ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2, KOTA vs. M/S KRITIKA VEGITABLE OIL PVT. LTD., KOTA

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR Jh fot; iky jko] U;kf;d lnL; ,oa Jh Hkkxpan] ys[kk lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, AM vk;dj vihy la-@ITA No. 752 & 753/JP/2017 fu/kZkj.k o"kZ@Assessment Year : 2013-14 & 2014-15 cuke The ACIT, M/s Kritika Vegetable Oil Pvt. Ltd. Vs. Circle-2, NH-12, village Kasar, The. Ladpura, Kita. Dist. Kota. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AACCK 5841 Q vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : None jktLo dh vksj ls@ Revenue by : Shri R.A. Verma (Addl. CIT) lquokbZ dh rkjh[k@ Date of Hearing : 20/12/2017 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 27/02/2018 vkns'k@ ORDER

PER: VIJAY PAL RAO, J.M. These appeals by the Revenue are directed against two separate orders of ld. CIT(A), Kota dated 03.07.2017 & 21.07.2017 for the assessment years 2013-14 & 2014-15. Since, none has appeared on behalf of the assessee despite notices issued to the assessee through RPAD on two occasions and neither the notices were received back un- served nor the acknowledgement were received on both occasions

ITA No. 752 & 753/JP/2017 ACIT v M/s Kritika vegetable Oil Pvt. Ltd.

therefore, we proposed to hear and disposed off these two appeals of

the Revenue ex-parte. The Revenue has raised the following grounds:-

(A.Y. 2013-14)

“ On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in :- (iii) Whether on the facts and in circumstances of the case, the ld. CIT(A) has erred in deleting the Trading Addition of Rs. 40,10,037/- as the assessee has declared more G.P. & N.P. rate in the previous year in comparison to this year. (iv) The appellant craves liberty to raise additional ground and to modify/amend the ground of appeal at the time of hearing.” (A.Y. 2014-15) “i) Whether on the facts and in circumstances of the case, the ld. CIT(A) has erred in deleting the Trading Addition of Rs. 54,77,768/- as the assessee has declared more G.P. & N.P. rate in the previous year in comparison to this year. ii) The appellant craves liberty to raise additional ground and to modify/amend the ground of appeal at the time of hearing.” 2. For the A.Y. 2013-14:- The Assessing Officer rejecting the

books of account of the assessee because of not maintaining any stock

register containing quantitative details of day to day purchases &

consumption of raw material, production of finished goods/bye-products

and purchase and sale of quality-wise & variety-wise various raw

materials, intermediate goods, finished products and bye-products. The

ITA No. 752 & 753/JP/2017 ACIT v M/s Kritika vegetable Oil Pvt. Ltd.

AO proceeded to assessee income of the assessee on estimated basis

by applying GP @ 1.373% as against the GP declared by the assessee

@ 1.23 and consequently AO made an addition of Rs. 48,10,037/-. On

appeal, the ld. CIT(A) though confirmed the rejection of books of

accounts u/s 145(3) however, the ld. CIT(A) has restricted the addition

made by the AO by adopting the GP 1.25% as against G.P. @ 1.373%

allowed by the AO. Accordingly the ld. CIT(A) has confirmed the

addition to the extent of Rs. 8 lacs as against Rs. 48,10,037/- by the

AO.

on record. None has appeared on behalf of the assessee therefore, we

have no privilege to hear the assessee. The limited grievance of the

Revenue is only to the extent of the GP rate applied by the ld. CIT(A)at

1.25 as against 1.373% applied by the AO. We find that the Assessing

Officer has worked out the GP rate by considering the past history of

the GP rate declared by the assessee including the current year. The

relevant finding of the assessee on this issue as under:-

“Considering the above facts and circumstances of the case, after rejection of the books of accounts, it is considered appropriate to apply the G.P. rate of 1.373% instead of G.P. rate declared by the @ 1.23% on the gross receipts of the assessee. In case of 3

ITA No. 752 & 753/JP/2017 ACIT v M/s Kritika vegetable Oil Pvt. Ltd.

Sumati Dayal & Other, the Hon’ble Supreme Court has held that assessee’s own case is the best case for comparison. In this case, in view of the above facts, the assessee has failed to explain reasons for fall in G.P. as well as N.P. Therefore, after rejection of books of accounts as mentioned above, the average of g.p. rate of this year and last two years is taken to take care of any cyclic trends in this line of business (1.57%+1.32%+1.23%/= 1373%, Further, in comparable cases in this line of business, namely M/s Goyal Proteins Ltd., M/s Goyal Veg. Oil Ltd & M/s Shiv Agrevo Ltd. assessed with the undersigned have shown better G.P. & N.P. results for A.Y. The assessee has not given any proper believable reasons for fall in G.P. & N.P. and the above mentioned defects were there is its books of account. The assessee has failed to bring any evidence to rebut the defects pointed out to him during the examination of books of accounts. The onus of proving and maintaining proper books of accounts are upon the asessee if he insist that he is showing the actual profit than he is required to comply with provisions and maintain proper records and books of accounts. The one who seeks equity must do equity himself.” Thus, it is clear that the AO has taken the average GP by taking into

consideration the past G.P. rate declared by the assessee including the

GP of the current year. On the other hand, ld. CIT(A) has restricted the

addition only on adhoc basis as under:-

“Thus in a totality of the facts involved, I am of the opinion that the estimation of GP @ 1.373% by the A.O. instead of 1.23% shown by the appellant was both on the higher side & also unsustainable. To serve the best interest of justice and to address the concerns raised by the A.O., I direct that an increase of Rs. 8,00,000/- towards the gross profit would served the purchase.

ITA No. 752 & 753/JP/2017 ACIT v M/s Kritika vegetable Oil Pvt. Ltd.

This would taken the G.P. to 1.25% which is considered reasonable.” From the comparative finding of AO and ld. CIT(A) it is discernable

that the AO applied G.P. rate on the basis of average rate declared by

the assessee in the past two years and in the year under consideration.

On the contrary, the ld. CIT(A) has restricted the addition by taking an

adhoc disallowance/ addition without any basis much less the proper

and reasonable basis. Accordingly, we are of the considered view that

when the AO has taken the GP on the basis of a proper and reasonable

basis and therefore, the average gross profit declared by the assessee

in past was taken by the AO for estimation of income for the year under

consideration. Since, the assessee has not challenged the order of the

ld. CIT(A) therefore, the issue of rejecting the books of account has

attained finality and consequently the income of the assessee has to be

computed on some reasonable and proper estimate basis. We find that

the basis adopted by the AO for estimation of income is proper and

reasonable and accordingly, cannot be faulted with. Hence, we set

aside the impugned order of the ld. CIT(A) qua this issue and restore

the order of the Assessing Officer.

ITA No. 752 & 753/JP/2017 ACIT v M/s Kritika vegetable Oil Pvt. Ltd.

For the A.Y. 2014-15:- The Assessing Officer after rejecting of 4.

books of accounts estimated the income of the assessee by applying

the net profit rate 0.19%. The ld. CIT(A) though confirmed the action

of the AO rejecting the books of accounts u/s 145(3) of the Act

however, the ld. CIT(A) restricted the estimate of profit by taking the

loss of the assessee @ 1% instead of 5.5% declared by the assessee.

Since, in the earlier assessment year 2013-14 the AO as well as ld.

CIT(A) has applied the gross profit rate to estimate the income

therefore, to maintain the rule of consistency the income of the

assessee was required to be estimated by adopting the proper and

reasonable estimate based on the past history of the G.P. rate declared

by the assessee. There is no dispute that the AO has given the past

history of G.P. rate declared by the assessee however, while estimating

the income the AO applied the net profit rate instead of G.P. rate.

Hence, in view of the facts and circumstances of the case and to

maintain the consistency of view we set aside this issue to the record of

the Assessing Officer for re-computing the income of the assessee by

taking the average GP based on past history of GP declared by the

assessee.

ITA No. 752 & 753/JP/2017 ACIT v M/s Kritika vegetable Oil Pvt. Ltd. In the result, the appeal of the Revenue for the A.Y. 2013-14 is allowed and for the A.Y. 2014-15 is allowed for statistical purposes.

Order pronounced in the open court on 27/02/2018 Sd/- Sd/- ¼Hkkxpan ½ ¼fot; iky jko½ (Bhagchand) (Vijay Pal Rao) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 27/02/2018. *Santosh. आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- ACIT, Circle-2, Kota. 2. izR;FkhZ@ The Respondent- M/s Kritika Vegetable Oil Pvt. Ltd., Kotak. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 6. xkMZ QkbZy@ Guard File {ITA No. 752 & 753/JP/2017} vkns'kkuqlkj@ By order,

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