Kamal Jewellers, Dehradun V. Addl. CIT, Dehradun

ITA 1154/DEL/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2919 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 28-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: P K MISHRA
• Keywords: Business income; Opportunity of being heard; Tax effect

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH D NEW DELHI BEFORE : SHRI I.C. SUDHIR , JUDICIAL MEMBER & SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 1128/DEL./2014 ASSTT. YEAR : 2009 - 10 A.C.I.T., CIRCLE 2, VS. KAMAL JEWELLERS, DEHRADUN. 35, KAMAL MARKET, NEW DELHI [PAN : AABFK1986C] ITA NO. 1154/DEL./2014 ASSTT. YEAR : 2009 - 10 KAMAL JEWELLERS, VS. ADDL. C.I.T., RANGE 2, 35, KAMAL MARKET, NEW DELHI DEHRADUN. (APPELLANT) (RESPONDENT) REVENUE BY : SH. RISHPAL BEDI, SR. DR ASSESSEE BY : SH. P.K. MISHRA, C.A. DATE OF HEARING : 12.01.2016 DATE OF PRONOUNCEMENT : 19 .01.2016 ORDER PER L.P. SAHU, ACCOUNTANT MEMBER: TH ESE TWO CROSS APPEALS BY THE REVENUE AND THE ASSESSEE ARISE OUT OF THE ORDER PASSED BY THE CIT(A) IN RELATION TO THE CAPTIONED ASSESSMENT YEAR. ITA NO. 1 128 & 1154 /DEL/20 14 2 2. ADVERTING TO THE APPEAL OF REVENUE , D URING THE COURSE OF HEARING, THE LD. DR, ALTHOUGH SUPPORTED THE ORDER OF THE ASSESSING OFFI CER, BUT COULD NOT CONTROVERT THE FACT THAT TAX EFFECT INVOLVED IN THIS APPEAL IS LESS THAN RS.10,00,000/ - . THE LD. AR OF THE ASSESSEE, ON THE OTHER HAND, CONTENDED THAT THE APPEAL OF THE REVENUE IS COVERED BY CIRCULAR OF CBDT NO. 21 OF 2015 DATED 10.12.20 15, REVISING THE MONETARY LIMIT TO RS.10,00,000/ - FOR NOT FILING APPEALS BEFORE THE TRIBUNAL. 3 . WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE PERUSED THE ABOVE CIRCULAR. FROM PARA 10 OF THE ABOVE CIRCULAR IT IS PALPABLE THAT THESE INSTRUCTIONS ARE APPLICABLE TO THE PENDING APPEALS ALSO AND THERE IS A CLEAR CUT INSTRUCTION TO THE DEPARTMENT TO WITHDRAW OR NOT PRESS SUCH APPEALS FILED BEFORE THE ITAT WHEREIN TAX EFFECT IS LESS THAN RS.10,00,000/ - . THESE INSTRUCTIONS ARE OPERATIVE RETROSPECTIVELY TO TH E PENDING APPEALS ALSO. 4 . IT GOES WITHOUT SAYING THAT THE BOARD S INSTRUCTIONS OR DIRECTIONS ISSUED TO THE INCOME - TAX AUTHORITIES ARE BINDING ON THEM. GOING BY THE PRESCRIPTION OF THE AFORE - NOTED CIRCULAR, WE ARE OF THE VIEW THAT THE REVENUE SHOULD HAVE EITHER NOT FILED THE INSTANT APPEAL BEFORE THE TRIBUNAL OR WITHDRAWN THE SAME AS THE ITA NO. 1 128 & 1154 /DEL/20 14 3 TAX EFFECT IN THIS APPEAL IS LESS THAN THE PRESCRIBED LIMIT FOR NOT FILING THE APPEAL. 5 . KEEPING IN VIEW THE ABOVE CIRCU LAR AND THE PROVISIONS OF SECTION 268A OF INCOME - TAX ACT, 1961, AND WITHOUT GOING INTO MERITS OF THE CASE, WE DISMISS THE INSTANT APPEAL FILED BY THE REVENUE AS TAX EFFECT IN THIS APPEAL IS LESS THAN RS.10.00 LAC. AS A RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. 6. NOW COMING TO APPEAL FILED BY THE ASSESSEE, IT IS SEEN THAT BY WAY OF VARIOUS GROUNDS, THE ASSESSEE HAS RAISED TWO ISSUES FOR ADJUDICATION, VIZ., (I). SUSTENANCE OF DISALLOWANCE OF RS.1,21,159/ - OUT OF INTEREST PAID ON UNSECURED LOANS AND ( II) SUSTENANCE OF DISALLOWANCE OF RS.3,27,345/ - OUT OF PARTNERS SALARY. 7. AS FAR AS THE FIRST ISSUE IS CONCERNED, THE LD. AUTHORITIES BELOW HAVE DISALLOWED THE INTEREST ON UNSECURED LOANS WHICH WERE RAISED IN A.Y. 2008 - 09 FROM THREE PERSONS, NAMELY HIMMA T SINGH, JABBAR SINGH AND SMT. KAVITA KANWAR . SINCE THESE UNSECURED LOANS WERE NOT FOUND GENUINE UPTO THE STAGE OF CIT(A) IN THE PROCEEDINGS FOR THAT YEAR, AND ADDITIONS WERE ACCORDINGLY MADE, THE INTEREST DEBITED BY THE ASSESSEE ON THESE UNSECURED LOANS I N THE YEAR UNDER CONSIDERATION, WAS DISALLOWED. THE LD. COUNSEL FOR THE ASSESSEE ITA NO. 1 128 & 1154 /DEL/20 14 4 SUBMITTED THAT THE ASSESSEE HAD PREFERRED AN APPEAL BEFORE THE TRIBUNAL CHALLENGING THE ABOVE ADDITIONS, WHEREIN THE ORDERS OF THE AUTHORITIES BELOW FOR A.Y. 2008 - 09 HAVE BEEN SET ASIDE AND THE MATTER HAS BEEN RESTORED TO THE FILE OF AO VIDE ORDER DATED 11 TH SEPT., 2014 (COPY PLACED ON RECORD) . THE LD. DR, ON THE OTHER HAND, RELIED ON THE ORDERS OF THE AUTHORITIES BELOW ON THIS COUNT. 8. HAVING CONSIDERING THE RIVAL SUBMISSION S IN THE LIGHT OF MATERIAL AVAILABLE ON RECORD, WE FIND THAT THE ALLOWANCE OR DISALLOWANCE OF INTEREST ON THE IMPUGNED UNSECURED LOANS RAISED IN A.Y. 2008 - 09 IS DEPENDENT UPON THE GENUINENESS OF SUCH LOANS. SINCE THE ISSUE REGARDING GENUINENESS OF UNSECUR ED LOANS HAS BEEN RESTORED BY TRIBUNAL TO THE FILE OF AO, IT WILL BE EXPEDIENT IN THE INTEREST OF JUSTICE TO RESTORE THE ISSUE OF INTEREST ALSO TO THE FILE OF AO FOR DECISION AFRESH IN THE LIGHT OF DECISION TO BE TAKEN BY AO ON GENUINENESS OF UNSECURED LOA N AS DIRECTED BY TRIBUNAL. NEEDLESS TO SAY, THE ASSESSEE SHALL BE GIVEN REASONABLE OPPORTUNITY OF BEING HEARD. 9. AS TO THE SECOND ISSUE REGARDING DISALLOWANCE OF RS.3,27,345/ - OUT OF SALARY TO PARTNERS, THE LD. AUTHORITIES BELOW HAVE DISALLOWED THE SAME BY HOLDING THAT CERTAIN INTEREST INCOME ITA NO. 1 128 & 1154 /DEL/20 14 5 COULD NOT BE ASSESSABLE AS BUSINESS PROFITS AND THUS OUTSIDE THE PURVIEW FOR CALCULATING SALARY ALLOWABLE TO PARTNERS. THE STAND OF THE ASSESSEE HAS BEEN THAT THE ASSESSEE PURCHASED FDRS FOR COMPLIANCE OF BANK GUARAN TEE TO BE PROVIDED TO THE BANK, HENCE, THE INCOME DERIVED FROM THESE FDRS SHOULD BE TREATED AS THE BUSINESS INCOME AND NOT THE INCOME FROM OTHER SOURCES. HE HAS ALSO RELIED UPON THE DECISION OF AHMEDABAD BENCH IN THE CASE OF ALMAC CORPORATION V. DCIT (201 5) 60 TAXMANN.COM 34 (AHD - TRIB). 10. HAVING CONSIDERED THE RIVAL SUBMISSIONS, WE FIND THAT THE ISSUE IN DISPUTE IS COVERED BY THE DECISION OF ITAT AHMEDABAD BENCH IN ALMAC CORPORATION (SUPRA), WHEREIN THE TRIBUNAL HAS RELIED UPON THE DECISION OF HON BLE CA LCUTTA HIGH C OURT IN MD. SERAJUDDIN & BROS. VS. CIT (2012) 24 TAXMANN.COM 46 OBSERVING AS UNDER: THE SAID CHAPTER NOWHERE PROVIDES THAT METHOD OF ACCOUNTING FOR THE PURPOSE OF ASCERTAINING NET PROFIT SHOULD BE THE ONLY INCOME FROM BUSINESS ALONE AND NOT FROM OTHER SOURCES. SECTION 29 PROVIDES HOW THE INCOME FROM PROFITS AND GAINS OF BUSINESS OR PROFES SION SHOULD BE COMPUTED AND THIS HAS TO BE DONE AS PROVIDED UNDER SECTION 30 TO 43D. BY VIRTUE OF SECTION 5 OF THE SAID ACT THAT TOTAL INCOMES OF ANY PREVIOUS YEARS INCLUDES ALL INCOME FROM WHATEVER SOURCE DERIVED. THUS FOR THE PURPOSE OF SECTION 40(B)(V) READ WITH EXPLANATION THERE CANNOT BE SEPARATE METHOD OF ACCOUNTING FOR ASCERTAINING NET PROFIT AND / OR BOOK - PROFIT. THE SAID SECTION NOWHERE PROVIDES AS RIGHTLY POINTED BY MR. KHAITAN, ITA NO. 1 128 & 1154 /DEL/20 14 6 LEARNED SENIOR ADVOCATE THAT THE NET PROFIT AS SHOWN IN THE PROFIT AN D LOSS ACCOUNT NOT THE PROFIT COMPUTED UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION. 11. IN VIEW OF THE ABOVE DECISION AND ALSO THE FACT THAT THE AUTHORITIES BELOW HAVE NOT REBUTTED THE EXPLANATION OF ASSESSEE STATING THE CIRCUMSTANCES UNDER WHICH THE IMPUGNED FDRS WERE PURCHASED , WE ARE OF THE CONSIDERED OPINION THAT THE LD. AUTHORITIES BELOW ARE NOT JUSTIFIED IN WORKING OUT THE CLAIM OF REMUNERATION AFTER EXCLUDING THE INTEREST INCOME ON SUCH FDRS , AS NOTED ABOVE. THE LD. CIT(A) HAS RELIED UPON THE DECISION OF HON BLE SUPREME COURT IN TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. VS. CIT, 227 ITR 172. WE HAVE GONE THROUGH THIS DECISION AND WE FIND THAT THE VERDICT OF HON BLE SUPREME COURT IS BASED ON DIFFERENT FOOTINGS, INASMUCH AS IN THAT C ASE INTEREST INCOME WAS EARNED BY THE ASSESSEE ON SHORT - TERM DEPOSITS WITH BANKS BEFORE COMMENCEMENT OF BUSINESS AND IN THAT SITUATION, HON BLE COURT HELD THAT SUCH INTEREST WAS TAXABLE AS INCOME FROM OTHER SOURCES. NO SUCH SITUATION DOES EXIST IN THE INST ANT CASE BEFORE US. THEREFORE, THIS DECISION OF HON BLE APEX COURT DOES NOT RENDER ANY HELP TO THE REVENUE. WE ACCORDINGLY, DELETE THIS ADDITION AND ITA NO. 1 128 & 1154 /DEL/20 14 7 DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED AND APPEAL OF ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 19.01.2016 . SD/ - SD/ - (I.C. SUDHIR) (L.P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 19.01.2016 *AKS/ - COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE B Y ORDER ASSISTANT. REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI