SM FEEDS & FARMS INDIA PRIVATE LIMITED,CHENNAI vs. DCIT COMPANY RANGE 6(2), CHENNAI

The assessee has filed the present appeal against the order of the Commissioner of Income Tax (Appeals)-15, Chennai, dated 29.12.2017 and pertains to assessment year 2014-15.

Shri K. Ravi, the Ld.counsel for the assessee, submitted that there was a survey in the premises of the assessee on 23.12.2013. On the basis of the material found during the course of survey operation, according to the Ld. counsel, the Revenue authorities reopened the assessment under Section 147 of the Income-tax Act, 1961 (in short 'the Act'). The Assessing Officer without rejecting the books of account maintained by the assessee in the regular course of its business, estimated the profit at 5.5% on the total sales. According to the Ld. counsel, unless the books of account are not rejected, the Assessing Officer cannot estimate the profit in respect of sales and purchase recorded in the books of account. Therefore, according to the Ld. counsel, the estimation of profit may be restricted to purchase and sales which are not recorded in the books of account.

On the contrary, Shri AR.V. Sreenivasan, the Ld. Departmental Representative, submitted that for the assessment years 2011-12, 2012- 13 and 2013-14, an identical issue came before this Tribunal. According to the Ld. D.R., the assessee inflated the purchases by falsely claiming that the purchases were made from non-existent entities. According to the Ld. D.R., the assessee has not purchased any material and inflated the purchases in the books to the extent of ₹24.86 crores. According to the Ld. D.R., during the course of survey operation, the Revenue

Shri AR.V. Sreenivasan, the Ld. Departmental Representative further submitted that a statement was recorded from the Managing Director of the assessee-company. During the course of survey operation, according to the Ld. D.R., the Managing Director of the assessee-company admitted that the purchases were never made and the payments were also not made. The Managing Director specifically admitted before the Revenue authorities that the assessee-company boosted the sales also. Based upon the material found during the course of survey operation and the clarification made by the Managing Director, according to the Ld. D.R., the Assessing Officer had no other way except to estimate the profit. This Tribunal for the assessment years 2011-12, 2012-13 and 2013-14, found that the profit has to be estimated at 5.5% on the entire turnover including bogus purchases and fictitious sales. In fact, according to the Ld. D.R., the Assessing Officer and the CIT(Appeals) have followed the order of this Tribunal on identical situation.

We have considered the rival submissions on either side and perused the relevant material available on record. It is an admitted fact that there were inflated purchases and the payments were not made. In fact, the assessee admitted that the purchases were recorded as if they were made from non-existent entities. The sales were also admittedly boosted. In such circumstances, the books of account said to be maintained by the assessee may not reflect the correct state of affairs of the assessee’s business transactions. When the Revenue authorities claim that they have identified ₹24.86 Crores of purchases from non- existent entities, this Tribunal is of the considered opinion that the Assessing Officer had no other way except to estimate the profit of the assessee.

When the appeal of the assessee for assessment years 2011-12, 2012-13 and 2013-14 came before this Tribunal, the Ld.counsel for the assessee himself submitted that he would not have any objection to estimate the gross profit and turnover reasonably. After taking into consideration of average profit disclosed by the assessee for earlier assessment year from 4% to 6%, this Tribunal is of the considered opinion that the estimation of profit at 5.5% would meet the ends of justice. Since both the authorities below followed the order of this Tribunal in the assessee's own case for assessment years 2011-12,

Since the appeal was disposed of, the Stay Petition filed by the assessee becomes infructuous. Therefore, the Stay Petition is dismissed as infructuous.

In the result, both the appeal and the Stay Petition filed by the assessee stand dismissed.