Sri Venkateswara Rice Industries, Nalgonda, Hyderabad V. ITO,Ward-1, Nalgonda, Nalgonda

ITA 1407/HYD/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6485 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 31-05-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 14-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B KURMI NAIDU
• Assessee Lawyers: B SATYANARAYANA MURTHY
• Keywords: Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 1407/HYD/2015 ASSESSMENT YEAR: 2008-09 SRI VENKATESWARA RICE INDUSTRIES, NALGONDA. PAN AAOFS 2549 G VS. INCOME TAX OFFICER, WARD 1, NALGONDA. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI B. SATYANARAYANA MURTHY REVENUE BY : SHRI B. KURMI NAIDU DATE OF HEARING 01-06-2016 DATE OF PRONOUNCEMENT 15-06-2016 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST T HE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) - 3 , HYDERABAD FOR AY 2008-09 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS A REGISTERED FIRM ENGAGED IN THE BUSINESS OF PURCHASE OF PADDY AND RUNNING RICE MILL, FILED ITS E-RETURN OF INCOME ADM ITTING TOTAL INCOME OF RS. 83,620/- ON 27/09/08, WHICH WAS PROCESSED U/S 1 43(1) OF THE INCOME-TAX ACT, 1961 (IN SHORT ACT). DURING THE Y EAR UNDER CONSIDERATION, THE ASSESSEE FIRM EFFECTED A TURN OV ER OF RS.8,84,06, 118/- THE MAJOR PORTION OF SALE IS MADE TO FOOD COR PORATION OF INDIA AS ML RICE, WITHIN STATE. FROM THE MANUFACTURING AN D TRADING ACCOUNT FOR YEAR UNDER CONSIDERATION, IT IS SEEN THAT THE A SSESSEE FIRM HAS SHOWN PURCHASES AS UNDER: 2 ITA NO. 1407/H/15 SRI VENKATESWARA RICE INDUSTRIES, NALGONDA ITEM PURCHASED AMOUNT FOR WHICH PURCHASES (RS.) PADDY 5,91,58,578 T.P. PADDY 1,24,52,990 A.P. RICE 15,25,098 GUNNIES 18,96,750 TOTAL 7,50,33,416 2.1 DURING THE COURSE OF HEARING THE ASSESSEE HAS S TATED THAT THE PURCHASE OF PADDY, T.P PADDY AND AP RICE IS MADE FR OM FARMERS. WHEN THE ASSESSEE HAD BEEN ASKED TO FURNISH THE DET AILS OF NAME AND ADDRESS OF THE FARMERS FROM WHOM THE PURCHASES ARE MADE, THE ASSESSEE HAD NOT FURNISHED THE DETAILS OF FULL ADDR ESS OF THE FARMERS. THE ASSESSEE PRODUCED THE BILLS FOR THE ABOVE PURCH ASES. THESE BILLS WERE PREPARED BY THE ASSESSEE AND DID NOT CONTAIN F ULL ADDRESSES OF THE PARTIES FROM WHOM THE PURCHASES ARE MADE. AS SU CH THE PURCHASES WERE NOT INDEPENDENTLY VERIFIABLE. FURTHE R, THE ASSESSEE ADMITTED THAT THE PAYMENTS FOR PURCHASES WERE MADE IN CASH. THE ASSESSEE'S AR ARGUED THAT THE PAYMENTS MADE IN CASH TO FARMERS IN VILLAGES WHERE THERE IS NO BANKS AND THEY ARE UNEDU CATED. THE ASSESSEE'S AR FURTHER ARGUED THAT THESE PAYMENTS FA LL WITHIN RULE 6DD OF INCOME TAX RULES, 1962. HOWEVER, THE AO OPIN ED THAT THE GENUINENESS OF THE PURCHASES MADE BY THE ASSESSEE I S NOT VERIFIABLE INDEPENDENTLY AND CORRECT INCOME OF THE ASSESSEE CA N NOT BE ARRIVED AT. AS SUCH, PROFIT WAS ESTIMATED AT 5% OF THE TOTA L TURNOVER. THE TOTAL TURNOVER WAS RS.8,84,06,118/. THE PROFIT AT 5% WORK ED OUT TO RS.44,20,305/-. AFTER ALLOWING THE STATUTORY DEDUCT IONS FROM THE ESTIMATED INCOME OF RS. 44,20,305/-, THE AO ASSESSE D THE TOTAL INCOME OF THE ASSESSEE AT RS. 26,90,450/-. 3. AGGRIEVED WITH THE ABOVE ORDER, THE ASSESSEE PRE FERRED AN APPEAL BEFORE THE CIT(A), WHO CONFIRMED THE ACTION OF THE AO BY OBSERVING AS UNDER: 3 ITA NO. 1407/H/15 SRI VENKATESWARA RICE INDUSTRIES, NALGONDA IT IS EVIDENT FROM THE P&L A/C THAT BUT FOR THE IN TEREST ON FDR AND INTEREST ON APSEB, THE ASSESSEE DID NOT DISCLOS E ANY INCOME FROM MILLING OF PADDY ON A TURNOVER OF 8.84 CRORES. FURTHER, AS CORRECTLY STATED BY THE ASSESSING OFFIC ER, THE APPELLANT ON THE PRETEXT OF PURCHASING THE PADDY FR OM THE FARMERS RESIDING IN REMOTE VILLAGES CARRIED OUT THE ENTIRE TRANSACTIONS IN CASH THEREFORE SUCH TRANSACTIONS UN VERIFIABLE. IN ANY CASE THE INCOME ASSESSED AT RS. 26,90,449 WORKS OUT TO 3.04% ON TURNOVER OF RS. 8.84 CRORES WHICH IS VERY FAIR AND REASONABLE, THEREFORE I DO NOT SEE ANY REASON TO IN TERFERE WITH THE ASSESSMENT MADE BY THE ASSESSING OFFICER. THERE FORE THE APPEAL IS DISMISSED. 4. AGGRIEVED WITH THE ABOVE ORDER OF CIT(A), THE AS SESSEE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF A PPEAL: 1. THE ORDER OF THE HON'BLE COMMISSIONER OF INCOME TAX IS CONTRARY TO THE FACTS OF THE CASE AND THE PROVISION S OF LAW. 2. THE HON'BLE COMMISSIONER OF INCOME TAX IS INCORR ECT IN UPHOLDING THE ORDER OF THE ASSESSING OFFICER. 3. THE HON'BLE COMMISSIONER OF INCOME TAX ERRED IN OBSERVING THAT THE ASSESSEE DID NOT DISCLOSE ANY INCOME FROM BUSINESS OTHER THAN THE INTEREST ON FIXED DEPOSITS AND INTER EST FROM APSEB. 4. THE HON'BLE COMMISSIONER OF INCOME TAX SHOULD HA VE APPRECIATED FROM THE PROFIT & LOSS ACCOUNT EXTRACTE D BY HER IN THE ORDER, INTEREST AND REMUNERATION TO PARTNERS WE RE CHARGED TO PROFIT & LOSS ACCOUNT. SHE SHOULD HAVE APPRECIATED THE INTEREST AND REMUNERATION PAID TO PARTNERS ARE OUT OF THE PR OFIT DERIVED BY THE ASSESSEE FROM THE BUSINESS. 5. THE HON'BLE COMMISSIONER OF INCOME TAX SHOULD HA VE APPRECIATED THAT THE PROFIT DECLARED BY THE APPELLA NT IS COMPARABLE TO PROFIT RANGE AKIN TO THE RICE MILL IN DUSTRY. 6. THE HON'BLE COMMISSIONER OF INCOME' TAX SHOULD H AVE SEEN THAT THE PURCHASES ARE ALL VERIFIABLE EVEN BECAUSE THE FARMERS FROM WHOM PURCHASES WERE MADE, ARE FROM SMALL VILLA GES AND, EACH FARMER CAN BE IDENTIFIED EASILY ON THE BASIS O F HIS NAME AND VILLAGE. 7, THE HON'BLE COMMISSIONER OF INCOME TAX SHOULD HA VE SEEN THAT THE PURCHASE PRICE AND SALE PRICE OF PADDY IS UNDER THE CONTROL OF THE GOVERNMENT AND THEREFORE THE PROFIT EARNED IS FAIR AND REASONABLE. 8. WITHOUT PREJUDICE TO THE FOREGOING GROUNDS, IT I S SUBMITTED THAT THE ADDITION IS HIGHLY EXCESSIVE AND ARBITRARY. 4 ITA NO. 1407/H/15 SRI VENKATESWARA RICE INDUSTRIES, NALGONDA FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT TH E TIME OF HEARING OF THE APPEAL, IT IS SUBMITTED THAT THE ORD ER OF THE LEARNED ASSESSING OFFICER BE SET ASIDE OR MODIFIED MAY BE D EEMED FIT. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL FACTS ON RECORD. THE AO ESTIMATED THE PROFIT AT 5% ON THE GROUND THAT THE ASSESSEE FAILED TO FURNISH THE DETAILS OF NAME AND ADDRESS OF THE FARMERS FROM WHOM THE PURCHASES WERE MADE, HENCE, P URCHASES CANNOT BE INDEPENDENTLY VERIFIABLE. BEFORE US, THE LD. AR OF THE ASSESSEE FILED THE PAPER BOOK CONTAINING THE FOLLOW ING DOCUMENTS: 1. COPIES OF MONTHWISE CERTIFICATES FROM THE COLLE CTORATE (CS), NALGONDA FROM 01/04/2007 TO 31/03/2008 2. COPIES OF MONTH WISE PURCHASES AND SALES STATEM ENTS ADDRESSED TO THE SECRETARY, AGRICULTURAL MARKET CO MMITTEE, HUZURNAGAR FROM 01/04/2007 TO 31/03/2008. 3. COPIES OF PADDY PURCHASES FROM 01/04/2007 TO 31 /03/2008. 4. COPIES OF THE DETAILS OF TAX PAID PADDY PURCHAS ES. 5. COPIES OF THE ASSESSMENT ORDER OF THE AGRICULTU RAL MARKET COMMITTEE, HUZURNAGAR BEARING ASSESSMENT NO. 52/20 07-08, DTD 20/02/08 FOR THE AY 2007-08. AS THE AFORESAID DOCUMENTS ARE NOT FURNISHED BEFORE THE REVENUE AUTHORITIES AND THE SAME ARE TO BE REQUIRED FOR DEC IDING THE ASSESSEES APPEAL, WE RESTORE THE MATTER BACK TO TH E FILE OF THE AO WITH A DIRECTION TO COMPLETE THE RE-ASSESSMENT AFTE R EXAMINING THE SAID DOCUMENTS AND IN ACCORDANCE WITH LAW AFTER PRO VIDING REASONABLE OPPORTUNITY OF BEING HEARD TO ASSESSEE. THE PURCHASE AND SALES ARE CONTROLLED BY GOVT. THROUGH PRICE REGULAT ION. THE SELLING AND PURCHASE PRICE ALSO CAN BE COLLECTED FROM RESPECTIV E PANCHAYAT BOARDS, IF NECESSARY, AS THESE PRICES ARE CONTROLLE D AND REGULATED. 5 ITA NO. 1407/H/15 SRI VENKATESWARA RICE INDUSTRIES, NALGONDA 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 15 TH JUNE, 2016 SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHM AN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 15 TH JUNE, 2016 KV COPY TO:- 1) M/S SRI VENKATESWARA RICE INDUSTRIES, C/O VENUGO PAL & CHENOY, CAS, 4-1-889/16/2, TILAK ROAD, HYDERABAD 500 001. 2) THE ITO, WARD 1, HYD. 3) CIT(A) - 3, HYDERABAD 4) PR. CIT - 3, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.