JCIT SPL. RANGE, DELHI vs. UMANG DAIRIES LTD., NEW DELHI

The grounds of appeal are as under:-

The Ld. Counsel for the assessee submitted that the above appeal is squarely covered by the Co-ordinate Bench for the Assessment Year 2012-13 in Assessee’s own case in ITA No. 1036/Del/2019. The Ld. DR has not disputed the above submission made by the assessee.

We have heard the parties and perused the material available on record and gave our thoughtful consideration. It is found that the similar additions have been made by the A.O. which has been ultimately challenged in in Assessee’s own case for Assessment Year 2012-13 wherein the Coordinate Bench of the Tribunal has allowed the appeal the appeal of the assessee wherein it is held as under:-

At the outset it is pertinent to mention that admittedly assessee has earned FAT & SNF gain which has already been offered for tax. Ld. AO has found a case of unexplained purchase. In this context Ld. CIT(A) has rightly observed and reasoned that then disallowance can be made by Ld. AO only in a case where claim for deduction for the purchases is also made. In the present case, no deduction qua purchase has been claimed so the Ld. AO erred in making addition for the so called alleged unexplained purchases. The question thus involved was not if there were unexplained purchases but not verifiable gains then the resultant action was to exclude such gains amount from taxing as an income.

Now primarily the Ld. CIT(A) has considered the agreement and remand report to conclude that the nature of business module was such that the gains were attributable to the contract work for Mother dairy. It can be observed that Ld. AO has proceeded on his own belief of the matter and assuming that ideally the quantum of FAT & SNF received from the Mother Dairy should tally with the FAT & SNF sent back in the contract processing work under taken by the assessee. Ld. CIT(A) relied Annexure: A-6 of Written submission, which the assessee company had submitted that w.e.f 01.04.2014, Mother Dairies Foods & vegetable Pvt. Ltd has reduced the processing loss from 1% to 0.8%. It was also evident from correspondence exchanged by it and thus, Ld. CIT(A) has rightly held these facts are not theoretical.

Factually the Ld. AO concluded that MMPO returns submitted by the assessee do not include the contract/job work done by the assessee for Mother Dairy. Also, the trading account for the year does not includes stocks related to contract manufacturing. Ld. AO noted that the total quantities of opening stocks and procurement of milk during the year is reflected by the assessee as 36707.30 M.T. where as the milk procurement for contract manufacturing is only 1594.33 M.T. which is very about 4.34% of the total milk shown in the trading account. Thus, Ld AO doubted that the entire gain is owing to contract manufacturing.

However, what is established before Ld. CIT(A) is that the gain on account of reduction in process loss due to modern facilities is used for manufacturing of Ghee/Butter/SMP/DW/Other products, which is part & parcel of closing stock factored in trading account (part of MMPO report)/audited annual accounts. Therefore, the same is attributable to the contract work for Mother Dairies Ltd.

The assessee company established before the Ld. CIT(A) that there was typographical mistake in reporting of quantification of milk procured for contract manufacturing which was actually 159433 M.T (1594.33 lacs litres) instead of 1594.33 M.T as mentioned in audited reports. To substantiate the correct figure, a certificate given by the Mother Dairy Fruit and Vegetable Private Limited was submitted during the appellate proceedings which was also re-verified by Ld. CIT(A). This was bolstered by Ld. CIT by findings ; “The audited annual accounts of the appellant company reveals that it has earned conversion/job charges of Rs. 16.83 Cr in the year under consideration and if per ltr conversion charges is calculated considering the figure of 1594.33 M.T milk processed as per AO allegation then it comes to Rs. 105.56 per Ltr whereas on certified figure, it comes to Rs. 1.06 per Ltr..”

The Bench is of considered opinion that assessment order under the Act has to be passed on cogent evidence and sound reasoning which is on the basis of verifiable events. The reasons may be subjective, however the reasons inducing the said belief must always be objective. The objective reasons should lead to the formation of the subjective belief that, income is liable for assessment. In the case in hand the Ld. AO has relied his belief that ideally the quantum of FAT / SNF received from Mother Dairy should tally with the FAT & SNF sent back on completion of processing work. However, he failed to appreciate that every business activity has some inherent peculiarities which bring some incidental profits to the businessman than may actually appear to a prudent mind. When raised before Revenue, same need to be appreciated without much emphasis on evidence of every thing being incorporated in agreements. In present case, even the assumptions on which, the Ld. AO proceeded, in absence of evidence, have been factually corrected by Ld. CIT(A) on basis of additional evidence and no interference in the same is called for. The grounds no 1 and 2 raised by the revenue have no substance. The same are determined against the Revenue.

As with regard to substantive ground no 3 Ld Sr DR was unable to cite any proposition of law then relied by Ld CIT(A), in its impugned order, to distinguish. So the same is also decided against the Revenue.”

Since there is no change of circumstances emerges out of the record and also not been pointed out by the parties, by respectfully following the order of the Co-ordinate Bench for the Assessment Year 2012-13 in Assessee’s own case, we do not find any merit in the grounds of appeal of the Revenue, accordingly, the Appeal filed by the Revenue is dismissed.