Shri Motilal Dashrath Soni, Sendhwa V. The ACIT, Khandwa

ITA 161/IND/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70020 (ITAT-INDORE)
• Duration Of Justice: 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 28-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: S S DESHPANDE; R P MANDOVRA CAS
• Section: 143(3); 80IB; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AKQPS0071B I.T.A.NO. 161 /IND/201 3 A.Y. : 2006-07 SHRI MOTILAL DASHRATH SONI, PROP. SONI UDHYOG, WARLA ROAD, SENDHWA VS. ACIT, KHANDWA APPELLANT RESPONDENT APPELLANT BY : SHRI S.S.DESHPANDE AND SHRI R.P. MANDOVRA, CAS RESPONDENT BY : SHRI R.A.VERMA, SR. DR DATE OF HEARING : 24 . 0 7 .201 3 DATE OF PRONOUNCEMENT : 04 . 0 9 .201 3 O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER PASSED BY THE CIT(A)-II, INDORE, DATED 15.01.2013 F OR THE ASSESSMENT YEAR 2006-07 IN THE MATTER OF ORDER PASS ED U/S 143(3) OF THE INCOME-TAX ACT, 1961. -: 2: - 2 2. THE RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. DURING THE YEAR, THE ASSESSEE HAS DECLARED AGRICULTURAL INCOME OF RS. 6,25,000/-. THE STATEMEN T OF ACCOUNTS ENCLOSED WITH THE RETURN SHOWED THAT THE A SSESSEE HAS CREDITED AN AMOUNT OF RS. 7,65,699/- IN HIS BOO KS BY WAY OF AGRICULTURAL SALES. THE AGRICULTURAL EXPENSES DE BITED IN THE BOOKS AMOUNTED TO RS. 1,85,291/-. AGAINST THIS AGRI CULTURAL EXPENDITURE, THE ASSESSEE CLAIMS TO HAVE DERIVED AG RICULTURAL PRODUCE WORTH RS. 7,65,699/-. THUS, INPUT COST WAS JUST 24.2 % OF THE AGRICULTURAL OUTPUT. THE ASSESSING OFFICER HELD THAT IT IS IMPOSSIBLE TO DERIVE AGRICULTURAL PRODUCE WORTH RS. 7,65,699/- BY SPENDING MERELY RS.1,85,291/- ON FERT ILIZERS, PESTICIDES, SEEDS AND WAGES. ACCORDINGLY, THE ASSES SING OFFICER ESTIMATED EXPENDITURE AT 40% OF AGRICULTURAL INCOME . THUS, THE AGRICULTURAL INCOME SHOWN BY THE ASSESSEE WAS R EDUCED ACCORDINGLY. BY THE IMPUGNED ORDER, THE LD. CIT(A) ESTIMATED THE EXPENDITURE AT 35 % AFTER HAVING THE FOLLOWING OBSERVATIONS :- -: 3: - 3 5. REGARDING GROUND NO.1 I.E. DISALLOWANCE OF AGRICULTURAL INCOME AT RS. 1,65,580/- THE LD. COUNSEL FOR THE APPELLANT CONTENDED THAT AS PER ORDER OF THE HON'BLE I.T.A.T., INDORE BENCH, INDORE IN THE ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2000-01 TO 2005-06 THE HON'BLE I.T.A.T. HAS GIVEN FINDING THAT AGRICULTURAL EXPENDITURE SHOULD BE ESTIMATED @ 25% OF THE GROSS RECEIPT. THE HON'BLE I.T.A.T. IN ITS ORDER I.T(SS).A.NOS. 1 TO 6/IND/201 0 DATED 27 TH AUGUST, 2012, HAS HELD AS UNDER :- KEEPING IN VIEW THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE AND THE NATURE OF AGRICULTURAL PRODUCE IN INDIA AND THE FACT THAT THE ASSESSEE WAS DOING AGRICULTURAL OPERATION SINCE 1965, WELL EQUIPPED WITH NECESSARY TOOLS REQUIRED FOR AGRICULTURAL PURPOSES AND ATTENDS HIMSELF AND SUPERVISES AGRICULTURAL OPERATION, WE ESTIMATE THE EXPENDITURE AT 25 % OF AGRICULTURAL RECEIPT IN PLAC E OF EXPENDITURE ESTIMATED AT 35 % BY THE LD.CIT(A). ACCORDINGLY, WE MODIFY THE ORDER OF LOWER -: 4: - 4 AUTHORITIES TO THE EFFECT THAT TO THE EXTENT OF HIG HER ESTIMATION OF EXPENDITURE, THE NET AGRICULTURAL INCOME SHOULD BE REDUCED RATHER TREATING THE DIFFERENCE AS INCOME FROM OTHER SOURCES. WE DIRECT ACCORDINGLY. 5.1 IN THE PRESENT APPEAL, THE AGRICULTURAL EXPENSES HAVE BEEN SHOWN @ 24.2 % BUT I AGREE WITH THE VIEW OF THE ERSTWHILE CIT(A) THAT EXPENDITURE FOR SUCH AGRICULTURAL INCOME SHOULD BE TAKEN AT LEAST 35% OF THE TOTAL INCOME, AS THAT LEAVES A NET PROFIT RATE OF 65 %, WHICH IS VERY HIG H NET INCOME FROM AGRICULTURAL PRODUCE. SUCH RATE OF NET PROFIT IS NOT OBSERVED EVEN IN INDUSTRY. IF THAT RATE OF NET PROFIT WOULD HAVE BEEN A REALITY, ALL BIG INDUSTRIALISTS WOULD HAVE MOVED INTO AGRICULTURE SECTOR, WHICH HAS NOT HAPPENED. COMING TO THE FACTS OF THE CASE, ONUS REMAINED FASTENED ON APPELLANT TO PRODUCE PROOF OF AGRICULTURAL EXPENSES, BUT APPELLANT FAILED TO DISCHARGE SUCH ONUS. HENCE TO MY MIND ESTIMATE -: 5: - 5 OF AT LEAST 35% OF EXPENSES WOULD BE JUSTIFIED AND AS A RESULT AGRICULTURE EXPENSES COMES AT RS. 2,67,994/- INSTEAD OF RS. 1,85,291/- CLAIMED BY APPELLANT RESULTING INTO ADDITION OF RS. 82,703/- IN PLACE OF RS. 1,65,580/-, ON THE HEAD OF DISALLOWANCE OF UNPROVED AGRICULTURAL EXPENSES. HENCE, THIS GROUND IS PARTLY ALLOWED. 3. IT IS CLEAR FROM THE ORDER OF LOWER AUTHORITIES THA T THEY HAVE ESTIMATED AGRICULTURAL EXPENDITURE WITHOUT POI NTING OUT ANY UNVERIFIABLE EXPENDITURE HAVING BEEN INCURRED B Y THE ASSESSEE. IT IS ALSO CLEAR FROM THE ORDER OF TRIBUN AL IN ASSESSEES OWN CASE IN IMMEDIATELY PRECEDING YEAR D ATED 27 TH AUGUST, 2012, THAT AFTER GIVING DETAILED FINDING WI TH REGARD TO THE NATURE OF AGRICULTURAL PRODUCE AND THE FACT THA T THE ASSESSEE WAS DOING AGRICULTURAL OPERATIONS SINCE 19 65, WELL EQUIPPED WITH THE NECESSARY TOOLS REQUIRED FOR AGRI CULTURAL PURPOSES AND ATTENDS HIMSELF AND SUPERVISES AGRICUL TURAL OPERATION, EXPENDITURE AT 25% AGRICULTURAL RECEIPTS WAS FOUND TO BE REASONABLE. WITHOUT POINTING OUT ANY DIFFEREN CE IN FACTS OF THE YEAR UNDER CONSIDERATION VIS--VIS YEAR FOR WHICH THE -: 6: - 6 TRIBUNAL HAS DECIDED THE ASSESSEES OWN APPEAL, THE LD. CIT(A) HAS NOT FOLLOWED THE ORDER OF THE TRIBUNAL. ALL FAC TS AND FIGURES WERE BROUGHT TO THE NOTICE OF THE CIT(A) ALONGWITH ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE, HOWEVER, WITHOUT G IVING ANY REASON, MUCH LESS A COGENT REASON THE LD. CIT(A) HA S DISREGARDED THE ORDER OF TRIBUNAL WHICH IS NOT APPR ECIABLE. AS PER THE DECISION OF HON'BLE SUPREME COURT, LOWER CO URT IS REQUIRED TO FOLLOW THE DECISION OF UPPER COURT SO A S TO HAVE A JUDICIAL DISCIPLINE. WHEN THE EXACTLY SIMILARLY ISS UE WAS DECIDED BY THE BENCH OF TRIBUNAL AT INDORE, IN ASSE SSEES OWN CASE IN THE IMMEDIATELY PRECEDING YEAR, THE LD. CIT (A) FUNCTIONING AT INDORE, WITHOUT ANY REASON DISREGARD ED THE ORDER OF THE TRIBUNAL, WHICH WAS CITED BY THE ASSES SEE BEFORE HIM. MORE PARTICULARLY, WITHOUT POINTING OUT ANY DI FFERENCE IN FACTS DURING THE YEAR AS COMPARED TO THE FACTS DISC USSED BY THE TRIBUNAL IN ITS ORDER DATED 27 TH AUGUST, 2012, IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2000-01 TO 2005-06 . IT IS ALSO NOT THE CASE OF CIT(A) THAT DEPARTMENT HAS FIL ED AN APPEAL IN THE HIGH COURT AGAINST THIS ORDER OF TRIBUNAL. A CCORDINGLY, WE SET-ASIDE THE ORDER OF CIT(A) AND DIRECT THE ASS ESSING -: 7: - 7 OFFICER TO WORK OUT AGRICULTURAL INCOME BY TAKING E XPENDITURE AT 25% OF AGRICULTURAL RECEIPTS, AS HELD BY THE TRI BUNAL IN ITS ORDER DATED 27 TH AUGUST, 2012. WE DIRECT ACCORDINGLY. 4. THE ASSESSEE IS ALSO AGGRIEVED FOR ENHANCEMENT OF DISALLOWANCE OF DEDUCTION U/S 80IB MADE BY THE CIT U/S 251(1) OF THE INCOME-TAX ACT, 1961. IT WAS ARGUED B Y THE LD. AUTHORIZED REPRESENTATIVE THAT CIT(A) HAS COMPLETE LY FAILED TO APPRECIATE AND ADJUDICATE THAT THE ASSESSEE IS VERY MUCH ELIGIBLE FOR DEDUCTION U/S 80IB OF RS. 61,39,817/- BEING PROFIT DERIVED FROM BUSINESS OF INDUSTRIAL UNDERTAKING. 5. FROM THE RECORD, WE FOUND THAT THE ASSESSEES CLAIM OF DEDUCTION U/S 80IB AT RS. 15,80,448/- WAS DEALT BY THE ASSESSING OFFICER AS UNDER :- THE ASSESSEE HAS SHOWN INCOME OF INDUSTRIAL UNDERTAKING AT RS. 63,21,790/-. AFTER REDUCING THE INTEREST INCOME OF RS. 1,81,973/- FROM RS. 63,21,790/- THE ELIGIBLE INCOME OF INDUSTRIAL UNDERTAKING FOR CLAIMING DEDUCTION U/S 80IB WORKS OUT TO RS. 61,39,817/-. ACCORDINGLY, ALLOWABLE DEDUCTION U/S 80IB @ 25% WORKS OUT -: 8: - 8 TO RS. 15,34,954/-. THE ASSESSEE HAS CLAIMED DEDUCTION U/S 80IB AT RS. 15,80,448/-. IN VIEW OF THIS EXCESS CLAIM OF DEDUCTION U/S 80IB OF RS. 45,494/- ( RS. 15,80,448/- (-) RS. 15,34,954/-) IS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME. 6. DURING THE APPELLATE PROCEEDINGS, THE LD. CIT(A) HA S GIVEN A NOTICE OF ENHANCEMENT WITH THE FOLLOWING OB SERVATIONS :- Q.2 FOR THIS PURPOSE, THE APPELLANT IS HEREBY REQUIRED TO SHOW CAUSE AS TO WHY THE IMPUGNED ASSESSMENT BE NOT ENHANCED BY THE AMOUNT OF DEDUCTION ALLOWED BY THE ASSESSING OFFICER AT RS. 15,34,854/-. FOR THIS PURPOSE, THE APPEAL PROCEEDINGS FOR ENHANCEMENT ARE FIXED FOR HEARING AT MY OFFICE ON 14.07.10 AT 11:00 AM. Q.4.2 THE FIRST GROSS PROFIT OF RS. 40,10,454.00 RELATES TO THE PRE-SEARCH PERIOD, OF WHICH THE TRADING ACCOUNT SHOWS NO GINNING ACTIVITIES IN VIEW OF THE OPENING STOCK OF RUI ( -: 9: - 9 120 BALES) WEIGHING 192 QUINTALS HAVING BEEN SOLD AT 191.89 QTLS ( DRIAGE OSTENSIBLY EXPLAINING THE SMALL SHORTAGE ) AND OPENING STOCK OF COTTON SEED WEIGHING 375 QTLS. HAVING BEEN SOLD AT 376.60 QTLS. THE ENTIRE CLOSING STOCK OF KAPAS WITH THE VERY SAME VALUE [ BUT WITH A SHORTAGE OF 1.49 QUINTALS ] AS PER MANUFACTURING & TRADING (KAPAS A/C) FOR PRE SEARCH PERIOD, COMPRISES AS MENTIONED IN THE ACCOUNT INCLUSION OF EXCESS STOCK OF KAPAS FOUND DURING SEARCH U/S 132 TRANSFERRED TO PROFIT AND LOSS ACCOUNT. THE VALUE OF THE ENTIRE CLOSING STOCK OF RS. 40,12,000/- ACCORDINGLY COMES OUT OF THE SURRENDERED EXCESS STOCK OF RS. 40,10,454/- FOUND IN SEARCH. HENCE, THE OTHER GROSS PROFIT OF RS. 45,43,064.45 FOR THE POST SEARCH PERIOD COULD NOT HAVE BEEN CONSIDERED AS THE GROSS ELIGIBLE RECEIPTS FOR PURPOSES OF SECTION 80IB [IF AT ALL THE APPELLANT WERE OTHERWISE ELIGIBLE FOR THE SAID DEDUCTION ]. -: 10: - 10 7. THE LD. CIT(A) DIRECTED THE ASSESSING OFFICER TO DISALLOW CLAIM OF DEDUCTION U/S 80IB IN RESPECT OF AMOUNT OF INCOME OF RS. 40 LAKHS ARISING FROM EXCESS STOCK FO UND DURING THE COURSE OF SEARCH ON 10.11.20055. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND FOUND FROM RECORD THAT DURING THE COURSE OF ASSESSMENT, T HE ASSESSEE HAS SUBMITTED TWO MANUFACTURING ACCOUNT. O NE ACCOUNT WAS FROM 1.4.2005 TO 10.11.2005 I.E. TILL T HE DATE OF SEARCH, WHEREIN CLOSING STOCK OF KAPAS WAS DISCLOSE D AT RS. 40,12,000/-, WHICH GAVE RISE TO GROSS PROFIT OF RS. 40,10,454/- INCLUSIVE OF EXCESS STOCK OF KAPAS FOUND DURING SEA RCH U/S 132 TRANSFERRED TO PROFIT AND LOSS ACCOUNT. SECOND MANUFACTURING ACCOUNT WAS FROM 11.11.2005 TO 31.03. 2006, WHICH GAVE GROSS PROFIT OF RS. 45,43,064/-. IT APPE ARS THAT THE ASSESSEE HAS CLAIMED DEDUCTION IN RESPECT OF ENTIRE PROFIT OF RS. 63,21,790/-. THE ASSESSING OFFICER HAS NOT DELI BERATED ON THE FACTUAL ISSUE AT THE TIME OF ASSESSMENT. IN THE INTEREST OF JUSTICE AND FAIR PLAY, THIS GROUND IS RESTORED BACK TO THE FILE OF A.O. FOR DECIDING AFRESH AS PER LAW. -: 11: - 11 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D IN PART. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 4 TH SEPTEMBER,2013. SD/- SD/- (JOGINDER SINGH) (R. C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 4 TH SEPTEMBER, 2013. CPU* 30849