Case Law Details
Brief of the case:
ITAT Mumbai held in Punjab & Sind Dairy Products Pvt Ltd Vs Dy. CIT that in the case of assessee itself in earlier year, ITAT had rejected the books of accounts on the basis that assessee failed to produce books of accounts as demanded by ITAT. But in the year under consideration as assessee had presented all the books of accounts and documents as required by AO and CIT(A) so the same could not be rejected just by applying the assessee’s case of earlier year because in that case of earlier year facts and materials were different, in that case assessee failed to produce the books of account but in the present case as assessee had produced all the relevant document required for assessment. So the books of accounts rejected by AO and confirmed by CIT(A) was wrong. The same should be accepted.
If during search, cash was found of individuals directors then addition could not be made to the income of company.
Facts of the case:
The assessee was a company incorporated on 31st March, 2005 with main object of carrying on the business of manufacturers and traders in all kinds of dairy/Milk products through various retail outlets and its business premises. A survey operations were conducted on 8th March, 2007 u/s 133A, on the business premises and retail outlets which was converted into search u/s 132(1) on the same date. The search and seizure operation was carried out not only on the business premises of the assessee, but also on residential premises of the Directors and family members. During the course of search & seizure and survey operation conducted by the Investigation Wing, statements of various persons including Directors and employees were recorded and certain papers/documents were also seized. In pursuance of such search and seizure action, notices u/s 153A were sent and assessments were completed for the AYs 2006-07 and 2007-08, wherein the main addition was made on the ground that the sale of milk products have been camouflaged as sale of milk to reduce the tax liability, after rejecting the books of accounts u/s 145(3). Assessee field an appeal with ITAT regarding the rejection of books of accounts.
Contention of the Assessee:
Assessee was of the view that certain statements were given by salesmen of the assessee company during the course of survey, negating the sales of milk and relevant books and registers were not filed before authorized officers. Further this premise of the AO had been duly clarified again before him and was explained that day-to-day purchase and sale of milk and milk products have been maintained by the assessee on the regular basis and same were also filed before him. It was also brought on record that bulk of the sale of the milk was done through cheques and was sold to parties like, Asian Chemist, Godrej Nature Basket, Nandu distributors, etc. All these details and explanations were submitted by the assessee vide reply dated 07.10.2009. Not only that, the complete movement analysis of milk was also filed during the course of assessment proceedings. Even from the statement of the employees, it did not conclusively implythat milk had not sold because the bulk of the milk was sold directly through factory. In fact, it was clarified that the sale of milk hadnever been denied by the Directors or the Manager Sales. It was made clear to the concerned authority that sale of milk was done in the early hours of the morning from the factory premises itself,prior to the opening of the shop. In support, he referred to the reply filed by the assessee before the AO. These averments of the assessee had not been properly rebutted either by the AO or by the CIT (A). He further submitted that a detailed statement of purchase and sale of milk and milk products for the financial year 2007-08 was filed before the AO as well as CIT (A). The said details were also duly recorded in the books of accounts, which were not only audited but were also produced before the AO. He fairly admitted that in the assessment years 2006-07 and 2007-08,the Tribunal had decided the issue of rejection of books of accounts and estimation of net profit rate against the assessee. However, the said finding would not act as a res judicata and would not be applicable in the impugned assessment year for the reason that, in the matter of rejection of books of accounts, the AO should not be influenced by the decision arrived in the past assessment as each assessment was separate and distinct and each year facts needed to be considered separately. The assessee had produced all the books of account quantity wise and quality wise inclusive of production and consumption which was not rebutted properly by AO.
So rejection made by AO and confirmed by CIT(A) was wrong.
Contention of revenue:
Revenue submitted that once the Tribunal on the same issue had decided the matter and without there being any change in the facts and circumstances, the said decision should be followed or else the matter should be referred to a larger bench. In support of this proposition, he strongly relied upon the ITAT Mumbai SB decision in the case of DCIT vs Summit Securities Ltd reported in [2011] 132 ITD 1. On merits, he submitted that the findings of the AO as well as ld. CIT(A), was categorical that the quantitative detail of sale of milk and documentary evidences were filed inspite of query raised from time to time. Based on these facts ITAT had confirmed the rejection of book results. Neither the books of account nor the bill/vouchers etc. were produced before the authorized officers at the time of survey to substantiate the claim of sale of milk. Even the Director of the company, at the time of survey had admitted that no quantitative details had been maintained and no inward and outward registers and fresh register had been maintained. This finding itself was sufficient for rejecting the books of accounts and has estimated the profit. Thus, he strongly relied upon the order of the AO as well as CIT(A) and also the order of the Tribunal for the AYs 2006-07 and 2007-08.
Held by ITAT:
ITAT held that the only allegation of the Department was that there was no sale of milk by the assessee Such an allegation of the AO could not be sustained, firstly, for the reason that the sale of milk had been duly shown in the books of account, which had been maintained on regular basis and the relevant entry of sale of milk was duly corroborated by invoices of purchase and sale. Secondly, the bulk of the milk sold was evidenced by the invoices which had been sold on credit and payment had been received through account payee cheques. The details of which were there in the paper book. Not only that, the assessee had separately maintained purchase register, sale register, cash book, ledger &journal account for recording the entire transaction. No defect in these books of accounts and record had been pointed out either by the AO or by the CIT(A). Further, from the perusal of records it was observed that in the statement recorded of Shri Swaranjit Singh Bajaj, one of the Directors of the company on 08.05.2007, the following question regarding books of account were asked for which it was categorically stated that the books accounts have been regularly maintained.
Moreover simply relying upon the statements at the time of survey and non- production at the time of survey could not be conclusive finding of the fact. That could be the starting point of show cause and inquiry and then onus was heavily upon the assessee to controvert such information or material. Here in this case as discussed above, assessee had been able to controvert and substantiate the claim of sale of milk. Thus, the reasons given by the AO as well as CIT(A) for disturbing the book results is rejected and we hold that the assessee’s books of accounts and book results were liable to be accepted.
Appeal of the assessee as allowed.
