HIGH COURT OF ALLAHABAD
Commissioner of Income-tax
Raghuraji Agro Industries (P.) Ltd.
Income Tax Appeal No. 73 of 2009
Date of Pronouncement – 06.09.2011
Dr. Satish Chandra, J.
This appeal has been filed by the Department under section 260A of the Income-tax Act, 1961, against the judgment and order dated February 6, 2009, passed by the Income-tax Appellate Tribunal, Lucknow, in I. T. A. No. 875/Luc/2008 for the assessment year 2003-04.
2. The brief facts of the case are that the assessee is a private limited company and engaged in the business of running of solvent extraction plant and sale of rice bran oil and mustard oil, etc. During the assessment year under consideration, the assessee has filed the return showing details of income of Rs. 24,73,110. The case was selected for scrutiny. During the scrutiny the Assessing Officer after seeking clarification from the assessee has made additions which were not only deleted by the first appellate authority but also by the Tribunal. Still not being satisfied, the Department has filed the present appeal.
3. A Division Bench of this court on July 21, 2009, has admitted the appeal on the following three substantial questions of law :
Whether the finding of the learned Income-tax Appellate Tribunal that the Assessing Officer has not given any finding while adding the difference of Rs. 40 lakhs and Rs. 39.50 lakhs between the closing balance on March 31, 2002, and the opening balance on April 1, 2002, while ignoring that the Assessing Officer has categorically stated in his order that in the absence of any clarification he is left with no option except to treat the sum of Rs. 40 lakhs + Rs. 31.50 lakhs to have been paid out of books from the income not disclosed was not perverse.
4. Sri D. D. Chopra, learned counsel for the appellant, submits that the assessee furnished the copy of account of M/s. Akbarpur Wines wherein the opening balance as on April 1, 2002, was shown at Rs. 60 lakhs in place of Rs. 1 crore. It was noticed by the Assessing Officer that in the previous year there was closing balance of Rs. 1 crore as on March 31, 2002, in the names of Sri Ashish Pandey and Sri Rakesh Pandey through M/s. Akbarpur Wines, whereas in the year under consideration the balance was shown at Rs.2,02,12,630 as on March 31, 2003, under the head unsecured loan from the directors.
5. He further submits that during the course of the assessment proceeding, the Assessing Officer has categorically held that the assessee has tried to justify its claim by inviting other entries which have not been shown in annexure II clause 24(a) of the audited accounts, whereas the issue involved was how the amount of Rs. 1 crore has come down to Rs. 60 lakhs over a night. He read out the order of the Assessing Officer where it was mentioned that the explanation given by the assessee was not satisfactory. He further submits that the explanation given before the Commissioner of Income-tax (Appeals) was not explained before the Assessing Officer. No supporting evidence with regard to share application money was also brought on record. Lastly, he justified the assessment made by the Assessing Officer.
6. Sri Amit Shukla, learned counsel for the assessee, has justified the impugned order passed by the Tribunal as well as the Commissioner of Income-tax (Appeals). He submits that the opening balance in the account of Ashish Pandey and Rakesh Pandey was Rs. 1 crore which was relating to the previous year. It was having two elements, i.e, unsecured loan of Rs. 60 lakhs and share capital money of Rs. 40 lakhs, total of which comes to Rs. 1 crore. He also submits that though the amounts were mentioned separately for the convenience, but during the assessment year under consideration, these were clubbed together and consolidated balance of Rs. 1 crore was shown in schedule (IV) in the audit report, the said entries were verifiable and the copies were also produced before the Assessing Officer. It was also submitted by the counsel for the assessee that the amount of Rs.40 lakhs shown under the head share application money was not appearing in any other place separately in the books of account and to avoid confusion, both the accounts were clubbed together by transferring Rs. 40 lakhs from the head share application money to the head unsecured loan by passing a general entry which was verifiable from the books of account. So, no income was suppressed. The share application money has since not been reflected in the books of account separately, it has been merged with Rs. 1 crore and, therefore, there is no reason to make any addition.
7. We have heard both the counsel at length and gone through the material available on record. From the record, it appears that as on March 31, 2003, the figure of Rs. 1 crore was appearing in schedule IV, under the head unsecured loan” in the balance-sheet. In the earlier year it was appearing as “1. Unsecured loan Rs. 60 lakhs. “2. Share application money Rs. 40 lakhs.” During the assessment year under consideration, the same was shown as Rs. 1 crore consolidated. The Assessing Officer has not pointed out as to what happened to Rs. 40 lakhs which were earlier appearing in the balance-sheet. If the said sum has been transferred to the head unsecured loan, obviously Rs. 40 lakhs is a part of Rs. 1 crore only. In the instant case, no money has gone out from the books of account. It is merely adjustment of entries, i.e., transfer of the figure from one head to another head. The assessee has duly filed copies of ledger account for the years 2001-02 ; and 2002-03 before the Assessing Officer on which he has not given any findings which were provided in the books of account as well as the balance-sheet of the earlier year and the current year, hence the addition is based only on the presumption. The assessee has only figured out the entire share application money to another head during the financial year 2001-02. The inference drawn by the Assessing Officer is without any material and cannot be sustained.
8. Needless to mention that the power of the first appellate authority is co terminus with the power of the Assessing Officer as far as examining of the evidence is concerned. The appellate authority has all the power which original authority has, subject to condition/restriction, if any, prescribed by law as per the ratio laid down in the following cases,
(1) Jute Corp. of India Ltd. v. CIT  187 ITR 688; and
(2) CIT v. Nirbheram Deluram  224 ITR 610.
9. So, the plea of the appellant’s counsel that explanation given before the Commissioner of Income-tax (Appeals) was not given before the Assessing Officer, is not sustainable.
10. In view of the above, we find no reason to interfere with the impugned order passed by the Tribunal and the same is hereby sustained. The answer to the question is in the affirmative, i.e., against the Revenue and in favour of the assessee.
Whether the finding of the learned Income-tax Appellate Tribunal that the Assessing Officer has not given any finding while adding Rs.75,000 as unexplained expenditure on account of purchase of demand draft while ignoring that the Assessing Officer has categorically stated in his order that the assessee has not debited the amount in cash book for purchase of demand draft in favour of Bank of Baroda credit care although the demand draft of Rs. 75,000 has been made in favour of Bank of Baroda Credit Card was not perverse.
11. The second grievance of the assessee is pertaining to the addition of Rs.75,000. From the perusal of schedules forming part of profit and loss account as on February 31, 2003, it appears that in serial No. 15, a sum of Rs. 1,86,260 has been shown as “recovery” under the head “Cash found short in the chest”. The loss was debited under the head “Cash suspension”. The said amount was taken by the cashier and the same was returned during the next year. The Assessing Officer was not satisfied, so he made addition which was deleted not only by the first appellate authority but also by the Tribunal.
12. With this background, Sri Chopra submits that the assessee has not debited Rs. 40,000, Rs. 20,000 and Rs. 15,000 on June 18, 2002, July 15, 2002, and July 17, 2002, respectively in cash book for purchase of demand draft in favour of Bank of Baroda by credit card. It shows that the assessee has purchased the said demand drafts amounting to Rs. 75,000 from Bank of Baroda. Regarding misappropriation of funds by the cashier, no FIR was furnished by the assessee, so, Assessing Officer was right in making addition of Rs. 75,000. On the other hand, Sri Amit Shukla, counsel for assessee, supported the order of the Tribunal.
13. After having heard both the parties, we find that Rs. 1,86,260 were recovered from the cashier and if Rs. 75,000 is added which was the amount used for purchase of demand draft, the shortage of Rs. 2,61,260 stands explained. The amount was taken by the cashier during the assessment year under consideration and the same was duly shown as shortage in the cash chest. Since the figure tallies, there is no reason to reject the assessee’s explanation out rightly. The amount was recovered from the cashier during next year. Thus, there was no loss. As the cashier was an old employee, so, the assessee-company has not filed any FIR against him but the fact remains that the assessee did not suffer any pecuniary loss as an amount of Rs. 75,000 was recovered and accounted in the books. Moreover, the amount is fully reconciled and the figure tallies. When it is so, then we find no reason to interfere with the order passed by the Tribunal and the same is hereby sustained. The answer to the substantial question No. II is in the affirmative and in favour of the assessee and against the Revenue.
“Whether the finding of the learned Income-tax Appellate Tribunal that the Assessing Officer has not given any finding while adding Rs.17,18,494.00 under the head HSD and fuel paddy husk, while ignoring that the Assessing Officer has categorically stated in his order that the assessee had furnished different figures of Fuel HSD and fuel husk right from filing of return till to furnishing of replies during the course of assessment proceedings and therefore, in the absence of positive evidence the amount of Rs. 17,18,894 is being treated to have not incurred in this account was not perverse.”
14. The Assessing Officer found certain discrepancies in the account with regard to the consumption of high speed diesel (hereinafter referred as HSD). In the manufacturing and other expenses, the fuel expenses (HSD) was shown by the assessee at Rs. 97,58,573, whereas in the audit report, it was shown as total energy consumption at Rs. 90,60,751. The assessee was asked to explain. It was submitted that assessee has issued 5,56,816 litres of HSD valuing Rs. 98,85,700 from the store and it was duly verifiable from quantitative details of raw material and finished goods. But the Assessing Officer was not satisfied and he made addition of Rs. 17,18,894. The first appellate authority as well as the Tribunal has deleted this addition.
15. With this backdrop, Sri D. D. Chopra, learned counsel for appellant, justified the Assessing Officers order. He submits that the details pertaining to HSD shown by the assessee were not correct as mentioned by the Assessing Officer. It was further submitted that the assessee has shown excess consumption of paddy husk of Rs. 8,93,945 for which explanation furnished by the assessee is not satisfactory. The assessee has furnished different figures of fuel HSD and fuel husk right from filing of return till to furnishing of replies during the course of assessment proceeding. The total of fuel husk and transportation of husk comes to Rs. 42,78,720. The assessee has also not given correct figure of consumption of fuel husk. In the absence of any positive evidence, the sum of Rs. 8,24,949 (HSD) and Rs.8,93,945/(husk) totalling of Rs. 17,18,894 is being treated to have not incurred on this account and it was rightly added by the Assessing Officer to the total income of the assessee. The purchases made of HSD and husk which do not relate to business activities and have been made out of books of account. Lastly, he justified the Assessing Officer order.
16. On the other hand, Sri Amit Shukla, learned counsel for the assessee, justified the impugned order passed by the Tribunal.
17. After hearing both the parties and on perusal of record, it appears that so far as the quantity of HSD and paddy husk are concerned, there is no dispute. It has been fully reconciled and verifiable from the ledger mentioned by the Assessing Officer The books of account were not rejected nor any defect was pointed out by the Assessing Officer, so, there cannot be any ad hoc addition. The assessee has shown power and fuel consumption of HSD. The Assessing Officer has taken the figure from the auditors report under the head “conservation of energy”. Similarly, for making disallowance under the head “fuel paddy husk”, the Assessing Officer has taken figure as shown in the profit and loss account as the correct consumption and figure was given in the auditor report under the head of “Total energy consumption”. After analyzing the entire facts and material, it appears that so far the quantity is concerned there is no dispute as the total quantity of paddy husk and HSD fuel have fully reconciled. The Assessing Officer has examined entire books of account and purchase in this regard. If the value and quantity of the fuel is fully verifiable from the purchase vouchers, there cannot be any addition until and unless it is proved that there has been purchase made outside the books of account or there has been excess consumption of fuel which is not recorded in the books of account. On the other hand, the Assessing Officer has taken the figure from the auditor’s report and at the same time he has taken the figure from the profit and loss account without considering the quantity mentioned in the purchase vouchers.
18. Moreover, in the instant case, the Assessing Officer has made the addition on estimate basis which is merely a question of fact.
19. So, in view of the above, the addition is not sustainable specially when it is reconciled with the support of vouchers. Hence, in this regard the impugned order passed by the Tribunal is hereby sustained along with the reasons mentioned therein. The answer to the question is in the affirmative, i.e., in favour of the assessee and against the Revenue.
20. In the result, the appeal filed by the Department is dismissed.