M/s Jay Enterprise, RAJKOT-GUJARAT V. The Income Tax Officer, Ward-5(1), RAJKOT-GUJARAT

ITA 10/RJT/2012

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1189 (ITAT-RAJKOT)
• Duration Of Justice: 6 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 11-01-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: DM RINDANI
• Keywords: Business expenditure; Audit objection; Tax effect; Set aside

Judgement Text

: : IN THE INCOME TAX APPELLATE TRIBULAL: RAJKOT BENCH: RAJKOT , , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . / ITA NO.10/RJT/2012 / ASSESSMENT YEAR: 2008-09 M/S. JAY ENTERPRISE, MINA GALI, SONI BAZAR, MANDVI CHOWK, RAJKOT. [PAN: AACFJ 6355K] VS. INCOME TAX OFFICER, WARD-5(1), RAJKOT. ( / APPELLANT) ( /RESPONDENT) . / ITA NO.16/RJT/2012 / ASSESSMENT YEAR: 2008-09 INCOME TAX OFFICER, WARD-5(1), RAJKOT. VS. M/S. JAY ENTERPRISE, MINA GALI, SONI BAZAR, MANDVI CHOWK, RAJKOT. [PAN: AACFJ 6355K] /ASSESSEE BY : SHRI D.M. RINDANI, A.R /REVENUE BY : SHRI PRAVIN VERMA, SR. DR /DATE OF HEARING : 22-11-2018 / DATE OF PRONOUNCEMENT : 26-11-2018 / ORDER PER C.M. GARG, JUDICIAL MEMBER : THESE TWO APPEALS HAVE BEEN FILED BY THE ASSESSEE AND THE REVENUE AGAINST THE COMMON ORDER OF COMMISSIONER OF INCOME TAX 2 ITA NOS.10 & 16/RJT/2012 (A.Y: 2008-09) M/S. JAY ENTERPRISE (APPEALS)-IV, RAJKOT (CIT(A) FOR SHORT) DATED 28. 11.2011 FOR THE ASSESSMENT YEAR (A.Y) 2008-09. 2. THE SOLE GROUND RAISED BY THE ASSESSEE IN ITA NO .10/SRT/2012 READS AS FOLLOWS: THE LEARNED COMMISSIONER OF INCOME TAX (APPEA LS)-IV, RAJKOT HAS ERRED IN ENHANCING THE INCOME OF RS. 81,36,777/ - IN MCX TRANSACTION IS UNWARRANTED, UNJUSTIFIED AND BAD IN LAW. 11 2. THE GROUNDS RAISED BY THE REVENUE IN ITA NO.16/S RT/2012 READS AS FOLLOWS: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN D IRECTING THE AO TO DELETE THE ADDITION MADE ON ACCOUNT OF LOSS OF MCX DIVISION OF RS. 33,26,283/- WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE AO. 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN D IRECTING THE AO TO DELETE THE ADDITION OF RS. 28,93,390/- MADE ON ACCOUNT OF INTEREST PAID ON THE UNSECURE LOAN, WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE AO. 3. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN D IRECTING THE AO TO DELETE THE ADDITION OF RS. 1,27,403/- MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF PENALTY EXPENSES, WITHOUT APPRECIAT ING THE FACTS BROUGHT ON RECORD. 4. ON THE FACTS OF THE CASE AND IN LAW THE LD. CIT (A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO. 5. ANY OTHER GROUND THAT THE REVENUE MAY RAISE BEFO RE OR DURING HEARING PROCEEDINGS BEFORE THE HON'BLE ITAT. 6. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE C IT(A)-IV, RAJKOT MAY KINDLY BE SET-ASIDE AND THAT OF ASSESSING OFFICER B E RESTORED. GROUND NO.1 OF THE ASSESSEE : 3. APROPOS GROUND NO.1, WE HAVE HEARD THE ARGUMENTS OF BOTH SIDES AND CAREFULLY PERUSED THE RELEVANT MATERIAL PLACED ON THE RECORD OF THE 3 ITA NOS.10 & 16/RJT/2012 (A.Y: 2008-09) M/S. JAY ENTERPRISE TRIBUNAL. THE LD. ASSESSEES REPRESENTATIVE (AR) SU BMITTED THAT THE AUTHORITIES BELOW WERE NOT CORRECT IN TAXING THE IN COME FROM MCX TRANSACTIONS AND THE LD. CIT(A) WAS ALSO NOT CORREC T IN ENHANCING THE SAME INCOME TO RS. 81,36,777/- THEREFORE, THE ADDIT ION MADE BY THE AO AND ENHANCED BY THE LD. FIRST APPELLATE AUTHORITY M AY KINDLY BE SET ASIDE AND DELETED. THE LD. AR ALSO SUBMITTED THAT THE AU THORITIES BELOW HAVE IGNORED THE FACT THAT THE ASSESSEE INCURRED LOSS OF RS. 33,26,383/- FROM MCX DIVISION TRADING THEREFORE, THE ENTIRE AMOUNT C OULD NOT BE TAXED WHICH WERE EARNED FROM TRADING IN MCX DIVISION. 4. REPLYING TO THE ABOVE, THE LD. DEPARTMENTAL REPR ESENTATIVE (DR) SUPPORTED THE ACTION OF THE AUTHORITIES BELOW AND D REW OUT ATTENTION TOWARDS RELEVANT PARAS 4.1 TO 4.3 OF THE FIRST APPE LLATE ORDER AND SUBMITTED THAT THE APPELLANT HAS NOT SHOWN THE NET PROFIT OF RS. 81,36,777/- OF MCX DIVISION AS A PART OF TAXABLE INCOME AFTER SETTING OF THE LOSS INCURRED BY THE ASSESSEE IN ITS OWN FUTURE TRADING IN THE COMMO DITY MARKET. THEREFORE, THE AO WAS RIGHT IN MAKING DISALLOWANCE AND THE LD. CIT(A) WAS ALSO QUITE JUSTIFIED AND CORRECT IN ENHANCING T HE ADDITION AFTER ALLOWING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE . THE LD. DR VEHEMENTLY POINTED OUT THAT THE ASSESSEE EARNED HUG E AMOUNT FROM TRADING IN MCX DIVISION, WHICH WAS DIRECTLY TAKEN T O THE BALANCE SHEET WITHOUT ROUTING THE SAME THROUGH P & L A/C. AND OFF ERING THE SAME FOR 4 ITA NOS.10 & 16/RJT/2012 (A.Y: 2008-09) M/S. JAY ENTERPRISE TAXATION THEREFORE, THE LD. CIT(A) WAS RIGHT IN ENH ANCING THE INCOME OF THE ASSESSEE. THE LD. DR SUBMITTED THAT THE LOSS FROM MCX TRADING OF RS. 33,26,383/-HAS BEEN ALLOWED TO THE ASSESSEE BY THE LD. CIT(A) AGAINST WHICH THE REVENUE HAS RAISED GROUND NO.1 IN ITS APP EAL I.E., ITA NO.16/RJT/2012 THEREFORE, THIS CONTENTION OF THE AS SESSEE IS NOT TENABLE. 5. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISSI ONS, FROM CONCLUSION DRAWN BY THE LD. CIT(A) IN PARA 4.5 OF F IRST APPELLATE ORDER, WE OBSERVE THAT THE LD. FIRST APPELLATE AUTHORITY HAS DIRECTED THE AO TO ALLOW LOSS OF RS. 33,26,283/- IN MCX TRANSACTIONS NOT AS LOSS BUT AS BUSINESS EXPENDITURE THEREFORE, GRIEVANCE OF THE ASSESSEE IN THIS REGARD IS MISDIRECTED AND BASELESS. SO FAR AS ADDITION AND E NHANCEMENT OF INCOME BY RS. 81,36,777/- IS CONCERNED, ON BEING AS KED BY THE BENCH, THE LD. AR COULD NOT CONTROVERT THE ALLEGATION OF T HE AUTHORITIES BELOW THAT THE ASSESSEE HAS EARNED SAID INCOME IN MCX TRADING TRANSACTIONS AND THIS WAS SHOWN IN THE BALANCE SHEET WITHOUT SHOWING AND ROUTING THROUGH P & L A/C. AND WITHOUT OFFERING THE SAME FOR THE TA XATION IN THE COMPUTATION OF INCOME. THEREFORE, THE LD. CIT(A) W AS RIGHT IN ENHANCING THE ASSESSEES INCOME BY THIS AMOUNT AFTER ISSUING SHOW CAUSE NOTICE AND TAKING ON RECORD AND CONSIDERING THE REPLY OF T HE ASSESSEE TO THE NOTICE. WE ARE UNABLE TO SEE ANY VALID REASON TO I NTERFERE WITH THE SAME 5 ITA NOS.10 & 16/RJT/2012 (A.Y: 2008-09) M/S. JAY ENTERPRISE AND THUS, FINDINGS RECORDED BY THE LD. CIT(A) ARE U PHOLD. CONSEQUENTLY, SOLE GROUND OF THE ASSESSEE BEING DEVOID OF MERITS IS DISMISSED. ITA NO.16/RJT/2012 OF REVENUE : 6. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIV E (DR) AND PERUSED THE MATERIAL AVAILABLE ON RECORD AND FIND T HAT TAX EFFECT INVOLVED IN THIS APPEAL IS BELOW RS. 20 LAKHS. THE LD. DR AL SO DID NOT DISPUTE THIS FACT. WE FIND THAT THE CBDT VIDE CIRCULAR NO.3/201 8 DATED 11.07.2018 [F.NO.279/MISC.142/2007-ITJ (PT)] HAS REVISED THE M ONETARY LIMIT FOR FILING OF APPEAL BEFORE TRIBUNAL FIXING THE TAX EFFECT LIM IT AT RS.20 LACS. THE SAID CIRCULAR SUPERSEDES THE EARLIER CIRCULAR(S) ISSUED ON THE SUBJECT OF TAX EFFECT AND APPLIES TO ALL PENDING APPEAL RETROSPECT IVELY. THE BOARD HAS PROVIDED EXCEPTIONS PROVIDED UNDER PARA 10 OF THE C IRCULAR WHEREIN IT HAS BEEN PROVIDED THAT THE ISSUES RELATED IS TO BE CONT ESTED (A) WHERE THE CONSTITUTION VALIDITY OF THE PROVISION OF THE ACT O R (B) RULE IS UNDER CHALLENGE OR (C) WHERE BOARD`S ORDER, NOTIFICATION, INSTRUCTION OR CIRCULAR HAS BEEN HELD TO BE ILLEGAL OR ULTRA VIRES, OR WHER E REVENUE AUDIT OBJECTIONS HAS BEEN ACCEPTED BY THE DEPARTMENT OR (D) WHERE THE ADDITION RELATES TO UNDISCLOSED FOREIGN ASSETS/BANK ACCOUNTS, ETC. 7. WE FIND THAT THE PRESENT CASE DOES NOT FALL WITH IN THE EXCEPTIONS CLAUSE AND THE TAX DEMAND IS LESS THAN RS.20 LACS. THEREFORE, THE PRESENT APPEAL IS NOT MAINTAINABLE AS PER RECENT CIRCULAR ( SUPRA) AND HENCE THE 6 ITA NOS.10 & 16/RJT/2012 (A.Y: 2008-09) M/S. JAY ENTERPRISE SAME IS DISMISSED. HOWEVER, WE MAY MAKE IT CLEAR TH AT THE REVENUE IS AT LIBERTY TO APPROACH THE TRIBUNAL FOR RECALLING THIS ORDER, IF IT COMES TO THE NOTICE OF THE ASSESSING OFFICER THAT THE TAX EFFECT IS MORE THAN THE MONETARY LIMIT PRESCRIBED UNDER CIRCULAR OR REVENUE `S CASE FALLS WITHIN THE AMBIT OF THE EXCEPTIONS PROVIDED IN THE CIRCULA R. HENCE, THE APPEAL OF REVENUE IS DISMISSED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE AS WELL AS APPEAL OF REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 6 TH NOVEMBER, 2018 RAJKOT/ ; & / DATED : 26 TH NOVEMBER, 2018/ EDN, SR. P.S ! #$ %$ / COPY OF THE ORDER IS FORWARDED TO : 1. * / THE APPELLANT ; 2. +,* / THE RESPONDENT ; 3. . ( ) / THE CONCERNED CIT(A); 4.THE CONCERNED PRL. CIT; 5. / + , , / DR, ITAT, / RAJKOT; 6. / GUARD FILE . // BY ORDER // ASSISTANT REGISTRAR, ITAT, RAJKOT BENCH, RAJKOT SD/- SD/- ( . . /O.P.MEENA) / ACCOUNTANT MEMBER ( . . /C.M.GARG) /JUDICIAL MEMBER