MAGIC FIRE WORKS, Jaipur V. ITO, Jaipur

ITA 543/JPR/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5399 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 20-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA JCIT DR DHK
• Assessee Lawyers: K L MOOLCHANDAN I
• Keywords: Unexplained cash credit; Additional evidence
• Section: 133A; 68

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JUDICIAL MEMBER VK;DJ VIHY LA-@ ITA NO. 543/JP/2013 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 M/S. MAGIC FIRE WORKS 1, VILLAGE, CHAINUPRA, RAMGARH ROAD JAMWA RAMGARH, JAIPUR CUKE VS. THE ITO WARD- 7(3) JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAIFM 8755 A VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY: SHRI K.L. MOOLCHANDANI, ADVOCATE JKTLO DH VKSJ LS@ REVENUE BY :SHRI RAJ MEHRA, JCIT-.. DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 19/02/2016 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 15 /04/2016 VKNS'K@ ORDER PER R.P. TOLANI, JM THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD. CIT(A)-III, JAIPUR DATED 20-03-2013 FOR THE ASSE SSMENT YEAR 2008-09 WHEREIN THE ASSESSEE IS AGGRIEVED THAT THE LD. CIT (A) HAS ERRED IN:- (I) CONFIRMING THE ADDITION OF RS. 94,500/-ON ACCOUNT O F ALLEGED UNDER VALUATION OF THE CLOSING STOCK. (II) NOT ADMITTING THE ADDITIONAL EVIDENCES SUBMITT ED UNDER RULE 46A OF I.T. RULES,1962 IN SUPPORT OF ITS CLAIM AND EXPLANATION REGARDING ALLEGED UNRECORDED PURCHASES AND CONFIRMI NG ADDITION TO THE EXTENT OF RS. 1,10,668/-. ITA NO. 543//JP/2013 M/S. MAGIC FIRE WORKS VS. ITO, WARD- 7(3), JAIPUR . 2 (III) CONFIRMING THE ADDITION TO THE EXTENT OF RS. 9,241/- ON ACCOUNT OF THE SO CALLED PROFIT EARNED ON THE ALL EGED UNRECORDED PURCHASES OF RS. 1,10,668/- (IV) UPHOLDING THE ADDITION OF RS. 1.00 LAC MADE U/ S 68 OF THE ACT ON ACCOUNT OF UNEXPLAINED CREDIT IN THE CAPITAL AC COUNT OF THE PARTNER. 2.1 DURING THE COURSE OF HEARING, THE LD. COUNSEL F OR THE ASSESSEE CONTENDS THAT ASSESSEE HAS SISTER CONCERNS NAMED A M/S. M.N. FIREWORKS (P) LTD. AND BOTH OF THEM ARE DEALING IN FIRE WORKS . THE LD. AR FURTHER THROUGH HIS WRITTEN SUBMISSIONS AS UNDER:- THE APPELLANT IS A PARTNERSHIP FIRM OWNED BY THE FA MILY MEMBERS OF ONE SHRI ZAHEER AHMED. THIS FAMILY OWNS FIVE C ONCERNS; NAMELY (I) MAGIC FIRE WORKS (II) N.M. FIRE WORKS (P) LTD. (CO. ), (III) M/S. SNAZZY FIREWORKS (PARTNERSHIP FIRM) (IV) M/S. SNAZZY FIRER WORKS (PROP. CONCERN OF SHRI MUSHRAT ZAHIR V/S A.M/ PIYRO IND. (CONCERN OF SHRI MUSHRAT ZAHIR), OPERATING FROM TWO PREMISES LOCATED AT VILL AGE CHAINPURA AND 233, CHANDI KI TAKSAL, JAIPUR. IN THE WAKE OF SURVE Y OPERATIONS CARRIED OUT U/S 133A OF THE ACT ON 22-10-2008 AT BOTH THE B USINESS PREMISES, THE CASES OF ALL THE CONCERNS WERE TAKEN UP FOR SCRUTIN Y U/S 143(2) OF THE ACT ,INCLUDING THE CSSE OF THE APPELLANT FIRM FOR THIS YEAR. AFTER EXAMINING AND VERIFYING THE PAPERS AND DOCUMENTS AS FOUND DURING THE COURSE OF SURVEY OPERATIONS, THE AO HAD MADE FOLLOWING ADDITIONS. (A) TRADING ADDITIONS RS. 3,71,030/- (B) OVER-VALUATION OF THE CLOSING STOCK RS. 94,500/- ON ACCOUNT OF ALLEGED UNRECORDED PURCHASES RS. 2,87,600/- (D) ON ACCOUNT OF PROFIT EARNED ON SUCH PURCHASES RS. 94,700/- IN APPEAL, WHILE REQUESTING FOR ADMITTING THE ADDI TIONAL EVIDENCE UNDER RULE 46A OF INCOME-TAX RULE, 1962, THE ABOVE ADDITIONS WERE ASSAILED VEHEMENTLY ON VARIOUS COUNTS. THE LD. CIT( A) HAD HOWEVER, REFUSED TO ADMIT THE ADDITIONAL EVIDENCE BUT HAD DE LETED THE TRADING ADDITION OF RS. 3,71,030/-, RESTRICTED THE ADDITION OF RS. 2,87,600/- TO RS. 1,10,668/- ON ACCOUNT OF THE ALLEGED UNRECORDED PU RCHASES AND ALSO ITA NO. 543//JP/2013 M/S. MAGIC FIRE WORKS VS. ITO, WARD- 7(3), JAIPUR . 3 RESTRICTED THE ADDITION OF RS. 94,700/- TO RS. 9,24 1/-. REMAINING ADDITIONS OF RS. 94,500/- ON ACCOUNT OF UNDER VALUATION OF T HE CLOSING STOCK AND RS. 1,00,000/- ON ACCOUNT OF THE CAPITAL INTRODUCED BY THE PARTNERS WERE CONFIRMED AS DISCUSSED IN THE APPEAL ORDER. 3.1 APROPOS GROUND NO. 1, IT IS CONTENDED THAT THER E IS NO DIFFERENCE IN QUANTITY AND ONLY VALUATION HAS BEEN INCREASED BY T HE AO. RELIANCE IS PLACED IN THE CASE OF CIT VS. EXCEL INDUSTRIES LTD. (2013) 358 ITR 295 (SC). IT IS CONTENDED THAT ADDITION AT THE MOST AMO UNTS TO POSTPONEMENT IN NEXT YEAR BESIDES THERE BEING NO DIFFERENCE IN Q UANTITY. THE ADDITION IS UNJUSTIFIED. 4.1 APROPOS GROUND NO. 2 AND 3, THE ASSESSEE SUBMIT TED AS UNDER:- ANNEXURE 5 DID NOT CONTAIN DETAILED PARTICULARS O F THE GOODS PURCHASED. ONLY QUANTITIES OF THE GOODS WERE MENTIONED. IN THE CIRCUMSTANCES, THE APPELLANT HAD CARRIED OUT A DETAILED EXERCISE TO VERIFY SUCH QUANTITIES OF THE BOXES PURCHASED WI TH REFERENCE TO THE PURCHASES SHOWN IN ALL THE FAMILY CONCERNS OF T HE GROUP AT THE RELEVANT POINT OF TIME. AS A RESULT OF THIS EXERCIS E, THE APPELLANT HAD COME TO KNOW THAT THE GOODS AS SHOWN PURCHASES IN T HESE PAPERS WERE DULY RECORDED IN A FAMILY CONCERN M/S. N.M. FI REWORKS (P) LTD. ACCORDINGLY, IN THE APPEAL PROCEEDINGS, THE AP PELLANT HAD MOVED AN APPLICATION UNDER RULE 46A OF THE I.T. RUL ES, 1962 WHILE RELYING ON CERTAIN JUDICIAL CITATIONS MENTIONED AT PAGE NO. 7 OF THE APPEAL ORDER ON THE PLEA THAT THE APPELLANT HAD NO SUFFICIENT CAUSE NOT TO PRODUCE THESE DETAILS BEFORE THE AO. IN ORDE R TO DECIDE THE POINT AT ISSUE ON MERITS, THE ADDITIONAL EVIDENCES AS PRODUCED DURING THE APPEAL PROCEEDINGS WERE FORWARDED TO THE AO TO VERIFY THE CORRECTNESS OF THESE PAPERS AND DOCUMENTS FROM THE APPELLANT AND THIRD PARTY M/S. ROCKY TRADING CO. DIRECTLY. AF TER SUCH ENQUIRIES, IT WAS REPORTED IN THE BOOKS OF M/S. N.M . FIREWORKS BUT THERE WERE CUTTINGS AND OVERWRITINGS ON ALL THESE B ILLS AND THE NAME OF APPELLANT FIRM WAS CORRECTED AS M/S. N.M. FIREWO RKS. IN CROSS ITA NO. 543//JP/2013 M/S. MAGIC FIRE WORKS VS. ITO, WARD- 7(3), JAIPUR . 4 EXAMINATION ON THE POINT, IT WAS EXPLAINED THAT ALL THE CONCERNS WERE RELATED TO THE FAMILY GROUP ONLY SO THE PURCHA SES WERE MADE JOINTLY ON BEHALF OF ALL THE FAMILY CONCERNS BY THE MEMBERS OF THE FAMILY FROM TIME TO TIME. IN THE CIRCUMSTANCES, AT THE TIME OF THE SETTLEMENT OF ACCOUNTS WITH M/S. ROCKY TRADING CO. THESE BILLS WERE MADE SUBSEQUENTLY AS PER ACTUAL ACCOUNTING OF THE PURCHASES. IN THE CIRCUMSTANCES, CUTTING AND OVERWRITING WERE AFFECTED ON THE ACTUAL ACCOUNTING OF THESE PURCHASES. HOWEVER, THE FACT REMAINED UNDISPUTED THAT ALL SUCH PURCHASES STOOD RECORDED I N THE BOOKS OF M/S. N.M. FIREWORKS AND WERE DULY REFLECTED IN THE TRADING ACCOUNT OF M/S. N.M. FIREWORKS AND WERE ASSESSED AS SUCH (A S PER COPY OF A/C OF M/S. ROCKY TRADING CO. IN THE BOOKS OF M/S. N.M. FIREWORKS SUBMITTED HEREWITH FOR YOUR KIND PERUSAL AND RECORD). THE AO DID NOT DISPUTE THESE FACTS BUT HAD OPINED T HAT IT WAS AN AFTER-THOUGHT AS THERE WAS CUTTINGS AND CORRECTIONS ON THE BILLS SO NO RELIANCE COULD BE PLACED ON SUCH BILLS AND THERE FORE, THE EXPLANATION OF THE APPELLANT WAS NOT TENABLE. WHILE RELYING ON SUCH REMAND REPORT, THE LD. CIT(A) HAD REJECTED THE EXPL ANATION BUT RESTRICTED SUCH ADDITION TO RS. 1,10,668/- ON THE B ASIS OF ACTUAL COST OF THE PURCHASES SHOWN IN THE THESE BILLS. 5.1 ADVERTING TO GROUND NO. 4, IT IS CONTENDED THAT IT IS A SETTLED LAW THAT WHEN THE FIRM HAS BEEN HELD TO BE GENUINE THEN CAPITAL CONTRIBUTION OF THE PARTNER CANNOT BE ADDED IN THE HANDS OF THE FIRM. RELIANCE IS PLACED OF ITAT JODHPUR BENCH DECISION IN THE CASE OF M/S. KARNI INDUSTRIES, BIKANER VS. ITO, WARD- 2(1), BIKANER (ITA NO. 428/J U/2011 FOR THE ASSESSMENT YEAR 2008-09 ORDER DATED 19-12-2012), HO LDING AS UNDER:- APPELLANT IS A PARTNERSHIP FIRM. PARTNER OF THE F IRM WHO IS ALSO ASSESSED TO TAX DEPOSITED RS. 5.00 LACS IN THE FIRM AS CAPITAL A/C, AO MADE THE ADDITION IN THE HANDS O F FIRM ON PROTECTIVE BASIS BY REJECTING THE DETAILED EXPLANAT ION FILED BY THE ASSESSEE. ITA NO. 543//JP/2013 M/S. MAGIC FIRE WORKS VS. ITO, WARD- 7(3), JAIPUR . 5 CIT (A) REJECTED THE APPEAL OF ASSESSEE BY HOLDING THAT THE SATISFACTORY EXPLANATION IS MUST EVEN IF THE PA RTNER IS ASSESSED TO TAX. NOW HON'BLE ITAT HAS ACCEPTED THE APPEAL OF THE ASSESSEE BY HOLDING THAT THE ADDITION CANNOT BE MAD E IN THE HANDS OF THE FIRM IF THE DEPOSITOR PARTNER IS ASSES SEE AND HAS GIVEN THE EXPLANATION. 6.1 THE LD. DR SUPPORTED THE ORDERS OF THE AUTHORIT IES BELOW. 7.1 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. APROPOS GROUND NO. 1, IT HAS N OT BEEN DISPUTED THAT THERE IS NO DEFECTS IN THE QUANTITY. THE DIFFERENCE IS ONLY BASED ON ESTIMATED VALUATION. RESPECTFULLY FOLLOWING THE DEC ISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. EXCEL INDUSTRI ES LTD. (SUPRA), THE ADDITION OF RS. 94,500/- AS RAISED IN GROUND NO. 1 IS DELETED. 8.1 APROPOS GROUND NO. 2 AND 3, I FIND MERIT IN THE CONTENTIONS OF THE LD. AR OF THE ASSESSEE THAT THE GOODS IN QUESTION R EFLECTED ON ANNEXURE -5 ARE DULY MENTIONED IN THE BOOKS OF THE SISTER CONCE RN NAMELY M/S. M.N. FIRE WORKS. THE ASSESSEE'S EXPLANATION AND THE ACCO UNTS OF M/S. M.N. FIRE WORKS HAVE BEEN REJECTED BY THE AO ON PRESUMPT ION THAT IT WAS AN AFTERTHOUGHT. IN MY CONSIDERED VIEW WHEN THE ASSESS EE IS ABLE TO DEMONSTRATE CORROBORATIVE EVIDENCE RELATING TO M/S. M.N. FIRE WORKS THEN ASSESSEE'S EXPLANATION CANNOT BE REJECTED BY S WEEPING OBSERVATION THAT ITS EXPLANATION IS AN AFTERTHOUGHT. CONSEQUENT LY, THERE IS NO ITA NO. 543//JP/2013 M/S. MAGIC FIRE WORKS VS. ITO, WARD- 7(3), JAIPUR . 6 JUSTIFICATION IN THE ADDITIONS OF RS. 1,10,668/- AN D RS. 9,241/- IN RESPECT OF ALLEGED PURCHASES. HENCE, THESE ADDITIONS ARE D ELETED. 9.1 APROPOS GROUND NO. 4, RESPECTFULLY FOLLOWING TH E ITAT JODHPUR BENCH DECISION IN THE CASE OF M/S. KARNI INDUSTRIES , BIKANER VS. ITO, WARD- 2(1), BIKANER (SUPRA) WHEREIN IT IS HELD THAT WHEN FIRM HAS BEEN HELD AS GENUINE AND THE PARTNER IS ASSESSED TO TAX THEN CAPITAL ACCOUNT CONTRIBUTION BY PARTNER CANNOT BE ADDED IN THE HAND S OF THE FIRM U/S 68 OF THE ACT. CONSEQUENTLY, THE ADDITION OF RS. 1.00 LAC IS DELETED. 10.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 /04/2 016 SD/- VKJ-IH-RKSYKUH (R.P.TOLANI) U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 15 /04/ 2016 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S. MAGIC FIRE WORKS, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE ITO, WARD- 7(3), JAIPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 543/JP/2013) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR