Assistant Commissioner of Income-tax, V. M/s. Rajmal Lakhichand,

ITA 1178/PUN/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5094 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 04-02-2019
• Assessment Year: 2011-2012
• Appeal Filed On: 01-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARISE OUT OF
• Assessee Lawyers: AND OTHER
• Keywords: Business income; Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER . / ITA NO.963/PUN/16 / ASSESSMENT YEAR : 2011-12 M/S. RAJMAL LAKHICHAND, 169, BALAJI PETH, JALGAON 425 001 PAN : AACFR8609L VS. JCIT, RANGE-1, JALGAON . / ITA NO.1178/PUN/16 / ASSESSMENT YEAR : 2011-12 ACIT, CIRCLE-1, JALGAON VS. M/S. RAJMAL LAKHICHAND, 169, BALAJI PETH, JALGAON 425 001 PAN : AACFR8609L APPELLANT RESPONDENT / ORDER PER R.S.SYAL, VP : THESE TWO CROSS APPEALS - ONE BY THE ASSESSEE AND THE OTHER BY THE REVENUE ARISE OUT OF THE ORDER PASSED BY THE CIT(A)-2, NASHIK, ON 29-03-2016 IN RELATION TO THE ASSESS MENT YEAR 2011-12. APPELLANT BY SHRI SUNIL PATHAK RESPONDENT BY SHRI S.B. PRASAD DATE OF HEARING 06-02-2019 DATE OF PRONOUNCEMENT 07-02-2019 ITA NOS. 963 AND 1178/PUN/2016 M/S. RAJMAL LAKHICHAND 2 2. THE FIRST ISSUE RAISED BY THE ASSESSEE IN ITS APPEAL AN D THE ONLY ISSUE RAISED BY THE REVENUE IS IN RELATION TO A CERTAIN ADDITION MADE BY THE ASSESSING OFFICER (AO) U/S.40A(2)(A ) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER ALSO CALLED AS THE A CT). 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSES SEE IS A TRADER IN GOLD, SILVER, DIAMOND AND PRECIOUS STONES. IT MA DE CERTAIN PURCHASES FROM ITS SISTER CONCERNS. THE AO, APP LYING THE PROVISIONS OF SECTION 40A(2)(A), OF THE ACT MADE AN ADDITION OF RS.1,20,96,250/- IN RESPECT OF PURCHASE OF GOLD, BULLION AND RS.10,00,38,042/- TOWARDS PURCHASE OF NEW ORNAMENTS. THIS RESULTED INTO A TOTAL DISALLOWANCE OF RS.11.2 1 CRORE U/S.40A(2) OF THE ACT. THE ASSESSEE CHALLENGED TH E ACTION OF THE AO CONTENDING BEFORE THE LD. FIRST APPELLATE AUTHORITY THAT THE AO APPLIED THE RATES AT THE CLOSE OF THE DAY FOR WORKING OUT THE EXCESSIVE PAYMENTS AND CONVENIENTLY IGNORED OTHER TRANSACTIONS IN WHICH THE ASSESSEE MADE PURCHASES AT LOWER THAN SUCH STANDARD RATES AT THE CLOSE OF THE DAY. AS AGAINST EXCESS PAID CALCULATED BY THE AO AT RS.11. 21 CRORE, THE ASSESSEE SUBMITTED THAT IN THE SAME WAY, THE AOS CALCULATION DEPICTED LOWER PAYMENTS AT RS.31.14 CRORE. IT WA S THUS URGED THAT NO ADDITION COULD HAVE BEEN MADE AS THE ITA NOS. 963 AND 1178/PUN/2016 M/S. RAJMAL LAKHICHAND 3 ASSESSEE, IN FACT, MADE LOWER PAYMENTS FOR PURCHASE OF GOLD, BULLION AND GOLD ORNAMENTS BY RS.19.92. CRORE ON OVERALL BASIS. THE LD. CIT(A) GOT CONVINCED WITH THE SUBMISSIONS ADVANCED ON BEHALF OF THE ASSESSEE. HE THUS DELETED THE ADDITION U/S.40A(2) OF THE ACT. HE, HOWEVER, NOTED THAT TH E ASSESSEES TRANSACTION WITH ITS SISTER CONCERNS WERE MOSTLY FICTITIOUS WITHOUT DELIVERY AS WAS APPARENT FROM THE ASSESSMENTS MADE FOR THE IMMEDIATELY PRECEDING ASSESSME NT YEAR AND OTHER GROUP CONCERNS. HE, THEREFORE, HELD TH AT THE GP RATE DECLARED BY THE ASSESSEE AT 0.54% COULD NOT BE ACCEP TED ON THE GROUND THAT THE TRANSACTIONS WERE FICTITIOUS. HE, DIRECTED THE AO TO APPLY GP RATE OF 0.80% ON TOTAL SALES OF RS.2,302 CRORE DECLARED BY THE ASSESSEE. THIS RESULTED INTO A FRESH ADDITION OF RS.5,89,29,258/-. THE ASSESSEE IS AG GRIEVED BY THE APPLICATION OF GP RATE AT 0.80% AND MAKING THE ADDITION OF RS.5,89,29,258/-, WHEREAS THE REVENUE IS AGGRIEVED BY THE DELETION OF ADDITION OF RS.11.21 CRORE MAD E BY THE AO U/S.40A(2) OF THE ACT. 4. WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE RELEVANT MATERIAL ON RECORD. IT IS SEEN THAT THE AO AS WELL A S THE LD. CIT(A) HAVE FOLLOWED THEIR RESPECTIVE ACTIONS FOR THE ITA NOS. 963 AND 1178/PUN/2016 M/S. RAJMAL LAKHICHAND 4 A.YRS. 2009-10 AND 2010-11. THESE ASSESSMENT YEARS CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN APPEALS FILED BOTH BY THE ASSESSEE AS WELL AS THE REVENUE, IN THE SAME WAY A S HAS BEEN DONE FOR THE INSTANT YEAR. VIDE ORDER DATED 16-01- 2015, A COPY PLACED AT PAGES 193 ONWARDS OF THE PAPER BOOK, THE TRIBUNAL IN ITA NOS. 532 AND 663/PUN/2013 ETC. HAS UPHELD THE DELETION OF ADDITION U/S.40A(2) OF THE ACT FOR THE A.Y. 2010-11, I.E. IMMEDIATELY PRECEDING ASSESSMENT YEAR, THE TRIBUNAL HAS SUSTAINED THE ADDITION BY DIRECTING TO ENHANCE THE GP RATE BY 0.09%. SINCE THE FACTS AND CIRCUMSTANCES OF THE INSTANT GROUND ARE MUTATIS MUTANDIS SIMILAR TO THOSE OF THE IMMEDIATELY PRECEDING YEAR, RESPECTFULLY FOLLOWING THE PRECEDENT, WE UPHOLD THE ACTION OF THE LD. CIT(A) IN HOLDING THAT THE PROVISIONS OF SECTION 40A(2) WERE NOT ATTRACTED AND IT IS FURTHER HELD THAT THE GROSS PROFIT RATE OF 0.63% (0.54% A S DECLARED BY THE ASSESSEE PLUS ADDITION OF 0.09%) BE APPLIE D. THUS, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED AN D THOSE OF THE ASSESSEE ARE PARTLY ALLOWED. 5. THE NEXT ISSUE TAKEN UP BY THE ASSESSEE IN ITS APPEAL IS AGAINST CONFIRMATION OF ADDITION AMOUNTING TO RS.2,07,84,694/- U/S.2(22)(E) OF THE ACT. ITA NOS. 963 AND 1178/PUN/2016 M/S. RAJMAL LAKHICHAND 5 6. THE FACTS APROPOS THIS ISSUE ARE THAT THE AO FOUND THE ASSESSEE TO HAVE RECEIVED LOANS FROM M/S. MANRAJ JEWELLERS PVT. LTD. AND M/S. R.L. GOLD PVT. LTD., WITH OPENING BALANCES AT RS.37.67 CRORE AND RS.42.76 CRORE RESPECTIVELY AND CORRESPONDING CLOSING BALANCES AT RS.55.69 CRORE AND RS .60.13 CRORE RESPECTIVELY. CONSIDERING THE FACT THAT HE HAD MADE A SIMILAR ADDITION IN THE PRECEDING YEAR, THE AO MADE AN ADDITION OF RS.2,07,48,694/-, BEING, THE AMOUNT OF DEEMED DIVIDEND OF RS.1.18 CRORE IN RESPECT OF M/S. MANRAJ JEWELLE RS PVT. LTD. AND RS.89.01 LAKH IN RESPECT OF M/S. R.L. GOLD P VT. LTD. THE LD. CIT(A) SUSTAINED THE ADDITION, AGAINST WHICH THE ASSESSEE HAS COME UP IN APPEAL BEFORE THE TRIBUNAL. 7. HAVING HEARD BOTH THE SIDES AND GONE THROUGH THE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED THAT SIMILAR ISSUE CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE A.Y. 2010-11. A DETAILED DISCUSSION HA S BEEN MADE IN THE ORDER FOR SUCH YEAR AND EVENTUALLY THE M ATTER HAS BEEN RESTORED TO THE FILE OF AO FOR A FRESH A DECISION . ADMITTEDLY, THE FACTS AND CIRCUMSTANCES OF THE GROUND FOR THE INSTANT YEAR ARE SIMILAR TO THOSE OF THE PRECEDING YEAR. RESPECTFULLY FOLLOWING THE PRECEDENT, WE SET-ASIDE THE ITA NOS. 963 AND 1178/PUN/2016 M/S. RAJMAL LAKHICHAND 6 IMPUGNED ORDER ON THIS SCORE AND REMIT THE MATTER TO THE FILE OF AO FOR DECIDING THIS ISSUE IN CONFORMITY WITH THE DIRECTIONS GIVEN BY THE TRIBUNAL IN ITS ORDER FOR THE PRECEDING YEAR. 8. THE NEXT ISSUE RAISED IN THE APPEAL IS AGAINST THE DISALLOWANCE OF INTEREST OF RS.3,01,295/- U/S.36(1)(III) OF T HE ACT. 9. THE LD. AR SUBMITTED THAT SIMILAR ISSUE WAS RAISED IN THE PRECEDING YEAR AS WELL AND THE TRIBUNAL WAS PLEASED TO DECID E IT AGAINST THE ASSESSEE. IN VIEW OF THE CANDID ADMISSION MAD E BY THE LD. AR, WE COUNTENANCE THE IMPUGNED ORDER ON THIS SCORE. THIS GROUND IS NOT ALLOWED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOW ED FOR STATISTICAL PURPOSES AND THAT OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 07 TH FEBRUARY, 2019. SD/- SD/- (VIKAS AWASTHY) (R.S.SYAL) JUDICIAL MEMBER VICE PRESID ENT PUNE; DATED : 07 TH FEBRUARY, 2019 ITA NOS. 963 AND 1178/PUN/2016 M/S. RAJMAL LAKHICHAND 7 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT (APPEALS)-2, NASHIK 4. 5. THE PR.CIT-2, NASHIK , , / DR A, ITAT, PUNE; 6. / GUARD FILE. // TRUE COPY // / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE DATE 1. DRAFT DICTATED ON 06-02-2019 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 06-02-2019 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *