The Commissioner Of Incomebathinda v. M S Jai Bharat Rice Mills/ . Jalalabad (W), Distt Ferozepur

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH --- Income Tax Appeal NoDate of decision . 375 of 2005 : 26.10.2010 The Commissioner of IncomeBathinda --- Appellant Versus M s Jai Bharat Rice Mills/ . Jalalabad (W), Distt Ferozepur. --- Respondent ’CORAM:HON BLE MR JUSTICE ADARSH KUMAR GOEL. ’HON BLE MR JUSTICE AJAY KUMAR MITTAL. --- Present:Ms Savita Saxena Govt Standing Counsel. , . for the appellant. . --- AJAY KUMAR MITTAL J, . , . -This appeal under Section 260 A of the Income tax Act, 1961 (for short “the Act ”’ ) has been filed by the assessee against the order dated 7.1.2005, passed by the Income Tax Appellate Tribunal, Amritsar Bench Amritsar, , (SMC) (in short “the Tribunal”) in ITA No.460/ASR/2009 in respect of the assessment year 1998-99. Brieflynoticed, thefactsofthecaseare that the-respondent assessee firm filed its return for the assessment year1998-99 atanincomeofRs. 72,470/-. In the process ofassessment proceedings it came to light that the rice sheller of the, respondent had been surveyed by the Punjab Mandi Board on8.10.1997 when a stock of 1100 bags of paddy weighing, 715 quintals,valuing Rs. 3,18,175/- was found in excess as against the stockshownintheaccountbooksoftheassessee. The assesseeconfessed its guilt by means of moving an application under Section46 of the Punjab Agriculture Produce Market Act, 1961 (for short“1961 Act”) and requested for samjhota/ compounding the offence.The Mandi Board, accordingly, charged a sum of Rs. 17,726/-comprising of market fee RDF and composition samjhota fee, /. Detailed enquiries were thereafter made from the MandiBoard. Itwasintimatedthattheassesseehadbeen chargedsamjhotafee of Rs. 5,000/- along with market fee and RDF of Rs.6,363/- each on account of samjhotaof 1100 bags of paddy. It wasexplained that physical verification of the firms is done according to RegistersA, B, CandDmaintainedforFoodand Supplies Department whereas Register L is meant for the Market Committee.According to the Board, , market fee RDF samjhota fee etc///. are According to the Board, , market fee RDF samjhota fee etc///. arerecovered on the valuation of stocks mentioned in the concernedregisters. Working on the above information, the assessing officertreated the value of the stocks kept by the assessee out of accountsas its income and consequently made an addition in the sum of Rs.3,18,175/-, . . i ethevaluethatwasdetermined in the form ofsamjhota. Anotheradditionwasalsomadeinthe sum of Rs.93,656/- on account of profits earned by the assessee from theundeclared stocks of paddy of 1100 bags. Theassesseecarriedappealchallengingtheorders-passed by the assessing officer. The Commissioner of Income tax(Appeals) { in short “CIT A ”( ) }. The CIT A( ) upheld the additions madeby the assessing officer and dismissed the appeal. The assessee-filed further appeal before the Income tax Appellate Tribunal Amritsar, Bench, Amritsar ( in short “the Tribunal”). The Tribunal vide its orderdated 7.1.2005, deleted the additions made by the assessing officer. It is how the Revenue has preferred this appeal claiming thatthefollowingsubstantialquestionsoflawarise for theconsideration of this Court: 1-WhethertheITATislegallyjustifiedindeleting theaddition of Rs. 3,18,175/- made by the Assessing Officeraddition of Rs. 3,18,175/- made by the Assessing Officer on account of conclusive evidence collected by the Govt. on account of conclusive evidence collected by the Govt.Agencies of the Punjab Mandi Board vide Samjhota Feeletterdated 8.1.1997 andletter No. 7/3931 dated5.12.2000 attached as Annexure P -1 and P II - . 2- Whether the ITAT is legally justified in setting aside theaddition made by the Assessing Officer on the basis of an application made by the assessee to the Mandi Board forcompounding under Section 46 of the Punjab AgriculturalProduce Marketing Act, 1961 for composition of his offenceof keeping excess stock of paddy as compared to stocksshown in its books of accounts ”.. 1-WhethertheITATislegallyjustifiedindeleting theaddition of Rs. 3,18,175/- made by the Assessing Officeraddition of Rs. 3,18,175/- made by the Assessing Officer on account of conclusive evidence collected by the Govt. on account of conclusive evidence collected by the Govt.Agencies of the Punjab Mandi Board vide Samjhota Feeletterdated 8.1.1997 andletter No. 7/3931 dated5.12.2000 attached as Annexure P -1 and P II - . 2- Whether the ITAT is legally justified in setting aside theaddition made by the Assessing Officer on the basis of an application made by the assessee to the Mandi Board forcompounding under Section 46 of the Punjab AgriculturalProduce Marketing Act, 1961 for composition of his offenceof keeping excess stock of paddy as compared to stocksshown in its books of accounts ”.. of keeping excess stock of paddy as compared to stocksshown in its books of accounts ”.. We have heard learned counsel for the appellant and have perused the record . The point that arises for consideration is, whether theaddition was liable to be sustained merely on the ground that the assesseehad agreed to compound the offenceon payment of compromise fee (Samjhota fee) with the Punjab Mandi Board under Section 46 of the 1961 Act. In order to appreciate this question, itwould be appropriate to first reproduce the findings of the Tribunalwhere the aforesaid deduction was deleted which are as under, : , : “I have heard both the parties and given my thoughtful consideration to the rival submissions with reference tofacts, evidence and material on record. I have alsoreferred the relevant pages of the paper book to which myattention was drawn. The undisputed fact is that theassessee had maintained complete books of accounts,which were also audited. No specific defects have beenpointed out in the books of accounts by the authoritiesbelow. The impugned additions have been made purelyby relying on the inspection carried out by the PunjabMandi Board Officials. It is also true that the assessee. It is also true that the assesseeIt is also true that the assessee Mandi Board Officials. It is also true that the assessee. It is also true that the assesseeIt is also true that the assesseepaid samjhota fee to the Mandi Board Officials. However,the AO has not been able to confront the specific materialindicating that quantity of the stock actually found by the Inspection Team was as per books of accounts . In fact, theMandiBoardOfficialshadcarriedoutphysical verification in the form of physical counting of the stock isalso doubtful and no such information and material hasbeen furnished either by the AO or by the Mandi BoardOfficials. In fact the assessee has repeatedly requestedthe ASO to furnish such information and even to call forthe information u s / 131 of the Income Tax Act. Suchrequest has not been complied with The assessee has all. alone denied any discrepancy in the stock found by theMandiBoardOfficials. Theassesseehadfurthervehemently submitted that no physical verification of stockwas actually carried out by the Mandi Board Officials.Therefore the onus was on the Revenue to establish with, the evidence that the Mandi Board Officials had actuallycarried out such inspection and stock of 1100 bags ofpaddy was found in excess. No material has beenfurnished by the AO even before me. The Revenue hasnot placed any material to show actual discrepancy thatwas found about 1100 bags as pointed out by the MandiBoardOfficials. Thus, intheabsenceof any such material, it is difficult to justify the impugned additions, more so when no discrepancies have been pointed out in, the books of accounts either by the AO or by the Ld CIT. ( ). AThe two decisions of the ITAT Chandigarh Bench in, , the case of Jagdish Chander Gupta Vs ACIT. (supra) andthe judgment of the Hon ble Madras High Court in the’case of CIT Vs N Swamy . (supra) also support the caseof the assessee. The admission made before the PunjabMandi Board Officials does not automatically establish the material, it is difficult to justify the impugned additions, more so when no discrepancies have been pointed out in, the books of accounts either by the AO or by the Ld CIT. ( ). AThe two decisions of the ITAT Chandigarh Bench in, , the case of Jagdish Chander Gupta Vs ACIT. (supra) andthe judgment of the Hon ble Madras High Court in the’case of CIT Vs N Swamy . (supra) also support the caseof the assessee. The admission made before the PunjabMandi Board Officials does not automatically establish the fact of variation in stock and in the absence of anyconcrete material supplied by the Revenue and the Mandi Board Officials. I am of the opinion that the impugnedadditions made by the AO were not justified. Accordingly, IsetasidetheorderoftheCIT A( ) and delete theimpugned additions ”..impugned additions ”.. impugned additions ”.. The Tribunal on appreciation of evidence came to theconclusionthattheAssessingOfficerhadfailedtofurnish anymaterial which could show that actually any discrepancy was found in respect of 1100 bags of paddy which were said to have been inexcess. It was further recorded that no physical verification of stock was actually done by the Mandi Board Officials . The said finding has not been shown to be perverse one by the learned counsel for theRevenue. In fact a finding had been recorded that the assessee had, maintained the books of accounts which had been audited and nodefect was found in the said books by the authorities. . In the light of the above the substantial questions of law, are answered against the Revenue and the appeal is accordinglydismissed. . (AJAY KUMAR MITTAL)JUDGE October 26, 2010*rkmalik* ADARSH KUMAR GOEL ( ) JUDGE