M/s. Pathak Enterprises, Shahjahanpur V. Income Tax Officer , Shahjahanpur

ITA 66/LKW/2012

• Counselvise Citation: 6623714 RSA 2012
• Duration Of Justice: 1 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 21-10-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 13-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ALOK MITRA
• Keywords: Unexplained cash credit
• Section: 68; 144

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.66/LKW/2012 A.Y.: 2006 - 07 M/S PATHAK ENTERPRISES, KACCHA KATRA, SHAHJAHANPUR. PAN:AAHFP5491K VS. INCOME TAX OFFICER - II, SHAHJAHANPUR. (APPELLANT) (RESPONDENT) APPELLANT BY SHRI ABHINAV MEHROTRA, ADVOCATE RESPONDENT BY SHRI ALOK MITRA, D.R. DATE OF HEARING 23/10/2013 DATE OF PRONOUNCEMENT 1 3 /1 1 /2013 O R D E R PER A. K. GARODIA, A.M. THIS IS AN ASSESSEES APPEAL DIRECTED AGAINST THE ORDER OF LEARNED CIT(A), BAREILLY DATED 20/12/2011 FOR THE ASSESSMENT YEAR 2006 - 2007. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. THAT THE ASSESSMENT U/S 144 OF TH E I.T. ACT, 1961 HAD BEEN COMPLETED AND VARIOUS ADDITIONS RESULTING INTO MULTIPLE ADDITIONS HAD BEEN MADE WHICH IS LIABLE TO BE DELETED. THE ASSESSMENT ORDER RESULTS INTO THE IMPOSSIBLE DETERMINATION OF INCOME WHICH CAN NEVER BE ACHIEVED IN LINE OF THE BUS INESS OF THE ASSESSEE FIRM. 2 THE NET PROFIT SHOWN WAS 1.64% BUT THE ASSESSED PROFIT IS 18.92%. 2. THAT THE LD. CIT(A), BAREILLY ERRED ON FACTS AND IN LAW IN CONFORMING THE ACTION OF THE A.O. IN TREATING THE FIRM AS AOP INSPITE OF THE FACT THAT THE STATUS OF THE FIRM WAS BEING FOLLOWED SINCE THE INCEPTION OF THE FIRM. THE STATUS OF THE FIRM HAD WRONGLY BEEN CHANGED WHICH IS BAD IN LAW. 3. THAT THE LD. CIT(A), BAREILLY ERRED ON FACTS IN LAW IN CONFIRMING THE ADDITION OF RS.10,36947/ - ON ACCOUNT OF EXTRA PRO FIT BY APPLYING HIGHER GROSS PROFIT. 4. THAT THE LD. CIT(A), BAREILLY ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS.32,500/ - BEING THE CAPITAL CONTRIBUTED BY THE PARTNER, UMESH PATHAK SEPARATELY ASSESSED TO TAX. 5. THAT THE LD. C1T(A), BARE ILLY ERRED ON THE FACTS AND IN LAW IN CONFIRMING THE ADDITION OF 2,65,000/ - BEING THE CAPITAL CONTRIBUTED BY THE PARTNER, UMA PATHAK SEPARATELY ASSESSED TO TAX. 6. THAT THE LD. CIT(A), BAREILLY ERRED ON THE FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE OF SALARY OF RS.60,000/ - PAID TO THE PARTNERS AS PER THE PROVISIONS OF THE DEED OF PARTNERSHIP. 7. THAT THE LD. C1T(A), BAREILLY ERRED ON THE FACTS AND IN LAW THAT IN CHARGING THE INTEREST ON PARTNERS WITHDRAWALS AMOUNTING TO RS.30,018/ - WHICH IS CONTRARY TO THE FACTS OF THE CASE. 8. THAT THE LD. CIT(A), BAREILLY ERRED ON THE FACTS AND IN LAW ADDING RS.2,00,000/ - AS UNEXPLAINED CREDIT BEING THE LOAN TAKEN FROM SUMAN PATHAK SEPARATELY ASSESSED TO TAX. 3 9. THAT THE LD. CIT(A), BAREILLY ERRED ON THE FACTS AND IN LAW ADDING RS.25,98,503/ - BEING THE SUNDRY CREDITORS WHICH IN CONTRARY TO THE FACT THAT G.P. RATE HAD BEEN APPLIED AND NO OTHER ADDITION IS WARRANTED IN SUCH CIRCUMSTANCES AND THOSE HAD BEEN PROVED ALSO. 10. THAT NO FURTHER ADDITION IS REQUIR ED WHERE THE G.P. RATE HAD BEEN APPLIED BUT THIS HAD NOT BEEN FOLLOWED IN THE PRESENT CASE. 11. THE ASSESSEE FIRM RESERVES A RIGHT TO ADD/ALTER/AMEND ANY GROUND OF APPEAL AT THE TIME OF ITS HEARING. 3. IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT GROUND NO. 1 AND 2 ARE NOT PRESSED AND ACCORDINGLY, THESE TWO GROUNDS ARE REJECTED AS NOT PRESSED. 4. REGARDING GROUND NO. 3, IT WAS SUBMITTED BY HIM THAT THE GROSS PROFIT RATE OF 8.5% ADOPTED BY THE ASSESSING OFFICER AND CONFIRMED BY LEARNED CIT(A) IS HIGHLY EXCESSIVE. REGARDING THE COMPARABLE CASES, ADOPTED BY THE ASSESSING OFFICER, HE SUBMITTED THAT IN THE CASE OF THE COMPARABLES ADOPTED BY THE ASSESSING OFFICER, THE ASSESSEE WAS ENGAGED IN RETAIL TRADE WHEREAS IN THE PRESENT CASE , THE ASSESSEE IS A WHOLESALER AND, THEREFORE, THE HIGH RATE OF GROSS PROFIT SHOWN BY A RETAILER CANNOT BE ADOPTED IN THE PRESENT CASE. 5. LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDER OF LEARNED CIT(A). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND HAVE ALSO GONE THROUGH THE ORDERS OF THE 4 AUTHORITIES BELOW . WE FIND THAT THE COMPARISON CHART OF THE GROSS PROFIT RATE FROM ASSESSMENT YEAR 2000 - 2001 TO ASSESSMENT YEAR 2008 - 2009 IS AVAILABLE AT PAGE NO. 2 OF THE PAPER BOOK AND AS PER THE SAME, THE ASSESSEE REPORTED GROSS PROFIT OF 5.4 4 % IN ASSESSMENT YEAR 2002 - 2003 AND 5.12% IN ASSESSMENT YEAR 2001 - 2002 & 2000 - 2001 . IN THE PRESENT YEAR, THE ASSESSEE REPORTED A GROSS PROFIT RATE OF 4.06% WHEREAS THE ASSESSING OFFICER ADOPTED GROSS PROFIT RATE OF 8.5%. CONSIDERING THE FACTS OF THE PRESENT CASE IN ITS ENTIRETY, WE FEEL THAT GROSS PROFIT RATE OF 5.5% WOULD BE FAIR AND REASONABLE. WE DIRECT THE ASSESSING OFFICER ACCORDIN GLY. GROUND NO. 3 IS PARTLY ALLOWED. 7. GROUND NO. 4 AND 5 ARE SIMILAR REGARDING ADDITION OF RS.32,500/ - AND RS.2,65,000/ - IN RESPECT OF CAPITAL CONTRIBUTED BY TWO PARTNERS I.E. SHRI UMESH PATHAK AND MS. UMA PATHAK RESPECTIVELY. ON THIS ASPECT , THE ISSU E IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF PANKAJ DYE STUFF , I.T. REF.NO. 241 OF 1993 DATED 06/07/2005 WHEREIN IT WAS HELD THAT IN RESPECT OF CAPITAL CONTRIBUTION BY A PARTNER, ENQUIRY CAN B E MADE IN THE HANDS OF THE PARTNER AND ADDITION CAN BE MADE IN HIS HANDS IF HE IS NOT ABLE TO EXPLAIN THE SOURCE OF CONTRIBUTION TO THE PARTNERSHIP FIRM BUT NO ADDITION CAN BE MADE IN THE HANDS OF THE PARTNERSHIP FIRM. RESPECTFULLY FOLLOWING TH IS DECISION OF HON'BLE GUJARAT HIGH COURT, WE DELETE THE PRESENT ADDITION IN THE PRESENT CASE REGARDING THE CAPITAL CONTRIBUTION OF RS.32,500/ - AND RS.2,65,000/ - BY TWO PARTNERS . WE ALSO HOLD THAT THE ASSESSING OFFICER IS AT LIBERTY TO EXAMINE THE SOURCE OF INVESTME NT IN THE HANDS OF THE RESPECTIVE PARTNERS. GROUND NO. 4 & 5 ARE ALLOWED. 5 8. GROUND NO. 6 & 7 ARE INTERCONNECTED. REGARDING THESE TWO GROUNDS, IT WAS POINTED OUT BY LEARNED D.R. OF THE REVENUE TO THE BENCH THAT AS PER SUB SECTION 5 OF SECTION 184, DEDUCT ION IS NOT ALLOWABLE TO THE ASSESSEE IN RESPECT OF INTEREST AND REMUNERATION TO THE PARTNERS WHERE THE ASSESSEE HAS COMMITTED A DEFAULT AS MENTIONED IN SECTION 144 OF THE ACT. IN THE PRESENT CASE, THE ASSESSMENT WAS COMPLETED BY THE ASSESSING OFFICER U/S 144 BECAUSE OF CERTAIN DEFAULTS BY THE ASSESSEE AND, THEREFORE, AS PER SUB SECTION 5 OF SECTION 184, NO DEDUCTION IS ALLOWABLE TO THE ASSESSEE ON ACCOUNT OF INTEREST AND REMUNERATION TO THE PARTNERS. CONSEQUENTLY, GROUND NO. 6 IS REJECTED. 9. REGARDING G ROUND NO. 7, WE FIND THAT THIS ADDITION WAS MADE BY THE ASSESSING OFFICER BY WAY OF CHARGING INTEREST IN RESPECT OF DEBIT BALANCE IN THE NAME OF THE PARTNERS. WE DO NOT FIND ANY INFIRMITY IN THIS ACTION OF THE ASSESSING OFFICER, WHICH IS CONFIRMED BY CIT( A). GROUND NO. 7 IS ALSO REJECTED. 10. REGARDING GROUND NO. 8, IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THIS ADDITION IS NOT JUSTIFIED WHEREAS LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 11. WE FIND THAT A C LEAR FINDING HAS BEEN GIVEN BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS NOT BROUGHT ON RECORD EVEN AN IOTA OF EVIDENCE REGARDING LOAN OF RS.2,00,000/ - FROM SMT. SUMAN PATHAK. AT PAGE NO. 13 OF HIS ORDER , IT WAS NOTED BY LEARNED CIT(A) THAT THE ASSESSEE DID NOT FURNISH CONFIRMATION OF THE AMOUNT BROUGHT BY SMT. SUMAN PATHAK BEFORE 6 THE ASSESSING OFFICER EVEN AT THE STAGE OF PROCEEDINGS OF REMAND REPORT , A LTHOUGH THE ASSESSEE HAD EXPLAINED THE SOURCE OF CAPITAL OF RS.2,00,000/ - OF SMT. UMA PATHAK, WHICH W AS ACCEPTED BY THE ASSESSING OFFICER. BEFORE US ALSO, NO EVIDENCE IS BROUGHT ON RECORD TO ESTABLISH THE CREDITWORTHINESS OF THE LOAN CREDITOR SMT. SUMAN PATHAK ABOUT THE LOAN OF RS.2,00,000/ - AND, THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE O RDER OF LEARNED CIT(A). THIS GROUND IS ALSO REJECTED. 12. REGARDING GROUND NO.9, IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THE AMOUNT OF RS.25,98,503/ - IS IN RESPECT OF TRADE CREDITORS AND NOT CASH CREDIT AND, THEREFORE, NO ADDITION IS JUSTIF IED IN THIS REGARD U/S 68 OF THE ACT. REGARDING THE DETAIL OF THIS AMOUNT, THE LEARNED A.R. OF THE ASSESSEE SUBMITTED THAT THE DETAILS ARE AVAILABLE IN THE BALANCE SHEET OF THE ASSESSEE, WHICH IS AVAILABLE ON PAGE NO. 35 OF THE PAPER BOOK. HE ALSO SUBMIT TED THAT THE AMOUNT IS OUTSTANDING IN RESPECT OF 5 CREDITORS AND THE COPY OF THE ACCOUNTS OF ALL THESE 5 PARTIES ARE ALSO AVAILABLE ON PAGES 11 TO 15 OF THE PAPER BOOK. HE ALSO PLACED RELIANCE ON THE JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT RENDERED IN THE CASE OF CIT RAGHVENDRA PRATAP SINGH AS REPORTED IN 2009 (14) MTC 415. 13. LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 14. WE HAVE CONS IDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT IN THE PRESENT CASE , THE ASSESSMENT WAS COMPLETED BY THE ASSESSING OFFICER BY ESTIMATING THE NET PROFIT AFTER REJECTING THE BOOKS OF ACCOUNT. IN ADDITION TO THAT , THE ASSESSING OFFICER 7 ALSO MADE ADDITION U/S 68 AND THAT TOO IN RESPECT OF TRADE CREDITORS. AS PER THE JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT CITED BY LEARNED A.R. OF THE ASSESSEE HAVING BEEN RENDERED IN CIT VS. RAGHVENDRA PRATAP SINGH (SUPRA), IT WAS HELD THAT WHEN BOOKS OF ACCOUNT WERE REJECTED OR THE ASST IS MADE EX - PARTE, NO ADDITION CAN BE MADE U/S 68. RESPECTFULLY FOLLOWING THIS JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT, WE DELETE THIS ADDITION OF RS. 25,98,503/ - MADE BY THE ASSESSING OFFICER U/S 68 OF THE ACT. GROUND 9 OF THE APPEAL IS ALLOWED. 15. GROUND NO. 10 AND 11 OF THE APPEAL ARE GENERAL AND DO NOT CALL FOR ANY SEPARATE ADJUDICATION. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 3 / 1 1 / 2 0 1 3 *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. DR, ITAT, LUCKNOW ASSTT. REGISTRAR 8