revenue. for the Revenue. ----- ORDER: 1. The Revenue has preferred this appeal under Section260A of the Income Tax Act, 1961 (for short, “the Act”) againstorder dated 31.12.2008 of the Income Tax Appellate Tribunal,Chandigarh Bench ‘A’, Chandigarh passed in I.T.A. No.593/Chandi/2008 for the assessment year 2004-05, proposing to raisefollowing substantial questions of law:- “(i)Whether on the facts and in the circumstancesof the case, the ITAT is right in law in confirmingthe findings of the CIT(A) by holding that there isno case for rejection of books of accounts,ignoring the fact that the assessee had failed tofurnish the requisite separate trading and profit& loss account of trading of various commoditiesof the case, the ITAT is right in law in confirmingthe findings of the CIT(A) by holding that there isno case for rejection of books of accounts,ignoring the fact that the assessee had failed tofurnish the requisite separate trading and profit& loss account of trading of various commodities and that of the bottling plant and as such, interms of section 114 of Evidence Act, the AOwas justified in taking an adverse view.terms of section 114 of Evidence Act, the AOwas justified in taking an adverse view. (ii) Whether on the facts and in the circumstancesof the case, the ITAT is legally justified inholding that CIT(A) is justified in coming to aparticular conclusion, especially when ACIT’sletter dated 28.02.2008 addressed to the CIT(A)of the case, the ITAT is legally justified inholding that CIT(A) is justified in coming to aparticular conclusion, especially when ACIT’sletter dated 28.02.2008 addressed to the CIT(A) has merely affirmed the stand taken in theassessment order and nothing adverse hadbeen pin-pointed, even when the assessee hadfailed to furnish the requisite separate tradingand profit & loss account of various commoditiesand that of the bottling plant.”assessment order and nothing adverse hadbeen pin-pointed, even when the assessee hadfailed to furnish the requisite separate tradingand profit & loss account of various commoditiesand that of the bottling plant.” 2. The assessee is a cooperative society engaged in thebusiness of milk processing. It filed its return, declaring loss.The Assessing Officer, rejecting the books of account, madeassessment by applying Gross Profit rate of 22.29%. The CIT(A)set aside the order of the Assessing Officer and held that therewas no justification for rejecting the books of account. Theassessee had given explanation for decrease in sale. There wasno infirmity in the valuation of stock. The assessee followed thesame method of valuation consistently for the last so many years. 3. The Tribunal upheld the said view with the followingobservations:- “We have considered the rival submissions andperused the material available on the file. Brief factsare that the assessee was engaged in the business of 2. The assessee is a cooperative society engaged in thebusiness of milk processing. It filed its return, declaring loss.The Assessing Officer, rejecting the books of account, madeassessment by applying Gross Profit rate of 22.29%. The CIT(A)set aside the order of the Assessing Officer and held that therewas no justification for rejecting the books of account. Theassessee had given explanation for decrease in sale. There wasno infirmity in the valuation of stock. The assessee followed thesame method of valuation consistently for the last so many years. 3. The Tribunal upheld the said view with the followingobservations:- “We have considered the rival submissions andperused the material available on the file. Brief factsare that the assessee was engaged in the business of milk processing, declared loss of Rs.33,91,918 in itsreturn, filed on 29.10.2004 which was accompaniedby computation of total income, tax audit report, TDScertificate and other necessary documents. Theassessee attended the assessment proceedings fromtime to time and furnished requisite information /details called for and the same were duly test checkedwith the account books produced by the assessee.The Assessing Officer assessed the returned incomeat Rs.66,70,872 by rejecting the books of account byapplying Gross Profit rate as per last year whichresulted into addition of Rs.1,00,47,230. Admittedlythe method of accountancy was same as was for theearlier year. There is no denying the fact that thebooks of account were maintained with the sameprocedure. The assessee duly maintained all thebills, vouchers etc. The Assessing Officer did notpoint out any defect in the books of account andapplied Gross Profit rate as was in the earlier year.Admittedly, every Assessment Year is a separate andindependent year which should be considered to thefacts of that year. Even otherwise the AssessingOfficer has not given any basis while increasing theGross Profit rate while comparing the rate ofpurchases and sales of the last year specially whenthe rate of purchases for the impugned AssessmentYear considerably increased in comparison to lastyear. The conclusion as drawn in Para 3.2 of theimpugned order is reproduced herewith:- “During the appellate proceedings, the Counselfor the appellant Shri Sanjay Goyal attendedand argued that the reason for decrease in saleand Gross Profit rate is due to the fact thatoutsourcing for preparation of Ghee was doneby supplying 8162860 liters milk to M/s Milk Specialities Ltd. Dera Bassi in 2002-03 and theappellant neither entered into agreement toprepare ghee before the Assessment Year2003-04 nor after that. He has also contendedthat the return shows that for the year 2002-03conversion charges of Rs.71,80,109 packingexpenses of Rs.7,18,109 and purchase tax ofRs.32,57,072 are actually manufacturingexpenses but do not shown in that expenses inmanufacturing account rather these were shownin Profit & loss account resulting into higherbooking of Gross Profit by Rs.1,11,55,290 in2002-03. Considering these expenses as directexpenses the Gross Profit rate comes to19.26% for the year 2002-03 whereas for theyear 2003-04 it is 19.22% i.e. almost same asper last year. So, in this way there is nodifference in Gross Profit rate. He also statedthat a comparative chart for the last three yearshas been submitted during assessment whichclearly shows that above mentioned expensesare extraordinary for 2002-03 as compared toother years. So, reasons to be ascertained forsuch variance but Assessing Officer fails to takeinto account this variance.” If the facts mentioned in the afore-mentioned paraand the conclusion drawn in Para 3.6 of the impugnedorder, are analyzed we have not found any infirmity inthe impugned order specially when the AssessingOfficer has not assigned any reason while coming to aparticular conclusion specially when no defect waspointed out in the valuation of closing stock. Theassessee has followed the Fifo method while valuingthe stock at cost and copies of bills were submittedduring assessment proceedings and the latest rateswere available with the assessee in respect of itsproducts. In the light of these facts it can be said thatLd. CIT(A) is justified in coming to a particularconclusion specially when ACIT vide letter dated28.2.2008, addressed to the Ld. First Appellate Authority has merely affirmed the stand taken inassessment order and nothing adverse had beenpinpointed. This letter was duly considered in theimpugned order which was passed on 21.4.2008. Inthe light of these facts, the stand of the Ld. CIT(A) isupheld.” 3. We have heard learned counsel for the appellant. 4. Findings recorded above show that the same havebeen arrived at by appreciating relevant circumstances and arenot shown to be perverse. No substantial question of law arises. 5. The appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE August 19, 2009CHAUDHARY )ashwani ( JUDGE DAYA