M/s Sri Jayalakshmi Raw & Boiled Rice Mill, Conts.Sri Jayalakshmi Traders, V. The ITO, Ward-1, Kakinada

ITA 209/VIZ/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56831 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 26-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: TH LUCAS PETER
• Keywords: Assessment record
• Section: 143(3); 142(1); 263

Judgement Text

ITA NO.209 OF 2011 SRI JAYALAKSHMI RAW & BOILED RIC E MILL, VENTURU EAST GODAARI DISTT. PAGE 1 OF 9 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.209/VIZAG/2011 ASSESSMENT YEAR: 2006-07 SRI JAYALAKSHMI RAW & BOILED RICE MILL, VENTURU, EAST GODAVARI VS. ITO WARD-1, KAKINADA (APPELLANT) PAN NO:AAIFS 4320 H (RESPONDENT) APPELLANT BY: SHRI G.V.N. HARI, CA RESPONDENT BY: SHRI TH. LUCAS PETER, CIT (DR) DATE OF HEARING: 3/8/2011 DATE OF PRONOUNCEMENT: 30/8/2011 ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 24-03- 2011 PASSED BY LD CIT, RAJAHMUNDRY U/S 263 OF THE A CT IN THE HANDS OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2006-07. THE A SSESSEE IS CHALLENGING THE VALIDITY OF DIRECTION ISSUED BY LD CIT TO THE A SSESSING OFFICER. 2. THE FACTS RELATING TO THE ISSUES ARE STATED IN BRIEF. THE ASSESSEE IS A PARTNERSHIP FIRM AND IS ENGAGED IN THE BUSINESS OF PADDY DE-HUSKING, TRADING IN RICE AND ITS ALLIED PRODUCTS. THE ASSESS MENT IN THE HANDS OF THE ASSESSEE HEREIN WAS COMPLETED U/S 143(3) OF THE ACT BY ACCEPTING THE RETURN OF INCOME OF THE ASSESSEE. THE LD CIT, ON SC RUTINY OF THE ASSESSMENT RECORD, NOTICED CERTAIN OMISSIONS AND CO MMISSIONS ON THE PART OF THE ASSESSING OFFICER ON THE FOLLOWING ISSUES AN D ACCORDINGLY FELT THAT THE ASSESSMENT ORDER IS ERRONEOUS IN SO FAR AS PREJUDIC IAL TO THE INTERESTS OF THE REVENUE. ITA NO.209 OF 2011 SRI JAYALAKSHMI RAW & BOILED RIC E MILL, VENTURU EAST GODAARI DISTT. PAGE 2 OF 9 (A) VERIFICATION OF GENUINENESS OF TRADE CREDITORS. (B) VERIFICATION OF ADDITIONS TO THE FIXED ASSETS. (C) VERIFICATION OF REASONS FOR DECLARATION OF ABYSMALL Y LOW RATE OF PROFIT. (D) VERIFICATION OF SOURCES FOR INTRODUCTION OF CAPITAL BY THE PARTNERS. (E) VERIFICATION OF INCREASE IN THE INSURANCE RECEIVABL E ACCOUNT. (F) VERIFICATION OF GENUINENESS OF PURCHASES AND SALES VIS--VIS VAT RETURNS AND SALES TAX ORDERS. AFTER HEARING THE ASSESSEE, THE LD CIT SET ASIDE TH E ASSESSMENT ORDER AND DIRECTED THE ASSESSING OFFICER TO PASS FRESH ORDER IN THE LIGHT OF DISCUSSIONS MADE BY HIM. AGGRIEVED BY THE ORDER OF LD CIT, THE ASSESSEE IS IN APPEAL BEFORE US WITH THE PLEA THAT THE IMPUGNED REVISION ORDER IS UNWARRANTED AS THE IMPUGNED ASSESSMENT ORDER IS NOT ERRONEOUS OR P REJUDICIAL TO THE INTERESTS OF THE REVENUE. 3. THE LEGAL POSITION WITH REGARD TO THE REVISION PROCEEDING INITIATED UNDER SECTION 263 OF THE ACT HAS BEEN EXPLAINED BY HON'BL E DELHI HIGH COURT IN THE CASE OF CIT VS. DLF POWER LTD., (2010) (329 ITR 289) BY CONSIDERING THE DECISION OF HON'BLE SUPREME COURT IN THE CASE O F MALABAR INDUSTRIAL CO. LTD (243 ITR 83) IN THE FOLLOWING LINES. 18. FURTHER, EVEN IF TWO VIEWS WERE POSSIBLE, AND THE VIEW TAKEN BY THE ASSESSING OFFICER WAS PLAUSIBLE ONE, IT BY T HE COMMISSIONER OF INCOME-TAX, THAT WOULD NOT PROVIDE SUFFICIENT GRO UND FOR THE COMMISSIONER OF INCOME-TAX TO ASSUME JURISDICTION U NDER SECTION 263 OF THE ACT MERELY BECAUSE HE HAD A DIFFERENT VI EW. IN MALABAR INDUSTRIAL CO. LTD. [2000] 243 ITR 83, THE SUPREME C OURT GAVE THE FOLLOWING INTERPRETATION TO THIS PROVISION (HEA D-NOTE) : 'A BARE READING OF THIS PROVISION MAKES IT CLEAR TH AT THE PRE-REQUISITE TO EXERCISE OF JURISDICTION BY THE COMMISSIONER SUO MOTU UNDER IT, IS THAT THE ORDER O F THE INCOME-TAX OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE COMMISSIONER HAS TO BE SATISFIED OF TWIN CONDITIONS , NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUG HT TO BE REVISED IS ERRONEOUS ; AND (II) IT IS PREJUDICIA L TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENT-I F THE ORDER OF THE INCOME-TAX OFFICER IS ERRONEOUS BUT IS NOT PRE-JUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEO US BUT ITA NO.209 OF 2011 SRI JAYALAKSHMI RAW & BOILED RIC E MILL, VENTURU EAST GODAARI DISTT. PAGE 3 OF 9 IS PREJUDICIAL TO THE REVENUE RECOURSE CANNOT BE HA D TO SECTION 263(1) OF THE ACT. THE PRO-VISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE O R ERROR COMMITTED BY THE ASSESSING OFFICER, IT IS ONL Y WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUI REMENT OF THE ORDER BEING ERRONEOUS. IN THE SAME CATEGORY FALL ORDERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NA TURAL JUSTICE OR WITHOUT APPLICATION OF MIND. THE PHRASE `PREJUDICIAL TO THE INTERESTS OF THE REVENUE' IS NO T AN EXPRESSION OF ART AND IS NOT CONFINED IN THE ACT. UNDERSTOOD IN ITS ORDINARY MEANING IT IS OF WIDE IM PORT AND IS NOT CONFINED TO LOSS OF TAX. THE SCHEME OF T HE ACT IS TO LEVY AND COLLECT TAX IN ACCORDANCE WITH T HE PROVISIONS OF THE ACT AND THIS TASK IS ENTRUSTED TO THE REVENUE. IF DUE TO AN ERRONEOUS ORDER OF THE INCOME- TAX OFFICER, THE REVENUE IS LOSING TAX LAWFULLY PAY ABLE BY A PERSON, IT WILL CERTAINLY BE PREJUDICIAL TO THE I NTERESTS OF THE REVENUE. THE PHRASE `PREJUDICIAL TO THE INTE RESTS OF THE REVENUE' HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. EV ERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, FOR EXAMPLE, WHEN AN INCOME-TAX OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE LAW AND IT HAS RESULTED IN LOSS OF REVE NUE ; OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME-TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED A S AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE INCOME-TAX OFFICER IS UNSUSTAINABLE IN LAW.' 4. WE SHALL CONSIDER THE ISSUES BEFORE US IN TH E LIGHT OF PRINCIPLES LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF MA LABAR INDUSTRIAL COMPANY, (SUPRA). THE FIRST ISSUE RELATES TO THE EX AMINATION OF GENUINENESS OF TRADE CREDITORS. THE LD CIT HAS OBS ERVED THAT THE ASSESSMENT ORDER WAS FOUND TO BE ERRONEOUS SINCE TH E ASSESSING OFFICER DID NOT RECORD THE SATISFACTION OF GENUINENESS OF THE T RADE CREDITORS. HOWEVER, IT IS A SETTLED POSITION THAT THE ASSESSING OFFICER NEED NOT RECORD THE RESULT OF EACH AND EVERY ENQUIRY CONDUCTED BY HIM IN THE A SSESSMENT ORDER. THE ITA NO.209 OF 2011 SRI JAYALAKSHMI RAW & BOILED RIC E MILL, VENTURU EAST GODAARI DISTT. PAGE 4 OF 9 SCOPE OF REVISION PROCEEDING IS TO VERIFY WHETHER T HE ASSESSING OFFICER HAS EXAMINED THE VITAL ISSUES AND THE DECISION TAKEN BY HIM IS ONE OF THE POSSIBLE VIEWS AS HELD BY HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. SUPRA. THE LD. A.R INVITED OUR ATTENTION TO THE 142(1) NOTICE DATED 02-04-2008 ISSUED BY THE ASSESSING OFF ICER AND ALSO THE REPLIES DATED 22-07-2008 AND 06-11-2008 GIVEN BY THE ASSESS EE. ON THE CONTRARY, THE LEARNED D.R SUBMITTED THAT THE PAYMENTS FOR PUR CHASES ARE MADE IMMEDIATELY AND AT THE MOST, THE CREDITORS SHOULD P ERTAIN TO THE PURCHASES MADE IN THE MONTH OF MARCH ONLY. WE HAVE ALREADY S TATED ABOUT THE SCOPE OF REVISION PROCEEDINGS. WE NOTICE THAT IN THE LET TER DATED 06-11-2008, THE ASSESSEE HAS GIVEN REPLY WITH REGARD TO THE QUERY R AISED ON SUNDRY CREDITORS AND OTHER CREDITORS. THE LD CIT HIMSELF HAS OBSERVED THAT THE ASSESSEE HAS PRODUCED VOUCHERS FOR MAJOR PURCHASES. THE ASSESSEE HAS EXPLAINED THAT THE MODUS OPERANDI OF THE PURCHASE P ROCEDURES FOLLOWED BY IT AND THE ASSESSING OFFICER WAS SATISFIED WITH THE GENUINENESS OF PURCHASES FROM THESE TRADE CREDITORS. IT IS ALSO SEEN THAT THE ASSESSEE HAS ALSO FURNISHED THE BREAK UP DETAILS OF THE TRADE CREDITO RS. HENCE IT IS SEEN THAT THE ASSESSING OFFICER HAS EXAMINED THE IMPUGNED ISS UE DURING THE COURSE OF ASSESSMENT PROCEEDING. IT IS NOT SHOWN BY THE L D CIT THAT THE VIEW TAKEN BY THE ASSESSING OFFICER ON THIS ISSUE IS NOT SUSTAINABLE ONE. IN THESE CIRCUMSTANCES, WE DO NOT FIND ANY MERIT IN THE DIRE CTION OF THE LD CIT TO REEXAMINE THE IMPUGNED ISSUE AGAIN. ACCORDINGLY WE SET ASIDE THE ORDER OF LD CIT ON THIS ISSUE. 5. THE NEXT ISSUE RELATES TO THE VERIFICATION O F ADDITIONS MADE TO THE FIXED ASSETS HELD BY THE ASSESSEE. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE PURCHASED NEW MACHINERIES FOR A VALUE OF RS.1,06,04,906/-. THE LD CIT TOOK THE VIEW THAT THE ASSESSING OFFICER DID NOT VERIFY ALL THE BILLS PERTAINING TO THESE ADDITIONS AND FURTHER THE ASSESSING OFFICER DID NOT EXAMINE THE DETAILS OF CAPITALIZATION OF INTEREST O N THE LOAN BORROWED FOR THE PURPOSE OF PURCHASING THESE MACHINERIES. HOWEV ER, IT WAS SHOWN TO US ITA NO.209 OF 2011 SRI JAYALAKSHMI RAW & BOILED RIC E MILL, VENTURU EAST GODAARI DISTT. PAGE 5 OF 9 THAT THE ASSESSING OFFICER DID RAISE A SPECIFIC QUE RY ASKING FOR THE EVIDENCES FOR ADDITION TO DEPRECIABLE ASSETS. THE ASSESSEE, IN ITS REPLY DATED 22-07- 2008, HAS FURNISHED THE DETAILS OF PURCHASES OF MAJ OR MACHINERIES AND ALSO DREW ATTENTION OF THE FIXED ASSETS SCHEDULE FURNISH ED ALONG WITH THE RETURN OF INCOME. IT IS ALSO STATED THAT THE ASSESSEE HAS ENCLOSED THE COPIES OF THE INVOICES RELATING TO THE MACHINERIES. THUS, IT IS SEEN THAT THE ASSESSING OFFICER DID EXAMINE THE IMPUGNED ISSUE DURING THE C OURSE OF ASSESSMENT PROCEEDING. THE LD CIT HAS RAISED AN ISSUE WITH RE GARD TO THE CAPITALIZATION OF THE INTEREST, IF ANY, ON THE LOAN BORROWED FOR THE PURPOSE OF ACQUIRING THESE MACHINERIES. HOWEVER, ON A PERU SAL OF THE TAX AUDIT REPORT, IT IS NOTICED THAT THE TAX AUDITOR DID NOT REPORT ANY SUCH VIOLATION. IN THESE CIRCUMSTANCES, IN OUR VIEW, THERE IS NO REA SON TO SUSPECT THE VERACITY OF ENQUIRY CONDUCTED BY THE ASSESSING OFFI CER ON THIS ISSUE. FURTHER IT WAS NOT SHOWN BY LD CIT THAT THE DECISIO N OF THE ASSESSING OFFICER ON THIS ISSUE IS AN ERRONEOUS VIEW. HENCE, WE DO NOT FIND ANY MERIT IN THE DIRECTION OF THE LD CIT TO REEXAMINE THE IMP UGNED ISSUE AGAIN. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT ON TH IS ISSUE. 6. THE NEXT ISSUE RELATES TO THE VERIFICATION O F THE REASONS FOR DECLARING LOW PROFITS DURING THE YEAR UNDER CONSIDERATION. T HE LD CIT NOTICED THAT THE GROSS PROFIT DECLARED BY THE ASSESSEE WORKED OU T TO 8.21% AND THE NET PROFIT WORKED OUT TO 0.47%. THE LD CIT CONSIDERED THE SAID RATE OF PROFIT TO BE VERY MINISCULE IN THE LINE OF TRADE CARRIED O N BY THE ASSESSEE AND NOT COMMENSURATE WITH THE TURNOVER REPORTED BY THE ASSE SSEE. SINCE THE ASSESSING OFFICER DID NOT CALL FOR SPECIFIC EXPLANA TION IN THIS REGARD, THE LD CIT CONSIDERED THAT THERE IS FAILURE ON THE PART OF THE ASSESSING OFFICER. IN THIS CONNECTION, THE LD CIT NOTICED THAT THE ASSESS EE HAD CLAIMED ELECTRICITY CHARGES AT ` 18.24 LAKHS AS AGAINST ` 11.82 LAKHS THOUGH THE PRODUCTION HAS GONE DONE DURING THE YEAR. IT WAS SU BMITTED TO LD CIT THAT THE NET PROFIT DECLARED BY THE ASSESSEE IS THE NET RESULT OF ALL REVENUE AND EXPENSES DISCLOSED BY THE ASSESSEE AND SINCE THE AS SESSING OFFICER, HAVING ITA NO.209 OF 2011 SRI JAYALAKSHMI RAW & BOILED RIC E MILL, VENTURU EAST GODAARI DISTT. PAGE 6 OF 9 EXAMINED, THE BOOKS OF ACCOUNT AND FINANCIAL STATEM ENTS OF THE ASSESSEE, WAS SATISFIED WITH THE RESULTS SHOWN BY THE ASSESSE E. THE LEARNED A.R FURTHER SUBMITTED THAT THE ASSESSEE HAD ACTUALLY IN CURRED LOSS IN THE IMMEDIATELY PRECEDING YEAR AND THE SAME WAS ACCEPTE D BY THE DEPARTMENT. HOWEVER, DURING THE YEAR UNDER CONSIDE RATION, THE ASSESSEE HAS REALIZED PROFITS, I.E., THERE IS IMPROVEMENT I N THE WORKING RESULTS OF THE COMPANY. IN THIS REGARD, THE LD A.R INVITED OUR AT TENTION TO THE RELEVANT DOCUMENTS AVAILABLE IN THE PAPER BOOK SUBMITTED BY THE ASSESSEE. ON THE CONTRARY, THE LEARNED D.R SUBMITTED THAT THE PRINCI PLE OF RES JUDICATA SHALL NOT APPLY TO INCOME TAX ASSESSMENT AND HENCE THE WO RKING RESULT OF THE ASSESSEE HAS TO BE EXAMINED INDEPENDENTLY EVERY YEA R. REFUTING THE CONTENTION OF THE LEARNED D.R THAT THE ASSESSEE HAS INCURRED LOSS DURING THE YEAR UNDER CONSIDERATION ALSO, THE LEARNED A.R SUBMITTED THAT THE ASSESSEE HAS REALIZED BOOK PROFITS AND THE COMPUTAT ION MADE UNDER THE INCOME TAX ACT HAS RESULTED IN LOSS DUE TO STATUTORY DEDUCTIONS. HE FURTHER SUBMITTED THE COMPUTATIONS MADE BY THE ASSESSEE WER E VERIFIED AND ACCEPTED BY THE ASSESSING OFFICER. THOUGH THE LD C IT OBSERVES ABOUT THE LOW PROFITS SHOWN BY THE ASSESSEE, HE HAS NOT BROUG HT ANY MATERIAL ON RECORD TO SHOW THAT THERE IS SOME ERROR OR MISTAKES IN THE INCOME DISCLOSED BY THE ASSESSEE AND THUS THE SAID OBSERVATION HAS B EEN MADE ONLY ON SURMISES. IN ANY CASE, THE ASSESSING OFFICER HAS E XAMINED THE FINANCIAL STATEMENTS OF THE ASSESSEE DURING THE COURSE OF ASS ESSMENT PROCEEDING AND HAS ACCEPTED THE WORKING RESULTS DISCLOSED BY T HE ASSESSEE. THUS, THE LD CIT HAS FAILED TO BRING ANY MATERIAL TO SHOW THA T THE DECISION OF THE ASSESSING OFFICER IN THIS REGARD IS ERRONEOUS AND P REJUDICIAL TO THE INTEREST OF THE REVENUE. HENCE WE DO NOT FIND ANY MERIT IN THE DIRECTION OF LD CIT ON THIS ISSUE. 7. THE NEXT ISSUE RELATES TO THE VERIFICATION O F THE GENUINENESS OF THE ADDITIONAL CAPITAL BROUGHT IN BY THE PARTNERS. THOU GH THE LD CIT HAS ACCEPTED THAT THE ASSESSEE HAS FURNISHED NECESSARY DETAILS IN THIS REGARD, ITA NO.209 OF 2011 SRI JAYALAKSHMI RAW & BOILED RIC E MILL, VENTURU EAST GODAARI DISTT. PAGE 7 OF 9 HOWEVER, HE FELT THAT THE ASSESSING OFFICER DID NOT CONSIDER THE SAID DETAILS FOR ANY PURPOSEFUL ANALYSIS INCLUDING ASCERTAINING THE GENUINENESS OF THE SOURCES FOR SUCH INVESTMENT. HOWEVER, THE FACT REM AINS THAT THE ASSESSEE HAS FURNISHED THE DETAILS OF THE AMOUNT INTRODUCED BY EACH OF THE PARTNERS, THEIR RESPECTIVE INCOME TAX DETAILS, VIDE LETTER DA TED 22.7.2008 TO THE ASSESSING OFFICER. BESIDES THE ABOVE, THE ASSESSEE HAS FILED ALONG WITH THE INCOME TAX RETURN THE DETAILS OF SOURCES OF EACH OF THE PARTNERS WHILE EXPLAINING THEIR RESPECTIVE PERSONAL EXPENDITURE DE TAILS. IN THESE CIRCUMSTANCES, THERE IS NO MATERIAL ON RECORD TO CO ME TO THE CONCLUSION THAT THE ASSESSING OFFICER DID NOT PROPERLY EXAMINE THESE DETAILS. HENCE WE DO NOT FIND ANY REASON TO SUSPECT THE EXTENT OF THE VERIFICATION CARRIED ON BY THE ASSESSEE AND ACCORDINGLY, WE SET ASIDE THE O RDER OF LD CIT ON THIS ISSUE. 8. THE NEXT ISSUE PERTAINS TO THE INCREASE IN T HE INSURANCE CLAIM RECEIVABLE ACCOUNT. THE SAID ACCOUNT DISCLOSED AN OPENING BALANCE OF ` 75,00,000/-. DURING THE YEAR, THE SAID BALANCE WAS INCREASED TO ` 77,65,024/- AND HENCE THE LD CIT ASSUMED THAT THE S AID INCREASE IS REPRESENTED BY A CORRESPONDING INCOME, WHICH THE A SSESSEE HAS FAILED TO DISCLOSE TO THE DEPARTMENT. THE ASSESSEE EXPLAINED TO HIM THAT THE SAID INCREASED AMOUNT OF ` 2,65,024/- REPRESENTS THE COURT EXPENSES INCURRED B Y IT IN CONNECTION WITH PURSUING INSURANCE CLAIM COMP ENSATION. NOT CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEE, TH E LD CIT DIRECTED THE ASSESSING OFFICER TO ASCERTAIN THE CORRECT DETAILS FROM THE INSURANCE COMPANY IN THIS REGARD. EXPLAINING THE RELEVANT FA CTS ON THIS ISSUE, THE LD A.R SUBMITTED THAT THE ASSESSEE LODGED A CLAIM FOR COMPENSATION OF ` 75.00 LAKHS WITH THE INSURANCE COMPANY IN CONNECTION WITH THE LOSS SUFFERED TO ITS STOCK ON FIRE ACCIDENT. HE SUBMITTED THAT THE ASSESSEE HAS ACCOUNTED THE SAID AMOUNT IN THE PROFIT AND LOSS ACCOUNT OF T HE RELEVANT YEAR. SINCE THE INSURANCE COMPANY REJECTED THE CLAIM OF THE ASSE SSEE, IT TOOK UP THE MATTER TO THE COURT OF LAW AND SINCE THE EXPENSES I NCURRED ON THAT ACCOUNT ITA NO.209 OF 2011 SRI JAYALAKSHMI RAW & BOILED RIC E MILL, VENTURU EAST GODAARI DISTT. PAGE 8 OF 9 CAN ALSO BE CLAIMED FROM THE INSURANCE COMPANY, THE ASSESSEE DEBITED THE SAID EXPENSES TO INSURANCE RECEIVABLE ACCOUNT. AC CORDINGLY, HE SUBMITTED THAT THERE IS NO ELEMENT OF INCOME AT ALL IN THE IMPUGNED TRANSACTIONS. SINCE THE EXPENSES TO THE TUNE OF ` 2,65,024/- WAS INCURRED BY THE ASSESSEE ITSELF, THE SAID DETAILS WOULD NOT BE AVAILABLE WITH THE INSURANCE COMPANY. WE FIND MERIT IN THE SAID CONTEN TIONS OF THE LD A.R. AS SUBMITTED BY HIM, THERE IS NO INCOME ELEMENT ON THE EXPENDITURE OF ` 2,65,024/- INCURRED BY THE ASSESSEE FOR PURSUING TH E INSURANCE CLAIM MATTER IN THE COURT OF LAW. HENCE THE LD CIT HAS M ISDIRECTED HIMSELF ON THIS ISSUE AND ACCORDINGLY WE SET ASIDE HIS DIRECTI ON ON THIS ISSUE. 9. THE LAST ISSUE RELATES TO THE VERIFICATION O F VAT RETURNS AND THE SALES TAX ORDER. THE LD CIT WAS OF THE VIEW THAT THE ASS ESSING OFFICER HAS FAILED TO COMPARE THE AMOUNT OF PURCHASES AND SALES AS SHO WN IN THE BOOKS OF ACCOUNT WITH THE VAT RETURNS AND SALES TAX ORDER. IT WAS SHOWN TO US THAT THE ASSESSING OFFICER DID ASK FOR COPY OF SALES TAX /VAT ASSESSMENT ORDER, VIDE HIS NOTICE DATED 02-04-2008 AND THE ASSESSEE H AS REPLIED THAT THE ASSESSMENT ORDER IS NOT SERVED AFTER THE INTRODUCTI ON OF VAT. BEFORE THE LD CIT ALSO, THE ASSESSEE SUBMITTED RECONCILIATION STATEMENT RECONCILING THE PURCHASES AND SALES BETWEEN THE BOOKS OF ACCOUNT AN D VAT RETURN. THE LD A.R SUBMITTED THAT VAT RETURNS ARE SUBMITTED INI TIALLY BEFORE THE FINALIZATION OF BOOKS OF ACCOUNT. HENCE THERE BOUND TO BE MINOR DIFFERENCES BETWEEN THE VAT RETURNS AND BOOKS OF ACCOUNT DUE TO VARIOUS REASONS INCLUDING RELATING TO RETURN OF GOODS BY CUSTOMERS. HOWEVER, THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE THE FOUNDATION, ON THE BASIS OF WHICH THE VAT RETURNS ARE USUALLY CORRECTED LATER. ACCORDINGLY, HE SUBMITTED THAT THE MISTAKES, IF ANY, IN THE VAT RETURNS WILL HAVE EFFE CT IN THE SALES TAX PROCEEDING AND THERE WILL BE NO EFFECT ON THE INCOM E OF THE ASSESSEE UNDER INCOME TAX PROCEEDINGS. HE FURTHER SUBMITTED THAT T HE ASSESSEE HAS RECONCILED THE DIFFERENCE BEFORE THE LD CIT. HOWEVE R, THE LD CIT, WITHOUT APPRECIATING THE RECONCILIATION STATEMENT AND WITHO UT POINTING OUT ANY ERROR ITA NO.209 OF 2011 SRI JAYALAKSHMI RAW & BOILED RIC E MILL, VENTURU EAST GODAARI DISTT. PAGE 9 OF 9 IN IT, HAS TAKEN AN ADVERSE VIEW. WE FIND THAT THE ASSESSING OFFICER HAS ENQUIRED ABOUT THE DETAILS OF VAT/SALES TAX ORDER A ND THE ASSESSEE HAS REPLIED THAT THERE IS NO SYSTEM OF ISSUING ANY ORDE R UNDER VAT SCHEME. FURTHER, BEFORE THE LD CIT THE ASSESSEE HAS FILED T HE RECONCILIATION STATEMENT RECONCILING THE PURCHASE AND SALES FIGURE S, ON WHICH THE LD CIT DID NOT FIND ANY MISTAKE. THUS, IT IS SEEN THAT TH E ASSESSING OFFICER HAS EXAMINED THE IMPUGNED ISSUE. THE LD CIT COULD NOT POINT OUT ANY ERROR ON THIS ISSUE. ACCORDINGLY, WE DO NOT FIND ANY MERIT IN HIS DIRECTION ON THIS ISSUE AND ACCORDINGLY SET ASIDE THE SAME. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 30 TH AUGUST, 2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE: 30-08-2011 COPY TO 1 M/S SRI JAYALAKSHMI RAW & BOILED RICE MILL CONTS. SRI JAYALAKSHMI TRADERS, VENTURU, RAYAVARAM MANDAL, EAST GODAVARI D ISTT. 2 THE ITO WARD-1, KAKINADA 3 4. THE CIT RAJAHMUNDRY THE ADDL. CIT KAKINADA RANGE, KAKINADA 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM