Commissioner of Income Tax vs Shri Sindhuja Foods (P) Ltd.

This appeal has been filed by the revenue seeking to challenge the order of the Tribunal dated 20-1-2006. The appeal was admitted on 12-12-2006 by framing the following substantial question of law:

Whether the order of Tribunal is vitiated on account of non-consideration of material evidence and consideration of totally irrelevant material in reducing the additions made in the accounts of assessee by assessing officer ?

The necessary facts are that the assessee filed the return which was taken up for scrutiny, and notices were issued u/s 143(2). Thereafter the assessment order was passed by the learned assessing officer finding discrepancy in the purchase of raw material. Likewise discrepancy was also found in the sale of the product, in the sense that the sale shown by the assessee was found to be not confirmed by the respective purchasers, inasmuch as one purchaser was shown to have sold the goods worth Rs. 2,300 but the purchaser had denied. Likewise about other purchaser the assessee had shown to have sold goods worth Rs. 1,31,725 but the purchaser has confirmed only Rs. 77,125. Thus, on the other hand, the excessive sale was shown by the assessee. However, the assessing officer made additions. The assessment order was challenged in appeal. The learned Commissioner (Appeals) partly allowed the appeal, and reduced the addition.

Both the parties filed appeals in the Tribunal. The learned Tribunal found that it was not in dispute that the assessee had recorded bogus purchase in his books of accounts, it was found that bogus purchase was shown with a view to show excessive expenses in the purchase of raw material. However, the books of accounts as rejected by the authorities below was upheld. The next question was considered about the determination of GP rate, and the learned Tribunal considered the fact that in the previous year the GP rate applied was 7.09 per cent, and the same was applied by the learned Commissioner (Appeals) this year also, that was upheld.

For the purpose of satisfying the question as formulated, the learned Counsel for the revenue could not show as to what material has not been considered by the learned Tribunal, and what irrelevant material has been considered in reducing the additions made. Rather an overall consideration of the orders of the assessing officer, the Commissioner (Appeals) and the learned Tribunal does show, that on account of the assessee having shown bogus purchases, the books of accounts had been rejected, and the matter was proceeded u/s 145. Then, the question remained of determining the income on the basis of best judgment assessment. At this point, it is significant to note, that the gross sales figure for the relevant year is not in controversy, in the sense, that whatever bogus sales have been found by the assessing officer, if they were to be considered literally, they would have reduced the figure of sale, and there is no material or finding, or any indication, to show that the gross sale was shown by the assessee at any deflated figure.

In that view of the matter for making best judgment assessment the only relevant thing, required to be considered was, application of particular GP rate, which has been applied by the learned Tribunal, and the learned Commissioner (Appeals), on relevant consideration, being the GP rate applied in the last year.

Thus, in our view, it cannot be said that any material evidence has not been considered, or any irrelevant consideration has been taken into account by the learned Tribunal. Thus, the question as framed is answered against the revenue (and) in favour of the revenue (sic-assessee). The appeal thus has no force, and is dismissed.