ITO, Sawai Madhopur V. PRAHLAD CHAND METHI, Jaipur

ITA 199/JPR/2011

• Counselvise Citation: 19923114 RSA 2011
• Duration Of Justice: 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 07-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K MEENA
• Section: 131; 68

Judgement Text

1 ITA 199-110 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH A JAIPUR. ( BEFORE SHRI R.K. GUPTA AND SHRI N.L. KALRA ) ITA NO. 199/JP/2011 ASSTT. YEAR : 2007-08. THE INCOME-TAX OFFICER, VS. SHRI PRAHLAD CHAND ME THI, PROP. WARD-2, KAILASH CHAND PRAHLAD CHAND METHI, SAWAI MADHOPUR. NAI MANDI, GANGAPUR CITY. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI D.K. MEENA RESPONDENT BY : SHRI RAJEEV SOGANI DATE OF HEARING : 11.8.2011 DATE OF PRONOUNCEMENT : 19.8.2011. ORDER DATED : 19/08/2011. PER R.K. GUPTA, J.M. THIS IS AN APPEAL BY DEPARTMENT AGAINST THE ORDER OF LD. CIT (A) RELATING TO ASSESSMENT YEAR 2007-08. 2. THE FIRST ISSUE RELATES TO DELETING THE ADDITION OF RS. 6,29,000/- MADE BY THE AO UNDER SECTION 68 OF THE IT ACT. 3. DURING THE ASSESSMENT PROCEEDINGS, THE AO NOTICE D THAT ASSESSEE HAS TAKEN LOAN FROM FIVE PARTIES TOTALING TO RS. 6,29,000/-. THE ASSESSEE WAS REQUIRED TO FILE CONFIRMATION AND CREDITWORTHINESS OF THE DEPOSITORS . CONFIRMATIONS OF ALL THE PARTIES WERE FILED ALONG WITH PAN AND COPY OF ACCOUNT. HOWE VER, BANK STATEMENT COULD NOT BE 2 FILED. THEREFORE, THE AO TREATED THE ENTIRE LOAN AS UNEXPLAINED AND ADDED UNDER SECTION 68 OF THE ACT. 3.1. ASSESSEE PREFERRED APPEAL BEFORE LD. CIT (A). ALL THE DETAILS FILED BEFORE THE AO WERE FILED BEFORE LD. CIT (A) ALSO. COPY OF BANK S TATEMENT WAS ALSO FILED. RELIANCE WAS PLACED ON VARIOUS CASE LAWS INCLUDING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. ORISSA CORPORATION PVT. LTD., 159 ITR 78 (SC) AND THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF KANHIYA LA L JANGID VS. ACIT, 217 CTR 354 (RAJ.). THE LD. CIT (A) AFTER CONSIDERING THE SUBM ISSIONS AND PERUSING THE MATERIAL ON RECORD FOUND THAT ASSESSEE HAS DISCHARGED INITIAL B URDEN PLACED ON HIM REGARDING GENUINENESS OF THESE LOANS AS THE CONFIRMATIONS ALO NG WITH AFFIDAVITS OF THE PARTIES WERE FILED. LOANS WERE ADVANCED THROUGH ACCOUNT PAYEE C HEQUE AND THEY WERE RETURNED THROUGH ACCOUNT PAYEE CHEQUE. NO SUMMON UNDER SECT ION 131 WAS ISSUED TO THE RESPECTIVE PARTY INSPITE OF ALL THE DETAILS ALONG W ITH PAN WERE FILED BY THE ASSESSEE. THEREFORE, THE LD. CIT (A) HELD THAT ASSESSEE HAS F ILED ALL THE DETAILS REQUIRED TO PROVE THE LOAN GENUINE. ACCORDINGLY HE DELETED THE ADDITION. 4. AFTER CONSIDERING THE ORDERS OF THE AO AND LD. C IT (A) ON WHICH RELIANCE HAS BEEN PLACED BY RESPECTIVE PARTY, WE FIND NO INFIRMI TY IN THE FINDING OF LD. CIT (A) AS LD. CIT (A) HAS CONSIDERED PERSON-WISE LOAN TAKEN BY TH E ASSESSEE AND FOUND THAT ASSESSEE HAS DISCHARGED ONUS LAY UPON HIM. THE FINDING OF L D. CIT (A) REMAINED UNCONTROVERTED. THE ISSUE HAS BEEN DISCUSSED BY LD. CIT (A) AT PAGE S 3 TO 7 OF HIS ORDER. ALL THE DETAILS FILED BY ASSESSEE HAVE BEEN DISCUSSED IN DETAIL. T HEREFORE, WE SEE NO REASON TO INTERFERE WITH THE FINDING OF LD. CIT (A). ACCORDINGLY, WE C ONFIRM THE ORDER OF LD. CIT (A). 5. NEXT ISSUE RELATES TO DELETION OF DISALLOWANCE O F INTEREST OF RS. 3,62,662/-. 3 6. THE AO NOTICED THAT ASSESSEE HAS PAID INTEREST @ 18% PER ANNUM AND HAS CHARGED INTEREST ON LESSER AMOUNT. THEREFORE, AO RESTRICTE D THE SAME TO 15% AND MADE DISALLOWANCE OF RS. 1,14,525- ON THIS ACCOUNT. THE AO FURTHER NOTED THAT ASSESSEE HAS NOT CHARGED INTEREST FROM TWO FIRMS I.E. M/S. JAGDI SH PRASAD SURESH CHAND AND M/S. ASHISH UDYOG. ACCORDINGLY INTEREST OF RS. 35,850/- WAS ADDED IN THE COMPUTATION OF INCOME. A FURTHER DISALLOWANCE OF RS. 2,68,046/- W AS MADE IN RESPECT OF DEPOSITS OF VARIOUS AGRICULTURISTS. IN THIS WAY TOTAL DISALLOW ANCE WAS MADE BY AO AT RS. 3,62,66/-. DETAILED WRITTEN SUBMISSIONS WERE FILED BEFORE LD. CIT (A). THE REASON FOR CHARGING INTEREST @ 18% AND NOT CHARGING INTEREST FROM TWO P ARTIES WERE EXPLAINED. IT WAS SUBMITTED THAT THESE PARTIES I.E. M/S. JAGDISH PRAS AD SURESH CHAND AND M/S. ASHISH UDYOG HAVE BUSINESS RELATIONS WITH THE ASSESSEE. TH EREFORE, ON ACCOUNT OF BUSINESS EXPEDIENCY NO INTEREST WAS CHARGED FROM THEM. REGAR DING THE INTEREST PAID TO AGRICULTURISTS, IT WAS SUBMITTED THAT THE AGRICULTU RISTS SELL THEIR PRODUCE THROUGH ASSESSEE AND WHATEVER THE SALE PROCEEDS WERE THERE, THEY WER E REMAINED WITH THE ASSESSEE AND ON THIS AMOUNT THE ASSESSEE HAS PAID INTEREST TO THE R ESPECTIVE FARMERS SO THAT BUSINESS RELATIONS CAN BE MAINTAINED. THE LD. CIT (A) AFTER EXAMINING THE DETAILS FOUND THAT THE AO WAS NOT JUSTIFIED IN MAKING THE ADDITION ON ACCO UNT OF INTEREST PAID TO RELATIVES @ 18% AND ON ACCOUNT OF NON CHARGING OF INTEREST FROM THE TWO PARTIES I.E. M/S. JAGDISH PRASAD SURESH CHAND AND M/S. ASHISH UDYOG. IT WAS NOTED BY LD. CIT (A) THAT INTEREST @ 18% IS NOT UNREASONABLE. AMOUNT OF LOAN WAS TAKE N FOR BUSINESS EXPEDIENCY AND, THEREFORE, INTEREST @ 18% WAS REASONABLY PAID BY TH E ASSESSEE. REGARDING OTHER TWO PARTIES FROM WHOM NO INTEREST WAS CHARGED, THE LD. CIT (A) FOUND THAT THERE WERE COMMERCIAL RELATIONS WITH THESE TWO PARTIES. THEREF ORE, THE ASSESSEE WAS JUSTIFIED IN NOT 4 CHARGING INTEREST. ACCORDINGLY, THE INTEREST ADDE D AT RS. 1,14,525/- AND DISALLOWED AT RS. 35,850/- WAS DELETED BY LD. CIT (A). 7. REGARDING INTEREST PAID TO FARMERS, THE LD. CIT (A) DELETED THIS ADDITION BY OBSERVING THAT IF AO WAS OF THE OPINION THAT THESE PAYMENTS ARE NOT GENUINE, THEN HE SHOULD HAVE MADE ENQUIRY AT LEAST IN FEW CASES AND BROUGHT SOME SPECIFIC MATERIAL ON RECORD. NO SUCH EXERCISE WAS DONE BY THE AO. THERE FORE, DISALLOWANCE OF INTEREST OF INTEREST OF RS. 2,68,046/- IN RESPECT OF DEPOSITS O F VARIOUS AGRICULTURISTS WAS ALSO DELETED BY LD. CIT (A). THE LD. CIT (A) HAS ALSO HELD THAT DEPOSITS MADE BY AGRICULTURISTS WERE HELD AS GENUINE AS NO ADDITION ON ACCOUNT OF DEPOSI T FROM FARMERS WAS MADE BY THE AO. 8. FINDINGS OF LD. CIT (A), IN OUR VIEW ARE FINDING OF FACT, WHICH REMAIN UNCONTROVERTED. THE LD. CIT (A) HAS ASCERTAINED THE FACTUAL ASPECTS AND THEN ONLY HAS DELETED THE DISALLOWANCE OF INTEREST. THE SAME IS CONFIRMED. 9. NEXT ISSUE IS AGAINST RESTRICTING THE ADDITION T O RS. 8434/- OUT OF SHOP EXPENSES. 10. THE AO MADE CERTAIN DISALLOWANCES I.E. ON ACCOU NT OF TELEPHONE EXPENSES, SHOP EXPENSES ETC. @ 20% OF TOTAL EXPENSES. THE LD. CIT (A) CONFIRMED THE DISALLOWANCE ON ACCOUNT OF TELEPHONE EXPENSES AND ON ACCOUNT OF D-M AT EXPENSES. HOWEVER, THE LD. CIT (A) REDUCED THE EXPENSES ON ACCOUNT OF PALLEDARI KH ARCH. THE SAME WAS RESTRICTED @ 20% WHICH IS EQUAL TO RS. 8434/- AGAINST DISALLOWAN CE OF RS. 42,168/-. 11. AFTER CONSIDERING THE ORDERS OF AO AND LD. CIT (A), WE SEE NO UNREASONABLENESS IN THE FINDING OF LD. CIT (A) IN RESTRICTING THE DI SALLOWANCE. ON ACCOUNT OF PALLEDARI KHARCH, ADHOC DISALLOWANCE WAS MADE BY AO AND LD. C IT (A) HAS REDUCED TO THE EXTENT OF 20%. THEREFORE, WE CONFIRM THE ORDER OF LD. CIT (A) ON THIS ISSUE ALSO. 5 12. NEXT ISSUE RELATES TO DELETING THE TRADING ADDI TION OF RS. 7,000/- ON ACCOUNT OF VALUATION OF CLOSING STOCK OF BARDANA. 13. THE AO AFTER EXAMINING THE DETAILS OF BARDANA F OUND THAT THE ASSESSEE HAS TAKEN DIFFERENT STOCK VALUATION ON DIFFERENT ITEMS. IN H IS VIEW THE VALUE SHOULD BE OF RS. 35,000/- WHEREAS ASSESSEE HAS SHOWN RS. 28,000-. AC CORDINGLY HE MADE AN ADDITION OF RS. 7,000/-. IT WAS SUBMITTED BEFORE LD. CIT (A) T HAT ASSESSEE DERIVES INCOME FROM AGRICULTURAL PRODUCE AND AS COMMISSION AGENT. COMP LETE QUANTITATIVE TALLY OF ITEMS TRADED ARE BEING MAINTAINED ON DAY TO DAY BASIS AND VERIFIED BY THE AO. NO DEFECTS IN BOOKS OF ACCOUNT OR TRADING ACTIVITIES WERE FOUND E XCEPT IN CASE OF GUNNY BAGS WHERE THE AO CHALLENGED THE VALUATION OF GUNNY BAGS. THE ASSE SSEE HAS TAKEN THE VALUATION ON THE BASIS OF PURCHASE PRICE OR COST PRICE WHICHEVER IS LOWER AND, THEREFORE, THERE WAS NO QUESTION OF MAKING ANY TRADING ADDITION. THE CONTE NTION OF THE ASSESSEE WAS NOT FOUND UNREASONABLE. THEREFORE, THE LD. CIT (A) DELETED TH E ADDITION. 14. AFTER CONSIDERING THE ORDERS OF THE AO AND LD. CIT (A), AGAIN WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT (A) AS ALL THE DETAILS WERE MAINTAINED BY THE ASSESSEE. CERTAIN VALUATION OF GUNNY BAGS WERE SHOWN ON LOWER SIDE AS THERE IS WEAR AND TEAR OF GUNNY BAGS WHICH REDUCES THEIR VALUE. THEREFORE, THE LD. CIT (A) WAS REASONABLE IN DELETING THIS ADDITION ALSO. ACCORDINGLY, WE CONFIRM THE ORDER O F LD. CIT (A). 15. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISM ISSED. 16. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 19 .8.2011. SD/- SD/- ( N.L. KALRA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR, 6 D/ COPY FORWARDED TO :- THE ITO WARD-2, SAWAI MADHOPUR. SHRI PRAHLAD CHAND METHI, NAI MANDI, GANGAPUR CITY. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 199/JP/2011) BY ORDER, AR ITAT JAIPUR.