M/S ARVIND KUMAR AGRAWAL,HUF,RAIPUR vs. I.T.O.-2, BHILAI(CG)

The grounds of appeal are as under:

The assessee is an HUF and derives income through its propitiatory concern “M/s. Agarwal & Sons, Simga”, a rice mill owner doing the business of manufacturing and trading of rice and bye-products. Return of income filed at Rs. 2,56,780/- for the year under reference was assessed by the A.O at Rs. 14,44,432/- by making additions to the total income on various grounds. The A.O computed the income of the assessee by making various additions totaling to Rs. 11,87,654 the details of which are as under:

Being aggrieved by the Assessment order, the assessee filed an appeal before the CIT(A). The CIT(A) partly allowed the appeal.

As Regards Ground No. 1, the Ld. AR submitted that ground no. 1 is relating to disallowance of Rs. 4,80,000/- made by the A.O on account of payment of parboiling charges paid to M/s Dauji farms Pvt Ltd. The Ld. AR submitted that assessee has submitted all the details along with vouchers in respect of parboiling charges of husk/paddy. The Ld. AR submitted that the Hon’ble Tribunal in the case of M/s. Anant Rice Industries Vs ITO being ITA No. 280/NAG/2008 vide its order dated 26.08.2008 held that the A.O has not pointed out any single instance of sale of husk by the assessee or even there is no evidence of such sales brought on record. Then the exercise of the A.O adopting the net saleable price of husk was based on his surmises and conjectures and the same is not justified. Therefore, the Tribunal in the said case deleted the addition of Parboiling charges. The Ld. AR further submitted that the Tribunal in the case of ITO Vs. Shri Ashutoshkumar Arvindkumar Agarwal & bros. in ITA No. 201/BLPR/2010 order dated 01.11.2011 has allowed the same issue in favour of the assessee.

On the other hand Ld. DR supported the orders of the authorities below and submitted that the Assessing Officer rightly made the addition of Parboiling charges.

We have heard both the parties and perused the material available on record. The reliance of the assessee in the case of Shri Ashutoshkumar Arvindkumar Agarwal & Bros. (supra) is apt in assessee’s case. The Tribunal has given a clear finding that if the Assessing Officer has established that the assessee sold the husk and for such sale, the assessee has not offered any explanation then only the said addition can be made otherwise the same cannot be made. The husk/paddy is used in the boiling and drying process in

As regards Ground No.2 relating to addition of Rs. 1,90,684/- for difference in valuation of closing stock of Bardana i.e. Gunny bags, the Ld. AR submitted that the assessee correctly valued closing stock on vardana and there is no under valuation on part of the assessee. The Ld. AR submitted that the assessee has given all the relevant material and with the supporting evidences of the expenses were explained before the A.O as well as CIT(A). But the CIT(A) held that the assessee debited Rs. 16.74 per bag for consumption of not only the new bags but also the bags from the opening stock and in such circumstances leading to valuation of some of the old bags from the opening stock at Rs. 16.74 per bag for the purpose of debiting the profit and loss account as consumption and some of the old bags either from the opening stock or from balance stock from purchase of the year at Rs. 5.25 per bag from the purpose of crediting profit and loss account as closing stock and since this has not been conclusively proved, mere contention that value of closing stock has been taken at much lower rate since the bags were old and used, accordingly addition made by the A.O on this account is confirmed. The Ld. AR submitted that the closing stock of the Gunny bags has been properly described by the assessee and therefore the same cannot be added in the income of the assessee. The Ld. AR submitted that the assessee has opening stock of Rs. 41,450/- at the amount of Rs. 13.53 per bag. At the time of sale of Bardana, the rate ranges between Rs. 4.75 till Rs. 5.40 as per the conditions of the Bardana. Thus, the total sale of Bardana was 50,000 for Rs. 2,53,100/-.

The Ld. DR relied upon the orders of the authorities below.

We have heard both the parties and perused the material available on record. From the records it is clear that the assessee directly debited the adopted value of consumption on excessive rate and credited the value of closing stock of bardana at lower rate. Such claim of excessive value of bardana consumption and crediting the value of closing stock in lower rate were not accepted by the Assessing Officer as well as CIT(A). We find that after consumption of bardana its use for the carrying of rice gets detoriated and therefore at the time of closing stock the assessee has taken depreciation value which the CIT(A) as well as A.O has not taken into account. This contention prevalent in the practice of trading in rice and any food grains because gunny bags contain food grains then get damaged and on same occasion food grains cannot be stored in such gunny bags. Therefore, the contention of the assessee regarding the bardana has to be accepted to some extent but the rate which has been given by the assessee to that of Rs. 5.25 does not appears to be justified in absence of any supporting evidences. Therefore, it will be appropriate to make 30% of addition. Therefore, the ground of appeal No. 2 is partly allowed for statistical purposes.

As regards ground No. 3 relating to suppression of valuation without having any material on record the Ld. AR submitted that the assessee has rightly given all the evidences and the value of this rice was as per the records and the CIT(A) as well as A.O taken the cognizance of the sale of evidences produced before the authorities.

The Ld. DR submitted that the A.O as well as CIT(A) has rightly dealt this issue and there is no need to interfere with the findings of the A.O.

We have heard both the parties and perused the material available on record. Evidences show that the assessee has not at all suppressed any valuation. Hence, Ground No. 4 is allowed.

As regards Ground of appeal No. 5 is relating to estimated suppressed sale of husk. This issue is inter connected with the ground of appeal no.1. wWe have already given our findings in respect of ground of appeal no.1 the same is applicable here as well as the issue is covered by both the decision stated hereinabove. Therefore, ground of appeal No. 5 is allowed.

In the result the appeal filed by the assessee is partly allowed for statistical purpose.