M/s. Dashmesh Rice Mills, Hoshiarpur V. The Income-tax Officer, Dasuya

CO 6/ASR/2011

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 6915 (ITAT-AMRITSAR)
• Duration Of Justice: 10 month(s) 10 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 28-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 22-03-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 18-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R L CHHANALIA
• Assessee Lawyers: V K MAHAJAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.137(ASR)/2011 ASSESSMENT YEAR:2006-07 PAN:AAPFD9070B THE INCOME TAX OFFICER, VS. M/S. DASMESH RICE MIL LS, DASUYA. VPO GHOGRA, HOSHIARPUR. (APPELLANT) (RESPONDENT) C.O. NO.06(ASR)/2011 (ARISING OUT OF I.T.A. NO.137(ASR)/2011) ASSESSMENT YEAR:2006-07 PAN:AAPFD9070B M/S. DASMESH RICE MILLS, VS. THE INCOME TAX OFFI CER, VPO GHOGRA, DISTT. HOSHIARPUR. DASUYA. (APPELLANT) (RESPONDENT) DEPARTMENT BY: SH. R.L. CHHANALIA, DR ASSESSEE BY: SH.V.K. MAHAJAN, ADV. DATE OF HEARING :22/03/2012 DATE OF PRONOUNCEMENT:28/03/2012 ORDER PER BENCH; ITA NO.137(ASR)/2011 & C.O.NO.06(ASR)/2011 2 THIS APPEAL OF THE REVENUE ARISES FROM THE ORDER O F THE CIT(A), JALANDHAR, DATED 31.01.2011 FOR THE ASSESSMENT YEAR 2006-07. THE ASSESSEE HAS ALSO FILED THE CROSS OBJECTION AGAINST THE APPE AL OF THE REVENUE. 2. THE ONLY REVENUE RAISED BY THE REVENUE IS AS U NDER: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.10, 72,294/- ON ACCOUNT OF SUPPRESSION OF YIELD OF RICE BRAN, KHUDI PHAK, HUSK AND ON ACCOUNT OF UNDER VALUATION OF CLOSING STOCK. 3. THE ASSESSEE IN ITS C.O. HAS RAISED THE FOLLOWIN G GROUNDS: 1. WHETHER ON THE FACT AND THE CIRCUMSTANCES OF TH E CASE THE LD. CIT(A) WAS RIGHT IN CONFIRMING THE FINDING OF A.O. ON ACCOUNT OF ADDITION MADE OF AMOUNTING TO RS.402399 FOR SUPP RESSION OF YIELD OF KHUDDI PHAK (EQUAL TO 2%) & SUPPRESSION OF YIELD OF RICE BRAN BY .30% OF TOTAL PADDY MILLED ? 2. WHETHER ON THE FACT AND THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS JUSTIFIED TO UPHOLD THE ADDITION ON ACCO UNT OF UNDER VALUATION OF CLOSING STOCK OF BASMATI RICE OF AMOUN T TO RS.453026/-. 4. THE BRIEF FACTS IN THE APPEAL OF THE REVENUE AND C.O. OF THE ASSESSEE ARE THAT THE ASSESSEE FIRM DERIVES INCOME FROM THE MANUFACTURING AND SALE OF RICE, RICE BRAN ETC. IT MILLS ITS OWN PADDY AND THA T OF GOVT. AGENCIES. THE AO NOTED THAT THE ASSESSEE HAD MILLED 67066.65 QTLS. OF PADDY DURING THE RELEVANT PREVIOUS YEAR, WHICH INCLUDED ITS OWN PADD Y OF 6932.78 QTLS. THE YIELD OF RICE AND BYE-PRODUCTS SHOWN BY THE ASSESSE E WERE AS PER THE UNDER NOTED CHART: ITA NO.137(ASR)/2011 & C.O.NO.06(ASR)/2011 3 RICE RICEBRAN KHUDI PHAK HUSK PADDY MILLED OWN PADDY 6932.75 Q 4528.83 221.84 NIL 1179 PERCENTAGE 65.33% 3.20% NIL 17% GOVT. PADDY MILLED I. PUNGRAIN 49,309 Q II. PUNSUP 10,824.45 Q 60,133.90Q 39375.71 1927.27 NIL 10223 PERCENTAGE 65.48% 3.20% NIL 17% 4.1. THE AO WAS OF THE OPINION THAT THE YIELD OF TH E DIFFERENT PRODUCTS AND BYE-PRODUCTS SHOULD BE AS PER UNDER NOTED RATIOS, W HICH HAD ALSO BEEN ACCEPTED BY ITAT, AMRITSAR BENCH, AMRITSAR IN THE CASE OF VISHNU RICE TRADING CO., KAPURTHALA VS. ITO IN ITA NO.134(ASR)/ 2002 DATED 26.05.2005 FOR THE AY 1998-99: RICE 66% RICE BRAN 4% KHUDI PHAK 2% HUSK 18% THE AO NOTED THAT THE TRIBUNAL IN ITS DECISION HELD THAT THE YIELD OF RICE BRAN AND KHUDI PHAK TAKEN TOGETHER SHOULD BE 6%. THE AO APPLIED THE AFORESAID YIELDS IN THE ASSESSEES CASE. THE ASSESSEE OBJECTE D TO THE SAID AND CONTENDED THAT THE DECISION OF TRIBUNAL WAS FOR A PERIOD OF 8 YEARS BEFORE THE RELEVANT PREVIOUS YEAR. IT WAS SUBMITTED THAT THE YIELD OF R ICE CHANGED ACCORDING TO THE QUALITY OF PADDY WHICH WAS NOT THE SAME EVERY Y EAR. IT WAS ALSO SUBMITTED THAT THE GOVERNMENT ALLOWED DRIAGE OF 1% IN WHICH NORMAL YIELD OF ITA NO.137(ASR)/2011 & C.O.NO.06(ASR)/2011 4 RICE WAS 65%. THE LOWER YIELD OF RICE BRAN WAS STAT ED TO BE DUE TO THE HIGH MOISTURE CONTENT IN PADDY. THE YIELD OF KHUDI PHAK AND HUSK WERE ALSO STATED TO BE LOWER DUE TO THE EXCESS MOISTURE IN PA DDY MILLED BY IT OR PURCHASED BY IT. IT WAS FURTHER SUBMITTED THAT THE HUSK WAS USED FOR DRYING THE WET PADDY WHICH AFFECTED THE YIELD OF THESE TWO CONSTITUENTS. THE AO WAS NOT ENTIRELY SATISFIED WITH THE REPLY SUBMITTED BY THE ASSESSEE. HE HELD THAT THERE WAS NO JUSTIFICATION IN THE EXPLANATION IN RESPECT OF LOWER YIELD OF RICE BRAN, KHUDI PHAK AND HUSK. HE WAS OF THE OPINI ON WHEN A MARGIN OF 1% FOR DRIAGE WAS ALLOWED FOR DETERMINING THE YIELD PE RCENTAGE OF RICE, YIELD PERCENTAGES OF RICE BRAN, KHUDI PHAK AND HUSK WOULD HAVE TO BE TAKEN AS PER THE DECISION IN THE CASE OF M/S. VISHNU RICE TRADIN G CO; KAPURTHALA (SUPRA). THE AO WAS OF THE OPINION THAT THE CONSTIT UENTS WERE BOUND TO BE THE SAME IRRESPECTIVE OF THE YEAR OF MILLING, UNLES S THERE WERE EXCEPTIONAL OR ABNORMAL CIRCUMSTANCES. HE ALSO NOTED THAT THE ASSE SSEE HAD NOT SHOWN ANY YIELD OF KHUDI PHAK WHICH SHOWED THAT IT HAD SUPPRE SSED THE YIELD OF THIS ITEM FULLY. THE AO COMPUTED THE LOWER YIELD OF RIC E BRAN AT 677.51 QTL. BY ASSUMING ITS YIELD TO BE 4% AND THE TOTAL SALE CONS IDERATION SUPPRESSED IN THIS REGARD WAS WORKED OUT AT RS.2,99,629/-. THE Y IELD OF KHUDI PHAK @ 2% WAS COMPUTED AT 1341.37 QTL. AND THE SUPPRESSED SAL E CONSIDERATION IN THIS REGARD WAS WORKED OUT AT RS.4,02,399/-. THE UNDER-S TATEMENT IN THE YIELD OF HUSK WAS COMPUTED AT 669.99 QTL. AND THE SUPPRESSED SALE CONSIDERATION WAS ITA NO.137(ASR)/2011 & C.O.NO.06(ASR)/2011 5 COMPUTED AT RS.83,748/-. A TOTAL ADDITION OF RS.7,8 5,776/- WAS MADE BY THE LD. AO TO THE TOTAL INCOME DUE TO SUPPRESSION OF YI ELD. 5. THE LD. CIT(A), UPHELD THE ADDITION OF RS.4,02, 399/- VIDE PARA 1.8 OF HIS ORDER. AS REGARDS THE YIELD OF RICE BRAN, THE L D. CIT(A) ESTIMATED THE YIELD AT 3.5% AS COMPARED TO 4% TAKEN BY THE A.O. A ND 3.2% DECLARED BY THE ASSESSEE. THE AO WAS DIRECTED TO RECOMPUTE THE ADDITION ON ACCOUNT OF LOWER YIELD OF RICE BRAN ACCORDINGLY, AS PER PARA 1 .9 OF CIT(A)S ORDER. 5.1. AS REGARDS THE VALUATION OF STOCK, THE AO MADE AN ADDITION OF RS.231862/- ON ACCOUNT OF VALUATION OF PARMAL RICE AND RS.10,09,659/- ON ACCOUNT OF VALUATION OF BASMATI RICE. THE MAIN ALLE GATION OF THE AO WAS THAT THE ASSESSEE HAD MADE THE VALUATION ON ESTIMATED BA SIS ONLY. THE LD. CIT(A), DELETED THE ADDITION OF RS.2,31,862/- AND CONFIRMED THE ADDITION OF RS.4,53,026/-. 6. THE LD. COUNSEL FOR THE ASSESSEE, SH. V.K. MAHAJ AN, ADV. ARGUED THAT THE A.O. HAD MADE THE ADDITION MAINLY RELYING UPON THE DECISION OF ITAT, AMRITSAR BENCH, IN THE CASE OF M/S. VISHNU RICE TRA DING CO. IN ITA NO.134(ASR)/2022 DATED 26.05.2005 FOR THE A.Y. 1998 -99, WHEREAS THE ASSESSMENT YEAR OF THE ASSESSEE IS 2006-07, WHICH I S EIGHT YEARS AHEAD OF THE CASE OF M/S. VISHNU RICE TRADING CO. THE FACTS AND CONDITIONS IN THE CASE OF M/S. VISHNU RICE TRADING CO. ARE DIFFERENT TO THE F ACTS AND CONDITIONS IN ASSESSEES PRESENT CASE. THE QUALITY OF PADDY DEPEN DS UPON THE LOCAL AREA. ITA NO.137(ASR)/2011 & C.O.NO.06(ASR)/2011 6 THE ASSESSEE HAS DECLARED BETTER GP AS COMPARED TO THE GP DECLARED IN THE PRECEDING YEARS. THE AO HAS NOT POINTED OUT ANY DEF ECT IN THE STOCK RECORD OR IN THE BOOKS OF ACCOUNT PRODUCED BEFORE HIM. AS REGARDS THE VALUATION OF THE STOCK, THE ASSESSEE HAS BEEN VALUING THE STOCK CONSISTENTLY BY THE SAME METHOD. THE ASSESSEE HAD SUBMITTED THE DETAILS OF V ALUATION OF CLOSING STOCK, WHICH IS AVAILABLE IN THE ORDER OF THE CIT(A). 7. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE O RDER OF THE ASSESSING OFFICER. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. WE ARE CONVINCED WITH THE ARGUMENTS MADE BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE AO WAS NOT JUSTIFIED IN RELYING U PON THE FINDINGS IN THE CASE OF M/S. VISHNU RICE TRADING CO., KAPURTHALA, W HICH WERE FOR THE ASSESSMENT YEAR 1998-99 AND WAS SITUATED IN A DIFFE RENT AREA THAN THAT OF THE ASSESSEE. THE LOCAL CONDITION OF THE RICE BRAN IS D IFFERENT IN DIFFERENT AREA, THE PLANT AND MACHINERY, MILLING AND OTHER CONDITIO NS ARE ALSO DIFFERENT IN DIFFERENT UNITS. THE AO HAS NOT BROUGHT OUT ON RECO RD IDENTICAL FACTS OF M/S. VISHNU RICE TRADING CO. WITH THAT OF THE ASSESSEE. THEREFORE, THE SAID DECISION OF M/S. VISHNU RICE TRADING CO. CANNOT BE APPLIED TO THE FACTS OF THE PRESENT ASSESSEE. 8.1. AS REGARDS THE VALUATION OF CLOSING STOCK, THE ASSESSEE IS CONSISTENTLY FOLLOWING METHOD OF VALUATION. NO DEFECT HAS BEEN P OINTED OUT IN THE ITA NO.137(ASR)/2011 & C.O.NO.06(ASR)/2011 7 PURCHASES, SALES AND THE STOCK OF THE ASSESSEE. THE ASSESSE HAS SUBMITTED THE BASIS OF VALUATION, WHICH ARE AVAILABLE ON RECORD A ND IN SUCH CIRCUMSTANCES, ADDITION OF SUCH ACCOUNT CAN NOT BE MADE. THEREFORE , THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION. THE ADDITION SUST AINED BY THE LD. CIT(A), IS DIRECTED TO BE DELETED. IN THE FACTS AND CIRCUMSTAN CES, THE APPEAL OF THE REVENUE IS DISMISSED AND C.O. OF THE ASSESSEE IS A LLOWED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.137(ASR)/2011 IS DISMISSED AND C.O. NO.6(ASR)/2011OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28TH MARCH, 2012. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 28TH MARCH , 2012 /SKR/ COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE:M/S. DASMESH RICE MILLS, GHOGRA, HOSHI ARPUR. 2. THE ITO DASUYA. 3. THE CIT(A), JLR 4. THE CIT, JLR 5. THE SR DR, ITAT, ASR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH : AMRITSAR.