Mitlesh Jindal & Others, Meerut V. ITO Ward-1 (4), Meerut

ITA 2710/DEL/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 9592 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 18-01-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 18-08-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRATIMA KAUSHIK
• Assessee Lawyers: CHANDER MEHTA
• Keywords: Corroborative evidences
• Section: 40A(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E: NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER AND SHRI B.P. JAIN, ACCOUNTANT MEMBER I.T.A.NO.2710/DEL/2008 ASSESSMENT YEAR : 2003-04 M/S. MITHLESH JINDAL & OTHERS, INCOME-TAX OFFICER, C/O MEHRA & CO., VS. WARD 1(4), MEERUT. CHARTERED ACCOUNTANTS, 7, RAJESHWARI PALACE, NEAR COMMISSIONER RESIDENCE, CIVIL LINES, MEERUT. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI CHANDER MEHTA, CA. RESPONDENT BY : SMT. PR ATIMA KAUSHIK, SR. DR. O R D E R PER B.P. JAIN, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), MEERUT, DATED 3 RD JUNE, 2008 IN AN APPEAL AGAINST ASSESSMENT FRAMED UNDER SECTION 143( 3) OF THE INCOME-TAX ACT, 1961 (THE ACT). 2. GROUND NO.1 & 2 RAISED IN THIS APPEALS ARE AS UN DER:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED AO ERRED IN LAW BY TREATING THE FIRM AS AOP AND C.I .T.(A) HAS NOT BEEN JUSTIFIED TO CONFIRM BY TREATING THE GENUI NE FIRM AS ILLEGAL AND FURTHER ERRED IN LAW BY TREATING IT AS AOP. 2 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED AO ERRED IN LAW BY NOT ALLOWING THE SALARY AS RS.1, 44,000/- TO THE WORKING PARTNERS WHICH IS AS PER THE IT ACT. 3. WE HAVE HEARD THE PARTIES. BRIEF FACTS OF THE C ASE ARE THAT THE ASSESSEEE FILED THE RETURN OF INCOME IN THE STATUS OF FIRM ON 20.10.2003. THE ASSESSEE IS ENGAGED IN THE PURCHASE AND SALE OF COU NTRY LIQUOR. IT WAS OBSERVED BY THE ASSESSING OFFICER THAT FOR TRADING IN LIQUOR LICENCE WAS OBTAINED IN THE NAME OF MRS. MITHLESH JINDAL, INDIV IDUAL AND IT WAS STATED THAT FOR WANT OF ADEQUATE CAPITAL AND WORKING IN HA NDS FEW OTHER PERSONS JOINED SMT. MITHLESH JINDAL AND A PARTNERSHIP DEED WAS EXECUTED ON 26.3.2002 AND THEREAFTER THE BUSINESS WAS CARRIED O N IN THE STATUS OF FIRM. THE A.O. APPLYING THE CASE LAWS OF THE HONBLE SUPR EME COURT IN THE CASE OF CIT VS. FRIENDS & CO., 256 ITR 177 AND MOTI LAL CHUNI LAL TAK VS. CIT, 234 ITR 472, HELD THE FIRM AS ILLEGAL AS THERE WAS NO FIRM IN EXISTENCE BECAUSE OF VIOLATION OF EXCISE LAWS. THE A.O. ACCO RDINGLY MADE THE ASSESSMENT IN THE STATUS OF AOP ON PROTECTIVE BASIS AND SUBSTANTIVE ASSESSMENT WAS MADE IN THE CASE OF SMT. MITHLESH JI NAL BECAUSE A LICENCE HAD BEEN OBTAINED IN THE INDIVIDUAL NAME. ACCORDIN GLY SINCE THE ASSESSMENT WAS COMPLETED BY THE A.O. IN THE STATUS OF AOP, THE SALARIES TO PARTNERS AMOUNTING TO RS.1,44,000/- CLAIMED WAS DISALLOWED. 3 4. THE LEARNED CIT(A) UPHELD THE ACTION OF THE A.O. FOLLOWING THE DECISION OF DELHI BENCH OF ITAT IN THE CASE OF ANIL KUMAR VS. ITO IN ITA NO.3169/DEL/2005 FOR THE ASSESSMENT YEAR 2001-02. HOWEVER, VIDE PARA NO.7.2 OF THE LEARNED CIT(A)S ORDER, THE LEARNED C IT(A) DID NOT AGREE WITH THE VIEWS OF THE ASSESSING OFFICER IN MAKING THE AS SESSMENT ON PROTECTIVE BASIS. SINCE ONCE THE STATUS HAS BEEN TAKEN AS AOP AND THE AOP HAS NOT BEEN PROVED TO BE SHAM AND ONLY A PAPER ENTITY, THE RE IS NO REASON FOR TAKING THE INCOME IN THE HANDS OF INDIVIDUAL LICENCE HOLDE R. NOTHING HAS BEEN BROUGHT ON RECORD TO PROVE THAT THE OTHER PARTNERS ARE ONLY FOR NAME SAKE AND THE ENTIRE BUSINESS IS RUNNING FINANCIALLY AND ADMI NISTRATIVELY ONLY BY THE LICENCE HOLDER AND NO SUCH PROPOSITION HAS BEEN MAD E BY THE A.O. IN HIS ORDER. THEREFORE, THE OTHER PARTNERS WERE TREATED AS GENUINE PARTNERS AND THE AOP WAS TREATED AS VALID AOP IN WHOSE HANDS ASSESSM ENT SHOULD HAVE BEEN MADE ON SUBSTANTIVE BASIS. VIDE PARA 7.3 OF HIS OR DER, THE LEARNED CIT(A) CONFIRMED THE ACTION OF THE A.O. IN DISALLOWING THE SALARY TO THE PARTNERS. 5. WE HAVE PERUSED THE FACTS OF THE CASE. WE CONCU R WITH THE VIEWS OF THE LEARNED CIT(A) THAT THE FIRM HAS VIOLATED THE P ROVISIONS OF STATE EXCISE LAW SINCE THE LICENCE HAD BEEN OBTAINED IN THE NAME OF ONE OF THE PARTNERS BUT THE BUSINESS HAS BEEN CARRIED OUT BY INCORPORAT ING CERTAIN OTHER PARTNERS WHO ARE NOT LICENCE HOLDERS. THESE VIEWS ARE COVER ED BY THE DECISION OF 4 ITAT DELHI BENCH (MEERUT CAMP) IN THE CASE OF ANIL KUMAR VS. ITO (SUPRA) ON THE IDENTICAL ISSUE. AS REGARDS THE DEC ISIONS PLACED AT PAGES 26 TO 39 OF THE PAPER BOOK IN THE CASE OF M/S. MEENU TOMA R & CO. VS. ITO IN ITA NO.1631/D/2006 DATED 23.5.2008, IN THE SAID CAS E VIDE PARA 4 IT HAS BEEN OBSERVED THAT NOTHING HAS BEEN BROUGHT ON RECO RD BY THE A.O. AS WELL BY THE LEARNED CIT(A) TO SHOW THAT THERE WAS FACTUA L TRANSFER OF LICENCE WHEREAS IN THE PRESENT CASE IN THE PARTNERSHIP DEED PLACED AT PAGES 9 TO 14 OF THE PAPER BOOK AT PAGE 10 IN PARA 2 OF THE PARTNERS HIP DEED, IT HAS BEEN SPECIFICALLY MENTIONED THAT LICENCE SHALL BE IN THE NAME OF SMT. MITHLESH JINDAL WHICH SHALL BE DEEMED TO BE OF THE FIRM. H ERE IN THE PRESENT CASE THE LICENCE HAS BEEN DEEMED TO HAVE BEEN TRANSFERRED IN THE NAME OF THE FIRM THROUGH THE PARTNERSHIP DEED THOUGH THE TRANSFER HA S BEEN HELD TO BE ILLEGAL HEREIN BEFORE. THEREFORE, THE DECISION IN THE CASE OF M/S. MEENU TOMAR & CO. (SUPRA) CANNOT BE APPLIED IN THE PRESENT CIRCUM STANCES AND FACTS OF THE CASE. WE FIND NO INFIRMITY IN THE ORDER OF THE LEA RNED CIT(A) WHO HAS RIGHTLY CONFIRMED THE ACTION OF THE A.O. IN MAKING THE ASSESSMENT AS AOP. THE DIRECTION HAS RIGHTLY BEEN GIVEN TO MAKE THE AS SESSMENT ON SUBSTANTIVE BASIS AND IT HAS BEEN SUBMITTED BY BOTH THE PARTIES THAT THE ADDITIONS IN THE HANDS OF INDIVIDUAL PARTNERS HAVE BEEN DELETED BY T HE LEARNED CIT(A). CONSEQUENTLY, THE DECISION OF LEARNED CIT(A) IS COR RECT IN CONFIRMING THE 5 DISALLOWANCE OF THE SALARY TO THE PARTNERS. THE OR DER OF THE LEARNED CIT(A) APPEARS TO BE REASONED ONE AND WE FIND NO INFIRMITY IN HIS ORDER. THUS GROUND NOS.1 & 2 OF THE ASSESSEE ARE DISMISSED. 6. GROUND NO.3 RAISED IN THIS APPEAL BY THE ASSESSE E IS AS UNDER:- THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LEARNED AO ERRED IN LAW BY MAKING AN ADDITION U/S 40A(3) OF RS .7,43,056/- BEING 20% SO CALLED CASH PAYMENTS OF RS.37,15,283/- AND FURTHER LD. C.I.T.(A) HAS GIVEN PARTIAL RELIEF BY R EDUCING IT TO RS.4,48,197/- BEING 20% OF RS.24,40,986/-. THE OBS ERVATION OF AO AND FINDING GIVEN BY LD. CIT(A) ARE ERRONEOUS AS THE ASSESSEE NEVER MADE ANY PAYMENT EXCEEDING RS.20,000 /- IN SINGLE TRANSACTION, THUS THE ORDER OF AO AS WELL OF LD. C.I.T.(A) ARE BAD IN LAW. 7. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA D MADE PURCHASES OF COUNTRY LIQUOR IN CASH FROM VARIOUS DISTILLERIES. INFORMATIONS WERE OBTAINED FROM THESE DISTILLERIES U/S 133(6) OF THE ACT AS ME NTIONED IN THE ASSESSMENT ORDER. IT WAS OBSERVED BY THE A.O. THAT THE CASH P URCHASES IN EXCESS OF RS.20,000/- HAVE BEEN MADE. THE REPLY OF THE ASSES SEE WAS NOT FOUND SATISFACTORY AND ACCORDINGLY, THE A.O. MADE A DISAL LOWANCE OF 20% OF TOTAL CASH PURCHASES OF RS.37,15,283/- AT RS.7,43,056/-. THE LEARNED CIT(A) AFTER OBTAINING THE REMAND REPORT FOUND CERTAIN PAYMENTS TO HAVE BEEN MADE THROUGH CHEQUES AND ACCORDINGLY DISALLOWANCE TO THA T EXTENT WAS DELETED. THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE IN SUPP ORT OF CASH PAYMENTS 6 AMOUNTING TO RS.24,40,985/- AND THE LEARNED CIT(A) THEREFORE, CONFIRMED THE DISALLOWANCE @ 20% ON THE SAID CASH PAYMENTS. 8. WE HAVE PERUSED THE FACTS OF THE CASE. AS REGAR DS CLAIM OF THE ASSESSEE THAT EACH PAYMENT IN CASH DOES NOT EXCEED RS.20,000/-, THE SAME IS NOT CORROBORATED BY THE ENTRIES IN THE BOOKS OF THE RECIPIENTS I.E. THE DISTILLERIES AS PER THE COPIES OF ACCOUNTS TAKEN BY THE A.O. MOREOVER, THE ASSESSEE HAS ALSO NOT SUBMITTED ANY EVIDENCE IN THE FORM OF CASH RECEIPTS FOR THE PAYMENTS IN CASH BELOW RS.20,000/-. BY MAKING A CLAIM IN THE FORM OF SUBMISSION BEFORE THE LEARNED CIT(A) OR BEFORE US W ITHOUT ANY SUPPORTING EVIDENCE, THE CLAIM CANNOT BE ACCEPTED AND THE DISA LLOWANCE CANNOT BE DIRECTED TO BE DELETED. THE LEARNED CIT(A) AFTER C ALLING FOR THE REMAND REPORT HAS FOUND OUT CERTAIN CHEQUE PAYMENTS FOR WH ICH THE DISALLOWANCE HAS BEEN DELETED ON BALANCE OF THE PAYMENT IN CASH ABO VE RS.20,000/-, THE DISALLOWANCE @ 20% HAS RIGHTLY BEEN CONFIRMED. WE FIND NO INFIRMITY IN HIS ORDER. THUS GROUND NO.3 OF THE ASSESSEE IS ALS O DISMISSED. 9. IN THE RESULT, THE APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 22 ND JANUARY, 2010. SD/- SD/- (C.L. SETHI) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 22 ND JANUARY, 2010. 7 ITA NO.2710/DEL/2008 COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR, ITAT.