RAMANAND MODI, Jaipur V. ITO, Jaipur

ITA 616/JPR/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5404 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 05-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJ MEHRA JCIT DHK
• Keywords: Unexplained cash credit; Business income; Principle of natural justice; Wrong claim
• Section: 143(3); 131; 68; 6

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 EQDQY DS-JKOR] U;KF;D LNL; DS LE{K BEFORE: SHRI MUKUL K. SHRAWAT, JUDICIAL MEM BER VK;DJ VIHY LA-@ ITA NO. 616/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09. SHRI RAMANAND MODI , F-266, ROAD NO 13 VKIA, JAIPUR. CUKE VS. THE INCOME TAX OFFICER, WARD 4(2), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AB GPM 1001 L VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MAHENDRA GARGIEYA (ADVOCATE) JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAJ MEHRA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 10/03/2016 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 11/03/2016. VKNS'K@ ORDER PER MUKUL K. SHRAWAT, JM : THIS IS AN APPEAL FILED BY THE ASSESSEE ARISING FR OM THE ORDER OF LD. CIT (APPEALS)-II, JAIPUR DATED 25.06.2014. GROUNDS RAI SED ARE DECIDED AS UNDER :- GROUND NO. 1 : UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-II, JAIPUR HAS ERRED IN FACTS AND IN LAW SUSTAINING THE ADDITION OF RS. 1,38,049/- MADE BY THE ASSESSING OFFICER U/S 40(A)(IA) OF THE I.T. ACT. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED UNDER SECTION 143(3) DATED 28.12.2010 WERE THAT THE ASSESSEE IN INDIVIDUAL CAPACITY IS IN THE BUSINESS OF MANUFACTURING OF HDPE PIPES & PVC PIPES. ON VERIFICATION, IT WAS 2 ITA NO. 616/JP/2014 RAMANAND MODI VS. ITO NOTICED BY THE AO THAT THE ASSESSEE HAD PAID INTERE ST TO THE TUNE OF RS. 78,671/- DURING THE MONTH OF JANUARY, 2008. THE TDS WAS DEDUCTED BU T PAID ON 5 TH APRIL, 2008. FURTHER, IT WAS ALSO NOTICED THAT A COMMISSION OF R S. 6,243/- WAS PAID IN THE MONTH OF JANUARY, 2008 BUT THE TDS OF RS. 643/- WAS PAID IN THE MONTH OF APRIL, 2008. ANOTHER AMOUNT OF INTEREST WAS PAID TO SMT. SULOCHANA DEVI TOTALING RS. 53,135/- BUT NO TDS WAS DEDUCTED. AS PER AO, THE TOTAL DEFAULT UNDER SE CTION 40(A)(IA) WAS RS. 1,38,049/-. 3. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APP ELLATE AUTHORITY, FEW DECISIONS WERE CITED. HOWEVER, THE ACTION OF THE AO WAS UPHEL D. 4. ON THIS SHORT ISSUE, I HAVE HEARD BOTH THE SIDES . A REFERENCE HAS BEEN MADE REGARDING AMENDMENT IN FINANCE ACT, 2010 DUE TO WHI CH THE TDS CAN BE DEPOSITED BEFORE THE DUE DATE OF FILING OF RETURN. IN RESPEC T OF INTEREST TO SMT. SULOCHANA DEVI, THE ASSESSEE HAS EXPLAINED THAT THE ENTIRE ACCOUNT WAS SQUARED UP DURING THE YEAR. CONSIDERING FEW CASE LAWS AS CITED BEFORE ME, I HER EBY HOLD THAT THE ISSUE IS COVERED BY VECTOR SHIPPING SERVICES, 357 ITR 642 (ALL.). FE W OTHER CASE LAWS HAVE ALSO BEEN CITED BUT KEEPING BREVITY IN MIND NEED NOT TO BE DI SCUSSED AT LENGTH. I HEREBY DIRECT TO DELETE THE ADDITION. GROUND ALLOWED. GROUND NO. 2 : UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-II, JAIPUR HAS ERRED IN FACTS AND IN LAW SUSTAINING THE DISALLOWANCE OF RS. 3,52,765/- M ADE BY THE ASSESSING OFFICER U/S 40A(2)(A) OF THE I. TAX ACT IN RESPECT OF TURNOVER DISCOUNT GIVEN BY THE ASSESSEE TO TIGER IRRIGATION PVT. LTD. 5. ON VERIFICATION, IT WAS FOUND BY THE AO THAT THE ASSESSEE HAD PROVIDED A DISCOUNT OF RS. 3,52,765/- TO A CONCERN M/S. TIGER IRRIGATION PVT. LTD. STATED TO BE A 3 ITA NO. 616/JP/2014 RAMANAND MODI VS. ITO SISTER CONCERN OF THE ASSESSEE. THE ASSESSEE WAS A SKED TO EXPLAIN THE REASON FOR GRANTING DISCOUNT IN THE LIGHT OF THE PROVISIONS OF SECTION 40A(2)(A) OF THE IT ACT. THE AO WAS NOT SATISFIED WITH THE EXPLANATION OF THE AS SESSEE, THEREFORE, MADE THE ADDITION IN THE FOLLOWING MANNER :- IT IS SEEN THAT THE ASSESSEE HAS SHOWN TURNOVER D ISCOUNT ONLY DURING THE YEAR UNDER CONSIDERATION TO LOWER ITS PROFITS AND N O SUCH DISCOUNT WAS ALLOWED TO M/S. TIGER IRRIGATION PVT. LTD. DURING T HE A.Y. 2006-07, 2007- 08, 2009-10 & 2010-11. EVEN THOUGH THE TURNOVER IS EXCEEDING YEAR TO YEAR. THE AGREEMENT SO PRODUCED WAS NOTHING BUT TO JUSTIFY THE WRONG CLAIM OF THE ASSESSEE. SINCE M/S. TIGER IRRIGATION PVT. LTD. IS RELATED PERSON AS PER SECTION 40A(2)(B), THEREFORE, PROVISI ONS OF SECTION 40A(2)(A) ARE ATTRACTED IN THIS CASE AND THUS THE TURNOVER DI SCOUNT IS HELD AS UNREASONABLE AND THUS DISALLOWED AND ADDED TO THE T OTAL INCOME OF ASSESSEE. THUS RS. 3,52,765/- IS ADDED TO THE TOTAL INCOME OF ASSESSEE. 6. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APP ELLATE AUTHORITY, IT WAS EXPLAINED THAT THE DISCOUNT WAS NOT AN EXPENDITURE BECAUSE ON THE SALES IT WAS PROVIDED AND ONLY NET SALES WERE RECORDED IN THE AC COUNTS. IT WAS ALSO PLEADED THAT THE ACTION OF THE AO WAS UNILATERAL AND THERE WAS N O RATIONAL. RELIANCE WAS PLACED ON THE DECISION OF UNITED EXPORTS, 330 ITR 549 (DEL.). HOWEVER, THE LD. CIT (A) WAS NOT CONVINCED AND THE ACTION OF THE AO WAS CONFIRMED. 7. ON THIS SHORT ISSUE, I HAVE HEARD BOTH THE SIDES . THE ARGUMENT IS THAT THE AO HAD NOT PLACED ON RECORD THE SATISFACTION ABOUT THE UNREASONABLE OR EXCESSIVE CLAIM MADE BY THE ASSESSEE. NATURALLY, AS PER THE PROVISI ONS OF SECTION 40A(2)(A), THE ONUS IS ON THE REVENUE TO PLACE ON RECORD THE BASIS ON WHIC H HE IS SATISFIED THAT THE CLAIM WAS UNREASONABLE OR EXCESSIVE. IN THE ABSENCE OF ANY C OMPARABLE INSTANCE OR ANY COGENT 4 ITA NO. 616/JP/2014 RAMANAND MODI VS. ITO EVIDENCE, I HEREBY HOLD THAT THE ISSUE IS COVERED B Y THE DECISION OF HONBLE DELHI HIGH COURT PRONOUNCED IN THE CASE OF UNITED EXPORTS (SUPR A). AS A RESULT, I HEREBY REVERSE THE FINDINGS OF THE AUTHORITIES BELOW AND DIRECT TO DELETE THE ADDITION. GROUND NO. 3 : UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LD. COMMISSIONER OF INCOME TAX (APPEALS)-II, JAIPUR HAS ERRED IN FACTS AND IN LAW SUSTAINING THE ADDITION OF RS. 1,97,000/- MADE BY THE ASSESSING OFFICER U/S 68 OF THE I. TAX ACT TREATING ADVANCE F ROM CUSTOMERS AS UNEXPLAINED CREDIT. 8. AS PER THE CASH BOOK, ON SEVERAL DATES CASH DEPO SITS ALL BELOW RS. 20,000/-, TOTALING RS. 1,97,000/- WAS FOUND BY THE AO. THE EX PLANATION OF THE ASSESSEE WAS THAT THE ADVANCE WAS RECEIVED FROM THE CUSTOMERS TOWARDS THE PURCHASE OF SPRINKLER SYSTEM. THE OBJECTION OF THE AO WAS THAT IF THE ASS ESSEE NOT SHOWN ALLEGED CASH RECEIPTS, THEN THERE WAS NEGATIVE CASH BALANCE IN T HE CASH BOOK. THE AO HAS TAXED THE SAID AMOUNT IN THE HANDS OF THE ASSESSEE AS PER THE FOLLOWING OBSERVATIONS :- I HAVE CONSIDERED THE SUBMISSION OF ASSESSEE, THE MERE FACT THAT THE ASSESSEE HAS ENTERED THESE CASH RECEIPTS IN HIS BOO KS AS ADVANCE AND LATERON SHOWN REIMBURSEMENT DO NOT MAKE IT BUSINESS RECEIPTS. THE CASH RECEIPTS SO SHOWN ARE THE CASH CREDITS AS SPECIFIED IN SECTION 68. HOWEVER, TO CONFIRM THE VERSION OF ASSESSEE, SUMMON S U/S 131 WERE ISSUED IN NAME OF THESE PERSONS AT THE ADDRESSES GI VEN BY THE ASSESSEE AND SENT BY REGISTERED POST. BUT THESE NOTICES WER E RETURNED BACK WITH POSTAL REMARKS ADDRESS NOT COMPLETE OR NO SUCH PERSON EXIST AT THE GIVEN ADDRESS. THEREFORE, IT IS SEEN THAT THE VERS ION OF ASSESSEE IS NOT VERIFIABLE. SINCE THESE WERE CASH CREDITS IN HIS B OOKS OF ACCOUNTS AND THE ASSESSEE FAILED TO GET THESE VERIFIED. NOTICES/SUMM ONS SENT TO THESE PERSONS WERE NOT SERVED, THEREFORE, I HOLD THAT THE SE WERE NOT EXPLAINED AND TREAT IT AS UNEXPLAINED INCOME OF THE ASSESSEE U/S 68. THUS RS. 1,97,000/- IS ADDED TO THE INCOME OF ASSESSEE U/S 6 8 OF THE INCOME-TAX ACT, 1961. 5 ITA NO. 616/JP/2014 RAMANAND MODI VS. ITO 9. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APP ELLATE AUTHORITY, THE ACTION OF THE AO WAS APPROVED AS UNDER :- 4.3. I HAVE EXAMINED THE FACTS OF THE CASE; ASSES SMENT ORDER AND THE SUBMISSION OF THE APPELLANT. THE APPELLANT HAS CRED ITED CASH RECEIPTS (LESS THAN RS. 20,000) ON VARIOUS DATES TOTALING RS. 1,97 ,000/- IN HIS BOOKS OF ACCOUNTS. THE APPELLANT HAS SUBMITTED THAT HE HAS R ECEIVED CASH RECEIPTS AS ADVANCES FOR SPRINKLE SYSTEM. BUT SUBSEQUENTLY, THESE ADVANCES WERE RETURNED. THE ASSESSEE WAS NOT ABLE TO DISCHARGE HI S ONUS U/S 68OF THE I.T. ACT EVEN WITH RESPECT TO THE IDENTITY OF THESE PERSONS. ON INQUIRIES MADE BY THE AO, THESE PERSONS WERE NOT TRACEABLE AT THE ADDRESSES FURNISHED BY THE ASSESSEE. IN VIEW OF THE ABOVE, I DO NOT AGREE WITH THE APPELLANT THAT THESE ADVANCES WERE RECEIVED IN THE COURSE OF BUSINESS. THIS IS A CASE WHERE THE APPELLANT HAS CREDITED IN HIS BOOKS OF ACCOUNTS, CREDIT OF RS. 1,97,000/- IN CASH ABOUT WHICH HE IS UNABLE TO PROVIDE A SATISFACTORY EXPLANATION REGARDING THE NATURE AND S OURCE THEREOF. THEREFORE, I UPHOLD THE ACTION OF THE AO IN MAKING ADDITION OF RS. 1,97,000/- U/S 68 OF THE I.T. ACT. 10. HEARD BOTH THE SIDES. A BASIC QUESTION WAS ASKE D THAT WHETHER THE ASSESSEE HAS PLACED ON RECORD THE EVIDENCE BEFORE THE REVENUE AU THORITIES THAT FINALLY THE SALES WERE EXECUTED AND THE ADVANCE WAS ADJUSTED. THE ASSESSE E HAS DRAWN MY ATTENTION ON THE ORDER FORM AND THE DEBIT VOUCHERS FROM THE RECORDS OF THE ASSESSEE TO DEMONSTRATE THAT EITHER THE SALE WAS EXECUTED OR THE ADVANCE WA S REFUNDED. THE ASSESSEE HAS ALSO PLACED ON RECORD THE SUMMARY OF CASH PAYMENTS AND I N SUPPORT EXTRACT OF THE CASH BOOK HAS ALSO BEEN PLACED ON RECORD. ALTHOUGH THE A SSESSEE HAS PLEADED THAT ALL SUCH EVIDENCES WERE VERY MUCH BEFORE THE REVENUE AUTHORI TIES BUT IT APPEARS THAT NO DISCUSSION WAS MADE IN THE ASSESSMENT ORDER. EVEN T HE LD. CIT (A) HAS NOT TAKEN ANY COGNIZANCE OF THESE EVIDENCES. WHATSOEVER WOULD BE THE CIRCUMSTANCE, WHEN THE CASE OF THE ASSESSEE WAS PLACED BEFORE THE REVENUE AUTHO RITIES, THE PRESENT POSITION IS THAT 6 ITA NO. 616/JP/2014 RAMANAND MODI VS. ITO THE ASSESSEE HAS VEHEMENTLY PLEADED THAT HE IS IN P OSSESSION OF SUFFICIENT EVIDENCE IN SUPPORT OF THE GENUINENESS OF THE CASH DEPOSITS IN THE BOOKS OF ACCOUNTS. THEREFORE, THE NATURAL JUSTICE DEMANDS TO RESTORE THIS ISSUE B ACK TO THE FILE OF THE AO SO THAT HE CAN INVESTIGATE AND IF FOUND CORRECT THEN DECIDE TH E ISSUE IN ACCORDANCE WITH LAW. SINCE THIS GROUND HAS BEEN RESTORED BACK FOR DENOVO CONSI DERATION BY THE AO, THEREFORE, THIS GROUND MAY BE TREATED AS ALLOWED BUT FOR STATISTICA L PURPOSES ONLY. 11. IN THE RESULT, APPEAL IS ALLOWED THAT TOO FOR S TATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 11/03/201 6. SD/- EQDQY DS-JKOR (MUKUL K. SHRAWAT) U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 11/03/2016. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT-SHRI RAMANAND MODI, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- THE ITO WARD 4(2), 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.616/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 7 ITA NO. 616/JP/2014 RAMANAND MODI VS. ITO 8 ITA NO. 616/JP/2014 RAMANAND MODI VS. ITO SL. NO. DATE INITIAL 1 DATE OF DICTATION 2 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER OTHER MEMBER 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 FAIR ORDER COMES BACK TO THE SR.P.S./P.S. 6 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 8 THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER 9 DATE OF DISPATCH OF THE ORDER