ACIT, Alwar V. ASHOK KUMAR JAIN, Alwar

ITA 879/JPR/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5208 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 24-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAGHUVIR SINGH DUGAR
• Assessee Lawyers: P C PARWAL CA DHK
• Keywords: Loose papers; Proportionate interest
• Section: 80C; 143(3); 133A; 145

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO. 879/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2010-11. ASSTT. COMMISSIONER OF INCOME - TAX, CIRCLE-1, ALWAR. CUKE VS. SHRI ASHOK KUMAR JAIN, PROP. M/S. KUMAR CONSTRUCTION & JAIN POLES, PARSHAVNATH TOWER, ASHOK VIHAR, ALWAR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. ACEPJ 3042 K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAGHUVIR SINGH DUGAR (ADDL.CIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (CA) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 02.06.2016. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 13/06/2016. VKNS'K@ ORDER PER SHRI KUL BHART, JM. THE APPEAL BY THE REVENUE IS DIRECTED AGAINST THE O RDER OF LD. CIT (APPEALS), ALWAR DATED 30.10.2014 PERTAINING TO ASSESSMENT YEA R 2010-11. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- THAT THE COMMISSIONER OF INCOME TAX (APPEALS), AL WAR HAS ERRED IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN RESTRICTING THE TRADING ADDITION OF RS. 1,00,00,000 /- TO RS. 3,11,343/- MADE BY THE AO BY INVOKING THE PROVISION S OF SECTION 145(3) OF THE ACT. 2. BRIEFLY STATED THE FACTS ARE THAT A SURVEY ACTIO N WAS CONDUCTED UNDER SECTION 133A OF THE I.T. ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) AT THE BUSINESS PREMISES OF THE ASSESSEE ON 25.11.2009. SUBSEQUENTL Y THE CASE WAS PICKED UP FOR 2 ITA NO. 879/JP/2014 ACIT VS. SHRI ASHOK KUMAR JAIN SCRUTINY ASSESSMENT AND THE ASSESSMENT UNDER SECTIO N 143(3) OF THE ACT, 1961 WAS FRAMED THEREBY THE AO REJECTED THE BOOKS OF ACCOUNT S AND MADE ADDITION OF RS.1,00,00,000/- IN THE TOTAL INCOME OF THE ASSESSE E. APART FROM THIS, THE AO ALSO MADE DISALLOWANCE OF DEDUCTION UNDER SECTION 80C OF THE ACT. THE ASSESSEE AGGRIEVED BY THIS ORDER OF THE AO, PREFERRED APPEAL BEFORE LD. CIT (A) WHO AFTER CONSIDERING THE SUBMISSIONS OF THE PARTY ALLOWED TH E APPEAL THEREBY THE ADDITION OF RS. 1,00,00,000/- WAS REDUCED TO RS. 3,11,343/- AND BALANCE WAS DELETED. IN RESPECT OF THE DISALLOWANCE UNDER SECTION 80C OF TH E ACT, RS. 20,000/- WAS SUSTAINED BY THE LD. CIT (A). 3. THE REVENUE AGGRIEVED BY THIS ORDER OF LD. CIT ( A), PREFERRED APPEAL BEFORE THIS TRIBUNAL. 3.1. THE LD. D/R SUPPORTED THE ORDER OF THE AO AND SUBMITTED THAT THE LD. CIT (A) WAS NOT JUSTIFIED IN REDUCING THE TRADING. 3.2. ON THE CONTRARY, LD. COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE LD. CIT (A) AND SUBMITTED THAT LD. CIT (A) HAS GIVEN A FINDING OF FACT WHICH IS NOT REBUTTED BY THE REVENUE BY PLACING ANY CONTRARY MAT ERIAL ON RECORD. HE SUBMITTED THAT THE AO HAS ACCEPTED THE CONTENTION OF THE ASSE SSEE IN REMAND PROCEEDINGS. 3.3. WE HAVE HEARD RIVAL CONTENTIONS, PERUSED THE M ATERIAL AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE LD. CIT (A) H AS GIVEN A FINDING OF FACT BY OBSERVING IN PARA 4.7 TO 4.14 OF HIS ORDER AS UNDER :- 4.7. I HAVE PERUSED THE ASSESSMENT ORDER, REMAND REPORTS OF THE AO, DETAILED SUBMISSIONS MADE INCLUDING JUDICIAL CI TATIONS GIVEN THEREIN AND CROSS REPLY OF THE APPELLANT AND FIND THAT A TR ADING ADDITION OF RS. 1 CRORE WAS MADE BY THE AO ON ESTIMATE BASIS. THE A O HAS INVOKED THE PROVISIONS OF SECTION 145 OF THE IT ACT AND HAS STATED THE FOLLOWING 3 ITA NO. 879/JP/2014 ACIT VS. SHRI ASHOK KUMAR JAIN DEFECTS IN THE BOOKS OF ACCOUNTS, IN THE COURSE OF ASSESSMENT PROCEEDINGS :- (I) STOCK, PURCHASES AND SALES ARE NOT VERIFIABLE AS TH E BOOKS OF ACCOUNT WERE FOUND TO BE NOT COMPLETE ON THE DATE O F SURVEY ON 25.11.2009. THE ENTRIES WERE FOUND RECORDED ONLY UP TO 28.10.2009. (II) THE EXPENSES CLAIMED ON ACCOUNT OF UN-RECOVERED SEC URITY DEPOSIT OF RS. 30,94,678/-, LATE DELIVERY AND OTHER DEDUCTIONS OF RS. 31,69,739/-, JOB WORK CHARGES OF RS. 18,79,832/ -, RST DEDUCTION CHARGED BY JVVNL OF RS. 2,62,929/- AND DI SMANTLE CHARGES OF RS. 10,20,224/- ARE NOT SUPPORTED WITH D OCUMENTARY EVIDENCES. (III) CERTAIN LOOSE PAPER WERE FOUND SHOWING PAYMENTS IN CASH, WHICH ARE NOT VERIFIABLE. (IV) CASH OF RS. 56,000/- WAS FOUND AT THE TIME OF SURVE Y BUT AFTER COMPLETION OF ENTRIES IN THE BOOKS OF ACCOUNTS, CAS H BALANCE WORKS OUT TO RS. 44,75,428/- IN THE FIRM M/S. KUMAR CONSTRUCTION CO. AND OF RS. 56,917/- IN THE FIRM M/ S. JAIN POLES. NO SATISFACTORY EXPLANATION COULD BE OFFERED. (V) ADVANCING INTEREST FREE FUNDS TO THE PROPRIETOR AN D CLAIMING DEDUCTION FOR INTEREST ON LOANS TAKEN. 4.8. THE APPELLANT HAS STATED THAT IT IS CARRYING O UT WORK OF INSTALLATION/INDUCTION OF TRANSFORMERS, SUPPLYING A ND ERECTION OF DISTRIBUTION BOXES, RENOVATION WORK ETC. AT VARIOUS SUB STATIONS OVER THE STATE OF RAJASTHAN FOR JAIPUR VIDHYUT VITARAN N IGAM LIMITED (JVVNL) FOR THE LAST MANY YEARS. AS PER THE TERMS O F THE WORK ORDER WITH JVVNL ASSESSEE HAS TO COMPLETE THE WORK WITHIN A TIME FRAME AND DEPOSIT THE RETRIEVED MATERIAL. THE ASSESSEE IS REQ UIRED TO FURNISH THE SECURITY DEPOSIT TO THE JVVNL FOR SATISFACTORY COMP LETION OF WORK. A BILL IS RAISED AFTER COMPLETION OR PART PERFORMANCE OF T HE WORK. THE JVVNL AFTER MAKING DEDUCTION ON ACCOUNT OF TDS, WCT, RMD, DEDUCTION N ACCOUNT OF RETRIEVED MATERIAL, LATE DELIVERY CHARGE S ETC. PASSES THE BILL FOR PAYMENT. ACCORDINGLY, ASSESSEE ACCOUNTS FOR THE SAME BY DEBITING TO JVVNL AND BY CREDITING THE SAME TO JOB WORK RECE IPT. 4.9. IN COURSE OF THIS WORKING, CERTAIN SECURITY DE POSITS GIVEN BY THE ASSESSEE IS FORFEITED OR A DEDUCTION IS MADE ON ACC OUNT OF LATE DELIVERY OR ON ACCOUNT OF NON DEPOSITION OF RETRIEVED MATERI AL OR ON ACCOUNT OF RST DEDUCTION BY THE JVVNL. DURING THE YEAR AFTER V ERIFYING AND ANALYZING THE RECOVERY/REALIZATION OF SUCH DEDUCTIO N/DEPOSIT, THE ASSESSEE HAS CHARGED THE UNRECOVERABLE SECURITY DEP OSIT/DEDUCTIONS TO 4 ITA NO. 879/JP/2014 ACIT VS. SHRI ASHOK KUMAR JAIN THE PROFIT & LOSS ACCOUNT. COPY OF THE LEDGER ACCO UNT OF ALL THESE HEADS WERE FILED FROM WHICH IT CAN BE NOTED THAT RS . 75,26,060/- HAS BEEN CLAIMED UNDER THESE HEADS. IT IS SUBMITTED THA T AS PER THE BOOKS OF ACCOUNTS EVEN AFTER CHARGING SUCH AMOUNT TO THE P&L ACCOUNT, RS. 63,96,455/- IS SHOWN AS RECOVERABLE FROM JVVNL WHER EAS JVVNL VIDE ITS LETTER DT. 21.03.2013 HAS INTIMATED THAT ONLY A SUM OF RS. 34,68,463/- IS DUE TO THE ASSESSEE AND THIS AMOUNT IS ALSO DEDUCTED AGAINST VARIOUS TENDERS ON ACCOUNT OF NON FURNISHIN G OF BANK GUARANTEES AND PENALTY TOWARDS DELAY IN DELIVERY WH ICH IS ADJUSTABLE/PAYABLE ONLY AFTER RECEIPT OF CLEARANCE FROM THE ORDER PLACING AUTHORITIES. 4.10. THE EVIDENCE FILED WITH REGARD TO THE QUANTUM OF DEDUCTIONS MADE BY THE JVVNL FROM THE BILLS FILED BY THE APPEL LANT ON ACCOUNT OF JOB WORK/INSTALLATION/ERECTION CHARGES HAS ALSO BEE N EXAMINED IN THE COURSE OF REMAND PROCEEDINGS. THE ADDITIONAL EVIDEN CE I.E. THE CERTIFICATE OF JVVNL DATED 21.03.2013, WHEREIN IT W AS CONFIRMED THAT ONLY AN AMOUNT OF RS. 34,68,463/- IS PAYABLE TO THE APPELLANT AS AGAINST THE AMOUNT OF RS. 63,96.445/- SHOWN AS RECO VERABLE FROM JVVNL AS ON 31.03.2012 AS PER THE AUDITED BOOKS OF ACCOUNTS, WAS OBTAINED BY THE TAX RECOVERY OFFICER FROM THE JVNNL . THE EVIDENCE AND SUBMISSIONS FILED BY THE APPELLANT IN THIS REGA RD HAVE BEEN EXAMINED BY THE AO AND HAS BEEN ACCEPTED AS VERIFIE D. 4.11. THE SUBMISSIONS MADE BY THE APPELLANT AS REGA RDS LOOSE PAPERS ARE CONCERNED HAVE BEEN EXAMINED BY THE AO IN THE C OURSE OF REMAND PROCEEDINGS AND HAVE BEEN ACCEPTED AS SUCH WITHOUT GIVING AN ADVERSE FINDING. FURTHER THE CASH BALANCE AS PER TH E BOOKS OF ACCOUNTS AND THE CASH FOUND AT THE TIME OF SURVEY HAS ALSO B EEN EXAMINED BY THE AO AND HE HAS ACCEPTED THE CONTENTIONS OF THE A PPELLANT. 4.12. FURTHER, AS REGARDS THE CLAIM OF JOB WORK CHA RGES OF RS. 18,79,832/- ARE CONCERNED, THE APPELLANT HAS STATED THAT COMPLETE VOUCHERS WERE PRODUCED BEFORE THE AO AND IN THE ABS ENCE OF ANY SPECIFIC DEFECT BEING POINTED OUT BY THE AO THERE I S NO JUSTIFICATION IN MAKING THE DISALLOWANCE. HOWEVER, TO PREVENT ANY LE AKAGE OF REVENUE ON THIS ACCOUNT, I HOLD THAT IT WOULD BE FAIR TO MA KE THE DISALLOWANCE @ 10% OF THE TOTAL JOB WORK CHARGES WHICH COMES TO RS. 1,87,983/-. AS REGARDS THE ISSUE OF GIVING INTEREST FREE LOANS TO THE PROPRIETOR IS CONCERNED, IT IS SUBMITTED THAT INTEREST FREE FUNDS ARE AVAILABLE IN THE FORM OF CAPITAL ACCOUNT BALANCE OF THE PROPRIETOR. ON THIS ISSUE, I FIND THAT M/S. KUMAR CONSTRUCTIONS HAS GIVEN INTEREST FR EE ADVANCES TO THE PROPRIETOR AND OTHER CONCERNS TO THE EXTENT OF RS. 10,28,000/- AS AGAINST THE BORROWED FUNDS ON WHICH INTEREST AMOUNT ING TO RS. 4,23,248/- HAS BEEN PAID DURING THE PERIOD UNDER CO NSIDERATION. THESE FACTS HAVE BEEN EXAMINED BY THE AO IN THE COURSE OF REMAND PROCEEDINGS. 5 ITA NO. 879/JP/2014 ACIT VS. SHRI ASHOK KUMAR JAIN 4.13. HOWEVER, IN MY VIEW THERE IS NO FORCE IN THE ARGUMENT OF THE APPELLANT THAT SUFFICIENT INTEREST FREE FUNDS ARE A VAILABLE IN THE BUSINESS AS THE FUNDS ARE FUNGIBLE AND NO CORRELATION COULD BE WORKED OUT BETWEEN THE SOURCE AND UTILIZATION OF FUNDS BY THE APPELLANT. THE CAPITAL ACCOUNT BALANCE SHOWS ONLY AN AMOUNT OF RS. 11.09 LACS AND THESE FUNDS HAVE BEEN INVESTED IN THE ASSETS OF THE CONCERN. AS AGAINST THIS BALANCE, THE BORROWED FUNDS ARE TO THE TUNE OF RS. 1.37 CRORES. THEREFORE, I HOLD THAT IT WOULD BE FAIR AND JUST TO DISALLOW THE PROPORTIONATE INTEREST EXPENSES DEBITED IN THE P&L ACCOUNT OF RS. 1,23,360/- (BY TAKING 12% INTEREST ON RS. 10,28,000 /-. 4.14. FURTHER, IT IS SEEN THAT THE NET PROFIT RATE DECLARED BY THE APPELLANT (AFTER CONSIDERING THE SURRENDERED INCOME ) IS 20.54% IN AY 2007-08, 14.92% IN AY 2008-09, 20.61% IN AY 2009-10 AND 23.34% IN AY 2010-11 I.E. IN THE PERIOD UNDER CONSIDERATIO N. THEREFORE, I DO NOT FIND ANY JUSTIFICATION IN THE ORDER PASSED BY T HE AO AS THE NET PROFIT RATE (TRADING RESULTS) DECLARED IS MUCH BETT ER IN THE CURRENT YEAR AS COMPARED TO THE EARLIER YEARS. HOWEVER, FOR THE REASONS STATED ABOVE, I CONFIRM AN ADDITION OF RS. 3,11,343/- (RS. 1,87,983 + 1,23,360) OUT OF THE TOTAL TRADING ADDITION OF RS. 1 CRORE MADE BY THE AO ON ESTIMATED BASIS UNDER THIS HEAD. THE ABOVE FINDING OF THE LD. CIT (A) HAS NOT BEEN C ONTROVERTED BY THE REVENUE. ON THE CONTRARY, THE LD. D/R HAS CONCEDED THE FACT THA T THE AO HAS ACCEPTED THE EXPLANATION IN REMAND PROCEEDINGS. THEREFORE, WE DO NOT SEE ANY REASON TO INTERFERE INTO THE ORDER OF LD. CIT (A). THE SAME IS HEREBY UPHELD. THE GROUND RAISED BY THE REVENUE IS REJECTED. 4. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 13/06/2016 . SD/- SD/- FOE FLAG ;KNO ( DQY HKKJR ) (VIKRAM SINGH YADAV) ( KUL BHART ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 13/06/2016. DAS/ 6 ITA NO. 879/JP/2014 ACIT VS. SHRI ASHOK KUMAR JAIN VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- THE ACIT, CIRCLE-1, ALWAR. 2. THE RESPONDENT- SHRI ASHOK KUMAR JAIN, ALWAR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 879/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR