PRABHU DAYAL JAT, Jaipur V. ITO, Jaipur

ITA 265/JPR/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5420 (ITAT-JAIPUR)
• Duration Of Justice: 3 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 12-03-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Gross profit estimation; Rejection of books of accounts; Retrospective amendment; Cost of acquisition; Tax effect
• Section: 143(3); 194C; 145; 2

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH VH-VKJ-EHUK] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF; D LNL; DS LE{K BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA-@ ITA NOS. 265/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2009-10. SHRI PRABHU DAYAL JAT, MANOHAR PURA, JAIPUR. CUKE VS. THE INCOME TAX OFFICER, WARD 7(3), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AGTPJ 1660 N VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NOS. 269/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2009-10. THE INCOME TAX OFFICER, WARD 7(3), JAIPUR. CUKE VS. SHRI PRABHU DAYAL JAT, MANOHAR PURA, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AGTPJ 1660 N VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY S BY : SHRI MANISH AGARWAL (C.A.) JKTLO DH VKSJ LS@ REVENUE BY : SHRI KAILASH MANGAL (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 24.02.2016. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 8/04/2016. VKNS'K@ ORDER PER SHRI LALIET KUMAR, J.M. THESE ARE TWO CROSS APPEALS FILED BY THE ASSESSEE AND THE REVENUE ARISING FROM THE ORDER DATED 13.12.2012 PASSED BY THE LEARN ED CIT (A)-III, JAIPUR FOR THE A.Y. 2009-10. THE GROUNDS RAISED ARE AS UNDER :- ITA NO. 265/JP/2013 (ASSESSEES APPEAL) 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE T HE LD. CIT (A) HAS GROSSLY ERRED IN UPHOLDING THE APPLICATION OF THE P ROVISIONS OF SECTION 2 ITA NOS. 265 & 269/JP/2013 SHRI PRABHU DAYAL JAT VS. ITO 145(3) OF THE INCOME TAX ACT, 1961 WITHOUT APPRECIA TING THE SUBMISSIONS MADE BEFORE HIM AND HAS FURTHER ERRED IN SUSTAINING THE TRADING ADDITION OF RS. 7,42,083/- BY APPLYING G.P. RATE 5.40% AS AG AINST G.P. RATE 5.19% DECLARED BY THE ASSESSEE WITHOUT ANY BASIS, THUS TH E ACTION OF THE LD. CIT (A) DESERVES TO BE HOLD BAD IN LAW AND THE TRADING RESULTS DECLARED DESERVES TO BE ACCEPTED. 1.1. THAT THE LD. CIT (A) HAS FURTHER ERRED IN NOT APPRE CIATING THE FACT THAT THE LD. AO HAS INVOKED THE PROVISION OF SECTION 145 (3) FOR NON MAINTENANCE OF STOCK REGISTER, WHILE IN FACT ASSESS EE HAS MAINTAINED ALL THE POSSIBLE DETAILS THUS THE ADDITION OF RS. 7,42, 083/- SO SUSTAINED DESERVES TO BE DELETED. ITA NO. 269/JP/2013 (REVENUES APPEAL) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE TH ELD. CIT (A) HAS ERRED IN :- (I) THE CIT (A) HAS ERRED IN DELETING THE ADDITION OF R S. 22,54,518/- MADE BY THE AO UNDER SEC. 40(A)(IA) OF THE IT ACT, 1961. (II) THE CIT (A) HAS ERRED IN DELETING THE PROPORTIONATE DISALLOWANCE OF INTEREST PAYMENT OF RS. 4,53,206/- MADE BY THE A.O. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS RUNNING A MILK DAIRY. THE ASSESSEE FILED HIS RETURN DECLARING TOTAL INCOME OF RS. 11,23,561/- ON 30.09.2009 FOR THE ASSESSMENT YEAR 2009-10. THE CASE OF THE ASSESS EE WAS SCRUTINIZED UNDER SECTION 143(3) AND ASSESSMENT WAS COMPLETED VIDE OR DER 20.12.2011 AT AN INCOME OF RS. 47,88,160/-. DURING THE YEAR UNDER CONSIDER ATION, THE ASSESSEE DECLARED GROSS PROFIT OF RS. 1,85,88,790/- ON TOTAL TURNOVER OF RS. 35,79,79,139/- GIVING A GP RATE OF 5.19% APPROXIMATELY. THE AO NOTICED THAT T HE GP AS WELL AS NP RATE DECLARED BY THE ASSESSEE FOR THE CURRENT YEAR IS LO W IN COMPARISON TO PRECEDING YEARS PER THE CHART GIVEN BELOW : 3 ITA NOS. 265 & 269/JP/2013 SHRI PRABHU DAYAL JAT VS. ITO A.Y. 2007 - 08 A.Y. 2008 - 09 A .Y. 2009 - 10. TOTAL TURNOVER 22,99,66,096 35,06,30,592 35,79,79,139 GROSS PROFIT 1,22,91,846 1,91,30,418 1,85,88,790 % OF GP 5.34% 5.46% 5.19% NET PROFIT 8,83,511 14,55,453 12,02,560 % OF NP 0.38% 0.42% 0.34% AT THE TIME OF ASSESSMENT PROCEEDINGS THE ASSESSEE PRODUCED BOOKS OF ACCOUNTS I.E. CASH BOOKS, LEDGER ACCOUNT, BANK BOOK, BILLS/VOUCHE RS, STOCK DETAILS/REGISTER ETC. ON EXAMINATION OF THE BOOKS OF ACCOUNT ALONG WITH OTHE R DETAILS PRODUCED, THE AO NOTICED THAT THE ASSESSEE HAS NOT MAINTAINED QUALIT Y-WISE STOCK REGISTER OF MILK, INCOMING AND OUTGOING OF MILK UNIT-WISE AS THE ASSE SSEE WAS RUNNING 9 MILK COLLECTION CENTRES. THE AO NOTED THAT THE ASSESSEE HAS MADE SALE AND PURCHASE OF MORE THAN 1.91 CRORE LITRE MILK AFTER PROCESSING/CH ILLING BUT NO SHORTAGE HAS BEEN CLAIMED, WHICH IS NOT POSSIBLE. THUS THE AO TREATED THE STOCK DETAILS AS INCORRECT. THE AO FURTHER NOTED THAT THE ENTIRE PURCHASE OF MI LK WAS MADE IN CASH ON THE BASIS OF SELF MADE VOUCHERS AND SOME OF THE SALES ARE ALS O MADE IN CASH. EXPENSES ON ACCOUNT OF CHILLING, HAND LOAD, DIESEL, FREIGHT INW ARD ETC HAVE BEEN INCURRED TO THE TUNE OF RS. 1,86,71,422/- AND HAVE BEEN SHOWN IN TR ADING ACCOUNT. MOST OF THE EXPENSES HAVE BEEN PAID UNDER THE ABOVE HEADS IN CA SH AND SHOWN ON THE BASIS OF SELF MADE VOUCHERS. THE AO, CONSIDERING THAT THE A SSESSEE HAS NOT MAINTAINED PROPER STOCK REGISTERS AND OTHER SUPPORTING EVIDENC ES IN CONNECTION WITH THE VARIOUS EXPENSES, HELD THAT THE SALES, PURCHASES AND THE EX PENSES INCURRED CANNOT BE VERIFIED IN ABSENCE OF SUPPORTING DOCUMENTS. ON THE BASIS OF ABOVE DEFECTS, THE AO TREATED THE BOOKS OF ACCOUNTS OF THE ASSESSEE AS IN CORRECT AND INCOMPLETE AND 4 ITA NOS. 265 & 269/JP/2013 SHRI PRABHU DAYAL JAT VS. ITO TRADING RESULTS OF THE ASSESSEE ARE NOT ACCEPTABLE. STATING THE ABOVE DEFECTS, THE AO ASKED THE ASSESSEE VIDE NOTE SHEET DATED 16.12.2 011 TO SHOW CAUSE AS TO WHY THE PROVISIONS OF SECTION 145(3) SHOULD NOT BE INVO KED AND TRADING RESULT BE ESTIMATED ON THE BASIS OF PAST HISTORY. 2.1. IN COMPLIANCE, THE ASSESSEE VIDE LETTER DATED 19.12.2011 SUBMITTED WRITTEN SUBMISSIONS STATING THEREIN AS UNDER :- I) THE ASESSEE FIRMS ACCOUNTS HAVE BEEN AUDITED U /S 44AB OF I.T. ACT, 1961 AND THE AUDITED FINANCIAL STATEMENT ALONG WITH COPY OF AUDITORS REPORT HAVE BEEN SUBMITTED. ALL THE REQUIR ED DETAILS INCLUDING QUANTITATIVE DETAILS HAVE BEEN VERIFIED IN THE AUDI TORS REPORT. II) AS REGARDS MAINTAINING OF STOCK REGISTER AT UNI T LEVEL IT IS SUBMITTED THAT THE UNITS WERE MAINTAINING DETAILS O F INCOMING AS WELL AS OF OUTGOING MILK QUANTITY IN COMPUTERIZED SYSTEM AND THE SAME WAS CONSOLIDATED AT HO LEVEL. THE MONTHLY DETAILS OF QU ANTITY HAVE BEEN SUBMITTED TO YOU ON EARLIER DATES OF HEARING. FURTH ER THERE IS NO SHORTAGE/LOSS IN QUANTITY. III) THE PAYMENT OF MILK PURCHASE IS BEING MADE ON FAT VALUE BASIS FOR WHICH CHECKING WAS BEING DONE WITH THE HELP OF EQUIPMENTS & REPORT WERE BEING GENERATED. IV) THE MILKS PURCHASE WERE BEING DONE FROM FARMERS IN REMOTE VILLAGE AND THEY DO NOT ISSUE ANY PRINTED BILL FOR MAKING THE SALES. THEREFORE WE HAD TO PREPARE PURCHASE VOUCHERS AT OU R OWN LEVEL. THIS PRACTICE IS BEING FOLLOWED BY ALL THE PERSONS DOING THE MILK BUSINESS. V) MAKING CASH SALES IS NOT PROHIBITED UNDER THE AC T, THEREFORE, AS PER DEMAND OF CUSTOMERS WE HAD MADE CASH SALES OF M ILK. VI) MOST OF THE EXPENSES ARE DULY SUPPORTED BY THIR D PARTY EVIDENCES. AS A GENERAL BUSINESS REQUIREMENT A FEW EXPENSES HAVE BEEN MADE IN CASH AS UNKNOWN SUPPLIER/SERVICE PROVI DERS DO NOT ACCEPT CHEQUES, THOUGH RATIO OF SUCH EXPENSE IS VER Y LOW. IN THE CIRCUMSTANCES MENTIONED ABOVE IT IS SUBMITTE D THAT INVOKING THE PROVISIONS OF SECTION 145(3) OF THE I.T. ACT, 1961 IS NOT WARRANTED IN OUR CASE. THE AUDITED RESULT SHOULD BE ACCEPTED. FU RTHER EACH YEAR IS TOTALLY DIFFERENT FROM OTHERS. THE ASSESSEE HAS SHO WN THE CORRECT GROSS PROFIT. THE REASONS OF LOW GP AS COMPARED TO EARLIE R YEAR IS INCREASE IN PURCHASE PRICE OF MILK BY RAJASTHAN CO-OPERATIVE DA IRY FEDERATION LTD. 5 ITA NOS. 265 & 269/JP/2013 SHRI PRABHU DAYAL JAT VS. ITO (RCDF) DUE TO DROUGHT IN RAJASTHAN DURING F.Y. 2008 -09. THEREFORE, PAST HISTORY IS ALSO NOT APPLICABLE IN OUR CASE. YO U ARE, THEREFORE, REQUESTED TO ACCEPT THE TRADING RESULT DECLARED BY ASSESSEE. THE AO CONSIDERED THE ABOVE REPLY OF THE ASSESSEE B UT COULD NOT FIND IT ACCEPTABLE FOR THE REASON THAT ENTIRE PURCHASE OF M ILK HAS BEEN MADE IN CASH AND SHOWN ON THE BASIS OF SELF MADE VOUCHERS, THERE FORE, VERIFICATION OF THE PURCHASE COST AS WELL AS STOCK DETAILS CANNOT BE MA DE. THE AO WAS ALSO OF THE VIEW THAT ASSESSEE HAS NOT MAINTAINED PRIMARY REGIS TER OF INCOMING AND OUTGOING OF GOODS AT ALL THE COLLECTING UNITS. FURT HER, THE AO HELD THAT IN ABSENCE OF QUALITY-WISE STOCK REGISTER/DETAILS, THE SALE RA TE ADOPTED BY THE ASSESSEE ON THE BASIS OF FAT VALUE CLAIMED, CAN NOT BE VERIFIED . 2.2. THE AO HAS ALSO NOT ACCEPTED THE CLAIM OF NIL SHORTAGE/LOSS IN PROCESS/CHILLING ON THE GROUND THAT HOW IT IS POSSI BLE THAT NO SHORTAGE/LOSS OCCURRED DURING THE PROCESS/CHILLING OF SUCH HUGE Q UANTITY OF 1.91 CRORE LITRE MILK. THEREFORE, HE HELD THAT THE STOCK REGISTER/ PROCESSING REGISTER MAINTAINED AND PRODUCED, CANNOT BE TREATED AS CORRECT AND COMP LETE. IN THIS REGARD, HE PLACED RELIANCE ON THE DECISION HONBLE ORISSA HIGH COURT IN THE CASE OF ORRISA FISHERIES DEVELOPMENT CORPORATION LTD. VS. CIT, 111 ITR 923 (ORRISA). 2.3. REGARDING CASH SALE, THE AO HELD THAT ALTHOUG H CASH SALE IS NOT PROHIBITED AS STATED BY LD. A/R, BUT IT IS ADMITTED FACT THAT THERE WERE CASH SALE. IT IS ALSO A FACT THAT CASH TRANSACTIONS CANNOT BE VERIFIED. THUS, VERIFICATION OF THE CASH SALES RECORDED BY THE ASSESSEE IN BOOKS OF ACCOUNT CANNOT BE MADE. 2.4. REGARDING VARIOUS EXPENSES CLAIMED BY THE ASSE SSEE, THE AO HELD THAT IT IS AN ADMITTED FACT THAT THE ASSESSEE HAS SHOWN SOME DIRECT/INDIRECT EXPENSES ON THE BASIS OF SELF MADE VOUCHERS AND PAYMENT THER EOF HAS ALSO MADE IN CASH 6 ITA NOS. 265 & 269/JP/2013 SHRI PRABHU DAYAL JAT VS. ITO RANGING BETWEEN RS. 17,000/- TO RS. 19,000/- THUS, VERIFICATION REGARDING CORRECTNESS AND GENUINENESS OF THE SAME CANNOT BE M ADE. 2.5. TAKING INTO CONSIDERATION THE FACTS AS DISCUS SED ABOVE, THE AO TREATED THE BOOKS OF ACCOUNTS AS INCORRECT AND INCO MPLETE AND TRADING RESULT SHOWN BY THE ASSESSEE HAS NOT BEEN ACCEPTED BEING N OT VERIFIABLE, REJECTED THE BOOKS OF ACCOUNTS BY INVOKING THE PROVISIONS OF SEC TION 145 OF THE IT ACT. THUS THE AO DETERMINED THE INCOME OF THE ASSESSEE ON THE BASIS OF PAST HISTORY OF THE ASSESSEES CASE AND PROFIT DECLARED IN COMPARABLE C ASES. THE AO TAKING NOTE OF THE FACT THAT ASSESSEE HAS SHOWN GP AT 5.46% FOR A. Y. 2008-09 AND TURN OVER OF THE YEAR, IS ALMOST AT PAR WITH THE YEAR UNDER CONS IDERATION, THEREFORE, CONSIDERING THE PAST HISTORY OF THE ASSESSEE HIMSEL F, APPLIED GP RATE OF 5.46% ON THE TOTAL TURNOVER OF RS. 35,79,79,139/- THEREBY WORKED OUT GP AT RS. 1,95,45,660/-. AS THE ASSESSEE HAS ALREADY DISCLOS ED GP AT RS. 1,85,88,790/-, THEREFORE, TRADING ADDITION OF RS. 9,56,870/- (RS. 1,95,45,660 RS. 1,85,88,790) HAS BEEN MADE AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 3. BEING AGGRIEVED BY THE ORDER OF AO, THE ASSESSE E CARRIED THE MATTER BEFORE LD. CIT (A), WHO AFTER DISCUSSING THE MATTER AT GREAT LENGTH AT PAGES 10 TO 21 OF HIS ORDER, ALLOWED PART RELIEF TO THE ASSE SSEE RESTRICTING THE GP RATE TO 5.40% AS AGAINST 5.46% APPLIED BY THE AO, AND THERE BY DELETED THE BALANCE ADDITION. THE OBSERVATIONS MADE BY THE LD. CIT (A ) ARE AS UNDER :- I HAVE CONSIDERED THE FACTS OF THE CASE AND THE S UBMISSIONS MADE. THE AO HAS REJECTED THE BOOKS OF ACCOUNTS BY INVOKI NG PROVISIONS OF SECTION 145(3) OF INCOME TAX ACT, 1961 AND MADE TRA DING ADDITION OF RS. 9,56,870/- BY APPLYING G.P. RATE OF 5.46% AS AG AINST DECLARED GP RATE OF 5.19% BY THE ASSESSEE. I AM OF THE OPINION THAT IN THE STATE OF RAJASTHAN THE PURCHASE PRICE OF THE MILK FROM FARME RS WAS INCREASED UNILATERLY BY THE STATE GOVT CONSIDERING THE DRAUGH T SITUATION IN THE 7 ITA NOS. 265 & 269/JP/2013 SHRI PRABHU DAYAL JAT VS. ITO STATE, WHILE THE ASSESSES MARKET I.E. PURCHASING DE ALERS WERE OUT OF RAJASTHAN FROM WHERE HE COULD NOT REALIZE BETTER SA LE PRICE IN COMPARISON TO INCREASE IN HIS PURCHASE PRICE IN RAJ ASTHAN. THEREFORE, I AM OF THE CONSIDERED OPINION THAT THE GP RATE OF 5. 40% SHOULD BE APPLIED IN THIS CASE AS AGAINST 5.46% CONSIDERED BY A.O. CONSEQUENTLY, THE TRADING ADDITION SUSTAINED TO THI S EXTENT ONLY. THE BALANCE ADDITION IS DELETED. 4. NOW THE ASSESSEE IS BEFORE US. 4.1. THE LD. A/R OF THE ASSESSEE SUBMITTED THAT APP LICATION OF GP RATE OF 5.40% BY THE LD. CIT (A) WAS WITHOUT ANY JUSTIFICATION. THE LD. CIT (A) HAS NOT GIVEN ANY REASON FOR ARRIVING AT THE GP RATE OF 5.40% THOUGH HE HIMSELF HAS ACCEPTED THE PRACTICAL DIFFICULTIES IN TRADING OF MILK DUE TO GE OGRAPHICAL DIFFERENCE BETWEEN SUPPLIERS AND CUSTOMERS. THEREFORE, THE GROSS PROFI T FOR THE YEAR UNDER APPEAL WAS NATURALLY BOUND TO FALL, THOUGH BY A VERY SMALL DIF FERENCE I.E. 0.27%. THEREFORE, THE LD. A/R IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCE S OF THE CASE PRAYED THAT THE GP RATE AS DECLARED BY THE ASSESSEE MAY PLEASE BE ACCE PTED AND THE ADDITION SUSTAINED BY THE LD. CIT (A) OF RS. 7,82,083/- HAVING ADOPTED THE GP RATE OF 5.40% DESERVES TO BE DELETED. 4.2. ON THE OTHER HAND, THE LD. D/R SUPPORTED THE O RDER OF LD. CIT (A). 4.3. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. ON PERUSAL OF THE BOOKS OF ACCOUNT ALONG W ITH VARIOUS DOCUMENTS FURNISHED BY THE ASSESSEE, WE FIND THAT THE LD. CIT (A) HAS R IGHTLY ESTIMATED THE GP RATE AT 5.40% AFTER TAKING INTO CONSIDERATION THE TRADING R ESULTS OF THE ASSESSEE FOR THE PRECEDING ASSESSMENT YEARS. THEREFORE, WE SEE NO J USTIFICATION TO INTERFERE WITH THE ORDER OF LD. CIT (A) WHICH IS UPHELD. IN THE LIGHT OF ABOVE, THE GROUND OF THE ASSESSEE IS DISMISSED. 8 ITA NOS. 265 & 269/JP/2013 SHRI PRABHU DAYAL JAT VS. ITO ITA NO. 269/JP/2013 (REVENUES APPEAL) : 5. GROUND NO. 1 OF REVENUES APPEAL RELATES TO DELE TION OF ADDITION OF RS. 22,54,518/- MADE BY THE AO UNDER SECTION 40(A)(IA) OF THE IT ACT. 5.1. BRIEF FACTS PERTAINING TO THIS GROUND ARE THAT THE AO MADE THE ADDITION OF RS. 22,54,518/- UNDER SECTION 40(A)(IA) OF THE IT ACT O N THE GROUND THAT THE ASSESSEE HAD NOT DEPOSITED THE TDS DEDUCTED BY HIM UNDER SEC TION 194C BEFORE THE END OF THE RELEVANT FINANCIAL YEAR I.E. 31.03.2009. THE A SSESSEE HAD DEDUCTED TDS OF RS. 30,147/- AND RS. 20,940/- U/S 194C AND DEPOSITED TH E SAME ON 01.06.2009 TO THE CREDIT OF CENTRAL GOVERNMENT. HOWEVER, THE AO ALLEG ED THAT THE SAME SHOULD HAVE BEEN DEPOSITED BEFORE THE END OF THE RELEVANT FINAN CIAL YEAR I.E. 31.03.2009. EXPLANATION REGARDING DISALLOWANCE OF THE SAME WAS SOUGHT FROM THE ASSESSEE VIDE ORDER SHEET DATED 12.12.2011. IN RESPONSE, THE LD. A/R VIDE WRITTEN SUBMISSION DATED 16.12.2011 SUBMITTED THAT THE ASSESSEE HAD MADE PAYMENT OF RS. 13,30,420/- TO CONTRACTORS FOR THE MONTH OF JAN. 20 09 AND DEDUCTED TDS OF RS. 30,147/- THEREON WHICH WAS DEPOSITED ON 01.06.2009. SIMILARLY, PAYMENT OF RS. 9,24,098/- FOR THE MONTH OF FEB. 2009 WAS MADE IN M ARCH & TDS OF RS. 20,940/- WAS DEPOSITED ON 01.06.2009. BOTH THE PAYMENTS WER E MADE PRIOR TO LAST DATE OF FILING OF RETURN I.E. 30.09.2009, THEREFORE, DEDUCT ION OF EXPENSES SHOULD BE ALLOWED AS CLAIMED BY THE ASSESSEE. THE REPLY OF THE ASSESSEE WAS CONSIDERED BUT HE COULD NOT FOUND IT ACCEPTABLE AND, THEREFORE, HE MA DE THE DISALLOWANCE U/S 40(A)(IA). 6. ON APPEAL BEFORE LD. CIT (A), THE LD. CIT (A) DE LETED THE ADDITION BY OBSERVING AS UNDER :- 9 ITA NOS. 265 & 269/JP/2013 SHRI PRABHU DAYAL JAT VS. ITO I HAVE CONSIDERED THE FACTS OF THE CASE AND THE S UBMISSIONS MADE. IN THIS REGARD REFERENCE WAS MADE TO THE DECISION DATE D 9 TH SEPTEMBER, 2011 OF ITAT SPECIAL BENCH B MUMBAI IN ITA NO. 24 04/MUM/2009 FOR AY 2005-06 IN THE CASE OF M/S. BHARATI SHIP YARD LT D., MUMBAI VS. DCIT CIRCLE 3(1), MUMBAI, IN WHICH IT WAS HELD THAT THE AMENDMENT CARRIED OUT BY THE FINANCE ACT 2010 WITH RETROSPECT IVE EFFECT FROM AY 2010-11 CANNOT BE HELD TO BE RETROSPECTIVE FROM AY 2005-06. THE COUNSEL OF THE ASSESSEE WAS GIVEN OPPORTUNITY TO EX PLAIN HIS CASE IN LIGHT OF THE SAID DECISION OF ITAT SPECIAL BENCH B MUMBAI (2011- TIOL-560-ITAT-MUM-SB). THE COUNSEL FOR ASSESSEE HAS SUB MITTED THAT THE HIGH COURT OF CALCUTTA IN THE CASE OF CIT, KOLKATA-XI, KOLKATA VS. VIRGIN CREATIONS (ITAT NO. 302 OF 2011, GA 3200 /11), HAS DISMISSED THE APPEAL OF THE DEPARTMENT ON THE ISSUE WHETHER AMENDMENT TO SECTION 40(A)(IA) IS HAVING RETROSPECT IVE OPERATION OR NOT BY HOLDING THE LD. TRIBUNAL ON FACT FOUND THAT THE ASSESSEE HAD DEDUCTED TAX AT SOURCE FROM THE PAID CHARGES BETWEE N THE PERIOD APRIL 1, 2005 AND APRIL 28, 2006, I.E. WELL BEFORE THE DU E DATE FOR FILING OF THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATI ON. THIS FACTUAL POSITION WAS UNDISPUTED. MOREOVER, THE SUPREME COUR T, AS HAS BEEN RECORDED BY THE LD. TRIBUNAL, IN THE CASE OF ALLIED MOTORS PVT. LTD. AND ALSO IN THE CASE OF ALOM EXTRUSIONS LTD., HAS ALREA DY DECIDED THAT THE AFORESAID PROVISION HAS RETROSPECTIVE APPLICATION. AGAIN, IN THE CASE REPORTED IN 82 ITR 570, THE SUPREME COURT HELD THAT THE PROVISION, WHICH HAS INSERTED THE REMEDY TO MAKE THE PROVISION WORKABLE, REQUIRES TO BE TREATED WITH RETROSPECTIVE OPERATION SO THAT REASONABLE DEDUCTION BE GIVEN TO THE SECTION AS WELL. IN VIEW OF THE AUTHORITATIVE PRONOUNCEMENT OF THE S UPREME COURT, THIS COURT CANNOT DECIDE OTHERWISE. HENCE WE DISMISS THE APPEAL WITHOUT ANY ORDER AS TO COSTS. IN THE PRESENT APPEAL, THE ASSESSEE HAS MADE PAYMEN T OF TDS, WITH RESPECT TO WHICH DISALLOWANCE OF PAYMENT TO CONTRAC TORS HAS BEEN MADE, ON 01.06.2009, WHICH IS WELL BEFORE THE DATE SPECIFIED FOR FILING OF RETURN U/S 139(1). THEREFORE, RESPECTFULLY FOLLO WING THE ORDER OF THE HONBLE HIGH COURT OF CALCUTTA, AS CITED ABOVE, IT IS HELD THAT THE AMENDMENT CARRIED OUT BY THE FINANCE ACT 2010 WITH EFFECT FROM AY 2010-11 WILL HAVE RETROSPECTIVE EFFECT FROM AY 2005 -06 BEING CURATIVE IN NATURE AND CONSEQUENTLY THE DISALLOWANCE OF RS. 22,54,518/- IS DELETED. 7. NOW THE REVENUE IS IN APPEAL BEFORE US. 10 ITA NOS. 265 & 269/JP/2013 SHRI PRABHU DAYAL JAT VS. ITO 7.1. THE LD. A/R FOR THE ASSESSEE SUBMITTED THAT TH E AO WHILE MAKING THE IMPUGNED ADDITION, DID NOT CONSIDER THE FOLLOWING C RUCIAL FACTS AS WELL AS RELEVANT LAW AS POINTED OUT AS UNDER : 1. THAT THE PAYMENT WAS MADE ON 01.06.2009 WHICH IS BE FORE THE DUE DATE OF FILING OF RETURN. 2. THAT AN AMENDMENT HAS BEEN MADE IN SECTION 40(A)(IA ) BY THE FINANCE ACT, 2010 WHICH CHANGED THE POSITION WITH EFFECT OF WHICH, IF THE TDS DEDUCTED AT ANY POINT OF TIME THROUGHOUT THE YEAR W AS NOT DEPOSITED ON OR BEFORE THE END OF THE RELEVANT FINANCIAL YEAR (31.03.2009) IN THIS CASE), THEN THE SAME COULD BE DEPOSITED BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME. 3. THAT THE ABOVE MENTIONED AMENDMENT HAS BEEN HELD TO BE RETROSPECTIVE IN OPERATION BY THE HONBLE ITAT, JAI PUR BENCH, JAIPUR IN THE CASE OF M/S. INDER PRASAD MATHURALAL VS. ITO IN ITA NO. 1068/JP/2010 VIDE ORDER DATED 27.05.2011 AND BY THE HONBLE ITAT, AHMEDABAD BENCH IN THE CASE OF KANUBHAI RAMJIBHAI V S. ITO, (2011) 49 DTR 70 (AHD.). FURTHER, IT HAS BEEN HELD IN THE CASE OF BANSAL PARIVAHAN (INDIA) P. LTD. VS. ITO, 137 TTJ 319 (MUM BAI) THAT THE AMENDMENT CARRIED OUT BY THE FINANCE ACT, 2010 IS C URATIVE AND HENCE, IS APPLICABLE RETROSPECTIVELY. FURTHER, THER E ARE A LOT OF JUDICIAL PRONOUNCEMENTS WHICH HOLD THAT ANY AMENDMENT WHICH IS CURATIVE OR CLARIFICATORY IN NATURE MUST BE GIVEN RETROSPECTIVE EFFECT. CASE LAWS WHICH SUPPORT THIS PROPOSITION ARE : A. ALLIED MOTORS P. LTD. VS. CIT, 224 ITR 677 (SC) 11 ITA NOS. 265 & 269/JP/2013 SHRI PRABHU DAYAL JAT VS. ITO B. GOODYEAR INDIA LTD. & ORS. VS. STATE OF MAHARASHTRA & ANR. (1991) 188 ITR 402 (SC) C. R.B. JODHA MAL KUTHIALA VS. CIT, (1971) 82 ITR 570 (SC) IN LIGHT OF THE ABOVE, IT IS SUBMITTED THAT THIS SE TTLED LEGAL POSITION WAS BRUSHED ASIDE BY THE LD.AO AND HE WENT ON TO MAKE ADDITION U/S 40(A)(IA). NEVERTHELESS, DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE L D. CIT (A), ALL THESE FACTS ALONG WITH RELEVANT LEGAL POSITION WERE SUBMITTED BEFORE LD. CIT (A) WHO AFTER PERUSING THEM CAREFULLY PASSED A VERY REASONED ORDER, ACKNOW LEDGING THEREIN ALL THE ABOVE MENTIONED FACTS AS WELL AS LAW IN LIGHT OF THE SETT LED LAW AND THEREBY DELETED THE ADDITION MADE BY LD. AO. 7.2. A BARE PERUSAL OF THE OBSERVATIONS OF LD. CIT (A) IN HIS APPELLATE ORDER WOULD CLEARLY SHOW THAT THE ORDER OF LD. CIT (A) IS VERY WELL REASONED ORDER, PASSED AFTER DUE EXAMINATION OF ACTUAL FACTS AND CIRCUMSTANCES O F THE CASE AND AFTER PAYING DUE REGARD TO THE CASE LAWS SQUARELY APPLICABLE IN THE FACTS OF THE CASE AND THUS, LEAVES NO SCOPE FOR INTERFERENCE ON ANY GROUNDS. THEREFORE , HE PRAYED THAT THE OBSERVATIONS OF THE LD. CIT (A) MAY BE UPHELD AND T HE APPEAL OF THE REVENUE MAY PLEASE BE DISMISSED. 7.3. ON THE OTHER HAND, THE LD. D/R HEAVILY RELIED ON THE ORDER OF THE AO AND REQUESTED TO SET ASIDE THE ORDER OF LD. CIT (A) AND RESTORE THAT OF THE AO. 7.4. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED TH E MATERIAL ON RECORD. A PERUSAL OF THE RECORD SHOWS THAT THE TDS DEDUCTED F ROM THE PARTIES WAS DEPOSITED TO THE CENTRAL GOVERNMENT ACCOUNT BEFORE THE DUE DA TE OF FILING OF THE RETURN. AS PER THE AMENDMENT MADE IN SECTION 40(A)(IA) BY THE FINANCE ACT, 2010 WHICH IS MADE RETROSPECTIVE IN OPERATION BY THE COORDINATE B ENCH OF THE ITAT IN THE CASE OF M/S. INDER PRASAD MATHURALAL VS. ITO IN ITA NO. 106 8/JP/2010 DATED 27.05.2011 AND 12 ITA NOS. 265 & 269/JP/2013 SHRI PRABHU DAYAL JAT VS. ITO BY THE ITAT AHMEDABAD BENCH IN THE CASE OF KANUBHAI RAMJIBHAI VS. ITO, 49 DTR 70 (AHD.), WE FIND THAT THE TDS DEPOSITED BEFORE TH E DUE DATE OF FILING OF THE RETURN IS IN ORDER. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT (A) WHICH IS UPHELD. THE GROUND OF THE REVENUE IS DISMISSED. THE APPEAL OF THE REVENUE IS ALSO LIABLE TO BE DISMISSED IN VIEW OF THE RECENT CBDT CIRCULAR BE ARING NO. 21/2015 DATED 10.12.2015 AS THE TAX EFFECT IN THIS CASE IS LESS T HAN RS. 10 LACS AND THE REVENUE SHOULD NOT FILE APPEAL OR PURSUE THE APPEAL WHICH HAS TAX EFFECT BELOW THE MONETARY LIMIT PRESCRIBED IN THIS CIRCULAR. AS PER SECTION 268A, NOTIFICATION REFERRED HEREIN ABOVE, IF THE TAX EFFECT IS LESS THAN RS. 10 LACS, THEN THE APPEAL OF THE DEPARTMENT IS LIABLE TO BE DISMISSED BEING NOT MAINTAINABLE/PRESS ED. 8. GROUND NO. 2 RELATES TO DELETION OF PROPORTIONAT E DISALLOWANCE OF INTEREST PAYMENT OF RS. 4,53,206/- MADE BY AO. 8.1. BRIEF FACTS PERTAINING TO THIS GROUND OF APPEA L ARE THAT, IN THE PROFITS & LOSS ACCOUNT PERTAINING TO THE YEAR UNDER APPEAL, THE AS SESSEE HAD CLAIMED A SUM OF RS. 16,28,1271- BEING INTEREST PAID ON FUNDS BORROWED FOR BUSINESS PURPOSES. HOWEVER, THE LD. AO OBSERVED THAT THE ASSESSEE HAD GIVEN ADV ANCES TO A FIRM NAMED M/S PRABHUJEE DAIRY FOOD PROCESSORS PVT. LTD. OF RS. 75,53,442/- AND FURTHER TRADE ADVANCES OF RS. 35,00,000/- AND INTEREST WAS NOT CHARGED THEREON. ON BEING CONFRONTED, IT WAS SUBMITTED BY THE ASSESSEE THAT, THE ASSESSEE HAD SUFFICIENT INTEREST FREE FUNDS IN HIS HANDS TO LEND THE SAME A S INTEREST FREE ADVANCES AND NONE OF THE INTEREST BEARING FUNDS HAS BEEN LENT AS INTE REST FREE ADVANCE AND THAT THE BORROWED FUNDS HAVE BEEN UTILIZED ONLY FOR BUSINESS PURPOSE. SPECIFICALLY, IT WAS SUBMITTED BEFORE THE LD. AO THAT, THE ASSESSEE HAD RECEIVED INTEREST FREE LOANS 13 ITA NOS. 265 & 269/JP/2013 SHRI PRABHU DAYAL JAT VS. ITO TOTALING TO RS. 80,00,000/- IN HIS HANDS AVAILABLE AT HIS DISPOSAL FROM FOLLOWI NG PARTIES: 1. DIVINE HERITAGE HOTEL PVT. LTD. RS. 20,00,000. 00 2. MOOL CHAND YADAV &NISHA YADAV RS. 30,00,000.0 0 3. GM GARMENTS PVT. LTD. RS. 30,00,000.00 RS. 80,00,000.00 THE AO CONSIDERED THE SUBMISSIONS OF THE ASSESSEE B UT FOUND IT NOT ACCEPTABLE AND MADE THE ADDITION BY OBSERVING AS UNDER :- 11. ON PERUSAL OF INTEREST ACCOUNT, IT WAS NOTICED THAT MOST OF INTEREST WAS GIVEN TO VARIOUS FINANCIAL INSTITUTION LIKE KOT AK MAHINDRA, RELIANCE CAPITAL, STANDARD CHARTERED BANK, HDFC, CHOLA MANDA LAM ETC. FROM THE ABOVE DISCUSSION, IT IS CLEAR THAT THE ASSESSEE HAS NOT UTILIZED THE LOAN TAKEN FROM THESE INSTITUTES IN BUSINESS TO THE EXTENT OF QUANTUM OF INTEREST FREE ADVANCE MADE TO M/S. PRABHUJI DAIR Y FOOD PROCESSORS PVT. LTD. THUS, INTEREST DEBITED IN P & L ACCOUNT I S NOT ALLOWABLE TO THE EXTENT OF INTEREST CHARGEABLE ON THE INTEREST FREE ADVANCE GIVEN TO THE COMPANY. CONSIDERING THE FACTS, INTEREST CHARGEABL E AT THE RATE OF 12% P.A. I.E. RS. 4,53,206/- ON THE AMOUNT OF INTER EST FREE ADVANCE MADE TO M/S. PRABHUJI DAIRY FOOD PROCESSORS PVT. LT D. OF RS. 75,53,422/-, IS DISALLOWED OUT OF THE INTEREST DEBI TED TO PROFIT AND LOSS ACCOUNT AND IS ADDED BACK TO THE TAXABLE INCOME OF THE ASSESSEE. 9. ON APPEAL BEFORE LD. CIT (A), THE LD. CIT (A) DE LETED THE ADDITION. HE OBSERVED THAT THE ASSESSEE HAD TAKEN INTEREST FREE ADVANCES FROM VARIOUS PERSONS/CONCERNS AS DETAILED IN ASSESSMENT ORDER AM OUNTING TO RS. 80.00 LACS IN ADDITION TO CAPITAL OF RS. 7,45,220/- WHICH HAS NOT BEEN CONSIDERED BY LD. AO WHILE WORKING THE DISALLOWANCE OF INTEREST. I AM INCLINED TO AGREE WITH THE SUBMISSION OF THE COUNSEL THAT THE FUNDS AVAILABLE IN CAPITAL ACC OUNT OF THE ASSESSEE AS WELL AS INTEREST FREE ADVANCES TAKEN BY THE ASSESSEE SHOULD HAVE BEEN CONSIDERED WHILE WORKING OUT THE DISALLOWANCE AS THE SAME WAS AVAILA BLE FOR MAKING INTEREST FREE ADVANCES. ACCORDINGLY, THE DISALLOWANCE OF INTEREST OF RS. 4,53,206/- U/S 36(1)(III) IS HEREBY DELETED AND THE ASSESSEE GETS RELIEF OF RS. 4,53,206/-. 14 ITA NOS. 265 & 269/JP/2013 SHRI PRABHU DAYAL JAT VS. ITO 10. NOW THE REVENUE IS IN APPEAL BEFORE US. 10.1. THE LD. A/R FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD HIS OWN CAPITAL OF RS. 7,45,220/- AND THUS, TOTAL INTEREST FREE FUNDS AVAILABLE WITH ASSESSEE AMOUNTED TO RS. 87,45,220/-. SINCE SUFFICIENT INTEREST FREE FUNDS WERE AVAILABLE WITH THE ASSESSEE, IT CANNOT BE SAID THAT THE ASSES SEE HAS GIVEN INTEREST FREE ADVANCES OF RS. 75,53,442/- OUT OF THE INTEREST BEARING / BORROWED FUNDS, WITHOUT ESTABLISHING ANY NEXUS BETWEEN THE TWO. IT IS SETTL ED LAW, THE ONUS OF PROVING NEXUS OF INTEREST BEARING FUNDS WITH GIVING INTEREST FREE ADVANCES (NON-BUSINESS PURPOSE) IS ON THE AO. THE LD. A/R PLACING RELIANCE ON THE VARIOUS JUDICIAL PRONOUNCEMENTS REQUESTED THAT THE ORDER OF LD. CIT (A) BE CONFIRME D. 10.2. ON THE OTHER HAND, THE LD. D/R PLACING RELIAN CE ON THE ORDER OF AO, PRAYED THAT THE ORDER OF LD. CIT (A) BE SET ASIDE AND THAT OF THE AO BE RESTORED AND THE ADDITION BE CONFIRMED. 10.3. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED T HE MATERIAL AVAILABLE ON RECORD. AFTER GOING THROUGH THE ORDERS OF BOTH THE LOWER AUTHORITIES AND THE SUBMISSIONS OF THE LD. A/R PLACING RELIANCE ON VARI OUS CASE LAWS AS MENTIONED IN THE WRITTEN SUBMISSIONS, WE FIND NO INFIRMITY IN THE OR DER OF LD. CIT (A) AND THE SAME IS UPHELD. ACCORDINGLY THE GROUND OF THE REVENUE IS DI SMISSED. 11. IN THE RESULT, APPEAL OF THE ASSESSEE AS WELL A S OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 8/04/2016. SD/- SD/- VH-VKJ-EHUK YFYR DQEKJ (T.R. MEENA) (LALIET KUMAR) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 8/04/2016. DAS/ 15 ITA NOS. 265 & 269/JP/2013 SHRI PRABHU DAYAL JAT VS. ITO VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI PRABHU DAYAL JAT, JAIPUR. 2. IZR;FKHZ@ THE ITO WARD 7(3), JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDRVIHY@ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 265 & 269/JP/2013) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR