M/S MAHAVIR AGRO INDUSTRIES, TARN TARAN V. INCOME TAX OFFICER WARD- 1(4), TARN TARAN

ITA 4/ASR/2018

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 7524 (ITAT-AMRITSAR)
• Duration Of Justice: 4 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-07-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 01-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 131; 145(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER I.T.A. No. 04/ASR/2018 Assessment Year: 2011-12 M/s Mahavir Agro Industries Chela Road, Bhikhiwind, Distt. Tarn Taran [PAN: AANFM 9256H] Vs. I.T.O., Ward 1(4), Tarn Taran (Appellant) (Respondent) Appellant by : None Respondent by: Sh. S. M. Surendranath, Sr. DR Date of Hearing: 17.05.2022 Date of Pronouncement: 14.07.2022 ORDER Per Anikesh Banerjee, JM: The instant appeal is directed against the order of Ld. Commissioner of Income Tax (Appeal)-1, Amritsar, {in brevity CIT(A)} bearing appeal no. 70/2014-15 dated of order 24.11.2017, order passed u/s. 250(6) of the Income Tax Act, 1961 (in brevity of the Act) for the Assessment year 2011-12. The impugned order was originated from the order of Income Tax Officer, Ward 1(4), Amritsar (in brevity A.O) order passed u/s.143(3) of the Act order dated 31.03.2014. 2. The assessee has raised the following grounds of appeal: ITA No. 04/ASR/2018 Mahavir Agro Industries vs. ITO 2 1. That the learned AO has erred inn law and on facts while making addition/disallowances and likewise ld. CIT(A) is not justified while confirming the same. 2. That the learned Commissioner of Income-tax (Appeals) has not appreciated the facts of the case, explanation offered, affidavit of accountant, rice stock register filed before the AO and proceeded to confirm the addition arbitrarily. 3. That the learned Commissioner of Income Tax (Appeals) has not appreciated the facts of the case, explanation offered, confirming the addition of Rs.3,99,763/- made by the Income Tax Officer in Trading Account. 4. That the learned CIT(A) is not justified while confirming the addition of Rs.36,208/- on account of interest for the amount advanced to Sh. Sandeep Dhawan and Sh. Sarabjit Dhawan who are also partners in the firm. Both the partners had substantial deplosit in their accounts and this amount can be considered to have been advanced. 5. That without prejudice to this it is submitted that interest @6% has been paid to the partners and as such interest on advance to partners should be restricted to 6%. 6. That the Learned CIT(A) has erred in law on facts while confirming the addition on account of alleged sundry creditors in the name of M/s. Bankey Bihari Enterprises of Rs. 1,37,773/- and J. Kishore & Co. (wrongly mentioned Jugal Kishore & Co.) of Rs.17,275/-. AO has not appreciated the fact that these are purchases made from these parties. AO has neither confronted the letter alleged to have been received through the counsel (without any authority) of M/s. J. Kishore & Co. nor he summoned the parties u/s. 131 despite our request made to this effect. Likewise learned AO has erred in law and on facts while not summoning M/s. Banke Bihari Enterprises u/s. 131.” 3. Tersely, we advert the fact of the case. The assessee is a trader and manufacturer of Rice. During the assessment proceeding, the additions were made as follows: - a. Amount to Rs.19,47,145/- on account of difference in reconciliation of purchase price and sale price with manufacturing cost, ITA No. 04/ASR/2018 Mahavir Agro Industries vs. ITO 3 b. Amount to Rs. 3,99,763/-by the ld. AO who had recasted the trading account of Rice and worked out the said addition, c. Amount to Rs.36,238/- on account of calculated interest on credit balance of partner’s Capital account, d. Amount to Rs.1,51,408/- on account of unverified sundry creditors of M/s. Bankey Bihari Enterprises amount to Rs.1,37,773/- and J. Kishore & Coamount of Rs.17,275/-. Assessee filed an appeal before the ld. CIT(A). The Appellate Authority had confirmed the additions made by the ld. AO. Aggrieved assessee filed an appeal before us. 4. The ld. Counsel of the assessee filed a Paper Book on 11.02.2019 which is kept in record. The ld. AO, during the assessment proceedings observed that the following discrepancies in the value of purchase and sale of Rice and Paddy relating to Trading and Manufacturing of the assessee. The order of the ld. AO in page no. 2 and 3 is extracted as follows: “03. It is also noticed that you have purchased rice @1700/-per quintals and also manufactured rice from own paddy which comes @1915/- per quintals. The average of purchases and manufacture of rice from own paddy comes to Rs.1810/- per quintals (47,77,154 +40,77,450) / (2494.27 + 2591.50), where you have sold the rice at average rate of Rs.1748.45 per quintals, which cannot be accepted from a prudent businessman. It is presumed that the assessee has sold the rice and no profit no loss basis, the sale price should have been Rs.1810/- per quintals. From the above facts, your rice trading account is as under: Quintals Amount Quintals Amount ITA No. 04/ASR/2018 Mahavir Agro Industries vs. ITO 4 To Opening stock 1257.30 2514600 To sales 4395.91 7956597 To Trfd paddy 2494.27 4777754 To sales 1174.85 2126479 Suppressed (1000+174.85 quintals) To purchases 2398.50 4077450 To closing 1754.16 3683736 To purchase 1174.85 1997245 Stock Suppressed To profit 399763 TOTAL: 7324.92 1,37,66,812 7324.92 1,37,66,812” 5. Learned Sr. DR argued and relied on the order of the CIT(A). The relevant paragraph from page number 7 is extracted as follows: “In the remand report submitted by the AO it was submitted that:- (a) As per column 9b of audit report in form CD, it was stated that stock register has been maintained. (b) Examination of xerox copy of stock register file by assessee and bills issued by M/s. Swami Agro industries does not agree / tally with each other as under: S.No. of Bill Date of issue of bill Quantity in quintals Date of entry in stock register 59 16.12.2010 299.80 3.11.2010 61 17.12.2010 299.85 4.11.2010 63 18.12.2010 299.80 12.11.2010 66 19.12.2010 299.75 19.11.2010 70 21.12.2010 299.70 22.11.2010 74 23.12.2010 299.75 23.11.2010 The AO rightly observed and remarked that how the stock purchased in the month of December 2010 can be a part of stock register in the month of November 2010. In the rejoinder to the remand report the appellant has not furnished any explanation to explain the above discrepancies in the books of accounts. Therefore, I agree with the AO for his ITA No. 04/ASR/2018 Mahavir Agro Industries vs. ITO 5 observations in the assessment order and the above Data that the books of accounts of the appellant are not reliable and rightly rejected by the AO with reference to the stock register claimed. Therefore, in view of the above discrepancies in the books of accounts of the appellant, the books of account were rightly rejected u/s. 145(3) of the act by the AO and the action of the AO is confirmed. The AO had recast the trading account of rice and worked out the addition of Rs.399,763/- to the total income which is confirmed. The addition of Rs.19.97.145/- as unaccounted income out of sale of rice out of books of account is also confirmed.” 5.1 The Sr. DR further argued that the amount Rs.3,99,763/- was related to discrepancies in Trading account. Further argued that the assessee did not charge any interest on the credit balance of the partner. Whereas the assessee is taking benefit of payment of interest to the different parties on unsecured loan amount of interest on loan is Rs. 22,83,370/-. Accordingly, the ld. AO calculated the interest on credit balance of the sister concerns of the assessee and disallowed interest amount of Rs.36,238/-. As per the ld. AO there is unverified sundry creditorslack of business of identity, credit worthiness and genuineness of the transactions. The amount of Rs.1,37,773/- and Rs.17275/- were added back on account of unverified Sr Creditors. The ld. Sr. DR fully relied on the order of Revenue Authority. 6. We considered the rival submissions and relied on the documents available in the record. During the assessment proceedings and the appeal, the ITA No. 04/ASR/2018 Mahavir Agro Industries vs. ITO 6 assessee filed the written submission which is annexed in page no. 66 to 266 of the Paper Book of assessee. During the calculation of sale / purchase rate of rice and paddy both the Revenue Authorities rejected the stock register of the assessee and not relied on the books of account. But the whole calculation is based on average method. No comparable in the same nature of business has brought by both the Revenue Authorities. For calculation of rate/ value of goods the purchase bill, sale bills and stock registered are required to reach the finality. This issue is required for further adjudication. 6.1. In the case of calculation of interest on loan to sister concern, we are not intervening in the order of both the Revenue Authorities, so the interest amount to Rs. 36,238/- is confirmed. 6.2. In the above point of non-verifiable sundry creditors, in the assessment order, the ld. AO had repeatedly mentioned the name of sundry creditor M/s Jugal Kishore & Co. Whereas the assessee specifically mentioned that the name of creditor is M/ J.Kishore & Co. Both the Revenue Authorities did not take cognizance on the variable facts. On the other hand, the ld. CIT(A) claimed that the assessee was unable to submit the details related to sundry creditor. The issue should be remanded back for further adjudication. 6.3. We have decided that during calculation of stock by the ld. AO and during the appeal proceedings both the Authorities did not take care the submission of assessee. The assessee through its council submitted documents ITA No. 04/ASR/2018 Mahavir Agro Industries vs. ITO 7 appearing in page no. 1 to 266 of APB. The revenue Authorities were lacking to take cognizance of the documents filed by the assessee. On the other hand, the assessee was not properly participated in both the proceedings. We are setting aside the matter before the ld. CIT(A) for denovo adjudication on the assessee’s addition. On the other hand, assessee is directed to participate in appeal proceedings with proper documentation. The reasonable opportunity should be granted to the assessee for its case. 7. In the result, ground no. 1 & 2 which is general in nature. Ground 4 & 5 are dismissed. Ground no. 3 & 6 are allowed for statistical purposes. Order pronounced in the open court on 14.07.2022 Sd/- Sd/- (Dr. M. L. Meena) (Anikesh Banerjee) Accountant Member Judicial Member *GP/Sr. PS* Copy of the order forwarded to: (1) The Appellant: (2) The Respondent: (3) The CIT(A), (4) The CIT concerned (5) The Sr. DR, I.T.A.T (6) The Guard File True Copy By Order