Naresh Dayanand Chandnani, New Delhi V. ACIT, Circle-54(1), New Delhi

ITA 5339/DEL/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5964 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 17-08-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B R MISHRA SENIOR
• Keywords: Business income; Search and seizure; Application of stay
• Section: 14A; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E : NEW DELHI) BEFORE HONBLE PRESIDENT, SHRI G.D. AGRAWAL AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.5339 /DEL./2017 (ASSESSMENT YEAR : 2012-13) AND STAY NO.342/DEL/2018 (IN ITA NO.5339 /DEL./2017) (ASSESSMENT YEAR : 2012-13) SHRI NARESH DAYANAND CHANDANI, VS. ACIT, CIRCLE 54 (1), O 63, GROUND FLOOR, NEW DELHI. LAJPAT NAGAR, NEW DELHI 110 024. (PAN : AAEPC9337Q) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VED JAIN, FCA REVENUE BY : SHRI B.R. MISHRA, SENIOR DR DATE OF HEARING : 21.05.2018 DATE OF ORDER : 25.05.2018 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, SHRI NARESH DAYANAND CHANDANI (HERE INAFTER REFERRED TO AS THE ASSESSEE) BY FILING THE PRESEN T APPEAL, SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 19.06.2017 PASSE D BY LD. CIT ITA NO.5339/DEL./2017 2 (APPEALS)-18, NEW DELHI QUA THE ASSESSMENT YEAR 201 2-13 ON THE GROUNDS INTER ALIA THAT :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE ORDER PASSED BY THE LEARNED CIT(A) IS BAD BOTH IN T HE EYE OF LAW AND ON FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW I N CONFIRMING THE DISALLOWANCE OF INTEREST OF RS.4,37, 2701- U/S 36(1)(III). 3. (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED- IN MAKING DISALLOWANC E UNDER SECTION 36(1 )(III), REJECTING THE CONTENTION OF THE ASSESSEE THAT THE LOANS WERE GIVEN OUT OF BUSINESS EXPEDIENCY THEREFORE NO DISALLOWANCE OF INTEREST CA N BE MADE. (II) THAT THE LEARNED CIT(A) HAS ERRED IN REJECTING THE CONTENTION OF THE ASSESSEE, THAT IN VIEW OF THE INTEREST EXPENDITURE CLAIMED BY THE ASSESSEE HAVING A DIRECT NEXUS WITH THE OTHER LOANS DIRECTLY RELATED TO THE BUSINESS OF THE ASSESSEE NO DISALLOWANCE U/S 36(1)( III) CAN BE MADE. 4. WITHOUT PREJUDICE TO THE ABOVE AND IN THE ALTERNATIVE NO DISALLOWANCE OF INTEREST U/S 36(1)(I II) IS CALLED FOR IN VIEW OF THE ASSESSEE HAVING SUFFICIEN T OWNED FUNDS TO EXTEND SUCH INTEREST FREE LOANS. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW I N ENHANCING THE INCOME BY RS.2,24,99,000/- ON ACCOUNT OF SALES MADE DURING THE YEAR UNDER CONSIDERATION. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW I N ENHANCING THE INCOME OF THE ASSESSEE BY SETTING UP A NEW SOURCE OF INCOME WHICH IS BEYOND THE POWER OF T HE LD. CIT(A) AND HIS JURISDICTION ALSO. ITA NO.5339/DEL./2017 3 7. (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN L AW IN MAKING THE ADDITION OF CASH SALES MADE BY THE ASSESSEE WITHOUT REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE. (II) THAT SUCH AN ADDITION AMOUNTS TO DOUBLE TAXATION IN VIEW OF THE FACT THAT THE ASSESSEE HIMS ELF HAS DECLARED THE SOURCE OF HIS SALES. (III) THAT THE LEARNED CIT (A) HAS ERRED BOTH ON FA CTS AND IN LAW IN DRAWING ADVERSE INFERENCE ON ACCOUNT OF CASH SALES, IGNORING THE FACT THAT THERE IS NO BAR IN MAKING CASH SALES, IN LAW. 8. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW I N MAKING THE ABOVE SAID ADDITION BY INDULGING IN GROS S CONJECTURE AND SURMISES WITHOUT BRINGING ANY ADVERS E MATERIAL ON RECORD. 9. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW I N MAKING THE ADDITION ARBITRARILY REJECTING THE EXPLANATION AND EVIDENCES FILED BY THE ASSESSEE IN THIS REGARD. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICA TION OF THE CONTROVERSY AT HAND ARE : ASSESSING OFFICER MADE AD DITION OF DISALLOWANCE UNDER SECTION 14A OF THE INCOME-TAX AC T, 1961 (FOR SHORT THE ACT) TO THE TUNE OF RS.31,870/- AND MAD E FURTHER ADDITION OF RS.24,71,261/- UNDER SECTION 36(1)(III) BEING THE INCOME FROM PROFITS AND GAINS FROM BUSINESS OR PROF ESSION. ITA NO.5339/DEL./2017 4 3. ASSESSEE CARRIED THE MATTER BY WAY OF APPEAL BEF ORE THE LD. CIT (A) WHO HAS DELETED THE ADDITION MADE U/S 14A A ND RESTRICTED THE ADDITION MADE BY THE AO U/S 36(1)(III) OF THE ACT TO RS.4,37,270/-. LD. CIT (A) FURTHER ENHANCED THE IN COME OF THE ASSESSEE TO RS.2,24,99,000/- ON ACCOUNT OF SALES MA DE DURING THE YEAR UNDER ASSESSMENT. FEELING AGGRIEVED, THE ASSES SEE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUND NO.1 5. GROUND NO.1 IS GENERAL IN NATURE, HENCE DOES NOT REQUIRE ANY ADJUDICATION. GROUNDS NO.2, 3 & 4 6. THE LD. AR FOR THE ASSESSEE HAS NOT PRESSED THES E GROUNDS QUA THE ADDITION ON ACCOUNT OF DISALLOWANCE OF INTE REST OF RS.4,37,270/- MADE BY AO AND CONFIRMED BY LD. IT (A ) U/S 36(1)(III) OF THE ACT KEEPING IN VIEW THE SMALLNESS OF THE ADDITION. CONSEQUENTLY, GROUNDS NO.2, 3 & 4 ARE DETERMINED AG AINST THE ASSESSEE. ITA NO.5339/DEL./2017 5 GROUNDS NO.5, 6, 7, 8 & 9 7. UNDISPUTEDLY, TAKING NOTICE OF CASH DEPOSITS OF RS.1,12,49,000/- AND RS.1,12,50,000/- ON MAY 4, 201 1 AND MAY 5, 2011 RESPECTIVELY BY THE ASSESSEE IN ITS CURRENT AC COUNT MAINTAINED WITH THE INDIAN OVERSEAS BANK, THE LD. CIT (A) ENTE RTAINED SUSPICION AND PUT THE CASH SALES TO SCRUTINY U/S 40 A(3) ON THE GROUND THAT THE GOLD HAS BEEN SOLD ON THE SAME DAY AND TRADING HAS BEEN DONE APPARENTLY FOR A LOSS OF RS.3,600/-. IT IS ALSO NOT IN DISPUTE THAT THE AUDITOR HAS DULY VERIFIED THE SALE S AND PURCHASES OF GOLD BY THE ASSESSEE AS RECORDED IN THE BOOKS OF AC COUNT IN THEIR TAX AUDIT REPORT. IT IS ALSO NOT IN DISPUTE THAT THE B OOKS OF ACCOUNT OF THE ASSESSEE HAVE NEVER BEEN REJECTED NOR DISPUTED ANY TRANSACTION RECORDED IN THE BOOKS OF ACCOUNT. IT IS ALSO NOT I N DISPUTE THAT THE LD. CIT (A) HAS ENHANCED THE INCOME OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAS FAILED TO RECORD DETAILED ADD RESS OF PERSONS/ PURCHASER TO WHOM THE GOLD WAS SOLD. 8. IN THE BACKDROP OF THE AFORESAID FACTS AND CIRCU MSTANCES OF THE CASE, ORDER PASSED BY LD. REVENUE AUTHORITIES B ELOW, ARGUMENTS ADVANCED BY LD. AR FOR THE PARTIES, THE SOLE QUESTI ON ARISES FOR DETERMINATION IN THIS CASE IS :- ITA NO.5339/DEL./2017 6 AS TO WHETHER CASH SALES OF GOLD BY THE ASSESSEE I S PART OF THE TRADING TRANSACTION AND THE TRADER BUYING TH E GOLD WOULD FALL U/S 14A(3)? 9. THE LD. AR FOR THE ASSESSEE CONTENDED THAT ENHAN CEMENT OF INCOME BY THE ASSESSEE TO THE TUNE OF RS.2,24,99,00 0/- IS NOT SUSTAINABLE BECAUSE A TRADER IN GOLD AND SILVER IS NOT BARRED FROM MAKING SALE OF GOLD AND SILVER IN CASH NOR A TRADER IS REQUIRED UNDER LAW TO RECORD THE NAMES AND ADDRESS OF THE PURCHASE RS TO WHOM THE CASH SALE OF GOLD AND SILVER IS MADE AND RELIED UPO N THE DECISION RENDERED BY HONBLE DELHI HIGH COURT IN CASE CITED AS CIT-II VS. JINDAL DYECHEM INDUSTRIES PVT. LTD. 2012 (4) TMI 423 DELHI HIGH COURT, THE DECISION RENDERED BY THE HONBLE BOMBAY HIGH COURT IN R.B. JESSARAM FETEHCAHND (SUGAR DEPT.) VS. CIT, BOMBAY CITY-II 1969 (7) TMI 10- BOMBAY HIGH COURT AND THE DECISION RENDERED BY THE TRIBUNAL IN CASE OF KISHORE JERAM BHAI KHANIYA, PROP. M/S. POONAM ENTERPRISES, MP-83 VS. I TO ITA NO.1220/DEL/2011 & ORS. DATED 13.05.2014 . HOWEVER, ON THE OTHER HAND, LD. DR FOR THE REVENUE TO REPEL THE ARG UMENTS OF THE LD. AR FOR THE ASSESSEE RELIED UPON THE ORDERS PASSED B Y THE REVENUE AUTHORITIES BELOW. 10. HONBLE DELHI HIGH COURT IN CIT-II VS. JINDAL DYECHEM INDUSTRIES PVT. LTD. (SUPRA) DECIDED THE IDENTICAL ISSUE IN FAVOUR OF ITA NO.5339/DEL./2017 7 THE ASSESSEE BY HOLDING THAT THERE WAS NO REQUIREME NT IN LAW FOR RECORDING THE PURCHASE OF THE BULLION TO WHOM THE C ASH SALES WERE MADE. OPERATIVE PART OF THE JUDGMENT IS EXTRACTED AS UNDER :- 11. WE MAY ALSO POINT OUT THAT WE HAD ENQUIRED FRO M THE LEARNED COUNSEL FOR THE APPELLANT AS TO WHETHER THE RE WAS ANY REQUIREMENT IN LAW OF RECORDING THE NAMES OF TH E PURCHASERS OF THE BULLION TO WHOM THE CASH SALES OF GOLD AND SILVER WERE MADE. THE LEARNED COUNSEL FOR THE R EVENUE STATED THAT THERE WAS NO SUCH REQUIREMENT IN LAW AT THE RELEVANT TIME. CONSEQUENTLY, NO ADVERSE INFERENCE C OULD HAVE BEEN DRAWN BY THE ASSESSING OFFICER ON ACCOUNT OF THE FACT THAT THE ASSESSEE WAS NOT IN A POSITION TO FUR NISH THE NAMES OF THE PERSONS TO WHOM THE CASH SALES OF THE BULLION WERE MADE. 11. COORDINATE BENCH OF THE TRIBUNAL IN CASE CITED AS KISHORE JERAM BHAI KHANIYA, PROP. M/S. POONAM ENTERPRISES, MP-83 VS. ITO (SUPRA) DECIDED THE IDENTICAL ISSUE IN FAVOUR OF TH E ASSESSEE BY RELYING UPON THE DECISION RENDERED BY HONBLE BOMBA Y HIGH COURT IN CASE CITED AS R.B. JESSARAM FETEHCAHND (SUGAR DEPT.) VS. CIT, BOMBAY CITY-II 1969 (7) TMI 10- BOMBAY HIGH COURT BY RETURNING FOLLOWING FINDINGS :- CONFIRMATION OF ADDITION MADE U/S 68 OF THE ACT - SEARCH AND SEIZURE - CASH SALES MADE - HELD THAT:- THERE I S NO LAW WHICH PROHIBITS A TRADER OR A MANUFACTURER IN MAKIN G CASH SALES - RELYING UPON R.B.JESSARAM FATEHCHAND (SUGAR DEPTT) VS. CIT [1969 (7) TMI 10 - BOMBAY HIGH COURT ] - SALES CAN BE IN CASH AND IT IS HARDLY NECESSARY FOR THE SELLER TO BOTHER ABOUT THE NAME AND ADDRESS OF THE PURCHAS ER - SO LONG AS THE AVAILABILITY OF STOCK IS THERE AND THER E IS NOTHING ADVERSE-AGAINST THE CASH MEMOS ISSUED BY THE ASSESS EE, SUCH CASH SALES CANNOT BE DOUBTED - THE VOLUME OF SUCH C ASH SALES AT 0 22.06 IS TO BE SEEN IN THE LIGHT OF THE ASSESSEE'S TOTAL TURNOVER OF RS.10.29 CRORE IT IS BUT NATURA L THAT IF A CUSTOMER MAKES .CASH PURCHASE AND LIFTS THE GOODS, THERE IS ITA NO.5339/DEL./2017 8 NO DUTY CAST UPON THE SELLER TO INSIST FOR THE ADDR ESS OF THE PURCHASER - THE ASSESSEE HAS HIMSELF OFFERED THE AM OUNT OF CASH SALES AS HIS INCOME BY DULY INCLUDING IT IN HI S TOTAL SALES -ONCE A PARTICULAR AMOUNT IS ALREADY OFFERED FOR TAXATION, IT CANNOT BE AGAIN CONSIDERED U/S 68 OF T HE ACT - THUS, ANY ADDITION CANNOT BE MADE BY TREATING CASH SALES AS BOGUS - DECIDED IN FAVOUR OF ASSESSEE. 12. WHEN WE EXAMINE THE CASE OF THE ASSESSEE IN THE LIGHT OF THE AFORESAID DECISIONS RENDERED BY THE HONBLE HIGH COURT OF DELHI IN CASE OF CIT-II VS. JINDAL DYECHEM INDUSTRIES PVT. LTD. (SUPRA) , THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN R.B. JESSARAM FETEHCAHND (SUGAR DEPT.) VS. CIT, BOMBAY CITY-II (SUPRA) AND THE DECISION OF THE TRIBUNAL IN CASE OF KISHORE JERAM BHAI KHANIYA, PROP. M/S. POONAM ENTERPRISES, MP-83 VS. I TO (SUPRA), IT IS APPARENTLY CLEAR THAT THE LD. CIT (A) HAS ACC EPTED THE TRADING RESULTS AND HAS NEVER REJECTED THE BOOKS OF ACCOUNT WHICH ARE DULY AUDITED AND IN PARA 5.4.2, CIT (A) HAS CATEGORICALL Y MENTIONED THAT PRIMA FACIE THERE IS NO DISPUTE AS REGARDS RECORDIN G OF TRANSACTION IN THE BOOKS OF ACCOUNT AND QUANTITATIVE DETAILS FO R THE PERIOD 01.04.2011 TO 31.03.2012 INCLUDES INWARD OR OUTWARD TRANSACTIONS OF GOLD OF 10 KGS. DURING THE YEAR UNDER ASSESSMENT . 13. BUT THE CIT (A) HAS PROCEEDED ON THE BASIS OF S URMISES THAT, THE BUSINESS TRANSACTIONS OF JEWELLERY AND BULLION DEALERS ARE HIGHLY CASH INTENSIVE IN NATURE AND IT IS ALWAYS AP PREHENDED THAT THEY COULD BE USED FOR FLOW OF BLACK MONEY INTO THE SYSTEM AND HAS ITA NO.5339/DEL./2017 9 REFERRED TO SECTION 115BBE. CIT (A) ALSO MENTIONED THAT DURING THE YEAR UNDER ASSESSMENT, MENTION OF PAN WAS MADE MANDATORY W.E.F. 01.07.2011 FOR BULLION PURCHASE OF RS.5,00,0 00/- OR MORE AT A TIME. 14. SO FAR AS QUESTION OF MAKING MENTION OF PAN AS MANDATORY W.E.F. 01.07.2011 FOR ALL JEWELLERY/BULLION PURCHAS ES OF RS.5,00,000/- OR MORE IS CONCERNED, WHEN IT IS UNDI SPUTED CASE OF THE ASSESSEE THAT THE SALE OF GOLD IN QUESTION WAS MADE ON 03.05.2011 AND SOLD ON 05.05.2011, THE PROVISIONS F OR MENTIONING PAN WHICH CAME INTO EFFECT W.E.F. 01.07.2011 ARE NO T ATTRACTED. LD. CIT (A) IN PARA 4.3(B) AT PAGE 18 HAS HIMSELF R ECORDED THAT, INTERESTINGLY AND COINCIDENTALLY, IN OUR CASE, THE APPELLANT HAS UNDERTAKEN THESE TRANSACTIONS JUST BEFORE THAT. CIT(A) DESPITE B EING SATISFIED THAT THE PROVISIONS ARE NOT APPLICAB LE IN CASE OF THE ASSESSEE BUT PROCEEDED TO ENHANCE THE INCOME OF THE ASSESSEE TO THE TUNE OF RS.2,24,99,000/- ON ACCOUNT OF SALES IN CAS H OF BULLION BEING UNEXPLAINED IN THE ABSENCE OF DETAIL AND CORR OBORATION. 15. IN THE FACE OF THE FACT THAT BOOKS OF ACCOUNT D ULY AUDITED BY THE AUDITORS HAVE BEEN ACCEPTED BY THE DL. CIT (A) AND NO ADVERSE INFERENCE HAS BEEN DRAWN AND PROVISIONS CONTAINED U /S 115BBE ARE NOT ATTRACTED, THE INCOME HAS BEEN ENHANCED BY LD. CIT (A) APPARENTLY ON THE BASIS OF SURMISES WHICH IS NOT SU STAINABLE IN THE ITA NO.5339/DEL./2017 10 EYES OF LAW, HENCE FOLLOWING THE DECISION RENDERED BY HONBLE HIGH COURTS AND TRIBUNAL IN CIT-II VS. JINDAL DYECHEM INDUSTRIES PVT. LTD. (SUPRA) , R.B. JESSARAM FETEHCAHND (SUGAR DEPT.) VS. CIT, BOMBAY CITY-II (SUPRA) AND KISHORE JERAM BHAI KHANIYA, PROP. M/S. POONAM ENTERPRISES, MP-83 VS. ITO (SUPRA), ADDITION OF RS.2,24,99,000/- MADE BY LD. CIT (A) IS ORDERED TO BE DELETED. CONSEQUENTLY, GROUNDS NO.5, 6, 7, 8 & 9 ARE DETERMI NED IN FAVOUR OF THE ASSESSEE. 16. RESULTANTLY, THE APPEAL FILED BY THE ASSESSEE I S PARTLY ALLOWED. 17. IN VIEW OF THE FACT THAT APPEAL BEARING ITA NO.5339/DEL/2017 IN WHICH THE PRESENT STAY APPLICAT ION WAS FILED HAS SINCE BEEN DISPOSED OFF VIDE THIS COMPOSITE ORD ER, THE PRESENT STAY APPLICATION IS HEREBY DISMISSED HAVING BEEN BE COME INFRUCTUOUS. ORDER PRONOUNCED IN OPEN COURT ON THIS 25 TH DAY OF MAY, 2018. SD/- SD/- (G.D. AGRAWAL) (KULDIP SINGH ) PRESIDENT JUDICIAL MEMBER DATED THE 25 TH DAY OF MAY, 2018 TS ITA NO.5339/DEL./2017 11 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-18, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.