The Dy.Commissioner of Income-tax, Amritsar. V. M/s Sifti Rice Mills, Amritsar.

ITA 764/ASR/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5587 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 27-02-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 22-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAHUL DHAWANLD
• Assessee Lawyers: SALIL KAPOOR LD
• Section: 143(3); 142(1); 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. T. S. KAPOOR, ACCOUNTANT MEMBER AND SH. N.K. CHOUDHRY, JUDICIAL MEMBER ITA NO.764/(ASR)/2014 ASSESSMENT YEAR: 2011-12 PAN: AAPFS6697G DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, AMRITSAR. VS. M/S. SIFTI RICE MILLS, KHASA ROAD, VILL- KATHANA, DISTT. AMRITSAR. (APPELLANT) (RESPONDENT) APPELLANT BY : SH. RAHUL DHAWAN (LD. D.R.) RESPONDENT BY: SH. SALIL KAPOOR (LD. ADV.) DATE OF HEARING : 27/02/2017 DATE OF PRONOUNCEMENT : 26/05/2017 ORDER PER N. K. CHOUDHRY (JM): THIS IS AN APPEAL FILED BY REVENUE DEPARTMENT, AGGR IEVED AGAINST THE ORDER DATED 17.10.2014 IN APPEAL NO. 379/IT/CIT (A)- 1/LUDHIANA/2013-14 PASSED BY THE LD.CIT(A) NO. 1 LUDH IANA FOR ASST. YEAR 2010-11. 2. THE APPELLANT HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE THE DECISION OF CIT(A) IS CORRECT IN DELETING THE ADDITION OF RS . 82,21,420/- MADE TOWARDS TRADING RESULTS BY IGNORING THE DETAILED RE ASONS RECORDED BY THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER. 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) IS CORRECT IN ASSUMING THAT SINCE THE AUDITORS HAVE NO T POINTED ANY DISCREPANCIES IN THE BOOKS OF THE ASSESSEE, NO FURT HER INVESTIGATION/INQUIRY WAS REQUIRED TO BE MADE BY TH E ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS. ITA NO.764/ASR/2014 ASST. YEAR: 2011-12 2 3. WHETHER ON THE FACTS AND CIRCUMSTANCES O F THE CASE, LD. CIT(A) IS CORRECT IN NOT APPRECIATING THE REASONS FOR THE REJ ECTION OF TRADING RESULTS OF THE ASSESSEE. 4. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROUNDS OF APPEAL ON OR BEFORE IS HEARD AND DISPOSED OFF. 5. IT IS PRAYED THAT THE ORDER OF THE COMM ISSIONER OF INCOME TAX (APPEALS), BE SET-ASIDE AND THAT OF THE ASSESSING O FFICER BE RESTORED ON MERITS. 3. THE BRIEF FACTS OF THE CASE AS REFLECTS FROM THE ASSESSMENT ORDER ARE AS UNDER: THE RETURN IN THIS CASE WAS E-FILED ON 29 TH SEPTEMBER, 2011 AS IT DECLARING AN INCOME OF RS.32,00,130/-, AND THE CASE WAS SELEC TED FOR SCRUTINY UNDER CASS AND STATUTORY NOTICES U/S 143(2) AND 142(1) WE RE ISSUED ALONG WITH QUESTIONNAIRE. DURING THE COURSE OF EXAMINATION OF THE CASE IT WAS NOTICED THAT DURING THE YEAR, THERE HAS BEEN A DRASTIC FALL INN THE G.P. RATE DECLARED BY THE ASSESSEE FROM 14.30% IN THE LAST YEAR 2005 WERE IN THIS YEAR. IT WAS OBSERVED BY THE ASSESSING OFFICER THAT IT AP PEARS THE SANCTIONS IMPOSED AGAINST IRAN WERE THE SOLE CAUSE OF THE LOWER G.P. OF THE ASSESSEE, DESPITE THE FACT THAT THE ASSESSEE HIMSEL F WAS NOT AN EXPORTER. IT ALSO INDICATES THAT IRAN IS THE SOLE IMPORT OF INDI AN RICE. IN ORDER TO FURTHER VERIFY THE SUBMISSIONS OF THE ASSESSEE, VIDE ORDER SHEET ENTRY ORDER DATED 23 OF AUGUST 2013, THE ASSESSEE WAS AGAIN ASKED TO FURNISH:- 1. PARTNERS CAPITAL ACCOUNTS WITH SOURCES OF ADDITI ONS. 2. QUANTITY OF MILLING OF OUTSIDE PARTIES AND POSIT ION REGARDING BYE PRODUCTS OF THAT MILLING. 3. PERCENTAGE YIELD CHART OF BYE PRODUCTS ON SELF MILLING AND OUTSIDE MILLING. RATES OF SALE OF BYE PRODUCTS. 4. NO HUSK PRODUCTION OR SALE SHOWN, REASONS THERE OF. IF CONSUMED, RECORDS IF ANY FOR THE SAME. 5. COMPLETE RECORDS OF CONSUMPTION OF RAW MATERIAL AND PRODUCTION OF FURNISHED GOODS. ITA NO.764/ASR/2014 ASST. YEAR: 2011-12 3 6. COMPARATIVE CHART OF THIS YEAR AND LAST YEAR AB OUT QUANTITY AND VALUE OF SALES AND RATE OF THE SAME. IN RESPONSE TO THE NOTICE AS TREATED ABOVE, THE A SSESSEE FILED A REPLY DATED 9 TH SEPTEMBER, 2013 IN ORDER TO CLARIFY THE ISSUES THE REAFTER, THE ASSESSING OFFICER AFTER CONSIDERATION OF THE REPLY HAS OBSERVED AND CONCLUDED AS UNDER: THERE IS SOME FORCE AND LOGIC IN THE ARGU MENTS PUT FORWARD BY THE ASSESSEE. BUT STILL THERE ARE VARIOUS ISSUES WHICH ARE ALSO BEHIND THE DRASTIC FALL IN THE G.P. RATE AS COMPARED TO THE LAST YEAR. VIZ:- 1. THE YIELD OF SHARBATI RICE IS SHOWN ONLY AT 63% AS AGAINST THE NORMAL YIELD OF 66%. 2. THE YIELD OF RICE BRAN AND THIN PHUK VARIES BETWEEN 3% TO 4% AS AGAINST THE NORMAL YIELD OF ABOUT 5%. 3. THERE IS NO ACCOUNT OF HUSK PRODUCTION OR CONSUMPTI ON WHICH IS A SUBSTANTIAL BYE PRODUCT OF MILLING. 4. THE RECORDS FOR CONSUMPTION OF RAW MATERIAL AND PRO DUCTION OF FINISHED PRODUCTS AS MAINTAINED BY THE ASSESSEE ARE TOTALLY UNRELIABLE. 5. THERE HAS BEEN AN INCREASE IN PRODUCTION EXPENSES L IKE LABOUR AND MACHINERY REPAIR DESPITE FALL IN PRODUCTION AS CLAI MED BY THE ASSESSEE. 6. THE VALUATION OF CLOSING STOCK HAS BEEN MADE ARBITR ARILY AND SHOWN AT LESSER RATE THAN CLOSING STOCK DESPITE INCREASE IN PRODUCTION EXPENSES. 7. THERE ARE ADDITIONS TO THE CAPITAL ACCOUNTS OF THE PARTNERS WHICH ARE CLAIMED TO BE OUT OF THEIR PERSONAL BALANCE SHEETS WHICH ARE TOTALLY UNRELIABLE AND EVEN THEY DO NOT PROPERLY EXPLAIN TH E SOURCES OF CASH AND DESPITE SEVERAL OPPORTUNITIES THE ASSESSEE COUL D NOT FURNISH A FOOL PROOF EVIDENCE REGARDING THE SOURCES OF CASH I NTRODUCED. THE POSITION REGARDING CASH INTRODUCED IN CAPITAL ACCOU NTS AND CASH IN HAND AS PER ALLEGED BALANCE SHEETS IS AS UNDER:- NAME OF PARTNER CASH INTRODUCED OPENING C.I.H. CLO SING C.I.H. SATISH KUMAR RS. 2,00,000 RS. 1,95,891 RS. 1,09,422 VINOD KUMAR RS. 1,00,000 RS. 1,22,213 RS. 27,393 THE ABOVE CHART IS ONLY INDICATIVE OF THE STATE OF AFFAIRS OF THE ASSESSEE THOUGH NO SEPARATE ADDITION FOR THE ABOVE IS BEING MADE. IN VIEW OF THE ABOVE FACTS OF THE CASE, IT IS APPAR ENT THAT THE TRADING RESULTS OF THE ASSESSEE ARE NOT FULLY RELIABLE ALTHOUGH SOM E CREDIT HAS BEEN GIVEN FOR THE VARIOUS EXPLANATIONS PUT FORTH BY THE ASSESSEE. HOW EVER CONSIDERING THE VARIOUS ITA NO.764/ASR/2014 ASST. YEAR: 2011-12 4 DISCREPANCIES NOTICED IN THIS CASE THE G.P. RATE OF 9.53% SHOWN IN THE RETURN IS NOT ACCEPTABLE AND AN ADDITION OF 2% IS BEING MADE TO T HE SAME WHICH WORKS OUT TO RS. 82,21,420/-. THIS REFLECTS THE CONCEALED INCOME OF THE ASSESSEE WHICH WAS NOT REFLECTED IN THE RETURN BY MAKING VARIOUS MANIPULAT IONS AS DISCUSSED ABOVE. THEREFORE, I AM SATISFIED THAT THE ASSESSEE HAS CON CEALED HIS PARTICULARS OF INCOME TO THE ABOVE EXTENT AND HENCE PENALTY U/S 271(1)( C ) IS ALSO BEING INITIATED. ACCORDINGLY THE INCOME OF THE ASSESSEE IS BEING COM PUTED AS UNDER:- RETURNED INCOME =RS. 32,00,130/- ADD:- ADDITION AS ABOVE =RS. 82,21,420/- TOTAL INCOME = RS. 1,14,21,550/- 4. FEELING AGGRIEVED BY THIS ASSESSMENT ORDER, THE ASSESSEE PREFERRED THE FIRST APPEAL BEFORE THE LD. CIT(A), AN D RE-AGITATED THE CONTENTIONS AS RAISED DURING THE ASSESSMENT PROCEEDINGS AND EXPLAINED THE REASONS FOR FALL IN THE G.P. RATE AND WRONGLY REJ ECTION OF TRADING RESULT BY THE ASSESSING OFFICER. THE LD. CIT(A) FINALLY DELETED THE ADDITION QUO GP @ 2% AS DETERMINED BY THE ASSESSING OFFICER. 5. FEELING AGGRIEVED BY THE SAID ORDER PASSED BY THE LD. CIT(A), THE REVENUE DEPARTMENT PREFERRED THE INSTANT APPEAL WHICH IS UNDER CONSIDERATION. 6. THE LD DR IN SUPPORT OF ITS CASE ARGUED THAT THE DECISI ON OF THE LD. CIT(A) IS NOT CORRECT IN DELETING THE ADDITION OF RS.82,21,420/-MADE TOWARDS TRADING RESULTS BY IGNORING THE DETAILED REASO NS RECORDED BY THE AO IN HIS ASSESSMENT ORDER. THE LD. CIT(A) WAS NOT CORRECT IN ASSUMING THAT SINCE THE AUDITORS HAVE NOT POINTED OUT ANY DISCREP ANCIES IN THE ITA NO.764/ASR/2014 ASST. YEAR: 2011-12 5 BOOKS OF THE ASSESSEE, NO FURTHER INVESTIGATION/INQUIRY W AS REQUIRED TO BE MADE BY THE AO DURING THE ASSESSMENT PROCEEDINGS, AND HE WAS NOT CORRECT IN NOT APPRECIATING THE REASONS FOR THE REJECTION OF TRADING RESULTS OF THE ASSESSEE. IN THE INSTANT CASE NO RECORDS/DET AILS OF PRODUCTION OR CONSUMPTION OF PADDY HUSK WERE PRODUCED D ESPITE A SPECIFIC QUERY TO THIS EFFECT BY THE ASSESSING OFFICER AND DETAILS IF ANY MAINTAINED THEN IT WAS NOT PROPERLY MAINTAINED. FURT HER THE LD. DR EMPHASIZED WHEREAS THE ASSESSEE WAS CLAIMING THAT DURING TH E YEAR, THERE WAS A SLUMP IN BUSINESS DUE TO THE INTERNATIONAL F ACTORS BUT ON THE OTHER HAND, THERE WAS NOT MUCH FALL IN TURNOVER AND THE ELECTRICITY EXPENSES HAD ALSO BEEN REDUCED ONLY MARGINAL RATE, RATH ER THERE WAS AN INCREASE IN EXPENSES UNDER LABOUR AND MACHINERY REPAIR F OR WHICH THERE WAS NO EXPLANATION AND THE ASSESSEE WAS NOT MAINTAINING PROPER RECORDS OF CONSUMPTION OF RAW MATERIAL AND PRODUCTION O F FINISHED PRODUCTS ESPECIALLY BYE PRODUCTS OF MILLING, IT WAS FURTHE R ARGUED BY THE LD. DR THAT THE ASSESSEE EXPENSES ARE MORE THAN THE PURCH ASE PRICE AND THE PRICE DOES NOT APPLY UNIVERSALLY BECAUSE IT CHANG ES EVERY YEAR INDEPENDENTLY AND IT IS A MATTER OF FACT THAT NO STOCK REGISTER WAS MAINTAINED, FURTHER THE LD. DR EXPRESSED THAT THE ASSESSI NG OFFICER CORRECTLY ADDED 2% BECAUSE FROM THE TRADING RESULT OF T HE ASSESSEE IT IS APPARENT THAT THE TRADING RESULTS OF THE ASSESSEE ARE NOT FULLY RELIABLE ALTHOUGH SOME CREDIT HAS BEEN GIVEN FOR THE VARIOUS EXP LANATIONS PUT FORTH BY THE ASSESSEE. FURTHER LD. DR RELIED UPON THE JUDGMENT PASSED BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF HARISH AHU JA VS. COMMISSIONER OF INCOME TAX CITATION 2015 (93) CCH 0239 P HHC AND SUBMITTED THAT THE JURISDICTIONAL HIGH COURT HAS CLEARLY HELD THAT IN THE ABSENCE OF STOCK REGISTER, THE REJECTION OF BOOKS OF ACCOUN TS IS CORRECT AND JUSTIFIED. ITA NO.764/ASR/2014 ASST. YEAR: 2011-12 6 7. ON THE OTHER HAND, THE LD. AR CONTROVERTED THE CONTE NTION OF THE LD. DR AND ARGUED THAT ALL PURCHASES AND SALES ARE FULLY VOUCHED AND DAILY STOCK TALLIES WERE MAINTAINED FOR ALL THE QUALI TIES OF PADDY & RICE I.E. PARMAL, SHARBATI, NO. 1121 AND BASMATI. THE STA TEMENTS SHOWING DAY TO DAY DETAIL OF PURCHASE OF QUALITY-WISE P ADDY AND DAY TO DAY STATEMENTS SHOWING PRODUCTION OF RICE ETC. WERE DULY FILED BY THE ASSESSING OFFICER ALONG WITH THE YEARLY STOCK TALLIES OF AL L THE QUALITIES. THE CONTENTION OF THE DR IS NOT CORRECT THAT NO STOCK REG ISTERS HAVE BEEN MAINTAINED. THE LD. AR FURTHER ARGUED THAT THE ASSESSEE HAD DEMONST RATED REASONS FOR FALL IN THE G.P. RATE IN CORRECT MANNER AS T HE ASSESSEE IS NOT A DIRECT EXPORTER AND DIRECT EXPORTERS ARE EITHER PURCH ASING RICE FROM THE ASSESSEE OR GOT THEIR PADDY MILLED (JOB WORK) THROU GH THE ASSESSEE AND THEIR MAIN EXPORTS WERE TO IRAN AND IRAQ, DURING THE START OF F.Y. 2010-11, VARIOUS SANCTIONS WERE IMPOSED BY U.S.A./ UNI TED NATIONS AGAINST IRAQ. THERE WAS A DRASTIC CHANGE IN THE JOB WOR K AS COMPARED TO LAST YEAR AND THE ASSESSEES PROFIT HAD FALLEN DUE TO THA T. THE LD. AR FURTHER SUBMITTED THAT DETAIL OF PARTY-WISE JOB WORK DONE DURING THIS YEAR AS COMPARED TO THE SAME OF LAST YEAR IS ALSO DEMONSTR ATED TO THE ASSESSING OFFICER AND FURTHER SUBMITTED THAT THE FALL IN G.P. RATE WAS DUE TO MARKET CONDITION AND INTERNATIONAL POLITICS OVER WH ICH THE ASSESSEE HAS NO CONTROL AND EVEN OTHERWISE THAT THE LD. ASSESSING O FFICER HAD AGREED THAT THERE WAS SOME FORCE AND LOGIC IN THE ARGUM ENTS PUT FORWARD BY THE ASSESSEE HOWEVER, THE ASSESSING OFFICER MAD E THE ADDITION BY MENTIONING 7 REASONS WHICH THE ASSESSEE HAS PR OPERLY EXPLAINED. HOWEVER, THE ASSESSING OFFICER TAKEN THE CONTR ARY VIEW WHICH IS AT ALL ILLOGICAL. IT WAS FURTHER ARGUED THAT THE ASSE SSING OFFICER HAS ITA NO.764/ASR/2014 ASST. YEAR: 2011-12 7 ACCEPTED THE ACCOUNT BOOKS OF THE ASSESSEE AND HAS COMPLETED T HE ASSESSMENT ORDER U/S 143(3) AND THE FALL IN THE G.P. RAT E WAS FULLY EXPLAINED, THEREFORE, THE ADDITION IN THE TRADING A CCOUNT WAS UNCALLED FOR, FURTHER IT WAS SUBMITTED THAT THE LD. ASSESSING OFF ICER, BY AND LARGE, ACCEPTED VARIOUS REASONS GIVEN FOR FALL IN THE G. P. RATE BUT STILL THE ADDITION HAS BEEN MADE BY CALCULATING THE SAME @ 2% OF SALES, THEREFORE, THIS APPROACH IS ARBITRARY, MERELY BASED ON SURMISES & CONJECTURES AND WITHOUT PREJUDICE TO THE RIGHTS OF THE A SSESSEE IS EXORBITANTLY EXCESSIVE. IT WAS FURTHER ARGUED BY THE LD . AR THAT CIT(A) HAS CONSIDERED THE OBJECTIONS OF THE ASSESSING OFFICER AND T HE REPLIES OF THE ASSESSEE AND CONCLUDED THAT ASSESSING OFFICER PROCEEDED TO REJECT THE TRADING RESULT WITHOUT POINTING OUT ANY DEFECT IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE BECAUSE THE ASSESSMENT HAS A LSO BEEN FRAMED U/S 143(3) AND NOT U/S 144. THE LD. CIT( A) FURTHER HELD THAT THE ASSESSEE HAS SOLD SHARBATI RICE LARGELY ON CREDIT BASE. THE SUSPICION OF THE ASSESSING OFFICER RECORDING UNDER INVOICING WAS UNFOUNDED AND FURTHER OBSERVED THAT THE ASSESSEE HAD STAR TED AUTOMATIC PLANT INSTALLED AND THE RICE HUSK WAS BEING U SED AS FUEL THROUGH THE CONVEYOR BELT. THE CIT(A) NOTED IN THE O RDER THAT THE MARGINAL INCREASE IN LABOUR CHARGES WAS ATTRIBUTABLE TO CHANGE PACKING SOUGHT BY THE CLIENT AND THE MACHINERY REPAIRS WERE ON ACCOUNT OF MAJOR OVERALL NECESSITATED TO MAINTAIN AND SUPPLY THE EXPORT QUALITY OF RICE AND THE MACHINERY REPAIRS EXPENSES WERE FULLY VOUCHE D AND NO DEFECT HAS BEEN POINTED OUT. FURTHER THE CAPITAL INTRO DUCED BY THE PARTNERS IS ALSO EXPLAINED AND THE PARTNERS ARE REPEATE DLY ASSESSED AND IN THEIR PERSONAL CASES, THE INVESTMENT MADE BY THEM IS A CCEPTED AND EVEN OTHERWISE CLOSING STOCK HAS BEEN TAKEN AT AVERAGE RA TE WHICH IS AN ACCEPTED PRINCIPLE OF VALUATION OF CLOSING STOCK. THE L D. AR ALSO FILED ASSESSMENT ORDER PERTAINING TO A.Y. 2010-11 IN SUPPORT O F ASSESSEE ITA NO.764/ASR/2014 ASST. YEAR: 2011-12 8 CASE. FURTHER THE LD. AR ALSO RELIED THE CASES DECIDED BY DELHI BENCH IN ITA NO.2089/DEL/2005 AND BY ITAT BENCH, MUMBAI IN IT A NO.4125/MUM/2012 AND JUDGMENT PASSED BY THE BOMBAY HIGH COURT IN ITA NO.297/2014 TITLED AS CIT, 25 VS. UDAY. M. GHARE AND EMPHASIZED THAT CRUX OF THE AFORESAID JUDGMENTS IS THAT THE VALUA TION STOCK AT AVERAGE COSTS BASIS IS REASONABLE AND JUSTIFIED AND THE AV ERAGE COSTS METHOD IS ONE OF THE ACCEPTED METHODS FOR VALUATION OF CLOSING STOCK. 8. ALL THE GROUNDS ARE INTERLINED THEREFORE THE SAME AR E TAKEN SIMULTANEOUSLY FOR DECISION. WE HAVE GIVEN THOUGHTFUL CO NSIDERATION TO THE SUBMISSIONS OF THE PARTIES AND GONE THROUGH WITH TH E FACTS AND CIRCUMSTANCES OF THE CASE AND CASES AND DOCUMENTS RELIED UPON THE PARTIES. IN THE ASSESSMENT ORDER, IT REFLECTS THAT ASSESSING OFFICER NOTICED THAT DURING THE YEAR THERE HAS BEEN DRASTIC FAL L IN THE G.P RATE WHICH ACCORDING TO OUR CONSIDERED OPINION THE ASSESSEE HAS RE ASONABLY DEMONSTRATED ABOUT FALL OF THE G.P RATE BECAUSE THE A SSESSEE WAS NOT A DIRECT EXPORTER AND DIRECT EXPORTERS HAD EITHER PURCHA SED RICE FROM THE ASSESSEE OR GOT THEIR PADDY MILLED (JOB WORK) THROUGH T HE ASSESSEE BECAUSE THEIR MAIN EXPORTS WERE TO IRAN AND IRAQ AND V ARIOUS SANCTIONS HAVE BEEN IMPOSED BY THE USA/UN AGAINST IRAQ, THEREFO RE, THERE WAS A DRASTIC CHANGE IN THE JOB WORK AS COMPARE TO LAST YEAR AN D THE SAME WAS THE MAIN REASON FOR FALL OF THE ASSESSEE PROFIT. IN OUR VIEW, NO CONTRARY MATERIAL WAS EVER BROUGHT BY THE REVENUE AGA INST MARKET SITUATION AS DEMONSTRATED BY THE ASSESSEE, NEITHER BEFORE THE AUTHORITIES BELOW NOR BEFORE US. EVEN OTHERWISE THE ASS ESSEE FILE THE COMPARISON FOR PERUSAL OF LD. ASSESSING OFFICER AS WELL AS LD . CIT(A) AND EVEN OTHERWISE AS THE SUBMISSIONS OF THE ASSESSEE AS OBSERVED BY THE LD. CIT(A) THAT FALL IN G.P RATE DUE TO MARKET CONDI TIONS AND ITA NO.764/ASR/2014 ASST. YEAR: 2011-12 9 INTERNATIONAL POLITICS ON WHICH THE LIABILITY CANNOT B E ACCRUED TO THE ASSESSE. THEREFORE, THE OBSERVATIONS OF THE ASSESSING OFFICER WAS NOT CORRECT. FURTHER WITH REGARD TO THE CONTENTION OF LD. AR THA T LD. CIT(A) WAS NOT CORRECT IN ASSUMING THAT SINCE THE AUDITORS HAVE N OT BEEN POINTED OUT ANY DISCREPANCIES OF THE BOOKS OF THE ASSESSEE , THEREFORE, NOT FURTHER ENQUIRY WAS REQUIRED TO BE MADE BY THE A SSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS AND HE WAS NOT CORRECT IN NO APPRECIATING THE REASONS FOR THE REJECTION OF TRADING R ESULTS OF THE ASSESSEE. THIS CONTENTION HAS BEEN SPECIFICALLY DEALT WITH BY THE LD. CIT(A) IN HIS ORDER BY WHICH IT IS CLEAR THAT HE HAS CO NSIDERED VARIOUS ISSUES QUA BOOK RESULTS AND ITS CLARIFICATIONS BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDING AND EVEN OTHERWISE FROM THE ASSESSMENT ORDER, IT REFLECTS THAT THE ASSESSING OFFICER AFTER CONSIDERING THE CLARIFICATION BY THE ASSESSEE ON THE ISSUES RAISED BY THE LD. ASSESSING OFFICER, WAS JUSTIFIED TO SOME EXTENT AS RECORDED IN THE ASSESSMENT ORDE R BUT PROCEEDED TO REJECT THE TRADING RESULT WITHOUT POINTIN G OUT ANY DEFECT IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE AND EVEN O THERWISE THE ASSESSMENT HAS BEEN FRAMED U/S 143(3) BUT NOT U/S 144 THEREFORE, THE CONTENTIONS OF THE LD. DR DONT HAVE FORCE FOR TAK ING CONTRARY VIEW. WITH REGARD TO THE CONTENTIONS OF THE LD. DR THAT IN THE ABSENCE OF STOCK REGISTER, THE REJECTION OF BOOKS OF ACCOUNT IS COR RECT IN ACCORDANCE WITH THE JUDGMENTS PASSED BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF HARISH AHUJA VS. CIT, IN ITA NO.196/201 5 (2015) 93 CCH 0239 PHHC. IN THE INSTANT CASE, THE ASSESSEE HAS MAINTAINED P ROPER BOOKS OF ACCOUNTS IN WHICH NO DEFECTS HAVE BEEN FOUND BY T HE ASSESSING ITA NO.764/ASR/2014 ASST. YEAR: 2011-12 10 OFFICER. EVEN OTHERWISE THE ACCOUNTING RESULTS AS PER PROFIT/LOSS AC COUNT AND TRADING ACCOUNT PREPARED BY THE ASSESSEE DOES NOT DE SERVE REJECTION UNLESS AND UNTIL SOME DEFECTS POINTED IN THE BO OKS OF ACCOUNT. THEREFORE, IT IS NOT THE CASE HERE THAT IN ABSENCE OF STO CK REGISTER, THE BOOKS OF ACCOUNT AS LIABLE TO BE REJECTED, SPECIFICALLY, I N THE ASSESSMENT OF THE PREVIOUS YEARS, THE DEPARTMENT ACCEPTED THE SAME TRADING RESULT OF GROSS PROFIT RATIO EVEN OTHERWISE THE G.P RATIO OF A.Y.2007-08 AND 2008-09 IS SIMILAR TO THE G.P RATIO OF A.Y.2011-12 AN D THE COMPLETE BILLS /VOUCHERS, QUANTITY RECORDS AND COMPLETE BOOKS OF ACCOUNTS ARE IN CORRECT FORM AND DULY PRODUCED BEFORE THE AUTHORITIES B ELOW FROM TIME TO TIME AND EVEN OTHERWISE THE ASSESSEE HAD MAINTAINED C OMPLETE STOCK TALLIES OF ALL PURCHASE, PRODUCTIONS AND SALE AND INVENTO RIES OF OPENING AND CLOSING STOCK AND FURNISH THE SAME ON RECORD AND FU RTHER ALL PURCHASE AND SALES WERE FULLY VOUCHED AND HISTORY OF T RADING ACCOUNT WAS ACCEPTED IN THE PAST AND NO ADDITION IN TRADING ACCOU NT WAS EVER MADE AND EVEN OTHERWISE THE OTHER CO-ORDINATION BENCH ES OF MUMBAI AND DELHI DEALT WITH THE SAME IDENTICAL MATTER WITH R EGARD TO THE FOLLOWING OF AVERAGE COSTS METHOD AS ONE OF THE ACCEPTED METHODS FOR VALUATION OF CLOSING STOCK. THEREFORE, WE DO NOT HAVE ANY HESITATION TO HOLD THAT THE ASSESSEE IN THE RELEVANT A.Y FOLLOWED AV ERAGE COSTS METHOD OF VALUATION OF CLOSING STOCK WHICH IS ACCEPTED AS O NE OF THE ACCEPTED METHOD. FURTHER WITH REGARD TO THE CONTENTION OF THE LD. DR THAT ASSESSEE WAS CLAIMING THAT DURING THE YEAR, THERE WAS A SLUMP IN BUSINESS DUE TO INTERNATIONAL FACTORS BUT ON THE OTHER HAND, THERE WAS NOT MUCH FALL IN TURNOVER AND THE ELECTRICITY EXPENSES HAD ALSO BEEN REDU CED ONLY ON THE MARGINAL RATE AND RATHER THERE WAS AN INCREASE IN EXPE NSES UNDER LABOUR, AND MACHINERY REPAIR FOR WHICH THERE WAS NO EX PLANATION AND ITA NO.764/ASR/2014 ASST. YEAR: 2011-12 11 THE ASSESSEE HAS NOT MAINTAINED PROPER RECORDS OF CONSUMPTIO N OF RAW MATERIAL AND PRODUCTION FINISHED PRODUCTS ESPECIALLY BYE PRODUCT OF MILLING AND EVEN OTHERWISE THE ASSESSEE EXPENSES ARE MORE THAN PURCHASE PRICE AND THE PRICE DOES NOT APPLY UNIVERSALLY BECAUSE WHICH CHANGES EVERY YEAR INDEPENDENTLY AND IT IS MATTER FACT THAT NO STOCK REGISTER WAS MAINTAINED. IN OUR CONSIDERED VIEW, THE LD . CIT(A) THOROUGHLY CONSIDERED THE SUBMISSIONS OF THE ASSESSEE TO TH E EFFECT THAT DURING THE ASSESSMENT YEAR 2011-12, THERE WAS ACCEPTANCE OF HEAVY LOSSES BY THE OTHER SIMILAR INDUSTRIES AS OF THE ASSESSEE DU E TO RESTRICTIONS IMPOSED BY THE U.S GOVT. ON IRAN WHO IS TH E MAIN CONSUMER OF RICE OF THE ASSESSEE AND FOR THAT REASON THE ASSESSEE DECID ED TO REMAIN AWAY FROM THE MARKET AND PURCHASING IN THE RE LEVANT ASSESSMENT YEAR WAS ONLY OF RS.8.8 CRORES AS AGAINST PURCHASE OF RS.43.60 CRORES IN THE PREVIOUS FINANCIAL YEAR AND THE ASSESSEE SOLD ITS BROUGHT FORWARDED STOCKS AT THE LOWER AVERAGE PRICE AS CO MPARED TO LOSS YEAR AND THE SAME IS ALSO EVIDENT FROM THE COMPARISO N OF COSTS OF SALE VS. SALE PRICE CHART AND THE ASSESSEE ALSO SEEING THE HE AVY RATE OF PADDY DURING THE CROP SEASON OF F.Y. 2010-11 AND RESTR ICTION ON IRAN, MOST OF THE EXPORTERS INCLUDING THE ASSESSEE REDUCED THEIR BUSINESS WHICH AFFECTED THE SHELLING RATE ADVERSELY AND ON THE OTHER HAND INCREASE IN THE RATE OF BUYER, FUEL, LABOUR AND CONSUM ABLE WHICH AFFECTED THE NET PROFIT FROM SHELLING ALSO. ON THE AFORESAID OBSERVATION, WE DO NOT FIND ANY REASO NS TO INTERFERE WITH THE ORDER PASSED BY THE LD. CIT(A) AND IN OUR CONSIDERED VIEW, THE APPEAL FILED BY THE REVENUE/DEPARTMENT IS LIABLE TO BE DISMISSED, SPECIALLY IN VIEW OF THE FACT THAT THE ASSESSING OFFICER PROCEEDED TO REJECT THE TRADING RESULT WITHOUT POINTIN G OUT ANY DEFECTS IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE BECAUSE T HE ASSESSMENT HAS FRAMED U/S 143(3) AND SECONDLY THE AVERAGE COST ITA NO.764/ASR/2014 ASST. YEAR: 2011-12 12 METHOD WHICH IS REASONABLE AND JUSTIFIED AND FOLLOWED B Y THE ASSESSEE FROM YEAR AFTER YEAR AND RECOGNIZED AS ONE OF THE ACCEP TED METHODS FOR VALUATION OF CLOSING STOCK BY VARIOUS CO-ORDINATION BEN CHES AS WELL AS HIGH COURTS. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE/ DEP ARTMENT STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 .05.2017. SD/- SD/- (T. S. KAPOOR) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JU DICIAL MEMBER DATED: 26.05.2017. /GP/ SR.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