Durga Trading Co., SRIGANGANAGAR V. ITO, SRIGANGANAGAR

CO 20/JODH/2011

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7484 (ITAT-JODHPUR)
• Duration Of Justice: 1 year(s) 1 month(s) 21 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 11-07-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 20-05-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G R KOKANI
• Keywords: Additional evidence
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO.593/JODH/2010 ASSESSMENT YEAR: 2007-08 INCOME TAX OFFICER, VS. M/S DURGA TRADING COMPANY , WARD-1, SRI GANGANAGAR. 9-A, NEW DHAN MANDI, SRI GANGANAGAR. (PAN: AAAFD 8421 G). C.O. NO.20/JODH/2011 (ITA NO.593/JODH/2010) ASSESSMENT YEAR: 2007-08 M/S DURGA TRADING COMPANY, VS. INCOME TAX OFFICER , 9-A, NEW DHAN MANDI, WARD-1, SRI GANGANAGAR. SRI GANGANAGAR. (PAN: AAAFD 8421 G). (APPELLANTS) (RESPONDENTS) REVENUE BY : SHRI G.R. KOKANI, D.R. ASSESSEE BY : NONE (WRITTEN SUBMISSION) DATE OF HEARING : 05.07.2012 DATE OF PRONOUNCEMENT OF ORDER : 11.07.2012 ORDER PER A.L. GEHLOT, ACCOUNTANT MEMBER: APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE AS SESSEE HAVE BEEN FILED AGAINST THE ORDER DATED 25.10.2010 PASSED BY THE LD . CIT(A), BIKANER FOR THE ASSESSMENT YEAR 2007-08. ITA NO.593/JODH/2010 & C.O. NO.20/JODH/2011 A.Y. 2007-08 . 2 2. THE GROUNDS RAISED IN APPEAL BY THE REVENUE READ AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN:- 01. DELETING THE ADDITION OF RS.11,539/- MADE BY TH E AO ON ACCOUNT OF UNDER VALUATION OF STOCK IN GWAR ACCOUNT. 02. DELETING THE ADDITION OF RS.4,39,094/- MADE BY THE AO ON ACCOUNT OF UNEXPLAINED DEPOSIT U/S 68. 03. DELETING THE ADDITION OF RS.3,72,002/- MADE BY THE AO ON ACCOUNT OF INTEREST. 04. DELETING THE ADDITION OF RS.50,000/- MADE BY TH E AO ON ACCOUNT OF INTEREST NOT CHARGED FROM DEBTORS. 05. DELETING THE ADDITION OF RS.2,848/- MADE BY THE AO ON ACCOUNT OF SHOP EXPENSES. 3. NONE WAS PRESENT ON BEHALF OF THE ASSESSEE. HOW EVER, THE ASSESSEE FILED WRITTEN SUBMISSION. AFTER HEARING THE LD. DEPARTME NTAL REPRESENTATIVE, WE PROCEED TO DECIDE THE APPEAL ON MERIT BY CONSIDERING THE WR ITTEN SUBMISSION FILED BY THE ASSESSEE. 4. THE BRIEF FACTS OF FIRST GROUND ARE THAT THE ASS ESSEE IS A COMMISSION AGENT AND TRADING OF FOOD GRAINS. DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER (A.O.) NOTICED THAT THE ASSESSEE HAS NOT CO RRECTLY VALUED THE CLOSING STOCK OF GWAR. THE A.O. NOTICED THAT THE ASSESSEE HAS SHO WN CLOSING STOCK OF GWAR AS ON 31.03.2007 AT 88.76 QUINTALS VALUED AT RS.1,46,454/ - AT THE MARKET RATE OF ITA NO.593/JODH/2010 & C.O. NO.20/JODH/2011 A.Y. 2007-08 . 3 RS.1,650/- PER QUINTAL. THE A.O. FURTHER NOTICED T HAT THE ASSESSEE HAS VALUED THE CLOSING STOCK LESSER THAN THE ACTUAL MARKET PRICE. THE A.O. DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE THAT THE VALUE OF CLOSI NG STOCK DEPENDS ON THE QUALITY OF THE GOODS. THE ASSESSEE HAS SOLD THE GOODS @ OF RS .1,630/- TO RS.1,730/- IN THE ENSUING YEAR. THE A.O. FOUND THAT ACCORDING TO THE KRISHI UPAJ MANDI SAMITI (GRAIAN), SRI GANGANAGAR THE PRICE OF GWAR S IN MAR CH 2007 WAS RS.1,780/- PER QUINTAL. THE A.O.; REVALUED THE CLOSING SOCK BY ZA OPTING RATE OF RS.1,780/- PER QUINTAL AND ADDED DIFFERENCE OF RS.11,539/-. 5. THE CIT(A) DELETED THE ADDITION AS UNDER :- (PAG E NOS.2 & 3) I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SU BMISSIONS MADE. THE BASIS ON WHICH THE AO RELIED I.E. THE RA TES PREVAILING IN THE MARKET AS PER KUMS HAVE BEEN CONTROVERTED BY TH E A/R. THE APPELLANT HAD TAKEN A PRICE BETWEEN THE AVERAGE MAR KET PRICE AND THE LOWEST MARKET PRICE WHICH IS FOUND TO BE REASONABLE . THUS, THERE APPEARS TO BE NO CASE FOR MAKING ADDITION ON THIS A CCOUNT. THE ADDITION MADE BY THE AO IS, THEREFORE, DELETED. 6. WE FIND THAT THE CIT(A) BEFORE DELETING THE ADDI TION CONSIDERED THE ASSESSEES SUBMISSION THAT THE CLOSING SOCK REMAINE D WITH THE ASSESSEE WERE OF INFERIOR QUALITY. THE ASSESSEE HAS VALUED THE CLOS ING STOCK @ RS.1,650/- PER QUINTAL WHICH WAS LOWER THAN THE MARKET PRICE. IT WAS ALSO SUBMISSION OF THE ASSESSEE THAT THE VALUATION OF CLOSING STOCK THIS Y EAR AT A ENHANCED RATE WOULD MEAN HIGHER OPENING STOCK IN THE COMING YEAR AND DOES NO T IMPACT THE REVENUE AS SUCH. ITA NO.593/JODH/2010 & C.O. NO.20/JODH/2011 A.Y. 2007-08 . 4 THE CIT(A) FOUND THAT THE ASSESSEE HAS VALUED CLOSI NG STOCK AS PER THE REGULAR METHOD FOLLOWED BY THE ASSESSEE WHICH WAS FOUND REA SONABLE. THE SETTLED PRINCIPLE OF VALUATION OF CLOSING STOCK IS MARKET P RICE OR COST WHICH IS LOWER. IN THE CASE UNDER CONSIDERATION, THE ASSESSEE FOLLOWED SAID METHOD OF VALUATION OF STOCK THOUGH THE CIT(A) USED THE WORD REASONABLE WHICH WE ARE SUBSTITUTING LOWER. EVEN ON MODIFICATION OF THE ORDER OF CIT( A) TO THAT EXTEND WE DO NOT FIND THAT FINAL OUTCOME WILL BE CHANGED. IN THE LI GHT OF FACTS, WE CONFIRM THE ORDER OF CIT(A) ON THE ISSUE. 7. THE BRIEF FACTS OF SECOND GROUND ARE THAT DURING THE ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE ASSESSEE HAS SHOWN LOAN A ND DEPOSIT FROM RELATIVES AND FRIENDS OF WHICH DETAILS NOTED FROM THE ORDER OF CI T(A) ARE AS UNDER :- (PAGE NO.4) 1. SMT. KAMLESH RANI RS.87,746/- 2. SHRI SANDEEP BHAKAR RS.1,39,370/- 3. SMT. RAJNI DEVI RS.1,10,239/- 4. SMT. VIMLA DEVI RS.1,01,779/- TOTAL RS.4,39,094/- 8. THE A.O. MADE ADDITION ON THE GROUND THAT CREDIT ORS WERE RELATED TO THE PARTNER AND THE AGRICULTURAL INCOME WAS SHOWN BY TH E CREDITORS BUT THE LAND WAS NOT IN THE NAME OF THE CREDITORS. THE ASSESSEE MAD E A DETAILED SUBMISSION BEFORE THE CIT(A). THE ASSESSEE SUBMITTED AFFIDAVIT FROM THE LEGAL OWNERS CONFIRMING THE STATEMENT IN RESPECT OF OWNERSHIP OF THE LAND. THE CIT(A) FOUND THAT THESE WERE ITA NO.593/JODH/2010 & C.O. NO.20/JODH/2011 A.Y. 2007-08 . 5 THE ADDITIONAL EVIDENCE, THEREFORE, THE SAME WERE F ORWARDED TO THE A.O. FOR EXAMINATION. THE A.O. FILED HIS REPLY DATED 26.08. 2012 WHEREIN IT WAS ADMITTED THAT THE CLAIM OF AGRICULTURAL PRODUCE HAVING BEEN SOLD IN SRIGANGANAGAR WAS FOUND TO BE CORRECT. THE A.O. EXAMINED THE CREDITORS AND WAS SATISFIED ABOUT THE SALE OF AGRICULTURAL PRODUCE BY THEM IN SRIGANGANAGAR. WE FIND THAT THE ASSESSEE HAS DISCHARGED ITS BURDEN UNDER SECTION 68 OF THE ACT B Y FURNISHING THE DETAILS OF IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE T RANSACTION. HOWEVER, SOME ADDITIONAL EVIDENCE IN THE FORM OF AFFIDAVIT ETC. W ERE FURNISHED BEFORE THE CIT(A) AND THE CIT(A) CALLED FOR THE REMAND REPORT FROM TH E A.O. IN THE REMAND REPORT, THE A.O. ADMITTED THAT THE CREDITORS HAD SOLD AGRIC ULTURAL PRODUCE IN SRIGANGANAGAR. THE A.O. DID NOT POINT OUT ANY CONTRARY MATERIAL IN HIS REMAND REPORT TO ESTABLISH THAT THE ASSESSEE HAS FAILED TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION. THE FACT OF THE CASE IS THAT S RI BUDHA RAM, FATHER AND GRANDFATHER OF THE PARTNERS OF THE FIRM WAS HAVING IRRIGATED AGRICULTURAL LAND MEASURING ABOUT 160 BIGHAS IN DIFFERENT VILLAGES OF DISTRICT SRIGANGANAGAR. ON HIS DEMISE THE FAMILY MEMBERS GOT THE MUTATION PROCEEDI NGS DONE AS PER FAMILY AGREEMENT. AS PER THE AGREEMENT ALL THE MEMBERS OF THE FAMILY HAD RIGHT OVER THE AGRICULTURAL PRODUCE DESPITE THE LAND BEING LEGALLY OWNED BY ONLY SOME OF THE MEMBERS. IT IS IN ACCORDANCE WITH THIS POSITION TH AT THE AGRICULTURAL PRODUCE BELONGING TO DIFFERENT FAMILY MEMBERS WAS SOLD AND THE SUMS CREDITED TO THE ITA NO.593/JODH/2010 & C.O. NO.20/JODH/2011 A.Y. 2007-08 . 6 CREDITORS ACCOUNT. THE IDENTITY OF THE CREDITORS W AS ESTABLISHED SO ALSO THE LAND HOLDING AND THE AGRICULTURAL PRODUCE THEREFROM. TH E A.O. MADE ADDITION UNDER SECTION 68 OF THE ACT ONLY ON THE GROUND THAT THE A SSESSEE HAS FAILED TO PRODUCE THE CREDITORS FOR EXAMINATION, BUT THE CIT(A) PROVIDED OPPORTUNITY OF HEARING TO THE A.O. AND THE A.O. HAS EXAMINED THOSE PERSONS AND SA TISFIED ABOUT THE SALE OF AGRICULTURAL PRODUCE BY THEM. IN THE LIGHT OF THES E ADMITTED FACTS ESTABLISHED BY THE ASSESSEE AND SPECIFICALLY ALL THE THREE INGREDIENTS REQUIRED UNDER SECTION 68 OF THE ACT I.E. IDENTITY CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION, WE, THEREFORE, FIND THAT THE CIT(A) HAS RIGHTLY CANCELED THE ADDI TION. 9. THE BRIEF FACTS IN RESPECT OF THIRD GROUND ARE T HAT THE A.O. MADE THE ADDITION OF S.3,72,002/- BEING INTEREST PAID TO CASH CREDITO RS. THE A.O. MADE ADDITION ON THE GROUND THAT THE INTEREST AMOUNT WAS PAID TO VAR IOUS FAMILY MEMBERS OR RELATIVES OF THE PARTNER OF THE FIRM. THE A.O. DIS ALLOWED THE INTEREST ON THE GROUND THAT SOURCE OF PRINCIPAL SUM BEING EXPLAINED ON ACC OUNT OF AGRICULTURAL PRODUCE COULD NOT BE BELIEVED BECAUSE THESE PERSONS DID NO HAVE ANY AGRICULTURAL LAND. THE CIT(A) AFTER CONSIDERING THE ASSESSEES SUBMISSION DELETED THE SAID ADDITION OBSERVING THAT ALL THE BALANCES WERE OPENING BALANC ES AND NO FRESH CAPITAL WAS INTRODUCED DURING THE YEAR UNDER CONSIDERATION BY T HE RESPECTIVE CREDITORS. THE CIT(A) NOTED THAT IF AT ALL THE A.O. HAD ANY DOUBT OR DID NOT BELIEVE THE CREDITORS TO ITA NO.593/JODH/2010 & C.O. NO.20/JODH/2011 A.Y. 2007-08 . 7 BE TRUE THAN THE SAME OUGHT TO HAVE BEEN HAVE BEEN EXAMINED AT THE TIME OF INTRODUCTION OF SUCH CASH CREDITS. THE A.O. DID NO T HAVE ANY CASE ABOUT THE UNREASONABLENESS OR THE GENUINENESS OF THE INTEREST PAYMENT AS NOTED BY THE CIT(A). WE FIND THAT THE INTEREST PAYMENT IS IN RE SPECT OF CREDITORS HAVING OPENING BALANCES. THE A.O. DID NOT FIND THAT THE INTEREST PAYMENT WAS UNREASONABLE OR NOT GENUINE. WHEN THE AMOUNT HAS BEEN ACCEPTED AS GENU INE DEPOSIT OF LOAN, THE RELEVANT INTEREST PAYMENT IS FOR THE PURPOSE OF BUS INESS WHICH IS ALLOWABLE EXPENSES. WE FIND THAT THE CIT(A) HAS RIGHTLY DELE TED THE ADDITION. ORDER OF THE CIT(A) IS CONFIRMED ON THE ISSUE. 10. THE BRIEF FACTS OF THE FOURTH GROUND ARE THAT T HE A.O. MADE LUMP SUM ADDITION OF RS.50,000/- ON ACCOUNT OF INTEREST CHAR GEABLE FROM DEBTORS. THE CIT(A) DELETED THE ADDITION OBSERVING AS UNDER :- I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SU BMISSIONS MADE. AFTER PERUSAL OF DETAILS ON RECORD THE SUBMI SSIONS OF A/R ARE FOUND TO BE FAIR AND REASONABLE. EVEN OTHERWISE, A CCORDING TO THE A.O. THE TOTAL INTEREST CHARGEABLE FROM THE DEBTORS WOULD BE AROUND RS.18,000/- WHEREBY THE REASON FOR MAKING THE LUMP SUM ADDITION AT RS.50,000/- IS NOT UNDERSTOOD. FURTHER, THE REASON FOR NOT EVEN CHARGING INTEREST OF RS.18,000/- HAS BEEN EXPLAINED SATISFACTORILY ON GROUND OF BUSINESS EXPEDIENCY. ABOVE ALL, THE APPE LLANT HAD SHOWN NET INTEREST INCOME IN THE RETURN OF INCOME. THUS, THE ADDITION MAD BY THE A.O. IS HELD TO BE UNJUSTIFIED AND, THEREFORE, DELETED. ITA NO.593/JODH/2010 & C.O. NO.20/JODH/2011 A.Y. 2007-08 . 8 11. WE FIND HAT THE CIT(A) BEFORE DELETING THE ADDI TION CONSIDERED THE ASSESSEES SUBMISSION AND FOUND THAT ACCORDING TO T HE A.O. THE TOTAL CHARGEABLE INTEREST FROM DEBTORS WOULD BE RS.18,000/- WHEREAS THE A.O. MADE THE ADDITION OF RS.50,000/- WITHOUT ANY BASIS. THE ASSESSEE HAS EX PLAINED THE REASON FOR NOT CHARGING INTEREST FROM DEBTORS ON THE GROUND THAT T HE DEBTORS WERE NOT IN A POSITION TO REPAY THE PRINCIPAL AMOUNT. THEREFORE, THE ASSE SSEE DID NOT CHARGE ANY INTEREST. HOWEVER, FROM WHATEVER THE INTEREST CHARGED BY THE ASSESSEE, THE ASSESSEE HAS SHOWN THE NET INTEREST INCOME IN THE RETURN OF INCO ME. THE CIT(A) HAS ALSO NOTED THAT THE A.O. HAS FAILED TO ESTABLISH THAT THE ASSE SSEE HAS IN FACT CHARGED THE INTEREST FROM DEBTORS. WE FIND THAT LUMP SUM ADDITION WITHO UT BASIS ON ACCOUNT OF CHARGING INTEREST FROM DEBTORS IS NOT SUSTAINABLE. CHARGING OR NOT CHARGING INTEREST IS THE DECISION OF THE BUSINESSMAN AND THERE IS NO MATERIAL ON RECORD TO SHOW THAT THE ASSESSEE HAS IN FACT CHARGED INTEREST ON DEBTOR S AND DID NOT OFFER FOR TAX. THE ASSESSEE DECIDED NOT TO CHARGE INTEREST AS THE REPA YMENT OF PRINCIPAL MOUNT ITSELF WAS IN DOUBT. IN THE LIGHT OF THE FACTS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). ORDER OF THE CIT(A) IS CONFIRMED ON TH E ISSUE. 12. THE BRIEF FACTS OF THE FIFTH GROUND ARE THAT TH E A.O. DISALLOWED RS.5,697/- OUT OF SHOP EXPENSES OF RS.28,484/- FOR WANT OF VERIFIC ATION. THE CIT(A) AFTER CONSIDERING THE ASSESSEES SUBMISSION FOUND THAT TH E DISALLOWANCE MADE BY THE A.O. WAS ON HIGHER SIDE. THE CIT(A) AFTER CONSIDER ING THE VOLUME AND NATURE OF ITA NO.593/JODH/2010 & C.O. NO.20/JODH/2011 A.Y. 2007-08 . 9 BUSINESS OF THE ASSESSEE FOUND THAT THE DISALLOWANC E FROM 1/5 TH TO 1/10 TH WOULD BE REASONABLE AND BALANCE AMOUNT HAS BEEN DELETED. WE NOTICE THAT IT IS A CASE OF ESTIMATION OF DISALLOWANCE OF SHOP EXPENSES ON ACCO UNT OF VERIFICATION. THE CIT(A) AFTER CONSIDERING THE RECORDS AND AFTER CONS IDERING ASSESSEES SUBMISSIONS FOUND THAT THE DISALLOWANCE MADE BY THE A.O. WAS ON EXCESSIVE SIDE. THE CIT(A) AFTER CONSIDERING THE NATURE OF BUSINESS FOUND THA T IT WILL BE FAIR AND REASONABLE TO RESTRICT THE DISALLOWANCE FROM 1/5 TH TO 1/10 TH OF SUCH EXPENSES. THE REVENUE HAS FAILED TO POINT OUT ANY CONTRARY MATERIAL TO THE FI NDING OF THE CIT(A) BASED ON WHICH A DIFFERENT ESTIMATION CAN BE MADE AT THIS ST AGE. IN THE LIGHT OF THE FACTS, ORDER OF THE CIT(A) IS CONFIRMED. 13. IN THE RESULT, APPEAL FILED BY THE REVENUE IS D ISMISSED. 14. THE CROSS OBJECTION FILED BY THE ASSESSEE IS IN SUPPORT OF ORDER OF THE CIT(A). SINCE WE HAVE CONFIRMED THE ORDER OF CIT(A ), THEREFORE, THE CROSS OBJECTION HAS BECOME INFRUCTUOUS. 15. IN THE RESULT, APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE BOTH ARE DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT) SD/- SD/- (BHAVNESH SAINI) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER PBN/* ITA NO.593/JODH/2010 & C.O. NO.20/JODH/2011 A.Y. 2007-08 . 10 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, JODHPUR BENCH, JODHPUR 6. GUARD FILE. BY ORDER ASSISTANT REGISTRAR INCOME-TAX APPELLAT E TRIBUNAL, JODHPUR TRUE COPY