Shri Kaila Devi Ice & Cold Storage Vs ITO (ITAT Chandigarh)
The ITAT, Agra Bench upheld rejection of books u/s 145(3) in the case of a cold storage business, noting serious defects in accounting of loading, unloading & grading expenses, doubtful vouchers and suppression concerns. However, the Tribunal firmly held that estimation must be rational and evidence-based, not arbitrary.
The AO had artificially inflated both quantity (bags stored) and hire charges (₹56 to ₹70 per bag) and then applied a 25% NP rate, leading to an excessive addition. The Tribunal rejected this approach, holding that neither enhancement of bags nor rate hike had any factual basis. Only actual bags stored (1,82,959) and actual hire charges of ₹56 per bag—already increased during the year—could be adopted.
At the same time, considering past history, the Tribunal accepted 25% NP rate as average of preceding two years, but directed proper allowance of partners’ interest & remuneration u/s 40(b) and disallowed double taxation of interest recovered from farmers, which was already embedded in hire charges.
Accordingly, NP was recomputed at ₹12.34 lakh, replacing the inflated addition of ₹32.51 lakh. The appeal was partly allowed, striking a balance between book defects and fair estimation
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
