DAPHALAPURE DAIRY AND AGRO PRODUCTS,BELGAVI vs. ITO WARD 1, BELGAVI

Assessee has raised following grounds of appeal :

Brief facts of the case are that the assessee is a partnership firm engaged in the business of wholesale purchase and sale of milk under the name and style of Dahalapure Dairy and Agro Products. Income of Rs.77,420/- declared in the return for A.Y. 2015-16 e-filed on 11.09.2015. Assessment proceedings u/s.143(3) of the Act carried out and concluded on 07.09.2017 assessing income at Rs.6,77,446/- after making addition for unproved sundry creditors at Rs.5,16,489/- and disallowance of expenses at Rs.83,543/-. Thereafter, assessment records were called for by ld. PCIT under the powers provided u/s.263 of the Act and vide order dated 18.06.2019 ld. PCIT directed the Assessing Officer to verify the correctness of purchase price debited to the Trading Account. In the proceedings u/s.143(3) r.w.s.263 of the Act, ld. Assessing Officer called for the details of the purchase of milk. It was submitted by the assessee that rates of milk purchase per litre vary from one supplier to other and also depends upon the quality of milk, smell, fat content etc. However, ld. Assessing Officer was not satisfied with the submissions filed by the assessee and estimated the inflated milk purchase rate per litre at Rs.2.29 per litre on the total quantity purchased during the year and disallowed purchases of Rs.65,86,346/- and assessed income at Rs.72,63,792/-.

Aggrieved assessee preferred appeal before ld.CIT(A) and again made detailed submissions, however, ld.CIT(A) dismissed the assessee’s appeal observing as follows :

Aggrieved assessee is now in appeal before this Tribunal.

Ld. Counsel for the assessee at the outset submitted that application dated 29.04.2026 filed requesting for the admission of additional evidences as they go to the root of the matter relating to the issue involved in terms of benchmarking of purchase price of milk and also demonstrated that appellants gross profit is consistent. It is also stated that the entire payments to all vendors have been made through banking channel and has not been disputed at any level. The additional evidences are placed at pages 162 to 200, price of party-wise summary of milk sale with milk type and quantity with benchmarking of milk price, ledger extract of milk purchase and SMP price, sample copies of purchase invoice, SMP price, gross profit, invoices for previous and subsequent financial years and audited financial statements for F.Y. 2010- 11 to 2017-18 excluding F.Y. 2014-15. 7. Referring to these additional evidences, ld. Counsel for the assessee prayed that the matter may please be restored to the file of ld. Jurisdictional Assessing Officer for necessary examination of the genuineness of purchases shown by the assessee in the audited financial statements

On the other hand, ld. DR supported the order of ld.CIT(A).

We have heard the rival contentions and perused the record placed before us. The only issue for our consideration is that whether the ld.CIT(A) is justified in confirming the disallowance of purchases of Rs.65,86,346/- made by the Assessing Officer calculated on the basis of difference between the average rate per lite of milk debited to Trading Account less average rate of milk per litre paid to vendors and the difference of inflated purchase price per litre calculated at Rs.2.29 per litre. Ld. Assessing Officer has applied this rate on 28,76,134.36 litres of milk purchased during the year.

Before us, assessee has claimed that the books of account of the assessee firm are being regularly audited for past many years and the gross profit to sales from A.Y. 2012- 13 to A.Y. 2014-15 has been 1.62%, 1.79% and 1.86% and that for the subsequent assessment years A.Y. 2016-17 A.Y. 2017-18 and A.Y.2018-19 gross profit rate is 3.96%, 6.20% and 3.29% respectively. During the course of assessment proceedings and before ld.CIT(A) assessee was asked to file the summary of milk sale, milk type and quantity with benchmarking of milk purchase and the extract of milk purchase along with sample copies of purchases but these details could not be furnished and application for admission of additional evidences has been filed which are placed at pages 162 to 200 of the paper book. These details contain party wise summary of milk sale, milk type and quantity with benchmarking of milk purchases along with bifurcation of Buffalow and Cow Milk and the sales made to other dairies and the proportion of Buffalow Milk and Cow Milk is 90.79% 9.21%. Details have also been filed for the SMP purchase price per litre for Buffalow and Cow Milk thereby calculating the effective price for selling milk at Rs.24.60 per litres for Cow Milk and Rs.33/- per litre for Buffalow Milk. Ledger extracts have also been furnished for the milk purchases. Audited financial statement for the three preceding assessment years have also been filed showing that the assessee is maintaining details consistently and the gross profit is also consistent and there is no abnormal increase in purchase price during the year.

We however considering the fact that these additional evidences were not placed before the lower authorities and they go to the root of the matter, therefore, considering the prayer made by ld. Counsel for the assessee, we deem it appropriate to admit the additional evidences and restore the issues back to the file of ld. Jurisdictional Assessing Officer for denovo examination and adjudication of alleged issue. Needless to mention that ld. JAO in the set aside proceedings shall provide reasonable opportunity to the assessee. Impugned order is set aside and grounds of appeal raised by the assessee are allowed for statistical purposes.

In the result, the appeal of the assessee is allowed for statistical purposes.

The Pr. CIT concerned. विभ गीय प्रतितनधि, आयकर अपीलीय अधिकरण, Panaji 4. ‘DB’ Bench / DR, ITAT, Panaji ‘DB’ Bench ग र्ड फ़ इल / Guard File. 5. आिेश नुस र / BY ORDER,