MANOJ JINDAL, Jaipur V. ITO, Jaipur

ITA 242/JPR/2011

• Counselvise Citation: 24223114 RSA 2011
• Duration Of Justice: 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 18-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K C MEENA
• Section: 131; 68

Judgement Text

1 ITA 242-11 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH B JAIPUR BEFORE SHRI R.K. GUPTA AND SHRI N.L. KALRA ITA NO. 242/JP/2011 ASSTT. YEAR : 2006-07. SHRI MANOJ JINDAL, VS. THE INCOME-TAX OFFICER, PROP. JINDAL ELECTRICALS, WARD 6(1), 13/215, MALVIYA NAGAR, JAIPUR. JAIPUR. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ANIL GOYAL RESPONDENT BY : SHRI K.C. MEENA ORDER DATE OF ORDER : 22/07/2011. PER R.K. GUPTA, J.M. THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF LD. CIT (A) RELATING TO ASSESSMENT YEAR 2006-07. 2. THE FIRST GROUND IS AGAINST ENHANCING THE DISALL OWANCE OF RS. 2,00,000/[- DISALLOWED BY AO TO RS. 3,25,000/-. 3. CERTAIN PURCHASES WERE REMAINED UNVERIFIABLE. TH E ASSESSEE COULD NOT PRODUCE THOSE PARTIES FROM WHOM THE PURCHASES WERE MADE EXC EPT FILING THE PURCHASE BILLS AND OTHER DETAILS OF THOSE PARTIES. THE AO MADE A LUMP SUM ADDITION OF RS. 2,00,000/-. THE LD. CIT (A) NOTED THAT PURCHASES OF RS. 12,93,660/- WERE MADE IN CASH, THEREFORE, HE DISALLOWED 25% OF THESE PURCHASES WHICH RESULTED IN A TRADING ADDITION OF RS. 3,25,000/-. WHILE ENHANCING THE INCOME, NO NOTICE UNDER SECTION 251(2) WAS GIVEN BY LD. CIT (A) BY 2 OBSERVING THAT HE HAS REDUCED SOME OTHER ADDITIONS, THEREFORE, THERE IS NO NEED TO GIVE ENHANCEMENT NOTICE. 4. THE LD. COUNSEL OF THE ASSESSEE HAS OBJECTED IN ENHANCING THE ADDITION AS WITHOUT ISSUING NOTICE UNDER SECTION 251(2). DETAILED SUBM ISSIONS WERE ADVANCED IN RESPECT TO ADDITION MADE BY AO AT RS. 2,00,000/-. IT WAS SUBM ITTED THAT THE TURNOVER OF THE ASSESSEE HAS BEEN INCREASED FOUR TIMES AS COMPARED TO EARLIE R YEAR AND, THEREFORE, THERE WAS A MARGINAL DECLINE OF 2.78% IN THE GROSS PROFIT. IT WAS FURTHER SUBMITTED THAT IF THE TRADING ADDITIONS ARE SUSTAINED THEN THE G.P. RATE WILL ARR IVE AT 11.63% WHICH IS NOT POSSIBLE ON THE FACT OF THE PRESENT CASE. 5. ON THE OTHER HAND, LD. D/R PLACED RELIANCE ON TH E ORDER OF LD. CIT (A). 6. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING T HE MATERIAL ON RECORD, WE FIND THAT ASSESSEE DESERVES TO SUCCEED IN THIS GROUND IN PART. FOR ENHANCEMENT MADE BY LD. CIT (A) IS NOT JUSTIFIED AS NO NOTICE UNDER SECTION 251(2) WAS GIVEN WHICH IS MANDATORY. THE LD. CIT (A) HAS STATED THAT IN ANOTHER HEAD HE HAS REDUCED THE ADDITION, THEREFORE, THERE IS NO NEED TO GIVE NOTICE UNDER SECTION 251(2 ), IN OUR CONSIDERED VIEW THIS OBSERVATION OF LD. CIT (A) IS NOT CORRECT AS THE LD . CIT (A) IS ENHANCING THE TRADING ADDITION AND IF UNDER THE HEAD INCOME FROM BUSINES S HE WANTS TO ENHANCE THE INCOME THEN THE NOTICE IS MANDATORY. THEREFORE, ENHANCEME NT OF INCOME IS NOT JUSTIFIED. 6.1. EVEN ON MERIT, WE NOTED THAT THE LD. CIT (A) D RAWN ADVERSE INFERENCE AS THE ASSESSEE HAS MADE CASH PURCHASES. CASH PURCHASES AR E NOT BARRED. INFERENCE SHOULD HAVE BEEN DRAWN TAKING INTO CONSIDERATION THE PAST HISTO RY AND UNVERIFIABLE NATURE OF PURCHASES. NO DOUBT, GROSS PROFIT RATE IS DECLINED FROM 8% TO 5.22% DURING THE YEAR UNDER CONSIDERATION. HOWEVER, THERE IS A FOUR TIME INCREASE IN SALES. THEREFORE, THIS 3 ASPECT HAS TO BE TAKEN INTO CONSIDERATION FOR CONSI DERING THE DECLINE IN GROSS PROFIT RATE. THIS IS ALSO A MATTER OF FACT THAT CERTAIN PURCHASE S REMAINED UNVERIFIABLE, THEREFORE, IN VIEW OF SLIGHT DECLINE IN GROSS PROFIT RATE AND IN VIEW OF UNVERIFIABLE PURCHASES, WE ARE OF THE VIEW THAT IF AN ADDITION OF RS.60,000/- IS SUST AINED THAT WILL MEET THE ENDS OF JUSTICE. ACCORDINGLY WE SUSTAIN THE ADDITION OF RS.60,000/- AGAINST TOTAL ADDITION SUSTAINED BY LD. CIT (A) AT RS. 3,25,000/-. THIS GROUND OF THE ASSES SEE IS ALLOWED IN PART. 7. NEXT GROUND IS AGAINST SUSTAINING THE DISALLOWAN CE OUT OF FABRICATION AND JOB CHARGES AT RS. 1,22,500/-. 8. THE AO MADE DISALLOWANCE OF RS. 1,31,877/- BEING 20% OF TOTAL EXPENSES OF RS. 6,59,385/- SPENT ON FABRICATION AND JOB WORK FOR NO N PRODUCTION OF BOOKS OF ACCOUNT AND VOUCHERS. HOWEVER, LD. CIT (A) RESTRICTED 25% DISAL LOWANCE OF THE EXPENSES MADE IN CASH AT RS. 4,90,000/- WHICH RESULTED IN A DISALLOW ANCE OF RS. 1,22,500/- AGAINST THE DISALLOWANCE MADE BY AO. 9. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING T HE MATERIAL ON RECORD, WE FIND THAT DISALLOWANCE IS ON HIGHER SIDE. WE ARE OF THE VIEW THAT IF DISALLOWANCE IS RESTRICTED TO RS. 25,000/- THAT WILL MEET THE ENDS OF JUSTICE. ACCORDINGLY, WE RESTRICT THE ADDITION TO RS. 25,000/-. 10. REMAINING ISSUE IS AGAINST CONFIRMING THE ADDIT ION OF RS. 5,40,000/- UNDER SECTION 68 ON ACCOUNT OF UNSECURED LOANS. 11. DURING THE ASSESSMENT YEAR ON EXAMINATION OF BA LANCE SHEET, THE AO NOTICED THAT ASSESSEE HAS SHOWN UNSECURED LOANS OF RS. 5,40,000/ -. NO DETAILS OF THESE LOANS WERE ENCLOSED WITH THE RETURN OF INCOME. IT MENTIONED T HAT LOANS HAVE BEEN TAKEN FROM FRIENDS AND RELATIVES. VIDE QUERY LETTER DATED 29.7.2008 T HE ASSESSEE WAS ASKED TO FURNISH THE 4 CONFIRMATION OF UNSECURED LOANS. HOWEVER, NONE APP EARED ON BEHALF OF THE ASSESSEE ON THE DATE OF HEARING. THEREAFTER ADJOURNMENT WAS ALS O GRANTED. NO CONFIRMATION WAS FILED ON FURTHER HEARING ALSO. THEREFORE, AO MADE AN ADD ITION OF RS. 5,40,000/-. DETAILED SUBMISSIONS WERE FILED BEFORE LD. CIT (A), BOOKS OF ACCOUNT WERE ALSO PRODUCED. THE PETTY LOANS WERE TAKEN FROM 29 PARTIES FROM TIME TO TIME. THE REMAND REPORT WAS SOUGHT FROM THE AO BY SENDING THE COPIES OF AFFIDAVITS FIL ED ON BEHALF OF THE CREDITORS. THE ASSESSEE WAS REQUIRED TO PRODUCE ALL THE CREDITORS. HOWEVER, THEY WERE NOT PRODUCED IN THE REMAND PROCEEDINGS ALSO. THE AO ISSUED NOTICE UNDER SECTION 131 ON ALL THE 29 PERSONS. 10 PERSONS RECEIVED THE NOTICE AS A/D WAS RECEIVED BACK BY THE AO. 10 NOTICES ISSUED UNDER SECTION 131 WERE RETURNED BACK WITH PO STAL REMARK INCOMPLETE ADDRESS. HOWEVER, 9 NOTICES ISSUED UNDER SECTION 131 NEITHER WERE RETURNED NOR ANY A/D WAS RECEIVED BACK. THE AO SENT HIS REMAND REPORT THAT N ONE OF THE PERSONS HAVE BEEN PRODUCED, THEREFORE, ADDITION MADE IN THE ASSESSMEN T ORDER IS LIABLE TO BE CONFIRMED. AN OPPORTUNITY WAS GIVEN BY LD. CIT (A) TO FILE REPLY IN RESPONSE TO REMAND REPORT. THREE PERSONS FROM WHOM THE AFFIDAVITS WERE FILED WERE PR ODUCED BEFORE LD. CIT (A) FOR TEST CHECK. STATEMENTS OF THESE PERSONS WERE RECORDED IN THE OFFICE OF LD. CIT (A). AFTER CONSIDERING ALL THESE DETAILS, THE LD. CIT (A) WAS NOT SATISFIED WITH THE EXPLANATION. IN HIS VIEW THE AFFIDAVITS FILED BY ASSESSEE IS AN AFTER T HOUGHT. PARTIES COULD NOT BE PRODUCED. SOURCE OF LOAN REMAINED UNEXPLAINED. ACCORDINGLY, H E CONFIRMED THE ORDER OF AO ON THIS ASPECT. 12. NOW THE LD. COUNSEL OF THE ASSESSEE REITERATED THE CONTENTION RAISED BEFORE LD. CIT (A) HERE BEFORE THE TRIBUNAL. RELIANCE WAS PLACED ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF LABHCHAND BOHRA, 189 TAXMAN 131 AND IN THE 5 CASE OF DAULAT RAM RAWATMULL, 87 ITR 349. RELIANCE WAS ALSO PLACED IN THE CASE OF SANTOSH BAHETI, 38 TAX WORLD 148, IN CASE OF ARAVAL I TRADING CO., 220 CTR 622, IN CASE OF BHAWANI OIL MILS PVT. LTD., 49 DTR 212 AND IN CA SE OF KANHAIALAL JANGID, 217 CTR 354. 13. ON THE OTHER HAND, THE LD. D/R STRONGLY PLACED RELIANCE ON THE ORDER OF LD. CIT (A). 14. AFTER CONSIDERING THE SUBMISSIONS AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT ASSESSEE DESERVES TO SUCCEED IN THIS GROUND. W E NOTED THAT THESE ARE PETTY CASH LOANS RANGING BETWEEN RS. 15,000/- TO RS. 20,000/-. AFFI DAVITS OF ALL THE PERSONS WERE FILED DURING THE APPELLATE PROCEEDINGS AND LD. CIT (A) HA S SOUGHT REMAND REPORT. THREE PERSONS WERE PRODUCED BEFORE LD. CIT (A) ALSO WHOSE STATEMENTS WERE RECORDED AND THEY HAVE CLEARLY ADMITTED IN HAVING ADVANCED LOANS TO T HE ASSESSEE. THE CONTENTS OF THE AFFIDAVITS REMAINED UNCHALLENGED AS NO ADVERSE MATE RIAL WAS FOUND THAT CONTENTS NOTED IN THE AFFIDAVIT FILED ARE NOT CORRECT. THEREFORE, IN OUR CONSIDERED VIEW, REJECTION OF AFFIDAVITS IN A ROUTINE MANNER IS NOT JUSTIFIED. EV EN THE LD. CIT (A) HAS NOT ALLOWED THE BENEFIT OF THE PERSONS WHO APPEARED IN PERSON BEFOR E HIM AND STATEMENTS OF THOSE PERSONS WERE RECORDED AND THEY HAVE ADMITTED IN HAVING ADVA NCED LOANS TO THE ASSESSEE. 15. IN THE CASE OF CIT VS. BHAWANI OIL MILLS PVT. L TD. (SUPRA), THE HONBLE RAJASTHAN HIGH COURT HAS OBSERVED THAT MERE NON APPEARANCE OF 8 OTHER PERSONS IN RESPONSE TO THE NOTICE GIVEN BY AO, BY ITSELF CANNOT BE A REASON TO DISCARD THEIR VERSION PARTICULARLY WHEN SOME OF THEM HAD APPEARED AND ADMITTED ADVANCEMENT OF LOANS. IT IS FURTHER OBSERVED THAT EVEN IF OTHERS HAVE SUBSEQUENTLY FILED THEIR C ONFIRMATIONS SUPPORTED BY THEIR AFFIDAVITS IT CANNOT BE ASSUMED THAT THEY WOULD NOT HAVE MADE THE SAME STATEMENTS IF 6 THEY HAD APPEARED IN RESPONSE TO THE NOTICE ISSUED BY THE AO. IT HAS ALSO BEEN PROVED THAT AO WAS REQUIRED TO EXAMINE THE CONFIRMATIONS A ND CONTENTS OF THE AFFIDAVITS ON THEIR MERIT TREATING IT AS IF THEIR STATEMENTS GIVEN TO H IM, THEIR VERSION CONTAINED IN THE AFFIDAVIT COULD NOT BE TREATED AS OF LESSER IMPORTANCE THAN T HE STATEMENTS GIVEN BY ONE OF THE CREDITORS. THE OBSERVATIONS OF HONBLE RAJASTHAN HI GH COURT ARE IN SUPPORT OF THE CASE OF THE ASSESSEE. IN CASE OF ASSESSEE, THREE PERSONS HAVE APPEARED AND THEY HAVE ADMITTED HAVING GIVEN THE LOANS TO THE ASSESSEE. SIMILAR AF FIDAVITS WERE FILED BY THESE PERSONS ALSO AS FILED BY OTHERS WHO COULD NOT APPEAR BEFORE THE AO INSPITE OF ISSUING NOTICE UNDER SECTION 131. THEREFORE, IN OUR VIEW, THE ADVERSE I NFERENCE DRAWN BY THE AUTHORITIES BELOW AS NOT JUSTIFIED. IN VIEW OF THESE FACTS AND CIRCUM STANCES, WE DELETE THE ADDITION OF RS. 5,40,000/- SUSTAINED BY LD. CIT (A). 16. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D IN PART. 17. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 22 .7.2011 SD/- SD/- ( N.L. KALRA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR, D/- COPY FORWARDED TO :- SHRI MANOJ JINDAL, JAIPUR. THE ITO WARD 6(1), JAIPUR. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 242/JP/2011) BY ORDER, AR ITAT JAIPUR. 7