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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: HONBLE KUL BHARAT & HONBLE MANISH BORAD
order u/s 143(3) of the Act dated 23.12.2016 framed by ITO-2, Ratlam.
Pravin Kumar Jain IT.A.No.557/Ind/2017 2. Revenue has raised following grounds of appeal:-
(1) Whether on the facts and in the circumstances of the case, ld. CIT(A) was justified in deleting the addition of Rs. 18,44,404/made on account of unverified commercial advance claimed by the assessee. (2) Whether on the facts and in the circumstances of the case, ld. CIT(A) was justified in deleting the addition of Rs. 32,40,040/-, Rs. 6,60,000/- and Rs. 14,56,506/- made on account of unsecured loans ignoring the findings of AO in assessment order and remand report. (3) Whether on the facts and in the circumstances of the case, ld.CIT(A) was justified in deleting the addition of Rs. 89,74.337/made on account of Chukara Khata ignoring the findings of AO in assessment order and remand report. (4) Whether on the facts and in the circumstances of the case, ld. CIT(A) was justified in deleting the addition of Rs. 4,22,283/made on account of various expenses ignoring the findings of AO in assessment order and remand report. (5) Whether on the facts and in the circumstances of the case, ld.CIT(A) was justified in deleting the addition of Rs. 84,183/- made on account of freight expenses ignoring the findings of AO in assessment order and remand report. (6) Whether on the facts and in the circumstances of the case, ld. CIT(A) was justified in admitting the additional evidences in violation of provisions of Rule 46A even when sufficient opportunity was given to assessee during assessment proceedings.
Brief facts of the case as culled out from the records are that the assessee is the proprietor of M/s. Amar Trading Company engaged in the business of trading in garlic and other products.
Return of income declaring income of Rs.10,99,140/- was filed on 2
Pravin Kumar Jain IT.A.No.557/Ind/2017 31.03.2015 for the Assessment Year 2014-15. The case was selected for scrutiny. Statutory notices u/s 143(2) of the Act was duly served upon the assessee. Assessment u/s 143(3) of the Act was completed on 23.12.2016 at Rs.1,77,79,883/- making various additions.
Aggrieved assessee preferred appeal before Ld. CIT(A) and succeeded.
Now the Revenue is in appeal against the deletion of disallowances made by Ld. A.O.
Per contra Ld. Departmental Representative vehemently argued and supported order of Ld. A.O.
Ld. counsel for the assessee along with relying on the finding of Ld. CIT(A) also referred to the paper book filed on 11.10.2018 bearing page no.1 to 131 showing the submissions made before the Ld. CIT(A), audited financial statement, confirmation of the unsecured loans/creditors, copy of the purchases from the farmers and details of payments made and copy of expenses for hammali payments & freight. Reference was also made to the written submissions filed before the Tribunal on 16.10.2019 along with another paper book bearing page no.1 to 22 showing bank statements of creditors, copy 3
Pravin Kumar Jain IT.A.No.557/Ind/2017 of account of Sona Trading Co., newspaper cutting for late payment to agriculturist and two case laws, namely,CIT vs. Pukhraj Telecom Pvt. Ltd. (2017) 30 ITJ 58 (MP) and the decision of Indore Bench of ITAT in the case of Mohd. Atique and Others vs. Asstt. Commissioner of Income Tax (2019) 35 ITJ 410 (Trib-Indore).
We have heard rival contentions and perused the records placed before us and carefully gone through the paper book and case laws referred and relied by the Ld. counsel for the assessee.
Apropos to Ground No.1: wherein revenue is aggrieved with the deletion of addition of Rs. 18,44,404/- made on account of unverified commercial advance to M/s. Sona Trading Co. Bangalore. We find that the ld. CIT(A) deleted the additions observing as follows:
Ground No.l :- Through this ground of appeal the appellant has challenged the addition of Rs.18.44,404/_ on account of trading advances. The appellant received the trading advance of Rs.18,44,404/- from M/s Sona Trading Company, Bangalore. The appellant has made the sales against the advances received from above party. The appellant furnished the confirmation from M/s Sona Trading Company, Bangalore. All the transactions are through banking channel. The appellant recorded the sales made and payment received in the books of account. These are the regular business transaction which has been reflected in the books of account of the appellant. The advance received is not a loan from the above party. The confirmation received from the above party has been forwarded to the Pravin Kumar Jain IT.A.No.557/Ind/2017 AO for his comments. The AO has not pointed out any defect in the confirmation filed. Therefore the addition made by the AO amounting to Rs.18,44,404/_ is deleted. Therefore, the appeal on this ground is Allowed.
9. From perusal by the above finding of Ld. CIT(A) and also going through the paper book, we observe that assessee has a regular trading account of M/s Sona Trading Company to which regular sales are made and payments received through banking channel. The revenue authorities have not raised any question on the genuineness of the transactions. We, therefore, find no inconsistency in the finding of Ld. CIT(A) and the same is upheld. Ground no.1 of the revenue’s appeal is dismissed.
10. Apropos to Ground No.2: wherein the revenue is aggrieved with the deletion of addition of unexplained/unsecured loans/cash credit of Rs.32,40,040/-, Rs.6,60,000/- and Rs.14,56,506/-, we find that the Ld. CIT(A) after considering the various documents in the form of confirmation of letters, name and address of the creditors and the PAN No. and also considering remand report of the assessing officer dated 26.04.2017, deleted all the three additions of Rs.32,40,040/-, Rs.6,60,000/- and Rs.14,56,506/- observing as follows:
5.2 Ground No.2:- Through this ground of appeal the appellant has challenged the addition of Rs.32,40,040/- on account of unsecured loan. The AO made the 5
Pravin Kumar Jain IT.A.No.557/Ind/2017 addition on the ground that in respect of the following persons the loans confirmation were not bearing the signature of the lenders:- i. Prakashchandra Ratanlal Rs.2,07,800/- ii. Rajmal Dhariwal Rs.2,30,590/- iii. Sagarmal; Onkarlal Rs.5,04,900/- iv. Sushila Jain Rs.5,04,900/- v. Pankaj Karnawat Rs.50,000/- vi. Mahesh Kumar Babulal Rs.11,31,850/- vii. Nirmala Jain Rs.2,10,000/- viii. Abhishek Vora Rs.4,00,000/- Total Rs.32,40,040/-
The appellant furnished the loans confirmation along with PAN No. and address in respect of the above persons. Most of the loans from the above parties except at the serial no. 5 & X have been squared up during the year. The appellant received and repaid the loan through banking channel. In the remand report also the AO has not commented adversely. Therefore, the addition made by the AO amounting to Rs.32,40,040/- is Deleted. Therefore, the appeal on this ground is Allowed.
Ground No.3- Through this ground of appeal the appellant has challenged the 5.3 addition of Rs.6,60,000/- on account or unsecured loan. The AO made the addition on the ground that in respect or the following persons, the loan confirmations were not filed. i. Abhinandan Marketing Rs.70,000/- ii. Nagulal Chandmal (HUF) Rs.1,50,000/- iii. Praveen Nahta Rs.2,40,000/- iv. Ragesh Kumar Babulal Rs.50,000/- v. Rekha Surana Rs.1,00,000/- vi. Teena Pankaj Kumar Rs.50,000/- Total Rs.6,60,000/-
The appellant furnished the loans confirmation along with PAN No. and address in respect of the above persons. Most of the loans from the above parties except at the serial no. 2 & 5 are old loans. The appellant received and repaid the loan through banking channel. In the remand report also the AO has not commented adversely. Therefore, the addition made by the AO amounting to Rs.6,60,000/- iss Deleted. Therefore, the appeal on this ground is Allowed. 5.4 Ground No.4:- Through this ground of appeal the appellant has challenged the addition of Rs.14,55,506/- on account of unsecured loan. The AO made the addition on the ground that in respect of the following persons, the loan confirmations were not tiled:-
The appellant furnished the loans confirmation along with PAN No. and address in Pravin Kumar Jain IT.A.No.557/Ind/2017 respect of the above persons. Most of the loans from the above parties except at the serial no. 5, 6 & 7 are old loans. The appellant received and repaid the loan through banking channel. In the remand report also the AO has not commented adversely. Therefore, the addition made by the AO amounting to Rs.14,55,506/- is Deleted. Therefore, the appeal on this ground is Allowed.
From perusal of the above finding of Ld. CIT(A) and the available records, we observe that the assessee has filed confirmation letters with the name, address and PAN No. of all the creditors. Most of the loan accounts were squared off during the year, all the transactions were carried out through proper banking channel. All the transactions have also passed through the eyes of the auditor who has issued tax audit report under section 44AB of the Act mentioning about the loans taken and repaid during the year. There is no evidence on record to shows that any enquiry was initiated by the assessing officer on the basis of PAN No. and other details.
In these given facts and circumstances of the case, in our considered view, Ld. CIT(A) has rightly appreciated the evidence filed by the assessee and considering them to be sufficient enough to prove identity, genuineness and creditworthiness of the loan transactions. We, therefore, find no reason to interfere in the finding of Ld. CIT(A) deleting the addition for unexplained cash credit of Rs. 32,40,040/-, Rs.6,60,000/- and Rs.14,56,506/-. Thus, ground No.2 of the revenue’s appeal is dismissed.
Pravin Kumar Jain IT.A.No.557/Ind/2017 13. Apropos to Ground No.3: wherein the revenue is aggrieved with the deletion of addition of Rs.89,74,337/- made on account of Chukara Khata.
We find that during the course of assessment proceedings Ld. Assessing Officer observed that payment for purchase of agricultural produce of Rs.9,88,44,781/- was made through Chukara Khata. He further observed that payment for purchase for the month of April of Rs.89,74,337/- was made for the subsequent months. Ld. Assessing Officer was of the view that normally the payments to the farmers have to be made instant at the time of purchase itself but the assessee had showed payments in the subsequent months as per the availability of cash in the books. He, thus, interpreted that unaccounted money was used to pay the farmers at the time of purchase. He, thus treated the purchase of April month as a peak and made the addition for unexplained cash credit u/s 68 of the Act at Rs.89,74,337/-. When the matter came up before the Ld. CIT(A), he after examining the working of the assessee, its process of making purchase through Mandi and making the payments have analysed the transactions and after placing reliance on the judgment of Hon’ble High Court of Jammu and Kashmir in the case of International Forest Co. vs. CIT (1975) 101 ITR 821 (J & K). The Ld. CIT(A) deleted the addition of Rs.89,74,337/- made on account of unexplained Chukara Khata observing as follows: 8
Pravin Kumar Jain IT.A.No.557/Ind/2017 5.5 Ground No.5:- Through this ground of appeal the appellant has challenged the addition of Rs.89, 74,337/- on account of chukara khata. The AO made the addition on the ground that the appellant was required to make the payment to the farmers on the same date of purchase. The appellant has not made the payment to the farmers on the date of purchase. The appellant is making the purchase from the Mandi. The appellant prepared the balance as on last day and there were outstanding to the fanners on the last day of working. The appellant furnished the name of the persons from whom the appellant has purchased the agriculture produce, date of purchase, name of the commodity, outstanding amount as on 31- 03-2014 and date of payment of above amount. The appellant purchased the agriculture produce from the auction yard of the mandi. The employee of the Mandi Board writes the name and addresses of the farmers and the rate at which the auction completed on the slip. The weighment is done by tulvati accepted agency of Mandi Board and he prepares the slip for number or bags, total weight, name of the buyers and commodity. The appellant prepares the purchase vouchers and bills on the basis or of two slips presented by the farmers to the appellant. The name and addresses mentioned in the purchased bill is on the basis of the two slips given by the employees of the Mandi to the farmers. The appellant has no control over the name and address on the slips. As per the Mandi Act the payment is to be made on the same date of purchase but this practice has not been followed strictly. By merely not making the payment on the same day, the AO is not justified in disallowing the purchase. The appellant has made the payment to the farmers subsequently against the purchases made. It sometimes happens that the farmers have to undertake the late night journey and they wi11 not take the cash in the night while going back to village after selling the agriculture produce.
5.5.1 The AO’s conclusion that the appellant has made the payment to the farmers on the same day of purchase from the unaccounted money is not acceptable. The AO failed to bring anything on record which suggests that the payment has been made from undisclosed sources. It has been held by the Hon’ble J&K High Court in the case of International forest Co. v/s CIT (1975) 101 ITR 821 (J&K) :- 9
Pravin Kumar Jain IT.A.No.557/Ind/2017 “The AO cannot proceed to make an arbitrary addition and base his conclusion purely on guesswork. He ought to have related the estimate to some evidence or material on the record as it is now well settled that if the profits shown by the assessee in his return are not accepted, it is for the taxing authorities to prove that the assessee has made more profits than returned”.
The AO in this case purely assumed that the appellant has made the payment to the farmers from his undisclosed cash and manipulated the accounts without bringing anything on record. Therefore, the AO is not justified in making the addition on account of outstanding balances in the name of the farmers. Therefore, the addition made by the AO amounting to Rs.89, 74,337/- is Deleted. Therefore, the appeal on this ground is Allowed.
After going through detailed finding of facts by Ld. CIT(A) and also observing that the assessee is having a consistent style of doing business in this manner wherein the assessee purchase agricultural produce from auction yard of the Mandi and receives slip having name and address of the farmers, rate and quantity of item purchased. The transactions are not directly between the assessee and the farmers but are through the Mandi and the employees of the Mandi maintain complete records of the transactions entered into between assessee and farmers. Generally the payments are to be made on the same date but it’s strictly compliance is very hard to achieve. Ld. Counsel for the assessee has referred to various instances in the form of Newspaper cutting placed at page 18 of the paper book showing that payments to farmers remain outstanding on various occasions
Pravin Kumar Jain IT.A.No.557/Ind/2017 Even otherwise revenue authorities have not doubted the genuineness of the purchase and have not rejected the books of accounts. We, therefore, in the given facts and circumstances of the care, are of the considered view that there is no infirmity in the detailed finding of the Ld. CIT(A), and therefore, the addition made by the assessing officer of Rs.89,74,337/- on account of Chukara Khata has been rightly deleted by the Ld. CIT(A). We, accordingly, dismiss revenue’s ground no.3.
Apropos to ground No.4 & 5: through which the revenue has challenged the action of Ld. CIT(A) deleting the addition for disallowance of expenses at Rs. 4,22,283/- being 20% of the expenses out of salary wages and Hamali expenses, disallowance of Rs.84,183/- being 20% to freight expenses, we observe that Ld. Assessing Officer made disallowance of 20% of the expenses booked in the head of salary wages, Hammali and freight. Ld. CIT(A) has deleted the addition observing as follows:
Ground No.6:- Through this ground of appeal the appellant has challenged 5.6 the disallowance of 20% expenses out of salary, wages and Hammali Paid amounting to RS.4,22,283/-. The appellant is engaged in trading of garlic. The above expenditures are integral part of the business. The AO is not justified in making the disallowance out. of above expenses without any, reason. Therefore, the addition made by the AO amounting to Rs.4,22,283/-. is Deleted. Therefore the appeal on this ground is Allowed.
5.7 Through this ground of appeal the appellant challenged the disalalowance of Pravin Kumar Jain IT.A.No.557/Ind/2017 20% expenses out of freight expenses amounting to Rs.84,173/-. The appellant is engaged in trading of garlic. The above expenditures are integral part of the business. The AO is not justified in making the disallowance out of above expenses without any reason. Therefore, the addition made by the AO amounting to Rs.84, 173/· is Deleted. Therefore, the appeal on this ground is Allowed.
16. From perusal of the above finding of Ld. CIT(A), we observe that the disallowance have been deleted merely, by observing that the assessing officer has made disallowance without giving any reason and thus made an ad hoc disallowance. We, however on going through the assessment order observe that after the case was selected for scrutiny there was no compliance on the part of assessee or his Authorised Representative to the notices of the Ld. Assessing officer on 15.02.2016, 10.08.2016, 06.09.2016, 18.10.2016 and 08.11.2016. Thereafter on 21.11.2016 some details were filed. Again the assessing officer requested the assessee/ authorized representative to furnish remaining information but again there was no compliance on 26.11.2016, 05,12.2016 & 20.12.2016. Since the case was getting time barred for want of completion of assessment proceedings on 31.12.2016, the assessing officer had no option except to frame the assessment on 23.12.2016. Thus, on repeated occasions assessee had not furnished the details of various expenses claimed in the profit and loss account. There is a general plea taken on the part of the assessee that books of account were audited and no instance of non- 12
Pravin Kumar Jain IT.A.No.557/Ind/2017 genuineness of the expenses has been found but in the instance case on repeated occasions assessee made a default by not furnishing the details and thus not allowing the assessing officer to carry out the examination of bills and vouchers and the genuineness of expenses claimed which has thus left no option with the assessing officer except to disallow the expenses @ 20% and made addition of Rs. 4,22,283/- & Rs.84,183/-.
We, however, being fair to both the parties and in the given facts whether the books of accounts are duly audited u/s 44 AB of the Act and the ledger account of the expenses placed in the paper book, restrict the disallowance to 10% as against 20% made by the assessing officer. Thus, as against the disallowances of Rs. 4,22,283/- & Rs.84,183/- made by the assessing officer, we confirm the disallowance of Rs.2,11,141/- being 10% of salary wages and Hammali and Rs.42,091/- being 10% of freight expenses. Thus, ground no.4 & 5 of the revenue’s appeal are partly allowed.
In ground No.6: The revenue is aggrieved with the action of the Ld. CIT(A) admitting the additional evidences in violation of provision of Rule 46A of the IT.
Rules. We find that the additional evidences placed by the assessee before the ld. CIT(A) through application u/s 46A of the I.T. Rules were going to the root cause of the issues i.e. additions made by the assessing officer. They mainly constituted
Pravin Kumar Jain IT.A.No.557/Ind/2017 the documents and evidences given in order to prove the identity, genuineness and creditworthiness of the cash creditors. In our considered view the Ld. CIT(A), in order to adjudicate the issues on merits and in the light of the facts was justified in accepting the application under Rule 46A of the I.T. Rules for admission of additional evidences. Thus ground No.1, 2, 3 & 6 are dismissed and Ground No.4 & 5 are partly allowed.
In the result appeal of the revenue is partly allowed.
The order pronounced in the open Court on 28 .05.2020.