High Court Of Delhi
R. L. Traders vs. ITO
Section : 145
Assessment Year : 2010-11
S. Ravindra Bhat And R.K. Gauba, JJ.
IT Appeal No. 743 Of 2014
March 9, 2015
JUDGMENT
1. Issue notice.
2. Mr. Rohit Madan, advocate accepts notice on behalf of the Revenue.
3. With the consent of the parties, matter is finally heard.
4. The question of law urged in this appeal is : “Whether the Income-tax Appellate Tribunal and the lower authorities fell into error in rejecting the appellant-assessee’s accounts on the footing that quantitative tally of the ingredients and raw materials were not maintained and proceeded to arrive at an improper gross profit rate as well as the turnover figures ?”
5. The assessee carries on his business in preparation and trading of hing. The assessee filed its return for the assessment year (AY) 2010-11 and declared an income of Rs. 3,15,210. In the scrutiny the Assessing Officer (AO) rejected the turnover figures and the gross profit rate of 3.57 per cent. of the total sale and instead directed that the gross profit rate of 10 per cent. be applied, against the total turnover of Rs. 6,14,84,607. The Assessing Officer consequently added Rs. 39,54,014. The Commissioner of Income-tax (Appeals) partially accepted the assessee’s contentions and granted relief to the extent that the gross profit rate was applied at 6.55 per cent. (as in the preceding year) and confirmed the addition of Rs. 21,21,220. The Income-tax Appellate Tribunal (ITAT) on the assessee’s further appeal refused to grant any relief and confirmed the finding of the lower authority.
6. The assessee argues that the Assessing Officer and other authorities fell into error in not taking into consideration that quantitative tally of ingredients and raw material was available in the records. It is contended that the Assessing Officer’s opinion was influenced by the fact that the gross profit rate claimed was 3.57 per cent. for the concerned assessment year as against the total turnover of Rs. 6,14,84,607. Learned counsel urges that the previous years’ turnover figures did not follow any uniform pattern, both in respect of turnover as well as in respect of gross profit rate, and that the Department in all its previous years had accepted the books of account and the method of maintaining them. In the light of this, the assessee urges that the Commissioner of Income-tax (Appeals)-and the Income-tax Appellate Tribunal-did not apply their mind in considering whether the facts and the material placed on record reflected that the relevant documents evidencing procurement of raw material existed and that a qualitative tally of the same had been made. Learned counsel for the assessee argued that the Revenue went ahead with the pre-disposed mind that the quantitative tally of the raw materials was not maintained in the assessee’s books.
7. Counsel for the Revenue contested the assessee’s submissions by pointing out that by two appeals the assessee’s contention was rejected after due consideration of the material on record. Learned counsel highlighted that before the Assessing Officer, the assessee had contended that due to family problems, the total turnover for the current year in question had been lesser than the previous years.
8. This court has carefully considered the submissions both before the Commissioner of Income-tax (Appeals) as well as the Income-tax Appellate Tribunal. The assessee categorically appears to have submitted that a quantitative tally of all the raw materials consumed in the making/preparation of the final marketable product was being maintained. Even though the Commissioner of Income-tax (Appeals) noticed this contention as a matter of fact, the said authority did not render any finding. The Income-tax Appellate Tribunal instead went by the findings of the lower authority and merely based its conclusion on the interpretation of section 145(2) of the Income-tax Act, 1961. In fact, there is an assumption in paragraph 9 that the assessee did not maintain quantitative details of ingredients such as mixing gum, starch and oil.
9. This court is of the opinion that having regard to the assessee’s stand that such details were forthcoming both by way of books as well as through a quantitative tally, the Commissioner of Income-tax (Appeals) should have addressed himself to the issue and rendered clear findings. Failure to have done so has prejudiced the assessee. Consequently, the impugned order is hereby set aside. The matter is remitted back to the Commissioner of Income-tax (Appeals) for fresh examination of the books of account, specifically with regard to whether the quantitative tally was undertaken of the raw material used by the assessee in its business activities and if so, the inference is to be drawn from it and the other available material on the record. All rights and contentions of the parties are reserved.
10. The question of law is accordingly answered in favour of the assessee and against the Revenue.
11. The appeal is, therefore, partly allowed.
[Citation : 374 ITR 22]
