ASST CIT 31(3), MUMBAI V. UNIQUE GEMS & JEWELLERY, MUMBAI

ITA 1364/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2498 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 27-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV GUBGOTRA
• Assessee Lawyers: RAMKRISHNA A LINGSUR
• Keywords: Salary income; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA NO. 1364 / MUM . /2017 ( ASSESSMENT YEAR : 20 12 13 ) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 31 ( 3 ), MUMBAI . APPELLANT V/S UNIQUE GEMS & JEWELLERY 271, BUSINESS PARK VISHVESHWAR NAGAR NEAR VIRVANI INDUSTRIAL ESTATE MODEL INDUSTRIAL COLONY GOREGAON (E), MUMBAI 400 063 PAN AACFU3067H . RESPONDENT REVENUE BY : SHRI RAJEEV GUBGOTRA ASSESSEE BY : SHRI RAMKRISHNA A. LINGSUR DATE OF HEARING 13 . 1 2 .201 8 DATE OF ORDER 08.03.2019 O R D E R PER SAKTIJIT DEY, J.M. A FORESAID APPEAL HA S BEEN FILED BY THE REVENUE CHALLENGING THE ORDER DATED 2 6 TH OCTOBER 2016 , PASSED BY THE LEARNED COMMISSIONER (APPEALS) 42 , MUMBAI , FOR THE ASSESSMENT YEAR 20 1 2 13 . 2 . I N GROUND NO.1, THE REVENUE HAS CHALLENGED THE DELETION OF ADDITION OF ` 88,50,833. GROUND NO.2, WHEREIN THE REVENUE HAS 2 UNIQUE GEMS & JEWELLERY CHALLENGED VIOLATION OF RULE 46A OF THE INCOME TAX RULES, 1962, IS ALSO IN CONNECTION WITH GROUND NO.1. 3 . B RIEF FACTS ARE, THE ASSESSEE , A PARTNERSHIP FIRM , IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF GOLD AND DIAMOND JEWELLERY. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED ITS RETURN OF INC OME ON 28 TH SEPTEMBER 2012, DECLARING TOTAL INCOME OF ` 72,17,704. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER FOUND THAT AS PER DOCUMENTS IMPOUNDED DURING THE SURVEY OPERATION CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE , A STATEMENT OF ACCOUNT FURNISHED TO STATE BANK OF INDIA SHOWING SUNDRY DEBTOR S AMOUNTING TO ` 79,56,37,453, AS ON 31 ST MARCH 2012 WAS FOUND . HOWEVER, HE NOTICED, AS PER BALANCE SHEET AS AT 31 ST MARCH 2012, THE ASSESSEE HAS SHOWN SUNDRY DEBTORS OF ` 77,26,91,364. THUS, T HE ASSESSING OFFICER FOUND A DIFFERENCE IN SUNDRY DEBTORS TO THE TUNE ` 2,29,46,090. THEREFORE, HE CALLED UPON THE ASSESSEE TO EXPLAIN WHY THE DIFFERENCE IN SUNDRY DEBTORS SHOULD NOT BE ADDED TO THE INCOME. ALLEGING THAT THE ASSESSEE NEITHER FURNISHED ANY DETAILS NOR RECONCILED THE DIFFERENCE , THE ASSESSING OFFICER ADDED BACK THE AMOUNT OF ` 2,29,46,090, TO THE INCOME OF THE ASSESSEE. BEING AGGRIEVED WITH THE AFORESAID ADDITION, THE ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4 . BEFO RE LEA RNED COMMISSIONER (APPEALS) IT WAS SUBMITTED BY THE ASSESSE E THAT THE STATEMENT OF ACCOUNT SHOWING SUNDRY DEBTORS 3 UNIQUE GEMS & JEWELLERY SUBMITTED TO THE STATE BANK OF INDIA ON 7 TH APRIL 2012, WAS ON THE BASIS OF UNAUDITED / PROVISIONAL FIGURES AND THE DIFFERENCE WAS DUE TO THE ACCOUNTING OF FLUCTUATION IN FOREIGN EXCHANGE. IT WAS SUBMITTED , IN THE STATEMENT SUBMITTED TO THE BANK , THE FOREIGN EXCHANGE RATE AS ON 31 ST MARCH 2012, WAS TAKEN . W HEREAS , THE EFFECT OF FORWARD BILL DISCOUNTING CONTRACT ENTERED WITH RESPECT TO THE INVOICES RAISED ON THE DEBTORS PRIOR TO 31 ST MAR CH 2012, WAS NOT CONSIDERED. L EARNED COMMISSIONER (APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE CONTEXT OF THE FACTS AND MATERIAL RECORD OBSERVED THAT THE ASSESSING OFFICER HAS NOT PROVIDED A NY DETAILS OF THE SUNDRY DEBTORS NOR HAS REFERRED TO ANY PARTICULAR PARTY WHOSE BALANCES DO NOT MATCH WITH THE BALANCES MENTIONED IN THE BOOKS OF ACCOUNT. HE OBSERVED , UNLESS THE ASSESSING OFFICER IS ABLE TO DETERMINE ANY OUTSTANDING BALANCE WHICH IS NOT RECORDED IN THE BOOKS OF ACCOUNT, IT IS NOT POSSIBLE TO DECIDE WHETHER ANY ADDITION IS CALLED FOR OR NOT. HE OBSERVED , THE ASSESSEE BEING AN EXPORTER IT IS POSSIBLE THAT THE DE TAILS GIVEN TO THE BANK MAY HAVE BEEN GIVEN WITH THE INCORRECT IMPACT OF FOREIGN EXCHANGE FLUCTUATION. HAVING HELD SO, LEARNED COMMISSIONER (APPEALS) EXAMINED THE CALCULATION OF FOREIGN EXCHANGE FLUCTUATION FURNISHED BY THE ASSESSEE AND FOUND THAT THE ASSE SSEE HAD NOT PROPERLY ACCOUNTED FOR THE FOREIGN EXCHANGE FLUCTUATION IN THE CURRENT ASSESSMENT YEAR. AFTER EXAMINING IN DETAILS ALL RELEVANT FACTS AND MATERIAL AS C ALLED FOR FROM THE ASSESSEE, LEARNED COMMISSIONER 4 UNIQUE GEMS & JEWELLERY (APPEALS) ULTIMATELY WORKED OUT THE DIFFER ENCE IN CLOSING BALANCE OF SUNDRY DEBTORS AT ` 1,40,95,257, AND SUSTAINED THE ADDITION TO THAT EXTENT. 5 . THE LEARNED DEPARTMENTAL REPRESENTATIVE WHILE ARGUING ON THE ISSUE MAINLY STRESSED UPON THE FACT THAT LEARNED COMMISSIONER (APPEALS) HAD CONSIDERED ADDITIONAL EVIDENCES WITHOUT FOLLOWING THE MANDATE OF RULE 46A. 6 . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , NO ADDITIONAL EVIDENCE WAS FURNIS HED BEFORE LEARNED COMMISSIONER (APPEALS) BUT THE ASSESSEE ONLY FURNI SHED A REVISED WORKING OF FOREIGN EXCHANGE FLUCTUATION GAIN AS PER AS 11. THUS, HE SUBMITTED , THERE IS NO VIOLATION OF RULE 46A. 7 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. AS RIGHTLY OBSERVED BY THE LEARNED COMMISSIONER (APPEALS) , THE ASSESSING OFFICER WHILE MAKING THE ADDITION HAS NOT SPECIFICALLY REFERRED TO THE DIFFERENCE IN OUTSTANDING BALANCES OF A PARTICULAR PARTY. SIMPLY RELYING UPON THE SUNDRY DEBTOR S FIGURE SHOWN IN THE STATEMENT OF ACCOUNT FURNISHED TO THE STATE BANK OF INDIA , THE ASSESSING OFFICER HAS A DDED BACK THE DIFFERENCE BETWEEN THE FIGURE IN THE SAID STATEMENT AND THE SUNDRY DEBTORS AS SHOWN IN THE BALANCE SHEET. HOWEVER, IN THE C OURSE OF APPEAL PROCEEDINGS, LEARNED COMMISSIONER 5 UNIQUE GEMS & JEWELLERY (APPEALS) HAS CALLED FOR ALL NECESS ARY INFORMATION AND DETAILS FROM THE ASSESSEE AND HAVING EXAMINED THEM IN DETAIL HAS FOUND THE DIFFERENCE IN SUNDRY CREDITORS ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION GAIN AT ` 1,40,95,257. IT IS RELEVANT TO OBSERVE , THE IMPUGNED ORDER OF LEARNED COMMISSIONER (APPEALS) DOES NOT REVEAL EXAMINATION OF ANY ADDITIONAL EVIDENCE FURNISHED BY THE ASSESSEE. RATHER, TH E ORDER CLEARLY REVEALS THAT LEARNED COMMISSIONER (APPEALS) HAS RENDERED A FACTUAL FINDING AFTER CONDUCTING A PROP ER ENQUIRY WITH RE FERENCE TO ASSESSEES CLAIM AND SUCH ENQUIRY WAS CONDUCTED IN PURSUANCE TO THE POWER CONFERRED UNDER THE STATUTE. THAT BEING THE CASE, THE CONTENTION RAISED BY THE DEPARTMENT WITH REGARD TO VIOLATION OF RULE 46A IS UNACCEPTABLE. MOREOVER, THE DEPARTMENT HA S FAILED TO CONTROVERT THE FACTUAL FINDING RENDERED BY THE LEARNED COMMISSIONER (APPEALS) WITH REGARD TO THE ACTUAL DIFFERENCE IN THE CLOSING BALANCE OF SUNDRY DEBTORS WHICH HAS BEEN ARRIVED AT ` 1,40,95,257. THAT BEI NG THE CASE, THE DECISION OF LEARNED CO MMISSIONER (APPEALS) ON THE ISSUE DESERVES TO BE UPHELD. GROUNDS NO.1 AND 2 ARE DISMISSED. 8 . IN GROUND NO.3, THE REVENUE HAS CHALLE NGED THE DELETION OF DISALLOWANCE OF ` 2,39,11,706, ON ACCOUNT OF SALARY AND INTEREST PAID TO THE PARTNER S . 9 . BRIEF FACTS ARE, DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICING THAT AMOUNTS OF ` 1,94,11,706 AND ` 45,00,000 WERE 6 UNIQUE GEMS & JEWELLERY PAID TO THE PARTNERS TOWARDS INTEREST AND SALARY RESPECTIVELY , CALLED UPON THE ASSESSEE TO JUSTIFY THE CLAIM. IN RESPONSE, IT WAS SUBMITTED BY THE ASSESSEE THAT SUCH PAYMENT OF SALARY AND INTEREST TO THE PARTNERS WAS PROVIDED IN THE AMENDED DEED OF PARTNERSHIP WHICH COULD NOT BE FURNISHED IN THE COURSE OF SURVEY PROCEEDINGS. IT WAS SUBMITTED BY THE ASSESSEE THAT IT IS NOT MANDATORY TO GET THE FIRM REGISTERED U NDER THE INDIAN PARTNERSHIP ACT,1932 . FURTHER, IT WAS SUBMITTED THAT THE STAMP PAPER WAS PURCHASED IN THE NAME OF WALIA BUILDER AND DEVELOPER THE PROPRIETARY CONCERN OF SHRI PURSHOTTAM WALIA, ONE OF THE PARTNERS OF THE FIRM. THE ASSESSING OFFICER DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE. REFERRING IN EXTENSO TO THE STATEMENT RECORDED IN THE COURSE OF SURVEY OPERATION AS WELL AS POST SURVEY PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT IN THE SAID STATEMENT THE ASSESSEE HAD CATEGORICALLY STATED THAT THE ONLY PARTNERSHIP DEED WAS DATED 21 ST APRIL 2008, AND THEREAFTER THERE WAS NO CHANGE IN THE PARTNERSHIP DEED. HE OBSERVED , IN THE SAID STATEMENT IT WAS STATED THOUGH THE PAYMENT OF SALARY AND INTEREST WAS NOT PROVIDED IN THE PA RTNERSHIP DEED, HOWEVER, IT WAS PAID TO THE PARTNERS AS PER MUTUAL UNDERSTANDING. THUS, THE ASSESSING OFFICER OBSERVED THAT THE AMENDED PARTNERSHIP DEED CANNOT BE ACCEPTED CONSIDERING THE STATEMENT RECORDED AT THE TIME OF SURVEY OPERATION. FURTHER, THE ASS ESSING OFFICER ALSO RAISED DOUBT OVER THE AUTHENTICITY OF THE AMENDED PARTN ERSHIP DEED ON THE BASIS OF DATE OF THE STAMP PAPER AND THE 7 UNIQUE GEMS & JEWELLERY NAME IN WHICH IT WAS PURCHASED. ACCORDINGLY, HE DISALLOWED THE PAYMENT OF S ALARY AND INTEREST. CHALLENGING THE DISALLOWA NCE M ADE BY THE ASSESSING OFFICER ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 10 . LEARNED COMMISSIONER (APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE CONTEXT OF FACTS AND MATERIAL ON RECORD AND JUDICIAL PRECEDENTS CITE D BEFORE HIM OBSERVED THAT THERE IS NO REQUIREMENT IN LAW TO MANDATORILY REGISTER THE PARTNERSHIP FIRM WITH THE REGISTRAR OF FIRM. FURTHER, HE OBSERVED , ONLY BECAUSE THE AMENDED PARTNERSHIP DEED WAS NOT FOUND AT THE TIME OF SURVEY IT CANNOT BE SAID THAT TH E AMENDED PARTNERSHIP DEED IS NOT AUTHENTIC OR A MERE AFTERTHOUGHT. FURTHER, HE OBSERVED , THE SALARY AND INTEREST RECEIVED BY THE PARTNER S HAVE BEEN OFFERED BY THEM IN THE RETURN OF INCOME MUCH BEFORE THE SURVEY OPERATION. THAT BEING THE CASE, THE DEDUCTIO N CLAIMED BY THE ASSESSEE CANNOT BE DISALLOWED. ACCORDINGLY, HE DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 11 . THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE ASSESSING OFFICER. 12 . THE LEARNED AUTHORISED REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE LEARNED COMMISSIONER (APPEALS). 8 UNIQUE GEMS & JEWELLERY 13 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. IT IS EVIDENT , THE ASSESSING OFFICER HAS DISALLOWED THE INTEREST AND SALARY PAYMENT MADE TO THE PARTNERS PRIMARILY RELYING UPON THE STATEMENT RECORDED FROM ONE OF THE PARTNERS OF THE FIRM DURING SURVEY AND POST SURVEY PROCEEDINGS. HOWEVER, IN THE COURSE OF ASSESSMENT PR OCEEDINGS, THE ASSESSEE HAS FURNISHED AN AMENDED PARTNERSHIP DEED PROVIDING FOR PAYMENT OF SALARY AND INTEREST TO THE PARTNER. IT IS EVIDENT , THE ASSESSING OFFICER HAS REFUSED TO ACCEPT THE AMENDED PARTNERSHIP DEED POINTING OUT CERTAIN TECHNICAL DEFECTS AN D ALSO ALLEGING THAT THE AMENDED PARTNERSHIP IS AN AFTERTHOUGHT. HOWEVER, LEARNED COMMISSIONER (APPEALS) AFTER EXAMINING THE AMENDED PARTNERSHIP DEED AND OTHER FACTS ON RECORD HAS RECORDED A FACTUAL FINDING THAT THE REASONING ON WHICH THE ASSESSING OFFICER HAS DISBELIEVED THE AMENDED PARTNERSHIP DEED IS NOT VALID REASONS. ON CONSIDERING THE RELEVANT FACTS ON RECORD, WE CONCUR WITH THE AFORESAID FACTUAL FINDING OF THE LEARNED COMMISSIONER (APPEALS). IT IS ALSO RELEVANT TO OBSERVE , THE FACTS ON RECORD REVEAL THAT THE INTEREST AND SALARY INCOME RECEIVED BY THE PARTNERS HAVE BEEN OFFERED IN THE RETURN OF INCOME FILED MUCH PRIOR TO THE SURVEY OPERATION. THEREFORE, THE AFTERTHOUGHT ALLEGATION OF THE ASSESSING OFFICER MAY NOT HAVE MUCH RELEVANCE. IN VIEW OF THE A FORESAID, WE UPHOLD THE DECISION OF THE LEARNED COMMISSIONER (APPEALS) ON THE ISSUE. GROUND RAISED IS DISMISSED. 9 UNIQUE GEMS & JEWELLERY 14 . IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 08.03.2019 SD/ N.K. PRADHAN ACCOUNTANT MEMBER SD/ SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 08.03.2019 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (SR. PRIVATE SECRETARY) ITAT, MUMBAI