M/s Rajwadi Sales Agency, JAMNAGAR V. The Income Tax Officer, Ward-2(2), JAMNAGAR

ITA 926/RJT/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 2987 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 29-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AVINASH KUMAR
• Keywords: Business income; Deemed to accrue or arise in india
• Section: 69C; 80HHC; 133A; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI A.L. GEHLOT (AM) AND SHRI D.T. GARASIA (JM) I.T.A. NO. 926/RJT/2009 (ASSESSMENT YEAR 2004-05) M/S RAJWADI SALES AGENCY VS ITO, WD.2(2) RAJWADI CHAMBER JAMNAGAR CHANDI BAZAR, JAMNAGAR PAN : AACFR8262P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI DS VARIA RESPONDENT BY: SHRI AVINASH KUMAR O R D E R A.L. GEHLOT : THIS IS AN APPEAL FILED BY THE ASSESS EE AND IS DIRECTED AGAINST THE ORDER OF THE CIT(A), JAMNAGAR DATED 26-05-2009 FOR THE ASSES SMENT YEAR 2004-05. 2. THE SOLE GROUND RAISED IN THE APPEAL IS THAT CIT (A) ERRED IN TREATING THE BUSINESS INCOME REFLECTED IN THE RETURN ON ACCOUNT OF EXCESS STOCK OF TRADING GOODS BEING RS.65,546 AS DEEMED INCOME U/S 69B OF THE ACT AND N OT ALLOWING REMUNERATION TO WORKING PARTNERS. 3. THE BRIEF FACTS OF THE CASE ARE THAT A SURVEY U/ S 133A OF THE ACT WAS CARRIED ON AT THE BUSINESS PREMISES OF THE ASSESSEE ON 10-12-2003 . DURING THE COURSE OF SURVEY RS.65,423 WAS DISCLOSED ON ACCOUNT OF EXCESS STOCK. THE ASSESSEE DID NOT DISPUTE ABOUT THE SAID DISCLOSURE, HOWEVER, CLAIMED THAT IT IS ASSESSABLE UNDER THE HEAD INCOME FROM BUSINESS. THE ASSESSING OFFICER ASSE SSED THAT INCOME U/S 69B OF THE ACT AND DID NOT ALLOW INTEREST AND REMUNERATION TO PART NERS. THE ORDER OF THE ASSESSING OFFICER HAS BEEN CONFIRMED BY THE CIT(A). 4. AFTER HEARING LEARNED REPRESENTATIVES OF THE PAR TIES WE FIND THAT AN IDENTICAL ISSUE HAS BEEN DECIDED BY THIS BENCH OF THE TRIBUNAL IN T HE CASE OF ITO WD.2(2), JAMNAGAR VS M/S RAJWADI FOOD PRODUCTS IN ITA NO.902/RJT/2009 & OTHER ORDER OF EVEN DATED. THE RELEVANT FINDINGS OF THE ITAT IS REPRODUCED BELOW: ITA NO.926/RJT/2009 2 16.1. AS REGARDS THE ISSUE WHETHER SUCH ADDITION IS ASSESSABLE U/S 69B OF THE ACT OR ASSESSABLE AS BUSINESS INCOME WE FIND THAT THE CIT(A) HAS RELIED UPON THE ORDER OF THE ITAT, RAJAKOT BENCH IN THE CASE OF NAVNEET JEWELLERS ITA NO.32/RJT/06-07 DATED 07-11-2006 AND THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF FAKIR MOH MED HAJI HASAN 247 ITR 290 (GUJ) WHEREAS THE ASSESSEE RELIED UPON THE DECISION OF SPINWELL ENGINEERS ITA NO.358/RJT/2007 DATED 28-03-2008 WHER EIN THE ITAT HAS CONSIDERED THE JUDGMENT OF HONBLE GUJARAT HIGH COU RT IN THE CASE OF FAKIR MOHMED HASAN (SUPRA) THE RELEVANT FINDINGS O F ITAT IS REPRODUCED BELOW: 6. FROM THE ABOVE STATEMENT OF THE ASSESSEE, SURVE Y PARTY FOUND THAT THE EXCESS STOCK OF RS.5,02,305/- BUT WE FIND THAT CIT(A) HAS DELETED TWO ITEMS OF DIAMOND ROLLS VALUED AT RS.1,59,345/- AND RS.1,21,545/- WHICH WAS NOT STOCK ITEMS BUT MACHINERY INVENTORY O F THE STOCK. BOTH THESE ITEMS WERE APPEARING IN THE REGULAR BOOKS OF ACCOUNT UNDER THE HEAD FIXED ASSETS. THEREFORE, IT WAS NOT HELD TO B E ACCOUNTED INCOME OF THE ASSESSEE FIRM. WE FIND THAT THE DEPARTMENT HAS NOT FILED ANY APPEAL. MOREOVER, WE ALSO FIND THAT THE AO HAS NOT MADE ANY INQUIRY THAT THE ASSESSEE HAS EARNED THIS INCOME BEING EXCESS STOCK OUT OF UNDISCLOSED SOURCE. WE FIND THAT THE HONBLE GUJARAT HIGH COUR T IN THE CASE OF FAKIR MOHMED HAJI HUSSEIN VS CIT 247 ITR 290, WHEREIN THE HONBLE GUJARAT HIGH COURT HA TAKEN VIEW ON THE GROUND THAT ASSESSE E WAS INDULGING IN SMUGGLING ACTIVITIES THEREFORE, WHEN ASSESSEE IS NO T INDULGING IN ILLEGAL ACTIVITIES, NO DEDUCTION CAN BE GRANTED UNDER SECTI ON 69 TO 69C BECAUSE THIS ALL INCOME DO NOT FALL UNDER ANY HEADS OF THE INCOME. IT IS FOUND THAT THE A.O. HAS RELIED ON THE JUDGMENT GIVEN BY THE HO NBLE GUJARAT HIGH COURT IN THE CASE OF FAKIR MOHMED HAJI HASAN VS. C. I.T. 247 ITR 290. ON APPRECIATION OF THE FACTS OF THE CASE OF FAKIR H AJI HASAN AND THAT OF THE APPELLANT, IT IS FOUND THAT THE FACTS OF TWO CA SES ARE DIFFERENT SUBSTANTIALLY. IN THE CASE OF FAKIR MOHMED HAJI HA SAN, THE HONBLE APPELLATE TRIBUNAL HAS GIVEN A FINDING THAT IT WAS NOT THE ASSESSEES CASE THAT HE HAD DERIVED INCOME FROM ANY BUSINESS OF SMU GGLING AND THEREFORE IT COULD BE SAID THAT CONFISCATION OF GOLD REPRESEN TED A TRADING LOSS IN THE HANDS OF THE ASSESSEE. WHILE IT WAS FOUND IN THE C ASE OF FAKIR MOHMED HAJI HASAN THAT HE WAS NOT CONDUCTING ANY BUSINESS. IN APPELLANTS CASE, IT IS FOUND THAT THE APPELLANT WAS CONDUCTING BUSIN ESS AND THE VALUE OF EXCESS STOCK ARRIVED AT AFTER PREPARING THE INVENTO RY OF STOCK FOUND AT THE BUSINESS PREMISES OF THE ASSESSEE. THE RATIO OF FA KIR MOHMED HAJI HASAN DOES NOT APPLY IN THE APPELLANTS CASE. WE R ELY ON THE DECISION OF I.T.A.T., RAJKOT BENCH IN THE CASE OF A.C.I.T. S SH RI PRABHUDAS S PAREKH WHEREIN BENCH HAS HELD AS UNDER: SEARCH WAS CONDUCTED AND SOME UNACCOUNTED JEWELLER Y WAS FOUND. THE DEPARTMENT ACCEPTED THE STATEMENTS MADE BY THE ASSESSEE. AFTER CONSIDERING THE FACTS AND CIRCUMST ANCES DISCUSSED ABOVE IN VIEW OF LEGAL POSITIONS, WE ARE OF THE CONSIDERED OPINION THAT THE LEARNED C.I.T.(A) IS PE RFECTLY JUSTIFIED IN TREATING THE INCOME OF THE ASSESSEE FROM BUSINES S AND HE HAS CORRECTLY DIRECTED THE A.O. TO RE-COMPUTE THE DEDUC TION UNDER SEC. ITA NO.926/RJT/2009 3 80HHC TREATING THE DISCLOSED INCOME AS BUSINESS INC OME. THE SAME TRIBUNAL JUDGMENT WHICH THE DEPARTMENT HAS FIL ED. HONBLE GUJARAT HIGH-COURT HAS DISMISSED THE APPEAL. IN THE CASE OF THE ASSESSEE, ASSESSEE HAS EARNED TH IS INCOME FROM BUSINESS ONLY. THEREFORE, THIS JUDGMENT WILL NOT H ELP TO THE DEPARTMENT. WE, THEREFORE, REVERSE THE FINDING OF THE CIT(A) AN D WE ALLOW THE APPEAL OF THE ASSESSEE. 16.2 AFTER CONSIDERING THE FACTS OF THE CASE WE FIN D THAT THE CASE OF THE ASSESSEE IS COVERED BY THE ORDER OF ITAT IN THE CAS E OF SPINWELL ENGINEERS (SUPRA). THE ORDER OF ITAT IN THE CASE OF NAVNEET JEWELLERS (SUPRA) AND THE JUDGMENT OF THE HONBLE GUJARAT HIG H COURT RELIED UPON BY THE CIT(A) IS DISTINGUISHABLE ON FACTS AS IN THO SE CASES THERE WERE NO EVIDENCE THAT THE ADDITION MADE WAS ON ACCOUNT OF B USINESS ACTIVITIES. WE RESPECTFULLY FOLLOW THE ABOVE ORDER OF ITAT IN T HE CASE OF SPINWELL ENGINEERS (SUPRA). AND IN THE LIGHT OF THAT. WE HO LD THAT THE ADDITION MADE ON ACCOUNT OF EXCESS CLOSING STOCK IS ASSESSAB LE AS BUSINESS INCOME. THE ASSESSING OFFICER IS DIRECTED TO RECAL CULATE THE TOTAL INCOME ACCORDINGLY. SINCE FACTS ARE IDENTICAL , WE FOLLOW THE ABOVE ORD ER OF ITAT AND IN THE LIGHT OF THAT WE SET ASIDE THE ORDERS OF REVENUE AUTHORITIES AND ALL OW THE GROUND OF APPEAL OF THE ASSESSEE. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 10-12-2010 SD/- SD/- (D.T. GARASIA) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER RAJKOT, DT : 10 TH DECEMBER, 2010 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A), JAMNAGAR 4. THE CIT, JAMNAGAR 5. THE DR (TRUE COPY) BY ORDER ITA NO.926/RJT/2009 4 ASSTT.REGISTRAR, ITAT, RAJKOT