DCIT 24(2), MUMBAI V. MANIRATNA 'THE JEWEL PARADISE", MUMBAI

ITA 7707/MUM/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8050 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 10-09-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 27-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PREMANAND
• Assessee Lawyers: JITENDRA SINGH
• Keywords: Business income; Additional evidence
• Section: 143(3); 194C

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B , BENCH MUMBAI , BEFORE : SHRI R.C.SHARMA , A M & SHRI AMIT SHUKLA , J M ITA NO. 7707 / MUM/20 1 2 ( ASSESSMENT YEAR : 200 9 - 10 ) DCIT - 24(2), MUMBAI - 51 VS. M/S MANIRATNA, THE JEWEL PARADISE, SHOP NO.7, SHANTI SADAN, MALAD(W), MUMBAI - 64 PAN/GIR NO. : A A EFM 5550 F ( APPELLA NT ) .. ( RESPONDENT ) /REVENUE BY : SHRI PREMANAND /ASSESSEE BY : SHRI JITENDRA SINGH DATE OF HEARING : 10 TH SEPT. 201 4 DATE OF PRONOUNCEMENT : 10 TH OCT , 201 4 O R D E R PER R.C.SHARMA ( A .M.) : TH IS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER CIT(A ) , DATED 8 - 10 - 2012 FOR ASSESSMENT YEAR 200 9 - 10 , IN THE MATTER OF ORDER PASSED U/S. 143(3) OF THE I.T. ACT ON THE FOLLOWING GROUNDS OF APPE AL : - (I) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF TELEPHONE AND MOTOR CAR EXPENSES WHEN THE PERSONAL ELEMENT IS INVOLVED IN THESE EXPENSES; (II) ON THE FACT S AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE AO OF RS.19,06,374/ - BY ADMITTING ADDITIONAL EVIDENCE IN CONTRAVENTION TO RULE 46A, DESPITE THE ASSESSEE FAILING TO PRODUCE THE DOCUMENTS DURING AS SESSMENT PROCEEDINGS; (III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE AO U/S 40(A)(IA) OF THE ACT WHEN THE ASSESSEE FAILED TO DEDUCT TDS ON ADVERTISEMENT EXPENSES AS PER PROVIS ION TO SECTION 194J; ITA NO. 7707 /1 2 2 (IV) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE AO OF RS.5 LACS AS SUPPRESSED SALES ON ACCOUNT OF LABOUR CHARGES WHEN THE ASSESSEE FAILED TO GIVE BIFURCATIO N OF SALES AND MAKING CHARGES/LABOUR CHARGES RECEIPTS; (V) 'THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY.' 2 . THE FIRST GRIEVANCE OF THE REVENUE RELATES TO DELETION OF ADDITION OF RS. 19.06 LAKHS IN RESPECT OF PURCHASES ON THE PLEA THAT CIT(A) HAS ADMITTED THE ADDITIONAL EVIDENCE IN CONTRAVENTION OF THE RULE 46A. 3 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT THE AO HAS MADE THE SAID ADDITION ON THE PLEA THAT NOTICES WERE ISSUED TO THE SUPPLIE R U/S. 136 , WHICH WAS RETURNED UNSERVED. THE AO ASKED THE ASSESSEE TO PRODUCE ALL THE FOUR PARTIES, DUE TO FAILURE OF ASSESSEE, THE AO TREATED THE ENTIRE PURCHASE OF ALL T HE FOUR PARTIES AS UNPROVED PURCHASE AND ADDED THE SAME AS INCOME. 4 . BY THE IMPUGNED ORDER, THE CIT(A) DELETED THE ADDITION AFTER HAVING THE FOLLOWING OBSERVATION : - I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT ALONG WITH T HE PAPER BOOK AND THE IMPUGNED ASSESSMENT ORDER ON THIS ISSUE. THE FOLLOWING ARE TH E DETAILS OF D ISALLOWANCES MADE BY THE ASSESSING OFFICER: - 1 DARSHAN B SHAH 4,08,866 2 MANGLABEN K SHAH 8,00,008 3 PRIYA RAJ 4,97,200 4 BUNKA V RAJ 2,00,200 5 TOTAL 19,06,374 (1) DARSHAN B SHAH: - IT WAS THE CONTENTION OF THE APPELLANT THAT THE PURCHASES MADE FROM THIS PARTY IS GENUINE AND IN SUPPORT OF THIS, COPY OF THE RETURN OF INCOME FILED FOR A.Y.2009 - 1 0, COPY OF THE BANK STATEMENTS, CONFIRMATION LETTER & COPY OF THE PAN CARD WERE ALL FURNISHED WHICH IS AVAILABLE IN PAGES 41 TO 46 OF THE P APER BOOK. IT WAS THE CONTENTION OF THE APPELLANT THAT THE CONFIRMATION LETTER AND BANK STATEMENTS WERE PRODUCED BEFORE THE ASSESSING OFFICER. I HAVE PERUSED THE ABOVE DOCUMENTS. THE IDENTITY OF THE SELLER HAS BEEN PROVED BY FILING THE COPY OF THE PAN CARD . THE PAYMENT WAS MADE BY WAY OF CHEQUE AND THE STATEMENT OF ACCOUNT OF ITA NO. 7707 /1 2 3 MRS.DARSHAN P. SHAH , PROPRIETOR OF M/S ANNERY ENTERPRISES SHOWS THE CREDIT OF RS .4,08,866/ - IN HER BANK ACCOUNT ON 20.01.2008. THE RETURN OF INCOME FILED BY DARSHANA B SHAH FOR A.Y.200 9 - 10 INDICATES THAT LONG TERM CAPITAL GAIN ON SALE OF JEWELLERY HAS BEEN DULY ADMITTED. (2) MANGLABEN K SHAH: THE APPELLANT HAD FILED CONFIRMATION LETTER THAT ANCESTRAL JEWELLERY WAS SOLD TO IT ALL 12.9.2008 VIDE BILL NO .40 . COPY OF THE BANK STATEMENT INDICATING THE CREDIT OF ~.8,00,008/ - ON 15.9.2008 WITH ICICI BANK, KANDIVALI BRANCH, COPY OF THE PHOTO ID PROOF WERE ALL FURNISHED IN SUPPORT OF THE GENUINENESS OF THE TRANSACTION WHICH ARE AVAILABLE IN PAGES 47 TO 49 OF THE PAPER BOOK. (3) PRIYA RAJ & (4) BARKHA V RAJ COPIES OF THE CONF I RMATION LETTERS GIVEN BY BOTH THE PARTIES AND COPIES OF BANK STATEMENTS OF THE ABOVE INDIVIDUALS ARE AVAILABLE IN PAGES 50 TO 55 OF THE PAPER BOOK. THE PERUSAL OF THE CORPORATION BANK A/C. OF PRIYA RAJ INDICATES THE C REDIT OF RS. 4,97,200/ - ON 6 - 4 - 2009. SIMILARLY THE STATEMENT OF ACCOUNT OF BARKHA V RAJ WITH ABHYUDAYA CO - OP. BANK INDICATES THE CREDIT OF RS.2,00,300/ - ON 4 - 4 - 2009. 3.3.1. THE APPELLANT HAD ALSO FILED COPY OF THE STOCK REGISTER SHOWING THE RECEIPT OF OLD ORNAMENTS IN PAGES 60 TO 64 OF THE PAPER BOOK. THE COPIES OF THE INVOICES RECEIVED OF THE ABOVE 4 INDIVIDUALS AVAILABLE IN PAGES 56 TO 59 OF THE PAPER BOOK. THE DETAILS OF OLD ORNAMENTS PURCHASED AS PER THE INVOICE IS AS UNDER: - SL.NO. NAME INVOICE NO. D ATE QTY. JEWELLERY OFPURCHASED RATE PER GRAM(RS.) VALUE(RS.) 1. DARSHANA B. SHAH 28 13.7.2008 353.690GM 1156 4,08,886 2. MANGLABEN SHAH 40 12.9.2008 768.550 GM 1041 8,00,008 3. BARKHA V RAJ 97 28.3.2008 183.760 GM 1090 2,00,300 4. PRIYA V RAJ 98 28.3.2 009 452 GM 1100 4,97,200 I HAVE PERUSED THE STOCK REGISTER. THE APPELLANT HAD PROPERLY ENTERED THE FACT OF RECEIPT OF OLD JEWELLERY IN THE STOCK REGISTER .. 3.3.2. THE ASSESSING OFFICER HERSELF IN PARA 6 & 7 OF THE ORDER ACKNOWLEDGE THAT CONFIRMATION LETTERS AND BANK STATEMENTS WERE FILED IN RESPECT OF THE ABOVE PARTIES BUT SINCE THE PARTIES COULD NOT BE PRODUCED IN PERSON CAME TO THE CONCLUSION THAT THE GENUINENESS OF THE TRANSACTION IS NOT PROVED. AS MENTIONED ALREADY MRS. D ARSHANA B SHAH FIELD RETURN OF INCOME DISCLOSING THE CAPITAL GAINS SINCE THE PAYMENT MADE BY THE APPELLANT WAS THROUGH BANKING CHANNELS, THE GENUINENESS CANNOT BE DOUBTED. MERELY BECAUSE THE APPELLANT WAS NOT IN A POSITION TO PRODUCE THE ABOVE PARTIES SHOULD NOT LEAD TO A CONCLUSION THAT THE ABOVE TRANSACTIONS ARE NON GENUINE. THE IDENTITY OF THE SELLERS HAVE ALSO BEEN ITA NO. 7707 /1 2 4 PROVED AND THE PAYMENT WAS BY WAY OF CHEQUE WHICH GOT CLEARED IN THEIR BANK ACCOUNTS. THE ASSESSING OFFICER DID NOT BRING ANY MATERIAL ON RECORD TO SHOW THAT THESE PAY MENTS MADE WERE RECEIVED BACK BY THE APPELLANT. IN VIEW OF THE ABOVE, IT IS CONCLUDED THAT THE URD PURCHASES IN RESPECT OF THE ABOVE 4 PARTIES ARE GENUINE AND THE ADDITION MADE RS. 19,06,374/ - IS HEREBY DELETED. T HIS GROUND OF APPEAL IS ALLOWED. 5. WE HAV E CONSIDERED RIVAL CONTENTIONS AND FOUND THAT AFTER RECORDING DETAILED FINING THE CIT(A) REACHED TO THE CONCLUSION THAT IDENTITY AND GENUINENESS OF THE TRANSACTION OF THE PURCHASES WAS ESTABLISHED WITH REFERENCE TO THE INVOICES ISSUED, CONFIRMATION LETTER GIVEN BY THE PARTIES, THEIR BANK STATEMENT REGARDING PAYMENT THROUGH ACCOUNT PAYEE CHEQUES. THE CIT(A) ALSO RECORDED THE FINDING WITH REFERENCE TO THE STOCK REGISTER SHOWING RECEIPTS OF OLD ORNAMENTS SO AS TO JUSTIFY THE GENUINENESS OF THE PURCHASES TRANSA CTION. MERELY BECAUSE FOUR PARTIES WHO HAVE SOLD THE OLD JEWELLERY DID NOT APPEAR BEFORE THE AO, COULD NOT BE MADE REASON FOR DISALLOWING THE PURCHASES IN VIEW OF THE DETAILED FINDING RECORDED BY THE CIT(A) AT PARA 3 OF HIS ORDER, WHICH HAS NOT BEEN CONTRO VERTED BY THE LEARNED DR BY BRINGING ANY POSITIVE MATERIAL ON RECORD. 6 . THE DISALLOWANCE OF RS. 72,616/ - WAS MADE BY AO U/S. 40(A)(IA ) IN RESPECT OF PAYMENT TO M/S ARIHANT ADVERTISING AND TRISHUL ADVERTISING TOWARDS ADVER TISING EXPENSES. AS PER THE AO THE PAYMENTS SO MADE FALL UNDER SECTION 194J AND ASSESSEE HAS FAILED TO DEDUCT TAX AT SOURCE ON THE ABOVE PAYMENT. BY THE IMPUGNED ORDER THE CIT(A) DELETED THE DISALLOWANCE AFTER HAVING THE FOLLOWING OBSERVATION : - 4.3. I HAVE CAREFULLY CONSIDERED THE SUBMISS IONS MADE BY THE APPELLANT AND FIND THAT THE ASSESSING OFFICER DID NOT HAVE ANY MATERIAL ON RECORD TO SHOW THAT THERE EXISTS A SPECIFIC CONTRACT BETWEEN THE APPELLANT AND THE ABOVE ADVERTISING AGENCIES. IT IS THE CONTENTION OF THE APPELLANT THAT THE PROVIS IONS OF SECTION 194C IS APPLICABLE TO THE FACTS OF THE CASE. AS PER SECTION 194C, CASE WHERE THE PAYMENT EXCEEDS RS .50,000/ - , THE TDS ITA NO. 7707 /1 2 5 HAS TO BE DEDUCTED, BUT IN APPELLANT'S CASE SINCE THE PAYMENT DID NOT EXCEED RS .50,000/ - THE APPELLANT IS NOT LIABLE TO DE DUCT THE TDS. 4.3.1 THE ASSESSING OFFICER HAD COME TO THE CONCLUSION THAT THE PROVISIONS OF SECTION 194J ONLY IS APPLICABLE TO THE FACTS OF THE CASE AND IT IS NOT SECTION 194C. SECTION 194J TALKS ABOUT PAYMENT OF FEES FOR PROFESSIONAL OR TECHNICAL SERVIC ES RENDERED OR ROYALTY OR PAYMENT IN SUM REFERRED TO UNDER CLAUSE 5(A) OF SECTION 28. I FIND THAT THE PAYMENT MADE TO THE ABOVE ADVERTISING AGENCIES DOES NOT FALL INTO ANY OF THE ABOVE CATEGORY AND HENCE THE PAYMENT MADE DOES NOT ATTRACT PROVISIONS OF SECT ION 194J. THE CONCLUSION DRAWN BY THE ASSESSING OFFICER CANNOT BE ACCEPTED AND THE ADDITION MADE IN THIS REGARD IS DELETED. FURTHER, I FIND THE CONTENTION OF THE APPELLANT THE ENTIRE PAYMENTS HAS ALREADY BEEN MADE AND NOTHING IS PAYABLE AS ON 31.3.2009 IS ACCEPTABLE AND HENCE RESPECTFULLY FOLLOWING THE DECISION OF SPECIAL BENCH, VI S HAKAPAPTNAM IN THE CASE OF MERLYN SHIPPING AND TRANSPORT(SUPRA), I DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION MADE IN THIS REGARD. THIS GROUND OF APPEAL IS ALLOWED. 7. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT PAYMENT MADE TO M/S ARIHANT ADVERTISING AND TRISHUL ADVERTISING WAS COVERED BY PROVISIONS OF SECTION 194C. AS PER PROVISIONS OF SECTION 194C, WHERE PAYMENT EXCEEDS RS. 50,000/ - THE TDS HAS TO BE DEDUCTED. IN THE INSTANT CASE, WE FOUND THAT NONE OF THE PAYMENT EXCEEDED RS. 50,000/ - . ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR DELETING THE DISALLOWANCE MADE BY AO ON THE PLEA THAT PAYMENT WAS MADE FOR PROFESSIONAL OR TECHNICAL SERVICES RENDERED OR ROYALTY OR PAYMENT IN SUM REFERRED TO UNDER CLAUSE 5(A) OF SECTION 28. 8 . THE AO HAS ALSO MADE AN ADDITION OF RS. 5 LAKHS IN RESPECT OF MAKING CHARGES. THE ASSESSING OFFICER FOUND THAT THE TOTAL SALES OF GOLD/SILVER OR NAMENTS AND SILVER UTENSI LS INCLUDES THE MAKING CHARGES. HOWEVER IT DID NOT CONTAIN THE BIFURCATION OF MAKING CHARGES SEPARATELY AND HENCE ADHOC DISALLOWANCE OF RS. 5 LACS WAS MADE ON ACCOUNT OF MAKING C HARGES/LABOUR CHARGES. BY THE IMPUGNED ORDER, THE CIT(A) DELETED THE ADDITION AFTER HAVING FOLLOWING OBSERVATIONS : - ITA NO. 7707 /1 2 6 5.1.2. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT IN THIS REGARD. IN SUPPORT OF ITS CONTENTION, SAMPLE COPIES OF INVOICES WERE FILED BEFORE ME WHICH IS AVAILABLE IN PARA 71 TO 75 OF THE PAPER BOOK. THE PERUSAL OF THE INVOICES CLEARLY INDICATES THAT THE TOTAL SALE VALUE INCLUDES THE LABOUR CHARGES. THE COPY OF ONE OF THE INVOICE RAISED IS REPRODUCED BELOW: - MANIRATNA THE JEWEL PARDISE SHANTI SADAN, MARVE ROAD, S.V.ROAD JUNCTION, MALAD (W), MUM BAI - 60000064 MAHESH M PATEL TAX INVOICE B/14, RAZZAK CHAWL, ORLEM TANK, MALAD(W), MUMBAI - 400 064 GOLD SALES BILL DATE:16.5.2008 NO.538 G.O.NO. C.O.NO. DESCRIPTION CT D.WT. GR.WT. NET WT. RATE AMOUNT CHAIN 916 INCL.LAB 916 22. 410 22.410 1190 29703.00 VAT 297.00 SUBJECT TO MUMBAI JURISDICTION 22.410 22.410 TOTAL 30000.00 RECEIVED THE GOLD ORNAMENTS MENTIONED IN THIS BILL ARE CHECKED BY ME & I AM SATISFIED WITH THE PURITY & DESIGN & WEIGHT CUSTOMER SIGN. FOR MANIRATNA (SD/ - ) (SD/ - ) ADV. CASH 30000.00 THE ABOVE CLEARLY INDICATES THAT 22.41 GRAMS OF GOLD JEWELLERY WAS SOLD TO THE CUSTOMER ON 16.5.2008 FOR RS .29,703/ - WHICH IS INCLUSIVE OF LABOUR CHARGES. THE REFORE THE INVOICE IS A COMPOSITE ONE ISSUED FOR BOTH JEWELLERY & LABOUR CHARGES. THE PREVAILING GOLD RATE ON THAT DATE OF INVOICE WAS RS .1190/ - PER GRAM. ACCORDINGLY, THE VALUE OF GOLD SOLD WORKS OUT TO RS .26,667.90 (22.41X1190). THE BALANCE RS .3035.1 0 I S NOTHING BUT LABOUR CHARGES COLLECTED. IT IS THE CONTENTION OF THE APPELLANT THAT THE SALE TRANSACTIONS ARE HUGE AND IT IS DIFFICULT TO BIFURCATE THE MAKING CHARGES FROM THE SALE BILLS FOUND TO BE ACCEPTABLE. THE ABOVE DISCUSSION IN RESPECT OF ONE SAMPLE INVOICE DEMONSTRATES CLEARLY THAT THE SALE INCLUDES COMP ONENT OF LABOUR CHARGES ALSO. IT IS THE GENER AL PRACTICE CONSISTENTLY FOLLOWED BY THE APPELLANT IN TH E PAST FEW YEARS. THE ASSESSING OFFICER HAD NO MATERIAL IN HIS POSSESSION TO SHOW THAT THE LABOUR C HARGES COLLECTED ARE SUPPRESSED BY THE APPELLANT. IN VIEW OF THIS , THE AD HOC ADDITION MADE BY THE ASSESSING OFFICER IS HEREBY DELETED, TH IS GROUND OF APPEAL IS ALLOWED 9 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT ASSESSEE USED TO ISSUE COMPOS ITE BILL FOR MATERIAL AND LABOUR CHARGES OF JEWELLERY. THUS, THE TOTAL SALES VALUE INCLUDED LABOUR CHARGES. AFTER ITA NO. 7707 /1 2 7 VERIFYING THE SAMPLE BILL OF THE SALE, THE CIT(A) RECORDED A CATEGORICAL FINDING THAT JEWELLERIES WERE SOLD AT THE PREVAILING MARKET RATE AND ASSESSEE H AS ALSO CHARGED LABOUR CHARGES WHICH WAS INCLUDED IN THE SALE PRICE. IT WAS A GENERAL PRACTICE CONSISTENTLY FOLLOWED BY THE ASSESSEE IN THE PAST AND THAT THE AO HAS NO MATERIAL IN HIS POSSESSION TO SHOW THAT LABOUR CHARGES WERE SUPPRESSED BY THE ASSESSEE. THE DETAILED FINDING RECORDED BY THE CIT(A) AT PARA 5 HAS NOT BEEN CONTROVERTED BY THE DEPARTMENT BY BRINING ANY POSITIVE MATERIAL ON RECORD. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A). 10 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10/10 / 201 4 . / 2014 SD/ - SD/ - ( ) ( AMIT SHUKLA ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 10/10 /2014 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2 . / THE RESPONDENT. 3. / THE CIT(A), MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// ITA NO. 7707 /1 2 8