Sh Radhe Rice Mills , Hoshiarpur V. The Income-tax Officer, Hoshiarpur

ITA 263/ASR/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0764 (ITAT-AMRITSAR)
• Duration Of Justice: 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 16-05-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 01-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V K MALHOTRA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR (SMC). BEFORE SH. A.D. JAIN, JUDICIAL MEMBER ITA NO.263(ASR)/2015 ASSESSMENT YEAR:2010-11 PAN: ABFS9049D SHRI RADHE RICE MILS, VS. INCOME TAX OFFICER, VILL. BHILOWAL, WARD-1, HOSHIARPUR. HOSHIARPUR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. V.K. MALHOTRA, ADVOCATE RESPONDENT BY: SH. UMESH TAKYAR, DR DATE OF HEARING: 16/05/2016 DATE OF PRONOUNCEMENT: 23/05/2016 ORDER THIS IS THE ASSESSEES APPEAL FOR THE ASSESSMENT Y EAR 2010-11, AGAINST THE ORDER, DATED 15.04.2015, PASSED BY THE LD. CIT(A), JALANDHAR. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL: 1. THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT THE ASSESSEE HAS MAINTAINED THE RECORD OF RICE MANUFACTURED AND ITS BYE PRODUCTS. THE STOCK REGISTERS WERE PRODUCED BEFORE THESE AUTHORITIES. 2. THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE TH E LAW AND FACTS, WHILE SUSTAINING THE ADDITION OF RS.2,94,842/- SPEC IALLY WHEN ASSESSING OFFICER HAS FAILED TO BRING ANY EVID ENCE TO REJECT THE BOOKS OF ACCOUNTS. ITA NO.,263(ASR)2015 ASSESSMENT YEAR: 2010-11 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FIRM IS RUNNING A RICE SHELLER UNDER THE NAME AND STYLE OF M/S. RAD HE RICE MILLS AT VILLAGE BHILOWAL, DISTRICT HOSHIARPUR, HAD FILED IT S RETURN OF INCOME DECLARING THEREIN AN INCOME OF RS.2,67,990/-. THE A O NOTICED THAT THE ASSESSEE FIRM APART FROM MILLING ITS OWN PADDY WAS ALSO MILLING PADDY OF VARIOUS GOVT. AGENCIES LIKE PUNJGRAIN AND PSWHC. T HE PERCENTAGE OF YIELD SHOWN BY THE ASSESSEE FIRM IN RESPECT OF RICE BRAN, KHUDI PHAK AND RICE HUSK HAD BEEN SHOWN AS UNDER: RICE 67% RICE BRAN 5% KHUDI PHAK 3% HUSK 13% SHORTAGE 12% THE AO FURTHER NOTICED THAT THE ASSESSEE-FIRM HAD N OT KEPT ANY DAY TO DAY RECORD OF MILLING OF PADDY AND MANUFACTURING OF DIFFERENT BI-PRODUCTS LIKE RICE, RICE BRAN, KHUDI PHAK AND RICE HUSK. THE AO FURTHER NOTICED THAT THE ASSESSEE FIRM HAD ALSO NOT KEPT ANY STOCK REGISTER. IN THE ABSENCE OF DAY TO DAY RECORD WITH REGARD TO MANUFAC TURING OF RICE, RACE BRAN, KHUDI PHAK AND HUSK AND IN THE ABSENCE OF STO CK REGISTER, THE AO WAS OF THE OPINION THAT THE TRADING RESULTS SHOWN B Y THE ASSESSEE FIRM ARE NOT OPEN FOR VERIFICATION. HE, THEREFORE, REJEC TED THE BOOK RESULTS SHOWN BY THE ASSESSEE FIRM BY INVOKING THE PROVISIO NS OF SECTION 145(1) OF THE ACT. THE AO, AFTER REJECTING THE BOOK RESULT S, RESTRICTED THE TOTAL SHORTAGE TO 10% AS AGAINST 12% SHOWN BY THE ASSESSE E FIRM AND ENHANCED THE YIELD OF RICE HUSK AT 15% AS AGAINST 1 3% SHOWN BY THE ITA NO.,263(ASR)2015 ASSESSMENT YEAR: 2010-11 3 ASSESSEE FIRM BY RELYING ON THE DECISION OF THE HON BLE PUNJAB & HARYANA HIGH COURT, IN THE CASE OF M/S. CHAMAN LAL AMAR NA TH & CO., (2009) 184 TAXMAN 479 (P&H), VIDE WHICH THE SHORTAGE OF 10 % IN THE CASE OF RICE SHELLER WAS CONSIDERED AS REASONABLE SHORTAGE. THE AO, THUS, MADE AN ADDITION OF RS.2,94,842/- TO THE RETURNED INCOM E OF THE ASSESSEE FIRM WHICH REPRESENTED THE VALUE OF RICE HUSK WHICH HAD NOT BEEN TREATED AS SHOWN BY THE ASSESSEE-FIRM. 3. BY VIRTUE OF THE IMPUGNED ORDER, THE LD. CIT(A) DISMISSED THE ASSESSEES APPEAL. 4. THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED T HAT BOTH THE AUTHORITIES BELOW HAVE FAILED TO APPRECIATE THAT TH E ASSESSEE HAS MAINTAINED THE RECORD OF RICE MANUFACTURED AND ITS BYE PRODUCTS, THOUGH THE STOCK REGISTERS WERE PRODUCED. HE FURTHER STAT ED THAT THE LD. CIT(A) HAS ERRED IN SUSTAINING THE ADDITION OF RS.2,94,842 /-, WHEN NO EVIDENCE WAS BROUGHT ON RECORD BY THE AO TO REJECT THE BOOKS OF ACCOUNT. HE ACCORDINGLY PRAYED THAT THE ADDITION SO MADE MAY BE DELETED. 5. ON THE OTHER HAND, THE LD. DR RELIED ON THE IMPU GNED ORDER. 6. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE LD. CIT(A), WHILE PASSING THE IMPUGN ED ORDER HAS OBSERVED, AS FOLLOWS: 6.2 I HAVE CONSIDERED THE OBSERVATIONS OF THE ASSES SING OFFICER AS MADE BY HIM IN THE ASSESSMENT ORDER AS W ELL AS THE ITA NO.,263(ASR)2015 ASSESSMENT YEAR: 2010-11 4 WRITTEN SUBMISSIONS FILED BY THE LD. AR OF THE ASSE SSEE VIDE LETTER DATED 15.04.2015. I HAVE ALSO CONSIDERED VARIOUS JU DICIAL PRONOUNCEMENTS RELIED UPON BY THE LD. AR OF THE ASS ESSEE AS WELL AS BY ASSESSING OFFICER. ON CAREFUL CONSIDERATION O F THE WRITTEN SUBMISSIONS, I AM OF THE OPINION THAT THE PRODUCTIO N OF BYPRODUCTS SHOWN BY THE ASSESSEE FIRM TAKEN TOGETHER IS VERY M UCH ON THE LOWER SIDE. MOREOVER, HONORABLE PUNJAB & HARYANA HI GH COURT HAS CONSIDERED SHORTAGE OF 10% AS REASONABLE IN THE CAS E OF SOME OF THE RICE SHELLERS INCLUDING THAT OF THE CASE RELIED UPO N BY THE ASSESSING OFFICER. THE ASSESSEE ALSO COULD NOT JUSTIFY THE SH ORTAGE OF 12% AS SHOWN BY IT IN ITS CASE. IN MY CONSIDERED OPINION A ND IN THE ABSENCE OF DAY TO DAY RECORDS IN RESPECT OF RICE AND DIFFER ENT BYPRODUCTS AND IN THE ABSENCE OF STOCK REGISTER, IT IS DIFFICULT T O BELIEVE THAT THE TRADING RESULTS SHOWN BY THE ASSESSEE FIRM DEPICT C ORRECT TRADING RESULTS. THE ACTION OF THE ASSESSING OFFICER IN REJ ECTING THE BOOKS OF ACCOUNT IS, THEREFORE, JUSTIFIED. THE JUDICIAL PRON OUNCEMENTS RELIED UPON BY THE LD. AR HAVE ALTOGETHER DISTINGUISHABLE FACTS FROM THE FACTS OF THE CASE OF THE ASSESSEE AND THESE DECISIO NS HAVE NO APPLICATION IN THE CASE OF THE ASSESSEE. ON THE OTH ER HAND, THE CASE RELIED UPON BY THE ASSESSING OFFICER SUPPORT HIS CA SE. MOREOVER, THE ASSESSING OFFICER IS VERY REASONABLE IN ENHANCING T HE PRODUCTION OF ONLY RICE HUSK, THE VALUE OF WHICH IS AT THE LOWER SIDE FROM THE VALUE OF OTHER BYPRODUCTS. I, THEREFORE, DO NOT FIND ANY AMBIGUITY IN THE ACTION OF THE ASSESSING OFFICER IN MAKING THE IMPUG NED ADDITION BY ADOPTING THE PRODUCTION OF RICE HUSK AT 15%. 6.3 IN VIEW OF THE ABOVE STATED FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AM OF THE OPINION THAT T HE ASSESSING OFFICER IS FULLY JUSTIFIED IN REJECTING THE BOOKS O F ACCOUNT AND THEREAFTER MAKING AN ADDITION OF RS'.2,94,842/- TO THE RETURNED INCOME OF THE ASSESSEE ON ACCOUNT OF SUPPRESSION OF PRODUCTION OF RICE HUSK. THE ADDITION OF RS.2,94,842/- MADE BY TH E ASSESSING OFFICER IN THIS CASE IS, THEREFORE, UPHELD. IN THE RESULT, GROUNDS NO. 2, 3 AND 4 OF APPEAL TAKEN BY THE ASSESSEE ARE DISMISS ED. 7. THUS, THE LD. CIT(A) HAS CONFIRMED THE AOS ACT ION RELYING ON THE JUDGMENT OF THE HONBLE PUNJAB & HARYANA HIGH COURT , IN THE CASE OF CHAMAN LAL AMAR NATH & CO. VS. CIT & ANOTHER, 184 TAXMAN 479 (P&H). THE QUESTION IS, WHETHER SUCH RELIANCE IS I NCORRECT IN AS MUCH ITA NO.,263(ASR)2015 ASSESSMENT YEAR: 2010-11 5 ACCORDING TO THE ASSESSEE, IN THE PRESENT CASE, NO DEFECT WAS FOUND IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. 8. HEREIN, AS PER THE RECORD, THE YEAR UNDER CONSID ERATION WAS THE FIRST YEAR OF THE BUSINESS OF THE ASSESSEE OF MILLI NG PADDY AND MANUFACTURE OF RICE AND ITS ALLIED PRODUCTS. THE YI ELD FOR RICE MANUFACTURED WAS 67% AS AGAINST THE NORMS OF FOOD C ORPORATION OF INDIA ( F.C.I.) AT 64.50%. THE PRODUCTION OF RICE B RAN GAVE YIELD AT 5%, KHUDI PHAK AT 3%, HUSK AT 13% AND WASTAGE AT 12%. T HOUGH THE AO DID NOT FIND ANY SPECIFIC DEFECT IN THE BOOKS OF ACCOUN T OF THE ASSESSEE, HE OBSERVED THAT THE YIELD OF HUSK OUGHT TO BE 15% AND STORAGE SHOULD BE 10%, AS AGAINST 13% OF HUSK YIELD. THE AO OBSERVED THAT THE ASSESSEE HAD NOT KEPT DAY TO DAY RECORD OF MILLING OF PADDY AND ITS BYE PRODUCTS AND THAT NO STOCKS REGISTER HAS BEEN MAINTAINED BY THE ASSESSEE. REJECTING THE BOOKS OF ACCOUNT, THE AO MADE THE ADD ITION OF RS.2,94,842/-. THUS, DESPITE THE FACT THAT THE ASSE SSMENT ORDER CONTAINS NO OBSERVATION OR FINDING TO THE EFFECT THAT IN THE ABSENCE OF DAY TO DAY DRAYAGE REGISTER, THE ASSESSEES INCOME COULD NOT B E DEDUCED FROM THE METHOD OF ACCOUNTING OF THE ASSESSEE. NO ALTERNATIV E BASIS FOR COMPUTATION OF PROFIT WAS ALSO SUGGESTED. INTER-ALI A, THE ASSESSEE HAS MAINTAINED MILLING REGISTER AND RICE REGISTER. STAT UTORY REGISTERS PRESCRIBED BY THE GOVERNMENT ARE ALSO MAINTAINED, B ESIDES A COMPLETE RECORD OF PURCHASE AND SALE. THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE DULY AUDITED. THERE IS NO ALLEGATION THAT MANUFACTU RING OF RICE AND ITS ITA NO.,263(ASR)2015 ASSESSMENT YEAR: 2010-11 6 BYE-PRODUCTS ARE NOT, AS PER GOVERNMENTAL NORMS AND THOSE OF FCI. THERE IS NO MATERIAL ON RECORD TO ESTABLISH THAT TH E ASSESSEE MANUFACTURED HUSK AT 15%, AS ARRIVED AT BY THE AO. IT HAS NOT BEEN BROUGHT ON RECORD THAT THE ALLEGED HUSK MANUFACTURE D WAS SOLD BY THE ASSESSEE OUTSIDE THE BOOKS OF ACCOUNT. MOREOVER, IF THE HUSK MANUFACTURED IS TO BE RETAINED BY THE ASSESSEE IN I TS CLOSING STOCK, THIS WOULD FORM THE OPENING STOCK OF THE SUCCEEDING YEAR . THEREFORE, NO INSTANCE OF REVENUE LOSS HAS BEEN MADE OUT. THESE FACTS ARE NOT SHOWN TO HAVE BEEN PRESENT BEFORE THE HONBLE HIGH COURT IN THE CASE OF CHAMAN LAL AMAR NATH & CO., (SUPRA). AS SUCH, CH AMAN LAL AMAR NATH & CO. (SUPRA), ON FACTS IS NOT APPLICABLE TO THE PRESENT CASE, WHICH HAS NOT BEEN TAKEN INTO CONSIDERATION BY THE A.O. T HE LD. CIT(A) TOO, DID NOT CONSIDER THE AFORE=MENTIONED FACTS AND ERRED I N CONFIRMING THE ACTION OF THE A.O. BY PLACING RELIANCE ON CHAMAN L AL AMAR NATH & CO., (SUPRA), TO DECIDE AGAINST THE ASSESSEE. 9. IN PANDIT BROS. VS. COMMISSIONER OF INCOME TAX , 26 ITR 159 (PUNJAB), IT WAS HELD THAT WHEN THE ITO FINDS TH AT THERE IS NO METHOD OF ACCOUNTING REGULARLY MAINTAINED BY THE ASSESSEE OR THAT IT IS SUCH THAT PROFITS/LOSSES ARE NOT DISCLOSED, HE CAN REJECT TH E ACCOUNTS OF THE ASSESSEE, THAT THERE MUST BE SUCH A FINDING TO REJE CT THE ACCOUNTS AND FOR ARRIVING AT THAT FINDING, THERE MUST BE MATERIA L BEFORE HIM; THAT THE FACT THAT THE PROFITS APPEARED TO BE LOW OR THAT NO STOCK REGISTER WAS ITA NO.,263(ASR)2015 ASSESSMENT YEAR: 2010-11 7 MAINTAINED WOULD NOT BE SUFFICIENT MATERIAL TO ARRI VE AT SUCH FINDING; THAT THESE WOULD ONLY BE MATERIAL FOR PROVOKING FU RTHER ENQUIRY; THAT THE ITO MUST DISCOVER OTHER MATERIAL OR EVIDENCE TO CO ME TO SUCH CONCLUSION; AND THAT HE MUST ALSO EMPLOY A METHOD O R BASIS TO DETERMINE ANY INCREASE IN INCOME. 10. IN SHANKER RICE CO. VS. INCOME TAX OFFICER, 7 2 ITD 139 (SPECIAL BENCH), IT WAS HELD THAT FOR APPLICATION OF PROVIS O SECTION 145(1) AND REJECTION OF ACCOUNTS, THERE SHOULD BE SOME POSITIV E MATERIAL WITH THE AO. THE ASSESSEE, THEREIN, A RICE SHELLER, LIKE THE PRESENT ASSESSEE WAS MAINTAINING REGULAR BOOKS OF ACCOUNT DULY AUDITED, MAINTAINING STATUTORY REGISTERS AND HAVING ITS PURCHASE AND SAL E REGULATED BY STATUTORY PROVISIONS, ITS PURCHASES WERE DULY ACCE PTED BY THE EXCISE AND TAXATION DEPARTMENT. IT WAS HELD THAT THE ACCO UNTS OF THE ASSESSEE COULD NOT BE REJECTED MERELY ON CONJECTURES AND SUR MISES . 11. IN ASHOKE REFRACTORIES (P) LTD. VS. CIT, 279 ITR 457 (CALCUTTA), IT WAS HELD THAT IN ORDER TO REJECT BOOKS OF ACCOUNT , IN CASE OF ABSENCE OF STOCK REGISTER, THE AO HAS TO COME TO AN OPINION T HAT THE METHOD APPLIED IS SUCH THAT THE INCOME CANNOT PROPERLY BE DEDUCED FROM THE ACCOUNTS MAINTAINED. IT WAS OBSERVED THAT NEITHER THE AO NO R THE TRIBUNAL HAD HELD THAT THE ACCOUNTS MAINTAINED BY THE ASSESSEE W ERE NOT CORRECT OR COMPLETE OR THAT INCOME COULD NOT BE DEDUCED FROM T HE BOOKS OF ACCOUNT. IT WAS HELD THAT THE BOOKS OF ACCOUNT COUL D NOT BE REJECTED ITA NO.,263(ASR)2015 ASSESSMENT YEAR: 2010-11 8 MERELY FOR WANT OF STOCK REGISTER OR FAILURE TO MA INTAIN ITEM-WISE STOCK IN THE STOCK REGISTER WHEN THERE WAS OTHER MATERIAL A VAILABLE FROM WHICH, INCOME COULD BE DEDUCED. 12. IN C.I.T. VS. JAS JACK ELEGANCE EXPORTS, VID E JUDGMENT DATED 26.04.2010, PASSED BY THE HONBLE DELHI HIGH COURT, IN ITA NO.681/2010 (COPY PLACED ON RECORD), NO STOCK REGIS TER WAS PRODUCED, AS HAVING NOT BEEN MAINTAINED. THE AO DID NOT FIND ANY DEFECT IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. IT WAS ALSO NOT THE CASE OF THE AO THAT THE ACCOUNT OF THE ASSESSEE WAS NOT COMPLET E. NO PROVISION WAS POINTED OUT, MANDATING THE ASSESSEE TO MAINTAIN A STOCK REGISTER IN THIS LINE OF BUSINESS, I.E., MANUFACTURE AND EXPORT OF R EADYMADE GARMENTS. THE ACTION OF THE TRIBUNAL IN UPHOLDING THE DELETIO N OF THE ADDITION, WAS CONFIRMED BY THE HONBLE HIGH COURT. 13. NO DECISION TO THE CONTRARY HAS BEEN BROUGHT TO OUR NOTICE. 14. IN VIEW OF THE ABOVE, WE HOLD THAT SINCE IN THE PRESENT CASE, NO SPECIFIC DEFECT OR WAS POINTED OUT BY THE AO, THE ASSESSEES RESULTS OUGHT NOT TO HAVE BEEN REJECTED BY REJECTING ITS B OOKS OF ACCOUNT AND THAT AS SUCH, CHAMAN LAL AMAR NATH & CO., (SUPRA) , IS NOT APPLICABLE ON FACTS. 15. NO OTHER ARGUMENT WAS RAISED BEFORE THIS BENCH . 16. FOR THE ABOVE DISCUSSION, THE ORDER UNDER APPEA L IS FOUND TO BE ERRONEOUS AND UNSUSTAINABLE IN LAW. ITA NO.,263(ASR)2015 ASSESSMENT YEAR: 2010-11 9 17. THE GRIEVANCE OF THE ASSESSEE IS JUSTIFIED AND IS ACCEPTED. THE IMPUGNED ORDER IS REVERSED AND THE ADDITION IS DELE TED. 18. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23/05/ 2016. SD/- (A.D. JAIN) JUDICIAL MEMBER /SKR/ DATED: 23/05/2016 COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE: SHRI RADHE RICE MILLS, HOSHIARPUR. 2. THE ITO WARD-1, HOSHIARPUR. 3. THE CIT(A), JALANDHAR. 4. THE CIT, JALANDHAR. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.