ACIT, Hyderabad V. M/s Aravind Parboiled Modern Rice Mills, Nalgonda District

ITA 928/HYD/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2895 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-12-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 18-06-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M H NAIK
• Assessee Lawyers: V SATYANARAYAN A
• Section: 131; 69; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.928/HYD/2010 ASSESSMENT YEAR 2006-07 ACIT, CIR-9(1), HYDERABAD VS M/S. ARVIND PARBOILED MODERN RICE MILLS, MIRYALAGUDA. PAN:AADFA8706G {APPELLANT) (RESPONDENT) APPELLANT BY : SRI M.H. NAIK RESPONDENT BY : SHRI V.SATYANARAYAN A DATE OF HEARING : 27-03-2013 DATE OF PRONOUNCEMENT : 22-05-2013 ORDER PER SAKTIJIT DEY,JUDICIAL MEMBER. THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER PASSED BY THE CIT (A) VI, HYDERABAD DATED 30 -3-2010 PASSED IN APPEAL NO.0438/08-09/CIT (A)-VI/2099-10 A ND IT PERTAINS TO THE ASSESSMENT YEAR 2066-07. 2. THE DEPARTMENT HAS RAISED THE FOLLOWING GROUND S:- 1. THE ORDER OF THE CIT (A) IS ERRONEOUS BOTH ON FACTS AND IN LAW. 2. THE CIT (A) ERRED IN LAW N DELETING THE ADDITION S MADE BY THE ASSESSING OFFICER MERELY BECAUSE HE HAS NOT MENTIONED A SPECIFIC SECTION IN I T ACT. ITA NO.928 OF 2010 ARAVIND PARBOILED MODERN RICE MILLS, ================== 2 3. CIT (A) ERRED IN LAW IN STATING THAT UNDISCLOSED INVESTMENT NOT RECORDED INTO BOOKS OF ACCOUNTS IS NOT COVERED UNDER SECTION 69 OF THE ACT. 4. THE LD CIT (A) OUGHT TO HAVE UPHELD THE ACTION O F THE ASSESSING OFFICER IN ESTIMATING THE SUPPRESSED TURNOVER IN VIEW OF STOCK VARIATIONS NOTICED BY COMMERCIAL TAX AUTHORITIES AND BANK AUTHORITIES. 5. THE LD CIT (A) OUGHT TO HAVE CONFIRMED THE UNDISCLOSED PROFIT ESTIMATED BY THE ASSESSING OFFICER ON THE SUPPRESSED TURNOVERS. 6. THE CIT (A) FAILED TO APPRECIATE THE FACT THAT T HE DISCREPANCIES IN STOCK REPORTED BY BANK AUTHORITIES COULD NOT BE RECONCILED BY THE ASSESSEE EVEN DURING THE APPELLATE PROCEEDINGS. 7. THE CIT (A) HAVING OBSERVED VIDE PARA 4.4 OF PAGE 12 OF THE APPELLATE ORDER THAT THERE IS A VARIATION OF 94.22 LAKHS SHOULD HAVE INSISTED FOR PROPER RECONCILIATION BY THE ASSESSEE OR ALTERNATIVELY SHOULD HAVE CONFIRMED THE SUPPRESSION TO THAT EXTENT AS THE ASSESSEE FAILED TO RECONCILE THE VARIATION. 8. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F HEARING. 3. BRIEFLY THE FACTS ARE, THE ASSESSEE A PARTNERSHI P FIRM IS ENGAGED IN THE BUSINESS OF RICE MILL. FOR THE ASSE SSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED ITS RETURN OF INC OME ON 31-10- 2006 ADMITTING AN INCOME OF RS.2,90,800/-. DURING THE SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ON VE RIFYING THE STOCK REGISTER FOUND THE TOTAL QUANTITY OF PADDY MI LLED DURING THE YEAR AT 67,360.07 QUINTALS. THE ASSESSING OFFICER FINDING INCONSISTENCY BETWEEN THE MONTH WISE QUANTITY OF PA DDY MILLED AND MONTHLY CONSUMPTION SOUGHT FOR EXPLANATION FROM THE ITA NO.928 OF 2010 ARAVIND PARBOILED MODERN RICE MILLS, ================== 3 ASSESSEE. THE ASSESSING OFFICER FURTHER NOTED THAT A SUM OF RS.5,000/- WAS DEBITED IN THE PROFIT AND LOSS ACCOU NT TOWARD COMPOUNDING FEE. WHEN HE ENQUIRED WITH THE ASSESSE E ON HIS ASPECT, THE ASSESSEE SUBMITTED THAT THE COMPOUNDING FEE WAS COLLECTED BY THE CTO, MIRYALGUDA ON SURPRISE VISIT AND THEY HAVE COLLECTED COMPOUND FEE FOR THE VARIATION BETWEEN TH E PHYSICAL STOCK AND INFORMATION NOTED ON THE STOCK BOARD. AF TER RECEIVING REPLY FROM THE ASSESSEE, THE ASSESSING OFFICER MADE FURTHER ENQUIRY WITH THE CTO, MIRYALGUDA. THE CTO, MIRYALGU DA VIDE HIS LETTER DATED 6-12-2008 INFORMED THAT DURING THE COU RSE OF AUDIT CONDUCTED IN THE CASE OF THE ASSESSEE ON 25-10-2005 EXCESS STOCK OF PADDY AMOUNTING TO 105 QUINTALS WHICH WAS NOT ACCOUNTED FOR IN THE BOOKS OF ACCOUNT WAS FOUND WHI CH WAS VALUED AT RS.68,250/- ON ACCOUNT OF SURPLUS STOCK AND COMPOUNDING FEE WAS COLLECTED. 4. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE H AD A CASH CREDIT ACCOUNT WITH SBH, SIB, MIRYALGUDA WHO HAD S ANCTIONED A LIMIT OF RS.60 LAKHS AGAINST STOCK. ON AN ENQUIRY MADE WITH THE SBH SEEKING INFORMATION ON THE VALUE OF STOCKS AGAI NST WHICH THE LIMIT WAS SANCTIONED, THE BANK AUTHORITIES INFO RMED THE TOTAL VALUE OF STOCKS AS AT THE END OF EACH MONTH FROM AP RIL, 2005 TO MARCH, 2006. ON THE BASIS OF STOCK AS PER THE INFO RMATION OBTAINED FROM THE BANK AND THE STOCK AS RECORDED IN THE STOCK REGISTER, THE ASSESSING OFFICER FOUND THE DIFFERENC E OF 94.22 QUINTALS. FURTHER, THE ASSESSING OFFICER NOTICED SI GNIFICANT VARIATION BETWEEN THE FIGURES OF TOTAL QUANTITY OF PADDY MILLED AS PER THE STOCK REGISTER AND AS SHOWN IN THE YIELD ST ATEMENT FILED ALONG WITH RETURN. WHILE AS PER STOCK REGISTER, TH E TOTAL QUANTITY OF PADDY MILLED DURING THE YEAR WAS 67360.07 QUINTA LS. HOWEVER, IN THE YIELD STATEMENT FILED ALONG WITH RE TURN OF ITA NO.928 OF 2010 ARAVIND PARBOILED MODERN RICE MILLS, ================== 4 INCOME, THE TOTAL QUANTITY OF MILLING WAS SHOWN AT 62400.04 QUINTALS. WHEN THE ASSESSING OFFICER ASKED THE ASS ESSEE TO CLARIFY WITH REGARD TO VARIATION/DISCREPANCY FOUND AND NOTED BY THE ASSESSING OFFICER, THE ASSESSEE DID NOT SUBMIT ANY REPLY. THE ASSESSING OFFICER THEREFORE ISSUED SUMMONS TO T HE ASSESSEE U/S 131 OF THE ACT. IN RESPONSE TO THE SUMMONS, TH E ASSESSEE APPEARED AND PRODUCED ITS BOOKS OF ACCOUNT AND SUBM ITTED A REPLY WITH REGARD TO THE DISCREPANCY IN MILLING SHO WN VIS A VIS ELECTRICAL CONSUMPTION. NO REPLY RELATING TO THE V ARIATION BETWEEN THE FIGURES OF MILLING OBTAINED FROM THE S TOCK REGISTER AND THAT SHOWN IN THE YIELD STATEMENT WAS FILED. 5. THE ASSESSEE ALSO DID NOT EXPLAIN THE DISCREPAN CY BETWEEN THE VALUE OF STOCK SHOWN IN THE BOOK AND AS PER THE BANK AUTHORITIES AND ALSO THE DISCREPANCY IN STOCK FOUND BY THE THE CTO, MIRYALGUDA. SO FAR AS MONTHLY ELECTRICAL CONSUMPTION VIS A VIS, MILLING IS CONCERNED THE ASSESSEE IN ITS REPLY SUBMITTED THAT THE PROCESS OF PRODUCTION IS LINKED WITH THE N ATURE AND VARIETY OF THE PADDY AND POWER CUTS DURING THE MONT H. THIS IS BECAUSE, THE NATURE OF THE PRODUCTION BEING A CONT INUOUS PROCESS ANY VARIATION IN POWER DISTURBS THE ENTIRE PROCESS OF PRODUCTION AND AFTER CHANGE OF POWER IT TAKES LOT M ORE TIME TO COME BACK TO NORMAL AND IT WILL CONSUME MORE POWER TO TURN BACK TO NORMAL PRODUCTION PROCESS. IT WAS FURTHER SUBMITTED THAT THE POWER CONSUMPTION CANNOT BE THE SAME TO RA W RICE AND BOILED RICE. IT WAS STATED THAT DURING SOME MONTHS THERE WAS HEAVY POWER CUT AND THE RICE MILL WAS RUN WITH THE HELP OF GENERATOR. THE EXPENDITURE ON ACCOUNT OF DIESEL FO R GENERATOR IS HIGH WHEN POWER CONSUMPTION IS LESS WITH REFERENCE TO THE PADDY ISSUED FOR MILLING. THE ASSESSEE FURTHER STA TED THAT IN A YEAR FOR TWO TO THREE MONTHS RICE MILL REMAINS IDLE FOR CARRYING ITA NO.928 OF 2010 ARAVIND PARBOILED MODERN RICE MILLS, ================== 5 OUT REPAIRS AND MAINTENANCE. THEN THE ELECTRICITY DEPARTMENT CHARGES THE MINIMUM BILL DEPENDING UPON THE CONTRAC TED LOAD IRRESPECTIVE OF THE ACTUAL CONSUMPTION. SINCE THE NATURE OF THE INDUSTRY IS SEASONAL, THE PRODUCTION CANNOT BE UNIF ORM AND HENCE ON ACCOUNT OF MINIMUM BILLING METHOD WILL ATT RACT THE ELECTRICITY COST IRRESPECTIVE OF THE ACTUAL PRODUCT ION. THE ASSESSING OFFICER HOWEVER FOUND THE EXPLANATION SUB MITTED BY THE ASSESSEE TO BE UNACCEPTABLE. THE ASSESSING OF FICER AFTER ANALYSING THE FIGURES OF MONTHLY ELECTRICAL CONSUMP TION AND PADDY MILLED FOUND LOTS OF VARIATION IN THE QUANTIT Y OF PADDY MILLED PER UNIT OF CONSUMPTION WHICH IS GIVEN IN A TABULAR FORM AT PAGE-12 OF THE ASSESSMENT ORDER. 6. THE ASSESSING OFFICER FURTHER NOTED THAT NEW PAD DY ARRIVAL STARTS FROM AROUND 3 RD WEEK OF DECEMBER AND THEREFORE THE DECEMBER IS THE LAST MONTH IN WHICH ALL OLD STOCK O F PADDY WILL BE EXHAUSTED AND MILLED. FROM THE QUANTITY OF CLOS ING STOCK OF PADDY AS AT THE END OF EACH MONTH AND QUANTITY MILL ED IN THE MONTH, THE ASSESSING OFFICER NOTED THAT THE STOCK O F PADDY HAS BEEN COMING DOWN CONTINUOUSLY TILL THE END OF NOV. 2005. HOWEVER, THE STOCK ON 31-12-2005 HAS RISEN DUE TO N EW ARRIVALS IN DECEMBER, 2005. FROM THIS THE ASSESSING OFFICER INFERRED THAT ALL OLD STOCK WILL BE EXHAUSTED AND ELECTRICIT Y WILL BE CONSUMED FOR TOTAL MILLING OF ALL OLD STOCK DURING THE MONTH OF DECEMBER. THE ASSESSING OFFICER CALCULATED PADDY M ILLED PER UNIT OF ELECTRICAL CONSUMPTION AT 0.1563. HE THERE FORE SOUGHT FOR AN EXPLANATION FROM THE ASSESSEE AS TO WHY THE TOTAL QUANTITY MILLED SHOULD NOT BE ADOPTED BY TAKING DEC EMBER2005 FIGURE OF PRODUCTION PER UNIT OF ELECTRICAL CONSUMP TION AND THE SUPPRESSION IN MILLING DETERMINED ON THAT BASIS. H OWEVER, THERE WAS NO REPLY FROM THE SIDE OF THE ASSESSEE. ON THE BASIS OF ITA NO.928 OF 2010 ARAVIND PARBOILED MODERN RICE MILLS, ================== 6 DISCREPANCY FOUND AND IN THE ABSENCE OF ANY CLARIFI CATION FROM THE ASSESSEE, THE ASSESSING OFFICER CAME TO A CONCL USION THAT THE BOOK RESULTS SHOWN BY THE ASSESSEE ARE NOT RELI ABLE. HE THEREFORE REJECTED THE BOOKS OF ACCOUNT U/S 145 OF THE ACT AND PROCEEDED TO ESTIMATE THE INCOME. THE ASSESSING OF FICER ON THE BASIS OF SUPPRESSION QUANTIFIED BY HIM MADE THE FOL LOWING ADDITIONS:- 1. UNDISCLOSED INVESTMENT IN PURCHASE OF PADDY RS.36,94,800 2. UNDISCLOSED PROFIT ON SUPPRESSED MILLING RS.9,47,515 3. UNDISCLOSED PROFIT ON VARIATION IN MILLING RS.2,13,380 THE ASSESSEE BEING AGGRIEVED OF THE ASSESSMENT ORDE R, PREFERRED AN APPEAL BEFORE THE CIT (A). 7. ON APPEAL, THE CIT (A) DELETED ALL THE ADDITIONS MADE IN THE ASSESSMENT ORDER BY OBSERVING THAT THE ASSESSEE MAINTAINS PROPER BOOKS OF ACCOUNTS WHICH WERE DULY AUDITED BY THE CHARTERED ACCOUNTANT U/S 44AB OF THE ACT. THE ASS ESSEE ALSO FILED AUDIT REPORT ALONG WITH ALL NECESSARY ANNEXUR E WITH THE RETURN OF INCOME, THE ASSESSING OFFICER EVEN AFTER THOROUGH EXAMINATION OF BOOKS OF ACCOUNTS, DID NOT NOTICE AN Y DISCREPANCY IN THE BOOKS OF ACCOUNTS ARE IN ANY OTH ER RECORD. HE FURTHER OBSERVED THAT THERE WAS NO EVIDENCE ON R ECORD TO SHOW THAT THERE WAS ANY TRANSACTION WHICH WAS ESCAP ED OR OMITTED EXCEPTING VARIATION IN STOCK FOUND BY THE C TO WHICH IS ALSO VERY INSIGNIFICANT AMOUNTING TO 105 QUINTALS O N VERIFICATION OF 13300 QUINTALS. THE CIT (A) FURTHER HELD THAT MERE FIGURE DONE BY THE ASSESSING OFFICER WITHOUT SUPPORTING EV IDENCE OR ITA NO.928 OF 2010 ARAVIND PARBOILED MODERN RICE MILLS, ================== 7 THE INCONSISTENCY CANNOT BE A BASIS FOR REJECTION O F TRADING RESULTS. ACCORDINGLY, THE CIT (A) DELETED ALL THE ADDITIONS. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMIT TED BEFORE US THAT THE ASSESSEE HAVING NOT RECONCILED T HE DISCREPANCY FOUND BY THE ASSESSING OFFICER, THE CIT (A) SHOULD NOT HAVE DELETED THE ADDITIONS. 9. THE LEARNED AUTHORISED REPRESENTATIVE FOR THE AS SESSEE SUBMITTED THAT THE CIT (A) HAVING PASSED THE ORDER CONSIDERING ALL THE ASPECTS OF THE MATTER, THERE IS NO NEED TO INTERFERE WITH THE ORDER OF THE CIT (A). 10. WE HAVE CONSIDERED RIVAL SUBMISSIONS OF THE PAR TIES AND PERUSED THE MATERIAL ON RECORD. ON PERUSAL OF THE A SSESSMENT ORDER, IT IS EVIDENT THAT THE ASSESSING OFFICER HAS FOUND VARIATION/DISCREPANCIES WITH REGARD TO THE STOCK AS PER THE INFORMATION OBTAINED FROM THE BANK AND AS PER THE S TOCK REGISTER. VARIATION WAS ALSO FOUND WITH REGARD TO THE STOCK OF PADDY AS PER THE STOCK REGISTER AND THE YIELD STATE MENT FURNISHED WITH THE RETURN OF INCOME. IT IS ALSO A FACT THAT DISCREPANCY IN STOCK WAS FOUND ON PHYSICAL VERIFICA TION DONE BY THE CTO, MIRYALGUDA TO THE EXTENT OF 105 QUINTALS ON 25-10- 2005. THESE VARIATION/DISCREPANCIES HAVE NOT BEEN EXPLAINED/CLARIFIED BY THE ASSESSEE DURING THE ASSE SSMENT PROCEEDINGS IN SPITE OF AVAILING SUFFICIENT OPPORTU NITY. THIS FACT HAS ALSO BEEN ACCEPTED BY THE CIT (A). IN PARA 4.9 OF HIS ORDER, THE CIT (A) HAS ADMITTED THE FACT THAT THE CTO, MIR YALAGUDA HAS FOUND VARIATION IN STOCK. THE CIT (A) HAS ALSO NOT ED THAT THERE IS VARIATION IN VALUE OF STOCK AS PER THE INFORMATI ON OBTAINED FROM THE BANK AUTHORITIES. WHEN SUCH VARIATION/DIS CREPANCY IS ITA NO.928 OF 2010 ARAVIND PARBOILED MODERN RICE MILLS, ================== 8 FOUND ON RECORD, IT IS THE DUTY CAST UPON THE ASSES SEE TO RECONCILE THE VARIATION/DISCREPANCIES WITH THE BOOK S OF ACCOUNTS MAINTAINED BY HIM. IN THE ABSENCE OF ANY EXPLANATIO N FROM THE ASSESSEE, A PRESUMPTION AGAINST THE RELIABILITY OF BOOKS OF ACCOUNTS WOULD CERTAINLY ARISE. 11. FURTHER, IT IS A FACT ON RECORD THAT THE CTO, MIRYALGUDA HAS FOUND DISCREPANCIES IN STOCK TO THE EXTENT OF 1 05 QUINTALS WHEN HE VISITED THE PREMISES OF THE ASSESSEE. SUCH DISCREPANCY FOUND CANNOT BE IGNORED BY TERMING IT AS INSIGNIFIC ANT. THE ASSESSEE CERTAINLY OWES AN EXPLANATION FOR SUCH VARIATION/DISCREPANCY. THEREFORE, IN OUR VIEW THE C IT (A) WAS NOT JUSTIFIED IN DELETING THE ADDITIONS BY ACCEPTIN G THE CLAIM OF THE ASSESSEE WITHOUT PROPER RECONCILIATION BEING MA DE BY THE ASSESSEE TO EXPLAIN THE VARIATIONS/DISCREPANCIES. IN AFORESAID VIEW OF THE MATTER, WE ARE INCLINED TO REMIT THE MA TTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR DE NOVO ASSES SMENT. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY THE C IT (A) AND DIRECT THE ASSESSING OFFICER TO MAKE FRESH ASSESSME NT AFTER CONSIDERING ALL FACTS AND EVIDENCES AVAILABLE ON RE CORD AND ANY FURTHER EVIDENCE WHICH MAY BE PRODUCED BY THE ASSES SEE. THE ASSESSING OFFICER SHALL AFFORD A REASONABLE OPPORTU NITY OF BEING HEARD TO THE ASSESSEE. 12. IN THE RESULT, THE APPEAL FILED BY THE DEPARTME NT IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 22-05-201 3. SD/- (CHANDRA POOJARI) SD/- (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 22 ND MAY, 2013. ITA NO.928 OF 2010 ARAVIND PARBOILED MODERN RICE MILLS, ================== 9 COPY FORWARDED TO: 1. ACIT, 1 ST FLOOR, B- BLOCK, IT TOWERS, AC GUARDS, HYDERABAD. 2. M/S. ARVINDA PARBOILED MODERN RICE MILLS, NALGONDA, MIRYALAGUDA, NALGONDA DISTRICT. 3. CIT (A)-VI, HYDERABAD. 4. CIT CONCERNED, HYDERABAD. 5. THE DR, ITAT, HYDERABAD JMR* ITA NO.928 OF 2010 ARAVIND PARBOILED MODERN RICE MILLS, ================== 10