COMMISSIONER OF INCOME TAX, PT vs. SUNIL TRADERS. RAJPURA

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IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. --- Income-tax Reference No. 146 of 1999 Date of decision: 9.9.2010 Commissioner of Income-tax, Patiala --- Petitioner Versus Sunil Traders, Rajpura --- Respondent CORAM: HON’BLE MR. JUSTICE ADARSH KUMAR GOEL HON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- PRESENT: Mr. Tajinder K. Joshi, Standing Counsel for the petitioner. --- AJAY KUMAR MITTAL, J. At the instance of the Revenue, the Income-tax Appellate Tribunal Chandigarh Bench ‘A’, Chandigarh (in short “the Tribunal”), vide its order dated 25.2.1998 passed in the appeal relating to the assessment year 1989-90, has referred the following question for the opinion of this Court: “Whether, on the facts and circumstances of the case, the Tribunal was right in confirming deletion of addition of Rs. 3,79,600/- in the absence of maintenance of stock register for production of phuk, phoose, driage etc.” The facts as narrated in the statement of the case leading to the filing of the present reference are that it was observed by the assessing officer that the assessee had husked 53507 quintals of paddy and obtained 34787

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quintals of rice, which gave a percentage of 65.01. The yield of the rice bran was shown at 5.02%, phuk at 3.09% and husk at 19.34%. The assessing officer found that in the milling register, the assessee had recorded daily production of rice and rice bran on estimate basis without actual weighment and had also not kept any record for driage of paddy nor did the assessee maintain any stock register for production of phuk and phoose. The sales of phuk and phoose were more or less on cash basis and the bills issued did not disclose the weight of the items sold. The assessing officer rejected the books after obtaining expert opinion of the Punjab Agricultural University and proceeded to work out the suppression of yield of rice, rice bran, phuk and phoose. The assessing officer made the following additions: Amount in Rs. Commodity Account AGGREGATE TOTAL 2,86,200 rice 1,18,950 Rice bran 39,840 phuk 28,300 phoose 4,73,290/- The Commissioner of Income-tax (Appeals) {in short “CIT(A)”} upheld the rejection of books of account and held that it would be fair and reasonable to work the yield of rice at 65.5% of paddy milled as against 65.01% shown by the assessee. The CIT(A), thus, sustained the addition of Rs. 93,600/- on account of low yield of rice. As regards the yield of rice bran, phuk and husk, yield shown by the assessee was found to be reasonable and acceptable. The CIT(A), thus, allowed a relief of Rs. 3,79,600/- to the assessee. The Tribunal concurred with the view taken by the CIT(A) and additionally also accepted the plea of the assessee regarding yield in respect of rice and allowed relief of 93,600/- as well. The question aforesaid has been referred for the opinion of this Court.

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We have heard learned counsel for the petitioner and have perused the record. The question that arises for consideration of this Court is, whether the Tribunal was justified while affirming the view of the CIT(A) which deleted the addition of Rs.3,79,600/- that had been initially made by the assessing officer on account of low yield of rice bran, phuk and phoose. The yield of rice; rice bran, phuk and phoose from paddy cannot be comparable with exactitude as paddy being an agricultural produce which yields rice, rice bran, phuk and phoose can differ on account of various factors like quality of seeds, availability of water resources, climatic condition like monsoon, natural calamities and other similar factors. Further, it can vary from place to place, like yield in Punjab must not necessarily be equivalent to yield in other States where climate and other conditions are different. Still further, even within the State yield of rice from paddy differs in various Districts itself. Therefore, to adopt tailor made formula for yield of rice and its by-products would be a fallacy and would not give correct results. It shall depend upon facts and circumstances of each case. In order to adopt such an approach, the Assessing Officer would be required to show that the books of accounts have not been properly maintained as required under Section 145 of the Act and, therefore, method of comparison would be apt in such a situation. In the absence of the same, it would not be legally justified to match the colour between two different cases. Contention of the assessee before the CIT(A) and the Tribunal was that non-maintenance of non-statutory record cannot be treated as a defect in the books of account. The assessee had given detailed reply to the various defects pointed out by the Assessing Officer and had produced the books of account consisting of cash book, ledger, stock register (paddy and rice), bills

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and vouchers, which were examined but no defect was noticed there either in the books or the vouchers supporting them. Further, the CIT (A) and the Tribunal on appreciation of the evidence had concurrently arrived at a finding that the yield shown by the assessee of rice bran, phuk and phoose was reasonable and, therefore, deleted the addition of Rs.3,79,600/-. No error or perversity could be pointed out in the finding recorded by the CIT (A) and the Tribunal and, therefore, the conclusion arrived at by the Tribunal cannot be said to be erroneous. The question of law referred by the Tribunal is, therefore, decided against the Revenue. The Reference stands disposed of. (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) September 9, 2010 JUDGE rkmalik/gbs