Income Tax Appellate Tribunal - Amritsar
Sh. Satnam Singh, Kapurthala vs The Income Tax Officer, Kapurthala on 3 September, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH, AMRITSAR
BEFORE SH. VIKRAM SINGH YADAV, ACCOUNTANT MEMBER AND
SH. N.K.CHOUDHRY, JUDICIAL MEMBER
ITA No.114(Asr)/2017
Assessment Year:2009-10
Sh. Satnam Singh Vs. Income Tax Officer
M/s Guru Teg Bahadur Cold Ward-2, Kapurthal
Storage & Ice Factory, Village
Madhopur Jallowal via Kala
Sanghian, Distt. Kapurthala.
[PAN:ABNPS 7942R]
(Appellant) (Respondent)
ITA No.115(Asr)/2017
Assessment Years:2009-10
Sh. Jagtar Singh Vs. Income Tax Officer
M/s Guru Teg Bahadur Cold Ward-1, Kapurthal
Storage & Ice Factory, Village
Madhopur Jallowal via Kala
Sanghian, Distt. Kapurthala.
[PAN:ABQPS 5058P]
(Appellant) (Respondent)
Appellant by: Sh. Sudhir Sehgal
Respondent by: Sh. Dheeraj Garg (Ld. DR)
Date of hearing: 25.07.2019
Date of pronouncement: 03.09.2019
ORDER
PER N.K.CHOUDHRY, JM:
Both the appeals have been filed by the assessees against the separate orders dated 08/12/2016 passed by the Ld. CIT(A)-
2 ITA Nos.114 & 115/Asr/2017(A.Y.2009-10) Satnam Singh & Jagtar Singh vs. ITO 2, whereby the Ld. CIT(A) has partly affirmed the assessment orders passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961 (hereinafter called as 'the Act').
2. Both these appeals having common facts and issues, therefore, for the sake of convenience and brevity the facts of ITA No.114/Asr/2017 have been taken into consideration and result of the same should also be applicable mutatis mutandis to ITA No.115/Asr/2017.
3. The Brief facts of the case are that the assessee and his brother Sh. Jagtar Singh (Appellant in ITA No.115/Asr/2017) have been jointly carrying on agriculture activities over the years and during the financial year relevant to the assessment year under consideration derives income from interest on capital with M/s. Guru Teg Bahadur Cold Storage and M/s. Satnam Agro Cold Storage, the sister concerns run by the family. The assessee declared interest income of Rs.2,26,954/- and agricultural income of Rs.18,50,000/-. The assessee also revised its return of income and declared the income from short term capital gain to the tune of Rs.45,000/- on account of sale of some immovable property. The case of the assessee came under scrutiny through AIR. In the assessment proceedings, the assessee submitted that in the year under consideration assessee and his bother have grown Potatoes (seed potato and ration potato) on 398 acres of land (27 acres land is owned by them and 371 acres have been taken on lease from different persons). The assessee claimed that total sale proceeds out of 398 acres land cultivated by the assessee and his bother accrued to Rs.8,12,71,018/- and out of which Rs.7,75,71,018/- has been 3 ITA Nos.114 & 115/Asr/2017 (A.Y.2009-10) Satnam Singh & Jagtar Singh vs. ITO claimed as expenses and net agricultural income of Rs.37 lac has been shown in half shares by the assessee and his brother in their respective returns of income. On examination the sale bills, vouchers and other documents, it was found by the Assessing Officer that during the year under consideration total sales as per sale bills procured from the assessee was Rs.11,77,38,005/- but not Rs.8,12,71,018/- as shown by the assessee, therefore, the balance sales of Rs.3,64,66,987/- was considered to be unaccounted sales i.e. not of agriculture produce grown by the assessee. The assessee was show caused as to why trading profit on the amount of Rs.3,64,66,987/- be not brought to tax. In response to which the assessee vide its reply filed on dated 26.12.2011 narrated the following facts before the Assessing Officer.
i. We dispose of only our own produce by cultivating agricultural lands.
ii. The transfer bills issued in respect of potatoes sent for storage at Tinsukhia of the value of Rs.3,63,94,624/- do not belong to us.
iii. The said potatoes pertain to other agriculturists who grow potatoes on their lands and they all just asked us to store their produce of potato in the cold storage taken on hire by us from Mahabir Cold Storage, Tinsukhia through an agreement dated 16.01.2009. The proof of sending the potatoes belonging to other cultivators are the railway receipts showing the names and addresses of the owners.
iv. The cold store owner to whom the potatoes were sent for storage has misappropriated the produce and has not given us the potato or any money in lieu of potatoes misappropriated by them. We have filed a complaint before the SSP, Kapurthala against the 4 ITA Nos.114 & 115/Asr/2017 (A.Y.2009-10) Satnam Singh & Jagtar Singh vs. ITO owners of Mahavir Cold Storage from whom we still have to receive Rs.5,20,66,352/-.
v. The fact that the potatoes of other agriculturists were sent through our transfer bills, is evident from the complaint lodged by us with SSP. Kapurthala. The said party was summoned by SHO, Police Station, Kapurthala and investigation is in progress.
vi. The growers whose potato was sent to be stored in the cold storage taken on rent by us have given their affidavits to this effect.
The Assessing Officer did not get impress by the explanation/claim of the assessee qua filing of Railway receipts, affidavits of the other farmers and police complaint filed before the SSP, Kapurthala against Mahavir Cold Storage, Tinsukhia and while applying the profit rate @ 10% on the excess sale of Rs.3,64,66,987/- made an addition of Rs.36,46,698/- jointly and Rs.18,23,350 separately against the assessee and his brother.
4. The assessee challenged the said addition before the Ld. CIT(A) , who though upheld the finding of the Assessing Officer to the effect that the receipt of Rs.3,64,66,987/- pertains to the trading receipts on account of sale of potatoes, however reduced the addition of Rs.18,23,350/- to Rs.7,27,898/- while applying the profit rate @ 4% as against 10% as applied by the Assessing Officer. For the sake of brevity and ready reference the concluding part of the order impugned herein is reproduced herein below.
"4.3 I have gone through the assessment order passed by the A.O, detailed submissions made in this regard and material brought on record including judicial citations stated by the appellant and find that an addition of Rs.18,23,350 has been made by the AO on account of unexplained business income 5 ITA Nos.114 & 115/Asr/2017 (A.Y.2009-10) Satnam Singh & Jagtar Singh vs. ITO from trading of potatoes. During the course of assessment proceedings, it was found by the AO that total sales as per the sale bills (produced before the AO) works out to Rs.11,77,38,005 as against the declared sales of Rs.8,12,71,018 in the books of account. Therefore, it was held by the AO that receipts of Rs.3,64,66,987 pertain to the trading receipts on account of sale of potatoes. The detailed reasons for holding these sales as from trading business have been discussed on page 3 to 5 of the order, which is reproduced above.
4.4 The AO has also worked out the level of agricultural income declared by the appellant over a period of 3 years and the percentage of expenses claimed against this income. The contentions of the appellant with regard to these sale bills on account of transfer of potatoes on behalf of other parties for sending to Assam and other eastern parts of the country was also rejected by the AO for the reasons stated above. It was held by the AO that an income of 10% has been earned on these business receipts of Rs. 3,64,66,987 and accordingly, undisclosed income of Rs. 36,46,698 was assessed in the hands of both the brothers who carried on the business jointly. Therefore, an addition of Rs.18,23,350 each was made in the hands of the appellant and his brother.
4.5 The appellant has submitted that AO has failed to appreciate that agricultural income varies from year to year depending on number of factors like season, use of fertilizers, availability of labour and other natural causes. It is also stated that transfer bills of the value of Rs.3,63,94,627 (as against Rs. 3,64,66,987 stated by the AO) have been issued and the balance amount of Rs. 72,359 is on account of wastage and shortage. Further, it is stated that a godown was taken on hire in Assam and material was sent pertaining to other cultivators to be stored in Assam. The complete details of agricultural goods sent by the other cultivators through the appellant were filed before the AO. The copy of these receipts can be verified against the Railway receipts, which have issued in their name.
4.6 Further, it is stated that affidavits of these cultivators have been filed confirming that potatoes have been sent to Assam through the appellant. The railway receipts have been issued in the names of the cultivators. It is also stated that a complaint was filed with the Police at Kapurthala Station by all 6 ITA Nos.114 & 115/Asr/2017 (A.Y.2009-10) Satnam Singh & Jagtar Singh vs. ITO the agriculturists. The appellant has stated that there was no malafide intention in not disclosing the complete receipts. Further, it is stated that AO has not rebutted the claim made by the farmers in the affidavits. At last, the appellant has submitted that profit rate of 10% is much higher as compared to the rate of profit of 4.5% declared on the agricultural produce and therefore, net profit on trading cannot be more than 0.5% of the sales.
4.7 Having considered the submissions made in this regard, I find that there is no dispute that sale bills of Rs. 3,63,94,627 have been issued by the appellant. However, the fact that 19 persons have confirmed the fact that potato packets were sent by them through the appellant for the purposes of storage in their godown which had been taken on rent in Assam. These persons, who are agriculturalists have confirmed this fact by filing an affidavit in the course of assessment proceedings. A copy of the rent agreement for the godown taken on rent in Assam by the appellant was also filed before the AO. It is further stated by the appellant that all the railway receipts, issued by the railway authorities for transportation of potato packets to Assam have been drawn in the name of respective agriculturalists.
4.8 The appellant has also submitted that a police complaint was lodged with the station at Kapurthala, on 19.10.2011 that these potato packets have him sent by the agriculturists. Further, it is stated that a notice under section 160 of Cr. PC has been issued in consequence to the complaint lodged by these agriculturalists against the owners of cold storage in Assam.
4.9 Thus, after going through the evidence brought on record by the appellant 1 hold that these potato packets have not been grown by the appellant and v u. grown by the 19 persons whose affidavits have been filed by the appellant. However, the fact which cannot be ignored that in the course of assessment proceedings, while examining the sale bills the total turnover of the appellant has been worked out at Rs.11,77,38,005 as against the declared sales of Rs.8,12,71,018 in the books of account. Therefore, it was stated by the AO that r e c e i p t s of Rs. 3,64,66,987 pertain to the trading receipts on account of sale of potato.7 ITA Nos.114 & 115/Asr/2017
(A.Y.2009-10) Satnam Singh & Jagtar Singh vs. ITO 4.10 The fact that income declared by the appellant in the preceding succeeding years has been accepted by the department does not mean that profit rate cannot be varied in the period under consideration on the basis of hard evidence with regard to the trading receipts, as computed by the AO. The fact which cannot be denied that evidence pertaining to these receipts in the form of sale bills has been produced by the appellant himself before the AO in the course of assessment proceedings.
4.11 Thus, after considering the explanation given by the appellant, I hold that trading receipts have to be assessed at Rs.3,63,94,627 (as against Rs. 3,64, 66, 987 stated by the AO) and the balance amount of Rs.72,359 is to be treated a account of wastage and shortage. Now, the issue which arises for consideration is the percentage of profit which is to be applied for working out the income earned on these undisclosed receipts of the trading business.
4.12 AO has stated in the order that the profit rate of 10% is to be applied on these receipts of trading business, whereas appellant has stated that net profit rate of 0.5% is to be applied on these receipts, as an alternative plea. I find that a profit rate of 4.5% has been declared on the agricultural receipts of the appe llant for the period under consideration. AO has not given any basis for adopting a profit rate of 10% on these trading receipts and also the appellant has no t f urnished the reasoning for taking a profit rate of 0.5% on these receipts. Thus, I am left with no alternative but also to adopt an estimated rate of 4% as it is a common knowledge that a trader earns as much as or even more than what an agriculturists earn in practice. Accordingly, I hold that it would be just and fair to apply a profit rate of 4% on the undeclared receipts of Rs.3,36,94,627, which works out to the profit of Rs.14,55,785 and one half share of the appellant would come to Rs.7,27,892.
4.13 In view of the above facts, I confirm an addition of Rs.7,27,892 out of the total addition of Rs.18,23,350 made 8 ITA Nos.114 & 115/Asr/2017 (A.Y.2009-10) Satnam Singh & Jagtar Singh vs. ITO by the AO on account of explained income earned from the business of trading of potatoes."
5. On being aggrieved, the assessee preferred the instant appeal and in support of its case reiterated the contentions as raised before the authorities below and vehemently submitted that order under challenge is perverse and suffers from impropriety and illegality and therefore liable to be set aside.
6. On the contrary, the Ld. DR refuted the claim of the assessee and submitted that order impugned herein is not only based on analyzation of facts but also based on the logical reasonings and is a well-reasoned order, therefore, does not requires any interference by this Court.
7. Having heard the parties at length and perused the material available on record. This is not in controversy that the excess amount of Rs.3,64,66,987/- was detected as unaccounted sale i.e. not of agriculture produces grown by the assessee, however, the assessee has claimed that the said sale amount does not belong to the assessee as the produces amounting to Rs.3,63,94,624/- have been grown by other agriculturist and have been sent through Railway consignments to Mahabir Cold Storage, Tinsukhia for storage purposes in order to sell the said produce in market of Assam later on. However, the cold storage owner misappropriated the produces therefore the assessee and other farmers filed the police complaint before the SSP, Kapurthala against the owner of the Mahabir Cold Storage, Tinsukhia in the month of October, 2011. The assessee also claimed that various farmers who have grown potatoes and sent the same to be stored in the Cold Storage taken by rent by 9 ITA Nos.114 & 115/Asr/2017 (A.Y.2009-10) Satnam Singh & Jagtar Singh vs. ITO the assessee, have given their affidavits by affirming the growing of potatoes, sending the same through railway consignment, for storage in Mahabir Cold Storage, Tinsukhia, misappropriation by the owner of said cold storage and filing of police complaint against the said owner.
7.1 The Assessing Officer though considered the aforesaid submissions and documents of the assessee, however, did not agree and in respect of police complaint observed that the police complaint is not supported by any previous correspondence and email etc. exchanged with that party for making any efforts to recover its money and further observed that the action in the form of police complaint was taken only in the month of October, 2011 i.e. more than 2 and ½ years after and during the pendency of assessment proceedings. The Assessing Officer in respect of affidavits of the farmers concluded that these are self serving documents. The Assessing officer finally while considering the facts and circumstances specifically the bills issued by the assessee made the addition while applying gross profit rate.
The assessee before the Ld. CIT(A) reiterated the same facts as submitted before the Assessing Officer, however, at last claimed that the profit rate @ 10% as applied by the Assessing Officer was much higher as compared to the rate of profit of Rs.4.5% declared on the agriculture produce and therefore, net profit on trading account cannot be more than 0.5% of the sales. The Ld. CIT(A) though affirmed the findings of the Assessing Officer, however, reduced the profit rate.
10 ITA Nos.114 & 115/Asr/2017(A.Y.2009-10) Satnam Singh & Jagtar Singh vs. ITO 7.2 Considering and analyzing the peculiar facts and circumstances of the case, in our considered view, the police complaint filed before the SSP, Kapurthala and its out come is paramount for proper and real adjudication of the issue under hand, whereas at the time of argument of these appeal neither the assessee nor the Revenue Department has drawn our attention to the latest development of the police complaint filed by the assessee qua criminal offence of misappropriation allegedly committed by the owner of said Cold Storage. Though, the Assessing Officer considered the affidavits as self serving document, however in order to ascertain the real and correct picture of the instant case did not examine any of the persons, who have given the affidavit. It is a settled law that the affidavit sworn by the persons, cannot be thrown out or sidelined unless and until rebuttal is made of the same. The assessee has also produced the Railway Receipts in order to show the sending of potatoes by the farmers directly to Mahavir Storage, Tinsukhia. Though the assessee with regards to bills issued by the assessee and produced voluntarily before the Assessing Officer during the course of assessment proceedings, claimed that the sales bills were issued on behalf of other farmers of the "Jimidar Union "
and given to M/s Mahavir Cold Storage, Tinsukhia, Assam as the owner of the said cold storage wanted a bill to obtain loan from the Bank against the potatoes stored with them, by the assessee and other farmers, however, in our view, in absence of any other corroborative material these bills cannot be discarded, therefore examination and consideration of affidavits of the farmers, Railway receipts and the police complaint filed before the SSP and its outcome are very much necessary and essential in its 11 ITA Nos.114 & 115/Asr/2017 (A.Y.2009-10) Satnam Singh & Jagtar Singh vs. ITO right perspective for proper and real adjudication of the issue in hand. Hence, we are inclined to set aside the orders passed by the Authorities below and to remand this case to the file of the Assessing Officer to decide afresh after examining the farmers randomly who have given affidavits, railway consignment receipts and the police officials who have dealt with police complaint and result of the police complaint. Suffice to say due opportunity is required to be given to the assessees.
8. In the result, both the appeals under consideration filed by the assessees stands allowed for statistical purposes.
Order pronounced in the open Court on 03.09.2019.
Sd/- Sd/-
(VIKRAM SINGH YADAV) (N.K.CHOUDHRY)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 03.09.2019
/PK/ Ps.
Copy of the order forwarded to:
(1) Sh. Satnam Singh & Sh. Jagtar Singh M/s Guru Teg Bahadur Cold Storage & Ice Factory, Village Madhopur Jallowal via Kal Sanghian, Distt. Kapurthala (2) The ITO, Ward-2, Kapurthala (3) The CIT(A)-2, Jalandhar (4) The CIT concerned (5) The SR DR, I.T.A.T., Amritsar True copy By order