Deputy Commissioner of Income-tax, Jalgaon V. Shri Rtanlal Chunnilal Bafna, Jalgaon

ITA 625/PUN/2014

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7186 (ITAT-PUNE)
• Duration Of Justice: 5 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 23-07-2019
• Assessment Year: 2009-2010
• Appeal Filed On: 01-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VISHWAS MUNDE
• Keywords: Document seized; Additional evidence; Fair market value; Corroborative evidences; Documents seized; Set aside
• Section: 14A; 201; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, PUNE BEFORE SHRI R.S.SYAL, VP AND SHRI PARTHA SARATHI CHAUDHURY, JM . / I TA NO. 625 /PUN/20 14 / ASSESSMENT YEAR : 2009 - 10 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 1, JALGAON. ....... / APPELLANT / V/S. SHRI RATANLAL CHUNNILAL BAFNA, 96, SUBHASH CHOWK, JALGAON - 425 001. PAN: AAMPB3939K / RESPONDENT A SSESSEE BY : SHRI SUNIL GANOO REVENUE BY : SHRI VISHWAS MUNDE / DATE OF HEARING : 23 .0 7 .2019 / DATE OF PRONOUNCEMENT : 29 .0 7 .2019 / ORDER PER PARTHA SARATHI CHAUDHU RY, JM : THIS APPEAL PREFERRED BY THE REVENUE EMANATES FROM THE ORDER OF THE LD. CIT(APPEALS) - 2, NASHIK DATED 13.01.2014 FOR ASSESSMENT YEAR 2009 - 10 AS PER THE FOLLOWING CONCISE GROUNDS OF APPEAL ON RECORD: 2 ITA NO. 625 /PUN/20 14 A.Y. 2009 - 10 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE HON'BLE CIT (A), NASHIK HAS ERRED IN RESTRICTING THE FIGURE OF MELTING LOSS TO THE EXTENT OF 50% OF THE ADDITION I.E. AT RS.96,872/ - AND RELIED UPON THE ASSESSEE'S SUBMISSION WITHOUT AN Y DOCUMENTARY EVIDENCES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE HON'BLE CIT(A), NASHIK HAS ERRED IN DELETING THE ADDITIONS AMOUNTING TO RS.1,41,000/ - MADE ON ACCOUNT OF DISALLOWANCE OF SALARY PAID TO SHRI RAJKUMAR RATANLAL BAFNA U/S 40A (2)(B) OF THE ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE HON'BLE CIT(A), NASHIK HAS ERRED IN DELETING THE ADDITIONS AMOUNTING TO RS.77,02,672/ - ON ACCOUNT OF TRANSACTIONS WITH CHHORIYA GROUP. 4. ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE HON'BLE CIT(A), NASHIK HAS ERRED IN DELETING THE ADDITIONS AMOUNTING TO RS.5,11,061/ - MADE ON ACCOUNT OF INTEREST PAYMENT AND CONSIDERED THE NET INTEREST DEBITED TO P & L ACCOUNT WHILE CALCULATING DISALLOWANCE OF INTEREST U/S.14A. 5. THE A PPELLANT CRAVES LEAVE TO ADD, ALTER, MODIFY, DELETE, AMEND ANY OF THE GROUNDS WITH PRIOR PERMISSION OF THE HONBLE CIT AS PER THE CIRCUMSTANCES OF THE CASE. 6. THE APPELLANT PRAYS TO FILE ANY OF THE ADDITIONAL EVIDENCE APPROPRIATE TO THE GROUNDS TAKEN IN APPEAL. 2. GROUND NO.1 IS WITH REGARD TO THE FINDINGS OF THE LD. CIT(APPEALS) IN RESTRICTING THE FIGURE OF MELTING LOSS TO THE EXTENT OF 50% OF THE ADDITION I.E. AT RS.96,872/ - . 3. THE ASSESSING OFFICER HAD OBSERVED THAT THE ASSESSEE HAS NOT MAI NTAINED THE QUANTITATIVE DETAILS OF MANUFACTURING ACCOUNT OF ACTUAL CONSUMPTION OF SILVER AND ON VERIFICATION OF SILVER ACCOUNT; IT WAS FOUND THAT ACTUAL USE OF SILVER IS MORE IN MANUFACTURING OF SILVER UTENSILS AND ORNAMENTS. WHEN IT WAS POINTED OUT TO THE ASSESSEE , THE ASSESSEE ADMITTED AND SURRENDERE D VALUE OF MELTING LOSS AND THUS, ADDITION OF RS.1,93,744/ - U/S.69 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) , WAS MADE BY THE ASSESSING OFFICER . 3 ITA NO. 625 /PUN/20 14 A.Y. 2009 - 10 4. THE LD. CIT(APPEALS) OBS ERVED THAT THE ASSESSEE IS NOT MAINTAINING THE QUANTITATIVE DETAILS OF MANUFACTURING ACCOUNTS OF ACTUAL CONSUMPTION OF SILVER. HOWEVER, THE LD. CIT(APPEALS) CONSIDERED THE NATURE OF BUSINESS OF THE ASSESSEE, SHORTAGES DUE TO MELTING LOSS IN THE SILVER ACCO UNT CANNOT BE STRAIGHT WAY DENIED. THE ASSESSING OFFICER HAD DISALLOWED ENTIRE MELTING LOSS AT 8741.41 KG AND THE LD. CIT(APPEALS) RESTRICTED MELTING LOSS OF DISALLOWANCE TO 50% AT RS.96,872/ - . 5. WE HAVE PERUSED THE CASE RECORDS AND HAVE GIVEN CONSIDERABLE THOUGHT TO THE FINDINGS OF THE LD. CIT(APPEALS). WE FIND , IT IS CATEGORICALLY OBSERVED BY THE LD. CIT(APPEALS) THAT THE ASSESSEE HAS NOT MAINTAINED THE QUANTITATIVE DETAILS OF MANUFACTURIN G ACCOUNT OF ACTUAL CONSUMPTION OF SILVER . HOWEVER, IN EVERY TRADE OR BUSINESS THERE ARE CERTAIN PRACTICAL ASPECTS WHICH HA VE TO BE CONSIDERED AND THAT BENEFIT HAS TO BE ALLOWED TO THE ASSESSEE DOI NG SUCH PROFESSION OR BUSINESS. IN THIS CASE, THE SHORTAGE S DUE TO MELTING LOSS IN THE SILVER ACCOUNT CANNOT BE ALTOGETHER DENIED. THE LD. CIT(APPEALS) WAS CORRECT IN SUSTAINING 50% OF 8741. 41 KG OF VALUE OF RS.1,93,744/ - . WE DO NOT FIND ANY INFIRMITY WITH THE FINDINGS OF THE LD. CIT(APPEALS) AND HENCE, GROUND NO .1 RAISED IN APPEAL BY THE REVENUE IS DISMISSED. 6. GROUND NO.2 RELATES TO THE DISALLOWANCE OF AMOUNT RS.1,41,000/ - MADE ON ACCOUNT OF SALARY PAID TO SHRI RAJKUMAR RATANLAL BAFNA INVOKING PROVISION OF SECTION 40A(2)(B) OF THE ACT. 7. THE FACTS ON THIS ISSUE ARE THAT AS PER THE BOOKS OF ACCOUNT, SALARY AT RS.2,13,000/ - HAS BEEN DEBITED TO SHRI RAJKUMAR RATANLAL AGRAWAL AS AGAINST LAST YEARS SALARY AT RS. 96,000/ - . THERE WAS STATEMENT ON OATH TAKEN 4 ITA NO. 625 /PUN/20 14 A.Y. 2009 - 10 DURING THE COURSE OF SURVEY U/S.133A OF THE ACT WHEREIN SHRI BAFNA HAS ADMITTED RECEIPT OF SALARY @ ONLY RS.6000/ - PER MONTH. THE ASSESSING OFFICER THEREFORE, ALLOWED SALARY OF RS.6000/ - PER MONTH AS ADMITTED BY HIM IN HIS STATEMENT ON OATH AT THE TIME OF SURVEY AND DISALLOWED RS.1,41,000/ - TO BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 8. BEFORE THE LD. CIT(APPEALS) , IT WAS SUBMITTED BY THE LD. AR THAT AS PER CBDT CIRCULAR NO. 6P(LXXVI - 66) OF 1968 DATED 6 TH JULY, 1968 WHEREIN IT IS STATED THAT T HE REASONABLENESS OF ANY EXPENDITURE IS TO BE JUDGED HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOOD S , SERVICES OR FACILITIES FOR WHICH THE PAYMENT IS MADE OR LEGITIMATE NEEDS OF THE BUSINESS OR PROFESSION OR THE BENEFIT DERIVED BY , OR ACCRUING TO, THE TAXPAYER FROM EXPENDITURE. SUCH PORTION OF THE EXPENDITURE WHICH , IN THE OPINION OF THE ITO IS EXCESSIVE OF UNREASONABLE ACCORDING TO THESE CRITERIA IS TO BE DISALLOWED IN COMPUTING THE PROFIT OF THE BUSINESS OR PROFESSION. IT IS FURTH ER STATED THAT THE ITO IS EXPECTED TO EXERCISE HIS JUDGMENT IN A REASONABLE AND FAIR MANNER. IT SHOULD BE BORNE IN MIND THAT THE PROVISION IS MEANT TO CHECK EVASION OF TAX THROUGH EXCESSIVE OR UNREASONABLE PAYMENT TO RELATIVE AND ASSOCIATE CONCERNS AND SHO ULD NOT BE APPLIED IN A MANNER WHICH WILL CAUSE HARDSHIP IN BONA FIDE CASES. FOLLOWING THE GUIDELINES, THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. INDO SAUDI SERVICES (TRAVEL) P. LTD. REPO RTED IN (2009) 310 ITR 306 ( BOM.) HAS D ELETED THE ADDITIONS U/S.40A(2) OF THE ACT. THE LD. AR FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAS NOT POINTED OUT ANY SPECIFIC DEFECTS IN THE BOOKS OF ACCOUNT BY WHICH THE PROVISION S OF SECTION 145 (3) CAN BE INVOKE D . THE ASSESSING OFFICER HAS NOT REJ ECTED THE BOOKS OF THE ASSESSEE. AS RESULT OF OVERALL SERVICES OF RAJKUMAR BAFNA , THE BUSINESS OF THE ASSESSEE 5 ITA NO. 625 /PUN/20 14 A.Y. 2009 - 10 HA S INCREASED TO RS.4,30,57,480/ - AS ON 31.03.2009 AS AGAINST SALES OF RS.3,42,70,496/ - AS ON 31.03.2009 IN SILVER PALACE ACCOUNT. SIMILARLY , JO B CHARGES ARE INCREASED TO RS.10,77,015/ - AS ON 31.03.2009 AS AGAINST OF RS.8,09,882/ - AS ON 31.03.2009 IN METAL INDUSTRIES ACCOUNT. IT WAS FURTHER STATED THAT SHRI RAJKUMAR R. BAFNA WAS PROVIDING HIS SERVICES AS MANA GER SINCE LAST 20 YEARS AND HE HA S A VE RY GOOD AND DEEP KNOWLEDGE OF THE BUSINESS OF THE ASSESSEE. HIS SERVICES WERE MORE RELIABLE THAN OTHER EMPLOYEES. THESE SUBMISSIONS FOUND FAVOUR WITH THE LD. CIT(APPEALS) AND FOLLOWING THE BOARD CIRCULAR AS WELL AS DECISION OF THE HONBLE JURISDICTIONAL HI GH COURT ON THE ISSUE, THE LD. CIT(APPEALS) DELETED THE ADDITION. 9. WE HAVE PERUSED THE CASE RECORDS, CBDT CIRCULAR (SUPRA.) AS WELL AS THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. INDO SAUDI SERVICES (TRAVEL) P. LTD. (SUPRA.) . WE HAVE ALSO ANALYZED THE FACTS AND CIRCUMSTANCES OF THE CASE ON THIS ISSUE. WE FIND THAT THE ASSESSING OFFICER MADE THIS ADDITION ON THE BASIS OF STATEMENT RECORDED U/S.133A OF THE ACT DURING THE COURSE OF SURVEY AND WITHOUT ANY OTHER SUPPORTIN G/CORROBORATIVE EVIDENCES. IT HAS BEEN CLEARLY HELD BY VARIOUS JUDICIAL PRONOUNCEMENTS THAT NO ADDITION S CAN BE MADE ONLY ON THE BASIS OF STATEMENT TAKEN DURING THE COURSE OF SURVEY BY THE REVENUE AUTHORITIES UNLESS AND UNTIL THERE ARE SOME CORROBORATIVE / SUPPORTING EVIDENCES. IN THIS CASE, THE ASSESSING OFFICER HAS NOT BROUGHT IN ANY SPECIFIC REASONS FOR SUCH DISALLOWANCE EXCEPT THE FACT THAT SHRI RAJKUMAR R. BAFNA IS THE SON OF THE ASSESSEE AND HIS STATEMENT WAS RECORDED U/S.133A OF THE ACT. AS PER BOARD CIRCULAR (SUPRA.), THERE HAS TO BE SOME REASONABLENESS REGARDING ACTION TAKEN BY THE ASSESSING OFFICER FOR DISALLOWANCE OF EXPENSES. THE REASONABLENESS OF EXPENSES IS TO BE SEEN FROM THE VIEW POINT OF BUSINESSMAN AND NOT FROM THE VIEW POINT OF REVENUE 6 ITA NO. 625 /PUN/20 14 A.Y. 2009 - 10 AUTH ORITY. IN THIS CASE, SHRI RAJKUMAR R. BAFNA IS WORKING FOR LAST 20 YEARS HAVING FULL KNOWLEDGE OF THE ASSESSEES BUSINESS. IN EARLIER OCCASION , HE WAS PAID SALARY RS.96,000/ - WHEREAS NOW HIS SALARY IS RS.2,13,000/ - . TAKING INTO CONSIDERATION TO TALITY OF FACTS AND CIRCUMSTANCES IN THIS CASE AND ALSO THE BOARD CIRCULAR (SUPRA.) , WE DO NOT FIND ANY INFIRMITY WITH THE FINDINGS OF THE LD. CIT(APPEALS) WHICH IS THEREBY UPHELD. THUS, GROUND NO.2 RAISED IN APPEAL BY THE REVENUE IS DISMISSED. 10. GROUND NO. 3 IS WITH REGARD TO CHALLENGING THE DECISION OF THE LD. CIT(APPEALS) IN DELETING ADDITION AMOUNTING TO RS.77,02,672/ - ON ACCOUNT OF TRANSACTIONS WITH CHHORIYA GROUP. 11. THE FACTS WITH REGARD TO THIS ISSUE ARE THAT SEARCH ACTION U/S.132 O F THE ACT WAS CONDUCTED AT THE RESIDENTIAL PREMISES OF CHHORIYA GROUP AT JALGAON ON 22.08.2008. DURING THE COURSE OF SURVEY ACTION CERTAIN ROUGH CASH BOOKS WERE SEIZED AT RESIDENTIAL CUM FACTORY PREMISES OF SHRI KANHAIYALAL B. CHHORIYA, G - 1 TO 8, MIDC, JAL GAON. IT WAS NOTICED FROM THE SEIZED DOCUMENTS AS PER ANNEXURE - B, ITEM NO.1 TO 40 WHICH ARE ROUGH CASH BOOK OF CHHORIYA GROUP THAT SHRI R.C. BAFNA, JALGAON HAD GIVEN ADVANCES TO CHHORIYA GROUP DURING THE PERIOD FROM 01.04.2008 TO 31.03.2009. THE ASSESSING OFFICE R OBSERVED THAT ON PERUSAL OF BALANCE SHEET ALONG WITH RETURN OF INCOME FOR ASSESSMENT YEAR 2004 - 05 SHOWED THAT THESE ADVANCES WERE NOT REFLECTED IN THE SAID BALANCE SHEET AND HENCE, ADDITION S WERE ACCORDINGLY MADE BY THE ASSESSING OFFICER. 7 ITA NO. 625 /PUN/20 14 A.Y. 2009 - 10 12. TH E LD. CIT(APPEALS) AS PER DETAILED REASONING AS APPEARING IN HIS ORDER DELETED THE ADDITION. 13. WE HAVE PERUSED THE CASE RECORDS AND HAVE GIVEN CONSIDERABLE THOUGHT TO THE FINDINGS OF THE LD. CIT(APPEALS) . WE OBSERVE THAT REGARDING ONE OF THE ENTRIES, THE LD. CIT(APPEALS) HAS STATED IN HIS FINDI NGS THAT RS.25,00,000/ - HAS ALREADY BEEN CONSIDERED IN THE PEAK WORKING IN THE APPELLATE ORDER FOR A.Y.2008 - 09 AND THE SAME HAD BEEN BROUGHT TO TAX. WHEREAS AS PER THE DETAILS OF TRANSACTION GIVEN BY THE ASSESSING OFFICERS ORDER, THE AMOUNT OF RS.25,00,00 0/ - WA S A REPAYMENT BY CHHORIYA TO BAFNA DATED 16.04.2008 I.E. FINANCIAL YEAR 2008 - 09 RELEVANT TO CURRENT ASSESSMENT YEAR 2009 - 10 AND THEREFORE, IT IS NOT POSSIBLE THAT THIS AMOUNT HAS ALREADY BEEN SUBJ ECT TO TAX. WE ALSO OBSERVE THAT SO FAR AS THE AMOUNT OF RS.10,00,000/ - IS CONCERNED DA TED 02.04.2008, IT IS CASH RETURN ED . IF IT IS CASH RETURN ED , IT CANNOT BE THE INCOME OF THE ASSESSEE AS IT WAS AN ADVANCE TAKEN EARLIER WHICH WAS RETURNED. EXCEPT THE AM OUNT OF RS.10,00,000/ - , REST OF THE AMOUNTS NEED DETAILED VERIFICATION. WE THEREFORE, SET ASIDE THE ORDER OF THE LD. CIT(APPEALS) AND RESTORE THIS ISSUE TO THE FILE OF ASSESSING OFFICER FOR DETAILED VERIFICATION AS PER OUR DIRECTIONS GIVEN IN EARLIER YEARS . NEEDLESS TO SAY, THE ASSESSING OFFICER SHALL GRANT REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE IN ACCORDANCE WITH LAW. THUS, GROUND NO.3 RAISED IN APPEAL BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 14. GROUND NO.4 OF REVENUES APPEAL RELA TES TO ACTION OF THE LD. CIT(APPEALS) IN DELETING THE ADDITIONS AMOUNTING TO RS.5,11,061/ - MADE ON ACCOUNT OF INTEREST PAYMENT AND CONSIDERED THE NET INTEREST DEBITED TO P & L ACCOUNT WHILE CALCULATING DISALLOWANCE U/S.14A OF THE ACT. 8 ITA NO. 625 /PUN/20 14 A.Y. 2009 - 10 15. THE FACTS ON THIS ISSUE ARE THAT THE ASSESSING OFFICER HAS CONSIDERED THE NET INTEREST DEBITED TO P & L ACCOUNT OF RS.4,77,622/ - WHILE CALCULATING THE DISALLOWANCE OF INTEREST UNDER THE PROVISION OF SECTION 14A OF THE ACT, AS STATED AT PAGE NO.7 OF THE ASS ESSMENT ORDER. THE LD. CIT(APPEAL) DELETED THE ADDITION BY OBSERVING THAT THOUGH THE ASSESSEE IN THE P & L ACCOUNT HAS CLAIMED RS.4,77,622/ - , THE DISALLOWANCE OF INTEREST CANNOT BE AT RS.5,11,061/ - . THE DISALLOWANCE OF INTEREST CANNOT BE MORE THAN WHATEVER HAS BEEN CLAIMED BY THE ASSESSEE IN THE P & L ACCOUNT. THEREFORE, W E DO NOT FIND ANY INFIRMITY WITH THE FINDINGS OF THE LD.CIT(APPEALS) AND RELIEF PROVIDED TO THE ASSESSEE IS HEREBY SUSTAINED. THUS, GROUND NO.4 RAISED IN APPEAL BY THE REVENUE IS DISMISSED . 16. GROUND NO.5 AND 6 ARE GENERAL IN NATURE AND HENCE, REQUIRES NO ADJUDICATION. 17. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRO NOUNCED ON 29 TH DAY OF JU LY , 201 9 . SD/ - SD/ - R.S.SYAL PARTHA SARATHI CHAUDHURY VICE PRESIDENT JUDICIAL MEMBER / PUNE; / DATED : 29 TH JU LY , 2019 . SB 9 ITA NO. 625 /PUN/20 14 A.Y. 2009 - 10 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEALS) - 2, NASHIK. 4. THE CIT - 2, NASHIK. 5 . , , , / DR, ITAT, C BENCH, PUNE. 6. / GUARD FILE. // TRUE COPY // / BY ORDER, / PRIVATE SECRETARY , / ITAT, PUNE . 10 ITA NO. 625 /PUN/20 14 A.Y. 2009 - 10 DATE 1 DRAFT DICTATED ON 23 .0 7 .2019 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 29 .0 7 .201 9 SR.PS/PS 3 DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 DATE OF UPLOADING OF ORDER SR.PS/PS 8 FILE SENT TO BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE A.R 11 DATE OF DISPATCH OF ORDER