ITO, Jaipur V. RAJESH KUMAR GUPTA, Alwar

ITA 1138/JPR/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9710 (ITAT-JAIPUR)
• Duration Of Justice: 1 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 28-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA DHK
• Assessee Lawyers: TARUN MITTAL
• Keywords: Reassessment proceedings
• Section: 44AD; 40A(3); 28; 2

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH HKKXPAN] YS[KK LNL; ] DS LE{K BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER VK;DJ VIHY LA-@ ITA NO. 1138/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12 INCOME TAX OFFICER, WARD-1(4), ALWAR. CUKE VS. RAJESH KUMAR GUPTA, PROP.- M/S HUNDIWALA JEWELLERS, GOL MARKET, RAJGARH, ALWAR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ABTPG 9506 F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI TARUN MITTAL & SHRI MANISH AGARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAJ MEHRA LQUOKBZ DH RKJH[K@ DATE OF HEARING : 27/02/2017 MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 27/02/2017 VKNS'K@ ORDER PER: BHAGCHAND, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 27/10/2016 PASSED BY THE LD. CIT(A), ALWAR FOR THE A .Y. 2011-12. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS AGAINST DELETING T HE ADDITION OF RS. 40,90,805/- ON ACCOUNT OF PURCHASES MADE IN CONTRAV ENTION OF PROVISIONS OF ITA 1138/JP/2016_ ITO VS RAJESH KUMAR GUPTA 2 SECTION 40A(3) OF THE INCOME TAX ACT, 1961 (HEREINAF TER REFERRED AS THE ACT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A SMALL BUSINESSMAN AND DERIVED INCOME FROM SALE AND PURCHASE OF GOLD A ND SILVER JEWELLERY. THE RETURN OF INCOME OF THE YEAR UNDER CONSIDERATION WAS FILED ON 31/07/2010 DECLARING TOTAL INCOME OF RS. 2,96,630/- . THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD PURCHASED IN CASH GO LD AND SILVER FOR RS. 40,90,805/- IN THE ASSESSMENT YEAR 2010-11. ON BEIN G ASKED FROM THE ASSESSEE, HE FILED EXPLANATION, WHICH WAS NOT ACCEPT ED BY THE ASSESSING OFFICER AND THUS ADDITION OF RS. 40,90,805/- WAS MAD E. 3. THE LD. CIT(A) AFTER HEARING THE SUBMISSIONS OF B OTH THE PARTIES, HAS DELETED THE ADDITION BY HOLDING AS UNDER:- 5.3.2 I HAVE CONSIDERED THE ABOVE MENTIONED FACTS OF THE CASE. IT IS IMPORTANT TO NOTE THAT THE ASSESSEE HAD FILED ITS RETURN OF INCOME IN FORM 4S WHICH IS APPLICABLE FOR INCOME COVERED UNDER SECTION 44AD OF THE ACT. THE RETURN WAS ACCEPTED AND PROCESSED UNDER SECTION 143(1) OF THE ACT. EVEN DURING REASSESSMENT PROCEEDINGS UNDER SECTION 147/148 OF THE ACT, THIS FACT WAS NEVER PUT INTO ANY DOUBT. THE ACCEPTED TURNOVER OF THE ASSESSEE IS COVERED UNDER SECTION 44AD OF TH E ACT. NOW THE ONLY BONE OF CONTENTION IS WHETHER THE SECTION 40A(3) WOULD BE APPLICABLE WHEN THE INCOME ITA 1138/JP/2016_ ITO VS RAJESH KUMAR GUPTA 3 DECLARED IS COVERED UNDER THE PROVISIONS OF SECTION 44AD OF THE ACT? IT WOULD BE WORTHWHILE TO REPRODUCE PROVISION OF SECTION 44AD OF THE ACT; 44AD (1) NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN SECTIONS 28 TO 43C, IN THE CASE OF AN ELIGIBLE ASSESSEE ENGA GED IN AN ELIGIBLE BUSINESS, A SUM EQUAL TO EIGHT PER CENT OF THE TOTAL TURNOVER OR GROSS RECEIPTS OF THE ASSESSEE IN THE P REVIOUS YEAR ON ACCOUNT OF SUCH BUSINESS OR, AS THE CASE MAY BE, A SUM HIGHER THAN THE AFORESAID SUM CLAIMED TO HAVE BEEN EARNED BY THE ELIGIBLE ASSESSEE, SHALL BE DEEMED TO BE THE PROFIT S AND GAINS OF SUCH BUSINESS CHARGEABLE TO TAX UNDER THE HEAD PROF ITS AND GAINS OF BUSINESS OR PROFESSION. A PLAIN READING OF THE SECTION ITSELF SAYS THAT SEC TION 28 TO SECTION 43C OF THE I T ACT THAT INCLUDES SECTION 40A(3) IS NOT APPLICABLE WHEN THE INCOME IS COMPUTED UNDER SECTION 44AD OF THE ACT. THE A.O HAS NOT CONCLUDED IN THE ASSESSMENT ORDER THAT THE ASSESSEE IS NOT ELIGIBLE FOR SECTION 44AD OR THE BUSINESS UNDERTAKEN BY THE ASSESSEE IS NOT THE ELIGIBLE BUSI NESS UNDER SECTION 44AD OF THE ACT. SINCE, THE APPELLANT IS FULFILLING ALL THE NECESSARY CONDITIONS UNDER SECTI ON 44AD OF THE ACT, THE BENEFIT OF SECTION 44AD CANNOT BE DENIED TO THE ASSESSEE. EVEN DURING THE COURSE OF SURVEY OPERATION UNDER SECTION 133 A OF THE ACT, NO ADDITIONAL SALE/PURCHASE WERE NOTICED AND THE GROSS RECEIPTS OF RS.47,48,300/- DECLARED IN THE RETURN O F INCOME WAS NOT DISPUTED. ITA 1138/JP/2016_ ITO VS RAJESH KUMAR GUPTA 4 IT WOULD BE WORTHWHILE TO MENTION HERE THAT IN THE ASSESSEE OWN CASE FOR PRECEDING YEARS, ON THE SIMIL AR ISSUE (WHEN THE ASSESSEE DECLARED THE INCOME UNDER SECTION 44AF OF THE ACT, WHICH IS NO LONGER AVAILABL E IN THE STATUTE FROM A.Y 2011-12 AS THE CORE PROVISION HAS BEEN SUBSUMED IN SECTION 44AD OF THE ACT), THE A.O HAD DISALLOWED THE EXPENSES INCURRED IN VIOLATION OF SECTION 40 A (3) OF THE ACT. HONBLE IT AT, JAIPUR BENCH HAD PRONOUNCED AS UNDER; 2 . 7 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. RESPECTFULLY FOLLOWI NG THE DECISION OF IT AT AHMEDABAD BENCH IN THE CASE OF GOPALSINGH R RAJPUROHIL V/S ACIT, (SUPRA), I HOLD T HAT ONCE THE ASSESSEE HAS FILED HIS RETURN U/S 44AF, NO FURT HER DISALLOWANCE CAN BE MADE U/S 40(3) OF THE ACT. IT I S NOTEWORTHY THAT IN THIS CASE NO TRADING IRREGULARIT Y WAS FOUND AND ADDITION HAS BEEN SUSTAINED ONLY ON TECHN ICAL ISSUE OF SECTION 40A(3) OF THE ACT. THE PRESUMPTIVE SYSTEM OF TAX U/S 44AF STARTS WITH NON-OBSTANTE CLAUSE AND OVERRIDES OTHER PROVISIONS. IN VIEW THEREOF, THERE IS NO JUSTIFICATION IN MAKING THE ADDITION WHICH IS DELET ED. SINCE THE ADDITION IS DELETED ON MERITS, THERE IS NO NEED TO GO INTO ALTERNATIVE GROUND. THUS THE APPEAL OF THE ASS ESSEE IS ALLOWED. THUS IN VIEW OF THE FACTUAL MATRIX OF THE CASE AND PROVISIONS OF THE ACT AND ALSO TAKING INTO ACCOUNT HONBLE ITAT, JAIPUR BENCH DECISION IN THE APPELLAN TS OWN CASE ON SIMILAR ISSUE, THE ADDITION OF RS. 40,90,805/- ON ACCOUNT OF VIOLATION OF SECTION 40A( 3) OF THE ACT IS DELETED. ACCORDINGLY, APPELLANTS GRO UND OF APPEAL ON THE ISSUE IS ALLOWED. ITA 1138/JP/2016_ ITO VS RAJESH KUMAR GUPTA 5 4. NOW THE REVENUE IS IN APPEAL BEFORE US. THE LD. DR HAS VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER. AT TH E OUTSET, THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THE SIMILAR ISSUE WAS DE CIDED BY THE HONBLE ITAT (SMC) JAIPUR BENCH IN ASSESSEES OWN CASE FOR TH E ASSESSMENT YEAR 2006-07 AND 2007-08 VIDE ITS ORDERS DATED 12/04/201 5 AND 20/10/2016 PASSED IN ITA NOS. 734/JP/2015 AND 542/JP/2016 IN F AVOUR OF THE ASSESSEE. THEREFORE, HE PRAYED TO ALLOW THE APPEAL O F THE ASSESSEE. 5. I HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. FROM PERUSAL OF RECORDS, IT TRANSPIRES THAT THE ISSUE UNDER CONSIDERATION HAS ALREADY BEEN DECIDED BY THE COORDINATE BENCH OF THE ITAT IN ASSESSEES OWN CASE V IDE ITS ORDERS DATED 12/04/2015 AND 20/10/2016 PASSED IN ITA NOS. 734/JP /2015 AND 542/JP/2016 FOR THE ASSESSMENT YEARS 2006-07 AND 20 07-08. THE RELEVANT PORTION OF THE ORDER PASSED IN ITA NO. 734/JP/2015 IS AS UNDER:- 2.4 THE LD. COUNSEL FOR THE ASSESSEE ASSAILS THE A DDITION AND THE LD. COUNSEL FOR THE ASSESSEE FILED THE WRITTEN SUBMISSI ON IN WHICH THE SUMS AND SUBSTANCES RAISES FOLLOWING PLEAS. (I) ACCORDING TO SECTION 44AF, THE ASSESSEE WAS TO BE ASSESSED ON PRESUMPTIVE BASIS I.E. @ 5% NET PROFIT AND NO FURTH ER ADDITION CAN BE MADE. IN THIS REGARD NOTHING IS WRONG IN THE TRADIN G ACTIVITIES AND THERE HAS BEEN FOUND A TECHNICAL ISSUE OF SECTION 4 0A(3) OF THE ACT. (II) SECTION 44AF BEGINS WITH A NON-OBSTANTE CLAUSE AND SPECIFICALLY BARS THE APPLICATION OF PROVISIONS OF SECTION 28 TO 43C WHICH INCLUDES SECTION 40A(3) AS WELL. THEREFORE, I T IS CLEAR THAT ITA 1138/JP/2016_ ITO VS RAJESH KUMAR GUPTA 6 WHEN THE HAS DECLARED HIS INCOME U/S 40A(3) OF THE ACT, NO FURTHER DISALLOWANCE U/S 40A(3) CAN BE MADE, (III) THE LD. AR RELIED ON THE CASE OF ITAT AHEMDAB AD BENCH IN THE CASE OF GOPALSINGH R RAJPUROHIT VS. ACIT, 94 TTJ 86 5 WHEREIN IT HAS BEEN HELD THAT ONCE THE RETURN IS FILED U/S 44AF NO FURTHER DISALLOWANCE COULD BE MADE U/S 40A(3) OF THE I.T. A CT 2.5 ADVERTING TO ALTERNATIVE GROUND, THE LD. COUNSE L FOR THE ASSESSEE CONTENDS THAT SINCE ALL THE PARTIES FROM WHOM THE P URCHASES WERE MADE WERE RESIDING IN VILLAGES AND HAVING NO BANKIN G FACILITIES BECAUSE OF WHICH THEY HAD INSISTED THE ASSESSEE FOR MAKING PAYMENT IN CASH TOWARDS THE SALE OF THEIR PERSONAL ORNAMENT S TO THE ASSESSEE AND THUS IT IS CLEAR THE CASE OF THE ASSESSEE IS CL EARLY COVERED BY RULE 6DD(G) OF THE INCOME-TAX RULES, 1962 INASMUCH AS TH E EXCEPTIONAL CIRCUMSTANCES SPECIFIED THEREUNDER EXISTED IN THE C ASE OF ASSESSEE AND THAT BEING SO, NO ADDITION U/S 40A(3) OF THE AC T COULD HAVE BEEN MADE. RELIANCE IS PLACED BY THE LD. AR OF THE ASSES SEE AS UNDER:- (I) PACL INDIA LTD. VS. ACIT , 38 DTR 1 (JAIPUR ) (II) CIT VS. INTERSEAS, 40 DTR 143 (KER.) (III) SHREE SALASAR OVERSEAS V DCIT 107 DTR 225 (J AIPUR) 2.6 THE LD. DR IS HEARD. 2.7 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. RESPECTFULLY FOLLOWING THE DEC ISION OF ITAT AHEMDABAD BENCH IN THE CASE OF GOPALSINGH R RAJPURO HIT VS. ACIT, (SUPRA), I HOLD THAT ONCE THE ASSESSEE HAS FILED HI S RETURN U/S 44AF, NO FURTHER DISALLOWANCE CAN BE MADE U/S 40A(3) OF T HE ACT. IT IS NOTEWORTHY THAT IN THIS CASE NO TRADING IRREGULARIT Y WAS FOUND AND ADDITION HAS BEEN SUSTAINED ONLY ON TECHNICAL ISSUE OF SECTION 40A(3) OF THE ACT. THE PRESUMPTIVE SYSTEM OF TAX U/S 44AF STARTS WITH NON- OBSTANTE CLAUSE AND OVERRIDES OTHER PROVISIONS. IN VIEW THEREOF, THERE ITA 1138/JP/2016_ ITO VS RAJESH KUMAR GUPTA 7 IS NO JUSTIFICATION IN MAKING THE ADDITION WHICH IS DELETED. SINCE THE ADDITION IS DELETED ON MERITS, THERE IS NO NEED TO GO INTO ALTERNATIVE GROUND. THUS THE APPEAL OF THE ASSESSEE IS ALLOWED. SINCE THE ISSUE UNDER CONSIDERATION IS COVERED IN F AVOUR OF THE ASSESSEE BY THE ORDER OF THE ITAT, JAIPUR BENCH IN ASSESSEES OWN CASE, THEREFORE, I CONCUR WITH THE ORDER OF THE LD. CIT(A), WHO DELETED T HE ADDITION MADE BY THE ASSESSING OFFICER. ACCORDINGLY, THE APPEAL OF T HE REVENUE IS DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27/02/2017. SD/- HKKXPAN (BHAGCHAND) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 27 TH FEBRUARY, 2017 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE ITO, WARD-1(4), ALWAR. 2. IZR;FKHZ @ THE RESPONDENT- SHRI RAJESH KUMAR GUPTA, ALWAR. 3. VK;DJ VK;QDR @ 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. 1138/JP/2016) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR