M/s. P. N. Agro Pvt. Ltd., Burdwan V. I.T.O.,Wd-2(2), Burdwan, Burdwan

ITA 1645/KOL/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9350 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 14-06-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 22-09-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K PRAMANIK
• Assessee Lawyers: A K TULSYAN
• Keywords: Opportunity of being heard; Principle of natural justice
• Section: 40A(3); 68

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA () BEFORE . . . . . . . . , , , , , !'# !'# !'# !'# /AND . .. . . .. .' '' ' , $ ) [BEFORE HONBLE SRI D. K. TYAGI, JM & HONBLE SRI C . D. RAO, AM] #% #% #% #% / I.T.A NO. 1645/KOL/2009 &' '() &' '() &' '() &' '()/ // / ASSESSMENT YEAR : 2005-06 M/S. P. N. AGRO PVT. LTD. -VS- INCOME-TAX OFFIC ER, WD-2(2), BURDWAN. (PA NO.AABCP 7888 H) ( +, /APPELLANT ) (-+,/ RESPONDENT ) FOR THE APPELLANT : SRI A. K. TULSYAN FOR THE RESPONDENT : SRI A. K. PRAMANIK . / ORDER PER D. K. TYAGI, JM ( . . . . . . . . , , , , ) THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER PASSED BY THE LD. CIT(A), ASANSOL DATED 09.07.2009 FOR ASSESSMENT YEA R 2005-06 ON THE FOLLOWING GROUNDS : 1. THAT THE LD.CIT(A) WAS, WRONG IN CONFIRMING THE ADDITION OF RS,1,06,328/- FOR ALLEGED UNDISCLOSED SALE OF BRAN WITHOUT ANY COLLA BORATIVE EVIDENCE BASED ON MERE SUSPICION. THE ADDITION NEED TO BE DELETED. 2. THAT THE LD. CIT(A) ERRED IN CONFIRMING THE AD-H OC ADDITION MADE OF RS.29,006/- OUT OF THE PURCHASE OF GUNNY BAGS, RS.10,000/- ON ACCOUNT OF REPAIRS & MAINTENANCE OF GENERATOR AND RS.4,500/- ON ACCOUNT OF REPAIRS OF CAR WITHOUT GIVING ANY COGNIZANCE REASON, THE ADDITION MADE AND CONFIRMED BY THE LD. CIT(A) NEED TO BE DELETED. 3. THAT THE LD.CIT(A) ERRED IN ENHANCEMENT U/S 40A( 3) ON PADDY PURCHASED FROM FARMERS. AGRICULTURAL PRODUCE PURCHASED FROM FARME RS ON WHICH U/S 40(A)(3) DOES NOT ATTRACT. AS SUCH ENHANCEMENT MADE U/S 40A(3) OF TH E I. TAX ACT OF RS.59,06,064/- NEED TO BE DELETED. 4. THAT THE LD.CIT(A) FURTHER ERRED IN ENHANCING TH E DEPOSITS IN THE BANK A/CS AS UNEXPLAINED/UNPROVED CASH CREDIT/DEPOSIT U/S 68 OF THE I. TAX ACT RS.30,58,284/- WITHOUT APPRECIATE THE WHOLE FACTS THAT ENTIRE DEP OSIT IS PART OF REGULAR BOOKS OF A/C. THE ENHANCEMENT MADE THEREFORE, NEED TO BE DELETED . 2. GROUND NO. 1 IS IN RESPECT OF SUSTAINING THE ADD ITION OF RS.1,06,328/- ON ACCOUNT OF UNDISCLOSED SALE OF RICE BRAN. BRIEFLY STATED FA CTS OF THE CASE AS OBSERVED BY THE 2 ASSESSING OFFICER ARE THAT DURING THE COURSE OF ASS ESSMENT PROCEEDINGS, THE ASSESSING OFFICER FOUND THAT PRODUCTION OF BRAN HAS BEEN DISC LOSED 2.92% OF TOTAL PADDY MILLED WITH IS FOUND TO BE LOW. THE ASSESSEE FILED EXPLAN ATIONS REGARDING LOW BRAN PRODUCTION. THE ASSESSEE STATED THAT DUE TO CLIMATE AND GEOGRAP HICAL CONDITION AND DUE TO FAULTY MILLING AND BOILING OPERATION, THE PRODUCTION OF BR AN CAN ALSO COME DOWN. BUT THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTABLE TO AS SESSING OFFICER SINCE THE RATE OF PRODUCTION OF BRAN IS GENERALLY 5% OF THE PADDY MIL LED. BESIDES, IN THE LAST ASSESSMENT YEAR ASSESSEE DISCLOSED PRODUCTION OF BRAN @ 4.77%. HOWEVER, CONSIDERING THE SUBMISSION OF THE ASSESSEE THE ASSESSING OFFICER HE LD PRODUCTION OF BRAN SHOULD HAVE BEEN AT LEAST 5% OF THE PADDY MILLED DURING THE YEA R. HE, THEREFORE, CALCULATED RS.1,06,328/- WHICH WAS NOT DISCLOSED BY THE ASSESS EE AND AS SUCH ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. IN APPEAL, THE L D. CIT(A) WHILE REJECTING THE ASSESSEES GROUND OF APPEAL CONFIRMED THE ACTION OF THE ASSESSING OFFICER. BEING FURTHER AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 3. AT THE TIME OF HEARING BEFORE US THE LD. COUNSEL FOR THE ASSESSEE WHILE REITERATING HIS SAME SUBMISSIONS AS SUBMITTED BEFOR E THE LOWER AUTHORITIES FURTHER SUBMITTED THAT THE RICE BRAN IS A BYE PRODUCT OF PA DDY MILLING AND THE QUANTUM OF SUCH BYE PRODUCT DEPENDS ON VARIOUS ASPECTS, SUCH AS CLI MATIC AND GEOGRAPHICAL CONDITIONS. IN THE YEAR UNDER APPEAL, THE CLIMATIC AND GEOGRAPH ICAL CONDITION HAS BEEN DIFFERENT FROM THE EARLIER YEARS AND AS SUCH THE PAYERS OF TH E BRAN IN PADDY WAS THIN AND SAME WEIGHTED LESS. MOREOVER, THE BLOWER OF THE MILL WAS FAULTY AND AS SUCH RICE BRAN WAS BLOWN DUE TO IT BEING VERY FINE POWDER. THE ASSESS ING OFFICER HAS ACCEPTED THIS CONTENTION OF THE ASSESSEE AT THE TIME OF ASSESSMEN T PROCEEDINGS BUT HAS ESTIMATED THE QUANTUM OF BRAN WITHOUT HAVING ANY MATERIAL FACTS I N HIS POSSESSION TO DETERMINE THE QUANTUM OF BRAN. HE ALSO CONTENDED THAT IF ANY QUA NTITY OF PRODUCTION OF ANY BYE PRODUCT IS INCREASED, NATURALLY QUANTUM OF OTHER IT EMS IN PRODUCTION ARE DISTURBED. THE ASSESSING OFFICER SHOULD HAVE TALLIED THE QUANTUM OF DIFFERENT PRODUCTS AND BYE PRODUCTS WITH TOTAL PRODUCTION WHICH HE DID NOT. H E SIMPLY CAME TO CONCLUSION THAT PRODUCTION OF BRAN SHOULD HAVE BEEN AT LEAST 5% OF THE PADDY MILLED DURING THE YEAR AND CALCULATED A SUM OF RS.1,06,328/- AND ADDED THE SAM E TO THE INCOME OF THE ASSESSEE. HE ALSO CONTENDED THAT IF HE MADE SUCH CALCULATION, HE SHOULD HAVE DEDUCTED THE SAME 3 QUANTITY FROM FINISHED PRODUCTS. AS THE ADDITION W AS NEITHER BASED ON FACTS NOR ON LEGAL ASPECTS AS THE ASSESSING OFFICER HAD NO MATERIAL FA CTS IN HIS POSSESSION, HE PRAYED BEFORE THE BENCH TO DELETE THE ADDITION OF RS.1,06, 328/-. 4. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE RS OF THE LOWER AUTHORITIES AND URGED BEFORE THE BENCH TO CONFIRM THE SAME. 5. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD, WE FIND THAT THE ASSESSING OFFICER HAS MADE THE ADDITI ON OF RS.1,06,328/- BY HOLDING THAT THE RATE OF PRODUCTION OF BRAN IS GENERALLY 5% OF T HE PADDY MILLED WITHOUT BRINGING ANYTHING ON RECORD TO SAY SO. NO COMPARABLE CASE H AS BEEN CITED IN THIS REGARD. WE FURTHER FIND THAT THE SUBMISSION MADE BY THE ASSESS EE IN RESPECT OF LOW YIELD OF BRAN DURING THE YEAR UNDER APPEAL HAS NOT BEEN REBUTTED BY THE ASSESSING OFFICER. SINCE YIELD OF BRAN DEPENDS ON VARIOUS FACTORS AS POINTED OUT BY THE ASSESSEE IN ITS REPLY TO THE QUERY RAISED BY THE ASSESSING OFFICER WHICH IS AVAI LABLE AT PAGE 236 OF THE PAPER BOOK, ESTIMATION MADE BY THE ASSESSING OFFICER FOR MAKING THIS ADDITION IS NOT SUSTAINABLE. THE LD. CIT(A) HAS ALSO CONFIRMED THIS ADDITION WIT HOUT BRINGING ANY THING ON RECORD BEFORE GIVING HIS FINDING THAT THE YIELD OF BRAN HA S RIGHTLY BEEN ESTIMATED AT 5% OF THE PADDY MILLED BY THE ASSESSING OFFICER. IN VIEW OF THIS, THE ADDITION MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) I S HEREBY DELETED. 6. GROUND NO. 2 IS IN RESPECT OF CONFIRMING THE ADD ITIONS ON ACCOUNT OF PURCHASE OF GUNNY BAGS, REPAIRS AND MAINTENANCE OF GENERATOR AN D REPAIRS OF CAR. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER FOUND TH AT THE ASSESSEE PURCHASED GUNNY BAGS AMOUNTING TO RS.2,90,062.50 DURING THE YEAR. SINCE BILLS AND VOUCHERS WERE NOT PRODUCED INSPITE OF SEVERAL OPPORTUNITIES 10% OF RS .2,90,062/- AS EXPENSES FOR GUNNY BAGS PURCHASE WAS DISALLOWED BY THE ASSESSING OFFIC ER, WHICH COMES TO RS.29,006/- AND ADDED TO THE INCOME OF THE ASSESSEE. HE ALSO O BSERVED THAT THE ASSESEE HAS CLAIMED EXPENSES OF RS.1,75,693/- FOR REPAIR AND MAINTENANC E OF GENERATOR AND FUEL. BUT HE COULD NOT PRODUCE ANY BILLS AND VOUCHERS FOR REPAIR OF GENERATOR. AS SUCH, THE ASSESSING OFFICER DISALLOWED A SUM OF RS.10,000/- A ND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. HE ALSO OBSERVED THAT THE ASSESEE CLAIMED EXPENSES OF RS.42,889/- FOR FUEL AND REPAIR OF MOTOR CAR. IN A BSENCE OF ANY BILLS AND VOUCHERS FOR REPAIRS, A SUM OF RS.4500/- WAS DISALLOWED AND ADDE D TO THE TOTAL INCOME OF THE 4 ASSESSEE. IN APPEAL, THE LD. CIT(A) CONFIRMED THIS ACTION OF THE ASSESSING OFFICER. BEING FURTHER AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSESSING OFFICER DISALLOWED 10% OF T HE EXPENDITURE I.E. A SUM OF RS.29,006/- ON ACCOUNT OF GUNNY BAG PURCHASE FOR TH E REASON THAT BILLS AND VOUCHERS WERE NOT PRODUCED BEFORE HIM. THE LD. CIT(A) ALSO UPHELD THIS ACTION OF THE ASSESSING OFFICER FOR THE SAME REASON. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PARTIES, WE ARE OF THE CONSIDERED VIEW THAT ENDS OF JUSTICE WIL L BE MET IF THE DISALLOWANCE IS RESTRICTED TO 5% I.E. RS. 14,500/-. WE ORDER ACCOR DINGLY. IN RESPECT OF DISALLOWANCES ON ACCOUNT OF REPAIRS AND MAINTENANCE OF GENERATOR AND FUEL AND REPAIR OF CAR, THE ASSESSING OFFICER MADE THE DISALLOWANCE FOR THE REA SON THAT BILLS AND VOUCHERS WERE NOT PRODUCED BEFORE HIM. THE LD. CIT(A) ALSO CONFIRMED THESE ACTIONS OF THE ASSESSING OFFICER BY OBSERVING THAT BEFORE HIM ALSO THE ASSES SEE FAILED TO PRODUCE THE SAME. SINCE THE ASSESSEE HAS FAILED TO PRODUCE THE RELEVANT BIL LS AND VOUCHERS IN RESPECT OF THE EXPENSES, THE DISALLOWANCES SO CONFIRMED BY THE LD. CIT(A) NEED NOT BE INTERFERED WITH AND THE SAME IS HEREBY UPHELD. THIS GROUND OF APPE AL OF THE ASSESSEE IS PARTLY ALLOWED. 8. GROUND NOS. 3 AND 4 RELATE TO ENHANCEMENT MADE U /S. 40A(3) OF THE I. T. ACT OF RS.59,06,064/- AND TREATING THE DEPOSITS IN THE BAN K ACCOUNT OF RS.30,58,284/- AS UNEXPLAINED/UNPROVED CASH CREDIT/DEPOSIT U/S. 68 OF THE I. T. ACT. DURING THE APPELLATE PROCEEDING, THE LD. CIT(A) ISSUED NOTICE FOR ENHANC EMENT OF INCOME ON TWO GROUNDS VIZ., (I) 20% DISALLOWANCE ON RS.2,95,30,320/- U/S. 40A(3) ON CASH PURCHASE OF PADDY FROM SO CALLED FARMERS AMOUNTING TO RS.59,06,064/- AND (II) DISALLOWANCE U/S. 68 ON ACCOUNT OF UNEXPLAINED/UNPROVED CASH CREDIT/DEPOSIT IN BANK ACCOUNT OF RS.30,58,284/-. THE ASSESSEES CONTENTION IN RESPECT OF THE FIRST I SSUE WAS THAT THE PADDY AMOUNTING TO RS.2,95,30,320/- HAS BEEN PURCHASED FROM FARMERS AN D, THEREFORE, COVERED UNDER RULE 6DD OF THE I. T. RULES. IN SUPPORT OF ITS CONTENTI ON THE ASSESSEE FILED CERTIFICATE FROM 3 GRAM PANCHAYATS CERTIFYING THAT PADDY VENDORS BELON GED TO THEIR AREAS WERE FARMERS. TWENTY FIVE AFFIDAVITS WERE ALSO FILED FROM THE FAR MERS STATING THAT THEY POSSESSED AGRICULTURAL LAND AND HAVE PRODUCED PADDY AND ALSO CONFIRMED THAT THEY HAD SOLD PADDY TO THE ASSESEE WHICH WERE PRODUCED BY THEMSELVES. IN RESPECT OF THE OTHER ISSUE, ASSESSEES CONTENTION WAS THAT CASH DEPOSIT IN THE BANK IS OUT OF REGULAR BOOKS OF 5 ACCOUNTS MAINTAINED BY THE ASSESSEE AND IN SUPPORT OF THIS NECESSARY DOCUMENTS HAVE BEEN FILED. HOWEVER, THE LD. CIT(A) DID NOT ACCEPT THESE EXPLANATIONS OF THE ASSESSEE AND ENHANCEMENTS U/S. 40A(3) OF RS.59,06,604/- AND U/S. 68 OF RS.30,58,284/- WERE MADE. AGGRIEVED BY THESE ENHANCEMENTS ASSESEE IS I N APPEAL BEFORE US. 9. AT THE TIME OF HEARING LD. COUNSEL FOR THE ASSE SSEE REITERATED THE SAME SUBMISSIONS AS MADE BEFORE THE LD. CIT(A) AND FURTH ER SUBMITTED THAT THE EXPLANATION OFFERED BY THE ASSESSEE SUPPORTED BY THE NECESSARY DOCUMENTS HAS BEEN IGNORED BY THE LD. CIT(A) AS NO FURTHER VERIFICATION WHATSOEVER WA S MADE BY THE LD. CIT(A) BEFORE REJECTING THE EVIDENCE PRODUCED BY THE ASSESSEE AND COMING TO THE CONCLUSION THAT THE PADDY WAS PURCHASED FROM PERSONS OTHER THAN FARMERS AND THAT THE CASH DEPOSIT WAS OUT OF BOOKS ACCOUNT. HE, THEREFORE, PLACING RELIANCE ON THE EVIDENCE PRODUCED BEFORE THE LD. CIT(A) IN SUPPORT OF HIS CLAIM IN RESPECT OF BO TH THE ENHANCEMENTS MADE BY HIM, WHICH IS ALSO AVAILABLE IN THE PAPER BOOK FILED BY THE ASSESSEE BEFORE US, SUBMITTED THAT THE MATTER MAY KINDLY BE RESTORED TO THE FILE OF TH E ASSESSING OFFICER TO DECIDE BOTH THE ISSUES AFRESH AFTER MAKING NECESSARY VERIFICATION O F THE EVIDENCE FILED BY THE ASSESSEE. THE LD. DR DID NOT OBJECT TO THIS SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE. HENCE, IN THE INTEREST OF NATURAL JUSTICE, WE SET A SIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE ISSUES TO THE FILE OF THE ASSESSING OFF ICER FOR FRESH ADJUDICATION AFTER TAKING INTO CONSIDERATION THE EVIDENCE SUBMITTED BY THE AS SESSEE AND UPON PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. THEREFORE, THESE GROUNDS OF APPEAL OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. 11. ORDER IS PRONOUNCED IN THE OPEN COURT ON 22.02. 2011 SD/- SD/- . . ' , $ . . , (C. D. RAO) (D. K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER ( $ $ $ $) )) ) DATED : 22ND FEBRUARY, 2011 '/0 &12 3' JD.(SR.P.S.) 6 . 4 -5 65(7- COPY OF THE ORDER FORWARDED TO: 1 . +, / APPELLANT M/S. P. N. AGRO PVT. LTD., GUSHKARA MAN KAR ROAD, P.O. GUSHKARA, BURDWAN. 2 -+, / RESPONDENT, ITO, WD-2(2), BURDWAN. 3 . .& / THE CIT(A), ASANSOL 4. .& ( )/ CIT, ASANSOL . 5 . '= -& / DR, KOLKATA BENCHES, KOLKATA 5 -/ TRUE COPY, .&>/ BY ORDER, ? #2 /ASSTT. REGISTRAR .