Income tax Officer, BASTAR(CG) V. Shri Nand Lal Rathi, SUKMA(CG)

ITA 34/BIL/2012

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 0534 (ITAT-RAIPUR)
• Duration Of Justice: 3 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 11-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K JAIN
• Assessee Lawyers: G S AGARWAL
• Keywords: Unexplained cash credit; Onus to prove
• Section: 68

Judgement Text

, RAIPUR IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BEFORE S/SHRI G.D.AGARWAL( V.P) & MUKUL SHRAWAT (JM) . . , , ./ I.T.A. NO.34/BLPR/2012 ( / ASSESSMENT YEAR : 2007 - 08 ) INCOME TAX OFFICER, BEHIND JHANKAR TALKIES, CIVIL LINES, JAGDALPUR BASTAR. / VS. NAND LAL RATHIM, PROP. M/S. MAHESH RICE MILL, MAIN ROAD, SUKUMA, DIST: SUKUMA , SUKMA, C.G. ./ ./ PAN/GIR NO. : ACOPR 5941H ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SH D.K.JAIN / RESPONDENT BY : SH. G.,S.AGARWAL / DATE OF HEARING :07 - 10 - 2015 / DATE OF PRONOUNCEMENT : 09 - 10 - 2015 / O R D E R PER MUKUL KR. SHRAWAT, JM THIS IS AN APPEAL FILED BY THE REVENUE ARISING FROM THE ORDER OF THE LD CIT(A) - BILASPUR DATED 31.12.2011. THE GROUNDS RAISED BY THE REVENUE ARE REPRODUCED BELOW: 2 I.T.A. NO.34/BLPR/2012 ASSESSMENT YEAR : 2007 - 0 8 1. WHETHER IN LAW AND ON FACTS & CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.2,88,490/ - MADE BY THE AO ON ACCOUNT OF SUPPRESSED SALES OF HUSK. 2. WHET HER IN LAW AND ON FACTS & CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.23,52,678/ - MADE BY THE AO ON ACCOUNT OF UNEXPLAINED CREDITS U/S.68 OF THE I.T.ACT, 1961. 3. WHETHER THERE HAS BEEN VIOLATION OF PROVISIONS OF RULES 46 A OF THE I.T.,RULES BY CITA) WHILE PASSING THE PRESENT ORDER 2. AT THE OUTSET, THE BENCH HAS ASKED THE LD D.R TO DEMONSTRATE THE VIOLATION OF PROVISIONS OF RULE 46A OF I.T.RULES WHICH WAS MENTIONED IN GROUND NO.3 OF GROUNDS OF APPEAL. NOTHING SPECIFIC WA S POINTED OUT BY HIM, RATHER WE HAVE NOTED THAT IN THE TITLE OF THE APPEAL ORDER , DECIDED BY THE LD CIT(A), IT WAS CLEARLY MENTIONED THAT THE REMAND REPORT WAS RECEIVED FROM THE AO. IN SUCH SITUATION WHEN THE REVENUE WAS PROVIDED AN OPPORTUNITY, HENCE IT I S NOT JUSTIFI ABLE TO ALLEGE THAT THERE WAS ANY INFRINGEMENT OF RULE 46A OF I.T.RULES. RESULTANTLY, GROUND NO.3 IS HEREBY DISMISSED. 3. APROPOS TO GROUND NO.1,, WE HAVE BEEN INFORMED THAT ITAT NAGPUR BENCH IN THE CASE OF M/S. ANANT RICE INDUSTRIES, RAIPUR VS ITO IN ITA NO.280(NAG)/2008 FOR THE ASSESSMENT YEAR 2004 - 05 VIDE ORDER DATED 26.8.2008 HAS DECIDED THE ISSUE IN ASSESSEES FAVOUR VIDE PARA 4 IN THE FOLLOWING MANNER: WE HAVE HEARD THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US. IN OR OPINION, THE AO HAS GONE MORE 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 BROUGHT ON RECORD. IT HAS BEEN POINTED OUT BY THE LD COUNSEL THAT EVEN IN EARLIER ASSE SSMENT YEAR ALSO, THERE IS WAS NO SALE OF HUSK AND THE 3 I.T.A. NO.34/BLPR/2012 ASSESSMENT YEAR : 2007 - 0 8 DEPARTMENT DID NOT MAKE ANY ADDITION ON THAT ACCOUNT. THE ASSESSEE HAS ALSO FURNISHED EXAMPLES OF VARIOUS OTHER ASSESSES DOING SIMILAR NATURE OF RICE MILLING BUSINESS WHO HAVE NOT SOLD ANY HUSK. THE EXERCISE OF THE AO IN ADOPTING THE NET SALEABLE PRICE OF HUSK WAS BASED ON HIS SURMISES AND CONJECTURES. IN THAT VIEWS OF THE MATTER, THE ADDITION OF RS.1,88,000/ - MADE ON ACCOUNT OF UNRECORDED SALE OF HUSK WAS NOT JUSTIFIED AND THE CIT(A) WENT WRONG UP HO LDING THE SAME. THE ADDITION, THEREFORE, IS DIRECTED TO BE DELETED. 4. IN THE LIGHT OF THE ARGUMENTS OF BOTH THE SIDES, WE HAVE EXAMINED THE FACTS OF THE CASE. THE ASSESSEE IS A PROPRIETOR OF M/S. MAHESH RICE MILL. THE INCOME WAS DERIVED FROM PADDY MILL ING AND TRADING OF RICE AND ITS OTHER BY - PRODUCTS. THE ASSESSEE HAS ALSO GENERATED INCOME FROM BY - PRODUCTS. AS PER AUDITED REPORT AND BOOKS OF ACCOUNT, THE APPELLANT HAS SOLD PADDY HUSK @ RS.75/ - PER QUINTAL. HOWEVER AS PER AO, THE ASSESSE HAS SUPPRES SED THE SALE PRICE OF PADDY HUSK. THE AO HAS COMPARED ANOTHER CASE IN WHICH THE RATE WAS RS.113.50 PER QUINTAL. THEREUPON THE AO HAD ESTIMATED THE RATE OF SALE OF PADDY HUSK AT RS.100/ - PER QUINTAL AND MADE THE IMPUGNED ADDITION OF RS.2,88,490/ - . THE ASSE SSEES CASE WAS THAT PROPER BOOKS OF ACCOUNT HAVE BEEN MAINTAINED, WHICH WAS ALSO SUBJECTED TO AUDIT, THEREFORE, THERE WAS NO BASIS FOR ANY PRESUMPTION IN RESPECT OF RATE FOR SALE OF PADDY HUSK. THE CIT (A) HAS FOLLOWED THE SAID DECISION OF THE TRIBUNAL A ND GRANTED RELIEF IN THE MANNER: THE RIVAL SUBMISSIONS HAVE BEEN CAREFULLY CONSIDERED WITH REFERENCE TO THE FACTS OBTAINED FROM THE RECORD. ALONG WITH THE WRITTEN SUBMISSIONS FILED IN PROCEEDINGS BEFORE ME, THE APPELLANT HAD PRODUCED SALE BILLS/VOUCHERS TO PROVE THE SALE OF HUSK AND MOST OF THEM CONTAINED ALL RELEVANT DETAILS INCLUDING THE TRUCK NUMBERS. THE AO HAD NOT ADVERSELY COMMENTED ON THE AFOREMENTIONED SUBMISSIONS MADE ON BEHALF OF THE APPELLANT. IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, THE SALE OF HUSK WAS 4 I.T.A. NO.34/BLPR/2012 ASSESSMENT YEAR : 2007 - 0 8 ESTIMATED @ RS.20/ - PER QUINTAL AND IN FIRST APPEAL, THIS ESTIMATION WAS REDUCED TO RS.15/ - . THE IMPUGNED ESTIMATED ADDITION THIS YEAR WAS NOT BASED ON ANY EVIDENCE BROUGHT BY THE AO ON RECORD. BEFORE MAKING SUCH HUGE ADDITION ON PRESUM PTIONS, IT WAS INCUMBENT UPON THE AO TO HAVE BROUGHT EVIDENCE ON RECORD. WITHOUT BRINGING ANY EVIDENCE TO PROVE THE CONTRARY, THE IMPUGNED ADDITION WAS MADE ON PRESUMPTIONS. THIS IS OPPOSED TO THE DECISION IN DHAKESHWARI COTTON MILLS LTD VS. CIT (19540 26 ITR 775(SC) WHEREIN IT WAS HELD THAT IN MAKING THE ASSESSMENT, THE AO IS NOT ENTITLED TO MAKE A PURE GUESS AND MAKE AN ASSESSMENT WITHOUT REFERENCE TO ANY EVIDENCE OR MATERIAL. IN MY CONSIDERED VIEW, IT IS THE PREROGATIVE OF THE BUSINESSMAN HOW TO RUN THE BUSINESS AND IT IS NOT OPEN TO THE AO TO PRESUME THE SALE PRICE OF THE HUSK AGAINST THE SALE PROCEEDS DULY ACCOUNTED FOR IN THE AUDITED BOOKS OF ACCOUNT. EVERY BUSINESSMAN KNOWS HIS BUSINESS INTEREST BEST, CIT VS DHANRAJ GIRIRAJA THARASINGIRI (1973) 91 ITR 544 (SC). INCOME IN FACT EARNED IS ONLY TAXABLE AND NOT THE ONE PRESUMED TO HAVE BEEN EARNED.. RECORD EVIDENCES THE FACT THAT HER REASONABLENESS AND GENUINENESS OF THE SALE PROCEEDS OF HUSK ACCOUNTED FOR THIS YEAR IN THE BOOKS OF ACCOUNT, WAS FAR HIGHER THAN THAT ACCEPTED AS REASONABLE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. THERE IS NO CHANGE IN THE SET OF FACTS AND CIRCUMSTANCES. SIMILAR ESTIMATED ADDITION MADE IN THE CASE OF M/S. ANANT RICE INDUSTRIES, RAIPUR ON THE ALLEGED GROUND OF THE UNRECORDED SALE OF HUSK, MADE ON PRESUMPTIONS AND SURMISES WITHOUT ANY CORROBORATIVE EVIDENCE, WAS DELETED BY THE HONBLE ITAT, NAGPUR BENCH IN ITA NOZ.280(NAG)/2008 DATED 26.8.2008. THIS JUDGEMENT IS NOW CONSTANTLY FOLLOWED BY THE BILASPUR BENCH OF HONB LE ITAT. RESPECTFULLY FOLLOWING THE ABOVE DECISIONS, THE IMPUGNED PRESUMPTIVE ADDITION , UNSUBSTANTIATED ON THE STRENGTH OF EVIDENCE CANNOT BE SUSTAINED AND IS DELETED. THE APPELLANT GETS RELIEF OF RS.2,88,490/ - . 5. ON CAREFUL EXAMINATION OF THE FACTS, WE HAVE NOTED THAT THE LD CIT(A) HAS JUDICIOUSLY FOLLOWED THE DECISION OF THE ITAT NAGPUR BENCH PRONOUNCED IN THE CASE OF ANANT RICE INDUSTRIES (SUPRA). MOREOVER, WE ARE ALSO CONVINCED THAT IN 5 I.T.A. NO.34/BLPR/2012 ASSESSMENT YEAR : 2007 - 0 8 THE ABSENCE OF ANY CONTRARY MATERIAL IN RESPECT OF RATE OF SAL E OF PADDY HUSK, THE AO SHOULD NOT HAVE PRESUMED A HIGHER RATE OF SALE OF HUSK. THE SAID PRESUMPTION WITHOUT ANY CORROBORATIVE EVIDENCE DO NOT STAND IN THE EYES OF LAW. RESULTANTLY, FOLLOWING THE PAST PRECEDENT, WE HEREBY CONFIRM THE FINDINGS OF THE LD CIT(A). THIS GROUND IS, THEREFORE, DISMISSED. 6. APROPOS TO GROUND NO.2, THE OBSERVATION OF THE AO WAS THAT THE ASSESSEE HAD CLAIMED SUNDRY CREDITORS OF RS.43,52,678/ - OUT OF WHICH THE ASSESSEE HAD SHOWN MANDI CHUKARA OF RS.43,52,678/ - . THE ASSESSEE WA S ASKED TO FURNISH A LIST OF 44 PERSONS ALLEGED TO BE SUNDRY CREDITORS/MANDI CUKARA. THE ASSESSEE HAS STATED THAT THE CREDITORS WERE FARMERS FROM DIFFERENT VILLAGES FROM WHOM PADDY WAS PURCHASED; HENCE, IT WAS DIFFICULT TO PRODUCE THE FARMERS. IN THE ASS ESSMENT ORDER, THERE IS A REFERENCE OF GANJ CHUKARA REGISTER MAINTAINED BY THE ASSESSEE IN WHICH DETAILS OF PADDY PURCHASE WAS NOTED. IT HAS ALSO BEEN RECORDED BY THE AO THAT ON VERIFICATION OF CASH BOOK, IT WAS FOUND THAT MANDI BONUS ON PADDY PURCHAS E OF RS.40/ - PER QUINTAL AS FIXED BY THE STATE GOVERNMENT WAS PAID IN CASH ON THE DATE OF PADDY PURCHASE ITSELF. HOWEVER, AS PER AO, THE TRANSACTION CONTRADICTS REGARDING THE PAYMENT OF MANDI CHUKARA IN THE SUBSEQUENT YEARS THAT TO O MADE AF TER A GAP OF . LONG PERIOD. THE AO HAS FINALLY HELD THAT THE ASSESSEE HAD FAILED TO DISCHARGE THE ONUS TO PROVE THE SUNDRY CREDITORS, HENCE MADE AN ADDITION OF RS.23,52,678/ - . THE SAID ADDITION WAS CHALLENGED BEFORE THE FIRST APPELLATE AUTHORITY. 6 I.T.A. NO.34/BLPR/2012 ASSESSMENT YEAR : 2007 - 0 8 7. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, THE LIST OF 44 FARMERS HAS BEEN EXAMINED BY HIM. AFTER DETAILED DISCUSSION IN RESPECT OF THE FARMERS, ADDITION WAS DELETED IN THE CONCLUDING PARAGRAPH AS UNDER: FROM THE AFFIDAVITS OF VARIOUS SUPPLIERS, THE STATEMENTS RECORDED BY ME AND THE CERTIFICATE OF PATWARIS REGARDING LAND HOLDING, I HOLD THAT THE PURCHASE OF TRADING ITEMS BY THE APPELLANT WAS MADE FROM VARIOUS PERSONS IN THE COURSE OF BUSINESS AND THE RELEVANT AMOUNT WAS ALSO OUTSTANDING AS ON CLOSING DATE TOTALING TO RS.23,52,678/ - . THEREFORE, THE ADDITION OF RS.232,52,678/ - CANNOT BE SUSTAINED. I ALSO FIND THAT THE AO HAS ACCEPTED THE MANUFACTURING AND PROFIT & LOSS ACCOUNT AS WELL AS PURCHASES. SO FAR AS BONUS IS CONCERNED, I FIND THAT IT HAS BEEN PAID TO THE FARMERS AS IS APPARENT FROM MANDI RECORDS. THE APPELLANT HAS RECORDED ALL THE PURCHASES IN THE MANDI REGISTER AND HAS ALSO PAID MANDI TAX AND NIRASHRIT TAX. THE APPELLANT HAS PRODUCED EVIDENCES REGARDING AGRICULTURAL LAND HOLDING OF AS MANY AS 26 FARMERS. I APPRECIATE THE DIFFICULTY OF THE APPELLANT IN OBTAINING THE LAND RECORDS OF OTHER FARMERS. MOREOVER, I ALSO CONSIDER THAT IN ABSENCE OF LAND HOLDING, THE GENUINENESS OF TRANSACTION IS PROVED BY VIRTUE OF THEIR AFFIDAVITS AND STATEMENTS R ECORDED BEFORE ME. THERE IS NO OTHERWISE COMMENT OF THE AO WITH REGARD TO AFFIDAVITS STATEMENTS RECORDED ENTRIES IN MANDI PURCHASE REGISTER, PAYMENT OF MANDI TAX AND NIRASHRIT TAX. IN DECIDING THIS ISSUE THE FOLLOWING JUDGMENTS HAVE BEEN STUDIED: I) CIT VS JMD COMPU TERS & COMMUNICATIONS PVT LTD., (2009) 180 TAXMAN 485 (DELHI) II) JCIT VS MATHUR DAS ASHOK KUMAR - (2006) 101 TTJ ( LL) 810 III) DHAKESHWARI COTTON MILLS VS CIT, (1984) 26 ITR 775(SC ) IV) CIT VS. MAHESH CHANDZ(1993) 1999 ITR 247 (ALL) THE LD COUNSEL ALSO ARGUED THAT THE OUTSTANDING BALANCES WERE NOT FALLING UNDER THE PROVISIONS OF SECTION 68 AS THEY WERE NEITHER LOANS NOR DEPOSITS. HE HAD RELIED UPON CIT VS. KANCHAN DAS JAIN (2006) 205 CTR 444 (ALL). AS I AM ALLOWING RELIEF, THIS ISSUE IS NO ACADEMIC INTEREST A ND NEED NOT BE DECIDED. THE LD COUNSEL FURTHER ARGUED THAT NO OTHER EVIDENCE HAS BEEN BROUGHT BY THE LD AO SUBSTANTIATING HIS OBSERVATION THAT 7 I.T.A. NO.34/BLPR/2012 ASSESSMENT YEAR : 2007 - 0 8 OUTSTANDING BALANCE IS THE INCOME OF THE APPELLANT AND NOT BALANCE OF PURCHASE PRICE. .THE ISSUE IS COVERED IN T HE ABOVE FINDING. FOR THE ABOVE REASONS AND RESPECTFULLY FOLLOWING THE AFORESAID CASE LAWS, THE ADDITION OF RS.23,52,678/ - IS DELETED. THE APPELLANT GETS RELIEF OF RS.23,52,678/ - . 8. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES AND AFTER EXAMINING THE VOLUMINOUS COMPILATION FILED FROM THE SIDE OF THE ASSESSEE, WE ARE OF THE CONSIDERED OPINION THAT THERE WAS NO FALLACY IN THE ORDER OF THE LD CIT(A). THE ASSESEE HAD MADE PURCHASE OF PADDY OF RS.1,26,79,875/ - FROM VARIOUS FARMERS. HOWEVER, THE AMOUNT REM AINED OUTSTANDING AS ON 31.3.2007 WAS RS.23,52,678/ - PERTAINING TO 44 FARMERS. THE ASSESSEE HAS FURNISHED CERTAIN DETAILS TO ESTABLISH THAT PAYMENTS TO 6 FARMERS WERE MADE IN THE NEXT YEAR. HOWEVER, THE AO HAS DOUBTED THIS EXPLANATION. ON THE CONTRARY, THE EXPLANATION OF THE ASSESSEE WAS THAT PART PAYMENTS HAVE BEEN MADE AS IS EVIDENT FROM GANJ CHUKARA REGISTER. THE PURCHASES WERE MADE IN THE REGULAR COURSE OF BUSINESS WHICH WAS DULY RECORDED IN THE REGISTER REGULARLY MAINTAINED BY THE ASSESSEE. IT HAS ALSO BEEN EXPLAINED THAT THE ASSESSEE HAS DULY FOLLOWED THE REGULATION AS PRESCRIBED BY KRISHI UPAZ MANDI SAMITI. THE ASSESSEE HAS ALSO PAID MANDI TAX AND NIRASHRIT TAX. THE ENTRIES OF THE TAX PAID HAVE ALSO BEEN REGULARLY RECORDED IN THE PRESCRIBED REG ISTER. THOSE REGISTERS WERE ALSO SUBJECTED TO PERIODICAL CHECK BY THE KRISH MANDI SAMITI. EVEN IT WAS NOT THE CASE OF THE AO THAT THE ASSESSEE HAS CLAIMED EXCESSIVE EXPENSE OF PURCHASE OF PADDY DURING THE YEAR UNDER CONSIDERATION. OUR ATTENTION HAS BEEN DRAWN ON A COMPARATIVE FIGURE OF TRADING RESULT OF THE PAST YEAR. ACCORDING TO THE SAID CHART, THE PERCENTAGE OF GROSS PROFIT IN THE PRECEDING ASSESSMENT YEAR 2006 - 07 WAS 9.95%. HOWEVER, THE 8 I.T.A. NO.34/BLPR/2012 ASSESSMENT YEAR : 2007 - 0 8 PERCENTAGE OF GROSS PROFIT DURING THE YEAR UNDER CONSIDERATION I,E. A.Y. 2007 - 08 WAS 12.93%. THE ASSESSEE HAD ALSO SHOWN BETTER PERCENTAGE OF NET PROFIT WHICH HAD INCREASED FROM 1.88% TO 3.02%. THEREFORE, UNDER THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WHEN THE ASSESSEE HAD REGULARLY MAINTAINED THE A CCOUNTS AND THE REGISTERS IN WHICH NO DEFECT WAS POINTED OUT BY THE AO, WE HEREBY UPHOLD THE VERDICT OF LD CIT(A) AND REJECT THIS GROUND OF THE REVENUE. 9. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09 /10/2015 . SD/ - SD/ - ( . . , ) ( , ) G . D . AGARWAL , VICE PRESIDENT MUKUL KR . SHRAWAT , JUDICIAL MEMBER RAIPUR , DATED 09 / 10/2015 . . ./ PARIDA , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT : INCOME TAX OFFICER, BEHIND JHANKAR TALKIES, CIVIL LINES, JAGDALPUR BASTAR. 2. / THE RESPONDENT: NAND LAL RATHIM, PROP. M/S. MAHESH RICE MILL, MAIN ROAD, SUKUMA, DIST: SUKUMA , C.H. 3. ( ) / THE CIT(A) - BILASPUR 4. / CIT , RAIPUR 5. , , / DR, ITAT, RAIPUR 6. / GUARD FILE. / BY ORDER, //TRUE COPY// SR. PS, ITAT, CAMP: RAIPUR