INCOME TAX OFFICER vs. M/S GOPAL RICE MILL
What did the High Court hold?
The High Court held that no substantial question of law, as proposed by the appellant (revenue), was involved for adjudication of the appeal. The Tribunal had allowed the appeal of the assessee, setting aside the addition sustained by the CIT(A). The Tribunal's finding was that the assessee maintained regular, duly audited books of accounts and a day-to-day stock register. No defects were found by the AO in these records. Furthermore, the gross profit and overall yield disclosed by the assessee were better than in the preceding two years, and the AO had not found a single instance of sales suppression. The High Court, in view of the Tribunal's reasoning, concluded that the appeal was without substance and therefore dismissed it. The operative direction was the dismissal of the appeal.
What were the facts?
The assessee, M/s Gopal Rice Mill, operates a rice mill and derives income from manufacturing rice and its byproducts. For the relevant assessment year, the Assessing Officer (AO) initiated scrutiny proceedings under Section 143(2) of the Income Tax Act, 1961. Following assessment under Section 143(3), the AO made an addition of Rs. 43,01,514/- to the assessee's income, comprising Rs. 32,85,475/- on account of suppression of sales of rice and Rs. 8,18,541/- on account of suppression of sales of broken rice. The Commissioner of Income Tax (Appeals) partially allowed the appeal, sustaining an addition of Rs. 41,04,016/-. The assessee then appealed to the Income Tax Appellate Tribunal (ITAT). The ITAT allowed the assessee's appeal, setting aside the addition sustained by the CIT(A). The Income Tax Officer -1 (3) Raipur (CG) is the appellant (revenue) and M/s Gopal Rice Mill is the respondent (assessee). The appeal is against the order of the ITAT, Nagpur Bench.
What were the issues?
1. Whether, on the facts and circumstances of the case, the Income Tax Appellate Tribunal was justified in law in deleting the addition confirmed by the CIT(A) amounting to Rs. 41,04,016/-, while overlooking that the detailed working given in the assessment order was based on figures emerging from the assessee's own books of accounts and was not arrived at on presumptions? (Question of law) Assessee's Contention: The AO made the addition on conjectures and surmises without finding any fault with the books of accounts and without rejecting them. The profit was assessed on the basis of yield assessment, which is contrary to the books of accounts kept during the business process of the Rice Mill. Revenue's Contention: The AO made the addition after working out the suppression made by the assessee. The AO's reasoning was that the assessee would not sell polished rice at a lower rate than the raw rice purchased. The Tribunal, without considering this inconsistency, summarily allowed the appeal by relying on the books of accounts, which were implicitly rejected. Reliance was placed on the order in Commissioner of Income Tax, Circle-1, Raipur Vs. M/s Gupta Enterprises, which relied on Bandi Cooperative Labour and Construction Society Vs. Commissioner of Income Tax (2008) 300 ITR 107 (P&H), holding that a dispute regarding the method of estimation of sale value and estimation of income on the basis of sale value cannot be considered a substantial question of law.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
order was based on figuies emerging from assesee's own books of accounts and it was not arrived at on presumptions?"
Briefly stated, facts of the case are that the assessee is the owner of Rice Mill and derives income from manufacturing rice and its byproducts. The return filed by the assessee for the relevant year was selected for scrutiny and accordingiy, notice was issued under Section 143(2) of the Act to the assessee. The Assessing Officer (AO) after completing assessment proceedings under Section 143(3) of the Act, made addition of Rs.43,01,514/- considering the amount of suppression of Rs.32,85,475/- on sale of rice and Rs.8,18.541/- on sale of broken rlce.
The Commissioner of 'ncome Tax (Appeals) {in short "CIT(A)"} -i partiy allowed the appeal by sustaining the addition made by the AO to the extent of Rs.41,04.016/-. However, the Tribuna! aliowed
^ 0. the appeai of the assessee, set aside the addition sustained by the C!T(A), with a finding that the assessee is maintaining the reguiar books of accounts, which are duiy audited, and the day-to-day stock register; no defect was found by the AO in the books of accounts or stock register maintained by the assessee; the gross profit as well as overai! yield disclosed by the assessee is better than the gross profit and yield as compared to preceding two years; and that the AO has not found a single instance of suppression of sales by the assessee.
Shri S. Rajeshwar Rao, iearned counsel appearing for the ippeHanVrevenue submits that the AO made the above addition after working out the suppression made by the assessee. The reasoning assigned by the AO was that the assessee wouid not se!i the polished rice at iower rate than at which the raw rice was purchased by the assessee. However, the Tribunai without
considering the above glaring inconsistency in the conduct of the assesses, has sumrnarily ailowed the appeai of the assessee by piacing reiiance on the books of accounts, which stood impiiediy rejected.
On the other hand, learned counsei for the respondent argues that the AO made the addition on conjectures and surmises without finding any fauit with the books of accounts and without rejecting tl'ie same, the profit has been assessed on the basis of yield assessment, whlch is contrary to fhe books of accounts kept durins the process of business ofthe Rice Mlll.
Reiiance has been placed on the orcfer dated l^ April, 2009 passed in Commiss'ioner of income Tax, Circle-1, Raipur Vs. M/s Gupta Enferprises, Vk'herein this Court reiying upon the judgment in the matters of Bandi Cooperative Labourand Construction Society l/s. Commissioner of Income Tax, (2008) 300 !TR 107 (P&H), has heid that the dispute regarding method of estimation of sale value and estimation of income on the basis of sale vaiue can, by no streteh of imagination, be considered to be a substantia! question of !aw. have heard learned counsel for the parties.
3
Keeping in view the reasons assigned by the Tribuna! in para 11 of its order, we are of the opinion that no substantial question of iaw, as proposed by the appeilant, is involved for adjudication of this appeal. The appeal being wlthout substance deserves to be dismissed and is, accordingly, dismissed. Dhirendra Mishra Judge R.N. Chandrakar Judge 111
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