DURGA ENTERPRISES, Jaipur V. ITO, BEHROR

ITA 36/JPR/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5424 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-04-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 20-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: RAJ MEHRA J DHK
• 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. 36/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 M/S. DURGA ENTERPRISES JAIPUR TIRAHA, N.H.- SHAHPURA, JAIPUR CUKE VS. THE ITO WARD- BEHROR BEHROR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAFFD 5858D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY :SHRI MANISH AGARWAL FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI RAJ MEHRA, JCIT-DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 04/02/2016 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 01 /04/2016 VKNS'K@ ORDER PER R.P. TOLANI, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A), ALWAR; DATED 06-11-2013 FOR THE ASSESSMENT YEAR 2008-09 WHEREIN THE ASSESSEE IS AGGRIEVED THAT THE LD. CIT( A) HAS ERRED IN:- (I) CONFIRMING THE DISALLOWANCE OF RS. 1,20,000/- O N ACCOUNT OF REMUNERATION PAID TO ONE OF THE PARTNERS OF THE FIR M WITHOUT APPRECIATING THE FACTS THAT THE SAME IS AUTHORIZED IN TERMS OF PARTNERSHIP DEED. (II) UPHOLDING THE ACTION OF THE AO IN MAKING THE DISALL OWANCE OF RS. 43,188/ BEING 20% OF THE TOTAL OUTWARD FREIG HT. ITA NO.36/JP/2014 M/S. DURGA ENTERPRISES VS. ITO, WARD- BEHROR, ALWAR . 2 (III) UPHOLDING THE ACTION OF THE AO IN MAKING DISA LLOWANCE OF RS. 79,605/ U/S 40(A)(IA) OF THE ACT ON ACCOUNT OF FREIGHT INWARD PAID BY THE ASSESSEE. (IV) SUSTAINING THE ADDITIONS MADE BY THE AO TO THE TUNE OF RS. 2,39,625/- OF THE I.T. ACT BY TREATING THE CAPITAL INTRODUCED BY PARTNERS AS UNEXPLAINED INCOME 2.1 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. APROPOS GROUND NO. 1 BRIEF FAC TS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM HAVING TWO PARTN ERS NAMELY SHRI AMIT BHATNAGAR AND SMT. KAVITA SHARMA. BOTH OF THEM ARE CLAIMED TO BE WORKING PARTNERS AND DRAWING REMUNERATION FROM THE ASSESSEE FIRM. SHRI AMIT BHATNAGAR IS CLAIMED TO LOOK AFTER THE DAY TOD AY WORK FIRM RELATING TO THE BUSINESS TRANSACTIONS OF THE FIRM AND SMT. K AVITA SHARMA ON THE OTHER HAND IS CLAIMED TO LOOK AFTER ACCOUNTS OF THE FIRM INCLUDING THE SUPERVISION WORK OF THE FIRM. BOTH THE PARTNERS WER E DRAWING SALARY OF RS. 1,20,000/- EACH FOR THE ALLEGED SERVICES RENDER ED BY THEM TO THE PARTNERSHIP FIRM WHICH IS SAID TO BE IN ACCORDANCE WITH THE TERMS AND CONDITIONS MENTIONED IN THE PARTNERSHIP DEED. CONSI DERING ALL THE REASONS ENUMERATED IN THE ASSESSMENT ORDER, THE AO HELD THA T SMT. KAVITA SHARMA WAS NOT A WORKING PARTNER AND DISALLOWED THE REMUNE RATION PAID TO HER AMOUNTING TO RS. 1,20,000/-. IT IS OBSERVED THAT NO EVIDENCE WAS PRODUCED ABOUT THE WORKING OF SMT. KAVITA FOR THE FIRM, EITH ER AT THE TIME OF ITA NO.36/JP/2014 M/S. DURGA ENTERPRISES VS. ITO, WARD- BEHROR, ALWAR . 3 REMAND PROCEEDINGS AND APPELLATE PROCEEDINGS WHICH IS EVIDENT FORM THE AOS REMAND REPORT CALLED BY LD. CIT(A) AS UNDER:- 4.3 REMAND REPORT CALLED FROM AO, WHICH IS SUBMIT TED AS UNDER:- A LETTER WAS WRITTEN TO THE ASSESSEE ON 7-05-2013 T O PRODUCE PARTNER SMT. KAVITA BHATNAGAR FOR VERIFICAT ION/ EXAMINATION FIXING THE DATE FOR 15-05-2013 WHICH WA S SENT THROUGH REGISTERED POST BUT NEITHER THE ASSESSEE PRODUCED S MT. KAVITA BHATNAGAR ON THE FIXED DATE NOR ANY REPLY WAS RECEI VED. ANOTHER OPPORTUNITY WAS GIVEN TO THE ASSESSEE VIDE THIS OFF ICE LETTER NO.348 DATED 17-05-2013 BUT NEITHER THE ASSESSEE PRODUCED SMT. KAVITA BHATNAGAR FOR VERIFICATION / EXAMINATION NOR ANY WR ITTEN REPLY WAS RECEIVED. SINCE THE ASSESSEE HAS NOT MADE COMPLIANC E OF THE ABOVE LETTERS IN SPITE OF PROVIDING HIM SUFFICIENT OPPORT UNITIES IT IS THEREFORE, VERY MUCH CLEAR THAT THE ASSESSEE HAS NO THING TO SAY IN THIS REGARD HENCE THE PLEA TAKEN BY THE ASSESSEE IN HIS WRITTEN SUBMISSION BEFORE YOUR HONOUR HOLDS NO GROUND AND D ESERVE TO BE REJECTED. THE ADDITION MADE BY AO ON ACCOUNT OF DI SALLOWANCE OF REMUNERATION IS QUITE JUSTIFIED AND DESERVE TO BE S USTAINED. IT IS CONTENDED BY LD. DR THAT THE ONUS LIES ON THE ASSESSEE TO SUBSTANTIATE ITS CLAIM THAT SMT. KAVITA SHARMA ACTUALLY WORKED F OR THE FIRM SO AS TO BE ELIGIBLE FOR PAYMENT OF REMUNERATION PAID TO. IN CA SE OF NON-DISCHARGE OF ONUS, THE EXPENDITURE INCURRED CANNOT BE ALLOWED. I FIND MERIT IN HIS CONTENTION, SINCE ASSESSEE FAILED TO DISCHARGE ITS ONUS IN ESTABLISHING THAT SMT. KAVITA ACTUALLY WORKED AS WORKING PARTNER AND RENDERED THE ALLEGED SERVICES DURING THE COURSE OF ASSESSEES BUSINESS. IN VIEW THEREOF, THE GROUND NO. 1 OF THE ASSESSEE IS DISMISSED. ITA NO.36/JP/2014 M/S. DURGA ENTERPRISES VS. ITO, WARD- BEHROR, ALWAR . 4 3.1 APROPOS GROUND NO. 2, I.E. 20% AD HOC DISALLOW ANCE AMOUNTING TO RS. 43,188/-, THE AO OBSERVED THAT THE FREIGHT P AYMENT IS NOT SUBJECT TO PROPER VERIFICATION AND THE SAME CANNOT BE ALLOWED IN TOTO. THE AO DISALLOWED 20% OF THE FREIGHT PAYMENT MADE BY THE A SSESSEE RESULTING THEREBY ADDITION OF RS. 43,188 AS NO DOCUMENTARY E VIDENCE WERE FURNISHED BEFORE THE AO DURING THE COURSE OF ASSESS MENT PROCEEDINGS. HENCE, THE SAME WAS DISALLOWED BY THE AO WHICH WAS CONFIRMED BY THE LD. CIT(A). IT IS OBSERVED THAT THE ASSESSEE HAS PA ID SMALL/ PETTY AMOUNTS TO THE LOCAL LABORS FOR LOADING AND UNLOADING AND L OCAL TRANSPORTERS WHO OPERATE AT A VERY SMALL LEVEL AND BEING ILLITERATE THEY DO NOT ISSUE ANY RECEIPT IN RESPECT OF THE CHARGED AMOUNT BY THEM. IT IS NOT ALSO NOT PRACTICALLY POSSIBLE FOR THE ASSESSEE TO KEEP OR MA INTAIN ANY VOUCHERS IN RESPECT OF THE SERVICES OBTAINED BY SUCH SMALL LOCA L LABORS. I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVA ILABLE ON RECORD. IN VIEW OF THE ABOVE REASONS AND FACTS AND CIRCUMSTANC ES OF THE CASE, THE AD HOC DISALLOWANCE AMOUNTING TO RS. 43,188/- IS DELET ED. 4.1 APROPOS GROUND NO. 3, THE AO DISALLOWED THE AMO UNT OF RS. 79,605/- HOLDING THAT THE PAYMENT MADE TO M/S. SHAH PURA GOODS TRANSPORT COMPANY TOWARDS FREIGHT PAYMENT WAS LIABL E FOR TDS AND THE ASSESSEE HAS NOT DONE SO. THEREFORE, THE AMOUNT WAS DISALLOWED BY THE ITA NO.36/JP/2014 M/S. DURGA ENTERPRISES VS. ITO, WARD- BEHROR, ALWAR . 5 AMOUNTING TO RS. 79,605/- IN VIEW OF THE PROVISIONS OF SECTION 40A(IA) OF THE ACT WHICH WAS CONFIRMED BY THE LD. CIT(A). 4.2 THE LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT THE PAYMENTS MADE TO M/S.SHAHPURA GOODS TRANSPORT COMPANY IS ACTUALLY THE REIMBURSEMENT ON BEHALF OF M/S. BIRLA TYRES WHO HAS PAID THE FREIGHT CHARGES. THE ASSESSEE IS ONLY AN AGENT AND ONLY ON THE INSTRUCTIONS OF M/S. BIRLA TYRES, THE PAYMENT WAS MADE TO M/S. SHAH PURA GOODS TRANSPORT COMPANY. THESE FACTS ARE DULY REFLECTED I N THE DEBIT ENTRIES POSTED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE WHI CH WERE EXPLAINED TO THE AUTHORITIES BELOW. THUS THE ASSESSEE WAS NEITHE R THE PARTY OF THE GOODS CONTRACTOR NOR HAS PAID THE FREIGHT CHARGES. HENCE, THE REIMBURSEMENT MADE BY M/S. BIRLA TYRES ON BEHALF FR EIGHT PAYMENT TO THE ASSESSEE IS NOT LIABLE FOR TDS U/S 40A(IA) OF THE A CT. 4.3 THE LD. DR RELIED ON THE ORDERS OF THE LOWER AU THORITIES. 4.4 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. I FIND MERIT IN THE ARGUMENTS OF THE LD. AR . THEREFORE, THE ADDITION IS QUESTION IS NOT LIABLE F OR TDS. HENCE, THE DISALLOWANCE MADE AMOUNTING TO RS. 79,605/- U/S 40A (IA) OF THE ACT IS DELETED. ITA NO.36/JP/2014 M/S. DURGA ENTERPRISES VS. ITO, WARD- BEHROR, ALWAR . 6 5.1 ADVERTING TO GROUND NO. 4, THE LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT THE PARTNER SHRI AMIT BHATNAGAR INTRO DUCED INITIAL CAPITAL OF RS. 3,39,625/- AND PARTNERSHIP FIRM HAS BEEN HELD T O BE GENUINE AND SHRI AMIT BHATNAGAR IS REGULARLY ASSESSED AND FILED ITR HAVING PAN AFVPB 6313. THE COPY OF THE ITR FOR THE YEAR 2008-09 AND 2009-10 WAS ALSO SUBMITTED. SHRI AMIT BHATNAGAR WAS EMPLOYEE WITH RE LIANCE PETRO MARKETING (P) LTD. PRIOR TO THIS BUSINESS. IT IS SE TTLED LAW THAT ONCE THE FIRM IS HELD TO BE GENUINE THEN THE CAPITAL INTRODU CED BY THE PARTNER CANNOT BE TREATED IN THE FIRM AS UNEXPLAINED INCOME U/S 68 OF THE ACT. THE LD. AR OF THE ASSESSEE RELIED ON THE FOLLOWING CASE LAWS. (I) 115 TAXMANN.COM 322 (2011) KARNATAKA HC) (II) CIT VS. METACHEN INDUSTRIES, 245 ITR 160 (M.P.) (III) ITO VS. DHIMAN SYSTEM, 100 TTJ 466 (AMRITSAR) (IV) CIT VS. JAISWAL MOTOR FINANCE, 141 ITR 706 (ALL.) (V) INDIA RICE MILLS VS. CIT, 218 ITR 508 (ALL.) (VI) SURENDRA MOHAN SETH VS. CIT, 221 ITR 239 (ALL. ) THE AO FURTHER ALLOWED REMUNERATION PAID TO SHRI AM IT BHATNAGAR AND HELD HIM TO BE THE WORKING PARTNER. BEING A REGULAR ASSESSEE, THE AMOUNT IN QUESTION AT BEST BE IN THE HANDS OF SHRI AMIT BH ATNAGAR. CONSEQUENTLY, THE CAPITAL INTRODUCED BY AMIT BHATNAGAR CANNOT BE HELD AS UNEXPLAINED INCOME OF THE FIRM. 5.2 THE LD. DR RELIED ON THE ORDER OF THE AO. ITA NO.36/JP/2014 M/S. DURGA ENTERPRISES VS. ITO, WARD- BEHROR, ALWAR . 7 5.3 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. I FIND MERIT IN THE CONTENTION OF THE LD. AR THAT THE PARTNER SHRI AMIT BHATNAGAR HAS BEEN HELD TO BE GEN UINE RELYING ON THE CITED CASE LAWS. THE ADDITION MADE IN QUESTION CANN OT BE A SUBJECT MATTER OF SECTION 68. IN VIEW THEREOF, THE ADDITION MADE A MOUNTING TO RS. 2,39,625/- IS DELETED. 6.0 IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 01 /04/201 6. SD/- VKJ-IH-RKSYKUH (R.P.TOLANI) U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 01 /04/ 2016 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO:- 1. VIHYKFKHZ@ THE APPELLANT- M/S. DURGA ENTERPRISES, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE ITO, WARD- BEHROR, ALWAR 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. 36/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR