SHRI VINOD KUMAR JAIN,RAISEN vs. THE ITO, VIDISHA

The above captioned appeal filed at the instance of assessee pertaining to Assessment Year 2010-11 is directed against the orders of Ld. Commissioner of Income Tax (Appeals) (in short ‘Ld.CIT(A)’], Bhopal-2 dated 30.10.2015 which is arising out of the order u/s 143(3) of the Income Tax Act 1961(In short the ‘Act’) dated 01.03.2013 framed by ITO-Vidisha.

ITANo.477/Ind/2016 Shri Vinod Kumar Jain

1. That the Ld. Commissioner of Income Tax (A) erred in law in confirming the disallowance of Rs.18,63,552/- on the ground that there was no reason to exclude the business receipts of M/s. V.K. Transport from the audited accounts and direct and indirect expenses were already debited in the audited accounts and the documents submitted do not establish that the expenditure of Rs.18,63,552/- was incurred or paid against business receipts of M/s. V.K. Transport in any manner.

2. That the ld. Commissioner of Income Tax(A) erred in law in confirming the addition of Rs.10 lacs u/s 68 of the Act received by the appellant by way of gift from his mother-in-law on the ground that she was not being assessed to income tax. He erred in not providing reasonable opportunity to locate and furnish gift deed duly signed by her. The addition of Rs.10 lacs so confirmed is, therefore, wholly unjustified, improper and deserves to be quashed. 3. That the Ld. CIT(A) erred in law in confirming the addition of Rs.2,50,000/- u/s 69 of the Act being the amount received by way of gift from Shri Nemichand Jain, father of the appellant, who had also confirmed such payment. The additional evidence in the form of confirmation regarding payment from the father was not admitted on the ground that there was no reasonable cause for it non- submissions before the AO. The addition so confirmed is wholly unjustified, improper, bad in law and deserves to be quashed. 4. That without prejudice to above, the Learned Commissioner of Income Tax (A) ought to have allowed the telescoping benefit against the addition made u/s 68 and 69 of the Act being gifts received of 3

ITANo.477/Ind/2016 Shri Vinod Kumar Jain

Rs.12,50,000/-. He ought to have appreciated that when the expenditure claimed in profit and loss account of M/s. V.K. Transport has been treated as not incurred at all, such amount of cash was available with the appellant, which was deposited in bank. Disallowance of expenditure on one hand at Rs.18.63 lacs vis-à-vis gifts received from mother-in-law and father of the appellant at Rs.12.50 lacs assessed as unexplained cash credit/investment resulted into doubt taxation. The addition so made u/s 68 and 69 of the Act, therefore deserved to be quashed.

ITANo.477/Ind/2016 Shri Vinod Kumar Jain � At the outset, following two mistakes were committed by the appellant while submitting the return of income :- (i) Books of accounts of separate division viz. M/s. V.K. Transport were not audited and (ii) Income from said business was offered under the head “Income from other sources” instead of “Income from business”. � It is submitted that the nature of business in the case of M/s.Vinod Kumar Jain is that of excavation and sale of gitti, muram etc. which also involved transportation thereof. Contrary to this, separate business under the name and style as M/s. V.K. Transport was that of commission agency business of transportation of goods where the Trucks were taken on hire. Details of following major expenses incurred are annexed :- a) Lorry hire expenses charges Rs.6,71,450/-(Page 7 to 16 of P.B) b) Diesel expenses Rs.3,79,938/- (Page 17 to 26 of P.B) c) Repairs & maint. charges against transport work Rs.1,74,096/- (Page 27 to 31 of P.B) d) Loading service charges Rs.4,01,766/- (Page 32 & 33 of P.B)

It is also evident from copies of accounts of respective parties that major payments were made to them through banking channel and supporting evidences along with copies of account of creditors were also submitted before authorities below. In substance, gross receipts of transportation charges of Rs.18.04 lacs has been taxed as income but corresponding expenses to earn such income have been disallowed in full. � The Income tax officer did not doubt upon the genuineness of expenditure incurred by separate division i.e. M/s. V.K. Transport as regular books of accounts for both divisions were produced yet vide para-5 of the assessment order, disallowed entire expenditure reflected in the profit and loss account of M/s. V.K. Transport at Rs.18,63,552/- on following grounds :- a) Such expenditure were claimed as deduction u/s 57 of the Act i.e under the head “Income from other sources” hence not permissible. b) There was no reason to exclude the business income from the scope of audit and to offer it separately under the head “Income from Other Sources”. c) Direct and indirect expenses of M/s. V.K. Transport were already claimed in audited trading account. � The learned Commissioner of Income tax (A) confirmed the disallowance of entire expenditure at page – 4 of the appellate order he observed that both the receipts and expenses of the transport 5

ITANo.477/Ind/2016 Shri Vinod Kumar Jain part of the business activity are included in the audited trading account of M/s. Vinod Kumar Jain. Thus, receipts credited in separate set of books of M/s. V.K. Transport was considered as income but expenditure was disallowed on the same grounds stated by the AO vide para-7(g) of the appellate order. While confirming the disallowance he also observed following discrepancies :- i) Gross receipts as per P & L Account of V.K. Transport was Rs.19,88,592/- whereas as per copy of account of transportation charges it was Rs.18,04,227/- (Page 34 of P.B). Such observation is incorrect because he did not consider that gross receipts includes excavation charges recovered at Rs.1,66,365/- separately stated in profit and loss account. (Page 35 of P.B). ii) The bank account in the name of M/s. V.K. Transport maintained with State Bank of India do not match the credits with ledger account. iii) TDS was not deducted by M/s. Crompton Greaves Limited, M/s. Ratansingh Builders and M/s. Dawat Foods Limited on hiring charges. In fact, TDS was deducted by all of them as evident from copies of accounts at page-36 to 41 of the paper book. iv) Appellant did not deduct tax at source on Lorry hire expenses paid to other transporters hence provisions of Section 40a(ia) are attracted. No explanation was asked for non-deduction. In fact, the Truck owners were having less than 10 Trucks hence TDS was not deducted . II) Amount received from Mother-in-law assessed u/s 68 of the Act. The appellant had purchased residential house during the year for Rs.27,50,000/- vide registered sale deed executed on 04.09.2009 in joint name with his wife who also contributed towards cost of acquisition. Mother-in-law of the appellant being widow had gifted a sum of Rs.10 lacs for purchase of said house. She was in possession of said sum out of agricultural proceeds having more than 50 acres of land including accumulated funds received after the death of her husband. The fact regarding gift received was categorically stated during assessment proceedings vide letters dated 06.02.2013 and 08.10.2013 (Page 42 to 44 of P.B) and also submitted before CIT(A). Gift deed was executed in favour of the appellant on 04.06.2009 wherein other three sisters of appellant’s wife were witnesses. The gift deed could not be produced before lower authorities because the original gift deed duly notarised, was misplaced due to change of residential house. 6

ITANo.477/Ind/2016 Shri Vinod Kumar Jain In the absence of such gift deed and death of donor, genuineness could not be proved before lower authorities. Copy of gift deed was later on found with the father of the appellant. An application under Rule 24 of Income Tax (Appellate Tribunal) Rules 1983 has been filed with request to admit additional evidence. III) Amount received from Father assessed u/s 69 of the Act : The appellant is residing with his father who derives income from Kirana and Money lending business. His income is below taxable limit hence returns were not filed by him. However, while purchasing the residential house by the appellant, he contributed a sum of Rs.2,50,000/- for purchasing the stamps for registration and expenses thereof. He had also executed a gift deed in favour of the appellant which was duly notarized on 01.09.2009 but the same could not be produced before lower authorities because original gift deed executed was misplaced due to change of residential house. The fact regarding gift received was categorically stated during assessment as well appellate proceedings (Page 42 to 44 of P.B). In the absence of such gift deed, the capacity could not be proved before lower authorities whereas the genuineness was proved from the facts and circumstances. Copy of gift deed was found lateron with the father of the appellant. An application under Rule 24 of Income Tax (Appellate Tribunal) Rules 1983 has been filed with request to admit additional evidence.

“Additional Ground of Appeal – Telescopic Benefit of Rs.12.50 lacs: It is humbly submitted that the authorities below disallowed entire expenditure debited in separate profit and loss account of M/s. V.K. Transport amounting to Rs.18.63 lacs on the ground that such expenses were not incurred at all. Presuming but not admitting such conclusion, the appellant may please be given telescopic benefit on ITANo.477/Ind/2016 Shri Vinod Kumar Jain the ground that part of the expenditure incurred was impliedly available with the appellant which was utilized for investment in residential house, received in the form of gifts from father and mother-in-law of the appellant at Rs.12,50,000/- in aggregate. Such Telescopic benefit is being allowed by the Hon’ble Bench so as to avoid double taxation. [Kindly refer – C.I.T. vs. Omprakash Dhanwani, Indore – to 256/IND/15 order dated17.05.2016]. Kind attention is also invited to judgment in the case of M/s. Sind Medical Stores vs. Commissioner of Income tax (2014) 90 CCH 497 (Raj. HC) wherein vide para-12 of the judgment it was held that “when any amount is paid, letter withdrawn from the books would be available for recycling and rotation , unless otherwise established as invested elsewhere by the Revenue”. (Copy annexed).

It is prayed that disallowance of Rs.18.63 lacs on one hand and addition of Rs.10,00,000/- u/s 68 and Rs. 2,50,000/- u/s 69 of the Act resulted into double taxation on Rs.12,50,000/- hence appropriate relief may please be allowed.

ITANo.477/Ind/2016 Shri Vinod Kumar Jain

ITANo.477/Ind/2016 Shri Vinod Kumar Jain father it has been claimed that his father was deriving income from Kirana and Money Lending business. Since his income was below the taxable limit, return of income was not filed. He being a senior citizen it cannot be denied that he had accumulated savings from land in many years and thus his contribution of Rs.2,50,000/- as gift to his son for helping him to purchase a residential house cannot be doubted. Gift deed was duly notarized and signed by assessee’s father is placed on record. It is also submitted by Ld. counsel for the assessee, that assessee’s father has also expired before some time.

ITANo.477/Ind/2016 Shri Vinod Kumar Jain