Rajesh Agarwal Vs. ITO (ITAT Delhi)- It is found that there were discrepancies in the book result filed, traced on the scrutiny of the books made by the Assessing Officer which could not be properly replied/ explained. So, action of the Assessing Officer in rejecting the book result and confirmation of the same by the CIT(A) in view of the facts and circumstances is found to be justified and proper which action is upheld.
But, so far as quantum of trading addition on account of broken rice is concerned, plea of the assessee that State Regulatory Authorities are accepting it up to 25%, such acceptance of rate is true for millers and manufacturers, whereas assessee is trading in rice and paddy. Therefore, same yardstick will not hold good or apply here so far as assessee is concerned. However, in view of facts and the material placed on record, we find that the addition made by the Assessing Officer and confirmed by the CIT(A), though called for yet appears to be higher side Therefore, in view of facts and circumstances, we are of the opinion that it would meet the ends of justice if such addition made by the Assessing Officer and confirmed by the CIT(A) is restricted to 50% of the addition made. We hold and direct accordingly. So, assessee gets relief of Rs. 1,35,631.50.
INCOME TAX APPELLATE TRIBUNAL, DELHI
ITA No. 2214/Del./2010
(Assessment Year: 2004- 05)
Rajesh Agarwal
Vs.
ITO, Distt. Udham Singh Nagar
ORDER
PER U.B.S. BEDI, J.M.
This appeal of the assessee is directed against the order passed by the CIT(A)-II, Dehradun, dated 8.2.2010, relevant to assessment year 2004- 05 whereby assessee has challenged confirmation of the addition of Rs. 2,71,263/-in the income, as extra profit on account of sale of rice after rejecting books of account u/s 145(3) of the I.T. Act, 1961.
2. Assessee filed original return of income on 1.11.2004 declaring an income of Rs. 92,076/-. The case was processed u/s 143(1) and later on case was selected for scrutiny. In response to notice u/s 143(2) and 142(1), the assessee’s representative appeared before the Assessing Officer along with the brother of the assessee attended the hearing from time to time, filed written submissions and case was discussed with him.The assessee received income from trading of rice, excel sim prepaid and paddy. During the year under consideration, the assessee has shown purchases of the above items at Rs.5.29 crores and sales of Rs. 4.73 crores. The books of account were produced which were put to test check indicate that the assessee has shown combined g.p. of 1.18% on account of trading of excel sim recharge coupon, paddy and rice. However, on drawing trading account of rice separately, it was found that there is a loss of Rs. 1,82,955.08 on trading of rice. It is noted by the Assessing Officer that the assessee has not shown any loss in the trading account, but further discounts have been allowed to the customers on sale. In this manner, resultant loss in the trading of rice is much more than indicated in the above drawn trading account. During the course of assessment proceedings, assessee was asked to produce closing stock and valuation thereof. In response, the assessee filed inventory of closing stock along with copies of purchase bills of rice. The Assessing Officer noted that from the details, it was found that closing stock has not been properly valued. Further during the course of assessment proceedings, following observations have been made:
“On analyzing purchases and sales of three kinds of rice i.e. super fine (rice grade ‘A’), common rice and broken rice, it transpired that the assessee has recorded purchase of 4585.05 qtls. Of broken rice. However, the sales of broken rice have been made to the extent of 8584.94 qtls. In this manner, sale of excess quantity of 3998.89 qtls. Of broken rice has been recorded.
On perusal of quantitative details of rice given in the audit report, it was found that the purchase of broken rice has been shown only to the extent of 200 qtls. And there is opening stock of broken rice also at 131.75 qtls. Sales have been indicated at 331.75 qtls. Therefore, there is no conformity in the actual purchases and sales of broken rice and figures shown in the quantatitive details of audit report.”
3. After due notice, proposing rejection of books of account u/s 145(3), as correct profit cannot be deduced from such books of account. So, he was asked to as to why the profit worked out by applying sale rate of superfine and common rice instead of broken rice for the quantity of 3998.89 qtls. The assessee filed reply and submitted before the Assessing Officer that even Government accepts the fact of broken rice if they accept the levy rice after allowing 25% towards broken rice. So his book result should be accepted. Various other contentions were also raised and Assessing Officer while rejecting books of account has concluded to make addition of Rs.2,71,263/- as per para 4.3 of his order:
“Therefore, the books of account are liable to be rejected and hereby rejected u/s 145(3) of the I.T. Act, 1961. Accordingly, the sales in respect of fresh rice, recorded as broken rice are estimated. However, it cannot be ruled out that there must have been some broken in the handling of rice bags. Therefore, out of the total sale of 36168.54 qtls. 5% is taken to have been received as broken rice in handling of consignments. This quantity comes at 1808.42 qtls. In this manner, the sales of balance quantity of 2190.47 qtls. (3998.89 qtls. – 1808.42 qtls.) is taken to have recorded as broken rice instead of fresh rice. It is seen that there is substantial difference in the sale of rate of common rice and broken rice. For the sake of illustration the following figures are given are given:
Fresh Common Rice Broken Rice Difference
