M/S RAMA RICE CO,KOTKAPURA vs. THE INCOME TAX OFFICER-CUM OFFICER

ITA/36/2002HC Punjab & HaryanaPHHC01016517200203 January 2012Author: MR. JUSTICE M.M. KUMAR,MR. JUSTICE AJAY KUMAR MITTAL5 pages
AI SummaryRemanded

What were the facts?

The assessee, M/s Rama Rice Co., a partnership firm engaged in rice shelling, filed an appeal before the High Court against the Income Tax Appellate Tribunal's (ITAT) order for assessment year 1991-92. The Assessing Officer (AO) had made additions of Rs. 56,595 in the rice account and Rs. 1,85,430 in the rice phak account by applying the proviso to Section 145(1) of the Income Tax Act, 1961, to compute an increased yield. The Commissioner of Income Tax (Appeals) dismissed the assessee's appeal. The ITAT partly allowed the appeal, deleting the addition in the rice account but directing the adoption of a 2.70% yield for rice phak, against the assessee's 1.28% and the AO's 3.20%. The assessee is challenging the ITAT's decision regarding the rice phak yield.

What did the High Court hold?

The High Court found that the Tribunal's order in adopting the yield of rice phak at 2.70% against the actual yield shown by the assessee was not based on cogent reasons. The Tribunal had not adequately dealt with the applicability of the Proviso to Section 145(1) of the Act and did not provide any instances or basis for adopting the 2.70% yield, nor did it explain how the assessee's case was comparable to one with such a yield. The Court noted that the yield of rice and its by-products cannot be compared with exactitude as paddy is an agricultural produce whose yield can differ due to various factors like quality of seeds, water availability, climate, and natural calamities. It also varies from place to place and even within districts. Therefore, adopting a 'tailor-made formula' for yield would be a fallacy. The Court referred to its own decision in CIT vs. Sunil Traders, Rajpura, which held that to adopt such a comparative approach, the AO must show that the books of account were not properly maintained under Section 145. In the absence of such a finding, it is not legally justified to match yields between different cases. Consequently, the High Court remanded the matter back to the Tribunal to re-decide it afresh in accordance with the law.

What were the issues?

The Tribunal had to decide the following substantial questions of law: 1. Whether the Tribunal was justified in making any addition to the total income when it held that the proviso to Section 145(1) was not applicable? 2. Whether the Tribunal's order was perverse in directing the adoption of a particular yield in the Rice Phak Account without basis and ignoring comparative yields of other assessees? 3. Whether there was a reasonable basis for adopting a 2.70% yield for rice phak when the Tribunal accepted yields lower than the assessee's own shown yield in other cases? 4. Whether the ITAT could adopt different standards of yield for different assessees in similar circumstances without reasonable grounds? 5. Whether the ITAT was justified in ignoring the assessee's written submissions and passing a non-speaking order? Assessee's Contentions: The assessee argued that the Tribunal erred in adopting a 2.70% yield for rice phak by invoking the proviso to Section 145(1), especially after accepting the books of account by deleting the addition on rice yield. The assessee contended that the Tribunal wrongly relied on a Special Bench decision without considering the applicability of the proviso to Section 145(1) and without recording any infirmity in the books of account. The assessee also argued that agricultural produce yields vary due to several factors and that adopting a standardized yield without proper basis is incorrect. Revenue's Contentions: The revenue supported the order passed by the Tribunal.

Which sections of the Income-tax Act were involved?

Section 145,Section 260-A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. ITA No. 36 of 2002 Date of decision: 03.01.2012 M/s Rama Rice Co. -----Appellant Vs. The Income Tax Officer-cum-Assessing Officer, Faridakot (Punjab) ----Respondent CORAM:- HON'BLE MR JUSTICE M.M.KUMAR HON’BLE MR. JUSTICE AJAY KUMAR MITTAL

1.

To be referred to the Reporters or not?

2.

Whether the judgment should be reported in the Digest? Present:- Mr. Sandeep Goel, Advocate for the appellant. Mr. Kuldeep Singh, Advocate for the respondent. Ajay Kumar Mittal,J.

1.

The assessee has filed this appeal under Section 260-A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 20.7.2001 passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (in short, “the Tribunal”) in Appeal No.629 (ASR)/1993, relating to the assessment year 1991-92, claiming following substantial questions of law:- i) Whether on the facts and in the circumstances of the case, the learned Tribunal is justified to make any addition in the total income of the assessee, when the learned Tribunal has held that proviso to section 145(1) is not applicable? ii) Whether on the facts and in the c

The order continues below.

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