WOOD GALLERY, Jaipur V. ITO, Jaipur

ITA 330/JPR/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 99375 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 30-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA JCIT DHK
• Assessee Lawyers: S C JAIN
• Keywords: Reasonable cause
• Section: 68

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JUDICIAL MEMBER VK;DJ VIHY LA-@ ITA NO. 330/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09. M/S. WOOD GALLERY, BASEMENT DENA BANK, NAGAR RESIDENCY, NEAR ROONGTA HOSPITAL, KELGIRI ROAD, MALVIYA NAGAR, JAIPUR. CUKE VS. THE INCOME - TAX OFFICER, WARD-6(1), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAAFW 8066 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI S.C. JAIN , CA JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAJ MEHRA, JCIT LQUOKBZ DH RKJH[K@ DATE OF HEARING : 19/10/2015 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 19/10/2015 VKNS'K@ ORDER PER R.P. TOLANI, JM THE APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF THE LD. CIT (A)-II, JAIPUR DATED 21.02.2014 FOR THE ASSESSMENT YEAR 2008-09. T HE FOLLOWING GROUNDS ARE RAISED BY THE ASSESSEE :- 1. THAT THE LEARNED AUTHORITIES HAD ERRED AT LAW AS WE LL AS ON FACTS IN REJECTING THE BOOK RESULTS AND IN INVOKING OF SECTI ON 145(3) AND THEREBY FURTHER ERRED IN MAKING A TRADING ADDITION OF RS. 1,00,000/- 2 ITA NO. 330/JP/2014 A.Y. 2008-09. M/S. WOOD GALLERY VS. ITO, JAIPUR. DESPITE THAT THE BUSINESS WAS FOR THE 1 ST YEAR AND THE G.P. DECLARED WAS OF 25.19% ON THE SALES. 2. THAT THE LEARNED AUTHORITIES HAD ERRED AT LAW AS WE LL AS ON FACTS IN TAKING THE AMOUNT OF RS. 35,000/- INVESTED BY A PAR TNER AS CAPITAL AS CHARGEABLE TO TAX AS PER SECTION 68 OF THE IT ACT. 3. THAT THE LEARNED AUTHORITIES HAD ERRED AT LAW AS WE LL AS ON FACTS IN MAKING THE DISALLOWANCE OF ADVERTISEMENT EXPENSES O F RS. 2,68,888/- BY INVOKING THE PROVISIONS OF SECTION 40A(IA) READ WITH SECTION 194C. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE DE ALS IN FURNITURE. THE BUSINESS WAS STARTED IN THE YEAR 2007 AND DUE TO DISPUTE AMONG T HE PARTNERS, THE FIRM UNDER WENT 3 CHANGES IN CONSTITUTION. AT THE TIME OF HEARING, IT IS CONTENDED THAT SOME PARTNERS DID NOT PROVIDE THE BOOKS OF ACCOUNTS TO THOSE PARTNERS WHO WERE APPEARING IN INCOME TAX PROCEEDINGS. FOR THE YEAR UNDER CONSIDERATION THE ASSESSEE SHOWN GP RATE OF 25.19% ON SALES. THE NON PRODUCTION OF BOOKS OF ACCOUNT W AS BEYOND THE CONTROL OF THE ASSESSEE. AS THE FACT ABOUT THE DISPUTE AMONG THE PARTNERS HAS NOT BEEN DISPUTED BY THE LOWER AUTHORITIES, IT IS PLEADED THAT A REASONA BLE VIEW MAY BE TAKEN. 3. APROPOS GROUND NO. 2, IT IS PLEADED THAT THE ASS ESSEE FIRM HAS BEEN HELD TO BE GENUINE. IN THAT CASE THE CAPITAL INTRODUCED BY THE PARTNERS CANNOT BE ADDED IN THE HANDS OF THE FIRM AS THE IDENTITY AND GENUINENESS O F PARTNERSHIP OF THE PARTNERS IS ACCEPTED. THEREFORE, ADDITION, IF AT ALL TO BE CONS IDERED, IT MAY BE CONSIDERED IN THE HANDS OF THE PARTNERS AND NOT THE FIRM AS UNEXPLAIN ED CASH CREDIT. 4. APROPOS GROUND NO. 3, LD. COUNSEL FOR THE ASSESS EE CONTENDED THAT THERE WERE VARIOUS PAYMENTS MADE FOR ADVERTISEMENT WHICH WERE LESS THAN RS. 20,000/-. OUT OF 3 ITA NO. 330/JP/2014 A.Y. 2008-09. M/S. WOOD GALLERY VS. ITO, JAIPUR. THE ABOVE EXPENSES, ONLY FOLLOWING PAYMENTS ABOVE R S. 20,000/- WERE LIABLE FOR TDS WHICH WAS NOT MADE. 08.05.2007 RS. 22,917/- 31.05.2007 RS. 42,025/- 22.01.2008 RS. 30,556/- 28.01.2008 RS. 22,795/- A PRAYER WAS MADE TO LD. CIT (A) TO RESTRICT THE DI SALLOWANCE UNDER SECTION 40A(IA) TO THIS EXTENT. LD. CIT (A) CALLED FOR REMAND REPORT. THE AO WITHOUT APPRECIATING THE ASSESSEES LEGAL CONTENTION REPEATED THE ENTIRE ADD ITION WHICH WAS ACCEPTED BY THE LD. CIT (A). SINCE THE OTHER PAYMENTS, EACH BEING LESS THAN RS. 20,000/- CANNOT BE DISALLOWED UNDER SECTION 40(A)(IA). 5. THE LD. D/R SUPPORTED THE ORDER OF THE AO. 6. I HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE FACT ABOUT THE DISPUTE AMONG THE PARTNERS CANNOT BE DISPUTED. THEREFORE, THE ASSESSEE WAS PREVENTED BY REASONABLE CAUSE SINCE BOOKS OF AC COUNTS WERE NOT PRODUCED. THE ESTIMATE OF INCOME BECAME INEVITABLE SINCE THE ASSE SSEES FAILURE OF PRODUCING BOOKS IS NOT DELIBERATE. THEREFORE, THE CASE DESERVES A LENI ENT APPROACH IN THE INTEREST OF JUSTICE. THE ADDITION OF RS. 1,00,000/- IS REDUCED TO RS. 50,000/-. 7. APROPOS GROUND NO. 2, THERE IS MERIT IN THE CONT ENTION OF THE LD. COUNSEL THAT THE PARTNERSHIP HAVING BEEN ACCEPTED, THE CAPITAL INTRO DUCED BY PARTNERS CANNOT BE HELD TO BE UNEXPLAINED CASH OR INCOME OF THE ASSESSEE FIRM. THE ISSUE ABOUT THE AVAILABILITY OF RS. 35,000/- MAY BE CONSIDERED IN THE HANDS OF THE PARTNERS BUT CANNOT BE ADDED TO FIRMS INCOME. IN VIEW THEREOF, THE ADDITION OF RS. 35,000/- IS DELETED. 4 ITA NO. 330/JP/2014 A.Y. 2008-09. M/S. WOOD GALLERY VS. ITO, JAIPUR. 8. APROPOS GROUND NO. 3, THE ADVERTISEMENT PAYMENT S BEING LESS THAN RS. 20,000/-, IN MY CONSIDERED VIEW, THE DISALLOWANCE UNDER SECTI ON 40(A)(IA) IS TO BE RESTRICTED TO RS.1,18,293/-. THE AO IS DIRECTED TO RESTRICT THE DISALLOWANCE TO THIS EXTENT. 9. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 19/10/201 5. VKJ-IH-RKSYKUH (R.P.TOLANI) U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 19/10/ 2015 DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S. WOOD GALLERY, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- THE ITO WARD 6(1), JAIPUR. 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.330/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 5 ITA NO. 330/JP/2014 A.Y. 2008-09. M/S. WOOD GALLERY VS. ITO, JAIPUR.