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Income Tax Appellate Tribunal, DELHI BENCH ‘C’ NEW DELHI
Before: SHRI H.S. SIDHU & SHRI L.P. SAHU
Per L.P. Sahu, Accountant Member:
This is an appeal by the Revenue against the order dated 24.01.2013 of ld. CIT(A), Meerut for the assessment year 2009-10 on the following grounds :
“1. Whether in the facts and circumstances of the case, the Ld. Commissioner of Income tax (Appeals) has erred in law in deleting the addition of Rs. 80,24,335/-without appreciating the fact that addition was made by the AO on a/c of suppression of sales of Rs. 80,24,335/- by the assessee which amounts to virtual, actual and explicit rejection of books of accounts. Further, the report regarding crushing of sugarcane and percentage yield of byproducts was collected by the A.O. from the office of Cane Commissioner situated at Meerut which cannot be held wrong and inaccurate in absence of any other established scientific formula to rebut the same.
2. Notwithstanding and without prejudice to above, whether in the facts and circumstances of the case, the Ld. Commissioner of Income tax(Appeals) has erred in law in deleting the addition of Rs. 80,24,335/- and in holding that no addition on a/c of suppression of sales could be made as in the assessment order it was not categorically mentioned that the books of accounts were not rejected under section 145(3) of the I.T. Act, 1961 by the A.O. whereas the power of the Ld. CIT(A) are coterminous with that of the A.O. and what the A.O. failed to do in CIT(A)'s opinion could have been done by the Ld. CIT(A).
Whether in the facts and circumstances of the case the Ld. Commissioner of Income tax(Appeals) has erred in comparing the results of A.Y. in question to the preceding years results ignoring the judgments laid down in following case that every assessment year is a separate unit and principal of res judicata is not applicable in Income Tax proceedings . Reliance is placed on the following:-
i. CIT Vs Syed Saddique Imam and Others (Patna) 111 ITR 475. ii. Tamilnadu Chlorates Vs JCIT (ITAT, Chennai) 98 ITD 1. iii. New Jahangir Vakil Mills Co. Ltd. Vs. CIT(SC) 49 ITR 137. iv. Kotak Mahindra Finance Ltd. Vs. DCIT(Bom) 265 ITR 114. v. K. Bhaskaran Nair Vs CIT (Kerla) 177 Taxman 478.
The brief facts of the case are that the assessee is engaged in the manufacturing of Gur, Rab, Khandsari and Gur-raskat from crushing of sugarcane. The assessee filed its return of income declaring total income of Rs.48,819/-. In response to notices u/s. 143(2) and 142(1) of the Act, the assessee produced books of account which were test checked by the AO.
During the course of assessment proceedings, the AO made enquiry from the office of the Cane Commissioner, Meerut. On the basis of this enquiry, the AO was of the view that crushing of 1 quintal of sugarcane yields 39 Kg. Khoi and 61 kg sugarcane juice. 61 kg of sugarcane juice in turn yields 7.32 kg of Gur, 7.32 kg of Rab, 2,745 kg of Khandsari and 3.965 kg of Gur-raskat. During the year under consideration the assessee is shown to have undertaken crushing of 1,06,931 quintals of sugarcane. Thus, adopting this presumed yield, the AO determined that 1.06,931 quintal of sugarcane would yield 7827.35 quintal of Gur, 727.35 Quintal of Rab, 2395.26 quintal of Khandsari and 4329.81 quintal of Gur-raskat and after applying the rate at which these items had been valued in the opening stock, the AO assumed that the above quantities of items would have been sold for Rs. 2,60,17,214/-. As the assessee had shown only sales of Rs. 1,79,92,879/- of Gur-raskat and Khandsari, it was concluded that sales of Rs. 80,24,335/- had been suppressed by the assessee and the same was added back to the total income of the assessee. The assessee carried the matter before the ld. CIT(A), who considering the following submissions of the assessee, deleted the addition observing as under :
“4. In the submissions it was explained that sugarcane juice is boiled to produce the Rab and Gur. However, one unit of sugarcane juice could be fully utilized to yield 10-12% (of the sugarcane juice) Gur or a similar quantity of Rab, but not both. If Rab is manufactured, the same would yield 6.5% (of the sugarcane juice) of Gur-raskat and 4.5% (of the sugarcane juice) of Khandsari. In brief, it has been argued that the assumption that 1 quintal of sugarcane would yield 7.32 kg of Gur. 7.32 kg of Rab, 2.745 kg of Khandsari and 3.965 kg of Gur-raskat is incorrect. A certificate issued by the Khandsari Inspector, Meerut, duly certified by the Khandsari Officer, Govt. of U.P. dated 23.01.2012 has been furnished. It states that sugarcane juice could either be utilized to produce Gur or Rab. Both the items cannot simultaneously be produced from sugarcane juice. Further, the Rab is used to produce Khandsari and Gur-raskat.
5. The submissions had been forwarded to the AO and the report of the AO 20.12.2012 has been received. The AO has only repeated what had been stated in the assessment order and has mechanically stated that the submission-of the assessee was incorrect. Once again a letter was addressed to the JCIT, Range-1, Meerut, specifically mentioning that according to the AO, the products manufactured were cumulative whereas according to the assessee the products could be alternately produced. The AO has submitted a report vide letter dated 18.01.2013 which blandly states that the assessment order is based on enquiry conducted by that office. The contention that sugarcane juice could be utilized only for making one product and not all the product has not been discussed. It appears that the AO is not interested in clarifying the basic issue under consideration.
Under the circumstances, the report of the Khandsari Inspector, Meerut is assumed to be correct. The AO was clearly in error in assuming that aggregate quantity of 21.35 kg (Gur, Rab, Khandsari and Gur-raskat) could be produced from 61 kg of sugarcane juice. It may also be mentioned that in the assessment order, the AO has stated that books of account were produced and test checked. Obviously, it implies that no defect was found in the books. If indeed the AO wanted to estimate the income of the assessee (presuming that the yield considered by the AO was correct) on the basis of alleged suppression of sales, the books of account ought to have been rejected. This has not been done. In the case under consideration the AO appears to have accepted the correctness of the books of account. It is further noted that assessments for A.Y. 2005-06 and 2006-07 have been completed u/s. 143(3) and the book results have been accepted.
In view of the above, the addition to the total income is not sustainable.”
3. The ld. DR, reiterating the grounds of appeal, submitted that the ld.CIT(A) was not justified in deleting the addition for no good reason. The ld. AR, on the other hand, relied on the order of the ld. CIT(A) and submitted that the ld. CIT(A) has considered the explanation of the assessee supported by cogent evidence, in right perspective and has rightly deleted the addition.
Having considered the rival submissions and perused the entire materials available on record, we find no justification to interfere with the order of the ld. CIT(A). It is notable that the Assessing Officer has failed to point out any defect in the books of account maintained and produced before the AO and has recorded no satisfaction as to the correctness of account books maintained by assessee. It is also worth consideration that the AO was given sufficient opportunities to rebut the contention of the assessee that no cumulative production of various items can be made simultaneously in the business of the assessee, as observed by the AO. This explanation of the assessee was based on the certificate issued by the Khandsari Inspector, Meerut duly certified by the Khandsari Officer, Govt. of Uttar Pradesh. It is also notable that the deletion of addition made by ld. CIT(A) is not based solely on the basis of acceptance of books of account in previous years, but the order of the ld. CIT(A) is based on other good reasons also. Therefore, in our opinion, the contention raised in the grounds of appeal regarding application of res judicata and the decisions relied upon, do not render any help to the Revenue in the instant case. In such state of affairs, the ld. CIT(A) after considering totality of facts and circumstances, appears to have committed no error while deleting the addition made by the AO. No material is placed on record, on behalf of the Revenue to controvert the findings reached by the ld. CIT(A) in the impugned order. We, accordingly, are not inclined to interfere with the impugned order. The appeal of the Revenue, therefore, deserves to fail.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court on 20.09.2016.