ITA No. 250 of 2012 (O&M)

Ajay Kumar Mittal And Anita Chaudhry,JJ.

Mr. Deepak Aggarwal For the Petitioner :
Ms. Savita Saxena For the Respondent :

JUDGEMENT

The judgment of the court was delivered by

Ajay Kumar Mittal,J.- This appeal has been preferred by the assessee under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 19.3.2012, Annexure A.3 passed by the Income Tax Appellate Tribunal 'B' Bench, Chandigarh (in short, “the Tribunal”) in ITA No.264/CHD/2011, for the assessment year 2007-08, claiming following substantial questions of law (Annexure 'A' at Page 79 of the paper book):-

“1. Whether the books of account could be rejected merely on the premises that separate record of Government paddy and own paddy was not maintained that too in the absence of any specific defect in the books of account?

2. Whether the addition on account of low yield of rice is sustainable without having any comparable stance and by disapproving the results of the appellant in earlier years?

3. Whether the authorities misdirected in making addition on account of paddy milled outside books of account by taking the yield of bye product as benchmark to calculate the yield of main product, and without appreciating that the supplies were also made to Government agencies who never disapproved about the yield?

4. Whether the findings recorded by the authorities below are perverse and contrary to the evidence available on record?

2. The facts in brief, necessary for adjudicating the controversy involved, as narrated in the appeal, may be noticed. The assessee is deriving income from two concerns M/s Lajja Ram Pramod Kumar and M/s Lajja Rice & Oil Mills. He is engaged in the business of commission agent, milling of paddy and selling of the products namely rice, rice bran, husk and phak. During the assessment year 2007-08, the assessee had shown a gross profit of Rs. 24,75,369/- at the rate of 7.39%. Therefore, the assessee was asked to file the comparative figures of gross profit for the last year and while invoking the provisions of section 145(3) of the Act, the books of account of the assessee were rejected by the Assessing officer and additions had been made on different grounds vide order dated 18.11.2009, Annexure A.1. Aggrieved by the order, the assessee filed appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) vide order dated 31.1.2011, Annexure A.2 partly allowed the appeal while upholding all the additions though reduced in quantum and rejecting the books of account. Still not satisfied with the order, the assessee filed appeal before the Tribunal. Vide order dated 19.3.2012, Annexure A.3, the Tribunal concurred with the findings recorded by the CIT (A) and dismissed the appeal. Hence the present appeal by the assessee.

3. Learned counsel for the appellant-assessee submitted that the decline of growth profit rate by itself cannot be a ground for rejection of books of account. Reliance was placed on judgment in M.Durai Raj v. Commissioner of Income Tax, (1972) 83 ITR 484 (Ker.) in support of the submission. Learned counsel further relied upon judgments in International Forest Co. v. Commissioner of Income Tax, (1975) 101 ITR 721 (J&K), CIT v. Bharat Rice Mills, (2001) 250 ITR 584 (P&H), CIT v. R.K.Rice Mills, (2009) 319 ITR 173 (P&H), Jhandu Mal Tara Chand Rice Mills v. Commissioner of Income Tax, (1969) 73 ITR 192 (P&H) and CIT v. Bindals Apparels, (2011) 332 ITR 410 to submit that the findings recorded by the Tribunal sustaining the additions made by the authorities below were uncalled for and therefore substantial questions of law as claimed arise in the appeal.

4. On the other hand, learned counsel for the respondent submitted that the findings of fact recorded by the authorities below did not call for any interference as they were based on appreciation of evidence on record.

5. After hearing learned counsel for the parties, we do not find any merit in the petition.

6. The primary issue that arises for consideration relates to whether the assessing authority was justified in rejecting the books of account which was upheld by CIT(A) and the Tribunal. The Assessing Officer while rejecting the books of account has made comparison with regard to financial results for the assessment year 2006-07 and current year 2007-08 as under:-

From the above figures it is clear that during the year under consideration, the assessee has milled almost equal paddy in comparison to previous year, sales have increased by 29% but manufacturing expenses have increased by 45.93%. the increase in the figures of sales is partly due to opening stock at Rs. 92,94,527/- for which no manufacturing expenses have been incurred as there is no paddy in the opening stock. Had there been no sales out of opening stock, the increase in sales would have been even lower. It shows that either the assessee has inflated the expenses or depressed the sales.

Further, the assessee's contention that he had to pay Rs.8,92,106/- to farmers as 'bonus' is not convincing at all as it is a part of purchase price, the assessee has paid it and passed it on to the buyer of its finished product i.e. Rice and the sale price is all set to rise accordingly. The assessee's argument (B) above needs no comments as it will only reduce the gross profit which will again go against the assessee. Thus, the assessee's submission for low G.P. is dismissed.”

Further the reasons for rejecting the books of account were noticed as under:-

“Besides low G.P. there are other deficiencies in the books of accounts which have been dealt with in the following paragraphs in detail. However, the same are discussed briefly as under:-
a. The assessee has underreported yield of rice @ 65.19% as against 67% given to FCI. Para 4
b. The assessee has transferred rice superfine to FCI at 289.28 qtls. from own stock – para 5
c. The assessee has underreported paddy milling – para 6
d. The assessee has undervalued sales of husk according to prevalent yield percentage – para 7
e. The assessee has undervalued the closing stock of bardana. Para 8.”

7. The CIT(A) while partly accepting the appeal granted relief in the form of reduction in quantum of additions but upheld the rejection of books of account. The Tribunal while dismissing the appeal had affirmed the findings recorded by CIT(A). In view of the aforesaid deficiencies and discrepancies noticed in the books of account maintained by the assessee, it is concluded that the Assessing Officer, CIT(A) and the Tribunal were justified in rejecting the books of account of the assessee.

8. Referring to the judgments relied upon by learned counsel for the appellant, it may be observed that those cases were based on individual fact situation involved therein and the Court in view of the findings of fact recorded had declined to interfere. Consequently, the said judgments do not come to the rescue of the appellant.

9. In view of the above, no substantial question of law arises. The appeal being devoid of any merit is hereby dismissed.