TaxTMI 
TaxTMI 
2021 (5) TMI 657
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....dence and probabilities of case. 2. The learned Commissioner erred in confirming the order of the Assessing Officer, wherein, the net profit was estimated at 10% of the turnover. 3. The learned Commissioner further erred in an enhancing the income by an amount of Rs. 2,45,67,815/- by bifurcating the gross receipts of Rs. 13,91,80,000/- as revenue from operations Rs. 11,46,12,185/- and other income Rs. 2,45,67,815/-, without considering overall expenditure incurred in the business. 4. The learned Commissioner ought to have appreciated that when books of accounts are rejected to estimate the profit rate at 10% no further addition could have been from the same books, bifurcating the turnover as revenue from operation and other income, ignoring the overall expenditure of the assessee. 5. The learned Commissioner ought to have appreciated that assessee is eligible for deduction u/s 80lB (11A), as the assessee is deriving profit from the business of processing, preservation and packing of sweet corn, which is a vegetable. 6. The learned Commissioner ought to have appreciated that even if the sweet corn is considered as a grain still the assess....
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....question No. 13 and 14 and its answers are extracted as under: "Q. No. 13 please refer to the balance sheet and profit & Loss account flied by you for the A.Yrs. 2013-14 to 2015-16, wherein you have shown huge fresh corn purchases and claimed huge expenditure under various heads. It is now clearly established that you are not maintaining the supporting evidences in respect of purchases made and various heads of expenditure. In the absences of any supporting evidences, the financial statements prepared and submitted by you do not reflect true profits earned by you. Consequently, the net profits shown by you are not tenable and cannot be accepted. Please comment. Ans: No comments to offer. Q.No.14 In view of the above there is no other alternative left except to reject your books of account as the same do not reflect true profits derived by You and accordingly it is proposed to estimate. net profit at l0%. on gross receipts net of all expenditure including depreciation for the A.Yrs. 2013-14, 2014-15, 2015-16 and 2016-17 which are detailed as under. Please offer your comments. AY TO N.P @ 10% NP Shown Additional income to be offered 2013-1....
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....over of the business was R$,13.91 Cr., the provisions of Sec.44AD cannot be applied. The assessee has shown a meagre profit of 4.52% on a total turnover of Rs. 13.91Cr. Since the Act has envisaged a profit of 8% for small businesses, considering the facts and circumstances of the case and since the books of account have been rejected for the reasons discussed above, a profit @ 10% on total turnover is felt to be reasonable. Accordingly I hereby adopt the profits of the business @10% on gross receipts of Rs. 13,91,80,OOO/-, which includes all expenses, depreciation, deductions etc." 5. Aggrieved by the order of the AO, the assessee preferred an appeal before the CIT(A). 6. The CIT(A) after considering the details available with him upheld the profit estimated by the AO on the turnover and enhanced the income of the assessee from Rs. 1,39,18,000/- to Rs. 3,60,29,033/- by treating as other income after considering the documents as well as judgements relied upon by the assessee and as per the following table: Particulars Year ended 31st March, 2013 Year ended 31^st March, 2014 Year ended 31^st March, 2015 Franchise income From Bellary & Kakinada Income fro....
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.... the bills/vouchers as and when required for verification in support of the claim of expenses debited into the P&L A/c during the course of assessment proceedings, but, the assessee has failed to do so. After considering the totality of the facts of the case and statements recorded of Sri A. Srinagaveer, we do not find any reason to interfere with the orders of revenue authorities and, therefore, approve the 10% estimation on total turnover of the assessee. According, this grounds raised on this issue are dismissed. 11. As the regards the issue of enhancement of the income of the assessee by the CIT(A), the assessee filed written submissions dated 05.04.2021 which are as under: "10. The Assessing Officer treated the other income as a part of turnover and estimated the income at 10%. The CIT (Appeals) on the other hand is of the view that the entire other income is taxable. This is disputed by the appellant before the Hon'ble Income-Tax Appellate Tribunal. It is submitted that even the other income is a part of the business income and the income from the said receipts can be estimated at the same percentage as that of the business income. It cannot be treated as inco....
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....ess and therefore, the issue of considering the other income separately neither germinated from grounds of appeal nor from the order of the AO and therefore it is improper for the CIT(A) to enhance the income. Reliance was placed on the case of Bikram Singh Vs DCIT; New Delhi of ITAT A Bench, New Delhi in ITA No.3522/DEL/2013, dated 13.04.2016,which considered the full bench decision of Hon'ble Delhi High Court in CIT vs Sardarilal & Co (251 ITR 864) and also Hon'ble Delhi High Court in the case of Shapoorji Pallonji Mistri Vs CIT (34 ITR 342) which was confirmed by the Apex Court in 44 ITR 891." 13.1 However, the CIT(A) rejecting the submissions of the assessee, enhanced the income of the assessee by using powers u/s 251(2) of the Act. As contended by the ld. AR of the assessee that once the books of account are rejected, it is trite law that no further additions can be made from the same books of account. We find substance in the submissions of the ld. AR and case law relied on by him. Therefore, we set aside the decision of the CIT(A) in enhancing the income of the assessee and uphold the order of the AO in estimating the income of the assessee @ 10% on the total turn....
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....eceipt of this letter". 4.1. In response to the tetter issued, the Chartered Accountant submitted a letter dated 16 -12-16 wherein certain information was given on nature of business activity of the company and the deduction claimed u/s.80IB(11A). The relevant excerpts regarding deduction u/s.80IB are reproduced as under: "M/s. Tanvi Foods (India) pvt. Ltd has produced accounts in tally Including Trail Balance, Balance Sheet, P&L, sales and other ledgers. It has also produced Income tax returns filed, audit reports, note on business activity & business process and other relevant documents.. Based on the verification of above documents and information produced before us, we have considered that M/s. Tanvi Foods (India) Pvt. Ltd. is eligible for deduction u/s. 80IB(11A) and issued form 10CCB. 14.2 The AO denied assessee's claim of deduction u/s 80IB in the revised return by observing as under: 4.2. From the above, it is clear that the Chartered Accountant has given audit certificate in form No.10CCB relying on the accounts maintained in tally package only. In this connection, it is reiterated that during the, assessment proceedings and also in p....
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....markets. The assessee needs weighing machines and purchased eight weighing machines for weighment of corn cob purchased. (2) The second stage is removal of husk and corn silk and peeling of cobs to corn kernels. For this purpose the assessee purchased three working tables of 2500 kg/hour (page No.2 of annexures)and were used for removal of husk. (3) The next stage is cleaning of raw kernels. For this purpose the assessee purchased three numbers of Air bubbled cleaning machines of the capacity of 2500 kg/hour (page No.2 of annexures). (4) The next stage is boiling of raw kernels. The assessee purchased 2 Nos. of Boiler Chambers of the capacity of 2500 Kg/hour(page No.2 of annexures). (5) The next stage in the process is temperature dropping of boiled kernels. For this purpose the assessee purchased 4 Nos. of Spray Driers of the capacity of 2500 kg/Hr(page No.2 of annexures).. (6) The next stage is packing of processed kernels. The packing is undertaken with machine stitching by the employees. Seven stitching machines (page No.2 of annexures) of suitable capacity were purchased. ....
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....it hired freezing chambers and paid rent as mentioned above. The above facts would indicate that the appellant is in the activity of purchase, processing, preservation and packing of sweet corn which is a vegetable product. Therefore, it is entitled for deduction u/s 80IB(11A) of the LT. Act." 14.5 During the course of hearing, the ld. AR of the assessee strongly submitted that the business of the assessee is eligible for deduction u/s 80IB(11A) of the Act because assessee is engaged in the business of corn processing & packaging. In this regard, the assessee has invested on plant & machinery, which are evident from the Schedule of fixed assets and has incurred expenditure under the head 'storage' debited into P&L Account and he also strongly reiterated the submissions made before the CIT(A) that the corn is covered as a vegetable. In this regard he referred the submissions made before the CIT(A) dated 11/09/2017, 24/11/2017, 5/12/2017, 25/12/2017 & 26/12/2017, which are placed in the paper book and relied on the case laws quoted in the written submissions before the CIT(A). Further, he also relied on the paper book at page No. 155 & 156 regarding sweet corn, which is a vegetabl....
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.... Sweet Corn in vegetable or not we applied for advance ruling from the AI V AT department. Mis Sri Sai Agencies, Proprietor - A.Sri Nagaveer, was applied for advance ruling from Commercial tax department for taxability and classification of Sweet corn. He is Mancl~lI1; Director of Mis Tanvi Foods Pvt Ltd Question: Whether the Sweet Corn I Maize I Corn is exempted or fall under Schedule IV of the I\PVA 1 Act? ; AP Vat Act: Under AP VAT Act 2005, Schedule IV of the AP Vat Act contains taxable goods @4/5%, whereas Schedule I of the AP Vat Act is containing tax exempted goods. In the above said advance ruling it is concluded that: Fresh Sweet Corn is exempted under Entry 18 of Schedule I of the APVAT Act, 2005. SCHEDULE -1 (See Section 7) List of Goods exempt from Tax under Section 7: 18. Vegetables & fruits other than those cured, frozen, preserved, processed, dried, dehydrated or canned. From the above it is clearly evident that sweet corn is a vegetable." 14.6 On the other hand, the ld. DR relied on the orders of revenue authorities and submitted that the CIT(A)_ has coterminous powers with that of A....
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.... fruit or it does not fall under any of these categories. In this regard we are concurred with the submissions made by the ld. AR (supra) which is extract from paper book page no. 155 & 156. So far as our considered opinion "Although corn falls into the grain category, it also fits into the definition of a starchy vegetable. "The definition of a vegetable is 'a usually herbaceous plant grown for an edible part that is usually eaten as part of a meal,'" Gorin says. Yep, corn definitely fits the bill. Plus, the 2015-2020 U.S. Dietary Guidelines for Americans also lists corn as both a vegetable and a grain, she adds. So the double-identity is actually legit. Since corn is higher in carbohydrates and calories than vegetables like leafy greens and cruciferous veggies (think broccoli), it's typically considered a starchy vegetable. (Other examples of starchy veggies include potatoes and squash.) As part of a meal, corn and other starchy vegetables are more energizing than their non-starchy counterparts. The assessee has all the necessary equipment for procurement, processing, packing and preservation of sweet corn." In both the situation i.e. be it a fruit or vegetable the assessee i....