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Smt. Saroj Bala,Prop. Shri Ram Rice & Gen.Mills,Dhand, Kaithal. Vs. Addl. CI T,Kurukshetra Range Kurukshetra.
June, 15th 2012


                    ITA No.197/CHD/2012
                   Assessment Year: 2008-09

Smt. Saroj Bala,                            V   Addl. CI T,
Prop. Shri Ram Rice & Gen.Mills,                Kurukshetra Range
Dhand, Kaithal.                                 Kurukshetra.


     (Appellant)                                (Respondent)

                  Appellant by :   Smt. Jyoti
              Respondent by : Shri Akhilesh Gupta

                  Date of Hearing : 11.06.2012
                  Date of Pronouncement : 13.06.2012



     In this appeal, assessee has raised following grounds:

      1.     That the orders of the Ld. CIT (A), Chandigarh is
             arbitrary based        on   extraneous     considerations,
             devoid    of f acts   on record,       against   principles
             of     justice        theref ore       illegal, erroneous,
             perverse and thus uncalled f or.

      2.     That without prejudice to the above ground of
             appeal the appellant        disputes    the   addition   on
             account    of    Freight Charges of Rs. 91,316/- u/s
             40(a)(ia) of Income Tax Act, 1961.

      3.     That without prejudice to the above ground of
             appeal the appellant disputes the disallo wance of
             Labour Expenses of Rs. 1,00,000/- on estimation
             basis and the addition thereof ."

        4.    That without prejudice to the above ground of
              appeal    the appellant disputes the addition on
              account of Lo w Household expenses."

2.     The first ground is of general nature and does not

require separate adjudication.

3.     In Ground No. 2, during assessment proceedings, AO

noticed that assessee has claimed freight expenses, out of

which a sum of Rs.91,316/- was in respect of truck No. HR-

08-7008 on which no TDS was deducted and therefore, this

sum was added to the income of the assessee. On appeal, the

addition was confirmed by the ld. CIT(A).

4.     Before us, ld. counsel for the assessee submitted that

this   amount    was         paid    during          the   year,     therefore    no

disallowance can be made in view of the decision of Special

Bench in case of Merilyn Shiping & Transports V ACIT,

Vishakhapatnam         (IT    Appeal          No.    477     (VIZ)   2008,   dated

29.03.2012,     wherein       it    was       held    that    the    addition    u/s

40(a)(ia) can be made in respect of amounts payable.

5.     On the other hand, ld. DR submitted that it is not clear

from records, whether the amount was paid during the year

or not. Therefore, same may be sent for verification.

6.     After considering the rival submissions, it is not clear

from records whether the amount was paid during the year or

not. Therefore, in interest of justice, we set aside the order of

the CIT(A) and remit the matter back to the file of AO for

fresh examination and the same may be decided in the light

of Special Bench decision in the case of Merilyn Shipping &

Transports (supra).

7.    In Ground No.3, after hearing from both the parties, we

find, during assessment proceedings AO noticed that GP rate

of the assessee has fallen from 2.29% in last year to 2.22% in

the year. In response to the query, it was stated as under :

      " The   assessee          vide     letter     dated     13.10.2010
      expl ained that there is minor diff erence of 0.07% in
      the GP rate when compared to previous assessment
      year. This is due to 16383.76 quintal of govt. milling
      done during the assessment year 2007-08. If we
      deduct all the amount received due to Govt. mill ing
      and also reduce the expenditure made f or the Govt.
      mill ing, we f ind that the GP ratio during the relevant
      assessment year is much higher. During the year no
      Govt. mill ing was done."

8.    The AO was not satisfied with the above reply because

method adopted by assessee was not correct, because gross

profit for the last year of self milling @ 0.03% does not

appear to be reasonable.              He, also noted that husk has been

valued at estimated value.                   Further, it was found that

opening stock of the super fine rice was valued at Rs.1349.95

per   quintal,    whereas         the     average     purchase       rate    was

Rs.1154.69       per        quintal     and    average      sale    price    was

Rs.1122.60 per quintal.               The closing stock was valued at

Rs.1500/-.       In response, it was stated that value of the

closing stock was much higher than the last sale price of

Rs.1400/- per quintal. Therefore, no fault can be found with

the   valuation        of     closing    stock.       In     view    of     these

discrepancies, AO made an adhoc addition of Rs.4,00,000/-

towards trading results of the assessee.

9.    Before CIT(A), similar submissions were reiterated.                                 The

ld. CIT(A) after considering the submissions, restricted the

addition to Rs.1,00,000/- vide para 2.04, which is as under :

          "2.04     No     pl ausible             expl anation        of     the     above
          def iciencies noted by the AO coul d be given by the
          appell an t     in        the    wr itten        sub mis sions      exce pt       to
          reiterate      the        submissions             made    bef ore        the     AO
          during the assessment proceedings. In vie w of the
          above f acts, it is held that tr ading resul ts decl ared
          by the appell an t are not sub ject to verif ication and
          hence     the    s ame            are    re jected.       The     case         l a ws
          ref erred to by th e appel l ant are o f no help in vie w
          of the specif ic f acts of the case of the appell an t, as
          has been discussed above. As f ar as the trad ing
          addition made by the AO, the appell an t in the
          wr i tten sub miss ions sub mitted th at the addition on
          the     basis        of     decl ine        in     G.P.     works        out      of
          Rs.40,298/-onl y. In th is reg ard, it is noted th at the
          AO specif ical l y mentioned in the assess men t order
          th at    the     GP             decl ared        in   the        ye ar     under
          consider ation is not co mp arabl e wi th the l as t ye ar
          since trad ing account has not been prepared on the
          same bas is in view of the f ac t that price of bardana
          was included in the turnover of the l ast year bu t
          not of    the year under consideration. T aking in
          consider ation the entire ty of f acts, the addition
          made by the AO                   is res tricted to Rs.1 l akh wh ich
          wo uld meet the end of justice."

10.   Before us, ld. counsel for the assessee reiterated the

submissi ons made before l ower authorities.                               She further

submitted that addition has been made on adhoc basis,

which is not sustainable in l aw.                  On the other hand, ld.DR

strongly supported the order of AO and CI T(A) and submitted

that specific figures have been poi nted out by the AO.

11.    After consideri ng rival submissions, we find that over

valuation of closing stock cannot be a reason for making

addition to the trading resul ts because over valuati on would

itself result into higher profits.     Simi larly, the figure of

opening stock can also not be interfered.      No other specific

defect has been pointed out by the AO and addition seems to

be merely on adhoc basis, which cannot be made as per the

law.   Accordingly, we set aside the order of the CIT( A) and

delete the addition.

12.    In Ground No.4, after consideri ng both parties, we

found that during assessment proceedings, AO noticed that

assessee    has   shown   househol d    withdrawal s   only   for

Rs.81,000/- and after considering reply of the assessee, AO

estimated the withdrawals at Rs.15,000/- per month, which

would make the total expenditure required at Rs.1,80,000/-

and accordi ngly, he made additi on of Rs.1,00,000/-.         On

appeal, additi on was confirmed by ld. CI T( A).

13.    Before us, ld. counsel for the assessee submitted that

this additi on has also been made on purely estimated basis.

She further submitted that assessee is wife of Shri Des Raj

and was livi ng with her two grown-up sons. No expenditure

was incurred on education.     Moreover, her husband as well

as both sons were income ta x assessees and had also made

some withdrawal s. In this regard, she referred to page No.4

to 7 of the Paper Book.

14.    On the other hand, ld. DR strongl y supported the order

of CI T(A) and submitted that assessment year i nvolved is

2008-09 and in the present i nflati onary time, withdrawal of

Rs.15,000/-        per    month    esti mated     by   the    AO    was    quite


15.     We have considered rival submissions careful ly and

find some force i n the contentions of both parti es. It cannot

be doubted that in the present inflationary ti mes, some

minimum withdra wals are required by everybody. Though, it

was found that assessee's husband and both her sons had

filed    returns    of    income     tax,   but    no    detail s     of   their

withdrawals        have    been   furnished     before       us.     Therefore,

considering overall circumstances, we restrict the addition

of Rs.1,00,000/- to Rs.50,000/-. Accordi ngly, we set asi de

the order of ld. CI T(A) and direct AO to make addition of

Rs.50,000/- to wards household wi thdrawal s.

16.     In the result, appeal is partly allo wed.

        Order pronounced in the Open Court on 13 t h June,2012.

             Sd/-                                             Sd/-

   (H.L.KARWA)                                     (T.R.SOOD)
 VICE PRESIDENT                               ACCOUNTANT MEMBER
Dated: ...............June,2012.
Copy to:
     The Appellant, The Respondent, The CI T(A), The CI T,DR

                                            Assistant Registrar, I TAT
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