CIT V. SHIV KUMAR SONI

ITA/131/2011

AI Insights

The case revolves around an appeal by the Commissioner of Income Tax, Jaipur-II against Shri Shiv Kumar Soni concerning the allowance of a loss claimed on trading of gold bullion. The primary legal contention was whether the ITAT was justified in confirming the CIT(A)'s order allowing the loss without adequately appreciating the facts of the case. The appellant argued that the tribunal and CIT(A) erred in their judgment, highlighting issues such as substantial cash deposits and incomplete sale vouchers. However, the respondent defended the tribunal's decision, emphasizing the lack of evidence to support the appellant's claims of error. The High Court, after reviewing the arguments and evidence presented, decided to uphold the decisions of the lower authorities, dismissing the appeal.

• Counselvise Citation: [2017] 140 COUNSELVISE.COM (IT) 720190 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 21-08-2017
• Assessment Year: misc
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: GUNJAN PATHAK
• Assessee Lawyers: R B MATHUR; MEENAL GHIYA
• Keywords: Cash deposits; Disallowance of loss; Income tax appeal; Gold Bullion Trading Loss

Judgement Text

"HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 131 / 2011 Commissioner of Income Tax, Jaipur-II, Jaipur ----Appellant Versus Shri Shiv Kumar Soni, 348, Mangla Marg, Brahmpuri, Jaipur ----Respondent _____________________________________________________ For Appellant(s) : Mr. R.B. Mathur alongwith Ms. Meenal Ghiya For Respondent(s) : Mr. Gunjan Pathak _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE INDERJEET SINGH Judgment 21/08/2017 1. By way of this appeal, the appellant has challenged the judgment and order of the tribunal whereby the tribunal has dismissed the appeal of the department. 2. At the time of admission of the appeal, following questions were framed:- “Whether in the facts and circumstances of the case the ITAT was justified in confirming CIT(A)’s order in directing to allow the loss claimed on trading of gold bullion amount to Rs.21036425/- without appreciating the facts of the case?” 3. Mr. Mathur, appearing for the appellant contended that the (2 of 8) [ITA-131/2011] Tribunal and CIT (A) have committed a serious error in observing against the appellant. He pointed out para 5 and 6 of the order of A.O. which reads as under:- “5. On examination of the purchase and sale vouchers, the books of accounts and bank statements etc. it was noticed that most6 of the sales of the assessee in substantial amounts are in cash and there were huge cash deposits in the bank accounts of the assessee, in different cities of the country, through anywhere banking. Some examples of such cash deposits in bank accounts of the assessee are given below- HDFC BANK (A/c No.00540460000391) Date Amount City Where deposted 17.8.2005 1,54,00,000 Delhi 17.8.2005 12,66,000 Chennai 18.8.2005 86,00,000 60,00,000 Delhi 18.8.2005 25,00,000 Delhi 19.8.2005 1,48,00,000 Delhi 19.8.2005 30,00,000 Delhi 20.8.2005 80,00,000 Delhi 20.08.2005 37,73,000 Delhi 22.8.2005 75,07,300 Chennai 22.8.2005 1,42,00,000 Delhi 22.8.2005 18,00,000 Chennai 22.8.2005 19,00,000 Bangalore 23.08.2005 2,11,50,000 Delhi 24.8.2005 1,00,52,000 Chennai 25.08.2005 1,43,00,000 Delhi 25.08.2005 84,00,000 Delhi 25.8.2005 50,26,700 Chennai (3 of 8) [ITA-131/2011] 25.8.2005 37,79,000 Chennai 25.8.2005 7,00,000 Chennai 25.8.2005 12,50,000 Bangalore 26.8.2005 71,50,000 Delhi 26.8.2005 1,45,00,000 Delhi 26.8.2005 50,00,000 Bangalore ICICI Bank (A/c No.8314) Date Amount City Where deposted 18.8.2005 24,50,000 Bangalore 18.8.2005 9,99,000 GuwahatiChe nnai 19.8.2005 35,00,000 Bangalore 23.8.2005 9,98,000 Guwahati 23.8.2005 9,50,000 Nagpur 23.8.2005 9,98,000 Bangalore 27.8.2005 6,00,000 Kolkata PNB, Johari Bazar (A/c No.1511) Date Amount City Where deposted 22.8.2005 27,00,000 Raipur 22.8.2005 24,50,000 Indore 23.8.2005 35,00,000 Indore 23.08.2005 20,00,000 Jabalpur 25.08.2005 18,00,000 Indore 25.08.2005 23,50,000 Jabalpur 25.8.2005 13,50,000 Satna (4 of 8) [ITA-131/2011] Similar was the position of cash deposits in these accounts throughout the year. 6. On examination of the sale vouchers of the assessee it was noticed that no sale vouchers to any party of out of Rajasthan was issued. The sale vouchers also did not contain the complete names and addresses of the persons who made cash purchases from the assessee. The details of some such cash vouchers are given below:- Bill No Name of Purchaser Amount 01/17.8.2005 R.K. Soni, Jaisalmer 19,32,000 02 Vijay Kumar Mehta, Barmer 9,66,000 03 Shri Shyam & Sons Jewellers, Rajgarh Churu 6,44,000 04 Madan Lal, Jodhpur 12,88,000 05 Jai Chand, Dausa 19,32,000 06 Gopi Ram, Jodhpur 19.32,000 07 Hanuman Prasad, Sawaimadhopur 19,33,500 08 Amit Jain, Jodhpur 19,33,500 09 R.K. Soori, Udaipur 19,32,000 010 Suresh Jain, Bikaner 19,32,600 011 Vimal Kumar, Sujangarh 19,32,600 012 Anant Ram, Jodhpur 6,44,200 013 Shiv Soni, Hanumangarh 3,22,250 014/18.8.200 5 Rajiv Arora, Jaipur 6,25,500 015 Himayat International 1,01,592 016 M.C. Bhama, Churu, 6,43,000 (5 of 8) [ITA-131/2011] Ratangarh 017 Arun Jain, Jhunjhunu 19,33,500 018 Mohan Lal, Jodhpur 19,32,900 019 Arvind Jain, Jhunjhun 19,28,400 020 Raj Kumar, Barmer 19,26,000 021 Rajiv Agarwal, Jaisalmer 19,27,500 022 Mohan Malpani, Jodhpur 19,33,500 023 Hanuman Singh, Nagaur 19,32,500 024 Babu Lal, Pali 19,33,500 025 Moti Lal, Bhilwara 19,33,500 026 Amit Kumar Jain, Jodhpur 19,33,500 027 Raj Kishore, Jaipur 13,240 028 A.K. Soni, Chomu 14,480 029 Arvind Jain, Nagaur 9,67,800 030 Mohan Jain, Jaipur 1,28,840 The same was the position of sale bills for the remaining period of the accounting year. No complete addresses of the customers were there on the bills and these bills did not have any signatures of customers etc.” 4. Taking into consideration, he contended that transactions to the unknown people the assessment was made against the assessee for disallowances of loss of gold to the tune of Rs.2 crores. He further contended that CIT (A) has seriously committed an error holding as under:- “2.2 Challenging the said view of assessing officer Sh. Mundra has made following (6 of 8) [ITA-131/2011] submissions and he has also producd copy of suit filed in March, 2009 against MMTC Ltd. from whom the silver bullion was purchased: The ground No. (2) of appeal relates to objecting the action of the Ld. A.O. in disallowing the silver refining expenses of Rs. 13,10,469/- which is receivable from MMTC Ltd. In this connection it is submitted that assessee agreed with MMTC to purchase pure silver (99.9% purity) but MMTC supplied silver with 92% to 94% purity. The MMTC through MOU agreed to charge rate of sale as per purity of silver and also assured to make payment of refining charges of silver to make its purity to 99.9% as in market Bullion Silver of 99.9% is saleable. However despite repeated request neither they delivered the MOU duly signed by authorized officers of MMTC nor confirmed in writing the said verbal assurances. The assessee raised demand of Rs.13,10,469/- towards refining charges as well as a sum of Rs.8,75,58+/- which it retained which were refundable on account of rate difference due to less purity of silver. The assessee written various letters to MMTC for making said payment but except verbally avoiding the issue they did not at all responded. Thus the said claim of refining charges made by assessee was never acknowledged as payable by MMTC. It is settled law that an amount of income accrues only if assessee has enforceable right to receive it. In this case assessee has no document and prayer has not acknowledged the claim as its liability, the impugned amount has not been accrued at all during the year. The assessee after long wait and desperation has filed a law suit in March, 09 with competent court claiming the said amount which is pending. In view of these facts there was no accrual of refining charges claimed as receivable from MMTC and, therefore, Ld. A.O. is wrong in disallowing a sum of Rs.13,10,489/- out of silver refining expenses. 2.3 I have considered facts of the case and arguments taken by Sh. Mundra quite carefully. It is undisputed fact that the appellant has paid silver refining charges of Rs.14,24,428/- and this fact has also not been disputed by the assessing officer in the findings given by him in para 13 of the assessment order. The only ground for the disallowance of this claim to the extent of Rs.13,10,469/- is that said amount was received (7 of 8) [ITA-131/2011] from MMTC Ltd, and since, the appellant was following mercantile system of accounting therefore, the aforesaid amount should have been shown as income in the trading account. However, after analyzing the sequence of the events it can be appreciated that the MMTC agreed to charge rate of sale as per purity of silver and assured to make payment of refining charges of the silver to make it’s purity to 99.9% after it has been supplied by MMTC with 92 to 94% purity. However, neither the payment of said silver refining charges to the extent of Rs.13,10,469/- was made nor the copy of the MOU duly signed by authorized officers of MMTC was provided to the appellant. When as per documents or as per any evidence it is not established that the appelalnt was entitled to receive the said claim from MMTC therefore, unless it is received or the claim is acknowledged by MMTC or claim is enforceable as per any MOU or as per any other document how such amount receivable can be considered as income of the appellant even if it is following merchantile system of accounting. It is a fact that only on 30.3.2009 the appellant has filed a suit in District and Session Court of Jaipur City and before that there are no document/evidence on the basis of which it can be held that the said amount was receivable by the appellant from MMTC which has to be accounted for as amount receivable as a part of income under mercantile system of accounting. With this discussion the said disallowance of refining charges to the extent of Rs.13,10,469/- is hereby deleted by allowing relevant ground of appeal.” 5. However, counsel for the respondent contended that in view of the observations made by the Tribunal in para 9 and 10 which reads as under:- 6. There is concurrent finding of both the authorities and the appeal is liable to be dismissed. 7. We have heard the learned counsel for the parties. 8. Taking into consideration, the payment was made to the Govt. Corporation MMTC and loss which is incurred was due to (8 of 8) [ITA-131/2011] fluctuation of gold price which has been observed by both the parties, we see no reason to interfere in the order of the Tribunal. 9. The issues are answered in favour of the assessee against the department. 10. The appeal stands dismissed. (INDERJEET SINGH),J. (K.S. JHAVERI),J. Jyoti Item NO.75 "