Chhatarpal Singh, Chandigarh V. ITO,Ward-1(1), Ranchi

ITA 255/RAN/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 2792 (ITAT-RANCHI)
• Duration Of Justice: 1 year(s) 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Appeal Filed On: 24-09-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Onus to prove
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RANCHI E-COURT AT KOLKATA BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER I.T.A. NO.255/RAN/2019 ASSESSMENT YEAR: 2015-16 CHHATARPAL SINGH..... ...........APPELLANT PLOT NO.152, INDUSTRIAL AREA2, CHANDIGARH, PIN-160002. [PAN: AGKPS0551Q] VS. ITO, WARD-1(1), RANCHI...........................RESPONDENT APPEARANCES BY: SHRI NITIN KR. PASARI, AR,APPEARED ON BEHALF OF THE APPELLANT. SMT. CHINMAYA AURANGABADKAR, JCIT, DR, APPEARED ON BEHALF OF THE RESPONDENT. DATE OF CONCLUDING THE HEARING :MARCH 25, 2021 DATE OF PRONOUNCING THE ORDER : APRIL 30, 2021 ORDER PER SANJAY GARG, JUDICIAL MEMBER:- THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 14.06.2019 OF THE COMMISSIONER OF INCOME TAX (APPEALS), JHARKHAND[HEREINAFTER AS CIT(A)]. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: 1. FOR THAT, THE LD. APPELLATE AUTHORITY AS ALSO THE LD. ASSESSING OFFICER, FAILED TO TAKE INTO CONSIDERATION THAT, THE APPELLANT HAS BEEN DECLARING THE NET PROFIT AS BOOK RESULT TO BE WITHIN 2% TO 4% AND WHICH HAS BEEN ACCEPTED ALL THROUGH, AS AGAINST 8% NET PROFIT, WHICH HAS BEEN ARRIVED AT BY THE ASSESSING AUTHORITY. 2. FOR THAT, WITHOUT REJECTING THE BOOKS OF ACCOUNTS AND WITHOUT HOLDING ANY ENQUIRY TREATING THE TRANSACTION BE UNDISCLOSED TURNOVER, WHICH IS CONTRARY TO THE LAW LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE MATTER OF M/S. JAINSONS, THE ADDITION HAS BEEN MADE. 3. FOR THAT, THE LD. APPELLATE AUTHORITY AS ALSO THE LD. ASSESSING OFFICER, FELL INTO PATENT ERROR BY IGNORING THE EXPLANATION DATED 20.11.2017 OF THE APPELLANT ASSESSEE, WHICH SUBSTANTIATED THAT THE IMPORT OF GOODS (TOYS) IS BIFURCATED BETWEEN INDIVIDUAL AS ALSO IN HUF FILE OF THE APPELLANT ASSESSEE AND THE TAX LIABILITY IS DISCHARGED, ACCORDINGLY. 4. FOR THAT, PROCUREMENT OF ARTICLES UNDER SINGLE IMPORT LICENSEAND DISCHARGING THE TAX LIABILITY ON THE IMPORTED GOODS IS OF THEUTMOST IMPORTANCE INASMUCH AS BY BIFURCATING THE IMPORT ARTICLES IN TWO FILES THERE IS NO REVENUE LOSS TO THE INCOME TAXDEPARTMENT AND IN THE ABSENCE OF ANY SUPPRESSION/ EVASION OFTAX THE ADDITION MADE BY THE DEPARTMENT IN I.T.A. NO.255/RAN/2019 ASSESSMENT YEAR: 2015-16 CHHATARPAL SINGH 2 THE INDIVIDUAL FILE ON THE TRANSACTION ON WHICH TAX LIABILITY HAVING ALREADY BEENDISCHARGED, WOULD AMOUNT TO DOUBLE TAXATION, WHICH ISIMPERMISSIBLE. 5.FOR THAT, THE LD. APPELLATE AUTHORITY AS ALSO THE LD. ASSESSINGAUTHORITY, FAILED TO DISCHARGE THE LIABILITY TO PROVE THE TRANSACTIONTO BE OTHERWISE AS COMPARED TO WHAT WAS DISCLOSED BY THEAPPELLANT, INASMUCH AS AT THE FIRST INSTANCE THE LIABILITY TO PROOFIS THAT OF THE REVENUE AND ONCE THE SAID LIABILITY HAS BEEN DISCHARGED, THE ONUS TO PROVE IS SHIFTED ON THE ASSESSEE, WHICHIN THE PRESENT APPEAL HAS NEVER BEEN DISCHARGED BY THEREVENUE. 6. FOR THAT, THE LEVY OF INTEREST ON ENHANCED INCOME UNDERSECTION 234B & 234C IS BAD IN LAW, IN VIEW OF THE LAW LAID DOWNBY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE MATTER FOR M/S.AJAY KUMAR. 2. THE LD. COUNSEL FOR THE ASSESSEE HAS NOT PRESSED GROUND NOS.1 & 2, THEREFORE, THESE GROUNDS ARE DISMISSED AS NOT PRESSED. 3. THE SOLE ISSUE RAISED BY THE ASSESSEE IN THROUGH OTHER GROUNDS OF APPEAL IS RELATING TO THE DETERMINATION OF NET PROFIT ON THE TOTAL TURNOVER/SALES OF THE ASSESSEE. 4. THE ASSESSEE IS AN INDIVIDUAL AND IN THE BUSINESS OF TRADING OF IMPORTED TOYS. THE ASSESSEE HAS A CUSTOMS LICENCE FOR IMPORTING OF GOODS. THE ASSESSEE, DURING THE YEAR, IMPORTED GOODS OF THE VALUE OF RS.4,10,55,748/-. HOWEVER, THERE IS ANOTHER CONCERN NAMELY M/S CHATARPAL SINGH (HUF) OF WHICH THE ASSESSEE IS A KARTA. AS PER THE PROVISIONS OF THE INCOME TAX ACT, THE HUF HAS BEEN RECOGNISED AS A SEPARATE ENTITY FOR THE PURPOSE OF ASSESSMENT OF INCOME. THE ASSESSEE, IN THIS CASE, BIFURCATED IMPORTED GOODS INTO TWO PORTIONS, ABOUT 75% OF THE IMPORTED GOODS WERE BOOKED/TREATED AS STOCK OF THE INDIVIDUAL (CHHATARPAL SINGH, THE ASSESSEE HEREIN) AND THE REMAINING 25% OF THE GOODS WERE TREATED TO BE PROCURED BY THE HUF. SEPARATE INCOME TAX RETURNSWERE FILED IN THE NAME OF INDIVIDUAL AND HUF AND DUE TAXES WERE PAID ON THE SALES SEPARATELY MADE BY INDIVIDUAL AND HUF. 4. NOW, THE CASE OF THE DEPARTMENT IS THAT THE GOODS WERE IMPORTED IN THE NAME OF INDIVIDUAL ONLY AND A PART OF THE IMPORTED GOODS HAS BEEN DIVERTED TO THE HUF TO REDUCE THE TAX LIABILITY BY THE ASSESSEE. THE PLEA OF THE LD. DR IS THAT THE HUF HAS NO CUSTOMS LICENCE TO IMPORT THE GOODS. THAT ALL THE GOODS WERE IMPORTED IN THE NAME OF INDIVIDUAL AND THAT THE SALES WERE ALSO REQUIRED TO BE BOOKED IN THE PROPRIETORSHIP CONCERN OF THE INDIVIDUAL. THE LD. ASSESSING OFFICER, IN THE ASSESSMENT ORDER, HAS NOTED THAT IF THE I.T.A. NO.255/RAN/2019 ASSESSMENT YEAR: 2015-16 CHHATARPAL SINGH 3 CONTENTION OF THE ASSESSEE IS TO BE ACCEPTED THAT PART OF THE IMPORTED STOCK WAS DIVERTED TO HUF, THEN THE ASSESSEE SHOULD HAVE TRANSFERRED THE SAID STOCK BY MAKING AN ENTRY IN THE BOOKS OF ACCOUNT. HOWEVER, IN THIS CASE, THE HUF HAS DIRECTLY SHOWN THE PROCURED STOCK AS DIRECTLY IMPORTED BY HUF. THERE IS NO FORMAL ENTRY THAT THE STOCK HAS BEEN TRANSFERRED FROM INDIVIDUAL TO HUF. ON THIS BASIS, THE ENTIRE STOCK OF IMPORTED GOODS HAS BEEN TREATED AS THE STOCK-IN-TRADE OF THE INDIVIDUAL-ASSESSEE AND THE ENTIRE SALES HAS BEEN CONSIDERED AT THE HANDS OF THE INDIVIDUAL ASSESSEE. 5. THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE HUF IS A LEGALLY RECOGNISED ENTITY AND THE BUSINESS HAS BEEN DONE IN THE NAME OF HUF ALSO. THAT MERELY BECAUSE A FORMAL ENTRY HAS NOT BEEN PASSED THAT ITSELF CANNOT BE A GROUND TO REJECT THE BUSINESS DONE BY THE HUF AND TREAT THE ENTIRE SALES IN THE HANDS OF INDIVIDUAL. 6. I HAVE CONSIDERED THE RIVAL CONTENTIONS OF BOTH THE LD. REPRESENTATIVES OF THE PARTIES. HUF HAS BEEN RECOGNISED AS A SEPARATE ENTITY UNDER THE INCOME TAX ACT. THERE IS NO BAR FOR THE HUF TO DO BUSINESS AND FILE INCOME TAX RETURN. THE ASSESSEE BEING AN INDIVIDUAL HAS FILED A SEPARATE INCOME TAX RETURN AND BEING KARTA OF THE HUF HAS FILED SEPARATE INCOME TAX RETURN AND BOTH THE CONCERNS HAVE PAID DUE TAXES ON THE SALES/NET PROFIT ASSESSED BY THE DEPARTMENT. THE DEPARTMENT HAS REJECTED THE SALES/BUSINESS IN THE NAME OF HUF ONLY ON THE GROUND THAT THE CUSTOMS LICENCE WAS IN THE NAME OF INDIVIDUAL ONLY. HOWEVER, THERE IS NO BAR UNDER THE CUSTOM ACT OR ANY OTHER LAW TO TRANSFER THE IMPORTED GOODS BY AN INDIVIDUAL TO AN HUF, IRRESPECTIVE OF THE FACT THAT HE, HIMSELF IS THE KARTA OF SUCH AN HUF. NOW, THE ONLY GROUND ON WHICH THE ADDITION HAS BEEN MADE IN THE NAME OF THE ASSESSEE IS THAT THE INDIVIDUAL HAS NOT PASSED A FORMAL ENTRY OF TRANSFER OF GOODS TO THE HUF. THE HUF HAS TREATED THE GOODS IN THE BOOKS OF ACCOUNT AS IF THE SAME HAVE BEEN IMPORTED BY HUF ITSELF. IN MY VIEW, THAT MAY BE AN ERROR IN RECORDING A FORMAL ENTRY IN RESPECT OF THE TRANSFER OF IMPORTED GOODS BY INDIVIDUAL TO HUF BUT THE ACTUAL FACTS ON THE FILE SHOW THAT THE IMPORTED GOODS HAVE BEEN RECORDED AS STOCK-IN-TRADE SEPARATELY BY THE INDIVIDUAL AND THE HUF. BECAUSE OF AN ERROR IN RECORDING THE ENTRY, IN MY VIEW, THE BUSINESS DONE BY THE HUF CANNOT BE REJECTED WHEN UNDER THE INCOME TAX ACT, THE HUF HAS BEEN RECOGNISED A SEPARATE ENTITY AND THERE IS NO BAR FOR THE HUF TO DO I.T.A. NO.255/RAN/2019 ASSESSMENT YEAR: 2015-16 CHHATARPAL SINGH 4 THE BUSINESS. IN VIEW OF THIS, THE ACTION OF THE LOWER AUTHORITIES IN TREATING THE ENTIRE SALES IN THE HANDS OF THE INDIVIDUAL, IN MY VIEW, CANNOT BE HELD TO BE JUSTIFIED. IN VIEW OF THE ABOVE DISCUSSION, THE ASSESSING OFFICER IS DIRECTED TO ASSESS THE INCOME IN THE NAME OF THE INDIVIDUAL AND IN THE NAME OF HUF SEPARATELY AS PER THE SALES/TURNOVER SHOWN BY THEM. HOWEVER, SO FAR AS THE DETERMINING OF NET PROFIT IS CONCERNED, THE ASSESSEE HAS NOT PRESSED ON THE GROUNDS RAISED IN THIS RESPECT. THE APPEAL OF THE ASSESSEE IS HEREBY TREATED AS PARTLY ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 30.04.2021. SD/- [SANJAY GARG] JUDICIAL MEMBER DATED: 30.04.2021. RS COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- 2. THE RESPONDENT- 3. THE CIT CONCERNED- 4. THE CIT(A) - 5. THE DR - 6. GUARD FILE BY ORDER SR. P.S., ITAT, KOLKATA