Jagdeesh Prasad Saraf, CHAMPA (CG) V. Assistant Commissioner of Income-tax Circle-2(1), BILASPUR(CG)

ITA 202/BIL/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1525 (ITAT-RAIPUR)
• Duration Of Justice: 3 year(s) 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 04-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: H M MOHARANA
• Assessee Lawyers: G S AGARWAL
• Keywords: Depreciation
• Section: 44AD; 143(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BEFORE SHRI SHAMIM YAHYA (AM) & SHRI PARTHA SARATHI CHAUDHURY (JM) I.T.A. NO.202/BL PR /201 2 ASSESSMENT YEAR : 2006 - 07 JAGDEESH PRASAD SARAF, PROP. M/S. ARJUNLAL RAM KUMAR SARAF, SAKTI DIST: JANJGIR - CHAMPA, CHAMPA V S ACIT, CIRCLE 2(1), AAYAKAR BHAVAN, VYAPAR VIHAR, BILASPUR PAN/GIR NO. : ADLPA 9308 F (APPELLANT ) .. RESPONDENT APPELLANT BY : SHRI G.S.AGARWAL RESPONDENT BY : SHRI H.M.MOHARANA DATE OF HEARING : 1 9 - 04 - 2016 DATE OF PRONOUNCEMENT : 21 - 4 - 2016 O R D E R PER PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER: THIS IS AN APPEAL FILED BY THE REVENUE ARISING FROM TH E ORDER OF THE LD CIT(A), BILASPU R , DATED 12.6.2012, FOR THE ASSESSMENT YEAR 2006 - 07, IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE ACT. 2. GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, ORDER IS BAD IN LAW AS WELL AS ON FACTS. 2 . THE INCOME FROM THE TRADING ACCOUNT UNDER 44AF IS RS. 1,04,096.38 INSTEAD OF RS. 1,05,531/ - ASSESSED BY A.O. IN VIEW OF THE WORKING SUBMITTED OF RE - COSTED PROFIT & LOSS ACCOUNT. 3. THAT AFTER HAVING ASSESSED THE INCOME UNDER SECTION 44AF AND INCO ME FROM JOB WORK AT RS. 20,000/ - AS AGAINST THE INCOME OF RS. 17,081/ - , THE FURTHER ADDITIONS MADE BY DISALLOWING THE EXPENSES OUT OF 2 I.T.A. NO.202/BLPR/2012 ASSESSMENT YEAR : 2006 - 07 I) SALARY : RS.42,780.00 II) SHOP EXPENSES RS. 6 7,706 III) ELECTRICITY EXPENSES RS. 4,821.00 IV) TELEPHONE EXP. RS. 2,501.00 MAKING TOTAL DISALLOWANCE 57,808 IS ARBITRARY AND WITHOUT BASIS. THE ADDITION CONFIRMED BY LD CIT(A) IS UNJUSTIFIED. 4. THAT THE DISALLOWANCE OF THE LOSS AS PER THE RE - COSTED GIRVI ACCOUNT AMOUNTING TO RS. 59,618/ - CONFIRMED BY LEARNED CIT(A) IS ARBITRARY AND WITHOUT BASIS. DISALLOWANCE IS LIABLE TO BE QUASHED. 3. FACTS IN BRIEF AS EMERGED FROM THE IMPUGNED ORDER OF LD CIT(A) WERE THAT THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN TRADING IN GOLD AND SILVER ORNAMENTS, JOB WORKS AND PAWNING BUSINES S THROUGH HIS PROPRIETORSHIP CONCERN M/S. ARJUNLAL RAM KUMAR SARAF. SAKTI. SURVEY U/S 133A WAS CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE ON 17 - 01 - 2006 AND EXCESS STOCK OF GOLD AND SILVER JEWELLERY ALONGWITH EXCESS CASH AND THE COST OF PIECE - OF MARUTI STATUE TOTALING TO RS, 10.08.316/ - FOUND IN COURSE OF SURVEY WAS SURR ENDERED AS INCOME OF THE YEAR AND ACCORDINGLY, THE ASSESSEE FILED RETURN OF INCOME AT RS. 11,34,160/ - BEFORE DEDUCTION UNDER CHAPTER VIA OF THE ACT WHICH INCLUDES INCOME O F RS .10,08 .8,315 / - SURRENDERED AT THE TIME OF SURVEY AND INCOME RS. 1.05.591/ - DERIVED FROM TRADING IN ORNAMENTS, REPAIR WORKS AND PAWNING BUSINESS, BESIDES INTEREST FROM NSCS OF RS. 20,310/ - . THE INCOME FROM BUSINESS HAS BEEN DISCLOSED AS PER PROVISIONS O F 44AF OF THE ACT. THE INCOME FROM REPAIR WORKS OF GOLD AND SILVER ORNAMENTS AND PAWNING BUSINESS ARE BEYOND THE PURVIEW OF THE PROVISION U/S.44AF. THE AO NOTICED THAT DETAILS OF EXPENSES ON AFORESAID BUSINESS WITH DOCUMENTARY PROOF ARE NOT AVAILABLE WI TH THE ASSESSEE. FURTHER, THE AO OBSERVED THAT THE ASSESSEE HAS DISCLOSED THE INCOME FROM THREE 3 I.T.A. NO.202/BLPR/2012 ASSESSMENT YEAR : 2006 - 07 DIFFERENT SOURCES BY PREPARING CONSOLIDATED P&L A/C AND EXPENSES PERTAINING TO MAIN BUSINESS OF THE ASSESSEE WERE DIVERTED TOWARDS OTHER TWO BUSINESSES TO REDUC E THE PROFIT INCIDENCE. ACCORDINGLY, HE DISALLOWED RS. 42,780/ - . RS. 7706/ - , RS. 4821/ - , RS. 2500/ - TOWARDS SALARY, SHOP EXPENSES, ELECTRICITY EXPENSES, TELEPHONE EXPENSES ATTRIBUTABLE TO THE TRADING ACTIVITIES ON GOLD AND SILVER ORNAMENTS OUT OF WHOLE EXP ENSES UNDER THESE HEADS BOOKED IN JOB WORKS ACCOUNT. SIMILARLY, HE DISALLOWED RS. 59,618/ - OUT OF THE LOSS CLAIMED ON PAWING BUSINESS . THAT APART, HE MADE AN ADDITION OF RS. 15,000/ - TOWARDS LOW DRAWINGS FOR HOUSEHOLD EXPENSES AND RS. 20,000/ - TOWARDS UNDE RSTATEMENT OF INCOME FROM REPAIR WORKS/JOB WORKS. THUS, THE RETURNED INCOME WAS ASSESSED AT RS. 12,86,582/ - BEFORE DEDUCTION OF RS. 1,00,000/ - UNDER CHAPTER VIA. 4. BEFORE LD CIT(A), THE ASSESSEE SUBMITTED TRADING ACCOUNT ALONGWITH THE RETURN OF INCOME, PR OFIT AND LOSS ACCOUNT, WHICH WERE SUBMITTED BEFORE THE AO. IT WAS SUBMITTED THAT THE EXPENSES WHICH ARE DIRECTLY RELATED TO THE JOB WORK ACCOUNTS, SALES TAX, WHICH ARE CONCERNED WITH THE TRADING WAS ALLOCATED/CHARGED TO THE TRADING ACCOUNT. THE OT HER EXPENSES, NAMELY SHOP EXPENE S, BANK CHARGES, DEPRECIATION , TELEPHONE AND ELECTRICITY EXPENSES HAVE BEEN APPORTIONED ON PRO - RATA BASIS CONSIDERING THE SALES IN THE TRADING ACCOUNT, LABOUR CHARGES RE C EIVED IN THE JOB WORK ACCOUNT AND THE ADVANCE GIVEN IN GIRVI ACCOUNT. HE SUBMITTED THE INCOME IN EACH THREE ACTIVITIES AS PER THE RECASTED TRADING AND PROFIT AND LOSS ACCOUNT, AS UNDER: I) INCOME FROM TRADING OF GOLD/SILVER ORNAMENTS - RS.1,04,096.38 RETAIL BUSINESS, SALES RS.17,06,917/ - , INCOME OFFERED U/S.44AF II) JOB WORK - RS. 61,049..00 RS.1,65,145.38 4 I.T.A. NO.202/BLPR/2012 ASSESSMENT YEAR : 2006 - 07 III) LESS : LOSS IN GIRVI RS. 59,618.00 RS.1,05,526.38 SO FAR AS INTEREST PAID IS CONCERNED, IT RELATES TO THE TRADING AND GIRVI ACCOUNT, AS SUCH IT WAS APPO RTIONED BETWEEN THE TRADING AND GIRVI ACCOUNT. THE DETAILED WORKING WAS ALSO SUBMITTED AT THE TIME OF ASSESSMENT. AFTER ALLOCATION/APPORTIONMENT, THE NET RESULT OF TRADING WORKS OUT TO RS.1,04,096.38 IN RETAIL TRADE WHICH IS MORE THAN 5% OF THE SALES/TU RNOVER OF SILVER/GOLD ORNAMENTS AND SATISFIES ALL THE TERMS AND CONDITIONS OF THE PROVISIONS OF SECTION 44AF OF THE ACT. IT WAS SUBMITTED THAT THE DIRECT EXPENSES INCURRED IN THE RESPECTIVE ACCOUNTS HAS BEEN CHARGED THROUGH ACTIVITY WISE ACCOUNT WHEREAS T HE PROFIT AND LOSS ACCOUNT HAS BEEN PREPARED CONSIDERING THE G.P. FROM ALL THESE THREE ACTIVITIES OF THE ACCOUNTS, WHEREIN, THE COMMON EXPENSES INCURRED IN THE BUSINESS ARE APPEARING IN THE PROFIT AND LOSS ACCOUNT. 5. WITH REGARD TO THE INCOME ASSESSED U/ S.44AF OF THE ACT I.E. INCOME FROM JOB WORK OF RS.20,000/ - AS AGAINST INCOME OF RS.17,081/ - , FURTHER ADDITION MADE BY THE AO DISALLOWING EXPENSES OUT OF SALARY OF RS.42,780/ - , SHOP EXPENSES OF RS.7,706/ - , ELECTRICITY EXPENSES OF RS.4,821/ - AND TELEPHONE EX PENSES OF RS.2,501/ - ,, LD A.R. SUBMITTED THAT THE SAME IS WITHOUT ANY BASIS. 6. REGARDING ADDITION IN RESPECT OF SALARY IS CONCERNED, THE ASSESSEE STATED THAT THE SALARY APPEARING IN JOB WORK ACCOUNT CONSIST OF PAYMENT TO THE GOLDSMITH, AS SUCH IT IS THE EXPENSES WHICH ARE DIRECTLY CONCERNED WITH MAKING CHARGES I.E. JOB WORK, AS THE S AME HAS BEEN DEBITED TO THE JOB WORK ACCOUNT. BUT THE AO HAS WRONGLY CONSIDERED THE SAME AS IT IS ATTRIBUTABLE TO THE TRADING ACCOUNT, THE SALARY TO 5 I.T.A. NO.202/BLPR/2012 ASSESSMENT YEAR : 2006 - 07 THE GOLDSMITH ARE NOT ATTRIBUTABLE TO THE TRADING ACTIVITY AND THE INCOME SHOWN IS MORE THAN 5%. SO FAR A S THE SHOP EXPENSES AMOUNTING TO RS.24 , 860/ - , ELECTRICITY EXPENSES AMOUNTING TO RS. 15,553/ - AND TELEPHONE EXPENSES OF RS.6,814/ - APPEARING IN THE JOB WORK ARE CONCERNED, THE A.O. WAS OF THE VIEW THAT THESE EXPENSE S ALSO RELATE TO THE TRADING AND GIRVI AC TIVITY. AS PER RECASTED PROFIT AND LOSS ACCOUNT , THE SHOP EXPENSES, ELECTRICITY AND TELEPHONE EXPENSES WERE APPORTIONED ON PRO - RATA BASIS, CONSIDERING THE SALES AN D TRADING ACCOUNT, THE GROSS LABOUR CHARGES RECEIVED I N THE JOB WORK ACCOUNT AND GROSS ADVANC E GIVEN IN THE GIRVI ACCOUNT, THE EXPENSES IN TH E TRADING ACTIVITY ON THIS ACCOUNT WAS WORKED OUT TO RS, 16,888/ - WHICH WAS CHARGED TO THE TRADING ACTIVITY. AFTER APPORTIONMENT OF THESE EXPENSES TOWARD S TRADING ACTIVITY THE NET PROFIT WORKS OUT TO RS. 1,04 ,096.38 WHICH IS MUCH MORE THAN 5% AS ENUMERATED U/S 44AF OF THE INCOME TAX ACT. AFTER CONSIDERING THESE SUBMISSION S, THE A.O. HAS AGAIN MADE ADDITIONS UNDER THE FOLLOWING HEADS BEING ATTRIBUTABLE TO TRADING ACTIVITY: - SHOP EXPENSES : RS.7,706/ - ELECT RICITY EXPENSES : RS.4,821/ - TELEPHONE EXPENSES : RS.2500/ - THE A.O. HAS MADE THE ADDITION TWICE, ONCE IT HAS BEEN CONSIDERED IN A RECASTED TRADING ACCOUNT AT RS. 16,888/ - AND THE ADDITION AGAIN AT RS. 15.207/ - , AS THE EXPENSES HAVE ALREADY BEEN CONSID ERED WHILE OFFERING THE INCOME FROM TRADING ACTIVITY. THE AMOUNT WHICH HAS ALREADY BEEN APPORTIONED TO TRADING ACTIVITY CANNOT BE CONSIDERED AGAIN , WHICH AMOUNTS TO DOUBLE ADDITION. 7. AS REGARDS LOSS OF RS.59,618/ - , THE ASSESSEE STATED THAT THE ASSESSEE ASSESSEE HAS GOT THREE BUSINESS ACTIVITIES IN AS MUCH AS TRADING OF GOLD AND SILVER 6 I.T.A. NO.202/BLPR/2012 ASSESSMENT YEAR : 2006 - 07 ORNAMENTS, JOB WORK AND GIRVI (MONEY - LENDING) BUSINESS. THE ACCOUNTS ARE PREPARED SEPARATELY IN EAC H BUSINESS ACTIVITY. THE RECEIPTS/INCOME OF THE INTEREST IS ACCOUNTED FOR ON THE BASIS OF RELEASE OF ARTICLES WHEREAS THE EXPENSES ARE INCURRED CONSIDERING THE ADVANCES DURING THE YEAR. THE PROFIT IS HIGHER IN THE YEAR WHEREIN RELEASE OF ARTICLES IS MORE TO ADVANCES. AS AGAINST THE RELEASE OF ARTICLES TO THE TUNE OF RS. 28,00,520/ - IN THE GIRVI ACCOUNT, THERE ARE ADVANCES TO THE TUNE OF RS. 34,59,784/ - DURING THE YEAR UNDER REVIEW. CONSEQUENTLY, TH E RECEIPTS/INCOME WERE LESS AND THE EXPENSES ON ACCOUNT OF THE INTEREST ON THE DEPOSITS/BORROWED AMOUNT WILL BE MORE. THIS HAS RESULTED IN THE NET LOSS UNDER THIS HEAD. THE DETAILS OF INTEREST EARNED AND PAID HAVE BEEN FILED AS ALSO THE EXPENSES ALLOCATE D ON PRORATA BASIS I.E. TURNOVER BASIS , THE NET RESULT UNDER THIS HEAD WORKS OUT TO THE LOSS OF RS.59,618.60. 8. THE LD CIT(A) IN HIS ORDER HELD THAT VARIOUS OPPORTUNITIES DURING THE COURSE OF APPELLATE PROCEEDINGS WERE GIVEN TO JUSTIFY WITH COGENT EXPLA NATION AS WELL AS TO PRODUCE COGENT EVIDENCE ABOUT PAYMENT OF WAGES AND OTHER EXPENSES BOOKED TO THE JOB WORKS A/C. . IN ABSENCE OF ANY REPLY IN THE GIVEN FACTS AND CIRCUMSTANCES, HE OBSERVED THAT THE MAIN BUSINESS OF TRADING IN ORNAMENTS IS RUN FROM PR EMISES LOCATED AT STATION ROAD, SAKTI AND OTHER TWO BUSINESS ARE RUN FROM THE MAIN BUSINESS PREMISES. BUT, ALL THE EXPENSES INCLUDING SALARY OF RS.1,38,000/ - PAID TO SHRI GOPAL SARAF AND SHRI RAJESH SARAF FOR LOOKING AFTER THE SALES OF ORNAMENTS, ELECTRIC ITY CHARGES PAID FOR THE SHOP HAVE BEEN DIVERTED TO JOB WORKS A/C. TO REDUCE THE INCOME FROM JOB WORKS AND PAWNING BUSINESS.. EVEN THE NET PROFIT TRADING IN GOLD AND SILVER ORNAMENT IS NOT PROPERLY ASCERTAINABLE IN THE GIVEN STATE OF AFFAIRS. THE METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE IN CLUBBING INCOME/LOSS FROM PAWNING BUSINESS AND JOB WORK WITH THE INCOME FROM TRADING ACTIVITIES ON GOLD AND 7 I.T.A. NO.202/BLPR/2012 ASSESSMENT YEAR : 2006 - 07 SILVER ORNAMENTS AND THEN JUSTIFYING THE NET INCOME BY RESORTING TO THE PROVISION U/S.44AF IS NOT A CORREC T METHOD ACCEPTABLE TO THE REVENUE AS WELL. IN VIEW OF ABOVE DISCUSSION, LD CIT(A) HELD THAT THE AO WAS JUSTIFIED IN MAKING VARIOUS ADDITIONS ON MISAPPROPRIATION OF EXPENSES. AGAINST THE CONFIRMATION OF ABOVE ADDITIONS BY LD CIT(A), THE ASSESSEE IS IN FU RTHER APPEAL BEFORE US. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE VARIOUS RECORDS PLACED BEFORE US. 10. LD A.R. DID NOT PRESS GROUND NO.2, WHICH IS HEREBY DISMIS SED AS NOT PRESSED. GROUND NO.1 IS GENERAL. 11. AS REGARDS TO GROUND NO. 3 AND 4, B EFORE US, LD A.R. HAS SUBMITTED A PAPER BOOK, CONSISTING OF COMPILATION OF TRADING RESULTS VIS - - VIS RECASTED/PROFIT AND LOSS ACCOUNT/ASSESSED AS UNDER: SL. NO. PARTICULARS GROSS PROFIT/RECEIPTS INCOME AS PER RECASTED TRADING & P/L A/C. INCOME ASSESSED BY AO ADDED BY AO (DIFFERENCE) 1. 2. 3. 4. 5. 6 1. TRADING A/C. GOLD/SILVER ORNAMENTS 2,45,115 1,04,096 1,05,537 (+) 1451 2. JOB WORK 3,06,094 61049 77,907 (+)16,858 3. GIRVI 1,89,679 ( - )59,618 (+)59,618 (+)1,19,236 TOTAL 1,05,526 (+)1,37,535 AT THE SAME TIME, IN ALTERNATIVE, THE ASSESSEE HAS ALSO PRODUCED BEFORE US THE FOLLOWING CHART WHERE, HE HAS ACCEPTED THE ADDITION UPTO RS.19,541/ - AS UNDER: 8 I.T.A. NO.202/BLPR/2012 ASSESSMENT YEAR : 2006 - 07 SL.NO PARTICULARS AMOUNT ( RS ) 5% AS PER 44AF (RS.) 8% AS PER 44AD (RS.) 1. 2. RETAIL SALE JOB WORK GIRVI 17,06,917/ - 3,06,094/ - 1,89,679/ - 83,345/ - 24,553/ - 15,174/ - 85,345/ - 39,727/ - TOTAL .... RS. 85,345+RS. 39,727 = RS. 1,25,072/ - ... AS PER APPELLANT: RS. 1,05,531/ - ADDITION: RS. 19,541/ - 12 . WHEN CONFRONTED WITH LD D.R. ABOUT THE CHART AND THE ADDITION OF RS.19,541 / - ACCEPTABLE THE ASSESSEE, FOR RETAIL SALE, JOB WORK AND GIRVI UPTO RS.19,541/ - , LD D.R. WOULD HAVE NO OBJECTION THERETO, EXCEPT RELYING ON THE ORDERS OF AUTHORITIES BELOW. AFTER CAREFULLY PERUSING THE ORDERS OF LD CIT(A) AS WELL AS THE SUBMISSIONS OF TH E ASSESSEE AND ALSO THE NO - OBJECTION BY LD D.R. TO THE ADDITION ACCEPTABLE TO THE ASSESSEE, WE ARE OF THE CONSIDERED VIEW THAT IN THE INTEREST OF JUSTICE, WHATEVER ADDITION THAT THE ASSESSEE HAS ACCEPTED I.E. RS.19,541/ - IS FAIR IN THIS CASE. ACCORDINGLY, THE AO IS DIRECTED TO RE - COMPUTE THE INCOME OF THE ASSESSEE ACCORDINGLY. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED I N THE OPEN COURT ON 21/ 4/2016 . SD/ - SD/ - (SHAMIM YAHYA) (PARTHASARATHI CHAUDHURY) ACCOUNTANT MEMBER JUDICIAL MEMBER R AIPUR, DATED 21 / 0 4 /2016 9 I.T.A. NO.202/BLPR/2012 ASSESSMENT YEAR : 2006 - 07 PARIDA , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. HE APPELLANT : JAGDEESH PRASAD SARAF, PROP. M/S. ARJUNLAL RAM KUMAR SARAF, SAKTI DIST: JANJGIR - CHAMPA, CHAMPA 2. THE RESPONDENT: : ACIT, CIRCLE 2(1), AAYAKAR BHAVAN, VYAPAR VIHAR, BILASPUR 3. THE CIT(A) - BILASPUR 4. CIT , BILASPUR 5. DR, ITAT, RAIPUR 6. GUARD FILE. BY ORDER, //TRUE COPY// ASST.REGISTRAR, ITAT, RAIPUR