CIT, PATIALA vs. PATIALA DISTT. COOP. MILK PRODUCERS UNION LTD. PB

ITA/446/2009HC Punjab & HaryanaPHHC01084554200919 August 2009Author: MR. JUSTICE ADARSH KUMAR GOEL,MRS JUSTICE DAYA CHAUDHARY5 pages
AI SummaryDismissed

What were the facts?

The Revenue, Commissioner of Income Tax, Patiala, appealed against an order of the Income Tax Appellate Tribunal (ITAT) dated December 31, 2008, for Assessment Year 2004-05. The assessee, The Patiala Distt. Coop. Milk Producers’ Union Ltd., a cooperative society engaged in milk processing, had filed its return declaring a loss. The Assessing Officer (AO) rejected the assessee's books of account and made an assessment by applying a Gross Profit (GP) rate of 22.29%. The Commissioner of Income Tax (Appeals) [CIT(A)] set aside the AO's order, holding that there was no justification for rejecting the books of account, noting the assessee's explanation for decreased sales, consistent stock valuation, and adherence to the same method of valuation for years.

What did the High Court hold?

The High Court held that the findings recorded by the ITAT were arrived at by appreciating relevant circumstances and were not shown to be perverse. The Court found no infirmity in the ITAT's upholding of the CIT(A)'s order. The ITAT had observed that the AO did not point out any defect in the books of account and applied the GP rate from the earlier year without sufficient basis, especially when purchase rates had increased. The ITAT also noted that the assessee maintained books with the same procedure as earlier years, possessed all bills and vouchers, and followed the FIFO method for stock valuation. The explanation provided by the assessee regarding outsourcing for ghee preparation and the reclassification of certain expenses as direct expenses was considered by the CIT(A), leading to a comparable GP rate for different years. The ITAT found that the ACIT's letter merely affirmed the AO's stand without pinpointing any adverse issues. Therefore, the High Court concluded that no substantial question of law arose from the ITAT's order.

What were the issues?

1. Whether on the facts and in the circumstances of the case, the ITAT is right in law in confirming the findings of the CIT(A) by holding that there is no case for rejection of books of accounts, ignoring the fact that the assessee had failed to furnish the requisite separate trading and profit & loss account of trading of various commodities and that of the bottling plant, and as such, in terms of section 114 of the Evidence Act, the AO was justified in taking an adverse view? (Question of law/mixed law and fact, turning on Section 114 of the Evidence Act). 2. Whether on the facts and in the circumstances of the case, the ITAT is legally justified in holding that CIT(A) is justified in coming to a particular conclusion, especially when ACIT’s letter dated 28.02.2008 addressed to the CIT(A) has merely affirmed the stand taken in the assessment order and nothing adverse had been pinpointed, even when the assessee had failed to furnish the requisite separate trading and profit & loss account of various commodities and that of the bottling plant? (Question of law/mixed law and fact). Assessee's Contentions: The judgment does not record specific contentions made by the assessee before the High Court. However, the ITAT's observations indicate the assessee argued that the reason for decreased sales and GP rate was due to outsourcing for ghee preparation by supplying milk to another company, and that certain expenses shown in the Profit & Loss account for 2002-03 were actually manufacturing expenses. The assessee also contended that these expenses, when considered as direct expenses, brought the GP rate for 2002-03 to 19.26%, almost the same as 19.22% for 2003-04, and that these expenses were extraordinary for 2002-03. Revenue's Contentions: The Revenue argued that the assessee failed to furnish separate trading and profit & loss accounts for various commodities and the bottling plant, justifying an adverse view under Section 114 of the Evidence Act. The Revenue also contended that the ACIT's letter to the CIT(A) affirmed the AO's stand, and nothing adverse was pinpointed despite the failure to furnish separate accounts.

Which sections of the Income-tax Act were involved?

Section 260A,Section 114

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. 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 GOEL HON'BLE MRS. JUSTICE DAYA CHAUDHARY Present:- Mr. Rajesh Katoch, Standing Counsel for the Revenue. -----

ORDER:

1.

The Revenue has preferred this appeal under Section 260A of the Income Tax Act, 1961 (for short, “the Act”) against order 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 raise following substantial questions of law:- “(i) Whether on the facts and in the circumstances of the case, the ITAT is right in law in confirming the findings of the CIT(A) by holding that there is no case for rejection of books of accounts, ignoring the fact that the assessee had failed to furnish the requisite separate trading and profit & loss account of trading of various commodities

ITA No.446 of 2009 and that of the bottling plant and as such, in terms of section 114 of Evidence Act, the A

The order continues below.

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