M/s Shree Balaji Industires, Khanna V. Income Tax Officer, Khanna

ITA 1226/CHANDI/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8411 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 28-12-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 25-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Corroborative evidences
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA NO. 1226/CHD/2016 ASSESSMENT YEAR: 2011-12 M/S SHREE BALAJI INDUSTRIES, VS THE ITO, VILLAGE LALHERI, WARD-IV, KHANNA. KHANNA. PAN: ABLFS1859B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUDHIR SEHGA L RESPONDENT BY : SHRI S.K.MITTAL, DR DATE OF HEARING : 28.12.2016 DATE OF PRONOUNCEMENT : 03.01.2017 O R D E R THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS)-2 LUDHIANA DATED 03.06.2016 FOR ASSESSMENT YEAR 2011-12 ON THE FOLLO WING GROUNDS : I THAT THE WORTHY COMMISSIONER OF INCOME TAX (A) HAS ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN ASS ESSING THE INCOME AT RS. 4,30,223/- AGAINST THE INCOME OF RS. 3 0,580/- RETURNED BY THE ASSESSEE. 2. THAT THE WORTHY CIT (A) HAS FURTHER ERRED IN UPHOLDING THE ADDITION OF RS. 3,99,643/- MADE BY THE ASSESSING OFFICER IN THE RETURNED INCOME BY ADOPTING SALES RATE OF RICE FLOUR AT RS. 985/- PER QUINTAL FROM THE MONTH OF APRIL 2010 TO S EPTEMBER 2010/ IN RESPECT OF 5400.59 QUINTAL OF RICE FLOUR AGA INST THE RATES OF RS. 911/- PER QUINTAL, AS SHOWN BY THE ASS ESSEE. 2 3 THAT THE WORTHY CIT (A) HAS ERRED IN NOT CONS IDERING THAT THE ADDITION OF RS. 3,99,643/- IN THE TRADING RESULTS H AS BEEN MADE BY THE ASSESSING OFFICER ON PRESUMPTION AND GUES S WORK WITHOUT FINDING OR PIN POINTING ANY DISCREPANCY IN THE R EGULAR MAINTAINED BOOKS OF ACCOUNT AND WITHOUT REJECTING TH E BOOKS OF ACCOUNTS U/S 145 (3) OF THE INCOME TAX ACT. 4. THAT THE ADDITION HAS BEEN SUSTAINED BY THE WORTHY CIT (A) AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. THAT THE SUBMISSIONS FILED DURING THE COURSE O F HEARING BEFORE THE ASSESSING OFFICER AND WORTHY CIT(A) HAS NOT BEEN CONSIDERED PROPERLY. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS IN THE BUSINESS OF FLOUR AND RICE NAKKU AND TRADING OF PAD DY, HUSK ETC. DURING THE YEAR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED TRADING RESULTS OF ASSESSMENT YEAR UNDER APPEAL AS WELL AS PRECEDING ASSESSMENT YEARS. THE ASSESSEE WAS AS KED TO EXPLAIN THE REASONS FOR DECLINE IN TURNOVER AND NP RATE AND AMOUNT OF NET PROFIT DURING THE YEAR AS COMPARED TO EARLIER YEARS. THE ASSESSEE WAS ALSO A SKED TO JUSTIFY ITEM-WISE SALE RATES AND VALUATION OF CL OSING STOCK WITH SUPPORTING EVIDENCE. NO SATISFACTORY EXPLANATION OR SUPPORTING DOCUMENTS WERE OFFERED BY THE ASSESSEE. THE ASSESSING OFFICER NOTED CERTAIN IRREGULARITIES IN PARA 3 OF THE ASSESSMENT ORDER. FURTHER, THE ASSESSING OFFICER, AFTER DETAILED EXAMINATION OF TRADING RESULTS MADE DISALLOWANCE OF RS. 3,99,643/- ON ACCOUNT OF VALUATION OF STOCK. THE ASSESSING OFFICER HAS OBSERVED THAT WHILE EXAMINING THE TRADING RESULTS, IT WAS OBSERVED THAT OPENING STOCK OF RICE FLOUR HAS BEEN VALUED @ RS. 1150/- PER QUINTAL AND 3 CLOSING STOCK HAS BEEN VALUED @ RS. 1400/- PER QUIN TAL. THUS, AVERAGE COST OR MARKET RATE, WHICHEVER IS LES SER OF RICE FLOUR WAS RS. 1275/- PER QUINTAL BUT THE ASSES SEE HAS MADE SALES AT THE AVERAGE RATE OF RS. 911/- PER QUINTAL. THE ASSESSEE WAS ASKED TO JUSTIFY AS TO W HY SALES HAVE BEEN MADE AT THE BELOW COST OF MARKET RA TE. FURTHER, IT WAS NOTICED THAT RICE NAKKU HAS BEEN PURCHASED BY THE ASSESSEE AT THE AVERAGE RATE OF RS . 938/- BUT AFTER GRINDING IT, FLOUR RICE HAS BEEN SO LD AT THE AVERAGE RATE OF RS. 911/-. BESIDES, IT WAS NOT ICED THAT RICE NAKKU HAS BEEN PURCHASED AT AVERAGE RATE OF RS. 938/- PER QUINTAL BUT 1952.70 QUINTAL OF RICE N AKKU HAS BEEN SOLD AT THE AVERAGE RATE OF RS. 857.62 PER QUINTAL. IN VIEW OF THIS, THE ASSESSEE WAS ASKED T O JUSTIFY THE SALES AT LESS THAN COST PRICE WITH COMP LETE EVIDENCE. THE ASSESSEE EXPLAINED THAT IT IS MANUFAC TURER OF RICE FLOUR FROM RICE NAKKU AND AVERAGE PRICE PER QUINTAL OF RICE NAKKU IN THE HANDS OF THE ASSESSEE WAS RS. 879.475. IT IS, THEREFORE, CLEAR THAT AVERAGE PRICE PER QUINTAL OF RICE NAKKU IN THE HANDS OF THE ASSES SEE WAS RS. 879.47. ON THE OTHER HAND, RICE FLOUR HAS BEEN SOLD AT AVERAGE SALE PRICE OF RS. 911/- PER QUINTAL . BESIDES, THE LAW DOES NOT FORCE TO ASSESSEE TO MAKE SALES EITHER AT AVERAGE COST OR MARKET RATE, WHICHE VER IS LESS. THE ASSESSEE HAS MADE THE SALES AT THE RATE PREVAILING IN THE MARKET AT THE TIME OF SALES. THE ASSESSING OFFICER, HOWEVER, DID NOT ACCEPT CONTENTI ON OF 4 THE ASSESSEE AND NOTED THAT ASSESSEE HAS NOT CORREC TLY SHOWN SALES RATE OF RICE FLOUR DURING THE YEAR AND MADE UNDER-BILLING. THEREFORE, IT WAS HELD THAT ASSESSE E HAD UNDERSTATED/SUPPRESSED SALE RATE OF RICE FLOUR. TH E ASSESSING OFFICER, THEREFORE, BY ADOPTING SALE OF R ICE FLOUR AT RS. 985/- PER QUINTAL, SALES RATE OF THE A SSESSEE ENHANCED TO (RS. 985/-RS. 911/-) RS. 74/- PER QUINT AL AND MADE THE ADDITION OF RS. 3,99,643/-. 3. THE ASSESSEE CHALLENGED THE ADDITION BEFORE LD. CIT(APPEALS) AND WRITTEN SUBMISSION OF THE ASSESSEE IS REPRODUCED IN THE IMPUGNED ORDER IN WHICH THE ASSES SEE BRIEFLY EXPLAINED THAT BOOKS OF ACCOUNT OF THE ASSE SSEE ARE AUDITED IN WHICH NO DEFECTS HAVE BEEN POINTED O UT BY THE ASSESSING OFFICER AND EVEN BOOKS HAVE NOT BE EN REJECTED. COMPLETE BOOKS OF ACCOUNT HAVE BEEN PRODUCED BEFORE ASSESSING OFFICER. THE GENUINENESS OF THE SALE CANNOT BE DOUBTED. ALL THE PURCHASES AND SALES ARE DULY VOUCHED AND PAYMENTS HAVE BEEN MADE TO THE PARTIES FROM WHOM GOODS HAVE BEEN PURCHASED BY ACCOUNT PAYEE CHEQUES AND SALES RATE HAVE BEEN VERI FIED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER DI D NOT FIND ANY EVIDENCE REGARDING INFLATION OF EXPENSES O R PURCHASES AND SALES OUTSIDE THE BOOKS OF ACCOUNT. T HE ADDITION IS MADE ON ESTIMATE BASIS BY ENHANCING THE SALE RATES WHICH IS BASELESS. THE ASSESSEE RELIED UPON SEVERAL ORDERS OF THE TRIBUNAL IN SUPPORT OF CONTEN TION AND ALSO RELIED UPON ORDER OF ITAT CHANDIGARH BENCH IN 5 THE CASE OF SHRI MANPREET SINGH DHILLON VS ITO (ITA 69/2009) IN WHICH ON SIMILAR CIRCUMSTANCES, ADDITIO N HAS BEEN DELETED WHICH HAVE BEEN FOLLOWED BY THE TRIBUNAL IN THE CASE OF SHRI SATINDER KUMAR VS ITO IN ITA 436/2012 VIDE ORDER DATED 30.08.2012, COPY OF WHICH IS ALSO PLACED ON RECORD. 4. THE LD. CIT(APPEALS) IN HIS FINDINGS HAS AGREED WITH THE CONTENTION OF THE ASSESSEE, BUT ULTIMATELY DISM ISSED THE APPEAL OF THE ASSESSEE. 5. I HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PAR TIES AND PERUSED THE MATERIAL ON RECORD. THE DISPUTE IS WITH REGARD TO ADOPTION OF HIGHER SALES RATE FOR THE PUR POSE OF MAKING THE ADDITION. THE ASSESSEE PRODUCED BOOK S OF ACCOUNT, BILLS AND VOUCHERS AND BANK STATEMENTS BEF ORE ASSESSING OFFICER AT ASSESSMENT STAGE AND ALSO FURNISHED WRITTEN SUBMISSIONS TIME TO TIME. THE GP RATE OF THE ASSESSEE HAS INCREASED IN ASSESSMENT YE AR UNDER APPEAL TO 5.37% AS AGAINST 3.72% AND 2.11% IN PRECEDING ASSESSMENT YEARS 2009-10 AND 2010-11. HOWEVER, NP RATE HAS DECREASED IN ASSESSMENT YEAR UNDER APPEAL AND HAS BEEN SHOWN AT .14% AS COMPARED TO .16% AND .19% ADOPTED IN PRECEDING ASSESSMENT YE AR 2009-10 AND 2010-11. THE ASSESSING OFFICER NOTED CERTAIN IRREGULARITIES IN PARA 3 OF THE ASSESSMENT ORDER WITH REGARD TO VALUATION OF THE SALES OF THE CLOSIN G STOCK BUT HAS NOT POINTED OUT ANY SPECIFIC DEFECTS IN THE 6 MAINTENANCE OF THE BOOKS OF ACCOUNT BY THE ASSESSEE . THE ASSESSING OFFICER HAS NOT BROUGHT ANY COMPARABL E RATES OF SALES OF OTHER DEALERS. THE ASSESSING OFF ICER MERELY NOTING THAT AVERAGE SALE RATE HAS DECREASED IN ASSESSMENT YEAR UNDER APPEAL, ESTIMATED THE SALE RA TE OF THE ASSESSEE AND MADE THE ABOVE ADDITION. THE B OOKS OF ACCOUNT OF THE ASSESSEE HAVE NOT BEEN REJECTED. IT IS NOT ALWAYS NECESSARY THAT THE BUSINESSMAN WOULD ALWAYS EARN PROFIT. THERE MAY BE CASES OF LOSSES A S WELL. THE ASSESSEE EXPLAINED BEFORE ASSESSING OFFI CER THAT ASSESSEE MADE THE SALES AT THE RATE PREVAILING IN THE MARKET AT THE TIME OF SALES. 5(I) THE LD. COUNSEL FOR THE ASSESSEE REFERRED TO P B-25 WHICH IS REPLY FILED BEFORE ASSESSING OFFICER IN WH ICH THE ASSESSEE EXPLAINED THAT MAJORITY OF THE SALES HAVE BEEN MADE TO M/S PATIALA DISTILLERIES & MANUFACTURERS AN D THEIR CONFIRMED COPY OF THE ACCOUNTS HAVE BEEN FILE D FOR CONFIRMATION OF THE SALE RECEIPTS. THIS EVIDENCE A ND REPLY FILED BEFORE ASSESSING OFFICER HAVE NOT BEEN REBUTTED BY THE AUTHORITIES BELOW IN ANY MANNER, MEANING THEREBY, THAT MAJORITY OF THE SALES HAVE BE EN MADE TO ONE PARTY WHO HAVE ALSO CONFIRMED THE SALE RATES. THEREFORE, THE ASSESSING OFFICER SHOULD BRI NG SOME EVIDENCE ON RECORD TO DISBELIEVE THE CONFIRMAT ION FILED BY THE ASSESSEE. THEREFORE, MERELY FINDING O UT THAT SALE RATES OF THE ASSESSEE ARE LOWER, IS NO GROUND TO ENHANCE THE SALE RATE. BEFORE MAKING ANY SUCH ADDIT ION, 7 ASSESSING OFFICER SHOULD MAKE INQUIRY FROM THE PART IES TO WHOM SALES HAVE BEEN MADE IN ORDER TO VERIFY WHE THER SALE RATES OF THE ASSESSEE ARE LESSER. THE ASSESSI NG OFFICER SHOULD ALSO BRING ON RECORD SOME POSITIVE EVIDENCE TO SHOW THAT SALE RATES WERE EXCESSIVE AS AGAINST SALE RATES SHOWN BY THE ASSESSEE. 6. THE ASSESSEE MADE DETAILED SUBMISSIONS BEFORE LD . CIT(APPEALS) IN WHICH IT WAS SPECIFICALLY POINTED O UT THAT ASSESSING OFFICER HAS NOT POINTED OUT DEFECTS IN MAINTENANCE OF THE BOOKS OF ACCOUNT AND BOOKS OF ACCOUNT HAVE NOT BEEN REJECTED. IT WAS ALSO PLEADE D BEFORE LD. CIT(APPEALS) THAT ALL THE SALE AND PURCH ASE BILLS HAVE BEEN MAINTAINED AND THE RATES ARE VERIFI ABLE. THEREFORE, IN THE ABSENCE OF ANY MATERIAL AGAINST ASSESSEE, ASSESSING OFFICER SHOULD NOT HAVE MADE TH E ADDITION. THE LD. CIT(APPEALS) IN THE OPENING PARA OF HIS FINDINGS, HAS HELD THAT HE IS IN AGREEMENT WIT H THE CONTENTION OF THE ASSESSEE. BUT LATER ON, HE DID NOT ACCEPT CONTENTION OF THE ASSESSEE AND DISMISSED THE APPEAL OF THE ASSESSEE. THEREFORE, ON THE FACE OF THESE FACTS AND MATERIAL ON RECORD, IT IS CLEAR THAT SALE RATES OF THE ASSESSEE HAVE BEEN ENHANCED WITHOUT BRINGING ANY EVIDENCE OR MATERIAL ON RECORD AGAINST THE ASSE SSEE AND WITHOUT REJECTING BOOKS OF ACCOUNT AND SALES BI LLS OF THE ASSESSEE. THE LD. COUNSEL FOR THE ASSESSEE REL IED UPON ORDER OF ITAT CHANDIGARH BENCH IN THE CASE OF SHRI SATINDER KUMAR VS ITO DATED 30.08.2012 (SUPRA) IN 8 WHICH ADDITION WAS MADE ON ACCOUNT OF SALE OF RICE HUSK BY ESTIMATING THE SALE PRICE OF RICE HUSK IN WHICH THE TRIBUNAL FOLLOWED ITS EARLIER DECISION IN THE CASE OF SHRI MANPREET SINGH DHILLON (SUPRA) AND ADDITION ON ACCO UNT OF ENHANCEMENT IN SALE RATES HAVE BEEN DELETED. 7. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES, I DO NOT FIND ANY JUSTIFICATION TO S USTAIN THE ORDERS OF AUTHORITIES BELOW IN MAKING THE ADDIT ION. THE ORDERS OF AUTHORITIES BELOW ARE, ACCORDINGLY, S ET ASIDE THE ADDITION OF RS. 3,99,643/- IS DELETED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DATED : 3 RD JANUARY,2017. POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH