Commissioner of Income Tax vs Raghuraji Agro Industries Pvt. Ltd.

Dr. Satish Chandra, J.—This appeal has been filed by the department u/s 260A of the Income Tax Act, 1961 against the judgment and order dated 6.2.2009 passed by the Income Tax Appellate Tribunal, Lucknow in I.T.A No. 875/Luc/2008 for the assessment year 2003-04.

Brief facts of the case are that the Assessee is Pvt. Ltd Company and engaged in the business of running of solvent extraction plant & sale of Rice Bran oil and Mustard oil etc. During the assessment year under consideration, the Assessee has filed the return showing details of income of Rs. 24,73,110/.The case was selected for the scrutiny. During scrutiny the A.O. after seeking clarification from the Assessee has made additions which were not only deleted by the first appellate authority but also by the Tribunal. Still not being satisfied, the department has filed the present appeal.

A Division Bench of this Court on 21.7.2009 has admitted the appeal on the following three substantial questions of law;

Ist Question

Whether the finding of the learned Income Tax Appellate Tribunal that the Assessing Officer has not given any finding while adding the difference of Rs. 40.00 lacs and Rs. 39.50 lacs between the closing balance on 31.3.2002 and the opening balance on 1.4.2002, while ignoring that the Assessing Officer has categorically stated in his order that in the absence of any clarification he is left with No. option except to treat the sum of Rs. 40.00 lacs +Rs. 31.50 lacs to have been paid out of books from the income not disclosed was not perverse.

Sri D.D. Chopra, learned Counsel for Appellant submits that the Assesse furnished the copy of account of M/s Akbarpur Wines wherein the opening balance as on 1.4.2002 was shown at Rs. 60,00,000/ in place of Rs. 1 Crore. It was noticed by the A.O. that in the previous year there was closing balance of Rs. 1 crore as on 31.3.2002 in the names of Sri Ashish Pandey and Sri Rakesh Pandey through M/s Akbarpur Wines, whereas in the year under consideration the balance was shown at Rs. 2,02,12,630/ as on 31.3.2003 under the head unsecured loan from the Directors.

He further submits that during the course of assessment proceeding, the A.O. has categorically held that the Assessee has tried to justify its claim by inviting other entries which have not been shown in the annexures II Clause 24 (a) of audited accounts, whereas the issue involved was how the amount of Rs. 1Crore has come down to Rs. 60,00,000/ over a night. He read out the order of the A.O. where it was mentioned that the explanation given by the Assessee was not satisfactory. He further submits that the explanation given before the CIT(A) was not explained before the A.O. No. supporting evidence with regard to share application money was also brought on record. Lastly, he justified the assessment made by the A.O..

Sri Amit Shukla, learned Counsel for the Assessee has justified the impugned order passed by the Tribunal as well as CIT (A). He submits that the opening balance in the account of Ashish Pandey and Rakesh Pandey was Rs. 1 Crore which was relating to the previous year. It was having two elements, i.e un-secured loan of Rs. 60 lac; and share capital money of Rs. 40 lac, total of which comes to Rs. 1 crore. He also submits that though the amounts were mentioned separately for the convenience, but during the assessment year under consideration, these were clubbed together and consolidated balance of Rs. 1 crore was shown in schedule (IV) in the audit report, the said entries were verifiable and the copies were also produced before the A.O. It was also submitted by the counsel for Assessee that the amount of Rs. 40 lacs shown under the head share application money was not appearing in any other place separately in the books of accounts and to avoid confusion, both the accounts were clubbed together by transferring Rs. 40 lacs from the head " share application money" to the head "unsecured loan" by passing a general entry which was verifiable from the books of accounts. So, No. income was suppressed. "Share application" money has since not been reflected in the books of accounts separately, it has been merged with Rs., 1 crore and therefore, there is No. reason to make any addition.

We have heard both the counsels at length and gone through the material available on record. From the record, it appears that as on 31.3.2003, the figure of Rs. 1 crore was appearing in Schedule IV, under the head "unsecured Loan" in the balance sheet. In the earlier year it was appearing as "1. unsecured loan Rs. 60 Lacs"."2. Share Application Money Rs. 40 Lacs." During the assessment year under consideration, the same was shown as Rs. 1 Crore consolidated. The assessing officer has not pointed out as to what happened to Rs. 40 lac which were earlier appearing in the balance sheet. If the said sum has been transferred to the head "Unsecured Loan", obviously Rs. 40 Lac is a part of Rs. 1 crore only. In the instant case, No. money has gone out from the books of accounts. It is merely adjustment of entries i.e transfer of the figure from one head to another head. The Assessee has duly filed copies of ledger account for the years 2001-02; and 2002-03 before the A.O. on which he has not given any findings which were provided in the books of account as well as the balance sheet of the earlier year and the current year, hence the addition is based only on the presumption. The Assessee has only figured out the entire "share application" money to another head during the financial year 2001-02. The inference drawn by the A.O. is without any material and cannot be sustained.

Needless to mention that the power of first appellate authority is co terminus with the power of the A.O. as far as examining of the evidence is concerned. The appellate authority has all the power which original authority has, subject to condition/restriction, if any, prescribed by law as per the ratio laid down in the following cases,

1 Jute of Corporation of India Ltd. Vs. Commissioner of Income Tax and another, and

2 Commissioner of Income Tax, M.P., Bhopal Vs. M/s. Nirbheram Deluram,

So, the plea of the Appellant''s counsel that explanation given before CIT (A) was not given before the A.O., is not sustainable.

In view of above, we find No. reason to interfere with the impugned order passed by the Tribunal and the same is hereby sustained. The answer to the question is in affirmative i.e against the revenue and in favour of the Assessee.

IInd Question

Whether the finding of the learned Income Tax Appellate Tribunal that the Assessing Officer has not given any finding while adding Rs. 75,000.00 as unexplained expenditure on account of purchase of demand draft while ignoring that the assessing Officer has categorically stated in his order that the Assessee has not debited the amount in cash book for purchase of demand draft in favour of Bank of Baroda credit care although the demand draft of Rs. 75,000.00 has been made in favour of Bank of Baroda Credit Card was not perverse.

The second grievance of the Assessee is pertaining to the addition of Rs. 75,000. From the perusal of schedules forming part of P & L A/c as on 31.2.2003, it appears that in serial No. 15, a sum of Rs. 1,86,260 has been shown as "recovery" under the head "cash found short in the chest". The loss was debited under the head "cash suspension". The said amount was taken by the cashier and the same was returned during the next year. The A.O. was not satisfied, so he made addition which was deleted not only by the first appellate authority but also by the Tribunal.

With this background, Sri Chopra submits that the Assessee has not debited Rs. 40,000.00, 20,000.00 and 15,000.00 on 18.6.2002, 15.7.2002, and 17.7.2002 respectively in cash book for purchase of demand draft in favour of Bank of Baroda by credit card. It shows that the Assessee has purchased the said demand drafts amounting to Rs. 75,000 from bank of Baroda. Regarding mis-appropriation of funds by the cashier, No. FIR was furnished by the Assessee, so, A.O. was right in making addition of Rs. 75,000. On the other hand, Sri Amit Shukla counsel for Assessee supported the order of the Tribunal.

After having heard both the parties, we find that Rs. 1,86,260/ were recovered from the cashier and if Rs. 75,000 is added which was the amount used for purchase of demand draft, the shortage of Rs. 2,61,260 stands explained. The amount was taken by the cashier during the assessment year under consideration and the same was duly shown as shortage in the cash chest. Since the figure tallies, there is No. reason to reject the Assessee''s explanation out rightly. The amount was recovered from the cashier during next year. Thus, there was No. loss. As the cashier was an old employee, so, the Assessee company has not filed any FIR against him but the fact remains that the assess did not suffer any pecuniary loss as an amount of Rs. 75,000 was recovered and accounted in the books. Moreover, the amount is fully reconciled and the figure tallies. When it is so, then we find No. reason to interfere with the order passed by the Tribunal and the same is hereby sustained. The answer to the substantial question No. II is in affirmative and in favour of the Assessee and against the revenue.

IIIrd Question

Whether the finding of the learned Income Tax Appellate Tribunal that the Assessing Officer has not given any finding while adding Rs. 17,18,494.00 under the head HSD and fuel paddy husk, while ignoring that the Assessing Officer has categorically stated in his order that the Assessee had furnished different figures of Fuel HSD and fuel husk right from filing of return till to furnishing of replies during the course of assessment proceedings and therefore, in the absence of positive evidence the amount of Rs. 17,18,894.00 is being treated to have not incurred in this account was not perverse.

The A.O. found certain discrepancies in the account with regard to the consumption of High Speed Diesel (hereinafter referred as HSD). In the manufacturing and other expenses, the fuel expenses ( HSD) was shown by the Assessee at Rs. 97,58,573, whereas in the audit report, it was shown as total energy consumption at Rs. 90,60,751. The Assessee was asked to explain. It was submitted that Assessee has issued 5,56,816 Ltrs. of HSD valuing Rs. 98,85,700 from the store and it was duly verifiable from quantitative details of raw material and finished goods. But the A.O. was not satisfied and he made addition of Rs. 17,18,894. The first appellate authority as well as the Tribunal has deleted this addition.

With this backdrop, Sri D.D. Chopra learned Counsel for Appellant justified the A.O''s order. He submits that the details pertaining to HSD shown by the Assessee were not correct as mentioned by the A.O. It was further submitted that the Assessee has shown excess consumption of paddy husk of Rs. 8,93,945/ for which explanation furnished by the Assessee is not satisfactory. The Assessee has furnished different figures of fuel HSD and fuel husk right from filing of return till to furnishing of replies during the course of assessment proceeding. The total of fuel husk and transportation of husk comes to Rs. 42,78,720. The assesse has also not given correct figure of consumption of fuel husk. In the absence of any positive evidence, the sum of Rs. 8,24,949 (HSD) and Rs. 8,93,945/ (Husk) totaling of Rs. 17,18,894/ is being treated to have not incurred on this account and it was rightly added by the A.O. to the total income of the Assessee. The purchases made of HSD and Husk which do not relate to business activities and have been made out of books of account. Lastly, he justified the A.O. order.

On the other hand, Sri Amit Shukla, learned Counsel for Assessee justified the impugned order passed by the Tribunal.

After hearing both the parties and on perusal of record, it appears that so far as the quantity of HSD and paddy husk are concerned, there is No. dispute. It has been fully reconciled and verifiable from the ledger mentioned by the A.O. The books of accounts were not rejected nor any defect was pointed out by the A.O., so, there cannot be any ad-hoc addition. The Assessee has shown power and fuel consumption of HSD. The A.O. has taken the figure from the auditors report under the head "conservation of energy". Similarly, for making dis-allowance under the head " fuel paddy husk", the A.O has taken figure as shown in the profit and loss account as the correct consumption and figure was given in the auditor report under the head of" total energy consumption". After analyzing the entire facts and material, it appears that so far the quantity is concerned there is No. dispute as the total quantity of paddy husk and HSD fuel have fully reconciled. The A.O. has examined entire books of accounts and purchase in this regard. If the value and quantity of the fuel is fully verifiable from the purchase vouchers, there cannot be any addition until and unless it is proved that there has been purchase made outside the books of accounts or there has been excess consumption of fuel which is not recorded in the books of accounts. On the other hand, A.O. has taken the figure from the auditor''s report and at the same time he has taken the figure from profit and loss account without considering the quantity mentioned in the purchase vouchers.

Moreover, in the instant case, A.O. has made the addition on estimate basis which is merely a question of fact.

So, in view of above, the addition is not sustainable specially when it is reconciled with the support of vouchers. Hence, in this regard the impugned order passed by the Tribunal is here-by sustained along with the reasons mentioned therein. The answer to the question is in affirmative i.e in favour of the Assessee and against the revenue.

In the result, the appeal filed by the department is dismissed.