Shree Maruti Nandan Guwar Gum Private Limited, SURATGARH V. CIT, BIKANER

ITA 139/JODH/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7254 (ITAT-JODHPUR)
• Duration Of Justice: 4 year(s) 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 16-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BAD ON FACT
• Keywords: Related party transaction; Revision of order; Set aside
• Section: 40A(3); 143(3); 143(2); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, JODHPUR BENCH, JODHPUR BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER AND SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER ITA NO. 139/JODH/2017 (ASSESSMENT YEAR 2012-13) SHREE MARUTI NANDAN GUWAR GUM PRIVATE LIMITED, NEW DHAN MANDI, SURATGARH. VS. PR.C.I.T. BIKANER. PAN NO. AAMCS 3720 N O R D E R PER: SANDEEP GOSAIN, J.M. THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. PR.CIT, BIKANER DATED 24/01/2017 FOR A.Y. 2012-13 PASSED U/S 263 OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT) WHEREIN FOLLOWING GROUNDS HAVE BEEN RAISED: 1. THE ORDER PASSED BY THE LD. CIT-I, BIKANER U/S 263 IS BAD IN LAW AND BAD ON FACTS. 2. THE LD. CIT- BIKANER HAD ERRED IN OBSERVING THAT ORIGINAL ASSESSMENT MADE U/S 143(3) ON 5 TH JUNE 2014 WAS ERRONEOUS SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE AND HAS ERRED IN SETTING THE SAID ORDER. 3. THE ORDER U/S 263 IS VAGUE AND WITHOUT PROPER JURISDICTION AND THERE IS NO CONCLUSION THAT THE ORIGINAL ASSESSMENT MADE WAS ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF REVENUE AND JUST FOR RE EXAMINATION OF THE ISSUES SUCH ORDER COULD NOT HAVE BEEN SET ASIDE. 4. THE ORIGINAL ASSESSMENT WAS COMPLETED AFTER DETAILED SCRUTINY AND SETTING ASIDE SUCH ORDER FOR THE PURPOSE OF VERIFICATION OF CERTAIN ASSESSEE BY SHRI AMIT KOTHARI, CA & SHRI ABHINAV KOTHARI, CA REVENUE BY MISS. KAJAL SINGH, JCIT-DR DATE OF HEARING 10/08/2021 DATE OF PRONOUNCEMENT 06 /0 9 /2021 2 ITA 139/JODH/2017 SHREE MARUTI NANDAN GUWAR GUM P LTD.. VS CIT CLAIMS IS BAD IN LAW AND BAD ON FACTS. THERE IS NO FIRM CONCLUSION THAT THERE IS ANY INCOME WHICH HAD NOT BEEN CORRECTLY ASSESSED. 5. THE LD. CIT, BIKANER HAD ERRED IN OBSERVING THAT THE PURCHASES MADE FROM SATYA NARAYAN IS NOT PROPERLY VERIFIABLE FROM KRISHI MANDI AND ON SUSPICION HAD OBSERVED THAT CREDIT REMAINED OUTSTANDING FOR LONG PERIOD WHICH REQUIRED VERIFICATION. 6. THE LD. CIT BIKANER HAD ERRED IN OBSERVING THAT PROVISIONS OF SEC. 40A(3) IN RELATION TO WOODEN EXPENSES HAD NOT BEEN EXAMINED. 7. THE LD. CIT BIKANER HAD ALSO FURTHER ERRED IN RAISING DOUBTS ABOUT SHARE CAPITAL CONTRIBUTION MADE BY DEEPAK BHATIA. THE ORDER CANNOT BE SAID TO BE ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF REVENUE ON SUCH ISSUE. 8. THE LD. CIT BIKANER HAS FURTHER ERRED IN OBSERVING THAT SINCE THERE IS INCREASE IN CREDITORS THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 9. THE LD. CIT BIKANER HAS ERRED IN OBSERVING THAT ON ACCOUNT OF SHORTAGE AND DISPROPORTIONATE INCREASE IN CERTAIN EXPENSES THE ORDER IS ERRONEOUS THOUGH SUCH ISSUES WERE DULY EXAMINED AT THE TIME OF ORIGINAL ASSESSMENT. 10. THE LD. CIT BIKANER HAS FURTHER ERRED IN OBSERVING THAT THE VALUATION OF CLOSING STOCK NEEDS VERIFICATION. 11. THE ORDER U/S 263 IS CONTRARY TO THE FACTS AND CIRCUMSTANCES IN THE CASE OF THE APPELLANT AND IS CONTRARY TO THE WELL SETTLED JUDICIAL PRINCIPLES AND DECISIONS. THE ORIGINAL ORDER BY NO MEANS BE SAID TO BE ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF REVENUE. 12. THE APPELLANT CRAVES LIBERTY TO ADD, AMEND, ALTER, AND MODIFY ANY OF THE GROUND OF APPEAL ON OR BEFORE ITS HEARING BEFORE YOUR HONOUR. 2. THE ASSESSEE COMPANY FILED RETURN OF INCOME FOR A.Y. 2012-13 DECLARING TOTAL INCOME OF RS. 17,59,660/- ON 21.9.2012. THE SAID CASE WAS SELECTED UNDER CASS AND NOTICE WAS ISSUED U/S 143(2) ON 21.8.2013, AND THEREAFTER ASSESSMENT WAS COMPLETED U/S 143(3) VIDE ORDER DATED 5.6.2014. 3 ITA 139/JODH/2017 SHREE MARUTI NANDAN GUWAR GUM P LTD.. VS CIT 3. THE LD. PCIT WAS OF THE VIEW THAT THE SAID ORDER PASSED U/S 143(3) ON 5.6.2014 IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND ACCORDINGLY NOTICE WAS ISSUED ON 18.11.2016 ON VARIOUS ISSUES. THE FIRST ISSUE RAISED WAS ON ACCOUNT OF CERTAIN PURCHASES MADE FROM SATYANARAYAN CERTAIN PAYMENTS OF RS. 4 LAKHS AND RS. 2.90 LAKHS WAS MADE IN CASH. FOR THIS THE ASSESSEE HAD PRODUCED THE RECEIPTS ISSUED BY KRISHI UPAJ MANDI SAMITI ACCORDING TO WHICH THE GWAR WERE SOLD ON 20.1.2012 FOR RS. 14,80,626/-. THE SALES MADE ON CREDIT AND SALE MADE FOR FARMER APPEARS NOT ACCEPTABLE WITHOUT TAKING ANY ADVANCE. THE CONTENTION OF THE ASSESSEE IS THAT THIS ISSUE WAS DISCUSSED DURING THE ASSESSMENT PROCEEDINGS AND REPLY WAS FILED VIDE LETTER DATED 19.3.2014 AND 15.2.2016. THE SALE OF GUAR WAS MADE BY SATYA NARAYAN ON 20.1.2012, AND IN SUPPORT OF THE SAME AFFIDAVIT, CONFIRMATION OF ACCOUNT, DETAILS OF LAND HOLDING IN THE FORM OF AGRICULTURE LAND HOLDING WAS SUBMITTED. IT WAS ALSO SUBMITTED THAT THE PAYMENT WAS MADE TO AGRICULTURISTS AND THE PAYMENT IN CASH WAS COVERED BY EXEMPTION PROVIDED IN RULE 6DD(E)(I). THEREFORE THE SAME WAS RIGHTLY ACCEPTED BY THE AO AND NO ADVERSE INFERENCE CAN BE DRAWN. THE PURCHASES WERE THROUGH AUCTION MADE AT KRISHI MANDI AND THE PURCHASE WAS VERIFIABLE THEREFORE NO ERROR IN THE ORDER OR ANY REASON TO SUSPECT. 4. THE NEXT ISSUE RELATED TO WOODEN EXPENSES CLAIMED AT RS. 7,35,030/- FOR WHICH IT IS STATED THAT MOST OF THE PAYMENT IS MADE IN CASH AND THE AO HAS NOT EXAMINED THE VIOLATION OF SECTION 40A(3) IN RELATION INTO THE SAID PAYMENTS. IN THE TAX AUDIT REPORT ALSO NO SUCH CASH PAYMENT EXCEEDING 4 ITA 139/JODH/2017 SHREE MARUTI NANDAN GUWAR GUM P LTD.. VS CIT RS. 20,000/- HAS BEEN REPORTED. THE AO HAS NOT EXAMINED THIS ISSUE AND THEREFORE THE SAME IS ERRONEOUS. THE CONTENTION OF THE ASSESSEE HAD BEEN THAT THE PURCHASES OF WOOD WERE FROM DIFFERENT PARTIES AND PAYMENT WERE GIVEN TO THEM. WEIGHT RECEIPTS AS PROOF OF PURCHASE FROM DIFFERENCE PERSON AND PAYMENT VOUCHERS INDICATE THAT THE PAYMENT WAS MADE TO DIFFERENT PERSONS. THE REPLY IN THIS REGARD WAS ALSO SUBMITTED DURING THE ASSESSMENT PROCEEDINGS AND WAS SUBMITTED DURING THE PROCEEDINGS UNDER 263. AS REGARDS PAYMENT TO MAHAVEER PRASAD MISTRI AND TWO OTHER HELPERS THIS WAS PAYMENT TO THREE PERSONS AND THE PAYMENT WAS NOT IN VIOLATION OF SECTION 40A(3). 5. THE NEXT ISSUE WAS WITH REGARD TO THE SHARE CAPITAL OF RS. 4,50,000/- ISSUED TO DEEPAK BHATIA, WHICH WAS NOT VERIFIED DURING THE COURSE OF ASSESSMENT. THE MONEY WAS TAKEN FROM THE COMPANY AND DEPOSITED AS SHARE CAPITAL. NO PROPER ENQUIRY WAS BEING MADE IN THIS REGARD. THE CONTENTION OF THE ASSESSEE HAD BEEN THAT DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE VIDE LETTER DATED 18.2.2014 HAD SUBMITTED DETAILS, AFFIDAVIT, BANK PASS BOOK AND INCOME TAX RETURNS, PAN CARD OF DEEPAK BHATIA. HE WAS ONE OF THE MAJOR SHARE HOLDER IN THE COMPANY. THE PAYMENT WHICH WAS MADE BY THE COMPANY WAS TOWARDS REGULAR SALARY. THE ASSESSEE INVITED ATTENTION TOWARDS PAGE 15 OF THE ORDER U/S 263 IN WHICH THE ACCOUNT STATEMENT OF DEEPAK BHATIA IS EXTRACTED. THERE IS OLD BALANCE OF RS. 68,60,000/- WHICH IS ACCEPTED. FURTHER PAYMENT OF RS. 4,50,000/- AND RS. 4,00,000/- WAS RECEIVED AGAINST CAPITAL. THESE CAPITAL ARE DULY ACCEPTED, 5 ITA 139/JODH/2017 SHREE MARUTI NANDAN GUWAR GUM P LTD.. VS CIT AND THEREFORE THERE WAS NO REASON TO SUSPECT RS. 4,50,000/- RECEIVED ON ACCOUNT OF SHARE CAPITAL. IN THE SALARY ACCOUNT THERE IS DUE OF RS. S3,43,520/- WHICH WAS PAID TO DEEPAK BHATIA. IT WAS NOT A LOAN GIVEN TO HIM WHICH HAD BEEN GIVEN TO THE COMPANY. 6. THE NEXT ISSUE POINTED OUT IN THE NOTICE UNDER 263 RELATED TO VERIFICATION OF CREDITORS BEING NOT DONE. THE CIT STATES THAT THE CREDITORS HAD INCREASED TO 6.77 CRORES IN THE CURRENT YEAR FORM 18.21 IN THE PREVIOUS YEAR. THE ASSESSEE CONTENDED THAT THE TURNOVER HAD ALSO INCREASED MANIFOLD. IT WAS 28.48 CORES IN THE CURRENT YEAER AS AGAINST THE LAST YEAR 4.40 CORES IN THE LAST YEAR. THE MAIN CREDIT WAS ON ACCOUNT OF PURCHASES FROM SHREE MARUTINADAN COT SPIN FOR WHICH CONFIRMATION WAS DULY FILED. 7. THE NEXT ISSUE POINTED OUT WAS THAT THE ASSESSEE HAD CLAIMED SHORTAGES AND THE EXPLANATION GIVEN BY THE ASSESSEE WAS ACCEPTED WITHOUT PROPER VERIFICATION. THE ASSESSEE HAD SUBMITTED REPLY ON 19.3.2014 IN WHICH IT WAS STATED THAT SOME SARSON WAS PURCHASED FROM STATE FARM WAS OF INFERIOR QUALITY WHICH HAD RESULTED INTO SOME SHORTAGES. THIS PLEA AFTER EXAMINATION WAS ACCEPTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 8. THE NEXT OBJECTION OF THE PCIT IS THAT VERIFICATION OF TRANSACTION WITH RELATED PARTIES WAS NOT DONE. AS REGARDS TRANSACTIONS WITH RELATED PARTY THE DETAILS WERE SUBMITTED AND CONFIRMATION OF ACCOUNT WAS SUBMITTED. 9. IN RELATION TO THE NEXT ISSUE RELATING TO DISCOUNT THIS WAS ALSO DISCUSSED DURING THE ASSESSMENT PROCEEDINGS. THE AMOUNT OF DISCOUNT WAS 0.82% IN THE CURRENT YEAR AS AGAINST 1.10% IN THE LAST YEAR. AGAINST VARIOUS 6 ITA 139/JODH/2017 SHREE MARUTI NANDAN GUWAR GUM P LTD.. VS CIT OTHER EXPENSES PART DISALLOWANCE WAS ALSO MADE BY THE AO IN THE ASSESSMENT ORDER. 10. AS REGARDS OTHER EXPENSES ALSO DUE EXPLANATION WAS SUBMITTED AND IT IS CONTENDED THAT THERE IS NO SPECIFIC OBSERVATION OF THE PCIT TO STATE THAT THE ORDER PASSED BY THE AO WAS ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF REVENUE. THE PCIT AFTER MAKING SUCH OBSERVATION SET ASIDE THE ASSESSMENT ORDER TO BE FRAMED DENOVO AFTER PROPER VERIFICATION OF THE FACTS. 11. AFTER CAREFUL CONSIDERATION OF THE MATTER WE FIND THAT IN THE PRESENT ORDER THE LD. PCIT IS ALSO NOT OF THE FIRM VIEW WHETHER THE ON VARIOUS ISSUES THE ORDER CAN BE SAID TO BE PREJUDICIAL TO THE INTEREST OF REVENUE OR IS ERRONEOUS. VARIOUS OBSERVATIONS ARE MADE WHICH INDICATES ONLY SUSPICION AND NO SPECIFIC FINDING HAD BEEN GIVEN. WE ALSO FIND THAT VARIOUS ISSUES EXPLANATION WAS SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS WHICH WERE DULY EXAMINED. THE POWER OF REVISION OF ORDERS PASSED BY THE AO UNDER S. 263 OF THE ACT IS IN THE NATURE OF SUPERVISORY JURISDICTION WHICH IS PERMISSIBLE TO BE EXERCISED ONLY WHEN THE TWIN CONDITIONS ARE SATISFIED THAT THE ORDER PASSED BY THE AO IS ERRONEOUS AND FURTHER ON ACCOUNT OF ORDER BEING ERRONEOUS, PREJUDICE HAS BEEN CAUSED TO THE INTEREST OF REVENUE. IN THE INSTANT CASE, WHILE RECORDING THE CONCLUSION THAT THE ORDER PASSED BY THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE, APPARENTLY THE RECORD OF THE ASSESSMENT PROCEEDINGS WAS NOT EXAMINED BY THE PRINCIPAL CIT IN ITS ENTIRETY AND OBJECTIVITY. IN RELATION TO PURCHASES FROM AGRICULTURISTS DUE EVIDENCE WAS SUBMITTED WHICH CANNOT BE 7 ITA 139/JODH/2017 SHREE MARUTI NANDAN GUWAR GUM P LTD.. VS CIT REBUTTED AND THAT PURCHASES ARE MADE FROM THE AUCTION AT KRISHI MANDI. SIMILARLY THE SHARE CAPITAL CONTRIBUTION FROM THE EXISTING SHAREHOLDER AND OTHER CONTRIBUTION OF SHARE CAPITAL ARE DULY ACCEPTED FROM THE SAME SHAREHOLDER. THE PURCHASES HAD INCREASED, THE TURNOVER HAD INCREASED, IN SUCH VOLUME THE CREDITORS ARE BOUND TO INCREASE. THE MAIN CREDITOR WAS A RELATED PARTY FOR WHICH CONFIRMATION OF ACCOUNT WAS SUBMITTED AND NOTHING HAS BEEN POINTED OUT IN RELATION TO THE SAID CONFIRMATION. SIMPLY BECAUSE THE QUANTUM HAD INCREASED THIS CANNOT BE ANY BASIS TO SUBMIT THE SAME IS ERRONEOUSLY ACCEPTED. IN RELATION TO VARIOUS OTHER EXPENSES ALSO DUE REPLY HAD BEEN SUBMITTED. IN LIGHT OF ABOVE DISCUSSION WE HOLD THAT THE ORDER U/S 263 CANNOT BE SUSTAINED AS WE FIND THAT THE ASSESSMENT ORDER PASSED BY THE AO CANNOT BE SAID TO BE ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF REVENUE, AND ACCORDINGLY THE ORDER MADE U/S 263 IS QUASHED. 12. IN THIS RESULT, THIS APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 06/09/2021. SD/- SD/- (VIKRAM SINGH YADAV) (SANDEEP GOSAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER JODHPUR DATED 06/09/2021 *RANJAN COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A) 8 ITA 139/JODH/2017 SHREE MARUTI NANDAN GUWAR GUM P LTD.. VS CIT 5. THE DR 6. GUARD FILE ASSISTANT REGISTRAR JODHPUR BENCH