Income Tax Appellate Tribunal - Chandigarh
Shakti Rice Mills, Kurukshetra vs Department Of Income Tax on 1 March, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH 'A' BEFORE Ms. SUSHMA CHOWLA, JM AND SHRI MEHAR SINGH, AM ITA No. 764/Chd/2011 Assessment Year 2007-08 Shakti Rice & Gen Mills v. I.T.O. Ward -3, Kurukshetra Amin Road Kurukshetra PAN: AANFS 2449 A ITA No. 726/Chd/2011 Assessment Year 2007-08 I.T.O. Ward -1, Kurukshetra v. Shakti Rice Mills Amin Road Kurukshetra (Appellant) (Respondent) Assessee By : Shri D.K. Goyal Department By: Shri Akhilesh Gupta Date of hearing: 01.3.2012 Date of pronouncement: 30 .03.2012 ORDER Per Mehar Singh, AM
The present cross appeals filed by the assessee and the revenue for the Assessment Year 2007-08 vide ITA No. 764/Chd/2011 and ITA No. 726/Chd/2011 respectively are directed against the order of ld. CIT(A), Karnal, dated 30.3.2011, passed u/s 250(6) of the Income-tax Act, 1961 (hereinafter referred to, in short as "the Act").
2. The assessee has raised the following grounds of appeal:
"1 Because the action is being challenged on facts and law for having invoked the provisions of section 145 by rejecting the books of account overlooking the nature and type of business considered by the case of Shankar Rice Mills V. ITO (2000) 73 ITD 139 (Asr) (Special Bench).
2. Because the action is being challenged on facts and law for the addition on husk on account of estimating the percentage of yield 18% qua the paddy milled and thereupon estimating the rate of sale of the husk, overlooking the results of the assessee and even the consumption and yield is under challenge (AO addition Rs. 4,59,918/- relief CIT(A) on rate reduction from Rs. 101.60 to Rs. 80).
3. Because the action is being challenged on facts and law for an addition of Rs. 2,30,253/- for rice bran by applying an estimated rate value of closing stock at the rate of Rs. 450/- in place of declared at the rate of Rs. 351/- which is an unsustainable action. (AO addition of Rs. 17,28,041/- Less CIT(A) Rs. 14,97,789/- relief on rate of declared sales).
4. Because the action is being challenged on facts and law for an addition of Rs. 58,800/- (applying CIT v. Abhishek Industries, 205 CTR 304 (P&H) for not examining the facts and evidences qua the excess non interest being capital of the partners and there not being diversion of funds and even the rate of interest is being contested.
5. Because the action is being challenged on facts and law for estimating the sale rate (Rs. 22,09,732/-) of rice in the valuation of closing stock not considering the different verities of rice, quantity, the rates thereoff.
6. Because the action is challenged on facts and law for disallowance of Rs. 13,746/- (3/4th of the total) attributable to telephone expenses for personal usage whereas accordingly to Satya Parkash Sharma v. ACIT (2009) 20 DTR 561 (Delhi) (Trib) the disallowance is being prayed to be to the restricted to 1/10th."
3. In ground Nos. 1 and 2 the assessee has contended that the ld. CIT(A) erred in upholding the action of the AO u/s 145(3) of the Act and confirming the addition on husk account, by estimating the percentage of yield at 18% qua the paddy milled and thereupon estimating the rate of sale of husk, overlooking the results of the assessee and even the consumption and yield is under challenge (AO addition of Rs. 4,59,918/- relief CIT(A) on rate reduction from Rs. 101.60 to Rs. 80/-.)
4. Brief facts of the case are that the assessee derives income from running from a rice mill. It has also done custom milling for Government Department. During the assessment proceedings, the AO noted that no production record/quantitative details of by products, viz., husk and rice bran etc. was maintained. The assessee declared sale of husk at Rs. 2,46,650/- and closing stock of Rs. 3,53,350/-. The entire husk was shown to be sold in cash. The closing stock was taken on estimate basis. The income generated from production and sale of husk was, therefore, not verifiable. The AO pointed out these facts as per his office letter dated 9.12.2009. He proposed to take the husk produced @ 18% of paddy milled as was shown by the other rice sheller in that area and sale thereof proposed to be taken @ 101.60 per qtl, i.e., the average rate at which the sale was shown by other rice seller besides rejection of trading results by invoking the provisions of section 145(3) of the Act. The AO referred specific cases in support of his proposal to adopt the yield @ 18% and sale rate of husk @ 101.60 per qtl in that letter. As far as the claim of the appellant that most of the husk was consumed in the boiler and in staking of paddy/rice, the AO noted that for want of any records of production and of use of husk in boiler and in staking, the same was proposed to be taken at 1/3rd of the husk produced.
5. The findings of the AO are recorded in para 2.2 of the assessment order which are reproduced by the ld. CIT(A) in para 1.04 of his order.
6. The findings of the ld. CIT(A) as contained in para 1.08 are reproduced hereunder:
"1.08 The issue is considered. The fact remains that no record of production and use of chilka was maintained by the appellant. Even in the tax audit report, the auditors is required to give in col. 28(b), inter-alia, the quantitative details of by-products but no such detail was specified in the tax audit report. The main by-products in the case of a rice mill are chilka and rice bran which commands good market value in these days and hence the appellant is required to satisfy the AO about the correct recording thereof in the books of account. During the appeal proceedings also, partner of the appellant firm attended with his counsel and admitted that no record of production, consumption, sale and closing stock of chilka are maintained. The valuation of closing stock of chilka stated to be made on estimate basis. In view of these facts, plea of the appellant is not tenable and the correctness of trading results declared by the appellant are not verifiable. The rejection thereof by invoking the provisions of section 145(3) of the Act, is, therefore, confirmed. As far as the plea of the appellant about the result declared in the last year, it is noted that appellant declared the closing stock of chilka of Rs. 4,75 lakhs also in the last year which is also to be considered for comparison of the result besides the fact that each year is an independent year. The appellant further pleaded that the AO referred the different case of rice millers for yield and for sale rate, the records of M/s Kochar Mill, Ismailabad is available which is one of the cases, referred to by the AO. On examination thereof, it is noted that M/s Kochar Mills declared yield of chilka at 19.4% and average sale rate of Rs. 84 per qtl. The AO took the yield of chilka at 18% and average sale rate at Rs. 101.60 per qtl. Considering the entirety of facts, the yield of chilka taken by the AO is confirmed but the rate thereof directed to be taken @ Rs. 80/- per qtl. Regarding the relief allowed from the yield of chilka on account of use thereof in boiler for driage and in staking by the AO at 1/3rd the same is confirmed, for want of any record of production, consumption and sale thereof produced by the appellant. Ground of appeal No. 1 is as such partly allowed.
7. We have carefully perused the rival submissions, facts of the case, written submissions of the assessee and the case laws cited therein. The ld. CIT(A) has recorded a categorically finding that in the course of submissions before him, the assessee admitted that no record of production, consumption, sale of closing stock of chilka are maintained. It was further submitted by the assessee that the valuation of closing stock of chilka stated to be made on estimate basis. Therefore, the ld. CIT(A) upheld that the provisions of section 145(3) of the Act are applicable to the facts situation of the case as correctness and completeness of the trading results declared by the assessee remain unverifiable. In our considered view the findings of the ld. CIT(A) remains un-assessable. The case laws cited by the assessee in the case of ITO v. Mohan Lal Thapar & Bros (1993) 47 ITD 13 (TM) (Chd), ACIT v. Modern Rice Mills (1995) 52 TTJ 581 (Chd), Jhandumal Tara Chand and Mohanlal (1993) 47 ITD 13 (TM)(Chd), Dinesh Cotton Ginning Dal & Oil Mills V. ITO (2004) 86 TTJ 425 (Jdh), CIT v. Bharat Rice Mills (2001) 250 ITR 584 (P&H), ACIT V. Gandalal Hazirilal & Company (2003) 134 Taxman 384 (MP), Shanker Rice Co. V. ITO (2000) 72 ITD 139 (Asr) (SB) and Ganesh Jute Trading V. CIT (1998) 233 ITR 480 (Patna) are not applicable to the peculiar circumstances of the case vis-à-vis the facts situation obtaining in those cases. Therefore, these cases are factually different and distinguishable and hence not applicable to the facts of the present case. The ld. CIT(A) after making a reference to other similar Rice Millers for the purpose of yield and average sale rate, adjudicated the issue on the foundation of entirety of the fact situation of the case and the submissions filed by the assessee including the findings of the AO in the assessment order. The ld. CIT(A) has been very judicious and reasonable in upholding the addition made by the AO and granting partial relief to the assessee. We do not find any infirmity in the findings of the ld. CIT(A) hence ground Nos. 1 and 2 are dismissed.
8. In ground No. 3 the assessee contended that the ld. CIT(A) erred on facts and law for an addition of Rs. 2,30,253/- for Rice bran by applying an estimated rate value of closing stock @ Rs. 450/- in place of declared rate of Rs. 351/- which is un-sustainable action (AO addition of Rs. 17,28,041/- less CIT(A) Rs. 14,97,789/- relief on rate of declared sales).
9. We have carefully perused the rival submissions including the written submissions filed by the assessee. Brief facts of the case are that the assessee disclosed average sale of rice bran at Rs. 443.25/- per qtl. and valued the closing stock of rice branch at Rs. 351/- per qtl. The AO referred to three comparable cases for the purpose of arriving at the average sale rate of rice bran in these cases. The cases are: (i) M/s Ankit Trading Co. Ismailabad; (ii) M/s Shiva Ganesh Inds, Shahbad and (iii) M/s Kochar Rice Mill, Ismailabad. The assessee has estimated the stock and valued the stock as per audit report on estimate market value. Sale of rice bran is made to a single party namely M/s S.K. Trading Co. Kurukshetra and not to any other concern. Therefore, it was not feasible for the AO to rely on comparable cases of this product. The AO afforded opportunity to the assessee to explain these facts vide letter dated 9.12.2009 and also proposed to reject the books of account u/s 145 of the Act and consequently to adopt the value of rice bran at the average sale rate worked out in respect of above mentioned concerns. The assessee contended that it is maintaining day to day records of purchases of paddy and milling. The rice bran was sold in the open market at prevailing market rate and entire sale consideration was received through account payee cheques/drafts. The closing stock of rice bran was rightly valued at market rate. Regarding average rate of rice bran of the three specific parties, the assessee submitted that all the mills are situated almost 30 Km away from the assessee firm. The assessee further submitted that rate of rice bran depends upon the content of oil in rice bran and also depends on the quality of paddy and also depends upon the method of milling. The submissions made by the appellant were not found acceptable by the AO on the ground that these factors have equally effected the rice mills operating in the area. The AO further referred to the case of M/s Shiva Ganesh Inds. Shahbad, who sold rice bran @ Rs. 742.95 per qtl to M/s Sanjeev Kumar Pardeep Kumar, Shahbad on 11.8.2006 and to M/s Goya Agro Inds, Ltd. Kurukshetra at Rs. 681.51 per qtl on 15.9.2006. In view of the facts discussed above, the AO noted that the assessee has not maintained any register for the record of rice bran as admitted by him in its reply dared 24.11.2009 and hence the verification of sale made and valuation of closing stock is not possible and hence books of accounts are defective which fail to give the true picture of the business. The books of account of the assessee was, therefore, rejected u/s 145(3) of the Act. The AO worked out the sale made and valuation of closing stock @ Rs. 668/- per qtl., i.e., the average sale rate of other rice mills referred to and made addition of Rs. 17,28,041/- on this account.
10. The ld. CIT(A) after appreciation of the relevant assessment order and the submissions made by the assessee recorded his finding in para 2.05 to 2.08 of his order which are reproduced hereunder:
"2.05 The issue is considered. The facts in brief are that the appellant declare sale of rice bran @ average rate of Rs. 443.25 per qtl. The closing stock of the rice bran was declared at Rs. 351/- per qtl. The valuation of the closing stock has stated to be done at estimate market value. The AO noted in his order that other rice sellers working in that area shown the sale of rice bran at the average rate of Rs. 659.40/- per qtl to Rs. 671/- per qtl. The AO, therefore, held that the sale of rice bran was under invoiced and the closing stock was also under valued and took the same at the average rate of Rs. 668/- per qtl resulting in an addition of Rs. 17,28,041/- on this account which is challenged by the appellant vide ground No. 2 of the appeal.
2.6 In the written submissions, the appellant mainly placed reliance on the fact that the entire sale of rice bran was made to affirm and sale consideration was received through account payee cheques. The appellant further submitted that quality of rice bran depends upon the quality of paddy which is evidenced by the fact that there is difference of Rs. 80/- per qtl in average sale rate of rice bran of the rice sellers referred to / relied upon by the AO himself. The appellant further submitted that the AO alleged that the assessee has not maintained the production Register of rice bran which is irrelevant, since the addition was made on the basis of alleged under invoicing, whereas production register contains only of the details of weight and no record of sale price is recorded therein. Further complete sale vouchers containing the weight and sale was produced in which no deficiency could be pointed out by the AO. Regarding valuation of closing stock of rice bran, the appellant reiterated its submissions that value of rice bran depends upon the quality of oil contents in it. The appellant claimed that value of rice bran started diminishing heavily if it is not sold within a day or two as the oil becomes non-edible after the lapse of time.
2.07 As discussed above, the appellant claimed to have sold the entire rive bran to M/s S.K. Trading Co., Kurukshetra and entire payment thereof was stated to be received through account payee cheques, in which the AO could not point out any under invoices / discrepancy and hence estimating the sale of rice bran at the average sale rate of Rs. 668/- per qtl on the basis of the sale declared by the other rice millers, working in that area, cannot be sustained and hence addition on this account made by the AO is deleted. As far as undervaluation of closing stock of rice bran is concerned, it is noted that the same was stated to be valued at the estimated market value and enclosed details of sale made of rice bran. It is noted that the same was stated to be sold at the rate of Rs. 445/- per qtl on 26.2.2007 and Rs. 450/- per qtl on 26.3.2007 and as such plea of the appellant of estimating the value of rice bran of closing stock @ Rs. 351/- per qtl is not tenable. The further plea of appellant that the rice bran was sold at the same rate in September, 2007, is not tenable since for the purpose of valuation of closing stock, market value of the rice bran is to be taken as on 31.3.2007. The appellant filed the details of sale of rice bran in the next year which is as under:
Date Weight Rate 15.9.07 265.50 Rs. 350.00 17.9.07 256.50 Rs. 350.00 3.10.07 351.00 Rs. 355.00 15.10.07 265.00 Rs. 350.00 15.11.07 360.00 Rs. 490.00 29.11.07 337.50 Rs. 500.00 2.08 In view of the facts discussed above, it is held that the appellant failed to establish that the market rate of rice bran as on 31.3.2007 was Rs. 351/- per qtl and hence same is held to be @ Rs. 450/- per qtl, i.e., the rate at which the rice bran was sold on 26.3.2007. The AO is accordingly, directed to work out the value of closing stock and addition made on this account is confirmed up to that extent only. Grounds of appeal No. 2 as such partly allowed."
11. The ld. CIT(A) recorded a categorically finding that the assessee has failed to establish that the market rate of rice bran as on 31.3.2007 was Rs. 351/- per qtl and, hence, the ld. CIT(A) adopted the rate at Rs. 450/- per qtl, the rate at which the rice bran was sold on 26.3.2007. The ld. CIT(A) has taken the rate of Rs. 450/- per qtl being realistic on the basis of sale made by the assessee of the rice bran on 26.3.2007. Therefore, we do not find any factual and legal infirmity in adopting the said rate by the ld. CIT(A). We have also considered the decision relied upon by the assessee in the case of CIT v. Fazilka Cooperative Sugar Mill Ltd, 255 ITR 411. The facts of the case cited by the assessee are different and distinguishable, hence, not applicable to the issue in question. The assessee has failed to establish his contention by adducing cogent and corroborative material, in the matter. The assessee has made the valuation of closing stock at the estimated market value. The AO held that sale of rice bran was under invoice and the closing stock was under valued and took the same at the average rate of Rs. 668/- per qtl resulting an addition of Rs. 17,28,041/-. The ld. CIT(A) has taken the rate at Rs. 450/- per qtl as indicated earlier. Therefore, the case laws relied on by the assessee supports the case of the AO and not of the assessee. In view of this, we do not find any infirmity in the findings of the ld. CIT(A). The ld. CIT(A) has passed a detailed and speaking order based on categorical analysis of the facts of the case and submissions made by the assessee. Thus, the Ground No. 3 of assessee's appeal is dismissed.
12. In ground No. 4 the assessee contended that the ld. CIT(A) erred on facts and law foran addition of Rs. 58,800/- in the light of the decision of the Hon'ble Punjab & Haryana High Court in the case of CIT v. Abhishek Industries, 286 ITR 1 (P&H).
13. We have carefully perused the rival submissions including the written submissions made by the assessee. The brief facts of the case are that the assessee claimed payment of interest atRs. 11,34,714/- to bank and others. However, no interest was charged from the persons to whom the advances were made for non-business purposes. The AO disallowed the proportionate interest which was contested by the assessee on the ground of availability of capital in the partners account. The assessee also argued that one of the partners was ex-partner who died and the amount of outstanding in his account was transferred to his wife's account. It was further contended by the assessee that the advance in the name of Shri Ashok Kumar who had a credit balance of Rs. 6,65,393/- which is more than the debit balance and as such same cannot be considered for making disallowance. The AO accepted the submissions in these two cases. In other cases, the AO recorded finding that the assessee made the advances without business purposes and applying the ratio of the decision of Hon'ble jurisdictional High Court in the case of CIT v. Abhishek Industries (supra). The ld. CIT(A) recorded his finding in para 3.3 and 3.4 of his order which are reproduced hereunder:-
"3.03 The issue is considered. At the outset, it is noted that exact source of making interest free advance has not been brought on records. Further, the appellant claimed that capital in the partners capital account on which no interest was paid is more than the amount of interest free advances. This plea of the appellant is not tenable, since in that case, the amount of interest free advances should have been debited in the capital account of the partners. It is also noted from part B of annexure 1 of form 3CD, page 8 of paper book, that at Sr. No. 13, interest paid stated to include interest paid to partners on capital. As far as the applicability of the case of M/s Abhishek Inds. of the jurisdictional Hon'ble Punjab & Haryana High Court, it is noted that ratio of the case is applicable as may be noted from the extracts of the decision extracted below:
"business expenditure - interest on borrowed capital - condition precedent for grant-borrowed capital must be used for business purposes - loans advanced interest-free to sister concerns while payment outstanding on borrowed by company - inference that advances were from borrowed funds and for non-business purposes-onus on assessee to show borrowings used for business purposes - not on revenue to show nexus between borrowings and advances - that advances by company were out of its own funds of share capital or out of mixed funds, not sufficient to discharge onus-interest to extent relating to sums advances interest-free to be disallowed - income tax Act, 1961, s. 36(1)(iii)."
3.04 In view of these facts, it is noted that had the interest free advances been not made by the appellant, the same would be available for business and in turn interest liability of the appellant would also be reduced. As far as reliance placed by the appellant in the case of M/s Munjal Sales Corp., it is seen from the penultimate para of the decision, that the Hon'ble Court decided the issue of allow ability or otherwise of interest on the peculiar facts of this case. The Hon'ble Court did not as such hold any law to the fact that to the extent of capital brought in or the profits earned during the year, no disallowance of interest can never be made. Applicability of the decision as such would depend on the facts of each case. If the capital brought in by the firm stands already applied for purposes other than for the purposes of advancing money, free of interest, the decision of the Hon'ble Court will not apply. Only when the capital of the firm was s till available with the firm, the question of disallowance will not arise if the amount of interest free loan given is less than the funds available. Since the capital is seen to have already been applied for other business purposes, it is but natural to hold that the money has been advanced out of the interest bearing funds and hence disallowance has rightly been made by the AO. Disallowance out of interest made by the AO is, therefore, confirmed."
14. Having regard to the factual matrix of the case, provisions of the Act, the relevant record of the case and the case laws relied on by the contending parties, we are of the considered opinion that the findings of the ld. CIT(A) remains unrebutted by the assessee. Therefore, the same are upheld and ground No. 4 of assessee's appeal is dismissed.
15. In ground no. 5, the assessee contended that the ld. CIT(A) erred on facts and law for estimating the sale (Rs. 22,09,732/- of rice in the valuation of closing stock not considering the different verities of rice, quantity, the rates thereof. We have considered the rival submissions including the written submissions of the assessee.
16 The findings of the ld. CIT(A) are reproduced hereunder:
"4.05 The issue is considered. The appellant claimed that rive includes Rice Tibar, Dubar, Kinki, and Mungra etc., the valuation of which cannot be made at the same rate. The item wise details of closing stock of rice was stated to be furnished before the AO but the AO valued all the verity of rice at the same rte. The appellant further tried to justify on the ground that it has done custom milling and supplied about 5946 qtl of rice to the DFSC, which cannot contain broken rice and hence the same was less in the closing stock. Finally the appellant submitted that closing stock of rice were sold @ 700/- per qtl to Rs. 725/- per qtl in the next year.
4.06 At the outset, it is noted that claim of the appellant that the closing stock of rice contains Rice Tibar, Dubar, Kindki, Mungra etc. is not verifiable from the details of closing stock, specified in the tax audit report which is reproduced below:
Rice Opening stock 14926.93 Purchases 20405.20 Mfd. 7927.65 Sales 25978.43 Closing stock 17281.35 The appellant has also not dealt with the finding of the AO that stock register is maintained quality wise. In other words, details now submitted is not verifiable from the stock register. In any case, the appellant could not bring any evidence on record in support of this claim as well as to establish that the prevalent market price of rice grade-A was Rs. 857/- per qtl. The plea of the appellant that the closing stock of rice was sold in the next year at the rate of 700-725 per qtl is not tenable since the market price is to be taken as on 31.3.2007. The appellant as such has not been able to establish the correctness of valuation of the closing stock taken by it, and hence no interference is called for in the order of the AO in this regard and the addition made is hereby confirmed."
17. In the course of appellate proceedings, the assessee contended that the stock register is maintained quality wise and he produced photocopies of the same for the perusal of the Bench. A bare perusal of the stock register of rice and maintained by the assessee reveals that the same contains quality wise details of rice. The appellant submitted that the ld. CIT(A) as well as the AO had ignored the vital facts which goes to the root of the issue in the matter.
18. Having regard to the facts and circumstances of the case and rival submissions, we are of the considered opinion that the issue deserves to be restored to the file of ld. CIT(A), for the purpose of adjudicating the issue afresh, in the light of stock register filed by the assessee. The issue may be adjudicated afresh after affording reasonable opportunity to the assessee and in accordance with the relevant provisions of the Act. Accordingly Ground No. 5 is treated as allowed for statistical purposes. .
19. In ground No. 6, the assessee contended that the ld. CIT(A) erred in upholding the action of the AO in respect of disallowance of Rs. 13,746/- attributable to the telephone expenses for personal usage. The assessee placed reliance on the decision in the case of Satya Parkash Sharma V. ACIT (2009) 20 DTR 561 (Delhi).
20 The findings of the AO as contained in para 6 of the assessment order are as under:
"6. From the perusal of telephone bills, it is noticed that bills amounting to Rs. 18,329/- pertain to the residence of Shr Raj Kishan R/o H No. 252/7, Kurukshetra. When asked, the assessee stated that Shri Raj Kishan is ex-partner and father of two partners and the telephone bill is being used for business purpose only. The plea of the assessee is not fully acceptable as the telephone installed t residence has been used to the maximum extent for personal purposes by partner and their family members. Therefore, 3/4th of these expenses is disallowed on account of personal use of the telephone by the partners and their family members and accordingly addition of Rs. 13,746/- is made in the income of the assessee.
21. The findings of the ld. CIT(A) are reproduced hereunder:
"The issue is considered. The facts are that from the perusal of telephone bill, the AO noted that bills amounting to Rs. 18329/- pertained to the residence of Shri Raj Krishan, who was ex-partner and father of two partners. Though the telephone was claimed to be used for business purposes only yet no evidence in this regards could be brought on records. The AO, therefore, noted that telephone installed t residence was used to the maximum for personal purposes by partners and their family members and hence 3/4th of these expenses is disallowed on account of personal use of telephone. The appellant has not brought on record any evidence in support of its claim that the telephone installed at the residence of ex-partner was used for the purposes of business only and hence disallowance out of telephone expenses made by the AO is hereby confirmed."
22. Having regard to the facts and circumstances of the present case, rival submissions and the findings of the AO and the ld. CIT(A), it is evident that the assessee has failed to establish that the impugned expenses had been wholly and exclusively expended for the purpose of business. Therefore, the disallowance upheld by the ld. CIT(A) cannot be interfered with. Hence, the findings of the ld. CIT(A) are upheld. Ground No. 6 of assessee's appeal is dismissed.
22(i) Thus, the appeal of the assessee is partly allowed as indicated above.
ITA No. 726/Chd/2011 - Revenue's appeal23. In this appeal the Revenue has raised the following grounds:
"1 On the facts and in the circumstances of the case, ld. CIT(A) has erred in directing to take the value of closing stock of paddy husk @ Rs. 80/- per qtl instead of Rs. 101.60 per qtl applied by the AO thereby allowing a relief of Rs. 2,25,337/- without appreciating that as per Audit Report, the closing stock was valued by the assessee on estimate and AO has applied the average of sale rate shown in the cases oof other rice shellers of the area.
2. On the facts and in the circumstances of the case, the ld. CIT(A) has erred in directing to take the value of closing stock of rice bran @ Rs. 450/- per qtl as against Rs. 668/- per qtl applied by the AO thereby allowing a relief of Rs. 14,68,012/- without appreciating that the assessee has valued the closing stock on estimate and whereas the AO has valued the closing stock after applying the rate shown in the three other cases of rive shellers of the area.
3. The appellant craves leave to add or amend the grounds of appeal before the appeal is heard or disposed off."
24. Ground No. 3 raised by the revenue is general in nature and needs no separate adjudication. Hence the same is dismissed.
25. The findings of ld. CIT(A) given in para 1.08 are reproduced hereunder:
"1.08 The issue is considered. The fact remains that no record of production and use of chilka was maintained by the appellant. Even in the tax audit report, the auditors is required to give in col. 28(b), inter-alia, the quantitative details of by-products but no such detail was specified in the tax audit report. The main by-products in the case of rice mill are chilka and rice bran which commands good market value in these days and hence the appellant is required to satisfy the AO about the correct recording thereof in the books of account. During the appeal proceedings also, partner of the appellant firm attended with his counsel and admitted that no record of production, consumption, sale and closing stock of chilka are maintained. The valuation of closing stock of chilka stated to be made on estimate basis. In view of these facts, plea of the appellant is not tenable and the correctness of trading results declared by the appellant are not verifiable. The rejection thereof by invoking the provisions of section 145(3) of the Act, is, therefore, confirmed. As far as the plea of the appellant about the result declared in the last year, it is noted that appellant declared the closing stock of chilka of Rs. 4.75 lakhs also in the last year which is also to be considered for comparison of the result besides the fact that each year is an independent year. The appellant further pleaded that the AO referred the different case of rice millers for yield and for sale rate, the records of M/s Kochar Mills, Ismailabad is available which is one of the cases, referred to by the AO. On examination thereof, it is noted that M/s Kochar Mills declared yield of chilka at 19.4% and average sale rate of Rs. 84/- per qtl. The AO took the yield of chilka at 18% and average sale rate at Rs. 101.60 per qtl. Considering the entirety of facts, the yield of chilka taken by the AO is confirmed but the rate thereof directed to be taken @ Rs. 80/- per qtl. Regarding the relief allowed from the yield of chilka on account of use thereof in boiler for driage and in staking by the AO at 1/3rd the same is confirmed, for want of any record of production, consumption and sale thereof produced by the appellant. Ground of appeal No. 1 is as such partly allowed."
26. The issue raised by the revenue in ground No. 1 has been duly adjudicated before us while deciding ground No. 2 of assessee's appeal. The findings of the ld. CIT(A) have been upheld by us in respect of this ground raised by the assessee. This issue has been adjudicated by us in para 7 of assessee's appeal. In view of the findings given by the Bench in respect of grounds No. 1 and 2 of assessee's appeal, ground No. 1 raised by the revenue, is dismissed.
27. The issue raised in ground No. 2 by the revenue has been dealt with by us while adjudicating ground No. 3 of assessee's appeal. Therefore, the findings recorded in respect of ground No. 3 of assessee's appeal are application to the ground raised by the revenue. In view of such findings as recorded in para 11 of the assessee's appeal, the ground No. 2 of revenue appeal is dismissed.
27(i) Thus the appeal of the revenue is dismissed.
28. In the result, appeal of the assessee is partly allowed, whereas the appeal of the revenue is dismissed.
Order Pronounced on 30 .03.2012
Sd/- Sd/-
(SUSHMA CHOWLA) (MEHAR SINGH)
JUDICIAL MEMBER ACCOUNANT MEMBER
Chandigarh, the 30.03.2012
SURESH
Copy to:The Appellant/The Respondent/The CIT/The CIT(A)/The DR
PAGE 15