SANWAR MAL BAJAJ vs. I T O JHUNJHUNU

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ITA/348/2005HC RajasthanRJHC02024628200521 March 20174 pages
AI SummaryPartly Allowed

What did the High Court hold?

The High Court decided Issue No. 1 by partly allowing it in favour of the assessee. While the Tribunal had sustained a trading addition, the High Court, considering the assessee's average GP rate of 11.4% (compared to 10% in the Ram Sharan case and 14% in another comparable), decided that the GP rate should be considered at 11.4% instead of 24% as held by the Tribunal. The rest of the Tribunal's directions on this issue were to remain intact. For Issue No. 2, the High Court completely answered in favour of the assessee and against the department. The Tribunal had sustained an addition of Rs. 50,000/- in the case of Shri Santosh Kumar Agarwal, citing his limited means, while deleting a similar addition for Smt. Baby Agarwal. The High Court found this distinction unjustified and directed that the addition of Rs. 50,000/- pertaining to Shri Santosh Kumar Agarwal should be deleted, aligning with the relief granted to Smt. Baby Agarwal.

What were the facts?

This appeal by Shri Sanwarmal Bajaj, proprietor of M/s Pawan Cloth Store, challenges an order of the Income Tax Appellate Tribunal (ITAT) that partly allowed the assessee's appeal. The assessment year is not explicitly stated, but the survey was conducted on 28/01/1997. The dispute involves a trading addition of Rs. 1,50,000/- over Rs. 1,00,000/- surrendered, and a cash credit of Rs. 50,000/-. The High Court admitted the appeal on 04/01/2006, framing specific questions for determination. The assessee argues that the ITAT's decision on the trading addition and cash credit was perverse and inconsistent with its own prior rulings in similar cases.

What were the issues?

1. Whether, on the facts and in the circumstances, the ITAT was legally justified in sustaining a trading addition of Rs. 1,50,000/- over the Rs. 1,00,000/- surrendered, especially when a comparable case saw a full deletion of addition, rendering the ITAT's finding perverse? (Assessee's contention: The addition is unjustified and perverse, citing the deletion of Rs. 2,00,252/- in the case of Ram Sharan. Revenue's contention: Not recorded, but implied by the ITAT's decision to sustain part of the addition). 2. Whether, on the facts and in the circumstances, the ITAT was legally justified in sustaining a cash credit of Rs. 50,000/- in the account of Shri Santosh Kumar Jindal when he was an existing assessee, the amount was received by account payee cheque, and his identity, capacity, and genuineness were proved? (Assessee's contention: The addition is unjustified as identity, capacity, and genuineness were proved, and the transaction was by account payee cheque, contrasting it with the deletion of Rs. 50,000/- for Smt. Baby Agarwal. Revenue's contention: Not recorded, but implied by the ITAT's decision to sustain the addition for Shri Santosh Kumar Agarwal).

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 348 / 2005 Shri Sanwarmal Bajaj Prop. of M/s Pawan Cloth Store, Singhana District Jhunjhunu in the State of Rajasthan ----Assessee-Appellant Versus The Income Tax Officer Ward I, Jhunjhunju Having its office at Income Tax Office in the State of Rajasthan ----Respondent _____________________________________________________ For Appellant(s) : Mr.Siddharth Ranka For Respondent(s) : Mr.R.B. Mathur _____________________________________________________ HON'BLE THE ACTING CHIEF JUSTICE HON'BLE MR. JUSTICE MAHENDRA MAHESHWARI

JUDGMENT 21/03/2017

1.

By way of this appeal, the appellant-assessee has assailed the judgment and order of the Tribunal whereby the Tribunal has partly allowed the appeal preferred by the assessee.

2.

Counsel for the appellant has contended that on 04/01/2006, this Court while admitting the matter has framed the following questions:- “1. Whether on the facts and in the circumstances of the case, the ld. Income Tax Appellate Tribunal was right in law in sustaining trading addition of Rs.1,50,000/- over and above Rs.1 lac surrendered during the course of survey particularly in view of the fact that in the comparable case relied upon the entire addition was deleted by the ld. Income Tax Appellate Tribunal, the finding to sustain the addition is perverse?

(2 of 4) [ITA-348/2005] “2. Whether on the facts and in the circumstances of the case the ld. Income Tax Appellate Tribunal was right in law in sustaining the cash credit of Rs.50,000/- in the account of Shri Santosh Kumar Jindal when he is an existing assessee and the amount was received by account payee cheque and identity, capacity and genuineness of the transaction was proved?”

3.

Counsel for the appellant submits that the survey was carried on 28/01/1997 and the Tribunal has taken the view in I.T.A. No.132/JP/2002 filed by Ram Sharan, as follows:- “. . . . . . . . . .Therefore, by following the ratio laid down by the Jurisdictional High Court, we find no justification for making trading addition. Thus, both the orders of the lower authorities are hereby set aside and delete the addition of Rs. 2,00,252/-. The assessee will get the relief of this amount. This ground is allowed in favour of the assessee.”

4.

On the contrary, the appeal preferred by the assessee was dismissed and he was not granted the same relief as was granted by the Tribunal to Ram Sharan whose annual profit however was shown as 14% and in view of the statement given in paragraph 5 of the memo of appeal, the average G.P. of the present assessee for the assessment year 1993-94 was shown as 13% and for the relevant order, it is 10%. In that view of the matter, the view taken by the Tribunal on Issue No.1 should be re-considered.

5.

On Issue No.2, it is contended that the Tribunal while considering the case of the present appellant, has observed as follows:- “18. We heard both the parties at length and gone through the material available on record from which it appears that Smt. Baby Agarwal is a house wife and she was having some income as per the balance sheet. In the instant case, it was alleged that payment was withdrawn

(3 of 4) [ITA-348/2005] by her of Rs. 50,000/- from other creditors and was deposited in her bank account against which the cheque was issued. In the instant case, the identity is proved. The transaction was made through account payee cheque. She is the married lady and was having the gifts on many occasions and might be possessing the Stridhan. In these circumstances and by looking the amount involved and other circumstances, we accept her creditworthiness. So, we set aside both the orders of the lower authorities and delete the addition of Rs. 50,000/- pertaining to Baby Agarwal. However, regarding Shri Santosh Kumar Agarwal, it appears that he was working as mechanic and doing the repairing work of Fans, Coolers etc. He is just Class Xth pass and he was working earlier at the monthly salary of Rs. 1,200/-. In the past, he has also purchased a shop. He has a family of three members. In these circumstances, we fully agree with the orders of the lower authorities that he was not having the means to credit the amount of Rs. 50,000/-. He has not paid any single pai to government exchequer. In these circumstances, without repeating, we uphold the orders of lower authorities and sustain the addition of Rs. 50,000/-. Thus Ground No.5 is partly allowed as stated above.”

6.

Similar was the case of Smt.Baby Agarwal whose Rs.50,000/- addition was set-aside by the Tribunal but in the case of the present appellant, Rs.50,000/- addition was not set- aside. The Tribunal held that in the case of the present appellant, the G.P. Rate would be @24% however in the case of others, the Tribunal has considered the GP Rate @14%.

7.

The average profit has been shown in the present case to be 11.4% and in that view of the matter, we are making a departure from the view taken by the Tribunal that instead of GP Rate @10% as considered in the case of Ram Sharan holding that instead of GP Rate @24%, it shall be @11.4% in the present case. However, rest of the directions of the Tribunal would remain intact.

(4 of 4) [ITA-348/2005]

8.

In view of the above, while Issue No.1 is partially allowed in favour of the assessee, Issue No.2 is completely answered in favour of the assessee and against the department.

9.

The appeal stands disposed of accordingly. (MAHENDRA MAHESHWARI)J. (K.S. JHAVERI)ACTING C.J. Anil Goyal-PS/18

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