Krishna Devi, Panipat V. ITO, Panipat

ITA 2595/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91294 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 29-06-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 02-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GAURAV DUDEJA
• Assessee Lawyers: K C ANEJA
• Keywords: Principle of natural justice; Reasonable cause; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D NEW DELHI BEFORE SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI H.S. SIDHU: JUDICIAL MEMBER ITA NO. 2595/DEL/2013 ASSTT. YR: 2007-08 KRISHNA DEVI PROP. VS. INCOME-TAX OFFICER, DIVINE ENTERPRISES WARD-4, PANIPAT. MADLAUDA MANDI (PANIPAT) PAN: AFEPD 0117 N ( APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI K.C. ANEJA ADV. RESPONDENT BY : SHRI GAURAV DUDEJA SR. DR DATE OF HEARING : 29/06/2015. DATE OF ORDER : 09/07/2015. O R D E R PER S.V. MEHROTRA, A.M: THIS APPEAL, PREFERRED BY THE ASSESSEE, IS DIREC TED AGAINST CIT(A)S ORDER DATED 1-2-2013 RELATING TO A.Y. 2007-08. 2. FACTS IN BRIEF, ARE THAT THE ASSESSEE IN THE RE LEVANT ASSESSMENT YEAR DERIVED INCOME FROM TRADING OF FOOD GRAINS AND COMM ISSION AGENT. THE AO DETERMINED THE TOTAL INCOME AT RS. 10,49,331/-, INT ER ALIA, MAKING FOLLOWING ADDITIONS: (A) ON ACCOUNT OF LOW HOUSE HOLD WITHDRAWALS RS. 3,09, 000/- (B) INTEREST TO THE ASSESSEES TAXABLE INCOME ON ACCOUNT OF A SUM OF RS. 3,95,000/- 2 REMAINING WITH THE ASSESSEE FOR SIX MONTHS RS. 23 ,700/- (C) INTEREST ON DEBIT BALANCES OF RS. 6,82,949/- IN RESPECT OF ADVANCES TO OTHER FARMERS, LYING WITH THE ASSESSEE. RS. 81,905/- (D) DISALLOWANCE ON SHORTAGE OF PADDY LOSS CLAIMED BY THE ASSESSEE RS. 67,150/- 3. LD. CIT(A), WHILE PARTLY ALLOWING THE ASSESSEES APPEAL, CONFIRMED THE AFOREMENTIONED ADDITIONS. 4. BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFOR E US AND HAS TAKEN FOLLOWING GROUNDS OF APPEAL: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE ADDITION OF RS. 309000/- ALLEGED LOW AND UNEXPLAINE D HH EXP. VIDE PARA 4 OF THE ASSESSMENT ORDER HAVE ARBITRARIL Y BEEN MADE ON WRONG OBSERVATIONS OF FACTS AND ARE ILLEGAL. 2. THAT THE LEARNED CIT(A) ON MERE TECHNICAL CONSID ERATIONS CONFIRMED THE UNEXPLAINED HH EXP. RS. 309000/- VIDE PARA 5 OF THE APPEAL ORDER AND IGNORED THE NATURAL JUSTICE. 3. THAT ADVANCES TO FARMERS WERE MADE VIDE PARA 6 O F THE ASSESSMENT ORDER IN THE COURSE OF BUSINESS EXPEDIEN CY WITHOUT CONSIDERATION OF INTEREST. THE AO WITHOUT ANY REASO NS CHARGED INTEREST OF RS. 23700/- & 81905/- AND THE LEARNED C IT(A) VIDE PARA 7 OF THE APPEAL ORDER ERRED IN CONFIRMING THE SAME. 4. THAT AO CANT COMPEL TO MAXIMIZE THE PROFITS AND RATIO OF CIT/ABHISHEK IND. LTD. 286 ITR 1 IS NOT APPLICAB LE AS SUCH ADDITION OF RS. 23700/- + 81905/- HAVE WRONGLY BEEN MADE AND ARE WARRANTED. 5. THAT ADDITION OF RS. 67115/- VIDE PARA 7 OF THE ASSESSMENT ORDER IGNORING THE SHORTAGE OF PADDY IS ARBITRARY AND 3 WRONG AND THE LEARNED CIT(A) VIDE PARA 8 OF THE ORD ER HAS ERRED IN CONFIRMING THE SAME. 5. BRIEF FACTS APROPOS GROUND NOS. 1 & 2 IN REGARD TO LOW HOUSE-HOLD WITHDRAWALS, ARE THAT AO NOTICED THAT ASSESSEE HAD SHOWN HOUSE-HOLD WITHDRAWALS OF RS. 10,500/- ONLY. THE ASSESSEE POIN TED OUT THAT SHE WITH HER HUSBAND SHRI VIJENDER MANN WOULD EXPLAIN THE SOURCE OF HOUSE-HOLD EXPENSES. THE AO RECORDED THE STATEMENT OF SHRI VIJ ENDER MANN ON 23-9- 2009, IN WHICH HE DEPOSED THAT THE EXPENSES ON THE EDUCATION OF THE CHILDREN WERE APPROXIMATELY RS. 2 LACS AND RS. 10,000/- P.M. HAD BEEN INCURRED ON HOUSE-HOLD EXPENSES. THE SOURCE OF THESE EXPENSES W ERE EXPLAINED FROM AGRICULTURAL INCOME OF RS. 11.33 LAKHS DERIVED FROM 20 ACRES OF LAND. THE AO, AFTER CONSIDERING THE STATEMENT OF SHRI VIJENDE R MANN THAT HE HAD SOLD CROPS FOR RS. 11.33 LACS, REDUCED 35% OF THE TOTAL RECEIPTS TOWARDS EXPENSES ON AGRICULTURAL OPERATIONS WHICH WERE NOT SHOWN BY VIJENDER MANN IN HIS COPY OF ACCOUNT AND, ACCORDINGLY, CONCLUDED THAT ON LY RS. 6.33 LACS WAS LEFT WITH HIM. 6. AS REGARDS THE STATEMENT OF SHRI VIJENDER MANN T HAT ALL FUNDS WERE WITHDRAWN FROM THE FIRM M/S DIVINE ENTERPRISES AND DEPOSITED IN HIS BANK ACCOUNT FOR MEETING THE EXPENSES ON THE EDUCATION O F THE CHILDREN AFTER WITHDRAWING THE SAME FROM THE BANK A/C, SINCE NO DO CUMENTARY EVIDENCE WAS FURNISHED, THE AO SHOW CAUSED AS TO WHY RS. 3,2 0,000/- SHOULD NOT BE TREATED AS INCURRED OUT OF SOURCE NOT DISCLOSED TO THE DEPARTMENT AND ADDITION OF RS. 3,09,500/- BE NOT MADE AS SHRI VIJENDER MANN WAS NOT IN A POSITION TO MEET OUT ALL THE EXPENSES. THE ASSESSEE, INTER ALIA , STATED AS UNDER: IT IS STATED BY THE ASSESSEE VIDE REPLY DATED 9.11 .2009 THAT HE HAD WITHDRAWN MONEY AMOUNTING TO RS. 4 720000/- THROUGH CHEUQE FROM M/S DIVINE ENTERPRISES AND DEPOSITED THE SAME M HIS BANK ACCOUNT AND MET O UT THE EXPENSES ON HOUSEHOLD AND EDUCATION OF THE CHILDREN AFTER WITHDRAWING THE SAME. AS REGARDS TO THE EXPENSES ON AGRL. OPERATIONS, IT WAS STATED THAT HE SPENT RS. 4 LAKHS OUT OF MONEY WITHDRAWN FROM BANK AND PARTLY OUT OF SALES OF BUFFALOES AND TUDA AND KRISH I CARD LOAN FROM CENTRAL BANK OF INDIA, RS. 3,00,000/ -. REGARDING, PAYMENT OF LEASE MONEY FOR AGRICULTURAL LAND, IT WAS STATED THAT HE HAD PAID LEASE MONEY FO R AGRICULTURE LAND IN EARLIER YEARS OUT OF ADVANCE FR OM THE FIRM M/S DIVINE ENTERPRISES AND SOME PART OUT OF LO AN FROM BROTHER OR ANY OTHER RELATIVES BUT NO SUCH MAT TER WAS BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER WHEN STATEMENT OF SH. VIJENDER MANN WAS RECORDED. HOWEVER, NO EVIDENCE REGARDING SALES OF BUFFALOES, TUDA AND LOAN TAKEN FROM BROTHER AND OTHER RELATIVE S HAVE BEEN FILED. THE EXPLANATION FILED BY THE ASSES SEE HAS BEEN CONSIDERED AND CANNOT BE ACCEPTED IN TOTO. AS STATED ABOVE, SH. VIJENDER MANN, HUSBAND OF THE ASSESSEE WAS NOT IN A POSITION TO MEET OUT ALL THE EXPENSES FOR HOUSEHOLD AND EDUCATION OF THE CHILDRE N. MOREOVER, THE BANK STATEMENT FURNISHED BY THE ASSES SEE REVEALS THE ACCOUNT IS MAINTAINED JOINTLY BY THE AS SESSEE AND HER SPOUSE. IT HAS ALSO BEEN NOTICED THAT SH. VIJENDER MAN HAS WITHDRAWN AN AMOUNT OF RS. 100000/- ONLY ON 9.5.2006 FROM PUNJAB NATIONAL BANK AND HAS NOT MADE ANY WITHDRAWALS UPTO 4.9.2006 WHIC H IS SURPRISING AS THE MAJOR EXPENSES ON ACCOUNT OF EDUCATION OF CHILDREN AND HARVESTING OF WHEAT, PLOUGHING OF FIELDS, PLANTATION OF PADDY, FERTILIZE R AND PESTICIDES, IRRIGATION ETC. ARE TO BE INCURRED ALON G WITH OTHER HOUSEHOLD EXPENSES DURING THIS PERIOD. THE ASSESSEE HAS NOT EVEN MAINTAINED ANY AGRICULTURE EXPENSES, PLOUGHING, GROWING, IRRIGATION, SEEDS, MAINTENANCE OF FIELDS. PAYMENTS TO SERVANTS, HARVES TING OF CROPS ETC. KEEPING IN VIEW THE ABOVE FACTS, IT I S CLEAR THAT THE ASSESSEE HAS USED AGRL. INCOME OF HER HUSB AND AS A SHIELD FOR TAX EVASION WITH AN IMPRESSION IN M IND 5 THAT THE AGRL. INCOME CAN BE SHOWN WITHOUT ANY LIMI T AND BASE AS PR CONVENIENCE OF SOMEONE, WHICH IS EVIDENT FROM THE FACT THAT SH. VIJENDER MANN SPOUSE OF THE ASSESSEE IS NOT AWARE ABOUT THE PERSONS TO WHO M PAYMENT ARE TO BE MADE OR WHAT AMOUNTS AS HE FAILED TO GIVE DETAILS OF AMOUNT FOR WHICH BUFFALOES AND TUDA WAS SOLD AND AMOUNT OF LOAN FROM BROTHER AND RELATI VES. MOREOVER, HE COULD NOT CO-RELATE HIS WITHDRAWALS AN D EXPENSES INCURRED ON HOUSEHOLD, EDUCATION OF CHILDR EN AND AGRICULTURE EXPENSES. THEREFORE, AN AMOUNT OF R S. 30900/- INCURRED FOR HOUSEHOLD PURPOSES AND ON EDUCATION OF CHILDREN HAS BEEN SPENT BY THE ASSESSE E OUT OF HER UNDISCLOSED SOURCES AND THE SAME IS ADDED TOWARDS HER TAXABLE INCOME. 7. IN APPEAL, LD. CIT(A) CONFIRMED THE AOS ACTION. 8. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE STATEMENT OF SH. VIJENDER MANN WAS RECORDED ON 23-9-2009. HE REFERRE D TO THE STATE OF AFFAIRS AS OBTAINING ON THE SAID DATE. HE POINTED OUT THAT THE EXPENSES ON THE EDUCATION OF THE CHILDREN WHICH WER E ESTIMATED AT APPROXIMATELY RS. 2 LACS WERE NOT CORRECT BECAUSE I N FY 2006-07 THE CHILDREN WERE STUDYING IN +2 (CLASS TWELVE) AND NOT IN THE COLLEGE FOR WHICH THE EXPENSES OF RS. 2 LACS WERE STATED BY SH. VIJENDER MANN IN HIS STATEMENT. IN SUPPORT OF HIS CONTENTION, HE REFERRE D TO THE CONFIRMATION FROM DAV PUBLIC SCHOOL, PANIPAT DATED 5-3-2010 CONTAINED AT PAGES 22 & 23 OF THE PB WHEREIN THE D ETAILS OF FEE FOR THE WHOLE PERIOD IS GIVEN WHICH WAS RS. 17,515/ - IN CASE OF VIDHI MANN AND RS. 16,315/- IN CASE OF VIPIN MANN. LD. COUNSEL FURTHER REFERRED TO THE DETAILS OF WITHDRAWALS FOR AY 2006-07 AND 6 2007-08, CONTAINED AT PAGES 24 & 25 OF THE PB IN R ESPECT OF SH. VIJENDER MANN. 9. LD. COUNSEL FURTHER SUBMITTED THAT NO CREDIT HAS BEEN ALLOWED IN RESPECT OF SALE OF BUFFALO, TUDA AND KRISHI CARD LOAN FROM CENTRAL BANK OF INDIA AT RS. 3 LACS. 10. LD. DR RELIED ON THE ORDER OF LD. CIT(A). 11. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND HAVE P ERUSED THE MATERIAL AVAILABLE ON RECORD. THE STATEMENT OF SHRI VIJEND ER MANN IS CONTAINED AT PAGES 17 TO 19 OF THE PB. IN REPLY TO THE QUESTION RELATING TO FAMILY MEMBERS, SHRI VIJENDER HAD, INTER ALIA, STATED AS U NDER: QUE:- PLEASE GIVE THE DETAILS OF YOUR FAMILY MEMBER S ALONG WITH THEIR OCCUPATION AND SOURCE OF INCOME? ANS:- WE ARE FOUR MEMBERS I.E. MYSELF, WIFE TWO CH ILDREN. BOTH THE CHILDREN ARE COLLEGE GOING, MYSELF IS AGRICULTU RIST AND MY WIFE SMT. KRISHNA DEVI IS PROP. OF DIVINE ENTERPRIS ES, MADLAUDA. SH. VIPIN WHO IS STUDYING IN LLB 1 ST YEAR IN KURUKSHETRA UNIVERSITY AND MISS VIDHI MANN (DAUGHTE R) IS STUDYING B. SC. PHY. HONOURS, MARINDA HOUSE DELH I UNIVERSITY. 12. FROM THE REPLY, NOTED ABOVE, OF SH. VIJENDER MANN IT IS EVIDENT THAT HE WAS GIVING ANSWERS IN PRESENT TENSE AND, THEREFO RE, WE FIND CONSIDERABLE FORCE IN THE SUBMISSION OF LD. COUNSE L FOR THE ASSESSEE THAT THE STATEMENT REFERS TO THE POSITION AS OBTAINING O N 23-9-2009 WHEN ADMITTEDLY THE CHILDREN WERE NOT COLLEGE GOING. HOW EVER IN AY 2006- 07 THE CHILDREN WERE SCHOOL GOING AS IS EVIDENT FRO M THE CERTIFICATE FILED IN THE PB. THESE CERTIFICATES ARE PHOTO COPIES ONLY AND WERE NOT 7 FURNISHED BEFORE THE AO AND WERE FILED FOR THE FIRS T TIME BEFORE THE LD. CIT(A). LD. CIT(A) HAS NOT CONSIDERED THESE CERTIFI CATES. THEREFORE, THE AUTHENTICITY OF THESE CERTIFICATES NEEDS TO BE EXAMINED AT THE AO LEVEL. THESE CERTIFICATES CLEARLY NEGATE THE VERY B ASIS FOR MAKING ADDITION OF RS. 3,09,000/- WHICH WAS PRIMARILY MADE ON THE BASIS OF HOUSE-HOLD EXPENSES BEING RS. 10,000/- PER MONTH AN D CHILDREN EDUCATION AT RS. 2 LACS. FURTHER, KEEPING IN VIEW THE EXTENSIVE AGRICULTURAL ACTIVITIES CARRIED OUT BY ASSESSEES H USBAND, HIS STATEMENT THAT HE HAD SOLD BUFFALO AND TUDA FOR MORE THAN RS. 1 LACS CANNOT BE DOUBTED PARTICULARLY WHEN AT THE TIME OF TAKING THE STATEMENT THE AO DID NOT ASK FOR THE SAME WHICH IS EVIDENT FROM THE FOLLOWING QUESTIONNAIRE AND ANSWER: QUE:- AS YOU HAVE STATED ABOVE THAT YOU HAVE SPENT RS. 385000/- ON AGRL. OPERATION, RS. 200000/- ON EDUCAT ION OF CHILDREN, RS. 120000/- ON H.H. EXP. AND RS. 120000/ - PAID AS CONTRACT MONEY TOTALING RS. 825000/- ON PERUSAL OF YOUR A/C IT IS NOTICED THAT YOU HAVE SHOWN WITHDRAWALS FOR FERTILI ZERS ONLY RS. 15206/- PLEASE EXPLAIN NOW WHERE THE OTHER EXP. OF RS. 370000/- WERE MET OUT. ANS: IN ADDITION TO THE WITHDRAWALS OF RS. 15206/- I HAVE ALSO WITHDRAWN RS. 725000/- THROUGH CHEQUES AND THE SAME WERE DEPOSITED IN MY SAVING A/C WHERE FROM I HAVE MET OU T ALL THE OTHER EXPENSES. IN ADDITION TO SALE OF AGRI PRODUCT S I HAVE ALSO SOLD TURA AND BUFFALOES ETC. FOR MORE THAN RS. 1 LA KH . THE BALANCE EXP. OF RS. 85000/- WERE MET OUT OF THE CA SH MONEY RECEIVED ON SALE OF TURA/BUFFALOES. 8 13. THEREFORE, ASSESSEE SHOULD BE ALLOWED FURTHER C REDIT OF RS. 1 LAKK FROM THE ADDITION MADE FOR HOUSE HOLD EXPENSES OVE R AND ABOVE THE CREDIT TO BE ALLOWED IN RESPECT OF EDUCATIONAL EXPENSES, W HICH WERE ONLY RS. 33,830/- (RS. 17,515/- + 16,315/-) AND NOT RS. 2 LA KHS SUBJECT TO VERIFICATION OF THE CERTIFICATES FROM D.A.V. SCHOOL (SUPRA). 14. THE MATTER IS RESTORED TO THE FILE OF AO FOR VE RIFICATION OF THE CERTIFICATES FROM DAV SCHOOL CONTAINED AT PAGES 22 & 23 OF THE PB. IN THE RESULT, GROUND NOS. 1 & 2 ARE PARTLY ALLOWED FOR ST ATISTICAL PURPOSES. 15. APROPOS GROUND NOS. 3 & 4, BRIEF FACTS ARE THAT FROM THE BALANCE-SHEET AO NOTICED THAT ASSESSEE HAD NOT CHARGED INTEREST AGAINST DEBIT BALANCES OUTSTANDING FROM SHRI OM PAL DUHAN (RS. 6,00,000/-) , SH. VIJENDER MANN, SH. BALBIR RS. 27,951/- AND SH. BADAN MANN RS. 54,5 98/- WHEREAS SHE WAS PAYING HEAVY INTEREST ON THE BORROWED FUNDS TO THE BANKS AND OTHERS. THE AO, RELYING ON THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. ABHISHEK INDUSTRI ES LTD. 286 ITR 1, AND AFTER CONSIDERING THE ASSESSEES REPLY, MADE AD DITION OF RS. 23,700/- IN RESPECT OF INTEREST FREE ADVANCES TO SH . VIJENDER MANN OF RS. 3,95,000/- AND RS. 81,905/- IN RESPECT OF ADVAN CE TO OTHER FARMERS ON TOTAL DEBIT BALANCE OF RS. 6,82,940/-. 9 16. LD. CIT(A) CONFIRMED THE AOS FINDING, INTER AL IA, OBSERVING THAT THE PLEA OF THE ASSESSEE, THAT GIVING INTEREST FREE ADVANCE WAS ADVANTAGEOUS IN BUSINESS AND REGULAR MODE OF EARNIN G AND THESE ADVANCES WERE IN THE NATURE OF COMMERCIAL EXPEDIENC Y AND ACCEPTED IN TRADE PRACTICE, WAS NOT TENABLE AS THE ASSESSEE HAD PAID INTEREST TO EACH AND EVERY CREDITORS I.E. ALL THE FARMERS TO WHOM CO ST OF THEIR PRODUCES REMAINED UNPAID OR ADJUSTED THE LOAN ALONG WITH INT EREST OUT OF THEIR SALE PROCEEDS. 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEES EXPLANATION BEF ORE AO IS CONTAINED AT PAGES 26 TO 29 OF THE PB, IN WHICH AS REGARDS ADVAN CE TO VARIOUS DEBIT BALANCES , IT IS STATED AS UNDER: ADVANCE TO SH. VIJENDER MANN : SH. VIJENDER MANN IS MY HUSBAND. HE IS DOING AGRICU LTURE OPERATIONS. DURING THE YEAR 2006-07, HE HAS SOLD AGRICULTURE PR ODUCE WORTH RS. 1137629/- ON MY SHOP. HIS ACCOUNT RUN WHOLE OF THE YEAR. SOME TIME HIS ADVANCE REMAIN TOWARD ME AND SOME TIM E MY ADVANCE REMAIN TOWARD HIM. IT IS MY PRACTICE NO TO CHARGE AND NOT TO PAY ANY INTEREST TO HIM. HIS ACCOUNT WAS MOS TLY ADJUSTED THROUGH THE SALE OF HIS AGRICULTURE PRODUCE DURING THE YEAR. HIS TOTAL DEBIT BALANCE AS ON 31.03.2007 WAS RS. 2225 14.73. HIS ADVANCE CONSISTS OF THE PAYMENT TO HIM RS. 100000/- ON 19.03.2007 AND RS. 1000001- ON 23.03.2007. HENCE I DID NOT CHARGE ANY INTEREST FROM HIM. ADVANCE TO SH. BADAN MANN : 10 SH. BADAN MANN IS AN OLD CUSTOMER OF MY FIRM. HE SE LLS HIS FARM PRODUCE ON MY SHOP. DURING THE YEAR 2006-07, H E HAS SOLD HIS AGRICULTURE PRODUCE AMOUNTING TO RS. 527385/- O N MY SHOP. HE HAS PURCHASED FERTILIZER FOR RS. 434211- FROM MY SHOP. HE HAS TAKEN THE BALANCE IN CASH OR ACCOUNT PAYEE CHEQ UES. DURING THE YEAR 2006-07 HIS ACCOUNT WAS IN CREDIT UPTO 04. 03.2007 (ABOUT 11 MONTHS). HIS ACCOUNT BECAME DEBIT ONLY ON 05.03.2007 WHEN I PAID HIM RS. 1000001- THROUGH CHE QUE. ADVANCE TO SH. OM PAL DUHAN: I HAD GIVEN AN ADVANCE OF RS. 7000001- ON DATED 18. 09.2006 VIDE CH. NO. 060782 TO SH. OM PAL DUHAN FOR A SHORT PERIOD FOR PROMOTION OF MY BUSINESS. AFTER SOME TIME WHEN I DEMANDED BACK THE LOAN ALONGWITH INTEREST, HE HAS A VOIDED. AFTER MY REPEATED REQUEST FOR REPAYMENT, HE HAS REP AID RS. 1000001- (IN FIVE INSTALLMENT OF RS. 200001- EACH) IN THE LAST WEEK OF MARCH, 2007. IT IS VERY DIFFICULT TO RECOVE R BACK THE PRINCIPAL OF THE LOAN FROM HIM, WHAT TO SAY OF INTE REST. I AM RECOVERING BACK THE LOAN FROM HIM IN SMALL AMOUNTS. PRESENTLY AN AMOUNT OF RS. 3100001- OF PRINCIPAL IS OUTSTANDI NG TOWARDS HIM AND THERE ME VERY LOW CHANCES. OF RECOVERY OF T HIS AMOUNT. I WILL FILE A CASE IN THE COURT FOR THE RECOVERY OF MY LOAN. WHEN THERE ARE VERY LOW CHANCES OF RECOVERY OF PRINCIPAL AMOUNT, IT IS NOT PRUDENT TO CHARGE INTEREST ON SUCH AMOUNT. HENC E I DID NOT CHARGE ANY INTEREST ON THE ADVANCE TO SH. OM PAL DU HAN. ADVANCE TO SH. BALBIR : I HAD GIVEN AN ADVANCE OF RS. 27951/- TO SH. BALBIR . SH. BALBIR IS MY OLD CUSTOMER. HE HAS ADVISED MANY OTHER CUSTOMERS F OR DEALING WITH MY FIRM. THE AMOUNT OF ADVANCE IS VERY SMALL. SOME TIME HE DEPOSITS HIS MONEY WITH-THE FIRM AND I DO NOT PAY HIM ANY IN TEREST. I NEITHER CHARGE ANY INTEREST FROM NOR PAY ANY INTEREST TO HI M. 18. A BARE PERUSAL OF THE ABOVE NOTED EXPLANATION M AKES IT EVIDENT THAT SH. VIJENDER MANN AND ASSESSEE HAD CURRENT ACCOUNT AND THE ENTIRE 11 AGRICULTURAL PRODUCE WAS SOLD THROUGH ASSESSEE ON W HICH ASSESSEE GOT COMMISSION. 19. IN RESPECT OF OTHER ADVANCES ALSO THERE WERE BU SINESS DEALINGS WITH THE PARTIES AND, THEREFORE, AMOUNTS WERE LYING IN DIFFE RENT ACCOUNTS ON ACCOUNT OF COMMERCIAL EXPEDIENCY. HENCE, NO ADDITION WAS CA LLED FOR ON ACCOUNT OF DEBIT BALANCES LYING WITH CUSTOMERS ON NOTIONAL BAS IS FOR NOT CHARGING INTEREST ON THEIR ACCOUNT. WE MAY FURTHER OBSERVE T HAT THERE IS NO FINDING RECORDED BY LOWER REVENUE AUTHORITIES AS TO WHETHER THE ADVANCES LYING WITH CUSTOMERS WERE OUT OF BORROWED FUNDS OR OUT OF OWN FUNDS. THEREFORE, WE ARE OF THE OPINION THAT LOWER REVENUE AUTHORITIES W ERE NOT JUSTIFIED IN MAKING ADDITION ON THIS COUNT. WE, THEREFORE, DELETE THE A DDITION IN QUESTION. 20. APROPOS GROUND NO. 5, REGARDING DISALLOWANCE OF SHORTAGE OF PADDY, BRIEF FACTS ARE THAT ASSESSEE HAD CLAIMED SHORTAGE OF PADDY WEIGHING 43.61 QTLS. THE ASSESSEES EXPLANATION WAS THAT THE PADD Y WAS OLD AND SHE HAD PURCHASED THIS PADDY LAST YEAR. HENCE THERE WAS SMA LL SHORTAGE OF 43.61 QTLS DUE TO DRYING. THE AO REJECTED THE ASSESSEES CONTE NTION OBSERVING THAT THE ASSESSEE HAD BEEN DOING THE BUSINESS OF PURCHASE AN D SALE OF PADDY FOR LAST SO MANY YEARS BUT NO SHORTAGE HAD BEEN FOUND TO BE CLAIMED IN THE YEAR. MOREOVER, THE ASSESSEE HAD NOT FURNISHED ANY EVIDEN CE TO PROVE THE GENUINENESS OF THE CLAIM MADE BY THE ASSESSEE ON AC COUNT OF SHORTAGE OF 12 PADDY. HE, ACCORDINGLY, MADE ADDITION OF RS. 67,115 /- BY APPLYING THE RATE OF 1539/- PER QTL. AS ADOPTED BY THE ASSESSEE WHILE VALUING THE VALUE OF CLOSING STOCK. 21. BEFORE LD. CIT(A), THE ASSESSEE HAD, INTER ALIA , SUBMITTED AS UNDER: THIS PERTAINS TO PADDY SHORTAGE VALUE ADOPTED 6711 5, DISALLOWED COPY OF PADDY ACCOUNT ATTACHED PAGE 41. ON PERUSAL OF THE SAME IT IS EVIDENT THAT THERE IS BROUGHT FORWARD STOCK OF 345.96 QTL. PERTAINING TO PURCHASE S MADE IN 2004-05 & 2005-06 F. YEARS AND DURING THE YEAR 213. 54 QT. WAS PURCHASED. IT CONTAIN GREAT MOISTURE AND OVER A GAP E OF TIME IT IS DRIED UP RESULTING SHORTAGE. EVEN. PADDY PURCHASED BY THE SHALLERS HOLDERS ARE DIREDUP & SHORTAGE IN NORMAL PRACTICE 10 TO 12% ARE ALLOWED. BUT IN TH E CASE OF ASSESSEE BROUGHT FORWARD STOCK REMAINED FOR A LONGE R PERIOD, WHICH IS ALSO DECREASED BY EATING BY RATS. SHORTAGE OCCURRED IS ABOUT 8% WHICH IN NORMAL COURSE IS ALLOWABLE DUE TO NATURAL CAUSES & MAY PLEASE BE ALLOWED. THE AO WITHOUT ANY REASONABLE CAUSE DISALLOWED AND ADDED TO THE INCOME , WHICH IS WRONG. EVEN ON THE BASIS OF PURCHASES, AVERAGE VALU E RAT COMES TO RS. 1295 PER QT. AND RATE APPLIED RS. 1539 IS WR ONG. 22. LD. CIT(A) CALLED FOR THE COMMENTS OF THE AO. I N THE REMAND REPORT THE AO STATED AS UNDER: '(8) AS REGARDS TO THE DISALLOWANCE OF SHORTAGE. CL AIMED IN PADDY ACCOUNT, IT WAS CONTENDED BY THE ASSESSEE THAT THER E IS BROUGHT FORWARD STOCK OF 345.96 QTL. PADDY PERTAINING TO PU RCHASES MADE IN 2004-05 AND 2005-06 AND IN FINANCIAL YEAR I N QUESTION 213.54 QTLS. PADDY WAS PURCHASED AND IT CONTAIN GRE AT MOISTURE AND OVER A GAPE OF TIME IT IS DRIED UP RESULTING IN TO SHORTAGE. IT IS NOT TENABLE KEEPING I VIEW FACT THAT HAD THE PUR CHASES WERE MADE IN THE FINANCIAL YEAR 2004-05 AND 2005-06, THE SHORTAGE SHOULD BE CLAIMED IN THAT YEAR ALSO NOT IN THE YEAR IN QUESTION. 13 THE ASSESSEE USED THIS DEVICE ONLY TO AVOID TO PAY TAXES. AS REGARDS TO THE CONTENTION THAT AVERAGE RATE COME TO RS. 1295 PER QTL AS AGAINST RATE APPLIED BY THE AO AT RS. 1539/- IS NOT TENABLE AS THE RATE OF 1539/- WAS HERSELF ADOPTED BY THE AS SESSEE WHILE VALUING THE CLOSING STOCK. MOREOVER, NO DOCUMENTARY EVIDENCE SUBSTANTIATE HER CLAIM OF AVERAGE RATE OF RS. 1295/ - PER QUINTAL WAS FURNISHED BY THE ASSESSEE EITHER DURING THE COU RSE OF ASSESSMENT PROCEEDINGS OR BEFORE YOUR GOOD OFFICE. ' 23. LD. CIT(A) AFTER CONSIDERING THE REMAND REPORT, CONFIRMED THE ADDITION, BY OBSERVING AS UNDER: 8.04 THE ISSUE IS CONSIDERED. THE MAIN ARGUMENT PU T FORTH BY THE APPELLANT IS THAT IN THE CASE OF RICE SHELLERS, DRI AGE AND PILFERAGE UP TO 10% IS ALLOWABLE, WHEREAS, THE APPELLANT HAS ONLY CLAIMED A SHORTAGE OF 8%, WHICH THE APPELLANT CONTENDS IS N ORMAL. AS RIGHTLY OBSERVED BY THE AO IN THE ASSESSMENT ORDER, AS THE PURCHASES WERE MADE IN THE FINANCIAL YEAR 2004-05 A ND 2005- 06, THE APPELLANT SHOULD HAVE CLAIMED SHORTAGES IN THOSE YEARS TOO. THEREFORE, THE AO WAS RIGHT IN CONCLUDING THAT THE EXCUSE OF DRIAGE AND PADDY EATEN BY RATS IS A DEVICE USED BY APPELLANT TO AVOID TO PAY TAXES. FURTHER, THE PLEA OF THE ASS ESSEE IS ALSO NOT TENABLE IN VIEW THE FACT THAT THE APPELLANT HAS BEEN DOING THE BUSINESS OF PURCHASE AND SALE OF PADDY FOR LAST SO MANY YEAR BUT HAS NEVER MADE A CLAIM OF SHORTAGE EVER IN THE EARLIER YEARS. MOREOVER, THE APPELLANT AHS NOT FURNISHED ANY EVIDE NCE TO PROVE THE GENUINENESS OF CLAIM MADE. THEREFORE, THE CLAIM BY THE ASSESSEE ON ACCOUNT OF SHORTAGE OF 43.61 QUINTA LS OF PADDY WAS RIGHTLY DISALLOWED AND AN ADDITION OF RS. 67,11 5/- IS MADE BY APPLYING THE RATE OF RS. 1539/- PER QUINTAL, WHI CH WAS THE RAT E ADOPTED BY THE APPELLANT WHILE VALUING THE VALUE OF CLOSING STOCK. MOREOVER, NO DOCUMENTARY EVIDENCE TO SUBSTAN TIATE HER CLAIM OF AVERAGE RATE BEING RS. 1295/- PER QUINTAL WAS FURNISHED BY THE APPELLANT EITHER DURING THE COURSE OF ASSESS MENT PROCEEDINGS OR DURING APPEAL PROCEEDINGS. 24. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. LOSS ON ACCOUNT OF DRYING OF PADDY CANNOT BE DENIED 14 MERELY BECAUSE IN EARLIER YEAR ASSESSEE HAD NOT CLA IMED THE SAME. IT IS A NATURAL PHENOMENON AND, THEREFORE, ON ACCOUNT OF DR YING OF PADDY LOSS IN WEIGHT IS BOUND TO OCCUR. WE ARE IN AGREEMENT WITH LD. CIT(A) THAT AS FAR AS THE OPENING BALANCE IS CONCERNED, NO LOSS ON THIS C OUNT CAN BE ALLOWED BECAUSE, IF THERE WAS ANY SUCH LOSS, IT SHOULD HAVE BEEN CLAIMED IN EARLIER YEAR. HOWEVER, IN RESPECT OF PURCHASE OF PADDY DURI NG THE YEAR, WE ARE OF THE OPINION THAT IT WOULD MEET THE ENDS OF JUSTICE IF 5% LOSS ON THE PURCHASE OF PADDY DURING THE YEAR IS ALLOWED ON ACCOUNT OF M OISTURE LESS OF THE PADDY. IN THE RESULT, GROUND NOS. 3 & 4 ARE PARTLY ALLOWE D. 25. IN THE RESULT, APPEAL IS PARTLY ALLOWED FOR STA TISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 09, 07,2015. SD/- SD/- (H.S. SIDHU) ( S.V. MEHROTRA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 09-07-2015. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT(A) 4. CIT 5. DR (ITAT)