Income Tax Appellate Tribunal - Amritsar
Income Tax Officer vs Jiwan Singh Pritam Singh. on 13 August, 1993
Equivalent citations: (1994)48TTJ(ASR)534
ORDER
R. K. BALI, A. M. :
This is an appeal by the Revenue against order dt. 7th Sept., 1988 passed by the CIT(A)-II, Amritsar.
2. The Revenue has taken the following grounds :
"1. On the facts and in the circumstances of the case, the learned CIT(A) has erred in deleting the addition of Rs. 2,30,000 made by invoking provisions of S. 43B in respect of unpaid purchase tax relating to the fourth quarter of the financial year.
2. On the facts and in the circumstances of the case, the learned CIT(A) has further erred in deleting the addition of Rs. 5,44,000 made in respect of under-statement of stock of rice basmati.
3. While allowing relief at Sr. No. 2 above, the learned CIT(A) has failed to appreciate that the assessee has declared to the bank authorities, on solemn affirmation, 1856 qtls. of rice basmati as against 862 qtls. shown in the books of account.
4. It is prayed that the order of the CIT(A) be vacated and that of the ITO be restored."
2. Regarding ground of appeal No. 1, it is seen that the learned CIT(A) has deleted the addition for the reasons given in detail in paras 2 to 4. A perusal of the order passed by the learned CIT(A) indicates that there is some confusion regard to the date of the cheque amounting to Rs. 2,30,000 as to whether the date was 30th March, 1984 or 30th April, 1984. In any case the payment has been made and the cheque was encashed by the Sales-tax Department on 17th May, 1984, which date is much prior to the due date for filing of return for the asst. yr. 1984-85. Therefore, in view of the decision of Honble Patna High Court in the case of Jamshedpur Motor Accessories Stores vs. Union of India & Ors. (1991) 189 ITR 70 (Pat), which we have followed in a number of cases and which has also been subsequently approved by the Honble Calcutta and Orissa High Courts in the cases of CIT vs. Jagan Nath Steel Corpn. (1991) 191 ITR 676 (Cal) and CIT vs. Pyari Lal Kasam Manji & Co. Etc. (1992) 198 ITR 110 (Ori) respectively, we will uphold the order of the learned CIT(A) in this regard as the amendment made to S. 43B by the Finance Act, 1987 has been held to be clarificatory and as such retrospective although the Honble Delhi High Court in the case of Sanghi Motors vs. Union of India & Ors. (1991) 187 ITR 703 (Del) have held the amendment to S. 43B to be only prospective. The view taken by us is in accordance with the decision of Honble Supreme Court in the case of CIT vs. Vegetable Products Ltd. (1973) 88 ITR 192 (SC) in which it has been held that if there are two equally reasonable views possible then the one favouring the assessee should be preferred. Accordingly, the point in dispute is decided in favour of the assessee and against the Revenue.
3. Coming to ground of appeal No. 2 and 3 which relates to the deletion of addition of Rs. 5,44,000 made by the Assessing Officer as unexplained investment in the stock of Rice Basmati weighing 1088 qtls., Shri Raj Kumar, learned Departmental Representative, submitted that the CIT(A) was not justified in deleting the addition as, as per the register maintained by the assessee, the stock of Basmati Rice with the assessee was only 862 qtls. whereas as per the hypothecation statement of stock furnished to the Central Bank of India for obtaining overdraft facility, the quantity of Rice Basmati shown by the assessee was 1950 qtls. and since, the excess stock shown to the bank weighing 1088 qtls. was not properly explained the Assessing Officer has made the addition. It was submitted that the learned CIT(A) has deleted the addition by accepting the plea of the assessee that it was in possession of 1284 qtls. of Rice Parmal, a part of which was also declared as Rice Basmati for the purposes of obtaining higher overdraft facilities as the value of Rice Basmati is about Rs. 500 per qtls. and that of Parma Rice was Rs. 220 per qtl. It was submitted that the action of the CIT(A) is contrary to the facts in view of certificate in the form of stock statement which is given by the assessee to the bank and which bears signatures of the partners of the assessee firm, in which the quality, quantity and rate of stock hypothecated to the bank are stated to be true and in view of this certificate the assessee cannot be allowed to plead that he has wrongly declared to the bank Rice Parmal whose market price was 220 per qtls. as Rice Basmati whose value is Rs. 500 per qtl. He accordingly submitted that the order of the CIT(A) is required to be reversed in this regard.
4. Shri K. R. Jain, Advocate, learned representative of the assessee, supported the order of the CIT(A) and further submitted that the total quantity of rice available with the assessee, which comprises of Rice Basmati as well as Rice Parmal was much more than the rice hypothecated with the bank for the purposes of obtaining overdraft facility. He further submitted that the production of rice is directly controlled under the supervision of Directorate of Food & Civil Supplies Deptt. of Punjab Govt. and fortnightly statements of production are sent to the Directorate. It was submitted that 90% of the yield is taken away by the Distt. Food & Civil Supplies Controller as levy and the same is worked out on the basis of registers maintained by the assessee and as such there is no scope for suppression of Rice Basmati. It was submitted that the Assessing Officer has not pointed out any discrepancy in the stock register and the statements furnished by the assessee to the DFSC. He accordingly submitted that the change in description of Rice Parmal, to Rice Basmati for obtaining higher overdraft facilities was simply an attempt by the assessee to obtain higher overdraft for the purpose of business and it does not in any way affect the profits of the assessee firm for the purpose of income-tax. He accordingly submitted that the order of the learned CIT(A) deserves to be upheld.
5. We have considered the rival submissions. The learned CIT(A) has deleted the addition as per the reasoning given in para 5 and 6 of the impugned order, which we will like to reproduce for facility of reference :
"The next ground is against the addition of Rs. 5,44,000 as unexplained investment in stock of Rice Basmati weighing 1088 Qtls. It is argued that the stock of rice superior including Basmati declared to the bank was only 1950 Qtls. According to the ITO, the Basmati Rice available in the books was only 862 Qtls. It is argued that to obtain higher overdraft from the bank whole stock of 1950 Qtls. which was on rough basis was declared as Basmati Rice since the price of Basmati Rice is higher than the price of other superior quality of rice like Parmal. This practice is followed almost by all businessmen to obtain higher overdraft from the bank. Under the law, the assessee maintains statutory registers form day-to-day showing complete details of purchases, milling, yield, quantity given as levy and quality sold, etc. These registers are under strict control and supervision if DFSC and fortnightly statements are sent to them in this connection. Ninety percent of the yield is taken away by the DFSC as levy and the same is worked out on the basis of registers maintained. Under these circumstances, there is no scope for any concealment at all. The ITO has not at all pointed out any discrepancy in the stock registers and the statements furnished to the DFSC. Further market fee is also charged on the basis of registers and the statements are sent to the market area committee on that basis. If there had been any discrepancy in the stock, the licence of the assessee would have been cancelled. The Amritsar Tribunal in the case of ITO vs. R. K. Rice & Oil Mills in ITA No. 559/Asr/1986 for the asst. yr. 1983-84 deleted such an addition on the basis of Madras High Courts judgment in the case of CIT vs. Ramakrishan Mills (Coimbatore) Ltd. (1974) 93 ITR 49 (Mad) in which it was held that where no discrepancy had been pointed out in the stock register and the statutory statements submitted to the higher authorities, no addition on account of motivated statement for getting higher overdraft from the banks could be sustained. Similar judgment was given by the Chandigarh Bench of the Tribunal in the case of ITO vs. Bhagwati Rice Traders (1985) 18 TLR 938.
I have carefully considered the above arguments and agree with them. The assessee has maintained statutory registers and as submitted fortnightly statements to the DFSC. No discrepancy at all had been pointed out by the ITO in those registers or statements. It is on the basis of those registers that the levy rice is taken by the Govt. Under similar circumstances, such additions were deleted by the ITAT, Amritsar and Chandigarh in the cases cited above. The judgment of Madras High Court relied upon by the Tribunal also goes squarely in favour of the assessee. In view of this, the addition of Rs. 5,44,000 made by the ITO cannot sustain and is deleted."
6. We do not find any infirmity in the reasoning and conclusion of the learned CIT(A) as the same is based on the decision of Honble Madras High Court in the case of CIT vs. Ramakrishan Mills (Coimbatore) Ltd. (1974) 31 ITR 49 (Mad) and also the decision of Tribunal, Amritsar Bench in ITA No. 412/Asr/1988 dt. 23rd March, 1993 in the case of Devgun Rice & Gen. Mills vs. ITO. Accordingly, this ground of appeal is also decided in favour of the assessee and against the Revenue.
7. In the result, the appeal filed by the Revenue is dismissed.