Income Tax Officer, Barabanki V. M/s Rajiv and Company, Barabanki

ITA 368/LKW/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4786 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 8 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 07-01-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 09-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR A K SINGH
• Assessee Lawyers: K R RASTOGI
• Section: 40A(3); 68

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.368/LKW/2014 ASSESSMENT YEAR:2010-11 INCOME TAX OFFICER, BARABANKI. VS. M/S RAJIV AND COMPANY, BHEETRI PEERBATAWAN, BARABANKI. PAN:AAEFR6741H (APPELLANT) (RESPONDENT) APPELLANT BY DR. A. K. SINGH, CIT, D.R. RESPONDENT BY SHRI K. R. RASTOGI, C. A. DATE OF HEARING 07/01/2016 DATE OF PRONOUNCEMENT 03 /02/2016 O R D E R PER A. K. GARODIA, A.M. THIS IS REVENUES APPEAL DIRECTED AGAINST THE ORD ER OF LEARNED CIT(A)-II, LUCKNOW DATED 31/12/2013 FOR THE ASSESSM ENT YEAR 2010-11. 2. GROUND NO. 1 IS AS UNDER: 1. THE COMMISSIONER OF INCOME TAX (APPEALS), LUCK NOW HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETI NG THE ADDITION OF RS.16,28,868/- MADE BY THE ASSESSING OFFICER UNDER HEAD UNEXPLAINED UNSECURED LOAN AS TH E ASSESSEE FAILED TO PROVE THE CREDITWORTHINESS AND GENUINENESS OF THE PERSON LENDING UNSECURED LOAN DURING THE ASSESSMENT PROCEEDINGS. 3. LEARNED D. R. OF THE REVENUE SUPPORTED THE ORDER OF ASSESSING OFFICER WHEREAS LEARNED A. R. OF THE ASSESSEE SUPPO RTED THE ORDER OF LEARNED CIT(A). 2 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT THIS ISSUE WAS DECIDED BY CIT(A) IN FAVOUR OF THE ASSESSEE ON THE BASIS THAT THIS AMOUNT OF RS.16,28,868/- ADDED BY THE ASSESSING OFF ICER U/S 68 IS REGARDING OPENING BALANCE OF THREE OUTGOING PARTNER S AND THEREFORE, THE SAME IS NOT JUSTIFIED. WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) ON THIS ISSUE BECAUSE OPENING BALANCE CANNOT BE ADDED IN TH E PRESENT YEAR U/S 68 AND HENCE, WE DECLINE TO INTERFERE IN THE ORDER OF LEARNED CIT(A) ON THIS ISSUE. ACCORDINGLY, GROUND NO. 1 IS REJECTED. 5. GROUND NO. 2 IS AS UNDER: 2. THE COMMISSIONER OF INCOME TAX(APPEALS), LUCKN OW HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING T HE ADDITION OF RS.2,17,03,387/- MADE BY THE ASSESSING OFFICER, ON ACCOUNT OF UNEXPLAINED SUNDRY CREDITORS . 6. LEARNED D. R. OF THE REVENUE SUPPORTED THE ORDER OF ASSESSING OFFICER WHEREAS LEARNED A. R. OF THE ASSESSEE SUPPO RTED THE ORDER OF LEARNED CIT(A). HE ALSO SUBMITTED THAT THE DETAILS ARE AVAILABLE ON PAGES 2-31 OF THE PAPER BOOK. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT IT IS NOTED BY THE ASSESSING OFFICER IN PARA 5 OF THE ASSESSMEN T ORDER THAT IN THE BALANCE SHEET OF THE ASSESSEE AS ON 31/03/2010, SUN DRY CREDITORS AMOUNTING TO RS.2,20,87,655/- ARE SHOWN. THE ASSES SING OFFICER ASKED THE ASSESSEE TO PROVIDE NAMES, ADDRESSES AND COPIES OF ACCOUNTS OF THE SUNDRY CREDITORS BUT THE ASSESSEE HAS NOT PROVIDED ANY DET AIL OF THE SUNDRY CREDITORS. THE ASSESSING OFFICER HAS FURTHER NOTED THAT IN FACT VIDE ITS REPLY DATED 22/02/2013, THE ASSESSEE HAS EXPRESSED ITS IN ABILITY TO PROVIDE ANY FURTHER DETAILS. THE ASSESSING OFFICER HAS FURTHER NOTED THAT A PERUSAL OF RECORD REVEALS THAT NOT EVEN NAMES OF ANY SUNDRY CR EDITOR HAD BEEN 3 PROVIDED AND IT IS ALSO NOT KNOWN AS TO WHETHER THE CREDITORS ARE OF MATERIAL OR WAGES OR OF EXPENSES AND OPENING AND CL OSING BALANCES IN THESE ACCOUNTS ARE NOT KNOWN AND THE ASSESSEE HAS N OT MADE ANY EFFORT TO PROVE EVEN THE BASIC REQUIREMENT OF LAW WITH REGARD TO IDENTITY OF PERSONS. AFTER MAKING THESE OBSERVATIONS, THE ASSESSING OFFI CER MADE ADDITION OF RS.2,20,87,655/-, WHICH WAS DELETED BY CIT(A) ON TH E BASIS THAT OPENING BALANCE OF UNPAID LIABILITY OF MATERIAL AND LABOUR ETC. OF RS.2,17,03,387/- COULD NOT BE TREATED UNEXPLAINED UNPAID LIABILITY I N THE HANDS OF THE ASSESSEE DURING THE PRESENT YEAR UNDER CONSIDERATIO N. AS PER THE DETAILS AVAILABLE IN PAPER BOOK, WE FIND THAT THE LEDGER AC COUNT OF THE CREDITORS FOR MATERIAL AND LABOUR ETC. IS AVAILABLE ON PAGES 47 T O 64 OF THE PAPER BOOK. ON PAGE NO. 47 OF THE PAPER BOOK IS OPENING BALANCE AS ON 01/04/2009 OF RS.2,17,03,381/- AND THERE ARE DEBITS AND CREDITS B UT EVEN IN THE LEDGER ACCOUNT, NO NAME IS AVAILABLE AS TO ON WHOSE ACCOUN T THE LIABILITY IS INCREASING AND THE PAYMENTS ARE MADE IN CASH ON VAR IOUS DATES WITHOUT GIVING THE NAMES AS TO WHOM THE PAYMENT IS MADE. T HE CREDITS ARE WITH THE NARRATION, PURCHASE OF CONTRACT MATERIALS, LABO UR AND WAGES ETC. AND THE DEBIT IS BY MENTIONING NARRATION SUCH AS CASH O R BANK OF BARODA (CC). IT MAY BE THAT THE PAYMENTS IN THE PRESENT YEAR OF RS.1519.70 LACS HAS LIQUIDATED THE ENTIRE AMOUNT OF OPENING BALANCE OF RS.217.03 LACS AND THE ENTIRE AMOUNT OF CLOSING BALANCE OF RS.277.01 LACS IS IN RESPECT OF AMOUNT CREDITED IN THE PRESENT YEAR WITHOUT DISCLOSING THE NAME OF THE CREDITORS AND THEIR IDENTITY ETC. AND UNDER THESE FACTS, IN O UR CONSIDERED OPINION, THE ORDER OF CIT(A) IS NOT SUSTAINABLE BECAUSE THE ASSE SSEE HAS NOT BEEN ABLE TO ESTABLISH THE NAMES, ADDRESSES AND IDENTITY AND CREDITWORTHINESS OF THE CREDITORS AND THEREFORE, WE REVERSE THE ORDER OF CI T(A) ON THIS ISSUE AND RESTORE THAT OF THE ASSESSING OFFICER. WE ARE AWAR E THAT THERE ARE CERTAIN JUDGMENTS WHICH SAY THAT CREDITORS OF GOODS OR EXPE NSES CANNOT BE ADDED U/S 68 BUT IN THE PRESENT CASE, THE ASSESSEE HAS NO T ESTABLISHED THIS ALSO 4 THAT THE CREDITORS ARE FOR GOODS OR EXPENSES AND ME RE CREDITING THE AMOUNTS IN THE ACCOUNT WITH THE NOMENCLATURE CREDI TORS FOR MATERIAL AND LABOUR ETC. AS PER COPY AVAILABLE ON PAGES 47 TO 6 4 OF THE PAPER BOOK DOES NOT ESTABLISH THE CONTENTION THAT THERE ARE CREDITO RS FOR GOODS AND/OR EXPENSES PARTICULARLY IN THE ABSENCE OF NAME AND AD DRESS OF THE SAID CREDITORS. HENCE, WE REVERSE THE ORDER OF CIT (A) O N THIS ISSUE AND RESTORE THAT OF THE A.O. ACCORDINGLY, GROUND NO. 2 IS ALLOW ED. 8. GROUND NO. 3 IS AS UNDER: 3. THE COMMISSIONER OF INCOME TAX(APPEALS), LUCKNO W HAS ERRED IN LAW AND ON FACTS OF THE CASE IN ALLOWI NG THE SALARY OF PARTNERS AMOUNTING RS.32,71,702/-. 9. LEARNED D. R. OF THE REVENUE SUPPORTED THE ORDER OF ASSESSING OFFICER WHEREAS LEARNED A. R. OF THE ASSESSEE SUPPO RTED THE ORDER OF LEARNED CIT(A). 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE F IND THAT THE DISALLOWANCE OF SALARY TO PARTNERS HAS BEEN DELETED BY CIT(A) ON THE BASIS THAT DURING THE YEAR IN QUESTION, FRESH PARTNERSHIP DEED WAS PREPARED IN WHICH SALARY TO PARTNERS WAS SETTLED TO BE PAID ON THE BASIS OF PROFIT SHARING RATIO AND THIS WAS DONE TO GIVE BOOST TO TH E PARTNERS TO WORK MORE DILIGENTLY AND HONESTLY FOR THE UPLIFTMENT OF THE F IRM. HE HAS FURTHER NOTED THAT THE PARTNERS WERE ALSO REDUCED FROM 8 TO 5. R EGARDING THIS ALLEGATION THAT THE PARTNERSHIP DEED WAS NOT FILED, IT IS NOTE D BY CIT(A) THAT THE SAME WAS FILED BEFORE THE ASSESSING OFFICER AND THIS FIN DING OF CIT(A) COULD NOT BE CONTROVERTED BY LEARNED D. R. OF THE REVENUE AND THEREFORE, ON THIS ISSUE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) AND THEREFORE, WE UPHOLD HIS ORDER ON THIS ISSUE. ACCORDINGLY, GROUN D NO. 3 IS REJECTED. 11. GROUND NO. 4 IS AS UNDER: 5 4. THE COMMISSIONER OF INCOME TAX(APPEALS), LUCKNO W HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETI NG THE ADDITION OF RS.54,87,082/- MADE BY THE ASSESSING OF FICER BY INVOKING PROVISIONS OF SECTION 40A(3) OF THE INC OME TAX ACT, 1961. 12. LEARNED D. R. OF THE REVENUE SUPPORTED THE ORDE R OF ASSESSING OFFICER WHEREAS LEARNED A. R. OF THE ASSESSEE SUPPO RTED THE ORDER OF LEARNED CIT(A). 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE F IND THAT THE ASSESSING OFFICER HAS NOTED IN THE ASSESSMENT ORDER THE DATES AND AMOUNT OF VARIOUS PAYMENTS AND AFTER EXCLUDING THOSE PAYME NTS, WHICH WERE MADE BY WAY OF CHEQUE, THE ASSESSING OFFICER HAS DISALLO WED THE AMOUNT OF CASH PAYMENTS IN EXCESS OF RS.20,000/- BY INVOKING THE P ROVISIONS OF SECTION 40A(3) OF THE ACT. THIS DISALLOWANCE WAS DELETED B Y CIT(A) ON THE BASIS OF SUBMISSIONS OF THE ASSESSEE BEFORE HIM STATING THAT ON EACH DAY, PURCHASES WERE MADE IN CASH FROM DIFFERENT PERSONS/PARTIES ON SEVERAL OCCASIONS BUT THE PAYMENT MADE TO SINGLE PARTY ON SINGLE PURCHASE DID NOT EXCEED THE LIMIT OF RS.20,000/-. NO SUCH INSTANCE HAS BEEN NO TED BY CIT(A). IN THE PAPER BOOK FILED BEFORE US ALSO, NO SUCH EVIDENCE H AS BEEN BROUGHT ON RECORD TO ESTABLISH THAT THE DATE-WISE CASH PAYMENT NOTED BY THE ASSESSING OFFICER IS NOT PAYMENT TO ONE PARTY BUT TO DIFFEREN T PARTIES. HENCE, ON THIS ISSUE ALSO, WE FEEL THAT THE ORDER OF CIT(A) IS NOT SUSTAINABLE AND THEREFORE, WE REVERSE THE SAME AND RESTORE THAT OF THE ASSESSI NG OFFICER. ACCORDINGLY, GROUND NO. 4 IS ALLOWED. 14. GROUND NO. 5 IS AS UNDER: 5. THE COMMISSIONER OF INCOME TAX(APPEALS), LUCKNO W HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETI NG THE ADDITION OF RS.23,33,616/- OUT OF VARIOUS EXPENSES CLAIMED BY THE ASSESSEE IN ITS PROFIT AND LOSS ACCO UNT. 6 15. LEARNED D. R. OF THE REVENUE SUPPORTED THE ORDE R OF ASSESSING OFFICER WHEREAS LEARNED A. R. OF THE ASSESSEE SUPPO RTED THE ORDER OF LEARNED CIT(A). 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE F IND THAT THIS DISALLOWANCE WAS PARTLY DELETED BY CIT(A) ON THE BA SIS THAT THE DISALLOWANCE OF 2.5% WAS MADE BY THE ASSESSING OFFI CER ON AD HOC BASIS AND IN THE OPINION OF CIT(A), THE DISALLOWANCE OF 1 % IS REASONABLE. IN THIS MANNER, HE REDUCED THE DISALLOWANCE TO RS.15,55,749 /- AS AGAINST DISALLOWANCE OF RS.38,89,360/- MADE BY THE ASSESSIN G OFFICER. CONSIDERING THE FACTS OF THE PRESENT CASE, WE FEEL THAT THERE I S NO INFIRMITY IN THE ORDER OF CIT(A) ON THIS ISSUE. HENCE, WE DECLINE TO INTE RFERE IN THE ORDER OF LEARNED CIT(A) ON THIS ISSUE. ACCORDINGLY, GROUND NO. 5 IS REJECTED. 17. GROUND NO. 6 IS AS UNDER: 6. THE COMMISSIONER OF INCOME TAX(APPEALS), LUCKN OW HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETI NG THE ADDITION OF RS.5,77,731/- MADE BY THE ASSESSING OFF ICER UNDER HEAD DAMAGE AND STORAGE EXPENSES. 18. LEARNED D. R. OF THE REVENUE SUPPORTED THE ORDE R OF ASSESSING OFFICER WHEREAS LEARNED A. R. OF THE ASSESSEE SUPPO RTED THE ORDER OF LEARNED CIT(A). 19. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE F IND THAT IT IS NOTED BY CIT(A) ON PAGE NO. 21 OF HIS ORDER THAT RIGHT FR OM LOADING, UNLOADING TILL THE MATERIAL IS USED AT ITS FINAL STAGE, THERE IS S HORTAGE AT EVERY STAGE AND THE DAMAGE TO MATERIAL IS CAUSED BY NATURAL FACTORS I.E. BY PASSERSBY, BY THEFT, BY WASTAGE, BY SHORT WEIGHING AND MEASURING AND SO MANY OTHER FACTORS. AFTER NOTING DOWN THESE FACTS, IT IS NOTE D BY CIT(A) THAT THE DISALLOWANCE SHOULD BE RESTRICTED TO RS.25,000/- AN D IN THIS MANNER, HE 7 ALLOWED RELIEF OF RS.5,77,731/- ON THIS ISSUE. CON SIDERING THE FACTS OF THE PRESENT CASE, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) ON THIS ISSUE. THIS GROUND IS REJECTED. 20. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS PARTLY ALLOWED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBE R DATED:03/02/2016 *SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT . REGISTRAR