ITO, Kota V. SHRI HARISH KUMAR SACHDEVA, Kota

ITA 416/JPR/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5405 (ITAT-JAIPUR)
• Duration Of Justice: 3 year(s) 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 01-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Cost of acquisition
• Section: 143(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VH-VKJ-EHUK] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF; D LNL; DS LE{K BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA- @ ITA NO. 416/JP/2012 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2008-09 INCOME TAX OFFICER, WARD 1(1), KOTA. CUKE VS. HARISH KUMAR SACHDEVA, S/O- SHRI MANGAT RAM SACHDEVA, PROP- M/S HARDWARE HOUSE, 139, SHOPPING CENTRE, KOTA. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ANPPS 1194 P VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA- @ ITA NO. 826/JP/2012 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2008-09 HARISH KUMAR SACHDEVA, S/O- SHRI MANGAT RAM SACHDEVA, PROP- M/S HARDWARE HOUSE, 139, SHOPPING CENTRE, KOTA. CUKE VS. INCOME TAX OFFICER, WARD 1(1), KOTA. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ANPPS 1194 P VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT IZR;K{KSI.K @ C.O. NO. 26/JP/2015 (ARISING OUT OF VK;DJ VIHY LA-@ ITA NO. 416/JP/2012) FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2008-09 HARISH KUMAR SACHDEVA, S/O- SHRI MANGAT RAM SACHDEVA, PROP- M/S HARDWARE HOUSE, 139, SHOPPING CENTRE, KOTA. CUKE VS. INCOME TAX OFFICER, WARD 1(1), KOTA. LFKK;H YS[KK LA-@THVKBZVKJ LA- @ PAN/GIR NO.: ANPPS 1194 P IZR;K{KSID @ OBJECTOR IZR;FKHZ @ RESPONDENT ITA 416 & 826/JP/2012 & CO 26/JP/2015_ ITO VS. HARISH KR SACHDEVA 2 JKTLO DH VKSJ LS @ REVENUE BY : SHRI KAILASH MANGAL (JCIT) FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI P.C. PARWAL (CA) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 05/01/2016 MN?KKS'K .KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 14/03/2016 VKNS'K@ ORDER PER: T.R. MEENA, A.M.: THESE ARE CROSS APPEALS ONE BY THE REVENUE AND ANOT HER BY THE ASSESSEE AND CROSS OBJECTION BY ASSESSEE ARISE FROM THE ORDER DATED 29/02/2012 OF LD. CIT(A), KOTA, FOR A.Y. 2008-09. EF FECTIVE GROUNDS OF APPEALS AS WELL AS C.O. ARE AS UNDER:- GROUNDS IN REVENUE APPEAL ITA NO. 416/JP/2012 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED IN: (I) REDUCING THE NP RATE FROM 12% TO 20% OF THE TURNOVER WITHOUT ANY VALID BASIS WHEN THE ASSESSEE HAS NOT MAINTAINED ANY BOOKS OF ACCOUNTS; (II) DELETING ADDITION OF RS. 67,00,000/- ON ACCOUN T OF UNEXPLAINED INVESTMENT OF THE ASSESSEE JUST BY ACCEPTING EXPLANATION OF THE ASSESSEE AND WITHOUT EXAMINING VALIDITY OF CREATION OF AOP AND TAXABILIT Y OF INCOME IN ITS HANDS. GROUNDS IN ASSESSEES APPEAL ITA NO. 826/JP/2012 1. THE LD CIT(A) HAS ERRED ON FACTS AND IN LAW IN CON FIRMING THE ADDITION OF RS. 562633.00/- MADE BY A.O. BY APPLYING THE NET PROFIT RATE @ 0.12% ON ESTIMATED SA LES OF RS. 29927322.00 IN RESPECT OF LICENCE OF LIQUOR HELD BY ASSESSEE BY IGNORING/NOT ACCEPTING THE FOLLOWING CONTENTIONS OF ASSESSEE: ITA 416 & 826/JP/2012 & CO 26/JP/2015_ ITO VS. HARISH KR SACHDEVA 3 (I) THAT HE IS A MEMBER OF AOP OF ROYAL WINES, UDAIPU R AND THEREFORE ENTIRE TURNOVER OF ASSESSEE IS INCLUD ED IN TURNOVER OF ROYAL WINES. (II) SEPARATELY ESTIMATING AND ASSESSING THE INCOME OF LIQUOR LICENSE OF ASSESSEE IN ITS HAND WHEN SAME IS ALREADY ASSESSED IN CASE OF ROYAL WINES, HAS RESULTED INTO DOUBLE TAXATION. (III) INCOME SHOULD BE ASSESSED ON SUBSTANCE NOT ME RELY ON LEGAL FORM. (IV) NOT PROVIDING REASONABLE OPPORTUNITY TO ESTABL ISH THAT TURNOVER OF ASSESSEE IS INCLUDED IN TURNOVER O F ROYAL WINES AND THEREBY NOT CONSIDERING THE DETAILS FILED BY ROYAL WINES. 1.1 THE LD ASSESSING OFFICER HAS ERRED ON FACTS AND IN LAW IN ASSESSING THE SHARE OF INCOME FROM AOP OF ROYAL WIN ES IN HANDS OF ASSESSEE AND ALSO ESTIMATING INCOME OF LIQUOR LICENSE OF ASSESSEE. GROUNDS IN CROSS OBJECTION CO 26/JP/2015 1. THE LD CIT(A) HAS ERRED ON FACTS AND IN LAW IN CON FIRMING THE ADDITION OF RS. 5,62,633/- BY APPLYING THE NET PROF IT RATE @ 0.12% ON ESTIMATED SALES OF RS. 2,99,27,322/- IN RE SPECT OF LICENSE OF LIQUOR HELD BY ASSESSEE BY NOT ACCEPTING THE FOLLOWING CONTENTIONS OF THE ASSESSEE:- A) THAT HE IS A MEMBER OF AOP OF ROYAL WINES, UDAIPUR AND THEREFORE ENTIRE TURNOVER OF ASSESSEE IS INCLUD ED IN TURNOVER OF ROYAL WINES. B) SEPARATELY ESTIMATING AND ASSESSING THE INCOME O F LIQUOR LICENSE OF ASSESSEE IN ITS HAND WHEN SAME IS ALREADY ASSESSED IN CASE OF ROYAL WINES, HAS RESULTED INTO DOUBLE TAXATION. C) INCOME SHOULD BE ASSESSED ON SUBSTANCE AND NOT MERELY ON LEGAL FORM. ITA 416 & 826/JP/2012 & CO 26/JP/2015_ ITO VS. HARISH KR SACHDEVA 4 D) NOT PROVIDING REASONABLE OPPORTUNITY TO ESTABLIS H THAT TURNOVER OF ASSESSEE IS INCLUDED IN TURNOVER O F ROYAL WINES AND THEREBY NOT CONSIDERING THE DETAILS FILED BY ROYAL WINES. 1.1 THE LD ASSESSING OFFICER HAS FURTHER ERRED ON FA CTS AND IN LAW IN ASSESSING THE SHARE OF INCOME FROM AOP OF ROYAL WINES IN HANDS OF ASSESSEE AND ALSO ESTIMATING INCOME OF LIQUOR LICENSE OF ASSESSEE. 2. THE GROUNDS OF THE CROSS OBJECTION OF THE ASSESSE E AND CROSS APPEAL OF THE ASSESSEE ARE IDENTICAL AND THE APPEAL OF THE ASSESSEE HAS TO BE DECIDED BY THIS BENCH, THEREFORE, C.O. IS BEC OME INFRUCTUOUS AND HENCE DISMISSED. 3. THE ASSESSEE IS IN HARDWARE AND LIQUOR BUSINESS. H E FILED HIS RETURN ON 31/3/2009 DECLARING TOTAL INCOME OF RS. 1 ,00,600/-. THE CASE WAS SCRUTINIZED U/S 143(3) OF THE INCOME TAX ACT, 196 1 (IN SHORT THE ACT). THE FIRST GROUND OF REVENUES APPEAL, ASSESSEE S CROSS APPEAL AND CROSS OBJECTION FILED BY THE ASSESSEE IS AGAINST RE DUCING THE NET PROFIT RATE APPLIED BY THE ASSESSING OFFICER 20% TO 12% BY THE LD CIT(A). THE LD ASSESSING OFFICER OBSERVED THAT DURING THE COURS E OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS NOT PRODUCED THE BOOK S OF ACCOUNT, BILLS VOUCHERS ETC. ON THE PRETEXT THAT THE RETURN HAD BE EN FILED IN TERMS OF SECTION 44AF OF THE ACT BEING TURNOVER LESS THAN RS . 40 LACS. THE ASSESSING OFFICER FURTHER OBSERVED THAT DESPITE SPE CIFIC REQUIREMENT ITA 416 & 826/JP/2012 & CO 26/JP/2015_ ITO VS. HARISH KR SACHDEVA 5 MADE UNDER THE EXCISE LAW REGARDING MAINTAINING THE BOOKS OF ACCOUNT IN LIQUOR BUSINESS, THE ASSESSEE HAD NOT PRODUCED T HE BOOKS OF ACCOUNT FOR LIQUOR BUSINESS. THE ASSESSEE HAD OBTAINED LICEN SE FROM EXCISE DEPARTMENT AND DOING THE BUSINESS OF TRADING OF IMF L/BEER BUT THE TURNOVER RELATING TO THIS BUSINESS WAS NOT SHOWN IN T HEN RETURN ON THE PLEA THAT THE SAME HAD BEEN INCLUDED IN THE AOP M/S ROYAL WINES. THE INFORMATION OBTAINED FROM THE EXCISE DEPARTMENT AND THE TCS CERTIFICATE, THE DETAILS OF PURCHASE AND SALE HAD B EEN PROVIDED THERE. AS PER TCS CERTIFICATE, THE TOTAL PURCHASE OF THE LIQUO R DURING THE YEAR WERE RS. 1,23,84,855/- IN RESPECT OF SHOP NO. 6/65 AND R S. 1,25,54,540/- IN RESPECT OF SHOP NO. 6/58. THUS, THE TOTAL PURCHASES WERE MADE AT RS. 2,49,39,435/-. IN POINT NO. 5.13 OF THE LICENSE, IT HAS BEEN MENTIONED THAT THE LICENSEE CAN SELL IMFL/BEER BY TAKING MAXI MUM GROSS PROFIT OF 20% ON PURCHASE COST. HENCE, TOTAL TURNOVER WAS CALC ULATED BY THE ASSESSING OFFICER AT RS. 2,99,27,322/- IN THE YEAR UNDER CONSIDERATION. AS PER RULE AND REGULATION OF THE EXCISE DEPARTMENT , THE ASSESSEE HAD TO SUBMIT STOCK STATEMENT OF LIQUOR/BEER BY THE LIC ENSEE. THE ASSESSEE HAD ADMITTED IN HIS STATEMENT DATED 22/12/2010 THAT THE DETAILS OF MONTHLY STATEMENT WAS KEPT BY AOP. THE BOOKS OF ACCO UNT RELATING TO THE LIQUOR BUSINESS WERE NOT PRODUCED BY THE ASSESSE E. THE ASSESSEE ITA 416 & 826/JP/2012 & CO 26/JP/2015_ ITO VS. HARISH KR SACHDEVA 6 ALSO ADMITTED IN HIS STATEMENT THAT HE HAD NO KNOWLE DGE ABOUT THE MONTHLY RENT GIVEN TO THE SHOPS AND ALSO ABOUT THE EMPLOYEES OF THE SHOP. IN ABSENCE OF BOOKS OF ACCOUNT, PURCHASE AND SALE BILL, VOUCHERS AND SUPPORTING DOCUMENT, THE LD ASSESSING OFFICER H ELD THAT THE CORRECT PROFIT CANNOT BE DEDUCED FROM THE LIQUOR BUSINESS. THE ASSESSING OFFICER GAVE SHOW CAUSE NOTICE ON THIS ISSUE AND EST IMATING THE NET PROFIT @ 12% ON THE TURNOVER. THE ASSESSEE HAD REITER ATED THAT SINCE THE AOP HAD SHOWN THE ENTIRE INCOME, THERE WAS NO REA SON TO ASSESSEE THE SAME IN HIS INDIVIDUAL HANDS, WHICH WAS NOT FOUN D CONVINCING TO THE ASSESSING OFFICER. ACCORDINGLY, HE ESTIMATED THE NE T PROFIT ON TURNOVER OF RS. 2,99,27,322/- AT RS. 35,91,278/- AND ADDITIO N OF RS. 35,91,278/- WAS MADE BY THE ASSESSING OFFICER. 4. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING O FFICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD CIT(A), WH O HAD ALLOWED THE APPEAL PARTLY BY OBSERVING AS UNDER:- I HAVE CONSIDERED THE AOS FINDINGS & ASSESSEES SUBMISSIONS AND ALSO GONE THROUGH THE ORDER OF ASSE SSING OFFICER IN THE EASE OF M/S ROYAL WINES, AOP. IT IS SEEN THAT ASSESSEE HAS NOT OBTAINED ANY PERMI SSION FROM STATE EXCISE DEPARTMENT 'TO DO BUSINESS IN THE NAME OF AOP. ALL THE PURCHASES (IN RESPECT TO LIQUOR SHO PS ITA 416 & 826/JP/2012 & CO 26/JP/2015_ ITO VS. HARISH KR SACHDEVA 7 LICENSED TO THE ASSESSEE) DURING THE YEAR WERE MADE IN THE NAME OF ASSESSEE. ALL THE PAYMENTS (IN RESPECT TO L IQUOR SHOPS LICENSED TO THE ASSESSEE) FOR PURCHASE, LICEN SE FEE, EXCISE DUTY ETC. WERE MADE BY THE ASSESSEE. TAX COLLE CTED AT SOURCE (IN RESPECT TO LIQUOR SHOPS LICENSED TO T HE ASSESSEE) WAS COLLECTED FROM ASSESSEE. ALL THE PURCH ASES AND SALES .WERE MADE IN CASH. DURING THE OPERATION O F SHOPS, THE DISPLAY'S AT THE SHOPS (IN RESPECT TO LI QUOR SHOPS LICENSED TO THE ASSESSEE) WERE IN THE NAME OF ASSESS EE. IT IS ALSO SEEN THAT THE A.O. WHO ASSESSED THE INCOM E OF ROYAL WINES DID NOT EXAMINE THIS ISSUE. FROM THE ABOVE, IT CAN BE CONCLUDED THAT ASSESSEE H AS NOT TRANSFERRED THE LICENSE TO THE AOP, AND THAT ALL TH E TRANSACTIONS (IN RESPECT TO LIQUOR SHOPS LICENSED T O THE ASSESSEE) WERE CARRIED OUT BY ASSESSEE HIMSELF. IT I S THEREFORE HELD THAT PROFITS FROM THE SHOPS LICENSED TO THE ASSESSEE HAS TO BE ASSESSED IN THE HANDS OF ASSESSE E ITSELF. ONCE IT IS HELD THAT PROFITS FROM THE SHOPS LICENSE D TO THE ASSESSEE HAS TO BE ASSESSED IN THE HANDS OF ASSESSE E ITSELF, THE PROFITS FROM THE ABOVE HAS TO BE ESTIMATED. EST IMATION OF PROFIT @ 12% OF THE TURNOVER IS CONSIDERED EXCESS IVE FOR THE FOLLOWING REASONS:- (I) THE ASSESSEE GOT A DISCOUNT OF APPROXIMATELY 16% OF THE SALE PRICE. MAXIMUM DISCOUNT ALLOWED WAS 20%. ITA 416 & 826/JP/2012 & CO 26/JP/2015_ ITO VS. HARISH KR SACHDEVA 8 (II) THE ASSESSEE WAS REQUIRED TO PAY LICENSE FEE FOR THE ENTIRE YEAR. (III) THE ASSESSEE WAS REQUIRED TO PAY PERMIT FEE. (IV) THE ASSESSEE WAS ALSO REQUIRED TO PAY FREIGHT & TRANSPORT FOR THE GOODS PURCHASED. (V) APART FROM THE ABOVE, ASSESSEE HAS TO PAY RENT OF THE SHOP, ELECTRICITY & WATER EXPENSES, SALARIES OF EMPLOYEES AND OTHER MISC. EXPENSES. IN SIMILAR LINE OF TRADE, MOST OF THE TRADERS HAVE SHOWN PROFITS BELOW 2%. CONSIDERING THE ABOVE, IN MY OPINION, IT WOULD BE FA IR 86 REASONABLE TO ESTIMATE THE INCOME OF ASSESSEE @ 2% O F THE TURNOVER. THE SAME COMES TO RS. 5,98,546/-. IT IS ALSO SEEN THAT THE CREDIT FOR TCS HAS ALREADY BEEN ALLOWED IN THE CASE OF AOP, M/S ROYAL WINES SO. ASSE SSEE WILL NOT BE ENTITLED FOR CREDIT OF TCS. IT IS SEEN TH AT M/S ROYAL WINES DECLARED NET PROFIT @ 0.12% AND THIS INC LUDED PROFITS RELATED TO ASSESSEE ON ITS TURNOVER. AS THE ASSESSEES TURNOVER WAS RS. 2,99,27,322/- IT CAN BE PRESUMED TH AT PART OF THE PROFITS, AMOUNTING TO RS. 35,913/- (@0.1 2%) WERE INCLUDED IN THE INCOME OF M/S ROYAL WINES. TO AV OID DOUBLE TAXATION, IT IS CONSIDERED FAIR & REASONABLE TO EXCLUDE THIS AMOUNT FROM THE INCOME OF ASSESSEE. ITA 416 & 826/JP/2012 & CO 26/JP/2015_ ITO VS. HARISH KR SACHDEVA 9 IN THE RESULT, THE A.O. IS DIRECTED TO TAKE RS. 5,6 2,633/- AS INCOME OF ASSESSEE FROM LIQUOR SHOPS. THE A.O. IS D IRECTED TO DELETE BALANCE ADDITION OF RS. 30,28,645/-. THIS GROUND OF APPEAL IS THEREFORE PARTLY ALLOWED. 5. NOW THE REVENUE AND ASSESSEE ARE IN APPEALS AND A SSESSEE ALSO IN C.O. BEFORE US. THE LD DR HAS VEHEMENTLY SUPPORT ED THE ORDER OF THE ASSESSING OFFICER. AT THE OUTSET, THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THE FIRST ISSUE IN THIS CASE IS WHETH ER AN ASSESSEE TO WHOM LICENSE FOR RUNNING A SHOP OF LIQUOR IS GIVEN B Y THE EXCISE DEPARTMENT IS PROHIBITED FOR ENTERING INTO A PARTNE RSHIP OR FORMING AOP WITH OTHER PERSONS. AS PER THE CONDITION OF THE LICE NSE MENTIONED AT PAGE 8 OF THE ASSESSMENT ORDER, THERE IS NO PROHIBI TION FOR FORMING AN AOP, ONLY A PRIOR PERMISSION IS REQUIRED TO BE TAKE N. IN PRESENT CASE, SUCH PRIOR PERMISSION IS NOT TAKEN. FOR THIS REASON ALONE, THE INCOME OF THE TWO SHOPS FOR WHICH LICENSE IS GIVEN TO THE ASSES SEE CANNOT BE TAXED IN THE HANDS OF THE ASSESSEE WHEN THE PURCHASE , SALE AND OTHER EXPENSES IN RELATION TO THESE SHOPS IS ALREADY CONS IDERED BY THE AOP AND INCOME OF THE AOP IS ASSESSED BY THE DEPARTMENT IN ORDER PASSED U/S 143(3). IN THIS CONNECTION, RELIANCE IS PLACED IN CASE OF DURGA MADIRA SANGH VS. CIT 153 ITR 226 (RAJ.) (HC) WHERE IT WAS HELD THAT ITA 416 & 826/JP/2012 & CO 26/JP/2015_ ITO VS. HARISH KR SACHDEVA 10 WHERE THE EXCISE ACT DOES NOT PROHIBIT ENTERING INTO PARTNERSHIP BY LICENSE HOLDERS WITH NON-LICENSEES, SUCH A PARTNERSH IP IS VALID AND ELIGIBLE FOR REGISTRATION. FURTHER, THE SUPREME COU RT IN CASE OF BIHARILAL JAISWAL & OTHERS VS. CIT 217 ITR 746 AT PAGE 758 HELD THAT WHERE LAW PROHIBITS ENTERING INTO A PARTNERSHIP AGREEMENT, TH ERE CAN BE IN LAW NO PARTNERSHIP AGREEMENT OF THAT NATURE. HOWEVER, WHERE THE STATUTORY PROVISIONS OR THE CONDITION OF THE LICENSE DO NOT P ROHIBIT ENTERING INTO PARTNERSHIP, SUCH A PARTNERSHIP CANNOT BE HELD TO B E ILLEGAL, UNLAWFUL OR VOID. HOWEVER, IT FURTHER HELD THAT IT WOULD NOT MEA N THAT SUCH AN ILLEGAL PARTNERSHIP CANNOT BE TAXED. IT IS CERTAINL Y BOUND TO BE TAXED EITHER AS AN UNREGISTERED PARTNERSHIP FIRM OR AS AN AOP. THEREFORE, ONCE THE PURCHASE AND SALE OF THE TWO SHOPS LICENSED TO THE ASSESSEE IS INCLUDED IN THE PURCHASE AND SALE OF THE AOP AND AO P IS ASSESSED BY AO U/S 143(3), THE SAME CANNOT BE AGAIN ASSESSED IN THE HANDS OF THE ASSESSEE. HENCE, THE ADDITION MADE BY THE AO AND PA RTLY CONFIRMED BY THE CIT(A) IS BAD IN LAW AND THE SAME BE DELETED. HE FURTHER SUBMITTED THAT THE AO HAS WRONGLY STATED THAT IN EARLIER YEARS THE ASSESSEE WAS RUNNING THE LIQUOR SH OP IN HIS INDIVIDUAL CAPACITY. IN FACT IN AY 06-07 AN 07-08, THE ASSESSE E HAS RUN THESE ITA 416 & 826/JP/2012 & CO 26/JP/2015_ ITO VS. HARISH KR SACHDEVA 11 SHOPS IN THE PARTNERSHIP FIRM. THIS IS EVIDENT FROM THE TRADING AND P&L A/C FOR AY 06-07 REPRODUCED AT PG 9 OF THE ASSESSME NT ORDER WHERE EXPENDITURE ON PAYMENT OF INTEREST AND REMUNERATION TO PARTNERS IS DEBITED. IN AY 07-08, THE ASSESSEE HAS DECLARED REM UNERATION AND INTEREST FROM PARTNERSHIP FIRM IN HIS RETURN OF INC OME. FURTHER, THE N.P. RATE FOR 06-07 BEFORE REMUNERATION AND INTEREST TO PARTNERS IS 1.28%. THEREFORE, ASSESSING THE INCOME OF THE TWO SHOPS IN T HE HANDS OF THE ASSESSEE ON AN INCORRECT ASSUMPTION OF FACTS AND AP PLYING N.P. RATE OF 12% IS INCORRECT AND UNJUSTIFIED. THE LD AR HAS FURTHER SUBMITTED THAT THE AO, UDAIPU R IN VARIOUS CASES OF LIQUOR, WHERE SHOPS WERE ALLOTTED TO THE IND IVIDUAL MEMBERS BUT THEY FORM AN AOP, ASSESSED THE INCOME OF SUCH I NDIVIDUAL SHOPS IN THE HANDS OF THE AOP AND NOT IN THE HANDS OF THE IN DIVIDUAL MEMBERS. FURTHER, THE CREDIT OF TDS IN THE NAME OF INDIVIDUAL MEMBERS WAS ALLOWED TO THE AOP. THE ASSESSMENT OF SUCH INCOME IN THE HANDS OF THE AOP AND ALLOWING OF THE TDS WAS ALSO APPROVED BY HON BLE ITAT. COPY OF THE ORDER OF HONBLE ITAT IN THIS CONNECTION IS E NCLOSED. HE FURTHER SUBMITTED THAT THE LD CIT(A) HAS REDUCED THE ADDITION MADE BY THE AO BY CONSIDERING THE N.P. RATE OF 2% O N THE ESTIMATED ITA 416 & 826/JP/2012 & CO 26/JP/2015_ ITO VS. HARISH KR SACHDEVA 12 TURNOVER OF RS. 2,99,27,322/- AS AGAINST 12% APPLIE D BY THE AO. THE AO HAS NOT GIVEN ANY REASON FOR APPLYING N.P. RATE OF 12% ON THE TURNOVER. AS AGAINST THIS, CIT(A) HAS GIVEN REASONS FOR APPLYING N.P. RATE OF 2%. HOWEVER, THIS RATE IS ALSO EXCESSIVE AND UNREASONABLE MORE PARTICULARLY WHEN HE HAS HIMSELF MENTIONED THAT MOST OF THE TRADERS HAVE SHOWN THE PROFIT BELOW 2%. FURTHER, WHEN M/S ROYA L WINES HAS ALREADY BEEN ASSESSED @ 0.12%, THERE IS NO REASON T O APPLY N.P. RATE OF 2% ON SUCH TURNOVER. THEREFORE, THE ADDITION OF R S.5,62,633/- CONFIRMED BY CIT(A) IS UNJUSTIFIED AND THE SAME BE D ELETED. HE RELIED ON THE DECISION OF HONBLE JODHPUR ITAT BENCH IN THE CASE OF ACIT VS. M/S KRISHAN LAL MEEL & PARTY ALONGWITH OTHER CASES I N ITA NO. 370/JODH/2015 AND OTHER ITAS, WHICH WAS DECIDED ON 04 /09/2015 WHEREIN IDENTICAL ISSUE HAS BEEN DECIDED BY THE HON BLE BENCH IN FAVOUR OF THE ASSESSEE, AS THE ISSUE AVAILABLE IN THE PRES ENT CASE MAY ALSO PLEASE BE DECIDED IN FAVOUR OF THE ASSESSEE. THEREFO RE, HE PRAYED THAT THE GROUND OF THE DEPARTMENT BE DISMISSED AND THE C ROSS OBJECTION OF THE ASSESSEE BE DIRECTED TO BE ALLOWED. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS UN DISPUTED FACT THAT THE ITA 416 & 826/JP/2012 & CO 26/JP/2015_ ITO VS. HARISH KR SACHDEVA 13 LICENSE WAS GRANTED IN THE NAME OF THE ASSESSEE BY T HE EXCISE DEPARTMENT FOR TWO SHOPS. THE SALE OF THE LIQUOR HAS BEEN DISCLOSED BY THE ASSESSEE IN THE BUSINESS OF AOP. THE ASSESSEE HA S NOT TAKEN ANY PERMISSION FROM THE EXCISE DEPARTMENT FOR TRANSFERR ING HIS BUSINESS TO THE AOP BUT AS PER EXCISE RULE, ONLY PERMISSION IS REQUIRED TO RUN THE BUSINESS IN THE NAME OF AOP BY THE LICENSEE. THE AOP ALREADY HAD BEEN CONSIDERED THIS BUSINESS AND DISCLOSED THE INC OME ON IT. THE LD ASSESSING OFFICER APPLIED MAXIMUM PROFIT @ 20% ON PU RCHASE BUT WHICH IS HIGHER SIDE, HAD BEEN PRESCRIBED BY THE EXC ISE DEPARTMENT. THERE IS A TOUGH COMPETITION UNDER THIS BUSINESS AND THE ASSESSEE HAS TO RUN THE BUSINESS KEEPING IN VIEW OF THE PERCENTAG E OF THE PROFIT IS BEING CHARGED BY THE OTHER PARTIES OF THE NEARBY AR EA. THE LD ASSESSING OFFICER HAS ALSO NOT GIVEN ANY JUSTIFICATION FOR AP PLYING 12% NET PROFIT ON THE ESTIMATED SALE IN THE HANDS OF LICENSEE. IN CASE OF AOP, THE CASE HAS BEEN SCRUTINIZED U/S 143(3) OF THE ACT WHERE INC OME DISCLOSED BY THE AOP HAS BEEN ACCEPTED BY THE ASSESSING OFFICER. THE INCOME RESULT HAS BEEN ACCEPTED BY THE ASSESSING OFFICER. COPY OF SCRUTINY ASSESSMENT HAS BEEN PLACED IN THE PAPER BOOK. THE FI NDINGS GIVEN BY THE LD CIT(A) ARE ALSO NOT ON MERIT IN ESTIMATING TH E INCOME @ 2% AS IN THE HANDS OF AOP, SAME INCOME HAS BEEN TAXED BY HOL DING THAT ITA 416 & 826/JP/2012 & CO 26/JP/2015_ ITO VS. HARISH KR SACHDEVA 14 ASSESSING OFFICER OF THE AOP NAMELY ROYAL WINES HAS NOT CONSIDERED THE ISSUE OF LICENSE ISSUED DISPLAYED AT THE SHOP A ND TCS MADE BY THE EXCISE DEPARTMENT. THE IDENTICAL ISSUE DECIDED BY T HE COORDINATE BENCH OF JODHPUR ITAT IN THE CASE OF ACIT VS. M/S KRISHAN L AL MEEL & PARTY ALONGWITH OTHER CASES IN ITA NO. 370/JODH/2015 AND O THER ITAS ORDER DATED 04/09/2015 FOR A.Y. 2009-10 WHEREIN THE ISSUE WAS TCS IN THE NAME OF INDIVIDUAL BUT CREDIT WAS TAKEN BY THE AOP A ND TCS/TDS CREDIT HAVE BEEN DEDUCTED IN THE NAME OF INDIVIDUAL, HAS B EEN ALLOWED TO THE AOP. WHEN THE ASSESSING OFFICER IN SCRUTINY HAS ACC EPTED THE ASSESSEES INCOME AS SUCH AND NO DISALLOWANCE ON ACC OUNT OF NET PROFIT HAS BEEN MADE WHEREIN NET PROFIT HAS BEEN ACCEPTED B Y THE ASSESSING OFFICER @ .12%. ACCORDINGLY, WE DISMISS THE REVENUE S APPEAL ON THIS GROUND AND ALLOW THE ASSESSEES APPEAL ON THIS GROUN D. 7. THE 2 ND GROUND OF THE REVENUES APPEAL IS AGAINST DELETING THE ADDITION OF RS. 67 LACS ON ACCOUNT OF UNEXPLAINED I NVESTMENT. THE LD ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD PU RCHASED A HOUSE AT 6-SHOPING CENTRE, KOTA FOR RS. 67,34,210/- DURING T HE YEAR UNDER CONSIDERATION FROM SMT. GUNWANTI DEVI, W/O- SH. RAM SWAROOP KHATRI, SMT. ANIL KATHURIA AND SMT. RENU CHAWLA ON 10/3/2008 . THE LD ITA 416 & 826/JP/2012 & CO 26/JP/2015_ ITO VS. HARISH KR SACHDEVA 15 ASSESSING OFFICER GAVE REASONABLE OPPORTUNITY OF BE ING HEARD TO EXPLAIN THE INVESTMENT IN HOUSE. IT WAS SUBMITTED THAT THE A SSESSEE HAD WITHDRAWN RS. 67 LACS IN CASH FROM ROYAL WINES IN WHIC H THE ASSESSEE IS A PARTNER ON 05/3/2008. THE LD FURTHER OBSERVED THAT THE AOP IS NOT LEGAL IN VIEW OF THE EXCISE LAWS AND IT IS NOT POSSI BLE THAT HUGE AMOUNT OF RS. 67 LACS IN CASH HAD BEEN MADE BY THE ASSESSE E. HE RECORDED HIS STATEMENT, WHICH HAS BEEN REPRODUCED BY THE ASSESSI NG OFFICER ON PAGE 12 AND 13 OF THE ASSESSMENT ORDER. FOR SAKE OF CONV ENIENCE, WHICH IS REPRODUCED AS UNDER:- IZ'U &17 MIJKSDR EDKU VKIUS FDLLS [KJHNK] FDRUH JKF 'K ESA [KJHNK GS RFKK MLDK L=KSR LI'V DJSAA MRRJ ;G EDKU ESUSA JHEFR XQ.KOURH NSOH O JH VFUY DF KQFJ;K LS FNUAKD 10-03-2008 DKS :I;S 63 YK[K ESA [KJHNK FKKA BLDH JFTLVH PKTSZL :I;S 4]29]000@& YXK FKKA BLDS FY;S ESUSA :I; S 67 YK[K ESA JK;Y OKBZUL LS JKSDM IZKIR FD;S FKSA IZU &18 ;G ISLK VKIUS DGKA LS IZKIR FD;K FKKA MRRJ ;G JKF'K ESAUS JK;Y OKBZUL] MN;IQJ LS IZKIR FD ;K FKKA IZU &19 ;G JKF'K VKIUS FDL DS GLRS FY;K FKKA MRRJ ;G JKF'K ESAUS LO;A MN;IQJ TKDJ ,S-VKS-IH- DS DSFK;J LS YH FKHA ITA 416 & 826/JP/2012 & CO 26/JP/2015_ ITO VS. HARISH KR SACHDEVA 16 IZU &20 VKIUS JHERH XQ.KOURH NOSH O JH VFUY DFKQFJ ;K LS EDKU FD [KJHN DS ISVS :I;S 63 YK[K DK HKQXRKU UDN ESA FD;K FKK ;K ,DKMUV IS PSD }KJK\ MRRJ ;G JKF'K ESAUS FOSRKVKSA DKS UDN ESA NH FKHA IZU &21 VKIDK ICICI CSAD DK LVSVESAUV NS[KUS LS IRK PYRK GS FD VKIUS BL CSAD LS :I;S 6225000 DK GKMFLAX YKSU HKH FY;K GS A D`I;K CRK;SA FD ;G JKF'K VKIUS DGKA BLRSEKY DH GSA MRRJ EQ>S CSAD LS USV :I;S 60]08]280@& GH FEYS FKS FTLESA LS :I;S 14]75]000@& ESUSA ESA- JK;Y OKBZUL DKS OKIL YKSVK F N;S FKS] :I;S 9 YK[K IZFR ,-VKS-IH- LNL; DKS FN;S FKSA JKF'K FDLDKS NH XBZ FNUKAD 500000@& ESA - JK;Y OKBZUL 05 - 03 - 2008 975000@& ESA - JK;Y OKBZUL 20 - 03 - 2008 900000@& JKTW JKBKSJ 20 - 03 - 2008 900000@& EQDS'K DQEKJ 20 - 03 - 2008 900000@& FNUS'K CTKT 20 - 03 - 2008 900000@& UJSUNZ DQEKJ LPNSOK 20 - 03 - 2008 900000@& FD'KKSJ DQEKJ 20 - 03 - 2008 IZ'U &22 TC VKIUS MIJKSDR JKF'K :I;S 67 YK[K ESA- J K;Y OKBZUL LS YH FKH] RKS ;G JKF'K :I;S 9&9 YK[K BU IKAP O;FDR;KSA D KS D;KSA NH GS\ MRRJ BL CKJS ESA ESA DQN HKH CRKUS ESA VLEFKZ GWAA THE LD ASSESSING OFFICER FURTHER HELD THAT SINCE THE GENUINENESS OF THE TRANSACTION WAS NOT PROVED BEYOND DOUBT AS THE ASSES SEE HAS CAPITAL IN AOP AT RS. 11,99,860/- WHEREAS AMOUNT WITHDREW AT RS. 67 LACS. THE ITA 416 & 826/JP/2012 & CO 26/JP/2015_ ITO VS. HARISH KR SACHDEVA 17 AMOUNT OVER AND ABOVE SHOULD BE LOAN OF AOP TO MEMB ER I.E. ASSESSEE. THE AOP AND ASSESSEE ARE HAVING BANK ACCOUNTS AND SA LE PROCEEDS OF AOP OF LIQUOR BUSINESS WERE DEPOSITED IN THE BANK AC COUNTS. EVEN THEN THE ASSESSEE HAD TAKEN ALLEGED LOAN IN CASH. THE ASS ESSEE HAS ALSO TAKEN LOAN FROM THE ICICI BANK AT RS. 62,25,000/- O N 17/3/2008. ALL THESE FACTS SHOWED THAT THE ASSESSEE HAD INTRODUCED HIS OWN INCOME FROM UNDISCLOSED SOURCE IN THE GARB OF LOAN FROM TH E AOP. THEREFORE, HE MADE ADDITION OF RS. 67 LACS UNDER THE HEAD UNEX PLAINED INVESTMENT IN HOUSE FROM UNDISCLOSED SOURCE. 8. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD CIT(A), WH O HAD DELETED THE ADDITION BY OBSERVING AS UNDER:- 4.3.2 THE A.O. MADE THE ADDITION ON THE GROUND THAT THE CREATION OF AOP, M/S ROYAL WINES WAS HELD TO BE ILLE GAL AND THEREFORE CASH WITHDRAWAL OF RS. 67,00,000/- CANN OT BE TREATED AS GENUINE. IN MY OPINION, THE CREATION OF AOP WAS NOT HELD AS ILLEGAL. THE A.O. ASSESSING THE AOP HAS NOT GIVEN ANY SUCH FINDING. THE FINDINGS GIVEN BY THE, A.O. IN THE CASE OF THE ASSESSEE WERE RESTRICTED TO TRANSFER OF LICENSES ISS UED TO ASSESSEE. I HAVE ALREADY HELD THAT LICENSES WERE NOT ITA 416 & 826/JP/2012 & CO 26/JP/2015_ ITO VS. HARISH KR SACHDEVA 18 TRANSFERRED IN THE NAME OF AOP. I HAVE ALSO HELD TH AT INCOME FROM SHOPS LICENSED TO THE ASSESSEE HAS TO B E TAXED IN THE HANDS OF ASSESSEE HIMSELF. HOWEVER, NON E OF THESE FINDINGS WOULD MEAN THAT THE CREATION OF AOP I TSELF WAS ILLEGAL. THE A.O. HAS NOT EXAMINED THE AVAILABILITY OF CASH WITH AOP AND INSTEAD HARPED ON OTHER IRRELEVANT FACTS. I HAVE GONE THROUGH THE CASH BOOK OF ROYAL WINES A ND IT WAS SEEN THAT THERE WAS AVAILABILITY OF SUFFICIENT FU NDS WITH THE AOP AND THE TRANSACTION OF RS. 67,00,000/- WAS DULY RECORDED. I HAVE ALSO EXAMINED THE ISSUE OF RE TURN OF PART OF THE MONEY TO MEMBERS OF AOP AND NOT TO THE AOP ITSELF. IT WAS EXPLAINED THAT THE MONEY WAS INTENDED TO BE RETURNED TO THE AOP THROUGH ITS MEMBERS. IN MY OPINION, IT IS IRRELEVANT HOW THE MONEY WAS RETURNED. WHAT WAS RELEVANT WAS THE INITIAL ADVANCEMENT OF THE MONEY TO THE ASSESSEE AND WHETHER THE SOURCE OF THE SAME WAS EXPLAINED OR NOT. THE A.O. HAS NOT BROUGHT ANYTHING ON RECORD TO DISP ROVE THE GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF CREDITOR. THE A.O. SIMPLY MADE THE ADDITION ON THE GROUND THAT CREATION OF AOP WAS ILLEGAL. IN VIEW OF THE ABOVE, THE ACTION OF A.O. IS NOT CON FIRMED AND THE A.O. IS DIRECTED TO DELETE THE ADDITION OF RS. 67,00,000/-. THIS GROUND OF APPEAL IS THEREFORE ALL OWED. ITA 416 & 826/JP/2012 & CO 26/JP/2015_ ITO VS. HARISH KR SACHDEVA 19 9. NOW THE REVENUE IS IN APPEAL BEFORE US. THE LD DR HAS VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFF ICER AND ARGUED THAT THE ASSESSEE HAD NOT PROVED THE AVAILABILITY O F CASH WITH THE AOP EVEN THE AOP WAS ILLEGAL. THE ASSESSEE HAD ALSO TAKEN LOAN FROM ICICI BANK, THEREFORE, IT HAS BEEN PRAYED TO CONFIRM THE ORDER OF THE ASSESSING OFFICER. 10. AT THE OUTSET, THE LD AR OF THE ASSESSEE HAS VE HEMENTLY SUPPORTED THE ORDER OF THE LD CIT(A). THE ASSESSEE HA S WITHDRAWN RS. 67 LACS FROM AOP ON 05/3/2008. THE SOURCE IN THE HAN DS OF AOP HAS BEEN ESTABLISHED BY THE ASSESSEE. THE AOP WAS LEGAL, WHICH HAS BEEN ACCEPTED BY THE ASSESSING OFFICER OF THE AOP. THE LD CIT(A) HAS VERIFIED THE CASH BOOK OF AOP DURING THE APPELLATE PROCEEDIN GS. THEREFORE, HE PRAYED TO UPHOLD THE ORDER OF THE LD CIT(A). 11. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE LD CIT(A) HAS EXAMINED THIS ISSUE THOROUGHLY, WHICH HAS NOT BEEN CONTROVERTED BY THE LD DR, THUS THE ASSESSING OFFICER HAVE DOUBTED THE CASH PAYMENT MADE TO THE SELLERS OF THE HOUSE PROPERTY, WHICH IS NOT P ROHIBITED UNDER THE ITA 416 & 826/JP/2012 & CO 26/JP/2015_ ITO VS. HARISH KR SACHDEVA 20 IT LAWS. THE SOURCE IN THE HANDS OF AOP HAD BEEN EXPLA INED BY THE ASSESSEE, THEREFORE, WE UPHOLD THE ORDER OF THE LD C IT(A). 12. IN THE RESULT, REVENUES APPEAL IS DISMISSED, A SSESSEES APPEAL IS ALLOWED AND C.O. OF THE ASSESSEE IS ALSO DISMISSED A S INFRUCTUOUS. ORDER PRONOUNCED IN THE OPEN COURT ON 14/03/2016. SD/- SD/- YFYR DQEKJ VH-VKJ-EHUK (LALIET KUMAR) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 14 TH MARCH, 2016 * RANJAN VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE ITO, WARD 1(1), KOTA. 2. IZR;FKHZ@ THE RESPONDENT- SHRI HARISH KUMAR SACHDEVA, KOTA. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 416 & 826/JP/2012 & CO 26/JP/2015) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR