VIJAY INDUSTRIES vs. C I T ALWAR

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 21 / 2005 Vijay Industries ----Appellant Versus C I T Alwar ----Respondent _____________________________________________________ For Appellant(s) : Mr. Priyesh Kasliwal For Respondent(s) : Ms. Parinitoo Jain _____________________________________________________ HON'BLE THE ACTING CHIEF JUSTICE HON'BLE MR. JUSTICE MAHENDRA MAHESHWARI JUDGMENT 21/03/2017 1. By way of this appeal, the appellant has assailed the judgment and order of the Tribunal whereby the Tribunal has allowed the appeal preferred by the department. 2. This Court while admitting the matter on 29th March, 2005 framed the following questions:- “1. Whether the Income Tax Appellate Tribunal was justified in reversing the categorical finding of the first appellate authority that the books have not been rejected under Section 145 of the Act in the present case and in absence of such rejection, the book results cannot be substituted? 2. Whether in the facts and circumstances of the case, the learned Tribunal was justified in rejecting the books of appellant u/s 145 of the Act and restoring the addition of Rs. 6,00,000/- on account of alleged excess drayage in the process of manufacturing of

(2 of 4) [ITA-21/2005] mustard oil by crushing of mustered oil seeks and whether this finding is perverse? 3. Counsel for the appellant Mr. Kasliwal contended that the CIT(A) while considering the case of the appellant-assessee has observed as under:- “I have gone through the assessment order and written submissions and as well as discussion held with Mr. Datta. He has submitted before me the certificate from merchant Chamber & Agriculture Research Department Certifying the fact that new crop of Mustard Seed start arriving in the market from January and contains moisture from 25% to 35%. The learned counsel has also practically demonstrated before me with the help of electronic device called digital moisture meter, showing the moisture content at 20% in mustard seed. It is also not clear from assessment order that the opportunity was given to the appellant firm vis-a-vis case relied upon by the assessing officer as specifically requested by the appellant. Further also it is a natural phenomena that mustard seed of lower quality fetches less price. The relevant replies of statement of Sh. Rohitash Kumar, reproduced in the order, if read with the appellant’s explanation of shortage mentioned at page-3 of the assessment order, it becomes clear that deiage is ascertained on actual weight of the last bag which is not filled in fully. This implied that labour and time is saved by not weighing each and every bag of 85kg. Physically and separately out of a particular lot purchased and put in sun light for driage and entry of the same is made on the basis of bills. The inference of the AO that the driage is recorded purely on estimate basis, cannot considered well founded. In the instant case it is claimed that books of account are properly maintained and all the required books of account are maintained and not defect in books of account were pointed out and unless and until the book results are rejected u/s 145(2) of the I.T. Act resort to disallowing the driage loss cannot be made. Neither maintenance of stock register has been denied for any specific defect in maintenance of books of accounts, has been brought on record. A reading of last order shows that nowhere the Assessing officer have found any defect in books of a/c of the appellant, therefore, addition on a/c driage of Rs. 10,21,020/- cannot be sustained without first rejecting the books of a/c which the AO has not done. In view of this, the addition of Rs.10,21,020/- is hereby deleted.

(3 of 4) [ITA-21/2005] The next ground of appeal relates to additions on account of insurance of Rs.6,69,784/- and treating as an income of the assessee. The copy of insurance account of the appellant is as under:- summary of Insurance account: 1993-94: Amount Particulars Amount Particulars 9,85,397 Opening balance 3,89,051 Premium paid 6,27,686 Collection 3,87,899 Claim lodged (341350+46549) 3,84,590 Claim received 12,20,723 Balance C/D 19,97,673 19,97,673 During the year under consideration the appellant has received a sum of Rs. 2,38,635/-(627686-389051) being excess amount collected by the appellant over and above insurance premium paid and assessing officer treated as income of the appellant firm on the basis of Hon’ble Supreme Court decision in the case of Sincilare Murray & Co. (P) Ltd V CIT 97 ITR 615 and Chowrangee Sales Bureau V CIT 87 ITR 542. 4. We have heard counsel for both the sides. 5. He contended that while considering the case of the appellant the Tribunal in para 4 and 6 has not given cogent reasons. For ready reference para 4 and 6 are reproduced as under:- “4. In the light of above discussion and by considering the totality of facts and circumstances of the case, we find the justification in the order of the AO in estimating the dryage @ 1.5% but fact remains that moisture depends on the quantity and quality of the mustard seeds and also the month when it was dried. When it is so, then the addition made by the AO is looking on higher side. Therefore, we modify both the order of lower authorities and restrict the addition to Rs. 6,00,000/-. Thus, the assessee will get adhoc relief of Rs. 4,21,020/-

(4 of 4) [ITA-21/2005] from the order of the AO. This ground is partly allowed in favour of the Department. 6. The assessee- firm received a sum of Rs. 6,27,686/- on account of insurance receipt against which the payment to the extent of Rs. 7,76,950/- on account of payment of insurance premium as well as loss suffered while goods remained in transit has been claimed, but the AO has not allowed the claim. So, he made the addition of Rs. 6,69,784/-. But in first appeal, the CIT(A) has restricted the said addition to Rs. 2,38,635/- by observing that the said amount was not utilized for the purpose of insurance and it was converted into the trading receipt. The payment to the Insurance Company is genuine. Only the excess amount was utilized for the trading receipt and the same was rightly added by the CIT(A). Therefore, we uphold the order of the CIT(A) in this regard for the reasons mentioned therein. Thus, this ground is dismissed.” 6. Counsel for the respondent has supported the judgment of Tribunal and contended that the matter is required to be remitted back to the Tribunal. 7. Taking into consideration the reasoning adopted by the CIT(A), more particularly when the books of account were not rejected, the analogy applied by the CIT(A) is correct and both the issues are required to be answered in favour of the assessee and against the department. 8. Hence, the appeal stands allowed. (MAHENDRA MAHESHWARI),J. (K.S. JHAVERI)ACTING C.J. A.Sharma/6