M/s Maheshwari Flour Mills, Sitapur V. Dy. Commissioner of Income Tax, Sitapur

ITA 404/LKW/2014

• Counselvise Citation: 40423714 RSA 2014
• Duration Of Justice: 1 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 21-08-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 21-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: RAVINDRA AGARWAL
• Section: 145

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A , LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO. 404 /LKW/201 4 ASSESSMENT YEAR: 20 0 6 0 7 M/S MAHESWARI FLOUR MILLS, BIJWAR KHURD, OPP. DIC, SITAPUR - 261001 PAN: AALFM3436D VS. DCIT , SITAPUR (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI RAVINDRA AGARWAL, C. A. REVENUE BY SHRI AMIT NIGAM, SR. DR DATE OF HEARING 21/08/2015 DATE OF PRONOUNCEMENT 1 8 /09/2015 O R D E R PER A. K. GARODIA, A.M. T HIS IS ASSESSEES APPEAL DIRECTED AGAINST THE ORDER OF LEARNED CIT ( A ) BAREILLY DATED 2 0 . 1 2 .201 3 FOR A.Y. 20 0 6 0 7 . 2. GROUND NO. 1 & 2 ARE INTERCONNECTED, WHICH READ AS UNDER: - 1. LD. AUTHORITIES BELOW HAVE ERRED IN LAW AS WELL AS ON FACTS IN NOT APPRECIATING PECULIAR NATURE OF BUSINESS AND REJECTING THE EXPLANATION OF ASSESSEE EVEN THOUGH BOOKS OF ACCOUNT ARE ACCEPTED. THUS APPLICATION OF SECTION 145 IS AGAINST LAW. 2. LD. AUTHORITIES BELOW HAVE ERRED IN ADDING RS. 561,789/ - TO THE INCOME OF ASSESSEE ON ACCOUNT OF ALLEGED LOW YIELD FROM MANUFACTURING PROCESS. 3 . LEARNED AR OF THE ASSESSEE REITERATED THE SAME CONTENTIONS WHICH WERE RAISED BEFORE CIT (A). LEARNED DR OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 2 4 . W E HAVE CONSIDERED THE RIVAL SUBMISSIONS AND GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES BELOW. WE F IND THAT THIS ISSUE WAS DECIDED BY CIT(A) AS PER FOLLOWING PARA ON PAGE 3 OF HIS ORDER AND THIS IS REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE: - I HAVE CAREFULLY CONSIDERED THE ISSUE, PERUSED THE ASSESSMENT ORDER AND GONE THROUGH THE DETAILED WRITTEN SUBMISSIONS. IT IS ALSO SEEN THAT THE AO IN THE ASSESSMENT ORDER HAS CLEARLY MENTIONED THAT . 'IN THIS LINE OF BUSINESS MILLING GAIN RAGES BETWEEN .5% TO 2% ACCORDING TO QUALITY OF WHEAT. IT IS NOT POSSIBLE THAT TOTAL PURCHASES OF WHEAT HAS BEEN MADE OF INFERIOR QUALITY. ASSESSEE HAS NOT EXPLAINED THE REASONS FOR NO MILLING GAIN. THEREFORE, PROVISIONS OF SECTION 145 OF I.T. ACT ARE APPLICABLE FOR WORKING OUT ACTUAL PRODUCTION. CONSIDERING FACTS OF CASE IT WILL BE REASONABLE TO ADOPT 075% IF MILLING GAIN. IN VIEW OF ABOVE PRODUCTION RATE OF EACH PRODUCT WORK OUT AT 69.69% OF MAIDA, 3.36% OF SUJI, 25.46% OF CHOKER & 1.97% OF REFRAIN (TOTAL 100.75%). BY APPL YING ABOVE RATIO PRODUCTION WORK OUT AS UNDER: - TOTAL CONSUMPTION 88451.95 QUINTAL MAIDA SUJI CHOKAR REFRAIN PERCENTATE 69.69% 3.63% 25.46% 1.97% PRODUCTION IN QUINTALS 61642.16 QTL. 3210.81 QTL. 22519.87 QTL. 1742.50 QTL. PRODUCTION SHOWN BY ASSESSEE 61181.60 QTL. 3 192.70 QTL. 22359.50 QTL. 1733. 15 QTL. EXTRA PRODUCTION 460.56 QTL. 18.11 QTL. 160.37 QTL. 9.35 QTL. AVERAGE SALE RATE AS SHOWN BY ASSESSEE 929.26 PAISE 963. 03 PAISE 690.53 PAISE 601.99 PAISE VALUE OF EXTRA PRODUCTION 427980 17440 110740 5629 TOTAL 561789/ - IN VIEW OF ABOVE FACTS RS.561789/ - WILL BE ADDED IN THE INCOME OF ASSESSEE AS EXTRA SALES MADE OUT OF BOOKS.' IN THE FACTS AND CIRCUMSTANCES OF THE CASE, AND DETAILED WORKING GIVEN BY THE AO I AM OF THE CONSIDERED VIEW THAT THE AO WAS PERFECTLY JUSTIFIED IN APPLYING PROVISIONS OF SECTION 145 OF THE IT ACT. AS SUCH THE ADDITION MADE BY THE AO IS SUSTAINED. 3 5. WE FIND THAT IN THE ASSESSMENT ORDER, THE A.O. HAS NOTED THAT THE ASSESSEE REPORTED YIELD OF 69.17 % MAIDA, 3.60% SUJI, 25.27% CHOKAR AND 1.96% REFRAIN TOTAL YIELD 100% BUT NORMAL MILLING GAIN IN THIS LINE OF BUSINESS IS IN THE RANGE OF 0.5 TO 2%. THE A.O. HELD THAT IN THE FACTS OF THE PRESENT CASE 0.75% MILLING GAIN IS PROPER AND REASONABLE AND HE MADE ADDITION ON THAT BASIS. F ROM THE ABOVE PARA OF THE ORDER OF CIT (A), IT IS SEEN THAT THE A.O. HAS ADOPTED TOTAL YIELD AT 100.75% I.E. MILLING GAIN OF 0.75% AS AGAINST NORMAL MILLING GAIN OF 0.5 TO 2%. HENCE, THE MILLING GAIN ADOPTED BY THE A.O. IS NOT UNREASONABLE PARTICULARLY WHEN THE ASSESSEE COULD NOT ESTABLISH THAT ENTIRE PURCHASE OR MAJOR PURCHASE OF WHEAT IS OF INFERIOR QUALITY. IN THE LIGHT OF THESE FA CTS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT (A) ON THIS ISSUE. THESE GROUNDS ARE REJECTED. 6. GROUND NO. 3 IS AS UNDER: - 3. LD. AUTHORITIES BELOW HAVE ERRED IN NOT ACCEPTING THE METHOD OF VALUATION OF STOCK FOLLOWED BY THE ASSESSEE CONSISTENTLY AND ADDING RS. 245,822/ - TO VALUE OF CLOSING STOCK. 7. LEARNED AR OF THE ASSESSEE REITERATED THE SAME CONTENTIONS WHICH WERE RAISED BEFORE CIT (A). LEARNED DR OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 8. WE HAVE CONSIDERED THE RIVA L SUBMISSIONS AND GONE THROUGH THE ORDERS OF THE LOWER AUT HORITIES BELOW. WE FIND THAT THAT IT IS THE CLAIM OF THE ASSESSEE THAT THE ASSESSEE IS FOLLOWING FIFO METHOD BUT THE A.O. DID NOT ACCEPT IT WITH THE OBJECTION THAT THE ASSESSEE COULD NOT PROVE THAT THE STOCK RECEIVED FIRST WAS USED FIRST. IN OUR CONSIDERED OPINION, THERE IS NO SUCH REQUIREMENT OF LAW THAT FOR ADOPTING FIFO METHOD, THE ASSESSEE HAS TO ESTABLISH THAT STOCK RECEIVED FIRST WAS USED FIRST. THIS IS A PERMITTED METHOD OF VALUING CLOSING STO CK WITHOUT ANY SUCH REQUIREMENT THAT THE ASSESSEE HAS TO ESTABLISH THAT STOCK RECEIVED FIRST WAS USED FIRST. HENCE, 4 THIS OBJECTION IS NOT VALID. NOW WE EXAMINE WHETHER THE VALUATION DONE BY THE ASSESSEE IS PROPER OR NOT AS PER FIFO METHOD. WE FIND THAT THE ASSESSEE HAS VALUED CLOSING STOCK OF 5716.8 QUINTALS WHEAT @ RS. 710/ - PER QUINTAL AND THE VALUE WAS WORKED OUT AT RS. 40,58,928/ - AND THE A.O. ADOPTED THE RATE OF RS. 753/ - PER QUINTAL AND THE VALUE WAS WORKED OUT AT RS. 43,04,750/ - AND ADDITION OF RS. 245,822/ - WAS MADE FOR THE DIFFERENCE IN THESE TWO VALUES. ON PAGES 6 TO 17 OF THE PAPER BOOK, THE ASSESSEE HAS FURNISHED COPY OF PURCHASE BILLS OF WHEAT IN THE END OF MARCH, 2006. ALL THESE BILLS ARE @ RS. 660/ - PER QUINTAL TO WHICH MANDI SULK AND CESS IS TO BE ADDED AND AFTER THAT THE COMPOSITE RATE COMES TO RS. 677/ - PER QUINTAL. HENCE, THE VALUATION BY THE ASSESSEE AT RS. 710/ - PER QUINTAL IS NOT ON LOWER SIDE. WE, THEREFORE, DELETE THIS ADDITION. GROUND NO. 3 IS ALLOWED. 9 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED . (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUM AR YADAV) ( A. K. GARODIA ) JUDICIAL MEMB ER ACCOUNTANT MEM BER DATED: 1 8 /0 9 /201 5 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR