INCOME TAX OFFICER, WARD- BHIWADI V. SHRI SATISH KUMAR, ALWAR

ITA 637/JPR/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1896 (ITAT-JAIPUR)
• Duration Of Justice: 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 02-08-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJENDRA JHA SH
• Keywords: Rejection of books of accounts; Additional evidence
• Section: 80C; 143(3); 68; 145

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH HKKXPAN] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, A M VK;DJ VIHY LA-@ ITA NO. 637/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2012-13 INCOME TAX OFFICER, WARD- BHIWADI. CUKE VS. SATISH KUMAR, J-501-502, KRISH VATIKA, BHIWADI, TEH-TIJARA, DISTRICT- ALWAR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AIEPK 2046 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT IZR;K{KSI.K @ C.O. NO. 33/JP/2017 (ARISING OUT OF VK;DJ VIHY LA-@ ITA NO. 637/JP/2017) FU/KZKJ.K O'K Z @ ASSESSMENT YEAR 2012-13 SATISH KUMAR, J-501-502, KRISH VATIKA, ALWAR BYE PASS ROAD, BHIWADI. CUKE VS. INCOME TAX OFFICER, WARD- BHIWADI. LFKK;H YS[KK LA-@THVKBZVKJ LA- @ PAN/GIR NO.: AIEPK 2046 C IZR;K{KSID @ OBJECTOR IZR;FKHZ @ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAJENDRA JHA FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (CA) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 17/11/2017 MN?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 22/11/2017 VKNS'K@ ORDER PER: BHAGCHAND, A.M. THE APPEAL BY REVENUE AND CROSS OBJECTION BY ASSESS EE ARISE FROM THE ORDER DATED 25/05/2017 OF LD. CIT (A), ALWAR PERT AINING TO THE A.Y. 2012-13. ITA 637/JP/2017 & C.O. 33/JP/2017_ ITO VS SATISH KUMAR 2 2. THE RETURN OF INCOME WAS FILED ON 29/09/2012 DECLA RING TOTAL INCOME OF RS. 13,67,188/-. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS FILED U/S 143(3) OF THE INCOME TAX ACT , 1961 (IN SHORT THE ACT) ON 23/03/2015 AT AN INCOME OF RS. 82,28,54 0/-. 3. THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A ). THE LD. CIT(A) HAS GRANTED PART RELIEF ON CERTAIN ISSUES. NOW THE R EVENUE IS IN APPEAL AND THE ASSESSEE IS IN C.O. BEFORE THE ITAT BY TAKIN G FOLLOWING GROUNDS OF APPEAL: GROUNDS IN REVENUES APPEAL. (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDI TION OF RS. 60,49,000/- MADE BY THE A.O. U/S 68 OF THE I .T. ACT, 1961 WITHOUT APPRECIATING THE MATERIAL FACTS OF THE CASE. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 50,000/- MADE BY THE A.O. U/S 80 C OF THE I.T. ACT, 1961. GROUNDS IN ASSESSEES CROSS OBJECTION (I) THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE OF RS. 3,47,600/- BEING 25% OF THE COMMISSION PAID TO THREE PERSONS. (II) THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE REJECTION OF BOOKS OF ACCOUNT AND TRADING ADDITION OF RS. 3,99,167/-. ITA 637/JP/2017 & C.O. 33/JP/2017_ ITO VS SATISH KUMAR 3 4. IN THE GROUND NO. 1 OF REVENUES APPEAL, THE ISS UE INVOLVED IS DELETING THE ADDITION OF RS. 60,49,000/- MADE BY TH E ASSESSING OFFICER U/S 68 OF THE ACT. THE LD. CIT(A) HAS GRANTED RELIEF TO T HE ASSESSEE BY HOLDING AS UNDER: 6.5 I HAVE GONE THROUGH THE ASSESSMENT ORDER AS W ELL AS SUBMISSIONS MADE BY THE APPELLANT. THE APPELLANT HAS FILED ADDITIONA L EVIDENCES AND CITED THE REASONS FOR NOT BEEN ABLE TO FILE BEFORE THE A. O. THE REASONS GIVEN ARE TAKEN INTO CONSIDERATION AND THE ADDITIONAL EVI DENCES SUBMITTED DURING THE APPELLANT PROCEEDINGS HAVE BEEN TAKEN ON RECORD UNDER RULE 46A OF THE INCOME TAX RULES, 1962 AS THE SAME ARE I MPORTANT EVIDENCES REQUIRED FOR ADJUDICATION OF THE GROUNDS OF APPEAL. THE ADDITIONAL EVIDENCES WERE SENT TO THE A.O FOR HIS EXAMINATION AND COMMENTS. THE A.O HAS SUBMITTED THE REMAND REPORT VIDE LETTER DAT ED: 28/04/2017. THE COPY OF THE REMAND REPORT WAS GIVEN TO THE AR OF TH E APPELLANT FOR CROSS REPLY. IT HAS ALSO BEEN TAKEN INTO ACCOUNT. ALL THE FACTS AND SUBMISSIONS HAVE BEEN TAKEN INTO ACCOUNT AND FOLLOWING FACTS HA VE EMERGED; 1. THAT THE APPELLANT IS A SCRAP DEALER DURING THE YEAR UNDER CONSIDERATION. 2. THAT THE APPELLANT HAD RAISED AN AMOUNT OF RS. 67, 49,000/- DURING THE YEAR UNDER CONSIDERATION AND OUT OF THIS AN AMOUNT OF RS. 7 LAKHS WAS REPAID DURING THE YEAR ITSELF LEAVING AMO UNT OF RS. 60,49,000/- OUTSTANDING AT THE END OF THE RELEVANT YEAR. 3. THAT ALL THE 6 PERSONS ARE REGULAR INCOME TAX A SSESSEE. 4. THAT ALL THE LOAN AMOUNT WERE ADVANCED THROUGH BANKING CHANNEL. 5. THAT IDENTITIES OF ALL THE 6 PERSONS ARE ESTABL ISHED. ITA 637/JP/2017 & C.O. 33/JP/2017_ ITO VS SATISH KUMAR 4 6. THAT THE A.O HAS ADDED THE AMOUNT OF RS. 60,49, 000/- UNDER SECTION 68 OF THE ACT BY CONCLUDING THAT THE CREDIT WORTHINESS OF THE PERSONS WERE NOT ESTABLISHED. 7. THAT THE APPELLANT HAS CITED VARIOUS COURT JUDG MENTS IN FAVOUR OF ITS CLAIM THAT THE ONUS ON THE PART OF THE APPELLAN T HAS BEEN DISCHARGED AND THE ADDITION U/S 68 IS NOT JUSTIFIED. 6.5.2 I HAVE CONSIDERED THE ABOVE MENTIONED FACTS O F THE CASE. THE PROVISION CONTAINED IN SECTION 68 OF INCOME TAX ACT READS AS UNDER:- '68. CASH CREDITS.-WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OF FERED BY HIM IS NOT, IN THE OPINION OF THE ASSESSING OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR: PROVIDED THAT WHERE THE ASSESSEE IS A COMPANY (NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED), AND THE S UM SO CREDITED CONSISTS OF SHARE APPLICATION MONEY, SHARE CAPITAL, SHARE PREMI UM OR ANY SUCH AMOUNT BY WHATEVER NAME CALLED, ANY EXPLANATION OFFERED BY SU CH ASSESSEE-COMPANY SHALL BE DEEMED TO BE NOT SATISFACTORY, UNLESS- (A) THE PERSON, BEING A RESIDENT IN WHOSE NAME SUC H CREDIT IS RECORDED IN THE BOOKS OF SUCH COMPANY ALSO OFFERS AN EXPLANATIO N ABOUT THE NATURE AND SOURCE OF SUCH SUM SO CREDITED; AND (B) SUCH EXPLANATION IN THE OPINION OF THE ASSESSI NG OFFICER AFORESAID HAS BEEN FOUND TO BE SATISFACTORY: PROVIDED FURTHER THAT NOTHING CONTAINED IN THE FIR ST PROVISO SHALL APPLY IF THE PERSON, IN WHOSE NAME THE SUM REFERRED TO THEREIN I S RECORDED, IS A VENTURE CAPITAL FUND OR A VENTURE CAPITAL COMPANY AS REFERR ED TO IN CLAUSE (23FB) OF SECTION 10.' THUS, THE PROVISION OF THE SECTION CONFERS UPON THE ASSESSEE TO GIVE NATURE AND SOURCE OF THE CREDIT. IN THIS CASE THE A PPELLANT HAD PROVIDED FOLLOWING DOCUMENTS TO THE A.O DURING ASSESSMENT PR OCEEDINGS; 1. NAME AND ADDRESS OF THE PERSONS. 2. COPIES OF INCOME TAX RETURNS. 3. COPY OF BANK ACCOUNTS. ITA 637/JP/2017 & C.O. 33/JP/2017_ ITO VS SATISH KUMAR 5 THAT THE FACTUAL POSITION OF THE AMOUNTS OF LOAN R AISED DURING THE YEAR HAVE BEEN TABULATED AS UNDER; NAME OF THE PERSON (S/SH.) AMOUNT OF LOAN(IN RS.) WHETHER THROUGH A/C PAYEE CHEQUE WHETHER INCOME TAX ASSESSEE CONFIRMATIONS FILED AMIT 5,00,000/- YES YES YES M/S BALAJI ENTERPRISES 12,99,000/- YES YES YES SMT. HEMLATA 9,50,000/- YES YES YES PANKAJ BANSAL 3,00,000/- YES YES YES R P SINGH 15,00,000/- YES YES YES SATISH MENDIRATTA & SONS 15,00,000/- YES YES YES I HAVE ALSO TAKEN INTO CONSIDERATION THE REMAND REP ORT OF THE A.O ON THE ISSUE. THE RELEVANT PART OF THE A.OS REPORT IS AS UNDER:- ASSESSEE HAS PREFERRED APPEAL BEFORE YOUR GOOD SEL F AND FILED SUBMISSION WHICH WAS FORWARDED TO THIS OFFICE FOR REMAND. ASSE SSEE WAS PROVIDED AN OPPORTUNITY TO FILE OTHER SUPPORTING DOCUMENTS R EGARDING HIS CLAIM VIDE THIS OFFICE LETTER NO. 1961 DATED 19.01.2017. THE ASSESSEE HAS FILED HIS REPLY ON 03.03.2017. THE ASSESSEE HAS FILED THE DOCUMENTS TO PROVE THE IDENTITY OF PERSONS WHO ADVANCED THE LOAN, DOCU MENTARY EVIDENCES TO SUBSTANTIATE THE GENUINENESS OF TRANSACTION AND PROOF REGARDING CREDITWORTHINESS OF THE PERSONS WHO ADVANCED THE LO AN. THE DOCUMENTS FILED BY THE ASSESSEE RELEVANT TO TH E PERSONS FROM WHOM ASSESSEE HAS RECEIVED THE LOAN DURING THE YEAR UNDE R CONSIDERATION IS AS UNDER: S. NO. NAME OF THE PERSONS FROM WHOM LOAN WAS TAKEN AMOUNT OF LOAN CONFIRMATION OF THE PARTY {AS PROOF OF IDENTITY AND GENUINENESS OF TRANSACTION) COPY OF ITR/PAN (AS PROOF OF CREDITWORTHINESS) 1 AMIT 5,00,000/- YES PAN CARD 2 M/S BALAJI ENTERPRISES 12,99,000/- YES PAN CARD 3 HEMLATA 9,50,000/- YES ITR 4 PANKAJ BANSAL 3,00,000/- YES ITR 5 R.P SINGH 15,00,000/- YES ITR & PAN CARD 6 SATISH MENDIRATTA & SONS 15,00,000/- YES PAN CARD ITA 637/JP/2017 & C.O. 33/JP/2017_ ITO VS SATISH KUMAR 6 THE ASSESSEE HAS ALSO FILED HIS BANK ACCOUNT STATEM ENT IN WHICH TRANSACTION RELATED TO ABOVE MENTIONED PARTIES FOR ABOVE SAID LOAN WAS HIGHLIGHTED AND TRIED TO INDICATE THAT WHOLE TRANSA CTIONS WERE COMPLETED THROUGH BANKING CHANNEL. BUT ASSESSEE HAS NOT FILED COPY OF BANK STATEMENTS OF ABOVE PERSONS FORM WHOM LOAN WAS TAKE N BY THE ASSESSEE. THESE FACTS ARE SUBMITTED FOR YOUR KIND C ONSIDERATION. I HAVE CONSIDERED THE ABOVE MENTIONED FACTS. IN TH IS REGARD I HAVE ALSO TAKEN INTO CONSIDERATION HONBLE DELHI HIGH COURT J UDGMENT WHICH HAS ALSO DISCUSSED THE PARAMETERS SET BY THE HONBLE SU PREME COURT IN THE CASE OF CIT VS LOVELY EXPORTS LTD. IT HAS OBSERVED AS UNDER; DIVISION BENCH OF DELHI HIGH COURT BY JUDGMENT REND ERED ON 31.01.2011 REPORTED AS CIT V. OASIS HOSPITALITIES PVT. LTD. (2011) 333 ITR 119 (D EL.) = 2011-TIQL-69- HC-DEL-IT. TAKING NOTE OF THE JURISPRUDENTIAL DEVELOPMENT ON THE SUBJECT AS CULMINATING IN JUDGME NT OF SUPREME COURT IN CIT V. LOVELY EXPORTS PVT. LTD.(SUPRA), IT WAS HELD THAT T HE INITIAL BURDEN IS UPON THE ASSESSEE TO EXPLAIN THE NATURE A ND SOURCE OF THE SHARE APPLICATION MONEY AND IN ORDER TO DISCHARGE T HIS ONUS, THE ASSESSEE SHOULD PROVE (A) THE IDENTITY OF SHAREHOLD ER: (B) GENUINENESS OF THE TRANSACTION; AND (C) CREDITWORTHINESS OF SHAREH OLDERS. IT WAS FURTHER OBSERVED THAT FOR DISCHARGING THE ABOVE BURDEN, THE ASSESSEE MUST FILE SOME DOCUMENTS OR PRODUCE THE SHAREHOLDER TO PROVE HIS IDENTITY. IN THE CASE OF SUBSCRIBER BEING A COMPANY DETAILS IN THE F ORM OF REGISTERED ADDRESS OR PAN IDENTITY , ETC. WOULD SUFFICE. THE GENUINENESS OF THE TRANSACTION MAY BE DEMONSTRATED BY SHOWING THAT THE ASSESSEE HAD, IN FACT, RECEIVED MONEY FROM THE APPLICANT SHAREHOLDER AND THAT IT HAD COME NOT FROM THE COFFERS OF THE ASSESSEE BUT FROM THAT OF THE APPLICANT SHAREHOLDER. AS TO THE CREDITWORTHINESS OR FINANCIA L STRENGTH OF THE SUBSCRIBER . THE PROOF COULD INCLUDE BANKS STATEMENTS OF THE SUB SCRIBER SHOWING SUFFICIENT BALANCE IN ITS KITTY TO ENABLE I T TO SUBSCRIBE. THEREFORE, TAKING INTO ACCOUNT FACTUAL MATRIX OF TH E CASE AND THE PARAMETERS TO DETERMINE THE STATUS OF ONUS ON THE A SSESSEE AS ARE DISCUSSED IN THE ABOVE MENTIONED JUDGMENTS, IT IS M Y CONSIDERED VIEW THAT THE APPELLANT HAS DISCHARGED ITS ONUS W.R.T. T HE CREDIT OF RS.60,49,000/- RECEIVED FROM THE ABOVE MENTIONED PE RSONS. ACCORDINGLY, ITA 637/JP/2017 & C.O. 33/JP/2017_ ITO VS SATISH KUMAR 7 THE ADDITION OF RS. 60,49,000/- U/S 68 IS NOT JUSTI FIED, HENCE, DELETED. APPELLANTS GROUND OF APPEAL ON THE ISSUE IS ALLOWE D. 5. THE LD DR HAS RELIED ON THE ORDER OF THE ASSESSIN G OFFICER. LD. DR ALSO PLEADED THAT THE LD. CIT(A) SIMPLY ACCEPTED THE PAN AND ITR AS PROOF OF CREDITWORTHINESS. SIMPLY PROVIDING PAN CARD AND COPY OF ITR ARE NOT SUFFICIENT TO ESTABLISH THE CREDITWORTHINESS OF THE CREDITORS. THE ASSESSEE HAS TO ESTABLISH THE CREDITWORTHINESS OF EA CH AND EVERY CREDITOR BY SUBMITTING NECESSARY DOCUMENTS. THESE DOCUMENTS M UST ESTABLISH THAT THESE PEOPLE WERE HAVING CAPACITY TO ADVANCE T O THE ASSESSEE. IN ABSENCE OF SAME, THE LD. CIT(A) WAS COMPLETELY UNJUST IFIED IN ACCEPTING THE CONTENTION OF THE ASSESSEE. HE PLEADED THAT THE ORDER OF THE LD. CIT(A) MAY BE REVERSED. 6. WHILE PLEADING ON BEHALF OF THE ASSESSEE, THE LD AR HAS SUBMITTED ON THIS ISSUE AS UNDER: 1. IT IS SUBMITTED THAT IN THE REMAND REPORT THE AO HAS ACCEPTED THAT ASSESSEE HAS FILED THE DOCUMENTS TO PROVE THE IDENT ITY OF PERSONS WHO ADVANCED THE LOAN, DOCUMENTARY EVIDENCE TO SUBS TANTIATE THE GENUINENESS OF TRANSACTION AND PROOF REGARDING THE CREDIT WORTHINESS OF THE PERSONS WHO ADVANCED THE LOAN. TH E LOAN AMOUNT RECEIVED IS VERIFIABLE FROM THE BANK ACCOUNT OF THE ASSESSEE. HOWEVER, HE OBSERVED THAT ASSESSEE HAS NO T FILED THE COPY OF BANK STATEMENTS OF THE PERSONS FROM WHOM LO AN WAS TAKEN. FINALLY HE OPPOSED THE ADMISSION OF INFORMAT ION IN SUBMISSION FILED BY THE ASSESSEE. ITA 637/JP/2017 & C.O. 33/JP/2017_ ITO VS SATISH KUMAR 8 2. IN THE ABOVE FACTS, THE AO HAVING ACCEPTED THE I DENTITY, GENUINENESS OF THE TRANSACTION AND CREDIT WORTHINES S OF THE CREDITOR, THE LD. CIT(A) HAS RIGHTLY DELETED THE AD DITION AS PER THE FINDING GIVEN IN PARA 6.5 OF THE ORDER, PAGES 7-9. HE RELIED ON THE FOLLOWING CASE LAWS: 1. CIT VS. ORISSA CORPORATION PVT. LTD. 159 ITR 78 (SC) 2. CIT VS. SHIV DHOOTI PEARLS & INVESTMENT LTD. (2 016) 237 TAXMAN 104 (DEL.) (HC) 3. CIT VS. JAI KUMAR BAKLIWAL (2014) 366 ITR 217/ 101 DTR 377 (RAJ.) (HC) 4. CIT VS. H.S. BUILDERS (P.) LTD. (2012) 78 DTR 1 69 (RAJ.) (HC) 5. LABH CHAND BOHRA VS. ITO 189 TAXMAN 141/ 219 CT R 571 (RAJ.) (HC) 6. KANHAIALAL JANGID VS. ACIT 217 CTR 354 (RAJ.) ( HC) 7. ARAVALI TRADING CO. VS. ITO 187 TAXMAN 338 (RAJ .) (HC) IN VIEW OF ABOVE, THE ADDITION MADE BY THE AO IS R IGHTLY DELETED BY THE LD. CIT(A) AND THEREFORE, THE GROUND OF THE DEPARTMENT BE DISMISSED. 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. WE HA VE ALSO GONE THROUGH THE VARIOUS CASE LAWS RELIED UPON BY THE LD AR AND ALSO THE FACTUAL MATRIX OF THE ISSUE UNDER CONSIDERATION. WE HAVE NOTICED T HAT SHRI AMIT HAD ITA 637/JP/2017 & C.O. 33/JP/2017_ ITO VS SATISH KUMAR 9 ADVANCED RS. 5.00 LACS TO THE ASSESSEE AND THE LD. CIT(A) HAS SIMPLY ACCEPTED THE PAN AS ESTABLISHING THE CREDITWORTHINES S OF THIS CREDITOR. IN OUR CONSIDERED VIEW, SIMPLY PAN CARD CAN NOT ESTABLI SH THE CAPACITY OF THE LENDER. THE PAN CARD IN ITSELF IS NOT A CERTIFIC ATE TO ESTABLISH THE CREDITWORTHINESS OF ANY OF THE CREDITOR. SIMILARLY I N THE CASE OF M/S BALAJI ENTERPRISES, WHO HAS ADVANCED RS. 12,99,000/- TO THE ASSESSEE. PAN CARD WAS ACCEPTED BY THE LD. CIT(A) AS EVIDENCE FOR ESTABL ISHING THE CREDITWORTHINESS. IN OUR CONSIDERED VIEW, THAT IS NOT A SUFFICIENT PROOF TO ESTABLISH CREDITWORTHINESS. SIMILARLY IN THE CASE OF HEMLATA, WHO HAS ADVANCED RS. 9,50,000/- TO THE ASSESSEE, A COPY OF THE ITR WAS MADE A BASIS FOR ESTABLISHING THE CREDITWORTHINESS. FROM TH IS ITR (PLACED AT PAGE NO. 14 OF THE PAPER BOOK), IT IS NOTICED THAT THE G ROSS TOTAL INCOME OF HEMLATA WAS ONLY RS. 1,45,655/- WHILE THE ADVANCE MA DE BY HER WAS RS. 9,50,000/-. IN THE CASE OF PANKAJ BANSAL ALSO THE R ETURNED INCOME WAS RS. 95,969/- WHILE THE ADVANCE WAS MADE AT RS. 3,00,000/ -. IN THE CASE OF SINGH, THE ADVANCE RECEIVED BY THE ASSESSEE WAS RS. 15,00,000/-. THE RETURNED INCOME WAS ONLY RS. 8,16,000/-. COPIES OF I TRS ARE NOT SUFFICIENT TO ESTABLISH THE CREDITWORTHINESS OF ANY OF THE CRED ITOR. IN THE CASE OF SATISH MENDIRATTA (HUF), THE ADVANCE RECEIVED BY TH E ASSESSEE IS OF RS. 15,00,000 LACS AND THE RETURNED INCOME WAS ONLY RS. 3,23,670/-. THUS, THE ITR IN ITSELF IS NOT A SUFFICIENT EVIDENCE TO ES TABLISH THE ITA 637/JP/2017 & C.O. 33/JP/2017_ ITO VS SATISH KUMAR 10 CREDITWORTHINESS OF SATISH MENDIRATTA (HUF). THUS, IN ALL THE CREDITORS CASE, THE RELIANCE OF THE LD. CIT(A) WAS ONLY ON THE PAN CARD OR THE ITR, WAS NOT SUFFICIENT TO ESTABLISH THE CREDITWORTHINESS OF THESE PEOPLE. FURTHER, IT IS ALSO NOTICED THAT THE ASSESSING OFFI CER WAS ASKED TO SUBMIT THE REMAND REPORT AND HE HAS NOTED THAT THE ASSESSE E HAS NOT FILED COPY OF BANK STATEMENT OF THE PERSONS FROM WHOM THE LOAN S WERE TAKEN BY THE ASSESSEE. HOWEVER, THE ASSESSING OFFICER HAS NOT ASK ED THE ASSESSEE TO SUBMIT SUCH DOCUMENTS IN THE REMAND PROCEEDINGS. CO NSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE , WE FIND IT APPROPRIATE TO RESTORE THE ISSUE TO THE FILE OF THE ASSESSING O FFICER WHEREIN THE ASSESSEE SHALL BE AT LIBERTY TO FILE NECESSARY DOCU MENTS TO ESTABLISH THE CREDITWORTHINESS OF ALL THE CREDITORS AND THE ASSESS ING OFFICER SHALL DECIDE THE ISSUE AFRESH. 8. IN THE GROUND NO. 2 OF THE REVENUES APPEAL, THE ISSUE INVOLVED IS DELETING THE DISALLOWANCE OF RS. 50,000/- MADE BY T HE ASSESSING OFFICER U/S 80C OF THE ACT. THE LD. CIT(A) HAS GRANTED RELIEF TO THE ASSESSEE BY HOLDING AS UNDER: 5.3 I HAVE CONSIDERED THE EVIDENCE FILED IN SUPPORT OF CLAIM MADE FOR PAYMENT OF INSURANCE PREMIUM AMOUNTING TO RS. 50,00 0/- UNDER SECTION 80C PAID TO MAX LIFE INSURANCE DATED 18/09/ 2011. THE APPELLANT HAS SUBMITTED THAT DURING THE ASSESSMENT PROCEEDINGS HE COULD FILE PROOF FOR PAYMENT OF RS. 50,000/- INS URANCE PREMIUM ONLY AND COULD NOT FILE PROOF FOR THE BALANCE AMOUN T CLAIMED. I ITA 637/JP/2017 & C.O. 33/JP/2017_ ITO VS SATISH KUMAR 11 HAVE CONSIDERED THE APPELLANT SUBMISSION AND THE EV IDENCE OF PAYMENT OF RS. 50,000/- TOWARDS INSURANCE PREMIUM. ACCORDINGLY, THE DEDUCTION OF RS. 50,000/- IS ALLOWED UNDER SECT ION 80C OF THE ACT. HOWEVER, IN ABSENCE OF PROOF FOR PAYMENT OF RS . 15,000/- TO QUALIFY FOR DEDUCTION U/S 80D OF THE ACT, THE SAME IS REJECTED. ACCORDINGLY, THE APPELLANTS GROUND OF APPEAL ON TH E ISSUE IS PARTLY ALLOWED. 9. THE LD. DR HAS RELIED ON THE ORDER OF THE ASSESSI NG OFFICER. 10. WHILE PLEADING ON BEHALF OF THE ASSESSEE, THE L D AR HAS SUBMITTED AS UNDER: 1. THE ASSESSEE CLAIMED DEDUCTION OF RS.50,000/- U/ S 80C AND RS.15,000/- U/S 80D OF THE IT ACT. IN ASSESSMENT PR OCEEDINGS, ASSESSEE FILED THE PROOF OF PAYMENT OF INSURANCE PR EMIUM OF RS.50,000/- BUT AO DISALLOWED THE ENTIRE CLAIM OF D EDUCTION FOR WANT OF EVIDENCE. 2. THE LD. CIT(A) AFTER CONSIDERING THE EVIDENCE FI LED BY THE ASSESSEE, ALLOWED THE DEDUCTION OF RS.50,000/- U/S 80C. 3. IT IS SUBMITTED THAT ASSESSEE HAS PAID LIFE INSU RANCE PREMIUM OF RS.50,000/- TO MAX NEW YORK LIFE INSURANCE CO. LTD. ON 18.09.2011. COPY OF INSURANCE PREMIUM RECEIPT AND P OLICY OWNER DATA IS AT PB 23-24. THESE DOCUMENTS WERE ALSO PROD UCED DURING ASSESSMENT PROCEEDINGS BUT AO INCORRECTLY HELD THAT ASSESSEE HAS NOT FILED ANY PROOF OF PAYMENT AND DISALLOWED THE D EDUCTION. IN VIEW OF ABOVE, THE ORDER OF LD. CIT(A) BE UPHEL D BY DISMISSING THE GROUND OF DEPARTMENT. ITA 637/JP/2017 & C.O. 33/JP/2017_ ITO VS SATISH KUMAR 12 11. AFTER HEARING BOTH THE SIDES ON THIS ISSUE AND CONSIDERING THE PLEADINGS, WE ARE OF THE VIEW THAT THE LD. CIT(A) WAS J USTIFIED IN DELETING THE ADDITION, THEREFORE WE SUSTAIN THE ORDER OF THE LD. CIT(A) ON THIS GROUND. 12. IN THE GROUND NO. 1 OF THE ASSESSEES C.O., THE ISSUE INVOLVED IS CONFIRMING THE DISALLOWANCE OF RS. 3,47,600/- BEING 25% OF THE COMMISSION PAID TO THREE PERSONS. THE LD. CIT(A) HAS DEALT THIS ISSUE IN HIS ORDER AT PARA 7.3., WHICH IS AS REPRODUCED AS UN DER: 7.3 I HAVE GONE THROUGH THE ASSESSMENT ORDER AS WE LL AS SUBMISSIONS MADE BY THE APPELLANT. I HAVE CONSIDERED THE FACTS OF TH E CASE. THE ONUS LIES ON THE ASSESSEE TO PROVE THAT THE COMMISSION HAS BEEN PAID FOR THE PURPOSE OF EARNING PROFIT IN THE BUSINESS AND THAT THE AMOU NT OF COMMISSION COMMENSURATE WITH THE TYPE OF SERVICES RENDERED BY THEM. IN THIS CASE, THE PAYMENTS OF COMMISSION WERE MADE TO PERSONS COV ERED U/S 40A. IN MY CONSIDERED VIEW THE ONUS HAS NOT BEEN FULLY DISC HARGED BY THE ASSESSEE IN THIS REGARD. ACCORDINGLY, THE A.O IS JU STIFIED IN DISALLOWING 25% OF THE COMMISSION AMOUNT PAID TO SH. RATI RAM, SH. MUKESH KUMAR & SH. KAPIL DEV. ACCORDINGLY, THE ADDITION OF RS. 3 ,47,600/- IS SUSTAINED AND APPELLANTS GROUND OF APPEAL IS DISMISSED ON TH IS ISSUE. 13. THE LD AR OF THE ASSESSEE ON THIS ISSUE HAS SUBM ITTED AS UNDER: 1. IT IS SUBMITTED THAT BOTH THE LOWER AUTHORITIES HAVE CONFIRMED THE DISALLOWANCE OF 25% OF THE EXPENSES FOR THE REASON THAT THE ENTIRE EXPENSES IS NOT WHOLLY AND EXCLUSIVELY FOR THE PURP OSE OF BUSINESS IN AS MUCH AS THE PAYMENT IS MADE TO THE PERSONS SPECIFIE D U/S 40A(2)(B). ITA 637/JP/2017 & C.O. 33/JP/2017_ ITO VS SATISH KUMAR 13 2. IT IS SUBMITTED THAT ALL THE THREE PERSONS TO WH OM COMMISSION IS PAID ARE REGULARLY ASSESSED TO TAX AND HAVE INCLUDED THE COM MISSION SO CREDITED TO THEIR ACCOUNT IN THEIR INCOME. ASSESSEE HAS DEDU CTED TAX AT SOURCE ON THE AMOUNT SO CREDITED. ONLY BECAUSE PAYMENT IS MAD E TO THE RELATIVES CANNOT BE A REASON TO HOLD THAT THE EXPENSES ARE NO T WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OR TO INVOK E SECTION 40A(2)(B) WITHOUT GIVING A FINDING THAT PAYMENT SO MADE IS EX CESSIVE OR UNREASONABLE. IN VIEW OF ABOVE, THE DISALLOWANCE CONFIRMED BY CI T(A) BE DIRECTED TO BE DELETED. 14. ON THE OTHER HAND, THE LD DR HAS RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 15. AFTER HEARING BOTH THE SIDES ON THIS ISSUE, WE F IND THAT THE DISALLOWANCE WAS MADE ONLY 25% OF THE EXPENSES DEBITE D UNDER THE HEAD COMMISSION PAID BY INVOKING THE PROVISIONS OF SEC TION 40A((2)(B) OF THE ACT AND ALSO THAT THE ENTIRE EXPENSES WERE NOT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. IT IS NOTI CED THAT ALL THE THREE PERSONS WERE REGULARLY ASSESSED TO TAX AND NECESSARY TDS WAS ALSO DEDUCTED. IT WAS PAID TO THE PERSONS, WHO WERE RELATIV ES OF THE ASSESSEE. IT WAS NOT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IT WAS EXCESSIVE PAYMENT IN VIEW OF THE PROVISIONS OF SECTI ON 40A OF THE ACT. THUS, THERE IS NO CLEAR CUT FINDING THAT ON WHAT BASI S THIS PAYMENT ITA 637/JP/2017 & C.O. 33/JP/2017_ ITO VS SATISH KUMAR 14 WAS HELD TO BE EXCESSIVE OR UNREASONABLE. THEREFORE, WE DIRECT TO DELETE THE ADDITION. 16. IN THE GROUND NO. 2 OF ASSESSEES C.O., THE ISS UE INVOLVED IS CONFIRMING THE REJECTION OF BOOKS OF ACCOUNT AND MA KING AND CONFIRMING TRADING ADDITION OF RS. 3,99,167/- FOR THE YEAR UND ER CONSIDERATION. THE LD. CIT(A) HAS CONFIRMED THE ADDITION BY HOLDING AS UNDER: 8.3 I HAVE GONE THROUGH THE ASSESSMENT ORDER AS WE LL AS SUBMISSIONS MADE BY THE APPELLANT. I HAVE TAKEN INTO CONSIDERATION T HE REASONS GIVEN BY THE A.O TO ESTIMATE THE GP AFTER INVOKING SECTION 145 O F THE ACT. THE A.O HAS PARTICULARLY CITED THE NON-RECONCILIATION OF TDS/TC S AS SHOWN IN THE ITR AND AS APPEARING IN FORM 26AS. TAKING AN OVERALL FA CTUAL POSITION INTO CONSIDERATION, I FIND IT REASONABLE TO ESTIMATE GP OF 3.5% AS AGAINST 3.21% DECLARED BY THE APPELLANT FOR THE YEAR UNDER CONSIDERATION. I FIND IT REASONABLE, WHEN COMPARED WITH GP OF 3.91% IN THE I MMEDIATE PRECEDING YEAR AND 4.99% IN THE YEAR PRIOR TO IMMED IATE PRECEDING YEAR. ACCORDINGLY, THE ADDITION OF RS. 3,99,167/- IS SUST AINED. APPELLANTS GROUND OF APPEAL ON THIS ISSUE IS DISMISSED. 17. THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS DECLARED GROSS PROFIT OF RS. 44,85,616/- ON TURNOVER OF RS.13,95,65,227/- GIVING G.P. RATE OF 3.21%. IN THE IMMEDIATE PRECEDI NG YEAR, THE TURNOVER OF RS.5,35,70,378/- AND G.P. RATE WAS3.91% AND PRIO R TO THAT YEAR, THE TURNOVER WAS RS. 2,63,64,738/- AND THE G.P. RATE WAS 4.99%. IT WAS PLEADED THAT THE ASSESSEE WAS DEALING IN SCRAP TRADI NG AND IT BECAME ITA 637/JP/2017 & C.O. 33/JP/2017_ ITO VS SATISH KUMAR 15 MORE COMPETITIVE, THEREFORE, THE MARGINS WERE SQUEEZ ED. FURTHER IT WAS ALSO CLAIMED THAT THE ASSESSEE MIGRATED FROM THIS B USINESS TO MANUFACTURING OF MS INGOT AND THE ASSESSEE WAS NOT A BLE TO GIVE FULL ATTENTION TO THIS TRADE, THEREFORE, THE PROFIT MARG INS DECLINED. THE LD AR OF THE ASSESSEE HAS FURTHER SUBMITTED AS UNDER: 1. THE ASSESSEE IS MAINTAINING DAY TO DAY BOOKS OF ACCOUNTS. THE SAME ARE SUBJECT TO TAX AUDIT. THE SALES AND PURCHA SES OF THE ASSESSEE ARE DULY SUPPORTED BY THE BILLS AND VOUCHE RS. THE AO REJECTED THE BOOKS OF ACCOUNTS ON THE GROUND THAT N O BOOKS OF ACCOUNT AND BILLS/VOUCHERS HAVE BEEN PRODUCED FOR V ERIFICATION. THIS FINDING OF AO IS CONTRADICTORY IN AS MUCH AS A T PAGE 1 OF HIS ORDER HE HAS STATED THAT BOOKS OF ACCOUNTS ALONG WI TH SUPPORTING BILLS/VOUCHERS, ETC. WERE PRODUCED WHICH WERE EXAMI NED ON TEST CHECK BASIS. ANOTHER REASON GIVEN BY THE LOWER AUTH ORITIES FOR REJECTING THE BOOKS OF ACCOUNTS IS THE NON-RECONCIL IATION OF TDS/TCS AS SHOWN IN THE ITR AND AS APPEARING IN FOR M 26AS. IT IS SUBMITTED THAT FROM THE CHART SHOWING DIFFERENCE IN TCS AS PER RETURN AND FORM 26AS (PB 37), IT CAN BE NOTED THAT THERE IS DIFFERENCE OF ONLY RS.2,682/-. TCS CREDIT AS PER RE TURN IS RS.11,85,939/- (PB 38-49) AND AS PER FORM 26AS IS R S.11,88,621/- (PB 50-61). THE ASSESSEE HAS CLAIMED LESS CREDIT OF RS.2,682/-. THUS, PURCHASES ARE FULLY RECONCILABLE. HENCE, THE OBSERVATIONS GIVEN BY THE LOWER AUTHORITIES FOR REJECTING THE BO OKS OF ACCOUNTS AND CONFIRMING THE TRADING ADDITION IS INCORRECT. 2. OTHERWISE ALSO, IT IS SUBMITTED THAT THERE IS A SLIGHT DECLINE OF 0.70% IN G.P. RATE AS COMPARED TO PREVIOUS YEAR ON INCREASED TURNOVER BY RS.8,59,94,849/-. IT IS NORMAL BUSINESS PRACTICE THAT ITA 637/JP/2017 & C.O. 33/JP/2017_ ITO VS SATISH KUMAR 16 ASSESSEE IS MAINLY INTERESTED IN VOLUME OF THE PROF IT EARNED INSTEAD OF THE RATE. THIS VOLUME CAN BE ACHIEVED ON LY BY INCREASING THE SALES BY REDUCING THE MARGIN. IN THE VARIOUS CASES IT HAS BEEN HELD THAT SIMPLY BECAUSE THERE IS DECLINE IN THE G.P. RATE DUE TO SUBSTANTIAL INCREASE IN THE TURNOVER, THE TR ADING ADDITION IS NOT JUSTIFIED. HE RELIED ON THE FOLLOWING CASE LAWS : 1. PCIT VS. PURSHOTTAM B. PITRODA (2017) 248 TAXMA N 118 (GUJ.) (HC). 2. MADAN LAL V. INCOME TAX OFFICER 99 TTJ 538 (JD. ) 3. ITO V. ARUN KUMAR GUPTA 103 TTJ 134 (JD.) IN VIEW OF ABOVE, THE TRADING ADDITION CONFIRMED B Y CIT(A) BE DIRECTED TO BE DELETED. 18. ON THE OTHER HAND, THE LD DR HAS RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 19. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE MATERIAL AVAILABLE ON THE RECORD. FROM THE RECORDS, WE FIND THAT THERE WAS DISCREPANCY IN THE RECONCILIATION OF TDS/TCS AS PER I NCOME TAX RETURN AND AS PER FORM 26AS. FURTHER THERE WAS DECLINE IN T HE GROSS PROFIT. THE REASON PROVIDED BY THE ASSESSEE ARE NOT CONVINCING, THEREFORE, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER HAS RIGHTLY REJE CTED THE BOOKS OF ACCOUNT, WHICH HAS BEEN SUSTAINED BY THE LD. CIT(A). ACCORDINGLY WE SUSTAIN THE REJECTION OF BOOKS OF ACCOUNT. FURTHER WE ARE OF THE VIEW THAT ITA 637/JP/2017 & C.O. 33/JP/2017_ ITO VS SATISH KUMAR 17 THE REASONS PUT FORWARD BY THE ASSESSEE TO EXPLAIN THE DECLINE IN THE G.P. RATE ARE ALSO NOT CONVINCING. THE ASSESSING OFFICER AND THE LD. CIT(A) WERE QUITE REASONABLE IN MAKING AND SUSTAINING THE G ROSS PROFIT RATE @ 3.5% WHILE IT WAS 3.91% IN THE IMMEDIATE PRECEDING Y EAR AND 4.99% IN THE YEAR PRIOR TO THE IMMEDIATE PRECEDING YEAR. THE HONBLE RAJASTHAN HIGH COURT HAS RULED THAT AVERAGE OF THE PAST YEARS G.P. IS GOOD CRITERIA TO ESTIMATE THE G.P. RATE. WHEN THE BOOKS OF ACCOUN T DO NOT REFLECT THE TRUE AFFAIRS OF INCOME OF THE ASSESSEE THEN ESTIMAT E BASED IN PAST YEARS GROSS PROFIT IS JUSTIFIED. IN ASSESSEES CASE, IT WA S EVEN ESTIMATED LESS IN COMPARISON TO IMMEDIATE PRECEDING YEAR. THE ESTIMATE @ 3.5% INSTEAD OF 3.91% SHALL TAKE CARE OF FALL IN G.P. IF ANY ON ACCOUNT OF INCREASE IN TURNOVER AND OTHER FACTORS AS PLEADED BY THE LD AR. THEREFORE, AFTER CONSIDERING ALL THE FACTUAL ASPECTS AND ALSO CASE L AWS RELIED UPON, WE SUSTAIN THE ORDER OF THE LD. CIT(A). HENCE, THIS GR OUND OF ASSESSEES C.O STANDS DISMISSED. 20. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE AND THE C.O. OF THE ASSESSEE IS PARTLY ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 22/11/2017. SD/- SD/- FOT; IKY JKO HKKXPAN (VIJAY PAL RAO) (BHAGCHAND) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR ITA 637/JP/2017 & C.O. 33/JP/2017_ ITO VS SATISH KUMAR 18 FNUKAD@ DATED:- 22 ND NOVEMBER, 2017 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE ITO, WARD-BHIWADI. 2. IZR;FKHZ @ THE RESPONDENT- SHRI SATISH KUMAR, BHIWADI (ALWAR). 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 637/JP/2017 & C.O. 33/JP/2017) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR