The Dy. Commissioner of Income Tax, Amritsar. V. M/s Mahant Overseas, Amritsar.

ITA 111/ASR/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5585 (ITAT-AMRITSAR)
• Duration Of Justice: 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 27-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR BEFORE SH.T.S. KAPOOR, ACCOUNTANT MEMBER AND SH.N.K.CHOUDHRY, JUDICIAL MEMBER I.T.A NO.111(ASR)/2017 ASSESSMENT YEAR: 2013-14 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3, AMRITSAR. VS. M/S. MAHANT OVERSEAS, TARN TARAN RAOD, O/S. CHATIWIND GATE, AMRITSAR. PAN:AAFFM-0375H (APPELLANT) (RESPONDENT) APPELLANT BY: SH. RAHUL DHAWAN (DR.) RESPONDENT BY: SH. SATISH BANSAL (CA). DATE OF HEARING: 15.05.2017 DATE OF PRONOUNCEMENT:14.07.2 017 ORDER PER T. S. KAPOOR (AM): THIS IS AN APPEAL FILED BY REVENUE AGAINST THE ORDE R OF LD. CIT(A)-1, AMRITSAR DATED 30.11.2016, FOR ASST. YEAR: 2013-14. 2. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD CIT(A)-I, AMRITSAR HAS ERRED IN DELETING THE TRADING ADDITION OF RS.42,41,1 00/- MADE BY THE AO BY REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE U/S 145(3) OF THE ACT. 2. WHILE DELETING THE TRADING ADDITION, THE LD CIT (A) HAS NOT APPRECIATED THE FINDINGS OF THE AO CONTAINED IN THE ASSESSMENT ORDER IN SUPPORT OF THE TRADING ADDITION. 3. THE ORDER OF LD. CIT(A) IS SILENT UPON THE POIN T RAISED BY THE AO THAT THE ASSESSEE HAS NOT COME UP WITH ANY DAY TO DAY PRODUC TION RECORD WHICH GIVES CLEAR CUT CATEGORIZATION OR CLASSIFICATION OF INFERIOR QU ALITY OF RICE PRODUCED FROM THE MILLING OF THE INFERIOR QUALITIES OF BASMATI. IN THESE CIRC UMSTANCES AT A GIVEN DAY ACTUAL PRICES OF RICE QUALITY WISE COULD NOT BE ASCERTAINE D. 3. THE BRIEF FACTS AS NOTED IN THE ASSESSMENT O RDER ARE THAT THE ASSESSEE IS A FIRM DERIVING INCOME FROM MANUFACTURI NG AND TRADING OF RICE. ITA NO.1 11(ASR)/2014 ASST. YEAR: 2013-14 2 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER OBSERVED THAT THE SALE OF ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAS INCREASED BUT GROSS PROFIT HAD FALLEN DOWN AS COMPA RED TO PRECEDING YEAR AND THEREFORE, THE ASSESSEE WAS SHOW CAUSED TO EXPL AIN THE SAME. IN RESPONSE TO THE ABOVE QUERIES, THE LD. AR OF TH E ASSESSEE APPEARED AND FILED REPLY DATED 10.12.2015 & 15.01.2 016 WHEREIN THE ASSESSEE FILED DETAILS REGARDING OPENING STOCK, PUR CHASES, MILLING, PURCHASE OF RAW MATERIAL AND PRODUCTION OF FINISHED PRODUCTS. THE ASSESSING OFFICER, THEREAFTER, RECORDED VARIOUS DIS CREPANCIES AND BY NOTING DOWN DISCREPANCIES, HE CALCULATED THE SUPPRESSION I N GROSS PROFIT AND MADE AN ADDITION OF RS.42,41,100/- AFTER REJECTING THE BOOKS OF ACCOUNT. 4. AGGRIEVED WITH THE ORDER, THE ASSESSEE FILED APP EAL BEFORE LD. CIT(A), AND THE LD. CIT(A) DELETED THE ADDITION BY HOLDING AS UNDER: 6. I HAVE GONE THROUGH THE GROUNDS OF APPEAL, SUBM ISSION & THE ASSESSMENT ORDER. GROUND 1 TO 3: THE AO HAS REJECTED THE BOOKS OF ACCOUNTS ON THE VA RIOUS ISSUES WHICH HAVE BEEN DISCUSSED AT LENGTH IN THE ASSESSME NT ORDER. THE AO HAS POINTED OUT THAT THE SALE HAS INCREASED BUT GP HAS FALLEN. THE INCREASE IN SALE FROM RS.65,12,21,761/- TO RS.81,27,65,009/- IT SELF EXPLAINS THE REASON FOR FALL IN GP. FURTHER THE RICE SHELLING IS A SEASONAL INDUSTRY AND THE ENTIRE PRICES ARE DETERMINED BY MARKET FORCE AS WELL AS THE QUALITY OF RICE MANUFACTURED. THE AO HAS CHALLENGED THE DOMEST IC SALE OF BROKEN RICE DURING THE YEAR. IT IS A FACT THAT THE BROKEN RICE IS SOLD AT A MUCH LOWER PRICE THAN THAT OF HEAD RICE. MONGRA, DOBAR KANI AR E THE INFERIOR QUALITY WITH RESPECT TO HEAD RICE. THERE IS NO CONFUSION AS TO THIS ASPECT OF RICE INDUSTRY. IT SEEMS AO HAS NOT UNDERSTOOD THE BASIC CONCEPTS OF RICE INDUSTRY. THE SALE BILLS HAVE BEEN PRODUCED BY THE ASSESSEE. IT IS A SETTLED LAW THAT ONUS IS UPON HE WHO ALLEGES. IT WILL BE TH E ONUS OF THE AO IN CASE HE WANT TO DISPUTE THE EVIDENCE OR DISBELIEVE THE S AME, TO BRING MATERIAL IN SUPPORT THEREON. A PERUSAL OF RECORD SHOWS THAT THI S IS A CASE WHERE THERE IS ABSOLUTELY NO MATERIAL WHATSOEVER WITH THE AO TO SUPPORT HIS DOUBTS. IT IS A SETTLED LAW THAT SUSPICION/DOUBT HOWSOEVER STR ONG CANNOT TAKE THE PLACE OF LEGAL PROOF AS HAS BEEN HELD BY THE SUPREM E COURT IN THE CASE OF ITA NO.1 11(ASR)/2014 ASST. YEAR: 2013-14 3 UMA CHARAN SAW 6 B ORS VS. CIT 37 ITR 271. FURTHER WHILE CALCULATING THE RATE OF DOMESTIC SALE THE AO HAS NOT CONSIDERED THE FIGURES FOR 16.06.2012 TO 30.06.2012 & 01.08.2012 TO 15.08.2012 FOR THE RE ASONS BEST KNOWN TO HIM. IN CASE SAID PERIOD IS TAKEN THEN THE AVERAGE RATE WILL COME TO RS.2058 INSTEAD OF RS.1706 AS CALCULATED BY THE AO. THE APPELLANT HAD EXPLAINED THAT 79% OF GOOD QUALITY RICE PRODUCED HA D BEEN EXPORTED AND BALANCE 21% HAD BEEN SOLD IN DOMESTIC MARKET. THE A O HAD CONSIDERED ONLY THE SALE OF ONE QUARTER AND EXCLUDING 2 FORTNI GHTS WHICH WAS A LEAN PERIOD AND IGNORED THE OTHER QUARTERS 8B THE EXPORT SALE. HE HAS DECIDED THE TOTAL ISSUE BY CIRCLING AROUND AND PICKED UP ON E INCOMPLETE QUARTER WHICH CONSTITUTED ONLY 3.97% OF THE TOTAL SALE. THE APPELLANT HAS FILED THE STOCK TALLY OF PADDY AS WELL OF BY PRODUCTS. THE RICE OTHER THAT THE GOOD QUALITY RICE FOR EXPOR T ARE SOLD UNDER DIFFERENT NOMENCLATURE AT A LESSER RATE THAN THE FU LL GRAIN RICE. THE PERIOD OF THE SALE PICKED UP BY THE AO IS NOT THE BEST SEA SONAL PERIOD RATE WISE. THE ANNUAL AVERAGE SALE RATE OF RICE EXPORT IS RS.5 047/- AND FOR DOMESTIC SALE IT IS RS.2836/-. HENCE THE ANNUAL AVERAGE SALE RATE OF RICE FOR EXPORT IS RS.4415/-. THE AO HAS ACCEPTED THE SALE RATE OF 96% OF TOTAL SALES. NO EVIDENCE HAS BEEN BROUGHT ON RECORD TO PROVE THAT T HE ASSESSEE HAD SOLD THE PRODUCT AT THE LESSER RATE THAN THE RATE PREVAI LING IN MARKET. THE MENTIONING OF INPUT CREDIT OF CST IS ALSO A WRONG P RESUMPTION, BECAUSE THERE IS NO PROVISION OF CLAIM OF INPUT CREDIT OF C ST FOR THIS INDUSTRY. THE PERIOD CHOSEN BY THE AO IS THE PERIOD BEFORE TH E START OF THE SEASON IN WHICH THE SHELLER SELL THEIR STOCK TO MAK E SPACE FOR THE NEW ARRIVAL. AT P9 SR. NO. 14 THE COUNSEL FOR THE APPEL LANT SUBMITTED AS UNDER: HE HAS CONSIDERED THE SALE OF RICE OF QUARTER 01 .06.2012 TO 30.09.2012 AS A DISTRESS SALE AND ENHANCED THE OTHER SALE TO 3. 65 CRORES FROM 3.225 CR, WITHOUT GIVING ANY JUSTIFICATION OR COMPARISON OF O THER CASES TO SUPPORT THE ADDITION. THE ID. A.O. HAS WRONGLY CALCULATED THE AM OUNT OF SALE AT RS. 32258903/- INSTEAD OF CORRECT TOTAL AT RS. 36578863/ -. THE TOTAL OF QUANTITY IS CORRECT. THUS THE TOTAL AVERAGE COMES TO 1934 IN STEAD OF 1930 CALCULATED & ADOPTED FOR THE ADDITION BY THE LD. AO. IT IS CLEAR FROM ABOVE THAT THERE IS A MISTAKE IN C ALCULATING THE AVERAGE RATE OF RS.1706/- OF THE FORTNIGHT BY THE A O AGAINST WHICH HE HAD ADOPTED THE RATE OF RS.1930/- PER QUINTAL. THE CORR ECT TOTAL OF SALE OF THIS PERIOD IS RS.36578863/- WHICH GIVE AVERAGE SALE RAT E OF (36578863/18909) AGAINST THE AVERAGE SALE RATE ADOPTED BY AO AT RS.1 930. THE WHOLE EFFORT DONE BY THE AO IS MEANINGLESS AS T HE ASSESSEES RESULTS ARE BETTER THAN THE RESULTS DETERMINED BY T HE AO EVEN FOR THE PERIOD SELECTED BY HIM. IT IS DIFFICULT TO COMPREHE ND HOW THE AO MADE THE MISTAKE OF CALCULATION OF THE AVERAGE SALE RATE OF RS.1706/- AS 71% OF SALE OUT OF THESE TRANSACTIONS WERE AT A MUCH HIGHER RAT E THAN THE AVERAGE RATE CALCULATED BY HIM. HE REJECTED BOOKS OF ACCOUNTS AN D MADE ADDITION ONLY BE CONSIDERING 3.79% OF THE TOTAL TRANSACTIONS OF S ALE, WHILE REST OF THE TRANSACTIONS HAVE BEEN ACCEPTED BY HIM. THUS, THE A CTION OF THE AO IN REJECTING THE BOOKS OF ACCOUNTS IS INVALID AND ACCO RDINGLY THE GROUNDS OF APPEAL OF ASSESSEE I.E. GROUND NO.1,2&3 ARE ALLOWED . ITA NO.1 11(ASR)/2014 ASST. YEAR: 2013-14 4 5. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US. 6. AT THE OUTSET, THE LD. DR SUBMITTED THAT THE ASS ESSEE HAD NOT MAINTAINED DAY TO DAY PRODUCTION RECORDS WHICH COUL D GIVE CATEGORIZATION OR CLASSIFICATION OF INFERIOR QUALITIES OF RICE PRO DUCED FROM THE MILLING. HE FURTHER ARGUED THAT THE LD. CIT(A) HAS NOT APPRECIA TED THE FINDINGS OF THE ASSESSING OFFICER CONTAINED IN ASSESSMENT ORDER IN SUPPORT OF THE TRADING ADDITION AND THEREFORE, IT WAS PRAYED THAT THE ORDE R OF ASSESSING OFFICER BE UPHELD. 7. ON THE OTHER HAND, THE LD. AR SUBMITTED THAT ASS ESSING OFFICER HAD SELECTED THE LEAN PERIOD WHICH CONSTITUTED ONLY 3.9 7% OF THE TOTAL SALES AND HAS ADOPTED THE AVERAGE SALE RATE OF RS.1930 PE R QUINTAL AND TREATED THE SALE OF THIS PERIOD AS DISTRESS SALE AND MADE THE ADDITION WITH THE AMOUNT OF DIFFERENCE IN SALE FIGURE. THE LD. AR SUB MITTED THAT ALL THE PRODUCTS WERE SOLD TO THE PARTIES FROM WHOM PAYMENT S WERE RECEIVED THROUGH BANKING CHANNEL AND ASSESSING OFFICER DID N OT FIND ANY WRONG IN THE BOOKS OF ACCOUNTS. THE LD. AR SUBMITTED THAT AS SESSING OFFICER HAD ENHANCED THE TURN OVER OF THE ASSESSEE FROM 3.225 C RORES TO 3.65 CRORES. THE LD. AR FURTHER SUBMITTED THAT EACH OF THE OBJEC TIONS NOTED BY ASSESSING OFFICER WERE REPLIED BEFORE THE LD. CIT(A ) AND LD. CIT(A) AT PAGE 12 HAS NOTED THE OBJECTIONS OF ASSESSING OFFICER AL ONG WITH REMARKS OF ASSESSEE AND THEREFORE, IT WAS SUBMITTED THAT THE L D. CIT(A) HAS PASSED WELL REASONED AND SPEAKING ORDER. ITA NO.1 11(ASR)/2014 ASST. YEAR: 2013-14 5 8. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH ROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT LD. CIT(A) HAS MADE A FINDING OF FACT THAT RICE SHELLING IS A SEASONAL INDUSTRY AND THE ENTIRE PRICES ARE DETERMINED BY MARKET FORCES AS WELL AS THE QUALITY OF RICE MANUFA CTURED. HE HAS HELD THAT PRICE OF BROKEN RICE FOR WHICH THE ASSESSING OFFICE R HAD MADE ADDITION IS MUCH LOWER THAN THAT OF FULL HEAD RICE. THE CIT(A) HAS HELD THAT WHILE CALCULATING THE RATE OF DOMESTIC SALE THE AO HAD NO T CONSIDERED THE FIGURES FOR 16.6.2012 TO 30.06.2012 & 1.8.2012 TO 15.08.201 2 AND IN CASE HE HAD CONSIDERED THE RATES FOR THESE PERIODS ALSO THE AVE RAGE RATE WOULD HAVE CAME TO RS.2058 INSTEAD OF RS.1706 AS CALCULATED BY THE AO. WE FIND THAT LD. CIT(A) HAS RECORDED COMPLETE FACTS WHICH HAS BE EN REPRODUCED EARLIER IN THIS ORDER. THE LD. CIT(A) HAS VERY ELABORATELY EXPLAINED THE FACTS IN WHICH WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD. CIT(A). 9. IN VIEW OF THE ABOVE, THE APPEAL FILED BY THE RE VENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.07.2017 . SD/- SD/- (N.K.CHOUDHRY ) (T. S. KAPOO R) JUDICIAL MEMBER ACC OUNTANT MEMBER DATED:14.07.2017. /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER