M/S NATANI ROLLING MILLS PVT. LTD., JAIPUR V. INCOME TAX OFFICER, WARD-4-2, JAIPUR

CO 29/JPR/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0355 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 5 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 02-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 27-08-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J C KULHARI
• Keywords: Rejection of books of accounts; Retrospective amendment; Tax effect; TDS; Set aside
• Section: 40(a)(ia); 207; 148

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH A JAIPUR JH FOT; IKY JKO ] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM IZR;K{KSI.K @ C.O. NO. 29 & 30/JP/2018 (ARISING OUT OF VK;DJ VIHY LA-@ ITA NO. 537 & 538/JP/2018) FU/KZKJ.K O'K Z @ ASSESSMENT YEAR 2010-11 & 2011-12 M/S NATANI ROLLING MILLS PVT. LTD. F-694, ROAD NO. 9-F-2, VKI AREA, JAIPUR JAIPUR, RAJASTHAN CUKE VS. INCOME TAX OFFICER, WARD-4(2), JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAACN5961E IZR;K{KSID@ OBJECTOR IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SHRI J. C. KULHARI (JCIT) FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI P. C. PARWAL (CA) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 23/08/2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 02/09/2019 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THESE ARE CROSS OBJECTIONS FILED BY THE ASSESSEE DI RECTED AGAINST THE ORDERS OF THE LD. CIT(A)-2, UDAIPUR DATED 01/02 /2018 FOR A.Y 2010- 11 & 2011-12 RESPECTIVELY. 2. AT THE OUTSET, IT IS NOTED THAT THE APPEAL OF TH E REVENUE IN ITA NO. 537/JP/2018 AND 538/JP/2018 FOR AY 2010-11 AND 2011-12 HAVE BEEN DISMISSED VIDE ORDER DATED 02/09/2019 ON ACCOU NT OF LOW TAX EFFECT IN VIEW OF THE CBDT CIRCULAR DATED 8.08.2019 . C.O. NOS 29 & 30/JP/2018 M/S NATANI ROLLING MILLS PVT. LTD., JAIPUR VS. ITO, JAIPUR 2 3. SINCE THE COMMON ISSUES ARE INVOLVED, ALL THESE CROSS OBJECTIONS WERE HEARD TOGETHER AND ARE DISPOSED OFF BY THIS CO NSOLIDATED ORDER. FOR THE PURPOSE OF PRESENT DISCUSSION, THE MATTER R ELATING TO A.Y 2010-11 IS TAKEN AS THE LEAD CASE WITH CONSENT OF BOTH THE PARTIES WHEREIN THE FOLLOWING GROUNDS OF APPEAL ARE TAKEN:- 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN ADOPTING THE AMOUNT OF UNRECORDED SALES AT RS. 1,42,40,278/- (RS . 1,27,14,534/- NET OF EXCISE) ON THE BASIS OF THE PA PERS FOUND IN SEARCH CONDUCTED BY THE CENTRAL EXCISE DEPARTMENT A S AGAINST THE UNACCOUNTED SALES OF RS. 92,89,856/- (RS. 82,94 ,514/- NET OF EXCISE) WORKED OUT BY THE ASSESSEE ON THE BASIS OF THESE PAPERS. 1.1. THE LD. CIT(A) HAS FURTHER ERRED ON FACTS AND IN LA W IN APPLYING THE G.P RATE OF 3.61% ON THE ALLEGED UNREC ORDED SALES OF RS. 1,42,40,278/- INSTEAD OF APPLYING G.P RATE OF 3 .43% DECLARED BY THE ASSESSEE ON THE UNACCOUNTED SALES OF RS. 92, 89,856/- (RS. 82,94,514/- NET OF EXCISE), THEREBY CONFIRMING THE ADDITION TO THE EXTENT OF RS. 5,14,074/-. 2. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN EST IMATING THE INVESTMENT IN THE UNACCOUNTED PURCHASES AT RS. 11,86,494/-, THEREBY MAKING THE ADDITION FOR THE SAME. 3. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CON FIRMING THE ENTIRE DISALLOWANCE OF RS. 9,400/- U/S 40(A)(IA ) ON ACCOUNT OF NON DEDUCTION OF TAX AT SOURCE ON INTEREST PAID TO SH. RAMESH CHAND BANSAL BY NOT ACCEPTING THE CONTENTION OF ASS ESSEE THAT IN VIEW OF THE AMENDMENT MADE IN THIS SECTION W.E.F 01 .04.2015 WHICH IS TO REMOVE UNINTENDED HARDSHIP, ONLY 30% OF SUCH AMOUNT CAN BE DISALLOWED AS THIS AMENDMENT HAS RETR OSPECTIVE EFFECT. C.O. NOS 29 & 30/JP/2018 M/S NATANI ROLLING MILLS PVT. LTD., JAIPUR VS. ITO, JAIPUR 3 4. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CON FIRMING THE DISALLOWANCE OF RS. 16,745/- OUT OF TELEPHONE E XPENSES, BEING 10% OF RS. 1,67,455/-. 4. BRIEFLY STATED, THE FACTS OF CASE ARE THAT THE A SSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF MS BAR, MS ANGL E, SECTION AND CHANNEL ETC. NOTICE U/S 148 DATED 17.04.2015 WAS IS SUED ON THE BASIS OF ORDER DATED 13.05.2014 PASSED BY COMMERCIAL TAXE S DEPARTMENT, ANTI EVASION WING WHERE THEY DETERMINED UNDISCLOSED SALES OF RS.1,42,40,278/- FOR AY 2010-11 WHICH IN TURN WAS B ASED ON ORDER OF ADDITIONAL COMMISSIONER, CENTRAL EXCISE WHEREIN THE Y MADE OUT A CASE OF DUTY EVASION OF RS.25,43,832/- IN CONNECTION WIT H THE SEARCHES CONDUCTED BY CENTRAL EXCISE DEPARTMENT AT THE FACTO RY PREMISES OF THE ASSESSEE AND ALSO AT THE RESIDENTIAL PREMISES OF TH E DIRECTOR SHRI RAJESH NATANI ON 03.08.2010. THE AO ON THE BASIS OF THESE ORDERS ISSUED SHOW CAUSE NOTICE DATED 14.10.2016 TO THE ASSESSEE AS TO WHY THE BOOKS OF ACCOUNTS BE NOT REJECTED AND WHY SUCH ALLE GED UNRECORDED SALES BE NOT ASSESSED AS INCOME OF THE ASSESSEE. IN RESPONSE, THE ASSESSEE FILED ITS RESPONSE, HOWEVER THE SAME WAS N OT FOUND ACCEPTABLE. THE AO AT PARA 7.3 OF HIS ORDER HELD T HAT THE CONTENTION OF THE ASSESSE HAS NO SUBSTANCE AS IN COURSE OF THE SE ARCH BY THE EXCISE AUTHORITIES SUFFICIENT EVIDENCE OF UNACCOUNTED PURC HASES AND SALES WERE FOUND. THEREFORE, BOOKS OF ACCOUNTS ARE LIABLE TO B E REJECTED. ACCORDINGLY, THE UNACCOUNTED SALES OF RS.1,42,40,27 8/- IS TO BE ASSESSED AS UNDISCLOSED INCOME OF THE ASSESSEE. 5. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL. THE LD. CIT(A) HELD THAT THOUGH THE REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) IS SUSTAINABLE, THE ADDITIONS MADE FOR UNACC OUNTED SALES U/S C.O. NOS 29 & 30/JP/2018 M/S NATANI ROLLING MILLS PVT. LTD., JAIPUR VS. ITO, JAIPUR 4 69A, AND LUMP SUM ADDITION OF RS.5 LAKHS NEEDS FINE TUNING IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. ACCORDIN GLY, HE CONFIRMED THE ACTION OF THE AO IN REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) OF THE ACT. FURTHER, THE ARGUMENT OF THE ASSESSEE THAT ESTIMATI ON OF SALES BY THE EXCISE DEPARTMENT SHOULD NOT BE ADOPTED AS THE APPE AL IS PENDING BEFORE THE CESTAT WAS NOT FOUND ACCEPTABLE AS IT WI LL ONLY LINGER ON THE ISSUE. THE ADDITION OF ENTIRE SALES CANNOT BE MADE. AT THE MOST, THE ADDITION CAN BE MADE ON THE PROFIT EARNED THEREON. THE HIGHEST GROSS PROFIT RATE IN THE LAST 7 YEARS IS 3.61% IN AY 2007 -08. THEREFORE, IT WOULD BE REASONABLE TO RESTRICT THE ADDITION TO RS. 5,14,074/- I.E., 3.61% OF THE ESTIMATED SALES OF RS.1,42,40,278/-. FURTHE R, AS ONLY INCOME EARNED ON THE UNACCOUNTED SALES CAN BE ADDED, ADDIT ION FOR UNACCOUNTED PURCHASES IS INEVITABLE AS WITHOUT UNAC COUNTED PURCHASES, UNACCOUNTED SALES IN LOGICALLY NOT POSSIBLE. ACCORD INGLY, AT PARA 5.5, CONSIDERING THE AVERAGE UNACCOUNTED SALES AT RS.1,4 8,31,178/- AND CYCLE OF 6 TIMES IN A YEAR, 1/6 TH OF UNACCOUNTED SALES I.E., RS.24,71,863/- IS ADDED ON ACCOUNT OF UNEXPLAINED I NVESTMENT IN PURCHASES WHICH WAS BIFURCATED INTO RS.11,86,494/- FOR AY 2010-11 AND RS.12,85,369/- FOR AY 2011-12. IN VIEW OF THE ABOVE ADDITIONS, THERE IS NO RATIONAL IS LEFT FOR THE LUMP SUM ADDITION MADE. FURTHER, THE AO HAS NOT FOUND ANY OTHER INSTANCE OF SALES OR OUT OF BOO K PURCHASES OTHER THAN THAT FOUND BY THE EXCISE DEPARTMENT AND THAT E STIMATED BY SALES TAX DEPARTMENT. THESE DISCREPANCIES HAVE ALREADY BE EN CONSIDERED. THEREFORE, THE LUMP SUM ADDITION OF RS.5 LAKHS IS D ELETED. AGAINST THE SAID FINDINGS, THE ASSESSEE IS NOW IN APPEAL BY WAY OF CROSS-OBJECTION. 6. DURING THE COURSE OF HEARING, THE LD. AR, AT THE OUTSET, SUBMITTED THAT AGAINST THE ALLEGATION OF THE CENTRAL EXCISE D EPARTMENTS THAT ASSESSEE HAS BEEN INDULGED IN CLANDESTINE ACTIVITIE S OF REMOVAL OF C.O. NOS 29 & 30/JP/2018 M/S NATANI ROLLING MILLS PVT. LTD., JAIPUR VS. ITO, JAIPUR 5 FINISHED GOODS WITHOUT PAYMENT OF DUTY AND THUS, EV ADED THE DUTY TO THE TUNE OF RS.25,43,832/-, ASSESSEE FILED AN APPEA L TO THE HONBLE CESTAT, NEW DELHI. THE HONBLE TRIBUNAL, VIDE ITS O RDER DATED 07.02.2019 SET ASIDE THE ORDER PASSED BY THE EXCISE AUTHORITIES AND ALLOWED THE APPEAL OF THE ASSESSEE BY GIVING FOLLOW ING FINDING AT PARAS 5 TO 8 OF THE ORDER: 5. ON GOING THROUGH THE IMPUGNED ORDER PASSED BY T HE COMMISSIONER (APPEALS), I FIND THAT THE APPELLANT H AD TAKEN A CATEGORICAL STAND THAT THE ENTRIES IN THE LEDGER, O N WHICH REVENUE HAS RELIED UPON NOT ONLY BELONG TO THEM BUT THE SAM E RELATES TO ONE M/S SANJOG STEELS, BAGRU. IT WAS DISCLOSED BY T HEM THAT THE DIRECTOR WAS ALSO DOING THE TRADING IN THE SAME VER Y GOODS AND AS SUCH VARIOUS DOCUMENTS RECOVERED FROM HIS PREMIS ES WERE IN CONNECTION WITH HIS TRADING ACTIVITY AND HAS NOTHIN G TO DO WITH THE MANUFACTURING ACTIVITIES OF THE APPELLANT. THEY ALSO PRODUCED THE LEDGER ACCOUNT OF M/S SANJOG STEELS TO IMPRESS UPON THEIR STAND THAT THE ENTRIES IN THE LEDGER RECOVERED FROM THE RESIDENTIAL PREMISES WERE OF M/S SANJOG STEELS. IT WAS FURTHER CONTENDED THAT IN THE APPELLANTS PREMISES, NO STOCK TAKING O F THE FINAL PRODUCT OR THE RAW MATERIALS WAS CONDUCTED SO AS TO CORROBORATE THE CHARGE OF CLANDESTINE REMOVAL. FURTHER, THEY SU BMITTED THAT THE REVENUE HAS NOT PRODUCED ANY EVIDENCE TO SHOW T HAT THE APPELLANT HAD MANUFACTURED EXCESS FINAL PRODUCT AND HAS CLEARED THE SAME IN A CLANDESTINE MANNER. BY REFERRING TO V ARIOUS JUDICIAL DECISIONS, IT WAS SUBMITTED THAT THE CLANDESTINE RE MOVAL ALLEGATIONS ARE REQUIRED TO BE BASED UPON PRODUCTIO N OF POSITIVE AND TANGIBLE EVIDENCE AND CANNOT BE UPHELD ON THE B ASIS OF ASSUMPTIONS AND PRESUMPTIONS. C.O. NOS 29 & 30/JP/2018 M/S NATANI ROLLING MILLS PVT. LTD., JAIPUR VS. ITO, JAIPUR 6 6. I FIND THAT THE COMMISSIONER (APPEALS), THOUGH R ECORDED ALL THE ABOVE SUBMISSIONS OF THE ASSESSEE, OBSERVED THAT TH E ORIGINAL ADJUDICATING AUTHORITY HAS DISCUSSED ALL THE CONTEN TIONS OF THE APPELLANTS IN DETAILS AND THE APPELLANTS HAVE NOT S UBMITTED ANY EVIDENCE TO THE CONTRARY BUT SIMPLICITOR REPEATED T HEIR GROUNDS RAISED IN REPLY TO THE SHOW CAUSE NOTICE. AS REGARD S, NO DISCREPANCY IN THE PHYSICAL VERIFICATION OF THE GOO DS, HE OBSERVED THAT THE CASE WAS INITIATED BY THE DEPARTMENT ON TH E BASIS OF INTELLIGENCE GATHERED BY THEM AND NON-CONDUCT OF ST OCK TAKING DOES NOT MAKE ANY DIRECT SUSTAINABLE IMPACT ON THE FACTS OF THE CASE AND ACCORDINGLY HE REJECTED THE SAME. 7. I NOTE THAT THE ENTIRE CASE OF THE REVENUE IS BA SED UPON RECOVERY OF THE SO CALLED INCRIMINATING EVIDENCE FR OM THE RESIDENTIAL PREMISES OF ONE OF THE DIRECTORS. THEY HAVE NOT ADDUCED ANY EVIDENCE TO CONNECT THESE DOCUMENTS WIT H THE ACTIVITIES OF THE MANUFACTURING UNIT. NO FURTHER IN VESTIGATIONS STAND MADE BY THEM FROM THE PERSONS CONCERNED WITH THE PRODUCTION OF THE GOODS IN THE ASSESSEES FACTORY A ND THEIR CLEARANCES. FURTHER, THERE IS NO IDENTIFICATION OF THE TRANSPORTERS OR THE RECIPIENT OF THE GOODS, THUS ESTABLISHING TH AT THE APPELLANT HAD ACTUALLY CLEARED THE GOODS IN A CLANDESTINE MAN NER. THOUGH, REVENUE IS NOT EXPECTED TO PROVE ITS CASE OF CLANDE STINE ACTIVITIES TO THE HILT BUT THE EVIDENCES PRODUCED BY THE REVEN UE SHOULD BE, AT LEAST, TO AN EXTENT SO 5 AS TO INSPIRE CONFIDENC E IN THE PROSECUTIONS CASE. IN THE PRESENT CASE, I NOTE THA T NO FURTHER INVESTIGATIONS EXCEPT THE RECOVERY OF CERTAIN INCRI MINATING DOCUMENTS FROM THE RESIDENTIAL PREMISES OF THE ASSE SSEES C.O. NOS 29 & 30/JP/2018 M/S NATANI ROLLING MILLS PVT. LTD., JAIPUR VS. ITO, JAIPUR 7 DIRECTOR READ WITH HIS RETRACTED STATEMENT, STAND M ADE. THE FINDINGS OF THE CLANDESTINE ACTIVITIES CANNOT BE UP HELD ON THE SAID DOCUMENTS, WHICH WERE NOT EVEN RECOVERED FROM THE P REMISES OF THE MANUFACTURING UNIT AND AS SUCH HAS TO BE TREATE D IN THE NATURE OF THIRD PARTY DOCUMENTS. THE SAME REQUIRED CORROBORATION, WHICH THE REVENUE HAS FAILED TO. 8. IN VIEW OF THE FOREGOING, I FIND NO JUSTIFICATIO N IN UPHOLDING THE IMPUGNED ORDER. ACCORDINGLY, THE SAME IS SET ASIDE AND APPEAL IS ALLOWED WITH CONSEQUENTIAL RELIEF TO THE APPELLANT . 7. IT WAS SUBMITTED THAT WHERE THE VERY BASIS ON WH ICH THE CHARGE OF UNACCOUNTED SALE IS MADE AGAINST THE ASSESSEE DO ES NOT SURVIVE, ADDITION MADE BY THE AO BUT PARTLY CONFIRMED BY THE LD. CIT(A) ALSO DOES NOT SURVIVE. IT WAS FURTHER SUBMITTED THAT THE LD. CIT(A) HAS WORKED OUT ALLEGED INVESTMENT OF RS.24,71,863/- FOR ALLEGED UNACCOUNTED PURCHASES BY CONSIDERING 1/6 TH OF THE ALLEGED AVERAGE UNACCOUNTED SALES FOR AY 2010-11 & AY 2011-12. THE RE IS NO BASIS FOR SUCH ASSUMPTION. IN ANY CASE, SINCE THE ENTIRE CASE MADE OUT BY THE EXCISE AUTHORITIES NO LONGER SURVIVES AFTER THE ORD ER OF HONBLE CESTAT, THE ADDITION SO MADE BY THE LD. CIT(A) DOES NOT SUR VIVE. 8. THE LD DR IS HEARD WHO HAS RELIED ON THE ORDER A ND FINDINGS OF THE LOWER AUTHORITIES. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. AS WE HAVE NOTED ABOVE, THE W HOLE CASE OF THE REVENUE REGARDING UNDISCLOSED SALES REST ON THE ORD ERS OF THE CENTRAL EXCISE AUTHORITIES WHICH HAS SINCE BEEN SET-ASIDE B Y THE CESTAT VIDE ITS C.O. NOS 29 & 30/JP/2018 M/S NATANI ROLLING MILLS PVT. LTD., JAIPUR VS. ITO, JAIPUR 8 ORDER DATED 7.02.19. IN VIEW OF THE SAME, THE ADDI TIONS SO MADE BY THE ASSESSING OFFICER TOWARDS GROSS PROFIT ON UNRECORDE D SALES AND UNACCOUNTED PURCHASES IS DIRECTED TO BE DELETED. A T THE SAME TIME, THE REVENUE WOULD BE AT LIBERTY TO TAKE ACTION AS PER L AW WHERE THE MATTER SO DECIDED BY THE CESTAT IS APPEALED AGAINST BY THE REVENUE AND IS DECIDED IN ITS FAVOUR. IN THE RESULT, THE GROUND N O. 1, 1.1 AND 2 IN ASSESSEES CROSS OBJECTION IS DECIDED IN FAVOUR OF THE ASSESSEE. 10. NOW, COMING TO GROUND NO. 3 OF ASSESSEES CROSS OBJECTION. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE AO NOTICED THAT THE ASSESSEE PAID INTEREST OF RS.9,400/- TO SHRI RAMESH CHAND BANSAL WITHOUT DEDUCTION TAX AT SOURCE AND HE ACCORDINGLY DISALLOWED THE AMOUNT INVOKING PROVISIONS OF SECTION 40(A)(IA) OF THE ACT WHICH ON APPEAL, HAS BEEN CONFIRMED BY THE LD CIT(A). 11. DURING THE COURSE OF HEARING, THE AR SUBMITTED THAT AN AMENDMENT HAS BEEN MADE BY THE FINANCE ACT, 2014 W. E.F. 01.04.2015 IN SECTION 40(A)(IA) WHEREBY IT IS PROVIDED THAT 30 % OF ANY SUM PAYABLE TO A RESIDENT SHALL BE DISALLOWED IF TAX IS NOT DED UCTED AT SOURCE UNDER CH. XVIIB AS AGAINST THE 100% DISALLOWANCE PRESENTL Y MADE. THE PURPOSE OF THIS AMENDMENT WAS EXPLAINED IN THE MEMO RANDUM AS UNDER:- THE DISALLOWANCE OF WHOLE OF THE AMOUNT OF EXPENDI TURE RESULTS INTO UNDUE HARDSHIP AND THEREFORE IN ORDER TO REDUC E THE HARDSHIP, IT IS PROPOSED THAT IN CASE OF NON-DEDUCT ION OR NON- PAYMENT OF TDS ON PAYMENTS MADE TO RESIDENTS AS SPE CIFIED IN SECTION 40(A)(IA) OF THE ACT, THE DISALLOWANCE SHAL L BE RESTRICTED TO 30% OF THE AMOUNT OF EXPENDITURE CLAIMED. C.O. NOS 29 & 30/JP/2018 M/S NATANI ROLLING MILLS PVT. LTD., JAIPUR VS. ITO, JAIPUR 9 12. THE FINANCE MINISTER WHILE INTRODUCING THE AMEN DMENT IN PARA 207 OF THE BUDGET SPEECH HAS STATED AS UNDER:- 207. CURRENTLY, WHERE AN ASSESSEE FAILS TO DEDUCT AND PAY TAX ON SPECIFIED PAYMENTS TO RESIDENTS, 100 PERCENT OF SUC H PAYMENTS ARE NOT ALLOWED AS DEDUCTION WHILE COMPUTING HIS IN COME. THIS HAS CAUSED UNDUE HARDSHIP TO TAXPAYERS, PARTICULARL Y WHERE THE RATE OF TAX IS ONLY 1 TO 10%. HENCE, I PROPOSE TO P ROVIDE THAT INSTEAD OF 100 PERCENT, ONLY 30% OF SUCH PAYMENTS W ILL BE DISALLOWED. 13. IT WAS SUBMITTED THAT FROM THE ABOVE, IT CAN BE NOTED THAT THE AMENDMENT MADE BY FA (NO.2) ACT, 2014 W.E.F. 01.04. 2015 IS TO REMOVE UNINTENDED AND UNDUE HARDSHIP AND THEREFORE THIS AMENDMENT SHOULD BE GIVE RETROSPECTIVE EFFECT AS PER THE VARI OUS DECISIONS STATED ABOVE. THE LD. CIT(A) HAS INCORRECTLY STATED THAT A MENDMENT IS NOT RETROSPECTIVE. RELIANCE IS PLACED ON THE FIVE MEMBE R BENCH DECISION OF THE HONBLE SUPREME COURT IN CASE OF CIT VS. VATIKA TOWNSHIP PVT. LTD. 109 DTR 33 WHERE IT HAS BEEN HELD THAT LEGISLATIONS WHICH MODIFY ACCRUED RIGHTS OR WHICH IMPOSE OBLIGATIONS OR IMPOS E NEW DUTIES OR ATTACH A NEW DISABILITY HAVE TO BE TREATED AS PROSP ECTIVE UNLESS THE LEGISLATIVE INTENT IS CLEARLY TO GIVE THE ENACTMENT A RETROSPECTIVE EFFECT. HOWEVER, IF LEGISLATION CONFERS A BENEFIT ON SOME P ERSONS BUT WITHOUT INFLICTING A CORRESPONDING DETRIMENT ON SOME OTHER PERSON OR ON THE PUBLIC GENERALLY AND WHERE TO CONFER SUCH BENEFIT A PPEARS TO HAVE BEEN THE LEGISLATORS OBJECT, THEN THE PRESUMPTION WOULD BE THAT SUCH LEGISLATION, GIVING IT A PURPOSIVE CONSTRUCTION, WO ULD WARRANT IT TO BE GIVEN A RETROSPECTIVE EFFECT. THEREFORE EVEN IN A C ASE IT IS HELD THAT THE C.O. NOS 29 & 30/JP/2018 M/S NATANI ROLLING MILLS PVT. LTD., JAIPUR VS. ITO, JAIPUR 10 DISALLOWANCE U/S 40(A)(IA) IS WARRANTED, SAME SHOUL D BE RESTRICTED TO ONLY 30% OF THE AMOUNT OF INTEREST PAID. 14. IT WAS FURTHER SUBMITTED THAT THE HONBLE SUPRE ME COURT IN CASE OF CIT VS. CALCUTTA EXPORT COMPANY (2018) 165 DTR 3 21/ 255 TAXMAN 293 HAS ALSO HELD THAT THE PURPOSE OF THE AMENDMEN T MADE TO SEC. 40(A)(IA) BY THE FINANCE ACT, 2010 IS TO REMOVE THE ANOMALIES THAT THE SECTION WAS CAUSING TO THE BONA FIDE TAXPAYERS AND THEREFORE, THE AMENDMENT BEING CURATIVE IN NATURE IS REQUIRED TO B E GIVEN RETROSPECTIVE OPERATION I.E., FROM THE DATE OF INSE RTION OF THE SAID PROVISION W.E.F. AY 2005-06. THIS RATIO LAID DOWN EQUALLY APPLIES TO THE AMENDMENT MADE BY FINANCE ACT, 2015. 15. IT WAS FURTHER SUBMITTED THAT JAIPUR TRIBUNAL I N CASE OF SHRI RAJENDRA YADAV VS. ITO AJMER ORDER DATED 29.01.2016 IN ITA NO. 895/JP/2012 AFTER CONSIDERING THE AMENDMENT MADE BY FINANCE ACT 2014 IN SECTION 40(A)(IA) HAS HELD AS UNDER :- --IN THE PRESENT CASE, THE AUTHORITIES BELOW HAS ADDED THE ENTIRE SUM OF RS.7,51,322/- BY DISALLOWING THE WHOL E OF THE AMOUNT. THOUGH THE SUBSTITUTION IN SECTION 40 HAS B EEN MADE EFFECTIVE FROM 1.04.2015, IN OUR VIEW THE BENEFIT O F THE AMENDMENT SHOULD BE GIVEN TO THE ASSESSEE EITHER BY DIRECTING THE AO TO CONFIRM FROM THE CONTRACTORS, NAMELY M/S. GARVIT STONEX, M/S. CHANDA MARBLES AND M/S. NIDHI GRANITES AS TO WHETHER THE SAID PARTIES HAVE DEPOSITED THE TAX OR NOT AND FURTHER OR RESTRICT THE ADDITION TO 30% OF RS.7,51, 322/-. IN OUR VIEW IT WILL BE TIED OF JUSTICE IF THE DISALLOWANCE IS ONLY RESTRICTED TO 30% OF RS.7,51,322/-. C.O. NOS 29 & 30/JP/2018 M/S NATANI ROLLING MILLS PVT. LTD., JAIPUR VS. ITO, JAIPUR 11 16. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUED THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, THERE IS NO DISPUTE THAT THE ASSESSEE IS LIABLE TO DEDUCT TDS ON INTEREST PAYMEN T TO SHRI RAMESH CHAND AND NON-DEDUCTION OF THE TDS WILL ENTAIL DISA LLOWANCE U/S 40(A)(IA) OF THE ACT. HOWEVER, IN VIEW OF THE CONS ISTENT POSITION TAKEN BY THE COORDINATE BENCHES OF THE TRIBUNAL WHEREIN T HE AMENDMENT IN SECTION 40(A)(IA) HAS BEEN HELD RETROSPECTIVE IN NA TURE, THE DISALLOWANCE IS RESTRICTED TO 30% OF THE TOTAL AMOUNT. IN THE R ESULT, THE CROSS- OBJECTION IS PARTLY ALLOWED. 17. NOW, COMING TO GROUND NO. 4 IN ASSESSEES CROSS -OBJECTION. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE AO OBSE RVED THAT THE ASSESSEE HAS DEBITED RS.1,67,455/- TOWARDS TELEPHONE EXPENSE S AND THE PERSONAL/OTHER THAN BUSINESS USE OF TELEPHONE COULD NOT BE RULED OUT AND THEREFORE, MADE DISALLOWANCE OF RS.16,745/- BEI NG 10% OF THE EXPENSES. THE LD. CIT(A) HELD THAT THE PERSONAL USE OF TELEPHONE BY DIRECTOR CANNOT BE RULED OUT AND NO EVIDENCE IS BRO UGHT TO CONSIDER THE SAME AS PERQUISITE. THUS, THE DISALLOWANCE MADE BY AO IS REASONABLE AND ACCORDINGLY, CONFIRMED THE ADDITION. IT WAS SUB MITTED BY THE LD AR THAT THE TELEPHONE EXPENSES ARE INCURRED IN RESPECT OF TELEPHONE INSTALLED AT FACTORY AND MOBILE OF DIRECTORS AND EM PLOYEE. THE TELEPHONES ARE USED FOR THE PURPOSE OF THE BUSINESS . HENCE, THE ADHOC DISALLOWANCE OF 10% OF THE EXPENSES CANNOT BE MADE. EVEN OTHERWISE, IN CASE OF A COMPANY, NO DISALLOWANCE CAN BE MADE O N ACCOUNT OF PERSONAL USE. WE DONOT SEE ANY INFIRMITY IN THE ORD ER OF THE LD CIT(A) AND THE SAME IS HEREBY CONFIRMED. IN THE RESULT, T HE CROSS-OBJECTION IS DISMISSED. C.O. NOS 29 & 30/JP/2018 M/S NATANI ROLLING MILLS PVT. LTD., JAIPUR VS. ITO, JAIPUR 12 18. IN THE RESULT, THE CROSS-OBJECTION SO FILED BY THE ASSESSEE IS PARTLY ALLOWED. 19. IN CROSS OBJECTION NO. 30/JP/2018 FOR AY 2011-1 2, THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEAL: 1. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN ADOPTING THE AMOUNT OF UNRECORDED SALES AT RS. 1,54,22,078/- (RS . 1,37,69,712/- NET OF EXCISE) ON THE BASIS OF THE PA PERS FOUND IN SEARCH CONDUCTED BY THE CENTRAL EXCISE DEPARTMENT A S AGAINST THE UNACCOUNTED SALES OF RS. 32,65,518/- (RS. 29,15 ,641/- NET OF EXCISE) WORKED OUT BY THE ASSESSEE ON THE BASIS OF THESE PAPERS. 1.1 THE LD. CIT(A) HAS FURTHER ERRED ON FACTS AND I N LAW IN APPLYING THE G.P RATE OF 3.61% ON THE ALLEGED UNREC ORDED SALES OF RS. 1,54,22,078/- INSTEAD OF APPLYING G.P RATE OF 2 .25% DECLARED BY THE ASSESSEE ON THE UNACCOUNTED SALES OF RS. 32, 65,518/- (RS. 29,15,641/- NET OF EXCISE), THEREBY CONFIRMING THE ADDITION TO THE EXTENT OF RS. 5,56,737/-. 2. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN ESTIMATING THE INVESTMENT IN THE UNACCOUNTED PURCHASES AT RS. 12,85,369/-, THEREBY MAKING THE ADDITION FOR THE SAME. 3. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE OF RS. 5,768/- OUT OF TELEPHONE EX PENSES, BEING 10% OF RS. 57,678/-. 20. ADMITTEDLY AND UNDISPUTEDLY, THE FACTS AND CIRC UMSTANCES OF THE CASE ARE EXACTLY IDENTICAL TO FACTS AND CIRCUMSTANC ES OF THE CASE IN CROSS OBJECTION NO. 29/JP/18 FOR AY 2010-11, THEREFORE, O UR FINDINGS AND DIRECTIONS CONTAINED THEREIN SHALL APPLY MUTATIS MUTANDIS TO THESE CROSS OBJECTION SO FILED BY THE ASSESSEE. C.O. NOS 29 & 30/JP/2018 M/S NATANI ROLLING MILLS PVT. LTD., JAIPUR VS. ITO, JAIPUR 13 IN THE RESULT, BOTH THE ASSESSEES CROSS OBJECTIONS ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 02/09/2019 SD/- SD/- FOT; IKWY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 02/09/2019 *GANESH KR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S NATANI ROLLING MILLS PRIVATE LIMITED, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- ITO, WARD-4(2), JAIPUR 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (CO NO. 29 & 30/JP/2018) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR