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Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI ANIL CHATURVEDI, AM & SHRI VIKAS AWASTHY, JM
आदेश / ORDER PER VIKAS AWASTHY, JM
These two appeals by the Revenue are directed against the orders of Commissioner of Income Tax (Appeals)-2, Nashik.
In ITA No.776/PUN/2017, the Department has assailed the order of Commissioner of Income Tax (Appeals)-2, Nashik dated 27.01.2017 for the assessment year 2010-11.
2 ITA Nos. 776 & 777/PUN/2017 A.Ys.2010-11 & 2011-12
ITA No.777/PUN/2017 by the Department is against the order of Commissioner of Income Tax(Appeals)-2, Nashik dated 27.01.2017 for the assessment year 2011-12.
Since the issue raised in both appeals are common and are arising from same set of facts, these appeals are taken up together for adjudication and are being disposed of vide this common order.
ITA No.776/PUN/2017 A.Y.2010-11
Shri Sunil Pathak appearing on behalf of the assessee submitted at the outset that appeal of the Revenue is liable to be dismissed on account of low tax effect. The ld. AR submitted that the solitary issue raised in appeal by the Department is against deleting the disallowance of Rs.50,05,561/- u/s.40A(2)(a) of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟). The tax effect involved in the appeal is less than Rs.20,00,000/-. In view of CBDT Circular No.3/2018 dated 11.07.2018, the appeal by the Department is not maintainable.
Shri Rajesh Gawali representing the Department fairly admitted that in the present appeal by the Department tax effect is less than Rs.20 Lakhs.
Both sides heard. The Revenue is in appeal against the order of Commissioner of Income Tax (Appeal) in deleting the disallowance of Rs.50,05,561/-. Undisputedly, the tax effect involved in appeal is less than the monetary limit prescribed by the CBDT Circular (supra.) for filing of appeals before the Tribunal by the Department. The CBDT vide Circular No. 3/2018, dated 11-07-2018 has raised the monetary limit of tax effect for
3 ITA Nos. 776 & 777/PUN/2017 A.Ys.2010-11 & 2011-12
filing of appeals by the Department before the Tribunal to Rs.20 lakhs. The Circular applies to the appeals to be filed by the Department in future as well as the appeals pending before the Tribunal. Without going into merit of the grounds raised in the appeal, in view of the CBDT Circular (supra.), the present appeal of the Revenue is dismissed on account of low tax effect.
Before parting, we clarify here that the Revenue shall be at liberty to approach the Tribunal for restoration of appeal, with the requisite material to show that the appeal is protected by the exceptions prescribed in Para 10 of the Circular (supra).
In the result, appeal of the Revenue is dismissed.
ITA No.777/PUN/2017 A.Y.2011-12
In ITA No.777/PUN/2017, the Department has assailed the findings of Commissioner of Income Tax (Appeals) by raising following grounds:
“1. On facts and in law, the Ld. CIT(A) has erred in deleting the disallowance u/s.40A(2)(a) of Rs.1,06,10,353/-, relying upon the Hon'ble ITAT, Pune's decision in the case of M/s Rajmal Lakhichand for AY 2009- 10. 2. On facts, the Ld. CIT-A has erred in not appreciating the fact that the disallowance u/s.40A(2)(a) on the excess payment on purchases made from the Sister Concern was made after considering the Jalgaon(Local) rates of Gold and Silver. 3. On the facts and circumstances of the case and in law, the order of the Ld.CIT(A)-II, Nashik be cancelled on the above issue and that of the A.O be restored. 4. The appellant craves leave to add, alter, modify, delete amend any of the grounds with prior permission of the Ld.Pr.CIT, as per the circumstances of the case. 5. The appellant prays to file any of the additional evidence, with the permission of Ld. Pr.CIT, appropriate to the grounds taken in appeal.”
4 ITA Nos. 776 & 777/PUN/2017 A.Ys.2010-11 & 2011-12
The ld. AR for the assessee submitted that the issue raised by Department in appeal is identical to the one already adjudicated by the Tribunal in the case of assessee‟s sister concern M/s. Rajmal Lakhichand in ITA No.670/PUN/2015 for the assessment year 2010-11 decided on 28.02.2018 and in ITA No.963/PUN/2016 for the assessment year 2011-12 decided on 07.02.2019. The ld. AR submitted that the Commissioner of Income Tax(Appeals) in the impugned order granted relief to the assessee by following the order of Tribunal in the case of M/s. Rajmal Lakhichand for the assessment year 2009-10.
The ld. DR vehemently defended the assessment order and reiterated the contentions recorded in statement of facts. However, the ld. DR admitted that the issue raised in the present appeal is similar to one considered by the Tribunal in the case of assessee‟s sister concern M/s. Rajmal Lakhichand.
Both sides heard. Orders of the Authorities below perused. The solitary issue raised by the Department is against deleting the disallowance of Rs.1,06,10,353/- u/s.40A(2)(a) of the Act. The assessee is engaged in trading of gold, silver, diamond and precious stones etc. and making of gold/silver jewellery. It is an undisputed fact that the business carried out by the assessee and its sister concern M/s. Rajmal Lakhichand is on similar lines. There are several inter group purchase and sale transactions of gold, silver and ornaments, etc. The Assessing Officer made addition u/s.40A(2)(a) of the Act on the premise that the assessee has made payments to its group concern which are excessive and unreasonable. The ld. AR has brought our attention to the tabular chart annexed as annexure of the assessment order and contended that there are several transactions
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where the assessee has made payment in excess of market rate and at the same time there are transactions where the assessee has received payments less than the market rate. The ld. AR pointed that if the consolidated amount of the transactions are taken into consideration, there is marginal difference between payment made in excess/less than the market price for purchase of gold, silver, ornaments etc. The Co-ordinate Bench of the Tribunal in the case of M/s. Rajmal Lakhichand Vs. JCIT in ITA No.963/PUN/2016 for the assessment year 2011-12 while dealing with the issue has held as under:
“4. We have heard both the sides and gone through the relevant material on record. It is seen that the AO as well as the ld. CIT(A) have followed their respective actions for the A.Yrs. 2009-10 and 2010-11. These assessment years came up for consideration before the Tribunal in appeals filed both by the assessee as well as the Revenue, in the same way as has been done for the instant year. Vide order dated 16-01-2015, a copy placed at pages 193 onwards of the paper book, the Tribunal in ITA Nos. 532 and 663/PUN/2013 etc. has upheld the deletion of addition u/s.40A(2) of the Act For the A.Y. 2010-11, i.e. immediately preceding assessment year, the Tribunal has sustained the addition by directing to enhance the GP rate by 0.09%. Since the facts and circumstances of the instant ground are mutatis mutandis similar to those of the immediately preceding year, respectfully following the precedent, we uphold the action of the ld. CIT(A) in holding that the provisions of section 40A(2) were not attracted and it is further held that the gross profit rate of 0.63% (0.54% as declared by the assessee plus addition of 0.09%) be applied. Thus, the grounds raised by the Revenue are dismissed and those of the assessee are partly allowed.”
The Commissioner of Income Tax (Appeals) granted relief to the assessee on this issue by following the order of Tribunal in the case of M/s. Rajmal Lakhichand for assessment year 2009-10 (supra.).
Thus, in view of parity of facts in the case of assessee and its sister concern, we find no reason to interfere with the findings of Commissioner of Income Tax (Appeals). Accordingly, the same are upheld and the appeal of
6 ITA Nos. 776 & 777/PUN/2017 A.Ys.2010-11 & 2011-12
Revenue for assessment year 2011-12 is dismissed being devoid of any merit.
In the result, both the appeals of Revenue for assessment years 2010-11 and 2011-12 are dismissed.
Order pronounced on Monday, the 01st day of July, 2019.
Sd/- Sd/- (अननऱ चतुर्वेदी /ANIL CHATURVEDI) (वर्वकास अर्वस्थी /VIKAS AWASTHY) ऱेखा सदस्य/ACCOUNTANT MEMBER न्याययक सदस्य/JUDICIAL MEMBER ऩुणे / Pune; ददनाांक / Dated : 01st July, 2019 SB आदेश की प्रनतलऱवऩ अग्रेवर्त / Copy of the Order forwarded to : अऩीऱाथी / The Appellant. 1. प्रत्यथी / The Respondent. 2. 3. The CIT(Appeals)-2, Nashik. 4. The Pr. CIT-2, Nashik. , आयकर अऩीऱीय अधधकरण, “ए” बेंच, 5. ववभागीय प्रयतयनधध ऩुणे / DR, ITAT, “A” Bench, Pune. गार्ड फ़ाइऱ / Guard File. 6.
// True Copy // आदेशानुसार / BY ORDER,
यनजी सधचव / Private Secretary आयकर अऩीऱीय अधधकरण, ऩुणे / ITAT, Pune.
7 ITA Nos. 776 & 777/PUN/2017 A.Ys.2010-11 & 2011-12
Date 1 Draft dictated on 18.06.2019 Sr.PS/PS 2 Draft placed before author 19.06.2019 Sr.PS/PS 3 Draft proposed and placed JM/AM before the second Member 4 Draft discussed/approved by AM/JM second Member 5 Approved draft comes to the Sr.PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order