TMI Blog2016 (11) TMI 732X X X X Extracts X X X X X X X X Extracts X X X X ..... he recipients from the Assessee have so included the sum in their returns of income and filed the same, no disallowance u/s.40(a)(ia) of the Act should be made by the AO. In case the recipient parties are not cooperating in providing details, the AO should be directed to call for the information u/s. 133(6) or 131 of the Act, for verification of the same Estimation of income on account of alleged "sale of rice bran" - Held that:- Taking into consideration the process of husking carried out by the assessee of paddy, the assessee’s nature of activity ought not to have been compared with the rice mill which is a sophisticated mechanised process of operation. As already seen the plant and machinery owned by the assessee was negligible and it was only worth less than ₹ 25,000/-. Therefore the basic assumption on which the impugned addition was made by the revenue authorities cannot be sustained. Besides the above the completeness and correctness of the books of account was also not disputed by the AO and in the circumstances as already laid down by Hon’ble Amritsar Bench in the case of Chattar Extraction (P)Ltd vs ITO (2004 (1) TMI 297 - ITAT AMRITSAR ) no addition could be mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are concerned, the AO disallowed a sum of ₹ 2,41,530/- which was payment on account of commission on which the assessee failed to deduct tax at source as required u/s 194H of the Income Tax Act, 1961 (Act). In view of the provisions of Sec.40(a)(ia) of the Act which provides that where tax has not been deducted as required in law, the corresponding expenditure on which tax was not deducted will not be allowed as a deduction, the AO disallowed a sum of ₹ 2,41,530/- and added the said sum to the total income of the Assessee. The order of AO was confirmed by the CIT(A) giving raise to Gr.No.1 2 by the Assessee before the Tribunal. 4. At the time of hearing of the appeal, the limited prayer of the ld. Counsel for the assessee was to set aside the order of CIT(A) on this issue and remand the issue of disallowance u/s 40(a)(ia) of the Act to the AO with the liberty to the assessee to establish before AO that the persons to whom the payments were made without deducting tax at source after filing their return of income and showed the amounts received from the assessee as total income. If the persons to whom the assessee made payments have included the receipts in their tot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have included the receipts paid by the assessee in their respective returns of income and also paid taxes on the same. To the extent the recipients from the Assessee have so included the sum in their returns of income and filed the same, no disallowance u/s.40(a)(ia) of the Act should be made by the AO. In case the recipient parties are not cooperating in providing details, the AO should be directed to call for the information u/s. 133(6) or 131 of the Act, for verification of the same. 6. I am of the view that similar directions as were made above should be given in the present case also. The issue is accordingly set aside to the AO for verification as done in the aforesaid decision. Ground nos.1 and 2 are allowed for statistical purposes. 7. Ground Nos. 3 and 4 raised by the assessee read as follows :- 3. FOR THAT the specious action of the Ld. Commissioner of Income Tax (Appeals) XXXII, Kolkata in upholding the estimated income in the sum of ₹ 15,56,820/- on account of alleged sale of rice bran as conceived by the Ld. Income Tax Officer, Ward 49(1), Kolkata indulging in speculation, surmise, suspicion and conjecture is wholly illegal, illegitimate and infi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the year under consideration. 10. The AO however rejected the contention of the Assessee and he held that the Assessee failed to substantiate that the Assessee was not owning Mini Rice Mill and that what he owned should only be treated as 'Husking Mill'. The AO held that the Assessee sold bran produced in the process of milling paddy outside the books of accounts and added a sum of ₹ 15,56,820/- to the total income of the Assessee. 11. Before CIT(A) the assessee contended that findings of the AO in respect of Income from undisclosed sale of Bran for ₹ 15,56,820 cannot be sustained as it is based on conjectures and surmises. It was submitted that the AO failed and/or neglected to appreciate that the Assessee was carrying on Business of running a Mini Rice Mill commonly known as husking mill and whatever bran was available was consumed in the process of boiling paddy as a fuel element. Hence the wrongful addition of ₹ 15,56,820.00 to the total income was unjustified and as such the same should be deleted. The Assessee pointed out that there were number of difference between Mini Rice Mill and a Rice Mill. It was argued that a Mini Rice Mill uses m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ld. Counsel for the assessee drew my attention to the balance sheet of the assessee which shows that the plant and machinery owned by the assessee was only of the value of ₹ 24,894/-. It was submitted by him that it was unrealistic on the part of the revenue authorities to presume that the assessee was carrying on rice mill with sophisticated equipments and therefore the assessee ought to have obtained bran from rice mill and sold them outside the books of account. He pointed out that before the AO the assessee specifically submitted that the assessee was only carrying out husking of paddy whereby the paddy is first boiled and later dried and whatever is derived as bran in the process of husking is used as a fuel by the assessee for the purpose of boiling the paddy. The other submissions made before CIT(A) were reiterated. He also placed reliance on the decision of ITAT, Amritsar Bench in the case of Chattar Extraction (P)Ltd. Vs ITO 91 ITD 385 (ASR)(TM) wherein it was held that where the correctness and completeness of audited books of accounts had not been disputed by the revenue, addition on account of rice bran extraction was not justified. The ld. DR relied on the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 13,95,000/1550 qntl.). Hence, quantity of rice produced was calculated by the AO as under :- Opening stock of paddy (as shown) 4000.00 qntl. Add: Purchase of paddy 27116.57 qntl. 31116.57 qntl. Less : Closing stock calculated above 156.77 qntl. 30959.80 qntl. The AO further held that as per govt. norms, assessee could produce rice out of milling of paddy of 30959.80 qntl. @68% of 21052.66 qntl. But assessee sold 21175.00 qntl which indicate that assessee produced rice nearly 68.40% hence according to the AO the entire produced rice has been sold and stock of paddy is kept intact. In the light of the above, shortage of handling of ₹ 1,98,145/- was concluded by the AO as bogus and without any basis. He therefore disallowed the same and added to the total income of the assessee. 18. Before CIT(A) the assessee submitted that shortage in handling of 3,116.57 Qntl. was on account of dust immature paddy, damaged gunny bag for packing, eaten by rabbi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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