M/s. J.D. Aneja Edible Pvt. Ltd., JODHPUR V. ITO, SRIGANGANAGAR

CO 36/JODH/2013

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 2651 (ITAT-JODHPUR)
• Duration Of Justice: 3 year(s) 8 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 14-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-12-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 06-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K DAS
• Keywords: Depreciation; Business expenditure; Diversion of income; Additional evidence; Unabsorbed depreciation
• Section: 143(3); 115JB; 154

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, JODHPUR BEFORE SHRI B.P JAIN ACCOUNTANT MEMBER AND SHRI PARTHA SAR A THI CHAUDHURY JUDICIAL MEMBER ITA NO.190/JODH/2013 ASSESSMENT YEAR: 2009 - 10 THE ITO, VS. M/S J.D. ANEJA EDIBLE PVT. LTD. WARD - 2 UDHYOG VIHAR SRIGANGANAGAR PAN NO. AABCJ4948C CROSS OBJECTION NO. 36/JODH/2013 (IN ITA NO.190/JODH/2013) ASSESSMENT YEAR:2009 - 10 M/S J.D.ANEJA EDIBLE PVT. LTD. VS. ITO C/O SHRI U.C. JAIN, ADVOCATE WARD - SHATRUNJAY HARI SINGH NAGAR, SRIGANGANAGAR PALI ROAD JODHPUR PAN NO. AABCJ4948C (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. RAJENDRA JAIN DEPARTMENT BY : SH. A.K.DAS DATE OF HEARING : 07/12/2016 DATE OF PRONOUNCEMENT : 14/12/2016 ORDER PER PARTHA SAR A THI CHAUDHURY , JM THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A ), BIKANER DT. 30/01/2013 ON THE FOLLOWING GROUNDS OF APPEAL: 2 I) DELETED ADDITION OF RS. 23,11,460/ - MADE ON ACCOUNT OF DEBIT NOTES OF NAFED. II) DELETING ADDITION OF RS. 8,05,785/ - MADE ON ACCOUNT OF DIFFERENCE IN SARSON / MUSTERED SEEDS. III) DELETING ADDITION OF RS. 17,24,135 - AND RS. 6,90,585/ - MADE ON ACCOUNT OF DIFFERENCE IN BARDANA ACCOUNT. IV) DELETING ADDITION OF RS. 11,04,294/ - MADE ON ACCOUNT OF UNDER VALUATION OF CLOSING S TOCK OF SARSON. V) DELETING ADDITION OF RS. 2,44,145/ - MADE ON ACCOUNT OF CREDIT NOTE IN KHAL ACCOUNT. 2. THE BRIEF FACTS APPEARING IN THIS CASE ARE THAT THE ASSESSEE FIRM IS RUNNING AN OIL MILL, THEREBY CRUSHING OF SARSON. THE ASSESSEE HAS FILED ITS RET URN OF INCOME ON 14/09/2009 DECLARING INCOME OF RS. NIL AFTER SET OFF OF UNABSORBED DEPRECIATION TO THE EXTENT OF RS. 91,737/ - AND BALANCE UNABSORBED DEPRECIATION OF RS. 12,15,959/ - TO BE CARRIED FORWARDED IN THE STATUS OF (PVT.) LTD. COMPANY. FOR CALCULAT ION FOR MAT UNDER SECTION 115JB THE INCOME HAS BEEN WORKED OUT AT RS. 1,41,366/ - . THE CASE WAS EVENTUALLY TAKEN FOR SCRUTINY WITH THE APPROVAL OF CIT, BIKANER. NOTICE UNDER SECTION 143(2) WAS ISSUED AND COMPLIED WITH. DURING THE ASSESSMENT PROCEEDING THE B OOKS OF ACCOUNT CONSISTING OF CASH BOOK, LEDGER, AND PURCHASE - SALE BILLS WERE PRODUCED AND EXAMINED BY TEST CHECK WHICH FOUND MENTIONED IN THE ORDER OF THE AO. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT WITH TOTAL INCOME ASSESSED AT RS. 80,76,130/ - . 3 3. WITH REGARD TO THE FIRST GROUND OF APPEAL WHICH RELATES T O DELETION OF ADDITION OF RS. 23,11,460/ - MADE ON ACCOUNT OF DEBIT NOTES OF NAFED. 4. THE AO IN THE ASSESSMENT ORDER OBSERVED THAT DURING THE SOME PART OF THE YEAR UNDER CONSIDERATION AND IN THE EARLIER YEARS THE COMPANY WAS CRUSHING MUSTARD SEEDS OF NAFE D ON JOB BASIS AND FOR WHICH NECESSARY AGREEMENT WAS EXECUTED. THE AO NOTED THAT IN THE JOB WORK ACCOUNT THE ASSESSEE COMPANY DEBITED A SUM OF RS. 18,09,259/ - AND RS. 5,02,207/ - TOTALING TO RS. 23,11,466/ - AGAINST THE JOB WORK RECEIPTS. THE DEBIT NOTES ISS UED BY THE NAFED WERE FOR SHORT SUPPLY OF MUSTARD OIL THAN THE OIL TO BE PROCURED AS PER MATERIAL BALANCING FORMAT AND LABORATORY REPORT. THE AO ENQUIRED FROM THE NAFED ON THE ISSUE AND INFORMATION WAS CALLED FOR. AS PER INFORMATION RECEIVED FROM THE NAFED , THE MUSTARD SEED SUPPLIED BY THEM AFTER OBTAINING A LABORATORY REPORT, WHICH GIVES THE COMPLETE DETAILS AS REGARDS THE PERCENTAGE OF OIL CONTENTS AND QUANTITY OF OIL CAKE TO BE EXTRACTED AND TO BE SUPPLIED BY THE ASSESSEE AFTER EXTRACTING FROM MUSTARD SE ED. THE AO FURTHER FOUND THAT, IF THE ASSESSEE IS NOT SATISFIED WITH THE YIELD SHOWN IN THE LABORATORY REPORT SUPPLIED BY THE NAFED, THEN THE ASSESSEE WAS AT LIBERTY TO REFER THE MATERIAL TO ANOTHER LABORATORY KNOWN AS EMPIRE LABORATORY AND THEN PARAMETERS OF NEW REPORTS SHOULD BE ADOPTED. THE AO ALSO 4 NOTICED THAT THE ASSESSEE DID NOT OBJECTED THE LABORATORY REPORT OF THE NAFED AS HE DID NOT REFER THE SAME TO OTHER LABORATORY AS SUGGESTED IN THE A GREEMENT. THE AO ISSUED A SHOW CAUSE NOTICE AS TO WHY THE AMO UNT DEBITED IN JOB WORK ACCOUNT BEING THE DEBIT NOTE ISSUED BY THE NAFED BE DISALLOWED. THE AO NOTICED FURTHER THAT ONE DEBIT NOTE OF RS. 18,09,259/ - WHICH WAS ENTERED BY THE ASSESSEE IN HIS BOOKS OF ACCOUNTS ON 01/04/2008 WAS ISSUED BY THE NAFED ON 29/03/ 2008 AND AS SUCH AS PER THE AO IT PERTAINS TO THE PRECEDING ASSESSMENT YEAR AND AS SUCH NOT ALLOWABLE IN THE YEAR UNDER CONSIDERATION. IN LIGHT OF THESE DISCUSSIONS THE AO DISALLOWED THE TOTAL CLAIM OF RS. 23,11,653/ - AND THE FINDINGS ARE RECORDED AT PAGE 13 TO 15 OF THE ASSESSMENT ORDER. THAT DURING THE COURSE OF APPELLATE PROCEEDINGS THE ASSESSEE FILED ADDITIONAL EVIDENCES IN FORM OF INVENTORY RECORD MAINTAINED FOR THE MUSTARD SEED AND OIL ETC WHICH WERE RETURNED TO THE NAFED AFTER COMPLETION OF CONTRACT. THE ASSESSEE SUBMITTED THAT SUCH EVIDENCES COULD NOT BE FURNISHED DURING THE COURSE OF ASSESSMENT PROCEEDING AS THE SAME WERE HANDED OVER TO THE NAFED AFTER COMPLETION OF CONTRACT AS PER TERMS OF CONTRACT AND AS SUCH THE SAME WAS ADMITTED AS AN ADDITIONAL EVIDENCE FOR WHICH THE AO HAS ALSO NOT MADE ANY OBJECTION RATHER ACCEPTED ITS CORRECTNESS AND OBSERVED AS UNDER: A) ADDITION OF RS. 23,11,466/ - : - DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE THEN AO MADE AN ADDITION OF RS. 23,11,466/ - ON 5 ACCOUNT OF DE BIT NOTE RAISED BY NAFED FOR DIFFERENCE IN STANDARD PRODUCTION WHILE AT THE APPELLATE STAGE THE ASSESSEE HAS PRODUCED THE ADDITIONAL EVIDENCES AND AFTER MAKING NECESSARY ENQUIRIES THE SAME WERE ACCEPTED. 5. THE LD. CIT(A) IN HIS DETAILED ORDER ALSO CONSIDERED THE SUBMISSIONS OF THE ASSESSEE WHICH FINDS PLACE IN HIS ORDER AND HENCE ON RECORD. THE LD. CIT(A) IN HIS ORDER OPINED THAT THE AMOUNT CHARGED BY THE NAFED FOR THE SHORT PRODUCTION OF MUSTARD OIL FROM THE MUSTARD SEEDS SUPPLIED WAS IN THE NORMAL COURSE OF BUSINESS AND ALLOWABLE DEDUCTION AS BUSINESS EXPENSES AS OIL CANNOT BE EXTRACTED IN THE SAME RATIO WHICH WAS DETERMINED ON BASIS OF SAMPLES. FURTHER THE CONDITION OF THE MACHINERY EMPLOYED BY THE ASSESSEE, WHICH IS NOT FULLY AUTOMATIC AND OLD CA NNOT BE EXPECTED TO OBTAIN THE SAME PERCENTAGE AND AS SUCH SOME VARIATION IS BOUND TO OCCUR. THAT THE TOTAL OUTPUT OF CAKE AND OIL IS ALMOST NEARER TO THE TOTAL QUANTITY EXPECTED BY THE LABORATORY TEST AND AS SUCH FOR MINOR VARIATION NO ADVERSE VIEW CAN BE TAKEN AS TAKEN BY THE AO AND ACCORDINGLY THE CLAIM OF DEBIT NOTE IS ALLOWABLE. SO FAR AS THE DEBIT NOTE ISSUED BY THE NAFED ON 29/03/2008 WAS RECEIVED BY THE ASSESSEE AFTER 31/03/2008 AND AS SUCH THE LIABILITY TO THE ASSESSEE AROSE ON THE DATE OF THE RECE IPT OF THE DEBIT NOTE WHICH IS 01/04/2008 AND AS SUCH THE LIABILITY AROSE IN THE YEAR UNDER CONSIDERATION AND AS SUCH THE SAME IS ALLOWABLE. EVEN OTHERWISE, IF 6 IT IS TREATED AS EXPENDITURE PERTAINING TO A.Y. 2008 - 09, THEN AS PER RATIO OF THE DECISION OF HO NBLE ITAT AHMEDABAD BENCH IN THE CASE OF PERFECT EQUIPMENTS VS. DCIT [85ITD50(AHD)] A DIRECTION IS TO BE ISSUED TO THE AO TO ALLOW THE SAME IN THE A.Y. 2008 - 09. SINCE IN THE A.Y. 2008 - 09 THERE WAS CARRY FORWARD OF LOSSES AND EVEN AFTER SUCH DIRECTION THE QUANTUM OF LOSS OF THE A.Y. 2008 - 09WILL BE INCREASED FOR THE SAME AMOUNT AND IS REQUIRED TO BE ADJUSTED FROM THE PROFIT ASSESSED IN THIS YEAR AND AS SUCH IT WILL HAVE NO IMPLICATION ON THE TOTAL INCOME OF THIS YEAR AND AS SUCH RATHER GIVING SUCH DIRECTION THE LD. CIT(A) HELD IT APPROPRIATE TO ALLOW THE SAME FOR THIS YEAR. ACCORDINGLY THE LD. CIT(A) GAVE RELIEF TO THE ASSESSEE OF RS. 23,11,466/ - (RS. 18,09,259/ - + RS. 5,02,207/ - ). 6. WE HAVE PERUSED THE RECORDS IN THIS CASE AND HEARD THE RIVAL CONTENTIONS, FACTS AND CIRCUMSTANCES, WE ARRIVE AT OUR CONSIDERED VIEW THAT THE LD. CIT(A) IN HIS ORDER HAS CONSIDERED THAT THE AMOUNT CHARGED BY THE NAFED FOR SHORT PRODUCTION OF MUSTARD OIL FROM THE MUSTARD SEEDS SUPPLIED WAS IN THE NORMAL COURSE OF BUSINESS AND ALL OWABLE DEDUCTION AS BUSINESS EXPENSES SINCE OIL CANNOT BE EXTRACTED IN THE SAME RATIO AS DETERMINED ON THE BASIS OF SAMPLES WHICH VIEW IS CORRECT BECAUSE THE MUSTARD OIL EXTRACTED IS DEPENDS UPON THE TYPE OF MUSTARD SEEDS SUPPLIED AND IT CANNOT BE EQUATED TO THOSE USED FOR SAMPLES AND IF ANY AMOUNT AS IN THIS CASE IS 7 CHARGED BY THE NAFED FOR SHORT PRODUCTION IT IS VERY MUCH IN THE NORMAL PRACTICE AND COURSE OF BUSINESS AND IS AN ALLOWABLE DEDUCTION AS A BUSINESS EXPENSES. FURTHER IT IS ALSO ON RECORD THAT T HE CONDITION OF THE MACHINERY USED BY THE ASSESSEE IS NOT FULLY AUTOMATIC AND AS SUCH THE EXTRACTION OF OIL CANNOT BE EXPECTED TO HAVE THE SAME PERCENTAGE OF THE SOME VARIATION IS BOUND TO OCCUR. 7. THE ASSUMPTION OF AO , THAT THE ACTUAL PRODUCTION OF MUSTARD OIL WHICH BOUND AS PER THE LABORATORY REPORT IS INCORRECT AS : I) THE SAMPLE PROCESSED IN THE LABORATORY BY THE TECHNICAL PERSON IN THE STANDARD ENVIRONMENT, WHILE THE ACTUAL PRODUCTION WAS CARRIED OUT AT THE FACTORY IN A CONTINUOUS PROCESS BY THE LABOUR. II) THAT IN ACTUAL PROCESSING OF THE MUSTARD MANY TIMES DUE TO POWER FAILURE AND / OR MACHINE BREAKDOWN THE OIL COULD NOT BE EXTRACTED AS PER STANDARD. THAT EVEN ON PERUSING THE ORDER OF THE AO WE FIND IT IS PRIMAR ILY BASED ON THE HYPOTHETICAL PRESUMPTIONS AND ASSUMPTIONS AND THE AO DISALLOWED THE DEBIT NOTE WITHOUT ASSIGNING ANY COGENT REASON. 8. THE OBSERVATIONS OF THE LD. CIT(A) IN HIS ORDER IS MUCH MORE APPLICABLE IN A PRACTICAL SENSE CONSIDERING THE BUSINESS O F THE ASSESSEE AND THE REASON BROUGHT OUT BY THE LD. CIT(A) HOLDS GOOD IN OUR VIEW SINCE THE DISTINCTION AS TO WHY THE PRODUCTION OF OIL IN SAMPLES AND IN ACTUAL PRODUCTION IS DIFFERENT AT TIMES. THAT ON BASIS 8 OF THE AFORESAID DISCUSSIONS WE UPHOLD THE ORD ER OF THE LD. CIT(A) AND DISMISS THIS GROUND OF APPEAL FILED BY THE REVENUE. 9. THE GROUND NO.2 RELATES TO THE DELETION OF ADDITION OF RS. 8,05,785/ - MADE ON ACCOUNT OF DIFFERENCE IN SARSON/MUSTARD SEEDS. 10. THE AO DURING THE ASSESSMENT PROCEEDINGS ASKED THE ASSESSEE TO FILE TRADING ACCOUNT OF MUSTARD SEED ALONGWITH QUANTITY DETAILS. FROM THE DETAILS SUBMITTED BY THE APPELLANT, THE AO OBSERVED THAT THERE WAS A DIFFERENCE IN CONSUMPTION OF MUSTARD SEED SHOWN BY THE ASSESSEE AND THE MUSTARD SEED AVAILABLE W ITH THE ASSESSEE FOR CRUSHING. SINCE THE QUANTITY USED FOR CRUSHING AND SALE IS MORE THAN SHOWN AS PURCHASES, THEREFORE THE AO VIDE LETTER DT. 09/02/11 SOUGHT EXPLANATION AS TO WHY ADDITION OF RS. 8,05,785/ - BE ADDED TO THE TOTAL INCOME BEING AMOUNT OF QUA NTITY OF SARSON SEED SHORT SHOWN AS PURCHASES. THE ASSESSEE SUBMITTED REPLY THAT WHILE ARRIVING AT THE FIGURE OF CONSUMPTION OF MUSTARD SEEDS WHILE PREPARING THE QUANTITY CHART WHEREAS AS PER THE QUANTITY DETAILS OF PURCHASES, SALES AND CLOSING STOCK THE F IGURES OF CONSUMPTION OF THE MUSTARD SEED COMES TO 53642.22 QTL AND FOR WHICH THE ASSESSEE FILED A DETAILED REVISED STATEMENT. THE AO REJECTED THE EXPLANATION AND MADE AN ADDITION OF RS. 8,05,785/ - TO THE TOTAL INCOME AT THE APPELLATE STAGE BEFORE THE LD. CIT(A) THE ASSESSEE MADE A SUBMISSION WHICH IS ON RECORD. 9 11. THE LD. CIT(A) ON CONSIDERATION OF THE ASSESSMENT ORDER AND SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE AO REJECTED THE RE - CASTED TRADING ACCOUNT MERELY BECAUSE THE QUANTITY FIGURES WERE REVI SED IN THE SECOND TRADING ACCOUNT WITHOUT EXAMINATION OF THE FIGURES AVAILABLE IN THE INVENTORY RECORD . THE FIGURE STATED IN THE REVISED TRADING ACCOUNT ARE VERIFIABLE FROM THE INVENTORY RECORD AND AS SUCH THE REJECTION OF SAME ON THE BASIS OF TRADING ACCO UNT FILED BEFORE AO WAS NOT CORRECT ON THE PART OF THE AO PARTICULARLY WHEN THE FIGURES ARE VERIFIABLE FROM THE INVENTORY RECORDS.THE LD. CIT(A) HELD THAT HE HAS GONE THROUGH THE REVISED STATEMENT COMPARED THE SAME FROM THE INVENTORY RECORD AND FOND THE CO NTENTION OF THE ASSESSEE AS CORRECT AND AS SUCH THE ADDITION WAS DELETED. 12. WE HAVE PERUSED THE RECORDS OF THIS CASE AND FACTS AND CIRCUMSTANCES OF THE CASE AND WE ARRIVE AT OUR CONSIDERED VIEW THAT THE LD. CIT(A) BEFORE COMING TO ANY DECISION HAS HIMSE LF VERIFIED THE REVISED STATEMENT FILED BY THE ASSESSEE AND COMPARED THE SAME FROM THE INVENTORY RECORD AND FOUND WITH THE CONTENTION OF THE ASSESSEE IS CORRECT. THE POWER OF THE LD. CIT(A) BEING CO - TERMINUS WITH THAT OF THE AO AND HE HAS GIVEN THE FINDING S WHICH IS ON RECORD THAT THE FIGURES STATED IN THE REVISED TRADING ACCOUNT ARE VERIFIABLE FROM INVENTORY RECORD AND AFTER GOING THROUGH THE REVISED STATEMENT AND INVENTORY RECORD THE LD. CIT(A) HAS ARRIVED AT THE 10 DECISION WE FIND NO INFIRMITY WITH THE DEC ISION OF THE LD. CIT(A) ON THIS GROUND AND WE UPHOLD THE SAME AND THE GROUND OF THE APPEAL FILED BY THE REVENUE IS DISMISSED. 13. THE THIRD GROUND OF APPEAL RELATES TO THE DELETION OF ADDITION OF RS. 17,24,135/ - AND RS. 6,90,585/ - MADE ON ACCOUNT OF DIFFERENCE IN BARDANA ACCOUNT. THAT IN CROSS OBJECTION THE FIRST GROUND IS REGARDING SUSTAINING THE ADDITION OF RS. 4,90,000/ - SINCE THE GROUND OF APPEAL AND THE CROSS OBJECTION ARE INTERRELATED SO THIS IS DECIDED TOGETHER. 14. WE TAKE UP THE DELETION OF RS. 17,24,135/ - AND RS. 6,90,585/ - FIRST WHICH IS THE APPEAL PREFERRED BY THE REVENUE AND THEREIN IT HAS BEEN SUBMITTED BY THE ASSESSEE COMPANY USED TO PURCHASE MUSTARD SEED PACKED IN BARDANA AS WELL AS WITHOUT PACKING IN BARDANA IN FORMS OF LOTS. IT WAS FURTHER SUBMITTED THAT DURING THE YEAR ASSESSEE PURCHASED TOTAL QUANTITY OF MUSTARD SEED WEIGHING 57,873.72/ - QTL. THE QUANTITY OF MUSTA RD SEED PURCHASE PACKED IN BARDANA WAS 43075 QTL AND THE QUANTITY PURCHASED IN LOTS WITHOUT BARDANA W AS 14798.72 QTL. IN ONE BAG OF BARDANA 85KG MUSTARD SEED CAN BE FILLED AND AS SUCH THE TOTAL QUANTITY OF BARDANA BAGS REQUIRES FOR FILLING OF OF MUSTARD SE ED WEIGHING 43075 QTL REQUIRES 50677 EMPTY BARDANA. DURING THE YEAR THE ASSESSEE PURCHASED 67306 EMPTY OLD BARDANA FROM MARKET THUS TOTAL EMPTY BARDANA 11 BAGS AVAILABLE WERE 117983 (50677 + 67306). THE ASSESSEE EXPLAINED THAT OUT OF SUCH IT SOLD 15000 EMPTY BARDANA AND AS SUCH IT REQUIRES THE EXPLANATION OF 102983 EMPTY BARDANA (117983 - 15000). THE ASSESSEE FURTHER STATED THAT IT HAS SHOWN THE QUANTITY OF 32341 BARDANA AS CLOSING STOCK AND SHOWN CONSUMPTION OF 70642/ - BARDANA IN PACKING OF THE MUSTARD CAKE AND ALL THESE FIGURES ARE VERIFIABLE FROM THE RECORDS OF THE ASSESSEE AND QUANTITATIVE DETAILS. REGARDING THE AVAILABILITY OF EMPTY BARDANA FROM MUSTARD SEED PROCESSED FOR NAFED IT WAS SUBMITTED THAT THE EMPTY BARDANA OF MUSTARD SEED OF NAFED WERE NOT AVAILAB LE TO THE ASSESSEE AS THE SAME IS REQUIRED TO BE RETURNED TO THE NAFED AS PER TERMS OF CONTRACT FOR WHICH THE COPY OF CONTRACT WAS PRODUCED. 15. THE LD. CIT(A)ON THIS ISSUE OBSERVED THAT THE AGREEMENT BETWEEN NAFED AND ASSESSEE IS CLEAR THAT THE EMPTY BAG S OF MUSTARD SEED WILL NOT AVAILABLE TO THE ASSESSEE AND IT REMAINS THE PROPERTY OF THE NAFED AND THE ASSESSEE WAS REQUIRED TO RETURN THE SAME AND AS SUCH THE PRESUMPTION OF THE AO WITH REGARD TO AVAILABILITY OF THE EMPTY BAGS OF BARDANA IS NOT CORRECT AND THEREFORE THE ADDITION OF RS. 1724135/ - WAS DELETED. REGARDING ADDITION OF RS. 6,90,585/ - THE LD. CIT(A) HELD THAT THE ASSESSEE HAS PARTLY EXPLAINED THE QUANTITY OF PURCHASE OF OLD BARDANA, BARDANA AVAILABLE FROM THE SEEDS PURCHASED IN FORM OF BAGS AND TH E QUANTITY 12 SHONWN AS SOLD, SHOWN IN CLOSING STOCK AND USED IN PACKING OF OIL CAKES, THERE REMAINS NO DIFFERENCE IN THE QUANTITY WHICH CAN BE HELD AS NOT SHOWN IN THE STOCK AND AS SUCH THE ADDITION OF RS. 6,90,585/ - ON THE BASIS OF ERRONEOUS PRESUMPTION WAS DELETED BY THE LD. CIT(A). 16. WE HAVE PERUSED THE RECORDS OF THE CASE, FACTS AND CIRCUMSTANCES AND THE RIVAL CONTENTIONS PLACED BEFORE US AND WE ARRIVE AT OUR CONSIDERED VIEW THAT ALL THE EXPENSES WERE AVAILABLE BEFORE THE AO AS PROVIDED BEFORE THE ASSE SSEE AND THE AO COULD EVEN RECALCULATE THE AMOUNT IN THE LIGHT OF THE SUBMISSIONS OF THE ASSESSEE WHICH WAS NOT DONE NOR THE AO ASSIGNED ANY SPECIFIC REASON AS TO WHY THE EXPLANATIONS OF THE ASSESSEE WERE NOT CONSIDERED, THOUGHT THE SAME WAS ON THE BASIS O F FACTUAL ASPECT VERIFIABLE FROM THE BOOKS OF ACCOUNTS. 17. THE LD. CIT(A) HAS BROUGHT ON RECORD THAT ON PERUSAL OF THE AGREEMENT BETWEEN NAFED AND THE ASSESSEE THE ADDITION OF RS. 17,24,135/ - IS NOT JUSTIFIED AND HENCE IT WAS DELETED. FURTHER THE LD. CIT( A) ALSO BROUGHT ON RECORD IN HIS ORDER THAT BARDANA AVAILABLE FROM THE SEED PURCHASES IN FORM OF BAGS AND THE QUANTITY SHOWN AS SOLD, SHOWN IN CLOSING STOCK AND USED IN PACKING OF OIL CAKES, THERE REMAINS NO DIFFERENCE IN THE QUANTITY WHICH CAN BE HELD AS NOT SHOWN IN THE STOCK AND THEREFORE THE ADDITION OF RS. 6,90,585/ - WAS 13 DELETED BY THE LD.CIT(A). WE THEREFORE FIND NO INFIRMITY ON THESE TWO GROUNDS MADE BY THE LD. CIT(A) AND UPHOLD THE SAME AND THE DELETION IS THEREBY SUSTAINED. 18. THAT WITH REGARD TO THE GROUND NO. 1 OF THE CROSS OBJECTION AGAINST THE ADDITION OF RS. 4,90,000/ - THE LD. CIT(A)CONFIRMED THE ADDITION BY SAYING THAT THE ASSESSEES CONTENTION IN RECONCILIATION STATEMENT IS NOT CONVINCING AND AS PER REMAND REPORT HE AGREES WITH AO'S OBSERVA TION HENCE THE ADDITION OF RS. 4,90,000/ - WAS CONFIRMED BY THE LD. CIT(A). 19. WE HAVE PERUSED THE CASE RECORDS ON THIS GROUND AND WE OBSERVED FIRST THAT IN THE REMAND REPORT IT IS STATED THAT ADDITION WAS MADE ON THE BASIS OF DIFFERENCE BETWEEN NAFED BAR DANA ACCOUNT AND DETAILS OF CRUSHING AS PER DEBIT NOTE OF NAFED AS THE ASSESSEE HAS FILED TO RECONCILE THE SAME AND THE ADDITION WAS MADE AS PER MATERIAL AVAILABLE ON RECORD ONLY. 20. THE LD. CIT(A) IN HIS ORDER CONFIRMED THIS ADDITION SAYING THAT ASSESSE ES CONTENTION IN RECONCILIATION STATEMENT IS NOT CONVINCING. THE LD. AR STATES THAT ASSESSEE FAILS TO RECONCILE WHILE LD. CIT(A) ORDER STATES THAT THE ASSESSEES CONTENTION IN RECONCILIATION STATEMENT IS NOT CONVINCING. THE CIT(A) HAS NOT BROUGHT OUT ANY SPECIFIC REASON NOR ANY RECONCILIATION STATEMENT WAS CALLED FOR BEFORE ARRIVING AT ANY CONCLUSION. THAT AT THE SAME TIME FOR RS. 6,90,585/ - THE LD. CIT(A) FINDS NO DIFFERENCE IN THE QUANTITATIVE DETAILS SHOWN IN FORM OF QUANTITY 14 SOLD AND THAT SHOWN IN CLO SING STOCK , THEREBY DELETING THE SAID ADDITION. THAT THEREFORE IT IS ON RECORD THAT ON THE BASIS OF THE DETAILS SUBMITTED BY THE ASSESSEE SOME GROUNDS IS ACCEPTED BY THE LD. CIT(A) THAT AT THE SAME TIME WITHOUT CALLING FOR ANY RECONCILIATION STATEMENT AND JUST DEPENDING ON THE REMAND REPORT AND WITHOUT BRINGING OUT ANY INDEPENDENT ENQUIRY AND DECISION LD. CIT(A) ADDS RS. 4,90,000/ - WHICH SEEMS THEREFORE BASELESS AND ERRONEOUS. THAT ON BASIS OF THE AFORESAID DISCUSSIONS WE REVERSE THE FINDINGS OF THE LD. CI T(A) ON THIS GROUND AND DELETE THE SAID ADDITION THEREFORE GROUND NO. 1 OF THE CROSS OBJECTION IS ALLOWED. 21. THE NEXT GROUND OF APPEAL IS WITH REGARD TO THE DELETION OF ADDITION OF RS. 11,04,294/ - MADE ON ACCOUNT OF UNDER VALUATION OF CLOSING STOCK OF SARSON. 22. THE AO FOUND THAT AS PER THE AUDIT REPORT THE VALUATION METHOD OF RAW MATERIAL WAS AVERAGE BUT THE V ALUATION OF CLOSING STOCK OF RAW MATERIAL IN THE P&L ACCOUNT IS NOT TAKEN AT AVERAGE COST. THE AO VALUED THE SARSON AT AVERAGE COST WHICH RESULTED IN THE ADDITION OF RS. 11,04,294/ - . IT HAD VALUED THE RAW MATERIAL THE BY FIFO METHOD AND THE METHOD OF VALUA TION STATED IN THE AUDIT REPORT WAS ERRONEOUSLY STATED AT AVERAGE COST. THAT EVEN AT THE ASSESSMENT PROCEEDINGS IT WAS SUBMITTED BY THE ASSESSEE WAS REGULARLY VALUING THE INVENTORY ON FIFO BASIS THEREFORE NO INTERFERENCE SHOULD BE DRAWN ON THE BASIS OF AUD IT REPORT. THE LD. CIT(A) ACCEPTED THE CONTENTION OF THE ASSESSEE AND FOUND IT WAS FIFO METHOD WHICH WAS CONTINUOUSLY AND CONSISTENTLY FOLLOWED BY THE ASSESSEE AND HENCE THE ADDITION WAS DELETED. 15 23. WE HAVE PERUSED THE CASE RECORDS AND WE OBSERVED THAT A PARTICULAR METHOD WAS CONSISTENTLY FOLLOWED BY THE ASSESSEE FOR VALUATION OF THE RAW MATERIAL WHICH IS FIFO METHOD AND IT IS ALSO ON RECORD. 24. THAT THE LD. CIT(A) FOUND IT JUSTIFIED TO ACCEPT THAT THE ASSESSEE WAS FOLLOWING THE FIFO METHOD AS IT IS ON RECORD. 25. LD. AO IN HIS REMAND REPORT AND IN THE ASSESSMENT ORDER HAS NOT BROUGHT OUT ANY JUSTIFIABLE REASON AS TO WHY THE FIFO METHOD VALUATION WILL NOT BE ACCEPTED AND AO HAS SIMPLY STATED THAT SINCE THE ASSESSEES BOOKS ARE DULY AUDITED THEREFORE TH E CONTENTION OF THE ASSESSEE INCORRECT. 26. THAT IN THE REMAND REPORT THE LD. AR RELIED ON THE DECISION OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF BANDI CO - OPERATIVE LABOUR & CONSTRUCTION SOCIETY VS. CIT (203 - CTR - 111) WHEREIN IT WAS HELD THAT EACH YEA R IS INDEPENDENT ASSESSMENT YEAR AND ON THIS BASIS THE ADDITION OF RS. 11,04,294/ - WAS MADE. 27. THAT ON THE OTHER HAND IN THE PAPER BOOK FILED WE FIND WRITTEN SUBMISSION WHERE AS THE ASSESSEE SUBMITTED IF THE VALUE OF THE CLOSING STOCK ENHANCED FOR THE Y EAR UNDER CONSIDERATION, THE AO MAY KINDLY TAKE THE OPENING STOCK OF THE NEXT YEAR AT THE ENHANCED VALUE. RELIANCE IS PLACED BY THE ASSESSEE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MAHENDRA MILLS LTD. VS. APPELLATE ACIT [99 ITR 135(SC)] IN WHICH THE HONBLE SUPREME COURT UPHOLD THE RECTIFICATION OF THE LATER YEAR ON THE GROUND OF CHANGE IN THE CLOSING STOCK IN THE APPELLATE ORDER FOR THE PREVIOUS YEAR. 16 28. THAT, IT IS CLEAR FROM RECORDS THE ASSESSEE WAS MAINTAINING A PARTICULAR METHOD FOR VALUATION WHICH WAS EVEN VERIFIED ABOVE AND ACCEPTED BY THE LD. CIT(A) IN HIS ORDER. 29. THE LD. AO IN HIS REMAND REPORT HAS NOT ASSIGNED ANY DEFINITE COGENT REASON AND TA KING ALL THESE INTO CONSIDERATION WE ARRIVE AT OUR CONSIDERED VIEW THAT THE LD. CIT(A) IS CORRECT IN DELETING THE ADDITION OF RS. 11,04,294/ - WHICH IS THEREFORE SUSTAINED. THEREFORE, THIS GROUND OF APPEAL FILED BY THE REVENUE IS DISMISSED. 30. THE NEXT GR OUND WITH REGARD TO THE ADDITION OF RS. 2,44,145/ - ON ACCOUNT OF CREDIT NOTE IN KHAL ACCOUNT. 31. THE LD. CIT(A) IN HIS ORDER HELD THAT THE ONLY REASON ASSIGNED BY THE AO FOR MAKING THIS ADDITION WAS THAT IN AY 2007 - 08 THE ASSESSEE MADE SUCH CLAIM AND REC OGNIZED THE SAME AS INCOME BUT SUCH INCOME WAS NEVER MATERIALIZED AS THE NAFED HAS NOT RECOGNIZED SUCH CLAIM AS PER THE TERMS OF CONTRACT. FURTHER IN THE YEAR UNDER CONSIDERATION NO SUCH CLAIM WAS MADE BY THE ASSESSEE AND IN ABSENCE OF SUCH CLAIM THE AO WA S NOT JUSTIFIED IN PRESUMING SUCH INCOME. THE ADDITION SO MADE IS PURELY ON NOTIONAL BASIS AND AS SUCH THE SAME IS NOT SUSTAINABLE. ACCORDINGLY LD. CIT(A) DELETED THE ADDITION OF RS. 2,44,145/ - . 32. WE HAVE PERUSED THE MATERIAL ON RECORD, FACTS AND CIRCUM STANCES AND WE ARRIVE AT OUR CONSIDERED VIEW THAT IT WAS ONLY FOR THE AY 2007 - 08 THE ASSESSEE HAS MADE SUCH CLAIM BUT SUCH CLAIM DID NOT MATERIALIZED AS NAFED HAS NOT RECOGNIZED SUCH CLAIM AS PER THE TERMS OF CONTRACT. THAT IN THE RELEVANT AY THE 17 ASSESSEE HAS MADE NO SUCH CLAIM AND THERE IS NO BASIS FOR THE AO TO PRESUME SUCH INCOME. WE ACCORDINGLY SUSTAINED THE DELETION ON THIS GROUND AND UPHELD THE ORDER OF THE LD. CIT(A). THIS GROUND OF APPEAL FILED BY THE REVENUE IS THEREFORE DISMISSED. 33. NOW WE TAKE UP THE GROUND NO. 2 OF CROSS OBJECTION WHICH STATES THAT THE LD. CIT(A) ERRED IN SUSTAINING AN ADDITION OF RS. 140544/ - ON ACCOUNT OF ALLEGED DIVERSION OF INCOME ON SALE OF MUSTARD OIL AND MUSTARD CAKE TO ITS SISTER CONCERN M/S ANEJA MOTORS. 34. THE AO D URING THE COURSE OF ASSESSMENT PROCEEDINGS FOUND THAT THE ASSESSESS SISTER CONCERN M/S ANEJA MOTOR PURCHASED MUSTARD CAKE OF RS. 11,88,387/ - AND MUSTARD OIL OF RS. 7,06,27,115/ - FROM THE ASSESSEE. THE AO TREATED THE PROFIT EARNED BY M/S ANEJA MOTOR ON THE SE TRANSACTIONS AMOUNTING TO RS. 5,36,981/ - AS DIVERSION OF PROFIT AND TAXED THE SAME IN THE HANDS OF THE ASSESSEE. LATER ON ORDER UNDER SECTION 154 WAS PASSED AND THE ADDITION WAS REDUCED TO RS. 1,40,544/ - . 35. LD. CIT(A) WHILE CONFIRMING THIS ADDITION I N HIS ORDER HAS NOT GIVEN ANY SPECIFIC FINDINGS AS WE CAN SAY IT IS A SPEAKING ORDER. THAT AT THE SAME TIME LD. CIT(A) IN HIS ORDER MENTIONED THAT BOTH THE FIRMS ARE ASSESSED TO TAX AND THE RATE OF TAXATION IS SAME AND AS SUCH NO BENEFIT CAN BE DERIVED FOR MAKING SALES TO SISTER CONCERN AT CONCESSIONAL PRICE. THAT HAVING SAID SO AND WITHOUT GIVING OUT ANY SPECIFIC REASON THE LD. CIT(A) GOES ON TO SUSTAIN THIS ADDITION BY SIMPLY FOLLOWING THE ORDER UNDER SECTION 154 WHICH IS ON RECORD. 18 36. WE ARRIVE AT OUR CONSIDERED VIEW THAT ASSESSEE SOLD MUSTARD OIL AND MUSTARD CAKE TO ITS SISTER CONCERN M/S ANEJA MOTOR AND WHEN THE SISTER CONCERN PURCHASED THE GOODS FROM THE ASSESSE THE RISK IS ALSO TRANSFERRED TO THE SISTER CONCERN. THE AO DID NOT RECORD ANY FINDING THA T THE TRANSACTION BETWEEN THE ASSESSEE AND SISTER CONCERN WERE NOT AT ARM LENGTH OR ARE UNDER TAKEN TO AVOID OR EVADE INCOME TAX ON THE PROFIT ARISES FROM SUCH TRANSACTION. THAT IT IS ON RECORD AS SUBMITTED BY THE ASSESSEE THAT THE SISTER CONCERN EARNED ON LY 1,40,544/ - FROM THE TRANSACTION OF RS. 71,81,55,02/ - FROM THE ASSESSEE AND PAID THE DUE TAX THEREON. ON THESE FACTUAL POSITION THE ASSESSMENT OF THE INCOME EARNED BY M/S ANEJA MOTORS IN THE HAND OF ASSESSEE IS WITHOUT AUTHORITY OF LAW. 37. THAT IF THE LD. CIT(A) IN HIS ORDER HAS CATEGORICALLY STATED THAT NO BENEFIT CAN ARISES THAT BOTH THE FIRMS ARE ASSESSED TO TAX AND RATE OF TAXATION ARE SAME FOR MAKING SALES TO SISTER CONCERN AT CONCESSIONAL PRICE. WE ACCORDINGLY ON THE BASIS OF AFORESAID DISCUSSION REVERSE THE FINDINGS OF THE LD. CIT(A) AND DELETED THE ADDITION OF RS. 1,40,544/ - . 38. THIS GROUND OF CROSS OBJECTION IS ALLOWED. 39. THAT THE NEXT GROUND OF CROSS OBJECTION RELATES TO THE SUSTAINING OF ADDITION OF RS. 25,000/ - OUT OF LABOUR CHARGE BY TH E LD. CIT(A). 40. THE AO HAS DISALLOWED RS.50,000 IN RESPECT OF LABOUR CHARGES. 41. THE LD. CIT(A) IN HIS ORDER HELD THAT THIS DISALLOWANCE MADE BY THE AO IS FOUND TO BE ON HIGHER SIDE AND CONSIDERING THE VALUE AND NATURE OF THE BUSINESS OF THE ASSESSEE I T WOULD BE FAIR TO RESTRICT THE DISALLOWANCE TO RS. 25,000/ - . 19 42. WE ARRIVE AT OUR CONSIDERED VIEW THAT NEITHER THE AO NOR THE LD. CIT(A) HAS BROUGHT OUT ANY SPECIFIC ORDER IN RELATION TO THE DISALLOWANCE MADE ON GROUND OF LABOUR CHARGES AND HENCE SUCH DI SALLOWANCE CAN BE TERMED AS ADHOC ARBITRARY AND ERRONEOUS IN TERMS OF QUASI JUDICIAL DECISION. THAT SINCE THERE IS NO ELEMENT OR REASON STATED BY THE SUBORDINATE AUTHORITIES FOR THIS ADDITION OF RS. 25,000/ - IS THEREBY DELETED AND ORDER ACCORDINGLY. 43. TH IS GROUND OF CO IS ALLOWED. 44. GROUND NO. 4 & 5 OF THE CO ARE GENERAL IN NATURE THEREFORE NEEDS NO ADJUDICATION. 45. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED WHEREAS CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT . SD/ - SD/ - (B.P. JAIN) ( PARTHA SAR A THI CHAUDHURY ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 14/12/2016 AG COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR