ITO, Sangrur v. M/s Nabha Rice Mills, Bhawanigarh

ITA 181/CHANDI/2011 | 2007-2008
Pronouncement Date: 30-03-2011 | Result: Dismissed

Appeal Details

RSA Number 18121514 RSA 2011
Assessee PAN WHICH3969Q
Bench Chandigarh
Appeal Number ITA 181/CHANDI/2011
Duration Of Justice 1 month(s) 13 day(s)
Appellant ITO, Sangrur
Respondent M/s Nabha Rice Mills, Bhawanigarh
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 30-03-2011
Assessment Year 2007-2008
Appeal Filed On 15-02-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI D.K.SRIVASTAVA ACCOUNTANT MEMBER AND MS.SUSHMA CHOWLA JUDICIAL MEMBER ITA NO.181 /CHD/2011 (ASSESSMENT YEAR : 2007-08) INCOME-TAX OFFICER VS. M/S NABHA RICE MILLS WARD-1 SANGRUR. BHAWANIGARH. PAN: AAAEFN1690D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI N.K.SAINI DR RESPONDENT BY : NONE O R D E R PER SUSHMA CHOWLA J.M : THE APPEAL FILED BY THE REVENUE IS AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME-TAX (A) DATED 21.12.2010 RE LATING TO ASSESSMENT YEAR 2007-08 AGAINST THE ORDER PASSED UN DER SECTION 143(3) OF THE INCOME-TAX ACT. 2. DESPITE SERVICE OF NOTICE NONE APPEARED ON BEHAL F OF THE ASSESSEE. WE FIND THAT THE APPEAL HAS BEEN DECIDED BY THE CIT (A) FOLLOWING THE ORDER OF THE TRIBUNAL ON SIMILAR ISSUE. THE LEARNE D D.R. PLACED RELIANCE ON THE ORDER OF THE A.O. WE PROCEED TO DISPOSE OF THE APPEAL AFTER HEARING THE LEARNED D.R. 3. GROUND NOS.1 AND 2 RAISED BY THE REVENUE ARE INT ERLINKED. THE ISSUE RAISED IN THESE GROUNDS IS AGAINST THE ORDER OF THE CIT(A) IN CONCLUDING THAT THE REJECTION OF BOOK RESULTS UNDER SECTION 145(3) OF THE 2 INCOME-TAX ACT WAS NOT JUSTIFIED AND FURTHER ADDITI ON MADE ON ACCOUNT OF UNDERSTATEMENT OF SALE CONSIDERATION OF HUSK SOL D BY THE ASSESSEE AT RS.5 42 451/- WAS DELETED. 4. WE FIND THE A.O. TO HAVE CONFRONTED THE ASSESSEE WITH REGARD TO THE SALE CONSIDERATION OF HUSK SHOWN BY THE ASSESSE E IN COMPARISON TO THE AVERAGE RATE OF PURCHASES MADE BY OTHER CONCERN S NAMELY INDIAN ACRYLICS LTD. MILKFED AND UNITED BREWIRES LTD. TH E A.O. RECOMPUTED THE SALE CONSIDERATION AFTER TAKING THE MARKET RATE OF PURCHASES MADE BY OTHER CONCERNS AT RS.15 63 828/- AS AGAINST THE SAL E OF RS.10 21 377/- SHOWN BY THE ASSESSEE AND AFTER ALLOWING ALLIED EXP ENSES MADE ADDITION OF RS.5 42451/-. THE CIT(A) ALLOWED THE CLAIM OF T HE ASSESSEE AS THE FACTS AND CIRCUMSTANCES WERE IDENTICAL TO THE FACTS ON THE ISSUE DECIDED BY THE CHANDIGARH BENCH OF THE TRIBUNAL IN SH.MANPR EET SINGH DHILLON C/O DHILLON RICE MILLS NABHA IN I.T.A.NO. 69/CHD/2 010 RELATING TO ASSESSMENT YEAR 2006-07 AND I.T.A.NOS. 684 TO 689/C HD/2010 (ORDERS DATED 18.6.2010). THE CIT(A) FURTHER HELD THAT THE ACTION OF THE A.O. UNDER SECTION 145(3) IS SET ASIDE AND THE BOOK RESU LTS SHOWN ARE ACCEPTED. THE REVENUE IS IN APPEAL AGAINST THE SA ME. 5. WE FIND THAT THE CLAIM OF THE ASSESSEE BEFORE TH E CIT(A) WAS THAT IT WAS MAINTAINING REGULAR BOOKS OF ACCOUNT WHICH W ERE DULY AUDITED AND WERE PRODUCED BEFORE THE A.O. FURTHER IT WAS POINT ED OUT THAT NO INCRIMINATING DOCUMENTS OR ENTRIES WERE FOUND IN TH E BOOKS OF ACCOUNT BY THE A.O. THE BOOK RESULTS WERE REJECTED MERELY ON COMPARISON OF THE SALE CONSIDERATION OF HUSK SHOWN BY THE ASSESSE E WITH THE RATE OF PURCHASES MADE BY OTHER CONCERNS. SIMILAR ISSUE OF ADOPTION OF THE SALE RATE OF HUSK SOLD BY THE ASSESSEE AROSE BEFORE THE TRIBUNAL IN SH.MANPREET SINGH DHILLON (SUPRA) AND VIDE ORDER DA TED 18.6.2010 THE TRIBUNAL HELD AS UNDER : 3 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAS SHOWN SALE OF HUSK. TOTAL QUANTIT Y OF HUSK SOLD DURING THE YEAR WAS 13 280 QUINTALS OUT OF WHICH 3969 QUINTALS WERE SOLD TO M/S A.P. ORGANICS. THE A VERAGE RATE OF SALE TO M/S A.P. ORGANICS WAS RS. 99/-. TH E SALE OF HUSK TO M/S A.P. ORGANICS HAD BEEN ACCEPTED BY THE ASSESSING OFFICER. FURTHER THE ASSESSEE HAD SOLD HUSK WEIGHING 9310.40 QUINTALS IN CASH ON DIFFERENT DAT ES AT DIFFERENT RATES AVERAGING BETWEEN RS. 89/- TO RS. 1 00/- PER QUINTALS. THE TOTAL SALE PRICE OF THE HUSK WAS SHOW N BY THE ASSESSEE WAS AT RS. 8 73 497/-. THE AVERAGE SALE P RICE WORKS TO RS. 93.81 PER QUINTAL. THE SAID SALES WERE MADE IN CASH AND ARE REFLECTED IN THE BOOKS OF ACCOUNT WHIC H IN TURN ARE AUDITED BY THE AUDITORS. THE ASSESSING OFFICER COMPARED THE RATE OF SALES AT WHICH THE ASSESSEE HA D SOLD THE RICE HUSK WITH THE RATE OF PURCHASE BY THREE DI FFERENT CONCERNS I.E. INDIAN ACRYLICS LTD M/S MILKFED AND M/S UNITED BREWERIES LTD. FROM THE PERUSAL OF THE DATA INCORPORATED IN PARA 2.4 OF THE ASSESSMENT ORDER WI TH REGARD TO THE PURCHASE OF RICE HUSK REFLECTED BY TH E SAID PARTIES WE FIND THAT THE SAME IS AT VARIANCE AND AVERAGE RATE WAS APPLIED BY ASSESSING OFFICER. THE PLEA OF THE ASSESSEE WITH REGARD TO OVERHEAD EXPENDITURE OF TRANSPORTATION LOADING / UNLOADING AND MIDDLEMAN COMMISSION WAS ACCEDED TO BY THE ASSESSING OFFICER AND DEDUCTION OF RS. 50/- PER QUINTAL WAS ALLOWED FROM THE NET RATE APPLIED MONTH-WISE. 7. THE ENTRIES IN BOOKS OF ACCOUNT DEPICT A TRUE ST ATE OF AFFAIRS UNLESS SOME EVIDENCE IS FOUND TO BE CONTRAR Y. IN THE ABSENCE OF ANY SUCH EVIDENCE BEING FOUND AND BROUG HT ON RECORD AGAINST THE ASSESSEE THERE IS NO MERIT I N REJECTING THE BOOK RESULTS AND MAKINGS ADDITIONS ON ESTIMATE BASIS. THE BOOK RESULTS SHOWN BY AN ASSESSEE CAN BE COMPAR ED WITH ANOTHER CONCERN IN CASE THERE ARE IDENTICAL CIRCUMSTANCES. MERELY BECAUSE TWO CONCERN /S ARE EN GAGED IN SAME BUSINESS CANNOT BE THE BASIS FOR ADOPTING T HE RATES OF PURCHASE / SALE SHOWN BY ONE CONCERN AS THE RATE S OF SALE / PURCHASE OF THE OTHER CONCERN. THE RESULTS SHOWN BACKED BY BOOKS OF ACCOUNTS CANNOT BE REJECTED ON THE SURM ISES THAT THE RATES OF PURCHASES / SALES SHOWN BY THE AS SESSEE IN ITS BOOKS OF ACCOUNT IS AT VARIANCE WITH THOSE BY O THER CONCERN UNLESS IT IS PROVED WITH EVIDENCE THAT THE TRANSACTIONS UNDERTAKEN BY TWO WERE UNDER IDENTICAL CIRCUMSTANCES AND TWO CONCERNS WERE DEALING WITH ID ENTICAL COMMODITIES. THE ASSESSEE BEFORE US IS DEALING IN T HE SALE OF RICE HUSK WHICH IS AN AGRICULTURAL COMMODITY AN D MERELY BECAUSE THE SALE RATE REFLECTED IN THE BOOKS OF ACC OUNT OF ASSESSEE IS AT VARIANCE WITH THE PURCHASE RATE SHOW N BY THREE CONCERNS CANNOT BE THE BASIS FOR MAKING ADDI TION IN THE HANDS OF THE ASSESSEE IN THE ABSENCE OF ANY EV IDENCE BROUGHT ON RECORD TO PROVE THE QUALITY OF PRODUCT D EALT IN BY THE TWO CONCERNS AND THE QUANTITY PURCHASED / SO LD. FURTHER IF WE COMPARE THE PURCHASE RATES OF THE TH REE CONCERNS INTER SE THERE IS VARIANCE OF RS. 150/- TO RS. 196/- PER QUINTAL FOR THE RICE HUSK PURCHASED BY TH ESE 4 CONCERNS. IN THE FACTS AND CIRCUMSTANCES WHERE NO DEFECT HAS BEEN FOUND IN THE BOOK ENTRIES OF THE ASSESSEE MERELY BECAUSE THE RATES OF SALE OF RICE HUSK SHOWN BY THE ASSESSEE DO NOT TALLY WITH PURCHASE RATES SHOWN BY ANOTHER C ONCERN CANNOT BE THE BASIS FOR REJECTION OF BOOK RESULTS A ND ADOPTION OF AVERAGE RATE FOR COMPUTING THE VALUE OF HUSK SOLD BY THE ASSESSEE DURING THE YEAR IN THE ABSEN CE OF ANY EVIDENCE FOUND TO THE CONTRARY IS NOT JUSTIFIED. H ENCE THE SAME IS REJECTED. 8 WE FIND NO MERIT IN THE WORKING OF THE VALUE OF S ALE CONSIDERATION BY ASSESSING OFFICER OF 9310.40 QUINT AL OF RICE HUSK SOLD BY THE ASSESSEE. THE ASSESSEE HAD PR ODUCED THE LEDGER ACCOUNT TO JUSTIFY THE SALE OF RICE HUSK . THE COMPARISON MADE BY THE ASSESSING OFFICER WITH PURCH ASES MADE BY THREE DIFFERENT PARTIES DOES NOT STAND THE TEST AS THE RELEVANT DETAILS IN RESPECT OF THE PURCHASES MA DE BY THEM ARE NEITHER AVAILABLE ON RECORD NOR WERE THEY MADE AVAILABLE TO THE ASSESSEE. THIS BEING AN AGRICULTUR E PRODUCT NO SET STANDARD CAN BE LAID TO DETERMINE T HE VALUE OF A PARTICULAR PRODUCT SOLD OR PURCHASED BY A PERS ON VIS-- VIS THE SAME PRODUCT DEALT IN BY THE OTHER PERSON. THE ASSESSING OFFICER HAS FAILED TO BRING ON RECORD ANY EVIDENCE TO JUSTIFY THE APPLICABILITY OF HIGHER VAL UE AS COMPARED TO THE RATES REFLECTED IN THE BOOKS OF ACC OUNT OF THE ASSESSEE. IN THE ENTIRETY OF FACTS AND CIRCUMST ANCES WHERE THE SALE OF RICE HUSK SHOWN AT THE RATE OF 96 .60 PAISA PER QUINTAL SHOWN BY THE ASSESSEE IN THE PRECEDING YEAR HAS BEEN ACCEPTED BY THE ASSESSING OFFICER VIDE ORD ER PASSED U/S 143(3) OF THE ACT THE RESULTS SHOWN FOR THE YEAR MERITS TO BE ACCEPTED. ACCORDINGLY WE SET ASIDE T HE ORDER OF CIT(A) AND DELETE THE ADDITION OF RS. 1 04 819/ - MADE ON ACCOUNT OF UNDER VALUATION OF HUSK SOLD BY THE ASSE SSEE. THE GROUND NOS. 2 & 3 RAISED BY THE ASSESSEE ARE TH US ALLOWED. 6. THE ISSUE IN THE PRESENT CASE IS IDENTICAL TO TH E ISSUE RAISED BEFORE THE TRIBUNAL WHEREIN ALSO THE SALE RATES WERE COMPA RED WITH THE AVERAGE RATES OF PURCHASES MADE BY M/S INDIAN ACRYLICS LTD. M//S MILKFED AND M/S UNITED BREWIRES LTD. AND ADDITION WAS DELETED B Y THE TRIBUNAL. FOLLOWING THE PARITY OF REASONING OF THE ISSUE BEIN G IDENTICAL WE UPHOLD THE ORDER OF THE CIT(A) IN THIS REGARD. FURTHER T HERE IS NO MERIT IN THE ORDER OF THE A.O. IN REJECTING THE BOOKS OF ACCOUNT WITHOUT POINTING OUT ANY DISCREPANCY IN THE ACCOUNTS MAINTAINED BY THE A SSESSEE. THUS GROUND NOS. 1 AND 2 RAISED BY THE REVENUE ARE DISMI SSED. 5 7. GROUND NO.3 RAISED BY THE REVENUE IS AS UNDER :- 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.86 698/- MADE ON ACCOUNT OF DIFFERENCE IN THE C ASE OF MARKFED ONE OF THE SUNDRY DEBTORS WITHOUT APPRECI ATING THE FACT THAT THE ADDITION HAD BEEN MADE ON THE BAS IS OF INFORMATION GATHERED U/S 133(6) OF THE INCOME TAX A CT 1961. 8. THE REVENUE IS AGGRIEVED VIDE GROUND NO.4 TO TH E ADMISSION OF ADDITIONAL EVIDENCE IN THE FORM OF EXPLANATION REN DERED REGARDING THE DIFFERENCE IN THE ACCOUNT OF MARKFED PUT FORTH BY T HE ASSESSEE DURING THE APPELLATE PROCEEDINGS BEING IN VIOLATION OF RULE 46 A OF THE INCOME-TAX ACT. 9. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT D URING THE COURSE OF ASSESSMENT PROCEEDINGS THE A.O. FOUND DIFFERENCE I N THE CASE OF ONE OF THE SUNDRY DEBTORS I.E. MARKFED SANGRUR. IIN THE BOOKS OF ACCOUNT OF THE ASSESSEE THE BALANCE WAS SHOWN AT RS.5 30 803/ - AS AGAINST RS.4 45 105/- SHOWN BY M/S MARKFED IN ITS BOOKS OF ACCOUNT. THE INFORMATION FROM M/S MARKFED WAS OBTAINED BY THE A. O. UNDER SECTION 133(6) OF THE ACT. THE ASSESSEE WAS CONFRONTED ON THIS ISSUE VIDE ORDER SHEET ENTRY DATED 16.11.2009 BUT IN THE ABSENCE OF ANY REPLY THE DIFFERENCE OF RS.86 698/- WAS ADDED TO THE INCOME O F THE ASSESSEE. THE SUBMISSIONS OF THE LEARNED A.R. FOR THE ASSESSEE AR E INCORPORATED IN PARA 5.2 OF THE APPELLATE ORDER WHICH IS REPRODUCED HERE UNDER : 5.2 DURING THE HEARING BEFORE ME THE COUNSEL FOR T HE APPELLANT HAS CONTENDED THAT SUCH A DIFFERENCE IS D UE TO THE REASON THAT HIGHER DEDUCTION CHARGES FOR QUALIT Y CUTS OF RICE SUPPLIED TO FCI AND PAYMENTS OF GUNNY BAGS TO THE GOVT. AGENCY FOR PADDY MILLED BY THE APPELLANT HAS BEEN MADE. THE AMOUNT IS RETAINED BY THE AGENCY AN D IS REQUIRED TO BE ADJUSTED BY MARKFED AT THE TIME OF FINALIZATION OF PADDY MILLING CHARGES OF THE APPELL ANT. HE FURTHER STATED THAT THE ASSUMPTION MADE BY THE A .O. 6 THAT THE PAYMENT IS GIVEN OUT SIDE THE BOOKS OF ACC OUNT IS TOTALLY INCORRECT AS MARKFED IS A SUNDRY DEBTOR OF THE APPELLANT AND MAKES PAYMENTS TO THE APPELLANT THROU GH CHEQUES/DRAFT AD NOT IN CASH. FURTHER THE SUNDRY D EBTORS BALANCE IN THE ACCOUNTS OF THE MARKFED IS DUE TO TH E PROVISIONAL RATES OF QUALITY CUTS AND GUNNY BAGS AN D NOT ON ANY OTHER ACCOUNT AND CANNOT BE SAID TO BE OUT S IDE THE BOOKS OF ACCOUNT. THE COUNSEL HAS FURTHER STAT ED THAT IF THE DEDUCTIONS OF QUALITY CUTS AND BARDANA PAYMENTS ARE CREDITED THEN IT WILL DECREASE THE PRO FIT OF THE YEAR BY RS.86 698/-. 10. THE CIT(A) ON CONSIDERATION OF THE FACTS HELD A S UNDER : 5.3 I HAVE GONE THROUGH THE FACTS OF THE CASE AND SUBMISSIONS OF THE COUNSEL FOR THE APPELLANT. IT I S CORRECT THAT MOST OF THE AGENCIES INCLUDING MARKFED INDICATE PROVISIONAL RATES TO THE MILLERS AND THE A CTUAL FIGURES ARE ONLY CONVEYED MUCH LATER. THE AMOUNTS ON ACCOUNT OF QUALITY CUTS AND GUNNY BAGS HAVE BEEN PROVISIONALLY TAKEN BY THE APPELLANT BECAUSE THE SA ME HAVE NOT BEEN FINALLY QUANTIFIED OR FINALIZED. THI S IS A REGULAR METHOD OF ACCOUNTING FOLLOWED BY THE APPELL ANT. THERE IS NO GROUND FOR THE A.O. TO DIFFER FROM THIS SYSTEM AND TO MAKE THE IMPUGNED ADDITION. 11. ON THE PERUSAL OF THE RECORD WE FIND THAT THE D IFFERENCE AROSE IN THE CASE OF ONE OF THE SUNDRY DEBTORS OF THE ASSESS EE I.E. M/S MARKFED SANGRUR. THE ASSESSEE IN ITS BOOKS OF ACCOUNT HAD SHOWN A SUM OF RS.5 33 803/- AS RECOVERABLE FROM M/S MARKFED SANGR UR AS AGAINST WHICH THE SAID COMPANY HAD SHOWN A SUM OF RS.4 44 1 05/- AS PAYABLE TO THE ASSESSEE. THE EXPLANATION OF THE ASSESSEE WAS THAT THE DIFFERENCE WAS ON ACCOUNT OF HIGHER DEDUCTION CHARGES FOR QUAL ITY CUTS OF RICE SUPPLIED TO FCI AND PAYMENT OF GUNNY BAGS TO THE GO VT. AGENCY FOR PADDY MILLED BY THE ASSESSEE. THE EXPLANATION OF T HE ASSESSEE WAS THAT THE DIFFERENCE WAS ON ACCOUNT OF THE PROVISIONAL FI GURES ADOPTED BY THE ASSESSEE AS THE SAME HAVE NOT BEEN QUANTIFIED OR FI NALIZED BETWEEN THE PARTIES. THIS WAS THE METHOD OF ACCOUNTING FOLLOWE D BY THE ASSESSEE. IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES WE ARE IN AGREEMENT WITH THE 7 ORDER OF THE CIT(A) AND UPHOLD THE SAME. GROUND NO .3 RAISED BY THE REVENUE IS DISMISSED. FURTHER THE EXPLANATION OF THE ASSESSEE WITH REGARD TO THE ADDITION MADE BY THE A.O. CANNOT BE S AID TO BE ADMISSION OF ADDITIONAL EVIDENCE AND AS SUCH THERE IS NO MERI T IN GROUND NO.4 RAISED BY THE REVENUE ALLEGING THE VIOLATION OF RUL E 46A OF THE INCOME- TAX ACT. GROUND NO.4 RAISED BY THE REVENUE IS THUS DISMISSED. 12. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH DAY OF MARCH 2011. SD/- SD/- (D.K.SRIVASTAVA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30 TH MARCH 2011 RKK COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. .