SH. MANOJ KUMAR JOHARI, Sikar V. DCIT, Sikar

ITA 1111/JPR/2011

• Counselvise Citation: 111123114 RSA 2011
• Duration Of Justice: 2 year(s) 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 19-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K KHANDELWAL
• Assessee Lawyers: G G MUNDRA
• Keywords: Business income; Retrospective amendment
• Section: 40A(3); 10B; 139

Judgement Text

ITA NO. 1111//JP/2011 SHRI MANOJ KUMAR JOHRI VS. DCIT , CIRCLE- SIKAR 1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH, JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. ME ENA) ITA NO. 1111/JP/2011 ASSESSMENT YEARS : 2008-09 PAN : ADWPJ 8870 A SHRI MANOJ KUMAR JOHRI VS. THE DCIT PROP. M/S. THE ART PALACE SIKAR RAMGARH, SHEKHAWATI, SIKAR (APPELLANT) (RESPONDENT) ITA NO. 133/JP/2012 ASSESSMENT YEARS : 2008-09 PAN : ADWPJ 8870 A THE DCIT VS. SHRI MANOJ KUMAR JOHRI SIKAR PROP. M/S. THE ART PALACE RAMGARH SHEKHAWATI, SIKAR (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.G. MUNDRA DEPARTMENT BY: SHRI A.K. KHANDELWAL DATE OF HEARING: 24-09-2014 DATE OF PRONOUNCEMENT: 21-11-2014 ORDER PER R.P. TOLANI, JM BOTH THESE APPEALS ARE THE CROSS APPEALS AGAINST T HE ORDER OF THE LD. CIT(A)-III, JAIPUR DATED 09-11-2011 FOR THE AS SESSMENT YEAR 2008-09. 2.1 THE GROUND NOS. 1 AND 2 OF THE ASSESSEE'S APPEA L IN RESPECT OF REJECTION OF BOOKS OF ACCOUNT AND GROSS PROFIT RATE ARE NOT PRESSED BY THE ITA NO. 1111//JP/2011 SHRI MANOJ KUMAR JOHRI VS. DCIT , CIRCLE- SIKAR 2 ASSESSEES WHICH LEAVES ONLY FOLLOWING TWO GROUNDS FOR ADJUDICATION IN ASSESSEE'S APPEAL. (3) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LD. CIT (A) IS WRONG, UNJUST AND HAS GROSSLY ERRED IN LAW IN UPHOLDING DISALLOWANCE OF PAYMENT OF RS. 2703977/- MADE TO C & F AGENT M/S SACHIN CARGO MOVERS U/S 40 (A) (IA) OF TH E I. T. ACT, 1961 BY CONFIRMING APPLICABILITY OF PROVISIONS OF SEC. 1 94C TO THESE PAYMENTS. (4) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE LD. CIT (A) IS WRONG AND HAS ERRED IN LAW IN UPHOLD ING FINDING RECORDED BY THE ASSESSING OFFICER THAT DISALLOWANCE S MADE U/S 40 (A) (IA) OF THE I. T. ACT, 1961 DOES NOT QUALIFY FOR DE DUCTION U/S 10BA OF THE I. T. ACT, 1961. 2.3 GROUND NOS. (I) TO (VI) OF THE REVENUE RAISE O NLY GROUND AS UNDER:- THE LD. CIT(A) HAS ERRED IN ALLOWING DEDUCTION OF RS. 1,13,07,214/- U/S 10BA OF THE ACT ON THE BASIS OF UNSUBSTANTIATED CLAIM OF ASSESSEE AND IGNORING THE DETAILED FACTS AND REASONS GIVEN IN THE ASSESSMENT ORDER . 2.4 THE REMAINING GROUNDS OF THE REVENUE ARE AS UND ER:- (VII) THE CIT (A) HAS PASSED A PERVERSE ORDER IN DE LETING THE DISALLOWANCE OF RS. 47,74,561/- MADE OUT OF C & F C HARGES (VIII) THE CIT (A) HAS PASSED A PERVERSE ORDER IN D ELETING THE DISALLOWANCE OF RS. 40,52,766/- OUT OF JOB WORK CON TRACT PAYMENTS MADE IN CONTRAVENTION OF SECTION 40 (A) (IA) OF THE ACT. (IX) THE CIT (A) HAS PASSED A PERVERSE ORDER IN DEL ETING THE DISALLOWANCE OF RS. 2,96,883/- MADE U/S 40A(3) OF T HE ACT IN RESPECT OF CASH PAYMENTS IN EXCESS OF RS. 20,000/- PER DAY TO SINGLE PERSON. (X) THE CIT (A) HAS PASSED A PERVERSE ORDER IN HOLD ING THE CONFIRMED TRADING ADDITION OF RS. 66,43,253/- AS EL IGIBLE FOR DEDUCTION U/S 10BA PARTICULARLY WHEN THE ENHANCED P ROFIT WAS RELATED TO DOMESTIC SALES. ITA NO. 1111//JP/2011 SHRI MANOJ KUMAR JOHRI VS. DCIT , CIRCLE- SIKAR 3 3.1 THE ASSESSEE VIDE ITS APPLICATION DATED 30-06-2 014 PRAYED FOR ADMISSION OF ADDITIONAL GROUND WHICH HAS NOT BEEN P RESSED BY THE LD. AR OF THE ASSESSEE ON THE DATE OF HEARING. 4.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A PROPRIETORSHIP CONCERN KNOWN AS M/S. ART PALACE WHICH IS CLAIMED TO BE AN INDUSTRIAL UNDERTAKING ENGAGED IN THE MANUFACTURING AND EXPORTING OF HANDM ADE ARTICLES WHICH REQUIRES THE USE OF WOOD AS MAIN RAW MATERIAL. THE SALES ARE MAINLY EXPORT AND SMALL PORTION IN INDIA. THE ASSESSEE WAS ALLOWE D 100% DEDUCTION FROM ELIGIBLE MANUFACTURING ACTIVITIES U/S 10BA OF THE A CT IN EARLIER YEARS. 4.2 A SURVEY WAS CARRIED OUT IN THE PREMISES OF THE ASSESSEE ON 22-09- 2008. ASSESSMENT FOR ASSESSMENT YEAR 2006-07 WAS FR AMED BY THE AO ON 12-12-2008 DISALLOWING THE ASSESSEE'S CLAIM U/S 10B A OF THE ACT. ASSESSMENTS FOR ASSESSMENT YEARS 2007-08 AND 2008- 09 WERE FRAMED ON SIMILAR LINES BY DISALLOWING ASSESSEE'S CLAIM U/S 1 0BA OF THE ACT. 4.3 THE ASSESSEE FILED APPEALS FOR ASSESSMENT YEARS 2006-07 AND 2007-08. THE LD. CIT(A) WAS PLEASED TO ALLOW THE CLAIM OF TH E ASSESSEE U/S 10BA OF THE ACT AND PART RELIEF IN RESPECT OF TRADING ADDI TION AND DISALLOWANCE OF EXPENSES. THE DEPARTMENT FILED SECOND APPEALS, ITAT , JAIPUR BENCH DISMISSED THEM IN ITA NOS. 315 & 316/JP/2011 BY CO NSOLIDATED ORDER ON 31-10-2011. ITA NO. 1111//JP/2011 SHRI MANOJ KUMAR JOHRI VS. DCIT , CIRCLE- SIKAR 4 4.4 IN THE YEAR IN QUESTION, THE LD. CIT(A) FOLLOWI NG HIS EARLIER ORDERS ALLOWED DEDUCTION U/S 10BA ON PROFITS AND GAINS OF INDUSTRIAL UNDERTAKING OF ASSESSEE EXCLUDING THE RECEIPTS OF DUTY DRAW BACK A ND FURTHER GAVE PART RELIEF IN TRADING ADDITION AND HOLDING THAT DISALLOWED TRA DING ADDITIONS WERE IN RESPECT OF ELIGIBLE BUSINESS OF THE ASSESSEE AND T HEY WERE INCLUDED IN WORKING OUT THE DEDUCTION U/S 10BA OF THE ACT. 4.5 AGGRIEVED AGAINST THE ORDER OF THE LD. CIT(A), BOTH THE PARTIES ARE IN FIRST APPEAL. 4.6 APROPOS REVENUES APPEAL, THE LD. DR RELIED ON THE ORDER OF THE AO . 4.7 THE LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT THAT APROPOS FIRST ISSUE ABOUT ALLOWABILITY OF ASSESSEE'S CLAIM U/S 10BA OF THE ACT, THE LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE RELYING ON ITAT J UDGEMENT , BY OBSERVING AS UNDER:- 2.3 I HAVE CAREFULLY EXAMINED THE FACTS OF THE CA SE AND SUBMISSIONS OF LD. AR MADE IN THIS REGARD. FROM THE ABOVE AND A LSO ON PERUSAL OF THE RELEVANT RECORDS, IT IS EVIDENT THAT THE MAIN ISSUE INVOLVED, IN THIS GROUND OF APPEAL, IS AS TO WHETHER THE APPELLANT IS ENTITLED TO THE CLAIMED DEDUCTION OF RS. 1,13,07,214/- U/S 10BA OF THE I.T. ACT. IN THIS REGARD, THE AO HAS HELD THAT THE APPELLANT DID NOT FULFILL THE CONDITIONS A S MENTIONED IN CLAUSES (A), (B), (C) AND (D) OF SUCH SECTION (2) OF SECTION 10B A OF THE I.T. ACT. HOWEVER, ON THE OTHER HAND, THE LD. AR HAS CLAIMED THAT THE APPELLANT HAS FULFILLED ALL THE CONDITIONS OF THE AFORESAID CLAUSES OF SECTION 10BA(2) OF THE I.T. ACT. IN THIS REGARD, IT WAS SUBMITTED BY THE LD. AR THAT TH E SIMILAR ISSUE HAS BEEN DECIDED BY HON'BLE ITAT JAIPUR BENCH IN THEIR CASE S IN ASSESSMENT YEAR 2005-06 T 2007-08, IN THEIR FAVOUR. THE COPY OF THE ORDER DATED 31-10-2011, OF THE HON'BLE ITAT , JAIPUR BENCH FOR ASSESSMENT YEAR 2006-07 AND 2007- ITA NO. 1111//JP/2011 SHRI MANOJ KUMAR JOHRI VS. DCIT , CIRCLE- SIKAR 5 08 (ITA NO. 315 & 316/JP/2011) WAS ALSO FURNISHED I N THEIR SUPPORT. THE RELEVANT PARA OF THE ABOVE ORDER, READS AS UNDER:- 11. FINDINGS OF THE TRIBUNAL ARE IN CONSONANCE WI TH THE FINDING OF TRIBUNAL FOR ASSESSMENT YEAR 2005-06 AS THEY HAVE BEEN GIVEN AFTER CONSIDERING THE ORDER OF TRIBUNAL FOR ASSESSMENT YEAR 2005-06. THERE IS NO CHANGE IN MATERIAL FACTS, THEREFORE, WE SEE NO REASON TO INTERFERE WITH THE FINDING OF L D. CIT (A). ACCORDINGLY FINDINGS OF LD. CIT (A) ARE CONFIRMED. ON SIMILAR FACTS, THE DEDUC TION UNDER SECTION 10BA WAS DISALLOWED FOR ASSESSMENT YEAR 2007-08 ALSO AND ON SIMILAR REASONING, THE LD. CIT (A) HAS ALLOWED THE ISSUE IN FAVOUR OF THE ASSESSEE. S INCE FACTS AND CIRCUMSTANCES ARE SIMILAR AND WE HAVE ALREADY CONFIRMED THE ORDER OF LD. CIT (A) FOR THE ASSESSMENT YEAR 2006-07, THEREFORE, FOR THE SAME REASONING THE ORDER OF LD. CIT (A) FOR THE ASSESSMENT YEAR 2007- 08 ALSO IS CONFIRMED. IN VIEW OF THE ABOVE, IT IS FELT THAT, AS PER THE E STABLISHED PRINCIPLE, THE DECISION OF JURISDICTIONAL TRIBUNAL / HIGH COURT IS BINDING ON THE LOWER AUTHORITIES AND UNDER NO CIRCUMSTANCES SUCH ORDER C AN BE IGNORED OR VIOLATED. IN OTHER WORDS FOR THE SAKE OF BETTER JUD ICIAL ADMINISTRATION AND UNITY, THE DECISION GIVEN BY TRIBUNAL/ COURTS ARE R EQUIRED TO BE FOLLOWED BY THE LOWER APPELLATE/ ADMINISTRATIVE AUTHORITIES IN LETTER AND SPIRIT OF SUCH ORDER. THE ABOVE RATIOS HAVE BEEN ESTABLISHED IN TH E FOLLOWING DECISIONS:- I. DUNLOP INDIA LTD. -154 ITR 172 (SC) II. BANK OF BARODA -256 ITR 385 (BOM.) ACCORDINGLY, WHILE FOLLOWING THE PRINCIPLE OF JURIS DICTIONAL DISCIPLINE AND ALSO THAT AS THE FACTS AND CIRCUMSTANCES OF THE CUR RENT YEAR OF THE APPELLANT, RELEVANT TO THE CLAIM OF DEDUCTION U/S 10BA, ARE SI MILAR TO THE ASSESSMENT YEARS RELEVANT TO THE DECISIONS OF THE ITAT JAIPUR BENCH, ACCORDINGLY, IT IS HELD THAT THE RATIO UPHELD THEREIN ARE SQUARELY APP LICABLE IN THE CURRENT ASSESSMENT PROCEEDING. IN THE LIGHT OF THE ABOVE FACTUAL AND LEGAL POSITIO N, WHILE FOLLOWING THE ABOVE DECISION OF HON'BLE ITAT JAIPUR BENCH IT IS CONCLUDED THAT THE APPELLANT FULFILLED THE CONDITIONS/ REQUIREMENTS O F CLAUSES (A), (B), (C) & (D) OF SUB-SECTION 2 OF SECTION 10BA OF THE I.T. ACT AN D HENCE, THE APPELLANT WAS ENTITLED TO THE CLAIMED DEDUCTION OF RS. 1,13,07,21 4/- U/S 10BA OF THE I.T. ACT. ACCORDINGLY, THE AO IS DIRECTED TO GRANT THAT DEDUCTION TO THE APPELLANT. CONSEQUENTLY, THIS GROUND OF APPEAL IS TREATED AS U PHELD. ITA NO. 1111//JP/2011 SHRI MANOJ KUMAR JOHRI VS. DCIT , CIRCLE- SIKAR 6 4.8 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE EARLIER YEARS ASSESSES ACTIVITIES HAVE BEEN HELD TO BE ELIGIBLE FOR DEDUCTION RESPECTFULLY FOLLOWING TH E ITAT JUDGEMENT OF THIS BENCH (SUPRA) IN THE CASE, WE HOLD THAT THE ASSESSE E ENTITLED TO DEDUCTION U/S 10BA OF THE ACT. THUS GROUND NO. (I) TO (V) OF THE REVENUE ARE DISMISSED. 5.1 ADVERTING TO GROUND NO. (VI) OF THE REVENUES A PPEAL WHEREIN THE LD. DR HAS RELIED ON THE ORDER OF THE AO. 5.2 THE LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT THE LD. CIT(A) AFTER FOLLOWING HIS PREDECESSOR ORDER FOR ASSESSMENT YEAR 2007-08, PARTLY ALLOWED RELIEF, BY FOLLOWING OBSERVATIONS. 4.3.1 IN VIEW OF THE FACTS THAT THE RELEVANT ISSU ES AND OTHER ASPECTS OF THE CURRENT YEAR ARE EXACTLY S IMILAR TO SUCH MATTER OF THE ASSESSMENT YEAR 2007-08, THER EFORE, I AM ALSO IN AGREEMENT WITH THE FINDINGS GIVEN BY M Y PREDECESSOR ON SUCH DISPUTE. ACCORDINGLY, IT IS HEL D THAT THE REJECTION OF BOOKS OF ACCOUNT U/S 145(3) IS DON E OF VALID GROUNDS THUS THE SAME IS UPHELD, THUS THE APPLICABILITY OF GROSS PROFIT RATE 17.20% IS ALSO F OUND IN ORDER. HOWEVER, I FIND NO JURISDICTION IN ENHANCEM ENT OF THE TURNOVER FROM RS. 21,52,22,166/- TO RS. 21.90 CRORES, AS ASSUMED BY THE AO. IN VIEW OF THE SAME, THE ADDI TION OF GROSS PROFIT IS REWORKED OUT AT RS. 66,43,253/- (RS. 3,70,18,212/- BEING 17.20% OF THE TURNOVER TO RS. 21,52,22,166 RS. 3,03,74,944/- GP DECLARED BY THE APPELLANT), IN COMPARE TO RS. 72,93,056/-, AS ESTIM ATED BY THE AO. HOWEVER, IT IS ALSO HELD THAT SINCE THE ENHANCEMENT IN THE GROSS PROFIT IS BASICALLY RELATE D TO EXPORT BUSINESS OF THE APPELLANT, WHICH HAS BEEN FO UND AS ELIGIBLE UNDERTAKING U/S 10BA, THEREFORE, HE WOULD BE ALSO ELIGIBLE FOR THE EXEMPTION U/S 10BA OF THE ACT ON THE ITA NO. 1111//JP/2011 SHRI MANOJ KUMAR JOHRI VS. DCIT , CIRCLE- SIKAR 7 REVISED PROFIT FIGURES, AS DETERMINED HEREINABOVE. CONSEQUENTLY, THE GROUND OF APPEAL IS PARTLY HELD. 5.3 THE REVENUE CHALLENGED THIS ORDER OF THE LD. CI T(A) RELATING TO ASSESSMENT YEAR 2007-08. ITAT JAIPUR BENCH AT PAGE 32 IN PARA 12 ONWARDS DEALT WITH THIS ISSUE OF ESTIMATION GROSS PROFIT RA TE OF 17.20% AND UPHELD THE FINDINGS OF THE LD. CIT(A) BY FOLLOWING OBSERVATION S. 15. AFTER CONSIDERING THE SUBMISSIONS, THE LD. CIT (A) GAVE FOLLOWING FINDING RECORDED IN PARA 5.3 AT PAGE 27 O F HIS ORDER ARE AS UNDER :- 5.3. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS OF LD. AR. HOWEVER, ON PERUSAL OF RELEVANT RECORDS, I FIND THAT THE LD. AO WAS FULLY JUSTIFIED IN REJECTING THE APPELLANTS BOOKS OF ACCOUNT U/S 145(3) OF THE I.T. ACT, IN VIEW OF THE SPECIFIC DEFECTS FOUND IN THE APPELLANTS BOOKS OF ACCOUNT, AS NOTED BY THE LD. AO IN PARA 8, 8.1. & 8.2 OF THE AS SESSMENT ORDER, PARTICULARLY IN THE ABSENCE OF THE QUANTITATIVE DET AILS OF THE RAW MATERIAL CONSUMED, SEMI FINISHED GOODS AND FINISHED GOODS AND IN THE ABSENCE OF ANY STOCK REGISTER I THE INVENTORY O F CLOSING STOCK. THEREFORE, THE SAID ACTION OF THE LD. AO IS CONFIRM ED. FURTHER, I FIND THAT THE LD. AO WAS ALSO JUSTIFIED IN APPLYING THE GP RATE OF 17.20% IN THE APPELLANTS CASE IN THIS YEAR, ON THE BASIS OF APPELLANTS OWN PAST HISTORY, WHEREBY THE APPELLANT HAD HIMSELF DECLARED THE GP RATE OF 17.20% IN THE IMMEDIATELY P RECEDING A.Y. 2005-06. THEREFORE, THE SAID ACTION OF THE LD. AO I N ESTIMATION OF THE .GP RATE OF 17.20% IN THE APPELLANTS CASE IN T HIS YEAR IS ALSO CONFIRMED. HOWEVER, I FIND THAT THE LD. AO WAS NOT JUSTIFIED IN ESTIMATING THE SALES OF THE APPELLANT AT RS.12,85,8 0,000)-, AGAINST THE DECLARED SALES OF RS.12,61,80,155/-, WITHOUT BR INGING ANY ADVERSE MATERIAL / EVIDENCE ON RECORD, INDICATING A NY OUT OF BOOKS SALE BY THE APPELLANT. THEREFORE, IN ACCORDANCE WIT H THE ABOVE DISCUSSION, THE TRADING ADDITION IS CONFIRMED TO TH E EXTENT OF RS. 24,11,395/-, AGAINST THE TRADING ADDITION OF RS.28, 24,170/- MADE BY THE LD. AO. HOWEVER, IT IS TO BE MENTIONED HERE THAT THE APPELLANT WOULD BE ENTITLED TO THE CONSEQUENTIAL CH ANGE IN THE CLAIMED AMOUNT OF DEDUCTION U/S 1OBA OF THE I. T. A CT, AS A RESULT OF THIS DECISION. CONSEQUENTLY, THIS GROUND OF APPE AL IS TREATED AS PARTLY ALLOWED. ITA NO. 1111//JP/2011 SHRI MANOJ KUMAR JOHRI VS. DCIT , CIRCLE- SIKAR 8 16. THESE FINDINGS OF LD. CIT (A) REMAINED UNCONTRO VERTED AND DO NOT REQUIRE ANY INTERFERENCE. ACCORDINGLY WE CO NFIRM THE FINDINGS OF LD. CIT (A). 17. SIMILAR GROUND AS TAKEN IN ASSESSMENT YEAR 2006 -07, HAS BEEN TAKEN FOR ASSESSMENT YEAR 2007-08 THOUGH THE F IGURE OF ADDITION IS DIFFERENT BUT THE ISSUE IS SAME. FOR T HE SAME REASONING AS DISCUSSED IN ASSESSMENT YEAR 2006-07, WE CONFIRM THE ORDER OF LD. CIT (A) FOR ASSESSMENT YEAR 2007-08 ALSO. 5.4 THE LD. AR PLEADED THAT FACTS AND CIRCUMSTANCE S ARE SAME IN COMPARISON TO EARLIER YEARS. NO INFIRMITY IS FOUND IN THE BOOKS OF ACCOUNT OF THE ASSESSEE IN RESPECT OF SALES OR PURCHASES. IN T HIS EVENTUALITY, THE ESTIMATION OF SALES HAS BEEN RIGHTLY REJECTED BY TH E LD. CIT(A) AND LOOKING AT THE PAST HISTORY THE GROSS PROFIT RATE OF 17.20% HA S BEEN ADOPTED BY THE LD. CIT(A) WHICH IS IN ORDER AND LD. CIT(A) HAS FOLLOWE D HIS PREDECESSOR ORDER AND ITAT ORDER IN REJECTING THE ESTIMATION OF SALES . THUS THERE IS NO INFIRMITY IN THE ORDER OF THE LD. CIT(A). 5.5 AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIALS AVAILABLE ON RECORD, WE SEE NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) INASMUCH MUCH THERE IS NO EVIDENCE ON RECORD TO SUGGEST ANY SALES OUTSIDE THE BOOKS OF ACCOUNT. THE BOOKS OF ACCOUNT ARE REJECTED BECAUSE OF NON-MAINTENANCE OF DETAILED PARTICULARS OF CLOSING STOCK. CONSEQUENTLY , THE ASSESSEE'S GROSS PROFIT RATE DECLARED AT 14.11% IS ADOPTED AT 17.20% BY LD. CIT(A) WHICH IS COMMENSURATE TO THE PAST HISTORY OF THE ASSESSEE. I N VIEW THEREOF, WE SEE NO ITA NO. 1111//JP/2011 SHRI MANOJ KUMAR JOHRI VS. DCIT , CIRCLE- SIKAR 9 INFIRMITY IN THE ORDER OF THE LD. CIT(A) ON THIS IS SUE WHICH IS UPHELD. THUS GROUND NO. (VI) OF THE REVENUE IS DISMISSED. 6.1 THE GROUND NO. (VII) OF THE REVENUE PERTAINS TO DISALLOWANCE OF C&F AGENT FOR WHICH THE LD. DR RELIED ON THE ORDER OF T HE AO. 6.2 THE LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT THE ENTIRE C&F AGENT EXPENDITURE PAID TO M/S. SACHIN CARGO MOVERS, IS SU PPORTED WITH PROPER DEBIT NOTE AND NO DEFECT HAS BEEN POINTED OUT. THE C&F AGENT M/S. SACHIN CARGO MOVERS IS REGULARLY ASSESSED TO TAX AND IS HO LDER OF A VALID PAN. THE AO WITHOUT POINTING OUT ANY SPECIFIC ITEM OF EXPEND ITURE DISALLOWED THIS AMOUNT OF RS. 47,74,561/-. 6.3 THE LD. CIT(A) DELETED THE DISALLOWANCE MADE BY THE AO BY FOLLOWING OBSERVATION. I HAVE CAREFULLY GONE THROUGH THE CONTENTION OF TH E AO AND THE SUBMISSION OF THE LD. AR IN THIS REGARD. FROM T HE ABOVE, IT CAN BE SEEN THAT THE AO HAS SIMPLY DISALLOWED THE PARTI AL C & F EXPENSES, WHILE COMPARING THE CURRENT YEAR RATIO OF SUCH EXPENSES WITH THE EXPORT TURNOVER TO THE PREVIOUS YEARS TRE ND IN THIS REGARD. IT IS ALSO FOUND THAT THE AO HAS NOT GIVEN ANY COGE NT OR CONVINCING REASONS, FOR RESORTING TO SUCH BASIS, TO ARRIVE AT SUCH ADVERSE CONCLUSION. ACCORDINGLY, I FIND NO JUSTIFICATION IN APPLYING THE RATIO OF SIMILAR EXPENSES OF THE PREVIOUS YEAR TO THE FIG URE OF C & F EXPENSES OF THE CURRENT YEAR; AS SUCH YARDSTICK IS NOT AN ACCEPTABLE PRINCIPLE TO DETERMINE THE REASONABLENESS OF AN EXP ENSE. MOREOVER, THE COURTS HAVE ALSO HELD THAT THE REASONABLENESS O F SUCH DECISION OR EXPENSES CLAIMED HAS TO BE ADJUDGED FROM THE ASSESS EES POINT OF VIEW. THE ABOVE RATIOS HAVE BEEN UPHELD IN FOLLOWIN G DECISIONS: - I) KASHI RAM RADHA KRISHAN 155 ITR 609 (RAJ.) II) DHANRAJ GIRI & OTHERS 91 ITR 544 (SC) ITA NO. 1111//JP/2011 SHRI MANOJ KUMAR JOHRI VS. DCIT , CIRCLE- SIKAR 10 IN VIEW OF THE ABOVE LEGAL POSITION, I FIND THAT AO HAS FAILED TO MAKE A REASONABLE CASE TO JUSTIFY THE ADVERSE VI EW TAKEN IN THIS REGARD. IN OTHER WARDS THE ADDITION MADE BY THE AO IN THIS REGARD IS FOUND BASED ON ASSUMPTION AND SURMISES ON THE PART OF THE AO, WHICH CAN NOT BE RATIFIED UNDER THE GIVEN CIRCUMSTA NCES. ACCORDINGLY, THE ADDITION OF RS. 4774561/- MADE NO ACCOUNT OF DISALLOWANCE OF PARTIAL C & F EXPENSES IS FOUND UNJ USTIFIED, THUS, DELETED ACCORDINGLY. CONSEQUENTLY, THIS GROUND OF A PPEAL IS UPHELD. 6.4 IT IS PLEADED BY THE LD. AR OF THE ASSESSEE THA T EXPENDITURE TO C&F AGENT IS FULLY VOUCHED AND VERIFIABLE. THUS THE LD. CIT(A) IS JUSTIFIED IN DELETING THE ADDITION MADE BY THE AO. 6.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE C&F AGENT EXPENDITURE IS A CONTROLLED EXPENDITURE INASMUCH AS IT IS RELATABLE TO PARTICULAR EXPORT CO NSIGNMENTS. THE AO HAS NOT POINTED OUT ANY PARTICULAR ITEM OF EXPENDITURE OR E XPORT CONSIGNMENTS OR ANY MISMATCH THEREIN. IN VIEW THEREOF, WE UPHOLD THE OR DER OF THE LD. CIT(A) AND HOLD THAT RELIEF HAS BEEN GIVEN JUST AND PROPER CON SIDERATION. THUS GROUND NO. (VII) OF THE REVENUE IS DISMISSED. 7.1 APROPOS GROUND NO. (VIII) OF THE REVENUE REGARD ING DELETION OF DISALLOWANCE OF RS. 40,52,766/- OUT OF JOB WORK CON TRACT PAYMENTS MADE IN CONTRAVENTION TO SECTION 40(A)(IA) OF THE ACT ; LD. DR SUPPORTED THE ORDER OF THE AO. ITA NO. 1111//JP/2011 SHRI MANOJ KUMAR JOHRI VS. DCIT , CIRCLE- SIKAR 11 7.2 THE LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT IT IS NOT DISPUTED THAT TDS AMOUNT WAS PAID BEFORE PRESCRIBED DATE OF FILIN G THE RETURN. BESIDES SECTION 40(A)(IA) OF THE ACT, HAS BEEN RETROSPECTIV ELY AMENDED BY FINANCE ACT, 2007 IN THIS BEHALF. THE LD. CIT(A) RELYING ON THE AMENDMENT IN THE ACT AND CASE LAWS, DELETED THE ADDITION BY FOLLOWIN G OBSERVATION. PAYMENT OF JOB WORK CONTRACTORS :- IN THIS REGARD CONSIDERING THE FACT THAT THE TDS WAS DEDUCTED AND PAID BELATED, HOWEVER, BEFORE THE DUE DATE OF FILING OF RETURN U/ S 139 (1) OF THE ACT AND ALSO THE RATIO UPHELD BY THE SUPREME COURT IN T HE ALLIED MOTORS PVT. LTD. 224 ITR 677 AND ATOM EXTRUSIONS PVT. LTD. (185 TAXMAN 416). I AGREE WITH THE CONTENTION OF THE LD. AR THA T NO DISALLOWANCE U/S 40 (A) (IA) CAN BE MADE UNDER THE GIVEN CIRCUMS TANCES. LD. AR FURTHER SUBMITTED THAT THE LEGAL VIEW ADOPTE D BY LD. CIT (A) IS FURTHER SUPPORTED FROM FOLLOWING JUDICIAL PRONOUNCE MENTS ITO V. ANIL KUMAR & CO. [2013] 214 TAXMAN 202 (KAR.) / CIT V. N ARESH KUMAR (2014) 221 TAXMAN 59 RAMA BUILDERS VS. I.T.O. 142 ITD 405 AND CIT VS. CHAUDHARY CONSTRUCTION COMPANY (2014) 42 TAXMAN.COM 547 (RAJ.) AND VARIOUS OTHER JUDGEMENTS IN WHICH IT HAS BEEN HELD THAT AMENDMENT TO SECTION 40 (A) (IA) BY FINANCE ACT, 2010 IS RETROSP ECTIVELY EFFECTIVE FROM 1- 4-2005; ON PAYMENT, FOR WHICH TAX IS DEDUCTED AND D EPOSITED WITHIN DATE SPECIFIED IN SECTION 139 (1) CANNOT BE DISALLOWED U /S 40 (A) (IA). 7.3 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND NO INFIRMITY IN THE OR DER OF THE LD. CIT(A). THE ITA NO. 1111//JP/2011 SHRI MANOJ KUMAR JOHRI VS. DCIT , CIRCLE- SIKAR 12 DEPARTMENT HAS NOT DISPUTED THE FACT THAT REQUISITE TDS WAS PAID BEFORE THE DUE DATE OF FILING OF THE RETURN. THUS IN THE LIGHT OF THE RETROSPECTIVE AMENDMENT IN THE FINANCE ACT, 2007 AND THE CASE LAW S CITED, WE UPHOLD THE ACTION OF THE LD. CIT(A). THUS GROUND NO. (VIII) OF THE REVENUE IS DISMISSED. 8.1 GROUND NO. (IX) OF THE REVENUE PERTAINS TO DELE TION OF DISALLOWANCE OF RS. 2,96,883/- MADE U/S 40A(3) OF THE ACT IN RES PECT OF CASH PAYMENTS IN EXCESS OF RS. 20,000/- PER DAY TO SINGLE PERSON WHE REIN THE LD. DR RELIED ON THE ORDER OF THE AO. 8.2 THE LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT RELIEF HAS BEEN GIVEN BY THE LD. CIT(A) FOLLOWING HIS OWN ORDER IN EARLIER Y EARS WHICH ARE CONFIRMED BY THE ITAT IN ITS ORDER FOR ASSESSMENT YEAR 2006 -07 AND 2007-08, BY FOLLOWING OBSERVATION. 7.1 I HAVE GONE THROUGH THE OBSERVATION OF THE AO IN THIS REGARD AND THE ARGUMENTS EXTENDED BY THE LD. A .O. AR, IN SUPPORT OF THEIR APPEAL. THE BRIEF FACTS OF THE ISS UE UNDER CONSIDERATION ARE THAT THE AO OBSERVED THAT THE APP ELLANT HAS MADE CASH PAYMENT TO SINGLE PERSON IN A PARTICULAR DAY A ND THE TOTAL OF SUCH PAYMENTS WAS MORE THAN RS. 20000/-, AS SUCH. I N VIEW OF THE SAME, THE AO HELD THAT THE PROVISION OF SEC. 40A(3) WOULD BE APPLICABLE ON SUCH TRANSACTIONS, AMOUNTING TO RS. 1 484416/- AND 20% OF THE SAME, I.E. RS. 296883/-, WAS DISALLOWED ACCORDINGLY. HOWEVER, THE LD. A.O. CONTENDED THAT THESE PAYMENTS , THROUGH MADE IN SINGLE DAY, WERE MADE AT DIFFERENT TIMES WITH DI FFERENT VOUCHERS, THUS PROVISIONS OF SEC. 40A (3) IS NOT APPLICABLE O N SUCH TRANSACTIONS. ITA NO. 1111//JP/2011 SHRI MANOJ KUMAR JOHRI VS. DCIT , CIRCLE- SIKAR 13 BEFORE GOING INTO THE MERITS OF THE RIVAL STANDS, A S DISCUSSED ABOVE, IN THIS REGARD, IT IS FOUND THAT THE HON'BLE ITAT, JAIPUR BENCH, IN THE APPELLANTS OWN CASE FOR A.Y. 2006-07 & 2007 -08, HAS DECIDED THE SIMILAR ISSUE IN THE FAVOUR OF THE APPELLANT. A CCORDINGLY WHILE FOLLOWING THE PRINCIPLE JUDICIAL DISCIPLINE, I ALSO UPHOLD THAT THE PROVISION OF SEC. 40A (3) ARE NOT APPLICABLE ON THE TRANSACTIONS ENTERED ON SINGLE DATE WITH A COMMON PERSON AND HAV ING THE AGGREGATE AMOUNT INVOLVED OF MORE THAN RS. 20,000/- . CONSEQUENTLY THIS GROUND OF APPEAL IS UPHELD. 8.3 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THIS BENCH OF ITAT IN ITS EARL IER ORDER (SUPRA) HAS TAKEN A VIEW THAT THE ASSESSEE CAN ISSUE CASH LESS THAN R S. 20,000/- TO SAME PERSON AT DIFFERENT INTERVAL DURING ONE DAY. RESPECTFULLY, FOLLOWING ITAT ORDER, WE UPHOLD THE ORDER OF THE LD. CIT(A). THUS GROUND NO. (IX) OF THE REVENUE IS DISMISSED. 9.1 COMING TO LAST GROUND NO. (X) OF THE REVENUE WH ICH CHALLENGES THE ORDER OF LD. CIT(A) HOLDING THAT TRADING ADDITIONS OF RS. 66,43,253/- AS ELIGIBLE FOR DEDUCTION U/S 10BA OF THE ACT ON THE G ROUND THAT THE ENHANCED PROFIT WAS RELATED TO DOMESTIC SALES. 9.2 IN THIS GROUND, THE LD. CIT(A) CAME THE FOLLOWI NG OBSERVATION. 8.1 THE ABOVE GROUND OF APPEAL IS OF THE NATURE O F CONSEQUENTIAL OF THE RESULT OF THE GROUND NO. 4,5 & 6 AS DISCUSSED AND DECIDED ABOVE. ACCORDINGLY IT IS HELD THAT AS FAR AS GROUND NO. 4 & 5 ARE CONCERNED, SINCE THE DISALL OWANCE MADE THEREIN, ARE DELETED, THEREFORE, THE ISSUE RAI SED IN THE ITA NO. 1111//JP/2011 SHRI MANOJ KUMAR JOHRI VS. DCIT , CIRCLE- SIKAR 14 PRESENT GROUND OF APPEAL HAS BECOME IRRELEVANT AND NO FINDINGS ARE REQUIRED TO BE GIVEN. HOWEVER, REGARDING THE AD DITIONS, AS UPHELD BY ME RELATED TO GROUND NO. 5 THE APPELLANT WOULD NOT BE ENTITLED TO CLAIM DEDUCTION U/S 10BA OF THE ACT TOWARDS THE ENHANCEMENT OF INCOME DUE TO DISALLOWANCE OF TRANSP ORT CHARGES (RS. 27,03,977/-) FACTORY RENT (RS. 1,92,00 0/-) AND CARRIAGE OUTWARD CHARGES (RS. 87,600/-) FOR THE REA SONS DISCUSSED IN THE RELEVANT FOREGOING PARA, AS DISCUS SED ABOVE. AS FAR AS THE OTHER DISALLOWANCE I.E. JOB WORK PAYM ENT (RS. 40,52,766/-) IS CONCERNED, SINCE THE SAME HAS BEEN DELETED, THEREFORE, THE RELIEF, AS ASKED FOR, IN THE PRESENT GROUND OF APPEAL IS BECOME INFRUCTUOUS. CONSEQUENTLY, THIS GR OUND OF APPEAL IS PARTLY UPHELD. 9.3 THE LD. DR RELIED ON AOS ORDER. 9.4 LD COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF LD. CIT(A) AND ITAT JUDGMENT IN THE CASE OF S B DEVELOPERS V. ITO 45 SOT 335 (MUM) FOR THE PROPOSITION THAT THE DEDUCTION U/S 10BA IS TO BE ALLOWED ON THE FINALLY ASSESSED TAXABLE INCOME FROM THE INDUSTRIAL UNDERTAKING. 9.5 AFTER CONSIDERING THE RIVAL CONTENTIONS WE ARE OF THE VIEW THAT DEDUCTION U/S 10BA IS THE ELIGIBLE TAXABLE PROFITS FROM THE INDUSTRIAL UNDERTAKING, IF ANY DISALLOWANCE OF EXPENDITURE IS MADE IT INCREASES THE ELIGIBLE UNDERTAKINGS TAXABLE INCOME. LD. CIT(A) HA S RIGHTLY HELD THAT AFTER ANY DISALLOWANCE OF EXPENDITURE THE RESULTANT INCOM E OF THE INDUSTRIAL UNDERTAKING WILL BE ELIGIBLE FOR DEDUCTION U/S 10BA . WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT(A) ON THIS ISSUE. CONSEQUENTLY GROUND NO. (X) OF THE REVENUE IS DISMISSED. ITA NO. 1111//JP/2011 SHRI MANOJ KUMAR JOHRI VS. DCIT , CIRCLE- SIKAR 15 10.1 ADVERTING TO THE ASSESSEE'S APPEAL RELATING TO GROUND NO. 3 WHEREIN THE LD. AR OF THE ASSESSEE CONTENDS THAT NO TRANSPO RTATION EXPENSES OF RS. 27,03,977/- HAS BEEN DEBITED SEPARATELY IN P & L A/ C OF ASSESSEE. THIS AMOUNT WAS PAID TO M/S SACHIN CARGO MOVERS, JAIPUR (CLEARING AND FORWARDING AGENT OF ASSESSEE) WHICH WERE DEBITED UN DER THE HEAD CLEARING & FORWARDING CHARGES. THE PAYMENTS ARE IN THE NATURE OF REIMBURSEMENT OF EXPENSES INCURRED BY SAID C & F AGENT. THE HEADWISE DETAILS OF THESE EXPENSES IN THIS BEHALF WERE FURNISHED BEFORE AO AN D CIT (A). THE AO DID NOT APPRECIATE ASSESSEE'S EXPLANATION AND HELD TH EM AS CONTRACTUAL PAYMENTS LIABLE FOR TDS. AS THEY WERE IN THE NATURE OF REIMBURSEMENT THEREFORE, ASSESSEE DID NOT DEDUCT TDS FROM THE SAI D AMOUNT AND AO DISALLOWED THE SAME BY INVOKING PROVISIONS OF SECTI ON 40 (A) (IA). 10.2 IN APPEAL BEFORE LD. CIT (A), THE ASSESSEE REI TERATED THE FACTS, ACTUAL NATURE OF PAYMENTS AND FILED THE CHART IN THIS BEHA LF. IT WAS CONTENTED THE AMOUNT WAS NOT PAID FOR ANY TRANSPORT OF GOODS FOR HIRING ANY GOODS CARRIAGES TO M/S SACHIN CARGO MOVERS, JAIPUR. THEY REPRESENTED ONLY REIMBURSEMENT OF EXPENSES INCURRED BY THEM ON ASSES SES BEHALF. LD. CIT (A) DID NOT APPRECIATE THE NATURE OF EXPENSES AND R EJECTED EXPLANATION OF ASSESSEE AND CONFIRMED THE ADDITION. ITA NO. 1111//JP/2011 SHRI MANOJ KUMAR JOHRI VS. DCIT , CIRCLE- SIKAR 16 10.3 LD. COUNSEL REITERATED THE FACTS AND REFERRED TO THE PAPER BOOK TO BUTTRESS HIS SUBMISSIONS THAT THESE AMOUNTS WERE P AID TO SACHIN CARGO MOVERS AS REIMBURSEMENTS AND NOT FOR HIRING ANY GOO DS VEHICLE. MERELY BECAUSE THEY WERE DEBITED TO C & F A/C, THEY HAVE B EEN HELD TO BE LIABLE FOR TDS. IT WAS NOT THE ASSESSEE BUT M/S SACHIN CARGO M OVERS WHO HIRED ON BEHALF OF THE ASSEESSEE, SOME GOODS VEHICLES FOR T RANSPORT FROM FACTORY TO PORT AND PAID CHARGES ON ASSESSES INSTRUCTIONS TO O THER TRANSPORTERS WHICH ARE REIMBURSED TO THEM. M/S SACHIN CARGO MOVERS DEDUCT ED TDS FROM TRANSPORTERS AND DEPOSITED IN GOVT. ACCOUNT AND FUR NISHED A CERTIFICATE TO THIS EFFECT (P.B. PAGE NO. 71). THUS AGENT HAVING D EDUCTED DUE TDS AND PAID THE SAME TO GOVT. A/C AND SO THERE IS NO LIABI LITY OF ASSESSEE TO DEDUCT TDS. THE LD. AR PLACED RELIANCE ON THE JUDGEMENT O F CIT VS. HARBANS LAL MALHOTRA & SONS P. LTD. (2013) 262 CTR 94 (CAL.) / (2013) 217 TAXMAN 112 AND CIT VS. GUJRAT NARMADA VALLY FERTILIZERS CO . LTD. (2014) 361 ITR 192 HOLDING THE PROPOSITION THAT WHERE THE ASSESSEE PAID AMOUNT TO ITS AGENT WITHOUT DEDUCTING TAX AT SOURCE, WHO IN TURN, DEDUC TED TAX AT SOURCE WHILE MAKING PAYMENT ON BEHALF OF ASSESSEE DISALLOWANCE C OULD NOT BE MADE U/S 40(A) (IA) . IT IS PLEADED THAT IN VIEW OF ABOVE FACTS AND LEGAL POSITION THE DISALLOWANCE MAY BE DELETED. ITA NO. 1111//JP/2011 SHRI MANOJ KUMAR JOHRI VS. DCIT , CIRCLE- SIKAR 17 10.4 THE LD. AR FURTHER PLEADED THAT EVEN IF THIS D ISALLOWANCE IS UPHELD THEN GROUND NO. 4 OF THE ASSESSEE BECOMES ALTERNATE GROUND AS THIS EXPENDITURE RELATES TO ELIGIBLE BUSINESS. THIS AS A CONSEQUENCE WILL INCREASE THE ELIGIBLE BUSINESS INCOME WHICH IS DEDUCTIBLE U/ S 10BA OF THE ACT. FURTHER RELIANCE IS PLACED ON THE CASE OF S.B. DEVE LOPERS VS. ITO (2011) 45 SOT 335 (MUM.). 10.5 THE LD. DR SUPPORTED THE ORDERS OF THE LOWER A UTHORITIES. 10.6 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. IN OUR CONSIDERED VIEW THE NAT URE OF BETWEEN ASSESSEE & M/S. SACHIN CARGO MOVERS, C&F AGENT, WAS FOR REIMBU RSEMENT OF EXPENSES. BESIDES, THE TDS THEREON HAS BEEN DEDUCTE D BY THE AGENT AS MENTIONED ABOVE. BY NOW, IT HAS BEEN SETTLED BY VA RIOUS COURTS THAT REIMBURSEMENT OF EXPENSES ARE NOT LIABLE FOR DEDUCT ION U/S 40(A)(IA) OF THE ACT. IN ANY CASE THE AGENT HAS DEDUCTED THE TDS A F ACT NOT DISPUTED BY REVENUE, IN THIS EVENTUALITY ALSO THE CASE LAWS CIT ED BY THE LD. AR SUPPORTS THIS PROPOSITION. IN VIEW THEREOF, WE HOLD THAT THE EXPENSES PAID TO M/S. SACHIN CARGO MOVERS, C&F AGENT, BEING FOR REIMBURSE MENT OF EXPENSES CANNOT BE DISALLOWED U/S 40(A)(IA) OF THE ACT. THUS GROUND NO. 3 OF THE ASSESSEE IS ALLOWED. ITA NO. 1111//JP/2011 SHRI MANOJ KUMAR JOHRI VS. DCIT , CIRCLE- SIKAR 18 11.1 SINCE WE HAVE ALLOWED THE MAIN GROUND NO. 3 OF THE ASSESSEE THEREFORE, THE GROUND NO. 4 OF THE ASSESSEE WHICH I S AN ALTERNATE GROUND BECOMES INFRUCTUOUS. 12.0 IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED AND THAT OF THE ASSESSEE IS ALLOWED THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 21- 11-2014 SD/- SD/- (T.R. MEENA) (R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR DATED: 21 ST NOV 2014 *MISHRA COPY FORWARDED TO:- 1. SHRI MANOJ KUMAR JOHRI, SIKAR 2. THE DCIT, CIRCLE- SIKAR 3. THE LD. CIT 4. THE LD. CIT(A), JAIPUR BY ORDER 5..THE LD. DR 6.THE GUARD FILE (IT NO. 1111/JP/2011) AR ITAT, JAIPUR