ACIT, Circle - 2, Burdwan, Burdwan V. M/s. Tulasi Rice Mill, Burdwan

ITA 1722/KOL/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4787 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 25-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANKAR HALDER JCITSRDR
• Assessee Lawyers: BISWESWAR GHOSH
• Keywords: Bogus purchase; Rejection of books of accounts; Corroborative evidences
• Section: 143(3)

Judgement Text

, C , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. A.L. SAINI, ACCOUNTANT MEMBER ITA NO. 1722 / KOL / 20 17 ASSESSMENT YEAR :2014-15 ACIT, CIRCLE-2 AAYAKAR BHAWAN, COURT COMPOUND,BURDWAN- 713101 V/S . M/S TULASI RICE MILL VILL & PP.O. MONDALGRAM, DIST. BURDWAN-713426 [ PAN NO.AADFT 3080 G ] /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI SANKAR HALDER, JCIT-SR-DR /BY RESPONDENT SHRI BISWESWAR GHOSH, ADVOCATE /DATE OF HEARING 14-03-2019 /DATE OF PRONOUNCEMENT 17-05-2019 / O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THIS REVENUES APPEAL FOR ASSESSMENT YEAR 2014-15 A RISES AGAINST THE COMMISSIONER OF INCOME TAX (APPEALS)-BURDWAN ORDER DATED 28.04.2017 PASSED IN CASE NO.91/CIT(A)/ACIT/CIR-2/BWN/2016-17, INVOLVING PROCEEDINGS U/S 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT T HE ACT. 2. THE REVENUE RAISES THE FOLLOWING SUBSTANTIVE GRO UNDS IN ITS INSTANT APPEAL:- 1. WHETHER LD. CIT(A) HAS ERRED ON FACTS WHILE GIVI NG RELIEF TO THE ASSESSEE BY RESTRICTING THE ENHANCEMENT OF GROSS PROFIT BY ONLY ABOUT 0.5% WHEREAS THE AO ESTIMATED THE ENHANCEMENT OF GROSS PROFIT BY ABOUT 3.5% SUCH THAT THE OVERALL GROSS PROFIT WAS 8.5% IN THE ASSESSMENT ORDER, WHIL E THE ASSESSEE HAD RETURNED INCOME WITH A GROSS PROFIT OF ONLY ABOUT 5.5% LD. C IT(A) QUASHED THE REPORTS OF THE SEVERAL GOVERNMENT AND PRIVATE ORGANIZATIONS THAT H AVE CARRIED OUT EXTENSIVE RESEARCH IN THE FIELD OF THE PHYSICAL AND FINANCIAL ASPECTS OF RICE MILLS SITUATED ALL OVER INDIA. LD. CIT(A) HAS REFUTED THE RESULTS OF SUCH R EPORT WITHOUT ANY OTHER COUNTERPROOF. LD. CIT(A) IS THUS ERRONEOUS IN HIS J UDGEMENT. 2. WHETHER CIT(A) HAS ERRED IN FACTS IN ESTIMATING THE ADDITION TO GROSS PROFIT AMOUNTING TO ONLY 0.5% WHILE STATING THAT IF THE PURCHASES ARE ENHANCED THROUGH ITA NO.1722/KOL/2017 A.Y. 2014-1 5 ACIT CIR-2/BWD VS. M/ TULASI RICE MILL PAGE 2 BOGUS ENTRIES BY 10% THEN THIS COULD LEAD TO A CORR ESPONDING ENHANCEMENT IN GROSS PROFIT BY ROUGHLY 10% KEEPING ALL OTHER FACTORS THE SAME AND VICE VERSA. 3. THE CIT(A)S DETAILED DISCUSSION PARTLY UPHOLDI NG THE ASSESSING OFFICER IMPUGNED ADDITION READS AS UNDER:- DURING APPEAL THE APPELLANT HAS SUBMITTED A SET OF WRITTEN SUBMISSIONS AS WELL AS PRODUCED DOCUMENTARY EVIDENCE IN SUPPORT OF HIS SUB MISSIONS IN ORDER TO CHECK THE MATERIAL RELIED UPON BY THE AO, THE ASSESSMENT RECO RDS WERE ALSO CALLED FOR AND PERUSED. THE OLD CASH BOOK AND THE NEW ONE PRODUCED BY THE APPELLANT WERE EXAMINED AND COMPARED. THE WRITTEN SUBMISSIONS OF T HE APE ARE REPRODUCED BELOW FOR READY REFERENCE. 1. THAT THE LD AO HAD ERRED IN ADDING RS.95,80,579 TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF INGENUINE PAYMENT TOWARDS P URCHASE OF PADDY WHEN IT IS APPARENT FROM THE FACE OF THE ORDER VIDE PAGE NO .-3 UNDER PARA-5, THAT THERE IS NO DISPUTE WITH THE PURCHASE AO HIMSELF. PLEASE NO TE THAT THE TOTAL PURCHASE OF THE ASSESSEE FIRM FOR THE YEAR UNDER CONSIDERATION WAS OF RS.25,61,22,805 AND THE SAME FIGURE BEING CORROBORATED BY THE ACKNOWLED GEMENT OF THE RETURNS FILED BEFORE THE DIRECTORATE OF THE COMMERCIAL TAXES, DEP ARTMENT OF FINANCE, GOVT. OF WEST BENGAL, PHOTOCOPIES OF WHICH ARE ATTACHED FOR YOUR KIND PERUSAL. 2. THAT THE LD AO REJECTED THE BOOKS OF ACCOUNTS I NCLUDING THE CASH BOOK BECAUSE HE FOUND SOME DEVIATION. HOWEVER, HE DID NOT INVOKE SUCH DEVIATION INTO ADDITION BUT ESTIMATED THE GROSS PROFIT OF THE ASSESSEE FIRM BASED ON SOME RESEARCH PAPERS THAT WERE MOSTLY CONDUCTED ON HYPOTHETICAL D ATA AND SUCH PAPERS DO NOT HAVE ANY VERACITY TO BE RELIED UPON FOR THE REASONS AS ATTACHED FOR YOUR KIND PERUSAL IN A SEPARATE SHEET AND HOPE YOUR HONOUR WI LL APPRECIATE THE FACT AND DELETE THE ADDITION. 3. THAT DURING THE, ASSESSMENT PROCEEDINGS, THE CAS H BOOK WAS ASKED IN TWO PARTS AND THEY WERE COMPUTER GENERATED BY USING THE SOFTW ARE NAMED TALLY. ON 24/11/16 THE CASH BOOK FOR THE MONTH OF APRIL 2013, NOVEMBER 2013 AND FEBRUARY 2014 WAS PRODUCED AND LEDGERS OF SOME PART IES FROM WHOM PURCHASES WERE MADE DURING THE YEAR WAS PRODUCED. AND IN TALL Y, ONCE A VOUCHER ENTRY IS MADE, IT WILL AUTOMATICALLY FIT UNDER DIFFERENT HEA DS AND THERE IS NO SCOPE OF MANUAL INTERVENTION. AND THE DEVIATION OCCURRED BET WEEN THE THREE MONTH'S CASH BOOK PRODUCED AND THE LEDGER. AS BOTH THE LEDGER AN D THE CASH BOOK WAS PRODUCED IN THE SAME DAY AND TIME, THE DEVIATION MU ST HAVE OCCURRED DUE TO SOME TECHNICAL FAULT AND THAT IS WHY, THE WHOLE CAS H BOOK IN BINDED FORM WAS PRODUCED DURING THE ASSESSMENT PROCEEDINGS ON 08/12 /2016 TO CLARIFY ALL THE DOUBTS AND DEVIATION AND THAT TALLIED IN TOTO WITH ALL THE ENTRIES. THE LD AO ALLEGED THAT THE NEW CASH BOOK IS AFTER THOUGHT AND THE ASSESSEE TRIED TO RECTIFY THE DEFECTS AS HELD VIDE PAGE NO 5 UNDER PARA - 9, BUT THAT IS NOT TRUE. IF THAT WAS SO, THEN THE FOLLOWING BALANCE WOULD NOT HAVE TALLI ED WITH THE BALANCES OF THE BINDED CASH BOOK:- PARTICULARS AMOUNT(RS) OPENING CASH BALANCE AS ON 01/05/2013 24,15, 938/- CLOSING CASH BALANCE AS ON 31/10/2013 1,26,9 2,696/- OPENING CASH BALANCE AS ON 01/12/2013 53,30, 118/- CLOSING CASH BALANCE AS ON 31/01/2014 48,16, 739/- OPENING CASH BALANCE AS ON 01/03/2014 24,17, 824/- SO IGNORING THE TECHNICAL FAULT AND ALLEGING THE AS SESSEE TO HAVE MADE AN AFTERTHOUGHT CASH BOOK AND REJECTING THE BOOKS OF A CCOUNT IS BAD IN LAW AS THE WHOLE CASH BOOK IN BINDING FORM WAS GIVEN DURING TH E ASSESSMENT STAGE ONLY ON ITA NO.1722/KOL/2017 A.Y. 2014-1 5 ACIT CIR-2/BWD VS. M/ TULASI RICE MILL PAGE 3 0811212016, WHEREAS THE ORDER WAS PASSED ON 2011212 016 AND HOPE YOUR HONOUR WILL APPRECIATE THE FACT AND DO THE NEEDFUL. 4. THAT IN PAGE NO. - 6, UNDER POINT - II OF PARA - 12, THE LD AO CONTENDED THAT PAYMENT TOWARDS PURCHASE TO THE TUNE OF RS 39,55,31 6 IS BOGUS, IGNORING THE FACT THAT THEY WERE PAID BY CHEQUE. PLEASE NOTE THAT THE LD. AO WAS TRYING TO FIND OUT THE CHEQUE PAYMENTS IN THE CASH BOOK AND HE SUO MOT O TOOK IT TO BE GRANTED THAT ALL THE PURCHASES WERE MADE IN CASH, WHICH IS NOT T RUE AND VIDE LETTER DATED 12/12/2016 RECEIVED BY THE DEPT. ON 13/12/2016, THE ASSESSEE CLARIFIED THAT PART WERE CHEQUE PAYMENTS AND THE LD AO HAD THE BANK DET AILS WITH HIM TO VERIFY THE ASSESSEE'S CONTENTION BUT INSTEAD HE DISALLOWED A M AJOR PART OF IT ON VAGUE REASONS. PLEASE ALSO FIND ATTACHED A SEPARATE SHEET HAVING ALL THE DETAILS OF THE CHEQUE PAYMENTS WITH CORROBORATING EVIDENCES AND HO PE YOUR HONOUR WILL APPRECIATE THE FACT AND DELETE THE ADDITION. 5. THAT IN PAGE NO. - 6, UNDER POINT - I OF PARA - 12, THE LD AO CONTENDED THAT PAYMENT TOWARDS PURCHASE TO THE TUNE OF RS 3,81,000 IS BOGUS, BECAUSE THOUGH THE PERSONAL LEDGER SHOWS THERE WAS CASH PAYMENT BU T THE CASH BOOK DID NOT SHOW SUCH. NOW AS ALREADY SAID UNDER POINT - 3 OF T HIS SUBMISSION THAT THIS TECHNICAL FAULT PROVES THAT THE BINDED FORM OF CASH BOOK PROVIDED BEFORE THE LD. A 0 ON 0811212016 WAS NOT AFTER THOUGHT BUT WAS IN FA CT ORIGINAL AND REAL AND DUE TO SOME TECHNICAL ERROR, THE DEVIATION OCCURRED AND IT WAS PURELY BEYOND HUMAN CONTROL AND THEREFORE REJECTING THE CASH BOOK AND A DDING THE AMOUNT WILL BE BAD IN LAW. 6. THAT THE LD. AO HOWEVER DID NOT INVOKE ANY OF TH E DEVIATION BUT ESTIMATED THE GROSS PROFIT AT AN UNREALISTIC RATE OF 8.5% BASED O N SOME RESEARCH PAPERS THAT WERE CONDUCTED OUTSIDE THE STATE OF WEST BENGAL AND ALSO SUCH RESEARCH WAS BASED ON HYPOTHETICAL DATA. PLEASE NOTE THAT THE PR OFITABILITY OF A BUSINESS IN WEST BENGAL DEPENDS ON ITS CLIMATIC CONDITION AND D EMOGRAPHIC CHARACTER OF THE LAND FROM WHERE THE RAW MATERIALS PROCURED AND THE NATURE AND TYPE OF THE PRODUCTS THAT COME OUT AS FINISHED GOODS. IN THIS I NSTANT CASE, THE ASSESSEE FIRM PRODUCES PAR BOILED NON BASMATI COMMON RICE, WHICH IS LOCALLY KNOWN AS LAL SWORNO AND IN SIMPLE TERM IT CAN BE SAID AS THE POO R MAN'S RICE, WITHOUT ANY GRADE AND IN TECHNICAL TERM IT IS CALLED MTU7029. P LEASE ALSO NOTE THAT THIS RICE IS ONLY PRODUCED IN WEST BENGAL AND ALL THE RESEARCH P APERS BASED ON WHICH THE UNREALISTIC ESTIMATION OF 8.5 % GROSS PROFIT IS MAD E, HAD CONDUCTED ITS STUDY IN THE SOUTHERN PARTS OF INDIA AND APPLYING SUCH PROFIT IN THE BUSINESS CONDUCTED IN WEST BENGAL IS NOT JUSTIFIED AND BAD IN ASSESSMENT AND THEREFORE HOPE YOUR HONOUR WILL APPRECIATE THE FACT AND DELETE THE ADDI TION. 7. THAT IN THESE CIRCUMSTANCES, IT IS APPARENT THAT THERE IS NO AMBIGUITY WITH PURCHASE MADE BY THE ASSESSEE FOR THE F/Y 2013-2014 AND THEY ARE ALL CLEAN AND TRANSPARENT AND SUCH IS ALSO ADMITTED BY THE LD AO IS HIS ORDER VIDE PAGE NO.- 3 UNDER PARA - 5 WHERE HE CATEGORICALLY MENTIO NED THAT THERE IS NO DISPUTE WITH THE QUANTITY OF GOODS SOLD AND PURCHASED, BUT HE QUESTIONED THE PAYMENTS BUT SUCH PAYMENTS ARE CORROBORATED TO BE GENUINE BY THE BY THE ACKNOWLEDGEMENT OF THE RETURNS FILED BEFORE THE DIR ECTORATE OF THE COMMERCIAL TAXES, DEPARTMENT OF FINANCE, GOVT. OF WEST BENGAL, AS STATED UNDER POINT - 1 OF THIS SUBMISSION. 8. THAT IT IS REQUESTED BEFORE YOUR HONOUR TO DELET E THE ADDITION AS THAT WAS IMPOSED ON VAGUE GROUND AND WITHOUT ANY MERIT. REASONS WHY THE BELOW NOTED RESEARCH PAPERS CAN NOT BE RELIED UPON TO MAKE THE UNREALISTIC ESTIMATION OF 8 .5% GROSS PROFIT IN THE CASE OF MIS TULASI RICE MILL FOR THE AIY 2014-15 . 1. NABARD - DATA PROVIDED IN THE PAPER ARE HYPOTHET ICAL IN NATURE BASED ON A MODEL PROJECT. THIS IS BECAUSE UNDER PAGE -6, IT US ES THE TERM ' TENTATIVE ' UNDER THE HEADING ' ELECTRICAL AND OTHER ITEMS '. ALSO UNDER PAGE NO.-7, UNDER HEADING ITA NO.1722/KOL/2017 A.Y. 2014-1 5 ACIT CIR-2/BWD VS. M/ TULASI RICE MILL PAGE 4 ' UTILITIES ' AND SUB HEADING ' POWER ', IT COULD BE SEEN THAT THE PAPER IS BASED ON A MODEL PROJECT, WHICH IS FAR FROM REALITY. 2. DEPTT. OF SCIENCE & TECHNOLOGY, GOVT. OF INDIA ( FICCI) - THIS STUDY WAS CONDUCTED TAKING THE OUT RUN RATIO AS 80% , WHICH IS MOST UNREALISTIC BECAUSE THE CENTRAL GOVT. IN ITS CIRCULAR VIDE NO. 39-412014-S & I DATED 03/12/2014 STATES THAT THE UNIFORM OUT RUN RATIO FO R PAR-BOILED RICE TO BE 68%. 3. ANDHRA PRADESH INDUSTRIAL & TECHNICAL CONSUL TAN CY ORGANISATION L TO. (APITCO)- THIS REPORT IS BASED O N HYPOTHETICAL DATA AND DOES NOT RELY UPON ORIGINAL AND REALISTIC INFORMATI ON BUT ONLY DOES A PROJECTION ON WHAT COULD HAPPEN IN A GIVEN CIRCUMSTANCES. MOREOVE R, THIS STUDY DOES NOT ALSO CLARIFY THE NATURE OF THE TYPE OF PRODUCT. 4. CLUSTER DEVELOPMENT EXECUTIVE SMALL INDUSTRIES S ERVICE INSTITUTE - THIS PAPER AS PROVIDED BY THE LEARNER A .O. BASED ON WHICH THE ESTIMATION HAS BEEN MADE IS NOT A COMPLETE SET AND MOSTLY IT DISCUSSES ABOUT BASMATI VARIETY OF RICE. 5. PROJECT REPORT IN RESPECT OF RICE MILLS IN KELAD Y, KERALA - THIS REPORT IS INCOMPLETE AND DOES NOT SPECIFY THE TYPE OF RICE. 6. DEPARTMENT OF AGRICULTURAL MARKETING, CO-OPERATI ON AND BUSINESS MANAGEMENT UNIVERSITY OF AGRICUL TURAL SCI ENCES BENGALURU-560065 - UNDER PAGE - 5 OF THE REPORT, IT CATEGORICALLY SAYS THAT 'FURTHER, THE EXPRESSED OPINION WITH REGARD TO VARI OUS IS. SUES OF THE STUDY MAY NOT BE TOTALLY FREE FROM PERSONAL BIAS AND PREJUDIC E. HENCE, 7. CRISIL L TO. - THE STUDY IS LIMITED TO BASMATI V ARIETY OF RICE ONLY. I HAVE EXAMINED THE MATERIAL ON RECORD AND THE APPE LLANTS SUBMISSIONS AND OTHER SUPPORTING EVIDENCE. THE FOLLOWING SALIENT FEATURE S EMERGE FROM THIS STUDY: IT IS QUITE APPARENT THAT THERE ARE DISCREPANCIES I N THE LEDGER ACCOUNTS OF CERTAIN PARTIES, AMOUNTING TO JUST OVER 3 LAKHS, TH AT HAVES NOT BEEN SATISFACTORILY EXPLAINED BY THE APPELLANT. THE FACT OF THE MATTER IS THAT IT WAS THE APPELLANT WHO SUBMITTED, FIRST COPIES OF CASH BOOK EXTRACTS FOR THREE MONTHS, AND THEREAFTER , THE ENTIRE CASH BOOK UPON THE ASSESSING OFFICER'S DEMAND. THE DISCREPANC IES THAT ARE NOTED ARE VERY MUCH PART OF THE RECORD. THE APPELLANT HAS NO REASONABLE ANSWER AT ALL TO EXPLAIN WHY THESE DISCREPANCIES CREPT IN. THE DISCR EPANCIES AMOUNTED TO ABOUT A CRORE FOR TWO MONTHS. THERE ARE NO FURTHER DISCREPANCIES FOR THE MONTHS OTHER THAN THOSE FOR WHICH TWO SEPARATE OL D AND NEW CASH BOOK EXTRACTS WERE FURNISHED. THERE ARE CERTAIN UNEXPLAINED PURCHASES, PAYMENTS F OR WHICH WERE CLAIMED TO HAVE BEEN MADE IN CHEQUE. THE AO COULD NOT FIND A JUSTIFICATION FOR THESE PAYMENTS. THE APPELLANT HAS HOWEVER SOUGHT TO EXPLA IN THESE PAYMENTS DURING APPEAL. THIS HAS BEEN EXPLAINED IN PARA 4 OF HIS WRITTEN SUBMISSIONS REPRODUCED ABOVE. HE HAS ALSO PRODUCED THE BANK BOO K AS WELL AS OTHER MATERIAL INCLUDING DETAILS OF CHEQUE PAYMENTS TO SU BSTANTIATE HIS CLAIMS. THE DISCREPANCIES BETWEEN THE CASH OUTGOES OF THE C ASH BOOK AND THE PURCHASES DECLARED BY THE APPELLANT REMAINED UNEXPL AINED IN VIEW OF THE ABOVE DISCREPANCIES NOTE BY THE AO. WHEN WE EVALUATE THIS APPEAL IN THE BACKDROP OF THE ABOVE NOTED SUMMARY OF DISCREPANCIES, WE FIND THAT THE BOOKS OF THE APPELL ANT THE CASH BOOK MAINLY, IN THIS CASE IS QUITE UNRELIABLE IN RESPECT OF THE THREE MONTHS MENTIONED ABOVE. THE AO WAS QUITE RIGHT IN REJECTING THE BOOKS OF ACCOUNT E VEN IF WE PARTLY ACCEPT THE DISCREPANCIES IN RELATION TO CHEQUE PAYMENTS. HAVIN G SAID THAT, WE HAVE TO NOW COME TO THE NEXT QUESTION OF ESTIMATING THE GROSS P ROFITS OF THE APPELLANT HAS RELIED UPON CERTAIN REPORTS ENUMERATED ABOVE AND TAKEN 8.5 % AS THE GROSS PROFIT OF THE APPELLANT. ITA NO.1722/KOL/2017 A.Y. 2014-1 5 ACIT CIR-2/BWD VS. M/ TULASI RICE MILL PAGE 5 THE APPELLANT HAS HOWEVER RAISED SOME VALID OBJECTI ONS AND QUERIES IN RELATION TO THE ASSUMPTION OF THE SAID GROSS PROFIT ON THE BASI S OF REPORTS THAT HE SAYS ARE NOT VALIDATED NOR GIVE A REALISTIC PICTURE OF THE RICE MILLING BUSINESS WHEN APPLIED TO THE REGION IN WHICH THE APPELLANT OPERATES. HE HAS SUMM ARIZED THE REASONS AS UNDER:- REASONS WHY THE BELOW NOTED RRESEARCH PAPERS CAN NO T BE RRELIED UPON TO MAKE THE UNREALISTIC ESTIMATION OF 8.5% GORSS PROFIT IN THE CFASE OF M/S TULASI RICE MILL FOR THE A/Y 2014-15. 1. NABARD DATE PROVIDED IN THE PAPER ARE HYPOTHET ICAL IN NATURE BASED ON A MODEL PROJECT. THIS IS BECAUSE UNDER PAGE-6, IT USE S THE TERM TENTATIVEUNDER THE HEADING ELECTRICAL AND OTHER ITEMS. ALSO UNDE R PAVGE NO.-7, UNDER HEADING UTILITIES AND AFTER EXAMINING THE ABOVE REPORTS, WE CONCLUDE THAT THE FACT IS THAT RIGHT FROM PROCUREMENT OF PADDY, CONSUMPTION OF PADDY, PRODUCT ION OF RICE, SALE OF RICE, STOCK OF PADDY AND RICE ARE CONTROLLED AND MONITORE D BY EMPOWERED AUTHORITIES. STATUTORY REGISTERS ARE INSISTED UPON BY THE GOVERN MENT'S FOOD AND PUBLIC AND FOR SUPERVISION MOVEMENT OF PADDY AND RICE BY EACH AND EVERY RICE MILLS. OFFICIALS OF EMPOWERED AUTHORITIES VISIT EACH AND EVERY RICE MILL PERIODICALLY FOR MONITORING OF RICE MILL OPERATIONS. DAILY PROCUREMENT OF PADD Y ARE RECORDED IN STATUTORY REGISTERS WHICH FORMS AN INTEGRAL PART OF BOOKS OF ACCOUNTS. BUT DESPITE THESE SAFEGUARDS THERE MIGHT HAVE BEEN QUESTIONS OF QUANT ITY OF PADDY ACTUALLY PURCHASED BY THE APPELLANT. BUT, THIS WE FIND, IS N OT THE CASE. THE AO HAS NOT FOUND ANY FLAW WITH THE REGISTERS, OR ANY OF THE BO OKS MAINTAINED BY THE APPELLANT. THE QUANTITIES PROCURED BY THE APPELLANT HAVE NOT BEEN QUESTIONED. IT HAS, IN FACT, BEEN CATEGORICALLY ASSERTED IN THE AS SESSMENT ORDER THAT THERE IS NO DISPUTE AS REGARDS QUANTITY OF PADDY PURCHASED, CON SUMPTION OF PADDY. PRODUCTION AND SALE OF RICE AND RICE BRAN, AND STOC K OF PADDY RICE AND CASH. DUE TO ABSENCE OF NAME AND ADDRESS, THE ASSESSING O FFICER HELD THAT CASE PURCHASES WERE NOT VERIFIABLE - BUT NOT IN TERMS OF QUANTITY, OR THAT THE PARTIES WERE BOGUS, BUT IN TERMS OF THE PRICE PAID FOR SUCH PROCUREMENT. THE AO HAS NOT BROUGHT ANYTHING ON RECORD TO SUBSTANTIATE HIS ASSU MPTION THAT THE PRICES PAID FOR PADDY WERE NOT RELIABLE OR WERE IN SOME WAY EXCESSI VE. HE HAS NOT MADE PER QUINTAL COMPARISONS FOR THE PURCHASE PRICE OF PADDY . HE HAS EVEN OTHERWISE NOT BROUGHT ANY CIRCUMSTANCES TO BEAR THAT THE PRICES A T WHICH THE PADDY WAS PURCHASED WERE IN ANY WAY UNRELIABLE. THIS ISSUE HA S TO BE BROUGHT ON RECORD BY THE AO, IF HE ASSERTS THAT THE PRICE OF PADDY WAS O VERSTATED. THIS IS ESPECIALLY IMPORTANT IN THE CONTEXT OF THE FACT THAT THERE IS A MINIMUM SUPPORT PRICE FOR PROCUREMENT OF PADDY WHICH IS FIXED BY THE GOVERNME NT OF INDIA IN EACH AND USEFUL GUIDE TO LIKELY PRICE AT WHICH PURCHASES OF PADDY WOULD BE MADE IN THE OPEN MARKET. I WOULD TREND TO AGREE WITH THE APPELL ANT WHEN HE STATES, IN THIS CONNECTION THAT THERE BEING NO DISPUTE WITH QUANT ITY OF PADDY PURCHASED, THE TOTAL QUANTITY ON BEING MULTIPLIED WITH MINIMUM SUP PORT PRICE WILL UNDOUBTEDLY REFLECT THE AMOUNT PAYABLE TOWARDS PADDY PURCHASE. AFTER DEDUCTING THE GROSS VALUE OF CREDIT PURCHASE, THE ACTUAL AMOUNT PAID AG AINST CASH PURCHASE, COULD IT WE BEEN EASILY DERIVED. EVEN THIS EXERCISE HAS NO T BEEN ENTERED INTO BY THE AO. HAVING SAID THIS, THE FACT IS THAT THE AO HAS BROUG HT ON RECORD THE FACT THAT THE CASH BOOM WAS UNRELIABLE TO THE EXTENT ELUCIDATED B Y HIM IN THE ABOVE DISCUSSIONS. THEREFORE IT GROSS WITHOUT SAYING THAT THE ESTIMATION OF THE GROSS PROFIT OF THE APPELLANT IS IN ORDER AND CALLED FOR . INSTEAD IF CONDUCTING AN EXERCISE IN WHICH HE ESTIM ATES THE AMOUNT OF DISCREPANCIES AND THEREFORE TRY AND DERIVE THE EXTE NT TO WHICH THE GROSS PROFIT IS ITA NO.1722/KOL/2017 A.Y. 2014-1 5 ACIT CIR-2/BWD VS. M/ TULASI RICE MILL PAGE 6 UNDERSTATED THROUGH AN ANALYSIS OF THE DISCREPANCI ES, THE AO HAS PICKED UP SOME REPORTS THAT INDICATED THE LIKELY GROSS PROFIT THAT A PERSONS IN THIS TYPE OF BUSINESS COULD BE LIKELY TO EXPECT. THESE REPORTS, WHILE UNDOUBTEDLY RELEVANT, SHOULD BE UTILIZED WITH CARE WHILE DECIDING ISSUES RELATED TO REVENUE. SINCE ALL THESE REPORTS ARE REGION-SPECIFIC AND ALSO DEPEND O N SEVERAL OTHER FACTORS, LIKE THE GRADE OF PADDY BEING USED, THE GEOGRAPHICAL ARE A, RAINFALL CONDITIONS, LOGISTICS LINES OF PADDY SUPPLIES, THE INCIDENCE OF POWER SUPPLIES, LABOUR CONDITIONS ETC., IT HAS TO BE DEMONSTRATED BY THE A O THAT ANY PARTICULAR REPORT THAT HE IS PROPOSING TO USE. THE CONDITIONS AS LAID DOWN IN THE SAID REPORTS SHOULD BE SHOWN TO HAVE AT LEAST A ROUGH EQUIVALENCE WITH THE CONDITIONS THAT EXIST IN THE CASE OF THE APPELLANT. THE REPORTS THEMSELVES VARY CONSIDERABLY FROM ONE ANOTHER AND SHOW PROJECTED GROSS PROFIT MARGINS THA T VARY OVER A RANGE OF 6% TO 8.5%. THIS KIND OF VARIATION OVER A TURNOVER OF ABO UT RS.25 CORE CAN CREATE A VARIATION IN GROSS PROFIT OF AS MUCH AS ABOUT 65 LA KH. THIS MAKES IT IMPERATIVE NOT ONLY FOR THE AO TO STATE CLEARLY WHICH REPORT HE IS RELYING ON BUT ALSO HOW THE RESULTS OF THIS REPORT WOULD APPLY TO THE APPELLANT S CASE. NEEDLESS TO SAY THAT THERE HAS TO BE A JUDICIOUS AN CAREFUL APPLICATION OF MIND IN THIS RESPECT BY THE ASSESSING OFFICER. COMING TO THE CASE AT HAND. THE AO HAS PICKED UP ON E OF SEVERAL STUDIES THAT HE HAS QUOTED. NOWHERE HAS HE STATED HIS REASONS FOR DOING SO. HE HAS NOT SHOWN HOW THE CONDITIONS ENUMERATED IN THESE STUDIES APPL Y TO THE CASE OF THE APPELLANT. IT IS THAT THE STUDIES QUOTED BY HIM ARE STUDIES CONDUCTED IN CONTROLLED ENVIRONMENTS AND THEREFORE WOULD ALSO HAVE TO SHOW HOW THEIR RESULTS WOULD E TRANSLATED THE WOULD BE SERIOUS DOUBTS RAISED AS TO THE VALIDITY OF SUCH CONTROLLED RESULTS UPON REAL-LIFE SITUATIONS. THE QUALITY OF R ICE THAT IS BEING USED, THE PADDY YIELDS, AND RATHER CONDITIONS DO NOT AS IS IT IS MA TCH UP WITH STUDIES THAT WERE CONDUCTED MOSTLY IN KERALA. ANDHRA PRADESH, HARYANA AND SUCH OTHER PLACES. IT IS NOT CLEAR FROM A STUDY OF THE REPORTS AS TO WHET HER THE CONDITIONS ENUMERATED THEREIN WOULD IN DE D BE APPLICABLE IN THE INSTANT CASE. THE APPELLANT HAS POINTED OUT SOME VERY VALID REASO NS, BESIDES THOSE MENTIONED ABOVE FOR INSISTING THAT RELIANCE COLD NOT AND SHOU LD NOT BE PLACED UPON THESE REPORTS. THESE ARE AS STATED ABOVE AND CANNOT, IN M Y OPINION BE REJECTED OUTRIGHT. THE APPELLANT HAS POINTED- OUT MATERIAL R EASONS LIKE THE DIFFERENCE IN THE TYPE AND GRADE OF RICE BEING REPORTED UPON AND THAT WHICH IS IN QUESTION THE INSTANT CASE. THE QUESTIONS RELATED TO GEOGRAPHICAL AREA, WEATHER, SOIL CONDITIONS, MARKETS ETC ALSO UNDOUBTEDLY HAVE RELEV ANCE COMING TO ISSUE OF PROCEDURES; EVEN IF FOR THE SAKE OF ARGUMENT, IT IS BELIEVED BY THE AO, OR SHOWN BY HIM THAT ONE OR MORE OF THE STUDIES HAVE RELEVAN CE TO THE SPECIFIC CASE OF THE APPELLANT, IT IS INCUMBENT UPON HIM TO GIVE THE APP ELLANT THE OPPORTUNITY TO REFUTE THIS INFERENCE OF THE AO. ANY MATERIAL THAT IS TO B E USED AGAIN THE APPELLANT HAS TO BE AT LEAST SHOWN TO HIM. THIS IS THE CASE EVEN IF THE MATERIAL TO BE USED IS FROM EXPERTS. THE APPELLANT, IN THIS CASE WAS NUT A FFORDED ANY OPPORTUNITY TO RESPOND IN IS DEFENCE. AN ADDITION BASED UPON SUCH A FAULTY PROCEDURE AS IT S NOT MAINTAINABLE IN LAW. WITHOUT PREJUDICE TO WHAT HAS ALREADY BEEN STATED A BOVE, EVEN IF THE AO WERE TO REJECT THE BOOKS AS UNRELIABLE, AND PROCEED TO ESTI MATE PROFITS, IT WOULD BE MORE CREDIBLE TO DO SO BY RELYING UPON THE DATA THAT VIR TUALLY ABOUNDS AROUND HIM IN BURDWAN. THERE ARE ALMOST 600 FUNCTIONAL RICE MILLS OPERATING IN BURDWAN. THERE IS AN ABUNDANCE OF DATA AVAILABLE FROM THESE MILLS FOR MAKING COMPARISONS AND FORMING ESTIMATES. THE AO, SURPRISINGLY, HAS NOT QU OTED EVEN ONE CASE AS MATTER OF ITA NO.1722/KOL/2017 A.Y. 2014-1 5 ACIT CIR-2/BWD VS. M/ TULASI RICE MILL PAGE 7 COMPARISON. THIS CIRCUMSTANCE WOULD ALSO CAST A DOU BT ON THE ESTIMATES FORMED BY THE AO. IN THE CONTEXT OF THE ABOVE DISCUSSIONS, I CANNOT U NDERSTAND AS TO HOW THE RESULTS OF HE SAID REPORTS WERE APPLIED IN THIS CASE WITHOU T FOLLOWING PROCEDURES FOR THE VALIDATION AND R LIABILITY OF THIS DATA IN RELATION TO THIS REGION OR WITHOUT AFFORDING THE APPELLANT WITH A REASONABLE OPPORTUNITY TO REBU T THE FINDINGS. I CANNOT FIND MERIT IN THE AO'S ACTION OF RELYING UPON THE SAID R EPORTS AND ASSUMING THAT THERE WAS A GROSS PROFIT OF 8.5%. IT WOULD BE MUCH MORE REASONABLE TO ESTIMATE THIS G ROSS PROFIT BY ESTIMATING THE MOUNT OF DISCREPANCY FOUND IN THE CASH BOOK. WE FIN D THAT THE AMOUNT OF DISCREPANCY FOUND IS JUST OVER 2 CRORE IN THE CASH BOOKS CLOSING AND OPENING BALANCES. SINCE THE OTHER DISCREPANCIES ALSO APPEAR WITHIN THE CASH BOOK AND THAT FACT THAT THE EFFECT OF ONE DISCREPANCY WOULD CARRY OVER - TO LARGE EXTENT- TO THE OTHER DISCREPANCY, ONE CAN ESTIMATE THAT THE TH ERE COULD BE A LOSS OF GROSS PROFIT AMOUNTING TO ABOUT 0.5% IN THE OVERSTATEMENT OF PURCHASES OF LOOKING OF BOGUS PURCHASES. THIS IS BECAUSE THE SAID DISCREPAN CIES WOULD TELESCOPE INTO ONE ANOTHER. IN THE INTERESTS OF JUSTICE AND FOR TH E PURPOSES OF REVENUE, THEREFORE, IT WOULD SUFFICE TO RESTRICT THE ESTIMATION OF PROF IT TO 0.5% OVER AND ABOVE THAT DECLARED BY THE APPELLANT. THE RATIONALE BEHIND THI S IS THAT THE DISCREPANCIES FOUND WITHIN PURCHASES ARE REFLECTED - IN THE NEGAT IVE - IN THE DISCREPANCIES FOUND IN GROSS PROFIT. FOR EXAMPLE, SAY, IF THE PURCHASES ARE ENHANCED THROUGH BOGUS ENTRIES BY 10%, THEN THIS WOULD LEAD A CORRESPONDIN G ENHANCEMENT IN GROSS PROFIT BY ROUGHLY 10%, KEEPING ALL OTHER FACTORS THE SAME, AND VICE VERSE. BEFORE, IN THE INSTANT CASE, THE MAXIMUM DISCREPANCIES IN PURCHASE S, EVEN WITHOUT TELESCOPING WOULD LEAD TO THE ENHANCEMENT IN PROFIT BY ABOUT 10 % OVER AND ABOVE WHAT WAS DECLARED BY THE APPELLANT. THIS WOULD LEAD TO A GRO SS PROFIT ENHANCEMENT OF ONLY ABOUT 0.5% AFTER MAKING SOME SMALL PROVISION FOR TE LESCOPING EFFECTS OF THE DISCREPANCIES IN ENTRIES FOUND IN THE CASH BOOK. TH E AO IS THEREFORE DIRECTED TO GIVE EFFECT TO THIS APPEAL ACCORDINGLY. 4. THE REVENUE VEHEMENTLY CONTENDS DURING THE COURS E OF HEARING THAT THE ASSESSING OFFICER HAD RIGHTLY MADE THE IMPUGNED ADDITION BASED ON PROFIT RATIO OF VARIOUS NON-PROFIT EARNING INSTITUTIONS CA RRYING OUT EXTENSIVE RESEARCH IN THE FIELD OF PADDY AND ON RICE MILLS SITUATED A LL OVER INDIA. ITS CASE IS THAT CIT(A) HAS ERRED IN LAW AND ON FACTS IN PARTLY REV ERSING THE ASSESSING OFFICERS ACTION THEREBY RESTRICTING THE IMPUGNED A DDITION ONLY TO THE EXTENT OF GROSS PROFIT ENHANCEMENT AS 8.5%. WE FIND NO MERIT IN REVENUES INSTANT ARGUMENT. CASE RECORD INDICATE THAT THE ASSESSEE HA D FILED ITA NO.2066/KOL/2017 AGAINST THE CIT(A) VERY ORDER. LEA RNED CO-ORDINATE BENCH THEREIN DIRECTED THE ASSESSING OFFICER TO RESTRICT THE IMPUGNED ADDITION TO A LUMP SUM FIGURE OF 5 LAC ON THE VERY ISSUE. THE REVENUE WAS DULY HEARD IN THE SAID PROCEEDINGS. WE THEREFORE CONCLUDE IN THES E PECULIAR FACTS AND ITA NO.1722/KOL/2017 A.Y. 2014-1 5 ACIT CIR-2/BWD VS. M/ TULASI RICE MILL PAGE 8 CIRCUMSTANCES THAT THE REVENUES INSTANT APPEAL SEE KING TO REVIVE THE ASSESSING OFFICERS ACTION MAKING THE IMPUGNED ADDI TION IN ENTERITY DOES NOT HOLD GROUND. AS THE ISSUE STANDS CONCLUSIVE DECIDED IN EARLIER ADJUDICATION. WE THEREFORE DECLINE THE REVENUES SOLE SUBSTANTIVE GROUND ON THIS COUNT ALONE. 5. THIS REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 17/ 05/2019 SD/- SD/- ( %) (' %) (DR.A.L. SAINI) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP, SR.P.S (- 17 / 05 /201 9 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-ACIT, CIR-2 AAYAKAR BHAWAN, COURT COMPO UND, BURDWAN-713101 2. /RESPONDENT-M/S TULSAI RICE MILL VILL & PO MONDALGR AM DIST. BURDWAN-713426 3. 3 4 / CONCERNED CIT KOLKATA 4. 4- / CIT (A) KOLKATA 5. 7 ''3, 3, / DR, ITAT, KOLKATA 6. < / GUARD FILE. BY ORDER/ , /TRUE COPY/ 3,