The Asstt.Commissioner of Income-tax, Amritsar. V. M/s. B.N.Exports, Amritsar.

ITA 299/ASR/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63516 (ITAT-AMRITSAR)
• Duration Of Justice: 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 09-10-2012
• Assessment Year: 2009-2010
• Appeal Filed On: 16-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R L CHHANALIA
• Keywords: Gross profit estimation
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.299(ASR)/2012 ASSESSMENT YEAR:2009-10 PAN :AADFB2579A ASSTT. COMMR. OF INCOME-TAX, VS. M/S. B.N. EXPORTS, CIRCLE-V, AMRITSAR. VILL. KHURMANIA, AMRITSAR. (APPELLANT) (RESPONDENT) I.T.A. NO.273(ASR)/2012 ASSESSMENT YEAR:2009-10 PAN :AADFB2579A M/S. B.N. EXPORTS, VS. ASSTT. COMMR. OF INCOME-TA X, VIL. KHURMANIA, AMRITSAR. CIRCLE-V, AMRITSAR. (APPELLANT) (RESPONDENT) ASSESSEE BY:SH. SALIL KAPOOR, ADVOCATE RESPONDENT BY:SH. R.L. CHHANALIA, DR DATE OF HEARING:09/10/2012 DATE OF PRONOUNCEMENT:11/10/2012 ORDER PER BENCH ; THESE CROSS APPEALS ONE BY THE REVENUE AND ANOTH ER BY THE ASSESSEE ARISE FROM THE ORDER OF THE LD. CIT(A), AMRITSAR, D ATED 31.05.2012 FOR THE ASSESSMENT YEAR 2009-10. ITA NO.299(ASR)/2012 ITA NO.273(ASR)/2012 2 2. THE REVENUE IN ITA NO.299(ASR)/2012 HAS RAISED F OLLOWING GROUNDS OF APPEAL: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) HAS ERRED IN DIRECTING THE AO TO RESTRICT TH E TRADING ADDITION TO THE EXTENT OF RS.15 LAKH FROM THE TOTAL ADDITION OF RS.1,15,61,617/- BY GIVING RELIEF TO RS.1,00,61,617 /-. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) HAS NOT GIVEN ANY BASIS OF RESTRICTING THE ADDITION TO THE TUNE OF RS. 15 LAKHS WHILE CONFIRMING THE ACTION OF THE AO IN REJECTING THE ASSESSEES BOOKS OF ACCOUNT BY INVOKI NG THE PROVISIONS OF SECTION 145(3) OF THE INCOME TAX ACT, 1961. 3. THAT THE ORDER OF THE LD. CIT(A) BE VACATED AND THAT OF THE AO BE RESTORED. 3. THE ASSESSEE IN ITA NO.273(ASR)/2012 HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LD. CIT(A) HAS, IN VIEW OF FACTS & CIR CUMSTANCES OF THE CASE, GROSSLY ERRED IN LAW AND ON FACTS, IN UPH OLDING THE REJECTION OF BOOKS OF ACCOUNT AND IN SUSTAINING AN ADDITION OF RS. 15 LAKHS IN THE TRADING ACCOUNT. 2. THAT THE OBSERVATION MADE BY THE LOWER AUTHORITI ES WERE AGAINST FACTS AND WERE BASED ON SURMISES AND CONJEC TURES AND DID NOT JUSTIFY THE REJECTION OF BOOKS OF ACCOUNT A ND THE ADDITION SUSTAINED. 3. THAT THE APPELLANT HAD MAINTAINED COMPLETE BOOKS OF ACCOUNT SUPPORTED BY COMPLETE STOCK TALLIES OF ALL PURCHASE S, PRODUCTION AND SALES AND INVENTORIES OF OPENING AND CLOSING ST OCKS AND FURNISHED THE SAME ON RECORD. ALL PURCHASES AND SAL ES WERE FULLY VOUCHED AND DULY ACCEPTED AND, THEREFORE, THE REJECTION OF BOOKS OF ACCOUNT WAS ILLEGAL AND BAD IN LAW. 4. THAT IN ANY CASE, THE BOOKS OF ACCOUNT MAINTAINE D BY THE APPELLANT WERE NOT FOUND INCOMPLETE OR INCORRECT AN D, THEREFORE, ITA NO.299(ASR)/2012 ITA NO.273(ASR)/2012 3 PROVISIONS OF SECTION 145 WERE WRONGLY APPLIED AND THE BOOKS WERE WRONGLY REJECTED. 4. THE BRIEF FACTS IN THE APPEALS OF THE REVENUE AN D THE ASSESSEE ARE THAT THE ASSESSEE IS RUNNING A SHELLING UNIT AND DERIVED INCOME FROM SHELLING AND TRADING OF HIGH QUALITY BRANDED RICE. THE TRADING R ESULTS OF THE IMPUGNED YEAR AND THE PRECEDING TWO YEARS ARE AS UNDER: SALE G.P. GPRATE NPRATE A.Y. 07-08 RS.26,17,67,203/- RS.2,25,70,318/- 0 8.62% 0.56% A.Y. 08-09 RS.29,55,52,383/- RS.3,62,03,054/- 12.2 5% 0.61% A.Y. 09-10 RS.50,58,44,674/- RS.5,41,98,193/- 10. 71 % 0.67% 4.1. IT WAS OBSERVED BY THE A.O. THAT GROSS PROFIT RATE HAS FALLEN AS COMPARED TO THE PRECEDING YEARS BY ALMOST 1.54% BUT THE TURNOVER HAS GONE UP ALMOST 71.15%. THE GROSS PROFIT SO FALLEN APPEAR S TO BE QUITE UNREASONABLE. THE ASSESSEE SUBMITTED THE EXPLANATI ON WITH REGARD TO THE FALL OF THE GP RATE, THE REASONS THAT THE CURRENT YEAR T URNOVER HAS INCREASED CONSIDERABLY ALMOST BY 70% DUE TO HIGH LEVEL OF COM PETITION IN THE MARKET, SINCE THE ASSESSEE HAD INTRODUCED NEW VARIETY OF PA DDY I.E. PADDY 1121 IN THE MARKET WHOSE DEMAND IN THE INTERNATIONAL MARKET AS WELL AS IN THE DOMESTIC MARKET WERE MUCH MORE AND THIS VARIETY WAS TRADED AT A LOW PROFIT.. THE COMPARATIVE CHART OF THE SALE OF DIFFE RENT BRAND OF RICE WAS SUBMITTEDS AS UNDER: ITA NO.299(ASR)/2012 ITA NO.273(ASR)/2012 4 SALE OF RICE ASSTT. YEAR 2008-09 QUINTALS ASSTT. YEAR 2009-10 QUINTALS. PARMAL VARIETY 44971.20 26432.40 SHARBATI VARIETY 92232.19 48368.77 1121/BASMATI NIL 71840 THE ASSESSEE WAS ASKED TO EXPLAIN THE LOW GP /NP OF OTHER CONCERNS IN THE SAME BUSINESS AS M/S. CHAMAN LAL SETIA, WHO HAD DEC LARED GP RATE OF 16.15% AND NP RATE OF 7.90% AND M/S. D.D. INTERNAT IONAL WHOSE GP RATE IS 19.43% AND NP RATE IS 3.37%. THE ASSESSEE SUBMITTED THE EXPLANATION THAT COMPARISON WITH DIFFERENT PRICE MILLERS IS NOT POSS IBLE BECAUSE OF THE FACTORS OF QUALITY OF MACHINERY, BRAND EQUITY AND MOREOVER THE FIRM, M/S. CHAMAN LAL SETIA IS MAINLY DEALING IN BASMATI RICE WHEREAS WE HAVE NO EXPERIENCE IN THIS TYPE OF RICE AND THEIR BRAND MAHARANI IS EXISTING FOR LAST 30 YEARS AND THEY ARE MAINLY SELLING THEIR PRODUCTS TO THE C ONSUMERS DIRECTLY THROUGH THEIR DISTRIBUTORS WHICH FETCH HIGHER GP/NP. THE NA TURE OF BUSINESS OF M/S. CHAMAN LAL SETIA AND M/S. D.D. INTERNATIONAL IS DIF FERENT BECAUSE THE SECOND PARTY IS MAINLY EXPORTING THEIR PRODUCTS I.E . 90% TO THE OVERSEAS MARKET & THEIR RELATION WITH FOREIGN BUYERS ARE VER Y OLD AND WHEREAS CHAMAN LAL SETIA IS SELLING THEIR PRODUCTS IN THE D OMESTIC AS WELL AS OVERSEAS MARKET. BOTH THESE FIRMS ARE MAINLY DEALIN G IN THE BUSINESS OF BASMATI RICE. WHEREAS IT IS THE FIRST YEAR FOR THE ASSESSEE TO ENTER INTO THE 1121 TYPE QUALITY. THE AO POINTED OUT CERTAIN DEFI CIENCIES IN THE BUSINESS ITA NO.299(ASR)/2012 ITA NO.273(ASR)/2012 5 OF BASMATI RICE LIKE, THE ASSESSEE IS NOT REFLECTIN G ITS COMPLETE CLOSING STOCK TO THEIR BANKERS; STOCK REGISTER KEPT BY THE ASSESS EE DOES NOT REFLECT ACTUAL PRODUCTION AND BIFURCATION OF FULL GRAIN AND BROKEN RICE, IN CERTAIN PURCHASE BILLS, THE QUALITY OR TYPE OF NAME OF PADDY IS NOT MENTIONED, SALE RATE OF RICE 1121 VARIES THROUGHOUT THE YEAR, STOCK REGISTER FOR FUEL AND DIESEL IS NOT MAINTAINED, STOCK REGISTER FOR BARDANA IS NOT MAI NTAINED AND STOCK REGISTER OF PHOOSE OR HUSK IS ALSO NOT MAINTAINED. AGAINST P URCHASE OF PADDY NO TRANSPORTATION BILLS, LABOUR BILLS HAVE BEEN PRODUC ED EXCEPT FROM OUTSIDE AMRITSAR MANDIS. AS REGARDS FREIGHT ON PADDY, CAS H VOUCHERS PRODUCED WERE SELF MADE, WHICH WERE PAID FOR LOCAL FREIGHT O N PADDY. THE ASSESSEE DID NOT SUBMIT ANY SATISFACTORY EXPLANATION BEFORE THE AO AND THE AO ACCORDINGLY RELYING UPON THE DECISIONS OF VARIOUS C OURTS OF LAW INVOKED THE PROVISIONS OF SECTION 145(3) OF THE ACT AND APPLIED THE GP @ 13% ON THE TOTAL TURNOVER DECLARED BY THE ASSESSEE AND MADE AN ADDITION OF RS.1,15,61,617/-. 5. BEFORE THE LD. CIT(A), THE ASSESSEE MADE THE SUB MISSIONS WHICH WERE SENT TO THE AO FOR REMAND REPORT. AFTER TAKING REMA ND REPORT FROM THE AO WHICH WAS CONFRONTED TO THE ASSESSEE, WHO HAD REBUT TED THE SAME, THE LD. CIT(A) ACCORDINGLY VIDE PARA 8.1 OF HIS ORDER UPHEL D THE INVOCATION OF PROVISIONS OF SECTION 145(3) OF THE ACT. THE LD. C IT(A) AFTER CONSIDERING ITA NO.299(ASR)/2012 ITA NO.273(ASR)/2012 6 THE EXPLANATION OF THE ASSESSEE, REMAND REPORT AND COUNTER REPLY OF THE ASSESSEE, DELETED THE ADDITION OF RS.1,00,61,617/- AND SUSTAINED THE ADDITION OF RS.15,00,000/- VIDE PARA 8.2 OF HIS WHICH FOR TH E SAKE OF CLARITY IS REPRODUCED AS UNDER: 8.2. AS PER REMAINING ISSUE VIDE GROUND OF APPEAL NO. 1 TO 6 THE APPELLANT HAS AGITATED THE TRADING ADDITION MADE BY THE A.O. AMOUNTING TO RS.1,15,61,617/- BY APPLYING G.P. RATE OF 13% ON TOTAL TURNOVER OF RS.50,58,44,674/-. HOWEVER, TO SUMMARIZ E THE FACT, THERE IS SUBSTANTIAL INCREASE IN SALES OF THE APPELLANT A S THESE HAVE INCREASED BY MORE THAN 70% DURING THE YEAR. IT IS A LSO A FACT THAT STOCK STATEMENT AS SUBMITTED TO THE BANK AND AS REF LECTED IN ITS BOOKS OF ACCOUNT DOES TALLY. FURTHER, I AM INCLINED TO AG REE AND CONVINCED WITH THE APPELLANTS CONTENTIONS THAT SINCE THE STO CK OF PADDY & MAIN FINISHED ITEMS LIKE RICE SHARBATI AND RICE 1121 HYP OTHECATED FOR AVAILING THE BANK OVER-DRAFT LIMIT AS SUFFICIENT TO COPE WITH ITS BANKERS REQUIREMENTS, THERE ARISES NO OCCASION TO FURNISH OR HYPOTHECATE STOCK OF BYE PRODUCTS, BARDANA & OTHER CONSUMABLE ITEMS. IT IS ALSO A FACT THAT THE APPELLANT IS MAIN TAINING BARDANA REGISTER. I HAVE ALSO CONSIDERED THE COMPUTER PRINT OUT OF BARDANA STOCK REGISTER, AS SUBMITTED BY THE APPELLANT, WHIC H IS MAINTAINING BARDANA REGISTER. I HAVE ALSO CONSIDERED THE COMPUT ER PRINT OUT OF BARDANA STOCK REGISTER, AS SUBMITTED BY THE APPELLA NT, WHICH IS PLACED ON RECORD. AS FAR AS THE WEIGHMENT SLIPS ARE CONCER NED THE APPELLANTS CONTENTION THAT ON EACH BILL OF PURCHAS E/SALE ITSELF, WEIGHT IS WRITTEN AND IT IS A PREVALENT MARKET PRACTICE IN SUCH LINE OF TRADE. STILL THERE REMAIN DISCREPANCIES OF VARIOUS NATURES INCLUDING TECHNICAL DISCREPANCIES LIKE FALL IN G.P. AS COMPARED TO IMME DIATELY PRECEDING ASSTT. YEAR, WHICH CANNOT BE COMPLETELY OVERLOOKED. ALTHOUGH, DURING APPELLATE PROCEEDINGS, THE APPELLANTS COUNSEL HAS VEHEMENTLY ARGUED BEFORE ME THAT IF AVERAGE OF LAST THREE YEARS ARE T AKEN, THEN THE G.P. RATE OF THIS YEAR REMAINS BETTER. HENCE, CONSIDERIN G ALL THE ASPECTS FROM ALL OF THIS YEAR REMAINS BETTER. HENCE, CONSID ERING ALL THE ASPECTS FROM ALL ANGLES, AND AFTER GOING THROUGH THE RECORD , SUBMISSIONS OF THE AO AND OF THE APPELLANT AS WELL AS PAST HISTORY OF THE CASE, I AM OF THE CONSIDERED VIEW THAT IT WOULD BE FAIR AND REASO NABLE TO RESTRICT THE TRADING ADDITION TO THE EXTENT OF RS.15,00,000/- AN D, THEREFORE, THE ITA NO.299(ASR)/2012 ITA NO.273(ASR)/2012 7 ADDITION TO THE EXTENT OF RS.15,00,000/- IS CONFIRM ED AND THE BALANCE ADDITION OF RS.1,00,61,617/- IS DIRECTED TO BE DELE TED. ACCORDINGLY, THE APPELLANT WOULD BE ENTITLED TO RELIEF OF RS.1,00,61 ,617/-. ALL THE RELEVANT GROUNDS OF APPEALS ARE PARTLY ALLOWED. 6. THE LD. DR, MR. R.L. CHHANALIA,ADDL. CIT, APPEAR ING FOR THE REVENUE AT THE OUTSET RELIED UPON THE DECISION OF T HE AO AND THE REMAND REPORT OF THE A.O. THE LD. DR ARGUED THAT THE AO H AS POINTED OUT MANY DEFECTS IN HIS ORDER AND THE ASSESSEE HAS NOT MET ANY OF THE DEFECTS TO THE SATISFACTION OF THE AO, IS EVIDENT FROM THE ORDER O F THE A.O. THEREFORE, THE LD. DR PRAYED TO CONFIRM THE ORDER OF THE AO ACCORD INGLY. 7. THE LD. COUNSEL FOR THE ASSESSEE, SH. SALIL KAPO OR, ADVOCATE, ON THE OTHER HAND VEHEMENTLY ARGUED AT THE OUTSET THAT IN NONE OF THE ORDER I.E. IN THE PAST OR IN FUTURE THERE HAS BEEN ANY APPLICATIO N OF PROVISIONS OF SECTION 145(3) OF THE ACT, IN THE CASE OF THE ASSESSEE. TH E RESULTS DECLARED BY THE ASSESSEE HAVE BEEN ACCEPTED BY THE DEPARTMENT IN TH E PAST IS NOT UNDER DISPUTE. IT IS ONLY THE IMPUGNED ORDER, THE AO HAS INVOKED THE PROVISIONS OF SECTION 145(3) OF THE ACT WHICH HAS BEEN CONFIRMED BY THE LD. CIT(A) AND THAT TOO WITHOUT ANY VALID REASON. MR. SALIL KAPOOR INVITED OUR ATTENTION TO PARA 8.1 OF CIT(A)S ORDER, WHO HAD CONFIRMED THE I NVOKING OF PROVISIONS OF SECTION 145(3) OF THE ACT, IS WITHOUT ANY REASONS ASSIGNED OR DISCUSSED BY THE LD. CIT(A). WHEREAS THE LD. COUNSEL FOR THE ASS ESSEE, MR. SALIL KAPOOR ITA NO.299(ASR)/2012 ITA NO.273(ASR)/2012 8 ARGUED THAT THE ASSESSEE HAD SUBMITTED THE EXPLANAT ION OF EACH AND EVERY QUERY RAISED BY THE AO WHICH IS PART OF THE PAPER B OOK. IT WAS ARGUED BY THE LD. COUNSEL, MR. SALIL KAPOOR THAT IT IS THE NET PR OFIT WHICH IS ULTIMATELY TAXED AND THE REVENUE IS COLLECTED BY THE INCOME TA X DEPARTMENT AND NP RATE IS HAVING INCREASING TREND WHICH IS 0.67% DURI NG THE IMPUGNED YEAR AS COMPARED TO 0.61% IN THE PRECEDING YEAR AND 0.56% I N THE YEAR BEFORE THE PRECEDING YEAR. IT WAS ALSO EXPLAINED BEFORE THE AU THORITIES BELOW THAT THERE WAS AN INTRODUCTION OF ONE NEW QUALITY I.E. PADDY 1121 WHICH WAS INTRODUCED DURING THE YEAR WHICH WAS SHELLED AND SO LD AT A LOWER PRICE TO MEET COMPETITION IN THE MARKET IS A MATTER OF FACT FOR WHICH NECESSARY DETAILS WERE SUBMITTED BEFORE THE AUTHORITIES BELOW. NO DEF ECT IN THE PURCHASE AND SALES, OPENING OR CLOSING STOCK OR IN ANY ITEM OF T HE TRADING HAS BEEN POINTED OUT BY THE LD. CIT(A). THEREFORE, HE IS NOT JUSTIFI ED IN CONFIRMING THE INVOCATION OF PROVISIONS OF SECTION 145(3) OF THE A CT. IT WAS FURTHER ARGUED THAT COMPLETE STOCK OF GOODS PURCHASED, GOODS PRODU CED AND GOODS SOLD WAS MAINTAINED AND WERE PRODUCED BEFORE THE AUTHORITIES BELOW, WHICH IS ON RECORD ALONGWITH AUDIT REPORT. AS REGARDS DEFICIENC IES POINTED OUT BY THE AO WHICH IN SHORT ARE REPRODUCED AS UNDER: I) COMPLETE CLOSING STOCK IS NOT REFLECTED TO BANKS. II) ASSESSEE IS NOT REFLECTING DAY TO DAY & MONTH-W ISE BIFURCATION OF PRODUCTION OF WHOLE GRAIN 1121 (WAND) & BROKEN 1 121 PRODUCTION. ITA NO.299(ASR)/2012 ITA NO.273(ASR)/2012 9 III) STOCK REGISTER FOR OIL & FUEL IS NOT MAINTAINED. IV) STOCK REGISTER FOR PHOOS OR HUSK IS NOT MAINTAINED. V) QUALITY OR TYPE OF NAME OF PADDY PURCHASED IS NOT M ENTIONED. VI) STOCK REGISTER FOR BARDANA IS NOT MAINTAINED. 7.1. AS REGARDS COMPLETE CLOSING STOCK NOT REFLECTE D TO THE BANK, IT WAS SUBMITTED THAT STOCK OF PADDY IS INTIMATED TO THE B ANK WAS MUCH MORE THAN THE LIMIT ENJOYED AND THEREFORE, THE STOCK IN THE F ORM OF RICE BRAN ETC. WAS NOT REQUIRED TO BE INTIMATED. THE STOCK TALLY OF TH E STOCK STATEMENT SUBMITTED TO THE BANK AND NO DEFECT HAS BEEN POINTED OUT. AS REGARDS NOT REFLECTING DAY TO DAY AND MONTH-WISE BIFURCATION OF PRODUCTION OF GRAIN 1121 AND BROKEN 1121 AND QUALITY OR TYPE OF NAME OF PADDY PURCHASE D INCLUDING WEIGHMENT SLIPS AND TRANSPORTATION BILLS AND STOCK TALLY OF THE BYE PRODUCT, DIESEL, HUSK AND CONSUMABLE STORES, IT WAS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE, MR. SALIL KAPOOR THAT REPLIES TO ALL THE OBJECTION S WERE FILED DURING THE COURSE OF ASSESSMENT BY LETTERS DATED 16.12.2011, 2 3.12.2011, 27.12.2001 AND 29.12.2011 WHICH IS A MATTER OF RECORD. THE NAT URE OF BUSINESS AND THE NATURE OF THE RECORDS MAINTAINED WERE FULLY EXPLAIN ED AND ALL THE OBJECTIONS RAISED BY THE AO WERE FULLY REPLIED. HE FURTHER SUB MITTED THAT MAIN OBJECTION ABOUT PURCHASE OF PADDY AND RICE WAS THAT QUALITY (I.E. PARMAL OR SHARBATI OR BASMATI 1121) IS NOT MENTIONED IN SOME OF THE PURCHASE VOUCHERS ITSELF. THE FACTS WERE EXPLAINED THAT THE SEASON OF PRODUCTION OF PADDY PARMAL, PADDY SHARVATI AND PADDY BASMATI WERE DIFFERENT AND THEIR ITA NO.299(ASR)/2012 ITA NO.273(ASR)/2012 10 RATES WERE ALSO VERY DIFFERENT AND WE HAD DULY RECO RDED THE PURCHASES QUALITY-WISE IN OUR PURCHASE REGISTERS. SIMILARLY, PURCHASES OF RICE SHARBATI AND RICE 1121 WERE MADE FROM DIFFERENT PARTIES AND THERE WAS BIG DIFFERENCE IN THEIR PURCHASE PRICES AND WE HAD DULY RECORDED T HE QUALITY IN OUR RICE PURCHASE REGISTER. A PRINT FROM THE PADDY PURCHASE REGISTER WS FILED BEFORE THE A.O. IT WAS FURTHER STATED THAT RICE WAS PURCHASED ONLY FROM 7 PARTIES. RICE 1121 WAS PURCHASED FROM 4 PARTIES AND RICE SHARBATI WAS PURCHASED FROM 3 OTHER PARTIES. THERE WAS BIG PRICE DIFFERENCE IN BOTH QUALITIES. MENTION OF QUALITY IN THE PURCHASE VOUCH ER WAS IMMATERIAL WHEN THE ASSESSEE HAD RECORDED THE PURCHASE OF RICE 1121 AND RICE SHARBATI QUALITY-WISE IN OUR PURCHASE AND STOCK REGISTER IS A MATTER OF RECORD. AS REGARDS THE OBJECTION REGARDING WEIGHMENT SLIPS AND TRANSPORTATION BILLS OF PADDY PURCHASES, IT WAS REPLIED THAT SUCH SLIPS WER E NOT RETAINED.. ALL GOODS CAME IN BAGS. THE NUMBER OF BAGS AND THE TOTAL WEIG HTS ARE MENTIONED IN ALL PURCHASE BILLS AND THE SAME ARE DULY RECORDED IN TH E PURCHASES AND THE TOTAL WEIGHT IS ACCOUNTED FOR BY PRODUCTION AND SALES AND THE FINAL STOCK TALLIES ARE MADE ACCORDINGLY. THE STOCK OF PADDY INTIMATED TO THE BANK WAS MUCH MORE THAN THE LIMIT ENJOYED AND, THEREFORE, THE STO CK IN THE FORM OF RICE BRAN ETC. WAS NOT REQUIRED TO BE INTIMATED. IT WAS ALSO SUBMITTED THAT 7517.86 QTLS OF RICE 1121 WAS TOTAL STOCK OF THAT V ARIETY WHICH WAS RIGHTLY ITA NO.299(ASR)/2012 ITA NO.273(ASR)/2012 11 VALUED AT COST @ RS.4400/-. IT WAS UNGRADED. ANOTHE R LOT OF 170 QTL. WAS PART OF GRADED RICE SOLD TO M/S. H.M. OVERSEAS, SAHARANP UR @ RS.5800 AND THEREFORE THAT STOCK WAS VALUED AT THAT RATE. THE G RADING WAS DONE ONLY WHEN THE ORDERS WERE RECEIVED OR THE SALES WERE MADE. THE STOCK TALLY OF OTHER BY PRODUCTS SUCH AS THIN PHAK AND RICE BRAN WAS KEPT A ND THE SAME WAS DULY FILED WITH THE AO. THE STOCK TALLY OF BARDANA WAS A LSO KEPT AND PRODUCED. HOWEVER, THE HUSK AND DIESEL BOTH WERE CONSUMABLE S TORES AND, THEREFORE, STOCK TALLY WAS NOT POSSIBLE. THE LD. COUNSEL FURTH ER SUBMITTED THAT STOCK REGISTER OF DIESEL AND HUSK WHICH ARE OUR CONSUMABL E STORES, WERE NOT MAINTAINED BUT THE STOCK REGISTER OF THINK PHAK AND RICE BRAN WERE MAINTAINED. ALL POSSIBLE STOCK REGISTERS ARE KEPT A ND SAME HAVE ALSO BEEN PRODUCED BEFORE THE AUTHORITIES BELOW. THE AO HAS N OT POINTED OUT ANY SINGLE DEFECT IN THE ACCOUNTS MAINTAINED BY THE AS SESSEE. ALL PURCHASES AND SALES WERE DULY VOUCHED AND ALL PAYMENTS WERE RECEI VED AND PAID BY PAYEES ACCOUNT CHEQUES INCLUDING PAYMENTS FOR JOB WORK RECEIPTS. IN FACT, ALL THE PURCHASES AND SALES WERE DULY ACCEPTED BY T HE A.O. IT WAS FURTHER STATED THAT IN THIS CASE ALL PURCHASES AND SALES AR E VOUCHED, ACCOUNTED FOR AND ACCEPTED BY THE AO. DAILY PRODUCTION REGISTER IS MAINTAINED BY THE ASSESSEE AND ON THAT BASIS, MONTHLY STOCK TALLIES A RE FILED AND ACCEPTED. THE AO HAS IMPOUNDED RICE AND PADDY PURCHASE FILES AS M ENTIONED IN THE ITA NO.299(ASR)/2012 ITA NO.273(ASR)/2012 12 ASSESSMENT ORDER. THESE FILES CONTAIN ALL ORIGINAL PURCHASE VOUCHERS FOR RICE & PADDY PURCHASES. MOST OF THESE PURCHASE VOUCHERS HAVE ATTACHED WEIGHMENT RECEIPTS AND G.R./TRANSPORTATION RECEIPTS . THE PADDY PURCHASED FROM LOCAL MANDIS WAS TRANSPORTED BY ASSESSEES OWN TRUCKS AND TROLLIES. STOCK TALLY OF BARDANA WAS ALSO MAINTAINED AND THE SAME WAS PRODUCED BEFORE THE AO AS WELL AS BEFORE THE LD. CIT(A). 7.2. MR. SALIL KAPOOR, ADVOCATE, FURTHER ARGUED THA T FALL IN G.P. RATE CANNOT BE THE SOLE REASON FOR REJECTING THE BOOKS O F ACCOUNT OR MAKING ADDITION WHICH IN FACT HAS BEEN DULY EXPLAINED BEFO RE THE AO AND THE LD. CIT(A). THE LD. COUNSEL RELIED UPON THE DECISIONS O F VARIOUS COURTS OF LAW IN THIS REGARD AS UNDER: I) CIT VS. BHARAT RICE MILLS (2001) 250 ITR 584 (P &H) II) CIT VS. BANSAL RICE AND GENERAL MILLS (2001) 25 0 ITR 588 (P&H) III) CIT VS. K.S. BHATIA (2004) 269 ITR 577 (P&H) 7.3. THE LD. COUNSEL FOR THE ASSESSEE, MR. SALIL KA POOR, FURTHER ARGUED THAT IN THE ABSENCE OF ANY DEFECT IN THE BOOKS OF ACCOUN T, THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE INVOCATION OF PROVISION S OF SECTION 145(3) OF THE ACT AND IS NOT FURTHER JUSTIFIED TO SUSTAIN THE ADD ITION OF RS. 15 LACS. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT THE AO HAS POI NTED OUT MANY MISTAKES IN ITA NO.299(ASR)/2012 ITA NO.273(ASR)/2012 13 HIS ORDER. AT THE SAME TIME, THE ASSESSEE HAD SUBMI TTED THE EXPLANATION FOR EACH AND EVERY DEFECT POINTED OUT BY THE AO. AS REG ARDS THE FALL IN GP WHICH HAS BEEN EXPLAINED THAT A NEW VARIETY I.E. PA DDY 1121 HAD BEEN INTRODUCED, WHICH IS SHELLED AND SOLD IN THE MARKET AT LOWER RATE TO MEET THE COMPETITION. THE LD. COUNSEL HAS ALSO SUBMITTED THE EXPLANATION WITH REGARD TO THE RESULTS OF M/S. CHAMAN LAL SETIA AND M/S. D. D. INTERNATIONAL, WHICH CANNOT BE COMPARED WITH THE PRESENT FACTS OF THE AS SESSEE FOR THE REASONS AND EXPLANATION SUBMITTED BEFORE THE AO AND THE LD. CIT (A). NO DEFECT IN THE PURCHASE AND SALE, OPENING STOCK AND CLOSING STOCK HAS BEEN POINTED OUT. COMPLETE STOCK TALLY OF GOODS PURCHASED, GOODS PROD UCED AND GOODS SOLD HAS BEEN MAINTAINED AND THE SAME HAS BEEN PLACED O N RECORD ALONGWITH AUDIT REPORT DURING THE COURSE OF ASSESSMENT PROCEE DINGS. THE ASSESSEE HAD SUBMITTED AND REPLIED ALL THE OBJECTIONS OF THE AO VIDE LETTERS DATED 16.12.2011, 23.12.2011, 27.12.2011 AND 29.12.2011. AS REGARDS THE QUALITY OF PADDY AND RICE IS NOT MENTIONED IN CERTAIN PURC HASE VOUCHERS. THE ASSESSEE SUBMITTED THE EXPLANATION THAT THE SEASON OF PRODUCTION OF PADDY PARMAL, PADDY SHARBATI AND PADDY BASMATI WERE DIFF ERENT AND THEIR RATES WERE ALSO VERY DIFFERENT , WHICH HAS BEEN RECORDED QUALITY-WISE IN THE PURCHASE REGISTER OF THE ASSESSEE. SIMILARLY, PURC HASE OF SHARBATI AND RICE 1121 WERE MADE FROM DIFFERENT PARTIES HAD BEEN REC ORDED QUALITY-WISE IN ITA NO.299(ASR)/2012 ITA NO.273(ASR)/2012 14 THE RICE PURCHASE REGISTER. THERE IS BIG DIFFERENCE BETWEEN QUALITY OF RICE 1121 AND RICE SHARBATI AND THE ASSESSEE HAD RECORDE D THE QUALITY IN THEIR PURCHASE REGISTER. THEREFORE, MENTION OF QUALITY IN THE PURCHASE VOUCHERS WAS IMMATERIAL WHEN THE ASSESSEE HAD RECORDED THE S AME IN THEIR PURCHASE REGISTER FOR WHICH NO DEFECT HAS BEEN POINTED OUT B Y ANY OF THE AUTHORITIES BELOW. AS REGARDS THE WEIGHMENT SLIPS AND TRANSPORT ATION BILLS, THE SAME WERE NOT RETAINED SINCE ALL GOODS RECEIVED IN BAGS AND NUMBER OF BAGS AND THE TOTAL WEIGHTS ARE MENTIONED IN ALL PURCHASE BIL LS, WHICH ARE DULY RECORDED IN THE PURCHASE REGISTER AND TAKEN INTO ACCOUNT FOR PRODUCTION AND SALES AND THE FINAL STOCK TALLIES ARE MADE FOR WHICH NO DEFEC T HAS BEEN POINTED OUT. THE STOCK OF PADDY INTIMATED TO THE BANK HAS BEEN TALLI ED WITH THE STOCK OF PADDY WITH THAT OF THE ASSESSEE AND NO DEFECT IN THE SAME HAS BEEN POINTED OUT. THE STOCK TALLY OF OTHER BY-PRODUCTS LIKE THIN PHAK AND RICE BRAN WAS KEPT AND THE SAME WAS DULY PLACED AND FILED WITH THE AO. THE STOCK TALLY OF BARDANA WAS ALSO KEPT AND PRODUCED. AS REGARDS THE HUSK AND DIESEL, BOTH WERE CONSUMABLE STORES, THEREFORE, STOCK TALLY WAS NOT P OSSIBLE. IT WAS ARGUED THAT HUSK IS USED BY THE ASSESSEE IN THEIR BOILER. IT WA S SUBMITTED THAT THE ASSESSEE HAD MAINTAINED ALL THE POSSIBLE STOCK REGI STERS I.E. THREE SEPARATE STOCK REGISTERS FOR PADDY WITH REGARD TO PADDY PARM AL, PADDY SHARBATI AND PADDY 1121 AND EACH REGISTER RECORDS DATE-WISE OPEN ING STOCK, PURCHASE ITA NO.299(ASR)/2012 ITA NO.273(ASR)/2012 15 FROM WITHIN STATE, PURCHASE FROM OUTSIDE STATE, SEN T FOR MILLING, SALES IF ANY THEN CLOSING STOCK. ACCORDINGLY, STOCK REGISTER OF RICE AND THE PRODUCTION REGISTER ARE MAINTAINED FOR WHICH NO DEFECT HAS BEE N POINTED OUT. AS REGARDS THE PURCHASES AND SALES FOR WHICH THE PAYMENTS AR E MADE THROUGH ACCOUNT PAYEE CHEQUES INCLUDING PAYMENTS FOR JOB WORK RECEI PTS AND NO DEFECT HAS BEEN POINTED OUT IN THE SAME IS A MATTER OF RECORD . THE ASSESSEE HAS ALSO MAINTAINED DAILY PRODUCTION REGISTER AND NO DEFECT IN THE SAME HAVE BEEN POINTED OUT. 8.1 IN THE FACTS AND CIRCUMSTANCES AND IN THE ABSEN CE OF ANY DEFECT POINTED OUT BY THE AUDITORS IN THE AUDIT REPORT AN D IN THE ABSENCE OF ANY DEFECT, WHICH HAS NOT BEEN EXPLAINED BY THE ASSESSE E, WE ARE OF THE VIEW THAT THE AO IS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 145(3) OF THE I.T. ACT, 1961. THOUGH, IN THE PRESENT CASE, THE LD . CIT(A) HAS TAKEN THE REMAND REPORT FROM THE AO, IN WHICH THE AO HAS REIT ERATED THE SAME AS IN THE ASSESSMENT ORDER. IT HAS BEEN REBUTTED BY THE A SSESSEE AND THE FACTS ARE AVAILABLE IN THE ORDER OF THE LD. CIT(A). THEREFORE , IN THE FACTS AND CIRCUMSTANCES AND KEEPING INTO CONSIDERATION THE EX PLANATION OF THE ASSESSEE, WHICH IS AVAILABLE IN THE ORDERS OF THE A .O. AND THE LD. CIT(A), FOR WHICH COPY WAS SENT TO THE AO FOR TAKING THE REMAND REPORT AND AFTER CONSIDERING THE REMAND REPORT, AS HELD HEREINABOVE AND KEEPING INTO THE ITA NO.299(ASR)/2012 ITA NO.273(ASR)/2012 16 DECISIONS RELIED UPON BY THE LD. COUNSEL FOR THE AS SESSEE, WE ARE OF THE VIEW THAT THE LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE AO FOR INVOKING THE PROVISIONS OF SECTION 145(3) OF THE AC T AND NO ADDITION ON ACCOUNT OF TRADING IS CALLED FOR. THEREFORE, THE AD DITION SUSTAINED BY THE LD. CIT(A) IS DIRECTED TO BE DELETED. THUS, ALL THE GR OUNDS OF THE REVENUE ARE DISMISSED AND THAT OF THE ASSESSEE ARE ALLOWED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.299(ASR)/2012 IS DISMISSED AND THE APPEAL OF THE ASSESSEE IN ITA NO. 273(ASR)/2012 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11TH OCTOBER, 2012. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 11TH OCTOBER, 2012 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. B.N. EXPORTS, AMRITSAR 2. THE ACIT, CIR.V, ASR. 3. THE CIT(A), ASR. 4. THE CIT, ASR 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL