M/s. Shiva Cotton & General Mills, Ferozepur V. The Incme-tax Officer, Ferozepur

ITA 87/ASR/2014

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3805 (ITAT-AMRITSAR)
• Duration Of Justice: 4 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 24-01-2019
• Assessment Year: 2010-2011
• Appeal Filed On: 11-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR (SMC) BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER I.T.A. NO. 87/ASR/2014 AS SESSMENT YEAR: 2010-11 SHIVA COTTON & GENERAL MILLS, MOHAN KE ROAD, MANDI GURUHARSAHAI [PAN: AAGFS 9125A] VS. INCOME TAX OFFICER, WARD-III (1), FEROZEPUR (APPELLANT) (RESPONDENT) APPELLANT BY : SH. NIPUN KHANNA (C.A .) RESPONDENT BY: SH. CHARAN DASS (D.R.) DATE OF HEARING: 24.01.2019 DATE OF PRONOUNCEMENT: 31.01.2019 ORDER PER SANJAY ARORA, AM: THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS), BATHINDA ('CI T(A)' FOR SHORT) DATED 21.11.2013, DISMISSING THE ASSESSEES APPEAL CONTES TING ITS ASSESSMENT U/S. 143(3) OF THE INCOME TAX ACT, 1961 ('THE ACT' HEREINAFTER) DATED 13.02.2013 FOR THE ASSESSMENT YEAR (AY) 2010-11. 2. THE APPEAL RAISES FIVE GROUNDS, OF WHICH GROUND 1 IS GENERAL IN NATURE, WARRANTING NO ADJUDICATION. THE ASSESSEE IS A PARTN ERSHIP FIRM IN THE BUSINESS OF GINNING OF NARMA TO PRODUCE COTTON AND COTTON SEEDS . THE FIRST ADDITION, AGITATED PER GD. 2, IS ON ACCOUNT OF LOW YIELD OF THESE TWO PRODUCTS FOR THE CURRENT YEAR (CY), I.E., IN COMPARISON WITH THE IMMEDIATELY PREC EDING YEAR (PY), AS UNDER: ITA NO. 87/ASR/2014 (AY 2010-11) SHIVA COTTON & GENERAL MILLS V. ITO 2 ITEM CY PY COTTON 33.81% 33.96% COTTON SEEDS 64.18% 64.57% ACCORDINGLY, AN ADDITION FOR RS.80,000 WAS MADE BY THE ASSESSING OFFICER (AO) BY NOT ACCEPTING THE ASSESSEES CASE THAT IT HAS MA INTAINED A PROPER STOCK REGISTER, DULY AUDITED, AND THAT THE FALL IN YIELD MAY BE ON ACCOUNT OF LOW QUALITY OF NARMA. THE SAME WAS CONFIRMED IN FIRST APPEAL BY THE LD. C IT(A), HOLDING THAT ESTIMATION IS A PROCESS KNOW TO LAW FOR FRAMING AN ASSESSMENT, RELYING ON THE DECISIONS IN CIT V. MD. WARASAT HUSSAIN [1988] 171 ITR 405 (PATNA) AND CHETAN DASS LACHHMAN DASS V. CIT [2002] 255 ITR 197 (DELHI). 3. I HAVE HEARD THE PARTIES, AND PERUSED THE MATERI AL ON RECORD. THE ASSESSEES CASE, NOT MET AT ANY STAGE, IS THAT NO DEFECTS IN I TS ACCOUNTS HAVE BEEN POINTED OUT AND, THEREFORE, THE YIELD COULD NOT BE ESTIMATED, A S DONE, ON THE BASIS OF THE RESULTS FOR THE PRECEDING YEAR. NO DOUBT, THE ASSESSEE HAS NOT SUBSTANTIATED ITS CLAIM OF LOW QUALITY OF NARMA WITH ANY EVIDENCE. HOWEVER, YI ELD IS NOT A CONSTANT, AND IS BOUND TO VARY FROM YEAR TO YEAR, NAY, FROM LOT TO L OT. THERE IS NO COMPARABLE CASE OR STUDY TO SHOW THAT THE YIELD OUGHT TO BE, UNDER ORDINARY CIRCUMSTANCES, NOT BELOW A PARTICULAR FIGURE. THE DIFFERENCE IS IN ANY CASE MARGINAL. THE AD HOC ADDITION IS LIABLE TO BE DELETED, AND I DO SO. 4. GROUND 3 IS IN RESPECT OF A DISALLOWANCE IN THE SUM OF RS.60,000 ON ACCOUNT OF LABOUR EXPENSES, CLAIMED AT RS.63.94 LACS, AS AG AINST RS.42.32 LACS FOR THE IMMEDIATELY PRECEDING YEAR. THE HUGE INCREASE WAS E XPLAINED BY THE ASSESSEE AS ON ACCOUNT OF A QUANTUM INCREASE IN THE VOLUME OF P RODUCTION FOR THE CURRENT YEAR. IN FACT, THE LABOUR RATES HAD ALSO INCREASED, TOWAR D WHICH A CHART DELINEATING THE DIFFERENT TYPES OF LABOUR ALONG WITH THE CORRESPOND ING QUANTITIES AS WELL AS RATES ITA NO. 87/ASR/2014 (AY 2010-11) SHIVA COTTON & GENERAL MILLS V. ITO 3 (THE LABOUR BEING CONTRACTUAL), I.E., FOR THE CURRE NT YEAR AND THE IMMEDIATELY PRECEDING YEAR (PB PG. 33). THE SAME HAS NOT BEEN R EPELLED OR FAULTED WITH. NO CASE FOR ANY DISALLOWANCE IS, IN VIEW THEREOF, MADE OUT. WITH REGARD TO THE OBSERVATION BY THE AO THAT THE PAYMENT OF RS.58,200 IS NOT SUPPORTED BY WORK SLIPS, IT WAS EXPLAINED BY THE LD. COUNSEL, SH. KHA NNA, THAT THERE IS NO QUESTION OF THE ASSESSEE HAVING BOOKED A HIGHER EXPENDITURE; TH E PAYMENT BEING TO THE SAME WORKERS, AND IT IS ONLY THAT WORK SLIPS TO THAT EXT ENT, OUT OF A HUGE MASS OF VOUCHERS, MAY HAVE BEEN MISPLACED. WHAT STOPS THE A SSESSEE FROM PREPARING FRESH WORK SLIPS TO THAT EXTENT. NO ADVERSE INFERENCE, IN MY VIEW, COULD THEREFORE BE DRAWN FROM THE NON-FINDING OF THE WORK SLIPS TO THA T EXTENT A MARGINAL FIGURE, PARTICULARLY CONSIDERING THAT THE LABOUR EXPENDITUR E PER THE SAID WORK SLIPS IS NOT AT A HIGHER RATE AND THE CORRESPONDING WORK IS DEMONST RATED. I DECIDE ACCORDINGLY. 5. THE NEXT GROUND IS IN RESPECT OF AN ADDITION IN THE SUM OF RS.10,000 FOR THE REASON THAT SCRAP TO THAT EXTENT OUGHT TO HAVE BEEN GENERATED CONSIDERING THE HUGE EXPENDITURE OF RS.5.53 LACS INCURRED AND CLAIMED BY THE ASSESSEE ON MACHINERY REPAIRS. WITHOUT DOUBT, GENERATION OF SCRAP IS INCI DENTAL TO THE REPLACEMENT OF MACHINERY PARTS, WHICH IS EXPLAINED TO BE THE MAJOR REASON FOR THE MACHINERY REPAIR EXPENSES. NO SCRAP SALES HAVE BEEN SHOWN TO HAVE BEEN MADE DURING THE YEAR AND, IN FACT, EVEN EARLIER. SH. KHANNA COULD N OT, ON THIS BEING POSED BY THE BENCH DURING HEARING, FURNISH ANY SATISFACTORY ANSW ER. THE AMOUNT ESTIMATED BY THE REVENUE, I.E., RS.10,000, IS IN MY VIEW REASONA BLE. THE ADDITION IS CONSEQUENTLY UPHELD. 6. THE LAST ISSUE AGITATED IN APPEAL (GD. 5) IS IN RESPECT OF THE DISALLOWANCE OF RS.26,530, SUSTAINED BY THE LD. CIT(A) OUT OF RS.47 ,950 BY THE AO TOWARD PERSONAL EXPENDITURE ON CARS, MOTOR-CYCLE/S, TELEPH ONE, MOBILE, ETC. ESTIMATED AT ITA NO. 87/ASR/2014 (AY 2010-11) SHIVA COTTON & GENERAL MILLS V. ITO 4 1/6. THE PART RELIEF ALLOWED BY THE LD. CIT(A) IS O N THE GROUND THAT THE ASSESSEE HAS, WHILE RETURNING ITS INCOME, MADE A DISALLOWAN CE TOWARD THE SAME TO THAT EXTENT. THE FIRM HAS THREE PARTNERS, SO THAT THE US ER OF THE FIRMS VEHICLES AND OTHER ASSETS FOR NON-BUSINESS PURPOSES BY THEM OR THEIR F AMILY MEMBERS CANNOT BE RULED OUT, WHICH IS A FACT OF LIFE, PARTICULARLY CONSIDER ING THAT NO SEPARATE EXPENDITURE HAS BEEN STATED AS INCURRED TOWARD THE SAME NOR IN FACT ANY LOG BOOK MAINTAINED. THE SAME IS IN FACT ADMITTED (PER THE RETURN OF INCOME) , SO THAT THE ONLY ASPECT THAT SURVIVES IS THE QUANTIFICATION OF THE SAID NON-BUSI NESS USER. THE SAME, AT RS.0.48 LACS, FOR THREE PARTNERS, I.E., AT RS.16,000 PER PA RTNER, IS IN MY VIEW QUITE REASONABLE. THE ASSESSEE HAS ALREADY BEEN ALLOWED C REDIT FOR THAT DISALLOWED PER THE RETURN OF INCOME WHICH, IN ANY CASE, OUGHT TO H AVE BEEN. AS REGARDS THE ARGUMENT BY SH. KHANNA THAT NO PERSONAL ELEMENT COU LD NOT BE REGARDED IN GENERAL EXPENSES (RS.0.92 LACS), SO THAT THE SAME, BEING ON LY IN THE EXPENDITURE ON LABOUR WELFARE, COULD NOT HAVE BEEN INCLUDED IN THE ACCOUN TS FOR WHICH THE PERSONAL EXPENDITURE HAS BEEN ESTIMATED, I AGREE IN PRINCIPL E. SO, HOWEVER, I OBSERVE NO SUCH CONTENTION RAISED BEFORE THE REVENUE AUTHORITI ES AT ANY STAGE. ACCORDINGLY, IT IS DIFFICULT TO ISSUE ANY FINDING IN THIS RESPECT. SO, HOWEVER, GIVING SOME CREDENCE TO THE STATEMENT OF THE LD. COUNSEL BEFORE ME, THE GENERAL EXPENSE INCLUDED FOR ESTIMATION OF THE NON-BUSINESS EXPENSES BE LIMITED TO RS.50,000, AS AGAINST RS.91,699. I DECIDE ACCORDINGLY. 7. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON JANUARY 31, 2 019 SD/- (SANJAY ARORA) ACCOUNTANT MEMBER DATE: 31.01.2019 /GP/SR. PS. COPY OF THE ORDER FORWARDED TO: ITA NO. 87/ASR/2014 (AY 2010-11) SHIVA COTTON & GENERAL MILLS V. ITO 5 (1) THE APPELLANT: SHIVA COTTON & GENERAL MILLS , MOHAN KE ROAD, MANDI GURUHARSAHAI (2) THE RESPONDENT: INCOME TAX OFFICER, WARD-II I (1), FEROZEPUR (3) THE CIT(APPEALS), BATHINDA (4) THE CIT CONCERNED (5) THE SR. DR, I.T.A.T. TRUE COPY BY ORDE R