DCIT, Jabalpur V. Smt. Kajal Bhagchandani, Jabalpur

ITA 23/JAB/2010

• Counselvise Citation: 2322914 RSA 2010
• Duration Of Justice: 3 year(s) 11 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 08-06-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 16-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K UPADHYAY
• Keywords: Unexplained cash credit; Unexplained expenditure; Depreciation; Income from undisclosed sources
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, JABALPUR BENCH, JABALPUR BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER ITA NO. 23/JAB./2010 ASST. YEAR : 2006-07 D.C.I.T., CIRCLE 1(1), VS. SMT. KAJAL BHAGCHANDA NI, JABALPUR. HIG-II, ANAND NAGAR, ADHARTAL, JABALPUR. (PAN- ADDBP 3272 B) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.K. UPADHYAY, D.R. RESPONDENT BY : SHRI VIJAY GUPTA, C.A. DATE OF HEARING : 24.03.2014 DATE OF PRONOUNCEMENT : 27. 03.2014 ORDER PER BHAVNESH SAINI, J.M.: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD. CIT(A)-I, JABALPUR DATED 17.12.2009 FOR THE ASSESSMENT YEAR 2 006-07. 2. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH TH E PARTIES AND PERUSED THE FINDINGS OF THE AUTHORITIES BELOW. 3. THE REVENUE HAS RAISED THE ADDITIONAL GROUND OF APPEAL STATING THEREIN THAT THE LD. CIT(A) HAS ERRED IN ADMITTING THE ADDITIONA L EVIDENCE BY WAY OF AFFIDAVITS AS REFERRED TO AT PAGE 2 OF THE APPELLATE ORDER IN VIOLATION OF RULE 46A OF THE IT ITA NO. 23/JAB./2010 2 RULES. THE LD. CIT(A) NOTED IN THE IMPUGNED ORDER T HAT ASSESSMENT WAS FRAMED EXPARTE U/S. 144 OF THE IT ACT AND ASSESSEE WAS ASK ED TO EXPLAIN AS TO WHY HE REMAINED ABSENT ON THE DATE OF HEARING AND WHAT WAS THE CAUSE FOR THE SAME. THE ASSESSEE FILED AFFIDAVIT EXPLAINING THEREIN THAT HE R HUSBAND APPEARED BEFORE THE AO, BUT HE WAS DENIED RIGHT OF HEARING AS HE WAS NO T HAVING AUTHORITY LETTER. IT WAS ALSO STATED THAT THE MATTER WAS BROUGHT TO THE KNOW LEDGE OF THEIR COUNSEL, WHO IN TURN INFORMED THAT BECAUSE OF HIS WIFES SERIOUS IL LNESS, HE WAS NOT IN A POSITION TO APPEAR ON THE DATE OF HEARING. THEREFORE, HUSBAND O F THE ASSESSEE APPEARED BEFORE THE AO. IT WAS SUBMITTED THAT ALL RELEVANT DOCUMENT S AND BOOKS OF ACCOUNT WERE PRODUCED BEFORE THE AO, BUT NO COGNIZANCE OF THE SA ME WAS TAKEN. THE LD. CIT(A) NOTED THAT SINCE NO BOOKS OF ACCOUNT AND VOUCHERS W ERE EXAMINED, THEREFORE, THE ASSESSEE WAS ASKED TO PRODUCE THE SAME IN THE APPEL LATE PROCEEDINGS ITSELF, SO THAT THE APPEAL COULD BE DECIDED ON MERITS. NOTHING MUCH IS CONTRIBUTED ON THIS ADDITIONAL GROUND OF APPEAL BY THE REVENUE. RULE 46 A(4) OF THE IT RULES HAS PROVIDED THE POWER TO THE LD. CIT(A) TO DIRECT THE PRODUCTION OF ANY DOCUMENT OR EXAMINATION OF ANY WITNESS TO ENABLE HIM TO DISPOSE OF THE APPEAL OR FOR SUBSTANTIAL CAUSE ON HIS OWN MOTION IN THIS REGARD. THUS, RULE 46A(4) IS EXCEPTION TO THE RULE AND HAS PROVIDED POWER TO THE LD. CIT(A) TO DIRECT PRODUCTION OF ANY DOCUMENT OR EXAMINATION OF ANY WITNESS SO AS TO DISPOSE OF AN A PPEAL IN ACCORDANCE WITH LAW. THE LD. CIT(A) WAS SATISFIED IN THIS CASE WITH THE AFFIDAVIT OF THE ASSESSEE AND DIRECTED THE ASSESSEE TO PRODUCE THE BOOKS OF ACCOU NT AND VOUCHERS SO THAT THE ITA NO. 23/JAB./2010 3 APPEAL COULD BE DECIDED ON MERITS. THUS, THERE IS N O VIOLATION OF RULE 46A IN THE MATTER BECAUSE WHEN THE LD. CIT(A) EXERCISED ITS PO WERS UNDER RULE 46A(4) OF THE IT ACT AND EXAMINED THE BOOKS OF ACCOUNT AND VOUCHE RS HIMSELF AT APPELLATE STAGE, NOTHING SURVIVES IN FAVOUR OF THE REVENUE. THE ADDI TIONAL GROUND IS, ACCORDINGLY DISMISSED. 4. ON GROUND NO. 1, THE REVENUE CHALLENGED THE DELE TION OF ADDITION OF RS.36.81 LACS MADE ON ACCOUNT OF INCOME FROM UNDISC LOSED SOURCES. THE AO OBSERVED THAT ACCORDING TO TDS CERTIFICATES, TOTAL RECEIPTS WERE OF RS.93,12,364/- WHEREAS IN THE PROFIT AND LOSS ACCOUNT THE ASSESSEE HAS SHOWN THE RECEIPTS TO THE EXTENT OF RS.1,27,60,023/-. THE AO HELD THAT DIFFER ENCE OF RS.36,81,032/- WAS ASSESSEES INCOME FROM UNDISCLOSED SOURCES AND ADDE D THE SAME TO THE INCOME OF THE ASSESSEE. IT WAS CONTENDED BEFORE THE LD. CIT(A ) THAT THERE HAS BEEN NO UNEXPLAINED CREDIT AS PRESUMED BY THE AO BECAUSE TH E TOTAL RECEIPTS OF RS.1.27 CRORES WAS RECORDED IN THE PROFIT AND LOSS ACCOUNT. THE DIFFERENCE WAS DUE TO THE FACT THAT THE TDS HAS BEEN DEDUCTED BY THE CONSIGNO R ON RS.93,13,364/- AND ON THE REMAINING AMOUNT OF RS.36,81,032/-, NO TDS WAS DEDU CTED. THE LD. CIT(A) FOUND THE CONTENTION OF THE ASSESSEE TO BE CORRECT BECAUS E THE ENTIRE RECEIPTS HAVE BEEN RECORDED IN THE BOOKS OF ACCOUNT AND DECLARED BY TH E ASSESSEE. THE TOTAL RECEIPTS WERE OFFERED FOR MORE AMOUNTS. THEREFORE, THERE IS NO INCOME FROM UNDISCLOSED SOURCES. THE ADDITION WAS ACCORDINGLY DELETED. ITA NO. 23/JAB./2010 4 5. ON CONSIDERATION OF RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT THE ADDITION HAS BEEN RIGHTLY DELETED BY THE LD. CIT(A). THE ASS ESSEE HAS SHOWN MORE RECEIPTS IN THE PROFIT AND LOSS ACCOUNT, ON WHICH THE TAXES HAVE ALSO BEEN PAID. TOTAL RECEIPTS WERE BIFURCATED INTO TWO AMOUNTS, ON WHICH EITHER TDS WAS DEDUCTED OR NO TDS WAS DEDUCTED BY THE CONSIGNOR. THE FACTS HAV E BEEN CORRECTLY APPRECIATED BY THE LD. CIT(A) FOR DELETING THE ADDITION. ACCORD INGLY, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 6. ON GROUND NO.2, THE REVENUE CHALLENGED THE DELET ION OF ADDITION OF RS.88,796/- ON ACCOUNT OF UNEXPLAINED EXPENDITURE A ND DEPRECIATION. THE AO OBSERVED THAT THE ASSESSEE HAD NOT FURNISHED ANY EX PLANATION REGARDING ADDITION OF RS.63,650/- IN FIXED ASSETS. HE, THEREFORE, CONCLUD ED THAT IT WAS ASSESSEES UNEXPLAINED EXPENDITURE. HE, ACCORDINGLY, DENIED DE PRECIATION OF RS.25,146/- CLAIMED ON SUCH ASSETS AND MADE ADDITION OF RS.88,7 96/-. THE ASSESSEE CONTENDED THAT THE ADDITION TO THE ASSETS IN THE ABOVE AMOUNT WAS MADE IN THIS YEAR, FOR WHICH VOUCHERS ARE AVAILABLE AND SINCE IT WAS USED FOR TH E PART OF THE YEAR, THEREFORE, PART DEPRECIATION WAS CLAIMED. THE BILL OF THE ASSET WAS PRODUCED BEFORE THE LD. CIT(A) TO PROVE THAT THE ASSET WAS PURCHASED AND USED FOR THE PURPOSE OF BUSINESS. ACCORDINGLY, THE ADDITION WAS DELETED. ITA NO. 23/JAB./2010 5 7. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. THE LD. CIT(A) ON EXAMINATION OF THE BILL AND VOUCHERS RIGHTLY HELD THAT THE ASSESSEE MADE ADDITI ON TO THE ASSETS ON WHICH DEPRECIATION HAS BEEN CORRECTLY CLAIMED. IN THE ABS ENCE OF ANY EVIDENCE ON RECORD CONTRARY TO THE FINDINGS OF THE LD. CIT(A), WE DO N OT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. SAME IS ACCORDINGLY DISMI SSED. 8. ON GROUND NO. 3, THE REVENUE CHALLENGED THE DELE TION OF ADDITION OF RS.24.04 LACS ON ACCOUNT OF DISALLOWANCE U/S. 40(A) (IA) OF THE IT ACT. THE AO OBSERVED THAT THE ASSESSEE HAS REFLECTED SUNDRY CRE DITORS OF RS.25,47,199/- WHICH COULD BE ONLY CONTRACTUAL IN NATURE. ACCORDING TO T HE AO THE BUSINESS OF ASSESSEE WAS OF TRANSPORTATION. ALL THESE CREDITS WERE UNDOU BTEDLY SERVICES OBTAINED BY THE ASSESSEE FROM VARIOUS PARTIES AS LISTED IN SCHEDULE B TO THE BALANCE SHEET. ON EXAMINATION OF SCHEDULE B, IT WAS FOUND THAT THERE WERE CERTAIN PAYMENTS/CREDITS IN SEVEN INSTANCES AMOUNTING TO RS.24,08,842/- THAT W ERE ABOVE THE LIMIT PRESCRIBED U/S. 194C. THE AO HELD THAT SINCE THE AMOUNT TO THE ABOVE EXTENT HAD BEEN PAID/CREDITED BY THE ASSESSEE TO THE PARTIES, THERE FORE, WAS LIABLE TO TDS U/S.194C AND ACCORDINGLY THE SAME WERE DISALLOWED U/S. 40(A) (IA) OF THE IT ACT. THE ADDITION WAS CHALLENGED BEFORE THE LD. CIT(A) AND IT WAS CON TENDED THAT THE CREDITORS SHOWN IN THE BALANCE SHEET WERE THOSE PARTIES, WHO HAD MADE PAYMENTS ON BEHALF OF THE ASSESSEE. THE ASSESSEE DID NOT HAVE ANY KIND OF CONTRACT OR SUB-CONTRACT ITA NO. 23/JAB./2010 6 EITHER IN WRITING OR ORAL. THE PARTIES HAD ONLY MAD E THE PAYMENTS ON BEHALF OF THE ASSESSEE. THE ASSESSEE HAD NOT CLAIMED ANY EXPENDIT URE ON BEHALF OF THE SERVICES TAKEN FROM THESE PARTIES. THEREFORE, THE PROVISIONS OF SECTION 40(A)(IA) WOULD NOT APPLY. THE LD. CIT(A) FOUND THE CONTENTION OF THE A SSESSEE TO BE CORRECT. IT WAS FOUND THAT THE CREDITORS APPEARING IN THE BALANCE S HEET WERE THOSE PARTIES, WHO HAD MADE PAYMENTS ON BEHALF OF THE ASSESSEE. THE ASSESS EE, THEREFORE, DID NOT HAVE ANY KIND OF CONTRACT OR SUB-CONTRACT EITHER IN WRITING OR ORAL. FURTHER, THE ASSESSEE HAD NOT CLAIMED ANY EXPENDITURE IN LIEU OF SERVICES TAK EN FROM THEM. THEREFORE, THE ABOVE TDS PROVISIONS WOULD NOT APPLY. THE ADDITION WAS ACCORDINGLY DELETED. 9. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE AR E OF THE VIEW THAT THE ADDITION HAS BEEN RIGHTLY DELETED BY THE LD. CIT(A) . THE LD. DR MERELY RELIED UPON THE ORDER OF THE AO WITHOUT POINTING OUT ANY INFIRM ITY IN THE ORDER OF THE LD. CIT(A). THE LD. CIT(A) HAS GIVEN SPECIFIC FINDING O F FACT THAT THE PARTIES REFLECTED IN THE BALANCE SHEET HAVE MADE PAYMENTS ON BEHALF O F THE ASSESSEE AND THERE IS NO CONTRACT OR SUB-CONTRACT BETWEEN THE ASSESSEE AND T HOSE PARTIES. IT WAS ALSO FOUND THAT THE ASSESSEE HAD NOT CLAIMED ANY EXPENDITURE I N THIS REGARD. THESE FINDINGS OF FACT HAVE NOT BEEN REBUTTED THROUGH ANY EVIDENCE. T HEREFORE, THE LD. CIT(A) RIGHTLY HELD THAT THE TDS PROVISIONS ARE NOT APPLICABLE IN THE CASE OF ASSESSEE. THEREFORE, THERE IS NO QUESTION OF DISALLOWANCE TO BE MADE U/S . 40(A)(IA) OF THE IT ACT. THIS GROUND OF APPEAL OF REVENUE IS ACCORDINGLY DISMISSE D. ITA NO. 23/JAB./2010 7 10. ON GROUND NO. 4, THE REVENUE CHALLENGED THE DEL ETION OF ADDITION OF RS.7.11 LACS ON ACCOUNT OF CASH EXPENDITURE. THE AO IN VIEW OF THE EXPARTE ASSESSMENT ORDER MADE DISALLOWANCE OUT OF VARIOUS EXPENDITURE IN A SUM OF RS.7,48,975/-. IT WAS CONTENDED BEFORE THE LD. CIT(A) THAT ALL THE EX PENDITURE WERE INCURRED FOR THE PURPOSE OF BUSINESS. THE LD. CIT(A) EXAMINED THE BO OKS OF ACCOUNT WITH REFERENCE TO THE SUPPORTING VOUCHERS AT APPELLATE STAGE AND F OUND MOST OF THE EXPENDITURE ARE REASONABLE AND ALLOWABLE. THE LD. CIT(A) ACCORDINGL Y MAINTAINED PART ADDITION AND DELETED THE ADDITION OF RS.7,11,125/-. 11. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE A RE OF THE VIEW, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION. THE LD. COU NSEL FOR THE ASSESSEE REFERRED TO THE ASSESSMENT ORDER AND STATED THAT SINCE IT WAS E XPARTE ASSESSMENT ORDER, THE AO PROPOSED TO ESTIMATE THE PROFIT OF ASSESSEE ON REJE CTION OF BOOKS OF ACCOUNT IN A SUM OF RS.4,65,700/-, BUT WHEN THE PROFIT OF THE AS SESSEE WAS AT MORE AMOUNT IN A SUM OF RS.7,52,385/-, THEREFORE, THE PROFIT DECLARE D BY THE ASSESSEE IN HIGHER AMOUNT WAS ACCEPTED. HE HAS, THEREFORE, SUBMITTED T HAT ONCE THE PROFIT IS ESTIMATED BY APPLYING PROFIT RATE AS PROPOSED BY THE AO AT 5% , NO FURTHER EXPENDITURE SHOULD BE DISALLOWED. HE HAS RELIED UPON THE DECISION OF H ONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. BANWARI LAL BANSIDHAR, 229 ITR 229 AND DECISION OF M.P. HIGH COURT IN THE CASE OF CIT VS. PURSHOTTAM LAL TA MRAKAR, 270 ITR 314. WE ITA NO. 23/JAB./2010 8 AGREED WITH THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE AO PROPOSED TO ESTIMATE THE INCOME OF ASSESSEE BY APPL YING PROFIT RATE OF 5%, HOWEVER, WHEN THE ASSESSEE HAS SHOWN MORE PROFIT, E VEN IN THE EXPARTE ASSESSMENT ORDER, THE INCOME DECLARED BY THE ASSESSEE WAS ACCE PTED. THEREFORE, THE ABOVE DECISIONS SQUARELY APPLY IN FAVOUR OF THE ASSESSEE. ONCE THE INCOME IS ESTIMATED BY APPLYING THE PROFIT RATE, NO FURTHER EXPENDITURE SH OULD HAVE BEEN DISALLOWED. EVEN ON MERITS, THE LD. CIT(A) AFTER EXAMINING THE BOOKS OF ACCOUNT AND VOUCHERS FOUND THAT MOST OF THE EXPENDITURE ARE REASONABLE AND ACC ORDINGLY SUBSTANTIAL ADDITION WAS CORRECTLY DELETED. THIS GROUND HAS NO MERIT AND IS, ACCORDINGLY, DISMISSED. NO OTHER POINT IS ARGUED OR PRESSED. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (T.S. KAPOOR) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, JABALPUR 6. GUARD FILE SR. PRIVATE SECRETARY ITAT, CAMP AT JABALPUR