SHANKAR JHALANI, Jaipur V. ITO, Jaipur

ITA 1053/JPR/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2076 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 01-12-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R A VERMA CIT DHK
• Keywords: Bogus purchase; Rejection of books of accounts; Peak credit; Additional evidence; Question of law; Non-deduction of tax; Non compliance
• Section: 69C; 143(3); 260A; 131; 68; 145; 144

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH HKKXPAN] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, A M VK;DJ VIHY LA-@ ITA NO. 1053/JP/2016 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2011-12 SHANKAR JHALANI, B-3, LALJI KA BAGH, MOTI LAL ATAL ROAD, JAIPUR. CUKE VS. INCOME TAX OFFICER, WARD 3(2), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ABTPJ 9902 E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.A. VERMA (ADDL.CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 29/01/2018 MN?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 19/02/2018 VKNS'K@ ORDER PER: BHAGCHAND, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE EMANATES FR OM THE ORDER OF THE LD. CIT(A)-I JAIPUR DATED 30/09/2016 FOR THE A.Y . 2011-12. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PRECIO US AND SEMI PRECIOUS STONES. THE RETURN OF INCOME WAS E-FILED BY THE ASSESSEE ON 30/09/2011 DECLARING TOTAL INCOME OF RS. 1,96,910/- . THE CASE WAS SELECTED FOR SCRUTINY. THE ASSESSING OFFICER HAS PAS SED ASSESSMENT ORDER U/S 144 R.W.S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) AND ITA 1053/JP/2016_ SHANKAR JHALANI VS. ITO 2 ASSESSED TOTAL INCOME OF THE ASSESSEE AT RS. 45,50, 810/- BY MAKING VARIOUS ADDITIONS. THE LD. CIT(A) HAS GIVEN PART RELI EF TO THE ASSESSEE. 3. NOW THE ASSESSEE IS IN APPEAL BEFORE THE ITAT BY TAKING FOLLOWING GROUNDS OF APPEAL: 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HA S ERRED ON FACTS AND IN LAW IN DECIDING THE APPEAL WITHOUT ADMITTING THE ADDITIONAL EVIDENCE FILED UNDER RULE 46A. 2. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE TRADING ADDITION OF RS . 11,99,984/- BY DISALLOWING 15% OF THE ENTIRE PURCHASES OF RS.79 ,99,891/- ALLEGING THE SAME TO BE UNVERIFIABLE BUT AT THE SAM E TIME ACCEPTING THE SALES DECLARED BY THE ASSESSEE AND IG NORING THE FACT THAT THE G.P. RATE DECLARED DURING THE YEAR IS BETT ER THAN THE EARLIER YEARS. 3. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE OF RS.73, 714/- U/S 40(A)(IA) WITHOUT CONSIDERING THE FACT THAT THE REC IPIENT OF THIS AMOUNT HAS INCLUDED THE SAME IN ITS INCOME AND PAID THE TAX ON THE SAME. 4. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING AN ADDITION OF RS.3,83,757 /- BY CONSIDERING THE PEAK OF CASH DEPOSIT AND WITHDRAWAL FROM THE BANK ACCOUNT AS UNEXPLAINED. HE HAS FURTHER ERRED I N CONFIRMING THE ADDITION IGNORING THAT THESE ARE REGULAR BANK A CCOUNTS OF THE ASSESSEE AND ALL THE DEPOSITS IN THE BANK ACCOUNT I S VERIFIABLE FROM THE CASH BOOK MAINTAINED BY THE ASSESSEE. 5. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE OF DEDUCT ION OF RS.56,256/- MADE UNDER CHAPTER VIA OF THE ACT. ITA 1053/JP/2016_ SHANKAR JHALANI VS. ITO 3 4. THE ISSUE INVOLVED IN GROUND NO. 1 OF THE APPEAL IS THAT THE LD. CIT(A) WITHOUT ADMITTING THE ADDITIONAL EVIDENCES DEC IDED THE APPEAL. IN THIS REGARD, THE LD CIT(A) HAS DEALT THE ISSUE BY HO LDING AS UNDER: (I) I HAVE DULY CONSIDERED THE ASSESSMENT ORDER, TH E SUBMISSIONS OF THE APPELLANT, THE REMAND REPORT OF THE AO AND ITS REJO INDER BY THE AR. IT MAY BE MENTIONED THAT THE ADDITIONAL EVIDENCES FILE D BY THE AR WERE NOT ADMITTED BY ME BEFORE SENDING THE SAME TO THE AO FO R OBTAINING ITS COMMENTS, AS SPECIFICALLY STATED IN MY LETTER TO TH E AO. IT WAS THE CONTENTION OF THE APPELLANT THAT SINCE IT WAS SUFFE RING FROM HEART DISEASE AND TB, IT COULD NOT MAKE COMPLIANCE BEFORE THE ASS ESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS. IT WOULD BE RELEVANT TO REPRODUCE RULE 46A OF THE IT RULES AS UNDER: PRODUCTION OF ADDITIONAL EVIDENCE BEFORE THE DEPUT Y COMMISSIONER (APPEALS) AND COMMISSIONER (APPEALS). 46A. (1) THE APPELLANT SHALL NOT BE ENTITLED TO PR ODUCE BEFORE THE DEPUTY COMMISSIONER (APPEALS)OR, AS THE CASE MAY BE, THE C OMMISSIONER (APPEALS), ANY EVIDENCE, WHETHER ORAL OR DOCUMENTAR Y, OTHER THAN THE EVIDENCE PRODUCED BY HIM DURING THE COURSE OF PROCE EDINGS BEFORE THE ASSESSING OFFICER, EXCEPT IN THE FOLLOWING CIRCUMST ANCES, NAMELY : (A) WHERE THE ASSESSING OFFICER HAS REFUSED TO ADMI T EVIDENCE WHICH OUGHT TO HAVE BEEN ADMITTED; OR (B) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE EVIDENCE WHICH HE WAS CALLED UPON TO PRODUCE BY THE ASSESSING OFFICER; OR (C) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING BEFORE THE ASSESSING OFFICER ANY EVIDENCE WHICH IS RELEVANT TO ANY GROUND OF APPEAL; OR (D) WHERE THE ASSESSING OFFICER HAS MADE THE ORDER APPEALED AGAINST WITHOUT GIVING SUFFICIENT OPPORTUNITY TO THE APPELLANT TO A DDUCE EVIDENCE RELEVANT TO ANY GROUND OF APPEAL. ITA 1053/JP/2016_ SHANKAR JHALANI VS. ITO 4 (2) NO EVIDENCE SHALL BE ADMITTED UNDER SUB-RULE ( 1) UNLESS THE DEPUTY COMMISSIONER (APPEALS) OR, AS THE CASE MAY BE, THE COMMISSIONER (APPEALS)] RECORDS IN WRITING THE REASONS FOR ITS A DMISSION. (3) THE DEPUTY COMMISSIONER (APPEALS)OR, AS THE CAS E MAY BE, THE COMMISSIONER (APPEALS) SHALL NOT TAKE INTO ACCOUNT ANY EVIDENCE PRODUCED UNDER SUB-RULE (I) UNLESS THE ASSESSING OFFICER HAS BEEN ALLOWED A REASONABLE OPPORTUNITY (A) TO EXAMINE THE EVIDENCE OR DOCUMENT OR TO CROSS -EXAMINE THE WITNESS PRODUCED BY THE APPELLANT, OR (B) TO PRODUCE ANY EVIDENCE OR DOCUMENT OR ANY WITN ESS IN REBUTTAL OF THE ADDITIONAL EVIDENCE PRODUCED BY THE APPELLANT. (4) NOTHING CONTAINED IN THIS RULE SHALL AFFECT THE POWER OF THE DEPUTY COMMISSIONER (APPEALS)] OR, AS THE CASE MAY BE, THE COMMISSIONER (APPEALS) TO DIRECT THE PRODUCTION OF ANY DOCUMENT, OR THE EXAMINATION OF ANY WITNESS, TO ENABLE HIM TO DISPOSE OF THE APPEAL , OR FOR ANY OTHER SUBSTANTIAL CAUSE INCLUDING THE ENHANCEMENT OF THE ASSESSMENT OR PENALTY WHETHER ON HIS OWN MOTION OR ON THE REQUEST OF THE ASSESSING OFFICER UNDER CLAUSE (A) OF SUB-SECTION (1) OF SECTION 251 OR THE IMPOSITION OF PENALTY UNDER SECTION 271 (I)(C) (II) IN VIEW OF THE PROVISIONS OF RULE 46A OF THE I .T. RULES, THE ADDITIONAL EVIDENCES COULD BE ADMITTED ONLY IF THE CASE OF THE ASSESSEE FALLS IN ANY OF THE FOUR CLAUSES AS MENTIONED IN SUB-RULE-1 OF R ULE 46A. IT WAS CLAIMED BY THE AR THAT SUFFICIENT OPPORTUNITIES WER E NOT PROVIDED BY THE AO TO PRODUCE THESE EVIDENCES. IT IS TO BE NOTED TH AT THIS CONTENTION OF THE AR IS NOT CORRECT AS IT IS EVIDENT FROM THE ASS ESSMENT ORDER AND THE REMAND REPORT OF THE AO THAT A LARGE NUMBER OF OPPO RTUNITIES WERE PROVIDED BY THE AO. THE CONTENTION OF THE APPELLANT THAT ITS AR DID NOT MADE COMPLIANCE BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS IS ALSO DEVOID OF ANY MERIT AS THE APPE LLANT HAS NOT FILED ANY AFFIDAVIT FROM ITS EARLIER AR IN THIS REGARD. (III) IT MAY BE MENTIONED THAT THE HONBLE DELHI HI GH COURT IN THE CASE OF MANISH BUILD WELL 204 TAXMAN 106 OBSERVED AS UNDER: ITA 1053/JP/2016_ SHANKAR JHALANI VS. ITO 5 'RULE 46A IS A PROVISION WHICH IS INVOKED, ON THE O THER HAND, BY THE ASSESSEE WHO IS IN AN APPEAL BEFORE THE COMMISSIONE R (APPEALS). ONCE THE ASSESSEE INVOKES RULE 46A AND PRAYS FOR ADMISSION O F ADDITIONAL EVIDENCE BEFORE THE COMMISSIONER (APPEALS), THEN THE PROCEDU RE PRESCRIBED IN THE SAID RULE HAS TO BE SCRUPULOUSLY FOLLOWED. THE FACT THAT SUBSECTION (4) OF SEC. 250 CONFERS POWERS ON THE COMMISSIONER (APPEAL S) TO CONDUCT AN ENQUIRY AS HE THINKS FIT, WHILE DISPOSING OF THE AP PEAL, CANNOT BE RELIED UPON TO CONTEND THAT THE PROCEDURAL REQUIREMENTS OF RULE 46A NEED NOT BE COMPLIED WITH. IF SUCH A PLEA OF THE ASSESSEE IS AC CEPTED, IT WOULD REDUCE RULE 46A TO A DEAD LETTER BECAUSE IT WOULD THEN BE OPEN TO EVERY ASSESSEE TO FURNISH ADDITIONAL EVIDENCE BEFORE THE COMMISSIO NER (APPEALS) AND, THEREFORE, CONTEND THAT THE EVIDENCE SHOULD BE ACCE PTED AND TAKEN ON RECORD BY THE COMMISSIONER (APPEALS) BY VIRTUE OF H IS POWERS OF ENQUIRY UNDER SUBSECTION (4) OF SECTION 250. THIS WOULD MEA N IN TURN THAT THE REQUIREMENT OF RECORDING REASONS FOR ADMITTING THE ADDITIONAL EVIDENCE, THE REQUIREMENT OF EXAMINING WHETHER THE CONDITIONS FOR ADMITTING THE ADDITIONAL EVIDENCE ARE SATISFIED, THE REQUIREMENT THAT THE AO SHOULD BE ALLOWED A REASONABLE OPPORTUNITY OF EXAMINING THE E VIDENCE, ETC., CAN BE THROWN TO THE WINDS, A POSITION WHICH IS WHOLLY UNA CCEPTABLE AND MAY RESULT IN UNACCEPTABLE AND UNJUST CONSEQUENCES. THE FUNDAMENTAL RULE WHICH IS VALID IN ALL BRANCHES OF LAW, INCLUDING IN COME TAX LAW, IS THAT THE ASSESSEE SHOULD ADDUCE THE ENTIRE EVIDENCE IN HIS P OSSESSION AT THE EARLIEST POINT OF TIME. THIS ENSURES FULL, FAIR AND DETAILED ENQUIRY AND VERIFICATION. IT IS FOR THE AFORESAID REASON THAT RULE 46A STARTS IN A NEGATIVE MANNER BY SAYING THAT AN APPELLANT BEFORE THE COMMISSIONER (A PPEALS) SHALL NOT BE ENTITLED TO PRODUCE BEFORE HIM ANY EVIDENCE, WHETHE R ORAL OR DOCUMENTARY, OTHER THAN THE EVIDENCE ADDUCED BY HIM BEFORE THE AO. AFTER MAKING SUCH A GENERAL STATEMENT, EXCEPTIONS H AVE BEEN CARVED OUT THAT IN CERTAIN CIRCUMSTANCES IT WOULD BE OPEN TO T HE COMMISSIONER (APPEALS) TO ADMIT ADDITIONAL EVIDENCE. THEREFORE, ADDITIONAL EVIDENCE CAN BE PRODUCED AT THE FIRST APPELLATE STAGE ONLY WHEN CONDITIONS STIPULATED IN RULE 46A ARE SATISFIED AND A FINDING IS RECORDED. T HE CONDITIONS PRESCRIBED IN RULE 46A MUST BE SHOWN TO EXIST BEFORE ADDITIONA L EVIDENCE IS ADMITTED AND EVERY PROCEDURAL REQUIREMENT MENTIONED IN RULE HAS TO BE STRICTLY COMPLIED WITH SO THAT RULE IS MEANINGFULLY EXERCISE D AND OF EXERCISED IN A ROUTINE OR CURSORY MANNER. A DISTINCTION SHOULD BE RECOGNIZED AND MAINTAINED BETWEEN A CASE WHERE THE ASSESSEE INVOKE S RULE 46A TO ADDUCE ADDITIONAL EVIDENCE BEFORE THE COMMISSIONER (APPEALS) AND A CASE WHERE THE COMMISSIONER (APPEALS), WITHOUT BEING PRO MPTED BY THE ASSESSEE, WHILE DEALING WITH THE APPEAL, CONSIDERS IT FIT TO CAUSE OR MAKE A FURTHER ENQUIRY BY VIRTUE OF THE POWERS VESTED IN H IM UNDER SUBSECTION (4) OF SECTION 250. IT IS ONLY WHEN THE EXERCISES HIS S TATUTORY SUO MOTU POWER ITA 1053/JP/2016_ SHANKAR JHALANI VS. ITO 6 UNDER THE ABOVE SUBSECTION, THAT THE REQUIREMENTS O F RULE 46A NEED NOT BE FOLLOWED. ON THE OTHER HAND, WHENEVER THE ASSESSEE, WHO IS IN APPEAL BEFORE HIM, INVOKES RULE 46A, IT IS INCUMBENT UPON THE COMMISSIONER (APPEALS) TO COMPLY WITH THE REQUIREMENTS OF RULE S TRICTLY. (IV) IT IS NOTED FROM THE FINANCIAL STATEMENTS OF T HE APPELLANT PLACED ON RECORD THAT FOR THE FINANCIAL YEARS 2012-13 AND 201 3-14, THE APPELLANT WAS HAVING TOTAL TURNOVER OF RS. 92,01,799/- AND RS . 57,26,420/- RESPECTIVELY. THESE FACTS CLEARLY PROVE THAT THE AP PELLANT WANT TO TAKE UNDUE ADVANTAGE ON ACCOUNT OF ITS ILLNESS AS IT WAS CLAIMED THAT IT WAS SUFFERING FROM HEART DISEASE AND TB WHEN IT COMES T O MAKE COMPLIANCE BEFORE THE AO, HOWEVER, THE SAID ILLNESS DID NOT HI NDER ITS BUSINESS ACTIVITIES. IT MAY BE NOTED FROM THE ASSESSMENT ORD ER AS WELL AS THE REMAND REPORT OF THE AO AS REPRODUCED ABOVE THAT A NUMBER OF NOTICES WERE ISSUED BY THE AO REQUIRING THE APPELLANT TO FI LE VARIOUS DETAILS, HOWEVER, NO COMPLIANCE WAS MADE BY THE APPELLANT. I N FACT, THE AO LEVIED A PENALTY UNDER SECTION 271(1)(B) OF THE ACT ON 15.10.2013 FOR NON COMPLIANCE OF NOTICE ISSUED U/S 142(1 )/143(2) OF T HE ACT. ANOTHER, PENALTY UNDER SECTION 272A(1)(C) WAS IMPOSED BY THE JCIT, RANGE FOR NON COMPLIANCE OF SUMMON ISSUED UNDER SECTION 131 OF TH E IT ACT. IT IS ALSO NOTED FROM THE REMAND REPORT OF THE AO THAT AGAIN A N OPPORTUNITY WAS PROVIDE TO THE APPELLANT BY THE AO TO EXPLAIN ITS C ASE, HOWEVER, STILL NO COMPLIANCE WAS MADE ON THE DATE FIXED. THIS SHOWS T HE NON-COOPERATIVE ATTITUDE OF THE APPELLANT. IN VIEW OF THE NON-COMPL IANCE BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS SUBMIT TED BY THE AO THAT ADDITIONAL EVIDENCES PRODUCED BY THE APPELLANT DURI NG APPELLATE PROCEEDINGS MAY NOT BE ADMITTED UNDER RULE 46A OF I NCOME TAX RULES. (V) IN VIEW OF THE ABOVE DISCUSSION AND RESPECTFULL Y FOLLOWING THE DECISION OF HONBLE DELHI HIGH COURT, THE ADDITIONAL EVIDENCES SOUGHT TO BE ADMITTED BY THE AR CANNOT BE ADMITTED UNDER RULE 46A OF THE IT RULES AS THE AR ITA 1053/JP/2016_ SHANKAR JHALANI VS. ITO 7 FAILED TO MAKE OUT THAT ITS CASE FALLS IN ANY OF CL AUSES OF RULE 46A AND THUS THE MATTER IS DECIDED WITHOUT TAKING INTO ACCO UNT THESE EVIDENCES. 5. WHILE PLEADING ON BEHALF OF THE ASSESSEE, THE LD AR HAS SUBMITTED AS UNDER: 1. IN COURSE OF ASSESSMENT PROCEEDINGS, AO OBSERVED THAT ASSESSEE DID NOT RESPOND TO THE SHOW CAUSE NOTICES ISSUED BY HIM AND THUS HE COMPLETED THE ASSESSMENT EX-PARTE U/S 144 ON THE BASIS OF MATERIAL ALREADY AVAILABLE ON RECORD. 2. IN APPELLATE PROCEEDINGS, ASSESSEE VIDE LETTER D T. 09.03.2016 (PB 12A) REQUESTED FOR ADMISSION OF ADDITIONAL EVIDENCE S UNDER RULE 46A. IT WAS SUBMITTED THAT ASSESSEE IS SUFFERING FR OM HEART DISEASE SINCE 2010 AND IN FY 2010-11, HE WAS DIAGNO SED WITH TB ALSO. THE TREATMENT OF TB WAS STARTED AND DUE TO TH IS HE COULD NOT GIVE ATTENTION TO THE VARIOUS NOTICES ISSUED BY AO AND WAS DEPENDENT ON HIS COUNSEL. THE MEDICAL DOCUMENTS WER E ALSO FILED. HOWEVER, ON RECEIPT OF ORDER IT WAS GATHERED THAT C OUNSEL DID NOT APPEAR BEFORE THE AO AS AND WHEN REQUIRED AND THUS THE ASSESSMENT WAS COMPLETED U/S 144. ON SUGGESTION OF COUNSEL, ASSESSEE FILED AN APPEAL. HOWEVER, IT WAS SEEN THAT HE WAS NOT GIVING ENOUGH TIME FOR PREPARATION OF THE CASE AND THUS ASSESSEE CHANGED THE COUNSEL. AFFIDAVIT OF ASSESSEE IN THIS REGARD IS AT PB 13A. 3. THE LD. CIT(A) CALLED FOR REMAND REPORT. IN REMA ND REPORT DT. 15.04.2016 (PB 14A-16A), AO SUBMITTED THAT NO DOCUM ENTARY EVIDENCE HAS BEEN FILED REGARDING CONTENTION OF ASS ESSEE THAT HE WAS SUFFERING FROM ILLNESS. THE ASSESSEE CASE DOES NOT FALL IN ANY OF THE EXCEPTIONS MENTIONED IN RULE 46A. THE AR OF THE ASSESSEE ITA 1053/JP/2016_ SHANKAR JHALANI VS. ITO 8 APPEARED ON 11.04.2016 AND SUBMITTED SOME BILLS AND SOUGHT ADJOURNMENT TILL 15.04.2016. HOWEVER, ON THIS DATE NONE ATTENDED. THUS, ALL EVIDENCES PRODUCED BY ASSESSEE ARE LIABLE TO BE REJECTED. 4. IN RESPONSE TO THE REMAND REPORT, ASSESSEE VIDE HIS REPLY (PB 17A) SUBMITTED THAT HE HAS PRODUCED THE MEDICAL TRE ATMENT PRESCRIPTIONS TO THE AO ON 11.04.2016. ALL THE EVID ENCES IN SUPPORT OF THE ADDITION MADE ARE PLACED IN THE PAPE R BOOK CONTAINING 102 PAGES. THE AO DID NOT EXAMINE THE SA ME SIMPLY BECAUSE AR OF THE ASSESSEE REACHED LATE ON 15.04.20 16 AND THE AO BY THAT TIME HAS ALREADY PREPARED AND SIGNED THE REPORT. 5. THE LD. CIT(A) HELD THAT ASSESSEES CASE DOES NO T FALL IN ANY OF THE FOUR CLAUSES MENTIONED IN SUB-RULE 1 OF RULE 46A. I N FY 2012-13 & 2013-14 ASSESSEE HAS SHOWN TURNOVER OF RS.92,01,799 /- AND RS.57,26,420/- RESPECTIVELY. THIS SHOWS THAT ASSESS EE WANTS TO TAKE UNDUE ADVANTAGE ON ACCOUNT OF ITS ILLNESS WHEN IT COMES TO MAKE COMPLIANCE BEFORE THE AO, HOWEVER, THE SAID IL LNESS DOES NOT HINDER ITS BUSINESS ACTIVITIES. A NUMBER OF NOT ICES WERE ISSUED BY THE AO REQUIRING THE APPELLANT TO FILE VARIOUS D ETAILS, HOWEVER, NO COMPLIANCE WAS MADE BY THE APPELLANT. IN REMAND PROCEEDINGS, AGAIN OPPORTUNITY WAS PROVIDED TO THE ASSESSEE TO EXPLAIN ITS CASE BUT NO COMPLIANCE WAS MADE ON THE FIXED DATE ALSO. THIS SHOWS NON-COOPERATIVE ATTITUDE OF THE AS SESSEE. ACCORDINGLY, AFTER RELYING ON THE DECISION OF HONB LE DELHI HIGH COURT IN CASE OF MANISH BUILD WELL 204 TAXMAN 106, LD. CIT(A) UPHELD THE ACTION OF AO AND DECIDED THE CASE WITHOU T TAKING INTO ACCOUNT ADDITIONAL EVIDENCE FILED UNDER RULE 46A. 6. IT IS A FUNDAMENTAL RULE OF JURISPRUDENCE THAT J USTICE SHOULD PREVAIL OVER THE TECHNICALITIES. SUPREME COURT IN CASE OF S . NAGARAJ VS. ITA 1053/JP/2016_ SHANKAR JHALANI VS. ITO 9 STATE OF KARNATAKA 4 SCC 595 OBSERVED THAT JUSTICE IS A VIRTUE WHICH TRANSCENDS ALL BARRIERS. NEITHER THE RULES OF PROCEDURE NOR TECHNICALITIES OF LAW CAN STAND IN ITS WAY. THE ORD ER OF THE COURT SHOULD NOT BE PREJUDICIAL TO ANYONE. RULE OF STARE DECISIONS IS ADHERED TO FOR CONSISTENCY BUT IT IS NOT AS INFLEXI BLE AS ADMINISTRATIVE LAW AS IN PUBLIC LAW. EVEN THE LAW BE NDS BEFORE JUSTICE. ENTIRE CONCEPT OF WRIT JURISDICTION EXERCIS ED BY THE HIGHER COURTS IS FOUNDED ON EQUITY AND FAIRNESS. IF THE CO URT FINDS THAT THE ORDER WAS PASSED UNDER A MISTAKE AND IT WOULD N OT HAVE EXERCISED THE JURISDICTION BUT FOR THE ERRONEOUS AS SUMPTION WHICH IN FACT DID NOT EXIST AND ITS PREPARATION SHALL RES ULT IN MISCARRIAGE OF JUSTICE, THEN IT CANNOT ON ANY PRINCIPLE BE PREC LUDED FROM RECTIFYING THE ERROR. MISTAKE IS ACCEPTED AS VALID REASON TO RECALL AN ORDER. DIFFERENCE LIES IN THE NATURE OF MISTAKEN AN D SCOPE OF RECTIFICATION, DEPENDING ON IF IT IS OF FACT OR LAW . BUT THE ROOT FROM WHICH THE POWER FLOWS IS THE ANXIETY TO AVOID INJUS TICES. IT IS EITHER STATUTORY OR INHERENT. THE LATTER IS AVAILABLE WHER E MISTAKE IS OF THE COURT. IN ADMINISTRATIVE LAW, THE SCOPE IS STIL L WIDER. TECHNICALITIES APART IF THE COURT IS SATISFIED OF T HE INJUSTICE THEN IT IS ITS CONSTITUTIONAL AND LEGAL OBLIGATION TO SET I T RIGHT BY RECALLING ITS ORDER. 7. IN THE PRESENT CASE, ASSESSEE HAS GIVEN AN EXPLA NATION WHICH PREVENTED HIM FOR SUBMITTING THE DOCUMENTS BEFORE T HE AO. THE SAME WERE SUBMITTED BEFORE THE LD. CIT(A). THE LD. CIT(A) ALSO CALLED A REMAND REPORT. THUS, OPPORTUNITY HAS BEEN GIVEN TO THE AO TO EXAMINE THE ADDITIONAL EVIDENCES FILED. ONCE THIS COURSE IS ADOPTED WHICH IS AS PER RULE 46A, IT IS NOT APPROPR IATE ON PART OF THE LD. CIT(A) NOT TO CONSIDER THE SAME. THE DECISI ON OF DELHI HIGH COURT IN CASE OF MANISH BUILD WELL 206 TAXMAN 106 IS IN A ITA 1053/JP/2016_ SHANKAR JHALANI VS. ITO 10 DIFFERENT FACT SITUATION WHERE THE ASSESSEE INVOKES RULE 46A AND PRAYED FOR ADMISSION OF ADDITIONAL EVIDENCE BUT THE LD. CIT(A) WITHOUT CALLING A REMAND REPORT FROM THE AO DECIDED THE ISSUE. AS AGAINST THIS, IN THE PRESENT CASE, CIT(A) HAS CALLE D A REMAND REPORT BUT THE AO WITHOUT GIVING HIS FINDING ON THE MERIT OF THE CASE HAS SUBMITTED THAT THE EVIDENCES PRODUCED MAY NOT BE ACCEPTED. THIS CONTENTION OF THE AO IS ACCEPTED BY THE LD. CIT(A) THOUGH ON THE BASIS OF THESE PAPERS HE HAS WORKED O UT THE PEAK BALANCE AND REDUCED THE ADDITION WITHOUT CONSIDERIN G THE CASH BOOK FURNISHED BY THE ASSESSEE IN SUPPORT OF THE TR ANSACTION MADE IN THE BANK ACCOUNT. IN VIEW OF THE ABOVE FACTS, THE ADDITIONAL EVIDENC E, IN THE INTEREST OF JUSTICE OUGHT TO HAVE BEEN ADMITTED AND THEREFOR E THE MATTER BE SET ASIDE TO THE AO FOR MAKING THE FRESH ASSESSM ENT AFTER CONSIDERING ALL THE EVIDENCES. 6. ON THE OTHER HAND, THE LD SR. DR HAS RELIED ON T HE ORDERS OF THE AUTHORITIES: 7. THE BENCH HAVE HEARD BOTH THE SIDES ON THIS ISSUE . THE ASSESSEE HAS CLAIMED THAT THE LD. CIT(A) WITHOUT ADMITTING HIS ADDITIONAL EVIDENCES DECIDED THE APPEAL OF THE ASSESSEE AND SUFFICIENT O PPORTUNITIES WERE NOT PROVIDED BY THE ASSESSING OFFICER TO THE ASSESSEE T O PRODUCE THE EVIDENCES. THE LD. CIT(A) HELD THAT IN THE PROVISIONS OF RULE 46A OF THE IT RULES, THE ADDITIONAL EVIDENCES COULD BE ADMITTED O NLY IF THE CASE OF THE ITA 1053/JP/2016_ SHANKAR JHALANI VS. ITO 11 ASSESSEE FALLS IN ANY OF THE FOUR CLAUSES MENTIONED IN SUB-RULE (1) OF RULE 46A. THE CLAUSES ARE AS UNDER: 46A.(1) THE APPELLANT SHALL NOT BE ENTITLED TO PROD UCE BEFORE THE DEPUTY COMMISSIONER (APPEALS)OR, AS THE CASE MAY BE, THE C OMMISSIONER (APPEALS), ANY EVIDENCE, WHETHER ORAL OR DOCUMENTAR Y, OTHER THAN THE EVIDENCE PRODUCED BY HIM DURING THE COURSE OF PROCE EDINGS BEFORE THE ASSESSING OFFICER, EXCEPT IN THE FOLLOWING CIRCUMST ANCES, NAMELY : (A) WHERE THE ASSESSING OFFICER HAS REFUSED TO ADMI T EVIDENCE WHICH OUGHT TO HAVE BEEN ADMITTED; OR (B) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING THE EVIDENCE WHICH HE WAS CALLED UPON TO PRODUCE BY THE ASSESSING OFFICER; OR (C) WHERE THE APPELLANT WAS PREVENTED BY SUFFICIENT CAUSE FROM PRODUCING BEFORE THE ASSESSING OFFICER ANY EVIDENCE WHICH IS RELEVANT TO ANY GROUND OF APPEAL; OR (D) WHERE THE ASSESSING OFFICER HAS MADE THE ORDER APPEALED AGAINST WITHOUT GIVING SUFFICIENT OPPORTUNITY TO THE APPELLANT TO A DDUCE EVIDENCE RELEVANT TO ANY GROUND OF APPEAL. THE LD. CIT(A) HELD THAT LARGE NUMBER OF OPPORTUNITIE S WERE PROVIDED BY THE A.O. TO THE ASSESSEE. IT IS NOTED FROM THE FINA NCIAL STATEMENTS OF THE ASSESSEE THAT FOR THE F.Y. 2012-13 AND 2013-14, THE ASSESSEE WAS HAVING TOTAL TURNOVER OF RS. 92,01,799/- AND RS. 57,26,420 /- RESPECTIVELY. VARIOUS NOTICES WERE ISSUED BY THE ASSESSING OFFICER TO FILE THE DETAILS BUT NO COMPLIANCE WAS MADE BY THE ASSESSEE. IN VIEW OF T HE ABOVE FACTS AND CIRCUMSTANCES, THE BENCH FIND THAT THERE ARE NO ANY CONTRARY MATERIAL IN THE ORDER OF THE LD. CIT(A), THEREFORE, WE UPHOLD THE ORDER OF THE LD. ITA 1053/JP/2016_ SHANKAR JHALANI VS. ITO 12 CIT(A) ON THIS ISSUE. ACCORDINGLY, THIS GROUND OF AS SESSEES APPEAL IS DISMISSED. 8. THE 2 ND GROUND OF THE APPEAL IS AGAINST CONFIRMING THE TRA DING ADDITION OF RS. 11,99,984/- BY DISALLOWING 15% OF TH E ENTIRE PURCHASES OF RS. 79,99,891/-. THE LD. CIT(A) HAS DEALT THE ISSUE B Y HOLDING AS UNDER: 3.1.2 DETERMINATION : (I) DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE APPELLANT WAS REQUIRED TO PRODUCE ITS BOOKS OF ACCOUNTS, WHICH WERE NOT PR ODUCED AND THEREFORE THE PURCHASES MADE BY THE APPELLANT REMAINED UNVERI FIABLE. IN VIEW OF THE BOGUS/UNVERIFIABLE PURCHASES, THE AO DISALLOWED 25% OF PURCHASES AMOUNTING TO RS. 79,99,891/- AND MADE ADDITION OF R S. 19,99,973/-. DURING APPELLATE PROCEEDINGS, IT WAS SUBMITTED THAT IT WAS MAINTAINING COMPLETE BOOKS OF ACCOUNTS ON DAY TO DAY BASIS AND THESE ARE SUPPORTED BY BILLS AND VOUCHERS. IT HAS ALSO FILED THE COPIES OF ITS PURCHASE BILLS. HOWEVER SINCE THE ADDITIONAL EVIDENCES SUBMITTED BY THE APPELLANT AT THE APPELLATE STAGE ARE NOT ADMITTED, THEREFORE NO COGNIZANCE COULD BE GIVEN TO THE ADDITIONAL EVIDENCES FILED BEFORE ME F OR THE FIRST TIME. IT IS NOTED THAT IN THE CASES OF BOGUS / UNVERIFIABLE PUR CHASES, THE HONORABLE ITAT, JAIPUR HAS TAKEN A CONSISTENT VIEW THAT THE 1 5% OF SUCH BOGUS / UNVERIFIABLE PURCHASES CAN BE DISALLOWED AND ACCORD INGLY RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE ITAT, JAIPUR IN THE CASE OF ANUJ VARSHNEY & OTHERS, IT IS HELD THAT THE TRADING EDIT ION IS TO BE RESTRICTED TO 15% OF PURCHASES SHOWN BY THE APPELLANT FOR THE YEA R UNDER CONSIDERATION. THEREFORE, OUT OF THE TRADING ADDITI ON OF RS. 19,99,973/- MADE BY THE AO, ADDITION OF RS. 11,99,984/- IS HERE BY SUSTAINED AND THE REMAINING ADDITION OF RS. 7,99,989/- IS HEREBY DELE TED. THEREFORE THIS GROUND OF APPEAL IS PARTLY ALLOWED. ITA 1053/JP/2016_ SHANKAR JHALANI VS. ITO 13 9. WHILE PLEADING ON BEHALF OF THE ASSESSEE, THE LD AR HAS SUBMITTED AS UNDER: 1. ASSESSEE IS MAINTAINING COMPLETE BOOKS OF ACCOUN T ON DAY-TO-DAY BASIS. THESE BOOKS ARE DULY SUPPORTED BY BILLS AND VOUCHERS. ALL THE TRANSACTION OF PURCHASES & SALES IS FULLY VERIF IABLE FROM THE SUPPORTING BILLS, VOUCHERS & DOCUMENTS MAINTAINED B Y ASSESSEE. THE ASSESSEE HAS PRODUCED THE COPY OF PURCHASE BILL S AND LEDGER ACCOUNT OF PARTIES (PB 70-93). FROM THESE DOCUMENTS IT CAN BE NOTED THAT PAYMENT TO THESE PARTIES WERE MADE BY CH EQUE. THESE DOCUMENTS WERE NOT ACCEPTED BY THE CIT(A) BECAUSE I T WAS NOT FILED BEFORE THE AO. THE AO HAS ACCEPTED THE SALES. THERE CANNOT BE SALE WITHOUT PURCHASE. IN THESE CIRCUMSTANCES, T HE DISALLOWANCE OF 15% OF THE PURCHASES MADE BY THE CI T(A) IS UNCALLED FOR. 2. HONBLE ITAT HAS TAKEN A VIEW IN VARIOUS CASES T HAT WHERE PURCHASES ARE UNVERIFIABLE, BOOKS OF ACCOUNTS ARE T O BE REJECTED BUT THE ADDITION CANNOT BE MADE BY DISALLOWING 25% OF THE PURCHASES, RATHER APPROPRIATE G.P. RATE IS TO BE AP PLIED CONSIDERING THE PAST HISTORY OF THE CASE & OTHER SU RROUNDING CIRCUMSTANCES. THE POSITION OF THE G.P. RATE DECLAR ED BY THE ASSESSEE AS COMPARED TO EARLIER YEAR IS AS UNDER:- A.Y. SALES GROSS PROFIT G.P. RATE 2011 - 12 1,27,12,846 18,67,361 14.68% 2010 - 11 99,94,807 14,60,532 14.61% 2009 - 10 2,10,06,499 30,46,728 14.50% FROM THE ABOVE TABLE, IT CAN BE NOTED THAT G.P. RA TE OF 14.68% DECLARED DURING THE YEAR IS BETTER THAN THE G.P. RA TE OF 14.61% DECLARED IN LAST YEAR & G.P. RATE OF 14.50% DECLARE D IN AY 09-10. ITA 1053/JP/2016_ SHANKAR JHALANI VS. ITO 14 IT IS A SETTLED LAW THAT, NO TRADING ADDITION IS CA LLED FOR IF THE RESULT DECLARED IS BETTER AS COMPARED TO THE RESULT DECLAR ED IN EARLIER YEAR. THUS, WHEN THE OVERALL AMOUNT OF PROFIT DECLA RED BY THE ASSESSEE IS BETTER AS COMPARED TO THE RESULTS DECLA RED IN EARLIER YEARS, DISALLOWANCE OF 15% OF PURCHASES MADE BY THE CIT(A) IS UNWARRANTED & BE DELETED. FOR THIS RELIANCE IS PLAC ED ON T HE FOLLOWING CASES:- CIT VS. VAIBHAV GEMS LTD. (2014) 112 DTR 84 (RAJ.) (HC) DT. 21.08.2014 WHILE THE PAST HISTORY BECOMES THE RELEVANT BASIS BUT IF THE AO WISHES TO TINKER WITH THE BASIS OF PAST RECORDS, TH EN SOME FLAW HAS TO BE FOUND BY THE AO IN MAKING SOME ADDITION. TRIB UNAL HAS COME TO A CONCLUSION THAT IN THE IMMEDIATE PAST ASS ESSMENT YEAR, THE TRIBUNAL ITSELF HAS APPLIED G.P. RATE OF 2.60% WHEREAS IN THE PRESENT YEAR UNDER CONSIDERATION, THE G.P. RATE HAS BEEN DECLARED AT 4.85%. AO WAS UNABLE TO POINT OUT AS TO WHAT ARE THE DISTINGUISHING FEATURES IN BETWEEN THE TWO ASSESSME NT YEARS. NO SUBSTANTIAL QUESTION OF LAW ARISES. CIT VS. GUPTA K.N. CONSTRUCTION COMPANY (2015) 116 DTR 377 (RAJ.) (HC) IN A CASE WHERE THE PROVISIONS OF SEC. 145(3) ARE INVOKED, EITHER THE PAST HISTORY OF THE ASSESSEE OR THE HISTORY OF SIMILARLY SITUATED CASES HAS TO BE CONSIDERED. IN THE INSTANT CASE, TH E AO IS ABSOLUTELY SILENT IN JUSTIFYING THE ADDITION/DISALL OWANCE MADE BY HIM WHICH HAS RESULTED IN N.P. RATE OF 13.7%. ASSES SMENT ORDER IS TOTALLY SILENT ABOUT THE NET PROFIT RATE SHOWN BY O THER SIMILARLY SITUATED CASES. WHILE COMPARING WITH THE PAST HISTO RY, IF THE ITA 1053/JP/2016_ SHANKAR JHALANI VS. ITO 15 RESULTS ARE FAIR AND REASONABLE, THEN INVARIABLY NO ADDITION IS TO BE MADE. IN THE RELEVANT YEAR, THOUGH THE CONTRACT REC EIPTS OF THE ASSESSEE HAVE SHARPLY INCREASED FROM RS. 10.60 CROR ES TO RS. 12.32 CRORES IN THE PRECEDING YEAR, THE N.P. RATE H AS INCREASED FROM 5.02% TO 5.38%. THOUGH THE ARGUMENT OF THE REV ENUE THAT WHERE THE ASSESSEE MANIPULATES THE ACCOUNTS BY KEEP ING THE PROFIT MARGINS COMMENSURATE WITH THE PAST YEARS OR SLIGHTLY MORE THAN BY ITSELF CANNOT BE A BASIS FOR ACCEPTANCE OF RESULTS IS JUSTIFIED, IT IS FOR THE AO TO BRING ON RECORD SOME CONCRETE MATERIAL/EVIDENCE TO MAKE A PROPER ADDITION. IN THE INSTANT CASE, THE AO HAS FAILED TO BRING ON RECORD ANY COMPARABLE CASE SO AS TO JUSTIFY THE ADDITION MADE BY HIM. TRIBUNAL HAS SUST AINED ONLY AN ADHOC ADDITION TO THE EXTENT OF RS. 5 LACS. FINDING S OF THE TRIBUNAL IS A PURE FINDING OF FACT BASED ON APPRECIATION OF EVIDENCE. THEREFORE, NO SUBSTANTIAL QUESTION OF LAW ARISES. CIT VS. INANI MARBLES PVT. LTD. 316 ITR 125 (RAJ.) (HC) DT. 19.08.2008 IN THIS CASE, AO REJECTED THE BOOKS OF ACCOUNTS, I NVOKED SECTION 145 & MADE ASSESSMENT BY APPLYING G.P. RATE OF 15% ON THE SALES DISCLOSED BY ASSESSEE. TRIBUNAL HELD THAT IN THE AB SENCE OF ANY CHANGE IN FACTUAL POSITION NORMALLY THE PROFIT RATE DECLARED & ACCEPTED IN PRECEDING YEAR, CONSTITUTES A GOOD BASI S FOR WORKING OUT THE GROSS PROFIT. ACCORDINGLY, IT APPLIED G.P. RATE DECLARED & ACCEPTED AT 2.51% IN EARLIER YEAR. HONBLE HIGH COU RT HELD THAT AS THE G.P. RATE OF 2.51% WAS APPLIED IN A.Y. 99-00 & THAT HAVING BEEN UPHELD BY THE TRIBUNAL, THE ORDER OF THE TRIBU NAL FOR A.Y. 00- 01 WAS JUSTIFIED. ITA 1053/JP/2016_ SHANKAR JHALANI VS. ITO 16 KANSARA BEARINGS P. LTD VS. ACIT 270 ITR 235 (RAJ) DT. 01.05.2003 IT WAS HELD THAT THE LAST YEARS PROFITS DECLARED BY ASSESSEE IS THE BEST GUIDE FOR APPLICATION OF PROFIT RATE AND WHEN THE GP SHOWN IN THE LAST YEAR WAS BETTER AND AO HAS NOT GIVEN ANY C OMPARABLE CASE FOR HIGHER GP THEN HIS ACTION TO MAKE THE TRAD ING ADDITION CANNOT BE APPROVED. CIT VS. BABULAL AGARWAL (2014) 97 DTR (RAJ) 284 (H C) G.P. SHOWN IN THE PRESENT YEAR AT 7.43% WAS REASON ABLY HIGHER THAN THE PREVIOUS YEARS, AND COULD NOT HAVE BEEN DU BBED AS FANCIFUL OR PALPABLY BASELESS. WHEN THE CIT(A) HAS DELETED THE ADDITION IN THE TRADING RESULT ON RELEVANT CONSIDER ATIONS AND FURTHER, WHEN ITAT HAS CONCURRED WITH THE CIT(A), N O SUBSTANTIAL QUESTION OF LAW ARISE AND APPEAL WAS THUS DISMISSED . THUS, WHERE THE GP RATES SHOWN BY ASSESSEE IN CURRENT YEAR WAS HIGHER THAN LAST YEAR'S PROFIT DECLARED BY THE ASSESSEE, PROFIT DECLARED BY ASSESSEE CANNOT BE REJECTED. M/S OSCAR EXPORTS VS ITO ITA NO. 203/JP/08 ORDER DA TED 19-09- 2008 IT WAS HELD THAT WHEN THE ESTIMATION IS MADE, THE IMMEDIATE PRECEDING YEAR IS THE NEAREST YEAR WHERE THE ASSESS EE HAS DECLARED THE GP RATE OF 10%. THE ASSESSEE HAS DECLA RED THE GP RATE OF 14.32% DURING THE IMPUGNED YEAR WHICH IS BE TTER THAN THE GROSS PROFIT DECLARED IN THE IMMEDIATE PRECEDING YE AR. THEREFORE, THOUGH THE BOOKS OF ACCOUNTS ARE REJECTED YET NO AD DITION IS CALLED FOR ON ACCOUNT OF TRADING. ITA 1053/JP/2016_ SHANKAR JHALANI VS. ITO 17 ADDL. CITVS. V. LAKHANI SHOES LIMITED 34 TAX WORLD 32 (JP) THE TRADING ADDITION CANT BE MADE WITHOUT POINTIN G OUT ANY SPECIFIC DEFECT IN THE BOOKS OF ACCOUNTS. FURTHER N O TRADING ADDITION IS REQUIRED WHERE THE ASSESSEE HAS SHOWN B ETTER RESULT THAN EARLIER YEARS. 3. THE HONBLE ITAT, JAIPUR BENCH VIDE ORDER DT. 22 .10.2014 IN CASE OF ANUJ KUMAR VARSHNEY VS. ITO (2014) 41 CCH 175 HE LD THAT DISALLOWANCE OF 15% OF UNVERIFIABLE PURCHASES IS RE ASONABLE. IN HOLDING SO, THE BENCH RELIED ON THE RAJASTHAN HIGH COURT JUDGMENT IN CASE OF VENUS ARTS & GEMS VS. ITO (2014 ) 369 ITR 161. IT MAY BE NOTED THAT IN THIS CASE, THE ASSESSE E CARRYING ON THE BUSINESS OF MANUFACTURING OF SILVER AND METAL B EADS ETC. DECLARED G.P. RATE OF 8.79% AS AGAINST G.P. RATE OF 11.4% DECLARED IN THE IMMEDIATELY PRECEDING YEAR. THE AO BY HOLDING THAT ASSESSEE IS UNABLE TO PROVE CERTAIN PURCHASES MADE TRADING ADDITION BY APPLYING G.P. RATE OF 14% ON THE DECLAR ED TURNOVER. THE LD. CIT(A)/ITAT AFTER PERUSING THE PREVIOUS HIS TORY OF THE ASSESSEE, APPLIED A G.P. RATE OF 11% AS AGAINST 14% APPLIED BY THE AO. ON APPEAL, THE HONBLE HIGH COURT UPHELD TH E TRADING ADDITION CONFIRMED BY HONBLE ITAT BY APPLYING THE G.P. RATE OF PREVIOUS YEAR BY HOLDING THAT ONCE PROVISIONS OF SE C. 145(3) ARE INVOKED THEN WHAT SHOULD BE A REASONABLE G.P. RATE IS REQUIRED TO BE SEEN WHICH IS A FINDING OF FACT AND ON THE BASIS OF APPRECIATION OF EVIDENCE, THUS IT IS A PURE FINDING OF FACT. THU S, IN THIS DECISION ALSO, THE TRADING ADDITION IS UPHELD BY APPLICATION OF G.P. RATE OF THE PREVIOUS YEAR. 4. RELIANCE IS FURTHER PLACED ON THE FOLLOWING CAS ES:- ITA 1053/JP/2016_ SHANKAR JHALANI VS. ITO 18 DIAGNOSTICS VS. CIT & ANR. 56 DTR 317 DT. 04.03.20 11 (CAL) (HC) ASSESSEE MADE PAYMENT FOR PURCHASES FROM VARIOUS P ARTIES BY ACCOUNT PAYEE CHEQUE AS WELL AS BY CASH. AO GAVE AN OPPORTUNITY TO THE APPELLANT TO PRODUCE THESE PARTIES FOR VERIF ICATION OF THE CLAIM, BUT NONE OF THEM APPEARED BEFORE THE AO. ACC ORDINGLY, HE MADE THE ADDITION BY TREATING THE CLAIM AS FICTITIO US. IT WAS HELD THAT IN RESPECT OF PURCHASES IN CASH, THE ASSESSEE HAVING FAILED TO PRODUCE ANY OF THE PARTIES EXCEPT THE BILLS ALLEGED TO BE RAISED BY THOSE CONCERNS, THE TRIBUNAL WAS JUSTIFIED IN DISBE LIEVING THOSE TRANSACTIONS. HOWEVER, IN RESPECT OF ANOTHER PARTY, PAYMENT WAS NOT MADE BY CASH BUT BY ACCOUNT PAYEE CHEQUES AND E NCASHED THROUGH THE BANKERS. IF AN ASSESSEE TOOK CARE TO PU RCHASE THE MATERIALS FOR HIS BUSINESS BY WAY OF ACCOUNT PAYEE CHEQUES FROM A THIRD PARTY AND SUBSEQUENTLY, THREE YEARS AFTER T HE PURCHASE, THE SAID THIRD PARTY DOES NOT APPEAR BEFORE THE AO PURS UANT TO THE NOTICE OR EVEN HAS STOPPED THE BUSINESS, THE CLAIM OF THE ASSESSEE ON THAT ACCOUNT CANNOT BE DISCARDED AS NON-EXISTENT . CIT VS. AMARPALI JEWELS (P.) LTD. 65 DTR 196 (RAJ. )(HC) IT IS ESSENTIALLY FOR THE TAXING AUTHORITIES TO DE CIDE AS TO WHAT SHOULD BE THE % RATE OF GP THAT SHOULD BE APPLIED O N PARTICULAR YEARLY TURNOVER OF THE ASSESSEE. IT IS A MATTER OF DISCRETION TO BE EXERCISED ON SETTLED PRACTICE APPLICABLE TO BUSINES S STANDARDS AND WHICH IS PREVALENT IN COMMERCIAL WORLD. THUS, IN A CASE, WHERE BOOKS OF ACCOUNTS ARE REJECTED U/S 145(3) & ADDITIO N MADE BY DISALLOWING 25% OF UNVERIFIABLE PURCHASES IS REDUCE D BY APPLYING A G.P. RATE BY ACCEPTING THE FACTUAL EXPLANATION OF A SSESSEE, THE SAME WOULD NOT INVOLVE ANY SUBSTANTIAL ISSUE OF LAW AS SUCH & THE COURT IN ITS APPELLATE JURISDICTION U/S 260A IBID, WOULD NOT AGAIN DE ITA 1053/JP/2016_ SHANKAR JHALANI VS. ITO 19 NOVO HOLD YET ANOTHER FACTUAL INQUIRY WITH A VIEW T O FIND OUT AS TO WHETHER EXPLANATION OFFERED BY ASSESSEE IS GOOD OR BAD, OR WHETHER IT WAS RIGHTLY ACCEPTED OR NOT. THEREFORE, IT IS ONLY WHEN THE FACTUAL FINDING RECORDED HAD BEEN ENTIRELY DE H ORS THE SUBJECT, OR UNREASONED, OR FOUND AGAINST THE PROVISIONS OF L AW, THEN A CASE FOR FORMULATION OF ANY SUBSTANTIAL QUESTION OF LAW ARISES. CIT VS. PRECIOUS JEWELS CORPORATION 205 TAXMAN 22 (RAJ.)(HC)(MAG.) IN COURSE OF ASSESSMENT, AO MADE CERTAIN ADDITION ON ACCOUNT OF BOGUS PURCHASES MADE BY THE ASSESSEE. CIT(A) AS ALS O TRIBUNAL DELETED THE ADDITIONS MADE BY AO HOLDING THAT TRANS ACTIONS IN QUESTION WERE GENUINE. IT WAS HELD THAT ONCE CIT(A) AND TRIBUNAL ACCEPTED THE FACTUAL EXPLANATION OFFERED BY THE ASS ESSEE & ON THAT BASIS DELETED THE ADDITIONS MADE BY AO, THEN, IT WO ULD NOT INVOLVE ANY SUBSTANTIAL QUESTION OF LAW FOR EXAMINATION BY HIGH COURT. THEREFORE, HIGH COURT IN ITS APPELLATE JURISDICTION U/S 260A, WOULD NOT DE NOVO HOLD ANOTHER FACTUAL INQUIRY WITH A VIE W TO FIND OUT AS TO WHETHER THE EXPLANATION OFFERED BY THE ASSESSEE WAS GOOD OR BAD & THUS REVENUES APPEAL IS TO BE DISMISSED. SHANKAR EXPORTERS VS. ACIT 42 DTR 441 DT.01.06.2010 (JPR.) ASSESSEE DEALING IN JEWELLERY, DIAMOND, PRECIOUS & SEMI PRECIOUS STONES & PEARLS RETURNED G.P. RATE OF 17.89% AS AGA INST 19.83% IN THE PRECEDING YEAR. AO REJECTED THE BOOKS OF ACC OUNTS & MADE TRADING ADDITION ON THE GROUND THAT ASSESSEE FAILED TO PRODUCE 8 PARTIES FOR VERIFICATION FOR GENUINENESS OF PURCHAS ES. ASSESSEE HAS MAINTAINED REGULAR BOOKS OF ACCOUNTS; DAY TO DAY ST OCK REGISTER, PRODUCTION & MANUFACTURING RECORDS & BOOKS WERE AUD ITED U/S ITA 1053/JP/2016_ SHANKAR JHALANI VS. ITO 20 44AB. IN THESE FACTS, IT WAS HELD THAT ONLY ON ACCO UNT OF NON VERIFIABILITY OF FEW PURCHASES REJECTION OF BOOKS O F ACCOUNTS WAS NOT JUSTIFIED AS NO OTHER DEFECT FOUND BY THE AO IN MAINTAINING BOOKS OF ACCOUNTS. A SMALL VARIATION IN G.P. RATE D OES NOT JUSTIFY DISTURBANCE IN THE TRADING RESULT & THEREFORE ADDIT ION ON ACCOUNT OF LOW G.P. RATE IS TO BE DELETED. COMMISSIONER OF INCOME-TAX V. LEADER VALVES P. LTD . 285 ITR 0435 (P&H) THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFA CTURE AND SALE OF VARIOUS TYPES OF VALVES, COCKS AND BOILER F ITTINGS, ETC. AO INVOKING THE PROVISIONS OF SECTION 145 OF THE INCOM E-TAX ACT, 1961, ASSESSED ITS INCOME AT RS. 2,10,63,154 WHICH INCLUDED BOGUS PURCHASES TO THE TUNE OF RS. 1,48,93,287. CIT (A) HELD THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE FULLY VER IFIABLE, THAT SECTION 145 NEED NOT HAVE BEEN INVOKED AND THE ADDI TION FOR PURCHASES AS BOGUS WAS WRONG AS THE CONSUMPTION STO OD FULLY PROVED AND THE EXISTENCE OF SELLING PARTIES COULD N OT BE DENIED. IT UPHELD THE BASIS OF VALUATION OF CLOSING STOCK OF W ORK-IN-PROGRESS AND HENCE DELETED THE ADDITIONS OF RS. 1,48,93,286 MADE BY THE AO ON ACCOUNT OF BOGUS PURCHASES. IT WAS HELD THAT THE PURCHASE OF SCRAP COULD NOT BE TERMED BOGUS FOR THE REASON T HAT IN THE SUBSEQUENT ASSESSMENT YEAR, THE PURCHASES FROM THES E VERY PARTIES STOOD ACCEPTED BY THE DEPARTMENT TO A VERY SUBSTANTIAL EXTENT. NO SALE INVOICES WERE FOUND TO BE UNDERVALU ED OR THE PURCHASES INFLATED. THE EXTRAORDINARY PROFIT IN RES PECT OF GOODS SOLD AND AS RECORDED IN THE BOOKS OF ACCOUNT WHICH OUGHT TO HAVE BEEN TAKEN FAVOURABLY QUA THE ASSESSEE, WAS CONSIDE RED ADVERSE BY THE ASSESSING OFFICER BY ADOPTING AN E RRONEOUS APPROACH. THE ASSESSEES CONTENTION THAT OUT OF TOT AL PURCHASES OF ITA 1053/JP/2016_ SHANKAR JHALANI VS. ITO 21 NON-FERROUS METALS OF RS. 2.44 CRORES, THE ASSESSIN G OFFICER HAD TREATED PURCHASES WORTH RS. 1.49 CRORES ONLY AS BOG US AND IT WAS IMPOSSIBLE TO MANUFACTURE THE GOODS SHOWN TO HAVE B EEN MANUFACTURED BY IT OUT OF THE REMAINING PURCHASES I F THE ASSESSING OFFICERS CONCLUSION WAS ACCEPTED ALSO FOUND FAVOUR WITH THE TRIBUNAL. THIS WAS A SIMPLE FINDING OF FACT BASED U PON APPRECIATION OF THE MATERIAL ON RECORD AND THUS NO QUESTION OF L AW AROSE. THE ASSESSEES METHOD OF ACCOUNTING STOOD APPROVED BY T HE TRIBUNAL AND IT HAD ATTAINED FINALITY. THE TRIBUNAL NOTICED THE DEPARTMENTS CONTRADICTORY STAND INASMUCH AS FIRSTLY SPECIFIC AD DITIONS WERE MADE IN THE ASSESSMENT ON ACCOUNT OF THE ALLEGED BO GUS PURCHASES AND THEN THE ASSESSEES BOOKS WERE REJECT ED ON THE GROUND THAT THESE WERE NOT VERIFIABLE BUT ADJUSTMEN T OF BOGUS PURCHASES WAS MADE WHILE WORKING OUT THE GROSS PROF ITS AND THAT TOO ON THE BASIS OF SALES VERSION IN THOSE VERY BOO KS THOUGH WITH A SLIGHT MODIFICATION. FURTHER, THE DEPARTMENT ALSO A CCEPTED THE METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE. THESE WERE PURE FINDINGS OF FACT AND NO QUESTION OF LAW AROSE. IN V IEW OF ABOVE, TRADING ADDITION UPHELD BY CIT(A) BE DELETED. 10. ON THE OTHER HAND, THE LD. SR. DR HAS RELIED ON THE ORDERS OF THE AUTHORITIES BELOW AND FURTHER SUBMITTED AS UNDER: IN THE ABOVE CASE THE PURCHASERS/SUPPLIERS COULD NO T BE VERIFIED DUE TO NOT PRODUCING NECESSARY DETAILS / PARTIES BEFORE AO AND THEREFORE, AO MADE THE ADDITION U/S 69C TO FOLLOW THE DECISION OF VIJAY PROTINS AND SANJAY OIL CAKES IN WHICH DISALLOWANCE OF 25% OF BO GUS PURCHASES WAS HELD JUSTIFIED. IN THE CASE OF SHRI VIJAY KEDIA (HU F) ITA NO. 248/JP/16 (REVENUE APPEAL), AO DISALLOWED 100% BOGUS PURCHASE BUT CIT(A) RESTRICTED TO 15% TO FOLLOW THE CASE OF ANUJ KUMAR VARSHNEY (ITAT, ITA 1053/JP/2016_ SHANKAR JHALANI VS. ITO 22 JAIPUR) WHICH IS NOT JUSTIFIED. IN MOST OF THE CASE S AO MADE THE ADDITION OF 25% BUT CIT(A) RESTRICTED TO 15% BY FOLLOWING DE CISION OF ANUJ KUMAR VARSHNEY (ITAT, JAIPUR) WHICH IS ALSO NOT UNJUSTIFI ED, BECAUSE FACTS OF ANUJ VARSHNEY ARE NOT APPLICABLE IN THOSE CASES. I RELIED UPON FOLLOWING DECISIONS IN WHICH EITHER 25% OR 100% WERE HELD JUS TIFIED. HE RELIED ON THE FOLLOWING CASE LAWS: 1. 58 TAXAMNN.COM 44 (GUJ)- VIJAY PROTINS - DISALLO WANCE OF 25% OF BOGUS PURCHASES WAS HELD JUSTIFIED 2. 316 ITR 274 (GUJ) - SANJAY OIL CAKES IND. - DISA LLOWANCE OF 25% OF BOGUS PURCHASES WAS HELD JUSTIFIED 3. 72 TAXMANN.COM 289 (GUJ) N.K. INDUSTRIES - DISAL LOWANCE OF 25% OF BOGUS PURCHASES WAS HELD JUSTIFIED 4. 2017-TIOL-23-SC-IT-NK PROTINS LTD- HONBLE SUPRE ME COURT HELD DISALLOWANCE OF 100% OF BOGUS PURCHASES WAS JUSTIFI ED 5. 178 CTR 420 (RAJ) -INDIAN WOOLLEN CARPET FACTORY - HELD THAT ONUS IS ON ASSESSEE TO PROVE THE GENUINENESS OF THE PURCHAS ES. 6. 186 CTR 718 (MP) - VISP PVT. LTD.- SAME VIEW WAS TAKEN AS IN CASE OF INDIAN WOOLEN 7. 227 ITR 391 (RAJ) - GOLCHA PROPERTIES P LTD 8. 250 ITR 575 (DEL) - LAW MEDICA 9. 240 ITR 322 (KER) - BEENA METALS 10. 229 ITR 181 (MP) - SYSTEM INDIA CASTING 11. 50 DTR 502 (ITAT, JAIPUR) - DEEPAK DALELA 12. 49 ITR 112 (SC) - SHRI LEKHA BANERJEE 13. 288 ITR 10 (SC) - KACHAWALA GEMS IN VIEW OF THE ABOVE, WHERE THE ASSESSEE FILLED THE APPEAL /CO MAY KINDLY BE DISMISSED AND WHERE REVENUE FILLED APPEAL MAY KI NDLY BE ALLOWED. ITA 1053/JP/2016_ SHANKAR JHALANI VS. ITO 23 11. THE BENCH HAVE HEARD BOTH THE SIDES ON THIS ISSU E. THE LD. CIT(A) HELD THAT THE ASSESSEE HAS NOT PRODUCED ITS BOOKS O F ACCOUNTS, THEREFORE, THE PURCHASES MADE BY THE ASSESSEE REMAINED UNVERIF IABLE. THE COORDINATE BENCH OF THE ITAT, JAIPUR BENCH IN THE CA SE OF ANUJ KUMAR VARSHNEY & ORS. HAD DECIDED THAT 15% OF SUCH BOGUS/ UNVERIFIABLE PURCHASES CAN BE DISALLOWED AND THE LD. CIT(A) HAD F OLLOWED THE SAME. THEREFORE, THE BENCH FIND NO MERIT IN THE CONTENTION OF THE LD. AR OF THE ASSESSEE. ACCORDINGLY, WE UPHOLD THE ORDER OF THE LD . CIT(A) IN THIS REGARD. HENCE, THIS GROUND OF THE ASSESSEES APPEAL STANDS DISMISSED. 12. THE ISSUE INVOLVED IN GROUND NO. 3 IS CONFIRMING THE DISALLOWANCE OF RS. 73,714/- U/S 40(A)(IA) OF THE ACT. THE LD. CIT(A) HAS DECIDED THE ISSUE BY HOLDING AS UNDER: 3.2.2 DETERMINATION : (I) THE BRIEF FACTS ARE THAT THE APPELLANT INCURRED CERTAIN EXPENDITURE WHICH WERE LIABLE TO TDS, HOWEVER, SINCE THE APPELLANT HA S NOT PRODUCED ANY DOCUMENTS RELATING TO THESE EXPENSES, THE AO ISSUED SHOW CAUSE NOTICE DATED 19.02.2014, REQUIRING THE APPELLANT TO EXPLAI N WHY THE FOLLOWING EXPENSES SHOULD NOT BE DISALLOWED FOR NON-DEDUCTION OF TAX AT SOURCE: BROKERAGE EXPENSES RS. 38,182/- INTEREST RS. 4,28,283/- LEGAL & CONSULTANCY CHARGES RS. 94,714/ TOTAL RS. 5.61179/- ITA 1053/JP/2016_ SHANKAR JHALANI VS. ITO 24 AS THE APPELLANT COULD NOT PROVE THAT TDS WAS MADE ON THESE EXPENSES, THE AO DISALLOWED EXPENSES OF RS. 5,61,179/- U/S 40 (A) (IA) OF THE ACT. (II) DURING THE APPELLATE PROCEEDINGS, IT WAS SUBMI TTED BY THE APPELLANT THAT: BROKERAGE RS.38,182/-:-THIS BROKERAGE WAS PAID TO ASHOK DHAMANI ON WHICH TAX WAS DEDUCTED AT SOURCE. INTEREST OF RS. 4,28,283/-:- THIS INTEREST WAS PAI D TO THE VARIOUS PARTIES ON LOAN TAKEN FOR THE PURPOSE OF THE BUSINESS AND T HE APPELLANT HAS DULY DEDUCTED THE TAX AT SOURCE, WHEREVER INTEREST PAID WAS MORE THAN RS.5,000/-. LEGAL AND CONSULTANCY EXPENSES RS.94,714/-:- OUT O F THE SAID AMOUNT PAYMENT OF RS. 73,714/- WAS MADE TO S. JHALANI & CO MPANY ON WHICH NO TAX WAS DEDUCTED AT SOURCE, PAYMENT AMOUNTING TO RS . 2,500/- TO VARIOUS PARTIES ON WHICH NO TAX WAS DEDUCTIBLE AT S OURCE AND PAYMENT TO AUDITOR AMOUNTING TO RS. 18,500/- FOR CONSULTANCY O N WHICH TDS WAS DEDUCTED. IT WAS FURTHER SUBMITTED THAT ONLY IN RES PECT OF AMOUNT OF RS.73,714/-, NO TAX WAS DEDUCTED AT SOURCE AND HENC E THE DISALLOWANCE MADE UNDER THIS HEAD BE RESTRICTED TO RS.73,714/-. (III) I HAVE DULY CONSIDERED THE SUBMISSIONS OF TH E APPELLANT, ASSESSMENT ORDER AND THE MATERIAL PLACED ON RECORD. IT IS AN A DMITTED TACT THAT THE APPELLANT HAS NOT DEDUCTED TAX AT SOURCE IN RESPECT OF PAYMENT OF RS. 73,714/-. IT WAS STATED THAT, HOWEVER, IT HAS DEDUC TED TAX AT SOURCE IN RESPECT OF PAYMENT OF RS. 18,500/- TO THE AUDITOR. IT WAS CLAIMED BY THE APPELLANT THAT IT HAS DEDUCTED TAX ON BROKERAGE OF RS. 38,182/- PAID TO SH. ASHOK DHAMANI AND HAS ALSO DEDUCTED TAX AT SOUR CE ON ACCOUNT OF INTEREST PAYMENT WHEREVER THE INTEREST PAID WAS MOR E THAN RS. 5,000/- DURING THE APPELLATE PROCEEDINGS, IT WAS SUBMITTED BY THE AR THAT THE ITA 1053/JP/2016_ SHANKAR JHALANI VS. ITO 25 DEDUCTION OF TAX AT SOURCE IS VERIFIABLE FROM THE T DS RETURN FILED BY THE APPELLANT WHICH IS ON THE RECORD OF THE DEPARTMENT. (IV) AS THE APPELLANT HAS ADMITTED THAT IT HAS NOT DEDUCTED TAX AT SOURCE ON ACCOUNT OF PAYMENT OF RS. 73,714/- , THE DISALLOWAN CES MADE BY THE AO U/S 40(A) (IA) OF THE ACT IS HEREBY SUSTAINED. REGA RDING THE REMAINING EXPENSES, THE AO IS DIRECTED TO OBTAIN THE TDS RETU RN FROM THE TDS WING OF THE INCOME TAX DEPARTMENT AND ALLOW THE CLAIM OF THE APPELLANT WHEREVER TDS WAS MADE IN RESPECT OF THE PAYMENTS UN DER CONSIDERATION. 13. WHILE PLEADING ON BEHALF OF THE ASSESSEE, THE L D AR HAS SUBMITTED AS UNDER: 1. THE AO OBSERVED THAT ASSESSEE HAS INCURRED BROKE RAGE EXPENSES OF RS.38,182/-, INTEREST EXPENSES OF RS.4,28,283/- AND LEGAL & CONSULTANCY CHARGES OF RS.94,714/- WHICH WERE LIABL E TO TDS. HOWEVER, SINCE THE ASSESSEE HAS NOT PRODUCED ANY DO CUMENTS RELATING TO THE EXPENSES, IT COULD NOT BE VERIFIED THAT TDS WERE MADE OUT OF THESE EXPENDITURES OR NOT. ACCORDINGLY, AO DISALLOWED EXPENSES OF RS. 5,61,179/- U/S 40(A)(IA). 2. BEFORE CIT(A), ASSESSEE SUBMITTED THAT EXCEPT PA YMENT OF RS.73,714/- MADE TO S. JHALANI & COMPANY, HE HAS DE DUCTED TDS ON THE REMAINING EXPENDITURE WHEREVER REQUIRED AND THE SAME CAN BE VERIFIED FROM THE TDS RETURN FILE BY THE ASSESSE E WHICH IS ON RECORD OF THE DEPARTMENT. 3. THE LD. CIT(A) CONFIRMED THE DISALLOWANCE OF RS. 73,714/- U/S 40(A)(IA) AND REGARDING THE REMAINING EXPENSES, DIR ECTED THE AO TO OBTAIN THE TDS RETURN AND ALLOW THE CLAIM OF THE ASSESSEE WHERE TDS IS MADE. ITA 1053/JP/2016_ SHANKAR JHALANI VS. ITO 26 4. IT MAY BE NOTED THAT SECOND PROVISO TO SECTION 4 0(A)(IA) INSERTED BY FA, 2012 W.E.F. 01.04.2013 HAS PROVIDED THAT WHE RE AN ASSESSEE FAILS TO DEDUCT TAX ON THE SUM PAID TO THE RESIDENT BUT SUCH RESIDENT PAYEE HAS FURNISHED THE RETURN, TAKEN INTO ACCOUNT SUCH SUM FOR COMPUTING INCOME AND HAS PAID THE TAX DUE ON THE INCOME DECLARED BY HIM THEN IT WILL BE DEEMED THAT ASSESSEE HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE O F FURNISHING OF RETURN BY THE RESIDENT PAYEE. THE RETURN OF S. J HALANI & COMPANY PVT. LTD. IS AT PB 94- 95. THEREFORE, CONSIDERING THE ABOVE AMENDMENT WHICH IS INTRODUCED TO REMOVE UNINT ENDED HARDSHIP, NO DISALLOWANCE U/S 40(A)(IA) BE MADE IN THE HANDS OF THE ASSESSEE. IT IS A SETTLED LAW THAT SECOND PROVI SO TO SECTION 40(A)(IA) INSERTED W.E.F. 01.04.2013 HAS RETROSPECT IVE EFFECT AS HELD BY DELHI HIGH COURT IN CASE OF CIT VS. ANSAL L AND MARK TOWNSHIP PVT. LTD. 124 DTR 185, BANGALORE BENCH IN CASE OF SH. G. SHANKAR VS. ACIT IN ITA NO.L832/BANG/2013 DT. 10 .10.2014, AGRA BENCH IN CASE OF RAJEEV KUMAR AGARWAL VS. ACIT (2014) 34 ITR(TRIB.)479, DELHI BENCH IN CASE OF ITO VS. DR. J AIDEEP KUMAR SHARMA (2014) 34 ITR(TRIB.)565, BANGALORE BENCH IN CASE OF DCIT VS. ANANDA MARAKALA (2014) 150 ITD 323 AS THE AMEND MENT WAS MADE TO REMOVE THE UNDUE HARDSHIP. IN VIEW OF ABOVE, DISALLOWANCE OF RS.73,714/- MADE U/S 40(A)(IA) BE DIRECTED TO BE DELETED. 14. ON THE CONTRARY, THE LD SR. DR HAS RELIED ON TH E ORDERS OF THE AUTHORITIES BELOW. 15. THE BENCH HAVE HEARD BOTH THE SIDES ON THIS ISSU E. THE LD. CIT(A) HELD THAT THE ASSESSEE HAS NOT DEDUCTED TAX AT SOUR CE IN RESPECT OF ITA 1053/JP/2016_ SHANKAR JHALANI VS. ITO 27 PAYMENT OF RS. 73,714/-. THE ASSESSEE HAS DEDUCTED T AX ON BROKERAGE OF RS. 38,182/- PAID TO SHRI ASHOK DHAMANI AND ALSO DE DUCTED TAX AT SOURCE ON ACCOUNT OF INTEREST PAYMENT OF MORE THAN RS. 5,0 00/-. THE ASSESSEE HAS ADMITTED THAT HE HAS NOT DEDUCTED TAX AT SOURCE ON ACCOUNT OF PAYMENT OF RS. 73,714/-. IN VIEW OF THE ABOVE, THE B ENCH FIND NO ANY CONTRARY MATERIAL IN THE ORDER OF THE LD. CIT(A), TH EREFORE, WE UPHOLD THE SAME. HENCE, THIS GROUND OF APPEAL OF ASSESSEE STAN DS DISMISSED. 16. IN THE 4 TH GROUND OF THE APPEAL, THE ISSUE INVOLVED IS CONFIR MING THE ADDITION OF RS. 3,83,757/- BY CONSIDERING THE PEAK OF CASH DEPOSIT AND WITHDRAWAL FROM THE BANK ACCOUNT AS UNEXPLAINED. THE L D. CIT(A) HAS DEALT THE ISSUE BY HOLDING AS UNDER: 3.3.2 DETERMINATION : (I) THE BRIEF FACTS OF THE CASE ARE THAT DURING TH E ASSESSMENT PROCEEDINGS, IT WAS OBSERVED BY THE AO THAT THE APPELLANT HAS MA DE CASH DEPOSIT OF RS. 17,24,150/- IN ALLAHABAD BANK AND RS. 5,000/- I N UNION BANK ON VARIOUS DATES AS MENTIONED ON PAGE 6 & 7 OF THE ASS ESSMENT ORDER. SINCE, THE APPELLANT HAS NOT FILED ANY EXPLANATION FOR THE SAME, THE AO MADE ADDITION OF RS. 17,24,150/- TO THE INCOME OF T HE APPELLANT. (II) DURING THE APPELLATE PROCEEDINGS, IT WAS SUBMI TTED BY THE APPELLANT THAT THESE ARE THE REGULAR BANK ACCOUNTS OF THE APP ELLANT AND DULY INCORPORATED IN THE BOOKS OF ACCOUNTS. THE SOURCE I N THE CASH BOOK IS EITHER RECEIPT FROM DEBTORS OR EARLIER WITHDRAWALS FROM THE BANK ACCOUNT ITSELF. IN SUPPORT OF ITS CONTENTION, THE A PPELLANT HAS FILED COPY ITA 1053/JP/2016_ SHANKAR JHALANI VS. ITO 28 OF BANK ACCOUNT AND RELEVANT PAGES OF CASH BOOK WHE RE THIS ACCOUNT WAS INCORPORATED AS ADDITIONAL EVIDENCE. IT WAS FUR THER SUBMITTED THAT THE AO HAS CONSIDERED THE ENTIRE DEPOSIT ONLY WHERE AS IN THE BANK ACCOUNT THERE IS CONTINUOUS DEPOSIT AS WELL AS WITH DRAWALS. IF THE SAME ARE CONSIDERED, THE ENTIRE DEPOSIT IS BACKED BY THE EARLIER WITHDRAWALS IN THE BANK ACCOUNT OR SALES OF THE BUSINESS. THE S UMMARY OF THE CASH WITHDRAWALS AND DEPOSITS IN ALL THE BANK ACCOUNT IS ENCLOSED. HENCE THE CASH DEPOSIT IN THE BANK ACCOUNT IS FULLY EXPLAINED . IT WAS ALSO SUBMITTED THAT IT IS A SETTLED LAW THAT WHERE THERE ARE CONTINUOUS DEBIT OR CREDIT ENTRIES, THE PEAK DEPOSIT SHOULD BE CONSI DERED FOR DETERMINING THE INCOME. IN SUPPORT OF ITS CONTENTION, THE APPEL LANT RELIED UPON A NUMBER OF JUDICIAL PRONOUNCEMENTS. (III) I HAVE GONE THROUGH THE ABOVE SUBMISSION OF T HE APPELLANT, ASSESSMENT ORDER AND THE MATERIAL PLACED ON RECORD. THE APPELL ANT HAS FILED COPY OF BANK ACCOUNT AND RELEVANT PAGES OF CASH BOOK WHERE THIS ACCOUNT WAS INCORPORATED AS ADDITIONAL EVIDENCE WHICH WERE NOT ADMITTED IN VIEW OF THE DISCUSSION MADE EARLIER IN THIS ORDER. HOWEVER, IT MAY BE MENTIONED THAT IN THE CASE OF SIND MEDICAL STORES VS. CIT (SU PRA), THE HONBLE JURISDICTIONAL HIGH COURT HELD THAT THIS COURT IN C IT VS. ISHWARDAS MUTHA (2004) 270 ITR 597 (RAJ.) ALSO ACCEPTED THE CONTENT ION TO TAKE INTO ACCOUNT, THE PEAK CREDIT THEORY. WHEN ANY AMOUNT IS PAID, LATER WITHDRAWN FROM THE BANK, WOULD BE AVAILABLE FOR REC YCLING AND ROTATION, UNLESS OTHERWISE ESTABLISHED AS INVESTED ELSEWHERE BY THE REVENUE. IT WAS HELD THAT THE ASSESSEE WAS ENTITLED TO THE BENE FIT OF PEAK CREDIT WHICH OUGHT TO HAVE BEEN ALLOWED INSTEAD OF MAKING SEPARATE ADDITION OF ENTIRE AMOUNT. HOWEVER, IT WAS OBSERVED THAT IT THE ASSESSING OFFICER COMES TO A FINDING THAT WITHDRAWN AMOUNT WAS USED O R SPENT BY THE ASSESSEE FOR ANY OTHER INVESTMENT OR EXPENDITURE TH AN THE BENEFIT OF PEAK OF SUCH CREDIT, IN SUCH CIRCUMSTANCES, MAY NOT BE AVAILABLE. ITA 1053/JP/2016_ SHANKAR JHALANI VS. ITO 29 (IV) IN THE INSTANT CASE UNDER CONSIDERATION, NO SP ECIFIC FINDING WAS RECORDED BY THE AO REGARDING THE UTILIZATION OF CASH WITHDRA WAL BY THE APPELLANT FROM ITS BANK ACCOUNTS IN SOME INVESTMENT OR EXPEND ITURE. THEREFORE, IN VIEW OF THE ABOVE REFERRED DECISION OF JURISDICTION AL HIGH COURT IN THE CASE OF SIND MEDICAL STORE VS. CIT (SUPRA), THE BEN EFIT OF PEAK CREDIT THEORY COULD BE ALLOWED TO THE APPELLANT. AS PER TH E CHART, ENCLOSED TO THIS ORDER AS ANNEXURE-A, SUBMITTED BY THE APPELLANT, THE PEAK CREDIT BALANCE WAS TO THE TUNE OF RS.3,83,757/- AS ON 27.0 1.2011 AND NOT RS. 2,53,857/- AS STATED BY THE APPELLANT. THEREFORE, A DDITION OF RS. 3,83,757/- IS HEREBY SUSTAINED AS UNDISCLOSED INCOM E OF THE APPELLANT. HOWEVER, THE AO IS DIRECTED TO EXAMINE THE PEAK DEP OSIT CHART I.E. ANNEXURE-A WITH THE BANK STATEMENTS OF THE APPELLANT AND TO RE CTIFY THE MISTAKE, IF ANY, IN THE SAID CHART. 17. THE LD. AR OF THE ASSESSEE HAS REITERATED THE AR GUMENTS AS MADE BEFORE THE LD. CIT(A) AND FURTHER SUBMITTED AS UNDER : 1 . THE AO OBSERVED THAT ASSESSEE HAS DEPOSITED CASH OF RS. 17,24,150/- IN ALLAHABAD BANK ON VARIOUS DATES AND RS.5,000/- IN UNION BANK OF INDIA ON 16.04.2010. SINCE ASSESSEE H AS NOT FILED ANY EXPLANATION FOR THE SAME, HE TREATED THE ABOVE CASH DEPOSIT OF RS. 17,29,150/- AS UNEXPLAINED AND MADE ADDITION FOR THE SAME U/S 68 OF THE IT ACT. 2. IN APPELLATE PROCEEDINGS, ASSESSEE SUBMITTED THA T THESE ARE REGULAR BANK ACCOUNTS AND DULY INCORPORATED IN THE BOOKS OF ACCOUNTS. THE SOURCE OF CASH DEPOSIT IS EITHER RECE IPT FROM DEBTORS OR EARLIER WITHDRAWAL FROM THE BANK ACCOUNT ITSELF. THE COPY OF BANK ACCOUNT AND CASH BOOK WAS FILED AS ADDITIONAL EVIDENCE (PB 23-69). IT WAS FURTHER SUBMITTED THAT THE AO HAS CO NSIDERED THE ITA 1053/JP/2016_ SHANKAR JHALANI VS. ITO 30 ENTIRE DEPOSIT WHEREAS IN THE BANK ACCOUNT THERE IS CONTINUOUS DEPOSIT AS WELL AS WITHDRAWALS. IF THE SAME IS CONS IDERED, THE ENTIRE DEPOSIT IS BACKED BY THE EARLIER WITHDRAWALS IN THE BANK ACCOUNT OR SALES OF THE BUSINESS. THE SUMMARY OF CA SH WITHDRAWAL AND DEPOSIT IN ALL THE BANK ACCOUNT WAS ALSO FILED (PB 10A-11A). ALTERNATIVELY, IT IS SUBMITTED THAT WHERE THERE ARE CONTINUOUS DEBIT OR CREDIT ENTRIES, THE PEAK DEPOSIT SHOULD BE CONSI DERED FOR DETERMINING THE INCOME AND THEREFORE, EVEN IF ADDIT ION IS TO BE MADE IT SHOULD BE RESTRICTED TO RS.2,53,857/-. 3. THE LD. CIT(A) HELD THAT THE DOCUMENTS FILED AS ADDITIONAL EVIDENCE CANNOT BE ADMITTED IN VIEW OF DISCUSSION M ADE EARLIER. HOWEVER, IN VIEW OF DECISION OF RAJASTHAN HIGH COUR T IN CASE OF SIND MEDICAL STORES VS. CIT, THE ASSESSEE IS ENTITL ED TO BENEFIT OF PEAK CREDIT. NO SPECIFIC FINDING WAS RECORDED BY TH E AO REGARDING THE UTILIZATION OF CASH WITHDRAWAL BY THE APPELLANT FROM ITS BANK ACCOUNTS IN SOME INVESTMENT OR EXPENDITURE. THE PEA K CREDIT BALANCE IS RS.3,83,757/- AS ON 27.01.2011 AND NOT R S.2,53,857/- AS STATED BY THE ASSESSEE. 4. AS DISCUSSED ABOVE, THE ADDITIONAL EVIDENCES F ILED BY THE ASSESSEE SHOULD BE ACCEPTED. FROM THE COPY OF BANK ACCOUNT AND CASH BOOK (PB 23-69) IT CAN BE NOTED THAT ALL THE DEPOSITS IN THE BANK ACCOUNT IS VERIFIABLE FROM THE CASH BOOK M AINTAINED BY THE ASSESSEE. THE SOURCE OF CASH DEPOSIT IS EITHER RECEIPT FROM DEBTORS OR EARLIER WITHDRAWAL FROM THE BANK ACCOUNT ITSELF. THE CHART SHOWING THE DEPOSIT IN THE BANK ACCOUNT AND T HE SOURCE OF SUCH DEPOSIT IS AT PB 6A-7A. IN VIEW OF ABOVE, THE ADDITION OF RS.3,83,757/- CONFIRMED BY CIT(A) BE DIRECTED TO BE DELETED. ITA 1053/JP/2016_ SHANKAR JHALANI VS. ITO 31 18. ON THE CONTRARY, THE LD SR. DR HAS RELIED ON TH E ORDERS OF THE AUTHORITIES BELOW. 19. THE BENCH HAVE HEARD BOTH THE SIDES ON THIS ISSU E. IT IS UNDISPUTED FACT THAT THE ASSESSEE HAS DEPOSITED RS. 17,24,150/ - ON VARIOUS DATES IN ALLAHABAD BANK. THE LD. CIT(A) HAS HELD THAT THE ASSE SSEE HAS FILED COPY OF BANK ACCOUNT AND RELEVANT PAGES OF CASH BOOK WHE RE THIS ACCOUNT WAS INCORPORATED AS ADDITIONAL EVIDENCE WHICH WERE NOT AD MITTED IN. HE ALSO HELD THAT IN THE CASE OF SIND MEDICAL STORES VS. CI T, THE HONBLE JURISDICTIONAL HIGH COURT HELD THAT THIS COURT IN C IT VS. ISHWARDAS MUTHA (2004) 270 ITR 597 (RAJ.) ALSO ACCEPTED THE CONTENTI ON TO TAKE INTO ACCOUNT, THE PEAK CREDIT THEORY. WHEN ANY AMOUNT IS PAID, LATER WITHDRAWN FROM THE BANK, WOULD BE AVAILABLE FOR RECYCL ING AND ROTATION, UNLESS OTHERWISE ESTABLISHED AS INVESTED ELSEWHERE BY THE REVENUE. IT WAS HELD THAT THE ASSESSEE WAS ENTITLED TO THE BENEFI T OF PEAK CREDIT WHICH OUGHT TO HAVE BEEN ALLOWED INSTEAD OF MAKING SE PARATE ADDITION OF ENTIRE AMOUNT. HOWEVER, IT WAS OBSERVED THAT IT THE ASSESSING OFFICER COMES TO A FINDING THAT WITHDRAWN AMOUNT WAS USED OR SPENT BY THE ASSESSEE FOR ANY OTHER INVESTMENT OR EXPENDITURE TH AN THE BENEFIT OF PEAK OF SUCH CREDIT, IN SUCH CIRCUMSTANCES, MAY NOT BE A VAILABLE. NO SPECIFIC REASON WAS RECORDED REGARDING THE UTILIZATION OF CAS H WITHDRAWAL BY THE ITA 1053/JP/2016_ SHANKAR JHALANI VS. ITO 32 ASSESSEE FROM ITS BANK ACCOUNTS IN SOME INVESTMENT OR EXPENDITURE. IN VIEW OF THE ABOVE AND CONSIDERING THE TOTALITY OF TH E FACTS AND CIRCUMSTANCES OF THE CASE, THE BENCH FIND NO ANY CO NTRARY MATERIAL IN THE ORDER OF THE LD. CIT(A), THEREFORE, WE UPHOLD THE SAM E. HENCE, THIS GROUND OF APPEAL OF ASSESSEE STANDS DISMISSED. 20. IN THE 5 TH GROUND OF APPEAL, THE ISSUE INVOLVED IS CONFIRMING THE DISALLOWANCE OF DEDUCTION OF RS. 56,256 MADE UNDER C HAPTER VI OF THE ACT. THE LD. CIT(A) HAS DECIDED THE ISSUE AS UNDER: 3.4.2 DETERMINATION : (I) IN ITS RETURN OF INCOME, THE APPELLANT HAS CLAI MED DEDUCTION OF RS. 56,256/- UNDER CHAPTER VL-A OF THE ACT, HOWEVER, SI NCE NO EVIDENCE WAS SUBMITTED BY THE APPELLANT, THE AO DISALLOWED THE C LAIM OF DEDUCTION UNDER CHAPTER VIA OF THE ACT. DURING APPELLATE PROC EEDINGS, IT WAS SUBMITTED BY THE APPELLANT THAT IT PAID THE AMOUNT OF RS. 56,256/- AS PREMIUM TO LIC. HOWEVER THE RECEIPT OF THE SAME WAS MISPLACED. AS THE APPELLANT HAS FAILED TO SUBMIT THE NECESSARY EVIDEN CE TO SUPPORT ITS CLAIM OF DEDUCTION OF RS. 56,256/- EVEN DURING THE APPELL ATE PROCEEDINGS, IT IS THEREFORE HELD THAT THE AO WAS JUSTIFIED IN NOT ALL OWING DEDUCTION UNDER CHAPTER VL-A OF THE ACT. HENCE, THIS GROUND OF APPE AL IS HEREBY REJECTED. (II) IN ITS WRITTEN SUBMISSION, THE APPELLANT HAS T AKEN GROUND OF APPEAL NO. 1 BY STATING THAT PASSING ORDER U/S 144 WITHOUT PROV IDING PROPER OPPORTUNITY OF HEARING TO THE ASSESSEE. IT MAY BE MENTIONED THAT THE APPELLANT HAS NOT RAISED ANY GROUND OF APPEAL RELAT ING TO PASSING OF EX- PARTE ORDER U/S 144 OF THE ACT IN THE GROUNDS OF AP PEAL ANNEXED WITH ITA 1053/JP/2016_ SHANKAR JHALANI VS. ITO 33 FORM NO. 35. FURTHER, NO PRAYER WAS MADE FOR ITS AD MITTANCE AS AN ADDITIONAL GROUND OF APPEAL. HOWEVER, IT MAY BE MEN TIONED THAT IT HAS BEEN DISCUSSED EARLIER IN THIS ORDER THAT A NUMBER OF OPPORTUNITIES WERE PROVIDED BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS TO THE APPELLANT TO EXPLAIN ITS CASE BUT NO COMPLIANCE WAS MADE. 21. WHILE PLEADING ON BEHALF OF THE ASSESSEE, THE L D AR HAS SUBMITTED AS UNDER: 1. THE ASSESSEE CLAIMED DEDUCTION UNDER CHAPTER VIA ON ACCOUNT OF PAYMENT TO LIC. BOTH THE LOWER AUTHORITIES DISALLOW ED THE CLAIM FOR THE REASON THAT EVIDENCE OF PAYMENT IS NOT FURNISHE D. 2. IT IS SUBMITTED THAT THE EVIDENCE OF PAYMENT OF LIC IS MISPLACED AND THEREFORE COULD NOT BE FURNISHED. HOWEVER, THE LOWER AUTHORITIES FAILED TO CONSIDER THAT ASSESSEE HAS MA DE A WITHDRAWAL OF RS.6,83,686/- AS PER THE CAPITAL ACCOUNT. THEREF ORE, THE AO BE DIRECTED TO BE ALLOWED THE DEDUCTION IN CASE IF ASS ESSEE IS ABLE TO FURNISH THE EVIDENCE FOR THE SAME. 22. ON THE CONTRARY, THE LD SR. DR HAS RELIED ON TH E ORDERS OF THE AUTHORITIES BELOW. 23. THE BENCH HAVE HEARD BOTH THE SIDES ON THIS ISSU E. THE ASSESSEE HAS CLAIMED DEDUCTION UNDER CHAPTER VI-A OF THE ACT BUT NO EVIDENCE WAS SUBMITTED BY THE ASSESSEE. DURING THE APPELLATE PRO CEEDINGS, THE ASSESSEE HAS SUBMITTED THAT HE HAS PAID THE AMOUNT AS PREMIUM OF LIC BUT HE FAILED TO SUBMIT NECESSARY DOCUMENTS. THEREF ORE, THE LD. CIT(A) ITA 1053/JP/2016_ SHANKAR JHALANI VS. ITO 34 HAS REJECTED THE CLAIM OF THE ASSESSEE. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THE BENCH FIND NO ANY CONTRARY MATERIAL IN THE ORDER OF THE LD. CIT(A), THEREFORE, WE UPHOLD THE SAME. HENCE, THIS GROUND OF APPEAL OF ASSESSEE STANDS DIS MISSED. 24. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 19/02/2018. SD/- SD/- FOT; IKY JKO HKKXPAN (VIJAY PAL RAO) (BHAGCHAND) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 19 TH FEBRUARY, 2018 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SHRI SHANKAR JHALANI, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE ITO, WARD 3(2), JAIPUR. 3. VK;DJ VK;QDR @ THE CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 1053/JP/2016) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR