Income Tax Appellate Tribunal - Chandigarh
Assistant Commissioner Of Income Tax vs Modern Rice Mills. on 4 April, 1995
Equivalent citations: (1995)52TTJ(CHD)581
ORDER
J. KATHURIA, A. M. :
These two appeals by the Revenue and two cross-objections by the assessee pertain to asst. yrs. 1986-87 and 1987-88. For the sake of convenience these appeals/cross-objections are disposed of by a combined order.
2. For asst. yr. 1986-87, the assessee-firm milled 1,38,789 qtls. of paddy. The assessee showed yield of husk at 27,758 qtls. which gave the rate of 20%. 4,000 qtls. of husk were shown as sold and 23,758 qtls. of husk were shown to have been consumed for driage purposes. This gave percentage of 17.120.
3. The Assessing Officer did not dispute the yield but was of the opinion that the consumption of husk for driage purposes was excessive. According to him, 10% of the husk yield was sufficient for driage purposes. Thus reducing a quantity of 2,776 qtls. from the quantity of 23,758 qtls. shown as consumed, the Assessing Officer found the quantity of 20,981 qtls. of husk as excessive which according to him was sold outside the books of account. Applying an average rate of 15 per qtl., the Assessing Officer worked out the excess consumption at Rs. 3,41,715. Thus the Assessing Officer made an addition of Rs. 3,41,715 to the book results of assessee. The learned CIT(A) deleted the addition. The Revenue is in appeal against this addition for asst. yr. 1986-87.
4. The Assessing Officer on the basis of certain comparable cases also held that even the sale rate of 4,000 qtls. of husk was not proper. He accordingly valued the husk sold by the assessee at the rate of Rs. 15 per qtl. thereby working out the sale value at Rs. 60,000. Since the assessee had shown the actual sales at Rs. 19,500 the Assessing Officer made a further addition of Rs. 40,500 which was reduced to Rs. 20,500 by the learned CIT(A). The assessee is in cross-objection with regard to the confirmation of this part addition.
5. Similarly, for asst. yr. 1987-88, the assessee showed yield of husk at 22,735 qtls. as against the total milled paddy at 1,13,762 qtls. while a quantity of 3,100 qtls. was shown as sold. The Assessing Officer considered the quantity of husk consumed for driage purposes at 19,635 qtls. as excessive and by certain calculations made in the assessment order, the Assessing Officer considered the consumption of 3,472 qtls. as reasonable. The balance quantity of husk amounting to 16,162 qtls. was considered to have been sold outside the books of account. Applying a rate of Rs. 20 per qtl., the Assessing Officer made an addition of Rs. 2,23,240 which was deleted in appeal by the learned CIT(A). The Revenue has come up in appeal against the deletion of this addition for asst. yr. 1987-88.
6. As regards the sale of 3,100 qtls. of husk at the rate of Rs. 6.85 per qtl., the same was also considered to be unacceptable by the Assessing Officer because the sales were mostly cash sales. The Assessing Officer adopted the sale rate of Rs. 20 per qtl. thereby working out the value of husk sold at Rs. 62,000. After deducting the value of husk shown in the books of account at Rs. 21,300, the Assessing Officer made an addition of Rs. 40,700 which was reduced to Rs. 25,200 by the learned CIT(A). On this ground, the assessee is in cross-objection.
7. The learned Departmental Representative relied on the orders of the Assessing Officer and submitted that in the absence of day-to-day consumption register and in view of the fact that the consumption of husk was rather excessive for driage purposes, the addition had been rightly made by the Assessing Officer.
8. Shri H. L. Singla, the learned counsel for the assessee, however, submitted that upto asst. yr. 1983-84, assessments had been made in the case of the assessee under S. 143(3) and the book results had been accepted as shown and that no addition on account of alleged sale of husk outside the books of account or by disturbing the sale rate of husk had been made by the Assessing Officer. It was submitted that for asst. yr. 1983-84, total paddy milled was of the order of 2,06,439 qtls. The assessee showed husk yield at 41,288 qtls. The sale of husk was shown at 2,534 qtls. and the consumption in the boiler/bhatti for drying of paddy was shown at 38,754 qtls. thereby giving percentage of 19.33. This, according to the learned counsel for the assessee, was accepted as reasonable. It was further pointed out that for asst. yr. 1984-85, the assessee had shown the consumption of husk at 19.47% which had been accepted by the Assessing Officer under S. 143(1) of the Act. Similarly, it was pointed out that for asst. yr. 1985-86, the assessee had shown consumption of husk at 18.58% out of the total yield of 20% which had also been accepted under S. 143(1) of the Act. It was submitted that the position of maintenance of account books was the same in the year under consideration as in the earlier years and still the Assessing Officer proceeded to depart from the earlier approach and made heavy additions. It was submitted that the heavy additions had been made and the past history had been deviated from though no cogent evidence had been adduced by the Assessing Officer.
9. Relying on the Punjab & Haryana High Court decision in the case of Jhandumal Tarachand Rice Mills vs. CIT (1969) 73 ITR 192 (P&H), the learned counsel for the assessee submitted that the method of accounting adopted by the assessee having been accepted by the Department in the previous years, there was no sufficient ground for making a trading addition in the years under consideration.
10. The learned counsel for the assessee also submitted that though the Assessing Officer had made reference to some comparable cases particularly in the assessment order of asst. yr. 1987-88 but no data regarding those cases was ever made available to the assessee in the absence of which the assessee could not meet the case of the Revenue.
11. The learned counsel for the assessee submitted that the additions had been made on the sole ground that the consumption of husk by the assessee in its own boiler/bhatti was excessive but no defects whatsoever in the maintenance of account books had been pointed out. Reliance in this regard was placed on the Calcutta High Court decision in the case of Sidheshwari Cotton Mills P. Ltd. vs. CIT (1979) 117 ITR 953 (Cal) for the proposition that simply because, according to the Assessing Officer, the assessees explanation for consumption of husk was not acceptable would be no basis for making a trading addition. Reliance was also placed on the Tribunals decision in the case of ITO vs. Mohan Lal Thaper & Bros. (1993) 47 TTJ (Chd) (TM) 452 : (1993) 204 ITR (AT) 30 (Chd) for the proposition that simply because some other miller had shown sales of husk or because the husk was a marketable commodity would not lead to the presumption that the Assessing Officer could interfere with the book results of the assessee.
12. The learned counsel for the assessee vehemently argued that the assessees sales has been accepted by the Sales-tax department as would be evident from the sales-tax assessment orders placed on record. It was also submitted that no evidence had been brought on record by the Assessing Officer that the assessee had effected the sales of husk outside the books of account. It was, therefore, submitted that the learned CIT(A) was justified in deleting the additions.
13. As regards the part confirmation of additions by applying a higher sale rate of sales of husk, it was submitted that this was also based on suspicions and surmises. Since the entire sales of the assessee had been accepted as correct by the Sales-tax department and there was no positive evidence that the assessee did sell the husk at a higher rate, the rate shown by the assessee should be accepted particularly when the books of account had not been rejected, so ran the submission.
14. After carefully considering the submissions of the learned representatives of both the parties, we find that no specific defects in the account books have been detected by the Assessing Officer. As per details of earlier years filed at page 2 of the assessees compilation, it is clear that for asst. yr. 1983-84 for which an assessment was made under S. 143(3), consumption of husk was shown at 19.33% as against the yield of husk @ 20% which was accepted by the Assessing Officer. Similarly, for asst. yrs. 1984-85 and 1985-86, the consumption of husk was 19.47% and 18.58% respectively as against the yield of 20%. This was also accepted under S. 143(1) of the Act. In the year under consideration, the consumption was 17.12% as against the yield of 20% which was the lowest consumption as compared to the immediately three preceding years. The Assessing Officer has, therefore, departed from the past history of the case without any cogent evidence being on record. The sales-tax figures of the assessee have been accepted by the Sales-tax department as is evident from the copies of the orders of sales-tax assessment produced before us. The Assessing Officer has also not brought on record any evidence to show that the sales of husk had in fact been made outside the books of account. Since there are no defects in the maintenance of account books, no addition could be made simply because the assessees consumption of husk according to the Assessing Officer was higher than that of other millers or the explanation of the assessee was not acceptable. The decision of the Punjab & Haryana High Court in the case of Jhandu Mal Tara Chand (supra) supports the assessees case. The other case law cited by the learned counsel for the assessee is also relevant and strengthens the case of the assessee. In the absence of full details, it is not possible be believe whether cases considered as comparable by the Assessing Officer were really comparable. Taking all these factors into consideration, we are of the considered opinion that the learned CIT(A) was justified in deleting the addition of Rs. 3,41,715 for asst. yr. 1986-87 and Rs. 3,23,240 for asst. yr. 1987-88. We hold accordingly.
15. As regards the assessees cross-objections, we find that the sales of the assessee have been accepted. The sale rate in the earlier years was also accepted which was still lower than what has been shown by the assessee in the two years under consideration. The application of an average rate of Rs. 15 for asst. yr. 1986-87 and Rs. 20 for asst. yr. 1987-88 by the Assessing Officer, in our opinion, was not justified. The learned CIT(A) was also not justified in sustaining a part addition. Having regard to the facts and circumstances of the case, we hold that no addition in respect of the husk sold by the assessee could be made. The additions partly sustained are also deleted.
16. In the result, the appeals of the Revenue are dismissed and the cross-objections of the assessee are allowed.