SHRI GOPAL KUMAR AGRWAL, RAIPUR (CG) V. ITO-1(3), RAIPUR (CG)

ITA 22/BIL/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94021 (ITAT-RAIPUR)
• Duration Of Justice: 4 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 18-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MEENA
• Assessee Lawyers: P C MALOO JAIN
• Keywords: Assessment record
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH , RAIPUR BEFORE S/SHRI MUKUL K SHRAWAT, ( JM) AND SHAMIM YAHYA,(AM) I TA . NO . 2 2 / BLPR / 2011 (ASSESSMENT YEAR : 200 6 - 07 ) SHRI GOPAL KUMAR AGRAWAL, C/O M/S LADDU GOPAL RICE MILL, NAWAPARA, RAIPUR (CG) VS. INCOME TAX OFFICER, 1(3), CENTRAL REVENUE BUILDING, CIVIL LINES, RAIPUR (CG), APPELLANT .. RESPONDENT PAN/GIR NO. : - ACJPA4870D APPELLANT BY : SHRI P C MALOO JAIN RESPONDENT BY : SHRI S K MEENA DATE OF HEARING : 9 .6.2015 DATE OF PRONOUNCEMENT : 19. 6. 201 5 O R D E R PER MUKUL K SHRAWAT, ( JM) : THE APPEAL FILED BY THE ASSESSES IS DIRECTED AGAINST THE ORDER DATED 24.11.2010 OF COMMISSIONER OF INCOME TAX, RAIPUR (CG) PASSED UNDER SECTION 263 OF THE INCOME TAX ACT AND IT RELATES TO THE ASSESSMENT YEAR 200 6 - 07 . 2. GROUND RAISED BY THE ASSESSEE IS REPRODUCED BELOW: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT HAS ERRED IN HOLDING THE ASSESSMENT ORDER PASSED BY THE AO AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THE LD. CIT HAS FURTHER ERRED IN SETTING ASIDE THE ASSESSMENT WITH A DIRECTION TO MAKE PROPER ENQUIRY ON PRODUCTION AND USE OF HUSK BY THE A SSESSEE. THE ORDER OF CIT IS UNJUSTIFIED, UNWARRANTED AND UNCALLED FOR. 3 . THE ASSESSMENT UNDER SECTION 143(3) WAS MADE VIDE ORDER DATED 3.11.2008, ACCORDING TO WHICH THE ASSESSEE IS STATED TO BE IN THE ITA. NO. 2 2 /BLPR/ 2011 2 BUSINESS OF MANUFACTURING OF RICE AND BYPRODUCT S UNDER THE PROPRIETARY SHIP OF M/S LADDUGOPAL RICE MILL . THE AO HAS NOT PROPERLY INVESTIGATED THE PRODUCTION OF HUSK AND THE CORRESPONDING SALE OF HUSK. A SHOW CAUSE NOTICE DATED 10.8.2010 U/S 263 OF THE ACT WAS ISSUED TO THE ASSESSEE IN THE FOLLOW ING MANNER: THE ASSESSMENT RECORDS OF TH E ASSESS E E WERE CALLED FOR AND EXAMINED WHEREIN IT WAS FOUND THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS MILLED 85715.12 QUINTALS PADDY ON OWN ACCOUNT AND 75248 QUINTALS ON CUSTOM MILLING. THUS THE TOTAL PADDY HAS BEEN MILLED AT 160963.12 QUINTALS . THE TOTAL YIELD OF PRODUCTS AND BY - PRODUCTS HAS BEEN SHOWN AT 73.76%. THE SHORTAGE HAS BEEN SHOWN AT 22491.15 QUINTALS ON ACCOUNT OF OWN ACCOUNT. IN COL. NO.28 OF THE TAX AUD I T REPORT, NO DETAILS OF CUSTOM MILLING HAVE BEEN SHOWN. THE SHORTAGE AT 26.24% (100( - ) 73.76) TAKEN IN THE CASE OF CUSTOM MILLING GIVES SHORTAGE AT 20317 QUINTALS. THUS, SHORTAGE ON OWN ACCOUNT AND CUSTOM MILLING COMES TO 42,808 QUINTALS. THIS SHORTAGE IS NOTHING BUT THE RICE HUSK OBTAINED BY THE ASSESSEE ON ACCOUNT OF MILLING OF PADDY . NO INCOME ON ACCOUNT OF SALE OF RICE HUSK HAS BEEN DISCLOSED BY THE ASSESSEE. THE ASSESSING OFFICER HAS ALSO FAILED TO ENQUIRE ABOUT THIS ISS U E . 4. IN COMPLIANCE OF THE SAID SHOW CAUSE NOTICE, THE LD. AR HAS EXPLAINED THAT THE AO HAS MADE THE CONNECTED INQUIRIES IN RESPECT OF THE MANUFACTURING ACTIVITY OF THE ASSESSEE . THE AO WAS AWARE ABOUT THE PRODUCTION OF HUSK BECAUSE THE ASSESSEE HAS SUBMITTED THE DETAILS O F YIELD OF THE PRODUCT. THE AO HAS ACCEPTED THE ACCOUNTED RESULT OF THE ASSESSEE. IT WAS FURTHER EXPLAINED THAT THE HUSK WAS USED AS A FUEL AND NO QUANTITY OF HUSK WAS SOLD BY THE ASSESSEE . IN RESPECT OF THE SAID BYPRODUCT NO QUANTITATIVE STOCK HAS BEEN M AINTAINED BY THE ASSESSEE BECAUSE IT WAS NOT PRACTICALLY POSSIBLE TO MAINTAIN THE DETAILS OF HUSK PRODUC ED . THE COMMISSIONER WAS NOT CONVINCED AND HELD AS UNDER: 3. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND EXAMINATION OF THE RECORD IT IS S EEN THAT THE CLAIM THAT THE AO HAS ITA. NO. 2 2 /BLPR/ 2011 3 MADE ENQUIRIES ABOUT THE PRODUCTION OF HUSK AND ITS USE IS NOT BORNE OUT FROM RECORDS. THE ASSESSEE HAS REFERRED TO A SUBMISSION DATED 27.10.2008 BEFORE THE AO AND STATED THAT THE AO HAS ENQUIRED ABOUT THE PRODUCTION AND SALE OF HUSK DURING THE ASSESSMENT PROCEEDINGS. FROM EXAMINATION OF THE SUBMISSION MADE IT IS CLEAR THAT THE AO HAS MADE NO ENQUIRES ON THIS ASPECT. IT IS PRESUMED THAT IN A PAR - BOILING UNIT THE HUSK IS UTILIZED IN GREAT EXTENT. BUT TO CLAIM THAT THE ENTI RE HUSK IS CONSUMED IN PAR - BOILING UNIT IS NOT ACCEPTABLE. IT IS DIFFICULT TO ACCEPT THE EXPLANATION THAT THE ASSESSEE REQUIRED ONLY AS MUCH HUSK IN ITS MANUFACTURING PROCESS WHICH WAS REQUIRED FOR PRODUCTION OF RICE. IT IS NOT DISPUTED THAT THE HUSK IS A VALUABLE BYPRODUCT IN THE ASSESSEES LINE OF BUSINESS AND THE SAME IS IN GREAT DEMAND IN THIS REGION FOR RUNNING OF HUSK BASED POWER GENERATION AND FOR MANUFACTURING OF OTHER PRODUCTS. IT IS ALSO DIFFICULT TO ACCEPT THE ASSESSEES CLAIM THAT IT IS NOT P OSSIBLE TO MAINTAIN AN ACCOUNT OF HUSK PRODUCED DURING THE MANUFACTURING PROCESS. 4. IT IS CLEAR THAT THE AO DID NOT GO INTO THESE ASPECTS OF THE ASSESSEES BUSINESS WHILE PASSING ORDER DATED 3.11.2008 IN THE INSTANT CASE. SINCE THE ORDER HAS BEEN PASSED WITHOUT MAKING PROPER ENQUIRY, THE SAME IS CONSIDERED TO BE BOTH ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE AND THEREFORE THE SAME IS SET - AS IDE FOR PASSING FRESH ORDER AFTER MAKING NECESSARY ENQUIRIES INTO THIS ASPECT OF THE ASSESSEES BUSINESS . BEFORE PASSING THE ORDER THE AO WILL PROV ID E PROPER OPPORTUNITY TO THE ASSESSEE TO PRESENT HIS CASE. 5 . FROM THE SIDE OF THE APPELLANT - ASSESSEE, THE LD . AR APPEARED AND PLEADED THAT IN COMPLIANCE WITH THE NOTICE ISSUED UNDER SECTION 143(2) OF THE ACT , THE RELEVANT DETAILS HAVE BEEN FURNISHED TO THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS . HE HAS REFERRED A LETTER DATED 26.6.2008 ADDRESSED T O THE ITO, RAIPUR, WHEREIN AS PER PARA 2, THE ASSESSEE HAS PREPARED A CHART OF LAST THREE YEARS FOR THE PERUSAL OF AO. THE LD. AR HAS ALSO DRAWN OUR ATTENTION TO THE PAGE 5 OF THE LETTER DATED 26.6.2008, AND SUBMITTED THAT IN THE SAID LETTER THE VA LUATION OF CLOSING STOCK AND THE MAINTENANCE OF STOCK REGISTER WAS DISCUSSED AND INFORMED THAT THE STOCK WAS VALUED AT COST PRICE. THE DETAILS OF WHICH WERE FURNISHED IN RESPECT OF THE YIELD AND THE GROSS PROFIT RATIO (GPR) AND THE COMPARATIVE CHART OF TH E NET PROFIT HAVE BEEN FURNISHED BEFORE US AS WELL. THE NET PROFIT AS PER THE SAID COMPARATIVE CHART WAS ADMITTEDLY ITA. NO. 2 2 /BLPR/ 2011 4 BETTER THAN THE PAST YEARS AND LIKEWISE, THE GPR WAS ALSO HIGHER THAN THE PERCENTAGE OF PROFIT OF THE PAST TWO YEARS . HE HAS ALSO ARGUED THAT THE LD.CIT HAS SIMPLY PRESUMED THAT HUSK WAS NOT USED BY THE ASSESSEE IN PARBOILING UNIT OF THE ASSESSEE. THEREFORE, THE COMMISSIONER HAS PROCEEDED MERELY ON ASSUMPTION THAT THE HUSK MIGHT HAVE BEEN SOLD BY THE ASSESSEE OUT OF BOOKS OF ACCOUNT ALTHOUGH HE HAD NO EVIDENCE IN HIS POSSESSION. HE HAS PLACED RELIANCE ON THOSE CASES WHICH WERE ALREADY MENTIONED DURING THE COURSE OF PROCEEDINGS BEFORE THE LOWER AUTHORITIES AS UNDER : A) CIT V/S ASHISH RA J PAL (2010) 320 ITR 674 (DEL) ; B) CIT V/S GABRIEL INDIA LTD 203 ITR 108 (BOM), C) MALABAR INDUSTRIES CO.LTD V/S CIT 243 ITR 83 (SC) 6 . FROM THE SIDE OF THE REVENUE, THE LD. DR HAS PLEADED THAT AS PER THE ASSESSMENT ORDER, IT IS EVIDENT THAT NO INQUIRY ABOUT THE PRODUCT ION OF HUSK WAS MADE B Y THE AO AND IN A SITUATION WHEN THE SALE OF HUSK WAS NOT DISCLOSED BY THE ASSESSEE , THEREFORE, THE IMPUGNED ORDER OF THE AO WAS AN ERRONEOUS ORDER . FURTHER, ADMITTED POSITION WAS THAT THE ASSESSEE HAS NOT MAINTAINED THE STOCK REGISTER IN RESPECT OF HUSK PRODUCTION. HENCE, THE SAID ORDER OF THE AO WAS RIGHTLY SET ASIDE BY THE COMMISSIONER. 7 . WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH . WE HAVE CAREFULLY PERUSED THE RELEVANT ORDERS IN THE LIGHT OF THE CASE LAW CITED. THE IMPUGNED OR DER OF THE AO WAS PASSED UNDER SECTION 143(3), WHICH MEANS THAT CERTAIN INQUIRIES SHOULD HAVE BEEN MADE BY THE AO AND THEREAFTER SHOULD HAVE PASSED THE ASSESSMENT ORDER IN QUESTION. WE HAVE FOUND THAT THE FEW ADDITIONS HAVE ALSO BEEN MADE AFTER HAVING DIS CUSSION IN THE ASSESSMENT ORDER. THE AO HAS DISCUSSED THE TRADING RESULTS OF THE ASSESSEE AND ACCEPTED THE FACTUAL POSITION THAT THE RATE OF PROFIT WAS BETTER THAN THE PAST YEARS. HOWEVER, THE LD. AR HAS ALSO DRAWN OUR ATTENTION ON THE SUBMISSIONS MADE BEF ORE THE AO IN COMPLIANCE OF THE NOTICE ISSUED UNDER SECTION 143(2) OF THE ACT , D URING THE COURSE OF ITA. NO. 2 2 /BLPR/ 2011 5 ASSESSMENT PROCEEDINGS . HENCE, ACCORDING TO US, IT IS NOT VERY CORRECT TO ALLEGE THAT THE AO HAS NOT APPLIED HIS MIND AT THE TIME OF FINALIZATION OF THE ASS ESSMENT ORDER. THE ASSESSEE HAS EXPLAINED TO THE COMMISSIONER THAT BOILER HAS BEEN INSTALLED WITHIN THE PREMISES AND DISCLOSED AS ASSETS IN THE BALANCE SHEET IN THE SCHEDULE OF FIXED ASSETS. THE REVENUE AUTHORITIES HAVE NOT CONSIDERED THE DISTINCTION BETW EEN THE PARA - BOILING PLANT AND NON - PARA - BOILING PLANT. THE ASSESSEE HAS USED THE HUSK FOR THE GENERATION OF POWERS; THEREFORE, THERE WAS NO QUESTION OF EARNING ANY INCOME ON SALE OF HUSK. CONSIDERING THE NATURE OF BUSINESS AND THE MANUFACTURING ACTIVITIES CARRIED OUT BY THE ASSESSEE, WE ARE OF THE VIEW THAT THE COMMISSIONER SHOULD HAVE GIVEN A SPECIFIC SATISFACTION ABOUT THE SALE OF HUSK THAT TOO BASED UPON SOME INQUIRIES OR ANY EVIDENCE IN HIS POSSESSION. RATHER THE LD.COMMISSIONER HAS SIMPLY P RESUMED THAT THE HUSK SO PRODUCED MIGHT NOT HAVE BEEN USED IN THE FURNESS BY THE ASSESSEE. WE HAVE ALSO BEEN INFORMED THAT THE NAGPUR BENCH OF THE TRIBUNAL IN THE CASE OF CIT V/S ANIL KUMAR SHARMA IN ITA NO.280/NAG/2008 (AY - 2004 - 05) DATED 26.8.2008 HAS HE LD THAT WITHOUT CONSIDERING THE RELEVANT MATERIAL BUT MERELY ON PRESUMPTION THE AO HAS BROUGHT TO TAX THE SALE OF HUSK. THE FINDINGS OF THE RESPECTIVE CO - ORDINATE BENCH OF THE NAGPUR TRIBUNAL WAS AS UNDER: 4. WE HAVE HEARD THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US. IN OUR OPINION THE AO HAS GONE MERE ON PRESUMPTION THAN ON REALITY. HE HAS NOT POINTED OUT A SINGLE INSTANCE OF SALE OF HUSK BY THE ASSESSEE OR EVEN THERE IS NO EVIDENCE OF SUCH SALES BOUGHT ON RECORD. IT HAS BEEN POINTED OUT BY THE LD.COUNSEL THAT EVEN IN EARLIER ASSESSMENT YEARS ALSO, THERE WAS NO SALE OF HUSK AND THE DEPARTMENT DID NOT MAKE ANY ADDITION ON THAT ACCOUNT. THE ASSESSEE HAS ALSO FURNISHED EXAMPLES OF VARIOUS OTHER ASSESSEES DOING SIMILAR NATURE OF RICE MILLING BUSINESS WHO HAVE NOT SOLD ANY HUSK. THE EXERCISE OF THE AO IN ADOPTING THE NET SALABLE PRICE OF HUSK WAS BASED ON HIS SURMISE S AND CONJECTURES. I N THAT VIEW OF THE MATTER, THE ADDITION OF RS.1,88,000/ - MADE ON ACCOUNT OF UNRECORDED SAL E OF HUSK WAS NOT JUSTIFIED AND THE CIT(A) WENT WRONG IN UPHOLDING THE SAME. THE ADDITION THEREFORE, IS DIRECTED TO BE DELETED ITA. NO. 2 2 /BLPR/ 2011 6 8. IF WE CONSIDER THIS DECISION OF THE RESPECTIVE CO - ORDINATE BENCH OF THE TRIBUNAL THEN ONE THING IS APPARENT THAT THERE ARE COMPARABLE INST ANCES IN THIS LINE OF MANUFACTURING OF RICE WHERE THE HUSK WAS NOT SOLD BUT THE SAME CONSUMED IN THE FURNESS BY THE MANUFACTURES. WE ARE ALSO OF THE VIEW, AS ARGUED BEFORE US, THAT THIS IS NOT A CASE, WHERE THERE WAS AN ALLEGATION THAT NO ENQUIRY WAS MADE BY THE AO. A T THE MOST IT COULD HAVE BEEN AN INADEQUATE INQUIRY BUT THAT SHOULD NOT BE MADE THE BASIS TO INVOKE THE JURISDICTION OF SECTION 263 OF THE ACT BY THE COMMISSIONER UNLESS AND UNTIL THE LD.CIT W A S NOT HAVING SOME SPECIFIC INFORMATION OR EVIDENCE THAT THE ASSESSEE DEFINITELY SOLD HUSK OUT OF THE BOOKS OF ACCOUNT WHICH HAD ESCAPED ASSESSMENT OR IN ANY MANNER CAUSED PREJUDICE TO THE REVENUE DEPARTMENT . IN SUPPORT OF THIS LEGAL PROPOSITION CASE LAW CITED I S CIT V/S ANIL KUMAR SHARMA (2011) 335 ITR 83(DEL), CIT V/S SUNBEAM AUTO LTD ( 2011)332 ITR 167 (DELHI) . W E THEREFORE, H O LD THAT THE ORDER OF THE AO WAS NOT ERRONEOUS SINCE IT WAS PASSED AFTER DUE APPLICATION OF MIND WHICH HAS NOT CAUSED ANY PREJUDICE TO T HE INTEREST OF REVENUE . FOR THIS LEGAL PROPOSITION, THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V/S GABRIEL INDIA LTD 203 ITR 108 (BOM), IS WORTH MENTIONING. UNDER THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE AS ALSO THE CASE LAW S DISCUSSED HEREIN ABOVE, WE HEREBY HOLD THAT THE LD. COMMISSIONER WENT WRONG IN INVOKING THE JURISDICTION OF SECTION 263 OF THE ACT ; HENCE THE SAME IS HEREBY REVERSED. THE IMPUGNED ORDER U/S 263, IS HEREBY , QUASHED. RESULTANTLY, THE GROUND RAISED BY THE AS SESSEE IS ALLOWED. 9 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19TH JUNE , 201 5 SD SD ( SHAMIM YAHYA ) ( MUKUL K SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER RAIPUR : 19TH JUNE,2015. SRL , SR. PS ITA. NO. 2 2 /BLPR/ 2011 7 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - CONCERNED 4. CIT CONCERNED 5. DR, ITAT, RAIPUR CONCERNED 6. GUARD FILE. BY ORDER, SENIOR PRIVATE SECRETARY, /AR