M/s. Baru Sigh Rana, New Delhi V. ITO, Uttrakhand

ITA 1895/DEL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3531 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 05-07-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 28-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Assessment record; Set aside
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A DELHI BEFORE SHRI RAJPAL YADAV AND SHRI K.G. BANSAL ITA NO.1895(DEL)/2010 ASSESSMENT YEAR: 2002-03 M/S BARU SINGH RANA, INCOME-TAX OFFICER, R/O PUROLA, UTTARKASHI. UTTARKASHI AT RISHIKESH. C/O O.P. SAPRA & ASSOCIATES, VS. (UT TRAKHAND) ADVOCATES, C-763, NEW FRIENDS COLONY, NEW DELHI. PAN-AAFFB7979N (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SANDEEP SAPRA, ADVOCAT E RESPONDENT BY: S HRI ASHOK PANDEY, CIT,DR ORDER PER K.G. BANSAL : AM THE QUESTION TO BE DECIDED IN THIS CASE IS- WHET HER, THE LD. CIT(APPEALS), DEHRADUN WAS JUSTIFIED IN EXERCISI NG REVISIONARY JURISDICTION U/S 263 OF THE INCOME-TAX ACT, 1961, IN RESPECT OF THE ASSESSMENT ORDER PASSED BY THE ITO, UTTARKASHI ON 12.10.2007 U/S 143(3) READ WITH SECTION 263 OF THE ACT. 2. IN ORDER TO APPRECIATE THE CONTROVERSY, NAR RATION OF BRIEF HISTORY OF THE CASE WILL BE IN ORDER. THE ASSESSEE HAD FIL ED THE RETURN OF INCOME ON 30.10.2002 DECLARING TOTAL INCOME OF RS. 2,81,32 0/-. ASSESSMENT WAS COMPLETED U/S 143(3) BY APPLYING THE PROVISION U/S 144AD, TAKING THE ITA NO. 1895(DEL)/2010 2 PROFITS AT RS. 7,28,474/-, BEING 8% OF GROSS R ECEIPTS OF RS. 91,05,921/-. INTEREST AND SALARY PAID TO PARTNERS WERE DEDU CTED AT RS. 3,83,568/-, LEADING TO COMPUTATION OF PROFITS AT RS. 4,44,806/- . INCOME FROM OTHER SOURCES AT RS. 47,136/- WAS ADDED TO THE BUSIN ESS PROFITS AND THE TOTAL INCOME WAS ASSESSED AT RS. 4,91,940/-. THIS ORD ER WAS SET ASIDE BY THE LD. COMMISSIONER OF INCOME-TAX U/S 263 ON THREE G ROUNDS THAT (I) SOURCE OF INVESTMENTS BY PARTNERS HAS NOT BEEN EXAMINED , (II) EXPENDITURE BY WAY OF PURCHASE OF MATERIAL, LABOUR CHARGES, TRANSPO RTATION CHARGES AND HIRE CHARGES HAS NOT BEEN VERIFIED, AND (III) OUTSTAND ING LIABILITY OF RS. 7,00,382/- IN RESPECT OF LABOUR CHARGES PAYABLE H AS NOT BEEN EXAMINED WITH A VIEW TO ASCERTAIN WHETHER IT HAS BEEN PAID IN SUBSEQUENT YEAR. 2.1 IN VIEW OF THE AFORESAID ORDER, THE AO PASSED A FRESH ORDER ON 12.10.2007, DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 4,91,940/-, BEING THE SAME AS ASSESSED IN ORDER DATED 31. 03.2002. IN THE COURSE OF THESE PROCEEDINGS, HE EXAMINED THE CAPITAL CONTRI BUTIONS OF THE PARTNERS, LABOUR CHARGES, TRANSPORTATION CHARGES, HIRE CHAR GES AND MATERIAL CHARGES. HE ALSO EXAMINED OUTSTANDING LABOUR CHARGES AND MENTIONED THAT THESE WERE PAID IN THE SUBSEQUENT YEAR. THE LD. CIT INVO KED REVISIONARY JURISDICTION AND HELD THAT THIS ORDER WAS ALSO ERRONEOUS AND PREJUDICIAL TO ITA NO. 1895(DEL)/2010 3 THE INTERESTS OF REVENUE. THEREFORE, HE SET ASIDE THE ORDER TO EXAMINE ALL THE AFORESAID MATTERS AGAIN. PARAGRAPH 3 O F THIS IMPUGNED ORDER RECORDS THE REASONS FOR COMING TO THE AFORESAI D CONCLUSION, WHICH IS REPRODUCED BELOW:- 3. I HAVE GONE THROUGH THE ORDER OF THE AO AN D THE SUBMISSION OF THE ASSESSEE VERY CAREFULLY. A P ERUSAL OF THE ASSESSMENT RECORDS REVEALS THAT EXCEPT FOR THE COPIES OF THE ACKNOWLEDGEMENT FILED IN THE CASE OF PARTNER SHR I VIKAS KUMAR AGARWAL, SHRI DEVENDRA PRASAD AGARWAL AND SHR I ROOP CHAND AGARWAL, THERE IS NO INDICATION ON RECORD AS TO THE MATERIAL EXAMINED BY THE AO WHILE RE-DOING THE ASSESSMENT CONSEQUENT TO SETTING ASIDE OF THE SAME BY THE CIT TO ARRIVE AT HIS SATISFACTION AS TO THE SOURCE OF PARTNERS CAPITAL. THERE IS ALSO NO MATERIAL ON RECORD WHICH CAN INDICATE THE GENUINENESS OF THE HUGE EXPENSES DEBITED TO T HE PROFIT AND LOSS ACCOUNT ON ACCOUNT OF LABOUR, PURCHASE OF MATERIAL AND TRANSPORTATION CHARGES. THERE IS ALSO NO MATERIAL ON RECORD WHICH COULD INDICATE ABOUT THE DATE OF PAYMENT OF THE WAGES PAYABLE AS ON 31.03.2002. THIS SHOWS THAT INSTRUCTIONS OF THE THEN COMMISSIONER OF INCOME-TA X IN HIS ORDER U/S 263 DATED 26.03.2007 HAVE NOT BEEN C ARRIED OUT IN ITS LETTER AND SPIRIT. THE NARRATION IN THE AS SESSMENT ORDER ON HIS HAVING REACHED SATISFACTION ON THESE POINTS, THEREFORE, IS ERRONEOUS AS BEING DEVOID OF ANY MATERIAL BASIS AND, THEREFORE, PREJUDICIAL TO THE INTERESTS OF REVEN UE. 3. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AO HAD MADE VERIFICATION AS DIRECTED IN THE FIRST REVISIONARY ORDER. HE CALLED FOR THE EXPLANATION IN REGARD TO CAPITAL CONTRI BUTIONS OF THE PARTNERS. HE ALSO EXAMINED VOUCHERS, MUSTER ROLLS, CHALLANS ETC. TO VERIFY THE ITA NO. 1895(DEL)/2010 4 EXPENSES INCURRED BY WAY OF MATERIAL CHARGES, LABO UR CHARGES, TRANSPORTATION AND HIRE CHARGES. HE ALSO VERI FIED PAYMENT OF OUTSTANDING LABOUR CHARGES WITH REFERENCE TO VOUCHERS AND MUSTER ROLLS AND FOUND THAT THESE HAD BEEN PAID IN THE SUBSEQUENT YEAR . THEREFORE, IT WAS ARGUED THAT THE FINDINGS OF THE LD. CIT RECORDED IN PA RAGRAPH 3 DO NOT STAND THE TEST OF SCRUTINY WITH REFERENCE TO MATERIAL ON RECORD. 4. IN REPLY, THE LD. DR RELIED ON THE ORDER O F THE LEARNED CIT. 5. WE HAVE CONSIDERED THE FACTS OF THE CASE AN D SUBMISSIONS MADE BEFORE US. THE FIRST POINT TAKEN UP IN THE R EVISIONARY ORDER IS REGARDING VERIFICATION OF CAPITAL CONTRIBUTIONS BY THE PARTN ERS. THIS ISSUE HAD BEEN DEALT BY THE AO IN ORDER DATED 12.10.2007 ON P AGES 1 AND 2, WHICH READS AS UNDER:- SOURCE OF INVESTMENT BY THE PARTNERS FOR A.Y. 2002-03 THE ASSESSEE STATED THAT SHRI DEVENDRA PRASAD AGARWAL IS RUNNING A BUSINESS IN THE NAME & STYLE M/S AGARWAL CONS UMER STORE AT ARAGHAR, DEHRADUN AND THE AFORESAID AMOUNT R S. 75,000/- WAS WITHDRAWALS FROM C.C. A/C 42404 AND INVESTME NT MADE IN THE FIRM. SECOND PARTNER SHRI VIKAS KUMAR AG ARWAL IS RUNNING THE BUSINESS OF TAXI CAR ASSESSED TO TA X WITH INCOME-TAX OFFICER, DEHRADUN AND INITIAL INVESTMEN T RS. 57,000/- WAS MADE OUT OF BORROWING FROM FOLLOW ING PERSONS:- ITA NO. 1895(DEL)/2010 5 (I) RS. 40,000/- FROM SMT. SUMITA AGARWAL VIDE A/C PAYEE CHEQUE FROM ACCOUNT NO. 944 WITH UCO BANK, DEHRADUN. (II) RS. 25,000/- FROM SHRI DEVENDRA AGARWAL VIDE A/C PAYEE CHEQUE FROM ACCOUNT NO. 940 WITH UCO BANK, DEHRADUN. SHRI ROOP CHAND AGARWAL(PARTNER) IS ALSO AN OLD ASSESSEE CARRYING BUSINESS OF SUPPLIES OF BUILDING MATERI AL AND INVESTED RS. 1,00,000/- WITH THE FIRM OUT OF WHICH RS. 45,000/- WAS DEPOSITED BY CHEQUE AND BALANCE RS. 55,000/- WAS OUT OF PAST SAVINGS. THE NEXT PARTNER, SHRI NAUNIHAL SI NGH S/O SHRI BARU SINGH IS ALSO DOING MILK BUSINESS. HE IS AN AGRICULTURIST AND OWNS SHEEP FARM. IN SUPPORT OF THIS, HE HAS FILED A PHOTOCOPY OF CERTIFICATE ISSUED BY FORE ST DEPARTMENT. HE HAS INVESTED RS. 1,00,000/- FROM BUSINESS OF SHEEP BREEDING AND MILK BUSINESS. THE ARGUMENT OF THE ASSESSEE REGARDING SOURCES OF INVESTMENT OF THE PARTNERS APPEARS TO BE CORRECT AND ACCEPTABLE. 5.1 FROM THE AFORESAID, IT IS CLEAR THAT THE AO HAD VERIFIED THE CAPITAL BROUGHT IN BY ALL THE FOUR PARTNERS. THREE OF T HE PARTNERS ARE EXISTING ASSESSEES, WHO CONTRIBUTED THE CAPITAL BY WAY O F TRANSFER OF MONEY FROM OTHER CONCERNS IN WHICH THEY WERE PARTNERS OR B Y WAY OF LOANS. THE FOURTH PARTNER IS ENGAGED IN MILK BUSINESS, WHO CONTRIBUTED RS. 1.00 LAKH FROM THIS BUSINESS AS CAPITAL CONTRIBUTION. TH E LD. CIT HAS NOT FURNISHED ANY REASON AS TO WHY THE EVIDENCE ON RECORD IS NOT RELIABLE. HE HAS ALSO NOT DOUBTED THE GENUINENESS OF THE PARTNERS. IN ANY CASE, THE ASSESSEE HAS BEEN ASSESSED IN THE STATUS OF FIRM WHIC H HAS NOT BEEN DOUBTED BY ITA NO. 1895(DEL)/2010 6 THE LD. CIT. IN THIS BACKGROUND, WE DO NOT FIN D THAT ENQUIRY WAS NOT MADE INTO THE SOURCES OF CAPITAL CONTRIBUTIONS OF THE PARTNERS RENDERING THE ORDER AS ERRONEOUS AND PREJUDICIAL TO THE INTE RESTS OF REVENUE. IN REGARD TO VERIFICATION OF VARIOUS EXPENSES AND GENUIN ENESS OF OUTSTANDING LABOUR CHARGES, THE AO RECORDED FOLLOWING OBSER VATIONS IN HIS ORDER:- REGARDING EXPENSES UNDER THE HEAD LABOUR CHARGE S, TRANSPORTATION CHARGES, HIRE CHARGES AND MATERIAL CHARGES, THE ASSESSEE HAS PRODUCED VOUCHERS, MUSTER ROLLS, CO PY OF CHALLANS AND VOUCHERS OF MATERIAL PURCHASED THE SAME HAVE BEEN CHECKED AND VERIFIED. THE ASSESSEE HAS ALSO PRODUCED VOUCHERS & MUSTER ROLL REGARDING PAYMENT OF LABO UR CHARGES WHICH WAS PAYABLE AS ON 31.03.02 AND PAID BY TH E ASSESSEE IN SUBSEQUENT YEAR. THE SAME WAS CHECKED AND V ERIFIED AND APPEARS TO BE CORRECT. 5.2 THUS, HE VERIFIED THE VOUCHERS, MUSTER ROLL S AND CHALLANS FOR THE EXPENSES; AND VOUCHERS AND MUSTER ROLLS FOR PAYM ENT OF OUTSTANDING LABOUR CHARGES. THE REVISIONARY ORDER OF THE LD. CIT DOES NOT REVEAL ANY INFIRMITY IN THE VERIFICATION MADE BY THE AO EX CEPT STATING THAT THERE IS NO MATERIAL ON RECORD TO INDICATE GENUINENESS OF THE EXPENSES OR PAYMENT OF OUTSTANDING LABOUR CHARGES. THIS OBSERVATION RUNS CONTRARY TO THE FINDINGS OF THE AO, WHICH HAD BEEN GIVEN AFTER MAKING VERIFICATION. THEREFORE, WE ARE OF THE VIEW THAT THIS PART OF THE ORDER ALSO CANNOT BE ITA NO. 1895(DEL)/2010 7 TAKEN TO BE ERRONEOUS AND PREJUDICIAL TO THE I NTERESTS OF REVENUE AS REQUISITE ENQUIRY HAD BEEN CONDUCTED BY THE AO. 6. IN THE RESULT, THE APPEAL IS ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 23 JULY, 2010. SD/- SD/- (RAJPAL YADAV) (K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE OF ORDER: 23RD JULY,2010. SP SATIA COPY OF THE ORDER FORWARDED TO:- M/S BARU SINGH RANA, R/O PUROLA, UTTARKASHI. C/O O. P.SAPRA, ADVOCATE, ITO, UTTARKASHI. CIT(A) CIT, DEHRADUN. THE DR, ITAT, NEW DELHI. ASSISTANT REGISTRAR.