Shri Shailesh Jain (P/o Oswal Jewellers), Indore V. The I.T.O., Indore

ITA 540/IND/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6084 (ITAT-INDORE)
• Duration Of Justice: 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 02-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Assessee Lawyers: SSH M C MEHTA; H CHIMNANI CAS
• Keywords: Business income; Depreciation; Notional interest

Judgement Text

1 1 IN THE INCOME TAX APPELLATE TRIBUNAL, SMC BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER ITA NO.540/IND/2009 A.Y. 2006-07 SHAILESH JAIN (PROP. OSWAL JEWELLERS) BADA SARAFA, INDORE (PAN ABGPJ 2895 P) .APPELLANT VS INCOMETAX OFFICER 2(2) INDORE .RESPONDENT APPELLANT BY S/SH. M.C. MEHTA & H. CHIMNANI, CAS RESPONDENT BY SMT. APARNA KARAN, SR. DR O R D E R THIS APPEAL IS BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED FIRST APPELLATE AUTHORITY, DATED 16.9.2009. DURING HEARI NG OF THIS APPEAL, I HAVE HEARD SHRI M.C. MEHTA, ALONG WITH SHRI HITESH CHIMN ANI, LEARNED COUNSEL FOR THE ASSESSEE AND SMT. APARNA KARAN, LEARNED SENIOR DR. THE FIRST GROUND RAISED BY THE ASSESSEE IS THAT ON THE FACTS AND IN THE CIR CUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN MAINTAINING THE ADDITION OF RS.47,120/- BY APPLYING G.P. RATE OF 10 .66% AS AGAINST 5.66% DECLARED BY THE ASSESSEE IN HIS GOLD BULLION TRADIN G ACCOUNT. 2 2 2. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT THE LD. CIT(A) IS NOT JUSTIFIED IN COMING TO A PARTICULAR CONCLUSION ESPECIALLY WHEN THE COMPLETE QUANTITATIVE DETAILS WERE MAINTAINED BY THE ASSESSE E FOR WHICH MY ATTENTION WAS INVITED TO PAGES 25 TO 26A OF THE PAPER BOOK BY FUR THER PLEADING THAT THE SALES MADE DURING THE YEAR WERE MADE AT LOSS CONSIDERING THE AVERAGE RATE OF PURCHASE AND SALES. IT WAS ALSO PLEADED THAT THE BO OKS OF ACCOUNTS ARE DULY AUDITED WHICH ARE COMPRISING OF COMPLETE DAY-TO-DAY QUANTITATIVE DETAILS ESPECIALLY WHEN ALL PURCHASES AND SALES ARE FULLY V OUCHED. THE LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE UPON THE DECISIONS IN SHYAM OIL CAKE VS. ACIT (83 TTJ 414) (JODH), THE DCIT VS. HIRA FERRO ALLOYS LTD . (29 ITC 346) (ITAT, NAGPUR) AND DCIT VS. HIRA INDUSTRIES LTD. (30 ITC 8 4) (ITAT, NAGPUR). IT WAS PLEADED THAT THE LD. ASSESSING OFFICER WAS NOT JUST IFIED IN SUMMARILY REJECTING THE BOOKS OF ACCOUNTS WITHOUT PINPOINTING ANY DEFEC T IN THEM. ON THE OTHER HAND, THE LD. SR. DR STRONGLY DEFENDED THE IMPUGNED ORDER BY CONTENDING THAT NO EXPLANATION WAS FURNISHED BY THE ASSESSEE FOR ST EEP FALL IN THE G.P. RATE AS THERE IS ALWAYS A UPPER TREND IN THE GOLD MARKET, E SPECIALLY WHEN THERE IS NO JUSTIFICATION WAS GIVEN BY THE ASSESSEE FOR THE ALL EGED LOSS. THE ADDITION WAS STRONGLY DEFENDED. 3. I HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. R EPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON THE FIL E. BRIEF FACTS ARE THAT THE ASSESSEE DEALS IN PURCHASE AND SALE OF GOLD BAR/GOL D ORNAMENTS AND BROKERAGE OF GOLD ORNAMENTS. THE ASSESSEE MADE SALES OF RS.9,42, 448/-, SHOWING G.P. 3 3 @5.66% (ASSESSMENT YEAR: 2006-07) AGAINST THE SALES OF RS.6,13,099/- BY SHOWING THE G.P. @13.03% (ASSESSMENT YEAR: 2005-06) AND G.P. AT 12% ON THE SALES OF RS.6,25,751/- (ASSESSMENT YEAR: 2004-05). THE LD. ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN SHARP FALL IN THE G.P . FOR THE IMPUGNED ASSESSMENT YEAR IN COMPARISON TO THE EARLIER YEARS. THE CLAIM OF THE ASSESSEE, DURING ASSESSMENT PROCEEDINGS, WAS THAT THE RATE OF GOLD W AS HIGHLY VOLATILE AND ALSO BEYOND THE CONTROL OF THE ASSESSEE. THE ASSESSING O FFICER WAS OF THE VIEW THAT THERE IS ALWAYS AN UPWARD TREND IN THE RATE OF GOLD , THEREFORE, IT IS NOT A VALID REASON FOR SHOWING FALL IN THE G.P. IDENTICAL SUBMI SSIONS WERE PREFERRED BY THE ASSESSEE BEFORE THE LD. FIRST APPELLATE AUTHORITY A S IS EVIDENT FROM THE IMPUGNED ORDER. IF TOTALITY OF FACTS, AS NARRATED ABOVE, ARE ANALYSED, THERE IS NO DISPUTE TO THE FACT THAT THERE IS A STEEP DECLINE IN THE G.P. AS FROM 13.03% (ASSESSMENT YEAR 2006-07), IT DECLINED TO 5.66% UNDER THE YEAR UNDER APPEAL. IT IS SEEN THAT THE CLAIM OF THE ASSESSEE IS NOT SUPPORTED BY ANY D OCUMENTARY EVIDENCE, THEREFORE, MERELY CLAIMING THAT THE BOOKS ARE AUDIT ED MAY NOT HELP THE ASSESSEE BECAUSE BURDEN IS ON THE ASSESSEE TO PROVE WITH DOC UMENTARY EVIDENCE THAT IN- FACT THERE WAS DECLINE IN THE G.P. IT IS ALSO AN AD MITTED FACT THAT NORMALLY, THERE IS ALWAYS AN INCREASING TREND IN THE GOLD PRICES AN D THE TOTAL SALES OF THE ASSESSEE ARE ALSO IN A INCREASING TREND AS IS EVIDE NT THAT ON THE TOTAL SALES OF RS.6,13,099/- (ASSESSMENT YEAR 2005-06), THE ASSESS EE SHOWED THE G.P. AT 13.03% WHEREAS ON THE SALES OF RS.9,42,448/- (ASSES SMENT YEAR 2006-07), THE G.P. REDUCED TO 5.66%. EVEN FOR ASSESSMENT YEAR 200 4-05, ON THE TOTAL SALES OF 4 4 RS.6,25,751/-, THE G.P. WAS DECLARED AT 12% OF THE TOTAL SALES. IN VIEW OF THESE FACTS, IT CAN BE SAID THAT THE STAND OF THE ASSESSE E THAT DIFFERENCE IN G.P. IS VERY MARGINAL, IS FACTUALLY INCORRECT, THEREFORE, ONUS I S CAST UPON THE ASSESSEE TO SUBSTANTIATE ITS CLAIM WITH DOCUMENTARY EVIDENCE, C ONSEQUENTLY, MERE CLAIM MAY NOT HELP. IN VIEW OF THESE FACTS, I AM OF THE C ONSIDERED OPINION THAT THE LD. ASSESSING OFFICER WAS QUITE JUSTIFIED IN INVOKING T HE PROVISIONS OF SEC. 145(2) IN REJECTING THE BOOKS OF ACCOUNTS, WHICH WAS AFFIR MED BY THE LD. FIRST APPELLATE AUTHORITY. EVEN OTHERWISE, IF THE MEAN OF ASSESSMEN T YEARS 2004-05 TO 2006-07 IS ANALYSED, IT ALSO COMES TO 10.23% WHEREAS THE AS SESSING OFFICER WORKED OUT THE G.P. @10.66%. HOWEVER, BY TAKING A LIBERAL APPR OACH AND THE CASE-LAWS (SUPRA), RELIED UPON BY THE ASSESSEE, I DIRECT THE LD. ASSESSING OFFICER TO ADOPT THE G.P. @9% IN PLACE OF 10.66% AFFIRMED BY THE LD. CIT(A), CONSEQUENTLY, THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED. 4. THE NEXT GROUND RAISED BY THE ASSESSEE IS THAT T HE LD. FIRST APPELLATE AUTHORITY ERRED IN MAINTAINING DISALLOWANCE OF RS.6 0,000/- OUT OF THE INTEREST PAID ON THE ADVANCE OF RS.5 LACS MADE TO HEENA WARE HOUSING LTD. WITHOUT CONSIDERING THAT SUIT FOR RECOVERY WAS FILED AGAINS T THE DEBTOR WHICH IS PENDING IN THE COURT. 5. THE CONTENTION RAISED ON BEHALF OF THE ASSESSEE IS THAT THE ADVANCE WAS GIVEN IN THE YEAR 1996 AND SINCE THEN, NO INTEREST HAS BEEN RECEIVED. IT WAS CLAIMED THAT THE ADVANCE WAS GIVEN FROM PERSONAL SE T OF BOOKS IN WHICH NO LOAN WAS TAKEN EXCEPT HOUSING LOAN TAKEN IN SUBSEQUENT Y EARS. PLEA WAS ALSO RAISED 5 5 THAT THE AMOUNT OF RS.1,16,248/- WAS PAID AS INTERE ST FROM PROP. CONCERN I.E. OSWAL JEWELLERS WHICH IS SEPARATE FROM PERSONAL BOO KS. IT WAS ALSO PLEADED THAT THE CHEQUE ISSUED BY THE DEBTOR WAS DISHONOURED AND SUIT FOR RECOVERY WAS FILED U/S 138 OF THE NEGOTIABLE INSTRUMENT ACT, 1997 WHIC H IS STILL PENDING. IT WAS CONTENDED THAT DISALLOWANCE OF INTEREST IS PATENTLY WRONG ESPECIALLY WHEN NO INTEREST BEARING FUNDS WERE UTILISED, THEREFORE, NO ADDITION CAN BE MADE TOWARDS NOTIONAL INTEREST AS THE SAME IS APPLICABLE ONLY FO R REAL INCOME. THE CRUX OF THE ARGUMENT IS THAT THE LOAN WAS GIVEN FROM PERSONAL A CCOUNT. THE FOLLOWING CASES WERE RELIED UPON: - BHRAHAMPUTRA CAPITAL VS. ITO (119 ITD 266) (DEL), MADHU GUPTA VS. DCIT (8 SOT 691) (MUM), FGP LTD. VS. CIT (9 DTR 295) (BOM), MALBROS INVESTMENT VS. DCIT (11 DTR 314) (DEL), POONA ELECTRIC (57 ITR 521) (SC), STATE BANK OF TRAVANCORE (158 ITR 102 (SC), UCO BANK (237 ITR 889), (SC), AND BALRAMPUR COMMERCIAL ENTERPRISES (262 ITR 439) (CAL ) ON THE OTHER HAND, THE LD. SR. DR STRONGLY DISPUTED THE ASSERTION OF THE ASSESSEE ON THE GROUND THAT NEW PLEA HAS BEEN RAISE D BEFORE THE TRIBUNAL AS NO SUCH PLEA WAS TAKEN BEFORE THE LD. ASSESSING OFFICE R THAT LOAN WAS GIVEN FROM PERSONAL ACCOUNT. IT WAS CONTENDED BY THE LD. COUNS EL FOR THE ASSESSEE THAT THE ASSESSEE IS EVEN NOW IN A POSITION TO EXPLAIN THAT THE LOAN WAS GIVEN FROM 6 6 PERSONAL ACCOUNT. THE LD. COUNSEL FROM BOTH SIDES F AIRLY AGREED THAT THIS ISSUE MAY BE REMANDED BACK TO THE FILE OF THE LD. ASSESSI NG OFFICER. IN VIEW OF THIS AGREEMENT AND WITHOUT GOING INTO MERITS OF THIS ISS UE, IT IS REMANDED BACK TO THE FILE OF THE LD. ASSESSING OFFICER FOR FRESH ADJUDIC ATION IN ACCORDANCE WITH LAW WITH THE DIRECTION TO EXAMINE WHETHER THE LOAN WAS GIVEN FROM THE PERSONAL ACCOUNT AND ALSO WHETHER THE INTEREST WAS PAID FOR THE PURPOSES OF BUSINESS. THE ASSESSEE IS AT LIBERTY TO FURNISH EVIDENCE, IF ANY, TO SUBSTANTIATE ITS CLAIM FOR WHICH DUE OPPORTUNITY BE PROVIDED TO THE ASSESSEE. THIS GROUND OF THE ASSESSEE IS, THEREFORE, ALLOWED FOR STATISTICAL PURPOSES ONL Y. 6. THE LAST GROUND RAISED BY THE ASSESSEE PERTAINS TO MAINTAINING DISALLOWANCES OF RS.3235/- AND RS.5860/- @20% OF TE LEPHONE AND VEHICLE RUNNING EXPENSES/DEPRECIATION FOR ALLEGED PERSONAL USE. 7. THIS GROUND WAS NOT PRESSED BY THE LD. COUNSEL F OR THE ASSESSEE BEING SMALLNESS OF THE AMOUNT INVOLVED. IN VIEW OF THESE FACTS, THIS GROUND OF THE ASSESSEE IS DISMISSED AS NOT PRESSED. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 9.2.2010. SD (JOGINDER SINGH) JUDICIAL MEMBER FEBRUARY 9, 2010 COPY TO APPELLANT, RESPONDENT, CIT, CIT(A), DR