ACIT, CIR-2, BURDWAN, Kolkata V. M/s Raj Laxmi Rice Mill Pvt. Ltd., Burdwan

ITA 1073/KOL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0976 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 04-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SOUMITRA CHOW DHURY
• Section: 133(6)

Judgement Text

1 ITA NO.1073/KOL/2015 RAJ LAXMI RICE MILL PVT. LTD., AY, 2010-11 , A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA ( ) . . , . ' # $% % , '( ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A. NO. 1073/KOL/2015 ASSESSMENT YEAR: 2010-11 ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-2, BURDWAN VS. M/S. RAJ LAXMI RICE MILL PVT. LTD. (PAN:AACCR5811P) APPELLANT RESPONDENT DATE OF HEARING 21.09.2017 DATE OF PRONOUNCEMENT 17.11.2017 FOR THE APPELLANT SHRI SALLONG YADEN, ADDL. CIT FOR THE RESPONDENT SHRI SOUMITRA CHOWDHURY, ADVOCAT E ORDER PER SHRI A.T.VARKEY, JM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A)-BURDWAN DATED 26.05.2015 FOR AY 2010-11. 2. THE SOLE GRIEVANCE OF THE REVENUE IS AGAINST THE ACTION OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS.54,92,434/- MADE BY AO U/S. 69B OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S INTO BUSINESS OF RICE MILLING AND HAD FILED E-RETURN OF INCOME ON 27.09.2010 DECLARING A TOTAL INCOME OF RS.13,50,523/-. LATER ON, THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COU RSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE MAINTAINED A CASH CREDIT LO AN ACCOUNT WITH SBI, BURDWAN MAIN BRANCH. THE AO ISSUED NOTICE U/S. 133(6) OF THE AC T TO THE BANK MANAGER ASKING FOR COPIES OF THE STATEMENT OF ASSETS HYPOTHECATED AGAINST CAS H CREDIT LOAN BY THE ASSESSEE. IN RESPONSE, THE CHIEF MANAGER, SBI FURNISHED THE COPI ES OF THE STATEMENT OF ASSETS HYPOTHECATED AGAINST THE CASH CREDIT LOAN SUBMITTED BY THE ASSESSEE WITH THE BANK FOR THE PERIOD FROM APRIL, 2009 TO 31.03.2010 AND IT WAS NO TICED BY THE AO FROM THE SAID 2 ITA NO.1073/KOL/2015 RAJ LAXMI RICE MILL PVT. LTD., AY, 2010-11 DOCUMENTS THAT STOCK POSITION AS ON 31.03.2010 HAS BEEN VALUED AT RS.96,53,000/- AGAINST CLOSING STOCK VALUED AT RS.41,60,866/- AS ON 31.03. 2010 AS SHOWN BY THE ASSESSEE IN THE BALANCE SHEET FOR THE YEAR. THUS, THE AO OBSERVED THAT THE ASSESSEE HAS UNDERVALUED THE CLOSING STOCK FOR COMPUTATION OF LOW PROFIT FOR THE PURPOSE OF REDUCING THE TAX BURDEN. THEREAFTER, THE AO ISSUED SHOW CAUSE NOTICE AS TO W HY THE UNDISCLOSED CLOSING STOCK OF RS.54,92,434/- SHOULD NOT BE ADDED TO THE TOTAL INC OME. THE ASSESSEE COMPANY REPLIED TO THE SAID SHOW CAUSE NOTICE THAT THE STOCK OF PADDY, PADDY WORK IN PROGRESS AND RICE BRAN WAS INFLATED IN THE BANK STATEMENT ONLY FOR SECURIN G HIGH CASH CREDIT AND THAT THE CLOSING STOCK SHOWN TO THE BANK WAS INFLATED AND THE ASSESS EE COMPANY REFERRED TO EIGHT CASE LAWS OF HONBLE HIGH COURTS OF MADRAS, RAJASTHAN, JAMMU & KASHMIR, ALLAHABAD ETC. TO THE NOTICE OF THE AO AND CONTENDED THAT IN THE LIGHT OF THE PLETHORA OF DECISIONS CITED THE ASSESSEES EXPLANATION MAY BE CONSIDERED AND NO ADD ITION BE MADE ON THIS SCORE. HOWEVER, THE AO DID NOT AGREE WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND REFERRED TO THE DECISION OF P&H HIGH COURT IN THE CASE OF B. T. STEELS LTD. VS. CIT (2010) 328 ITR 471 (P&H) AND KARNATAKA HIGH COURT DECISION IN THE CASE OF RECON MACHINE TOOLS PVT. LTD. VS. CIT 286 ITR 637 TO REPELL THE CONTENTION OF THE ASSESSEE CO MPANY AND MADE THE ADDITION OF RS.54,92,434/- AS UNDISCLOSED INVESTMENT U/S. 69B O F THE ACT. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO WAS PLEASED TO DELETE THE ADDITION. AGGRIEVED, THE REVENUE IS BEFORE US. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND CAREFULLY PE RUSED THE MATERIAL AVAILABLE ON RECORD. WE NOTE THAT THE ASSESSEE COMPANY IS DOING THE BUSINESS OF RICE MILLING. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ASKED FROM , THE SBI, BURDWAN FOR THE STATEMENT OF ASSETS HYPOTHECATED AGAINST CASH CREDIT LOAN BY THE ASSESSEE AND RECEIVED IT FROM THE SBI. WHEN HE COMPARED IT WITH THE ASSESSEES BALANCE SHE ET PRODUCED AS ON 31.03.2000 BEFORE HIM, FOUND THAT THERE WAS A DIFFERENCE OF CLOSING S TOCK OF RS.54,92,434/-. WHEN CONFRONTED, THE ASSESSEE COMPANY STATED THAT IN ORDER TO SECURE HIGHER CASH CREDIT, THE ASSESSEE HAS SHOWN ITS STOCK OF PADDY, PADDY WORK-IN-PROGRESS AN D RICE BRAN AT AN INFLATED AMOUNT AND RELIED ON THE DECISION OF VARIOUS HIGH COURTS WHERE IN IN SIMILAR CASES, THE EXPLANATION OF THE ASSESSEE TO SHOW INFLATED STOCK TO AVAIL HIGHER CASH CREDIT HAS BEEN ACCEPTED UNLESS THE 3 ITA NO.1073/KOL/2015 RAJ LAXMI RICE MILL PVT. LTD., AY, 2010-11 BANK HAD PHYSICALLY VERIFIED THE STOCK AND CERTIFIE D IT. WE NOTE THAT THE AO HAS RELIED ON THE DECISION OF HONBLE P&H HIGH COURT IN THE CASE OF B. T. STEELS LTD., (SUPRA) WHICH IS NOT APPLICABLE TO THE ASSESSEES CASE BECAUSE IN TH AT CASE THE TRIBUNAL HELD THAT THE AO NOT ONLY HAD THE BANK STATEMENT BEFORE HIM BUT ALSO THE VERIFICATION THEREOF BY THE REGIONAL OFFICER THAT THE STOCK WAS ACTUALLY LYING WITH THE ASSESSEE. IN THE PRESENT CASE IN HAND, THERE IS NO SUCH PHYSICAL VERIFICATION BY THE BANK THAT T HE HYPOTHECATED ASSETS HAVE BEEN PHYSICALLY VERIFIED. THE AO HAS NOT FOUND ANY MIST AKES IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. THE ASSESSEES SALES ARE SUBJECT TO VAT AND AS PER VAT RETURN, THE QUANTUM OF SALES IS TALLIED WITH THE SALES FOUND RE CORDED IN THE SALES DETAILS AND BOOKS OF ACCOUNT. THE OPENING STOCK AS PER AUDITED BOOKS OF ACCOUNT HAS NOT BEEN FOUND TO BE INCORRECT BY THE AO. THE AO HAS NOT FOUND ANY DISC REPANCY BETWEEN THE VALUE OF PURCHASE AND SALES SHOWN BY THE ASSESSEE IN THE BOOKS OF ACC OUNT. FURTHER, WE NOTE THAT THE ASSESSEES BUSINESS ARE MONITORED BY DISTRICT CONTR OLLER, FOOD & SUPPLIES DEPARTMENT, BURDWAN WHICH IS UNDER THE GOVT. OF WEST BENGAL SIN CE THE PADDY IS A CONTROLLED ITEM. THE OFFICERS OF FOOD & SUPPLIES DEPTT., ARE EMPOWERED T O SUPERVISE, CONTROL, MONITOR THE CONSUMPTION OF THE PADDY, PRODUCTION OF RICE, MOVEM ENT AND STOCK OF RICE SINCE IT IS AN ESSENTIAL COMMODITY UNDER THE ESSENTIAL COMMODITIES ACT. THE LD. CIT(A) HAS TAKEN NOTE OF THE FACT THAT THE DISTRICT CONTROLLER, FOOD & SU PPLIES DEPTT., BURDWAN HAD ATTESTED INTER ALIA, THE STOCK OF RICE AT RS.41,60,866/- WHICH TAL LIES WITH THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE LD. CIT(A) HAS TAKEN NOTE OF THE DEC ISIONS OF HONBLE MADRAS HIGH COURT IN CIT VS. APCOM COMPUTERS PVT. LTD. 292 ITR 630 (MAD) , HONBLE ALLAHABAD HIGH COURT IN CIT VS. KHAN & SIROHI STEEL ROLLING MILLS (2006) 15 2 TAXMAN 224 (ALL) AND HONBLE BOMBAY HIGH COURT DECISION IN CIT VS. ACRO INDIA LT D. 298 ITR 447 (MUM) AND THE COORDINATE BENCH DECISION OF TRIBUNAL, COCHIN BENCH IN THE CASE OF ACIT VS. MANGLAM PUBLICATION (2010) 190 TAXMAN (MAG.) 1 (ITAT COCHIN ) TO ACCEPT THE EXPLANATION RENDERED BY THE ASSESSEE COMPANY FOR THE DIFFERENCE IN STOCK POSITION BETWEEN THE STATEMENT GIVEN TO THE BANK AS WELL AND THAT GIVEN IN THE BALANCE SHEE T. WE NOTE THAT WHEN THERE ARE CONFLICTING DECISIONS OF VARIOUS HIGH COURTS AND WH EN THERE IS NO JURISDICTIONAL HIGH COURTS DECISION ON THE ISSUE, THEN THE DECISION FA VOURABLE FOR THE ASSESSEE NEEDS TO BE TAKEN AS PER THE DECISION OF THE HONBLE APEX COURT DECIS ION IN THE CASE OF CIT VS. VEGETABLE 4 ITA NO.1073/KOL/2015 RAJ LAXMI RICE MILL PVT. LTD., AY, 2010-11 PRODUCTS LTD. (1973) 88 ITR 192 (SC). THEREFORE, W E DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND WE UPHOLD THE SAME. APPEAL OF REVENUE IS, THEREFORE, DISMISSED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 17TH N OVEMBER, 2017 SD/- SD/- (DR. A. L. SAINI) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 17TH NOVEMBER, 2017 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1. APPELLANT ACIT, CIRCLE-2, BURDWAN 2 RESPONDENT M/S. RAJ LAXMI RICE MILL PVT. LTD., VILL & P.O-JABUI, DIST. BURDWAN, PIN-713422 3. THE CIT(A), BURDWAN 4. 5. CIT , BURDWAN DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, SR. PVT. SECRETARY