M/s. Naveen Kissan Rice Mills, Jaspur V. ITO, Kashipur

ITA 2976/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2155 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 18-11-2009
• Assessment Year: 2006-2007
• Appeal Filed On: 24-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H K LAL
• Assessee Lawyers: S C AGGARWAL
• Keywords: Unexplained expenditure; Business income
• Section: 69C; 143(3); 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F: NEW DELHI BEFORE SHRI D.R. SINGH, JUDICIAL MEMBER AND SHRI DEEPAK R. SHAH, ACCOUNTANT MEMBER I.T.A.NO.2976/DEL/2009 ASSESSMENT YEAR : 2006-07 M/S. NAVEEN KISSAN RICE MILL, INCOME-TAX OFFICER -2, PATRAMPUR ROAD, JASPUR, VS. KASHIPUR (U.S. NAGAR) . (U.S. NAGAR). (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.C. AGGARWAL, CA. RESPONDENT BY : SHRI H.K. LAL, SR. DR. O R D E R PER DEEPAK R. SHAH, ACCOUNTANT MEMBER. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, DEHRADUN DA TED 124.01.2009 IN AN APPEAL AGAINST AN ORDER OF ASSESSMENT FRAMED UND ER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (THE ACT). 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS BE FORE US:- 1. THE LD. CIT (APPEALS) WAS UNJUSTIFIED TO REJECT THE APPEAL AGAINST THE ADDITION OF RS.97791/- BY LD. A.O. ON A CCOUNT OF CONSUMPTION OF BARDANA U/S 69C, WHERE AS THE A.O. D ID NOT REJECT THE BOOKS OF ACCOUNTS OF THE APPELLANT U/S 1 45 AND ACCEPTED THE RESULTS SHOWN BY THE BOOKS OF ACCOUNTS . 2. THE LD. CIT (APPEALS) WAS UNJUSTIFIED TO REJECT THE APPEAL AGAINST THE ADDITION OF RS.33239/- ON ACCOUNT OF AL LEGED EXTRA 2 COST OF BUILDING CONSTRUCTION U/S 69C, WHEREAS THE VALUERS REPORTS IS MERELY AN ESTIMATE AND NOT ACTUAL COST O F CONSTRUCTION. 3. THE ASSESSEE FIRM CARRIES ON BUSINESS AS RICE MI LL. DURING THE COURSE OF ASSESSMENT THE ASSESSEE WAS REQUIRED TO FURNISH QUANTITATIVE DETAILS OF PACKING MATERIAL CONSUMED AGAINST SALE OF RICE AND RICE-BRAN. THE ASSESSEE FURNISHED THE DETAILS. THE ASSESSING OFFICER OBSER VED THAT EXPENSES ON BAGS (BARDANA) WERE RS.1,63,317/-. THE ASSESSEE HAS SOL D 18,510 QUINTALS OF RICE AND 1476 QUINTALS OF RICE BRAN. THE SALES ARE IN B AG CONTAINING 50 KG. THEREFORE, 39,972 BAGS SHOULD HAVE BEEN USED. THE V ALUE PER BAG COMES TO RS.4.24 PER BAG ONLY. THE ASSESSEE SELLS THE GOODS TO R.F.C. WHICH SHOULD BE IN NEW BAGS. THEREFORE, THE CONSUMPTION OF VALU E OF SUCH BAGS @ RS.14 PER BAG SHOULD BE RS.5,59,608/-. THIS RESULTS INTO UNACCOUNTED EXPENDITURE OF RS.3,96,291/-. THE ASSESSEE SUBMITTED THAT THER E IS NO EVIDENCE THAT THIS MUCH EXPENDITURE HAS BEEN INCURRED. THE ASSESSEE H AS PURCHASED 20,500 BAGS @ RS.11 PER BAG FOR SUPPLY TO R.F.C. SALES OF GOODS TO OTHER PERSONS WERE NOT IN NEW BAGS. THE ASSESSING OFFICER HELD T HAT THE TOTAL BAGS AVAILABLE TO THE ASSESSEE WERE 36,500 AND 10,000 BA GS REMAINED IN CLOSING STOCK. THEREFORE, THE CONSUMPTION OF 14,772 BAGS ( 39,972 25200) IS NOT EXPLAINED. THE VALUE OF 14,772 BAGS WAS TAKEN @ RS .6.62 PER BAG WHICH 3 WAS WORKED OUT AT RS.97,791/- AND WAS ADDED AS UNEX PLAINED EXPENDITURE UNDER SECTION 69C OF THE ACT. 4. BEFORE THE LEARNED CIT(A) THE ASSESSEE GAVE COMP ARABLE EXPENDITURE FOR THE LAST 3 YEARS. IT WAS SUBMITTED THAT THE BA RDANA CONSUMED TO TOTAL SALES IS WITHIN THE RANGE OF 0.80% TO 1.00% OF THE SALES. FOR THIS YEAR THE EXPENDITURE IS 0.92% OF SALES. THE LEARNED CIT(A) HELD THAT NO. OF BAGS CONSUMED IS NOT DISPUTED AND HENCE EXCESS CONSUMPTI ON HAS NOT BEEN EXPLAINED. THEREFORE, THE ADDITION IS SUSTAINED. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI S.C. A GGARWAL SUBMITTED THAT THE ASSESSEE IS PURCHASING PADDY AND AFTER MIL LING RICE AND RICE-BRAN ARE SOLD. FOR SALE OF GOODS TO R.F.C. NEW BAGS ARE PUR CHASED AND ARE ACCOUNTED AS SUCH. THE CONSUMPTION OF BAGS FOR SUPPLY TO R.F .C. IS NOT DISPUTED. WHEN THE ASSESSEE PURCHASES PADDY, IT COMES IN BAGS AND SAME BAGS ARE USED WHILE SELLING RICE AND RICE BRAN TO PARTIES OT HER THAN R.F.C. THERE IS NO INDICATION THAT ANY EXPENDITURE WAS INCURRED AND NO T RECORDED RATHER THE FINDING IS GIVEN ON THE BASIS OF WORKING OUT CONSUM PTION OF NUMBER OF BAGS WITHOUT TAKING INTO CONSIDERATION THE BAGS RECEIVED AT THE TIME OF PURCHASE OF PADDY. THEREFORE, THE ADDITION IS TO BE DELETED . THE LEARNED DR SHRI H.K. LAL SUBMITTED THAT SUCH SUBMISSION WAS NEVER M ADE AT ANY EARLIER PERIOD OF TIME. THIS BEING A NEW PLEA REQUIRES EXA MINATION. 4 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE A DDITION IS MADE UNDER SECTION 69C WHERE THE ASSESSEE HAS INCURRED A NY EXPENDITURE AND HE OFFERS NO EXPLANATION ABOUT THE SOURCE OF SUCH EXPE NDITURE OR IF THE EXPLANATION IS NOT SATISFACTORY, THE AMOUNT COVERED BY SUCH EXPENDITURE MAY BE DEEMED TO BE THE INCOME OF THE ASSESSEE. READIN G THE AFORESAID PROVISION IT IS CLEAR THAT THE SAME IS A DEEMING PROVISION. IT IS SETTLED LAW THAT DEEMING PROVISIONS ARE STRICTLY CONSTRUED. FOR SECTION 69C IS TO APPLY, THERE SHOULD BE A FINDING THAT THE ASSESSEE SHOULD HAVE INCURRED SUCH EXPENDITURE. HOWEVER, THE ASSESSEE HAS DENIED HAVING INCURRED AN Y EXPENDITURE AND THERE IS NO FINDING THAT ACTUAL EXPENDITURE WAS INCURRED. THE ADDITION IS MADE ON THE BASIS OF WORKING OUT AVAILABILITY OF NUMBER OF BAGS EXCLUDING THE BAGS RECEIVED AT THE TIME OF PURCHASE OF PADDY. THE ASS ESSEE HAS MAINTAINED STOCK DETAILS OF BAGS IN STOCK AS WELL AS PURCHASE. WHEN THE PURCHASES ARE RECORDED, IT CANNOT BE SAID THAT ANY OTHER EXPENSES WERE INCURRED AND NOT RECORDED. WE, THEREFORE, DELETE THE ADDITION OF RS .97,791/-. 7. THE ASSESSING OFFICER NOTED THE EXPENDITURE ON A CCOUNT OF CONSTRUCTION OF BUILDING AS RECORDED BY THE ASSESSE E WAS RS.12,54,361/-. THE ASSESSEE WAS REQUIRED TO FURNISH VALUATION REPO RT FROM APPROVED VALUER. AS PER THE APPROVED VALUERS REPORT THE VALUE WAS W ORKED OUT AT 5 RS.12,87,600/-. THE ASSESSING OFFICER THEREFORE, T REATED THE DIFFERENCE AS UNDISCLOSED INVESTMENT RESULTING INTO ADDITION OF R S.33,239/-. 8. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIND THAT WHEREAS THE ASSESSEE HAS RECORDED ACTUAL EXPENDITURE INCURRED, THE DIFFERENCE IS ONLY ON ACCOUNT OF VALUATION OF SUCH BUILDING BY APPROVED V ALUER. HOWEVER, THERE IS NOTHING ON RECORD TO SUGGEST THAT ANY SPECIFIC EXPE NDITURE WAS INCURRED AND NOT RECORDED. THE VALUATION DONE BY THE APPROVED V ALUER IS ONLY AN OPINION AND NOT A FINDING OF FACT THAT THE EXPENDITURE INCU RRED WAS RS.12,87,600/-. THE DIFFERENCE BETWEEN THE ACTUAL EXPENDITURE AND E STIMATED EXPENDITURE IS ONLY 2.65% WHICH DOES NOT GIVE RISE TO ANY ADDITION AS UNEXPLAINED EXPENDITURE. 9. IN THE RESULT, THE APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 18 TH DECEMBER, 2009. SD/- SD/- (D.R. SINGH) (DEEPAK R. SHAH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 18 TH DECEMBER, 2009. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR, ITAT.