M/s. Amar Rice Mills, Distt. Hoshiarpur V. The Income-tax Officer, Distt. Hoshiarpur

ITA 565/ASR/2011

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8753 (ITAT-AMRITSAR)
• Duration Of Justice: 5 year(s) 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 16-01-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 01-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: BHAWANI SHANKAR
• Assessee Lawyers: V M AROA
• Keywords: Rejection of books of accounts; Income from undisclosed sources; Reassessment proceedings
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR (CAMP AT JALANDH AR ) BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A NOS.565(ASR)/2011 ASSESSMENT YEAR: 2007-08 M/S AMAR RICE MILLS, VILLAGE:- JAMALPUR (SHERPUR), MUKERIAN, DISTRICT HOSHIARPUR. PAN: -AAEFA-9515K VS. INCOME TAX OFFICER, INCOME TAX OFFICER DASUYA, DISTRICT:-HOSHIARPUR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. SUDHIR SEHGAL & SH. V.M, AROA RESPONDENT BY: SH. BHAWANI SHANKAR (DR.) DATE OF HEARING:16.01.2017 DATE OF PRONOUNCEMENT: 21.02.20 17 ORDER PER T. S. KAPOOR (AM): THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE ORD ER OF LD. CIT(A), JALANDHAR, DATED 08.09.2011, FOR ASST. YEAR: 2007-0 8 2. THE GROUNDS OF APPEAL TAKEN BY ASSESSEE ARE REPR ODUCED HEREIN BELOW. (I) THE WORTHY COMMISSIONER OF INCOME TAX (APPEAL ), JALANDHAR ERRED IN CONFIRMING THE ADDITIONS MADE BY THE ASSESSING A UTHORITY IGNORING THE FACTS AND CIRCUMSTANCES OF THE CASE. (II) THE WORTHY CIT(A), JALANDHAR ERRED IN CONFIRM ING & INITIATING THE PROCEEDING U/S 147/148 OF THE INCOME TAX ACT IGNORI NG THE FACTS AND CIRCUMSTANCES OF CASE AND MATERIAL ON RECORD. ITA NO.56 5(ASR)/2011 ASST. YEARS: 2007-08 2 (III) THE CIT(A) ALSO ERRED IN CONFIRMING VALID PRO CEEDING U/S 147/148 INSPITE OF THE FACTS THAT INCOME TAX OFFICER DASUYA HAS NOT PASSED SPEAKING ORDER AS DIRECTED BY THE ADDITIONAL COMMIS SIONER OF INCOME TAX, JALANDHAR WHILE DISPOSING OFF THE APPLICATION U/S 1 44A OF THE INCOME TAX ACT. (IV) THAT THE WORTHY CIT(A) ERRED BY TREATING THE F IRM AS DISCONTINUING THE BUSINESS OR DISSOLUTION OF THE FIRM, WHILE ON THE F ACTS THE FIRM IS CONTINUING WHILE ONLY BUSINESS ACTIVITIES HAS BEEN DISCONTINUE D. (V) THE WORTHY CIT(A) ERRED IN REJECTING THE GROUN D NO.4 I.E. MAKING AN ASSESSMENT BY INVOKING THE PROVISIONS OF 145(3) OF THE INCOME TAX ACT. (VI) THE WORTHY CIT(A) JALANDHAR HAD ERRED BY CONF IRMING THE ADDITION MADE BY ASSESSING OFFICER RELIEF OF RS.5,45,700/- U NDER THE HEAD LAND AND BUILDING PLANT & MACHINERY AND OTHER ASSETS BY APPLYING THE PROVISIONS OF SECTION 50 WHICH ARE AGAINST THE FACT S AND CIRCUMSTANCES OF THE CASE IGNORING THE FACTS THAT LAND AND BUILDING DO NOT BELONG TO THE FIRM. (VII) THAT THE WORTHY CIT(A) ERRED WHILE MAKING ADD ITION ON ACCOUNT OF INTRODUCING CASH UNDER THE HEAD SUNDRY DEBTORS AMOU NTING TO RS.16,53,459/- WITHOUT CONFRONTING THE SAME TO THE ASSESSEE. (VIII) THAT THE ASSESSEE RESERVED THE RIGHT TO AMEN D, AND OR WITHDRAW ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING. (IX) THIS IS HEREBY CONFIRMED THAT ALL THE GROUNDS OF APPEAL ARE THE SAME AS TAKEN BEFORE THE CIT(A) AND NO FRESH GROUNDS OF APP EAL HAS BEEN TAKEN. 3. THE APPEAL WAS EARLIER DISMISSED FOR NON PROSECU TION VIDE TRIBUNAL ORDER DATED 04.09.2013, HOWEVER, THE SAID TRIBUNAL ORDER WAS RECALLED VIDE TRIBUNAL ORDER DATED 06.06.2014 AND APPEAL WAS LISTED FOR HEARING ON MERITS. 4. THE BRIEF FACTS AS NOTED IN THE ASSESSMENT ORDER ARE THAT ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS OF MILLING OF PAD DY AND SALE OF ITS PRODUCTS BYE PRODUCTS LIKE RICE, RICE BRAN PHAK ETC . DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR 2006-07, IT CAME TO THE NOTICE OF ASSESSING OFFICER THAT ASSESSEE FIRM HAD SOLD ITS RICE SHELLE R WITH ALL ASSETS TO ONE ITA NO.56 5(ASR)/2011 ASST. YEARS: 2007-08 3 M/S. CEE EMM RICE & GENERAL MILLS AND THEREFORE, TH E CASE OF THE ASSESSEE WAS REOPENED FOR THE YEAR UNDER CONSIDERAT ION. DURING REASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER CAM E TO KNOW THAT ASSESSEE HAD SOLD LAND AND BUILDING TO M/S CEE EMM RICE & GENERAL MILLS FOR RS.55,90,000/-. THE ASSESSING OFFICER FUR THER NOTED THAT ASSESSEE HAD SOLD PLANT AND MACHINERY FOR A CONSIDE RATION OF RS.15,00,000/-. THE ASSESSING OFFICER THEN RECORDED THE STATEMENT OF SH. RAJESH KUMAR, PARTNER OF M/S. CEE EMM RICE & GEN. M ILLS., WHO CONFIRMED THAT SHELLER WAS NOT FUNCTIONING WHEN THE Y HAD PURCHASED IT AND HE ALSO CONFIRMED THAT ENTIRE PLANT AND MACHINE RY ALONG WITH OTHER ITEMS WERE PURCHASED BY THEM. ON THE BASIS OF EXAMI NATION OF BUYER THE ASSESSING OFFICER HELD THAT ASSESSEE HAD SHOWN THE VALUE OF BUILDING TO HAVE BEEN SOLD FOR RS.12,00,000/- WHEREAS THE BUYER HAD REFLECTED THE PURCHASE OF BUILDING IN ITS ACCOUNTS AT RS.37,87,50 0/- AND THEREFORE, HE SUBSTITUTED THE SALE VALUE OF BUILDING OF RS.12,00, 000/- WITH RS.37,87,500/-. THE ASSESSING OFFICER FURTHER DISAL LOWED THE AMOUNT OF ADDITION OF RS.6,85,095/- CLAIMED BY ASSESSEE DURIN G THE YEAR AND TAXED THE SHORT TERM CAPITAL GAIN TO THE TUNE OF RS.32,97 ,759/- U/S 50/-. THE ASSESSING OFFICER FURTHER MADE AN ADDITION OF RS.12 ,28,088/- ON ACCOUNT OF SALE OF PLANT AND MACHINERY. THE ASSESSEE HAD CL AIMED AN ADDITION TO THE FIXED ASSETS TO THE TUNE OF RS.7,46,070/- WHICH THE ASSESSING OFFICER DISALLOWED AND AFTER REDUCING WDV OF RS.2,71,912/-O UT OF SALE CONSIDERATION OF RS.15,00,000/- TAXED RS.12,28,088/ - AS SHORT TERM ITA NO.56 5(ASR)/2011 ASST. YEARS: 2007-08 4 CAPITAL GAIN U/S 50. WHILE MAKING THESE ADDITIONS, THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THE ASSESSING OFFICER, FURTHER HELD THAT SUNDRY DEBTORS WERE STANDING AT R S.57,71,999/- AS ON 31.03.2006 WHICH HAD BEEN REDUCED TO RS.23,27,401/- AS ON 31.03.2007 BY INTRODUCING CASH IN THEIR ACCOUNTS WHEREAS THERE WAS NO CONFIRMATION FROM DEBTORS. HE FURTHER HELD THAT IN THE ABSENCE O F CONFIRMATION FROM DEBTORS THERE WAS NO OTHER EVIDENCE WHICH JUSTIFIED THE CASH DEPOSITS, THEREFORE, ASSESSING OFFICER MADE ADDITION OF RS.16 ,53,549 AS INCOME FROM UNDISCLOSED SOURCES. THERE WERE CERTAIN OTHER ADDITIONS ALSO WHICH ARE NOT THE SUBJECT MATTER OF APPEAL BEFORE US. 5. AGGRIEVED WITH THE ASSESSMENT ORDER THE ASESSEE FILED APPEAL BEFORE LD. CIT(A), WHO PARTLY ALLOWED RELIEF TO THE ASSESSEE BY GIVING A RELIEF OF RS.5,47,500/- OUT OF CAPITAL GAIN ON BUIL DING WHEREAS HE UPHELD THE CAPITAL GAIN ON ACCOUNT OF PLANT AND MACHINERY AND UPHELD THE ADDITION MADE BY ASSESSING OFFICER ON ACCOUNT OF UN CONFIRMED RECEIPTS FROM SUNDRY DEBTORS. 6. AGGRIEVED WITH THE ORDER OF LD. CIT(A), THE ASSE SSEE IS IN APPEAL BEFORE US. ITA NO.56 5(ASR)/2011 ASST. YEARS: 2007-08 5 7. THE LD. AR, AT THE OUTSET, SUBMITTED THAT HE WIL L NOT BE ARGUING GROUNDS NO. 1 TO 4 REGARDING LEGAL ISSUES AND HE WI LL BE ARGUING ONLY ON THE MERITS, THEREFORE, GROUND NOS.1 TO 4 WERE DISMI SSED AS NOT PRESSED. 8. AS REGARDS THE ADDITION SUSTAINED BY LD. CIT(A) WITH RESPECT TO LAND, THE LD. AR SUBMITTED THAT LAND BELONGED TO TH E PARTNERS OF THE FIRM AND WHICH WAS SOLD BY PARTNERS AND IN THIS RESPECT OUR ATTENTION WAS INVITED TO COPY OF SALE DEED PLACED AT (PB 8 TO 22) AND FURTHER ATTENTION WAS INVITED TO (PB-23) WHERE AN ENGLISH VERSION OF THE SALE DEED WAS PLACED. THE LD. AR FURTHER TOOK US TO (PB -3) WHERE A CHART SHOWING FIXED ASSETS OF THE ASSESSEE WAS PLACED AND IT WAS SUBMIT TED THAT LAND DID NOT FORM PART OF THE FIXED ASSETS. FURTHER WE WERE TAKE N TO (PB 43 TO 44) WHERE A COMPUTATION OF INCOME OF PARTNERS OF THE FI RM WAS PLACED WHERE THE PARTNERS OF THE FIRM HAD DECLARED THE LONG TERM CAPITAL GAIN FROM SALE OF SUCH LAND IN THE ASST. YEAR: 2007-08. IT WAS SUB MITTED THAT SINCE THE LAND BELONGED TO PARTNERS AND THE SAME WAS SOLD BY PARTNERS AND HAD BEEN DECLARED BY THE PARTNERS IN THEIR RESPECTIVE R ETURNS OF INCOME, THERE WAS NO JUSTIFICATION ON THE PART OF THE AUTHORITIES BELOW TO ASSESS THE INCOME FROM SALE OF LAND IN THE HANDS OF ASSESSEE. 9. AS REGARDS THE DISALLOWANCE OF RS.6,85,095/- AS ADDITION TO THE BUILDING ACCOUNT THE LD. AR SUBMITTED THAT THE ASSE SSEE HAD FILED BUILDING DETAILS REGARDING ADDITIONS AND VOUCHERS F OR THE ADDITIONS WERE ITA NO.56 5(ASR)/2011 ASST. YEARS: 2007-08 6 PRODUCED WHICH WERE REJECTED BY THE DEPARTMENT BY H OLDING THAT THERE WAS NO JUSTIFICATION FOR INCURRING EXPENDITURE WHEN THE ASSESSEE WAS GOING TO SELL THE SHELLER. IT WAS SUBMITTED THAT TH E ADDITIONS WERE MADE IN ORDER TO FETCH A GOOD AMOUNT OUT OF SALE OF SHEL LER AND IN VIEW OF THE ABOVE IT WAS SUBMITTED THAT CAPITAL GAIN DECLARED B Y ASSESSEE ON ACCOUNT OF BUILDING, PLANT AND MACHINERY MAY BE TAKEN AS SU CH. 10. AS REGARDS ADDITIONS OF PLANT AND MACHINERY, TH E LD. AR SUBMITTED THAT ADDITIONS SHOWN IN PLANT AND MACHINERY IN FACT ALREADY EXISTED UNDER OTHER HEADS OF ASSETS. 11. AS REGARDS ADDITION ON ACCOUNT OF REALIZATION O F DEBTORS, THE LD. AR SUBMITTED THAT THE DEBTORS FROM WHOM CASH WAS RECEI VED HAS BEEN ACCEPTED DURING SCRUTINY ASSESSMENT PROCEEDINGS U/S 143(3) FOR ASST. YEAR: 2006-07 AND THEREFORE, THE ADDITION ON ACCOUN T OF CASH INTRODUCED RECEIVED FROM DEBTORS WAS NOT JUSTIFIED. HE SUBMITT ED THAT THE ASSESSING OFFICER HAD SENT LETTERS TO SUNDRY DEBTORS WHILE FR AMING ASSESSMENT AND MADE THE ADDITIONS HOLDING THAT NO CONFIRMATION HAD BEEN FILED. THE LD. AR ARGUED THAT THE TREATMENT OF SUCH CASH RECEIVED FROM DEBTORS AS CASH CREDITS IS NOT PROPER SINCE THERE ARE TRADE DEBTORS TO WHOM SALES HAD BEEN MADE AND WHICH HAD BEEN ACCEPTED BY THE DEPART MENT IN EARLIER YEARS AND THEREFORE, IT WAS ARGUED THAT THE ADDITIO N SUSTAINED BY LD. CIT(A) MAY BE DELETED. ITA NO.56 5(ASR)/2011 ASST. YEARS: 2007-08 7 12. THE LD. DR, ON THE OTHER HAND, HEAVILY PLACED H IS RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 13. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE T HROUGH THE MATERIAL PLACED ON RECORD. WITH RESPECT TO ADDITION ON ACCOUNT OF SALE OF LAND, WE FIND THAT THERE IS NO BIFURCATION BETWEEN VALUE OF LAND AND BUILDING IN THE SALE DEED REPRESENTING SALE OF SHE LLER FOR A CONSIDERATION OF RS.55,90,000/-. THE ASSESSEE HAD ALLOCATED AN AM OUNT OF RS.12,00,000/- TOWARDS THE VALUE OF BUILDING AND RE ST OF RS.43,90,000/- WAS ALLOCATED AS VALUE OF LAND. THE LD. CIT(A) HAD HELD THE VALUE OF LAND TO BE AT RS.21,00,000/- AND THEREFORE, HE TOOK THE VALUE OF BUILDING AT RS.34,90,000/-, INSTEAD RS.43,90,000/-. THE LD. CIT (A) GAVE CREDIT OF RS.2,50,000/- BEING THE COST OF BOUNDARY WALL CONST RUCTED BY PARTNERS AND THEREFORE, HE CONSIDERED THE SALE VALUE OF BUIL DING AT RS.32,40,000/- AND WITHOUT GIVING CREDIT FOR ADDITION OF RS.6,58,0 95/- ALLOWED RELIEF TO THE ASSESSEE TO THE TUNE OF RS.5,47,500/- HOWEVER, WE FIND THAT IT IS AN UNDISPUTED FACT THAT THE LAND BELONG TO THE PARTNER S OF THE FIRM AND NOT TO THE ASSESSEE WHICH IS APPARENT FROM THE COPY OF SCHEDULE OF FIXED ASSETS AS WELL AS FROM THE COPY OF SALE DEED AS PLA CED IN (PB-23). IT IS ALSO A FACT THAT THE PARTNERS HAD DECLARED THE CAPI TAL GAIN EARNED ON SALE OF LAND IN THEIR RESPECTIVE RETURNS OF INCOME WHICH IS APPARENT FROM (PB 43 & 44). IT IS ALSO AN UNDISPUTED FACT THAT PARTNE RS HAD TAKEN THE VALUE OF BUILDINGS CONSTRUCTED ON THEIR LAND TO BE RS.12, 00,000/- WHICH THEY HAD REDUCED FROM THE SALE CONSIDERATION AND THESE R ETURNS FILED BY ITA NO.56 5(ASR)/2011 ASST. YEARS: 2007-08 8 PARTNERS OF THE FIRM HAS ATTAINED FINALITY AS THEIR ASSESSMENTS HAS BEEN COMPLETED U/S 143(1) OF THE ACT. THEREFORE, IN THE CASE OF ASSESSEE, THE VALUE OF SAME PIECE OF LAND CANNOT BE TAKEN AT RS.2 1,00,000/- AS ADOPTED BY LD. CIT(A) AND THEREFORE, WE DIRECT ASSE SSING OFFICER TO TAKE THE AMOUNT OF RS.12,00,000/- TOWARDS COST OF LAND A ND ALSO DIRECT ASSESSING OFFICER TO EXCLUDE THE CAPITAL GAIN ON AC COUNT OF SALE OF LAND AS THE LAND BELONGED TO PARTNERS AND PARTNERS HAD A LREADY DECLARED CAPITAL GAIN ON SALE OF SUCH LAND. 14. AS REGARDS THE CALCULATION OF CAPITAL GAIN ON ACCOUNT OF SALE OF BUILDING, WE FIND THAT ASSESSEE HAD DECLARED THE PR OFIT ON ACCOUNT OF SALE OF BUILDING AT RS.52,164/-. THIS FIGURE WAS CALCULA TED BY ASSESSEE BY REDUCING FROM THE ALLOCATED VALUE OF BUILDING THE A MOUNT OF OPENING WDV STANDING AT RS.4,89,714/- AND FURTHER AFTER RED UCING ADDITION OF RS.6,58,095/-. THE AUTHORITIES BELOW REJECTED THE C LAIM FOR ADDITIONS HOLDING THAT THE ASSESSEE WAS NOT ABLE TO SUBSTANTI ATE THE ADDITIONS. THE LD. CIT(A) HAS NOT GIVEN ANY FINDING WITH RESPECT T O THE ADDITIONS CLAIMED TO HAVE BEEN MADE BY ASSESSEE. SIMILARLY, WE FIND THAT WHILE CALCULATING CAPITAL GAIN ON SALE OF PLANT AND MACHINERY THE CRE DIT FOR ADDITION HAS NOT BEEN GIVEN. THE LD. AR HAS ARGUED THAT MOST OF THE ITEMS OF PLANT AND MACHINERY ALREADY EXISTED UNDER OTHER HEADS OF ASSETS. THEREFORE, WE DEEM IT APPROPRIATE TO REMIT THIS ISSUE BACK TO THE ASSESSING OFFICER WHO WOULD RECALCULATE THE AMOUNT OF CAPITAL GAIN ON ACCOUNT OF BUILDING AFTER CONSIDERING THE ALLOCATED VALUE OF BUILDING O F RS.43,90,000/- OUT OF ITA NO.56 5(ASR)/2011 ASST. YEARS: 2007-08 9 TOTAL SALE CONSIDERATION. WHILE CALCULATING THE CAP ITAL GAIN ON ACCOUNT OF SALE OF BUILDING, THE ASSESSING OFFICER WOULD ALSO CONSIDER THE CLAIM OF ADDITIONS MADE IN BUILDING ACCOUNT TO THE TUNE OF R S.6,58,095/-. THE ASSESSING OFFICER WILL ALSO VERIFY THE CLAIM OF ASS ESSEE REGARDING ADDITIONS OF PLANT AND MACHINERY. THE ASSESSEE WILL BE FREE T O FILE DOCUMENTARY EVIDENCE IN RESPECT OF ADDITIONS CARRIED ON BY IT I N THE BUILDING ACCOUNT WHICH THE ASSESSING OFFICER WILL VERIFY AND DECIDE AS PER LAW. 15. AS REGARDS THE ADDITION SUSTAINED BY LD. CIT(A) WITH RESPECT TO ALLEGED AMOUNT RECEIVED FROM SUNDRY DEBTORS TO THE TUNE OF RS.16,53,459/-, WE FIND THAT THE ASSESSEE DID NOT S UBSTANTIATE THAT THE RECEIPTS WERE FROM SUNDRY DEBTORS EXCEPT GIVING DET AILS OF SUNDRY DEBTORS AS ON 31.03.2005 AND 31.03.06. BEFORE LD. CIT(A) AL SO NO EVIDENCE WAS FURNISHED. THE LD. CIT(A) HAS ALSO HELD THAT COPY O F ACCOUNTS WERE NOT CONFIRMED BY RESPECTIVE PARTIES AND THEIR ADDRESS W ERE ALSO NOT PROVIDED BY APPELLANT AND UNDER THESE FACTS AND CIRCUMSTANCE S THE LD. CIT(A) HAS HELD THAT THERE WAS NO EVIDENCE THAT THE CASH INTRO DUCED IN THE ACCOUNTS DURING THE RELEVANT PREVIOUS YEAR CAME FROM THE DEB TORS. THE LD. AR IN HIS ARGUMENTS HAD ARGUED THAT THE LETTERS TO THE DE BTORS WERE SENT TO THE SUNDRY DEBTORS AT THE STAGE END OF THE ASSESSMENT, THEREFORE, IN THE INTEREST OF JUSTICE WE DEEM IT APPROPRIATE TO REMIT THIS ISSUE BACK TO THE ASSESSING OFFICER WHO ON THE BASIS OF VERIFICATION FROM SUCH SUNDRY DEBTORS WILL DECIDE AFRESH AFTER GIVING THE ASSESSE E AN OPPORTUNITY BEING HEARD. ITA NO.56 5(ASR)/2011 ASST. YEARS: 2007-08 10 16. IN VIEW OF THE ABOVE, GROUND NO.6 IS ALSO ALLOW ED FOR STATISTICAL PURPOSES. GROUND NO.1 TO 4 ARE DISMISSED AS NOT PRE SSED. 17. IN NUTSHELL, THE APPEAL OF THE ASSESSEE IS PART LY DISMISSED AND PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 21 .02. 2017. SD/- SD/- (A.D. JAIN) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 21.02.2017. /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER