M/S ARVIND KUMAR AGRAWAL,HUF, RAIPUR V. I.T.O.-2, BHILAI(CG)

ITA 52/BIL/2015

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4787 (ITAT-RAIPUR)
• Duration Of Justice: 3 year(s) 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 05-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: G S AGARWAL
• Keywords: Depreciation; Corroborative evidences

Judgement Text

1 ITA NO.52/RPR/2015 IN THE INCOME TAX APPELLA TE TRIBUNAL RAIPUR BENCH: RAIPUR BEFORE SHRI R. K. PANDA, ACCOUNTANT ME MBER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A .NO. 52/RPR/201 5 (A.Y 2008-09) M/S. ARVIND KUMAR AGARWAL HUF, PROP. M/S. AGARWAL & SONS, RICE MILLERS, PAN AABHA7878R (APPELLANT) VS ITO - AAYAKAR BHAVAN, CIVIC CENTRE, BHILAI. (RESPONDENT) APPELLANT BY SHRI G.S AGARWAL, CA RESPONDENT BY SHRI SANJAY KUMAR, DR ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF THE CIIT(A)-II, RAIPUR, DATED 05.01.2015 FOR THE A.Y. 2008-09. 2. THE GROUNDS OF APPEAL ARE AS UNDER: 1. THAT UNDER THE FACTS THE LD. CIT(A) ERRED IN CO NFIRMING THE DISALLOWANCE OF RS. 4,80,000/- MADE BY THE LD. A.O ON ACCOUNT OF PA YMENT OF PARBOILING CHANGES PAID TO M/S DAUJI FARMS PVT LTD. WITHOUT HAVING ANY MATERIAL ON RECORD AND BY REJECTING THE EXPLANATION. PRAYED THAT THE EXPENSES OF RS. 4,48,000/- BE ALLOW ED. DATE OF HEARING 09.08.2018 DATE OF PRONOUNCEMENT 15.10.2018 2 ITA NO.52/RPR/2015 2. THAT UNDER THE FACTS THE LD. CIT(A) FURTHER ERRE D IN MAINTAINING ADDITION OF RS. 1,90,684/- MADE BY THE LD. A.O FOR DIFFERENCE I N VALUATION OF CLOSING STOCK OF BARDANA I.E. GUNNY BAGS REJECTING THE EXPLANATION . PRAYED THAT THE APPELLANT CORRECTLY VALUED THE CLOS ING STOCK OF BARDANA AND THERE IS NO UNDERVALUATION. PRAYED TO DELETE THE ADDITIO N OF RS. 1,90,684/-. 3. THAT UNDER THE FACTS THE LD. CIT(A) FURTHER ERRE D IN MAINTAINING ADDITION OF RS. 2,77,900/- AS MADE BY THE LD. A.O FOR SO CALLED SUPPRESSION OF VALUE OF SALE OF RICE WITHOUT HAVING ANY MATERIAL ON RECORD. PRAYED TO DELETE THE ADDITION OF RS. 2,77,900/- 4. THAT UNDER THE FACTS THE LD. CIT(A) FURTHER ERRE D IN MAINTAINING THE ADDITION OF RS. 59,240/- OUT OF RS. 88,860/- MADE B Y LD. A.O FOR ESTIMATED SUPPRESSED SALE OF HUSK WITHOUT HAVING MATERIAL ON RECORD REJECTING THE EXPLANATION THAT NO HUSK WAS SOLD AS IT WAS CONSUME D IN THE PARBOILING PLANT. PRAYED TO DELETE THE ADDITION OF RS. 59,240/-. 3. THE ASSESSEE IS AN HUF AND DERIVES INCOME THROUG H ITS PROPITIATORY CONCERN M/S. AGARWAL & SONS, SIMGA, A RICE MILL O WNER DOING THE BUSINESS OF MANUFACTURING AND TRADING OF RICE AND BYE-PRODUCTS. RETURN OF INCOME FILED AT RS. 2,56,780/- FOR THE YEAR UNDER REFERENCE WAS ASS ESSED BY THE A.O AT RS. 14,44,432/- BY MAKING ADDITIONS TO THE TOTAL INCOME ON VARIOUS GROUNDS. THE A.O COMPUTED THE INCOME OF THE ASSESSEE BY MAKING V ARIOUS ADDITIONS TOTALING TO RS. 11,87,654 THE DETAILS OF WHICH ARE AS UNDER: 1. DISALLOWANCE OF BOILING CHARGES RS. 4,80,000/ - 2. UNDER VALUATION OF CLOSING STOCK OF BARDANA RS. 1,90,684/- 3. ADDITION ON RICE A/C RS. 3,88.110/- 4. ADDITION ON HUSK A/C RS. 88,860/- 3 ITA NO.52/RPR/2015 5. DISALLOWANCE OUT OF DIRECT EXPENSES RS. 40,00 0/- 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED AN APPEAL BEFORE THE CIT(A). THE CIT(A) PARTLY ALLOWED THE AP PEAL. 5. AS REGARDS GROUND NO. 1, THE LD. AR SUBMITTED TH AT GROUND NO. 1 IS RELATING TO DISALLOWANCE OF RS. 4,80,000/- MADE BY THE A.O ON ACCOUNT OF PAYMENT OF PARBOILING CHARGES PAID TO M/S DAUJI FAR MS PVT LTD. THE LD. AR SUBMITTED THAT ASSESSEE HAS SUBMITTED ALL THE DETAI LS ALONG WITH VOUCHERS IN RESPECT OF PARBOILING CHARGES OF HUSK/PADDY. THE L D. AR SUBMITTED THAT THE HONBLE TRIBUNAL IN THE CASE OF M/S. ANANT RICE IND USTRIES VS ITO BEING ITA NO. 280/NAG/2008 VIDE ITS ORDER DATED 26.08.2008 HE LD THAT THE A.O HAS NOT POINTED OUT ANY SINGLE INSTANCE OF SALE OF HUSK BY THE ASSESSEE OR EVEN THERE IS NO EVIDENCE OF SUCH SALES BROUGHT ON RECORD. THEN THE EXERCISE OF THE A.O ADOPTING THE NET SALEABLE PRICE OF HUSK WAS BASED O N HIS SURMISES AND CONJECTURES AND THE SAME IS NOT JUSTIFIED. THEREFO RE, THE TRIBUNAL IN THE SAID CASE DELETED THE ADDITION OF PARBOILING CHARGES. T HE LD. AR FURTHER SUBMITTED THAT THE TRIBUNAL IN THE CASE OF ITO VS. SHRI ASHUT OSHKUMAR ARVINDKUMAR AGARWAL & BROS. IN ITA NO. 201/BLPR/2010 ORDER DATE D 01.11.2011 HAS ALLOWED THE SAME ISSUE IN FAVOUR OF THE ASSESSEE. 6. ON THE OTHER HAND LD. DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSING OFFICER RIGHTLY MA DE THE ADDITION OF PARBOILING CHARGES. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE RELIANCE OF THE ASSESSEE IN THE CASE O F SHRI ASHUTOSHKUMAR ARVINDKUMAR AGARWAL & BROS. (SUPRA) IS APT IN ASSES SEES CASE. THE TRIBUNAL HAS GIVEN A CLEAR FINDING THAT IF THE ASSESSING OFF ICER HAS ESTABLISHED THAT THE ASSESSEE SOLD THE HUSK AND FOR SUCH SALE, THE ASSES SEE HAS NOT OFFERED ANY EXPLANATION THEN ONLY THE SAID ADDITION CAN BE MADE OTHERWISE THE SAME CANNOT BE MADE. THE HUSK/PADDY IS USED IN THE BOILI NG AND DRYING PROCESS IN 4 ITA NO.52/RPR/2015 THE PLANTS. IN THE PRESENT CASE THE A.O HAS NOT BR OUGHT ON RECORD ANY EVIDENCE AS TO PARBOILING CHARGES WHICH WAS ALSO INCURRED IN EARLIER YEAR AS WELL AS THIS YEAR. IN FACT, IN THE PRESENT ASSESSMENT YEAR DUE T O MARKET PRICE FOR PARBOILING CHARGES HAS INCREASED AND THUS, THE ASSESSEE HAS GI VEN A PROPER REASONING AS WELL AS THE EVIDENCES BEFORE THE REVENUE AUTHORITIE S WHY THE PARBOILING CHARGES HAVE INCREASED IN THE PRESENT. THEREFORE, GROUND NO. 1 OF THE ASSESSEE APPEAL IS ALLOWED. 8. AS REGARDS GROUND NO.2 RELATING TO ADDITION OF R S. 1,90,684/- FOR DIFFERENCE IN VALUATION OF CLOSING STOCK OF BARDANA I.E. GUNNY BAGS, THE LD. AR SUBMITTED THAT THE ASSESSEE CORRECTLY VALUED CLOSIN G STOCK ON VARDANA AND THERE IS NO UNDER VALUATION ON PART OF THE ASSESSEE . THE LD. AR SUBMITTED THAT THE ASSESSEE HAS GIVEN ALL THE RELEVANT MATERIAL AN D WITH THE SUPPORTING EVIDENCES OF THE EXPENSES WERE EXPLAINED BEFORE THE A.O AS WELL AS CIT(A). BUT THE CIT(A) HELD THAT THE ASSESSEE DEBITED RS. 16.74 PER BAG FOR CONSUMPTION OF NOT ONLY THE NEW BAGS BUT ALSO THE BAGS FROM THE OP ENING STOCK AND IN SUCH CIRCUMSTANCES LEADING TO VALUATION OF SOME OF THE O LD BAGS FROM THE OPENING STOCK AT RS. 16.74 PER BAG FOR THE PURPOSE OF DEBIT ING THE PROFIT AND LOSS ACCOUNT AS CONSUMPTION AND SOME OF THE OLD BAGS EIT HER FROM THE OPENING STOCK OR FROM BALANCE STOCK FROM PURCHASE OF THE YE AR AT RS. 5.25 PER BAG FROM THE PURPOSE OF CREDITING PROFIT AND LOSS ACCOUNT AS CLOSING STOCK AND SINCE THIS HAS NOT BEEN CONCLUSIVELY PROVED, MERE CONTENTION T HAT VALUE OF CLOSING STOCK HAS BEEN TAKEN AT MUCH LOWER RATE SINCE THE BAGS WE RE OLD AND USED, ACCORDINGLY ADDITION MADE BY THE A.O ON THIS ACCOUN T IS CONFIRMED. THE LD. AR SUBMITTED THAT THE CLOSING STOCK OF THE GUNNY BAGS HAS BEEN PROPERLY DESCRIBED BY THE ASSESSEE AND THEREFORE THE SAME CA NNOT BE ADDED IN THE INCOME OF THE ASSESSEE. THE LD. AR SUBMITTED THAT THE ASSESSEE HAS OPENING STOCK OF RS. 41,450/- AT THE AMOUNT OF RS. 13.53 PE R BAG. AT THE TIME OF SALE OF BARDANA, THE RATE RANGES BETWEEN RS. 4.75 TILL RS. 5.40 AS PER THE CONDITIONS OF THE BARDANA. THUS, THE TOTAL SALE OF BARDANA WAS 50 ,000 FOR RS. 2,53,100/-. 5 ITA NO.52/RPR/2015 THE CLOSING STOCK WAS 67820 FOR RS.3,40,300/-. THES E ASPECTS WERE NOT VERIFIED BY THE ASSESSING OFFICER AS WELL AS BY THE CIT(A). 9. THE LD. DR RELIED UPON THE ORDERS OF THE AUTHORI TIES BELOW. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. FROM THE RECORDS IT IS CLEAR THAT THE ASSE SSEE DIRECTLY DEBITED THE ADOPTED VALUE OF CONSUMPTION ON EXCESSIVE RATE AND CREDITED THE VALUE OF CLOSING STOCK OF BARDANA AT LOWER RATE. SUCH CLAIM OF EXCESSIVE VALUE OF BARDANA CONSUMPTION AND CREDITING THE VALUE OF CLOS ING STOCK IN LOWER RATE WERE NOT ACCEPTED BY THE ASSESSING OFFICER AS WELL AS CIT(A). WE FIND THAT AFTER CONSUMPTION OF BARDANA ITS USE FOR THE CARRYING OF RICE GETS DETORIATED AND THEREFORE AT THE TIME OF CLOSING STOCK THE ASSESSEE HAS TAKEN DEPRECIATION VALUE WHICH THE CIT(A) AS WELL AS A.O HAS NOT TAKEN INTO ACCOUNT. THIS CONTENTION PREVALENT IN THE PRACTICE OF TRADING IN RICE AND AN Y FOOD GRAINS BECAUSE GUNNY BAGS CONTAIN FOOD GRAINS THEN GET DAMAGED AND ON SA ME OCCASION FOOD GRAINS CANNOT BE STORED IN SUCH GUNNY BAGS. THEREFORE, TH E CONTENTION OF THE ASSESSEE REGARDING THE BARDANA HAS TO BE ACCEPTED T O SOME EXTENT BUT THE RATE WHICH HAS BEEN GIVEN BY THE ASSESSEE TO THAT OF RS. 5.25 DOES NOT APPEARS TO BE JUSTIFIED IN ABSENCE OF ANY SUPPORTING EVIDENCES. THEREFORE, IT WILL BE APPROPRIATE TO MAKE 30% OF ADDITION. THEREFORE, TH E GROUND OF APPEAL NO. 2 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 11. AS REGARDS GROUND NO. 3 RELATING TO SUPPRESSION OF VALUATION WITHOUT HAVING ANY MATERIAL ON RECORD THE LD. AR SUBMITTED THAT THE ASSESSEE HAS RIGHTLY GIVEN ALL THE EVIDENCES AND THE VALUE OF TH IS RICE WAS AS PER THE RECORDS AND THE CIT(A) AS WELL AS A.O TAKEN THE COGNIZANCE OF THE SALE OF EVIDENCES PRODUCED BEFORE THE AUTHORITIES. 12. THE LD. DR SUBMITTED THAT THE A.O AS WELL AS CI T(A) HAS RIGHTLY DEALT THIS ISSUE AND THERE IS NO NEED TO INTERFERE WITH THE FI NDINGS OF THE A.O. 6 ITA NO.52/RPR/2015 13. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. EVIDENCES SHOW THAT THE ASSESSEE HAS NOT A T ALL SUPPRESSED ANY VALUATION. HENCE, GROUND NO. 4 IS ALLOWED. 14. AS REGARDS GROUND OF APPEAL NO. 5 IS RELATING T O ESTIMATED SUPPRESSED SALE OF HUSK. THIS ISSUE IS INTER CONNECTED WITH T HE GROUND OF APPEAL NO.1. WWE HAVE ALREADY GIVEN OUR FINDINGS IN RESPECT OF G ROUND OF APPEAL NO.1 THE SAME IS APPLICABLE HERE AS WELL AS THE ISSUE IS COV ERED BY BOTH THE DECISION STATED HEREINABOVE. THEREFORE, GROUND OF APPEAL NO . 5 IS ALLOWED. 15. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH OCTOBER, 2018 . SD/- SD/- (R. K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 15/10/2018 KRK/R.N COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT PRIVATE SECRETARY RAIPUR BENCH, RAIPUR