JAI HIND AGARWAL, Jaipur V. ITO, Jaipur

ITA 999/JPR/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2111 (ITAT-JAIPUR)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 15-11-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA CIT DHK
• Assessee Lawyers: S L PODDAR
• Keywords: Additional evidence
• Section: 40A(3); 68

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH HKKXPAN] YS[KK LNL; ] DS LE{K BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER VK;DJ VIHY LA-@ ITA NOS. 999 & 1000/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2011-12 & 2012-13 JAI HIND AGARWAL, 301, MAHAVEER MARG, C-SCHEME, JAIPUR. CUKE VS. INCOME TAX OFFICER, WARD -5(4) JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ABEPA 3189 P VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI S.L. PODDAR (ADV) JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.A. VERMA (ADDL.CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 28/04/2017 MN?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 15/05/2017 VKNS'K@ ORDER PER: BHAGCHAND, A.M. BOTH APPEALS ARE FILED BY THE ASSESSEE ARISE AGAIN ST THE TWO SEPARATE ORDERS DATED 26/10/2016 PASSED BY THE LD C IT(A)-II, JAIPUR FOR THE A.Y. 2011-12 & 2012-13. IN BOTH THE APPEALS, TH E ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEAL: GROUNDS OF ITA NO. 999/JP/2016 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE T HE LD. CIT(A) HAS ERRED IN SUSTAINING THE ADDITION OF RS. ITA 999 & 1000/JP/2016_ JAIN HIND AGARWAL VS ITO 2 50,000/- ON ACCOUNT OF TRADING ADDITION OUT OF RS. 1,21,190/-. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LD. CIT(A) HAS ERRED IN SUSTAINING THE ADDITION OF RS. 2,90,000/- U/S 68 OF THE INCOME TAX ACT, 1961 ON ACCOUNT OF ADVANCES GIVEN TO STAFF. 3. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 11,09,269/- U/S 40A(3) OF THE INCOME TAX ACT, 1961. 4. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 85,455/- @ 10% OUT OF SALES COMMISSION EXPENSES. 5. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 57,236/- @ 10% OUT OF SALES PROMOTION EXPENSES. 6. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 33,842/- @ 10% OUT OF OTHER EXPENSES DEBITED IN P&L ACCOUNT. GROUNDS OF ITA NO. 1000/JP/2016 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE T HE LD. CIT(A) HAS ERRED IN SUSTAINING THE ADDITION OF RS. 2,00,000/- ON ACCOUNT OF TRADING ADDITION OUT OF RS . 5,00,000/-. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LD. CIT(A) HAS ERRED IN SUSTAINING THE ADDITION OF RS. 97,939/- @ 10% OUT OF SALES COMMISSION DEBITED IN P&L ACCOUNT. 3. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LD. CIT(A) HAS ERRED IN SUSTAINING THE ADDITION OF RS. ITA 999 & 1000/JP/2016_ JAIN HIND AGARWAL VS ITO 3 60,952/- @ 10% OUT OF SALES PROMOTION EXPENSES DEBITED IN P&L ACCOUNT. 4. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LD. CIT(A) HAS ERRED IN SUSTAINING THE ADDITION OF RS. 58,848/- @ 10% OUT OF OTHER EXPENSES DEBITED IN P&L ACCOUNT. 2. BOTH THE APPEALS ARE BEING HEARD TOGETHER, THERE FORE, FOR THE SAKE OF CONVENIENCE AND BREVITY, A COMMON ORDER IS BEING PASSED. 3. ITA NO. 999/JP/2016. IN THE GROUNDS NO. 1,4, 5 AND 6 OF THE APPEAL, THE LD. CIT(A) HAS SUSTAINED THE ADDITION OF RS. 50,000/- ON ACCOUNT O F TRADING ADDITION OUT OF RS. 1,21,190/-, SUSTAINED THE ADDITION FROM BEIN G 10% OUT OF THE SALES COMMISSION EXPENSES OF RS. 85,455/-, SUSTAINED 10% OF SALES PROMOTION EXPENSES AMOUNTING TO RS. 57,236/- AND SUSTAINED 10 % OUT OF OTHER EXPENSES DEBITED IN P&L ACCOUNT AT RS. 33,842/- RES PECTIVELY. IT WAS PLEADED THAT ONCE THE TRADING ADDITION HAS BEEN MAD E AND SUSTAINED BY INVOKING THE PROVISIONS OF SECTION 145(3) OF THE AC T AFTER REJECTING BOOKS OF ACCOUNT, NO OTHER ADDITION SHOULD HAVE BEEN MADE OUT OF THE VARIOUS EXPENSES DEBITED IN P&L ACCOUNT BEING COMMISSION ON SALES, SALES PROMOTION EXPENSES AND OTHER EXPENSES DEBITED TO P& L ACCOUNT. LD. AR PLEADED TO DELETE THE ADDITIONS SO MADE. LD. DR REL IED ON THE ORDER OF THE ASSESSING OFFICER. ITA 999 & 1000/JP/2016_ JAIN HIND AGARWAL VS ITO 4 4. I HAVE HEARD BOTH THE SIDES AND I FIND THAT THE PLEADINGS OF THE LD. AR HAS FORCE. ONCE THE BOOKS OF ACCOUNT HAS BEEN RE JECTED AND THE TRADING ADDITION HAS BEEN MADE THEN THERE IS NO SCO PE FOR MAKING FURTHER DISALLOWANCES FROM EXPENSES DEBITED UNDER TH E HEADS SALES COMMISSION, SALES PROMOTION AND OTHER EXPENSES DEBI TED IN P&L ACCOUNT. THEREFORE, CONSIDERING THE PLEADING OF BOTH THE SIDE S I UPHOLD THE TRADING ADDITION OF RS. 50,000/- SUSTAINED BY THE L D. CIT(A) ON. RELEVANT PARA OF THE LD. CIT(A)S ORDER IS AS UNDER:- I HAVE PERUSED THE FACTS OF THE CASE, THE ASSESSME NT ORDER AND THE SUBMISSIONS OF THE APPELLANT. AS NOTED IN THE ASSES SMENT ORDER, ON EXAMINATION OF BOOKS OF ACCOUNTS AND EVIDENCES PROD UCED BY THE ASSESSEE IT WAS FOUND THAT THE ASSESSEE IS NOT MAINTAINING S TOCK REGISTER, PURCHASES OF AN AMOUNT OF RS.3.33 CRORES HAVE BEEN MADE THROU GH CREDIT CARD, BILLS FOR WHICH DO NOT BEAR THE DETAILS OF WEIGHT OF THE PRECIOUS METAL/STONE AND THE COST FOR THE SAME, IN SOME BILLS OF OTHER S ALES ALSO THE NAME OF THE ITEM AND QUANTITY IS NOT MENTIONED. IN VIEW OF THE ABOVE THE BOOKS OF ACCOUNTS WERE REJECTED UNDER SECTION 145(3) AND AN ADDITION OF RS. 1,21,190/- WAS MADE UNDER THIS HEAD ADOPTING THE NE T PROFIT AT 15.51% AS SHOWN BY THE ASSESSEE IN THE PREVIOUS YEAR. IN THE PRESENT PROCEEDINGS, IT IS SUBMITTED THAT TH E BOOKS OF ACCOUNTS HAVE BEEN PROPERLY MAINTAINED AND SUBJECT TO AUDIT UNDER SECTION 44AB. AS REGARDS NON-MAINTENANCE OF STOCK REGISTER IT HAS BE EN STATED THAT THE BUSINESS OF THE ASSESSEE IS SUCH WHERE MAINTENANCE OF STOCK REGISTER WAS NOT POSSIBLE OR MAINTAINING SUCH DETAILED ACCOUNTS OF STOCK AND CONSUMPTION OF MATERIAL ON DAY TO DAY BASIS WAS NOT POSSIBLE. IT WAS CONTENDED THAT DEFECTS POINTED OUT ARE SUPERFICIAL AND NOT OF ANY ITA 999 & 1000/JP/2016_ JAIN HIND AGARWAL VS ITO 5 SIGNIFICANCE. AS REGARDS ABSENCE OF DETAILS ON BILL S, IT WAS CLAIMED THAT THE SAME WERE AVAILABLE ON MOST BILLS EXCEPT JEWELLERY PURCHASED FROM ANUJ JEWELS WORTH RS.26,18,656/- WHICH IS HARDLY 7% OF T HE TOTAL PURCHASES. IT WAS FURTHER CLAIMED THAT THE TURNOVER HAS INCREASED AND THE GROSS PROFIT RATE HAS ALSO MARGINALLY IMPROVED. IN VIEW OF ABOVE , IT WAS SUBMITTED THAT THE TRADING ADDITION BE DELETED. IT IS SEEN THAT THE ASSESSEE IS ITSELF ADMITTING TH AT THE STOCK REGISTER IS NOT MAINTAINED. FURTHER, IT IS ALSO NOT DENIED THAT CER TAIN BILLS ARE NOT SUBJECT TO SCRUTINY AS THEY DO NOT PROVIDE THE BASIC DETAIL S OF WEIGHT AND RATE APPLIED OF THE ITEMS SOLD. IN VIEW OF THE ABOVE, TH E REJECTION OF BOOKS IS UPHELD. HOWEVER, INSTEAD OF ADOPTING THE NET PROFIT AT 15.51% WHICH IS OF AN EARLIER YEAR, A LUMP SUM DISALLOWANCE OF RS.50,0 00/- WOULD BE IN ORDER. THIS GROUND OF APPEAL IS ACCORDINGLY PARTLY ALLOWED . THUS, GROUND NO. 1 OF THE ASSESSEES APPEAL IS DISMI SSED AND GROUNDS NO. 4,5 AND 6 OF THE APPEAL ARE ALLOWED. 5. IN THE GROUND NO. 2 OF THE APPEAL, THE ISSUE INV OLVED IS AGAINST SUSTAINING THE ADDITION OF RS. 2,90,000/- U/S 68 OF THE ACT. ON THIS ISSUE, THE LD AR HAS PLEADED THAT THIS WAS THE RECOVERY OF ADVANCES GIVEN TO THE EMPLOYEES. HOWEVER, THE LOWER AUTHORITIES HAVE IN VOKED THE PROVISIONS OF SECTION 68 OF THE ACT. HE ALSO PLEADE D THAT FOR DECIDING THIS ISSUE IN PROPER PERSPECTIVE, HE HAS FILED ADDITIONA L EVIDENCE, WHICH ARE NECESSARY TO REACH AT THE CORRECT FACTS. THESE EVIDE NCES COULD NOT BE FILED BEFORE LOWER AUTHORITIES AND HE HAD EXPLAINED THE REASONS FOR NOT SUBMITTING THESE DOCUMENTS BEFORE LOWER AUTHORITIES. ITA 999 & 1000/JP/2016_ JAIN HIND AGARWAL VS ITO 6 5.1 SIMILARLY ON THE GROUND NO. 3 OF THE APPEAL WHER E THE ADDITION OF RS. 11,09,269/- HAS BEEN SUSTAINED U/S 40A(3) OF TH E ACT. ON THIS ISSUE ALSO, THE LD AR OF THE ASSESSEE HAS PLEADED THAT HE HAS SUBMITTED ADDITIONAL EVIDENCE IN THE FORM OF CONFIRMATION FRO M THE PERSONS TO WHOM PAYMENTS WERE MADE. HE ALSO PLEADED THAT ONCE TH E BOOKS OF ACCOUNT HAS BEEN REJECTED THEN THERE WAS NO SCOPE FO R ADDITION U/S 40A(2) OF THE ACT. 6. ON THE OTHER HAND, THE LD SR.DR HAS SUBMITTED TH AT THE ADDITIONAL EVIDENCES SHOULD NOT BE ADMITTED. FURTHER IF ADMITT ED, THEN THE MATTER MUST BE RESTORED BACK TO THE ASSESSING OFFICER AS T HESE DOCUMENTS WHICH ARE NOW FILED BY THE ASSESSEE HAS NOT BEEN EXAM INED BY THE ASSESSING OFFICER. HE FURTHER SUBMITTED THAT THE AD DITION U/S 40A(3) OF THE ACT CAN BE MADE EVEN WHEN THE BOOKS OF ACCOUNT WE RE REJECTED AND ADDITION IS MADE. HE RELIED ON THE DECISION OF THE HONBLE ITAT JAIPUR BENCH IN ITA NO. 492/JP/2011 AND IN THE CASE OF RAM ESH CHAND SONI IN ITA NO. 527/JP/2006 ORDER DATED 14/12/2007. 7. I HAVE HEARD BOTH THE SIDES ON BOTH THESE ISSUES . CONSIDERING PLEADINGS AND LOOKING INTO THE FACTS AND CIRCUMSTAN CES, I ADMIT THESE ADDITIONAL EVIDENCES IN RELATING TO GROUNDS NO. 2 A ND 3 OF THE APPEAL. FURTHER I ALSO HOLD THAT THE ADDITION U/S 40A(3) OF THE ACT CAN BE MADE ITA 999 & 1000/JP/2016_ JAIN HIND AGARWAL VS ITO 7 AND SUSTAINED EVEN WHEN THE BOOKS OF ACCOUNT HAS BEE N REJECTED AND TRADING ADDITION HAS BEEN MADE. IN THE ASSESSEES C ASE, IT IS CLAIMED THAT THESE WERE THE PURCHASES OF PRECEDING YEAR AND THE P AYMENTS HAVE BEEN MADE DURING THIS YEAR. THE PROVISIONS OF SECTION 40A (3) OF THE ACT READ AS UNDER:- SECTION 40A: (3) WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RE SPECT OF WHICH A PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON IN A DAY, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, EXCEEDS TWENTY THOUSAND RUPEES, N O DEDUCTION SHALL BE ALLOWED IN RESPECT OF SUCH EXPENDITURE. THIS SECTION PROVIDES REGARDING EXPENSES OR PAYMENTS NOT DEDUCTIBLE IN CERTAIN CIRCUMSTANCES. THUS, THE EXPENSES AND PAYMEN TS, WHICH DOES NOT COMPLY WITH CERTAIN CIRCUMSTANCES, DESERVE TO BE DIS ALLOWED BY INVOKING THIS SECTION. THEREFORE, IN MY CONSIDERED VIEW, THE E XPENSES, WHICH IS DEDUCTED AND THE BOOKS OF ACCOUNT, WHICH IS ALLOWABL E EXPENSES AND WHEN THE BOOKS OF ACCOUNTS ARE REJECTED THEN ONLY FR OM SUCH EXPENSES NO OTHER DISALLOWANCES REQUIRED. HOWEVER, SECTION 40A DEALS THE EXPENSES OR PAYMENTS, WHICH ARE NOT DEDUCTIBLE IN CE RTAIN CIRCUMSTANCES, THEREFORE, THE ASSESSEES PLEA IN TH IS RESPECT IS NOT TENABLE. CONSIDERING ALL THESE FACTS AND CIRCUMSTAN CES AND WITH ABOVE OBSERVATIONS, I RESTORE THE ISSUE RAISED IN GROUNDS NO. 2 AND 3 TO THE FILE ITA 999 & 1000/JP/2016_ JAIN HIND AGARWAL VS ITO 8 OF THE ASSESSING OFFICER TO DECIDE DE NOVO AFTER CO NSIDERING ADDITIONAL EVIDENCES FILED BY THE ASSESSEE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. 9. NOW WE TAKE ITA NO. 1000/JP/2016. IN THIS APPEAL ALSO, THE ASSESSEE HAS CHALLENGED T HE SUSTAINING THE ADDITION OF RS. 2,00,000/- ON ACCOUNT OF TRADING AD DITION OUT OF RS. 5,00,000/-, THE LD. CIT(A) HAS ALSO SUSTAINED THE AD DITION OUT OF SALES COMMISSION OF RS. 97,939/-, OUT OF SALES PROMOTION EXPENSES AMOUNTING TO RS. 60,952/- AND OUT OF OTHER EXPENSES OF RS. 58 ,848/-. WHILE DECIDING THE ITA NO. 999/JP/2016, I HAVE DECIDED THAT ONCE T HE ADDITION HAS BEEN MADE AND SUSTAINED ON ACCOUNT OF TRADING ADDITION B Y WAY OF REJECTING THE BOOKS OF ACCOUNT THEN NO OTHER DISALLOWANCE, DES ERVES TO BE SUSTAINED. THEREFORE, FOR THIS YEAR ALSO, I SUSTAIN THE TRADING ADDITION OF RS. 2.00 LACS. RELEVANT PARA OF THE LD. CIT(A)S OR DER IS AS UNDER:- I HAVE PERUSED THE FACTS OF THE CASE, THE ASSESSME NT ORDER AND THE SUBMISSIONS OF THE APPELLANT. AS NOTED IN THE ASSES SMENT ORDER, ON EXAMINATION OF BOOKS OF ACCOUNTS AND EVIDENCES PROD UCED BY THE ASSESSEE IT WAS FOUND THAT THE ASSESSEE IS NOT MAIN TAINING STOCK REGISTER, MOST BILLS DO NOT HAVE THE COMPLETE DESCRIPTION AND ALSO THAT THE CLOSING STOCK HAS NOT BEEN SHOWN AT THE CORRECT FIGURE AND IN SOME CASES VAT ITA 999 & 1000/JP/2016_ JAIN HIND AGARWAL VS ITO 9 HAS BEEN INCLUDED WHILE IN SOME CASES IT IS NOT INC LUDED. THE DETAILS HAVE BEEN DISCUSSED ON PAGE 3 OF THE ASSESSING OFFICERS ORDER. IN VIEW OF THE ABOVE THE BOOKS OF ACCOUNTS WERE REJECTED UNDER SEC TION 145(3) AND A LUMPSUM ADDITION OF RS.5,00,000/- WAS MADE UNDER TH IS HEAD. IN THE PRESENT PROCEEDINGS, IT IS SUBMITTED THAT TH E BOOKS OF ACCOUNTS HAVE BEEN PROPERLY MAINTAINED AND SUBJECT TO AUDIT UNDER SECTION 44AB. AS REGARDS NON-MAINTENANCE OF STOCK REGISTER IT HAS BEEN STATED THAT THE BUSINESS OF THE ASSESSEE IS SUCH WHERE MAINTENANCE OF STOCK REGISTER WAS NOT POSSIBLE OR MAINTAINING SUCH DETAILED ACCOUNTS OF STOCK AND CONSUMPTION OF MATERIAL ON DAY TO DAY BASIS WAS NOT POSSIBLE. IT WAS CONTENDED THAT DEFECTS POINTED OUT ARE SUPERFICIAL AND NOT OF ANY SIGNIFICANCE. AS REGARDS ABSENCE OF DETAILS ON BILL S, IT WAS CLAIMED THAT THE SAME WERE AVAILABLE ON MOST BILLS EXCEPT SOME. AS REGARDS CLOSING STOCK IT WAS STATED THAT THE SAME HAS BEEN VALUED A T MARKET PRICE AND SINCE THE PRICES OF DIAMOND STUDDED JEWELLERY HAD C RASHED, THE SAME IS LESS THAN THE PURCHASE PRICE. IT WAS ALSO CONTENDED THAT THE CLOSING STOCK HAS BEEN VALUE AFTER TAKING INTO CONSIDERATION THE MARKET VALUE PLUS THE VAT THEREON. IT WAS FURTHER CLAIMED THAT THE TURNOV ER HAS INCREASED AND THE GROSS PROFIT RATE HAS ALSO MARGINALLY IMPROVED. IN VIEW OF ABOVE, IT WAS SUBMITTED THAT THE TRADING ADDITION BE DELETED. IT IS SEEN THAT THE ASSESSEE IS ITSELF ADMITTING TH AT THE STOCK REGISTER IS NOT MAINTAINED. FURTHER, IT IS ALSO NOT DENIED THAT CER TAIN BILLS ARE NOT SUBJECT TO SCRUTINY AS THEY DO NOT PROVIDE THE BASIC DETAI LS OF WEIGHT AND RATE APPLIED OF THE ITEMS SOLD. IN VIEW OF THE ABOVE, TH E REJECTION OF BOOKS IS UPHELD. HOWEVER, THE LUMPSUM ADDITION MADE BY THE A SSESSING OFFICER AT RS.5,00,000/- IS REDUCED TO RS.2,00,000/- WHICH IS REASONABLE. THIS GROUND OF APPEAL IS ACCORDINGLY PARTLY ALLOWED. ITA 999 & 1000/JP/2016_ JAIN HIND AGARWAL VS ITO 10 CONSIDERING ALL THESE ASPECTS, GROUND NO. 1 OF THE APPEAL IS DISMISSED AND GROUNDS NO. 2 TO 4 OF THE APPEAL ARE ALLOWED. 10. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15/5/2017. SD/- HKKXPAN (BHAGCHAND) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 15 TH MAY, 2017 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SHRI JAI HIND AGARWAL, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE ITO, WARD- 5(4), JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 999 & 1000/JP/2016) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR