Asstt. Commissioner of Income tax-I, Kanpur V. M/s Shyam Saree Centre, Kanpur

ITA 701/LKW/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83374 (ITAT-LUCKNOW)
• Duration Of Justice: 2 year(s) 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 02-09-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 25-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK MITRA
• Section: 133A

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.701/LKW/2011 ASSESSMENT YEAR:2006 - 07 A.C.I.T. - 1, KANPUR. VS. M/S SHYAM SAREE CENTRE, 55/63, KAHOO KOTHI, KANPUR. PAN:AARFS3502J (APPELLANT) (RESPONDENT) APPELLANT BY SHRI ALOK MITRA, D. R. RESPONDENT BY SHRI ABHINAV MEHROTRA, ADVOCATE DATE OF HEARING 02/09/2014 DATE OF PRONOUNCEMENT 2 1 /10/2014 O R D E R PER A. K. GARODIA, A.M. THIS IS REVENUES APPEAL DIRECTED AGAINST THE ORDER PASSED BY LEARNED CIT(A) - II, KANPUR, DATED 30/08/2011 FOR THE ASSESSMENT YEAR 2006 - 2007. 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.12,57,419/ - MADE BY THE ASSESSING OFFICER UNDER THE PROVISION OF SECTION 145(3) OF THE INCOME TAX ACT 1961, WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 2. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.11,09,000/ - U/S 68 OF THE INCOME TAX 2 ACT, 1961, WITHOUT APPRECI ATING THE FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 3. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1,33,080/ - ON ACCOUNT OF I NTEREST PAID TO THE PARTNERS AND CREDITORS WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER .DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 4. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - !!, KANPUR HAS ERRED IN LAW AND ON FACT S IN DELETING THE ADDITION OF RS.1,47,240/ - ON ACCOUNT OF INTEREST PAID ON DIVERTED FUNDS FOR NON - BUSINESS PURPOSES WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 5. THAT THE LD. COMM ISSIONER OF INCOME - TAX (APPEALS) - II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.1,00,000/ - MADE BY THE ASSESSING OFFICER OUT OF BUSINESS PROMOTION EXPENSES, WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 6. THAT THE ORDER OF THE LD. CIT (A) - II, KANPUR DATED 30.08.2011 NEEDS TO BE QUASHED AND THE ORDER DATED 15.12.2008 PASSED BY THE ASSESSING OFFICER BE RESTORED. 3. LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER. HE ALSO SUBMITTED THAT IT IS NOTED BY THE ASSESSING OFFICER ON PAGE 2 OF THE ASSESSMENT ORDER THAT THE ASSESSEE HAS NOT MAINTAINED STOCK REGISTER AND THE SALES WERE MADE PARTLY IN CASH AND PARTLY ON CREDIT. HE ALSO POINTED OUT THAT IT I S OBSERVED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER THAT DURING ASSESSMENT YEAR 2005 - 06 , SUBSTANTIAL DISCREPANCIES WERE NOTICED DURING THE COURSE OF SURVEY OPERATION CONDUCTED BY THE DEPARTMENT U/S 133A OF THE ACT. 3 4. AS AGAINST THIS, LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IN THE PRESENT YEAR, THE GROSS PROFIT RATE DISCLOSED BY THE ASSESSEE IS 3.61% AS AGAINST GROSS PROFIT RATE OF 4% IN ASSESSMENT YEAR 2005 - 06. BUT IN ASSESSMENT YEAR 2002 - 03 , THE GROSS PROFIT RATE WAS 2.74% AND IN ASSESSMENT YEAR 2003 - 04 , IT WAS 2.86% AND IN ASSESSMENT YEAR 2004 - 05 , THE GROSS PROFIT RATE WAS 3.25%. REGARDING FALL IN THE GROSS PROFIT IN THE PRESENT YEAR, IT WAS EXPLAINED BEFORE THE CIT(A) THAT THIS HAS HAPPENED DUE TO COMPETITIVE CONDITION IN THE MARKET AND TO ACHIEVE INCREASE IN THE SALE S . IN THIS REGARD , WE FIND THAT THE SALES REPORTED BY THE ASSESSEE IS RS.228.34 LAC S AS AGAINST SALE OF RS.188.14 LAC S IN ASSESSMENT YEAR 2005 - 06 AND EVEN AFTER FALL IN GROSS PROFIT RATE TO 3.61% IN THE PRESENT YEAR AS COMPARED TO 4% IN ASSESSMENT YEAR 2005 - 06, THE AMOUNT OF NET PROFIT HAS INCREASED TO 41.98 LAC S AS AGAINST 25.48 LAC S IN THE PRECEDING YEAR. THE NET PROFIT RATE HAS ALSO GONE UP FROM 0.54% IN ASSESSMENT YEAR 2005 - 06 TO 0.66% IN PRESENT YEAR. REGARDING THE REJECTION OF BOOKS OF ACCOUNT, IT IS NOTED BY LEARNED CIT(A) THAT NO DISCREPANCY IN THE VOUCHERS, BILLS AND BOOK ENTRIES OF PURCHASES OF STOCK HAVE BEEN POINTED OUT BY THE ASSES SING OFFICER NOR ANY SUCH OBSERVATION IS ON RECORD PURSUANT TO THE AUDIT REPORT U/S 44AB OF THE ACT. HE HAS ALSO OBSERVED THAT THE ASSESSEE HAS FURNISHED THE STOCK DETAILS AT THE END AND AT THE OPENING OF THE YEAR. BASED ON VARIOUS OBSERVATIONS IN HIS OR DER, A CLEAR FINDING IS GIVEN BY CIT(A) THAT THE ASSESSING OFFICER HAS CONCLUDED AND REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE ON THE WRONG BASIS, WHICH IS BASED ON WRONG PREMISES, PRESUMPTIONS, SUSPICIONS AND ESTIMATES FOR WHICH ASSESSING OFFICER DO N OT HAVE ANY SUPPORTING DOCUMENTS AND ALSO WITHOUT APPRECIATING THE EXPLANATION OF THE ASSESSEE. HE HAS ALSO GIVEN A FINDING THAT THERE IS NO 4 INSTANCE OF ANY SPECIFIC ENTRY OR TRANSACTION HAVING BEEN OMITTED AND ANY SUCH ENTRY OF THE BOOKS OF ACCOUNT FOUND NON VERIFIABLE. THESE SPECIFIC FINDINGS OF CIT(A) COULD NOT BE CONTROVERTED BY LEARNED D.R. OF THE REVENUE AND HENCE, ON THIS ISSUE , WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A). ACCORDINGLY, GROUND NO. 1 IS REJECTED. 6. REGARDING GROUND NO. 2, LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT ON THIS ISSUE, ON PAGE NO. 7 & 8 OF HIS ORDER, THIS SUBMISSION OF LEARNED A.R. OF THE ASSESSEE HAVE BEEN REPRODUCED BY CIT(A) TO THE EFFECT FOR ACKNOWLEDGEMENT TOWARDS FILING OF RETURN OF INCOME FOR THE RELEVANT YEAR, PHOTOCOPY OF PAN CARD, COMPUTATION OF INCOME, CASH FLOW STATEMENT ALONG WITH THE INDI VIDUAL BALANCE SHEET OF THE DEPOSITORS DULY DEPICTING THE RELEVANT ENTRY AND THE BALANCE OF THE CONCERNS WHERE THE CAPITAL CONTRIBUTION/DEPOSIT HAVE BEEN MADE ARE ON RECORD . THIS IS THE SUBMISSION OF LEARNED A.R. OF THE ASSESSEE BEFORE THE CIT(A) THAT THE ASSESSEE HAS DULY DISCHARGED ITS ONUS. RELIANCE WAS PLACED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS BY LEARNED A.R. OF THE ASSESSEE BEFORE THE CIT(A): ( I ) CIT VS. RAMESWAR SIRKAR [1994] 74 TAXMAN 294 (CAL) ( II ) CIT VS. SRI KRISHNA P. LTD. [1992] 193 ITR 494 (CAL ) ( III ) CIT VS. DWARKADHISH INVESTMENT (P) LTD. 330 ITR 298 (DEL) AFTER EXAMINING ALL THESE SUBMISSIONS OF LEARNED A.R. OF THE ASSESSEE, THIS FINDING IS GIVEN BY CIT(A) THAT THE ASSESSEE HAS DISCHARGED ITS ONUS BY SUBMITTING RELEVANT DETAILS WITH SUFFICIENT EVIDENCE AND THEREFORE, THE ASSESSING OFFICER IS NOT JUSTIFIED T O CONCLUDE THAT THE RECEIPTS ARE 5 UNEXPLAINED. THESE SPECIFIC FINDINGS OF CIT(A) COULD NOT BE CONTROVERTED BY LEARNED D.R. OF THE REVENUE AND HENCE, ON THIS ISSUE ALSO, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A). ACCORDINGLY, GROUND NO. 2 IS REJECTED. 8. REGARDING GROUND NO. 3, BOTH THE SIDES AGREED THAT THIS ISSUE IS CONSEQUENTIAL TO GROUND NO. 2 BECAUSE IF THE LOAN OF RS.11.09 LAC S IS ACCEPTED TO BE GENUINE THEN THE INTEREST IS ALLOWABLE AND IF IT IS HELD TO BE BOGUS THEN THE INTEREST IS NOT ALLOWABLE. WHILE DECIDING GROUND NO. 2, WE HAVE DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND THEREFORE, AS A CONSEQUENCE , GROUND NO. 3 IS ALSO REJECTED. 9. REGARDING GROUND NO. 4, LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT BEFORE THE CIT(A), IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT AN ADVANCE OF RS.11.11 LAC S WAS GIVEN FOR BUSI NESS PURPOSE TO DEVELOP A GODOWN AT THE LAND PROPOSED TO BE PURCHASED AND SUCH ADVANCE WAS GIVEN TO UNASSOCIATED, UNCONNECTED AND UNRELATED PARTY TO SHRI KUNWAR AYURVEDIC AND PHARMACY IN ASSESSMENT YEAR 2003 - 04 AND THERE WAS NO TERMS FOR CHARGING OF INTERE ST AND NO INTEREST WAS RECEIVED ON THIS ADVANCE. IT WAS ALSO SUBMITTED BEFORE THE CIT(A) THAT THIS ADVANCE WAS ULTIMATELY REALIZED AFTER FILING THE COURT CASE THROUGH THE COURT ORDERS. REGARDING THE SECOND ADVANCE OF RS.1.16 LAC PAID TO MRS. NEELAM AWAST HI , IT WAS NOTED THAT THIS IS ALSO FOR THE PURPOSES OF THE BUSINESS AND IT WAS SUBMITTED THAT SHE IS UNASSOCIATED, UNCONNECTED AND UNRELATED PARTY AND THERE WAS NO TERMS FOR CHARGING OF INTEREST. THE CIT(A) HAS DELETED THE DISALLOWANCE ON THE BASIS THAT T HE ASSESSEE HAS SATISFACTORILY PROVED THAT NO INTEREST WAS 6 RECEIVED ON THIS ADVANCE. HE HAS ALSO GIVEN A FINDING THAT THE AMOUNT HAS BEEN REALIZED AFTER THE INTERFERENCE OF COURT IN ONE CASE AND AFTER LEGAL ACTION INITIATION IN OTHER CASE. HE HAS ALSO GI VEN A FINDING THAT THE PARTIES WERE NOWHERE CONNECTED WITH THE ASSESSEE. THESE SPECIFIC FINDINGS OF CIT(A) COULD NOT BE CONTROVERTED BY LEARNED D.R. OF THE REVENUE AND HENCE, ON THIS ISSUE , WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A). A CCORDINGLY, GROUND NO. 4 IS REJECTED. 11. REGARDING GROUND NO. 5, LEARNED D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LEARNED A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF LEARNED CIT(A). 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIN D THAT CIT(A) HAS DECIDED THIS ISSUE AS PER PARA 22 OF HIS ORDER, WHICH IS REPRODUCED BELOW FOR THE SAKE OF READY REFERENCE: 22. IN VIEW OF THE ABOVE FACTS I HOLD THAT IT IS CUSTOMARY IN THIS STYLE OF BUSINESS TO GIVE THE BAGS FOR DELIVERY OF THE ITEMS SOLD BY THE RETAILERS. THIS ALSO HELPS IN PUBLICIZING THE TRADE OF THE APPELLANT CONCERN, LOOKING AT THE QUANTUM OF THE SALES OF THE APPELLANT AND THE NUMBER OF PARTIES DEALT WITH BY THE APPELLANT, I FIRMLY BELIEVE THAT THE DISTRIBUTION OF THE BAGS CAN BE DONE IN THREE DAYS, HENCE THERE WILL BE NO CLOSING STOCK OF THESE BAGS, THEREFORE, THE EXPENDITURE ON THIS ACCOUNT CANNOT BE TREATED AS PREPAID BECAUSE THERE WILL NOT BE ANY STOCK OF THESE ITEMS ON THE CLOSING DATE OF THE YEAR. THE ADDITION MADE BY THE AO OF RS.1,00,000/ - IS NOT JUSTIFIED AND STANDS DELETED. 12.1 FROM THE ABOVE PARA FROM THE ORDER OF LEARNED CIT(A), WE FIND THAT A CLEAR FINDING IS GIVEN THAT THE DISTRIBUTION OF THE BAGS CAN BE DONE IN THREE DAYS AND THEREFORE , THERE WILL BE NO CLOSING STOCK OF THESE BAGS . SO , THE EXPENDITURE ON THIS ACCOUNT CANNOT BE TREATED AS PREPAID BECAUSE THERE WILL NOT BE ANY STOCK OF THESE ITEMS ON THE CLOSING DATE OF THE YEAR. 7 THESE FINDINGS OF CIT(A) COULD NOT BE CONTROVERTED BY LEARNED D.R. OF THE REVENUE AND HENCE, ON THIS ISSUE ALSO, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A). ACCORDINGLY, GROUND NO. 5 IS REJECTED. 13. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTION ED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 1 /10/2014. *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR