ITO, Sonepat V. Sh. Gandhi Ram Hooda Prop., Sonepat

ITA 567/DEL/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9916 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 06-08-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 16-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BK GUPTA
• Section: 133A; 64

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G : NEW DELHI BEFORE SHRI R.P.TOLANI, JM AND SHRI R.C.SHARMA, AM ITA NO.567/DEL/2009 ASSESSMENT YEAR : 2005-06 INCOME TAX OFFICER, WARD-1, SONEPAT. VS. SHRI GANDHI RAM HOODA, PROP. M/S SHOBHA RICE MILLS, VILLAGE BAROTA, TEHSIL GOHANA, DISTRICT SONEPAT. (APPELLANT) (RESPONDENT) CROSS-OBJECTION NO.52/DEL/2009 ASSESSMENT YEAR : 2005-06 SHRI GANDHI RAM HOODA, PROP. M/S SHOBHA RICE MILLS, VILLAGE BAROTA, TEHSIL GOHANA, DISTRICT SONEPAT. VS. INCOME TAX OFFICER, WARD-1, SONEPAT. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI B.K.GUPTA, SR.DR. ASSESSEE BY : SHRI GAUTAM JAIN, ADVOCATE. ORDER PER R.C.SHARMA, AM : THIS IS AN APPEAL FILED BY THE REVENUE AND CROSS-O BJECTION BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) DATED 5.12.2008 FOR AY 2005-06. 2. FIRST GRIEVANCE OF THE REVENUE RELATES TO DELETI ON OF ADDITION OF RS.3,62,808/- MADE BY THE AO ON ACCOUNT OF LOW YIEL D. FACTS IN BRIEF ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURIN G AND TRADING OF RICE. A SURVEY U/S 133A WAS CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE ON 9.12.2004, AND THE STOCK WAS PHYSICALLY COUNTED AND WEIGHTED B Y SAMPLE TESTING EXCEPT THE STOCK OF CHHILKA WHICH WAS TAKEN ON ESTIMATE. WHIL E FRAMING THE ASSESSMENT, THE AO OBSERVED THAT ASSESSEE HAS SHOWN YIELD OF RICE A T THE RATE OF 65.5% WHILE IT WAS 66.1% IN LAST YEAR. HE FURTHER NOTED THAT IN T HE AY 2003-04, YIELD WAS ITA-567/D/2009 & CO-52/D/2009 2 65.97%. THE ASSESSEE WAS ASKED TO EXPLAIN THE REAS ON FOR LOW YIELD. IT WAS REPLIED THAT ASSESSEE WAS DEALING IN COMMODITY OF P RODUCE EXCHANGE AND YIELD IS DEPENDING ON THE QUALITY OF RAW MATERIAL. THE HARY ANA GOVERNMENT EVEN CONSIDERS YIELD OF 64 % AS REASONABLE. THE AO DID N OT ACCEPT THE ASSESSEES EXPLANATION AND WITHOUT POINTING OUT ANY DEFECTS IN THE BOOKS OF ACCOUNT AND WITHOUT REJECTING THE SAME, HE ESTIMATED THE YIELD AT HIGHER PERCENTAGE AND MADE AN ADDITION OF RS.3,62,808/-. BY THE IMPUGNED ORDE R, THE CIT(A) DELETED THE SAME BY OBSERVING THAT NO DEFECT HAS BEEN POINTED OUT IN THE BOOKS OF ACCOUNT, NO INSTANCE HAS BEEN NOTED IN THE ASSESSMENT ORDER WHE THER ANY PURCHASES WERE INFLATED OR ANY SALES WERE SHOWN AT A LOWER FIGURE. 3. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FOU ND FROM THE RECORD THAT ASSESSEE HAS FILED AUDITED PROFIT AND LOSS ACCOUNT GIVING DETAILS OF QUANTITY OF RAW MATERIALS PURCHASED, CONSUMED AND REMAINED IN STOCK . NO DEFECTS IN THE BOOKS OF ACCOUNT WERE POINTED OUT BY THE AO NOR ANY INSTANCE WAS QUOTED IN THE ASSESSMENT ORDER TO THE EFFECT THAT PURCHASES WERE INFLATED OR THAT SALES WERE SHOWN AT A LOWER FIGURE. SINCE THE YIELD OF A PART ICULAR YEAR DEPENDS ON PURCHASE, MANUFACTURE AND SALE, NEITHER THE QUANTITY NOR THE AMOUNT OF WHICH WAS DISPUTED ANYWHERE BY THE AO IN THE ASSESSMENT ORDER, THERE I S NO JUSTIFICATION IN HIS ACTION FOR ESTIMATING THE YIELD AT THE RATE SHOWN BY THE A SSESSEE IN THE EARLIER YEAR WITHOUT POINTING OUT ANY COGENT MISTAKE IN THE BOOK S OF ACCOUNT OR REJECTING THE SAME. WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR DELETING THE ADDITION MADE ON ACCOUNT OF LOW YIELD. SIMILAR LY, THE ADDITION MADE ON ACCOUNT OF LOW YIELD OF RICE BRAN WAS DELETED BY TH E CIT(A) BY OBSERVING THAT NO DEFECTS IN THE ACCOUNTS WITH REGARD TO PURCHASE, SA LE, WASTAGE, MANUFACTURE ETC. WAS POINTED OUT BY THE AO IN THE ASSESSMENT ORDER, THEREFORE TAKING THE YIELD OF RICE BRAN, AS IN THE EARLIER YEAR, IS NOT SUSTAINAB LE. ACCORDINGLY, GROUND NO.2 OF REVENUES APPEAL ALSO STANDS DISMISSED. ITA-567/D/2009 & CO-52/D/2009 3 4. NEXT GRIEVANCE OF THE REVENUE RELATES TO DELETIO N OF ADDITION OF RS.2,21,725/- MADE BY THE AO ON ACCOUNT OF EXCESS S HORTAGE OF CHHILKA. 5. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE AO COMPUTED WASTAGE/SHORTAGE BY REFERRING TO FIGURE OF PRODUCTI ON AND CONSUMPTION AS GIVEN IN THE AUDITED ACCOUNTS, AS UNDER :- PRODUCTION OF RICE TAKEN BY THE LD.AO 47142-85 RICE BRAN - 5705-64 KAMU - 178-90 CHHILKA - 17927-25 PADDY CONSUMED 71320-50 YIELD COME TO 99.49% 6. BY THE IMPUGNED ORDER, THE CIT(A) DELETED THE AD DITION BY OBSERVING THAT CALCULATION GIVEN BY THE AO REGARDING PRODUCTION OF DIFFERENT ITEMS IS NOT SUPPORTED BY ANY EVIDENCE. BY STATING THAT OVERALL SHORTAGE IN THIS LINE IS MORE THAN 7% DEPENDING UPON SO MANY FACTORS, HE DELETED THE ADDITION MADE ON ACCOUNT OF SHORTAGE OF CHHILKA. 7. IT WAS CONTENDED BY THE LEARNED AR THAT THE PADD Y SO PURCHASED WAS SUBJECT TO MOISTURE OF ABOUT 3-4% DEPENDING UPON TH E SEASON WHICH HAS NECESSARILY TO BE DRIED BEFORE PUTTING THE SAME INT O MACHINE. CHHILKA IS ALSO USED BY THE WORKERS FOR WARMING THEM UP IN THE WINTER AN D IS ALSO USED IN THE FACTORY FOR PLASTERING THE KACHAPHAD. WASTAGE OF CHHILKA C ANNOT ALSO BE RULED OUT DUE TO RAINS AND STRONG WINDS AS IT IS LYING IN THE OPEN. 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FOU ND FROM THE RECORD THAT FOR ARRIVING AT THE CONCLUSION OF 2% WASTAGE, THE AO HA S NOT BROUGHT ANY EVIDENCE ON RECORD NOR ANY COMPARABLE CASE HAS BEEN GIVEN. THE OVERALL SHORTAGE IN THIS LINE OF INDUSTRY IS ABOUT 5-6% DEPENDING UPON SO MANY FA CTORS. SINCE FOR ESTIMATING THE WASTAGE AT 2%, THEREBY MAKING ADDITION OF RS.2, 21,725/-, THE AO HAS NOT ITA-567/D/2009 & CO-52/D/2009 4 POINTED OUT ANY DEFECT IN THE BOOKS OF ACCOUNT, NOR REJECTED THE SAME, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR DELET ING THE SAME. 9. NEXT GRIEVANCE OF THE REVENUE RELATES TO DELETIO N OF ADDITION ON ACCOUNT OF BARDANA ACCOUNT AMOUNTING TO RS.2,13,927/-. IN THI S REGARD, THE AO OBSERVED THAT THE QUANTITY MANUFACTURED DURING THE YEAR HAS BEEN TAKEN AT 49544 QUINTAL AS AGAINST 54474 QUINTAL, THE CALCULATION OF THE SAME IS GIVEN AS UNDER:- 1. OP.STOCK TAKEN BY LD.AO ACTUAL RICE 638-00 638-00 RICE BRAN -- 435-00 2. PURCHASES 1530-00 1530-00 3. MFG. DURING THE YEAR 46779-00 46779-00 4. MFG. RICE BRAN 419-00 4914-00 5. KAMU 178-00 178-00 49544-00 54744-40 10. IT IS CLEAR FROM THE ABOVE THAT WHILE MAKING DI SALLOWANCE ON ACCOUNT OF BARDANA, THE AO HAS WRONGLY TAKEN THE FIGURE OF MAN UFACTURED RICE BRAN AT 419 INSTEAD OF 4914 AND SIMILARLY, THE OPENING STOCK OF RICE BRAN WAS OMITTED TO BE TAKEN BY THE AO. WE ALSO FOUND THAT THERE WAS INCR EASE IN RATES OF BARDANA PURCHASED DURING THE YEAR, WHICH HAS NOT BEEN CONSI DERED BY THE AO WHILE MAKING THE DISALLOWANCE. IT CAN ALSO NOT BE DISPUT ED THAT SALE OF USED BARDANA WHICH REMAINS LYING IN THE OPEN FACING ALL TYPES OF WEATHER WILL REALIZE AMOUNT THAN THE PURCHASE AMOUNT. SINCE THE ASSESSEE IS MA INTAINING QUANTITATIVE DETAILS OF BARDANA WHICH WAS FURNISHED ALONGWITH THE AUDITED R EPORT AS PER ANNEXURE A-2, NOTHING WAS FOUND WRONG BY THE AO. WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR DELETING THE ADDITION AFTER GIVING DETAILED OBSERVATION AT PARA 9 OF HIS APPELLATE ORDER, WHICH HAS NOT BEEN C ONTROVERTED BY THE LEARNED DR. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ITA-567/D/2009 & CO-52/D/2009 5 12. IN THE CROSS-OBJECTION, THE ASSESSEE HAS CHALLE NGED THE UPHOLDING OF DISALLOWANCE OF RS.1,26,666/- OUT OF DIESEL EXPENSE S. 13. IN THE COURSE OF ASSESSMENT, THE AO FOUND THAT THERE IS A DIFFERENCE IN DIESEL EXPENSES AS PER TRADING ACCOUNT AND AS PER B OOKS MAINTAINED BY THE ASSESSEE. HE HAS CLEARLY POINTED OUT DEFECTS IN TH E BILL OF DIESEL PURCHASED MADE IN CASH AND FOUND THAT SAME WERE FABRICATED AS THERE W AS OVERWRITING IN THE BILLS AND ALL WERE CONTAINING THUMB IMPRESSIONS. THE AO FURT HER FOUND THAT THESE EXPENSES HAVE BEEN INCREASED JUST TO COMPENSATE THE SURRENDE R MADE DURING THE COURSE OF SEARCH. IN VIEW OF THESE FINDINGS OF THE AO AND TH E CIT(A) CONCLUDED THAT THE TEST OF GENUINENESS IN RESPECT OF CASH VOUCHERS FOR PURC HASE OF DIESEL IS NOT PROVED. LEARNED AR COULD NOT CONTROVERT THE FINDINGS RECORD ED BY THE LOWER AUTHORITIES BY BRINGING ANY MATERIAL BEFORE US. ACCORDINGLY, WE C ONFIRM THE ADDITION MADE ON ACCOUNT OF DIFFERENCE IN DIESEL ACCOUNT ALLEGED TO BE PURCHASED IN CASH BY OBTAINING VOUCHERS. 14. NEXT GRIEVANCE OF THE ASSESSEE RELATES TO THE A DDITION ON ACCOUNT OF INTEREST AT RS.1,34,782/-. THIS ADDITION WAS MADE BY THE AO BY OBSERVING THAT THE ASSESSEE WAS PAYING INTEREST TO CREDITORS AT THE RA TE OF 12% BUT NOT CHARGING INTEREST FROM THE DEBTORS. IT WAS REPLIED THAT IT WAS A TRADE PRACTICE TO GIVE INTEREST TO THE CREDITORS AND NOT TO CHARGE FROM THE DEBTORS . ACCORDINGLY, HE COMPUTED SUCH INTEREST AT RS.1,34,782/- AND ADDED THE SAME I N THE TOTAL INCOME OF THE ASSESSEE AND THE CIT(A) HAS CONFIRMED THE SAME. 15. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FO UND THAT AO HAS CALCULATED INTEREST AT THE RATE OF 12% FOR FULL YEAR WITHOUT V ERIFYING WHETHER ANY INTEREST HAS BEEN CHARGED OR NOT. AS PER THE NORMAL TRADE PRACT ICE PREVAILING, THE ASSESSEE WAS NOT CHARGING ANY INTEREST ON THE DEBTORS, EVEN IN T HE PRECEDING YEAR NO SUCH INTEREST WAS CHARGED. SINCE NO ACTUAL INTEREST WAS CHARGED, NOR THERE WAS ANY COGENT MATERIAL BEFORE THE AO FOR REACHING TO SUCH CONCLUSION, ADDITION SO MADE ITA-567/D/2009 & CO-52/D/2009 6 BY ASSUMING INTEREST FROM THE DEBTORS IS NOT JUSTIF IED IN LAW. WE ACCORDINGLY DIRECT THE AO TO DELETE THE SAME. 16. LAST GRIEVANCE RELATES TO DISALLOWANCE OF RS.1, 19,224/- OUT OF FREIGHT OUTWARD EXPENSES. 17. DURING THE COURSE OF ASSESSMENT, THE ASSESSEE W AS ASKED TO FURNISH DETAILS OF PAYMENT MADE ON ACCOUNT OF FREIGHT PAID OUTWARD. IT WAS STATED THAT THE PAYMENT TO TRACTOR TROLLEY WAS MADE AT THE FIXED RA TES PER BAG FROM THE FACTORY TO FCI GODOWNS. THE AO DISALLOWED THE CLAIM BY OBSERV ING THAT ASSESSEE FAILED TO FURNISH DETAILS OF TRACTOR OWNERS. THE CIT(A) CONF IRMED THE ACTION OF THE AO. 18. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FO UND FROM THE RECORD THAT ASSESSEE USED TO CARRY RICE FROM FACTORY TO FCI GOD OWNS ON ACCOUNT OF LEVY RISE SUPPLIED TO GOVERNMENT THROUGH TRACTORS. THE GOODS ARE TO BE SENT FOR IN THE GODOWNS OF FCI, FULL DETAILS OF TRACTOR TROLLEY WER E GIVEN IN THE RECEIPT ISSUED BY THE FCI. THE ASSESSEE HAS ALSO GIVEN REGISTRATION NUMBER OF THE TRACTORS USED FOR CARRYING THE RICE. THE GENUINENESS OF THE EXPENDIT URE SO INCURRED WAS NOT DOUBTED, MERELY BECAUSE NAMES OF THE TRACTOR OWNERS WERE NOT AVAILABLE, THE AO HAS DISALLOWED THE ENTIRE PAYMENT. WE DO NOT FIND ANY JUSTIFICATION FOR SUCH DISALLOWANCE. ACCORDINGLY, THE SAME IS DELETED. 19. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED WHEREAS THE CROSS- OBJECTION OF THE ASSESSEE IS ALLOWED IN PART. DECISION PRONOUNCED IN THE OPEN COURT ON 31 ST AUGUST, 2009. SD/- SD/- (R.P.TOLANI) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 31.08.2009. VK. ITA-567/D/2009 & CO-52/D/2009 7 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR