Jagdamba Rice Mills V. Income Tax Officer, Ward-8, Sangrur and another

ITA/141/1999

AI Insights

M/s Jagdamba Rice Mills appealed to the High Court of Punjab & Haryana against the decision of the Income Tax Appellate Tribunal, which had affirmed the rejection of the assessee's books of accounts and the addition of Rs.1,77,000 for suppressed rice yield. The Assessing Officer had initially rejected the books due to discrepancies in the milling yield and moisture content of paddy, compared to other local mills. The Tribunal agreed with the Assessing Officer's findings, noting that the assessee failed to provide adequate justification for the lower yield compared to comparable cases. The High Court, upon review, found no substantial question of law and dismissed the appeal.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 795612 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 22-10-2013
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: SAVITA SAXENA
• Assessee Lawyers: AALOK MITTAL
• Keywords: Assessment; Comparable cases; Income Tax; Rejection of Books; Suppressed Yield
• Section: 260A; 145(2)

Judgement Text

"I.T.A. No.141 of 1999 -1- IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH I.T.A. No.141 of 1999. Decided on:-October 22, 2013. M/s Jagdamba Rice Mills, Sunam, District Sangrur. .........Appellant. Versus Income Tax Officer, Ward-8, Sangrur & another .........Respondents. CORAM: Hon'ble Mr. Justice Rajive Bhalla Hon'ble Mr. Justice Dr. Bharat Bhushan Parsoon. ***** Argued by:- Mr. Aalok Mittal, Advocate for the appellant. Ms. Savita Saxena, Advocate for the respondents. Dr. Bharat Bhushan Parsoon, J The assessee i.e. M/s Jagdamba Rice Mills has filed this appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as, the Act) challenging order dated 26.5.1999 passed by the Income Tax Appellate Tribunal (for short, the Tribunal), Chandigarh Bench, Chandigarh. 2. The Assessing Officer (for short, the AO) while framing assessment on 24.1.1991 for the year 1989-90 qua the assessee, had made an addition of Rs.7,09,085/-, inter alia, in trading account on account of difference in value of rice, rice bran, phuk and husk. This addition was due to overall shortage in milling in comparison to the total paddy milled. The Yag Dutt 2013.11.13 13:54 I attest to the accuracy and integrity of this document I.T.A. No.141 of 1999 -2- overall shortage by the assessee in milling was taken to be 10.30% of the total paddy milled. It was considered by the revenue to be excessive. It was observed that the paddy having more moisture content is generally sold at much less price than the support price but it was found that almost all the purchases of paddy by the assessee were either at support price or for even more price than this. It was thus concluded that the moisture content in paddy could not be more than 18%, noting further that the levy rice to be supplied to the Food Corporation of India as also in the open market contained about 14% of moisture. It was further found that 18% moisture content is found in paddy normally stored in open which absorbs extensive moisture but such paddy was sold in the market at much lower price than the support price. 3. The AO had further noticed that in the circumstances, the loss on account of driage could not be more than 4% of rice besides loss of 1% on account of dust and dirt. It was thus concluded that overall normal shortage should not have been more than 5% of the total paddy milled whereas overall loss shown by the assessee was 10.30%. When no reasonable explanation came forward and multiple embellishments were found in the books of accounts, the AO had rejected the books of accounts. Therafter, picking up two concrete comparable cases, the AO had found that yield of the assessee was shown to be much less even on most conservative basis. 4. In appeal preferred by the assessee, evaluating defects pointed out by the AO in rejection of the books of accounts of the assessee, findings of rejection of books was affirmed by the Commissioner of Income Tax (Appeals) [for short, the CIT(A)]. Similarly, addition of Rs.1,77,000/- as value of the supressed yield in respect of rice was also affirmed. However, with respect to additions made qua rice bran, phuk and husk, plea of the assessee was accepted and he got relief of Rs.5,32,085/- in the trading Yag Dutt 2013.11.13 13:54 I attest to the accuracy and integrity of this document I.T.A. No.141 of 1999 -3- account. 5. Undettered, against confirmation of additioin of Rs.1,77,000/-, the appellant knocked at the door of the Tribunal in appeal. Additional ground for challenging findings of the AO regarding rejection of its books of accounts in terms of Section 145(2) of the Act had also been taken. Considering additional grounds taken by the assessee in justification of genuineness of books of accounts, defects pointed out by the AO in his assessment order while rejecting the books of accounts were also appraised and evaluated. The Tribunal found merit in verdict of the AO regarding rejection of books of accounts and found no merit even in additional pleas raised by the assessee. Sequelly, addition of Rs.1,77,000/- as value of suppressed yield in respect of rice was confirmed even by the Tribunal. This appeal by the assessee is against the order of the Tribunal. 6. We have heard counsel for the parties while going through the paper book. 7. It is to be noticed that on rejection of its books of accounts, the assessee had given some alleged comparable cases. However, complete details of those cases had not been furnished. On the other hand, the AO had cited two other comparable cases, which formed the basis of addition. The concrete cases of two rice millers viz. M/s Garg Traders, Sunam and M/s Swami Rice Mills, Sunam, which had given yield of rice (PRO-106) at 66.91% and 66.94% respectively, cited by the AO were simply ignored by the assessee without any effort to distinguish, its case from these shellers. 8. The Tribunal taking into account all these facts and noticing in particular that comparable cases of the area of the assessee i.e. Sunam, having been pointedly mentioned by the AO, could not be distinguished by the assessee, observed that yield of rice in its case was only 64.50%, whereas even in the case of 9 mills from Sunam cited by the appellant, the Yag Dutt 2013.11.13 13:54 I attest to the accuracy and integrity of this document I.T.A. No.141 of 1999 -4- yield was 65% or more and in the comparable cases cited by the AO, the yield was even more than 66%. 9. The Tribunal upholding rejection of books of accounts of the assessee, confirmed the decision of the CIT(A) where rice yield adopted by the AO at 65.5% was approved, taking it to be just and fair. Addition of Rs.1,77,000/- on account of supression of yield of rice to the tune of 562 quintals by the assessee and taking rate of Rs.315/- per qunital, thus, was finally approved. Relevant extract of the order (Annexure P-3) of the Tribunal for ready reference is appended as below: “It is observed that the AO pointed out two comparable cases who had shown yield of rice at more than 66%. The Ld. Counsel did not refer to the aforesaid cases relied upon by the AO. Instead he has filed a chart of yield in the case of nine mills from Sunam, wherein the yield is 65% or more. In the case of assessee the yield of rice has been shown only at 64.75%. Having regard to the aforesaid cases as relied upon by the Ld. Counsel as also the cases relied upon by the AO, which are also from the area of the assessee i.e. Sunam, we feel that the yield shown by the assessee is definitely on the lower side and that the Ld. Counsel has not been able to place any material before us which would justify the yield shown by the assessee. Though the Ld. Counsel has agitated about the rejection of books, we feel that there is no cogent reply to various defects pointed out by the AO. Even if it is held that the books were wrongly rejected, we feel that in view of the comparable cases relied upon by the assessee itself, there were reasons for holding that the yield shown by the assessee is low. In the circumstances, we feel that the yield adopted by the Ld. CIT(A) at 65.5% is just and fair and the addition made on that account is accordingly sustained.” 10. When entire matter is re-looked in the background of the circumstances, it is clear that no question of law much less substantial arises in this appeal. Rather, in fact, entire exercise is based on facts. 11. Resultantly, we find no reason to differ from the opinion Yag Dutt 2013.11.13 13:54 I attest to the accuracy and integrity of this document I.T.A. No.141 of 1999 -5- recorded by the Tribunal and there being no substantial question of law invovled in the appeal, the same is dismissed. (Dr. Bharat Bhushan Parsoon) Judge (Rajive Bhalla) Judge October 22, 2013 'Yag Dutt' 1. Whether Reporters of local papers may be allowed to see the judgment? 2. Whether to be referred to the Reporters or not? 3. Whether the judgment should be reported in the Digest? Yag Dutt 2013.11.13 13:54 I attest to the accuracy and integrity of this document "