M/s. Abdulkadar Kalabhai Trunkwala, Surat V. The Income tax Officer,Ward-5(1), Surat

ITA 77/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9109 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 12-01-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 11-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: JIGNESH N MEHTA
• Keywords: Unexplained cash credit; Presumptive income; Depreciation; Business expenditure
• Section: 143(3); 142(1); 28; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE SHRI RAJPAL YADAV, JM, & SHRI MANISH BORA D, AM. ITA NO.77/AHD/2012 ASST. YEAR: 2008-09 M/S ABDULKADAR KALABHAI TRUNKWALA, 9/1999, UMDA CHOWK, MAIN ROAD, SURAT. VS. ITO, WAD-5(1), SURAT. APPELLANT RESPONDENT PAN AAJFA 7766L APPELLANT BY SHRI JIGNESH N. MEHTA, AR RESPONDENT BY SMT. SONIA KUMAR, SR. DR DATE OF HEARING: 12.1.2016 DATE OF PRONOUNCEMENT: 18 /03 /2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LD. CITT(A)-1, SURAT DATED 30.11.2011 IN APPEAL NO.CAS- 1/191/2011-12 PASSED AGAINST ORDER U/S 143(3) OF THE IT ACT, 1961 (IN SHORT THE ACT) FOR ASST. YEAR 2008-09 FRAMED ON 22.12.2010 BY ITO, WD-5(1) SURAT. ASSESSEE HAS RAISED FOLLOWING GROUNDS :- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AND ON FACTS BY NOT ACCEPTING THE CLAIM OF YOUR APPELLANT OF INCOME OFFERED FOR TAXATION ON PRESUMPTIVE BASIS U/S. 44AF OF THE ACT AND HAS CONFIRMED ADDITION @ 25% OF TOTAL PURCHASE AMOUNTING TO RS. 3 ,42,757/- AS ADDED BY THE LEANED A.O. SINCE YOUR APPELLANT IS ENGAGED IN RETAIL TRADING OF BAGS, SUITCASES AN TRUNK OF VIP LIMITED IS ENTITLED FOR FILLING OF RETURN OF ITA NO. 77/AHD/2012 ASST. YEAR 2008-09 2 INCOME U/S. 44AF OF THE INCOME TAX ACT, THE ASSESSM ENT MADE BY THE A.O.BY REJECTING THE PLEA OF YOUR APPELLANT OF PROV ISIONS OF SECTION 44AF OF THE ACT MAY PLEASE BE DELETED. 2. WITHOUT PREJUDICE THE GROUND OF APPEAL AT POINT 1 ABOVE, THE LEARNED CIT (A) HAS ERRED IN UPHOLDING ADDITION ON ACCOUNT OF D ISALLOWANCE OF BUSINESS EXPENDITURE TO THE EXTENT OF 10% AMOUNTING TO RS. 24,209 (10% OF RS. 2,42,086/-) WHICH MAY PLEASE BY DELETED. 3. THE LEARNED CIT(A) ERRED IN LAW AND FACTS IN CON FIRMING THE ADDITION MADE BY A.O. WITHOUT ADDUCING THE REASON FOR DOING SO? 4. THE APPELLANT CRAVES TO ADD, AMEND, ALTER, DELET E, SUBSTITUTE OR MODIFY ANY OR ALL THE GROUNDS OR GROUNDS OF APPEAL. 2. BRIEFLY STATED FACTS AS CULLED OUT FROM THE ASSE SSMENT RECORDS ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF TRADING OF BEGS, SUITCASE AND TRUNKS OF VIP LTD. AN D OTHER MANUFACTURERS. RETURN OF INCOME WAS FILED ON 31.3.2 009 SHOWING TOTAL INCOME OF RS.NIL. THE CASE WAS SELECTED FOR S CRUTINY ASSESSMENT AND NOTICES U/S 143(2) OF THE ACT WAS IS SUED ON 27.8.2009 FOLLOWED BY NOTICE U/S 142(1) OF THE ACT, DATE 18.1.2010 ALONG WITH DETAILED QUESTIONNAIRE CALLING FOR VARIO US DETAILS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FINANCIAL STAT EMENTS INCLUDING TRADING AND PROFIT AND LOSS A/C AND SUPPORTING OF P URCHASE AND SALE WERE SUBMITTED BY THE ASSESSEE. IN THE COMPUTATION OF INCOME ASSESSEE HAS OPTED FOR PRESUMPTIVE TAXATION U/S 44A F OF THE ACT, AS THE ASSESSEE WAS ENGAGED IN RETAIL TRADE HAVING TUR NOVER OF RS. 11,31,029/- IN THE YEAR UNDER APPEAL. HOWEVER, LD. ASSESSING OFFICER REJECTED THE CLAIM OF ASSESSEE OF BEING COVERED UND ER THE PROVISIONS OF SECTION 44AF OF THE ACT RELATING PRESUMPTIVE TAX ATION AND ASSESSED THE INCOME OF ASSESSEE AT RS.556,140/- AFT ER MAKING FOLLOWING ADDITIONS :- ITA NO. 77/AHD/2012 ASST. YEAR 2008-09 3 1 ADDITION ON ACCOUNT OF DISALLOWANCE OF PURCHASES RS.3,42,757/- 2 ADDITION ON ACCOUNT OF DISALLOWANCE OF EXPENSES RS.60,022/- 3 ADDITION ON ACCOUNT OF UNEXPLAINED CREDITORS RS.5,063/- 4 ADDITION ON ACCOUNT OF UNEXPLAINED CREDIT RS.1,48,302/- 3. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE LD. CI T(A) WHO PARTLY ALLOWED THE APPEAL OF ASSESSEE BY DISMISSING THE GROUND OF APPLYING PROVISIONS OF SECTION 44AF OF THE ACT AS PER BUSINESS OF ASSESSEE, DELETED ADDITION FOR UNEXPLAINED CREDITOR S OF RS.5,063/- AND ADDITION ON ACCOUNT OF UNEXPLAINED CREDIT OF RS .1,48,302/- AND PARTLY SUSTAINING DISALLOWANCE OF BUSINESS EXPENSES BY RESTRICTING THE ADDITION TO 10% INSTEAD OF 25% OF THE EXPENSES OF R S. 2,42,086/- WORKED OUT AT RS.24209/- AT THE PLACE OF RS.60022/- MADE BY ASSESSING OFFICER. 4. AGGRIEVED, ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUNAL. 5. THE LD. AR SUBMITTED THAT ASSESSEE FIRM IS A SMA LL HAWKER TYPE OF BUSINESS CARRIED ON IN LOW PRICE AREA OF THE SOC IETY ON TOTAL TURNOVER OF RS.11.31 LACS FROM RETAIL TRADE BUSINES S PROFIT WORKED OUT UNDER THE PROVISIONS OF SEC.44AF OF THE ACT CALCULA TED @ 5% COMES TO RS.56551/- WHEREAS ASSESSEE FIRM HAS DISCLOSED NET PROFIT OF RS.2,22,214/- BEFORE DEDUCTION OF INTEREST AND REMU NERATION PAYABLE TO PARTNER(S). LD. AR FURTHER SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS ALL DOCUMENTS RELATING TO PU RCHASES AND ITA NO. 77/AHD/2012 ASST. YEAR 2008-09 4 SALES WERE PROVIDED TO THE ASSESSING AUTHORITY INCL UDING THE COPY OF SALES-TAX RETURN FILED FOR THE YEAR TO SUPPORT TOTA L TURNOVER OF RS.11,31 LACS. COMPLETE DETAILS OF PURCHASES ALONG WITH DATE -WISE PURCHASE REGISTER SHOWING PARTY-WISE SUMMARY OF PURCHASES WI TH NAME(S), ADDRESSES, AMOUNT AND SALES-TAX REGISTER NUMBER WER E PROVIDED TO LD. ASSESSING OFFICER. LD. AR ALSO SUBMITTED THAT L D. ASSESSING OFFICER FAILED TO APPRECIATE THAT OUT OF THE TOTAL PURCHASE S OF RS.13,71,028/- SHOWN IN THE PROFIT AND LOSS ACCOUNT, PURCHASES OF RS.12.69 LACS WERE MADE FROM ARISTOCATE LUGGAGE LTD., AHMEDABAD, WHICH IS A WELL-KNOWN COMPANY. LD. AR THEREFORE, REQUESTED THA T ASSESSEES BUSINESS IS FULLY COVERED UNDER THE PROVISIONS OF 4 4AF OF THE ACT AS ASSESSEES IS IN RETAIL TRADE BUSINESS AND HAS SHOW N PROFITS HIGHER THAN THE PROFITS REQUIRED TO BE SHOWN BY RETAIN TRA DE BUSINESS U/S 44AF OF THE ACT AND THE ADDITIONS SUSTAINED BY LD. CIT(A) TO BE DELETED AND RETURNED INCOME OF THE ASSESSEE BE ACCE PTED. 6. ON THE OTHER HAND, LD. DR SUPPORTED THE ORDERS O F LOWER AUTHORITIES. 7. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. SOLITARY GRIEVANCE OF THE ASSESSEE IS AGAIN ST THE ACTION OF LD. CIT(A) FOR NOT ACCEPTING THE CLAIM OF ASSESSEE FOR BEING COVERED UNDER THE PRESUMPTIVE BASIS UNDER THE PROVISIONS OF SECTION 44AF OF THE ACT AND SUSTAINING PART OF THE ADDITION MADE BY LD. ASSESSING OFFICER. ITA NO. 77/AHD/2012 ASST. YEAR 2008-09 5 8. FROM GOING THROUGH THE RECORD WE UNDERSTAND THAT ASSESSEE IS A DEALER OF SUITCASE, BRIEF CASE AND IS ENGAGED IN RETAIL SALES AND MAJORITY OF ITS PURCHASES ARE FROM ARISTOCATE LUGGA GE LTD. DURING THE COURSE OF ASSESSMENT PROCEEDINGS SUFFICIENT DETAILS WERE PLACED ON RECORD BEFORE THE ASSESSING AUTHORITY ABOUT PURCHAS ES AND SALES EFFECTED DURING THE YEAR AND GENUINENESS OF SALES H AS NOT BEEN QUESTIONED BY THE ASSESSING AUTHORITY AT ANY STAGE. LD. ASSESSING OFFICER HAS DOUBTED THE PURCHASES OF RS.13,71,028/- ON WHICH ADDITION @ 25% HAS BEEN MADE EVEN WHEN COMPLETE DET AILS OF DATE- WISE PURCHASES AND NAMES, ADDRESSES AND AMOUNT OF S UPPLIERS WERE PLACED ON RECORD BEFORE LD. ASSESSING OFFICER BY TH E ASSESSEE VIDE HIS REPLY DATED 8 TH JULY, 2010. LD. AR ALSO SUBMITTED THAT OUT OF TOTA L PURCHASES OF RS.13.71 LACS, PURCHASES OF RS.12.69 L ACS WAS MADE FROM ARISTOCATE LUGGAGE LTD. 9. LOOKING TO THE BUSINESS ACTIVITIES OF THE ASSESS EE FIRM WE ARE INCLINED TO BELIEVE THAT ASSESSEE IS IN RETAIL TRAD E BUSINESS AND SPECIAL PROVISIONS FOR GETTING PRESUMPTIVE PROFIT O N RETAIL BUSINESS TRULY APPLIES ON THE ASSESSEE. 10. SECTION 44AF OF THE ACT READS AS UNDER :- 44AF. SPECIAL PROVISIONS FOR COMPUTING PROFITS AN D GAINS OF RETAIL BUSINESS. (1) NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN SECTIONS 28 TO 43C, IN THE CASE OF AN ASSESSEE ENGAGED IN RETAIL TRADE IN ANY GOODS OR MERCHANDISE, A SUM EQUAL TO FIVE PER CENT OF THE TOTAL TURNOVER IN THE PREVIOUS YEAR ON ACCOUNT OF SUCH BUSINESS OR, AS THE CASE MAY BE, A SUM HIGHER THAN THE AFORE SAID SUM AS DECLARED BY THE ASSESSEE IN HIS RETURN OF INCOME SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF SUCH BUSINESS CHARGEABLE TO TAX UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION': ITA NO. 77/AHD/2012 ASST. YEAR 2008-09 6 PROVIDED THAT NOTHING CONTAINED IN THIS SUB-SECTION SHALL A PPLY IN RESPECT OF AN ASSESSEE WHOSE TOTAL TURNOVER EXCEEDS AN AMOUNT OF FORTY LAKH RUPEES IN THE PREVIOUS YEAR. (2) ANY DEDUCTION ALLOWABLE UNDER THE PROVISIONS OF SECTIONS 30 TO 38 SHALL, FOR THE PURPOSES OF SUB-SECTION (1), BE DEEMED TO HAVE BEEN ALREADY GIVEN FULL EFFECT TO AND NO FURTHER DEDUCTION UNDER THOSE SECTIONS SHALL BE ALLOWED : PROVIDED THAT WHERE THE ASSESSEE IS A FIRM, THE SALARY AND INTEREST PAID TO ITS PARTNERS SHALL BE DEDUCTED FROM THE INCOME COMPUTED UNDER SU B-SECTION (1) SUBJECT TO THE CONDITIONS AND LIMITS SPECIFIED IN CLAUSE (B) OF SE CTION 40. (3) THE WRITTEN DOWN VALUE OF ANY ASSET USED FOR TH E PURPOSE OF THE BUSINESS REFERRED TO IN SUB-SECTION (1) SHALL BE DEEMED TO HAVE BEEN CALCULATED AS IF THE ASSESSEE HAD CLAIMED AND HAD BEEN ACTUALLY ALLOWED THE DEDUCTION IN RESPECT OF THE DEPRECIATION FOR EACH OF THE RELEVANT ASSESSMENT YEARS. (4) THE PROVISIONS OF SECTIONS 44AA AND 44AB SHALL NOT APPLY IN SO FAR AS THEY RELATE TO THE BUSINESS REFERRED TO IN SUB-SECTION ( 1) AND IN COMPUTING THE MONETARY LIMITS UNDER THOSE SECTIONS, THE TOTAL TURNOVER OR, AS THE CASE MAY BE, THE INCOME FROM THE SAID BUSINESS SHALL BE EXCLUDED.. 11. APPLYING THE SAME TO THE FACTS OF THE CASE OF A SSESSEE WHEREIN TOTAL TURNOVER IS SHOWN AT RS.11,31,029/- WHICH IS NOT DOUBTED BY THE LOWER AUTHORITIES AT ANY STAGE AND THE PURCHASES OF THE ASSESSEE ARE EXPLAINED AND THE PROFITS OF RS.2,22,214/- SHOWN BY THE ASSESSEE IS MUCH HIGHER THAN THE PROFIT @ 5% OF TURNOVER OF RS. 11,31,029/- CALCULATED AT RS.56,551/-, WE ARE OF THE VIEW THAT ASSESSEES DISCLOSED INCOME U/S 44AF OF THE ACT AT RS.2,22,214 /- SHOULD HAVE BEEN ACCEPTED BY THE REVENUE. FURTHER AS PER SECOND PROVISO TO SECTION 44AF ASSESSEE IS ALSO ELIGIBLE FOR CLAIMING DEDUCTION ON SALARY AND INTEREST PAID TO ITS PARTNERS AND IN THE CASE OF ASSESSEE INTEREST OF RS.1,69,358/- AND SALARY OF RS.50,000/- HAS BEEN SHOWN TO WORKING PARTNERS AND, THEREFORE, ASSESSEE HAS RIGHT LY FILED ITS RETURN ITA NO. 77/AHD/2012 ASST. YEAR 2008-09 7 OF INCOME AT NIL. WE, THEREFORE, ARE OF THE VIEW TH AT ASSESSEE IS COVERED UNDER THE PROVISIONS OF SECTION 44AF OF THE ACT AND NO ADDITION WAS CALLED FOR DISALLOWANCE OF PURCHASES A T RS.3,42,757/- AND SUSTAINING OF DISALLOWANCE ON EXPENSES @ 10% OF RS.2,42,086/-, THE SAME ARE DELETED. 12. OTHER GROUNDS ARE OF GENERAL NATURE, WHICH NEED NO ADJUDICATION. 13. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 /03/2016 SD/- SD/- (RAJPAL YADAV) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 18 /02 /2016 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD ITA NO. 77/AHD/2012 ASST. YEAR 2008-09 8 1. DATE OF DICTATION: 16/03/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 18/03/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 18/3/16 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: