The Assistant Commissioner of Income Tax, Hoshiarpur V. Sh. Hari Chand Prop., Hoshiarpur

ITA 64/ASR/2014

• Counselvise Citation: 6420914 RSA 2014
• Duration Of Justice: 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-01-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 09-12-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 05-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: TARSEM LALD R
• Assessee Lawyers: V K MALHOTRA
• Keywords: Business income; Notional interest

Judgement Text

IN THE INCOME TAX APPE LLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE SH. A.D. JAIN, HONBLE JUDICIAL MEMBER, AND SH. B.P. JAIN, HONBLE ACCOUNTANT MEMBER I.T.A. NO.64/ASR/2014 (ASSESSMENT YEAR: 2007-08) THE ASSISTANT COMMISSIONER OF INCOME TAX, HOSHIARPUR CIRCLE, HOSHIARPUR (APPELLANT) VS. SH. HARI CHAND PROP. HARI CHAND & SONS, 17-SABZI MANDI, HOSHIARPUR. PAN:ACWPC7651B(RESPONDENT) APPELLANT BY: SH. TARSEM LAL,DR RESPONDENT BY: SH. V.K. MALHOT RA, ADV. DATE OF HEARING : 09.12.2014 DATE OF PRONOUN CEMENT: 02.01.2015 ORDER PER: B.P. JAIN (AM): THIS APPEAL OF THE REVENUE IS ARISING FRO M THE ORDER OF LEARNED CIT(A)-JALANDHAR, DATED 11.11.2013 FOR THE ASSESSMENT YEAR 2007-08. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL. 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE TRA DING ADDITION OF RS.5,08,272/-. 2. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADD ITION OF RS.2,04,000/- OUT OF TOTAL ADDITION RS.2,40,000/- R IGHTLY MADE BY - 2 - ITA NO.64/ASR/2014 THE A.O. ON ACCOUNT OF DISALLOWANCE OF INTEREST OUT OF INTEREST CHARGES CLAIMED BY THE ASSESSEE. 3. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITIO N OF RS.11,12,508/- MADE BY THE A.O. OUT OF RECEIPT OF L ABOUR CHARGES TREATED AS COMMISSION INCOME OF THE ASSESSEE. 4. THAT, IT IS PRAYED THAT THE ORDER OF THE LD. CIT (A) BE SET- ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 5. THAT THE APPELLANT REQUESTS FOR LEAVE TO ADD OR AMEND OR ALTER THE GROUNDS OF APPEAL BEFORE THE APPEAL IS HE ARD AND DISPOSED OF. 3. AS REGARDS GROUND NO.1:- THE LEARNED CIT(A) HAS DELETED THE ADDITIONS OF RS.5,08,272/- UNDER THREE DIFFERENT HE ADINGS AS UNDER: (I) TRADING RESULTS AND COMMISSION INCOME RS.2,18,530/- . (II) TRADING RESULTS AND COMMISSION INCOME FROM BRAHANPUR BRANCH RS.2.03,755/-. (III) TRADING RESULTS AND COMMISSION INCOME FROM JALGAON BRANCH RS.85,987/-. TOTAL INCOME OF RS.5,08,272/- 4. THE BRIEF FACTS WITH REGARD TO THE TRADING RESUL TS AND BUSINESS INCOME IN (I) IS THAT THE ASSESSEE IS BASICALLY SEL LING GOODS I.E., FRUITS, SENT BY THE OUTSTATION/ OUT OF STATE PARTIE S FOR SALE IN FRUIT MARKET (MANDI) OF HOSHIARPUR. THE ASSESSEE GETS A C OMMISSION OF 5% BESIDES THE PROFIT FOR THE GOODS SOLD BY THE ASSESS EE FOR PURCHASES SHOWN IN ITS OWN NAME OUT OF SUCH GOODS IN OTHER MA NDIS AROUND HOSIARPUR AND EVEN IN HIMACHAL PRADESH. THE ASSESSE E HAS DECLARED GROSS TURNOVER/GROSS RECEIPTS AT RS.82,67,729/- AT G.P RATE(1.35%) - 3 - ITA NO.64/ASR/2014 AND COMMISSION RECEIVED AT RS.29,70,053/- DURING TH E IMPUGNED YEAR AS COMPARED TO THE GROSS TURNOVER/GROSS RECEIPTS AT RS.87,40,023/- AT G.P RATE (1.24%) AND COMMISSION RECEIVED AT RS.30,4 4,833/- IN THE PRECEDING YEAR. THE BOOKS RESULT WERE EXAMINED BY T HE AO WITH REGARD TO THE 500 BOXES FOR OF CHIKU FOR SALE FRO M M/S MANGU BAHI AND SONS, AHMEDABAD IN SPECIFIC, WHERE A G.P RATE OF 11.01% HAS BEEN FOUND. SIMILARLY, WITH REGARD TO THE CONSIGNME NT OF 3182 BOXES OF GRAPES FOR SALE FROM M/S. PANDIT KUTCHRE ASUAN DE, NASIK A G.P. RATE OF 3.49% WAS FOUND BY THE AO. THUS ON RANDOM B ASIS A G.P RATE OF 11.01% AND 3.49% WAS DECLARED BY THE ASSESSEE, W HEREAS OVERALL G.P. DECLARED BY THE ASSESSEE IN THE BOOKS OF ACCOU NT WAS 1.35% ONLY. THE ASSESSEE CAME OUT WITH EXPLANATION OF CER TAIN INSTANCES WHERE ONLY LOSSES HAD OCCURRED. HOWEVER, THE AO WAS OF THE VIEW THAT SINCE THE ASSESSEE HAD EARNED COMMISSION OF 5% ON THE COMMISSION SALES AND GOODS WHICH WERE NOT CONSUMED IN THE OPEN AUCTION, BUT WERE PURCHASED BY ASSESSEE AT A LESSER RATE AND SENT TO OTHER MARKETS FOR SALE, IN SUCH A SITUATION THE ASS ESSEE WAS BOUND TO EARN PROFITS EVEN BETTER THAN 5%. ACCORDINGLY, AS P ER THE AO, A G.P RATE OF 1.35% WAS NOT AT ALL REFLECTING THE CORRECT AND COMPLETE PICTURE OF THE VARIOUS TRANSACTIONS AND EVEN THE AU DITOR HAD GIVEN THE FOLLOWING COMMENTS IN COL. 28(A) OF HIS AUDIT R EPORT. - 4 - ITA NO.64/ASR/2014 NO DAY TO DAY QUANTITATIVE DETAILS ARE MAINTAI NED BY THE ASSESSEE. ACCORDINGLY, THE AO APPLIED A G.P RATE OF 4% ON THE SALES OF RS.82,67,729/- AND MADE ADDITION OF RS.2,18,530/- I N THE TRADING RESULT OF M/S. HARI CHAND AND SONS. 5. AS REGARDS TRADING RESULTS AND COMMISSION INCOME FROM BRAHANPUR BRANCH, THE ASSESSEE HAS DECLARED THE TRA DING OF KELA WHERE PURCHASE OF RS.49,43,542/- AND SALE OF RS.49, 37,278/- AT A GROSS LOSS OF RS.6,264/- HAD BEEN DECLARED. OUT OF SAID SALE THE ASSESSEE HAD DECLARED A SALE OF RS.41,76,418/- IN C ASH. THE EXPLANATION WITH REGARD TO THE SAID LOSS WAS SUBMIT TED BY THE ASSESSEE VIDE LETTER DATED 25.11.2009 THAT THE ASSE SSEE RECEIVES RIPE BANANAS WHICH DO NOT ALLOW THE DEALER TO FETCH MAXI MUM PRICE AS COMPARED TO KACHA (RAW) BANANA AND IN SUCH CIRCUMST ANCES LEFT OVER BANANAS OF POOR QUALITY AND SMALL SIZE ARE SOLD IN THE MARKET AT SOME PRICE, ELSE THE ASSESSEE WILL LOOSE THE CUSTOMER PE RMANENTLY. HE SUBMITTED THAT THEIR SALES AND PURCHASES ARE FULLY VOUCHED. 6. THE AO AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE MADE THE ADDITION OF RS.2,03,755/- BY CONSIDERING THAT BARRING ONE OR TWO INSTANCES, WHERE CONSIGNMENTS GOT DELAYED DUE TO AC CIDENTS, THE OTHER CONSIGNMENTS WERE DISPATCHED AS REGULAR SALES FROM THE ORIGIN OF THE PRODUCE SO THERE IS NO QUESTION OF MAKING AN Y KIND OF DISTRESS - 5 - ITA NO.64/ASR/2014 SELLING. MOREOVER, FROM THE SAME CONSIGNMENT I.E.TR UCK, THE ASSESSEE HAS MADE SALE OF SOME GOODS TO REGULAR DEALERS/TRAD ERS AND BALANCE HAS BEEN SHOWN CASH SALES E.G. OUT OF 134 QTLS PURC HASED 22.07.2006 ON 22.07.2006 FOR RS.82,661/20, THE ASSESSEE SOLD 3 4.43 QTLS ON 22.07.2006 TO M/S. GIAN CHAND AND SONS AT RS. 28,29 3/- AND BALANCE ABOUT 99.57 QTLS IN CASH FOR RS.31.985/- ONLY. SIMI LAR WAS THE POSITION IN OTHER CONSIGNMENTS. THERE WAS NO SPECIF IC REASON FOR THE ASSESSEE TO MAKE SUCH KIND OF DISTRESS SELLING. IN FACT THROUGH CASH SALES, THE NAME OF THE REAL BUYERS AND EXACT RATE I S NOT DISCLOSED AND SALES ARE BOOKED AT MUCH LESS RATE FOR CASH SALES O N THE PRETEXT OF PERISHABLE NATURE OF GOODS. HOW COME THAT ASSESSEE HAS MADE SALES OF JUST 15.41% (RS.760860 OUT OF RS.49,37,278/-) TO REGULAR TRADERS ON PROFIT AND REST OF CASH SALES TO THE TUNE OF RS. 84.59% (RS.41,76,418 OUT OF RS. 49,37,278/-) AS COMPULSIVE AND DISTRESS SELLING ON THE PRETEXT OF PERISHABLE NATURE OF GOOD S. IT IS NOT OUT OF PLACE TO MENTION THAT ASSESSEE IS VERY WELL EXPERIE NCED AND IN THIS LINE OF BUSINESS SINCE LONG. HE HAS SUFFICIENT MAN POWER TO MANAGE THE AFFAIRS SO THERE IS NO OCCASION TO FAULT IN REG ULAR DEALINGS. DISTRESS SELLING WOULD BE COVERED ONLY DUE TO MOST UNAVOIDABLE CIRCUMSTANCES LIKE ACCIDENTS, NATURAL CALAMITIES, B ANDS ETC WHICH WOULD DELAY THE CONSIGNMENT AND NOT IN DAY TO DAY A FFAIR OF THE ASSESSEES BUSINESS. IN VIEW OF THESE FACTS AND CIR CUMSTANCES, THE - 6 - ITA NO.64/ASR/2014 ASSESSEES TRADING RESULTS WERE CONSIDERED TO BE IN CORRECT AND INCOMPLETE AND ALSO MANIPULATED IN CASH TRANSACTION S. SO BY TAKING RECOURSE TO THE PROVISIONS OF SECTION 145(3) OF I.T . ACT,1961 THE PROFITS FROM THE SALE OF RS.49,37,278/- WERE DETERM INED AT RS.1,97,491/- BY APPLYING RATE OF 4% ON SALE OF RS. 49,37,278/- INSTEAD OF LOSS OF RS.6,264/- WHICH WOULD RESULT IN ADDITION OF RS.2,03,755/- ON THIS ACCOUNT. 7. AS REGARDS TRADING RESULTS AND COMMISSION INCOME FROM JALGAON BRANCH, THE FINDINGS OF THE AO ARE AT PAGE 10 WHICH READ AS UNDER: IN THIS BRANCH THE ASSESSEE HAS SHOWN SALES TO THE TUNE OF RS.2,20,248/- AGAINST THE PURCHASES OF RS.3,06,235/ - THUS CLAIMING GROSS LOSS OF RS.85,987/-. THE ASSESSEE JU STIFIED THE SALES AT LOWER RATE DUE TO MARKET CONDITIONS. FROM THE DETAILS OF THESE ACCOUNTS IT IS REVEALED THAT ASSESSEE HAD MADE PURCHASES ONLY IN THE MONTHS OF APRIL, 06 DECEMBER, 2006, JANUARY,07 AND FEB,07 AND EVERY TIME THE SALES WERE SHOWN AT THE RATE LESS THAN PURCHASES. HOWEVER, IN THE ABSEN CE OF COMPLETE EVIDENCE OF PURCHASES AND SALES, THE LOSS CLAIMED IN THIS ACCOUNT IS NOT CONSIDERED AS JUSTIFIED AND AS SUCH ADDITION OF THE AMOUNT OF LOSS OF RS. 85,987/- IS MADE BY RE JECTING THE TRADING RESULTS U/S 145(3) OF I.T. ACT,1961. PENALT Y PROCEEDINGS - 7 - ITA NO.64/ASR/2014 U/S. 271(1 (C ) OF THE I.T. ACT., 1961 FOR CONCEALM ENT OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME ARE BEING INITIATED SEPARATELY. 8. THE LEARNED CIT(A) AS REGARDS THE ADDITION OF RS .2,18,530/- OBSERVED THAT THE AO HAS TOTALLY IGNORED EXPLANATIO N OF THE ASSESSEE THAT HE HAS ALSO INCURRED LOSSES IN THE SALE OF FRU ITS IN PART OF THE TRANSACTION AND THE ASSESSEE HAS NOT POINTED OUT AN Y OTHER FAULT IN THE BOOKS OF ACCOUNT AND HAS ALSO NOT DISPUTED THE SAL ES AND PURCHASES AND THE AO HAS NOT REJECTED THE BOOKS OF ACCOUNT BE FORE MAKING ANY G.P ADDITION. ACCORDINGLY, HE OBSERVED THAT THE AO WAS NOT JUSTIFIED IN MAKING ANY ADDITION ON ACCOUNT OF TRADING AND CO MMISSION. THUS, HE DELETED THE ADDITION OF RS.2,18,530/-. 9. AS REGARDS THE ADDITION OF RS.2,03,755/- AND RS. 85,987/- THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE OBSERVED THAT THE AO HAS IGNORED THE EXPLANATION OF THE ASSESSEE THAT THE ASSESSEE HAD INCURRED LOSSES IN THE SALE OF GOO DS PERISHABLE IN THE NATURE. THE PURCHASES AND SALES HAVE NOT BEEN DOUBT ED. ACCORDINGLY, THE LEARNED CIT(A) OBSERVED THAT THE AO WAS NOT JUS TIFIED IN REJECTING THE BOOKS OF ACCOUNT AND ACCORDINGLY DELE TED THE ADDITION OF RS.2,03,755/- AND RS.85,987/-. 10. THE LEARNED DR RELIED UPON THE ORDER OF THE AO AND THE LEARNED AR RELIED UPON THE SUBMISSIONS MADE BEFORE THE LEAR NED CIT(A). - 8 - ITA NO.64/ASR/2014 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. AS REGARDS THE ADDITION OF RS.2,18,530/- WITH REGARD TO M/S HARI CHAND & SONS, THE AO HAD PICKED UP TWO INSTANC ES WHERE G.P RATES OF 11.01% AND 3.49% HAD BEEN EARNED BY THE AS SESSEE, AS EVIDENT AT PAGE 2 OF THE AOS ORDER, WHICH IS NOT D ISPUTED. THE EXPLANATION OF THE ASSESSEE WITH REGARD TO THE INST ANCES WHERE LOSS HAS BEEN INCURRED, THE AO HAS CONSIDERED THE SAME A T PAGE 3 OF HIS ORDER THAT THE ASSESSEE HAD EARNED COMMISSION OF 5% OF COMMISSION ON SALES AND GOODS ARE PURCHASED BY THE ASSESSEE AT A LESSER RATE AND SENT TO OTHER MARKETS FOR SALE. IN SUCH A SITUATION THE ASSESSEE IS BOUND TO EARN PROFITS EVEN BETTER THAN 5% WHICH IS ALSO APPARENT FROM VARIOUS SALE INSTANCES QUOTED BY THE AO. THE A O VERY CATEGORICALLY HAD GIVEN FINDING THAT THE GROSS PROF IT DECLARED BY THE ASSESSEE IS NOT AT ALL REFLECTIVE OF THE CORRECT AN D COMPLETE PICTURE OF THE VARIOUS TRANSACTIONS BY QUOTING THE AUDITORS C OMMENTS THAT NO DAY TO DAY QUANTITATIVE DETAILS ARE MAINTAINED BY T HE ASSESSEE. THIS FINDING OF THE AO TANTAMOUNTS TO REJECTING THE BOOK S OF ACCOUNT IN SUM AND SUBSTANCE AND IT IS TREATED AS INVOKING THE PROVISIONS OF SECTION 145(3) OF THE ACT. ACCORDINGLY THE FINDINGS OF THE LEARNED CIT(A) THAT NO DEFECT IN BOOKS OF ACCOUNT HAVE BEEN POINTED OUT IS OBLIVIOUS OF THE FACTS AS NARRATED BY THE AO IN HIS ORDER AT PAGE 2 & 3. MOREOVER, THE SPECIFIC INSTANCES OF THE LOSSES HAVE NOT BEEN - 9 - ITA NO.64/ASR/2014 BROUGHT ON RECORD BY THE LEARNED CIT(A) OR EVEN BEF ORE US FOR OUR PERUSAL WHETHER THERE ARE ACTUAL LOSSES IN SUCH TRA NSACTIONS AS CLAIMED BY THE ASSESSEE. IN THE ABSENCE OF THE SAME , THE FINDINGS OF THE AO AT PAGE 3 AS MENTIONED HEREIN ABOVE ARE FOUN D TO BE CORRECT THAT ASSESSEE HAS EARNED PROFIT BETTER THAN 5% AS C OMPARED TO G.P OF 1.35% DECLARED BY THE ASSESSEE. REGARDING THE ARGUM ENT OF LEARNED COUNSEL FOR THE ASSESSEE THAT NO TRADING ADDITION H AVE BEEN MADE IN THE PRECEDING YEAR AND ALSO IN THE FOLLOWING ASSESS MENT YEAR 2009- 10, WE ARE OF THE VIEW IN THE CIRCUMSTANCES AND FAC TS OF THE PRESENT CASE THAT THE PAST HISTORY AND THE RESULTS OF FOLLO WING YEAR CANNOT BE A GUIDE IN THE IMPUGNED YEAR, SINCE EVERY YEAR IS INDEPENDENT YEAR AND ON FACTS EARLIER HISTORY OR THE FOLLOWING YEARS CANNOT BE AN INDICATOR FOR THE IMPUGNED YEAR RESULTS BEING PECU LIAR AND INDEPENDENT CIRCUMSTANCES IN THE PRESENT YEAR. HOWE VER, LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND TO MEET THE ENDS OF JUSTICE WE DIRECT THE AO TO APPLY A G.P RATE OF 2% ON THE SALES OF RS.82,67,729/-. THE ORDERS OF BOTH THE AUTHORITIES ARE MODIFIED ACCORDINGLY. THUS, GROUND NO.1 OF THE REVENUE IS PA RTLY ALLOWED. 12. AS REGARDS GROUND NO.2 OF THE REVENUE:- THE BRI EF FACTS OF THE CASE ARE THAT AS PER THE ORDER OF THE AO WHICH IS R EPRODUCED HEREIN BELOW. - 10 - ITA NO.64/ASR/2014 THE ASSESSEE HAS CLAIMED EXPENSES ON ACCOUNT OF IN TEREST CHARGES OF RS.4,35,940/- IN P&L ACCOUNT. THESE CHAR GES HAVE BEEN PAID FOR BANK LOANS AND UNSECURED LOANS FROM F AMILY MEMBERS. ON THE OTHER SIDE THE ASSESSEE HAS SHOWN A MOUNT OF RS. 12 LACK IN IMPREST A/C WITH THE PROPRIETOR OR A SSESSEE, BESIDES CASH IN HAND OF RS.10,92,463/- AS ON 31.03. 2007. STILL FURTHER, ASSESSEE HAS GIVEN INTEREST FREE LOAN OF R S. 3 LAC TO SH. NEERAJ GUPTA ON 03.04.2006. THE ASSESSEE HAS CLAIME D ALL THESE TRANSACTIONS AS GENUINE BUSINESS TRANSACTIONS IN THE INTEREST OF BUSINESS. HOWEVER, ASSESSEE COULD NOT J USTIFY AS TO HOW THE INTEREST FREE LOAN OF RS.3 LAC TO SH. NEERA J GUPTA COULD BE CALLED AS BUSINESS LOAN. NO SUCH CONFIRMATION HA S BEEN PRODUCED WHICH COULD JUSTIFY THE COMMERCIAL EXPEDIE NCY. SIMILARLY THE HUGE IMPREST AMOUNT OF RS. 12 LAC WIT H THE PROPRIETOR WHICH IS OVER AND ABOVE HUGE CASH IN HAN D OF RS. 10.92 LACS BESIDES BANK BALANCE OF ABOUT 4.72 LAC, DOES NOT GET EXPLAINED BY SAYING THAT THE SAME IS AS PER BUSINES S NEEDS. SINCE THE ASSESSEE HAS HIMSELF CLAIMED THAT HE IS W ORKING AS COMMISSION AGENT FOR OUTSTATION PARTIES WHO SEND TH EIR GOODS FOR AUCTION, SO ASSESSEE IS NO WAY DEALING WITH THE FARMERS DIRECTLY WHERE IT NEEDS TO MAKE CASH PAYMENTS. RATH ER IN ASSESSEES CASE, THE SALE PROCEEDS ARE SENT TO SUPP LIER OF GOODS - 11 - ITA NO.64/ASR/2014 ONLY AFTER SELLING IN THE MARKET ON COMMISSION BASI S OR ON ACCOUNT OF SALE OF SELF PURCHASED GOODS. IN THE TOT ALITY OF FACTS AND CIRCUMSTANCES AND IN THE LIGHT OF THE JUDGMENT OF HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT VS ABHISHEK INDUSTRIES LTD. 286 ITR 1 (P&H) (2006), IT IS CONSI DERED APPROPRIATE TO MAKE DISALLOWANCE OF INTEREST AT THE NOTIONAL INTEREST OF 12% ON THE SUM OF RS. 12 LACK OF IMPRES T ACCOUNT, RS.5 LACKS FROM CASH IN HAND AND RS. 3 LAC AS INTER EST FREE ADVANCE TO SH. NEERAJ GUPTA. THIS WOULD RESULT IN D ISALLOWANCE OF INTEREST TO THE TUNE OF RS.2,40,000/- (12% OF RS .20 LAC) FROM THE INTEREST CLAIM AND THIS WOULD BE ADDED TO THE I NCOME OF THE ASSESSEE. 13. THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMIS SIONS OF THE ASSESSEE DELETED THE ADDITIONS AND HIS FINDING IN P ARA 7.4 AND 7.5 ARE REPRODUCE AS UNDER : 7.4 IN MY OPINION, THE ACTION OF THE ASSESSING OFF ICER IS NOT JUSTIFIED IN DISALLOWING INTEREST BY TAKING INTO AC COUNT THE AMOUNT LYING IN IMPREST ACCOUNT OR ON THE BASIS OF CASH IN HAND AS HE HAS NOT BROUGHT ANYTHING ON RECORD TO ESTABLI SH THAT THE CASH IN HAND OR CASH IN IMPREST ACCOUNT IS NOT ACTU ALLY AVAILABLE WITH THE ASSESSEE OR IT HAS BEEN UTILIZED BY THE PROPRIETOR FOR HIS PERSONAL PURPOSES OR FOR THE PUR POSES OTHER - 12 - ITA NO.64/ASR/2014 THAN THE BUSINESS. HOWEVER, IN MY CONSIDERED OPINIO N HE IS JUSTIFIED IN DISALLOWING PART OF THE INTEREST ON TH E BASIS OF INTEREST FREE ADVANCE TO SH. NEERAJ GUPTA BY APPLYI NG THE RATIO OF THE DECISION IN THE CASE OF ABHISHEK INDUSTRIES. IN MY CONSIDERED OPINION, NONE OF THE CASE LAWS RELIED UP ON BY THE ASSESSEE FIRM SUPPORTED ITS CASE AS THE FACTS OF TH OSE CASES ARE ENTIRELY DIFFERENT FROM THAT OF THE ASSESSEE. MOREO VER, IT HAS NOT BEEN DEMONSTRATED THAT AS TO HOW THE FACTS OF T HE CASE OF THE ASSESSEE ARE SIMILAR TO THAT OF THE CASE LAWS R ELIED UPON BY THE ASSESSEE. 7.5. IN THE ABOVE STATED FACTS AND IN THE CIRCUMSTA NCES OF THE CASE, ADDITION MADE BY THE ASSESSING OFFICER TO THE EXTENT OF RS.36,000/- IS CONFIRMED OUT OF TOTAL ADDITION OF R S. 2,40,000/- AND BALANCE ADDITION OF RS.2,04,000/- IS DIRECTED T O BE DELETED. IN THE RESULT, GROUND OF APPEAL NO.3 TAKEN BY THE A SSESSEE IS, THEREFORE, PARTLY ALLOWED. 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. WE CONCUR WITH THE VIEWS OF THE LEARNED C IT(A) THAT AO IS NOT JUSTIFIED IN DISALLOWING INTEREST ON THE IMPRES T ACCOUNT OR CASH IN HAND SINCE, THERE IS NOTHING ON RECORD THAT THE ASS ESSEE HAS USED A SAID SUM FOR PERSONAL PURPOSES. THE AO IS JUSTIFIED IN DISALLOWING PART OF INTEREST ON THE BASIS OF INTEREST FREE ADVA NCE TO SH. NEERAJ - 13 - ITA NO.64/ASR/2014 GUPTA. ACCORDINGLY, WE FIND NO INFIRMITY IN THE ORD ER OF LEARNED CIT(A) IN DELETING THE ADDITION OF RS.2,04,000/-. T HUS, GROUND NO.2 OF THE REVENUE IS DISMISSED. 15. AS REGARDS GROUND NO.3 OF THE REVENUE: THE BRIEF FACTS OF THE CASE ARE AS PER AOS ORDER AT PAGE 9 & 10 WHICH IS REPRODUCED HEREIN BELOW: THE ASSESSEES CLAIM THAT LABOUR CHARGED FROM BUY ER AND PAID TO THE LABOURERS AS PER THE MARKET RULES AND R EGULATION IS NOT SUPPORTED BY ANY KIND OF EVIDENCE EXCEPT ITS OW N SALE BILLS. MOREOVER, THE ASSESSEE HAS ALREADY INCLUDED ALL THE EXPENSES PAID TO THE COMMISSION AGENT, IN ITS OWN BILL. THE SAID BILL OF COMMISSION AGENT VERY WELL MENTIONS THE NUMBER OF T RUCK AS WELL ON WHICH GOODS ARE LOADED, WHICH IS EVIDENT FR OM ABOVE EXAMPLE AND THIS IS A REGULAR FEATURE. AT THE TIME OF RAISING OF BILL THE ASSESSEE IS ENTITLED ONLY FOR HIS OWN COMM ISSION OR ANY OTHER EXPENSE INCURRED OVER AND ABOVE THE CONSIGNME NT EXPENSES LIKE TRUCK ADVANCE AND THAT TOO ON THE BAS IS OF A RECEIPT FROM THE TRANSPORTER. THERE IS NOT ANY KIND OF INDEPENDENT EVIDENCE OF PAYMENT TO LABOURERS AND AN Y KIND OF CONFIRMATION FROM THE MANDI AUTHORITIES TO THE EFFE CT THAT AS A COMMISSION AGENT/SUPPLIER OF GOODS HE HAS TO INCUR LABOUR EXPENSES @400/- PER TRUCK. ON A RANDOM CHECKING OF BILLS - 14 - ITA NO.64/ASR/2014 ISSUED BY THE ASSESSEE IT HAS BEEN FOUND THAT IN SA LE BILL NO.474 DATED 01/08/2006 ISSUED TO M/S NAV JEEVAN FR UITS CO. KURALI, THE ASSESSEE HAS NOT SHOWN ANY LABOUR CHARG ES AND EVEN COMMISSION ON THESE SALES HAVE BEEN CHARGED AT RS.420/- ONLY INSTEAD OF CHARGES OF RS.620/-. SIMILARLY THER E ARE OTHER BILLS AS WELL WHERE ASSESSEE HAS SHOWN LESS COMMISS ION AND EVEN COMMISSION ON THESE SALES HAVE BEEN CHARGED AT RS.420/- ONLY INSTEAD OF CHARGES OF RS.620/-. SIMILARLY THER E ARE OTHER BILLS AS WELL WHETHER ASSESSEE HAS SHOWN LESS COMMI SSION AND HENCE LESSER LABOUR CHARGES EVEN FOR FULL TRUCK LOA D. IN THE BURHANPUR LABOUR ACCOUNT THE ASSESSEE HAS CREDITED THE AMOUNTS OF RS.400/- CHARGED PER TRUCK FROM THE BUYE R BUT IT HAS DEBITED THIS ACCOUNT THROUGH BURHANPUR IMPREST ACCO UNT WITH THE NARRATION, CASH PAID TO LABOUR. THE ASSESSEE HA S FAILED TO SUBSTANTIATE IF AT ALL ANY LABOUR PAYMENT HAS BEEN HIS LIABILITY, OVER AND ABOVE THE EXPENSES PAID TO THE COMMISSION AGENT AND THE ADVANCE IN SOME CASES TO THE TRANSPORTER. IT IS A WELL KNOWN PRINCIPLE THAT THE COMMISSION AGENT CHARGES EVERY E XPENSES IN HIS BILL INCLUDING LABOUR FOR LOADING OF THE CROP ( BANANA IN THIS CASE) IN TRUCKS OF THE BUYER AND SHOWS THE SAME IN THE BILL RAISED FOR THE PURPOSE. IN SUCH SITUATION, WHERE AS SESSEE HAS NOT BEEN ABLE TO GIVE ANY KIND OF EVIDENCE OF PAYME NT MADE FOR - 15 - ITA NO.64/ASR/2014 SO CALLED LABOUR EXPENSES AND IN THE ABSENCE OF ANY CONFIRMATION FROM THE BUYERS, MAJORITY OF WHICH ARE UNKNOWN DUE TO CASH SALES BY THE ASSESSEE AND NO SUBJECTED TO ANY KIND OF VERIFICATION AND FURTHER IN THE ABSENCE OF ANY C ONFIRMATION FROM MANDI AUTHORITIES OR THE COMMISSION AGENTS REG ARDING ANY SUCH PAYMENT BEING MADE BY THE ASSESSEE OVER AN D ABOVE THE CHARGES SHOWN BY THE LOCAL COMMISSION AGENT OF THE MANDI IN HIS BILL, THE CLAIM OF THE ASSESSEE TOWARDS LABO UR CHARGES PAYMENTS REMAINS UNVERIFIED. AS SUCH THE ASSESSEES BOOK RESULTS ARE TREATED TO BE INCOMPLETE AND INCORRECT WITHIN THE PROVISIONS OF SECTION 145(3) OF I.T.ACT,1961 AND TH ESE LABOUR CHARGES RECEIVED FROM CUSTOMERS ARE TREATED AS ASSE SSEES OWN INCOME, SET OFF AGAINST THE PSEUDO CLAIM OF LABOUR EXPENSES. IN VIEW OF THESE FINDINGS ADDITION OF RS.9,24,108/- (A S SHOWN IN LABOUR A/C) IS MADE TO COMMISSION ACCOUNT FROM BRHA NPUR KELA ACCOUNT. PENALTY PROCEEDINGS U/S 271(1) OF THE ACT ARE INITIATED FOR CONCEALMENT OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME. LIKE THE BURHANPUR BRANCH IN THIS BRANCH ALSO, THE ASSESSEE HAS SHOWN COMMISSION INCOME FROM SUPPLY OF BANANAS. THE ASSESSEE HAS SHOWN COMMISSION OF RS.2, 92,020/- FROM TOTAL SALE OF RS.1,33,70,102/-. THIS COMES TO 2.18%. IN - 16 - ITA NO.64/ASR/2014 THIS CASE ALSO THE ASSESSEE HAS SHOWN FIXED COMMISS ION OF RS.620/- PER TRUCK AND LIKE IN BURHANPUR CASE, CLAI MED LABOUR CHARGES OF RS.400/- ONCE AGAIN THE ASSESSEE FAILED TO GIVE ANY EVIDENCE OR CONFIRMATION FROM THE SELLERS, BUYERS, MANDI AUTHORITIES, OR THE ACTUAL RECIPIENTS OF THE LABOUR CHARGES. FOR THE DETAILED REASONS GIVEN IN THE CASE OF BURHANPUR , HERE ALSO THE ASSESSEES CLAIM OF LABOUR CHARES IS CONSIDERED TO BE DEVICE TO SET OFF THE COMMISSION EARNED FROM THE BUYERS WH ICH ARE MAINLY THE UNKNOWN PARTIES DUE TO CASH SALES. AS SU CH THE LABOUR CHARGES OF RS.1,88,400/-. (CALCULATED IN THE RATIO OF 400/620 OF THE COMMISSION INCOME BECAUSE AS AGAINST COMMISSION OF 620/- LABOUR CHARES AS SHOWN AT 400/- ) IS ADDED TO ASSESSEES INCOME AS COMMISSION INCOME. PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT, FOR CONCEALM ENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME ARE BEING INITIATED SEPARATELY. 17. THE LEARNED CIT(A) DELETED THE ADDITIONS VIDE P ARA 10.3,10.4 & 10.5 WHICH IS REPRODUCED FOR THE SAKE OF CONVENIENC E AS UNDER: 10.3. AT THE OUTSET, IT HAS BEEN STATED THAT NO S EPARATE ADDITION ON THIS ACCOUNT CAN BE MADE IN THE CASE OF JALGAON BRANCH AS THE ASSESSEE HAS PAID TOTAL LABOUR CHARGE S OF RS.9,24,108/- AND COMBINED ACCOUNT HAS BEEN MAINTAI NED IN - 17 - ITA NO.64/ASR/2014 RESPECT OF HO & BO. THE SUBMISSIONS OF THE ASSESSEE ARE FOUND TO BE CORRECT. HENCE ADDITION OF RS. 1,88,000/- IS DELETED SUBJECT TO VERIFICATION BY THE ASSESSING OFFICER. I N THE RESULT, GROUND OF APPEAL NO.8 IS ALLOWED. 10.4. AS REGARDS THE ADDITION OF RS. 9,24,108/-, I AM OF THE OPINION THAT THE ASSESSING OFFICER HAS NOT BROUGHT ANYTHING ON RECORD WHICH WILL SUGGEST THAT THE ASSESSEE HAS NOT PAID ANY LABOUR CHARGES WHICH HE HAS RECEIVED FROM THE BUYER S. THE ADDITIONS AGAIN HAVE BEEN FOUND TO BE MADE ON CONJE CTURES AND SURMISES. THE RECEIPT OF LABOUR CHARGES CANNOT BE T REATED AS COMMISSION IN THE ABSENCE OF ANY POSITIVE MATERIAL WHICH WILL JUSTIFY THE ACTION OF THE ASSESSING OFFICER. 10.5. IN THE ABOVE STATED FACTS AND IN THE CIRCUMST ANCES OF THE CASE, I AM OF THE CONSIDERED OPINION THAT THE ASSES SING OFFICER IS NOT JUSTIFIED IN MAKING IMPUGNED ADDITION OF RS. 9,24,108/- AND ADDITION MADE IS, THEREFORE, DIRECTED TO BE DEL ETED. IN THE RESULT, GROUND OF APPEAL NO.6 TAKEN BY THE ASSESSEE IS ALLOWED. 18. WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED THE FACTS OF THE CASE. THE CLAIM OF THE ASSESSEE IS THAT LABOUR IS C HARGED FROM THE BUYER AND PAID TO THE LABOURERS AS PER THE MARKET R ULES AND REGULATIONS. THOUGH, THE SAME IS NOT SUPPORTED BY A NY KIND OF EVIDENCE. AS REGARDS THE LABOUR CHARGES FROM THE BU YER, THE SAME IS - 18 - ITA NO.64/ASR/2014 RECOVERED FROM THE BUYER. AS REGARDS THE LABOUR PAI D AS PER MARKET RULE AND REGULATIONS, NO SUCH MARKET RULE AND REGUL ATIONS HAVE BEEN BROUGHT ON RECORD AND NO EVIDENCE OF ANY PAYMENT TO THE LABOUR HAS BEEN BROUGHT ON RECORD ON ANY BASIS. THE AO FOUND T HAT IN SALE BILL NO.474 DATED 01/08/2006 ISSUED TO M/S NAV JEEVAN FR UIT CO. KURALI, THE ASSESSEE HAS NOT SHOWN ANY LABOUR CHARGES WHERE AS COMMISSION ON THESE SALES HAVE BEEN CHARGED AT RS.420 ONLY INS TEAD OF RS.620. SIMILARLY IN OTHER BILLS THE AO HAS NOTED SIMILAR I NSTANCE OF THE ABSENCE OF ANY EVIDENCE OF PAYMENT OF LABOUR AND TH E ABSENCE OF ANY CONFIRMATION FROM THE BUYERS, MAJORITY OF WHICH ARE UNKNOWN DUE TO CASH SALES BY THE ASSESSEE. THE CLAIM OF THE ASSESS EE TOWARDS LABOUR CHARGES PAYMENTS REMAINS UNVERIFIED AND ACCORDINGLY THE AO HAS RIGHTLY INVOKED THE PROVISIONS OF SECTION 145(3) OF THE ACT WITH REGARDS TO THE BURHANPUR AND JALGAON BRANCH. THE F INDINGS OF THE LEARNED CIT(A) THAT THE ASSESSEE HAS PAID TOTAL LAB OUR CHARGES OF RS.9,24,108/- AND COMBINED ACCOUNT IN RESPECT OF HE AD OFFICE AND BRANCH OFFICE HAS BEEN MAINTAINED ON ONE HAND IN PA RA 10.3 AND ON THE OTHER HAND THE LEARNED CIT(A) HAS GIVEN FINDING THAT THERE IS NO LABOUR CHARGES HAVE BEEN PAID AS AGAINST THE ABOUR CHARGES RECEIVED FROM BUYERS WHICH IS A CONFLICTING FINDING. THEREFO RE, THE FINDINGS OF THE LEARNED CIT(A) THAT THE AO HAD MADE THE ADDITIO N ON CONJECTURE AND SURMISES ARE WITHOUT ANY BASIS. - 19 - ITA NO.64/ASR/2014 THE AO HAS GIVEN CLEAR CUT FINDINGS THAT THE ASSES SEE HAS CLAIMED THE LABOUR CHARGES FROM BUYERS BUT THE AO H AS IGNORED THAT ACTUAL PAYMENT TO THE LABOURS CERTAINLY MUST HAVE B EEN MADE THOUGH THERE NO EVIDENCE ON RECORD TO THIS EXTENT WHETHER SUCH CHARGES HAVE ACTUALLY BEEN PAID OR IF PAID HOW MUCH HAVE BEEN PA ID. AS MENTIONED HEREIN ABOVE WITHOUT PAYING LABOUR CHARGES THERE CA NNOT BE ANY LOADING OR UNLOADING AND CERTAINLY AGAINST THE LABO UR CHARGES RECEIVED, THE LABOUR PAYMENT HAS TO BE ALLOWED AS AN EXPENSE AS AGAINST THE AO HAS TOTALLY IGNORED SUCH LABOUR PAYM ENT. IN THE CIRCUMSTANCES AND THE FACTS OF THE CASE, AS AGAINST THE LABOUR CHARGES RECEIVED AT BURHANPUR AND JALGAON BRANCH TOTALING T O RS.11,12,508 AND IN THE INTEREST OF JUSTICE WE ALLOW 75% OF THE LABOUR CHARGES AS AN EXPENSE AND AO IS DIRECTED TO DISALLOW THE REMAI NING AND RETAIN THE SAID ADDITION. ACCORDINGLY, THE ORDERS OF BOTH THE AUTHORITIES ARE MODIFIED. THUS, GROUND NO.3 OF REVENUE IS PARTLY AL LOWED. 19. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND JANUARY, 2015. SD/- SD/- (A.D. JAIN) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMB ER DATED: 02.01.2015 PK. P - 20 - ITA NO.64/ASR/2014 COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE: SH. HARI CHAND PROP. HARI CHAND & SO NS, 2. THE ASSIST. COMMISSIONER OF INCOME TAX, HOSHIARPUR CIRCLE, HOSHIARPUR. 3. THE CIT(A), 4. THE CIT, 5. THE SR DR, I.T.A.T., TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.