G.V. Rice Unit V. Commissioner of Income Tax, Karnal

ITA/295/2012

AI Insights

The case involves G.V. Rice Unit, a partnership firm engaged in the business of processing and selling rice, which appealed against the order of the Income Tax Appellate Tribunal, Delhi. The Tribunal had upheld the addition of Rs. 4,00,000 to the firm's income for the assessment year 2008-2009, citing a significant drop in gross profits compared to the previous year. The firm argued that despite increased business volume, the gross profit margin had declined due to lower average realization per dollar and increased production costs. The Revenue contended that the firm's accounts were not genuine and lacked material information. The High Court dismissed the appeal, stating that the questions raised were factual and did not constitute substantial questions of law.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 795935 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 29-07-2013
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: PANKAJ JAIN
• Keywords: Adhoc Addition; Assessment; Gross profits; Income Tax; Partnership; Rice Sheller
• Section: 145; 260-A

Judgement Text

"ITA NO. 295 of 2012 1 HIGH COURT OF PUNJAB AND HARYANA CHANDIGARH. *** ITA NO. 295 of 2012 Date of decision: 29.07.2013 *** G.V.(God Vishnu) Rice Unit, G.T.Road, through Partner Shri Parmod Kumar, Taraoi, Karnal (Haryana). Versus Commissioner of Income Tax, Karnal. *** CORAM: HON'BLE MR. JUSTICE RAJIVE BHALLA HON'BLE MR. JUSTICE DR. BHARAT BHUSHAN PARSOON. *** Present: Shri Pankaj Jain, Advocate, for the appellant. *** DR. BHARAT BHUSHAN PARSOON, J This appeal under Section 260-A of the Income Tax Act, 1961 (hereinafter to be referred to as, “the Act”), is directed against the order dated 20.7.2012 of Income Tax Appellate Tribunal, Delhi Bench “C”, Delhi in I.T.A No. 156/DEL/2012 for the assessment year 2008-2009. Details of facts The appellant is a partnership concern running a Rice Sheller and is engaged in the business of processing as also of sale of rice and its bye-products. It had filed its return at an amount of Rs.23,97,763.76 with audit report etc. There was considerable fall in the gross profits in comparison to the previous assessment year 2007-2008. The appellant was called upon to explain the reasons thereof. Notwithstanding the explanation given by the assessee, the Assessing Officer framed the assessment vide order dated 29.11.2010, (Annexure P11), resulting in making of addition for declaration of low gross profits on adhoc basis at an ITA NO. 295 of 2012 2 amount of Rs.4,00,000/- (Rs. Four Lacs). Appeal preferred against this order by the Assessee was dismissed on 24.10.2011, (Annexure A-14). Still aggrieved with this decision, the Assessee had approached the Income Tax (Appellate) Tribunal, Delhi Bench, New Delhi but could not succeed. Questions of Law . In this appeal, the Assessee has come forward with the following alleged substantial questions of law:- 1. Whether under the facts and circumstances of the case, the Tribunals order is unsustainable and perverse, while overlooking the 'material facts' containing 'material particulars', particularly while there is an erroneous 'assumption and application of jurisdiction', without invoking the Provisions of Section 145 of the Income Tax Act, 1961?; and 2. Whether under the facts and circumstances of the case, the Tribunal conclusions are unreasonable and dehors to the 'material on record', being even in-apposite the assessment order and CIT (A) order? Plea of Assessee Exploring that though there is increase in the business but there is decline in the Gross Profits, consistent case of the Assessee is that the Gross Profits rate in the year under assessment has decreased from 7.64% to 5.91% for the following reasons:- i) Average realization per Dollar in the year under assessment was at the rate of 39.70 while in the preceding year it was 44.71; and, ii) Costs of production increased by 41.59% whereas the sale price increased only to the level of 37.03%. Plea of the Revenue Plea of the Revenue on the other hand is that accounts of the assessee are not genuine and only make belief version is forthcoming. In ITA NO. 295 of 2012 3 nutshell, it is explained that quality of paddy and rice as also of their byproducts has not been mentioned in the tabulated information of the assess. It is claimed that the books of accounts are contrived and material information is lacking. Action of the Revenue in making addition of 4 lacs in the income of the assessee is claimed to be right. Discussion follows: Material produced by the Assessee in support of his claim was tabulated and presented in a logical way, wherein it had given year-wise details (ranging from year ending 31.3.1999) on five parameters viz. returned income, opening stock, purchases, sales and closing stock. Besides, these details pertaining to a period of more than 12 years i.e 31.3.1999 to 31.3.2011, were considered. The Assessee had not contemplated any difficulty in explaining his side of the story, but was caught napping when the assessing officer called upon the Assessee to furnish quality-wise details of all the items for all these years. The Assessee showed its helplessness. The Assessee was plain and articulate that it had furnished all details but could not furnish quality wise details of the items. When close scrutiny of the comparative chart furnished by the Assessee was made by the Income Tax Authorities at different levels, it was found that primarily there were three components in the trading account of the Assessee for total assessment of the stock and these were opening stock, purchases and production during the year. These items differed in their value for each assessment year. On the other hand, there is consolidated sale of rice and by- products. It was found that the stock register maintained by the Assessee neither had quality-wise details of the paddy and rice nor such details of by- products viz nakku, chhilka, dobar, tibar and broken rice etc were available. ITA NO. 295 of 2012 4 As already mentioned the Assessee conceded that it is not possible to maintain qualitywise details of all the items. When examined from yet another angle, it was found that valuation of stock of rice had also not been made on any proper method of valuation of stock. Item-wise and quality wise closing stock of rice and paddy had also not been maintained. In short, information supplied by the Assessee was not only deficient in material particulars but the Assessee had also shown its helplessness to provide better particulars demanded by the Income Tax authorities. It is thus clear that record of the Assessee lacked probity and transparency so far as the material information is concerned. Conclusion Sequelly, adhoc addition of Rs.4,00,000/- (Four Lacs) in the income of the Assessee was made because of low Gross Profits declared by the Assessee. This view taken by the Assessing Officer was confirmed by the first and second appellate authority. In the light of entire gamut of facts and circumstances, it is evident that the questions framed by the Assessee are only questions of facts and details thereto. In fact these are not questions of law much-less substantial questions of law. An appeal under Section 260-A of the Act, is entertainable by this Court only on substantial questions of law. Since no question of law arises for an answer, the appeal is dismissed. (Dr. Bharat Bhushan Parsoon) Judge July 29, 2013 (Rajive Bhalla) malik Judge "