MESERS DHARIWAL BROTHERS, RAIPUR V. INCOME TAX OFFICER, WARD 3(1), RAIPUR

ITA 186/RPR/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4197 (ITAT-RAIPUR)
• Duration Of Justice: 3 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 05-10-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R K BARAL
• Assessee Lawyers: R B DOSHI
• Keywords: TDS; Set aside
• Section: 143(3); 133(6); 251; 208; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI PAWAN SINGH, JUDICIAL MEMBER ./ I.T.A. NO.186/RPR/2018 ( / ASSESSMENT YEAR : 2013-14) M/S. DHARIWAL BROTHERS, C/O. RAYMOND RETAIL SHOP, JEEWAN BIMA MARG, PANDRI, RAIPUR (C.G.) / VS. INCOME TAX OFFICER- WARD (3)(1), RAIPUR ./ ./ PAN/GIR NO. : AADFD 6404 E ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI R. B. DOSHI, CA / RESPONDENT BY : SHRI R.K. BARAL, DR / DATE OF HEARING 12.08.2021 / DATE OF PRONOUNCEMENT 05.10.2021 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME-TAX (APPEALS)-I, RAIPUR (CIT(A) IN SHORT) DATED 01.08 .2018 ARISING FROM THE ASSESSMENT ORDER DATED 03.03.2016 PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT IN SHORT). THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE READ AS UNDER :- 1. LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.2,15,750/- MADE BY THE AO U/S 68 ON ACCOUNT OF LOAN RECEIVED B Y THE APPELLANT FROM SUNIL KUMAR PRASHAN KUMAR HUF & INTE REST THEREON. THE ADDITION MADE BY AO AND SUSTAINED BY LD. CIT(A) IS NOT JUSTIFIED. 2. LD. CIT(A) ERRED IN CONFIRMING DISALLOWANCE OUT OF VEHICLES, TRAVELLING AND TELEPHONE EXPENSES TO THE EXTENT OF 10% OF THE CLAIM OUT OF THE DISALLOWANCE OF 20% MADE BY THE AO . THE DISALLOWANCE SUSTAINED BY THE LD. CIT(A) IS NOT JUS TIFIED. ITA NO. 186/RPR/2018 DHARIWAL BROTHERS VS. ITO AY : 2013-14 - 2 - 3. LD. CIT(A) ERRED IN CONFIRMING ADDITION OF RS.61 ,29,546/- MADE BY THE AO REJECTING THE BOOK RESULTS AND APPLY ING GP RATE OF 9.30% IN PLACE OF THE DISCLOSED GP RATE OF 7.03%. THE ADDITION MADE BY THE AO AND CONFIRMED BY CIT(A) IS NOT JUSTIFIED. REJECTION OF BOOKS AND ESTIMATION OF PRO FIT IS NOT JUSTIFIED AND IS ILLEGAL. 2. AS PER GROUND NO1, THE ASSESSEE HAS CHALLENGED T HE ADDITION OF RS.2,15,750/- MADE BY THE ASSESSING OFFICER UNDER S ECTION 68 OF THE ACT ON ACCOUNT OF LOAN RECEIVED BY THE ASSESSEE FRO M ONE SUNIL KUMAR PRASHAN KUMAR HUF AND INTEREST THEREON. AS NOTICED , IN THE COURSE OF THE SCRUTINY ASSESSMENT, THE ASSESSING OFFICER M ADE ADDITIONS UNDER SECTION 68 OF THE ACT ON ACCOUNT OF UNSECURED LOANS RECEIVED FROM SEVERAL PARTIES ON THE GROUND THAT THE ONUS WH ICH LAY UPON THE ASSESSEE UNDER SECTION 68 OF THE ACT WAS NOT DISCHA RGED. IN THE FIRST APPEAL, THE CIT(A) CONCLUDED THAT THE IDENTITY, CRE DITWORTHINESS AND GENUINENESS OF THE LOAN AMOUNT RECEIVED BY THE ASSE SSEE HAS BEEN EXPLAINED SATISFACTORILY IN TERMS OF SECTION 68 OF THE ACT. HOWEVER, IN RESPECT OF LOANS RECEIVED FROM SUNIL KUMAR PRASH AN KUMAR HUF, IT WAS FOUND TO BE UNEXPLAINED ON THE YARDSTICK OF SEC TION 68 OF THE ACT. THE ADDITION OF RS.2,15,750/-, RECEIVED FROM THE AFORESAID PARTY, WAS THUS SUSTAINED BY THE CIT(A) AND DISALLOWANCE O F INTEREST PAID TO THE PARTY WAS ALSO SUSTAINED. 2.1 BEFORE THE TRIBUNAL, THE LEARNED COUNSEL FOR TH E ASSESSEE SUBMITTED THAT ALL THE RELEVANT DETAILS SUCH AS PAN NUMBER, BANK STATEMENT OF THE LENDER ETC WERE FURNISHED. THE AMO UNT HAS BEEN RECEIVED THROUGH BANKING CHANNEL FROM THE AFORESAID PARTY WHO IS NOT RELATED TO THE ASSESSEE. INTEREST WAS ALSO PAID TH EREON. NOT ONLY THIS, THE AMOUNT HAS BEEN REPAID TO THE SAID PARTY DURING THE SAME YEAR. THE DISALLOWANCE WAS MADE ONLY ON THE GROUND THAT T HE PARTY HAS NOT ITA NO. 186/RPR/2018 DHARIWAL BROTHERS VS. ITO AY : 2013-14 - 3 - RESPONDED TO THE NOTICE SERVED UNDER SECTION 133(6) OF THE ACT. THE LEARNED COUNSEL RELIED UPON THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF CIT VS. ORISSA CORPORATION P. LTD (1986) 159 ITR 78 (SC) FOR THE PROPOSITION THAT WHERE THE NOTI CE REMAINED UNSERVED, BUT, HOWEVER, THE ASSESSING OFFICER HAS N OT MADE ANY FURTHER EFFORTS TO MAKE ENQUIRY, AN ADVERSE INFEREN CE CANNOT BE DERIVED AUTOMATICALLY. IT WAS CONTENDED THAT THE CA SE OF ASSESSEE IS ON A MUCH HIGHER PEDESTAL HAVING REGARD TO THE FACT TH AT NOTICE UNDER SECTION 133 (6) WAS SERVED BUT NOT RESPONDED. THE L EARNED COUNSEL FURTHER REFERRED TO SEVERAL JUDICIAL PRECEDENTS FOR THE PROPOSITION THAT WHERE THE REPAYMENT HAS BEEN MADE, THE ADDITION UND ER SECTION 68 IS NOT JUSTIFIED. 2.2 ON APPRAISAL OF THE FACTS NARRATED ABOVE, WE FI ND THAT THE ASSESSEE HAS RECEIVED THE MONEY THROUGH BANKING CHA NNEL AND ALSO REPAID THE SAME THROUGH BANKING CHANNEL. THE INTER EST HAS BEEN PAID ON THE LOANS AVAILED AND THE PAYMENT HAS BEEN MADE AFTER DEDUCTION OF TDS. THUS, THE WHOLE SET OF TRANSACTIONS APPEARS PRIMA FACIE BONAFIDE AND IN THE ORDINARY COURSE OF OBTAINING BO RROWALS. THE ONLY BASIS FOR ADVERSE INFERENCE BY THE LOWER AUTHORITY IS ABSENCE OF RESPONSE ON THE ENQUIRY LETTER ISSUED UNDER SECTION 133(6) OF THE ACT AND SERVED UPON THE LENDER. AS POINTED OUT ON BEHA LF OF THE ASSESSEE, IN VIEW OF THE OVERWHELMING EVIDENCES AVAILABLE IN FAVOUR OF THE ASSESSEE, THIS SOLITARY FACT COULD NOT GIVE RISE TO AN AUTOMATIC INFERENCE ADVERSE TO THE ASSESSEE IN THE LIGHT OF D ECISION OF HONBLE SUPREME COURT IN THE CASE OF ORRISA CORPORATION (SU PRA). 2.3. THE HONBLE GUJARAT HIGH COURT IN THE CASES OF CIT VS. AYACHI CHANDRASEKHAR NARSANGJI, 42 TAXMANN.COM 251 (GUJ) AND CIT ITA NO. 186/RPR/2018 DHARIWAL BROTHERS VS. ITO AY : 2013-14 - 4 - VS. MAHAVIR CRIMPERS, 95 TAXMAN.COM 323 (GUJ) HAVE HELD THAT WHEN THE DEPARTMENT HAS ACCEPTED THE FACTUM OF REPAYMENT , THE ADDITIONS UNDER SECTION 68 IS NOT SUSTAINABLE IN LAW. SIMILA R VIEW HAS BEEN EXPRESSED IN CIT VS. KARAJ SINGH (2011) 15 TAXMANN. COM 70 (P&H) & PANNA DEVI CHOWDHARY VS. CIT, 208 ITR 849 (BOM). 2.4 HAVING HEARD THE FACTS AND THE CIRCUMSTANCES OF THE CASE, WE HAVE NO HESITATION TO HOLD THAT THE ASSESSEE HAS SU FFICIENTLY DISCHARGED THE ONUS WHICH LAY UPON IT IN TERMS OF S ECTION 68 OF THE ACT. IN THIS VIEW OF THE MATTER, WE SET ASIDE THE ORDER OF THE CIT(A) ON THIS POINT AND DIRECT THE ASSESSING OFFICER TO D ELETE THE ADDITION ON THIS SCORE. 3. CONSEQUENTLY, GROUND NO.1 OF THE APPEAL OF THE A SSESSEE IS ALLOWED. 4. GROUND NO.2 CONCERNS AD-HOC DISALLOWANCE OUT OF VEHICLE, TRAVELLING AND TELEPHONE EXPENSES PARTLY SUSTAINED BY THE CIT(A). THE ASSESSEE COULD NOT, IN ANY MANNER, CONTROVERT THE V IEW TAKEN BY THE CIT(A). THE ACTION OF THE CIT(A) BEING REASONABLE ON THE FACTS OF THE CASE AND IN THE ABSENCE OF ANY SERIOUS REBUTTAL THEREOF, WE DECLINE TO INTERFERE. 5. GROUND NO.2 OF THE ASSESSEES APPEAL IS DISMISSE D. 6. GROUND NO.3 CONCERNS THE ADDITION OF RS.61,29,54 8/- MADE BY THE ASSESSING OFFICER BY ADOPTING GP RATE OF 9.30% IN PLACE OF GP RATE OF 7.03% ARISING FROM THE BOOK RESULTS. ITA NO. 186/RPR/2018 DHARIWAL BROTHERS VS. ITO AY : 2013-14 - 5 - 6.1. BEFORE THE TRIBUNAL, THE LEARNED COUNSEL FOR T HE ASSESSEE SUBMITTED, AT THE OUTSET, THAT INCREASE OR DECREASE IN THE GROSS PROFIT (GP IN SHORT) RATIO AND THE NET PROFIT (NP IN S HORT) RATIO DEPENDS ON VARIETY OF FACTORS IN A GIVEN BUSINESS VENTURE A ND THE BOOK RESULTS OF TWO DIFFERENT ASSESSMENT YEARS CANNOT BE EXPECTE D TO BE THE SAME. SUCH VARIATIONS IN THE PROFITS ARE NORMAL INCIDENTS OF ANY BUSINESS ENTERPRISE. 6.2 THE LEARNED COUNSEL FOR THE ASSESSEE NEXT POINT ED OUT THAT THE QUANTITATIVE DETAILS OF ALL ITEMS TRADED WERE ALSO SUBMITTED TO THE ASSESSING OFFICER (PAGE NO.48 AND 51 OF THE PAPER-B OOK) AND SUCH DETAILS WERE VERIFIABLE WITH REFERENCE TO THE SALES MADE TO IDENTIFIED PARTIES WHO ARE ALL WHOLESALERS. NO ENQUIRY HAS BE EN MADE FROM THE CUSTOMERS AND NO SUPPRESSION IN SALES WAS ACTUALLY FOUND. THE ACTION OF THE ASSESSING OFFICER IS IN THE REALM OF SUSPICI ON, SURMISES AND CONJECTURES. IT IS ONLY AN ELEMENTARY TO SAY THAT MERE FALL IN GP/NP WOULD NOT AUTOMATICALLY TRIGGER ESTIMATION. 6.3 IT WAS ALSO SUBMITTED THAT, BROADLY SPEAKING, T HE FALL IN GP/NP IN THE CURRENT YEAR VIS--VIS EARLIER YEAR IS ON AC COUNT OF FOLLOWING:- (I) FLUCTUATION IN FOREIGN EXCHANGE RATE OF THE GO ODS IMPORTED BY THE ASSESSEE; (II) THE ASSESSEE ENTERED INTO CONTRACT FOR SALE O F BLANKETS WITH RAYMOND LTD. FOR WHICH PURCHASE ORDER WAS OBTA INED (PAGE NOS. 52 & 53 OF THE PAPER-BOOK). BLANKETS WE RE SUBSEQUENTLY IMPORTED FROM CHINA AND SUPPLIED TO RAYMOND. THE PURCHASE PRICE HAPPENED TO BE MORE THA N ITA NO. 186/RPR/2018 DHARIWAL BROTHERS VS. ITO AY : 2013-14 - 6 - THE SELLING PRICE CONTRACT WITH THE CUSTOMER RESULT ING IN LOSS OF RS.10.28 LAKHS; (III) IN TRADING OF SOAP NOODLES, LOSS OF RS.13.57 LAKHS WAS INCURRED FOR WHICH DETAILED WORKING IS PLACED AT PA GE NO.55 OF THE PAPER-BOOK; (IV) CUSTOM DUTY ON PURCHASE OF WIRE-NETTING WAS 1 0% HIGHER IN FY 2011-12 WHICH FURTHER INCREASED TO 12.36% IN THE YEAR UNDER CONSIDERATION. THE VALUE OF IMPORTED W IRE- NETTING BEING SUBSTANTIAL, THE ADDITIONAL BURDEN OF CUSTOM DUTY IS ABOUT RS.8.83 LAKHS WHICH COULD NOT BE PASS ED ON TO THE PURCHASERS; (V) THE TURNOVER DURING THE YEAR INCREASED BY ABOU T 60% OWING TO LOWER MARGINS OF PROFITS CHARGED BY THE AS SESSEE. 6.4 THE LEARNED COUNSEL FURTHER POINTED OUT THAT IN THE SUBSEQUENT ASSESSMENT YEAR, I.E. AY 2014-15, THE TURNOVER OF T HE ASSESSEE AGAIN INCREASED BY ABOUT 71% AS COMPARED TO THE ASSESSMEN T YEAR 2013-14 IN QUESTION. THE GP RATE IN THE SUBSEQUENT YEAR FU RTHER DECLINED FROM EXISTING 7.03% TO 5.39% HAVING REGARD TO THE LOWER MARGIN CHARGED BY THE ASSESSEE. THE ASSESSING OFFICER, IN THE SCR UTINY ASSESSMENT, ACCEPTED THE GP RATE OF 5.39% WITHOUT ANY DISTURBAN CE. THE COPY OF THE ASSESSMENT ORDER DATED 16.08.2017 PASSED UNDER SECTION 143(3) OF THE ACT WAS PLACED ON RECORD. THE GROSS PROFIT IN THE SIMILAR RANGE AT 5.89% DECLARED IN ASSESSMENT YEAR 2015-16 WAS ALSO ACCEPTED BY THE ASSESSING OFFICER. THE LEARNED COUNSEL THUS SUBMIT TED THAT WHERE THE DEPARTMENT HAS ACCEPTED THE POSITION IN THE SUBSEQU ENT YEAR HAVING REGARD TO THE INCREASE IN TURNOVER AND HOST OF FACT ORS CONTRIBUTING TO THE DECLINE IN THE BUSINESS PROFITS, THERE WAS NO W ARRANT FOR THE ITA NO. 186/RPR/2018 DHARIWAL BROTHERS VS. ITO AY : 2013-14 - 7 - REVENUE TO ARTIFICIALLY ADOPT GP RATE OF EARLIER YE AR DERIVED IN ITS OWN SET OF FACTS. THE LEARNED COUNSEL ACCORDINGLY SUBM ITTED THAT THE ACTION OF THE REVENUE BE SET ASIDE AND THE POSITION OF THE ASSESSEE BE RESTORED. 6.5 PER CONTRA, THE CIT-DR FOR THE REVENUE RELIED U PON THE ORDER OF THE CIT(A) UNDER CHALLENGE AND ESSENTIALLY SUBMITTE D THAT THE ASSESSEE DID NOT FULLY EXPLAIN THE FALL IN GP AND T HE BURDEN TO SUBSTANTIATE THE TRADING RESULTS WERE NOT DISCHARGE D BY THE ASSESSEE. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS ON THE ISSUE. ON CAREFUL APPRAISAL OF THE SUBMISSIONS AND THE COR ROBORATING EVIDENCES, WE OBSERVE THAT THE QUANTITATIVE DETAILS OF THE ITEMS TRADED BY THE ASSESSEE WERE FURNISHED BEFORE THE ASSESSING OFFICER. NO ENQUIRY HAS BEEN MADE WITH THE CUSTOMERS. NO DISCRE PANCY IN THE VALUATION OF CLOSING STOCK WAS POINTED OUT BY THE A SSESSING OFFICER OR BY THE CIT(A) EITHER. THUS, BY IMPLICATION, THE TRA NSACTIONS IN THE TRADING ACCOUNT WERE WITHOUT MUCH DISPUTE. THE ASS ESSEE HAS ATTEMPTED TO EXPLAIN THE FALL IN GP BY CITING SPECI FIC REASONS. THE ASSESSEE CONTENDS THAT IT IS MAINLY IN THE BUSINESS OF IMPORTS AND ANY FLUCTUATION IN THE FOREIGN EXCHANGE RATE COULD NATU RALLY HAVE CASCADING EFFECT ON THE GROSS PROFIT WHERE THE CONT RACT FOR SALE HAS ALREADY BEEN ENTERED. THIS APART, THE SUBSTANTIAL I NCREASE IN THE TURNOVER HAS BEEN NOTICED. THE ASSESSEE SEEKS TO E XPLAIN THAT THE HIGHER TURNOVER COULD BE ACHIEVED OWING TO LOWER PR OFIT MARGINS. SUCH EXPLANATION MERITS ACCEPTANCE. THE GROSS PROFI T IN THE SUBSEQUENT ASSESSMENT YEARS HAVE FALLEN DOWN FURTHE R FROM 7.03% TO 5.39% IN SYNC WITH INCREASE IN TURNOVER. THE BOOK RESULTS IN THE SUBSEQUENT YEAR HAVE BEEN ACCEPTED BY THE REVENUE. THUS, WHEN SEEN ON BROADER PARAMETERS, THE BOOK RESULTS OF THE ASSE SSEE SHOULD BE ITA NO. 186/RPR/2018 DHARIWAL BROTHERS VS. ITO AY : 2013-14 - 8 - BELIEVED AND SHOULD NOT BE DISCARDED. THE BENEFIT OF DOUBT, IF ANY, NEEDS TO GO TO THE ASSESSEE MORE SO WHERE SUCH MA THEMATICAL RATIOS CANNOT BE EXPLAINED TO THE HILT. THE ASSESSEE, TO O UR MIND, HAS EXPLAINED THE FALL IN GP IN A BROADER RECKONING WIT H REASONABLE PARTICULARITY. THE ACTION OF THE REVENUE AUTHORITIE S THUS DESERVES TO BE SET ASIDE AND THE PLEA OF THE ASSESSEE FOR RESTO RATION OF BOOK RESULTS DESERVES TO BE ACCEPTED. 14. THE GROUND NO.3 OF THE APPEAL OF THE ASSESSEE I S ALLOWED. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. PRONOUNCED ON 05.10.2021 AS PER RULE 34(4) OF THE I NCOME TAX APPELLATE TRIBUNAL RULES, 1963. SD/- SD/- (PAWAN SINGH) (PRADIP KUMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMB ER BT TRUE COPY / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. / ASSESSEE 3. / CONCERNED CIT 4. - / CIT (A) 5. , , / DR, ITAT, RAIPUR 6. / GUARD FILE. BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR