ACIT, SANGRUR vs. M/S GANPATI FOODS, PATRAN

आदेश/Order

Per Sanjay Garg, Judicial Member:

The captioned are the cross appeals, one by the assessee and other by the Revenue against the order dated 26.10.2016 of the Commissioner of Income Tax (Appeals), Patiala [hereinafter referred to as ‘CIT(A)’].

ITA Nos. 7/Chd/2017 & 1405/Chd/2016- M/s Ganpati Foods, Pataran 2 of account of the assessee for the year under consideration observing that

there was a variation in electric consumption viz a viz production of the

assessee. There were some instances noticed by the Assessing officer of

valuing the closing stock at a higher rate and further the Assessing officer

also found discrepancy in relation to certain expenditure incurred by the

assessee on purchase of certain items. Since the assessee could not furnish

the reliable evidences and convincing explanation in this respect, he

therefore, estimated the of GP rate of the assessee @ 16.62% of the turn

over on the basis of GP rate as declared by the assessee in the subsequent

assessment year.

differs from year to year. The assessee gave explanation also regarding

variation in the electricity consumption, valuation of the closing stock etc.

The CIT(A) after considering the submissions of the assessee and also

considering the past GP rate declared by the assessee estimated the GP at

12%. Now, both the assessee and Revenue have come up in appeal

agitating the above findings of the CIT(A).

disturbed / reduced the GP rate estimated by the Assessing officer at 16.62

% of the total turn over, whereas, the plea of the counsel for the assessee is

that considering the submissions of the assessee, the Ld. CIT(A) should

have estimated the GP at a much lower rate.

the record. We have gone through the GP rates of the assessee in the past

ITA Nos. 7/Chd/2017 & 1405/Chd/2016- M/s Ganpati Foods, Pataran 3 and subsequent years. In the immediately subsequent assessment year, GP

rate shown by the assessee was at 14.23%, whereas, in the immediately

preceding year, the GP rate was at Rs. 8.96%. During the year the assessee

declared GP rate a 11.65% which was rejected by the Assessing officer.

Considering the variation in the GP rate and the explanation of the

assessee that production in a month cannot be entirely attributable to the

consumption of the electricity but there are various other facts involved

which have effect on the production and further that the assessee is not

only engaged in the rice production milling of its own but also is involved

in rice milling for the government agencies for which the electricity is

also consumed and that all the rice production cannot be considered

production of the assessee, but the assessee was only earning commission

income there upon and further considering the overall facts and

circumstances, we are of the view, that the interest of justice will be

served if the GP rate for the year under consideration is directed to be

taken at 12.50%. We order accordingly,

confirmation on addition of Rs. 2,04,000/- on account of non-charging of

interest from un-related parties. The Ld. Counsel for the assessee has

demonstrated before us that the aforesaid meager amount of Rs. 2.04 lacs

was advanced by the assessee out of his own funds and no interest bearing

funds were used for the aforesaid advances. Hence, there was no

justification for computing the notional interest by the Assessing officer.

The Ld. DR has also not disputed that the assessee was possessed of own

sufficient own funds to make the aforesaid advances. In view of this, we

do not find any justification on the part of the lower authorities in making

ITA Nos. 7/Chd/2017 & 1405/Chd/2016- M/s Ganpati Foods, Pataran 4 the aforesaid disallowance of Rs. 2.04 lacs on account of disallowance of interest out of expenditure. This ground of the appeal of the assessee is hereby allowed. No other ground is pressed or argued.

Sd/- Sd/- ( बी , आर . आर . कुमार / B.R.R. KUMAR) (संजय गग� / SANJAY GARG ) लेखा सद�य/ Accountant Member �या�यक सद�य /Judicial Member

Dated : 13. 12.2018 “आर.के.” आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�त/ CIT 4. आयकर आयु�त (अपील)/ The CIT(A) 5. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File

आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar