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TMI Blog2012 (9) TMI 289X X X X Extracts X X X X X X X X Extracts X X X X ..... er hearing both the parties we find that during assessment proceedings the Assessing Officer noticed that the assessee firm which is engaged in the business of running a Rice Mill, had declared yield of 17.55%. It was seen that many other rice mills have declared yield of 18% to 19%. It was further noted that the assessee had valued the closing stock of husk at estimated realizable value of Rs. 75/- per qtl whereas average sale price came to Rs. 98.54 per qtl. In response to a query it was stated that variation in the yield was quite negligible and depends on the quality of the paddy and various other factors like variation in moisture, mix of the paddy and quality of paddy itself. In respect of value of closing stock of husk, it was stated that sale value in the month of April and May was between Rs. 75 to 85 per qtl and the method was regularly followed, therefore, the method was correct. The Assessing Officer did not find force in the submissions and rejected the books of account. He considered 18% yield as reasonable and accordingly added a sum of Rs. 14,682/- on account of trading results and Rs. 2,32,300/- on account of lower value of the husk. 3. On appeal various contenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . There is a more irrelevant submission since the system of test check/periodical .check envisages random examination and whatever is found correct on check leads to a very safe assumption that the rest is also correct. No assessee would hope that he can make correct and wrong entries on different dates and pray that only the correct ones are verified and not the others. It is hoped that such arguments are in future not foisted upon the Tribunal unless there is conclusive evidence to support them and it must be emphasised that this is a Special Bench constituted to deal with important issues. It would be great hardship to an assessee carrying on a particular trade if his trading results are rejected and proviso to s. 145(1) is applied just because some other assessee in the same trade is showing something more may be even less than 1%. After all the facts of one's own case cannot be ignored and audited accounts and checking by State authorities of statutory registers cannot be brushed aside in a casual manner. Just because the AO feels that so and so fact is not correct and he should straightaway draw adverse inference. Sec. 145(1) is not to be casually invoked and assumptions and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of valuation of closing stock of husk is concerned, in our opinion, the correct value of stock has to be adopted even if books are not rejected. Since we have not upheld the rejection of books of account still addition on account of correct value of closing stock can be maintained. Further the ld. counsel of the assessee could not produce any invoice to show that the assessee has sold husk at Rs. 75/- or there about in the month of March, 2007 . Therefore, we are of the opinion that the ld. CIT(A) has already allowed the reasonable relief by directing the Assessing Officer to value the husk at Rs. 80 per qtl and accordingly we confirm the order of the ld. CIT(A) in this regard. 8. Grounds No. 2 & 3 - After considering the rival submissions we find that during assessment proceedings the Assessing Officer noticed that the assessee has shown sales of rice bran at Rs. 529.18 per qtl. The major sales were made to the sister concern M/s T.C. Agro (P) Ltd. He further observed that other concerns have sold rice bran at much higher rate and gave the following examples:- S No Name and Address Average sale rate i M/s Ankit Trading Co., Ismailabad Rs. 659.40 per qtl ii M/s Shiva Gane ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other parties by observing that the assessee has sold goods to the sister concern at the lower value and have also valued the closing stock at lower rates. The Assessing Officer has calculated the rate of Rs. 668/- per qtl as fair market value on the basis of sales made by following parties: S No Name and Address Average sale rate i M/s Ankit Trading Co., Ismailabad Rs. 659.40 per qtl ii M/s Shiva Ganesh Inds. Shahbad Rs. 666.00 per qtl iii M/s Kochar Rice Mill, Ismailabad Rs. 679.31 per qtl Thereafter he has found the difference in the sales as the assessee has sold 2389.95 qts rice bran at Rs. 529.18. However, it is settled law that Section 40A(2) can not be applied for making addition for the difference in value of sales at which the goods are actually sold and the value which in the opinion of the Assessing Officer is correct value. Hon'ble Madras High Court in case of CIT V. A.K. Subbaraya Chetty & Sons, 123 ITR 592 (Mad) has observed as under:- "The Tribunal's finding on the facts was that the assessee had charged only the net price and that there was no discount or rebate given to the purchasers. The bona fides of the transaction are not in dispute. In these ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be amended empowering the Assessing Officer to make adjustments to the income declared by the assessee having regard to the fair market value of the transactions between the related parties." From the above it is clear that revenue has itself agreed that certain amendments are required to be made in Section 40A(2) if Transfer Pricing Regulations were required to be applied to domestic transactions between related parties. Since the Hon'ble Supreme Court has expressed that Section 40A(2) could not be applied for sales transactions and revenue has also agreed to make amendments, we are of the opinion that the provisions of section 40A(2) cannot be attracted for making addition on account of difference in sale value effected by the assessee in comparison to the fair market value. As far as the value of closing stock is concerned, it is settled position that the same cannot be valued at fair market value whichever is lower and since the assessee has valued at cost and the Assessing Officer can not have substantiated this with fair market value. In these circumstances we set aside the order of the ld. CIT(A) and delete the addition of Rs. 3,56,596/-. 13. In the result, appeal file ..... X X X X Extracts X X X X X X X X Extracts X X X X
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