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TMI Blog2017 (6) TMI 1263X X X X Extracts X X X X X X X X Extracts X X X X ..... m the perusal of orders of the AO and CIT(A) that the above-mentioned points as well as the bottling process have not been fully considered by them. We are of the view that the aforesaid points as well as bottling process need to be first considered at lower level as it requires clear understanding of factual aspects having regard to bottling process, marketing, and related business aspects. In any case, set aside the appellate orders passed by CIT(A) and assessment orders passed by the AO for both the aforesaid assessee for both A.Y. 2008-09 and 2009-10 and we have already restored the matters to the file of the AO for denovo assessment. We hereby direct the AO to reexamine the matter regarding rate of depreciation on crates, during the proceedings for making denovo assessments and to pass fresh order as per law on this matter in the denovo assessment orders. - I.T.A .No.-2427/Del/2011, 2340/Del/2011, 3921/Del/2013, 3497/Del/2013, 3590/Del/2013, 3923/Del/2013, 4472/Del/2013, 4706/Del/2013, 3922/Del/2013, And I.T.A .No.-3588/Del/2013 - - - Dated:- 5-6-2017 - SH. I.C.SUDHIR, JUDICIAL MEMBER, AND SH.ANADEE NATH MISSHRA, ACCOUNTANT MEMBER For The Assessee : Sh.C.S.Aggarwal, Sr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing loss at ₹ 15,32,12,229 as against loss of ₹ 20,12,26,168 returned by the Appellant. 2. That on the facts and circumstances of the case, the CIT(A) merely relying on the order of the predecessor, has erred in upholding the ad hoc disallowance of ₹ 3,58,31,000 being ten percent of the total operating expenditure of ₹ 35,83,10,100 made by the Assessing Officer alleging that the same to be unverified, unreasonable and excessive without bringing anything on record in support thereof. Each of the above grounds is without prejudice and independent of each other. The Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at the time of hearing of the appeal. I.T.A.No.-3497/Del/2013 (ASSESSMENT YEAR-2008-09) (ITO vs Aradhana Foods Juices Pvt Ltd.) 1. The learned CIT(Appeals) has erred in facts and in law in considering the plastic crates under the head Bottles and Shells eligible for depreciation @ 50%. 2. The appellant craves leave for reserving the right to amend, modify, alter, and or forego any ground (s) of appeal at any time before or during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nable, and excessive without bringing anything on record in support thereof. 2. That on the facts and circumstances of the case and in law, the CIT(A in upholding the ad-hoc disallowance has erred in merely relied upon the order of Commissioner of Income Tax (Appeals)-V in Appellant s case for assessment year 2009-2010, without adjudicating the submission filed on merits. Each of the above grounds is without prejudice and independent of each other. The appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at the time of hearing of the appeal. I.T.A.No.-3922/Del/2013 ASSESSMENT YEAR-2009-10) (Aradhana Drinks Beverages Pvt Ltd. vs ITO) 1. That the CIT(A) erred on facts and in law in upholding the order dated 25.11.2011 of the assessing officer loss at ₹ 7,80,83,600, as against loss of ₹ 11,24,55,740 returned by the Appellant. 2. That on the facts and circumstances of the case, the CIT(A) has erred in upholding the ad hoc disallowance of ₹ 3,08,93,900, being ten per cent of the total operating expenditure of ₹ 30,89,39,000, made by the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of unverified purchases from related parties Rs.10,61,30,515/- disallowance out of operating expenses ₹ 8,72,60,100/- disallowance out of unverified fixed assets ₹ 2,45,00,000/- disallowance out of depreciation ₹ 36,75,000/- (B.1) The assessee filed appeal against the aforesaid assessment order before Ld. Commissioner of Income Tax(Appeals) [in short CIT(A) ] which was disposed off vide appellate order dated 21.02.2011. Ld.CIT(A) deleted the aforesaid addition of ₹ 10,61,30,515/-. Next, the disallowance of ₹ 8,72,60,100/- made by the AO out of operating expenditure @ 30% of total claim of ₹ 29,08,67,000/- was considered by the Ld.CIT(A) to be excessive and disallowance was sustained by the Ld.CIT(A) only to the extent of 10% out of the total claim ₹ 29,08,67,000/-. Further, the aforesaid addition of ₹ 2,45,00,000/- was deleted by the Ld.CIT(A) and furthermore the Ld.CIT(A) also deleted the aforesaid disallowance of ₹ 36,75,000/-. The assessee and Revenue, both are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is as low as (-) 26.8%. Stock-in-trade vis- -vis turn over ratio is also 0.01% only. Perusal of Clause 28(1) and 28(b) of Form 3CD (Enclosure 14) and P L Account shows that during the year under consideration assessee has produced 38,08,105 cases of aerated/non-aerated product at ₹ 14,73,59,000/- (raw material consumed-Rs.12,96,63,000/-) packing material ₹ 1,76,96,000/-). It also shows that assessee has purchased 13,36,787 cases for resale at ₹ 18,37,31,000/-. Thus, while the manufacturing cost per case has been shown at ₹ 38,70/- purchase cost per case for resale has been shown at ₹ 137.44/- i.e. 355% more than the manufacturing cost. It is pertinent to mention here that the assessee company has purchased goods worth ₹ 11,53,60,000/- and ₹ 9,75,53,000/- from its step-up Holding company and Fellow Subsidiaries respectively. Since, the books of accounts were not produced transactions with these related parties could not be examined. Manufacturing cost of ₹ 38.7 per case vis- -vis purchase cost of ₹ 137.44/- per case (particularly from related parties) is nothing but a colorable device used by assessee to reduce its t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of distributors dealers have already been provided in our reply to query no. 2. Further, copies of vouchers for purchase of visicoolers are enclosed on sample basis at page no. 28 to 42. The main supplies of visicoolers are M/s Voltas Ltd. Western Air-conditioning and Refrigeration Pvt. Ltd... Thus, the details of visicoolers were not provided. No details what so ever were provided in respect of bottles/tetra packs. Since, books of accounts along with bill, vouchers, in respect of the said addition in fixed assets have not been furnished a sum of ₹ 2,45,00,000/- is disallowed out of said addition in fixed assets on account of being unverified expenses and added to the income of the assessee for the relevant assessment year 2007-08. Depreciation @ 15% thereon i.e. ₹ 36,75,000/- is also disallowed accordingly. (B.2) The Ld. Counsel for the assessee vehemently opposed all the additions made by the AO. He drew our attention to paragraph 2 of the assessment order wherein the AO had noted that necessary details were called for and were submitted from time to time as per order sheet entries. Thus, he contended that even though books of accounts were not produced d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue, instead of harsher provisions, it may in certain situations; subject to other prescribed conditions under law, if any, being satisfied; create a situation fit for remedial measure(s) by Revenue under various statutory provisions, such as review u/s 263 of the Act, or re-opening u/s 147 of the Act, or rectification u/s 154 of the Act, etc.; but the assessee cannot have any legitimate grievance if provisions more beneficial to the assessee are invoked by the Revenue, instead of harsher provisions. Therefore, in the present case before us, the assessee cannot have a legitimate grievance if the harsher provisions u/s 144 of the Act were not invoked by the AO to make the assessment and instead, the assessment was made under more beneficial provision under section 143(3) of the Act. Merely because additions have been made in assessment concluded u/s 143(3) of Act and not u/s 144 of Act, it cannot be said that the additions are unsustainable. Whether the additions are partly or wholly sustainable or not and if yes; then, the extent to which the additions are sustainable depends also on merits and not merely on whether the assessment is concluded u/s 143(3) of Act or u/s 144 of Act. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duce the books of accounts, etc. before the AO as well as before the Ld.CIT(A) and further because of the failure of the Ld.CIT(A) to cause the production of books of accounts, etc. Even during appellate proceedings in ITAT, the assessee has not offered to produce the books of accounts, etc.; although it was stated at the time of hearing before us, by Ld. Counsel for the assessee, that the same are available with the assessee. Revenue has the authority to make verifications/inquiries/investigations etc. in accordance with law and the assessee needs to comply with the lawful requirements prescribed in that regard by the Revenue authorities. This authority has not been fully honoured in this case because of failure of the assessee to produce the books of accounts, etc and because of the failure of the Ld.CIT(A) to exercise the provisions under Rule 46A(4) of Income Tax Rules, 1962; as discussed earlier. When an assessee does not fully honour the lawful authority of Revenue, or when lawful requirements prescribed by Revenue authorities are not fully complied with; the assessee cannot claim a lenient view as a matter of right, and the assessee must face its consequences as per law. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 99,56,519/- and in the connected Ground No.1, the assessee has appealed against assessment of loss at ₹ 25,73,73,687/- as against returned loss of ₹ 32,12,88,140/-. In ITA No.4706/Del/2013 for A.Y. 2008-09 and in ITA No.3922/Del/2013 for A.Y. 2009-10, M/s. Aradhana Drinks and Beverages Pvt.Ltd. has filed appeal and in both the appeals Ground No.2 of the appeal is against the disallowance @ 10% made by the AO out of assessee s claim of operating expenditure. Ground No.1 of appeal in both these appeals filed by M/s. Aradhana Drinks and Beverages Pvt.Ltd. is connected with Ground No.2 and is specifically against assessment of loss at a figure lower than the loss returned by the assessee. In ITA No.3922/Del/2013, M/s. Aradhana Drinks and Beverages Pvt.Ltd. has contended in Ground No.3 that the facts in the case of M/s. Aradhana Drinks and Beverages Pvt.Ltd. are different from facts in the case of M/s Aradhana Foods and Juices Pvt.Ltd. In ITA No.3922/Del/2013, M/s. Aradhana Drinks and Beverages Pvt.Ltd. has also taken an additional ground wherein it is contended that the assessee had duly produced books of accounts in support of expenditure incurred under the head operating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were produced on 25.08.2011. The AO made a disallowance @ 10% out of operating expenses in the case of both the aforesaid assessees and for both A.Y. 2008-09 and 2009-10. These disallowances were confirmed by the Ld.CIT(A). During the appellate proceedings in ITAT, both the aforesaid assessees filed Synopsis in Brief wherein it was submitted that it was of no consequence that the assessee had not produced complete books of accounts or that books of accounts were produced only on sample basis. Ld. Counsel contended that the assessee had furnished all details as were called for by the AO and that the AO had not drawn any adverse inference on the basis of details filed by the assessee or on the basis of books of accounts produced by the assessee on sample basis. Detailed submissions were made on behalf of both the aforesaid assessees on the merits of the disallowances made by the AO and confirmed by the Ld.CIT(A) in the Synopsis in Brief . Further, at the time of hearing before us, the Ld. Counsel for the assessee made emphatic oral submissions on merits of the additions, relying on Synopsis in Brief filed during appellate proceedings in ITAT, he also drew our attention to certa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oth the aforesaid assessees and for both assessment years 2008-09 and 2009-10; and the matters are restored to the file of the AO with the direction to make denovo assessments as per law, after making further verification/inquiry/investigation, etc. in accordance with law. The AO is directed to provide opportunity to the aforesaid two assessees for complying with the statutory requirements and both the aforesaid assessees are directed to comply with the statutory requirements prescribed by the AO, during the proceedings for making denovo assessments for both assessment years 2008-09 and 2009-10. As we are setting aside the matters to the file of the AO for denovo assessment, we are presently not expressing any opinion on the merits and quantum of the additions made by the AO. Moreover, as we are setting aside the matters to the file of the AO for denovo assessment, Ground No.3 of appeal in ITA No.3922/Del/2013 filed by M/s Aradhana Drinks Beverages Pvt.Ltd. for A.Y.2009-10 becomes purely academic in nature at present and hence, it is not being adjudicated presently. The aforesaid four appeals filed by the aforesaid two assessees for A.Y. 2008-09 and 2009-10 (in ITA Nos.3921 392 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Synopsis in Brief filed during the appellate proceedings. Detailed written submissions have been made in Synopsis in Brief , wherein the bottling process is explained in detail, and it is contended that crates, alongwith bottles, constitute integrated assets. At the end of Synopsis in Brief , the summary of various contentions of the assessees is provided, and the following points have been raised: * Principles of natural justice have not been observed * Requirement of passing a speaking order has not been fulfilled * Disallowance out of claim of depreciation on crates is arbitrary * crates qualify as containers made of plastic and used as refills and fall within the classification of bottles and shells ; * Therefore, both the bottles and crates are integrated tools used as containers in the process of filling/refilling and subsequent delivery thereof in the assessee s business * Crates are a part of the block of assets namely, bottles and shells, and have lost their individual identity * The depreciation has been regularly followed by the assessee and the Ld.AO has accepted the claim in previous years * Disallowance of a higher rate of depreciation and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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