THE DCIT, CIRCLE-1, Kakinada V. M/s Sri Lakshmi Satyanarayana Raw & Boiled Rice Mill,

ITA 618/VIZ/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2023 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 10-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K SETHI
• Section: 143(3)

Judgement Text

ITA NO.618/VIZAG/2013 M/S. SRI LAKSHMI SATYANARAYANA RAW & BOILED RICE MI LL, KARAPA MANDAL 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.618/VIZAG/2013 ( / ASSESSMENT YEAR: 2009-10) DCIT CIRCLE - 1 KAKINADA VS. M/S. SRI LAKSHMI SATYANARAYANA RAW & BOILED RICE MILL KARAPA MANDAL [PAN: AAPFS 9531B ] ( % / APPELLANT) ( &'% / RESPONDENT) C.O. NO.136/VIZAG/2013 (ARISING OUT OF I.T.A.NO.618/VIZAG/2013) ( / ASSESSMENT YEAR: 2009-10) M/S. SRI LAKSHMI SATYANARAYANA RAW & BOILED RICE MILL KARAPA MANDAL VS. DCIT CIRCLE - 1 KAKINADA ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI M.K. SETHI, DR / RESPONDENT BY : SHRI G.V.N. HARI, AR / DATE OF HEARING : 17.02.2016 / DATE OF PRONOUNCEMENT : 18.03.2016 ITA NO.618/VIZAG/2013 M/S. SRI LAKSHMI SATYANARAYANA RAW & BOILED RICE MI LL, KARAPA MANDAL 2 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF CIT(A), VISAKHAPATNAM DATED 13.8.2013 FOR THE ASSES SMENT YEAR 2009-10. THE CROSS OBJECTION FILED BY THE ASSESSEE IS IN SUPPORT OF ORDER OF CIT(A). 2. FACTS ARE IN BRIEF THAT THE ASSESSEE IS A FIRM, ENGAGED IN THE RUNNING OF RICE MILL, SALE OF RICE AND BY-PRODUCTS, FILED ITS RETURN OF INCOME BY DECLARING TOTAL INCOME OF ` 13,09,830/-. THE RETURN FILED BY THE ASSESSEE WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE ACT'). THEREAFTER, ASS ESSMENT WAS COMPLETED U/S 143(3) OF THE ACT BY DISALLOWING PADDY PURCHASE S OF ` 33,65,147/-. IN THE ASSESSMENT ORDER, THE A.O. HAS NOTED THAT TH E ASSESSEE HAS MADE A PURCHASE FROM FARMERS AND THE SUNDRY CREDITO RS AS ON 31.3.2009 ON ACCOUNT OF SUCH PURCHASE WAS ` 6,73,02,934/-. THE A.O. HAD CALLED FOR THE CONFIRMATION LETTERS FROM THE CREDIT BALANC ES, WHICH THE ASSESSEE FAILED TO FURNISH. THE A.O. FIND THAT CREDITS ARE UNVERIFIABLE FOR WANT OF CONFIRMATION LETTERS AND ALSO CONSIDERING THE INABI LITY OF THE ASSESSEE TO FURNISH CONFIRMATION LETTERS, CONSIDERING THE VOLUM INOUS OF TRANSACTIONS MADE, AN ADHOC DISALLOWANCE OF 5% ON SUNDRY CREDITO RS OF ITA NO.618/VIZAG/2013 M/S. SRI LAKSHMI SATYANARAYANA RAW & BOILED RICE MI LL, KARAPA MANDAL 3 ` 6,73,02,934/- IN RESPECT OF PADDY FARMERS, AMOUNTI NG TO ` 33,65,147/- WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ASS ESSEE CARRIED MATTER IN APPEAL BEFORE THE CIT(A). DETAILED SUBMISSIONS WERE MADE BEFORE THE CIT(A). THE RELEVANT PORTION OF THE WRITTEN SU BMISSION MADE BY THE ASSESSEE IS AS UNDER: 'THE APPELLANT BEING A RICE MILL, PURCHASES PADDY F ROM FARMERS AND CONVERTS THE SAME INTO RICE. IT IS THE CUSTOM AND PRACTICE O F THIS BUSINESS THAT THE FARMERS SELL PADDY ON CREDIT AT THE TIME OF HARVEST AND LATER THE MILLER REPAYS THE AMOUNT WITHIN A PERIOD OF 2 TO 3 MONTHS. JANUARY AND FEBRUARY BEING THE MONTHS OF HARVESTING, HUGE AMOUNT OF PADD Y IS PURCHASED IN THESE MONTHS AND THE REPAYMENT OF THIS AMOUNT TAKES PLACE TO A MAJOR EXTENT IN THE MONTHS OF APRIL TO JUNE. THEREFORE, IT IS VERY COMM ON FOR ANY RICE MILL TO CARRY HUGE STOCKS OF PADDY/RICE AS ON 31 5' MARCH AND EQUALLY A SUBSTANTIAL AMOUNT OF SUNDRY CREDITORS IS CARRIED FORWARD. DURING THE F INANCIAL YEAR RELEVANT TO THE A.Y. 2009-10, THE APPELLANT PURCHASED PADDY TO THE EXTEN T OF RS.35,18,04,873 AND OUT OF THIS A SUM OF RS.6,73,02,934 REMAINED OUTSTA NDING AS ON 31 ST MARCH, 2009. THE COMPLETE BREAK-UP DETAILS OF THE ABOVE SAID AMO UNT WAS FURNISHED TO THE ASSESSING OFFICER AND ALSO THE DETAILS OF SUBSEQUEN T REPAYMENT OF THE ABOVE SAID AMOUNT IN THE SUBSEQUENT YEAR WERE ALSO FURNISHED. THE APPELLANT PLACED IN THE PAPER BOOK ALL THE RELEVANT DETAILS RELATING TO PAD DY CREDITORS. THE APPELLANT EXPLAINED THAT IT PURCHASED PADDY WOR TH RS.8,61,07,393 DURING THE MONTHS OF JANUARY TO MARCH, 2009 AND THE CLOSIN G STOCK OF PADDY AS ON 31 ST MARCH, 2009 WAS RS.9,05,68,400 APART FROM SUNDRY D EBTORS OF RS.3,30,29,952. THE ASSESSING OFFICER, WHILE AGREEING THAT THE PADD Y CREDITORS ARE BOUND TO EXIST AND ALSO AGREEING THAT THESE CREDITORS STOOD REPAID IN THE SUBSEQUENT YEAR RESORTED TO AN AD-HOC DISALLOWANCE OF RS. 33,6 5,147 BEING 5% OF THE TOTAL CREDITORS AS ON 31 ST MARCH, 2013. THE ASSESSING OFFICER TOOK SUPPORT FO R THE ADDITION BY STATING THAT THE APPELLANT FAILED TO FU RNISH CONFIRMATION LETTERS FROM THE CREDITORS. THE APPELLANT SUBMITS THAT THE ASSESSING OFFICER IS NOT JUSTIFIED IN RESORTING TO SUCH AD-HOC DISALLOWANCE FOR THE FOLLOWING:- ITA NO.618/VIZAG/2013 M/S. SRI LAKSHMI SATYANARAYANA RAW & BOILED RICE MI LL, KARAPA MANDAL 4 1. THE QUANTITATIVE DETAILS OF PURCHASE OF PADDY IS SU PPORTED BY STATUTORY REGISTERS MAINTAINED I.E. B REGISTER. 2. THE TOTAL VALUE OF PURCHASES IS CROSS VERIFIABLE WI TH THE VAT RETURNS AND THE ASSESSING OFFICER DID NOT NOTICE AN Y DISCREPANCIES BETWEEN THE VAT RETURNS AND THE BOOKS OF ACCOUNT. 3. FURTHER, THE APPELLANT INCURRED CESS LEVIED BY AGRI CULTURAL MARKET COMMITTEE IN RESPECT OF ALL ITS PURCHASES. 4. ALL THE CREDITS EMANATING IN THE ACCOUNTS OF THE PA DDY CREDITORS ARE ON ACCOUNT OF JOURNAL ENTRIES AND NO CASH ELEME NT IS INVOLVED. WHEN THE DEBIT PART OF THIS ENTRY I.E. THE PURCHASE AMOUNT IS CROSS VERIFIABLE, THE CREDIT PART OF THE ENTRY BEING THE AMOUNT CREDITED TO THE FARMER IS AUTOMATICALLY EXPLAINED. 5. IT IS ALSO NOT THE CASE OF THE ASSESSING OFFICER TH AT THESE AMOUNTS HAVE NOT BEEN PAID IN THE SUBSEQUENT FINANC IAL YEAR. 6. THE ASSESSING OFFICER DID NOT FIND ANY UNREASONABLE NESS IN THE VOLUME OF SUNDRY CREDITORS AS COMPARED WITH THAT OF THE EARLIER YEARS. THE APPELLANT PLACES RELIANCE IN THIS REGARD IN THE CASE OF SURYA EARTH MOVING WHEREIN THE HONBLE ITAT, VISAKHAPATNA M IN THEIR ORDER DATED 25 TH OCTOBER, 2010 IN ITA NO.316/VIZAG/2009 HELD THAT S UNDRY CREDITORS EMANATING FROM A JOURNAL ENTRY CANNOT BE CONSIDERED FOR ADDITION WHEN THE EXPENDITURE IN RESPECT OF THE SUNDRY CREDITORS IS A LLOWED. 3. THE LD. CIT(A), AFTER CONSIDERING THE DETAILED S UBMISSIONS MADE BY THE ASSESSEE, HE HAS DELETED THE DISALLOWANCE MA DE BY THE A.O. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED AS UNDER : 4.3 THE AR CONTENDED THAT ADHOC DISALLOWANCE OF CR EDITS IS UNJUSTIFIED AND NOT WARRANTED WHEN THE AO HAS NOT DOUBTED THE P URCHASES. IT WAS SUBMITTED THAT THE DOCUMENTS SUCH AS THE PRICE INVO ICE, THE WAYBILL FOR THE GOOD PURCHASED, THE ENTRY IN THE STOCK REGISTER AND PAYM ENT VOUCHERS WERE PRODUCED BEFORE THE AO WHICH WERE NOT QUESTIONED BY THE AO. A SAMPLE SET OF SUCH DOCUMENTS WERE ALSO PRODUCED FOR MY VERIFICATION. A COPY OF THE ORDER PASSED BY THE AMC WAS ALSO PRODUCED TO EXPLAIN THAT THERE IS NO DISCREPANCY IN THE VALUE OF PURCHASES OR QUANTUM PURCHASED. IT WAS REPRESENTED THAT OBTAINING CONFIRMATION ITA NO.618/VIZAG/2013 M/S. SRI LAKSHMI SATYANARAYANA RAW & BOILED RICE MI LL, KARAPA MANDAL 5 LETTERS FROM THE FARMERS WERE VERY DIFFICULT. IT WA S ALSO SUBMITTED THAT SPECIFIC ADDRESS IS NOT THERE AS THEY LIVE IN VILLAGES. HOWE VER THE NAME OF THE VILLAGE IS MENTIONED IN THE WAYBILL AND ALSO INVOICE. IT WAS F URTHER CONTENDED THAT MERELY BECAUSE CONFIRMATION LETTERS COULD NOT BE PRODUCED, BECAUSE OF THE TRANSACTION WITH FARMERS, THE CREDIT TRANSACTION CANNOT BE DOUB TED, PARTICULARLY WHEN NO DISALLOWANCE WAS MADE IN RESPECT OF PURCHASES AND N O DOUBT WAS RAISED ON THE PAYMENTS OF THESE CREDITS MADE IN SUBSEQUENT YEAR. THE AR WAS ASKED TO PRODUCE THE DOCUMENTS MAINTAINED FOR PURCHASERS AND CORRESPONDING CREDITS IN RESPECT OF FEW SPECIFIC TRANSACTIONS, WHICH WERE PR ODUCED DURING THE YEAR ON 26.07.2013. I HAVE GONE THROUGH THE DETAILS FILED AND SUBMISSION MADE. I FIND FROM THE ORDER OF THE AO THAT HE HAS NOT FOUND ANY DISCREPANCY IN THE PURCHASERS. FOR WANT OF CONFIRMATION LETTERS, AN AD HOC DISALLOWANCE HAS BEEN MADE, WHICH IN MY VIEW IS NOT LEGALLY TENABLE. FROM THE SAMPLE VERIFICATION MADE BY ME, NO DISCREPANCY WAS NOTICED WITH REGARD TO TH E PURCHASES OR AS TO THE PAYMENT FOR THE PURCHASE MADE. UNDER SUCH FACTUAL C IRCUMSTANCES, I AM OF THE VIEW THAT THE IMPUGNED ADDITION BY WAY OF ADHOC DIS ALLOWANCE IS NOT JUSTIFIED. ACCORDINGLY, THE ADDITION IS DELETED. THIS GROUND O F APPEAL IS ALLOWED. 4. ON BEING AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. THE LD. D.R. HAS SUPPORTED THE ORDER PASSED BY THE A.O. 5. THE LD. COUNSEL HAS SUPPORTED THE ORDER PASSED B Y THE CIT(A). 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE A.O. HAS DISALLOWED ON ACCOUNT OF PURCHASES MADE BY THE ASSESSEE OF ` 33,65,147/- ON THE GROUND THAT THE ASSESSEE HAS NOT PRODUCED CONFIRMATION LETTERS FROM THE PADDY FARMERS. HOWEV ER, THE ASSESSEE HAS SUBMITTED QUANTITATIVE DETAILS OF PURCHASES OF PADD Y ALONG WITH REGISTERS MAINTAINED BY HIM AND VAT RETURNS AND CESS LEVIED B Y AGRICULTURAL MARKET COMMITTEE IN RESPECT OF PADDY PURCHASED. HE MADE A DETAILED ITA NO.618/VIZAG/2013 M/S. SRI LAKSHMI SATYANARAYANA RAW & BOILED RICE MI LL, KARAPA MANDAL 6 SUBMISSION BEFORE THE LD. CIT(A). THE LD. CIT(A) A GAIN ASKED THE ASSESSEE TO PRODUCE THE DOCUMENTS MAINTAINED BY THE ASSESSEE IN RESPECT OF PURCHASES AND CORRESPONDING CREDITS IN R ESPECT OF THE TRANSACTIONS. THE SAME WERE PRODUCED BEFORE THE CO MMISSIONER ON 26.7.2013. THE LD. CIT(A) AFTER CONSIDERING THE DE TAILS SUBMITTED BY THE ASSESSEE, HE GAVE A CATEGORICAL FINDING THAT NO DISCREPANCY HAS BEEN FOUND IN THE PURCHASES MADE BY THE ASSESSEE AND FOR WANT OF CONFIRMATIONS, ADHOC DISALLOWANCE CANNOT BE MADE. WE FIND THAT THE ASSESSEE HAS SUBMITTED ALL THE DETAILS BEFORE THE A .O. EVEN BEFORE THE LD. CIT(A). ONLY ON ACCOUNT OF NON-FILING OF THE C ONFIRMATIONS FROM THE FARMERS WHO SOLD THE PADDY TO THE ASSESSEE, ADHOC D ISALLOWANCE CANNOT BE MADE. IN VIEW OF THE ABOVE, WE FIND NO REASON T O INTERFERE WITH THE ORDER PASSED BY LD. CIT(A). THUS, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 7. THE C.O. FILED BY THE ASSESSEE IS SUPPORTING THE ORDER OF THE CIT(A). THEREFORE, FOR THE REASONS RECORDED IN THE PRECEDING PARAGRAPHS, WE ARE OF THE OPINION THAT THE C.O. FIL ED BY THE ASSESSEE IS INFRUCTUOUS AND HENCE, THE SAME IS DISMISSED. ITA NO.618/VIZAG/2013 M/S. SRI LAKSHMI SATYANARAYANA RAW & BOILED RICE MI LL, KARAPA MANDAL 7 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS ALSO DISMI SSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 18 TH MAR16. SD/- SD/- ( . ) ( . ) (G. MANJUNATHA) (V. DURGA RAO) /ACCOUNTANT MEMBER /JUDICIAL MEMBER ! /VISAKHAPATNAM: % /DATED : 18.03.2016 VG/SPS '! (! /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE DCIT, CIRCLE-1, KAKINADA 2. / THE RESPONDENT M/S. SRI LAKSHMI SATYANARAYANA RAW & BOILED RICE MILL, 1-1, KOTIPALLI ROAD, PENUGUDURU (VILLAGE), KA RAPA MANDAL, E.G. DIST. PIN-533 106. 3. ) / THE PRINCIPAL CIT-2, VISAKHAPATNAM 4. ) ( ) / THE CIT(A), VISAKHAPATNAM 5. ! , , , , ! / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // /0 , (SR.PRIVATE SECRETARY) , , ! / ITAT, VISAKHAPATNAM