ACIT, Meerut v. M/s. Ramala Sahkari Chini Mills Ltd., Baghpat

ITA 2777/DEL/2013 | 2009-2010
Pronouncement Date: 28-04-2015 | Result: Dismissed

Appeal Details

RSA Number 277720114 RSA 2013
Assessee PAN AAAAR1018E
Bench Delhi
Appeal Number ITA 2777/DEL/2013
Duration Of Justice 1 year(s) 11 month(s) 21 day(s)
Appellant ACIT, Meerut
Respondent M/s. Ramala Sahkari Chini Mills Ltd., Baghpat
Appeal Type Income Tax Appeal
Pronouncement Date 28-04-2015
Appeal Filed By Department
Order Result Dismissed
Bench Allotted F
Tribunal Order Date 28-04-2015
Date Of Final Hearing 11-03-2015
Next Hearing Date 11-03-2015
Assessment Year 2009-2010
Appeal Filed On 07-05-2013
Judgment Text
INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F : NEW DELHI BEFORE SHRI R.S. SYAL ACCOUNTANT MEMBER AND SHRI A. T. VARKEY JUDICIAL MEMBER ITA NO.2777/DEL/2013 (ASSESSMENT YEAR: 2009 - 10) ACIT CIRCLE - 2 MEERUT VS. RAMALA SAHKARI CHINI MILLS LTD VILLAGE RAMALA BAGHPAT PAN NO - AAAAR1018E (APPELLANT) (RESPONDENT) CO NO.191/DEL2013 IN ITA NO.2777/DEL/2013 (ASSESSMENT YEAR: 2009 - 10) RAMALA SAHKARI CHINI MILLS LTD VILLAGE RAMALA BAGHPAT PAN NO - AAAAR1018E VS. ACIT CIRCLE - 2 MEERUT (APPELLANT) (RESPONDENT) APPELLANT BY :SHRI VIKRAM SAHAY SR.D R RESPONDENT BY :SHRI P. S. KASHYAP F. C.A. DATE OF HEARING 11.03. 2015 DATE OF PRONOUNCEMENT 2 8 . 04 .2015 ORDER PER A. T. VARKEY JUDICIAL MEMBER THIS APPEAL FILED BY THE REVENUE AND CROSS OBJECTION FILED BY THE ASSESSEE EMANATE OUT OF THE ORDER PASSED BY THE LD. CIT(A) MEERUT DATED 26.02.2013 PERTAINING TO ASSESSMENT YEAR 2009 - 10. 2. THE FACTS IN BRIEF ARE THAT IN THE RETURN SHOWING NET INCOME NIL WAS FILED ON 30. 0 9.2009 WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE I NCOME TAX ACT 1961 (HEREIN AFTER THE ACT) . THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS BASIS. STATUTORY NOTICES U/S. 143(2) DATED 19.8.2010 AND 27.8.2010. NOT ICE U/S. 142(1) DATED 15. 0 7.2011 WERE ISSUED WHICH WERE DULY SERVE D UPON THE ASSESSEE. BOOKS OF ACCOUNTS WERE PRODUCED WHICH HAVE BEEN EXAMINED ON TEST CHECK ITA NO S . 2777/ DEL/ 2013 & CO NO. 191/DEL/2013 2 BASIS BY THE AO AND THEREAFTER AFTER CONSIDERING THE DETAIL FURNISHED BY THE ASSESS EE THE AO HAS COMPLETED THE ASSESSMENT ON THE TOTAL INCOME OF RS. 2 16 43 241/ - BY MAKING VARIOUS ADDITIONS U/S. 143(3) OF THE ACT . 3 . AGAINST THE AFORESAID ORDER OF THE ASSESSING OFFICER ASSESSEE APPEALED BEFORE THE LD. CIT(A) WHO VIDE HIS ORDER DATE D 26.2.2013 HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 4 . NOW THE REVENUE AND ASSESSEE ARE IN APPEAL AND CROSS OBJECTION RESPECTIVELY BEFORE US ON THIS ISSUE. 5. THE REVENUE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS IN ITS APPEAL: - (1) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW IN RESTRICTING THE ADDITION OF RS.L 72 93 100/ - TO THE AMOUNT OF RS. 15 24 100/ - ON THE INCORRECT GROUNDS THAT (A) PARTIES WERE NOT FINANCIAL INSTITUTIONS AND (B) INTEREST WAS NOT CLAIMED IN THE P&L A/C WHEREAS THE INTEREST BEARING LOANS WERE ADMITTEDLY FROM STATE GOVERNMENTS ( VIRTUAL FINANCIAL INSTITUTIONS GIVING LOANS TO ASSESSEE) AND THE ASSESSEE HAS DEBITED ENTIRE INTEREST OF RS 5 42 30 7 19/ - AND CLAIMED ENTIRE SUM IN ITS P& L A/C AGAINST WHICH LD. CIT(A) WRONGLY HELD THAT MERELY RS 15 24 100/ - WERE CLAIMED BY THE ASSESSEE IN THE P&L A/C. (2) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.L 26 04 397/ - WITHOUT APPRECIATING THE FACTS THAT THE ADDITION WAS MADE BY THE A.O. ON A/C OF DIFFERENCE IN SALES PRICES OF MOLASSES IN VIEW OF COMPARABLE HIGHER SALE PRICE SHOWN BY THE ANOTHER ASSESSEES OF SAME TREND. RELIANCE IS PLACED ON THE RATIO LAID DOWN IN FOLLOWING CASES: (I) LAL CHAND WALAITI RAM VS. CIT (P&H) 111 ITR (II) BHARAT MILK PRODUCTS VS CIT (ALL.) 128 ITR 682 (III) CIT VS. KY. PILLAIAH & SONS (SC) 63 ITR 411. (IV) TAHIL RAM VS. ITO (ITAT AHMEDABAD) 229 ITR (AT) 34 (3) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.2 00764/ - WITHOUT APPRECIATING THE FACTS THAT THE ADDITION WA S MADE BY THE A.O. ON ALC OF DIFFERENCE IN SALES PRICES OF BAGASSE IN VIEW OF COMPARABLE HIGHER SALE PRICE SHOWN BY THE ANOTHER ASSESSEES OF SAME TREND. RELIANCE IS FURTHER PLACED ON THE JUDGMENTS CITED IN GROUND NO.2. (4) WHETHER IN THE FACTS AND CIRCUM STANCES OF THE CASE THE LD. CIT (APPEALS) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS. 10 54 351/ - ITA NO S . 2777/ DEL/ 2013 & CO NO. 191/DEL/2013 3 ON THE BASIS THAT THE CREDIT BALANCE IN QUESTION WAS OUTSTANDING AT THE BEGINNING OF THE PREVIOUS YEAR WHICH WERE MADE BY THE A.O. U/S 68 OF THE IT ACT 1961 IGNORING THE FACTS THAT CREDIT BALANCE AT THE FIRST DAY OF ACCOUNTING YEAR IS ALSO LIABLE TO BE ADDED U/S 68 AND WITHOUT APPRECIATING THE FACTS THAT THE ASSESSEE HAS FAILED TO PROVE THE GENUINENESS OF CREDITS. ONUS TO PROVE SUCH CREDIT WAS ENTIRELY U PON THE ASSESSEE WHICH TOTALLY REMAINED UNDISCHARGED. RELIANCE IS PLACED ON THE FOLLOWING JUDGMENTS: (I) BASANTIPUR TEA CO.(P) LTD. VS CIT 180 ITR 261(CAL) (II) CIT VS. LA MEDICA (2001) 250 ITR - 575 (DELHI) (III) SRI GANESH RICE MILLS VS. CIT (2007) 294 ITR 316 (ALLD.) (IV) CIT VS. UNITED COMMERCIAL AND INDUSTRIAL CO.(199) 187 ITR 596 CAL. (V) CIT VS PRECISION FINANCE PVT. LTD. (CAL) 208 ITR 465 (VI) CIT VS . KORLAY TRADING CO. LTD. (CAL.) 232 ITR 820. (VII) KRISHAN KUMAR JHANB VIS ITO AND ANR (PUNJAB & HARYANA) 17 DTR 249 (VIII) M / S SEJAI INTERNATIONAL LTD VIS CIT MEERUT (ALL.) APPEAL NO.306 OF 2010. (IX) CIT VS DURGA PRASAD MORE 82 ITR 540 (SC) (X) CIT VS P. MOHNAKALA 291 ITR 278 (SC) (XI) CIT VS SUMATI DAYAL 214 ITR 801 (SC) (XII) ITO VS DIZA HOLDINGS PVT. LTD. 255 ITR 573 (KERLA) (XIII) CIT VS NOVA PROMOTERS AND FI NLEASE PVT. LTD. 18 TAXMANN 217 6 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN ITS CROSS OBJECTION: - 1. THAT ON THE FACTS AND IN LAW MAKING DISALLOWING U/S. 43B TO RS. 15 24 100/ - IS TOTALLY WRONG UNJUSTIFIED AND ILLEGAL. IN ASSESSMENT ORDER THE AO HAS TREATED VARIOUS INSTITUTIONS OF UP GOVERNMENT AS FINANCIAL INSTITUTIONS WITHIN THE MEANING OF SECTION 43B(D) AND ACCORDINGLY DISALLO WED A SUM OF RS. 1 72 93 001/ - U/S. 43B(D) OF THE ACT. THE AO MAKE DISALLOWANCE NOT ON THE BASIS OF THE INTEREST CHARGED IN PROFIT AND LOSS ACCOUNT I.E. RS. 15 24 100/ - BUT DISALLOWED RS. 1 72 93 001/ - AS SHOWN IN THE BALANCE SHEET. IN APPEAL ORDER LD. CIT(A) HAS ACCEPTED THAT THE INSTITUTIONS OF STATE GOVERNMENT ARE NOT FINANCIAL INSTITUTIONS AS DEFINED IN SECTION 43B(D) OF THE ACT. BUT CIT(A) HAS CONFIRMED ADDITION OF RS. 15 24 100/ - AS ITA NO S . 2777/ DEL/ 2013 & CO NO. 191/DEL/2013 4 THE AMOUNT CHARGED IN PROFIT AND LOSS ACCOUNT U/S. 43B(D) OF T HE ACT. THE DISALLOWANCE MADE FOR RS.15 24 100/ - U/S. 43B(D) DESERVES TO BE DELETED IN FULL. 7. GROUND NOS. 5 AND 6 OF THE REVENUE ARE GE NERAL IN NATURE SO WE DISMISS THE SAME . 8. GROUND NO.1 OF THE REVENUE AND THE SOLE GROUND OF THE CO PREFERRED BY THE ASSESSEE ARE IN RESPECT OF RESTRICTION OF ADDITION OF RS.1 72 93 100/ - TO AN AMOUNT OF RS.15 24 100/ - BEING INTEREST PAYABLE BY ASSESSEE. 8.1 WE FIND THAT D URING THE ASSESSMENT PROCEEDINGS THE AO HAS NOTED THAT THE ASSESSEE HAD SHOWN INTEREST ACCRUED AND DUE ; BUT NOT PAID TO SHAKKAR VISHESH NIDHI & GOVT. OF U.P. TO THE TUNE OF RS.15 24 100 / - & RS.1 57 69 000 / - RESPECTIVELY. THE AO WAS OF THE OPINION THAT SINCE THE LOANS HAVE BEEN TAKEN FROM PUBLIC FINANCIAL INSTITUTIONS AND STATE FINANCIAL CORPORATIONS THE INTEREST ON SUCH LOANS OUGHT TO HAVE BEEN PAID BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME. THE L D A.R. OF THE ASSESSEE SUBMITTED BEFORE THE AO THAT THE EXPLANATION 4 TO SECTION 43B STATES THAT PUBLIC FINANCIAL INSTITUTIONS SHALL HAVE THE MEANING ASSIGNED TO IT IN SECTION 4A OF THE COMPANIES ACT 1956. AND SECTION 4A OF THE COMPANIES ACT LISTS SIX ENTITIES AS PUBLIC FINANCIAL INSTITUTIONS AND ALSO STATES THAT IN ADDITION TO SUCH ENTITIES T HE CENTRAL GOVERNMENT MAY BY NOTIFICATION IN THE OFFICIAL GAZETTE SPECIFY SUCH OTHER INSTITUTIONS AS IT MAY THINK FIT TO BE A PUBLIC FINANCIAL INSTITUTIONS AND SO UPSCMSL IS NOT PUBLIC FINANCIAL INSTITUTIONS . HOWEVER THE AO HAS REMARKED THAT THE EXPLANA TION GIVEN BY THE ASSESSEE WAS NOT FOUND TO BE 'CONVINCING'. ACCORDING TO THE LD AR THE AO THEREAFTER DWELLS ON THE INTENTION OF LEGISLATURE AND GIVES AN OMNIBUS INTERPRETATION OF THE PROVISION AS HAVING BEEN ENACTED TO COVER ALL FINANCIAL INSTITUTIONS CO NTROLLED BY THE GOVERNMENT. DURING THE APPEAL PROCEEDINGS IT WAS EXPLAINED BY THE AR THAT THE TOTAL INTEREST DEBITED TO THE PROFIT AND LOSS ACCOUNT IN THE RELEVANT YEAR IS RS. 5 42 30 720 / - AND THE DETAILS OF THE SAME HAVE BEEN GIVEN IN SCHEDULE P OF THE FINAL ACCOUNTS. TH E SAID SUM INCLUDES ONLY RS. 15 24 100 / - TOWARDS INTEREST TO SHAKKAR VISHESH NIDHI. THIS DOES NOT INCLUDE ANY INTEREST PAID/PAYABLE TO UP ITA NO S . 2777/ DEL/ 2013 & CO NO. 191/DEL/2013 5 SAHAKARI CHINI MILL SANGH LTD WHI CH THE AO HAS CONSIDERED AS LOAN FROM UP GOVERNMENT. IT WAS EXPLAINED BY THE LD AR THAT THE YEAR IN 2003 THE U.P. SAHAKARI CHINI MILLS SANGH LTD. (UPSCMSL) HAD GRANTED LOAN TO THE ASSESSEE SOCIETY BUT THE SAID LOAN AMOUNT WAS DISBURSED TO SOME OTHER PARTY INSTEAD OF THE ASSESSEE. DURING THE YEAR UNDER CONSIDERATION FOR THE PURPOSES OF RECONCILIATION THE ASSESSEE SOCIETY PASSED A JOURNAL ENTRY FOR THE LOAN AMOUNT AND INTEREST THEREON IN THE BOOKS OF ACCOUNTS. THE ASSESSEE HAD CURRENT ASSETS LOANS AND AD VANCES IN SCHEDULE H OF THE FINAL ACCOUNTS . ON CONSIDERATION OF THE ABOVE PLEA THE LD CIT(A) HAS RESTRICTED THE ADDITION TO RS.15 24 100/ - . BEFORE US THE LD AR SUBMITTED THAT THE RESPONDENT HAD RECEIVED LOAN S FROM TWO INSTITUTIONS OF U.P. GOVERNMENT NAMELY U.P.CO - OPERATIVE SUGAR FACTORIES FEDERATION AND SHAKKAR VISHESH NIDHI. HE FURTHER SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION RESPONDENT HAS DEBITED A SUM OF RS.15 24 100/ - AS INTEREST IN ITS PROFIT & LOSS ACCOUNT ON LOAN FROM SHAKKAR VISHESH NIDH I AS APPEARING IN SCHEDULE 'P'; THAT AS PER AO A TOTAL SUM OF RS.1 72 93 100/ - WAS REMAINING UNPAID ON U.P. GOVERNMENT INSTITUTIONS . HE FURTHER SUBMITTED THAT THE INTEREST OF RS.1 72 93 100/ - WAS NEVER DEBITED TO PROFIT & LOSS ACCOUNT AS OBSERVED BY CIT(A) IN HIS APPEAL ORDER IN PARA 2.2 AND ALSO SUBMITTED THAT SECTION 43B(D) TALKS ABOUT INTEREST PAYABLE ON ANY LOAN & BORROWING FROM ANY PUBLIC FINANCIAL INSTITUTIONS IN ACCORDANCE WITH THE TERMS & CONDITIONS. THE EXPLANATION 4 DEFINES THE TERM PUBLIC FINANC IAL INSTITUTIONS AS DEFINED IN SECTION 4A OF THE COMPANIES ACT 1956. THESE LOANS HAVE BEEN PROVIDED BY U.P. GOVERNMENT TO CLEAR THE OUTSTANDING CANE DUES OF FARMER S AND EVEN IN THE REMAND REPORT AO HAS NOT REBUTTED THE ABOVE FACTS. IT WAS FURTHER SUBMITTE D THAT IN THE CASE OF T HE BAGHPAT CO - OPERATIVE SUGAR MILLS LTD. WHICH IS ALSO A UNIT OF U.P. GOVERNMENT LIKE THAT OF THE ASSESSEE IT HAS BEEN HELD BY CIT(A) THAT THESE INSTITUTIONS I.E. SAHKKAR VISHESH NIDHI & U.P. CO - OPERATIVE. SUGAR FACTORIES FEDERATION LTD ARE U.P. STATE GOVERNMENT INSTITUTIONS. ACCORDING TO HIM BOTH THE INSTITUTIONS OF U.P. GOVERNMENT ARE NOT COVERED IN THE DEFINITION OF PUBLIC FINANCIAL INSTITUTIONS AS GIVEN IN SECTION 4A OF THE COMPANY AC T AS PROVIDED IN SECTION 43B(D) OF THE ACT AND SO INTEREST DEBITED IN PROFIT & LOSS OF RS.15 24 100/ - ON SHAKKAR VISHESH NIDHI IS ALSO TO BE ALLOWED IN FULL AS IT IS PAYABLE TO A GOVERNMENT INSTITUTION OF ITA NO S . 2777/ DEL/ 2013 & CO NO. 191/DEL/2013 6 GOVERNMENT. THE LD DR SUPPORTED THE ORDER OF THE A O BUT COULD NOT REBUT THE FACTUAL POSITION AS CONTENDED BY THE ASSESSEE. WE FIND CONSIDERABLE FORCE IN THE CONTENTION OF THE LD AR THAT OUT OF THE INTEREST IN RESPECT OF THE TWO PARTIES MENTIONED BY THE AO IN THE ASSESSMENT ORDER SINCE ONLY A SUM OF RS . 15 24 100 / - HAS BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT HENCE DISALLOWANCE COULD NOT HAVE EXCEEDED THIS SAID SUM AS ALSO BEEN CORRECTLY HELD BY THE LD CIT(A). THEREFORE THE LD CIT(A) HAS RIGHTLY HELD SO IN RESPECT TO UPSCMSL AND HAS GIVEN THE RELIEF TO THE ASSESSEE. 8.2 WE FURTHER FIND CONSIDERABLE FORCE IN THE CONTENTION RAISED BY THE ASSESSEES COUNSEL IN THE LIGHT OF THE ORDER OF THE LD CIT(A) IN RESPECT OF ANOTHER SIMILAR COMPANY LIKE ASSESSE NAMELY BAGHPAT CO - OPERATIVE SUGAR MILLS LTD THAT SAHKKAR VISHES NIDI AND UP COOPERATIVE SUGAR FACTORIES FEDERATION LTD. ARE UP STATE GOVT. INSTITUTIONS AND ARE NOT COVERED IN THE DEFINITION OF PUBLIC FINANCIAL INSTITUTIONS AS GIVEN IN SECTION 4A OF THE COMPANIES ACT AS PROVID ED IN SECTION 43B(D) OF TH E ACT THEN HOW CAN THERE BE DIFFERENT VIEW BE TAKEN IN THE CASE OF ASSESSEE . IN THE SAID SCENARIO IN THE INTEREST OF JUSTICE THIS ISSUE IS REMITTED BACK TO THE FILE OF THE AO TO EXAMINE WHETHER SH. SHANKAR VISHESH NIDHI IS A PUBLIC FI NANCIAL INSTITUTIO N AS ENVISAGED U/S 43B(D) OF THE ACT AND DECIDE THIS ISSUE AFRESH AFTER GIVING ADEQUATE OPPORTUNITY OF BEING HEARD. THE AO SHALL DECIDE THE SAID ISSUE UNTRAMMELED BY ANY OBSERVATION WE HAVE MADE ABOVE AND DECIDE THE QUESTION ON MERITS AND IN ACCORDANCE T O LAW. IN VIEW OF THE ABOVE THIS GROUND RAISED BY ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE AND THE GROUND RAISED BY THE REVENUE IS DISMISSED. 8 .3 IN THE RESULT THE GROUND NO. 1 RAISED BY THE REVENUE IN ITS APPEAL IS DISMISSED AND THE GROUND NO. 1 R AISED BY THE ASSESSEE IN ITS CROSS OBJECTION IS ALLOWED FOR STATISTICAL PURPOSE IN THE AFORESAID MANNER. 9 . WITH REGARD GROUND NO. 2 AND 3 RAISED BY THE REVENUE ARE CONCERNED WE FIND THAT THE AO MADE ADDITION OF RS. 1 36 04 397 / - MADE ON ACCOUNT OF DIFFERENCE IN SALES PRICE OF MOLASSES. THE AO HAD VALUED THE AVERAGE RATE OF SALE OF MOLASSES AT RS. 435.83 PER QUINTAL IN PLACE OF RS. 373.09 SHOWN BY THE ASSESSEE. THE AO HAD COMPARED THE SELLING RATE OF THE APPELLANT WITH THAT OF ANO THER UNIT NAMELY BAGHPAT COOPERATIVE SUGAR MILLS LTD (BCSML). WE FIND THAT THE IN THE ITA NO S . 2777/ DEL/ 2013 & CO NO. 191/DEL/2013 7 ASSESSMENT ORDER THE AO NOTED THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF PRODUCTION AND TRADING OF SUGAR. THE ASSESSEE WAS ASKED TO EXPLAIN WHY THE CLOSING STOCK O F PRODUCTS AND THE BYPRODUCTS SHOULD NOT BE TAKEN AT THE VALUE SHOWN BY ANOTHER ENTITY BCSML. THE AO NOTED THAT THIS CONCERN AS WELL AS THE ASSESSEE ARE IN THE SAME BUSINESS AND ARE SITUATED IN THE SIMILAR AREA AND ARE CONTROLLED BY THE U.P. GOVT. IN THE ASSESSMENT PROCEEDING WE TAKE NOTE THAT AO MADE A COMPARATIVE STUDY AND HAS GIVEN A CHART SPECIFYING QUANTITATIVE PRODUCTION AND RATE OF SALE OF SUGAR BAGASSE MOLASSES AND PRESS CAKE OF THE ASSESSEE BCSML AND ANOTHER CONCERN SBEC SUGAR. THEREAFTER THE AO COMPARED THE YIELD OF THESE ITEMS PER QUINTAL OF SUGAR CANE IN RESPECT OF THE THREE CONCERNS. HAVING DONE SO HE ESTIMATED THE INCOME ON THE BASIS OF BUSINESSES OF SIMILAR KIND OF INSTITUTION . THEREFORE THE AO WAS OF THE OPINION THAT THERE IS A DIFFER ENCE OF RS. 62.74 IN THE RATE OF SALE PER QUINTAL OF MOLASSES BETWEEN THE ASSESSEE AND BSCML. SO THE AO MULTIPLIED THIS DIFFERENCE TO THE QUANTITY OF MOLASSES SOLD BY THE ASSESSEE AND AN ADDITION OF RS. 1 36 04 397/ - WAS MADE ON THIS ACCOUNT TO THE TOTAL I NCOME OF THE ASSESSEE. DURING THE APPEAL PROCEEDINGS IT HAS BEEN BROUGHT TO THE NOTICE OF THE LD CIT(A) THAT THE ASSESSEE IS FULLY CONTROLLED BY THE U.P. GOVT. AND MAINTAINS REGULAR BOOKS OF ACCOUNTS WHICH ARE AUDITED. AND THE PRODUCTS MANUFACTURED BY THE ASSESSEE PARTICULARLY MOLASSES ARE EXCISABLE ITEMS. THE PRICE OF MOLASSES IS DETERMINED BY MARKET FORCES AND KEEPS FLUCTUATING AND THE ASSESSEE HAD SOLD THE MOLASSES AT THE BEST PREVAILING MARKET PRICE. SUCH SALES ARE D ULY RECO RDED IN THE REGULAR BOOKS OF ACCOUNTS. THUS THE LD AR CONTENDED THAT THERE WAS NO NEED FOR ANY COMPARATIVE ANALYSIS WITH ANY OTHER CONCERN. ACCORDING TO HIM SECTION 145 OF THE ACT OBLIGES THE AO TO COMPUTE THE PROFITS AND GAINS IN ACCORDANCE WITH METHOD OF ACCOUNTING REGULARLY EMPLOYED UNLESS THE AO IS OF THE OPINION THAT THE PROFITS AND GAINS CANNOT BE PROPERLY DEDUCED FROM THE BOOKS OF ACCOUNTS. AS REGARDS THE CASE LAWS CITED BY THE AO IT HAS BEEN STATED THAT THE FACTS IN THESE CASES WERE VERY DIFFERE NT FROM THAT OF THE INSTANT CASE . IN THESE CASES EITHER THE RECORDS OF THE ASSESSEE WERE NOT FOUND TO BE APPROPRIATE OR THERE WAS SPECIFIC DISCREPANCY FOUND IN THE BOOKS OF ACCOUNTS. SO AFTER APPRECIATING THE FACTS AND SUBMISSIONS AS STATED ABOVE THE LD CIT(A) OPINED FIRSTLY THE FACT THAT ITA NO S . 2777/ DEL/ 2013 & CO NO. 191/DEL/2013 8 THE ASSESSEE CONCERN IS FULLY CONTROLLED BY THE UP GOVT HAS NOT BEEN DISPUTED BY THE AO. THEREFORE HE WAS OF THE OPINION THAT THE BASIC ASSUMPTION THAT THE SALES HAVE BEEN UNDERSTATED CANNOT BE ACCEPTED UNLESS EVIDENC E POINTS IN THIS DIRECTION. SECONDLY THE LD CIT(A) WONDERED AS TO WHY THE AO HAS CHOSEN TO ADOPT THE RATE OF BCSML AS THE BENCHMARK TO BE APPLIED TO THE ASSESSEE AND NOT THE RATE OF SBEC OR ANY AVERAGE RATE OF THE THREE CONCERNS FOR WHICH THE FIGURES WERE AVAILABLE ? . THIRDLY THE LD CIT(A) NOTED THAT THE RATE PER QUINTAL OF SUGAR AS SHOWN BY THE ASSESSEE IS PRODUCT OF A CONCERN THROUGHOUT THE YEAR OR WAS THE RATE VARIABLE AND THE AO HAS ADOPTED AN AVERAGE RATE. THE LD CIT(A) RIGHTLY OBSERVED THAT THE POINT WHICH HAS NOT BEEN APPRECIATED BY THE AO IS THAT ANY PRODUCT COULD HAVE VARIABLE RATE OF SALES DEPENDING UPON THE QUALITY OF THE PRODUCT THE GEOGRAPHICAL AREA IN WHICH THE PRODUCT IS MARKETED THE TIME WHEN SALES HAVE BEEN EFFECTED ETC. MOLASSES CAN BE PUT TO DIVERSE USES SUCH AS AN INPUT IN THE CHEMICAL INDUSTRY FOR MAKING OF ETHANOL FOR THE MANUFACTURE OF POTABLE LIQUOR ETC. FURTHER HE RIGHTLY OBSERVED THAT THE PRICING ALSO DEPENDS ON WHETHER SALES HAVE BEEN EFFECTED IN THE CRUSHING SEASON WHEN T HE PRICES ARE LOW OR IN THE PERIOD OF DEFICIENCY WHEN PRICES ARE HIGH. LD CIT(A) HAS RIGHTLY OBSERVED THAT IF THERE IS A SIGNIFICANT DIFFERENCE IN THE RATE OF SALE BETWEEN ONE CONCERN AND ANOTHER CAN BE THE STARTING POINT OF INVESTIGATIONS AND THE AO WOULD BE COMPETENT TO ASCERTAIN WHETHER THERE IS A CASE OF UNDER INVOICING BY EXAMINING THE SALE VOUCHERS AND CONDUCTING APPROPRIATE ENQUIRIES WITH REGARD TO THE PURCHASERS . THE LD CIT(A) HAS RIGHTLY HELD THAT IT IS NOT OPEN FOR THE AO TO SUMMARILY ADOPT THE SA LE PRICE OF ANOTHER PARTY IN THE SAME BUSINESS REJECT THE BOOKS OF ACCOUNT ON THIS BASIS AND ESTIMATE UNACCOUNTED SALES OF AN ASSESSEE. WE ALSO TAKEN NOTE OF THE FACT THAT THE SUBMISSIONS MADE DURING THE APPEAL PROCEEDINGS BEFORE THE LD CIT(A) HAD BEEN FO RWARDED TO THE AO VIDE HIS OFFICE LETTER DATED 21.08.2012 FOR COMMENTS. AND REMINDERS WERE ALSO ISSUED ON 30.11.2012 & 21.01.2013. HOWEVER AO DID NOT OFFER HIS COMMENTS. AS REGARDS THE CASE LAWS RELIED UPON BY THE AO THE LD CIT(A) RIGHTLY HELD THAT THESE ARE CASES WHERE COMPARABLE INSTANCES WAS THE BASIS FOR ESTIMATING INCOME WHERE IT HAD BEEN CONCLUDED THAT THE BOOKS OF ACCOUNTS ARE NOT RELIABLE FOR DETERMINING THE ASSESSABLE INCOME WHEREAS IN THE CASE UNDER CONSIDERATION THE BOOKS OF ITA NO S . 2777/ DEL/ 2013 & CO NO. 191/DEL/2013 9 ACCOUNTS HAVE BEEN MAINTAINED AND HAVE ALSO BEEN AUDITED. IN FACT IN THE ASSESSMENT ORDER THE AO HAS STATED THAT BOOKS OF ACCOUNTS WERE PRODUCED AND WERE EXAMINED ON TEST CHECK BASIS. THE LD CIT(A) HAS RIGHTLY RELIED ON THE DECISION OF THE HON BLE SUPREM E COURT IN THE CASE OF CALCUTTA DISCOUNT CO. (91 ITR 8) WHEREIN IT HAS BEEN HELD THAT WHEN ONE TRADER TRANSFER ITS GOODS TO ANOTHER TRADER AT A PRICE LESS THAN THE MARKET PRICE THE TAXING AUTHORITY CANNOT TAKE INTO CONSIDERATION THE MARKET PRICE OF THOSE GOODS IGNORING THE REAL PRICE FETCHED. IN THE CASE OF PATIALA BISCUIT MANUFACTURERS LTD. (103 ITR 208) THE HIGH COURT OF PUNJAB AND HARYANA HELD THAT AN ASSESSEE IS ENTITLED TO SELL GOODS AT CHEAPER PRICE FOR IT IS THE OUTLOOK OF THE SELLER TO DISPOSE OF ITS GOODS IN THE MANNER IT LIKES. IN THE CASE OF MAGANBHAI KISHABHAI PATEL THE HIGH COURT OF GUJRAT HELD THAT IN A CASE WHERE THE TRANSACTION IS NOT HELD TO BE SHAM TRANSACTION OR THE PRICES WERE NOT RIGHTLY REFLECTED IN THE BOOKS OF ACCOUNTS THE AUTHOR ITIES HAVE NO RIGHT TO SUBSTITUTE THE MARKET PRICE OR AVERAGE PRICE IN PLACE OF THE AGREED PRICE. 10. WE FIND THAT THE ASSESSEE MAINTAINS REGULAR BOOKS OF ACCOUNTS AND THE SAME WERE DULY AUDITED AND NO DISCREPANCIES HAVE BEEN SPELLED OUT OR COULD BE POINT ED OUT BY THE AO IN THE BOOKS OF ACCOUNTS AND THE SAME WERE NOT REJECTED BY THE AO. IN THE ABSENCE OF ANY ADVERSE MATERIAL ON RECORD TO SHOW THAT ANY TRANSACTION OUTSIDE BOOKS OF ACCOUNTS HAS TAKEN PLACE AND DIFFERENTIAL SALE PROCEEDS HAVE BEEN RECEIVED N O ADDITION CAN BE ESTIMATED WITHOUT REJECTION OF BOOKS OF ACCOUNT. WE ALSO FIND CONSIDERABLE COGENCY IN THE ASSESSEES COUNSEL CONTENTION THAT MOLASSES IS AN EXCISABLE COMMODITY AND NO MOVEMENT OF MOLASSES CAN TAKE PLACE WITHOUT APPROVAL FROM EXCISE DEPARTMENT THE REPRESENTATIVES OF THEM ARE STATIONED INSIDE THE FACTORY PREMISES. IN THE CASE UNDER CONSIDERATION WE FIND THAT THE AO HAS MADE NO ADVERSE COMMENT WITH REGARD TO THE BOOKS O F ACCOUNT. IN VIEW OF THE ABOVE THE ADDITION MADE WAS RIGHTLY DELETED AND WE CONFIRM THE SAME. WE ALSO FIND THAT AO HAS MADE SIMILAR ADDITION OF RS.2 00 764/ - MADE ON ACCOUNT OF DIFFERENCE IN T HE SALE PRICE OF BAGASSE. FOR THE SA ME REASONS STATED ABOVE HE RIGHTLY DELETED THIS ADDITION ALSO. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS WE DO NOT FIND ANY INFIRMITY IN THE WELL REASONED FINDINGS OF THE LD . CIT(A) WITH RESPECT OF GROUND ITA NO S . 2777/ DEL/ 2013 & CO NO. 191/DEL/2013 10 NO. 2 AN D 3 HENCE WE UPHOLD THE SAME. IN TH E RESULT THE GROUND NO . 2 & 3 RAISED BY THE REVENUE ARE REJECTED. 11 . WITH REGARD GROUND NO. 4 RAISED BY THE REV ENUE REGARDING ADDITION OF RS. 10 54 351/ - ON ACCOUNT OF CREDIT BALANCE OF CREDITORS IS CONCERNED WE FIND THAT THE IN THE ASSESSMENT ORDE R THE AO NOTED THAT THERE WERE CREDITORS TO THE EXTENT OF THE AMOUNT INDICATED ABOVE WHICH WERE OUTSTANDING FOR MORE THAN ONE YEAR. IT WAS STATED ON BEHALF OF THE ASSESSEE THAT THE PAYMENTS HAD NOT BEEN MADE BECAUSE THE SOCIETY WAS OPERATING IN LOSS. HO WEVER AO DID NOT ACCEPT THE SAME AS IN HIS OPINION THE ASSESSEE IS ENGAGED IN REGULAR BUSINESS AND IF ANY FARMER HAS SUPPLIED SUGARCANE HE WOULD DEMAND PAY MENT IN A FORTNIGHT OR A MONTH. AND IN CASE OF NON - PAYMENT RECOVERY CERTIFICATE IS DRAWN BY THE DISTRICT MAGISTRATE. SO IN THE ABSENCE OF ANY COERCIVE ACTION BEEN INITIATED BY THE CREDITORS FOR THE AMOUNT IN QUESTION THE CREDITORS WERE TREATED AS NON - GENUINE BY THE AO. ACCORDING TO THE LD CIT (A) THE AO HAS SIMPLY ASSUMED THAT CREDITORS WERE OUTSTANDING FOR MORE THAN ONE YEAR AND WERE NOT GENUINE. WE FIND THAT LD CIT(A) HAS RIGHTLY OBSERVED THAT THE AO HAS PROCEEDED IN AD HOC MANNER TO LABEL ALL CREDITORS OUTSTANDING FOR MORE THAN A YEAR AS NON - GENUINE. HE HAS NEITHER SPECIFIED THE NAME OF THE CREDITOR S NOR HAS HE DISCUSSED THE NATURE OF TRANSACTIONS DUE TO WHICH SUCH CREDIT HAS COME INTO EXISTENCE NOR HAS MADE AN ENQUIRY WITH REGARD TO SUCH CREDITORS. WE FURTHER FIND CONSIDERABLE COGENCY IN THE ASSESSEES COUNSEL CONTENTION THAT THAT THIS IS A UNIT OF U.P. GOVERNMENT AND ALL THE PURCHASES ARE MADE AGAINST BILLS AND AT TIME DUE TO TIGHT LIQUIDITY SITUATION IN THE UNIT CERTAIN PAYMENT ARE DELAYED; THAT THE LD. AO IN AN AD HOC MANNER ADDED ALL T HE CREDIT BALANCES WITHOUT APPRECIATING THE FACT THAT PAYMENT S IN ISSUE WERE MADE IN SUBSEQUENT YEARS AND SETTLED AND ADJUSTMENTS WERE MADE IN SUBSEQUENT YEARS; AND THAT THE AO HAS NOWHERE DOUBTED THE GENUINENESS OF THESE CREDITORS; AND THAT NO ENQUIRES WERE MADE BY THE AO AND IN A CASUAL MANNER THE CREDIT BALANCES WERE ADDED TO THE INCOME OF THE ASSESSEE. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS WE FIND FORCE IN THE AFORESAID CONTENTION OF THE ASSESSEES COUNSEL AND DO NOT FIND AN Y INFIRMITY IN THE IMPUGNED ORDER OF THE LD CIT(A) HENCE WE UPHOLD THE SAME. THEREFORE THE GROUND NO .4 RAISED BY THE REVENUE IS REJECTED. ITA NO S . 2777/ DEL/ 2013 & CO NO. 191/DEL/2013 11 12 . IN THE RESULT THE REVENUES APPEAL IS DISMISSED AND THE ASSESSEES CROSS OBJECTION IS ALLOWED FOR STATISTICA L PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 28 . 04 .2015. - SD/ - - SD/ - (R.S. SYAL ) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED :28 / 04 /2015 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT NEW DELHI