Sh. H.S.Rice Mills, Distt. Gurdaspur V. The Income-tax Officer, BATALA

ITA 404/ASR/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80620 (ITAT-AMRITSAR)
• Duration Of Justice: 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 28-10-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 17-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: TARSAM LAL
• Assessee Lawyers: S K JAIN
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH: AMRITSAR. (SMC) BEFORE SH. B.P. JAIN, ACCOUNTANT MEMBER I.T.A. NO. 404 (ASR)/2014 ASSESSMENT YEAR: 2007-08 PAN: AAAFH8183M M/S H.S. RICE MILLS, VS. INCOME TAX OFFICER , VILL.- SAKHOWAL, P.O.-GHOMAN, WARD 2(3), BATALA TEHSIL - BATALA, (APPELLANT) (RESPONDENT) APPELLANT BY: SH. S.K. JAIN, ADVOCATE RESPONDENT BY: SH. TARSAM LAL, DR DATE OF HEARING: 28.10.2014 DATE OF PRONOUNCEMENT: 29.10.2014 ORDER 1) THIS APPEAL OF THE ASSESSEE ARISES FROM T HE ORDER OF LEARNED CIT(A), AMRITSAR, DATED 12.03.2014, FOR THE ASSESSM ENT YEAR 2007-08. 2) THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: I. THAT AN ASSESSMENT FRAMED BY THE LEARNED ITO-2(3), BATALA, AND AN ENHANCEMENT IN VALUATION OF CLOSING STOCK OF BARAD ANA MADE TO THE TUNE OF RS. 136811 BY THE LEARNED CIT(A), AM RITSAR IS AGAINST TRUE FACTS, UNWARRANTED, UNCALLED FOR AND W ITHOUT ANY COGENT EVIDENCE & ARGUMENTS ADVANCED BY THE APPELLA NT. II. THAT LEARNED CIT(A) DID NOT PROPERLY CONSTRUE THE E VIDENCE ADDUCED DURING THE ARGUING OF APPEAL RATHER ON THE CONTRARY IGNORED THE VALUATION OF CLOSING STOCK OF DIFFERENT TYPES OF BARDANA LEFT AT THE CLOSE OF THE FINANCIAL YEAR ENDING 31.0 3.2007 WHICH WAS 2 I.T.A. NO. 404 (ASR)/2014 ASSESSMENT YEAR: 2007-08 VALUED AS PER REALIZABLE RATE AND WAS SUBSEQUENTLY SOLD IN THE ASSESSMENT 2008-09. III. THAT ASSESSMENTS OF SUBSEQUENT YEARS IN THE CASE OF FIRM HAD ALREADY BE FINALIZED AND VALUATION OF CLOSING STOCK OF BARDANA HAD BEEN ACCEPTED WITHOUT DISTURBING THE BARDANA A/C. IV. THAT UNDER THESE GROUNDS OF APPEAL, IT IS HUMBLY PR AYED THAT AN ADDITION MADE BY THE LEARNED ITO ON ACCOUNT OF VALU ATION OF BARDANA STOCK TO THE TUNE OF RS. 15000 AND ENHANCED OF VALUATION OF CLOSING STOCK BARDANA MADE BY THE LEARNED CIT(A) TO THE EXTENT OF RS. 136811 MAY HUMBLY BE (136811-15000) DELETED AND THE APPEAL MAY BE ACCEPTED ACCORDINGLY OR THE APPELLANT MAY BE GRANTED ANY OTHER LEGITIMATE RELIEF WHICH IT IS ENT ITLED UNDER THE LAW. 3) THE BRIEF FACTS OF THE CASE, AS PER A.O.S ORDER , ARE REPRODUCED AS UNDER: THE ASSESSEE DERIVES INCOME FROM RUNNING A RICE SH ELLER. VARIOUS ISSUES ARISING IN THE COURSE OF ASSESSMENT PROCEEDINGS WER E EXAMINED AND DISCUSSED. IT WAS FOUND THAT THE SHORTAGE OF 140 BA GS WAS NOT PROPERLY EXPLAINED. SIMILARLY, THE VALUATION OF BARADAN STOC K WAS NOT CONCLUSIVELY VERIFIABLE. AFTER EXAMINATION AND DISCUSSION OF THE CASE, AN ADDITION OF RS. 15000/- IS MADE IN BARDANA ACCOUNT AND SIMILARL Y A DISALLOWANCE OR RS. 10000/- IS MADE OUT OF CLAIM OF SHORTAGE IN BAG S. WITH THE ABOVE OBSERVATIONS, TOTAL INCOME IS COMPUT ED AS UNDER:- TOTAL INCOME COMPUTED VIDE INTIMATION U/S 143(1), DATED 06.02.2009 19890 1) ADDITION IN BARDANA ACCOUNT AS DISCUSSED ABOVE. 15000 2) DISALLOWANCE OUT OF SHORTAGE IS BAGS AS DISCUSSED ABOVE 10000 3) A DISALLOWANCE OF RS. 3000/- IS ALSO MADE OUT OF EXPENSES DEBITED 3 I.T.A. NO. 404 (ASR)/2014 ASSESSMENT YEAR: 2007-08 TO P&L ACCOUNT FOR PERSONAL AND INADMISSIBLE EXPENSES. 3000 TOTAL INCOME ASSESSED. 47890 4) BEFORE THE LEARNED CIT(A), THE ASSESSEE MADE THE SUBMISSIONS, WHO DELETED THE ADDITION OF RS. 10,000/- VIDE PARA NO. 6 AT PAGE 3 OF HIS ORDER. LEARNED CIT(A) ISSUED AN ENHANCEMENT NOTICE TO THE ASSESSEE, IN RESPONSE TO WHICH, THE ASSESSEE MADE THE SUBMISSION S, WHICH WERE NOT FOUND CONVINCING TO THE LEARNED CIT(A) AND THE LEAR NED CIT(A) ACCORDINGLY VALUED THE CLOSING STOCK OF BARDANA AT RS. 10.41 PER BAG AT RS. 3,56,771/- INSTEAD OF RS. 2,19,960/- TAKEN BY T HE ASSESSEE. ACCORDINGLY, VALUE OF CLOSING STOCK WAS CONFIRMED A T RS. 1,36,811/-, THUS, ENHANCING THE ADDITION MADE BY THE A.O. BY RS . 1,21,811/-. 5) LEARNED COUNSEL FOR THE ASSESSEE MR. S.K. JAIN A RGUED THAT THE ASSESSEE HAS VALUED THE BARDANA AT MARKET VALUE/EST IMATED REALIZABLE VALUE CONSIDERING THE CONDITION OF THE BARDANA OUTS TANDING AS AT YEAR END. HE FURTHER ARGUED THAT THE BARDANA IS USED FOR BRIN GING PADDY TO THE PREMISES OF THE ASSESSEE AND IS FURTHER REPEATEDLY USED FOR PACKING AND UNPACKING OF PADDY/RICE DURING THE SHELLING PROCESS . THIS RESULTS IN DEPRECIATION OF BARDANA IN QUALITY AND VALUE. MOREO VER, THE BARDANA WHICH IS USED ONCE LOSES REALIZABLE VALUE BY 1/3 RD OF THE COST. THE 4 I.T.A. NO. 404 (ASR)/2014 ASSESSMENT YEAR: 2007-08 ASSESSEE HAS RECEIVED BARDANA ALONG WITH PADDY RECE IVED FOR MILLING WHICH (TOTAL BARDANA RECEIVED MUNUS BARDANA DELIVER ED ALONGWITH RICE) WAS HOWEVER BILLED TO THE ASSESSEE LATER IN THE FIN ANCIAL YEAR. HOWEVER, THE SAID BARDANA WAS CONSTANTLY USED DURING THE MAN UFACTURING PROCESS WHICH RESULTED IN DETERIORATION OF VALUE OF BARDANA . FURTHER, DUE TO WEATHER ALSO THERE IS DETERIORATION IN THE VALUE OF BARDANA. THE VALUATION DONE BY THE ASSESSEE IS BASED ON THE CONDITION OF B ARDANA AND THE ESTIMATED VALUE WHICH IT COULD FETCH IN THE MARKET, IF SOLD. HENCE THE VALUATION DONE BY THE ASSESSEE IS REASONALE AND BE ACCEPTED. REGARDING SHORTAGE OF 140 BAGS, IT IS SUBMITTED THAT WHEN THE BARDANA IS REPEATEDLY USED IN THE MANUFACTURING PROCESS BARDANA SOMETIMES IS TORN WHICH IS REPAIRED. HOWEVER, CERTAIN AMOUNT OF BARDANA BECOME S SO TORN WHICH CANNOT BE USED AND THE SHORTAGE IS ON ACCOUNT OF TH AT. CONSIDERING THE VOLUME OF WORK THE SAID SHORTAGE IS VERY NEGLIGIBLE . 6) HE FURTHER INVITED OUR ATTENTION TO THE BASIS OF VALUATION OF BARDANA WHICH WAS SUBMITTED BEFORE THE LEARNED CIT( A) AND IN TURN WHICH HAS BEEN REPRODUCED BY THE LEARNED CIT(A) VID E PARA 5 AT PAGES 2 & 3 OF HIS ORDER. THE WORKING OF CLOSING STOCK AS O N 31 ST MARCH, 2007, WHICH HAS BEEN DISPOSED OF IN THE FOLLOWING YEAR, W AS SUBMITTED TO THE LEARNED CIT(A) AND IN TURN THE SAME HAS BEEN REPROD UCED BY LEARNED 5 I.T.A. NO. 404 (ASR)/2014 ASSESSMENT YEAR: 2007-08 CIT(A) AT PAGE 4 AND 5. IT WAS ARGUED THAT NO DEFEC T IN THE SAME HAS BEEN POINTED OUT BY THE LEARNED CIT(A). THEREFORE, THE E NHANCEMENT MADE BY LEANED CIT(A) IS BAD IN LAW AND THE ENHANCEMENT SO MADE IS PRAYED TO BE DELETED. 7) LEARNED DR MR. TARSEM LAL, ON THE OTHER HAND, RE LIED UPON THE ORDER OF LEARNED CIT(A) AND ARGUED THAT THE STOCK H AS BEEN PURCHASED ON THE AVERAGE AT RS. 14.03 PER BAG AND SOLD AT RS. 12 .91 PER BAG AND CLOSING STOCK OF THE PRECEDING YEAR BEING THE OPENING STOCK OF THE CURRENT YEAR WHICH WAS VALUED AT RS. 10.41 PER BAG, THEREFORE, T HE LEARNED CIT(A) IS JUSTIFIED IN VALUING THE CLOSING STOCK OF BARDANA A T RS. 10.41 PER BAG. LEARNED DR, THEREFORE, PRAYED TO CONFIRM THE ORDER OF LEARNED CIT(A). 8) I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED T HE FACTS OF THE CASE. AT THE OUTSET, ON PERUSAL OF THE ORDER OF THE A.O. WHICH HAS BEEN REPRODUCED HEREINABOVE IS A NON-SPEAKING ORDER AND THE ADDITIONS HAVE BEEN MADE WITHOUT BRINGING ANY MATERIAL ON RECORD O R ANY REASONS FOR SUCH ADDITIONS. THEREFORE, ANY ADDITIONS MADE BY TH E A.O. IN HIS ORDER DATED 21.10.2009 ARE LIABLE TO BE DELETED ON THIS A CCOUNT ALONE. 9) HOWEVER, THE LEARNED CIT(A) HAD DELETED THE ADDI TION OF RS. 10,000/- CONSIDERING THE VALUE OF BAG AT RS. 10.41 PER BAG, CONSIDERING THE SHORTAGE OF BAG AS NORMAL. HOWEVER, FURTHER THE LEARNED CIT(A) HAS 6 I.T.A. NO. 404 (ASR)/2014 ASSESSMENT YEAR: 2007-08 ISSUED THE ENHANCEMENT NOTICE CONSIDERING THE PRICE OF PURCHASE OF BAGS AND SALE OF BAGS AT RS. 14.18 PER BAG DURING THE IM PUGNED YEAR AND HAVE VALUED THE CLOSING STOCK AT THE END OF IMPUGNED YEA R AT RS. 10.41 PER BAG BEING THE COST OF OPENING STOCK OF SUCH BAG. HOWEVE R, BEFORE THE LEARNED CIT(A), THE ASSESSEE HAD SUBMITTED THE EXPLANATION AND THE COMPUTATION OF THE VALUATION OF BARDANA AND THE CLOSING STOCK @ 14.61 PER BAG, WHICH HAS NOT BEEN COMMENTED UPON BY THE LEARNED CIT(A) A ND NO DEFECT IN THE SAME HAS BEEN POINTED OUT AS WELL. THE EXPLANAT ION OF THE ASSESSEE THAT CLOSING STOCK HAS BEEN SOLD IN THE FOLLOWING Y EAR BEING 5397 BAGS @ 10 PER BAG TO PUNJAB STOCK COOPERATIVE MARKETING FE DERATION LTD. AND 30,000/- BAGS @ RS. 6 PER BAG TO DURGA RICE & GENER AL MILLS, BATALA, HAS ALSO NOT BEEN COMMENTED UPON BY LEARNED CIT(A). THE EXPLANATION OF THE ASSESSEE IS THAT THE CLOSING STOCK OF THE AS SESSEE HAS BEEN SOLD AT THE RATES MENTIONED HEREINABOVE AND ACCORDINGLY THE VALUE AT RS. 6.41 PER BAG HAS BEEN TAKEN. ACCORDINGLY, IN THE ABSENCE OF CONSIDERATION OF EXPLANATION OF THE ASSESSEE, AS MENTIONED HEREINABO VE, THE LEARNED CIT(A) IS NOT JUSTIFIED IN TAKING THE VALUE OF CLOS ING STOCK AT RS. 10.41 PER BAG AND THE EXPLANATION OF THE ASSESSEE IS ACCE PTED BEING THE VALUATION AT RS. 6.41 PER BAG AND LEARNED CIT(A) WA S NOT JUSTIFIED IN GIVING THE ENHANCEMENT NOTICE AND THEREFORE, NO ADD ITION ON THIS ACCOUNT 7 I.T.A. NO. 404 (ASR)/2014 ASSESSMENT YEAR: 2007-08 IS CALLED FOR. ACCORDINGLY, ALL THE ADDITIONS MADE AND SUSTAINED BY LEARNED CIT(A) ARE DIRECTED TO BE DELETED AND ALL T HE GROUNDS OF THE ASSESSEE ARE ALLOWED, AS SUCH. 10) IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH OCTOBER, 2014 SD/- (B.P. JAIN) ACCOUNTANT MEMBER DATED: 29 TH OCTOBER, 2014 /RK/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE: H.S. RICE MILLS, VILL. SAKHOWAL, P.O. - GHOMAN, TEHSIL BATALA. 2. THE ITO-2(3), BATALA 3. THE CIT(A), 4. THE CIT, 5. THE SR DR, I.T.A.T., TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.