Vikas Gulati, Mohali V. ITO, Mohali

ITA 322/CHANDI/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73407 (ITAT-CHANDIGARH)
• Duration Of Justice: 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 25-11-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 21-03-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J S NAGAR
• Section: 40A(3); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.322 /CHD/2013 (ASSESSMENT YEAR : 2009-10) SH.VIKAS GULATI, VS. THE INCOME TAX OFFICER, H.NO.259, PHASE I, WARD 6(4), MOHALI. MOHALI. PAN: AWPG4461H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VINEET KRISHAN RESPONDENT BY : SHRI J.S.NAGAR, DR DATE OF HEARING : 25.11.2013 DATE OF PRONOUNCEMENT : 03.01.2014 O R D E R PER SUSHMA CHOWLA, J.M. : THE APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), CHANDIGARH DA TED 30.01.2013 RELATING TO ASSESSMENT YEAR 2009-10 AGAINST THE ORD ER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHOR T THE ACT). 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE REA D AS UNDER: 1. THAT THE ORDER PASSED UNDER SECTION 250(6) OF THE I.T. ACT 1 961 BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), CHANDIGARH IN APPEAL NO. 450/11-12 DATED 30.01.2013 IS CONTRARY TO LAW AND FACTS OF TH E CASE. 2. THAT THE ID. COMMISSIONER OF INCOME TAX (APPEALS), CHANDIGAR H GRAVELY ERRED IN NOT PROVIDING REASONABLE OPPORTUNITY OF BE ING HEARD TO THE ASSESSEE. 3. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E ID. CIT (APPEALS), CHANDIGARH GRAVELY ERRED IN UPHOLDING THE ADDITION MADE BY THE ID. ASSESSING OFFICER ON SHORT TERM CAPITAL GAIN OF RS. 9700/- ON THE ALLEGED SALE OF PROPERTY. 2 4. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LEARNED COMMISSIONER OF INCOME TAX (APPEALS) GRAVELY ERRED IN UPHOLDING THE ACTION OF THE ID. ASSESSING OFFICER WHO HAD MADE ADDITION OF RS. 39,5 4,572/- BY APPLYING THE PROVISIONS OF SECTION 40A(3) OF THE I.T. ACT, 1961. THE PROVISIONS OF SECTION 40A(3) OF THE I.T. ACT, 1961 WERE NOT APPLICABLE TO THE APPELLANT AS THE APPELLANT DERIVED COMMISSION INCOME ONLY FROM THE S ALE AND PURCHASE OF USED VEHICLES. 5. THAT WITHOUT PREJUDICE TO THE ABOVE, THE ADDITION SUSTAINED IS HIGHLY EXCESSIVE. 6. THAT THE APPELLANT CRAVES TO ADD, AMEND OR ALTER A NY GROUND OF APPEAL BEFORE OR AT THE TIME OF HEARING OF APPEAL. ANY OTHER GROUND THAT MAY BE TAKEN UP AT THE TIME O F HEARING WITH THE PERMISSION OF THE HON'BLE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH. 3. THE GROUND NO.1 RAISED BY THE ASSESSEE IS GENER AL AND HENCE THE SAME IS DISMISSED. 4. THE ASSESSEE BY GROUND NO.2 IS AGGRIEVED BY NON- PROVISION OF REASONABLE OPPORTUNITY OF HEARING BY THE CIT (APPEA LS). THE LEARNED A.R. FOR THE ASSESSEE STATED THAT PROPER OPPORTUNIT Y OF HEARING WAS NOT PROVIDED BY THE CIT (APPEALS). HOWEVER, PERUSAL OF PARA 3.2 OF THE APPELLATE ORDER OF THE CIT (APPEALS) REFLECTS THAT THE ASSESSEE HAD APPEARED BEFORE THE CIT (APPEALS) AND SUBMITTED THA T THE APPEAL MAY BE DECIDED ON MERITS. IN VIEW THEREOF, WE FIND NO MER IT IN GROUND NO.2 RAISED BY THE ASSESSEE AND THE SAME IS DISMISSED. 5. THE ASSESSEE HAS RAISED GROUND NO.3 AGAINST THE ADDITION MADE ON SALE OF PROPERTY BY TREATING IT AS SHORT TERM CAPIT AL GAINS AT RS.9700/-. THE LEARNED A.R. FOR THE ASSESSEE HAS FAILED TO ADD RESS THE SAID GROUND OF APPEAL AND THE SAME IS THUS DISMISSED. 6. THE GROUND NO.4 IS AGAINST THE ADDITION MADE BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT AT RS.39,54 ,572/-. 7. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT T HE ASSESSEE WAS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF CAR S. DURING THE YEAR 3 UNDER CONSIDERATION, THE PROFIT & LOSS ACCOUNT REFL ECTED SALES AMOUNTING TO RS.47,41,469/- ON ACCOUNT OF SALE OF 16 CARS/VEHICLES. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD PU RCHASED 18 CARS/VEHICLES AMOUNTING TO RS.52,17,845/-. THE INF ORMATION RELATING TO PURCHASES AND SALES OF CAR ALONGWITH SUPPORTING VOU CHERS WERE FILED BEFORE THE ASSESSING OFFICER AND PERUSAL OF THE SAI D INFORMATION REFLECTED CASH PURCHASES BEING MADE BY THE ASSESSEE IN VIOLATION OF THE PROVISIONS OF SECTION 40A(3) OF THE ACT. THE DETAI LS OF THE PURCHASES MADE BY THE ASSESSEE OF 18 VEHICLES IS TABULATED AT PAGE 3 OF THE ASSESSMENT ORDER. THE ASSESSEE WAS ASKED TO EXPLAI N WHY THE PROVISIONS OF SECTION 40A(3) OF THE ACT BE NOT INVOKED. THE A SSESSEE PLACED RELIANCE ON THE EXCEPTIONS PROVIDED UNDER RULES 6DD (J) AND 6DD(K) OF THE INCOME TAX RULE AND ALSO PLACED RELIANCE ON SER IES OF DECISIONS WHICH ARE ENLISTED UNDER PARA 7.1 OF THE ASSESSMENT ORDER. THE CLAIM OF THE ASSESSEE WAS THAT THE SAID PURCHASES WERE MADE FROM CAR BAZAAR WHICH WAS HELD ONLY ON SUNDAY AT OPEN CAR BAZAAR, S ECTOR 7, MADHYA MARG MARKET, CHANDIGARH AND PAYMENT MADE TO THE OWN ER/S ON SUNDAYS BE EXEMPTED FOR DISALLOWANCE UNDER SECTION 40A(3) O F THE ACT. THE ASSESSING OFFICER AFTER PERUSING THE DETAILS FILED BY THE ASSESSEE HAD DISCUSSED EACH PURCHASE MADE BY THE ASSESSEE IN DET AIL UNDER PARA 8 OF THE ASSESSMENT ORDER, WHEREIN THE ASSESSING OFFICER HAS TABULATED DATES OF PAYMENTS FOR THE PURCHASE OF THE INDIVIDUAL VEHI CLES AND DAYS ON WHICH SUCH PAYMENTS WERE MADE. THE PERUSAL OF THE SAID DETAILS REFLECT THAT THE PAYMENTS WERE MADE ON ALL DAYS EXCEPT SUND AY AND IN SOME CASES THE PAYMENTS WERE MADE IN INSTALLMENTS AND HA D STRETCHED UPTO MONTHS. THUS THE CONTENTION OF THE ASSESSEE FOR CL AIMING EXEMPTION UNDER RULE 6DD(J) OF THE INCOME TAX RULES WAS NOT A CCEPTED. FURTHER, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD P URCHASED CARS AND THEN SOLD THEM AND EVEN COPIES OF THE DELIVERY RECE IPTS OF THE SAID 4 VEHICLES REFLECTED CLEAR INDICATION OF PURCHASES MA DE BY THE ASSESSEE. OUT OF THE SAID PURCHASES, SOME OF THE VEHICLES WER E SHOWN AS CLOSING STOCK AND BALANCE WERE SOLD AFTER HOLDING THE SAME FOR SOME DAYS. THE TABULATED DETAILS IN THIS REGARD ARE UNDER PARA 8.3 OF THE ASSESSMENT ORDER. IN THE ABOVE SAID FACTS, THE ASSESSEE WAS H ELD TO HAVE VIOLATED THE PROVISIONS OF SECTION 40A(3) OF THE ACT AND THUS AD DITION OF RS.39,54,572/- WAS MADE IN THE HANDS OF THE ASSESSE E. 8. THE CIT (APPEALS) UPHELD THE ORDER OF THE ASSESS ING OFFICER. 9. THE ASSESSEE IS IN APPEAL AGAINST THE SAID ORDER OF THE CIT (APPEALS). THE LEARNED A.R. FOR THE ASSESSEE SUBMI TTED THAT THE ASSESSEE WAS ACTING AS A COMMISSION AGENT AND WAS NOT BUYING OR SELLING CARS. IT WAS FURTHER POINTED OUT BY THE LEARNED A.R. FOR THE ASSESSEE THAT IN THE SUCCEEDING YEAR THE SOURCE OF INCOME OF THE ASSESSE E WAS ACCEPTED AS COMMISSION AGENT. THE LEARNED A.R. FOR THE ASSESSE E FURTHER POINTED OUT THAT THE PARTIES FROM WHOM THE PURCHASES MADE WERE IDENTIFIABLE AND PURCHASES BEING GENUINE, THERE WAS NO MERIT IN APPL YING THE PROVISIONS OF SECTION 40A(3) OF THE ACT. RELIANCE WAS PLACED ON THE DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS. BRIJ MOHAN SINGH & CO. [209 ITR 753 (P&H)] AND ALSO ON THE DECISION OF HON'BLE ALLAHABAD HIGH COURT IN CIT VS. RAJA PAL AUTOMOBILES [320 ITR 185 (ALL)]. IT WAS FURTHER POINTED OUT BY THE LEARNED A.R. FOR THE ASSESSEE THAT PURCHASES WERE MADE IN CASH AS THE SAID PARTIES WER E NEW TO THE ASSESSEE. 10. THE LEARNED D.R. FOR THE REVENUE PLACING RELIAN CE ON THE ORDERS OF THE AUTHORITIES BELOW REFERRED TO THE TABULATED DET AILS IN PARA 6 OF THE ASSESSMENT ORDER WHICH CLEARLY REFLECT THAT THE PAY MENTS FOR PURCHASE OF 5 CARS WERE FIRSTLY NOT MADE ON SUNDAYS AND WERE MADE IN INSTALLMENTS, WHICH COULD HAVE BEEN MADE BY WAY OF CHEQUE/CASH. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE CLAIM OF THE ASSESSEE IS THAT IT WAS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF CARS ON COMMISSION BASIS. HOWEVER, THE PERUSAL OF THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT PLACED AT P AGES 5 AND 6 OF THE PAPER BOOK REFLECT THAT THE ASSESSEE HAD OPENING ST OCK OF RS.328624.68 AND DURING THE YEAR UNDER CONSIDERATION IT MADE PUR CHASE OF DIFFERENT VEHICLES TOTALING RS.52,17,845/-. THE ASSESSEE HAD SHOWN SALES AT RS.47,41,469/- AND HAD SHOWN CLOSING STOCK OF RS.8, 05,000/-. IN THE PROFIT & LOSS ACCOUNT THE ASSESSEE HAD DECLARED COM MISSION ON SALE AND PURCHASE OF CAR AT RS.11,03,144/- AND HAD BOOKED VA RIOUS EXPENSES UNDER DIFFERENT HEADS AND DECLARED NET PROFIT OF RS.3,02, 310/-. THE SAID CLOSING STOCK OF RS.8.05 LACS HAD BEEN REF LECTED IN THE BALANCE SHEET. THE ASSESSEE DURING THE YEAR UNDER CONSIDER ATION HAD PURCHASED 18 VEHICLES AS PER THE TABULATED DETAILS UNDER PARA 8.1 OF THE ASSESSMENT ORDER. THE TOTAL PURCHASE PRICE FOR THE SAID VEHIC LES WAS MADE IN CASH AND ON DAYS OTHER THAN SUNDAYS AS IS APPARENT FROM THE TABULATED DETAILS REPRODUCED BY THE ASSESSING OFFICER UNDER PARA 8.1 OF THE ASSESSMENT ORDER. IN RESPECT OF THE PURCHASE OF THE VEHICLES I.E. ITEM NO.5 SAFARI FOR TOTAL COST OF RS.4,20,500/-, ADVANCE OF RS.11,0 00/- WAS MADE ON 20.8.2008. THEREAFTER BALANCE AMOUNT WAS PAID IN I NSTALLMENTS AS UNDER: 28.8.2008 RS. 10,000/- 1.9.2008 RS.2,00,000/- 12.9.2008 RS. 20,000/- 13.9.2008 RS. 68,500/- 22.9.2008 RS.1,11,000/- 6 12. SIMILAR PAYMENTS IN PARTS WERE ALSO PAID BY THE ASSESSEE FOR PURCHASE OF VARIOUS OTHER VEHICLES AS TABULATED UND ER PARA 8.1 OF THE ASSESSMENT ORDER. FURTHER OUT OF THE AFORESAID, 18 VEHICLES, 4 VEHICLES HAVE BEEN SHOWN AS CLOSING STOCK BY THE ASSESSEE WH ICH WERE PURCHASED ON DIFFERENT DATES DURING THE YEAR UNDER CONSIDERAT ION. THE FIRST VEHICLE IS SAFARI PURCHASED ON 21.11.2008, MARUTI-800 PURCH ASED ON 23.1.2009, INDICA BOUGHT ON 19.5.2008 AND SANTRO ON 13.10.2008 . 13. THE CLAIM OF THE ASSESSEE BEFORE US WAS THAT IT WAS NOT ENGAGED IN THE PURCHASE AND SALE OF CARS BUT ON THE OTHER HAND , WAS CARRYING ON THE SAID BUSINESS ON COMMISSION BASIS ONLY. ADMITTEDLY , THE VEHICLES HAVE BEEN PURCHASED IN INSTALLMENTS BY MAKING PAYMENTS I N CASH. THE PERUSAL OF THE PROFIT & LOSS ACCOUNT REFLECT THAT THE ASSES SEE THOUGH HAD OPENING STOCK OF 2 VEHICLES AND CLOSING STOCK OF 4 VEHICLES BUT THE SALE CONSIDERATION OF ALL THE VEHICLES IS IDENTICAL TO I TS PURCHASE PRICE I.E. THE ASSESSEE HAS CLAIMED TO HAVE SOLD VEHICLES AT THE S AME PRICE AT WHICH THE SAME WERE PURCHASED AND ON THE OTHER HAND, THE ASSE SSEE HAD SHOWN COMMISSION ON SALE/PURCHASE OF CARS AT RS.11,03,144 /-. THE PRESENTATION OF THE PURCHASE AND SALE OF VEHICLES BY THE ASSESSE E THOUGH INDICATES THAT THE ASSESSEE WAS ENGAGED IN TRADING OF SAID VEHICLE S, HOWEVER THE PERUSAL OF THE FIGURES REFLECT THAT THE ASSESSEE HA D TABULATED THE LIST OF TOTAL VEHICLES PURCHASED/SOLD THOUGH HIM IN THE PRO FIT & LOSS ACCOUNT BUT ON THE OTHER HAND HAD SHOWN COMMISSION INCOME O N SALE/PURCHASE OF THE VEHICLES AND HAD NOT SHOWN GROSS PROFIT ON THE SALE/PURCHASE OF THE VEHICLES. IN THE ENTIRETY OF THE FACTS AND CIRCUMS TANCES, WHERE THE ASSESSEE IS NOT ENGAGED IN ACTUAL PURCHASE/SALE OF VEHICLES BUT IS ONLY ACTING AS COMMISSION AGENT FOR FACILITATING THE SAL E/PURCHASE OF THE VEHICLES, THE COST OF THE VEHICLES CANNOT BE TREATE D AS EXPENDITURE OF THE ASSESSEE AND THUS PROVISIONS OF SECTION 40A(3) OF T HE ACT ARE NOT 7 ATTRACTED. WE FIND NO MERIT IN THE STAND OF THE AU THORITIES BELOW IN THIS REGARD, IN THE ABSENCE OF ANY EVIDENCE BROUGHT ON R ECORD TO PROVE THAT THE PURCHASE PRICE HAD BEEN PAID BY THE ASSESSEE. THE PURCHASE PRICE PAID HAD BEEN IN INSTALLMENTS IN CASH BUT THE SAME HAD NOT BEEN BOOKED AS AN EXPENDITURE BY THE ASSESSEE AND CONSEQUENTLY, THE PROVISIONS OF SECTION 40A(3) OF THE ACT ARE NOT ATTRACTED. WE D IRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.39,54,572/-. THE GROUND OF APPEAL NO.4 RAISED BY THE ASSESSEE IS THUS ALLOWED. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 3 RD DAY OF JANUARY, 2014. SD/- SD/- (T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 3 RD JANUARY, 2014 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH