Commissioner Of Imcome Tax vs. M/S Som Distilleries & Breweries Ltd.

ITA-164-2010 1 THE HIGH COURT OF MADHYA PRADESH: JABALPUR (Division Bench) ITA No.

1 6 4 /2010 APP

ELLANT : Commissioner of Income Tax, Bhopal Versus RESPONDENT : M/s Som Distilleries & Breweries Ltd. ============================================= Coram: Hon’ble Shri Justice Ajay Kumar Mittal, Chief Justice Hon’ble Shri Justice Vijay Kumar Shukla, Judge ============================================= Appearance: Shri Sanjay Lal, Advocate for the Appellant. Shri Mukesh Agarwal, Advocate for the Respondent. ============================================= JUDGMENT

(Oral) { 05.02.2020 } Per: Ajay Kumar Mittal, Chief Justice: The present appeal has been preferred by the appellant-Revenue under Section 260-A of the Income Tax Act, 1961 (for short “the Act”) against an order dated 12.04.2010 passed by the Income Tax Appellate Tribunal, Indore Bench, Indore (hereinafter referred to as “the Tribunal”) in ITA No.22/Ind/2007 in respect of the Assessment Year 2000-01. 2. The appeal was admitted vide order dated 05.01.2016 on the following two substantial questions of law:- “1. Whether on the facts and the circumstances of the case, the ITAT was justified in law in upholding the quashing of reassessment proceedings on the ground that the reason recorded by the AO regarding escapement of income were reasons to suspect and not reasons to believe?” ITA-164-2010 2 2. Whether on the facts and in the circumstances of the case, the ITAT is justified in law in not upholding the addition of Rs.1,62,42,450/- on account of suppressed sales even when the addition was based on the norms prescribed by the Technical Excise Manual of the Excise Department? 3. Briefly stated, the facts giving rise to the present appeal, as enumerated in the memo appeal, are that the assessee, which is engaged in the business of Beer and bottling of Indian made foreign liquor (IMFL) filed its return of income declaring an income of Rs.1,60,96,580/-. The case was reopened under Section 147 of the Act as the assessee is said to have not shown the ratio of yield. Thereafter, notice under Section 148 of the Act was issued on 22.09.2004. The assessee in its reply submitted that the return filed on 30.01.2000 may be treated as return in pursuance to notice under Section 148 of the Act. The Assessing Officer vide order dated 27.03.2006, on the basis of Kerala State Excise Technical Manual formed an opinion that the assessee had suppressed the production and indulged in making the sales outside the books of accounts relating to Beer produced by it and therefore, after computing the production of Beer as per the methodology prescribed in the said manual, an addition of Rs.1,62,42,450/- was made. Feeling dissatisfied with the assessment order, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals-I), Bhopal [for short “the CIT(A)”], who vide order dated 23.10.2006 partly allowed the appeal of the assessee thereby holding that the Assessing Officer was not justified in making addition of Rs.1,62,42,450/-. Against the order of the CIT(A), the Revenue filed an appeal before the learned Tribunal, which has been dismissed vide order impugned herein. In this manner, the present appeal has been filed by the Revenue. ITA-164-2010 3 4. Learned counsel for the appellant-Revenue submitted that the Assessing Officer had reopened the case with the reason that as per the technical excise manual of Kerala some specified percentage of consumption of sugar and malt are consumed for production of same specified percentage of Beer but the assessee had not shown the said ratio of yield. According to him, on the basis of the Technical Excise Manual of Excise Department, 4672.9 BL of Beer is produced from one MT of Barley Malt and similarly as per Excise Technical rules framed by the Kerala State, 5857.14 BL worth is produced out of one MT of sugar. If 5% wastage is taken during manufacturing (as per manual) and 10% storage wastage is also allowed, which is a maximum permissible limit (as per manual) then there is a net short accountable of production of Beer by 613154 BL, which sale was not disclosed. Learned counsel argued that even if average selling price of Rs.26.49 per BL is taken out of books of accounts, it comes out to Rs.1,62,42,450/- and therefore, there was no illegality in the order passed by the Assessing Officer. 5. On the other hand, learned counsel for the respondent-assessee argued in support of the impugned order and prayed that the orders passed by the CIT(A) as well as the learned Tribunal deserve to be affirmed and this appeal be dismissed. 6. We have heard learned counsel for the parties and perused the impugned order. 7. The CIT(A) while setting aside the order passed by the Assessing Officer has given detailed reasons for not agreeing with the findings of the Assessing Officer. Inasmuch as, the CIT(A) had come to the conclusion that ITA-164-2010 4 the Assessing Officer had separately computed production of Beer on the basis of consumption of sugar whereas without addition of sugar, Beer cannot be produced from the barley malt. It was observed that the barley malt is the basic raw material for production of beer and therefore, if the production of Beer is computed only on the basis of barley malt, there will not remain any difference in the production of Beer, as worked out by applying the Excise Technical Rules framed by Kerala State. On that basis, it was held that the assessee had shown production of Beer more than what is worked out on the basis of Technical Excise Rules of Kerala State which were relied upon by the Assessing Officer. It was also noticed that the Assessing Officer had reopened the case without any evidence and that too after the block assessment was over and even the regular assessment under Section 143(3) of the Act was also completed. There was no evidence found during the course of search that there was undisclosed production. Further, no information was available with the Revenue that there was unaccounted production. The learned Tribunal concurred with the view of CIT(A) and in this view of the matter, dismissed the appeal of the Revenue holding that it was not a case for suppressed production as per the process of manufacturing which is applied in production of Beer. It was further noticed that even the Kerala State Excise Mannual which was applied by the Assessing Officer in the case of the assessee who was operating in State of Madhya Pradesh, was of no help to the reasoning given by the Assessing Officer, as it was a case of pretence and reasons to suspect only. The relevant extract of the order passed by the learned Tribunal is reproduced as under:- 9. “It is a settled judicial principle that finality of completed assessment cannot be disturbed in a light manner and therefore, the law ITA-164-2010 5 has provided safeguard in the form of reason to believe, which must exist doing so. However, in the present case, the assessee is operating in the State of M.P. and Kerala State Excise Manual is a general information and therefore, it is a case of pretence and reasons to suspect only. In this view of the matter, we hold that the Ld. CIT(A) has rightly quashed the assessment proceedings. Thus, this ground of the Revenue is dismissed. 10. In ground no.2, the Revenue has challenged the decision of Ld. CIT(A) on merits as well. However, having considered the submissions made by both the parties before us and after perusal of the order of the Ld. CIT(A), we are convinced that there is no case for suppressed production as per the manufacturing process explained to us and the A.O. has not correctly worked out the production even on the basis of Kerala State Excise Manual. In this view of the matter, ground no.2 of the Revenue is also dismissed.”