Appeal details
Counselvise Citation
[2016] 133 COUNSELVISE.COM (IT) 8830 (ITAT-AMRITSAR)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 8 month(s) 27 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
26-02-2016
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
DB
Next Hearing Date
07-12-2015
Assessment Year
2009-2010
Appeal Filed On
30-05-2014
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR BEFORE SH. A.D.JAIN, HONBLE JUDICIAL MEMBER AND SH. T.S. KAPOOR, HONBLE ACCOUNTANT MEMBER I.T.A NO. 353(ASR)/2014 ASSESSMENT YEAR: 2009-10 AND STAY APPLICATION NO. 11(ASR)/2014 (ARISING OUT OF ITA NO. 353(ASR)/2014) ASSESSMENT YEAR: 2009-10 M/S NEW BHARAT RICE MILLS, FAIZPURA ROAD, BATALA. PAN:AACFN5002H VS. THE ACIT, CIRCLE-II, AMRITSAR. (APPELLANT) (RESPONDENT) I.T.A NO. 370(ASR)/2014 ASSESSMENT YEAR: 2009-10 THE ACIT, CIRCLE-II, AMRITSAR. VS. M/S NEW BHARAT RICE MILLS, FAIZPURA ROAD, BATALA. PAN:AACFN5002H (APPELLANT) (RESPONDENT) APPELLANT BY: SH. ASHWANI KALI A & SH. HARSH AGGARWAL (CAS) RESPONDENT BY: SH. R.K. SHARDA (D R.) DATE OF HEARING: 06.01. 2016 DATE OF PRONO UNCEMENT: 26.02.2016 ORDER PER T. S. KAPOOR (AM): THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AS WELL AS BY THE REVENUE AGAINST THE ORDER OF LEARNED CIT(A) DATED 1 0.03.2014 FOR ASST. YEAR 2009-10. 2. THE GROUNDS OF APPEAL TAKEN BY THE ASSESSEE, ARE REPRODUCED BELOW: ITA NOS.353 & 370 (ASR)/2014 ASST. YEAR: 2009-10 2 1. THAT THE WORTHY CIT(APPEALS) HAS ERRED IN LAW A ND ON FACTS OF THE CASE BY CONFIRMING AND UPHOLDING THE ADDITIONS ON ACCOUN T OF FOLLOWING POINTS: A) SUPPRESSION OF VALUE OF CLOSING STOCK OF PADDY BY RS.22,67,525/-. B) SUPPRESSION OF VALUE OF CLOSING STOCK OF RICE BY RS.8,95,30,050/-. 2. THAT THE ORDER IS BAD IN LAW AND ON THE FACTS OF TH E CASE. 3. THAT THE APPELLANT PRAYS THAT THE ADDITION OF RS.9, 17,97,573/- ON ALLEGED SUPPRESSION OF VALUE OF CLOSING STOCK OF PA DDY AND RICE MAY KINDLY BE DELETED. WHEREAS THE FOLLOWING GROUNDS OF APPEAL HAS BEEN TA KEN BY THE REVENUE. 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LEARNED CIT(APPEALS) HAS ERRED IN LAW IN RESTRICTING THE AD DITION OF RS.4,86,07,983/- TO RS.22,67,523/-, MADE ON ACCOUNT OF UNDERVALUATION OF CLOSING STOCK OF PADDY. 2. IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE , WHETHER THE LEARNED CIT(APPEALS) WAS RIGHT IN ENTERTAINING FRES H EVIDENCE IN THE FORM OF VARIETY-WISE STOCK REGISTER OF PADDY EVEN THOUGH THE ASSESSING OFFICER HAD STRONGLY VOICED RESERVATION I N HIS/HER REMAND REPORT DATED 30.11.2012 THAT NO SUCH REGISTE R WAS PRODUCED DURING THE ASSESSMENT PROCEEDINGS DESPITE NUMBER OF OPPORTUNITIES. 3. WHETHER THE LEARNED CIT(APPEALS) WAS RIGHT IN HO LDING THAT THE ASSESSEE WAS NOT GIVEN OPPORTUNITY TO PRODUCED VAR IETY-WISE STOCK REGISTER OF PADDY, EVEN WHEN IT WAS SPECIFICALLY R EQUISITIONED VIDE QUESTIONNAIRE DATED 07.01.2011 AT POINT NO.4. 3. THE BRIEF FACTS AS NOTED IN THE ASSESSMENT ORDER ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM CONSISTING OF FOUR P ARTNERS AND IS ENGAGED IN THE MANUFACTURE AND SALE OF RICE IN INDIA AND AB ROAD. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE FILED ITS RETURN O F DECLARING A TOTAL INCOME OF RS.19,54,870/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY. DURING THE ASSESSMENT PROCEEDINGS THE ASS ESSING OFFICER OBSERVED THAT THE CLOSING STOCK OF PADDY AVAILABLE WITH THE ASSESSEE WAS 19,455.620 QUINTALS AND WHICH WAS VALUED @ RS.1642. 17 PER QTL. HE ITA NOS.353 & 370 (ASR)/2014 ASST. YEAR: 2009-10 3 OBSERVED THAT ON THE BASIS OF TOTAL PURCHASE PRICE OF PADDY AND EXPENSES THE PURCHASE PRICE OF PADDY PER QUINTAL WORKED OUT TO BE RS.2,179.54 PER QUTL. THEREFORE, THE ASSESSEE WAS SHOW CAUSED AS TO WHY THE AVERAGE COST PRICE PER QTLS AT RS.2.179.54 BE NOT APPLIED TO ARR IVE AT THE VALUE OF CLOSING STOCK OF PADDY. IN RESPONSE THE ASSESSEE VI DE WRITTEN SUBMISSIONS MADE ON 20.L07.2011 CONTENDED THAT THE PADDY PURCHASED BY IT CONSISTED OF FOUR TYPES OF VARIETIES OF PADDY . THE VARIETY WISE QUANTITY AND VALUE OF PURCHASE OF DIFFERENT VARIETI ES WAS SUBMITTED TO ASSESSING OFFICER. THE ASSESSING OFFICER FURTHER HE LD THAT SINCE NO SEPARATE STOCK REGISTER OF VARIOUS VARIETIES OF PA DDY WAS MAINTAINED BY THE ASSESSEE AND SINCE WHOLE OF THE PADDY WAS SHOWN AS A SINGLE UNIT, THEREFORE, HE APPLIED THE AVERAGE RATE OF PADDY AND MADE THE ADDITION OF RS.4,86,07,983/- BEING THE DIFFERENCE IN VALUATION OF STOCK OF PADDY. 4. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE HAD VALUED THE CLOSING STOCK OF RICE AT RS.16,65,76,115 /- VALUED @ RS. 2,179.54 PER QUTL. THE ASSESSING OFFICER OBSERVED T HAT THE ASSESSEE HAD PURCHASED RICE AT AVERAGE COST OF RS. 3,219.71 PER QTL. AND THEREFORE, THE ASSESSEE WAS SHOW CAUSED REGARDING UNDER VALUATION OF CLOSING STOCK OF RICE TO THE EXTENT OF RS.8,95,30,050/-. THE ASSESSE E IN ITS REPLY SUBMITTED THAT IT HAS BEEN FOLLOWING FOR THE LAST 3 0 YEARS OR MORE A CONSISTENT AND REGULAR METHOD OF VALUATION OF ITS S TOCK OF RICE WHICH WAS COST OR MARKET PRICE WHICHEVER IS LESS AND IT WAS S UBMITTED THAT THE HIGH QUALITY RICE WAS EXPORTED INSTANTLY AND THE LEFT OV ER STOCK IN THE FORM OF ITA NOS.353 & 370 (ASR)/2014 ASST. YEAR: 2009-10 4 CLOSING STOCK CONSISTED OF LOWER END VARIETY OF R ICE. IT WAS SUBMITTED THAT THE HIGH END VARIETY OF RICE WAS THE PRIMARY CONT RIBUTOR TO THE SALES INCLUDING EXPORTS SALES OF THE ASSESSEE. IT WAS FUR THER SUBMITTED THAT PURCHASE PRICE OF RS.3219.71 CANNOT BE UNIFORMLY AP PLIED TO ALL THE VARIETIES OF RICE. IT WAS ALSO SUBMITTED BY WRITTEN SUBMISSION DATED 19.12.2011 THAT THE TOTAL CLOSING STOCK OF RICE CON SISTED OF HIGH AND LOWER VARIETY AND ALSO INCLUDED BROKEN RICE HAVING DIFFER ENT MARKET VALUES AND A DETAILED VALUATION OF RICE WAS SUBMITTED WHICH IS NOTED BY ASSESSING OFFICER AT PAGE 10 OF HIS ORDER. THE ASSESSING OFF ICER, HOWEVER, DID NOT AGREE WITH THE CONTENTIONS OF THE ASSESSEE AS HE MA INTAINED THAT IN AUDIT REPORT THE AUDITOR HAS NOT STATED THAT THE RICE IS INCLUSIVE OF BROKEN RICE ALSO. HE FURTHER HELD THAT SINCE THE SALES MADE BY ASSESSEE WERE MADE AT RS.4200 PER QTL. AND THEREFORE, HE ARRIVED AT THE C ONCLUSION THAT VALUATION OF CLOSING STOCK WAS SUPPRESSED AND IN VI EW OF THE ABOVE ADDITION OF RS.8,95,30.050/- WAS MADE. 5. AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE THE LEARNED CIT(A) AND LEARNED CIT(A) PARTLY ALLOWED RELIEF TO THE ASSESSE E ON ACCOUNT OF ADDITION OF PADDY WHEREAS HE UPHELD THE ADDITION ON ACCOUNT OF UNDER VALUATION OF RICE. 6. AGGRIEVED BOTH THE PARTIES ARE IN APPEAL BEFORE US. 7. AT THE OUTSET THE LEARNED AR TOOK UP THE APPEAL OF ASSESSEE AND READ OUT THE GROUNDS OF APPEAL. THE LEARNED AR SUB MITTED THAT ASSESSEE HAD PURCHASED FOUR VARIETIES OF PADDY AND THE RATES OF EACH VARIETY OF ITA NOS.353 & 370 (ASR)/2014 ASST. YEAR: 2009-10 5 PADDY WAS DIFFERENT AND AT THE CLOSE OF YEAR DIFFER ENT VARIETIES OF PADDY WERE LAYING AS CLOSING STOCK AND THE SAME WERE VALU ED ON FIFO BASIS AT AVERAGE COST PRICE OF EACH VARIETY OF PADDY. HE SUB MITTED THAT THE ASSESSING OFFICER HAD VALUED ALL VARIETIES OF PADDY AT A UNIFORM RATE BY CALCULATING COST FROM WEIGHTED AVERAGE COST OF TOTA L PADDY PURCHASED. HE SUBMITTED THAT VIDE WRITTEN SUBMISSIONS DATED 20.07 .2011 COMPLETE BREAK UP OF VARIETY WISE VALUATION OF CLOSING STOCK OF PADDY WAS SUBMITTED TO ASSESSING OFFICER AND OUR ATTENTION WA S INVITED TO PAPER BOOK PAGE 68 TO 71 WHERE COMPLETE BREAK UP OF VARIE TY WISE PADDY PURCHASED, CONSUMED, OPENING STOCK AND MILLING DURI NG THE YEAR WAS PLACED. HE SUBMITTED THAT VALUATION MADE BY ASSESSE E WAS BASED UPON THE PURCHASE PRICE OF DIFFERENT VARIETIES OF PADDY WHEREAS THE ASSESSING OFFICER HAD APPLIED A UNIFORM RATE FOR ALL VARIETIE S OF PADDY. HE SUBMITTED THAT ASSESSING OFFICER HAD NOT MADE ANY ATTEMPT TO VERIFY THE PADDY PURCHASE OF VARIOUS VARIETIES OF PADDY WITH PURCHAS E BILLS AND IN THIS RESPECT, HE INVITED OUR ATTENTION TO LEARNED CIT(A) S FINDINGS AT PAGE 4 OF HIS ORDER WHERE THE LEARNED CIT(A) HAS REPRODUCED T HE FINDINGS OF ASSESSING OFFICER IN THE REMAND REPORT. IT WAS SUBM ITTED THAT IN REMAND REPORT THE ASSESSING OFFICER HAD CONFIRMED THE VALU ATION OF PADDY TO BE CORRECT AND, THEREFORE, THE LEARNED CIT(A) HAS WRON GLY UPHELD THE PART ADDITION ON ACCOUNT OF PADDY. IT WAS SUBMITTED THAT ALLEGATION OF ASSESSING OFFICER THAT VARIETY WISE STOCK REGISTER OF PADDY WAS NOT FURNISHED WAS WRONG AND RATHER VARIETY WISE DETAILS GIVING QUANTITY AND ITA NOS.353 & 370 (ASR)/2014 ASST. YEAR: 2009-10 6 VALUATION OF OPENING STOCK, PURCHASE FOR EACH VARIE TY AND CLOSING STOCK WERE ALSO FURNISHED VIDE SUBMISSIONS DATED 20.07.20 11 AS PER POINT NO 18 OF THE LETTER ALONG WITH WORKING SHEETS SHOWING CALCULATION OF AVERAGE COST OF EACH VARIETY OF PADDY ON FIFO BASIS AND IN THIS RESPECT OUR ATTENTION WAS INVITED TO PAPER BOOK PAGE 69 TO 77. HE SUBMITTED THAT DURING APPELLATE PROCEEDINGS BEFORE LEARNED CIT(A), THE ASSESSEE AGAIN CONTENDED THAT VARIETY WISE STOCK REGISTER OF PADDY WAS AVAILABLE AND LEARNED CIT(A) CALLED A REMAND REPORT FROM THE ASSE SSING OFFICER AND VARIETY WISE STOCK REGISTER OF PADDY WAS FURNISHED BEFORE THE ASSESSING OFFICER AND ASSESSING OFFICER IN HIS REPORT HAS CON FIRMED THAT ASSESSEE HAD PRODUCED VARIETY WISE STOCK REGISTER OF PADDY. INVITING OUR ATTENTION TO PARA 3.2 OF REMAND REPORT PLACED AT PAPER BOOK P AGE 87, THE LEARNED AR SUBMITTED THAT ASSESSING OFFICER IN REMAND REPOR T HAD VERIFIED THE VARIETY WISE PURCHASES AND CONSUMPTION OF PADDY AND HAS FOUND THE AVERAGE RATE OF PRICE OF RS.1642.16 PER QTL. TO BE CORRECT AND THEREFORE, IN VIEW OF THE ABOVE FINDINGS OF ASSESSING OFFICER IN HIS REMAND REPORT THE UPHOLDING OF PART ADDITION BY LEARNED CIT(A) WAS NO T JUSTIFIED. 8. ARGUING UPON THE NEXT ADDITION ON ACCOUNT OF SUP PRESSION OF CLOSING STOCK OF RICE THE LEARNED AR SUBMITTED THAT AT THE CLOSE OF FINANCIAL YEAR, THE ASSESSEE HAD 79543.24 QTLS OF R ICE CONSISTING OF VARIOUS VARIETIES QUALITIES OF RICE WHICH INCLUDED RICE SHARBTI, MUNGRA FULL HEAD BASMATI RICE AND BROKEN RICE AND THE MARK ET PRICES OF ALL THESE VARIETIES OF RICE WERE DIFFERENT AS THESE DIFFERENT VARIETIES WERE PRODUCED ITA NOS.353 & 370 (ASR)/2014 ASST. YEAR: 2009-10 7 FROM DIFFERENT VARIETIES OF PADDY WHICH ITSELF HAD DIFFERENT PRICES AND THEREFORE, THESE WERE VALUED AT DIFFERENT PRICES DE PENDING UPON THEIR MARKET PRICE AND IN THIS RESPECT OUR ATTENTION WAS INVITED TO PAGE 78 AND 79 WHERE A COPY OF LETTER WRITTEN TO ASSESSING OFFI CER WAS PLACED WHEREIN THE VARIETY WISE VALUATION OF RICE WAS SUBMITTED TO ASSESSING OFFICER. THE LEARNED AR SUBMITTED THAT THE FULL HEAD BASMATI AND HIGH END BASMATI RICE WAS VALUED AT 4500/- PER QTL WHICH WAS ABOVE T HE PRICE TAKEN BY ASSESSING OFFICER AND IN THIS RESPECT OUR ATTENTION WAS AGAIN INVITED TO PAPER BOOK PAGE 78 WHERE IN THE LETTER ADDRESSED TO ASSESSING OFFICE THE VALUATION OF 16200 QTLS OF RICE MADE @ RS.4500/- PE R QTL WAS SUBMITTED TO ASSESSING OFFICER. THE LEARNED AR FURTHER SUBMIT TED THAT ASSESSEE BESIDES ITS OWN MANUFACTURING HAD PURCHASED RICE O F 49025 QTL @ AVERAGE PRICE OF RS. 3825.51 PER QTL. AND IN THIS R ESPECT OUR ATTENTION WAS INVITED TO PAPER BOOK PAGE 52 WHERE A COPY OF A UDITED ACCOUNT OF RICE SHOWING THE ABOVE PURCHASE WAS PLACED. THE LEA NED AR FURTHER SUBMITTED THAT SUCH RICE PURCHASE CONSISTED OF HIG H END BASMATI RICE AND WAS THEREFORE INCLUDED IN THE QUANTITATIVE DETA IL OF BASMATI RICE WHICH WAS VALUED AT RS.4500/- PER QUTL AND WHICH W AS ABOVE THE PRICE AT RS. 3219 PER QTL. TAKEN BY ASSESSING OFFICER. TO SUBSTANTIATE HIS CLAIM THE LEARNED AR TOOK US TO PAPER BOOK PAGE 119 WHERE COMPLETE TALLY OF VARIETY WISE RICE WAS PLACED. HE SUBMITTED THAT THE ASSESSING OFFICER HIMSELF AT PAGE 10 OF HIS ORDER HAS REPRODUCED THE WRITTEN SUBMISSIONS OF ASSESSEE WHEREIN THE ASSESSEE HAD GIVEN COMPLETE BREAK UP OF RICE ITA NOS.353 & 370 (ASR)/2014 ASST. YEAR: 2009-10 8 CONSISTING OF VARIOUS VARIETIES WHICH TALLIES WITH DETAIL AT PAPER BOOK PAGE 119. THE LEARNED AR SUBMITTED THAT ASSESSING O FFICER INSTEAD OF ACCEPTING THE DETAILS FURNISHED BY ASSESSEE MADE TH E ADDITION HOLDING THAT THERE WAS NO VARIETY WISE ENTRIES IN THE STOCK REGISTER OF RICE. HE SUBMITTED THAT HE MADE THE ADDITION HOLDING THAT AU DITOR IN HIS AUDIT REPORT HAS NOT MENTIONED THAT RICE ACCOUNT IS ALSO INCLUSIVE OF RICE BROKEN. THE LEANED AR SUBMITTED THAT SALES MADE BY ASSESSEE WHICH WAS MAINLY EXPORTS AND WHICH CONSTITUTED ABOUT 90% OF S ALES AND WHICH CAN ONLY BE MADE OF FULL HEAD RICE AND THEREFORE, THE L EFT OVER CLOSING STOCK OF RICE CONSISTED MAINLY OF CHEAPER SHARBATI RICE, BRO KEN BASMATI RICE, AND BASMATI RICE. THE LEARNED AR FURTHER SUBMITTED THAT ALTHOUGH VARIETY WISE STOCK OF RICE WAS NOT MAINTAINED BUT T HE VARIETY WISE CALCULATION OF RICE PRODUCED INCLUDING BROKEN RICE FROM VARIOUS VARIETIES OF PADDY WAS SUBMITTED TO ASSESSING OFFICER. HE SUB MITTED THAT BROKEN RICE IS SEPARATED FROM FULL HEAD RICE AT THE TIME O F EXPORT AND AS ON 31 ST MARCH IN ORDER TO DETERMINE THE PROFITABILITY FOR T HE YEAR UNDER REFERENCE, THE PHYSICAL STOCK TAKING EXERCISE IS CARRIED OUT TO SEPARATELY DETERMINE THE QUANTITY OF CLOSING STOCK OF FULL HEAD RICE AND BROKEN RICE. HE SUBMITTED THAT BROKEN RICE IS PRODUCED ALONG WITH F ULL HEAD RICE WHICH IS A FACT WHICH CANNOT BE DISPUTED. STATING FROM THE R EPORT OF DR. S.K. JHA, SENIOR SCIENTIST, INDIA AGRICULTURAL RESEARCH INSTI TUTE (IARI), NEW DELHI, THE LEARNED AR SUBMITTED THAT OUT OF 100 KG OF PADD Y BASMATI 61 KG OF BASMATI RICE CAN BE PRODUCED WHICH INCLUDE 44 KG FU LL HEAD RICE AND 17 ITA NOS.353 & 370 (ASR)/2014 ASST. YEAR: 2009-10 9 KG OF BROKEN RICE. HE SUBMITTED THAT AS PER THIS RE PORT THE PRODUCTION OF FULL HEAD RICE CAN BE 44% WHEREAS THE ASSESSEE HAS DECLARED THE PRODUCTION OF FULL HEAD RICE AT 46.02 %. SIMILARLY AS AGAINST 17 KG OF BROKEN RICE AS PER THIS REPORT, THE ASSESSEE HAD PR ODUCED 15.34 KG OF BROKEN RICE. CONTINUING HIS ARGUMENTS THE LEARNED A R SUBMITTED THAT IN THE MILLING OF PADDY THE MAIN PRODUCT IS FULL HEAD RICE AND DIFFERENT BY PRODUCTS ARE BROKEN RICE, RICE BRAN AND PADDY HUSK. AS REGARDS THE FINDINGS OF LEARNED CIT(A) THAT MILLING OF PADDY SH OULD HAVE YIELDED 67% OF RICE AS PER REPORT OF FOOD CORPORATION OF INDIA, THE LEARNED AR SUBMITTED THAT THE REPORT HAS MENTIONED PADDY PARMA L IN ITS REPORTS WHEREIN YIELD OF RICE COMES TO 67%. HE SUBMITTED TH AT ASSESSEE HAD NOT PURCHASED PADDY PARMAL AND HAD PURCHASED ONLY PADDY BASMATI AND PADDY SHARBATI AND THEREFORE REPORT OF FCI WAS NOT APPLICABLE. AS REGARDS THE ALLEGATIONS BY AUTHORITIES BELOW THAT A SSESSEE MUST BE MIXING BROKEN RICE AND SHARBATI RICE WITH BASMATI R ICE, HE SUBMITTED THAT 5% OF RICE PRODUCED FROM SAME VARIETY OF PADDY BASMATI CAN BE MIXED IN THE BASMATI RICE TO BE EXPORTED WHICH IS P ERMITTED BY APEDA A REGULATING BODY RELATING TO EXPORT OF FOOD PRODUCTS FROM INDIA WHICH MEANS THAT OTHER RICE VARIETIES CAN NOT BE MIXED AT ALL. HE SUBMITTED THAT EVEN MIXTURE IS MENTIONED IN EXPORT BILLS AND IN RE SPECT OF BROKEN RICE PERMITTED BY APEDA THE LEARNED AR SUBMITTED THAT BR OKEN RICE MEANS THAT RICE WHICH IS BROKEN DURING THE TRANSIT AND N OT MIXED DELIBERATELY AT THE TIME OF PACKING/ DISPATCH. AS REGARDS ALLEG ATION OF LEARNED CIT(A) ITA NOS.353 & 370 (ASR)/2014 ASST. YEAR: 2009-10 10 REGARDING UNDER VALUATION BY RS.54,50,000/- IN CLOS ING STOCK OF SHARBATI RICE THE LEARNED AR SUBMITTED THAT AVERAGE PURCHASE PRICE OF PADDY SHARBATI PER QUINTAL COMES TO RS.1107/70- PER QUINT AL. THE EXPENSES ON PURCHASE OF SUCH PADDY COME TO RS.69.56/- PER QUINT AL. THE TOTAL COST OF PADDY SHARBATI PURCHASE PER QUINTAL COMES TO RS.1,1 77/26 PER QUINTAL. WITH 61.35% YIELD, THE COST OF PRODUCTION OF RICE C OMES TO RS.1919/- PER QUINTAL WHEREAS THE ASSESSEE HAS ALREADY VALUED THE CLOSING STOCK OF RICE OF SHARBATI AT RS.2100/- PER QUINTAL WHICH CLEARLY MEANS THAT THE EXPENSES OF PACKING AND BARDANA ETC. HAVE ALREADY B EEN INCLUDED. IN VIEW OF THE ABOVE HE SUBMITTED THAT THE FINDINGS OF THE LEARNED CIT(A) ARE NOT BASED UPON THE FACTS. 9. THE LEARNED DR, ON THE OTHER HAND REPLYING TO A SSESSEES APPEAL SUBMITTED THAT ASSESSEE HAD MAINTAINED A CONSOLIDATED STOCK REGIS TER FOR RICE AND EVEN TRADING ACCOUNT PREPARED AND SUBM ITTED BY ASSESSEE HAD ONLY ONE ACCOUNT AND IN THIS RESPECT INVITED OU R ATTENTION TO PAPER BOOK PAGE 52 WHERE A COPY OF TRADING ACCOUNT OF RIC E WAS PLACED. HE SUBMITTED THAT ASSESSEE HAD PURCHASED RICE @ RS.321 9/ PER QTL AND THEREFORE, HE ARGUED THAT IN VIEW OF CONSOLIDATED A CCOUNT OF RICE THE ASSESSING OFFICER HAD RIGHTLY CALCULATED THE SUPPRE SSION IN VALUATION OF CLOSING STOCK OF RICE BY TAKING A UNIFORM RATE TO A LL VARIETIES OF RICE. AS REGARDS VALUATION OF PADDY THE LEARNED DR SUBMITTED THAT EARLIER ASSESSING OFFICER HAD CLEARLY STATED THAT NO VARIET Y WISE STOCK REGISTER OF PADDY WAS PRODUCED AND IT WAS ONLY DURING REMAND PR OCEEDINGS THAT ITA NOS.353 & 370 (ASR)/2014 ASST. YEAR: 2009-10 11 ASSESSING OFFICER HAD STATED THAT VARIETY WISE STOC K REGISTER WAS PRODUCED THEREFORE THE AUTHENTICITY OF SUCH STOCK R EGISTER IS IN DOUBT AND THEREFORE, HE ARGUED THAT LEARNED CIT(A) RELYING UP ON THE REMAND REPORT HAS WRONGLY ALLOWED THE RELIEF. 10. ARGUING UPON REVENUES APPEAL THE LEARNED DR SU BMITTED THAT LEARNED CIT(A) HAS WRONGLY ALLOWED RELIEF TO THE A SSESSEE BY HOLDING THAT ASSESSEE HAD STATED THAT THEY HAD CHANGED THE METHO D OF VALUATION OF PADDY FROM WEIGHTED AVERAGE COST TO FIFO METHOD. TH E LEARNED DR ARGUED THAT HOW ASSESSEE CAN CHANGE METHOD OF VALUA TION OF RAW MATERIALS DURING ASSESSMENT PROCEEDINGS. 11. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GON E THROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT TO ARRIVE AT FAIR CO NCLUSION THE VARIETY WISE BREAK UP OF COST OF PADDY AND VARIETY WISE BREAK UP OF MARKET VALUE OF RICE HAS TO BE DETERMINED. THE ABOVE CALCULATIONS C AN BE MADE FROM THE MATERIAL AVAILABLE ON RECORD. FIRST WE TAKE UP THE CASE OF PADDY. AS REGARDS PADDY WE FIND THAT ASSESSEE HAD OPENING STO CK, PURCHASES, CONSUMPTION AND CLOSING STOCK OF FOUR VARIETIES OF PADDY WHICH FACT IS VERIFIABLE FROM PAPER BOOK PAGE 69 WHERE OPENING ST OCK PURCHASES, CONSUMPTION AND CLOSING STOCK FOR FOUR VARIETIES IS PLACED. FOR THE SAKE OF CONVENIENCE FIGURES FROM PAPER BOOK PAGE 69 ARE REPRODUCED BELOW. (QUANTITY IN QTLS.) PADDY SHARBATI PADDY 1121 PADDY BASMATI PADDY DB OP STOCK PURCHASE 50514.45 37909.40 24121.66 64169.57 ----- 23503.65 ----- 26786.89 TOTAL 88423.85 88291.23 23503.65 26786.89 ITA NOS.353 & 370 (ASR)/2014 ASST. YEAR: 2009-10 12 LESS CONSUMED BY MILLING. 40000.00 71550.00 15000.00 10000.00 CLOSING STOCK 48423.85 16741.23 8503.65 16786.89 NOW TO ARRIVE AT THE WEIGHTED AVERAGE COST PRICE OF EACH VARIETY OF PADDY WE HAVE TO DIVIDE THE TOTAL AMOUNT OF VARIETY WISE PADDY IN RUPEES WITH ITS QUANTITY RESPECTIVELY. THE WORKING OF THE SAME AS NOTED DOWN FROM PAPER BOOK PAGES 70 TO 71 IS DONE AS UNDER: PADDY SHARBATI PADDY 1121 PADDY BASMATI PADDY DB 1 2 3 4 (A) OP. STOCK (IN RS.) PURCHASE (IN RS.) 64968017.85 40116684.45 56230484.05 165433173.5 2 ----- 70251457 .49 ----- 42757564.1 0 105084702.30 221663657.5 7 70251457 .49 42757564.1 0 (B) TOTAL QLY OF OP STOCK AND PURCHASE IN (QTS) 88423.85 88291.23 23503.65 26786.89 (C) WEIGHTED AVERAGE COST OF PADDY ON THE BASIS OF PURCHASE BILLS RS.1107.70 PB PAGE 70 RS.2134.21 PB PAGE 75 RS.2765,7 5 PB PAGE 77 RS.1695.22 PB PAGE 73 (D) EXPENSES ON PURCHASES RS.69.34 RS.88.84 RS.88.84 RS.88.84 (E) WEIGHTED AVERAGE COST OF PADDY C+D RS.1177.04 RS.2223.05 RS.2854.5 9 RS.1784.06 (F) QUANTITY OF CLOSING STOCK OF PADDY 48432.85 16741.23 8503.65 16786.89 (G) VARIETY WISE VALUATION OF PADDY ON THE BASIS OF WEIGHTED AVERAGE COST. (EXF) 57007400.00 37216591.35 24274434 .25 29948818.9 7 (H) TOTAL VALUE OF CLOSING STOCK OF PADDY. ITA NOS.353 & 370 (ASR)/2014 ASST. YEAR: 2009-10 13 (I) (J) (G1+G2+G3+G4) TOTAL QUANTITY OF CLOSING STOCK PADDY AVERAGE PURCHASE PRICE H/I 1,48,44,7244.57 90464.62 QTLS. RS.1640/94 PER QTL. BEING 48432.85 + 16741.23+ 8503.65+ 16786.89 VALUE OF CLOSING STOCK OF TOTAL PADDY TAKEN BY ASSE SSEE AS PER TRADING ACCOUNT PLACED AT PAPER BOOK PAGE 52 IS 148543659.3 4 AND THEREFORE DIFFERENCE IN THE VALUATION IS ONLY RS.96414 AND TH AT MOREOVER THE ASSESSEE HAS TAKEN A HIGHER FIGURE IN ITS TRADING A CCOUNT. THE ASSESSING OFFICER HAD MADE AN ADDITION OF RS.48607983/- ON AC COUNT OF SUPPRESSION OF CLOSING STOCK OF PADDY AND LEARNED C IT(A) HAD RESTRICTED THE SAME TO RS.2267523/-. THEREFORE, BOTH THE AUTHO RITIES BELOW HAD MADE WRONG CALCULATION. FROM THE FACTS AND FIGURES THE DIFFERENCE IN VALUATION DONE BY ASSESSEE AND FIGURE CALCULATED BY US ON THE BASIS OF MATERIAL ON RECORD DO NOT EXCEED RS.96414/- AND WHI CH DIFFERENCE CAN BE BECAUSE OF ROUNDING OFF OF FIGURES. THE DIFFERENCE OF RS.96,414/- IS INSIGNIFICANT. MOREOVER THE AVERAGE PURCHASE PRICE OF TOTAL STOCK OF PADDY COMES OUT AT RS.1640/94 PER QUTL. WHICH MATCHES WIT H THE FINDINGS OF ASSESSING OFFICER IN HIS REMAND REPORT WHERE HE HAS FOUND VALUATION @ RS.1642 TO BE CORRECT. THE DIFFERENCE OF RS.1/ PER QTL. IS DUE TO ROUNDING OFF OF FIGURES. IN VIEW OF THE ABOVE, WE DO NOT SEE ANY JUSTIFICATION IN CONFIRMING THE PART ADDITION ON ACCOUNT OF UNDER VA LUATION OF PADDY. IN ITA NOS.353 & 370 (ASR)/2014 ASST. YEAR: 2009-10 14 VIEW OF THE ABOVE GROUND NO.1(A) OF ASSESSEES APPE AL IS ALLOWED WHEREAS GROUNDS OF APPEAL TAKEN BY REVENUE IN ITS APPEAL AR E DISMISSED. 12. NOW COMING TO THE ADDITION ON ACCOUNT OF RICE. WE FIND THAT ASSESSEE HAD PURCHASED DIFFERENT VARIETIES OF PADDY WHOSE PRICES ARE DIFFERENT AND THEREFORE THE PRICES OF RICE PRODUCED FROM SUCH DIFFERENT VARIETIES OF PADDY ARE BOUND TO BE DIFFERENT. THE A UTHORITIES BELOW HAS APPLIED UNIFORM RATE OF RICE TO ALL VARIETIES OF ST OCK OF RICE INCLUDING ON BROKEN RICE WHICH ACTION IS HIGHLY UNJUSTIFIED AS T HE RICE PRODUCED FROM DIFFERENT VARIETIES OF PADDY HAVING DIFFERENT PURCH ASE PRICES ARE BOUND TO BE DIFFERENT AND IT IS ALSO AN UNDISPUTED FACT THAT DURING PRODUCTION OF RICE SOME RICE IS BOUND TO BE PRODUCED AS BROKEN RI CE. THE QUANTITATIVE POSITION OF RICE INCLUDING BROKEN RICE PRODUCED FRO M DIFFERENT VARIETIES OF PADDY CAN BE SUMMARIZED AS UNDER: BASMATI RICE SHARBATI RICE BROKEN RICE TOTAL OP BALANCE AS ON 1.4.2008 40681.83 1012.123 30672.04 72366.00 RICE PURCHASED 49025.04 ----- ----- 49025.04 RICE PRODUCED 44425.00 24540 14808.00 83773.00 SALES RETURN 241.25. TOTAL 134131.87 25552.13 45721.29 205405.29 SALES EXPORT 102700.52 --- --- 102700.52 EXPORT AGAINST H FORM 13584.00 --- ---- 13584.00 DOMESTIC SALES 1647.35 3752.13 4178.05 9577.53 TOTAL 117931.87 3752.13 4178.05 125862.05 CLOSING STOCK 16200 21800 41543.24 79543.24 ITA NOS.353 & 370 (ASR)/2014 ASST. YEAR: 2009-10 15 THE ABOVE FIGURES ARE VERIFIABLE FROM PAPER BOOK P AGE 119 AND ARE ALSO TALLYING WITH THE FIGURES IN TRADING ACCOUNT PLACED AT PB PAGE 52. 13. THE YIELD OF TOTAL RICE PRODUCED OUT OF TOTAL P ADDY CONSUMED COMES OUT OF 61.35% WHICH INCLUDES BROKEN RICE ALSO. IT I S AN UNDISPUTED FACT THAT IN THE PROCESS OF MANUFACTURE OF RICE CERTAIN % AGE OF RICE IS PRODUCED AS BROKEN RICE WHICH CAN NOT BE EXPORTED A ND IN THE DOMESTIC MARKET ALSO IT FETCHES A LOWER PRICE. THE %AGE OF Y IELD DECLARED BY ASSESSEE IS MORE THAN THE YIELD NOTED BY SR. SCIENT IST SH. S.K. JHA IN ITS REPORT. SH. S.K. JHA IN HIS REPORT HAS NOTED THE FU LL HEAD RICE INCLUDING BROKEN RICE AT 61 KG OUT OF WHICH HE HAS MENTIONED 44 KGS AS FULL HEAD RICE AND 17 KGS AS BROKEN RICE. IN THE CASE OF ASSE SSEE THE PRODUCTION OF FULL HEAD RICE COMES OUT AT 50.50% (BEING 44425 +24 540 DIVIDED BY PADDY CONSUMED AMOUNTS OF RS.1,36,550 QTLS. WHICH I S MORE THAN 44 KGS OF FULL HEAD RICE. SIMILARLY THE YIELD OF BROKE N RICE IS LESS IN THE CASE ASSESSEE WHICH IS 15.84% AS COMPARED TO 17% IN THE REPORT. THEREFORE THE YIELDS OF RICE DECLARED BY ASSESSEE IS QUITE IN LINE WITH THE REPORT AND RATHER IT IS BETTER THAN THE STANDARDS SET OUT BY S R. S.K. JHA. 14. AS REGARDS VALUATION OF CLOSING STOCK OF RICE W E FIND THAT ASSESSEE HAD VALUED ITS CLOSING STOCK OF RICE AS UNDER: BASMATI RICE 16200 QTLS @ RS.4500/- 72,90,000.0 0 SHARBATI RICE 21800 QTLS @RS.2100/- 45,78,000.00 BROKEN RICE OF 41543.24 QTL HAS BEEN VALUED AT DIFFERENT PRICES AS DETAILED BELOW: 16100 QTL @ RS.1400/- 2254000.00 ITA NOS.353 & 370 (ASR)/2014 ASST. YEAR: 2009-10 16 17750 QTL @RS.1100/- 19525000.00 7693.24 QTL @ RS.758 5831115.00 TOTAL QTL 79543.24 1,66,57,6,115.00 THE ABOVE VALUATION OF STOCK HAS BEEN NOTED DOWN BY THE ASSESSING OFFICER IN HIS ORDER AT PAGE 10. AS PER ABOVE VALUA TION THE AVERAGE PRICE PER QTL OF TOTAL VARIETIES OF RICE INCLUDING BROKEN RICE COMES OUT AT RS.2094/-QTL. THE ASSESSING OFFICER OBSERVED THAT S INCE ASSESSEE HAD PURCHASED RICE @ RS.3219/- PER QTL THEREFORE, HE AP PLIED THIS RATE TO WHOLE QUANTITY AND MADE ADDITION OF THE DIFFERENCE AMOUNTING TO RS.8,95,30150/-. THE APPROACH ADOPTED BY AUTHORITIE S BELOW IN VALUING THE DIFFERENT VARIETIES OF RICE AT SAME PRICE IS NO T AT ALL JUSTIFIED. 15. TO EXAMINE AS TO WHETHER THERE WAS SUPPRESSION IN VALUATION OF RICE OR NOT LET US EXAMINE THE VARIETY WISE VALUATI ON OF DIFFERENT VARIETIES OF RICE MADE BY ASSESSEE. FIRST WE TAKE UP HIGH END BASMATI RICE. IN THIS RESPECT WE FIND THAT ASSESSING OFFICER HAS ADOPTED UNIFORM PRICE OF RS.3219/ PER QT. AND THEREFORE RICE BASMATI HAS ALS O BEEN VALUED AT THE SAME PRICE WHEREAS ASSESSEE ITSELF HAS VALUED IT @ RS.4500/- PER QTL. AS IS APPARENT FROM PAPER BOOK PAGE 119 AND AS NOTED B Y US IN TABLE MADE ON PAGE 14 OF THIS ORDER. THUS 16200 QTL OF BASMATI RICE INCLUDING RICE PURCHASED BY ASSESSEE HAS BEEN VALUED AT RS.4500/- PER QTL.. THE PRICE OF RS.4500/- IS MUCH HIGHER THAN THE PRICE AT WHICH THE ASSESSING OFFICER HAD VALUED THE STOCK AT RS.3219/ PER QTL. T HE ASSESSING OFFICER HAS EXAMINED THE EXPORT BILLS OF SUCCEEDING YEAR WH ERE HE HAS NOTED THAT ASSESSEE HAD MADE EXPORTS BETWEEN PRICES OF RS.4200 /- TO RS.5000/- PER ITA NOS.353 & 370 (ASR)/2014 ASST. YEAR: 2009-10 17 QTL. THIS OBSERVATION HAS BEEN MADE BY ASSESSING OF FICER IN PARA 13(D) OF HIS ORDER. FROM THE ABOVE IT FOLLOWS THAT VALUATION DONE BY ASSESSEE AT RS.4500/- PER QTL FOR THIS CATEGORY OF RICE IS QUIT E REASONABLE AND VALUATION OF THIS CATEGORY OF RICE IS ABOVE THE RAT E ADOPTED BY ASSESSING OFFICER. IN VIEW OF THE ABOVE HIGH END BASMATI RICE AMOUNTING TO RS.16200 QTLS HAS BEEN RIGHTLY VALUED @RS.4500/- PE R QTL. AND THERE IS NO SUPPRESSION IN ITS VALUATION. 16. NOW COMING TO VALUATION OF SHARBATI RICE, WE FI ND THAT DURING THE YEAR THE AVERAGE PURCHASE PRICE OF PADDY |SHARBATI AS NOTED IN OUR ORDER COMES OUT AT RS.1177/- QTL. WHEREAS AVERAGE PURCHAS E PRICE OF PADDY 1121 AND PADDY BASMATI COMES OUT AT RS.2223/- QTL. AND RS.2854/- QTL RESPECTIVELY. THE RICE PRODUCED FROM BASMATI PADDY AND PADDY 1121 HAS BEEN VALUED AT RS.4500/- QTL. WHICH IS ABOUT 15 8% OF AVERAGE PURCHASE PRICE OF PADDY AND IF WE APPLY THE SAME PE RCENTAGE OF 158% THE RATE OF RICE PRODUCED FROM PADDY SHARBATI COMES OUT AT RS.1860/- QTL AND THE ASSESSEE HAS VALUED THE SAME AT RS.2100 /- QTL. THEREFORE, NO DISCREPANCY CAN BE FOUND IN THE VALUATION OF RICE S HARBATI. THE DISCREPANCY AS NOTED BY LEARNED CIT(A) IN THE VALUA TION OF SHARBATI RICE IS NOT BASED UPON THE FACTS AND FIGURES OF THE CASE BUT IS BASED UPON ASSUMPTIONS THAT ASSESSEE HAD NOT INCLUDED COST OF BARDANA AND PACKING MATERIAL IN VALUATION OF STOCK WHEREAS AS P ER OUR CALCULATIONS THE VALUATION OF RICE SHARBATI CAN NOT EXCEED RS.18 60/- PER QTL WHICH IS BASED UPON THE COST PRICE OF PADDY SHARBATI AND WH EREAS ASSESSEE HAS ITA NOS.353 & 370 (ASR)/2014 ASST. YEAR: 2009-10 18 VALUED IT @ RS.2100/- PER QTL. AND THEREFORE COST O F PACKING AND BARDANA IS ALREADY INCLUDED IN THE ABOVE VALUATION AND THER EFORE IS NO SUPPRESSION IN THIS CATEGORY ALSO. 17. AS REGARDS VALUATION OF BROKEN RICE, WE FIND TH AT IT IS AN UNDISPUTED FACT THAT BROKEN RICE IS PRODUCED ALONG WITH PRODUCTION OF FULL HEADED RICE. WE FURTHER FIND THAT BROKEN RICE WAS NOT EXPORTED AS THE EXPORT BILLS PLACED AT PAPER BOOK PARE 134 TO 213 I NDICATES THAT EXPORT WAS MADE ONLY OF BASMATI A GRADE EXTRA LONG GRAIN. THEREFORE, BROKEN RICE PRODUCED DURING PRODUCTION REMAINED PART OF CL OSING STOCK. THE ASSESSEE HAD FILED GODOWN WISE DETAILS OF BROKEN RI CE ON THE BASIS OF PHYSICAL INVENTORY AS ON THE CLOSE OF YEAR WHICH IS PLACED AT PAPER BOOK PAGE 120 TO 131 FOR WHICH ASSESSING OFFICER HAS NOT MADE ANY ADVERSE COMMENTS. MOREOVER, WE FIND THAT BULK OF PART OF CL OSING STOCK OF BROKEN RICE WAS PART OF OPENING STOCK WHICH IS APPARENT FR OM PAGE 14 OF THIS ORDER WHERE OUT OF 41543.24 QTLS. OF BROKEN RICE 30 672.04 QTLS WAS FROM OPENING STOCK AND THIS OPENING STOCK WAS VALUED AT RS 1041/-PER QTL. IN THE EARLIER YEAR AS IS APPARENT FROM PAPER BOOK PAG E 119 AND THIS VALUATION HAS BEEN ACCEPTED BY AUTHORITIES IN THE E ARLIER YEAR, THEREFORE, CLOSING STOCK OF EARLIER YEAR THE VALUATION OF WHIC H WAS ACCEPTED @ RS.1041/ PER QTL. IN EARLIER YEAR CAN IN NO CIRCUMS TANCES BE VALUED AT UNIFORM RATE OF RS.3219/- PER QTL. THE ASSESSEE HAS VALUED THIS CATEOGY OF RICE @RS.1153 PER QTL. AS IS APPARENT FROM PAPER BOOK PAGE 119 WHICH ALSO IS MORE THAN VALUATION OF RS.1041/- IN THE EAR LIER YEAR AND WE HAVE ITA NOS.353 & 370 (ASR)/2014 ASST. YEAR: 2009-10 19 ALREADY OBSERVED THAT MOST PART OF CLOSING STOCK WA S PART OF OPENING STOCK. THEREFORE, THERE IS NO SUPPRESSION IN THIS C ATEGORY ALSO. THEREFORE, WE DO NOT FIND ANY DISCREPANCY IN THE VALUATION OF CLOSING STOCK OF BROKEN RICE ALSO. 18. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES WE DO NOT FIND ANY JUSTIFICATION IN THE VALUATION OF RICE AS MADE BY A UTHORITIES BELOW AS WE HAVE NOT OBSERVED ANY DISCREPANCY IN THE VALUATION OF ANY CATEGORY OF RICE DONE BY ASSESSEE. IN VIEW OF THE ABOVE GROUND 1(A) OF THE APPEAL FILED BY ASSESSEE IS ALLOWED. 19. SINCE, WE HAVE ALLOWED THE APPEAL OF THE ASSESS EE, THE STAY APPLICATION OF THE ASSESSEE HAS BECOME INFRUCTUOUS AND THE SAME IS DISMISSED AS SUCH. 20. IN NUTSHELL, THE APPEAL FILED BY ASSESSEE IS AL LOWED WHEREAS APPEAL FILED BY REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH FEBRUARY, 2016. SD/- SD/ - (A.D. JAIN) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 26.02.2016. /PK/PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, ITA NOS.353 & 370 (ASR)/2014 ASST. YEAR: 2009-10 20 (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.
