Shri Jai Prakash Soni, JODHPUR V. ITO, CHURU

ITA 197/JODH/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82907 (ITAT-JODHPUR)
• Duration Of Justice: 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 31-03-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Assessee Lawyers: U C JAIN
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENCH : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 197/JODH/2014 (A.Y. 200 9 - 1 0 ) SHRI JAI PRAKASH SONI, PROP. M/S. D.N. JEWELLERS, UTRADA BAZAR, CHURU. VS. ITO, WARD - 1(1), CHURU. PAN NO. ADUPS 0027 Q (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI U.C. JAIN & SHRI RAJENDRA JAIN. DEPARTMENT BY : SHRI N.A. JOSHI - D.R. DATE OF HEARING : 04 / 0 8 /201 4 . DATE OF PRONOUNCEMENT : 28 /0 8 /201 4 . O R D E R PER N.K. SAINI, A.M TH IS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 24 /01/2014 OF L D . CIT(A) - III , JAIPUR . THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN SUSTAINING DISALLOWANCE FOR RS. 1,00,000/ - MADE BY THE A.O. OUT OF DESIGNING CHARGES CLAIMED BY THE ASSESSEE. 2 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN SUSTAINING DISALLOWANCE FOR RS. 1,00,000/ - MADE BY THE A.O. OUT OF LABOUR CHARGES CLAIMED BY THE ASSESSEE. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN SUSTAINING DISALLOWANCE FOR RS. 34,936/ - MADE BY THE A.O . BEING 1/10 TH OF THE SHOP EXPENSES CLAIMED BY THE ASSESSEE. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN SUSTAINING DISALLOWANCE FOR RS. 40,675/ - MADE BY THE A.O. BEING 1/10 TH OF THE STAFF TIFFIN AND WELFARE EXPENSES CLAIMED BY THE ASSESSEE. 5. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE INTEREST LEVIED U/S. 234B & 234C IS ERRONEOUS. 6. THAT THE PETITIONER MAY KINDLY BE PERMITTED TO RAISE ANY ADDITIONAL OR ALTERNATIV E GROUND AT OR BEFORE THE TIME OF HEARING. 7. THE PETITIONER PRAYS FOR JUSTICE & RELIEF. 2 GROUND NOS. 6 & 7 ARE GENERAL IN NATURE, SO DO NOT RE QUIRE ANY COMMENTS ON OUR PART WHILE FACTS RELATING TO GROUND NOS. 1 TO 4 IN BRIEF, ARE THAT THE ASSESSEE DERIVED INCOME FROM TRADING OF SILVER AND GOLD ORNAMENTS. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE DECLARED GROSS PROFIT RATE OF 16.20% ON THE GROSS SALES OF RS. 5,83,78,944/ - , WHICH WAS SAME AS WAS IN THE PRECEDING YEAR ON THE GROS S TURNOVER OF RS. 6,13,99,650/ - . HOWEVER, NET PROFIT RATE DECLARED FOR THE YEAR UNDER CONSIDERATION WAS AT 1.40% AS AGAINST 1.09% IN THE PRECEDING YEAR. THE ASSESSING OFFICER MENTIONED THAT THE ASSESSEE MAINTAINED COMPLETE PURCHASE & SALES VOUCHERS, STOCK REGISTER WITH QUALITY AND QUANTITY - WISE DETAILS AND BOOKS OF ACCOUNTS WERE AUDITED AS REQU I RED U/S. 44A B OF THE I.T. ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT IN SHORT) . THE 3 ASSESSING OFFICER NOTICED THAT THE ASSESSEE DEBITED RS. 4,51,300/ - ON ACCOUNT OF DESIGNING CHARGES, OUT OF WHICH RS. 2,19,650/ - HAD BEEN PAID D URING THE MONTH OF MARCH, 2009 AND ALL THE PAYMENTS HAD BEEN MADE TO SMT. KANTA DEVI SONI WIFE OF THE ASSESSEE . HE ALSO POINTED OUT THAT THE ASSESSEE PAID RS. 3,64, 111/ - UNDER THIS HEAD IN THE EARLIER YEAR . THE ASSESSING OFFICER DISALLOWED RS. 1 LAC BY CONSIDERING THAT THE EXPENSES CLAIMED WERE NOT JUSTIFIABLE. THE ASSESSING OFFICER ALSO NOTED THAT THE ASSESSEE CLAIMED LABOUR CHARGES AT RS. 10,69,850/ - OUT OF WHICH EXPENSES TO THE EXTENT OF RS. 6,62,321/ - HAD BEEN PAID IN CASH AND THE ASSESSEE PRODUCED SELF MADE VOUCHERS IN RESPECT OF HIS CLAIM. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE SAID EXPENSES WERE NOT FULLY VERIFIABLE. HE MADE THE ADHOC D ISALLOWANCE OF RS. 1 LAC . THE ASSESSING OFFICER ALSO DISALLOWED RS. 34,936/ - I.E. 10% OUT OF SHOP EXPENSES AMOUNTING TO RS. 3,49,366/ - AND RS. 40,675/ - BEING 10% OF THE EXPENSES CLAIMED UNDER THE HEAD STAFF TIFFIN & STAFF WELFARE EX PENSES. 3. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) , WHO SUSTAINED DISALLOWANCE MADE BY THE ASSESSING OFFICER . NOW THE ASSESSEE IS IN APPEAL. 4. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE EXPENSES WERE SUPPORTED BY VALID AND AUTHENTIC BILLS /VOUCHERS AND NO PERSONAL ELEMENT 4 WAS INVOLVED IN THOSE EXPENSES. IT WAS FURTHER STATED THAT ALL THE PAYMENTS IN EXCESS OF RS. 20,000/ - WERE MADE THROUGH CHEQUES. THEREFORE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS NOT JUSTIFIED PARTICULARLY WHEN THE EXPENSES WERE EXCLUSIVELY INCURRED FOR B USINESS PURPOSES . RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: - I) ITO VS. MANISH MAHESHWARI (2010) XXXXIV TW 131, 132 (JP) II) ITO VS. SALWAN FURNISHING CO. (1985) 20 TAXMAN 79 (ITAT, DELHI) III) SMT. RENU GUPTA VS. ITO (2009) XLII TW 289 (JD.) IV) BOARD DYING COMPANY VS. ITO (1987) 27 TTJ 582 (ITAT, JAIPUR) 5. IN HIS RIVAL SUBMISSIONS, LEARNED D.R. SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 6 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AV AILABLE ON RECORD. IN THE PRESENT CASE , ASSESSING OFFICER HIMSELF ADMITTED IN THE BODY OF THE ASSESSMENT ORDER DATED 18/11/2011 THAT NET PROFIT RATE DECLARED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WAS BETTER IN COMPARISON TO THE EARLIER YEAR AND THAT THE COMPLETE PURCHASE S & SALES WERE FULLY VOUCHED, BOOKS OF ACCOUNTS WERE AUDITED AS REQUIRED U/S. 44AB OF THE ACT, STOCK REGISTER WAS MAINTAINED WITH QUALITY AND QUANTITY - WISE DETAILS. HE ACCEPTED THE 5 TRADING RESULTS DECLARED BY THE ASSESSEE , HOWEVER, MADE THE ADHOC DISALLOWANCE UNDER VARIOUS HEAD, BUT NOTHING IS BROUGHT ON RECORD TO SUBSTANTIATE THAT THE EXPENSE WERE NOT INCURRED FOR THE BUSINESS PURPOSE. HE HAS NOT STATED ANY COMPARABLE CASE WHILE D ISALLOWING THE DESIGNING & LABOUR CHARGES. IT WAS ALSO NOT BROUGH T ON RECORD AS TO HOW AND IN WHAT MANNER DESIGNING CHARGES PAID WERE EXCESSIVE U/S. 40A(2)(B) OF THE ACT. THE LD. CIT(A) H AS ALSO NOT GIVEN ANY COGENT REASONS FOR SUSTAINING THE SAID DISALLOWANCE S . IN OUR OPINION, THE DISALLOWANCE S MADE BY THE ASSESSING OFFICER UNDER THE HEAD DESIGNING CHARGES AND LABOUR CHARGES ARE NOT SUSTAINABLE, HOWEVER, INVOLVEMENT OF THE PERSONAL ELEMENT IN THE SHOP EXPENSES, STAFF TIFFIN & WELFARE EXPENSES CANNO T BE RULED OUT IN SUCH TYPE OF CASES . WE THEREFORE, TO MEET THE ENDS OF JUSTICE AND TO COVER UP THE REVENUE LEAKAGE, IF ANY, DEEM IT APPROPRIATE TO SUSTAIN THE DISALLOWANCE OF RS. 50,000/ - . THE REMAINING AMOUNT OF DISALLOWANCE/ ADDITIONS SUSTAINED BY THE LD. CIT(A) IS DELETED . 7 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART . ( ORDER PRONOUNCED IN THE COURT ON 28 TH AUGUST , 201 4) . S D/ - SD/ - ( HARI OM MARATHA ) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 28 TH AUGUST , 201 4 . 6 VR/ - COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD. CIT 4. THE CIT(A) 5. THE D.R SR. PRIVATE SECRETARY , ITAT, JODHPUR .