M/s Vikas Rice and General Mills, Kaithal V. ITO, W-4, Kaithal

ITA 1053/CHANDI/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 5589 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 09-09-2021
• Assessment Year: 2009-2010
• Appeal Filed On: 26-07-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHOK KHANNA CIT
• Assessee Lawyers: S K MUKHI
• Keywords: Audit objection; Proportionate interest; Set aside
• Section: 147; 148; 144

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BE NCH B, CHANDIGARH (VIRTUAL COURT) .., ! '# .. , $ %& BEFORE: SHRI. N.K.SAINI, VP & SHRI , R.L. NEGI, JM ITA NO.1053/CHD/2019 ASSESSMENT YEAR : 2009-10 M/S VIKAS RICE AND GENERAL MILLS, CHEEKA, KAITHAL C/O SH O.P. ARORA 646/14, PROFESSOR COLONY, KAITHAL THE ITO WARD-4, KAITHAL PAN NO: AAEFV1242K APPELLANT RESPONDENT !' ASSESSEE BY : SHRI S.K. MUKHI, ADVOCATE #!' REVENUE BY : SHRI ASHOK KHANNA, ADDL. CIT $ %! & DATE OF HEARING : 09/09/2021 '()*! & DATE OF PRONOUNCEMENT : 20/09/2021 %'/ ORDER PER N.K. SAINI, VICE PRESIDENT THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DT. 13/05/2019 OF THE LD. CIT(A), KARNAL. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEA L: 1. THAT THE ORDERS OF LD. CIT(A) IS ILLEGAL, ERRON EOUS AND PERVERSE AND THUS NEEDS TO BE QUASHED. 2. THAT THE LD. CIT(A) IS NOT JUSTIFIED IN CONCURRI NG WITH THE FINDINGS OF A.O., REGARDING FRAMING OF ASSESSMENT U/S 148 R.W.S 144 O F INCOME TAX ACT, 1961 WITHOUT APPRECIATING THE FACT THAT THE AND ERRONEOUS SERVIC E OF NOTICE BY AFFIXATION AND WITHOUT APPRECIATING THE FACT THAT THE VERY NOTICE U/S 148 WAS ILLEGAL, ARBITRARY AND PERVERSE AND AGAINST WELL SETTLED LAW AND THUS DESERVE TO BE SET ASIDE IN THE INTEREST OF JUSTICE. 3. THAT WITHOUT PREJUDICE TO ABOVE, THE LD. CIT(A) IS NOT JUSTIFIED IN UPHOLDING THE ADDITION MADE BY THE LD. A.O., OF RS. 4,41,065/ - U/S 36(1)(III) OF THE INCOME TAX ACT, 1961 ON SUNDRY DEBTORS WHICH FINDING OF THE CI T(A) ARE ILLEGAL, ARBITRARY AND 2 PERVERSE AND AGAINST WELL SETTLED LAW AND THUS DESE RVE TO BE SET ASIDE IN THE INTEREST OF JUSTICE. 4. THAT WITHOUT PREJUDICE TO ABOVE, THE LD. CIT(A) IS NOT JUSTIFIED IN UPHOLDING THE ADDITION MADE BY THE LD. A.O., OF RS. 2,82,442/- ON ACCOUNT OF BARDANA LOSS WHICH FINDING OF THE CIT(A) ARE ILLEGAL, ARBITRARY AND PERVERSE AND AGAINST WELL SETTLED LAW AND THUS DESERVE TO BE SET ASIDE IN THE INTEREST OF JUSTICE. 5. THAT WITHOUT PREJUDICE TO ABOVE, THE APPELLANT A LSO DISPUTES THE QUANTUM OF ADDITION AS HIGHLY EXCESSIVE. 6. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR DELETE ANY OF THE GROUNDS OF APPEAL ON OR BEFORE THE DISPOSAL OF THE PRESENT APPEAL. 3. THE MAIN GRIEVANCE OF THE ASSESSEE VIDE GROUND N O. 3 RELATES TO THE SUSTENANCE OF ADDITION OF RS. 4,41,065/- MADE BY TH E A.O. UNDER SECTION 36(1)(III) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED T O AS ACT). 4. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSME NT IN THIS CASE WAS COMPLETED ON 22/11/2011 AT AN INCOME OF RS. 1,15,00 0/-. THEREAFTER PROCEEDINGS WERE INITIATED BY THE A.O. UNDER SECTIO N 147 R.W.S 148 OF THE ACT. THE A.O. DURING THE COURSE OF ASSESSMENT PROCEEDING S NOTICED THAT THE ASSESSEE HAD PAID INTEREST OF RS. 18,87,825/- TO THE SUNDRY CREDITORS, ON THE OTHER HAND NO INTEREST WAS CHARGED FROM THE SUNDRY DEBTORS AMOUNT ING TO RS. 1,55,28,019/-. SHE WORKED OUT THE PROPORTIONATE INTEREST TO RS. 4,41,0 65/- AND CONSIDERED THE SAME AS NOT PERMISSIBLE IN TERMS OF SECTION 36(1)(III) O F THE ACT. SHE MADE THE ADDITION OF THE SAID AMOUNT. SHE ALSO OBSERVED THAT THE ASSE SSEE CLAIMED BARDANA LOSS OF RS. 2,82,444/- WITHOUT FURNISHING ANY DOCUMENTAR Y EVIDENCE, IT WAS ALSO ADDED TO THE INCOME OF THE ASSESSEE. THE A.O. PASSE D THE ASSESSMENT ORDER EXPARTE UNDER SECTION 144 OF THE ACT ON 16/03/2015 BY MAKING THE AFORESAID ADDITIONS. 5. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND AS REGARDS TO THE ADDITION MADE ON ACCOUNT OF INTEREST U/S 36(1)(III) OF THE ACT, SUBMITTED AS UNDER: 3 'IN THE ASSESSMENT PROCEEDING BEFORE RESPECTED JCIT, K URUKSHETRA, THIS FACT WAS BARELY AND LENGTHLY DISCUSSED AND EXPLAINED WI TH ALL DOCUMENTS, COPY OF A/CS VICE-VERSA OF DEBTORS, WHO WERE RICE PU RCHASERS OF THE TRADE IN THE YEAR OF BIG-LOSS IT IS NOT POSSIBLE IN ANY CIRCUM STANCE TO COLLECT INTEREST WHEN THE PAYMENTS OF RICE ARE AT RISK. TO CHARGE THE INTEREST AS THEY ARE ONLY TRADERS WHO SEL LS AND PURCHASES RICE IN THE ROUTINE. THIS IS CUSTOM OF THE TRADE TO S ECURE THE BUSINESS PAYMENTS FOR THE EXISTENCE OF THE DEBTORS VICE-VERSA W ITH CONFIRMATION OF THE BOTH SIDE ARE ON THE RECORDS OF ASSESSMENT, DULY AFF IRMED BY IT. JCIT KURUKSHETRA AS A.O OF THE CASE. COPY OF ACCOUNTS ON T HE FILE AND SALES BILLS OF THE RICE TO THE TRADERS ARE ON THE FILE. PLEA SE SUMMONS THE RECORDS OF THE ASSESSEE OF THE SAID YEAR. WHEN THE PAYMENT OF GOO DS IS UNSECURE DUE TO BIG LOSSES IN THE TRADE, QUESTION OF CHARGE AND COLLECTION OF THE INTEREST DOES NOT ARISE. THIS FACT IS NOT APPLICABLE I N OUR CASE BUT THIS FACT IS COMMON TO ALL CASES OF THE SAME TRADE I.E. IN ALL CASE S. HENCE THIS IS ALSO ILLEGAL ON THE PART OF THE REVENUE TO MAKE ADDITION U/S 36 (I)(III). WHEN THERE VENUE IS NOT BRING ANY FACTS EVIDE NCE ON THE RECORDS FOR CHARGE OF INTEREST FROM SUNDRY DEBTORS. YOUR KIND INTENSION HAS BEEN INVITED TO SO MANY HON'BLE HIG H COURTS AND SUPREME COURTS RULINGS ARE IN THE FAVOUR OF THE ASSESS EE. HENCE THIS ADDITION MUST BE DELETED FOR THE END OF JUSTICE.' 5.1 HOWEVER, THE LD. CIT DID NOT FIND MERIT IN THE AFORESAID SUBMISSIONS OF THE ASSESSEE AND SUSTAINED THE ADDITION BY OBSERVING IN PARA 5.2 OF THE IMPUGNED ORDER AS UNDER: I HAVE EXAMINED THE FACTS OF THE CASE AND THE REPOR T OF THE ASSESSING OFFICER DATED 06.09.2018. IT IS CLEAR THAT THE ASSESSEE HAS BEEN UNABLE TO EXPLAIN COHERENTLY THE REASON FOR NON-CHARGING OF INTEREST FROM DEBTORS. MERELY BY STATING THAT 'BIG LOSSES IN TRADE' WAS THE REASON FOR NON-C HARGING OF INTEREST IS NOT A SATISFACTORY EXPLANATION. THERE HAS TO BE A COGNITI VE REASON FOR THE SAME. IN MY VIEW, THE DISALLOWANCE HAS BEEN RIGHTLY MADE AND I CONFIRM THE SAME. THIS GROUND OF APPEAL IS DISMISSED. 6. NOW THE ASSESSEE IS IN APPEAL. 7. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND IT WAS FURTHER SUBMITTED THAT IN SUCH TYPE OF CASES NO 4 INTEREST WAS CHARGED ON THE TRADING DEBTORS. IT WAS ALSO SUBMITTED THAT THE PURCHASER OF THE RICE FROM THE ASSESSEE WERE HAVING THE LOSS IN THIS YEAR SO IT WAS NOT POSSIBLE TO CHARGE INTEREST WHEN THE PAYMENTS W ERE AT RISK AND THAT THERE WAS NO SUCH AGREEMENT BETWEEN THE PURCHASERS AND TH E ASSESSEE TO CHARGE ANY INTEREST. THEREFORE THE ADDITION SUSTAINED BY T HE LD. CIT(A) WAS NOT JUSTIFIED. 8. IN HIS RIVAL SUBMISSIONS THE LD. DR STRONGLY SUP PORTED THE ORDERS OF THE AUTHORITIES BELOW. 9. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CA SE, NOTHING IS BROUGHT ON RECORD TO SUBSTANTIATE THAT THERE WAS ANY AGREEMENT BETWEEN THE ASSESSEE AND THE DEBTORS FOR CHARGING OF INTEREST ON THE TRA DE DEBITS WHICH WERE ON ACCOUNT OF PURCHASES OF THE RICE MADE FROM THE ASSE SSEE. IN THE PRESENT CASE, THE ASSESSEE FURNISHED THE COPIES OF THE ACCOUNTS F ROM THE DEBTORS IN THE SAID ACCOUNTS ALSO NO INTEREST WAS CHARGED AND MOREOVER THE A.O. HAD NOT ESTABLISHED ANY NEXUS BETWEEN THE INTEREST BEARING FUNDS WITH THE INTEREST FREE ADVANCES. ON THE CONTRARY THE DEBTORS WERE ON ACCOU NT OF PURCHASES MADE FROM THE ASSESSEE, THEREFORE, THE A.O. WAS NOT JUST IFIED IN INVOKING THE PROVISION OF SECTION 36(1)(III) OF THE ACT AND MAKING THE IMP UGNED ADDITION WHICH WAS WRONGLY SUSTAINED BY THE LD. CIT(A). IN THE ABSENCE OF ANY NEXUS PROVED BETWEEN THE INTEREST BEARING FUNDS AND THE DEBTORS THE IMPUGNED ADDITION DESERVES TO BE DELETED, ACCORDINGLY THE SAME IS DEL ETED. 10. THE NEXT GRIEVANCE OF THE ASSESSEE VIDE GROUND NO. 4 RELATES TO THE SUSTENANCE OF ADDITION OF RS. 2,82,442/- MADE BY TH E A.O. ON ACCOUNT OF LOSS IN BARDANA. 11. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE TH AT THE A.O. MADE THE ADDITION OF RS. 2,82,442/- WHICH WAS SHOWN BY THE ASSESSEE A S BARDANA LOSS. 5 12. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED AS UNDER: 'THE ADDITION OF BARDANA LOSSES OF RS 2,82,442/- IS TOTALLY ILLEGAL ASSESSED AS A INCOME AS THE BARDANA IS PACKING MATERIAL OF THE GO OD OF SALES AT THE COMMODITY PRICE AS RICE RS. 40/60 PER KG AND PURCHA SE PRICE/COAST COMES HIGH RS. 80 PER BAG. LOSS IN THE PACKING MATERIAL IN BAR DANA IS COMPULSORY AND TRADE PRACTICE IS ALSO UNAVOIDABLE. ALL THE FACTS ARE THO ROUGHLY DISCUSSED IN THE ASSESSMENT PROCEEDING AND ALL DOCUMENTARY PROOF/ON THE ASSESSMENT FILE RECORDS. IN ALL OTHER CASES PACKING MATERIAL OF BARDANA IS A LWAYS AS LOSABLE ITEM THAT IS ESTABLISHED FACT ON THE RECORDS OF ALL CASES. BOTH THE ADDITION ARE ILLEGAL AND LIKELY TO BE QUAS H FOR THE ENDS OF JUSTICE AS NO NOTICE WAS SERVED UPON THE ASSESSEE AND ALL THE FAC T WITH DOCUMENTARY EVIDENCE BOOKS OF ACCOUNTS PURCHASE BILL SALE PLACE D ON THE FILE IN THE ASSESSMENT PROCEEDING. CAN A JUDGMENT OF THE TRIBUNAL BECOME THE BASIS OF AUDIT OBJECTION AND RE- OPENING OF CASE U/S 147/148 ? THIS IS ALSO COMPLETE LY ILLEGAL ON THE PART OF REVENUE WHEN THE FACT OF OUR CASE IS DIFFERENT. SO YOUR HONOR WOULD BE KIND ENOUGH TO QUASH THESE I LLEGAL ADDITION ON THE BASIS OF FILMIZY GROUNDS OBLIGE.' 12.1 THE LD. CIT(A) ON THE AFORESAID SUBMISSION OF THE ASSESSEE ASKED THE REMAND REPORT OF THE A.O. IN RESPONSE THE A.O. SUBM ITTED THE REMAND REPORT WHICH READ AS UNDER: IN THE CONTEXT, IT IS SUBMITTED THAT DURING THE COU RSE OF ASSESSMENT PROCEEDINGS ADDITION ON ACCOUNT OF BARDANA LOSS AND 2,82,442/- WAS MADE TO THE TOTAL INCOME OF THE ASSESSEE. AS THE ASSESSEE COULD NOT EXPLAIN/JUSTIFY THE SAID LOSS FU RTHER, AS PER THE PURCHASE BILLS/SALE BILLS REGARDING BARDANA AS PRODUCED BY THE ASSESSEE DURIN G APPELLATE PROCEEDINGS IT IS SEEN THAT THE ASSESSEE HAS PURCHASED THE BARDANA ON HIGHER PRICE AND SOLD THE SAME ON THE LESSER PRICE WITHIN SAME PERIOD FOR THE REASON BEST TO KNOW TO HIM AS P ER THE DETAIL GIVEN BELOW:- FROM THE ABOVE IT CAN BE INFERRED THAT AS TO HOW A PRUDENCE BUSINESS MAN WILL BUY THE THINGS ON THE HIGHER PRICE AND SOLD TH E SAME ON THE LESSER PRICE WITHIN THE SAME PERIOD. FURTHER, BEFORE THE UNDERSI GNED DESPITE ALLOWING THE BARDANA PURCHASED BARDANA SOLD DATE & BILL NO. RATE(RS.) DATE & BILL NO. RATE(RS.) 22.10.2008/025985 27.40/- 10.10.2008/163 6.08/- 5.11.2008/1036 10.19/- 17.10.2008/ 10.60/- 6.11.2008/1038 10.19/- 8.11.2008161 6.00/- 26.11.2008/1128 25.74/- 21.11.2008/173 6.00/- 6 ASSESSEE AN OPPORTUNITY FOR EXPLAINING THE SAID LOS S, HE TOTALLY FAILED TO SUBMIT ANY EXPLANATION TO JUSTIFY HIS LOSS ON ACCOU NT OF BARDANA. MOREOVER, BOOKS OF ACCOUNTS AS REQUIRED HAVE NOT BEEN PRODUCE D DESPITE THE SERVICE OF LETTER THROUGH AFFIXTURE. FROM THE ABOVE COMMENTS AND THE APPELLANT'S REPLIES , IT IS CLEAR THAT THE LATTER HAS NOT BEEN ABLE TO REBUT THE A.O.'S LO GICAL REASONING ON THIS ACCOUNT. THE APPELLANT HAS GIVEN VAGUE EXPLANA TIONS ON THIS ISSUE WHICH ARE NOT SUBSTANTIATED BY EVIDENCE. THEREFORE, THE ADDITION DESERVES TO BE SUSTAINED AN D I CONFIRM THE SAME. 12.2 THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIO NS OF THE ASSESSEE AND THE REMAND REPORT OF THE A.O. SUSTAINED THE ADDITION BY OBSERVING THAT THE A.O. MADE THE LOGICAL REASONING. 13. NOW THE ASSESSEE IS IN APPEAL. 14. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT TH E ASSESSEE PURCHASED THE BARDANA WHICH WAS USED AND REUSED TO STORE THE RICE & PADDY, DUE TO FREQUENT USE THERE WERE BEAR AND TEAR, AS SUCH THE SALE PRIC E WAS LESS THAN THE PURCHASE PRICE AND THAT NO SUCH DISALLOWANCE WAS MADE IN EAR LIER YEARS. THEREFORE THE ADDITION MADE BY THE A.O. AND SUSTAINED BY THE LD. CIT(A) WAS NOT JUSTIFIED. 15. IN HIS RIVAL SUBMISSIONS THE LD. DR SUPPORTED T HE ORDERS OF THE AUTHORITIES BELOW. 16. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CA SE IT IS NOTICED THAT THE A.O. FRAMED THE ASSESSMENT EXPARTE AND THE ASSESSEE FURN ISHED THE DOCUMENTARY EVIDENCE IN THE FORM OF PURCHASE AND SALE BILLS OF BARDANA BEFORE THE LD. CIT(A). IN SUCH TYPE OF BUSINESS THE BARDANA IS USE D TO STORE GOODS LIKE PADDY, 7 RICE AND RICE BRAN ETC. AND AGAIN REUSED, THE VALUE OF BARADANA DETERIORATE WITH PASSAGE OF TIME AND THERE IS ALSO BEAR AND TEA R, THEREFORE, THE PURCHASE PRICE AND THE SALE PRICE OF BARDANA CANNOT BE THE S AME. MOREOVER NOTHING IS BROUGHT ON RECORD THAT HE ASSESSEE INFLATED THE PUR CHASES OR SUPPRESSED THE SALES, THEREFORE, THE ADDITION MADE BY THE A.O. AND SUSTAINED BY THE LD. CIT(A) ON ACCOUNT OF LOSS IN BARDANA WAS NOT JUSTIFIED, AC CORDINGLY THE SAME IS DELETED. 17. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. (ORDER PRONOUNCED IN THE OPEN COURT ON 20/09/2021) SD/- SD/- .. .., (R.L. NEGI ) ( N.K. SAIN I) $ %&/ JUDICIAL MEMBER ! / VICE PRESIDENT AG DATE: 20/09/2021 (+! ,-.- COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. $ / CIT 4. $ / 01 THE CIT(A) 5. -2 45&456789 DR, ITAT, CHANDIGARH 6. 8:% GUARD FILE (+ $ BY ORDER, ; # ASSISTANT REGISTRAR