ITO, Rudrapur V. Sh. Ghanshyam Agarwal, Rudrapur

ITA 343/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3498 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2010
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 08-07-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 29-01-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SANJAY AWASTHI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : C : NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.343/DEL/2009 ASSESSMENT YEAR : 2004-05 INCOME TAX OFFICER, INCOME TAX OFFICE, MANDI PARISAR, KICHHA ROAD, RUDRAPUR. VS. SHRI GHANSHYAM AGRAWAL, SINGHAL AGRO MILL, KASHIPUR ROAD, RUDRAPUR. PAN : ABIPA1760C (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SANJAY AWASTHI, SR. DR REVENUE BY : SHRI K. SAMPATH, ADVOCATE ORDER PER I.P. BANSAL, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DIR ECTED AGAINST THE ORDER OF THE CIT (A) DATED 20 TH OCTOBER, 2008 FOR ASSESSMENT YEAR 2004-05. THE GR OUNDS OF APPEAL READS AS UNDER:- 1. LD. CIT (A) HAS ERRED IN LAW AND ON FACTS OF TH E CASE IN DELETING THE ADDITION OF RS.6,21,612/- ON ACCOUNT O F DISALLOWANCE OUT OF DIESEL EXPENSES WITHOUT APPRECIATING THE FAC T THAT THE ASSESSEE HAS FAILED TO JUSTIFY EXCESSIVE CLAIM OF D IESEL EXPENDITURE IN COMPARISON TO THE OTHER RICE MILLS LOCATED IN TH E SAME LOCALITY AND EVEN IN RELATION TO ITS SISTER CONCERN WHICH IS REF LECTING MUCH LOWER DIESEL EXPENSES PER QTL. OF HULLING. 2. LD. CIT (A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITION OF RS.3,14,824/- ON ACCOUNT O F EXTRA SALE OF RICE BRAN WITHOUT APPRECIATING THE FACT THAT IN ABS ENCE TO THE STOCK REGISTER OF RICE BRAN THE RECOVERY AND SALE OF RICE BRAN REMAINED UNVERIFIABLE. MOREOVER, THE RECOVERIES RICE AND RI CE BRAN ARE INTER- RELATED. ITA NO.343/DEL/2009 2 3. LD. CIT (A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITION OF RS.6,59,081/- ON ACCOUNT O F UNDISCLOSED SALE OF HUSK WITHOUT APPRECIATING THE FACT THAT IN ABSENCE OF THE STOCK REGISTER THE DAY TO DAY PRODUCTION CONSUMPTIO N AND SALE OF HUSK REMAIN UNVERIFIABLE. MOREOVER, THE ASSESSEE F AILED TO JUSTIFY NO SALE OF HUSK.. 2. THE ASSESSEE IS RUNNING THE BUSINESS ACTIVITIES OF RICE SHELLER. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS FOUND BY TH E ASSESSING OFFICER THAT THE ASSESSEE HAD INCURRED A SUM OF RS.20,72,041/- ON AC COUNT OF DIESEL EXPENSES AND RS.3,85,437/- ON ACCOUNT OF POWER AND ELECTRICI TY EXPENSES. ACCORDING TO THE ASSESSING OFFICER SUCH CLAIM OF EXPENDITURE WAS UNREASONABLE AND EXCESSIVE. THEREFORE, HE REQUIRED THE ASSESSEE TO EXPLAIN THE SAME. IT WAS SUBMITTED THAT THE ENTIRE QUANTITY OF DIESEL WAS PU RCHASED FROM INDIAN OIL CORPORATION. THE PURCHASES WERE MADE ACCORDING TO THE NEEDS OF THE BUSINESS. THE PLANT WAS SITUATED AT VILLAGE DIBDIBA, TEHSIL, BILASPUR IN THE DISTRICT OF RAMPUR IN UTTAR PRADESH WHERE THE SUPPLY OF ELECTRI CITY WAS VERY POOR AND THE ASSESSEE HAD TO MAINLY DEPEND UPON GENERATOR WHICH REQUIRED MORE CONSUMPTION OF DIESEL. IT WAS SUBMITTED THAT BESID ES THE MAIN RICE PLANT, THE ASSESSEE HAS ALSO INSTALLED DRYERS, GRADERS AND SIL KY PLANT. THE DRYERS ARE USED FOR EARLY DRYING OF RICE. GRADERS AND SILKY PLANTS ARE USED TO INCREASE THE QUALITY OF RICE AND ALL THESE PLANTS REQUIRED CONSUMPTION O F DIESEL. THAT THE ASSESSEE HAS NOT MAINTAINED STOCK REGISTER FOR DIESEL BECAUS E OF ITS BEING CONSUMABLE ITEM, BUT THAT DOES NOT MEAN THAT THERE WAS ANY PIL FERAGE OF DIESEL AND, THUS, IT WAS CLAIMED THAT THE EXPENSES IN THEIR ENTIRETY SHO ULD BE ALLOWED. 3. HOWEVER, LD. ASSESSING OFFICER DID NOT ACCEPT SU CH EXPLANATION OF THE ASSESSEE ON THE GROUND THAT IN THE COMPARABLE CASES OF M/S SHREE MAHAVIR INDUSTRIES WHICH WAS LOCATED AT THE SAME PLACE THE EXPENSES ON POWER UTILIZATION WAS RS.6,42,764/- AND THE QUANTITY OF PADDY HULLED WAS AT 93,787.38 QINTALS AND, THUS, GIVING THE AVERAGE YIELD CONSUMPTION OF RS.6. 85/- PER QUINTAL WHEREAS THE SAME IN THE CASE OF THE ASSESSEE WAS RS.29.08 PER Q UINTAL (TOTAL OF THE TWO ITEMS, DIESEL + POWER AND ELECTRICITY RS.24,57,478/ 84,497.63 DIVIDED BY QUANTITY OF PADDY HULLED) AND, THUS, THE ASSESSING OFFICER C ALCULATED THE EXCESS EXPENSES ITA NO.343/DEL/2009 3 INCURRED BY THE ASSESSEE ON POWER CONSUMPTION EXCES S BY RS.22.23 PER QUINTAL AS COMPARED TO THE COMPARABLE CASE. THE ASSESSING OFFICER ALSO ADMIT THAT THOUGH THE ASSESSEE IN ADDITION TO THE COMPARABLE C ASE WAS RUNNING DRYERS, GRADERS AND SILKY PLANTS, BUT, AT THE SAME TIME, TH E ASSESSEE HAS USED THE HUSK IN BOILERS AND DRYER WHICH WILL COMPENSATE THIS FAC TOR AS THE ASSESSEE DID NOT DISCLOSE ANY SALE OF HUSK WHICH WAS CONTENDED TO BE MAINLY USED IN DRYERS. THE ASSESSING OFFICER ALSO OBSERVED THAT THERE WAS NO D OUBT THAT THE PURCHASES OF DIESEL ARE VERIFIABLE AS THE SAME WERE PURCHASED FR OM INDIAN OIL CORPORATION, BUT, ACCORDING TO THE ASSESSING OFFICER, AT THE SAM E TIME, THE CONSUMPTION ON DIESEL COULD NOT BE VERIFIED. THE ASSESSING OFFICE R ALSO OBSERVED THAT THE OIL COMPANIES DIRECTLY SOLD QUANTITY OF OILS TO CONSUME RS FOR INDUSTRIAL USE IN LOWER RATES AS COMPARED TO THE DEALERS WHICH WAS LESS BY RS.2.50 PER LITRE. THE ASSESSING OFFICER ALSO REFERRED TO THE CONSUMPTION OF ASSESSEES SISTER CONCERN, NAMELY M/S SINGHAL ENTERPRISES, WHOSE PLANT WAS SIT UATED AT RUDRAPUR WHERE THE CONSUMPTION OF ELECTRICITY AND POWER WAS CALCU LATED TO BE AT RS.5.98 PER QUINTAL OF PADDY HULLED. THE ASSESSING OFFICER ALS O REFERRED TO OTHER TWO CASES, NAMELY, M/S KHANNA RICE MILL AND M/S JAGDAMBA RICE MILL TO CONTEND THAT THE EXPENSES INCURRED BY THE ASSESSEE DID NOT MATCH WIT H THOSE CONCERNS AND WERE ON HIGHER SIDE. HE ALSO OBSERVED THAT IN ASSESSEE S CASE THE SILK PLANT, GRADERS, ETC. ARE INSTALLED AND IN THOSE PLANTS SOME USE OF DIESEL WAS NECESSARY. CONSIDERING THOSE FACTORS LD. ASSESSING OFFICER HAS DISALLOWED 30% OF THE TOTAL DIESEL EXPENSES THEREBY MAKING A DISALLOWANCE OF RS .6,21,612.30. 4. FURTHER, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS SHOWN RECOVERY OF RICE BRAN AT 6% OF THE TOTAL MILLING OF PADDY WHICH WAS ON LOWER SIDE. ACCORDING TO THE ASSESSING OFFICER, THE RECOVERY OF RICE BRAN SHOULD HAVE BEEN AT LEAST AT 7%. HE REQUIRED THE ASSESSEE TO EXPLAIN T HE SAME. IN REPLY, IT WAS SUBMITTED THAT RECOVERY OF 6% IS A STANDARD RECOVER Y WHICH IS ACCEPTED BY THE FOOD AND SUPPLY DEPARTMENT. IT WAS SUBMITTED THAT SIMILAR RECOVERY WAS ACCEPTED IN EARLIER YEARS. IT WAS SUBMITTED THAT F OR ASSESSMENT YEAR 1998-99 THE CASE WAS COMPLETED U/S 143 (3) WHEREIN EVEN 5.77% R ECOVERY WAS ACCEPTED. IT ITA NO.343/DEL/2009 4 WAS ALSO SUBMITTED THAT THE SALES ARE FULLY VERIFIA BLE AND CERTIFICATES FROM SOME OF THE CONCERNS WERE ALSO FURNISHED TO SHOW THAT RECOV ERY WAS AROUND 6% AND IT WAS REQUESTED THAT THE SAME MAY BE ACCEPTED. THE A SSESSING OFFICER DID NOT ACCEPT SUCH SUBMISSIONS OF THE ASSESSEE ON THE GROU ND THAT ACCEPTANCE OF SIMILAR RECOVERY IN EARLIER YEARS DOES NOT OPERATE AS AN ESTOPPELS AS DOCTRINE OF RES JUDICATA IS NOT APPLICABLE ON INCOME TAX PROCEEDINGS. HE R EFERRED TO CERTAIN COMPARABLE CASES WHERE THE RECOVERY VARIES BETWEEN 7.15% TO 8.03% AND REFERRING TO THOSE CASES, HE HELD THAT THE ASSESSEE HAS SHOWN LESS RECOVERY OF 6% WHICH SHOULD HAVE BEEN 7% AND, IN THIS MANNER, S HORTAGE OF 844.98 QUINTALS WAS WORKED OUT. APPLYING THE RATE OF RS.372.58 PER QUINTAL, THE ADDITION WAS COMPUTED AT RS.3,14,824/- AND THE SAME WAS ADDED TO THE INCOME OF THE ASSESSEE. 5. THE ASSESSING OFFICER FURTHER FOUND THAT NO SALE OF HUSK WAS SHOWN BY THE ASSESSEE WHICH WAS ALSO A BYE PRODUCT OF THE MILLIN G OF PADDY. HE, BY TAKING RECOVERY OF RICE AT 67%, RECOVERY OF RICE BRAN AT 7 % WORKED OUT 26% RECOVERABLE HUSK AT 21,969.39 QUINTALS. AS PER ASSESSING OFFIC ERS ESTIMATE 50% OF THE HUSK MAY HAVE BEEN USED IN DRYER FOR DRYING THE PADDY, U SED BY THE LABOURERS, SPOILT BY THE RAIN AND RECEIVED AS DUST, ETC., AND BALANCE 50% MAY HAVE BEEN SOLD BY THE ASSESSEE IN OPEN MARKET. APPLYING THE AVERAGE RATE OF 60 PER QUINTAL, 50% OF 26%, I.E., 10984.69 QUINTAL, THE ADDITION WAS WO RKED OUT AT RS.6,59,081.40. 6. THE ASSESSEE WAS AGGRIEVED AGAINST THESE ADDITIO NS, HENCE, FILED AN APPEAL BEFORE THE CIT (A). 7. SO AS IT RELATES TO ADDITION MADE ON ACCOUNT OF DIESEL EXPENSES, IT WAS SUBMITTED THAT ACCORDING TO THE ASSESSING OFFICER, 1,25,000 LITRES OF DIESEL WAS CONSUMED WHICH WAS NOT A CORRECT FACT. THE TOTAL P URCHASES OF DIESEL WERE 1,20,000 LITRES OUT OF WHICH 12000 LITRES WAS EXIST ING IN STOCK AND, THUS, THE CONSUMPTION OF THE ASSESSEE DURING THE YEAR WAS 1,0 8,000 LITRES. IT WAS SUBMITTED THAT THE CAPACITY OF THE RICE MILL OF THE ASSESSEE WAS 7.5 TON AND THE ITA NO.343/DEL/2009 5 ASSESSEE ALSO HAD DRYER, GRADER AND SILKY PLANT, ET C. IT WAS SUBMITTED THAT THE ASSESSEE DID NOT OWN AMPLE OPEN LAND, THEREFORE, TH E USE OF DRYER WAS MUST. THE GENERATOR INSTALLED BY THE ASSESSEE WAS OF 250 KV, THE CONSUMPTION OF WHICH WAS APPROXIMATELY 49 LITRE DIESEL PER OUR. T HE CONSUMPTION OF ELECTRICITY AND DIESEL PER HOUR WAS WORKED OUT AS UNDER:- DRIER : 1 HOUR 49 LT. DIESEL /300 UNITS ELECTRICIT Y, PROCESSING 75 QNT. RICE PLANT : 1 HOUR 49 LT. DIESEL/ 300 UNITS ELECT RICITY, PROCESSING 75 QNT. GRADER & SILKY PLANT : 1 HOUR 25 LT. DIESEL / 120 UNITS ELECTRICITY. PROCESSING 30 QTL. 8. IT WAS SUBMITTED THAT THE QUANTITY OF PADDY MILL ED WAS 84,497 QUINTALS AND RICE PURCHASED FROM MARKET OF 23,085 QUINTALS WAS GRADED AND SILK PLANTED AND THE CONSUMPTION OF ELECTRICITY UNITS ON THE PADDY M ILLED AND RICE GRADED AND SILKY PLANTED WAS WORKED OUT AS UNDER:- WHILE USING DRIER 84497 QNT./75 QNT. = 1126.62 HOURS X 300 UNITS = 337986 UNITS WHILE USING RICE PLANT 84497 QNT/75 QNT. = 1126.62 HOURS X 300 UNITS = 337986 UNITS. WHILE USING GRADER & SILKY PLANT 23085 QNT./30 QNT. = 769.5 HOURS X 120 = 92340 UN ITS TOTAL 768312 UNITS RATE PER UNIT IS 3/- I.E. 768312 X 3 = 2304936/- 9. IT WAS SUBMITTED THAT IF THE ENTIRE PROCESS WAS DONE ON ELECTRICITY, THEN THE EXPENSES WHICH WERE TO BE INCURRED BY THE ASSESSEE WOULD BE AN AMOUNT OF RS.23,04,936/-. ITA NO.343/DEL/2009 6 10. IT WAS SUBMITTED THAT BESIDES USING THE POWER O N THE PROCESSING OF PADDY AND RICE THE ASSESSEE ALSO USED LIGHT, FAN, ETC. AN D SINCE THE MILL OF THE ASSESSEE IS SITUATED IN VILLAGE DIBDIBA, TEHSIL BILASPUR, WH ICH IS IN UTTAR PRADESH WHERE THE POWER POSITION IS BAD, THEREFORE, THE GENERATOR WAS INSTALLED. IT WAS SUBMITTED THAT IF THE PRODUCTION HAS TO BE DONE ONLY ON GENER ATOR, THE EXPENSES OF THE ASSESSEE WOULD BE AS UNDER:- WHILE USING DRIER 84497 QNT./75 QNT. = 1126.62 HOURS X 49 LT. = 5 5204 LT. WHILE USING RICE PLANT 84497 QNT/75 QNT. = 1126.62 HOURS X 49 LT. = 55 204 LT. WHILE USING GRADER & SILKY PLANT 23085 QNT./30 QNT. = 769.5 HOURS X 25 LT. = 19237 LT. TOTAL 129645 LT. DIESEL RATE RS. 18.66 PER LT.., I.E., 129645 X 18. 66 WAS RS. 2419000/- 11. IT WAS SUBMITTED THAT THE AMOUNT OF RS.24,19,00 0/- WILL BE REQUIRED ONLY FOR DIESEL BESIDES OTHER EXPENSES ON LIGHT, FAN, ETC. A ND, THUS, IT WAS SUBMITTED THAT THE EXPENDITURE INCURRED BY THE ASSESSEE ARE IN PRO XIMITY WITH THE CALCULATIONS MADE UNDER BOTH SITUATIONS AND, THUS, THE EXPENDITU RE INCURRED BY THE ASSESSEE ARE QUITE REASONABLE AND GENUINE. 12. IT WAS SUBMITTED THAT COMPARABLE CASES RELIED U PON BY THE ASSESSING OFFICER WERE DISTINGUISHABLE ON FACTS AS THEIR PLAN TS ARE LOCATED AT DIFFERENT LOCATIONS. IT WAS SUBMITTED THAT THE PLANTS OF M/S KHANNA RICE MILL AND M/S..JAGDAMBA RICE MILL ARE SITUATED IN UTTARANCHAL WHERE 24 HOUR POWER IS AVAILABLE. THOSE PLANTS HAVE AMPLE OPEN LAND WHICH DOES NOT REQUIRE DRYER, ETC. THEY ALSO DO NOT HAVE GRADER AND SILKY PLANT. THER EFORE, THEIR POWER CONSUMPTION COULD NOT BE COMPARED WITH THE ASSESSEE S POWER CONSUMPTION. ITA NO.343/DEL/2009 7 13. IT WAS SUBMITTED THAT THE ADDITIONS MADE BY THE ASSESSING OFFICER ARE BASED ON SUSPICION AND SURMISES THAT THE DIESEL WAS SOLD IN THE OPEN MARKET WHICH CANNOT BE ACCEPTED IN THE ABSENCE OF ANY MATE RIAL BROUGHT ON RECORD BY THE ASSESSING OFFICER. THE PURCHASES WERE MADE FRO M THE GOVERNMENT AGENCY AND ARE VERIFIABLE AND, THUS, IT WAS SUBMITTED THAT THE ADDITION HAS WRONGLY BEEN MADE. 14. CONSIDERING THESE SUBMISSIONS THE CIT (A) HAS O BSERVED THAT THE EXPENSES OF THE ASSESSEE ARE DULY SUPPORTED BY THE BILLS AND VOUCHERS AND THESE EXPENSES HAVE BEEN INCURRED FOR THE PURPOSE O F BUSINESS. THE ASSESSING OFFICER HAS NOT DRAWN ANY ADVERSE INFERENCE AGAINST THE TOTAL PURCHASE OF THE DIESEL MADE BY THE ASSESSEE FROM THE INDIAN OIL COR PORATION BECAUSE, THESE PURCHASES ARE FULLY VERIFIABLE. THE DISALLOWANCE O F 30% IS MADE MAINLY ON THE GROUND THAT THESE EXPENSES ARE EXCESSIVE AND ARE NO T COMPARABLE WITH OTHER CASES. IT WAS OBSERVED THAT THE ASSESSEE HAS CLEAR LY INDICATED THAT THE DIESEL IS MAINLY CONSUMED IN RICE MILLING INDUSTRY IN DRYERS AND ALSO IN GRADERS AND SILKY PLANT. THE ESTIMATE OF CALCULATION OF POWER AND DI ESEL CONSUMPTION AS AGAINST QUANTITY OF PADDY MILLED AND RICE PROCESSED AS FURN ISHED BY THE ASSESSEE HAS CLEARLY ESTABLISHED THAT THE CONSUMPTION OF DIESEL WAS AS PER BUSINESS NEEDS OF THE ASSESSEE AND IS QUITE REASONABLE. THE ALTERNAT IVE CONSUMPTION IN CASE NO DIESEL WOULD HAVE BEEN USED, BY WAY OF ELECTRICITY HAS ALSO BEEN ARRIVED AT AND SUCH CONSUMPTION IS IN THE VICINITY OF ACTUAL EXPEN DITURE INCURRED BY THE ASSESSEE EITHER ON ACCOUNT OF DIESEL OR ON ACCOUNT OF POWER. COMPARABLE CASES RELIED UPON BY THE ASSESSING OFFICER HAVE ALSO BEEN DISTINGUISHED. THE SALE OF PETROLEUM PRODUCT BY THE ASSESSEE CANNOT BE MADE IN THE ABSENCE OF LICENCE WHICH THE ASSESSEE DOES NOT POSSESS AND CONSIDERING ALL THESE FACTS, THE CIT (A) HAS DELETED THE ADDITION. 15. FURTHER, SO AS IT RELATES TO ADDITION MADE ON A CCOUNT OF EXCESS SALE OF RICE BRAN, THE ASSESSEE REITERATED THE SUBMISSIONS MADE BY HIM BEFORE THE ASSESSING OFFICER. IT WAS SUBMITTED THAT THE ENTIR E QUANTITY OF RICE BRAN IS ITA NO.343/DEL/2009 8 MAINTAINED AND THE ENTIRE SALES ARE VERIFIABLE. IT WAS SUBMITTED THAT SINCE ALL SALES ARE ON CREDIT BASIS AND PAYMENTS HAVE BEEN RE CEIVED THROUGH CHEQUES AND DRAFTS, THE SALES ARE VERIFIABLE. THE ASSESSIN G OFFICER WAS UNABLE TO DETECT ANY SALES WHICH COULD HAVE BEEN SAID TO BE SOLD OUT SIDE THE BOOKS OF ACCOUNT. IT WAS SUBMITTED THAT AS PER DIRECTIONS ISSUED BY THE GOVERNMENT OF UP, THE RICE MILLERS ARE REQUIRED NOT TO RECOVER MORE THAN 5% AN D LESS THAN 3% OF BRAN JUST TO MAINTAIN QUALITY OF RICE AND THE ASSESSEE HAD TO TR Y HIS BEST TO FOLLOW THE DIRECTIONS ISSUED BY THE GOVERNMENT. IT WAS SUBMIT TED THAT RECOVERY OF 5.5% RICE BRAN ON THE BASIS SIMILAR FACTS IN THE CASE OF ANNA PURNA RICE MILL WAS ACCEPTED BY THE CIT (A) VIDE HIS ORDER DATED 22 ND SEPTEMBER, 2006 AND, THUS, IT WAS SUBMITTED THAT ADDITION REQUIRES TO BE DELETED. 16. LD. CIT (A), AFTER CONSIDERING THESE SUBMISSION S HAS OBSERVED THAT THERE WAS A SUBSTANCE IN THE CONTENTION OF THE ASSESSEE T HAT QUALITY OF RICE IS AFFECTED BY THE MORE RECOVERY OF RICE BRAN AND, IF THE ASSES SEE WAS TO MAINTAIN THE QUALITY OF RICE, THE RECOVERY OF RICE BRAN WILL BE ON LOWER SIDE. BECAUSE IF ONE TRIES TO GET MORE RECOVERY OF RICE BRAN, THERE WILL BE MORE BROK EN RICE WHICH WILL ULTIMATELY RESULTS INTO LOSS. THE ENTIRE QUALITATIVE DETAILS OF RICE BRAN WAS MAINTAINED BY THE ASSESSEE AND THE SALES OF THE ASSESSEE ARE FULLY VE RIFIABLE. THE ASSESSING OFFICER DID NOT BRING ANY MATERIAL ON RECORD TO SHO W THAT THE SALES OF RICE BRAN WERE EFFECTED BY THE ASSESSEE OUTSIDE THE BOOKS OF ACCOUNT AND, THUS, THE VERSION OF THE ASSESSING OFFICER COULD NOT BE ACCEP TED THAT THERE COULD BE RECOVERY OF 7% OF RICE BRAN IN THE CASE OF THE ASSE SSEE. LD. CIT (A) HAS REFERRED TO THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 1998-99 AND HAS FOUND THAT THE RECOVERY OF RICE BRAN THEREIN WAS 5.77% AND, THUS, HE HAS DELETED THE ADDITION. 17. SO FAR AS IT RELATES TO THE ADDITION MADE ON AC COUNT OF RICE HUSK, IN ADDITION TO THE REITERATION OF SUBMISSIONS MADE BEF ORE THE ASSESSING OFFICER, IT WAS SUBMITTED BY THE ASSESSEE THAT THE ASSESSING OF FICER HAS IGNORED THE IMPORTANT FACTOR THAT THE ASSESSEE DOES NOT HAVE AM PLE OPEN SPACE TO DRY THE PADDY AND SUBSTANTIAL HUSK WAS USED IN THE BOILER T O DO SUCH PROCESS. THE ITA NO.343/DEL/2009 9 ENTIRE WORKING OF THE ASSESSING OFFICER WAS BASED O N HIS OWN ESTIMATION AND SURMISES IN THE ABSENCE OF ANY SPECIFIC INSTANCE OF SALE OF HUSK DETECTED BY THE ASSESSING OFFICER. IT WAS SUBMITTED THAT THE ASSES SEE HAS NEVER SOLD RICE HUSK IN THE MARKET. REFERENCE WAS MADE TO THE CASE OF T HE ASSESSEE FOR ASSESSMENT YEAR 1998-99 WHERE THE ADDITION WAS REDUCED TO RS.1 0,000/- BY THE CIT (A) AND REFERENCE WAS ALSO MADE TO THE CASE OF M/S ANNAPURN A RICE MILL WHERE VIDE ORDER DATED 22 ND SEPTEMBER, 2006, THE ADDITION MADE ON ACCOUNT OF R ICE HUSK WAS DELETED. LD. CIT (A), AFTER CONSIDERING THE SU BMISSIONS HAS OBSERVED THAT THE CONTENTION OF THE ASSESSEE THAT HUSK WAS USED A S FUEL IN DRYERS AND BOILERS FOR DRYING PADDY AND TO PRODUCE SELA RICE COULD NOT BE BRUSHED ASIDE ALTOGETHER. THE ASSESSING OFFICER HAS NOT BEEN ABLE TO BRING ON RECORD ANY MATERIAL TO ESTABLISH THAT THE HUSK WAS ACTUALLY SOLD OUTSIDE T HE BOOKS OF ACCOUNT AND, THUS, THE ADDITION WAS BASED MERELY ON PRESUMPTION AND IN THE ABSENCE OF SUCH EVIDENCE, THE ADDITION MADE BY THE ASSESSING OFFICE R COULD NOT BE SUSTAINED. 18. THE DEPARTMENT IS AGGRIEVED BY SUCH FINDINGS OF THE CIT (A) ON ALL THESE THREE ISSUES AND, HENCE, HAS FILED AN APPEAL. 19. AFTER NARRATING THE FACTS, IT WAS VEHEMENTLY PL EADED BY LD. DR THAT THE POWER CONSUMPTION SHOWN BY THE ASSESSEE IN THE SHAP E OF DIESEL WAS ON HIGHER SIDE AS COMPARED WITH THE COMPARABLE CASES AND, THU S, THE ASSESSING OFFICER WAS RIGHT IN MAKING THE ADDITION AND THE CIT (A) HA S WRONGLY DELETED THE SAME. LD. DR PLEADED THAT THE RECOVERY OF RICE BRAN SHOWN BY THE ASSESSEE WAS ALSO ON LOWER SIDE AND THE ASSESSING OFFICER HAS GIVEN T HE COMPARABLE CASES AND LD. CIT (A) HAS WRONGLY DELETED THE ADDITION. 20. ON THE ISSUE OF ADDITION MADE IN RESPECT OF RIC E HUSK, IT WAS PLEADED BY LD. DR THAT IT IS NOT POSSIBLE TO ACCEPT THE VERSIO N OF THE ASSESSE THAT THERE WAS NO RECOVERY OF RICE HUSK. HE SUBMITTED THAT THE AS SESSING OFFICER HAS ALSO GIVEN AMPLE RELIEF TO THE ASSESSEE AS HE HAS GIVEN REBATE OF 50% OF THE RECOVERY OF RICE HUSK ON THE USE OF DRYERS, ETC. AND THE CIT (A ) WAS WRONG IN ACCEPTING THE ITA NO.343/DEL/2009 10 ENTIRE CLAIM OF THE ASSESSEE AS IN ASSESSMENT YEAR 1998-99 ALSO THE ADDITION TO THE EXTENT OF RS.10,000/- WAS UPHELD. HE SUBMITTED THAT THE DELETION OF ADDITION ON THIS ACCOUNT IS ALSO WRONG. 21. THUS, HE SUBMITTED THAT THE ORDER OF CIT (A) ON ALL THE THREE YEARS SHOULD BE SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTO RED. 22. ON THE OTHER HAND, RELYING ON THE SUBMISSIONS M ADE BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AND THE CIT (A), IT WA S SUBMITTED BY LD. AR THAT LD. CIT (A), AFTER CONSIDERING THE FACTS AND AFTER PROP ERLY APPRECIATING THE FACTUAL POSITION HAS RIGHTLY DELETED THE ADDITIONS AND HIS ORDER SHOULD BE UPHELD AND THE DEPARTMENTAL APPEAL SHOULD BE DISMISSED. 23. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. SO FAR AS IT RELATES TO CONSUMPTION OF DIESEL, ETC., WE FIND THAT A COMPARISON WAS FURNISHED BY THE ASSESSE E BEFORE THE CIT (A) IN RESPECT OF BOTH ITEMS, NAMELY, DIESEL AND ELECTRICI TY ON THE QUANTITY OF PADDY MILLED AND THE QUANTITY OF RICE PROCESSED. THE PAR TICULARS REGARDING THESE COMPARISON HAS ALREADY BEEN DESCRIBED IN THE ABOVE PART OF THIS ORDER. IT HAS ALSO BEEN THE CONTENTION OF THE ASSESSEE RIGHT FROM THE BEGINNING THAT IT DOES NOT HAVE AMPLE OPEN LAND FOR DRYING THE PADDY WHICH IS A NECESSARY FACTOR FOR THE MILLING OF THE PADDY AND, THEREFORE, THERE WAS EXCE SS USE IN DRYER, ETC. SUCH CONTENTION OF THE ASSESSEE HAS NOT BEEN SHOWN TO BE WRONG. NO DEFECT HAS BEEN POINTED OUT IN THE COMPARISON DRAWN BY THE ASS ESSEE IN BOTH THE SITUATIONS WHEN SIMILAR QUANTITY OF PADDY AND RICE IS PROCESSE D ON THE BASIS OF DIESEL AND ELECTRICITY. THE ASSESSEE HAS DISTINGUISHED THE C OMPARABLE CASES RELIED UPON BY THE ASSESSING OFFICER. THE OBSERVATION OF THE A SSESSING OFFICER THAT THE ASSESSEE MAY HAVE SOLD DIESEL OUTSIDE THE BOOKS OF ACCOUNT IS ALSO BASED ON PRESUMPTION AS NO INSTANCE OF SUCH SALE HAS BEEN BR OUGHT ON RECORD. MOREOVER, AS AGAINST THAT IT IS THE CASE OF THE ASSESSEE AND IT IS THE FINDING OF THE CIT (A) THAT THE ENTIRE PURCHASE OF THE DIESEL BY THE ASSES SEE ARE VERIFIABLE AND THE ITA NO.343/DEL/2009 11 ASSESSING OFFICER ALSO HAS OBSERVED THAT THE PURCHA SE OF DIESEL BY THE ASSESSEE ARE VERIFIABLE. THE ASSESSING OFFICER HAS DOUBTED O NLY THE CONSUMPTION OF THE DIESEL WHICH DOUBT IS BASED ON PRESUMPTION AS IT HA S ALREADY BEEN POINTED OUT THAT NO INSTANCE OF SALE OF DIESEL HAS BEEN BROUGHT ON RECORD TO SHOW THAT ANY SALE OF DIESEL WAS MADE BY THE ASSESSEE IN THE OPEN MARKET OUTSIDE THE BOOKS OF ACCOUNT. IN THIS VIEW OF THE SITUATION, WE FIND N O INFIRMITY IN THE ORDER OF THE CIT (A) VIDE WHICH THE ADDITION ON ACCOUNT OF EXCESS CO NSUMPTION OF DIESEL HAS BEEN DELETED. 24. NOW, COMING TO THE ADDITION MADE ON ACCOUNT OF LESS RECOVERY OF RICE BRAN, IT HAS BEEN THE FINDING OF THE LD. CIT (A) TH AT THE ASSESSEE IS MAINTAINING COMPLETE QUANTITY OF RICE BRAN. THE SALES ARE ON C REDIT BASIS AND THE PAYMENTS HAVE BEEN RECEIVED THROUGH CHEQUES AND DRAFTS. THE RECOVERY OF RICE BRAN IN THE CASE OF THE ASSESSEE HIMSELF FOR ASSESSMENT YEAR 19 98-99 WAS ACCEPTED AT 5.77% AND COMPARABLE CASE WAS ALSO GIVEN TO THE ASS ESSING OFFICER AND THE CIT (A) IN WHICH IT WAS SHOWN THAT RECOVERY WAS IN THE VICINITY OF 6%. NO SALE OF RICE BRAN HAS BEEN DETECTED WHICH COULD BE SAID TO BE MA DE OUTSIDE THE BOOKS OF ACCOUNT BY THE ASSESSEE. IN THIS VIEW OF THE SITUA TION, THE ADDITION MADE BY THE ASSESSING OFFICER IS BASED ON PRESUMPTION AND SURMI SES AND LD. CIT (A) HAS RIGHTLY DELETED THE SAME. WE DECLINE TO INTERFERE IN THAT DELETION. 25. NOW, COMING TO THE THIRD ADDITION MADE ON ACCOU NT OF RICE HUSK, IT IS FOUND THAT NO SALE WHATSOEVER HAS BEEN SHOWN BY THE ASSESSEE. THOUGH TO SOME EXTENT IT CAN BE ACCEPTED THAT THE ASSESSEE HA S TO CONSUME MORE RICE HUSK DUE TO THE USE OF DRYERS, ETC. DUE TO THE NON- AVAILABILITY OF SUFFICIENT OPEN LAND FOR DRYING PROCESS, BUT, AT THE SAME TIME, IT ALSO CANNOT BE ACCEPTED THAT THERE WILL BE NO RECOVERY OF RICE HUSK EVEN AFTER S UCH USER. FOR ASSESSMENT YEAR 1998-99 LD. CIT (A) HAD SUSTAINED THE ADDITION UPTO RS.10,000/-. KEEPING IN VIEW ALL THESE FACTS, WE ARE OF THE OPINION THAT TH E ADDITION TO THE EXTENT OF RS.50,000/- SHOULD HAVE BEEN SUSTAINED BY THE LD. CIT (A). ACCORDINGLY, WE ITA NO.343/DEL/2009 12 ACCEPT THIS GROUND OF THE REVENUE IN PART AND RESTO RE THE ADDITION TO THE EXTENT OF RS.50,000/- ON ACCOUNT OF RICE HUSK. 26. IN THE RESULT, THE DEPARTMENTAL APPEAL IS PARTL Y ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 23.07.20 10. SD/- SD/- [B.C. MEENA] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED, 23.07.2010. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES