M/s Ved Parkash Anil Kumar, Ambala City v. ITO, Ambala

ITA 259/CHANDI/2011 | 2007-2008
Pronouncement Date: 27-07-2011 | Result: Dismissed

Appeal Details

RSA Number 25921514 RSA 2011
Assessee PAN AAAFB8454B
Bench Chandigarh
Appeal Number ITA 259/CHANDI/2011
Duration Of Justice 4 month(s) 14 day(s)
Appellant M/s Ved Parkash Anil Kumar, Ambala City
Respondent ITO, Ambala
Appeal Type Income Tax Appeal
Pronouncement Date 27-07-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 27-07-2011
Date Of Final Hearing 14-06-2011
Next Hearing Date 14-06-2011
Assessment Year 2007-2008
Appeal Filed On 14-03-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI D.K.SRIVASTAVA ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA JUDICIAL MEMBER ITA NO. 259/CHD/2011 ASSESSMENT YEAR: 2007-08 M/S VED PARKASH ANIL KUMAR VS. THE ITO WARD-1 AMBALA CITY AMBALA PAN NO. AAAFB8454B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.K.MUKHI / MS. JYOTI RESPONDENT BY: SHRI N.K.SAINI ORDER PER SUSHMA CHOWLA JM THE APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) PANCHKULA DATED 17.1.2011 RELATING TO ASSESSMENT YE AR 2007-08 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF THE I.T. A CT 1961. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THAT THE ORDERS OF THE LD. CIT(A) PANCHKULA IS ILLE GAL ERRONEOUS PERVERSE AND THUS UNCALLED FOR. 2. THAT THE LD. CIT(A) IS NOT JUSTIFIED IN CONCURRING WITH THE LD. ASSESSING OFFICER AND THEREBY ALLOWING MINO R PARTIAL RELIEF WITHOUT APPRECIATING THE FACTS REPL IES CONTENTIONS AND EVIDENCES FILED BY THE APPELLANT WH ICH NEEDS DUE CONSIDERATION BY THE HON'BLE TRIBUNAL. 3. THAT THE LD. CIT(A) NOT JUSTIFIED IN CONCURRING WIT H THE LD. ASSESSING OFFICER AND THEREBY CONFIRMING TH E ACTION OF ASSESSING OFFICER IN INVOKING THE PROVIS IONS 2 OF SECTION145(3) OF THE INCOME TAX ACT 1961 IN RJECTING THE BOOKS OF ACCOUNT WITHOUT APPRECIATING THE FACTS REPLIES CONTENTIONS AND EVIDENCES FILED BY THE APPELLANT WHICH NEEDS DUE CONSIDERATION BY THE HON'BLE TRIBUNAL. 4. (A) THAT THE LD. CIT(A) IS NOT JUSTIFIED IN CONCUR RING WITH THE LD. ASSESSING OFFICER AND THEREBY CONFIRM ING THE ACTION OF THE ASSESSING OFFICER IN MAKING THE ADDITION ON ACCOUNT OF PURCHASE OF RICE OUTSIDE THE BOOKS OF ACCOUNT TO THE EXTENT OF RS. 2 97 215/- ON SURMISES AND CONJECTURES. B) THAT WITHOUT PREJUDICE TO THE ABOVE GROUND OF APPEAL THE APPELLANT DISPUTES THE QUANTUM OF ADDITI ON I.E. RS. 2 97 215/- AS CONFIRMED BY THE APPELLATE AUTHORITY AS HIGHLY EXCESSIVE. 5. THAT THE LD. CIT(A) IS NOT JUSTIFIED IN CONCURRING WITH THE LD. ASSESSING OFFICER AND THEREBY CONFIRMING TH E ACTION OF THE ASSESSING OFFICER BY ALLOWING ONLY PARTIAL RELIEF ON ACCOUNT OF ASSUMPTION OF GP RATE OF THE PREVIOUS YEAR WITHOUT CONSIDERING THE FACTS AND CIRCUMSTANCES REPLIES CONTENTIONS AND EVIDENCES F IELD BY THE APPELLANT WHICH NEEDS DUE CONSIDERATION BY T HE HON'BLE TRIBUNAL. 6. THAT THE LD. CIT(A) IS NOT JUSTIFIED IN NOT ADJUDIC ATING THE ISSUE OF ADDITION ON ACCOUNT OF DRIER CHARGES A ND DEPRECIATION ON BARDANAS TO THE EXTENT OF RS. 22 30 5/- THOUGH DULY RAISED BY THE APPELLANT AND ALSO MENTIO NED BY THE CIT(A) IN ITS ORDER IN PARA 2 PAGE 2 THOUGH ALLOWED UNDER SIMILAR FACTS AND CIRCUMSTANCES IN OT HER COMPARABLE CASES WHICH NEEDS DUE CONSIDERATION BY THE HON'BLE TRIBUNAL. 3 3. THE GROUND NOS. 1 AND 2 RAISED BY THE ASSESSEE A DMITTEDLY ARE GENERAL IN NATURE AND THE SAME ARE DISMISSED. 4. THE ISSUE IN GROUND NO.3 RAISED BY THE ASSESSEE IS AGAINST THE REJECTION OF BOOKS OF ACCOUNT BY INVOKING PROVISION S OF SECTION 145(3) OF THE ACT. 5. THE ISSUE IN GROUND NO. 5 RAISED BY THE ASSESSEE IS AGAINST THE APPLICATION OF GP RATE OF THE PREVIOUS YEAR FOR DET ERMINING THE INCOME OF THE ASSESSEE. THE GROUND NO.4 RAISED BY THE ASSESS EE IS AGAINST THE ADDITION MADE ON ACCOUNT OF PURCHASE OF RICE OUTSID E THE BOOKS OF ACCOUNT RESULTING IN ADDITION OF RS.2 97 215/-. 6. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A RICE SHELLER AND IS MILLING PADDY ON ACCOUNT OF GOVERNMENT AND ALSO ON ITS OWN ACCOUNT. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HA D SHOWN SALES OF RS.187.84 CRORES AND HAD DECLARED GP RATE OF 8.71% AS AGAINST THE SALES OF RS.153.03 CRORES SHOWN DURING THE PRECEDING YEAR DECLARING GP RATE OF 16.96%. THERE WAS FALL IN THE NP RATIO ALSO I.E. F ROM 0.63% DECLARED DURING THE PRECEDING YEAR TO 0.44% REFLECTED DURING THE IMPUGNED YEAR. THE EXPLANATION OF THE ASSESSEE WITH REGARD TO FALL IN GP RATE WAS DUE TO UNFAVOURABLE MARKET TRENDS RATE OF LABOUR BEING HI GH LOSS OF YIELD DUE TO MOISTURE MITTI FOREIGN MATTER PARALI ETC. FUR THER EXPLANATION OF THE ASSESSEE WAS THAT THE GOVERNMENT AGENCIES ENTERED I NTO CONTRACT FOR 67% YIELD PERCENTAGE WITH EFFECTIVE YIELD OF RICE BEING 66.33%. IN ORDER TO MEET THE NEED OF THE GOVERNMENT AGENCIES THE ASSESS EE CLAIMS TO HAVE DELIVERED RICE OUT OF OWN PADDY WEIGHING 205 QUINTA L WHICH AS PER THE 4 ASSESSEE WAS NOT TAKEN INTO YIELD STATEMENT EARLIER FILED AND BY COUNTING THIS YIELD COMES TO 67.98%. THE ASSESSING OFFICER WAS OF THE VIEW THAT THERE WAS NO MERIT IN THE ARGUMENTS ADVANCED BY THE ASSESSEE AS THE GOVERNMENT AGENCIES WERE COMPELLED TO PURCHASE PADD Y WITH HIGHER CONTENTS OF MOISTURE AT MAXIMUM SUPPORT PRICE OTHE RWISE THE FARMERS OFTEN CAME ON ROADS. HOWEVER THE PRIVATE PARTIES WOULD NEVER PURCHASE THE PADDY WITH HIGHER RATE OF MOISTURE. THE SECOND CONTENTION OF THE ASSESSEE THAT THERE WAS LOSS OF YIELD DUE TO MOISTU RE MITTI FOREIGN MATTER PARALI ETC. WAS FOUND TO BE A GENERAL PRACTICE. T HE ASSESSEE HAS PLACED RELIANCE ON CERTAIN CONCERNS FOR THE YIELD OF PADDY WHICH WAS REJECTED BY THE ASSESSING OFFICER AS NO SCRUTINY ASSESSMENTS WE RE CARRIED OUT IN THE SAID CASES. FURTHER THE ASSESSEE WAS REQUISITIONED TO EXPLAIN HOW IT DELIVERED RICE @ 67% INSTEAD OF 66.33% OF PADDY TO THE GOVERNMENT AGENCIES. THE EXPLANATION OF THE ASSESSEE IN THIS REGARD WAS REJECTED BY THE ASSESSING OFFICER AND THE ASSESSING OFFICER COM PUTED THE PRODUCTION OF RICE @ 67% OF GOVERNMENT PADDY MILLED AND OWN PA DDY MILLED WHICH WORKED TO 24926.22 QTLS. THE ASSESSEE HAD ACCOUNT ED FOR PRODUCTION OF RICE IN ITS BOOKS OF ACCOUNT OUT OF OWN PADDY AT 68 47.04 QTLS AND RICE DELIVERED TO FCI FOR HAFED TOTALING 25224.57 QTLS. THE ASSESSEE WAS FOUND TO HAVE DELIVERED RICE EXCESS TO THE EXTENT O F 298.35 QTLS. THE PLEA OF THE ASSESSEE THAT IT HAD RECEIVED DRIAGE ALLOWAN CE OF RS.1 78 053/- BEING THE COST OF 1% OF 27392.75 QTLS. OF PADDY WH ICH WAS EQUAL TO 273.92 QTLS. @ RS.650/- PER QTL. THE ASSESSING OFF ICER THUS OBSERVED THE ASSESSEE TO HAVE RECEIVED PADDY WEIGHING ONLY 27392 .75 QTLS. AND AFTER DEDUCTING DRIAGE @ 1% I.E. 273.92 QTLS THE PADDY A VAILABLE WITH THE ASSESSEE FIT FOR MILLING WAS WORKED OUT TO 27118.82 QTLS. THE YIELD OF RICE @ 66% WAS FOUND TO BE 17898 QTLS. WHEREAS THE HAD DELIVERED 18377.53 QTLS. THE DIFFERENCE OF 479.11 QTLS WAS HELD TO BE FROM SOURCES 5 OUTSIDE THE BOOKS OF ACCOUNT PURCHASE PRICE OF WHI CH WAS WORKED OUT AT RS.4 88 690/- @ RS.1020/- PER QTL. THE ASSESSING OFFICER ALLOWED THE CREDIT FOR THE DRIAGE RECEIVED FROM HAFED AMOUNTING TO RS.1 67 095/- DETERMINING THE COST OF EXCESS RICE DELIVERED WEIGH ING 24.39 QTLS. AT RS.24 380/-. ACCORDINGLY THE ADDITION OF RS.2 97 215/- WAS MADE ON ACCOUNT OF PURCHASE OF RICE OUTSIDE THE BOOKS OF AC COUNT AND DELIVERED TO HAFED. THE EXPLANATION OF THE ASSESSEE BY WAY OF A NOTHER YIELD CHART AS INCORPORATED IN PARA 12 OF THE ASSESSMENT ORDER WAS REJECTED BY THE ASSESSING OFFICER AND ADDITION OF RS.2 97 215/- ON ACCOUNT OF PURCHASE OUTSIDE THE BOOKS OF ACCOUNT BEING EXCESS RICE DELI VERED TO FCI/HAFED WAS MADE BY THE ASSESSING OFFICER. 7. THE ASSESSING OFFICER CONSIDERED THE TRADING RES ULTS DECLARED BY THE ASSESSEE OF SALE AND PURCHASE OF DIFFERENT QUALITIE S OF RICE. AS POINTED OUT IN THE PARAS HEREINABOVE THERE WAS FALL IN GP R ATE I.E. THE ASSESSEE HAD DECLARED GP RATE OF 8.71% DURING THE YEAR AS AGAINS T 16.96% DECLARED DURING THE PRECEDING YEAR. THE ASSESSEE FURNISHED TRADING ACCOUNTS OF DIFFERENT QUALITIES OF RICE WHICH ARE INCORPORATED UNDER PARA 14 OF THE ASSESSMENT ORDER. THEREAFTER THE ASSESSING OFFICER CONSIDERED THE REASONS FOR FALL IN GP RATE IN RESPECT OF EACH QUAL ITY OF RICE TRADED BY THE ASSESSEE IN PARAS 15 TO 18 OF THE ASSESSMENT ORDER. THE EXPLANATION OF THE ASSESSEE BEFORE THE ASSESSING OFFICER THAT IT H AD VALUED ITS STOCK AT COST PRICE BASIS WAS REJECTED BY THE ASSESSING OFFI CER. THE ASSESSING OFFICER VIDE PARAS 22 AND 23 HAS POINTED OUT WITH S PECIFIC REFERENCES THAT THE RATES OF OPENING STOCK PURCHASE AND THE CLOSIN G STOCK REFLECTED BY THE ASSESSEE DID NOT MATCH. THE ASSESSING OFFICER HELD THAT THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE WERE NOT RELIABL E. IN VIEW THEREOF THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE REJECTED BY INVOKING THE 6 PROCEEDINGS OF SECTION 145(3) OF THE ACT. THE INCO ME OF THE ASSESSEE FOR THE YEAR WAS ESTIMATED BY APPLYING GROSS PROFIT RAT E OF 16.97% ON THE GROSS SALES MADE AND ADDITION OF RS.15 49 856./- WA S MADE. 8. THE CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER AS THE ASSESSEE HAD FAILED TO ANSWER THE ISSUES RAISED WIT H REGARD TO VALUATION OF CLOSING STOCK OF VARIOUS ITEMS TRADED DURING THE Y EAR. THE CIT(A) UPHELD THE REJECTION OF BOOKS OF ACCOUNT AS THE METHOD OF VALUATION OF CLOSING STOCK WAS UNSUPPORTED BY ANY FACTS AND FIGURES. FU RTHER THE CIT(A) CONSIDERED THE EXPLANATION OF THE ASSESSEE ON ACCOU NT OF FALL IN GP RATE AND WAS OF THE VIEW THAT THE GP RATE OF 15% IS TO B E APPLIED AS AGAINST 16.97% APPLIED BY THE ASSESSING OFFICER. THE CIT(A ) ALSO UPHELD THE ADDITION ON ACCOUNT OF PURCHASES OUTSIDE THE BOOKS OF ACCOUNT. 9. THE ASSESSEE IS IN APPEAL AGAINST THE AFORESAID ADDITION CONFIRMED BY THE CIT(A). THE LEARNED A.R. FOR THE ASSESSEE M ADE ELABORATE SUBMISSIONS WITH REGARD TO THE APPLICATION OF GP RA TE AND POINTED OUT THAT THE ASSESSEE WAS CARRYING OUT TRADING OF RICE AND T HE CLOSING STOCK DECLARED BY THE ASSESSEE WAS OF SUPERIOR QUALITY OF RICE LEFT WITH THE ASSESSEE WHICH EVENTUALITY WAS SOLD AT HIGHER PRIC E IN THE SUCCEEDING YEAR. THE LEARNED A.R. FOR THE ASSESSEE FAIRLY ADM ITTED THAT NO STOCK REGISTER WAS BEING MAINTAINED QUALITY-WISE THOUGH QUANTITY-WISE STOCK REGISTER WAS BEING MAINTAINED. IT WAS POINTED OUT BY THE LEARNED A.R. FOR THE ASSESSEE THAT THE ASSESSEE HAD DECLARED GP RATE OF 10.11% AS AGAINST GP RATE OF 15.9% DECLARED DURING THE PRECEDING YEAR . THE ASSESSING OFFICER HAD ESTIMATED THE TRADING ADDITION BY APPLY ING GP RATE OF 16.96% WHICH WAS REDUCED TO 15% BY THE CIT(A). RELIANCE WAS PLACED ON THE SERIES OF RATIO LAID DOWN BY VARIOUS COURTS. IN RE SPECT OF THE ADDITION 7 MADE ON ACCOUNT OF PURCHASE OUTSIDE THE BOOKS OF AC COUNT THE LEARNED A.R. FOR THE ASSESSEE PLACED RELIANCE ON THE ARGUME NTS RAISED BEFORE THE AUTHORITIES BELOW. 10. THE LEARNED D.R. FOR THE REVENUE POINTED OUT TH AT THE ASSESSING OFFICER VIDE PARAS 22 AND 23 HAD POINTED OUT THE CO ST PRICE OF THE STOCK AND THE VALUATION DECLARED BY THE ASSESSEE AND FIGU RES DO NOT MATCH EITHER WITH THE COST OF OPENING STOCK OR PURCHASES. IT WA S FURTHER POINTED OUT BY THE LEARNED D.R. THAT THE ASSESSEE WAS ASKED TO FIL E THE BASIS FOR THE VALUATION OF STOCKS WHICH HAS NOT BEEN SO FILED BE FORE THE AUTHORITIES BELOW. RELIANCE WAS PLACED ON THE OBSERVATIONS OF CIT(A) AT PAGE 8 OF THE ORDER WHEREIN IT HAS BEEN POINTED OUT THAT NO D ETAILS WERE GIVEN BY THE ASSESSEE. ACCORDINGLY IT WAS URGED THAT THE BOOK S OF ACCOUNT HAD BEEN RIGHTLY REJECTED. THE LEARNED D.R. FOR THE REVENUE FURTHER STATED THAT THERE WAS NO CALCULATION MISTAKE IN THE GP RATE REF ERRED TO BY THE ASSESSING OFFICER WHEREAS THE ASSESSEE HAS REFERRE D TO FIGURES OF RECONSTRUCTED TRADING ACCOUNT. FURTHER RELIANCE WA S PLACED ON PARA-VII OF THE ORDER OF CIT(A) WHERE THE REASONS FOR FALL IN G P RATE AS EXPLAINED BY THE ASSESSEE HAVE BEEN CONSIDERED BY THE CIT(A) AND THE ASSESSEE HAS FAILED TO CONTROVERT THE SAME. REGARDING THE ADDIT ION ON ACCOUNT OF PURCHASE PRICE OF STOCK RELIANCE WAS PLACED ON THE ORDER OF THE CIT(A). 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE IS A RICE MILLER AND CARRYING ON MILLING O F RICE BOTH ON BEHALF OF THE GOVERNMENT AGENCIES AND ON ITS OWN ACCOUNT. DU RING THE YEAR UNDER CONSIDERATION THOUGH THERE WAS INCREASE IN THE SALE AS COMPARED TO THE PRECEDING YEAR BUT THERE WAS A FALL IN THE GP RATE. THE ASSESSEE HAD DECLARED SALES OF RS.187.84 CRORES AND GP RATE OF 8 .71% DURING THE YEAR 8 AS COMPARED TO SALES OF RS.153.03 CRORES AND GP RAT E OF 16.96% SHOWN DURING THE PRECEDING YEAR. THE ASSESSEE WAS TIME A ND AGAIN ASKED TO EXPLAIN THE REASONS FOR FALL IN GP RATE WHICH THE ASSESSEE ATTRIBUTED TO LOSS OF YIELD ON ACCOUNT OF VARIOUS FACTORS AND BES T QUALITY OF PADDY BEING SUPPLIED TO THE GOVERNMENT AGENCIES AND ONLY LEFTOV ER PADDY BEING AVAILABLE FOR SALE IN THE MARKET. THE ASSESSEE CLA IMS TO HAVE MAINTAINED STOCK REGISTER OF THE VARIOUS TYPES OF RICE DEALT I N BY THE ASSESSEE AND THE RESULTS ARE TABULATED UNDER PARA 14 OF THE ASSESSME NT ORDER. THE TRADING RESULTS SHOWN BY THE ASSESSEE HAVE BEEN ELABORATELY CONSIDERED BY THE ASSESSING OFFICER VIDE PARAS 15 TO 20 IN RESPECT OF EACH QUALITY OF RICE DEALT IN BY THE ASSESSEE. THE SAME ARE NOT REPROD UCED FOR THE SAKE OF GRAVITY. HOWEVER THE PERUSAL OF THE SAME REFLECT S THE ASSESSING OFFICER TO HAVE CONCLUDED AS UNDER :- I) RICE SUPERFINE : TRADING ACCOUNT OF RICE S/F FOR WHOLE OF THE YEAR A S SUBMITTED BY THE ASSESSEE AND REPRODUCED IN THIS ORDER SHOWS THA T THE OPENING STOCK AS ON 1.4.2006 WAS VALUED AT THE RATE OF RS.1225/- PER QTL AND SALES WERE MADE AT THE RATE OF RS.1064.39 PER QTL WHEREAS THE CLOSING STOCK OF 7225.59 QTLS HAS BEEN VALUED FOR RS.9754543/- AT TH E RATE OF RS.1350/- PER QUINTAL. II) RICE BASMATI: THE ASSESSEE HAD BROUGHT FORWARD 2203 QTL OF RICE BASMATI FOR AN AMOUNT OF RS.48 46 600/- I.E. @ RS.2200/- PER QTL. NO PURCHASE WERE MADE DURING THE YEAR OR OTHERWISE NO ADDITIONS TO T HE STOCK OF THIS RICE BASMATI WAS MADE DURING THE YEAR. THE ASSESSEE SOL D 2160.51 QTLS FOR A CONSIDERATION OF RS.4739964.08 I.E. @ 2193.91 PER Q TL BUT HAD VALUED THE BALANCE OF RS.41.49 QTL OF CLOSING STOCK @ RS.2509. 67. COST IN THIS 9 PRODUCT TO THE ASSESSEE FOR THE ACCOUNTING YEAR SHO ULD HAVE BEEN RS.2200/- PER QTL. III) RICE SHARBATI: THAT ASSESSEE DID NOT MAKE ANY PURCHASE DURING THE YEAR BUT HAD OPENING STOCK OF 1052.10 QTL AS ON 1.4.2006 VALUED THE AMOUNT OF RS.1513760/- @ RS.1438.80. THE ASSESSEE SOLD 253.0 0 QTL @ 1634.88 PER QTL AND AT THE CLOSE OF THE YEAR THERE WAS CLOSING STOCK OF 799.10 QTL WHICH WAS VALUED BY THE ASSESSEE AT RS.1598200/- THAT BEI NG AT THE RATE OF 2000/- PER QTL. IV) HUSK: THE ASSESSEE DURING THE YEAR SOLD 5101 QTL OF HUSK OF RS.331565/- I.E. AT THE RATE OF RS.65/- PER QTL. AND 2413.67 QT L. WAS CONSUMED BY THE ASSESSEE IN THE MILL AS A FUEL; THE BALANCE LEFT WI TH THE ASSESSEE WEIGHING 3339.33 QTL WAS VALUED AT RS.267146.67 AS CLOSING S TOCK GIVING THE RATE OF RS.80/- PER QTL. THE ASSESSEE HAS NOT ADVANCED ANY SPECIFIC REASON FOR THE SALE OF HUSK AT THE PRICE LOWER THAN THE MARKET RATE AND VA LUE OF THE CLOSING STOCK AT THE PREVAILING MARKET RATE BUT NOT AT THE RATE O N WHICH THE SALES WERE BOOKED BY HIM. FURTHER THE ASSESSEE HIMSELF HAS VA LUED THE CLOSING STOCK OF HUSK AT 80/- PER QUINTAL. KEEPING IN VIEW THE F ACTS AND CIRCUMSTANCES OF THE CASE IT IS HELD THAT THE ASSESSEE SUPPRESSE D THE SALES OF HUSK AT THE RATE OF RS.15 PER QTL. 12. IN VIEW OF THE ABOVESAID FACTS AND CIRCUMSTANCE S THE BOOKS OF ACCOUNT OF THE ASSESSEE AND THE RESULTS DECLARED BY THE ASSESSEE WERE HELD TO BE MANIPULATED AND WERE REJECTED BY INVOKING THE PROVISIONS OF SECTION 10 145(3) OF THE INCOME TAX ACT. THE CIT(A) ALSO OBS ERVED VIDE PARA-VII AT PAGE 8 OF THE APPELLATE ORDER THAT THE ASSESSEE HAS NOT BEEN ABLE TO ANSWER THE ISSUE RAISED BY THE ASSESSING OFFICER WITH REGA RD TO THE VALUATION OF CLOSING STOCK OF VARIOUS ITEMS TRADED DURING THE YE AR. IN THE ABSENCE OF THE SAID THE BOOKS OF ACCOUNT WERE HELD TO BE RIGH TLY REJECTED BY THE CIT(A) AS THE METHOD OF VALUATION OF CLOSING STOCK ADOPTED BY THE ASSESSEE WAS UNSUPPORTED BY ANY FACTS AND FIGURES. 13. THE LEARNED A.R. FOR THE ASSESSEE BEFORE US HAD BROUGHT TO OUR ATTENTION THE SALE BILLS RELATABLE TO THE SAID CLOS ING STOCK WHICH WERE SOLD IN THE SUCCEEDING YEAR BY THE ASSESSEE. IT WAS PO INTED OUT BY THE LEARNED A.R. FOR THE ASSESSEE THAT THE SAID CLOSING STOCK A VAILABLE WITH THE ASSESSEE WAS OF SUPERIOR VALUE AND WAS SOLD SUBSEQU ENTLY AT HIGHER RATE AND ON THE BASIS OF SUCH RATES THE VALUATION OF CLO SING STOCK AS AT THE CLOSE OF THE YEAR MERITS TO BE ACCEPTED. THE LEAR NED A.R. FOR THE ASSESSEE RAISED ELABORATE ARGUMENTS THAT ONCE THE STOCK REGI STER IS REGULARLY BEING MAINTAINED BY THE ASSESSEE THERE IS NO MERIT IN REJ ECTING THE SAME AND ADOPTING THE GP RATE OF THE PRECEDING YEAR TO WORK OUT THE INCOME OF THE YEAR UNDER APPEAL. THE LEARNED A.R. FOR THE ASSESS EE HOWEVER FAILED TO CLARIFY THE DISCREPANCIES POINTED OUT BY THE ASSESS ING OFFICER VIS--VIS RATE APPLIED FOR VALUATION OF THE STOCK AT THE CLOS E OF THE YEAR WHERE THE AVAILABLE STOCK AT THE START OF THE YEAR AND THE PU RCHASES MADE DURING THE YEAR WERE AT LOWER VALUE AS COMPARED TO THE VALUE A DOPTED FOR DETERMINING THE CLOSING STOCK VALUATION. THE EXPL ANATION OF THE ASSESSEE THAT IT WAS LEFT WITH ONLY SUPERIOR QUALITY OF STOC K IS WITHOUT ANY BASIS AS NO MATERIAL HAS BEEN PLACED ON RECORD BY THE ASSESS EE TO SUBSTANTIATE ITS CLAIM. 11 14 UNDER THE PRINCIPLES OF ACCOUNTING THE PROCEDUR E FOR VALUATION OF CLOSING STOCK IS LAID DOWN AND ONE OF THE METHOD IS THAT THE CLOSING STOCK BE VALUED EITHER AT COST OR MARKET PRICE WHICHEVER IS LESS. THE ASSESSEE ADMITTEDLY IS FOLLOWING THE ABOVESAID METHOD FOR V ALUING ITS STOCK. HOWEVER THE ASSESSEE HAS NOT FOLLOWED THE SAID MET HOD WHILE VALUING ITS CLOSING STOCK IN THE YEAR UNDER APPEAL. AS POINTED OUT BY THE AUTHORITIES BELOW THE ASSESSEE HAS WORKED OUT THE RATE OF CLOSI NG STOCK AT FIGURE HIGHER THAN VALUING OF THE OPENING STOCK AND OR THE PURCHASES MADE DURING THE YEAR. FROM THE FACTUAL ASPECTS OF THE CASE IT WAS POINTED OUT BY THE ASSESSING OFFICER AS UNDER : 22. FROM THE DISCUSSION OF THE FACTS AS DISCUSSED IN THE EARLIER PARAS IT COULD NOT BE MADE OUT AS TO HOW T HE ASSESSEE HAS WORKED OUT THE COST PRICE OF THE VALUA TION OF CLOSING STOCK IN THE TRADE OF RISE S/F WHERE THE OPENING STOCK WAS BROUGHT FORWARD BY THE ASSESSEE @ 1225 PER QTL AND THE PURCHASES WERE AT THE RATE OF 954.56 PER QTL. /THE ASSESSEE HAS VALUED THE CLOSI NG STOCK WEIGHING 7225.59 QTL FOR AN AMOUNT OF RS.9754543.50 @ RS.1350/-. SIMILARLY IN THE CASE O F RICE BASMATI OPENING STOCK WAS BROUGHT FORWARD BY THE ASSESSEE AS ON 1.4.2006 @ 2200/- PER QTL. NO PURCHASES DURING THE YEAR WERE MADE BUT THE SALE OF 2160.51 QTL. FOR CONSIDERATION OF RS.4739964.08 GIV ING A RATE OF 2193.91. BUT THE VALUE OF CLOSING STOCK LEFT WITH THE ASSESSEE WEIGHING 42.49 QTL WAS VALUED AT THE RATE OF 2509.67 PS. IN THE CASE OF RICE SHARBATI A LSO OPENING STOCK WAS BROUGHT FORWARD BY THE ASSESSEE @ 1438 PER QTL. NO PURCHASES DURING THE YEAR WERE MA DE BUT THE SALE OF 253 QTL. WAS MADE BY THE ASSESSEE @ 1634.88 PER QTL AND THE CLOSING STOCK WEIGHING 799. 10 QTL WAS VALUED @ 2000/- PER QTL. 12 23. IN THE CASE OF RICE HUSK ALSO OPENING STOCK AS ON 1.4.2006 WEIGHING 3613 QTL. WAS BROUGHT FORWARD OF THE VALUE OF 2529.10 @ RS.70/- PER QTL. THE STOCK WAS ADDED TO THE EXTENT OF 7239 QTLS FOR CONSIDERATION OF RS.345801 @ 47.76 PER QTL. THE ASSESSEE MADE SALE OF 5101 QTL OUT OF TOTAL STOCK OF 10854 QTL @ RS.65 PE R QTL WHEREAS THE CLOSING STOCK OF 3339.33 QTL WAS VALUED AT THE RATE OF 80 PER QTL. THIS GIVES A RATE OF 55.16 PER QTL AS COST PRICE OF HUSK. BUT THE SALES WERE MADE AT RS.65/- PER QTL AND CLOSING STOCK IS STATED TO HAVE BEEN VALUED AT COST PRICE HAS BEEN VALUED AT RS.80/-. 15. BEFORE THE CIT(A) AND EVEN BEFORE US THE ASSESS EE HAS FAILED TO FURNISH ANY EXPLANATION OR EVIDENCE TO CONTROVERT T HE FINDINGS OF THE ASSESSING OFFICER. MERELY BECAUSE THE ASSESSEE IS MAINTAINING THE STOCK REGISTER DEPICTING THE QUANTITY TRADED IN DURING TH E YEAR ONLY ESTABLISHES THE QUANTITY OF STOCK AVAILABLE WITH THE ASSESSEE. AS POINTED OUT IN PARAS ABOVE THE ASSESSEE HAS FAILED TO FURNISH ANY EVIDEN CE TO PROVE ITS STAND THAT IT HAD SOLD LOWER QUALITY OF RICE DURING THE Y EAR AND ONLY SUPERIOR QUALITY WAS AVAILABLE WITH THE ASSESSEE AND FURTHER THE RATES ADOPTED FOR VALUING THE CLOSING STOCK WERE HIGHER THAN THE RATE S DECLARED OF OPENING STOCK AND THE PURCHASE RATES OF THE STOCK PURCHASED DURING THE YEAR. THERE IS NO MERIT IN THE CLAIM OF THE ASSESSEE THAT THE STOCK HAS BEEN SOLD AT THE RATES HIGHER THAN SHOWN IN THE SUCCEEDING YE AR. SUCH RATES CANNOT BE THE YARDSTICK FAR VALUING THE CLOSING STOCK OF T HE EARLIER YEAR. IN THE ABSENCE OF THE ASSESSEE HAVING DISCHARGED ITS ONUS OF ESTABLISHING ITS CASE VIS--VIS HIGHER RATES ADOPTED FOR VALUING STOCK IN VIEW ITS ADMISSION THAT IT WAS FOLLOWING THE PRACTICE OF ADOPTING VALUATION OF ITS STOCK AT COST PRICE OR MARKET PRICE WHICHEVER IS LOW WE ARE IN CONFORMITY WITH THE ORDER OF THE AUTHORITIES BELOW THAT THE RESULTS DEC LARED BY THE ASSESSEE ARE 13 MANIPULATED AND THE BOOKS OF ACCOUNT CANNOT BE RELI ED UPON. FURTHER THE ASSESSEE HAS FAILED TO EXPLAIN THE DRASTIC FALL IN GP RATE VIS--VIS THE RESULTS SHOWN IN THE PRECEDING YEAR. IN THE ABOVE CIRCUMSTANCES WE UPHOLD THE REJECTION OF BOOKS OF ACCOUNT UNDER SECT ION 145(3) OF THE ACT. THOUGH THE ASSESSING OFFICER HAD ESTIMATED THE TRAD ING RESULTS OF THE ASSESSEE FOR THE YEAR BY ADOPTING THE GP RATE OF 16 .97%. HOWEVER THE CIT(A) HAD REDUCED THE SAME TO 15%. WE ARE IN CONF ORMITY WITH THE OBSERVATIONS OF THE CIT(A) THAT AS A MATTER OF PRIN CIPLE THERE IS NO BETTER YARDSTICK TO ESTIMATE ASSESSEES INCOME THAN ITS OW N TRADING RESULTS BUT WHILE APPLYING THE RESULTS OF PREVIOUS YEARS THE SP ECIAL CIRCUMSTANCES FOR THE YEAR SHOULD BE KEPT IN CONSIDERATION. THE ASSE SSEE HAD GIVEN FOUR REASONS AS PER PARA- III PAGE 5 OF THE APPELLATE OR DER FOR FALL IN GP RATE AND HAD POINTED OUT THAT WHEN ACCOUNTING FOR THE SA ME THE RESULTS WERE HIGHER THAN THE PREVIOUS YEAR. THE FOUR REASONS FO R FALL IN GP RATE ARE AS UNDER : A) FEWER AMOUNTS RECEIVED ON ACCOUNT OF DEPRECIATI ON OF BARDANA FROM GOVT. AGENCY (HAFED) DURING THIS YEAR. B) PAYMENT OF BONUS ON PADDY HAS TO BE MADE AFTER MAKING PURCHASES OF PADDY DURING THIS YEAR. C) FEWER QUANTITIES OF RICE PURCHASED FOR TRADING THIS YEAR. D) QUANTITY OF GOVT. PADDY MILLED IS LESS THIS YEAR. 16. THE CIT(A) OBSERVED AS UNDER : I HAVE CAREFULLY GONE THROUGH THE REASONS GIVEN JUSTIFYING THE LOW GP AND FIND THAT ONLY ONE OF THE FOUR FACTORS MENTIONED BY THE AO I.E. LESS DEPRECIATION ON BARDA NA COULD 14 HAVE AFFECTED THE GP RATE. THE EXPENDITURE ON ACCO UNT OF PADDY BONUS IS BOOKED UNDER P&L ACCOUNT. SIMILARLY LESSOR QUANTITY OF PADDY MILLED OR LESSOR AMOUNT OF TRADIN G DONE WILL NOT EFFECT THE TRADING RESULTS. THIS MAY EFFECT TH E QUANTUM OF PROFIT BUT NOT THE GP RATIO. THEREFORE THE APPELLA NTS EXPLANATION WITH REGARD TO LOW GP IS FOUND TO BE ON LY PARTIALLY CORRECT AND ACCEPTABLE. 17. HOWEVER THE CIT(A) DIRECTED THE ASSESSING OFFI CER TO ADOPT GP RATE OF 15% AND REWORK THE GROSS PROFIT FOR THE YEA R IN THE HANDS OF THE ASSESSEE. IN THE ABSENCE OF THE ASSESSEE MEETING T HE OBJECTION OF THE CIT(A) WE UPHOLD THE ORDER OF CIT(A) IN THIS REGAR D AND DISMISS GROUND NOS. 3 AND 5 RAISED BY THE ASSESSEE. 18. NOW COMING TO THE ISSUE IN GROUND NO.4 RAISED B Y THE ASSESSEE VIS- -VIS UNACCOUNTED PURCHASES. THE CIT(A) VIDE PARA- III AT PAGE 5 OBSERVED AS UNDER : III) I HAVE GONE THROUGH THE CHART GIVEN BY THE AP PELLANT TRYING TO EXPLAIN THE DIFFERENCE IN THE YIELD OF TH E GOVT. PADDY AND THE OWN PADDY. THE SAME IS HOWEVER REJEC TED AS A JUGGLERY OF FIGURES. THE APPELLANT HIMSELF AC CEPTED BEFORE THE AO THAT NO SEPARATE ACCOUNT OF MANUFACTU RING OF GOVT. PADDY HAS BEEN KEPT AND THAT RICE @ 67% YI ELD HAS BEEN DELIVERED TO THE GOVT. THE APPELLANT HAS BEEN CHANGING ITS STAND WITH REGARD TO THE ACTUAL YIELD FROM 66% TO 67% AND FINALLY TO 67.97%. AS PER DETAILS SUBMITTED BEFORE THE ASSESSING OFFICER THE APPELLAN T HAS SHOWN A YIELD OF 67% OF THE TOTAL PADDY MILLED I.E. 25224.57 QUINTAL OF RICE MILLED OUT OF TOTAL PADDY OF 37767.05 QUINTALS. ON A QUERY BY THE ASSESSING OFF ICER THE APPELLANT HIMSELF SUBMITTED THAT THE ACTUAL YIE LD IS 67.98% AFTER KEEPING IN VIEW THE EXTRA RICE DELIVER ED TO 15 HAFED. THE EXPLANATION OFFERED BY THE APPELLANT HA S RIGHTLY BEEN REJECTED BY THE ASSESSING OFFICER AS A N AFTER THOUGHT. THE ASSESSING OFFICER HAS RIGHTLY HELD TH AT THE EXTRA RICE DELIVERED TO HAFED REPRESENTS THE APPELLANTS UNACCOUNTED INCOME. THIS COULD HAVE AR ISEN EITHER BECAUSE OF ACTUAL YIELD OF THE RICE BEING HI GHER THAN REFLECTED IN THE BOOKS OF ACCOUNT OR ON ACCOUN T OF PURCHASES OF RICE OUT SIDE THE BOOKS OF ACCOUNT. I N BOTH SET OFF CIRCUMSTANCES THE ADDITION MADE BY THE ASSESSING OFFICER IS JUSTIFIED AND IS UPHELD. 19. THE CONTENTION OF THE ASSESSEE THAT IT HAD GIVE N FINE RICE OUT OF HIS OWN MILLING TO HAFED/GOVT. AGENCIES AND HAD KEPT TU KDA/NAKKU RICE WITH HIM FOR OPEN SALE IS REJECTED IN THE ABSENCE O F ANY EVIDENCE BEING BROUGHT ON RECORD TO SUBSTANTIATE THE ABOVESAID CLA IM. THE SECOND CLAIM OF THE ASSESSEE THAT THE PADDY DRIAGE ALONGWITH HAD BEEN UTILIZED FOR THE PURCHASE OF EXTRA PADDY TO FULFILL THE DELIVERY OF GOVERNMENT NEED THOUGH AS PER THE ASSESSEE IS ACCOUNTED FOR IN THE STOCK R EGISTER PLACED IN THE PAPER BOOK BUT THE PERUSAL OF THE SAME AT PAGE 61 R EFLECTS ONLY THE RECEIPTS OF PURCHASES WHICH IN NO WAY ESTABLISHES THE CLAIM OF THE ASSESSEE. IN THE ABSENCE OF THE ASSESSEE HAVING D ISCHARGED ITS ONUS WE UPHOLD THE ORDER OF THE AUTHORITIES BELOW VIS--VIS PURCHASE OF RICE OUTSIDE THE BOOKS OF ACCOUNT. THE GROUND NO.4 RAI SED BY THE ASSESSEE IS THUS DISMISSED. 20. THE ASSESSEE VIDE GROUND NO.6 HAS RAISED THE IS SUE OF CIT(A) NOT ADJUDICATING THE ADDITION ON ACCOUNT OF DRIER CHARG ES AND DEPRECIATION ON BARDANA TO THE EXTENT OF RS.22 305/-. THE ASSESSIN G OFFICER VIDE PARA 29 OBSERVED AS UNDER : 16 29. FURTHER IT IS NOTED THAT THE ASSESSEE HAD RECE IVED AN AMOUNT OF RS.167095/- ON ACCOUNT OF DRIER CHARGES A ND DEPRECIATION ON BARDANA AMOUNTING TO RS.78754/- FRO M HAFED AMBALA WHEREAS THESE AMOUNTS HAVE BEEN CREDITED TO TRADING ACCOUNT OF RS.147710/- AND 7582 4/- RESPECTIVELY. DIFFERENCE BEING OF RS.22 305 (RS.19385+2920) IS ADDED BACK TO THE INCOME RETURNE D. THE ASSESSEE HAS CLAIMED TO HAVE THAT THESE EXPENSE S WERE DEDUCTED BY THE HAFED ON ACCOUNT OF MOISTURE CUT TAT & PATTI IN BARDANA. BOTH THE EXPENDITUR ES BEING OF PENAL IN NATURE AND NOT ALLOWABLE AND IS DISALLOWED. PENALTY PROCEEDINGS U/S 271(1)(C) ON T HIS ACCOUNT ARE INITIATED SEPARATELY. 21. THOUGH THE CIT(A) HAS NOT ADJUDICATED UPON THE SAID ISSUE BUT LOOKING AT THE SMALLNESS OF THE ISSUE INVOLVED WE P ROCEED TO DECIDE THE SAID ISSUE. THE ASSESSEE HAS FAILED TO EXPLAIN WI TH EVIDENCE THE ABOVESAID DISCREPANCY NOTED BY THE ASSESSING OFFICE R AND IN THE ABSENCE OF THE SAME THE ADDITION OF RS.22 305/- IS UPHELD. THE GROUND NO.6 IS THUS DISMISSED. 22. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF JULY 2011. SD/- SD/- (D.K.SRIVASTAVA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 27 TH JULY 2011 RATI COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT CHANDIGARH