Arabinda Kundu, Hooghly V. ITO, WD-49(2), KOLKATA, Karnataka

ITA 847/KOL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4590 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-09-2016
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Next Hearing Date: 23-08-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 02-05-2014
• Court: TRIBUNAL
• Department Lawyers: AMITABH BHATTACHARYA
• Section: 142(1); 133(6); 131; 69

Judgement Text

1 ITA NO.847/KOL/2014-ARABINDA KUNDU A.Y.2009-10 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH SMC K OLKATA [BEFORE HONBLE SHRI N.V.VASUDEVAN, JM ] ITA NO.847/KOL/2014 ASSESSMENT YEAR : 2009-10 ARABINDA KUNDU -VERSUS- I.T.O., WARD-49(1) KOLKATA ` KOLKATA (PAN:APXPK 5089 B) (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI SOMNATH GHOSH, ADVOCATE FOR THE RESPONDENT: SHRI AMITABH BHATTACHARYA, JCIT DATE OF HEARING : 23.08.2016. DATE OF PRONOUNCEMENT : 02.09.2016. ORDER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 17.02.2014 OF CIT(A)-XXXII, KOLKATA RELATING TO A.Y.2009-10. 2. GROUND NOS. 1 AND 2 RAISED BY THE ASSESSEE RE AD AS FOLLOWS :- 1. FOR THAT THE LD. COMMISSIONER OF INCOME TAX (AP PEALS) XXXII, KOLKATA GRAVELY ERRED IN UPHOLDING THE ADDITION AMOUNTING TO RS. 2, 41,530/- WHICH WAS BASED ON AN ILLEGAL REFERENCE TO THE PROVISIONS OF S. 40(A)(IA) OF THE INCOME TAX ACT, 1961 MISCONCEIVING THE PAYMENT INCURRED ON ACCOUNT OF AL LEGED 'COMMISSION' BY THE LD. INCOME TAX OFFICER, WARD 49(1), KOLKATA WHICH HAD N O CONNOTATION OF FALLING FOUL OF SUCH ENACTMENT AND THE PURPORTED FINDING REACHED ON THAT BEHALF ON EXTRANEOUS CONSIDERATIONS NOT GERMANE TO THE ISSUE IS TOTALLY OPPOSED TO LAW. 2. FOR THAT THE LD. COMMISSIONER OF INCOME TAX (APP EALS) XXXII, KOLKATA ACTED UNLAWFULLY IN UPHOLDING THE ADDITION IN THE SUM OF RS. 2,41,530/- IN RESPECT OF ALLEGED PAYMENT OF COMMISSION MADE ON AN ILLEGAL REFERENCE TO THE PROVISIONS OF S. 40(A)(IA) OF THE INCOME TAX ACT, 1961 BY THE LD. INCOME TAX OFFI CER, WARD 49(1), KOLKATA AND THE ADVERSE CONCLUSION REACHED ON THAT BEHALF WITHOUT C ONSIDERING THE PROPER FACTUAL MATRIX OF THE INSTANT CASE AND BASING ON SUBJECTIVE ISSUES NOT AMENABLE TO REASON IS WHOLLY ERRONEOUS, WRONG AND FLAWED IN THE CIRCUMSTA NCES OF THE CASE. 3. AS FAR AS THE AFORESAID GROUNDS ARE CONCERNED, T HE AO DISALLOWED A SUM OF RS.2,41,530/- WHICH WAS PAYMENT ON ACCOUNT OF COMMI SSION ON WHICH THE ASSESSEE 2 ITA NO.847/KOL/2014-ARABINDA KUNDU A.Y.2009-10 FAILED TO DEDUCT TAX AT SOURCE AS REQUIRED U/S 194H OF THE INCOME TAX ACT, 1961 (ACT). IN VIEW OF THE PROVISIONS OF SEC.40(A)(IA) OF THE A CT WHICH PROVIDES THAT WHERE TAX HAS NOT BEEN DEDUCTED AS REQUIRED IN LAW, THE CORRESPON DING EXPENDITURE ON WHICH TAX WAS NOT DEDUCTED WILL NOT BE ALLOWED AS A DEDUCTION, TH E AO DISALLOWED A SUM OF RS.2,41,530/- AND ADDED THE SAID SUM TO THE TOTAL I NCOME OF THE ASSESSEE. THE ORDER OF AO WAS CONFIRMED BY THE CIT(A) GIVING RAISE TO G R.NO.1 & 2 BY THE ASSESSEE BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING OF THE APPEAL, THE LIMI TED PRAYER OF THE LD. COUNSEL FOR THE ASSESSEE WAS TO SET ASIDE THE ORDER OF CIT(A) ON TH IS ISSUE AND REMAND THE ISSUE OF DISALLOWANCE U/S 40(A)(IA) OF THE ACT TO THE AO WIT H THE LIBERTY TO THE ASSESSEE TO ESTABLISH BEFORE AO THAT THE PERSONS TO WHOM THE PA YMENTS WERE MADE WITHOUT DEDUCTING TAX AT SOURCE AFTER FILING THEIR RETURN O F INCOME AND SHOWED THE AMOUNTS RECEIVED FROM THE ASSESSEE AS TOTAL INCOME. IF THE PERSONS TO WHOM THE ASSESSEE MADE PAYMENTS HAVE INCLUDED THE RECEIPTS IN THEIR TOTAL INCOME THE ADDITION U/S 40(A)(IA) OF THE ACT SHOULD BE DELETED. IN THIS REGARD OUR ATTEN TION WAS MADE TO THE DECISION OF THIS BENCH RENDERED IN THE CASE OF M/S. ABHOY CHARAN BAK SHI VIDE ITA NO.1492/KOL/2015 ORDER DATED 06.04.2016 WHERE IN SI MILAR DIRECTION WAS GIVEN BY ITAT. 5. I HAVE GIVEN A CAREFUL CONSIDERATION TO THE S UBMISSIONS MADE BY THE LD. COUNSEL FOR THE ASSESSEE. THIS TRIBUNAL IN THE CASE OF M/S . ABHOY CHARAN BAKSHI (SUPRA) HAS HELD AS FOLLOWS :- 15. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS. THE CIT(A) HAS HELD THAT THE SECOND PROVISO TO SEC.40(A)(IA) O F THE ACT WILL APPLY IN THE PRESENT CASE AND THAT APPLICABILITY OF THE SECOND PROVISO TO SEC .40(A)(IA) OF THE ACT WHICH WAS INTRODUCED BY THE FINANCE ACT, 2012 W.E.F. 1.4.2013 WAS RETROSPECTIVE IN OPERATION AND WAS TO APPLY W.E.F. 1-4-2005, BEING THE DATE FROM W HICH SUB-CLAUSE (IA) OF SECTION 40(A) WAS INSERTED BY THE FINANCE (NO. 2) ACT, 2004. T HE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANSAL LAND MARK TOWNSHIP (I) PVT.LT D., IN ITA NO.160/2015 JUDGMENT DATED 26.8.2015 HAS TAKEN THE VIEW THAT THE INSERTI ON OF THE SECOND PROVISO TO SEC.40(A)(IA) OF THE ACT IS RETROSPECTIVE AND WILL APPLY FROM 1.4.2005. ONCE IT IS HELD THAT THE ASSESSEE IS ENTITLED TO THE BENEFIT OF 2 ND PROVISO TO SEC.40(A)(IA) OF THE ACT, THE CIT(A) OUGHT TO HAVE DIRECTED THE AO TO VERIFY WHET HER THE RECIPIENTS HAVE INCLUDED THE RECEIPTS PAID BY THE ASSESSEE IN THEIR RESPECTIVE R ETURNS OF INCOME AND ALSO PAID TAXES ON THE SAME. TO THE EXTENT THE RECIPIENTS FROM THE ASSESSEE HAVE SO INCLUDED THE SUM IN THEIR RETURNS OF INCOME AND FILED THE SAME, NO DISA LLOWANCE U/S.40(A)(IA) OF THE ACT 3 ITA NO.847/KOL/2014-ARABINDA KUNDU A.Y.2009-10 OUGHT TO HAVE BEEN SUSTAINED BY THE CIT(A). THE C IT(A) OUGHT TO HAVE ALSO DIRECTED THE AO THAT IN CASE THE RECIPIENT PARTIES ARE NOT C OOPERATING IN PROVIDING DETAILS, THE AO SHOULD CALL FOR THE INFORMATION U/S. 133(6) OR 1 31 OF THE ACT, FOR VERIFICATION OF THE SAME. IN THIS REGARD WE ALSO FIND THAT THE ASSESSE E HAS FURNISHED ALL THE DETAILS OF ASSESSMENT PARTICULARS OF THE RECIPIENTS OF PAYMENT FROM THE ASSESSEE. THE AO THEREFORE SHOULD NOT HAVE ANY DIFFICULTY IN MAKING THE REQUIRED VERIFICATION. WE THEREFORE SET ASIDE THE ORDER OF THE CIT(A) TO THE EXTENT TO WHICH HE HAD SUSTAINED THE ORDER OF THE AO ON THE DISALLOWANCE U/S.40(A)(IA) O F THE ACT AND REMAND THE ISSUE TO THE AO TO VERIFY WHETHER THE RECIPIENTS HAVE INCLUDED T HE RECEIPTS PAID BY THE ASSESSEE IN THEIR RESPECTIVE RETURNS OF INCOME AND ALSO PAID TA XES ON THE SAME. TO THE EXTENT THE RECIPIENTS FROM THE ASSESSEE HAVE SO INCLUDED THE S UM IN THEIR RETURNS OF INCOME AND FILED THE SAME, NO DISALLOWANCE U/S.40(A)(IA) OF TH E ACT SHOULD BE MADE BY THE AO. IN CASE THE RECIPIENT PARTIES ARE NOT COOPERATING IN P ROVIDING DETAILS, THE AO SHOULD BE DIRECTED TO CALL FOR THE INFORMATION U/S. 133(6) OR 131 OF THE ACT, FOR VERIFICATION OF THE SAME. 6. I AM OF THE VIEW THAT SIMILAR DIRECTIONS AS WE RE MADE ABOVE SHOULD BE GIVEN IN THE PRESENT CASE ALSO. THE ISSUE IS ACCORDINGLY SET AS IDE TO THE AO FOR VERIFICATION AS DONE IN THE AFORESAID DECISION. GROUND NOS.1 AND 2 ARE ALLOWED FOR STATISTICAL PURPOSES. 7. GROUND NOS. 3 AND 4 RAISED BY THE ASSESSEE RE AD AS FOLLOWS :- 3. FOR THAT THE SPECIOUS ACTION OF THE LD. COMMISS IONER OF INCOME TAX (APPEALS) XXXII, KOLKATA IN UPHOLDING THE ESTIMATED INCOME IN THE SUM OF RS. 15,56,820/- ON ACCOUNT OF ALLEGED 'SALE OF RICE BRAN' AS CONCEIVED BY THE LD. INCOME TAX OFFICER, WARD 49(1), KOLKATA INDULGING IN SPECULATION, SURMISE, S USPICION AND CONJECTURE IS WHOLLY ILLEGAL, ILLEGITIMATE AND INFIRM IN LAW. 4. FOR THAT THE LD. COMMISSIONER OF INCOME TAX (APP EALS) XXXII, KOLKATA WAS REMISS IN UPHOLDING THE ADDITION AMOUNTING TO RS. 1 5,56,820/- MADE BY THE LD. INCOME TAX OFFICER, WARD 49(1), KOLKATA INVOKING THE PROVI SION OF S. 69 OF THE INCOME TAX ACT, 1961 WITHOUT CONSIDERING THE FACTUAL MATRIX OF THE INSTANT CASE IN THE CORRECT PERSPECTIVE AND THE SPECIOUS FINDINGS IN THAT REGAR D IS WHOLLY ARBITRARY, UNWARRANTED AND PERVERSE. 8. ACCORDING TO THE ASSESSEE IT IS RUNNING ONLY A HUSKING MILL WHEREAS ACCORDING TO THE AO THE ASSESSEE IS RUNNING A RICE MILL. THE QUE STION WHETHER THERE IS A DIFFERENCE BETWEEN A RICE MILL AND A HUSKING MILL WILL HAVE TH E SOME BEARING ON THE DECISION ON THE ISSUE RAISED BY THE ASSESSEE IN GROUND NOS. 3 A ND 4. THE ASSESSEE IS IN THE BUSINESS OF EXTRACTING RICE FROM PADDY. THE ASSESSEE PURCHAS ED PADDY FOR MILLING TO THE EXTENT OF 27116.57 QNTL. THE OPENING STOCK OF PADDY WAS 4 000 QNTL. THUS IN ALL THE QUANTITY OF PADDY AVAILABLE FOR MILLING WAS 31,116.57 QTL. DURING THE PREVIOUS YEAR THE 4 ITA NO.847/KOL/2014-ARABINDA KUNDU A.Y.2009-10 ASSESSEE HAD SHOWN SALE OF RICE OF 21175 QNTL. THE PREVAILING PERCENTAGE OF YIELD OF RICE TO PER 100 QUNTL. OF PADDY WAS 68 QNTL. OF RIC E AND INCIDENTALLY 5 QNTL. OF BRAN WOULD EMANATE AS BY PRODUCT IN THE PROCESSING OF MI LLING OF PADDY. THE ASSESSEE DID NOT SHOW ANY CLOSING STOCK OF RICE WHICH ACCORDING TO THE AO INDICATED THAT THE ENTIRE QUANTITY OF PADDY AVAILABLE (OPENING STOCK + PURCHA SES) HAD BEEN MILLED. ACCORDING TO THE AO IF 31,116.57 QNTL. OF PADDY IS MILLED THE YIELD OF BRAN AS BY PRODUCT OUGHT TO HAVE BEEN 1556.82 QUNTL. THE ASSESSEE DID NOT SHOW ANY SALE OR BRAN OR CLOSING STOCK OF BRAN. THE AO WAS OF THE VIEW THAT THE BRAN PROD UCED HAD BEEN SOLD BY THE ASSESSEE OUTSIDE THE BOOKS OF ACCOUNTS. THE AO WAS OF THE VIEW THAT APPLYING THE MINIMUM RATE OF RS.1000 PER QUNTL. OF BRAN, AN ADDI TION OF 15,56,820/- SHOULD BE MADE TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF SALE OF BRAN OUTSIDE THE BOOKS OF ACCOUNTS. 9. THE AO VIDE THIS OFFICE LETTER DT.21/12/2011 RE QUESTED THE ASSESSEE TO SHOW CAUSE WHY THE AFORESAID ADDITION SHOULD NOT BE MADE BASED ON THE ALLEGATIONS MADE BY THE AO AS STATED IN THE EARLIER PARAGRAPH. IN RESPONSE , ASSESSEE VIDE HIS WRITTEN SUBMISSION DT.26-12-2011 STATED THAT ....I CARRY ON A MINI RICE MILL THAT IS CALLED HUSKING MILL NOT RICE MILL. HE ALSO STATED THAT NO BRAN WAS PRODUCED DURING THE YEAR UNDER CONSIDERATION. 10. THE AO HOWEVER REJECTED THE CONTENTION OF THE ASSESSEE AND HE HELD THAT THE ASSESSEE FAILED TO SUBSTANTIATE THAT THE ASSESSEE W AS NOT OWNING 'MINI RICE MILL' AND THAT WHAT HE OWNED SHOULD ONLY BE TREATED AS 'HUSKI NG MILL'. THE AO HELD THAT THE ASSESSEE SOLD BRAN PRODUCED IN THE PROCESS OF MILLI NG PADDY OUTSIDE THE BOOKS OF ACCOUNTS AND ADDED A SUM OF RS.15,56,820/- TO THE TOTAL INCOME OF THE ASSESSEE. 11. BEFORE CIT(A) THE ASSESSEE CONTENDED THAT FIN DINGS OF THE AO IN RESPECT OF INCOME FROM UNDISCLOSED SALE OF BRAN FOR RS. 15,56, 820 CANNOT BE SUSTAINED AS IT IS BASED ON CONJECTURES AND SURMISES. IT WAS SUBMITTE D THAT THE AO FAILED AND/OR NEGLECTED TO APPRECIATE THAT THE ASSESSEE WAS CARRY ING ON BUSINESS OF RUNNING A MINI RICE MILL COMMONLY KNOWN AS HUSKING MILL AND WHATEV ER BRAN WAS AVAILABLE WAS CONSUMED IN THE PROCESS OF BOILING PADDY AS A FUEL ELEMENT. HENCE THE WRONGFUL ADDITION OF RS.15,56,820.00 TO THE TOTAL INCOME WAS UNJUSTIFIED AND AS SUCH THE SAME 5 ITA NO.847/KOL/2014-ARABINDA KUNDU A.Y.2009-10 SHOULD BE DELETED. THE ASSESSEE POINTED OUT THAT THERE WERE NUMBER OF DIFFERENCE BETWEEN MINI RICE MILL AND A RICE MILL. IT WAS ARG UED THAT A MINI RICE MILL USES MANUALS AS WELL AS SEMI MECHANIZED PROCESS OF OPERA TIONS. IT CONTAINS, SOAKING TANK, STEAM PARBOILED DRYING FLOOR, ENGLABERG HULLER. BUT A RICE MILL FULLY MECHANIZED PROCESSED OF DE-STONING PARBOILING HUSKING HUSK ASP IRATION, PADDY SEPARATIONS, WHITENING POLISHING LENGTH GRADING. IT CONTAINS PRE -CLEANER, SOAKING TANK, BOILER, STEAM PRESSURE, PARBOILED, DRYER, RUBBER ROLLER ETC . IN A MINI RICE MILL OR HUSKING MILL, THE BRAN PRODUCED IS OF LITTLE QUANTITY AND IS GENE RALLY USED ONLY AS FUEL FOR CARRYING OUT THE PROCESS OF BOILING PADDY BEFORE DRYING. IT WAS SUBMITTED THAT THE ADDITION WAS MADE ONLY BECAUSE OF THE MISCONCEPTION THAT THE ASS ESSEE WAS A RICE MILL. 12. CIT(A) HOWEVER DID NOT AGREE WITH THE SUBMISSI ONS OF THE ASSESSEE AND HE HELD AS FOLLOWS :- THE AO HAS HELD THAT THOUGH THE ASSESSEE HAS MILLE D 27116.57 QUINTALS OF PADDY, HE HAS DECLARED NO SALE OR STOCK OF BRAN, WHICH IS A B Y-PRODUCT OF MILLING OF RICE. THE AVERAGE PRODUCTION OF RICE BRAN PER 100 QUINTALS IS TAKEN BY THE AO AT 5 QUINTALS. THE RICE BRAN IS A SOUGHT AFTER COMMODITY FOR ITS RICE BRAN OIL AND THE DEOILED RICE BRAN IS AGAIN MUCH SOUGHT AFTER FOR POULTRY, CATTLE & FISH FEED. THE STATE OF WEST BENGAL IS THE LARGEST SUPPLIER OF DEOILED RICE BRAN. THE AO HAS ESTIMATED THE YIELD OF BRAN AT ONLY 5% ( WHICH IS VERY LOW) AND CALCULATED THAT THE ASSESSEE HAS NOT DECLARED THE INCOME FROM SALE OF BRAN, WHICH WAS ESTIMATED BY HIM AT RS. 15,56,820/-. THE YIELD OF RICE BRAN AS P ER VARIOUS EXPERTS IS USUALLY BETWEEN 6-12% AND SUCH REPORTS ARE AVAILABLE ON THE INTERNE T. THEREFORE, THE FIGURE OF 5% USED BY THE A.O. IS A ESTIMATE. THE ASSESSEE CLAIMS THAT HE BASICALLY RUNS A HUSKING MILL AND WHATEVER BRAN WAS PRODUCED HAS BEEN CONSUMED AS FUE L. HOWEVER, THERE IS NO EVIDENCE TO THIS EFFECT. RICE IS A CONTROLLED COMMODITY AND THE RICE MILLS HAVE TO GET GOVERNMENT PERMISSION TO OPERATE. THE ASSESSEE HAS NOT PRODUCE D ANY GOVERNMENT LETTER/AUTHORIZATION MENTIONING THAT HE IS ONLY TO OPERATE A HUSKING MILL. IN ANY CASE, THE RANGE OF OPERATIONS IN A MINI RICE MILL ARE NEARLY THE SAME AS A REGULAR RICE MILL AND THE DIFFERENCE IS LARGELY OF THE CAPACITY. AS THE ASSESSEE HAS NOT BEEN ABLE TO REBUT THE FIND INGS OF THE AO WITH ANY EVIDENCE, THE GROUND OF APPEAL NO.3 IS DISMISSED. 13. AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE HAS RAISED GROUND NOS.3 AND 4 BEFORE THE TRIBUNAL. 14. THE LD. COUNSEL FOR THE ASSESSEE DREW MY ATTEN TION TO THE BALANCE SHEET OF THE ASSESSEE WHICH SHOWS THAT THE PLANT AND MACHINERY O WNED BY THE ASSESSEE WAS ONLY 6 ITA NO.847/KOL/2014-ARABINDA KUNDU A.Y.2009-10 OF THE VALUE OF RS.24,894/-. IT WAS SUBMITTED BY HI M THAT IT WAS UNREALISTIC ON THE PART OF THE REVENUE AUTHORITIES TO PRESUME THAT THE ASSE SSEE WAS CARRYING ON RICE MILL WITH SOPHISTICATED EQUIPMENTS AND THEREFORE THE ASSESSEE OUGHT TO HAVE OBTAINED BRAN FROM RICE MILL AND SOLD THEM OUTSIDE THE BOOKS OF ACCOUN T. HE POINTED OUT THAT BEFORE THE AO THE ASSESSEE SPECIFICALLY SUBMITTED THAT THE ASS ESSEE WAS ONLY CARRYING OUT HUSKING OF PADDY WHEREBY THE PADDY IS FIRST BOILED AND LATE R DRIED AND WHATEVER IS DERIVED AS BRAN IN THE PROCESS OF HUSKING IS USED AS A FUEL BY THE ASSESSEE FOR THE PURPOSE OF BOILING THE PADDY. THE OTHER SUBMISSIONS MADE BEFOR E CIT(A) WERE REITERATED. HE ALSO PLACED RELIANCE ON THE DECISION OF ITAT, AMRITSAR B ENCH IN THE CASE OF CHATTAR EXTRACTION (P)LTD. VS ITO 91 ITD 385 (ASR)(TM) WHER EIN IT WAS HELD THAT WHERE THE CORRECTNESS AND COMPLETENESS OF AUDITED BOOKS OF AC COUNTS HAD NOT BEEN DISPUTED BY THE REVENUE, ADDITION ON ACCOUNT OF RICE BRAN EXTRA CTION WAS NOT JUSTIFIED. THE LD. DR RELIED ON THE ORDER OF CIT(A). 15. I HAVE GIVEN A CAREFUL CONSIDERATION TO THE RI VAL SUBMISSIONS. I AM OF THE VIEW THAT TAKING INTO CONSIDERATION THE PROCESS OF HUSKING CA RRIED OUT BY THE ASSESSEE OF PADDY, THE ASSESSEES NATURE OF ACTIVITY OUGHT NOT TO HAVE BEEN COMPARED WITH THE RICE MILL WHICH IS A SOPHISTICATED MECHANISED PROCESS OF OPER ATION. AS I HAVE ALREADY SEEN THE PLANT AND MACHINERY OWNED BY THE ASSESSEE WAS NEGLI GIBLE AND IT WAS ONLY WORTH LESS THAN RS.25,000/-. THEREFORE THE BASIC ASSUMPTION ON WHICH THE IMPUGNED ADDITION WAS MADE BY THE REVENUE AUTHORITIES CANNOT BE SUSTAINED . BESIDES THE ABOVE THE COMPLETENESS AND CORRECTNESS OF THE BOOKS OF ACCOUN T WAS ALSO NOT DISPUTED BY THE AO AND IN THE CIRCUMSTANCES AS ALREADY LAID DOWN BY HO NBLE AMRITSAR BENCH IN THE CASE OF CHATTAR EXTRACTION (P)LTD VS ITO (SUPRA) NO ADDI TION COULD BE MADE ON ACCOUNT OF RICE BRAN EXTRACTION. THERE IS NO EVIDENCE ON RECOR D TO SHOW EITHER AVAILABILITY OF BRAN OR ITS SALE OUTSIDE THE BOOKS OF ACCOUNTS. IN SUCH CIRCUMSTANCES, I AM OF THE VIEW THAT THE ADDITION MADE BY THE AO WAS PURELY ON ASSUMPTIO NS AND CONJECTURES. I THEREFORE DELETE THE ADDITION MADE BY THE REVENUE AUTHORITIES . 16. GROUND NO.5 RAISED BY THE ASSESSEE READS AS FO LLOWS :- 5. FOR THAT THE LD. COMMISSIONER OF INCOME TAX (APP EALS) XXXII, KOLKATA MISLED HIMSELF IN UPHOLDING THE ACTION OF THE LD. INCOME T AX OFFICER, WARD 49(1), KOLKATA OF DENYING THE LOSS IN THE SUM OF RS. 1,98,145/- SUFFE RED ON HANDLING CHARGES ON A WRONG 7 ITA NO.847/KOL/2014-ARABINDA KUNDU A.Y.2009-10 CONSPECTUS OF MATERIAL FACTS AND THE ALLEGED FINDIN G ON THAT ISSUE IS COMPLETELY UNFOUNDED, UNJUSTIFIED AND UNTENABLE IN LAW. 17. ON PERUSAL OF PROFIT AND LOSS A/C FOR THE YEAR UNDER CONSIDERATION, THE AO NOTICED THAT THE ASSESSEE CLAIMED AN EXPENDITURE OF RS.1,98 ,145/- IN RESPECT OF SHORTAGE OF RICE IN THE PROCESS OF LOADING AND UNLOADING. THIS HAS BEEN REFERRED TO AS SHORTAGE IN HANDLING IN THE ORDER OF ASSESSMENT. VIDE NOTICE U/ S 142(1) AS WELL AS ORDER SHEET NOTING, THE AO CALLED UPON THE ASSESSEE TO SUBMIT D ETAILS AND BASIS ON WHICH SUCH SHORTAGE IN HANDLING WAS ARRIVED AT BY THE ASSESSEE . ACCORDING TO THE AO, THE ASSESSEE FAILED TO GIVE PROPER EXPLANATION. THE AO NOTICED THAT THE ASSESSEE HAD SHOWN CLOSING STOCK OF PADDY OF RS.1,41,100/- AND F OLLOWING THE FIFO METHOD, QUANTITY OF STOCK COMES TO 156.77 QNTL. (RS.1,41,10 0/RS.900)(RS.900 PURCHASE AS ON 28-02-09 OF RS.13,95,000/1550 QNTL.). HENCE, QUANTI TY OF RICE PRODUCED WAS CALCULATED BY THE AO AS UNDER :- OPENING STOCK OF PADDY (AS SHOWN) 4000.00 QNTL. ADD: PURCHASE OF PADDY 27116.57 QNTL. 31116.57 QNTL. LESS : CLOSING STOCK CALCULATED ABOVE 156.77 QNTL. 30959.80 QNTL. THE AO FURTHER HELD THAT AS PER GOVT. NORMS, ASSESS EE COULD PRODUCE RICE OUT OF MILLING OF PADDY OF 30959.80 QNTL. @68% OF 21052.66 QNTL. BUT ASSESSEE SOLD 21175.00 QNTL WHICH INDICATE THAT ASSESSEE PRODUCED RICE NEARLY 68.40% HENCE ACCORDING TO THE AO THE ENTIRE PRODUCED RICE HAS BE EN SOLD AND STOCK OF PADDY IS KEPT INTACT. IN THE LIGHT OF THE ABOVE, SHORTAGE OF HAN DLING OF RS.1,98,145/- WAS CONCLUDED BY THE AO AS BOGUS AND WITHOUT ANY BASIS. HE THEREF ORE DISALLOWED THE SAME AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 18. BEFORE CIT(A) THE ASSESSEE SUBMITTED THAT SHO RTAGE IN HANDLING OF 3,116.57 QNTL. WAS ON ACCOUNT OF DUST IMMATURE PADDY, DAMAGED GUNN Y BAG FOR PACKING, EATEN BY RABBITS AND AT THE TIME OF DYING EATEN BY BIRDS. H ENCE THE ACTUAL SHORTAGE ARISING OUT OF ABOVE REASONS SHOULD BE ALLOWED AND THE ADDITION OF RS.1,98,145.00 SHOULD BE 8 ITA NO.847/KOL/2014-ARABINDA KUNDU A.Y.2009-10 DELETED. THE CIT(A) HOWEVER CONFIRMED THE ORDER OF AO HOLDING THAT THE ASSESSEE FAILED TO SATISFACTORILY EXPLAIN THE NATURE OF SHOR TAGE IN HANDLING. AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE HAS RAISED GROUND NO.5 BEFORE THE TRIBUNAL. 19. I HAVE HEARD THE RIVAL SUBMISSIONS. IN MY VIEW THAT IT IS NOT POSSIBLE TO ARRIVE AT THE CONCLUSION THAT THERE WOULD BE NO SHORTAGE OF S TOCK DUE TO DAMAGE IMMATURE PADDY DAMAGED CAUSED BY RATS ETC. THE BASIS ON WHIC H THE AO DISALLOWED THE CLAIM OF THE ASSESSEE WAS THAT THE ASSESSEE HAD SOLD THE ENT IRE STOCK OF PADDY AND THERE WAS NO POSSIBILITY OF SHORTAGE AND CONSEQUENT LOSS IN HAND LING PADDY. SUCH MATHEMATICAL CALCULATION IN MY VIEW WOULD NOT BE SUFFICIENT TO M AKING THE IMPUGNED DISALLOWANCE. SINCE THE IMPUGNED DISALLOWANCE IS MADE ON ASSUMPTI ONS AND SURMISES THE SAME IS DIRECTED TO BE DELETED. 20. IN THE RESULT THE APPEAL OF THE ASSESSEE IS AL LOWED. O RDER PRONOUNCED IN THE OPEN COURT ON 02.09.2016. SD/- [ N.V.VASUDEVAN ] JUDICIAL MEMBE R DATED : 02.09.2016. [RG PS] COPY OF THE ORDER FORWARDED TO: 1.ARABINDA KUNDU, C/O SHRI SOMNATH GHOSH, ADVOCATE, SEVEN BROTHERSLODGE, P.O.BUROSHIBTALA, CHINSURAH,DIST. HOOGHLY-712105. 2.I.T.O., WARD-49(1), KOLKATA.. 3. CIT(A)-XXXII, KOLKATA. 4. CIT-XVII, KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER, ASST. REGISTRAR, ITAT, KOLKATA BENCHES 9 ITA NO.847/KOL/2014-ARABINDA KUNDU A.Y.2009-10