The Onkar Rice Udyog Samiti, Fatehgarh Sahib V. ITO, Rajpura

ITA 501/CHANDI/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51432 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 09-05-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Assessee Lawyers: SUDHIR SEHGAL
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH (SMC) CHANDIGARH BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 501/CHD/2011 ASSESSMENT YEAR : 2007-08 THE ONKAR RICE UDYOG SMITI V I.T.O.WARD, RAJPURA VILLAGE CHELAM (AMALOH) FATEHGARH SAHIB. PAN: AAABT 2154 N (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SUDHIR SEHGAL RESPONDENT BY: SHRI N.K. SAINI DATE OF HEARING: 11.08.2011 DATE OF PRONOUNCEMENT: ORDER THE APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF CIT(A), PATIALA DATED 28.2.2011 RELATING TO ASSESSMENT YEAR 2007-08 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF THE I.T. ACT. 2. THE ASSESSEE HAS RAISED SEVERAL GROUNDS OF APPEA L. THE ASSESSEE HAS RAISED GROUNDS NOS. 1 TO 3 AGAINST THE ADDITION OF RS. 1,99,320/- AND THE EFFECTIVE GROUNDS OF APPEAL IS GROUND NO. 1 WHI CH READS AS UNDER:- 1 THAT THE CIT(A), PATIALA HAS ERRED IN HOLDING TH E ADDITION OF RS. 1,99,320/- MADE BY THE AO ON ACCOUNT OF SO CALLED LOW VALUATION OF BARDANA BY ADOPTING THE AVERAGE COST R ATE OF EACH BAG @ RS. 8.50 PER BAG. 3. THE FACTS RELATING TO FIRST ISSUE RAISED BY THE ASSESSEE ARE THAT THE ASSESSEE HAD SHOWN 79728 BAGS (BARDANA) IN THE CLOS ING STOCK. ASSESSEE HAD DECLARED RATE OF RS.6/- PER BAG FOR VALUATION O F CLOSING STOCK. THE AO 2 OBSERVED FROM THE EXAMINATION OF PURCHASE AND SALE BILLS RELATING TO BARDANA THAT THE BAGS WERE PURCHASED FOR PRICE MUCH MORE THAN RS.6/-. FURTHER, EVEN OLD BARDANA WHICH WAS SOLD BY THE ASS ESSEE WAS SOLD AT MUCH HIGHER RATE. THE AO COMPARED THE PRICES WITH OTHER SIMILAR CASES AND FOUND THAT THE AVERAGE PRICE OF BAGS (OLD AND N EW) VARIES BETWEEN RS.7/- TO RS.10/- PER BAG AND AS SUCH THE AVERAGE C OST OF THE PRICE WORKS OUT TO RS.8.50/- PER BAG. THE ASSESSEE WAS SHOW CA USED VIDE ORDER-SHEET ENTRY DATED 22.12.2009 VIZ-A-VIZ DISCREPANCY NOTICE D IN THE VALUATION OF CLOSING STOCK OF BARDANA. THE ASSESSEE FAILED TO F URNISH ANY EXPLANATION TO THE SAME. THE AO, THUS, WORKED OUT THE VALUE OF CLOSING STOCK OF BARDANA AT RS.6,77,688/- (78728 BAGS @ RS.8.50 PER BAG ) AGAINST RS.4,78,368/- DECLARED BY THE ASSESSEE. THE DIFFER ENCE OF RS.1,99,320/- WAS ADDED TO THE INCOME OF THE ASSESSEE. THE CIT(A ) UPHELD THE ORDER OF THE AO. 4. THE LD. AR FOR THE ASSESSEE POINTED OUT THAT THE BARDANA WAS VALUED AT MARKET PRICE AS THE STOCK WAS BEING VALUED BY TH E ASSESSEE ON MARKET PRICE AND NOT COST OR MARKET PRICE, WHICHEVER IS LO WER. AS PER THE LD. AR THE AVERAGE PURCHASE PRICE OF OLD AND NEW BAGS WAS RS.8.50 PER BAG WHEREAS THE BAGS IN QUESTION WERE OLD AND TORN OUT, HENCE THE RATE OF RS.6/- WAS ADOPTED. LD. DR FOR THE REVENUE POINTED OUT THAT THE ASSESSEE HAD PURCHASED THE BARDANA @ RS.10/- PER BAG APPROXI MATELY AND WAS SOLD @ RS.11.50 APPROXIMATELY AND AS SUCH THE VALUATION BY THE AO AT RS.8.50 SHOULD BE ACCEPTED. 5. ON HEARING THE RIVAL CONTENTIONS AND PERUSING T HE ASSESSMENT ORDER AND THE APPELLATE ORDER, THE ISSUE RAISED VIDE GROU ND NOS. 1 TO 3 BY THE ASSESSEE IS AGAINST THE ADDITION MADE ON ACCOUNT OF VALUATION OF BARDANA WHICH HAS BEEN DECLARED BY THE ASSESSEE AS ITS CLOS ING STOCK. THE CLAIM OF THE ASSESSEE IS THAT THE SAID BARDANA AVAILABLE WIT H THE ASSESSEE IS USED 3 AND RESIDUAL VALUE IS INSIGNIFICANT AS THE BAGS WER E NOT IN SALEABLE CONDITION. THE MARKET RATE FOR VALUING THE SAID ST OCK OF RS.6/- PER BAG WAS ADOPTED. ON THE OTHER HAND, THE AO COMPARED TH E AVERAGE PRICE OF THE BAG SHOWN BY OTHER CONCERNS AND COMPUTED THE VA LUATION OF BARDANA @ 8.50 PER BAG. IN TOTALITY OF FACTS AND CIRCUMSTANC ES OF THE CASE BEFORE US AND IN THE ABSENCE OF ANY EVIDENCE BEING AVAILABLE BOTH ON ACCOUNT OF THE CONDITION OF THE SO CALLED BARDANA AVAILABLE WITH T HE ASSESSEE AND THE MARKET RATES, IT IS DIRECTED THAT RATE OF RS.7/- PE R BAG BE ADOPTED TO DETERMINE THE VALUE OF CLOSING STOCK. THUS, GROUND NOS. 1 TO 3 RAISED BY THE ASSESSEE ARE PARTLY ALLOWED. 6. THE SECOND ISSUE RAISED BY THE ASSESSEE IS AGAI NST THE ADDITION OF RS. 87,845/- VIDE GROUNDS NOS. 4 TO 7 AND THE EFFEC TIVE GROUND BEING GROUND NO. 4 READS AS UNDER:- 4 THAT THE LD. CIT(A) HAS ALSO ERRED IN HOLDING AD DITION OF RS. 87,845/- MADE BY THE AO ON ACCOUNT OF ALLEG ED VALUATION OF CLOSING STOCK OF PHOOS IN PARA 5.1 OF THE ASSESSMENT ORDER. 7. THE SECOND ISSUE RAISED BY THE ASSESSEE IS AGAIN ST THE VALUATION OF CLOSING STOCK OF PHOOS. THE ASSESSEE HAD SHOWN 1254 9.25 QTLS. OF PHOOS VALUED AT RS.85/- PER QTL. THE AO HAD VALUED THE S AME @ RS.92/- PER QTL ON THE COMPARISON WITH OTHER RICE SHELLER CASES OF ASSESSEE'S AREA OF BUSINESS AND THE SALE BILLS RAISED BY THE ASSESSEE. AN ADDITION OF RS.87,845/- WAS MADE ON THIS COUNT AND IT WAS UPHE LD BY THE CIT(A). 8. THE AO HAS FAILED TO CONFRONT THE ASSESSEE WITH THE COMPARATIVE RATES RELIED UPON FOR ADOPTING THE RATE OF RS.92/- PER QTL. FURTHER, THE CASE OF THE ASSESSEE IS THAT PHOOS WHICH WAS AVAILA BLE WITH IT WAS NOT OF GOOD QUALITY AND THE GOOD QUALITY PHOOS WAS ALREADY SOLD BY THE ASSESSEE AT HIGHER RATE. HOWEVER, NO EVIDENCE HAS BEEN FILE D BY THE ASSESSEE TO 4 PROVE ITS STAND. IN THE ENTIRETY OF THE FACTS AND C IRCUMSTANCES OF THE CASE, IT IS DIRECTED THAT THE SAID STOCK OF PHOOS BE VALU ED @ RS.88/- PER QTL. THE SECOND ISSUE RAISED BY THE ASSESSEE IS, THUS PA RTLY ALLOWED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF AUGUST, 2011. SD/- (SUSHMA CHOWLA) JUDICIAL MEMBER DATED : 26 TH AUGUST,2011 POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH