ACIT, Kottayam V. M/s Mass Enterprises, Kottayam

ITA 1001/COCH/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4594 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2011
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 06-04-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 11-12-2008
• Court: TRIBUNAL
• Department Lawyers: T J VINCENT
• Assessee Lawyers: THOMAS CHERIAN
• Keywords: Business income; Income from undisclosed sources
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.VIJAYAKUMARAN & SHRI SANJAY ARORA I.T.A.NO.1001/COCH/2008 AND I.T.A.NOS.23 & 97/COCH/2009 ASST. YEARS:2002-03 TO 2004-5 THE ASST. COMMISSIONER OF INCOME-TAX,CIRCLE-1, KOTTAYAM. VS. M/ S. MAS ENTERPRISES P.LTD., KOTTAYAM. PA NO.AABCM 4605M (APPELLANT) ( RESPONDENT ) & C.O.NOS.05,08 & 15/COCH/2009 (ARISING OUT OF I.T.A.NO.1001/COCH/2008 AND I.T.A.NOS.23 & 97/COCH/2009 ASST. YEARS:2002 - 03 TO 2004 - 5 M/S. MAS EN TERPRISES P.LTD., KOTTAYAM. PA NO.AABCM 4605M VS. THE ASST. COMMISSIONER OF INCOME-TAX,CIRCLE-1, KOTTAYAM. (APPELLANT) (RESPONDENT) REVENUE BY SHRI T.J.VINCENT, SR.DR ASSESSEE BY SHRI THOMAS CHERIAN O R D E R PER BENCH: THESE APPEAL BY THE REVENUE AND THE CROSS OBJECTIO NS BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDERS OF THE CIT(APPEALS)-IV, KOCHI FOR THE ASSESSMENT YEARS 200 2-03, 2003-04 AND 2004-05. SINCE THE ASSESSEE IS ONE A ND THE ITA NOS. 1001/COCH/2008, 23 &97/22009 & C.O.NOS.05, 08 & 15/COCH/2009. 2 SAME, WE HAVE HEARD THESE MATTERS TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. 2. THE ASSESSEE IS A COMPANY IN WHICH PUBLIC ARE INTERESTED. THE ASSESSEE IS HAVING ITS OWN PLANTAT ION AND UNDERTAKES CARDAMOM AUCTION, EXPORTS SPICES, MANUFA CTURES CURRY POWER BESIDES IT IS A DEALER IN SPICES, DISTR IBUTOR OF AGRICULTURAL IMPLEMENTS AND IS A FRANCHISEE OF BSNL . 3. ITA NO.1001/COCH/2008 A.Y. 2002-03 : THIS APPEAL IS AGAINST THE ORDER OF THE CIT(APPEALS)-IV, KOCHI, DATED 27-08-2008. THE REVENUE HAS URGED THE FOLLO WING EFFECTIVE GROUNDS OF APPEAL: 2. THE LD. CIT(APPEALS) OUGHT TO HAVE SEEN THAT TH ERE WAS INTER-DIVISIONAL TRANSFER OF SALES/PURCHASES OF PRODUCE OF PLANTATION DIVISION WITH OTHER DIVISIONS OF THE ASSESSEE COMPANY. ONLY THE AVERAGE MARKET PRICE O F AGRICULTURAL PRODUCE CONSUMED DURING THE RELEVANT PREVIOUS YEAR IS ALLOWABLE AS A DEDUCTION. 3. THE LD. CIT(APPEALS) OUGHT TO HAVE SEEN THAT A S THE DETAILS OF INTER-DIVISIONAL TRANSFER OF SALES/PURCH ASE ARE NOT AVAILABLE IN THE ACCOUNTS FILED, APPORTIONMENT OF EXPENDITURE ON THE BASIS OF GROSS RECEIPTS FROM ITA NOS. 1001/COCH/2008, 23 &97/22009 & C.O.NOS.05, 08 & 15/COCH/2009. 3 AGRICULTURAL OPERATIONS AND NON-AGRICULTURAL OPERAT IONS IS JUSTIFIED AS HELD BY THE HONBLE SUPREME COURT IN T HE CASE OF CONSOLIDATED COFFEE LTD. VS. STATE OF KARNA TAKA - 248 ITR 432. 4. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THIS CASE, ASSES SMENT HAS BEEN MADE U/S.143(3) R.W.S.147 OF THE I.T.ACT. I N THE FIRST ROUND OF ASSESSMENT PROCEEDINGS, THE ORIGINAL BOOKS WERE PRODUCED. SEPARATE BOOKS WERE MAINTAINED AND COMB INED IN A CONSOLIDATED MANNER. HOWEVER,. ASSESSING OFF ICER APPLIED RULE 7 FOR ESTIMATING THE INCOME OF THEE AG RICULTURAL PRODUCE AND THAT OF THE FACTORY DIVISION. IN OTHE R WORDS, TO ASCERTAIN THE GROSS RECEIPTS FROM AGRICULTURAL OPER ATION AND NON-AGRICULTURAL OPERATION, THE ASSESSING OFFICER A DOPTED RULE 7. THE OBJECTION OF THE ASSESSEE THROUGH-OUT THE PROCEEDINGS IS THAT NO RAW MATERIALS FROM THE AGRIC ULTURAL DIVISION WERE SENT FOR CONSUMPTION TO THE FACTORY. THE FACTORY IS SITUATED IN TAMIL NADU STATE AND AGRICUL TURAL PLANTATIONS ARE WITHIN THE STATE OF KERALA. IF TH E AGRICULTURAL PRODUCE LIKE CARDAMOM IS TO BE MOVED O UT OF THE STATE, THE TRANSFER SHOULD BE THROUGH SALES-TAX FOR M ONLY. THESE FACTS WERE CONSIDERED BY THE LD. FIRST APPELL ATE AUTHORITY, IN VIEW OF THE FACT THAT SEPARATE ACCOUN TS ARE ITA NOS. 1001/COCH/2008, 23 &97/22009 & C.O.NOS.05, 08 & 15/COCH/2009. 4 MAINTAINED FOR DIFFERENT ACTIVITIES OF AGRICULTURAL AND NON- AGRICULTURAL OPERATIONS. THE LD. CIT(APPEALS) FUR THER FOUND THAT AGRICULTURAL PRODUCE OF THE ASSESSEE FROM THE PLANTATIONS HAS NOT BEEN USED AS RAW MATERIALS FOR MANUFACTURE. THE ENTIRE PLANTATIONS ARE IN KERALA WHEREAS THE MANUFACTURING FACILITY IS IN TAMIL NADU STATE, WHICH SHOULD BE BY AN INTER STATE TRANSFER OF AGRICULTURA L PRODUCE EFFECTED ONLY THROUGH S.T.FORMS. THE DECISION O F THE HONBLE APEX COURT IN THE CASE OF CONSOLIDATED COFF EE LTD. (2000) 248 ITR 432 HAS BEEN RIGHTLY DISTINGUISHED A ND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN F ACT, THE REOPENING OF THE ASSESSMENT WAS ON THE BASIS OF THE PRIMA FACIE BELIEF THAT AGRICULTURAL INCOME HAS BEEN OVER STATED FOR APPLICABILITY OF RULE 7. THE LD. CIT(APPEALS) NOTI CED THAT ACTIVITIES UNDERTAKEN BY THE ASSESSEE ARE CLEARLY S EGREGABLE AND SEPARATE ACCOUNTS HAS BEEN MAINTAINED FOR DIFFE RENT ACTIVITIES. THESE FACTS ARE BORNE OUT FROM THE RE CORDS. IT IS ALSO AN ESTABLISHED FACT THAT THE AGRICULTURAL P RODUCE FROM ASSESSEES PLANTATION WAS NOT USED AS A RAW MATERIA L IN ITS MANUFACTURING ACTIVITY. THE LD. CIT(APPEALS) FURTH ER FOUND THAT BOOKS OF ACCOUNTS AND THE RESULTS BASED ON BOO KS HAVE NOT BEEN REJECTED. WITHOUT REJECTING THE BOOKS OF ACCOUNTS, THERE CANNOT BE ANY ESTIMATION OF INCOME. THE LD. ITA NOS. 1001/COCH/2008, 23 &97/22009 & C.O.NOS.05, 08 & 15/COCH/2009. 5 CIT(APPEALS) HAS ACCEPTED THE CASE OF THE ASSESSEE FOR THE VALID REASONS. BEFORE US ALSO, THE LD. COUNSEL FO R THE ASSESSEE REITERATED THE VERY SAME ARGUMENTS. CONS IDERING THE RIVAL SUBMISSIONS AND PERUSAL OF RECORDS INCLUD ING THE GROUNDS OF APPEAL URGED BEFORE US THE ONLY FINDING ARRIVED AT BY THE LD. COMMISSIONER OF INCOME-TAX (APPEALS) COU LD NOT BE CONTROVERTED BY THE LD. SR. D.R. UNDER THE AB OVE CIRCUMSTANCES, WE SEE NO JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LD. CIT(APPEALS) FOR THIS ASSESSMENT Y EAR 2002- 03. ACCORDINGLY, THE APPEAL OF THE REVENUE DESERV ES TO BE DISMISSED. WE ORDER ACCORDINGLY. 5. TURNING TO C.O.NO.05/COCH/2009 , IT IS ONLY IN SUPPORT OF THE FINDINGS OF THE LD. CIT(APPEALS). AS WE HA VE UPHELD THE FINDINGS OF THEE LD. CIT(APPEALS), THE CROSS OB JECTION FILED BY THE ASSESSEE BECOMES INFRUCTUOUS AND DESE RVES TO BE DISMISSED. 6. ITA NO.23/COCH/2009 F.Y. 2003-04 : THIS DEPARTMENTAL APPEAL IS DIRECTED AGAINST THE ORDER O F THE LD. CIT(APPEALS)-IV, KOCHI, DATED 10-10-2008. THE E FFECTIVE GROUNDS RAISED IN THIS APPEAL READ AS FOLLOWS: ITA NOS. 1001/COCH/2008, 23 &97/22009 & C.O.NOS.05, 08 & 15/COCH/2009. 6 2.THE LD. CIT(APPEALS) OUGHT TO HAVE SEEN THAT THE FIGURES OF CLOSING STOCK OF AGRICULTURAL PRODUCE AS ON 31- 3-2003 AND OPENING STOCK AS ON 01-04-2003 ARE BASED ON FIGURES FILED BY THE ASSESSEE IN ITS ANNUAL REPORTS . 3. THE LD. CIT(APPEALS) OUGHT TO HAVE SEEN THAT T HE ASSESSEE HAS NOT OFFERED VALID OR REASONABLE EXPLAN ATION FOR THE DIFFERENCE IN THE VALUE OF STOCK AS ON 31-3 -2003 & 1-4-2003 REPORTED IN ITS FINANCIAL STATEMENTS AND THEREFORE THIS REPRESENTS ITS UNACCOUNTED INCOME. 7. WE HAVE HEARD RIVAL SUBMISSIONS. WE HAVE PERUS ED THE ENTIRE MATERIALS AVAILABLE ON RECORD INCLUDING THE PRECEDENTS. THE ASSESSEE HAS A CHOICE OF METHOD O F VALUATION OF STOCK. HE IS HOWEVER REQUIRED TO FOL LOW THE SAME METHOD YEAR AFTER YEAR. HAVING ACCEPTED A M ETHOD, IT IS NOT OPEN TO THE ASSESSING OFFICER TO QUESTION THE SAME. THIS WELL ESTABLISHED LAW HAS BEEN FOLLOWED RECENTL Y BY THE DECISION OF THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SANT RAM MANGAT RAM 275 IT 312. THE HONBLE PUNJAB & HARYANA HIGH COURT HAS CONSIDERED SEVERAL DECISIONS AS REFERRED IN THEIR JUDGMENT. THE PROP OSITION OF LAW LAID DOWN BY THE HONBLE SUPREME COURT IN TH E CASE OF UNITED COMMERCIAL BANK VS. CIT 240 ITR 355 HAS BEEN RELIED BY THE PUNJAB AND HARYANA HIGH COURT, WHICH READS AS UNDER (HEAD NOTE): ITA NOS. 1001/COCH/2008, 23 &97/22009 & C.O.NOS.05, 08 & 15/COCH/2009. 7 THE PRINCIPLES APPLICABLE IN VALUATION OF STOCK AR E (1) THAT FOR VALUING THE CLOSING STOCK, IT IS OPEN TO T HE ASSESSEE TO VALUE IT AT THE COST OR MARKET VALUE, WHICHEVER IS LOWER; (2) IN THE BALANCE-SHEET, IF TH E SECURITIES AND SHARES ARE VALUED AT COST, FROM THAT NO FIRM CONCLUSION CAN BE DRAWN. A TAXPAYER IS FREE TO EMPLOY FOR THE PURPOSE OF HIS TRADE, HIS OWN METHOD OF KEEPING ACCOUNTS, AND FOR THAT PURPOSE, TO VALUE ST OCK- IN-TRADE EITHER AT COST OR MARKET PRICE; (3) A METH OD OF ACCOUNTING ADOPTED BY THE TAXPAYER CONSISTENTLY AN D REGULARLY CANNOT BE DISCARDED BY THE DEPARTMENTAL AUTHORITIES ON THE VIEW THAT HE SHOULD HAVE ADOPTED A DIFFERENT METHOD OF KEEPING ACCOUNTS OR OF VALUATIO N; (4) THE CONCEPT OF REAL INCOME IS CERTAINLY APPLICA BLE IN JUDGING WHETHER THERE HAS BEEN INCOME OR NOT, BUT, IN EVERY CASE, IT MUST BE APPLIED WITH CARE AND WITHIN RECOGNIZED LIMITS; (5) WHETHER THE INCOME HAS REALL Y ACCRUED OR ARISEN TO THE ASSESSEE MUST BE JUDGED IN THE LIGHT OF THE REALITY OF THE SITUATION; (6) UNDER SE CTION 145 OF THE ACT, IN A CASE WHERE ACCOUNTS ARE CORREC T AND COMPLETE BUT THE METHOD EMPLOYED IS SUCH THAT IN TH E OPINION OF THE INCOME-TAX OFFICER, THE INCOME CANNO T BE PROPERLY DEDUCED THEREFROM, THE COMPUTATION SHALL B E MADE IN SUCH MANNER AND ON SUCH BASIS AS THE INCOME - TAX OFFICER MAY DETERMINE. FINALLY, THEIR LORDSHIPS OF PUNJAB & HARYANA HIGH C OURT IN HELD THAT THE ASSESSING OFFICER HAVING ACCEPTED THE METHOD CONTINUOUSLY ADOPTED BY THE ASSESSEE FOR VALUATION OF ITS STOCK AND ACCORDINGLY MAKING ASSESSMENT IN THE PREV IOUS ITA NOS. 1001/COCH/2008, 23 &97/22009 & C.O.NOS.05, 08 & 15/COCH/2009. 8 ASSESSMENT YEARS AND BY NOT CHALLENGING THE ORDER P ASSED, THE DEPARTMENT WILL BE DEEMED TO HAVE FORFEITED ITS RIGHT TO CHALLENGE THE ORDER PASSED BY THE TRIBUNAL IN THE P RESENT CASE AND WE DO NOT FIND ANY JUSTIFICATION TO PERMIT THE REVENUE TO QUESTION THE METHOD ADOPTED BY THE ASSES SEE FOR VALUATION OF ITS STOCK BY RELATION TO THE ASSESSMEN T YEAR 1981-82. IN THE CASE OF INDO NIPPON CHEMICALS CO.LTD.[2003] 261 ITR 275 THE SUPREME COURT HAS HEL D THAT THE AO WAS NOT ENTITLED TO ADOPT A DIFFERENT FOR VA LUING THE STOCK OF RAW MATERIAL AND UN-CONSUMED RAW MATERIAL. THUS, IT IS THE RIGHT OF THE ASSESSEE TO HAVE THE CHOICE OF METHOD OF VALUATION OF STOCK AND CONSISTENTLY FOLLOWED MET HOD CANNOT BE QUESTIONED BY THE ASSESSING OFFICER, IS T HE WELL SETTLED PRINCIPLE LAID DOWN. 8. IN THE INSTANT CASE, THE ASSESSEE HAS FOLLOWED A PARTICULAR METHOD OF ACCOUNTING BY THE PRACTICE OF VALUATION OF STOCK OF AGRICULTURAL PRODUCE OF THE PLANTATION DIVISION AT THE NET REALIZABLE VALUE WHICH HAS OBSERVED BY THE LD. CIT(APPEALS) HAD BEEN ACCEPTED BY THE DEPARTMENT I N THE EARLIER YEARS. AS FOUND BY THE LD. CIT(APPEALS), ONLY THIS YEAR THE LD. ASSESSING OFFICER HAS CHANGED THE METH OD OF VALUATION OF CLOSING STOCK ALONE. THIS HAS NOT BE EN ACTUALLY ITA NOS. 1001/COCH/2008, 23 &97/22009 & C.O.NOS.05, 08 & 15/COCH/2009. 9 DISTURBED THE METHOD OF VALUATION CONSISTENTLY AND REGULARLY BEING FOLLOWED BUT ALSO HAS DISTORTED THE FINANCIAL STATEMENT. HENCE, THE LD. CIT(APPEALS) FOUND THAT BASED ON THE PROCEEDINGS THAT THE CHANGE IN THE METHOD OF VALUAT ION AS CARRIED OUT BY THE ASSESSING OFFICER IS NOT AT ALL JUDICIOUS AND THAT BEING THE FACTUAL POSITION, THE LD. D.R. C OULD NOT CONTROVERT THE FINDINGS OF THE LD. CIT(APPEALS) NOR THE LD. SR.DR BROUGHT OUT THE INSTANCES THAT BY ADOPTING TH IS METHOD THE REAL INCOME CANNOT BE DEDUCED FOR THE PU RPOSE OF TAXATION. WHEN THE RECOGNIZED METHOD OF VALUAT ION OF STOCK IS BEING CONSISTENTLY FOLLOWED AND IT HAS BEE N ACCEPTED, THE DECISION WHICH HAS BEEN RELIED AND FO LLOWED BY THE LD. CIT(APPEALS) IS DIRECTLY APPLICABLE TO THE CASE PRESENT BEFORE US. HENCE, WE HAVE NO HESITATION I N CONFIRMING THE ORDER OF THE LD. CIT(APPEALS) BY REJ ECTING THE GROUNDS RAISED BY THE REVENUE BEFORE US AS THEY ARE DE VOID OF MERITS. 9. YET ANOTHER DECISION ON THE POINT THAT THE CLOSI NG STOCK OF THE EARLIER YEAR SHOULD BE THE OPENING STOCK OF THE CURRENT YEAR IS THAT OF THE APEX COURT IN THE CASE OF VKJ BUILDERS AND VKJ BUILDERS AND VKJ BUILDERS AND VKJ BUILDERS AND CONTRACTORS P.LTD. VS. CIT (2010) 228 CTR 143. CONTRACTORS P.LTD. VS. CIT (2010) 228 CTR 143. CONTRACTORS P.LTD. VS. CIT (2010) 228 CTR 143. CONTRACTORS P.LTD. VS. CIT (2010) 228 CTR 143. THEREFORE, THE CLOSING STOCK OF THE EARLIER YEAR HAS TO BE TAKEN AS THE ITA NOS. 1001/COCH/2008, 23 &97/22009 & C.O.NOS.05, 08 & 15/COCH/2009. 10 OPENING STOCK OF THE CURRENT YEAR AS OBSERVED BY THE LD. CIT(APPEALS). THE LD. ASSESSING OFFICER DISTURBED ONLY THE CLOSING STOCK BUT HE HAS NOT TAKEN CARE TO THROW TH E BENEFIT BY WAY OF AMENDING THE OPENING STOCK FIGURE FOR THE CURRENT YEAR. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE VIEW THAT THE GROUNDS URGED BY THE REVENUE DESERVE TO BE REJECTED AND ACCORDINGLY THE APPEAL OF THE REVENUE DISMISSED. 10. TURNING TO C.O.NO.08/COCH/2009 , IT IS ONLY IN SUPPORT OF THE FINDINGS OF THE LD. CIT(APPEALS). AS WE HA VE UPHELD THE FINDINGS OF THEE LD. CIT(APPEALS), THE CROSS OB JECTION FILED BY THE ASSESSEE BECOMES INFRUCTUOUS AND DESE RVES TO BE DISMISSED. 11. ITA NO.97/COCH/2009- A.Y. 2004-05: THIS APPEAL IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(APPEAL S)-IV, KOCHI, DATED 28-11-2008. THE EFFECTIVE GROUNDS RA ISED BY THE REVENUE ARE AS UNDER: 2. THE LD. CIT(APPEALS) OUGHT TO HAVE SEEN THAT TH E VALUATION OF AGRICULTURAL PRODUCE ARE BASED ON FIGU RES FILED BY THE ASSESSEE IN ITS PRODUCTION STATEMENT O F PLANTATION DIVISION. ITA NOS. 1001/COCH/2008, 23 &97/22009 & C.O.NOS.05, 08 & 15/COCH/2009. 11 3. THE LD. CIT(APPEALS) OUGHT TO HAVE SEEN THAT T HE ASSESSEE HAS NOT OFFERED VALID OR REASONABLE EXPLAN ATION FOR THE DIFFERENCE IN THE VALUATION OF AGRICULTURAL PRODUCE AS REPORTED IN ITS FINANCIAL STATEMENTS AND THOSE S HARE IN ITS PRODUCTION STATEMENT OF PLANTATION DIVISION AND THEREFORE THIS REPRESENTS ITS UNACCOUNTED INCOME. 12. THE GROUNDS OF THE REVENUE IS THAT ASSESSEE HAS OVER- STATED AGRICULTURAL INCOME SO AS TO AVOID THE TAX I ON RESPECT OF NON-AGRICULTURAL INCOME. THEREFORE, THE DIFFERENC E OF OVER STATED AGRICULTURAL INCOME WAS TREATED AS UNACCOUNT ED INCOME BY THE DEPARTMENT. 13. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE ENTIRE MATERIALS AVAILABLE ON RECORD INCLUDING THE PRECEDENTS. WE WILL GO DIRECTLY TO THE FINDINGS OF THEE LD. CIT (APPEALS) WHICH IS APPROPRIATE TO DECIDE THIS ISSUE. THE CO NTENTION OF THE ASSESSEE THROUGHOUT THE PROCEEDINGS WOULD BE TH AT THE LD. AO HAS ARBITRARILY VALUED THE AGRICULTURAL PRODUCE DIS-REGARDING THE FACT THAT THE SALES AS BOOKED BY THE ASSESSEE A RE COMPLETELY SUPPORTED BY TAX PAID INVOICES AND WERE SOLD THROUGH AUCTION, SUPPORTED BY INVOICES AND COMMISSI ON BILLS. THE MAIN PRODUCE OF THE ASSESSEE COMPANY IS CARDAMO M AND CARDAMOM COMES IN VARIOUS GRADES WITH DIFFERENTIAL VALUES AND ITA NOS. 1001/COCH/2008, 23 &97/22009 & C.O.NOS.05, 08 & 15/COCH/2009. 12 THEREFORE ONE CANNOT PUT ONE SINGLE ARBITRARY VALUE FOR CARDAMOM WHICH IS SOLD THROUGHOUT THE ENTIRE YEAR. MOREOVER, IT IS ALSO EXPLAINED THAT THE ENTIRE SALE S ARE REPORTED IN THE BOOKS, SALES ARE SUBJECTED TO SALES-TAX AND SERVICE TAX, ALL THE TAXES ARE PAID BY THE ASSESSEE, CARDAMOM DE VELOPMENT FUND IS MONITORING THE TRANSACTIONS AND WHEN THE PR ODUCTION SUFFERS SUCH VARIOUS TAXES AND LEVIES IT IS NEITHER FOR THE ASSESSING OFFICER TO COME TO A CONCLUSION THAT AGRI CULTURAL RECEIPTS WERE OVER-STATED. FURTHER THE COMPANY AL SO MAINTAINS BILLS, VOUCHERS AND ACCOUNTS FOR PRODUCTI ON AND SALES OF ITS PRODUCTS. IT IS ALSO SUBJECTED TO SALES-TA X AUTHORITIES, SPICES BOARD SUPERVISION WHICH GOT THE APPROVAL BY THEM. THEREFORE, THE LD. ASSESSING OFFICER CANNOT ARBITRA RILY RESORT TO ESTIMATION. THE LD. COUNSEL ARGUED THAT ONCE BOOK RESULTS ARE NOT FOUND TO BE RELIABLE AND WITHOUT REJECTING THE BOOKS, THE ESTIMATION IS NOT JUSTIFIED, IS THE ARGUMENT WHICH ARGUMENT PLEASED THE CIT(APPEALS) BASED ON THE FACTS AND CIR CUMSTANCES BUT ULTIMATELY DELETED THE ADDITION MADE UNDER THIS HEAD OF ALLEGED OVER STATED AGRICULTURAL INCOME. 14. THE REASONS ADOPTED BY THE LD. CIT(APPEALS) THA T WHEN THE ACCOUNTS WERE SEPARATELY MAINTAINED, ANY CHANGE IN THE VALUATION OF AGRICULTURAL PRODUCE WILL NORMALLY RES ULT IN CHANGE ITA NOS. 1001/COCH/2008, 23 &97/22009 & C.O.NOS.05, 08 & 15/COCH/2009. 13 OF PROFIT OF AGRICULTURAL BUSINESS UNLESS PROVED TH AT BUSINESS INCOME HAS BEEN SIPHONED OFF AS AGRICULTURAL RECEIP TS. FURTHER, THE LD. CIT(APPEALS) FOUND THAT THE ASSESSING OFFIC ER HAS NOT POINTED OUT ANY DEFECTS IN THE BOOKS AND THE BOOKS HAS NOT HAVEN REJECTED. THE SALES ARE SUPPORTED BY BILLS AND INVOICES AND THERE IS ABSOLUTELY NO QUANTIFICATION IN THE AS SESSMENT YEAR REGARDING THE ACCOUNTS AS MAINTAINED. WHEN T HESE RECEIPTS ARE SUPPORTED BY BILLS AND SALES WERE SUBJ ECTED TO SERVICE TAX, AND CESS, THE ACTION OF THE ASSESSING OFFICER IN DISREGARDING THE AGRICULTURAL RECEIPTS AS PER BOOKS WITHOUT CITING ANY VALID REASON OR POINTING OUT ANY DEFECTS IN THE ACCOUNTS AND RESORTRING TO ESTIMATION OF THE RECEIP TS BY ADOPTING THE AVERAGE PURCHASE RATE OF AGRICULTURAL PRODUCE AS A COMPARABLE CASE AS REFLECTED IN THE TRADING A/C. OF THE EXPORT DIVISION OF THE ASSESSEE CANNOT BE JUSTIFIED. THE OBSERVATION OF THE LD. CIT(APPEALS) FOR DELETING THE ADDITION I S QUITE CONVINCING AND WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(APPEALS) ON THIS POINT. THE LD. SR.DR WAS UNABLE TO CONTROVERT THE FINDINGS OF THE LD. CIT(APPEALS). UNDER THE ABOVE FACTS, WE REJECT THE GROUNDS URGED BY THE REV ENUE BEFORE US AND WE DECIDE THE ISSUE BY CONFIRMING THE ORDER OF THE LD. CIT(APPEALS) . ACCORDINGLY, THE APPEAL OF THE REVENUE FAILS. ITA NOS. 1001/COCH/2008, 23 &97/22009 & C.O.NOS.05, 08 & 15/COCH/2009. 14 15. TURNING TO C.O.NO.15/COCH/2009 , IT IS ONLY IN SUPPORT OF THE FINDINGS OF THE LD. CIT(APPEALS). AS WE HA VE UPHELD THE FINDINGS OF THEE LD. CIT(APPEALS), THE CROSS OB JECTION FILED BY THE ASSESSEE BECOMES INFRUCTUOUS AND DESE RVES TO BE DISMISSED. 16. IN THE RESULT, THE APPEALS AS WELL AS THE CROSS OBJECTIONS ARE DISMISSED. SD/- SD/- (SANJAY ARORA) (N.VIJAYKUMARAN) ACCOUNTANT MEMBER JUDICIAL M EMBER ERNAKULAM, DATED THE 19 TH APRIL,2011. PM. COPY FORWARDED TO: 1. THE ACIT.,CIRCLE-1, KOTTAYAM. 2. M/S. MAS ENTERPRISES P.LTD., KERALAPURM BUILDINGS, KOTTAYAM. 3. CIT(A)-IV, 4. CIT, KOTTAYAM. 5. D.R.