Pramod Kumar vs Commissioner of Income Tax

Ajay Kumar Mittal, J.—This appeal has been preferred by the asses-see under section 260A of the Income-tax Act, 1961 (in short, "the Act"), against the order dated March 19, 2012, annexure A. 3 passed by the Income-tax Appellate Tribunal "B" Bench, Chandigarh (in short, "the Tribunal") in I.T.A. No. 264/CHD/2011, for the assessment year 2007-08, claiming the following substantial questions of law (annexure "A" at page 79 of the paper book):

"1. Whether the books of account could be rejected merely on the premises that separate record of the Government paddy and own paddy was not maintained that too in the absence of any specific defect in the books of account?

Whether the addition on account of low yield of rice is sustainable without having any comparable stance and by disapproving the results of the appellant in earlier years?

Whether the authorities misdirected in making addition on account of paddy milled outside the books of account by taking the yield of bye-product as benchmark to calculate the yield of the main product and without appreciating that the supplies were also made to the Government agencies who never disapproved about the yield?

Whether the findings recorded by the authorities below are perverse and contrary to the evidence available on record?"

The facts in brief, necessary for adjudicating the controversy involved, as narrated in the appeal, may be noticed. The assessee is deriving income from two concerns, M/s. Lajja Ram Pramod Kumar and M/s. Lajja Rice and Oil Mills. He is engaged in the business of commission agent, milling of paddy and selling of the products, namely, rice, rice bran, husk and phak. During the assessment year 2007-08, the assessee had shown a gross profit of Rs. 24,75,369 at the rate of 7.39 per cent Therefore, the assessee was asked to file the comparative figures of gross profit for the last year and while invoking the provisions of section 145(3) of the Act, the books of account of the assessee were rejected by the Assessing Officer and additions had been made on different grounds, vide order dated November 18, 2009, annexure A. 1. Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income-tax (Appeals) (CIT(A)). The Commissioner of Income-tax (Appeals), vide order dated January 31, 2011, annexure A. 2 partly allowed the appeal while upholding all the additions though reduced in quantum and rejecting the books of account. Still not satisfied with the order, the assessee filed an appeal before the Tribunal. Vide order dated March 19, 2012, annexure A. 3, the Tribunal concurred with the findings recorded by the Commissioner of Income-tax (Appeals) and dismissed the appeal. Hence, the present appeal by the assessee.

Learned counsel for the appellant-assessee submitted that the decline of growth profit rate by itself cannot be a ground for rejection of books of account Reliance was placed on the judgment in M. Durai Raj Vs. Commissioner of Income Tax, Ernakulam, in support of the submission. Learned counsel further relied upon the judgments in International Forest Co. Vs. Commissioner of Income Tax, , Commissioner of Income Tax Vs. Bharat Rice Mills, , The Commissioner of Income Tax Vs. R.K. Rice Mills, , Jhandu Mal Tara Chand Rice Mills Vs. Commissioner of Income Tax, and Commissioner of Income Tax Vs. Bindals Apparels, to submit that the findings recorded by the Tribunal sustaining the additions made by the authorities below were uncalled for and, therefore, substantial questions of law as claimed arise in the appeal.

On the other hand, the learned counsel for the respondent submitted that the findings of fact recorded by the authorities below did not call for any interference as they were based on appreciation of evidence on record.

After hearing learned counsel for the parties, we do not find any merit in the petition.

The primary issue that arises for consideration relates to whether the assessing authority was justified in rejecting the books of account which was upheld by the Commissioner of Income-tax (Appeals) and the Tribunal. The Assessing Officer while rejecting the books of account has made comparison with regard to the financial results for the assessment year 2006-07 and current year 2007-08 as under:

From the above figures, it is clear that during the year under consideration, the assessee has milled almost equal paddy in comparison to the previous year, sales have increased by 29 per cent but manufacturing expenses have increased by 45.93 per cent the increase in the figures of sales is partly due to opening stock at Rs. 92,94,527 for which no manufacturing expenses have been incurred as there is no paddy in the opening stock. Had there been no sales out of opening stock, the increase in sales would have been even lower. It shows that either the assessee has inflated the expenses or depressed the sales.

Further, the assessee''s contention that he had to pay Rs. 8,92,106 to farmers as "bonus" is not convincing at all as it is a part of purchase price, the assessee has paid it and passed it on to the buyer of its finished product, i.e., rice and the sale price is all set to rise accordingly. The assessee''s argument (B) above needs no comments as it will only reduce the gross profit which will again go against the assessee. Thus, the assessee''s submission for low gross profit is dismissed."

Further, the reasons for rejecting the books of account were noticed as under:

"Besides low gross profit there are other deficiencies in the books of account which have been dealt with in the following paragraphs in detail. However, the same are discussed briefly as under:

(a) The assessee has underreported yield of rice at 65.19 per cent as against 67 per cent given to FCI - paragraph 4

(b) The assessee has transferred rice superfine to FCI at 289.28 qtls. from own stock - paragraph 5

(c) The assessee has underreported paddy milling - paragraph 6

(d) The assessee has undervalued sales of husk according to the prevalent yield percentage - paragraph 7

(e) The assessee has undervalued the closing stock of bardana - paragraph 8."

The Commissioner of Income-tax (Appeals) while partly accepting the appeal granted relief in the form of reduction in quantum of additions but upheld the rejection of books of account. The Tribunal while dismissing the appeal had affirmed the findings recorded by the Commissioner of Income-tax (Appeals). In view of the aforesaid deficiencies and discrepancies noticed in the books of account maintained by the assessee, it is concluded that the Assessing Officer, the Commissioner of Income-tax (Appeals) and the Tribunal were justified in rejecting the books of account of the assessee.

Referring to the judgments relied upon by the learned counsel for the appellant, it may be observed that those cases were based on individual fact situation involved therein and the court in view of the findings of fact recorded had declined to interfere. Consequently, the said judgments do not come to the rescue of the appellant. In view of the above, no substantial question of law arises. The appeal being devoid of any merit is hereby dismissed.