PARKAS CHAND KARORI MAL vs. COMMISSIONER INCOME TAX

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ITA/92/2003HC Punjab & HaryanaPHHC01046666200330 January 2024Author: MR. JUSTICE GURMEET SINGH SANDHAWALIA,MS. JUSTICE LAPITA BANERJI4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the Income Tax Appellate Tribunal (ITAT) had rightly quantified the percentage of phoos used in the dryer, considering the absence of any record or norms maintained by the assessee. The Tribunal's approach involved an investigation into the matter. In the absence of any records produced by the assessee, the Court found no substantial question of law arising from the appeal. The Tribunal had exercised its discretion to grant relief to the assessee by directing a recalculation of the addition at 5% of the paddy milled, acknowledging the use of phoos in the dryer. The Court found no tenable reason to entertain the appeal due to the lack of proven data or maintained records by the assessee. The appeals were dismissed.

What were the facts?

The appeals concern Assessment Year 1998-1999. The assessee, Parkash Chand Karori Mal, filed a return declaring an income of ₹9,160. The Assessing Officer (AO) processed the return and selected it for scrutiny. The AO observed that 77,869 quintals of paddy were processed, yielding phoos worth ₹6,62,214. Based on sale rates and closing stock valuation, the AO fixed the rate of phoos at ₹90 per quintal. Calculating the value of phoos at 17% of total paddy processed, the AO determined a value of ₹11,91,330. The difference between this calculated value and the disclosed value (₹11,91,330 - ₹6,62,214) resulted in an addition of ₹4,76,060 for suppressed phoos, leading to a total addition of ₹5,29,116. The Commissioner (Appeals) allowed the assessee's appeal, deleting the addition.

What were the issues?

1. Whether, in the facts and circumstances, Annexures P/1 and P/3 are untenable in law, as the lower authorities erred in not accepting the audited book results based on accounts maintained in the normal course of business, especially when the business is inspected by other departments (Sales Tax, Market Committee), and whether the respondent's action is arbitrary as the books of account were not rejected and Section 145 was not invoked while fixing the percentage? (Question of law and fact, concerning Section 145 of the Income Tax Act, 1961). Assessee's contentions: The lower authorities committed an error by not accepting the audited book results. The business is subject to inspection by other departments, and the books of account were not rejected. Section 145 was not invoked by the authorities while fixing the percentage, making their action arbitrary. Revenue's contentions: The revenue contended before the Tribunal that some phoos was used in the dryer, but the assessee maintained no day-to-day record and no norms were fixed for its usage. The Tribunal, while acknowledging the use of phoos in the dryer, directed a recalculation of the addition based on 5% of the paddy milled, instead of the 8% allowed by the CIT(A).

Which sections of the Income-tax Act were involved?

Section 260A,Section 143(1)(a),Section 142(1),Section 143(2),Section 145

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Neutral Citation No.2024:PHHC:012389-DB (202) ITA No.92 of 2003 Parkash Chand Karori Mal, Kapurthala ……Appellant Versus Commissioner Income Tax, Jalandhar and another ……Respondents (2) ITA No.89 of 2003 M/s Anand Rice Trading Co. ……Appellant Versus Commissioner Income Tax, Jalandhar and another ……Respondents (3) ITA No.90 of 2003 M/s Aggarwal Rice Mills ……Appellant Versus Commissioner Income Tax, Jalandhar and another ……Respondents (4) ITA No.91 of 2003 M/s Aggarwal Rice Mills ……Appellant Versus Commissioner Income Tax, Jalandhar and another ……Respondents Decided on : 30.01.2024 CORAM : HON'BLE MR.JUSTICE G.S. SANDHAWALIA HON'BLE MS.JUSTICE LAPITA BANERJI Present: Mr. Alok Mittal, Advocate for the appellants. Ms. Gauri Neo Rampal Opal, Senior Standing Counsel for the respondents. ***** G.S. Sandhawalia, J. (Oral) The present judgment shall dispose of four appeals i.e. ITA Nos.92, 89, 90 & 91 of 2003. Facts are being taken from ITA No.92 of 2003 ‘Parkash Chand Karori Mal Vs. Commissioner Income Tax, NAVEEN NAGPAL 2024.02.07 11:16 I attest to the accuracy and

authenticity of this order/judgment Chandigarh Page No.2

Jalandhar and another’, which has been filed under Section 260A of the Income Tax Act, 1961 (for short ‘the Act’) against the order dated 09.01.2003 passed in ITA No.246 (ASR)/2002 for the Assessment Year 1998-1999. 2. The only substantial question which is sought to be raised reads as under:- “7 (c) Whether in the facts and circumstances the Annexure P/1 and P/3 are untenable in law in as much as the lower authorities committed an error in not accepting the audited book results based on books account maintained in the normal course of business as the business of the appellant firm is inspected by other Department-such as Sales Tax Department and Department of Market Committee and furthermore whether the action of the respondent is arbitrary as the books of account have not been rejected and the relevant authorities have not taken recourse to Section 145 while fixing the percentage?

3.

A perusal of the assessment order dated 19.03.2001 (Annexure P-1) would go on to show that the return for the assessment year 1998-1999 had been filed on 30.09.1998 declaring an income of `9,160/-. The same was processed under Section 143(1)(a) of the Act on 10.10.2000 and the case was selected for scrutiny with the prior approval of Joint Commissioner of Income Tax, Range-2, Jalandhar. Notices under Section 142(1) and 143(2) of the Act were accordingly issued. It is the case of the appellant that books of accounts and the information as called for had been furnished and examined. The assessing authority had noticed that 77869 qtls. paddy had been processed and phoos worth of Rs.6,62,214/- had been manufactured. After taking into consideration the instances of sale rates of phoos, the average sale and closing stock NAVEEN NAGPAL 2024.02.07 11:16 I attest to the accuracy and authenticity of this order/judgment Chandigarh Page No.3

valuation of phoos, the rate of phoos was taken `90/- per qtl. Resultantly, the value of the phoos was calculated as under:-

“17% of total paddy processed at 77869 quintals = 13237

a. Value at the rate of Rs.90 per quintal = 1191330/- b. Value of phoos disclosed

= 662214/- Value of phoos suppressed (a-b) = 476060/-”

4.

Resultantly, an addition of `5,29,116/- on account of supersession in phoos was made. In the appeal filed before the Commissioner, Income Tax, a finding was recorded that a stereo-type order had been passed by the Assessing Officer and phoos was quantified at 9345 qtls. Accordingly, the appeal of the assessee was allowed and the addition made of `5,29,116/- was deleted.

5.

The revenue had taken the matter before the Appellate Tribunal, wherein while recording the finding that some phoos was used in the dryer for drying the paddy, however no day-to-day record was maintained by the assessee and no norms were fixed as to how much phoos could be used for the purpose of drying the paddy, since it depends upon many factors like contents of the moisture in the paddy and the conditions of the environment. Resultantly, 5% of the paddy milled and produced of raw rice was the methodology which was adopted and the Assessing Officer was directed to give relief to the assessee @ 5% of the paddy milled on account of use of the phoos in the dryer for the production of raw rice instead of 8% allowed by the CIT(A) and directions were issued to recalculate the addition.

6.

We are of the considered opinion that the Tribunal had rightly quantified the percentage, keeping in view the fact that in the absence of any record or norms the investigation had been done. In such circumstances, in the absence of any record being produced by the NAVEEN NAGPAL 2024.02.07 11:16 I attest to the accuracy and authenticity of this order/judgment Chandigarh Page No.4

assessee, no substantial question of law would arise as has been framed in the present appeal. The Tribunal has used its discretion to grant the relief to the assessee, we do not see any tenable reason to entertain the present appeal, in the absence of any proven data or record being maintained by the assessee. Resultantly, the present appeals are dismissed.

(G.S. SANDHAWALIA) JUDGE

30.01.

2024

(LAPITA BANERJI) Naveen

JUDGE

Whether speaking/reasoned : Yes

Whether Reportable :

No NAVEEN NAGPAL 2024.02.07 11:16 I attest to the accuracy and authenticity of this order/judgment Chandigarh

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