The Commissioner Of Income Tax, Jalandhar-Ii v. M/S Fathu Dhinga Rice Mills

ITA No. 402 of 2006 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 402 of 2006Date of Decision: 16.2.2011 The Commissioner of Income Tax, Jalandhar-II Versus M/s Fathu Dhinga Rice Mills ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Vivek Sethi, Advocate for the appellant. Mr. J.S. Bhasin, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1.This appeal has been preferred by the revenue underSection 260A of the Income Tax Act, 1961 (in short “the Act”) againstthe order dated 6.1.2006 passed by the Income Tax Appellate Tribunal,Amritsar Bench, Amritsar, in ITA No. 365/(ASR)/2005, relating to theassessment year 2001-02, claiming the following substantial questionsof law:- “1.Whether, on the facts and in the circumstances of thecase, the Tribunal was right in law in upholding theorder of Ld. Commissioner of Income Tax (Appeal)whereby he had deleted the addition ofRs.20,00,000/- accepting the misleading contentions of the assessee and ignoring the observations of theAO incorporated in the body of the assessmentorder? 2.Whether, on the facts and in the circumstances of thecase, the Tribunal was right in law in not appreciatingthe facts of the case in right perspective therebyrendering its order to be perverse?” 2.Briefly stated, the facts necessary for adjudication asnarrated in the appeal are that the assessee-firm filed its return ofincome for the assessment year 2001-02 on 29.10.2001 declaring itsincome as 'nil'. The assessment was framed on 19.3.2004 at a totalincome of Rs.3,91,596/-. During assessment proceedings, theAssessing Officer made various additions including an addition ofRs.20,00,000/- on account of losses disallowed claimed in trading ofrice. Feeling aggrieved, the assessee filed an appeal before theCommissioner of Income Tax (Appeals) [in short “the CIT(A)”] who videorder dated 31.3.2005 deleted the aforesaid addition of Rs.20,00,000/-and against the same, the revenue approached the Tribunal. TheTribunal vide order dated 6.1.2006 upheld the view of the CIT(A) anddismissed the appeal. Hence, the present appeal by the revenue. 3.We have heard learned counsel for the parties. 4.The Assessing Officer while disallowing the claim of theassessee with regard to loss on account of trading in rice amounting toRs.20,00,000/- had noticed that the assessee had failed to show thatthe identity of the sellers was established. Therelevantfindingsrecorded by the assessing officer reads thus:- “The assessee was specifically required to give a separatetrading account of purchase and sale of these commoditiesi.e. Rice, Wheat & Basmati and also to explain the reasonsfor loss in the said trading. The assessee submitted anaccount of opening balance, purchases, sales and closingstock of these cereals without accounting for the incidentalexpenses. Further details of sales and purchases partywise of these commodities was also requested withevidence. The assessee submitted a list of sale andpurchases of rice bill wise without mentioning the quality ofRice purchased/sold. The purchase bills, which werespecifically required to be produced, were not produced andultimately it was said that the same are with D.C.Kapurthala(no such evidence was led). Out of total purchases of45827.71 qtls of rice, purchase of 43621.26 qtls are madeat purchase rate above Rs.900/- per qtls ranging betweenRs.900/- per qtls to 950 per qtls. The rest of purchase of2006.45 qtls is below Rs.900/- per qtls. The averagepurchase rate thus comes to Rs.906/- per qtls. Thecomplete identity of parties from whom rice was purchasedwas also withheld. Some instances of party names to showthat identity of Sellers was not provided are as under:- 1.Oberoi Enterprises, Amritsar 2.R.S.Agro India, Delhi 3.M.M.Exports, Amritsar 4.Puneet Bros., Amritsar 5.G.J.Agro Inds., Jalandhar. 1.Oberoi Enterprises, Amritsar 2.R.S.Agro India, Delhi 3.M.M.Exports, Amritsar 4.Puneet Bros., Amritsar 5.G.J.Agro Inds., Jalandhar. It is, therefore, observed that purchases of rice are notverifiable with reference to parties and also in the absenceof purchase bills.” 5.The CIT(A) and the Tribunal had reversed the said findingwithout referring to any material relating to the identity of the aforesaidsellers. The CIT(A) as well as the Tribunal had noticed that thepurchases and sales bills had been produced by the assessee toestablish the same, but a perusal of the said orders clearly shows thatthere is no discussion with regard to the sales and purchases billsalleged to have been produced by the assessee. Accordingly, thefindings recorded by the CIT(A) and affirmed by the Tribunal are vitiatedand cannot be sustained. 6.In view of the above, the present appeal is allowed and theorders of the CIT(A) and the Tribunal are set aside. The matter isremitted to the CIT(A) to decide the matter afresh in accordance withlaw. 7.The parties through their counsel are directed to appearbefore the CIT(A) on 30.5.2011 for further proceedings in the matter. (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL)JUDGE