M/S. RAJMAL LAKHICHAND vs. JOINT COMMISSIONER OF INCOME-TAX,

आदेश / ORDER

PER R.S.SYAL, VP : These two cross appeals - one by the assessee and the other by the Revenue arise out of the order passed by the CIT(A)-2, Nashik, on 29-03-2016 in relation to the assessment year 2011-12.

2 ITA Nos. 963 and 1178/PUN/2016 M/s. Rajmal Lakhichand

only issue raised by the Revenue is in relation to a certain

addition made by the Assessing Officer (AO) u/s.40A(2)(a) of

the Income-tax Act, 1961 (hereinafter also called as ‘the Act’).

a trader in Gold, Silver, Diamond and Precious Stones. It made

certain purchases from its sister concerns. The AO, applying

the provisions of section 40A(2)(a), of the Act made an

addition of Rs.1,20,96,250/- in respect of purchase of Gold,

Bullion and Rs.10,00,38,042/- towards purchase of new

ornaments. This resulted into a total disallowance of Rs.11.21

crore u/s.40A(2) of the Act. The assessee challenged the

action of the AO contending before the ld. first appellate

authority that the AO applied the rates at the close of the day

for working out the excessive payments and conveniently

ignored other transactions in which the assessee made

purchases at lower than such standard rates at the close of the

day. As against excess paid calculated by the AO at Rs.11.21

crore, the assessee submitted that in the same way, the AO’s

calculation depicted lower payments at Rs.31.14 crore. It was

thus urged that no addition could have been made as the

3 ITA Nos. 963 and 1178/PUN/2016 M/s. Rajmal Lakhichand

assessee, in fact, made lower payments for purchase of Gold,

Bullion and Gold ornaments by Rs.19.92. crore on overall

basis. The ld. CIT(A) got convinced with the submissions

advanced on behalf of the assessee. He thus deleted the

addition u/s.40A(2) of the Act. He, however, noted that the

assessee’s transaction with its sister concerns were mostly

fictitious without delivery as was apparent from the

assessments made for the immediately preceding assessment

year and other group concerns. He, therefore, held that the GP

rate declared by the assessee at 0.54% could not be accepted

on the ground that the transactions were fictitious. He,

directed the AO to apply GP rate of 0.80% on total sales of

Rs.2,302 crore declared by the assessee. This resulted into a

fresh addition of Rs.5,89,29,258/-. The assessee is aggrieved

by the application of GP rate at 0.80% and making the

addition of Rs.5,89,29,258/-, whereas the Revenue is

aggrieved by the deletion of addition of Rs.11.21 crore made

by the AO u/s.40A(2) of the Act.

relevant material on record. It is seen that the AO as well as

the ld. CIT(A) have followed their respective actions for the

4 ITA Nos. 963 and 1178/PUN/2016 M/s. Rajmal Lakhichand

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.

against confirmation of addition amounting to

Rs.2,07,84,694/- u/s.2(22)(e) of the Act.

5 ITA Nos. 963 and 1178/PUN/2016 M/s. Rajmal Lakhichand

assessee to have received loans from M/s. Manraj Jewellers

Pvt. Ltd. and M/s. R.L. Gold Pvt. Ltd., with opening balances

at Rs.37.67 crore and Rs.42.76 crore respectively and

corresponding closing balances at Rs.55.69 crore and Rs.60.13

crore respectively. Considering the fact that he had made a

similar addition in the preceding year, the AO made an

addition of Rs.2,07,48,694/-, being, the amount of deemed

dividend of Rs.1.18 crore in respect of M/s. Manraj Jewellers

Pvt. Ltd. and Rs.89.01 lakh in respect of M/s. R.L. Gold Pvt.

Ltd. The ld. CIT(A) sustained the addition, against which the

assessee has come up in appeal before the Tribunal.

relevant material on record, it is observed that similar issue

came up for consideration before the Tribunal in assessee’s

own case for the A.Y. 2010-11. A detailed discussion has

been made in the order for such year and eventually the matter

has been restored to the file of AO for a fresh a decision.

Admittedly, the facts and circumstances of the ground for the

instant year are similar to those of the preceding year.

Respectfully following the precedent, we set-aside the

6 ITA Nos. 963 and 1178/PUN/2016 M/s. Rajmal Lakhichand

impugned order on this score and remit the matter to the file of

AO for deciding this issue in conformity with the directions

given by the Tribunal in its order for the preceding year.

disallowance of interest of Rs.3,01,295/- u/s.36(1)(iii) of the

Act.

preceding year as well and the Tribunal was pleased to decide

it against the assessee. In view of the candid admission made

by the ld. AR, we countenance the impugned order on this

score. This ground is not allowed.

for statistical purposes and that of the Revenue is dismissed.

Order pronounced in the Open Court on 07th February, 2019.

Sd/- Sd/- (VIKAS AWASTHY) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; �दनांक Dated : 07th February, 2019 सतीश

7 ITA Nos. 963 and 1178/PUN/2016 M/s. Rajmal Lakhichand

आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to: अ�ेिषत

अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. आयकर आयु�(अपील) / 3. The CIT (Appeals)-2, Nashik 4. The Pr.CIT-2, Nashik िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “ए” / DR 5. ‘A’, ITAT, Pune; गाड� फाईल / Guard file. // True copy // 6.

आदेशानुसार आदेशानुसार/ BY ORDER, आदेशानुसार आदेशानुसार

// True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune

Date 1. Draft dictated on 06-02-2019 Sr.PS 2. Draft placed before author 06-02-2019 Sr.PS 3. Draft proposed & placed JM before the second member 4. Draft discussed/approved JM by Second Member. 5. Approved Draft comes to Sr.PS the Sr.PS/PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *