The Income Tax Officer, Ward-2(1)(2), Rajkot V. M/s. Jogia Jewellers, Rajkot

ITA 377/RJT/2017

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 0192 (ITAT-RAJKOT)
• Duration Of Justice: 4 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 25-09-2022
• Assessment Year: 2014-2015
• Appeal Filed On: 06-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Business income; Depreciation
• Section: 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER (Conducted through Virtual Court) ITA No. 377/RJT/2017 Assessment Year: 2014-15 The Income-Tax Officer, Ward-2(1)(2), Rajkot बनाम/ Vs. M/s.Jogia Jewellers Palace Road, Near Jai Upashray, Rajkot (Appellant /Revenue) (Respondent / Assessee) PAN: AAIFJ 7885 L Assessee by Shri Chetan Agarwal, AR Revenue by Shri Shramdeep Sinha, CIT-DR Date of Hearing 26/09/2022 Date of Pronouncement 19/10/2022 आदेश/ O R D E R PER MS. SUCHITRA KAMBLE, JUDICIAL MEMBER : 1. This appeal is filed by the Revenue against the order dated 28/08/2017 passed by the Commissioner of Income-tax (Appeals)-2, Rajkot [“CIT(A)” in short] for Assessment Year 2014-15. 2. The Ground of appeal is as under :- ”The Ld.CIT(A), Rajkot has erred in deleting the addition of Rs.4,33,50,000/- u/s.68 of the I.T. Act.” 3. The assessee-firm is engaged in the business of manufacturing and sale of gold ornaments. The return of income showing total income at Rs.5,55,830/- was filed by the assessee on 19/09/2014. During the course assessment proceedings, the Assessing Officer observed that on ITA No. 377/Rjt/2017 ITO vs. M/s.Jogia Jewellers AY : 2014-15 [2] verification of computation of income, the assessee has shown income from business at Rs.3,97,344/- and income from other sources: interest on Bank FDR of Rs.1,58,486/- totalling to Rs.5,55,830/-. The case was selected for scrutiny for the following reasons: (a) Low net profit or loss shown from large gross receipts. (b) Large increase in Sundry Creditors against reduction in business income as compared to preceding year. (c) Mismatch in amount paid to related persons u/s.40A(2)(b) reported in Audit Report and ITR. 3.1. During the course of assessment proceedings, the assessee filed a ledger account of expenses, working of depreciation and bank statement. The assessee reconciled the amount paid to the related persons u/s.40A(2)(b) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) as per Audit Report and ITR. On verification of capital account of the partners, the Assessing Officer noticed that the partners introduced new capital in cash totalling to Rs.4,33,50,000/-. The Assessing Officer made addition of Rs.4,33,50,000/- towards capital introduced by the partners in cash treated as unexplained cash credit u/s.68 of the Act and Rs.56,56,567/- as interest on capital to partners. 4. Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) allowed the appeal of the assessee. 5. The Ld.DR submitted that the CIT(A) erred in deleting the addition of Rs.4,33,50,000/- u/s.68 of the Act as the assessee has not explained the source of the funds held by the partners and most of the new capital introduced by the cash which is treated as unexplained cash credit u/s.68 of the Act as income from other sources and required to ITA No. 377/Rjt/2017 ITO vs. M/s.Jogia Jewellers AY : 2014-15 [3] add in the total income of the firm. The Ld. DR relied upon the assessment order. 6. The Ld. AR submitted that the source of the funds held by the partners were explained by the assessee during the course of assessment proceedings. The Ld.AR submitted that the capital introduced by one of the partners Shri Jayeshbhai M. Jogia is having his proprietorship firm having total turnover of Rs.21,61,85,004.39 during the Financial Year (FY) 2013-14. Out of these sales transactions during FY 2013-14, Shri Jayeshbhai Jogia has given the funds to the assessee- firm which are properly accounted in the books of accounts of M/s. Jogia Jewellers, Porbandar. As regards capital introduced by Shri Rajeshbhai V.Lakhani, the same was taken loan against property from Bajaj Finserv Ltd. and the same was introduced to the assessee. As regards Shri Rajeshbhai Lakhani, the loan was taken against property from Bajaj Finserv Ltd. as his family member of Shri Rajesh V. Lakhani. As regards capital introduced by Shri Sachinbhai M.Jogia, the said cash was withdrawn from time to time from his savings bank account. Thus, the Ld.AR submitted that the assessee has explained all the details related to cash introduced as capital to the assessee-firm by its partners and, therefore, the CIT(A) has rightly deleted the addition. 7. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the assessee has explained each and every partner’s sources of cash and the same was not properly verified by the Assessing Officer at the time of assessment proceedings. In fact, the Assessing Officer has simply relied upon the ITA No. 377/Rjt/2017 ITO vs. M/s.Jogia Jewellers AY : 2014-15 [4] decision of Hon’ble Rajasthan High Court in the case of CIT vs. Kishorilal Santoshilal reported in 216 ITR 09 (Raj.) and treated the said cash credit as unexplained cash credit u/s.68 of the Act without taking any cognizance of evidences produced by the assessee during the assessment proceedings. The CIT(A) has rightly held that the two partners in turn have taken loan from Bajaj Finserv Ltd. of Rs.4.5 crores out of which Rs.4 crores has been introduced in the firm. Besides, the partners are assessed to the tax and their accounts are audited. These particulars were never doubted by the Assessing Officer at the time of assessment proceedings. Therefore, the CIT(A) has rightly deleted the addition. There is no need to interfere with the findings of the CIT(A). Hence, the ground of appeal of the Revenue is dismissed. 8. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open Court on 19 th October 2022 at Ahmedabad. Sd/- Sd/- (ANNAPURNA GUPTA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad, Dated 19 /10/2022 TC Nair,Sr.PS ITA No. 377/Rjt/2017 ITO vs. M/s.Jogia Jewellers AY : 2014-15 [5] आदेश े /Copy of the Order forwarded to : 1. / The Appellant 2. / The Respondent. 3. आ र आ / Concerned CIT 4. आ र आ ) (/ The CIT(A)-2, Rajkot 5. ! " ,आ र # र$/DR,ITAT, Rajkot, 6. ! %& फ ई /Guard file. आदेश " र/ BY ORDER, //True Copy// TRUE COPY ह ज र (Asstt. Registrar) आ र # र$ ITAT, Rajkot 1. Date of dictation- .... ....17.10.2022 (dictation-pad 13 pages is attached with file) 2. Date on which the typed draft is placed before the Dictating Member ..........17.10.2022...... Other member ......10.10.2022............... 3. Date on which the approved draft comes to the Sr.P.S./P.S. - ... ............... 4. Date on which the fair order is placed before the Dictating Member for Pronouncement 5. Date on which the file goes to the Bench Clerk...... 19.10.22 6. Date on which the file goes to the Head Clerk...... 19.10.22. 7. The date on which the file goes to the Assistant Registrar for signature on the order..................... 8. Date of Despatch of the Order