ITO, WARD-2, HANUMANGARH vs. SMT. LALITA SARAF , HANUMANGARH TOWN

These appeals by the Department and Cross Objections by the assessee are directed against the separate orders each dated 31.08.2018 of Ld. Commissioner of Income Tax (Appeals), Bikaner.

Hanumangarh in ITA NO. 551/Jodh/2018 and C.O. No. 10/Jodh/2019 for the A.Y. 2010-11.

(a) where the Constitutional validity of the provisions of an Act or Rule is under challenge, or (b) where Board’s order, Notification, Instruction or Circular has been held to be illegal or ultra vires, or (c) where Revenue Audit objection in the case has been accepted by the Department, or (d) where addition relates to undisclosed foreign income/undisclosed foreign assets including financial assets/undisclosed foreign bank account. (e) where addition is based on information received from external sources in the nature of law enforcement agencies such

as CBI/ED/DRI/SFIO/Directorate General of GST Intelligence (DGGI).

(f) cases where prosecution has been filed by the department and is pending in the court.

Appeals/SLPs in Income-tax Monetary S No matters Limit (in Rs) 1 Before Appellate Tribunal 20,00,000/- 2 Before High Court 50,00,000/- 3 Before Supreme Court 1,00,00,000/-

It is clarified that an appeal should not be filed merely because the tax effect in a case exceeds the monetary limits prescribed above. Filing of appeal in such cases is to be decided on merits of the case.

(A — B) + (C — D) where,

A = the total income assessed as per the provisions other than the provisions contained in section 115JB or section 115JC (herein called general provisions);

B = the total income that would have been chargeable had the total income assessed as per the general provisions been reduced by the amount of the disputed issues under general provisions;

C = the total income assessed as per the provisions contained in section 115JB or section 115JC; D = the total income that would have been chargeable had the total income assessed as per the provisions contained in section 115JB or section 1I5JCwas reduced by the amount of disputed issues under the said provisions:

However, where the amount of disputed issues is considered both under the provisions contained in section 115JB or section 115JC and under general provisions, such amount shall not be reduced from total income assessed while determining the amount under item D.

provisions of sub section (4) of section 268A of the Income-tax Act, 1961 which read as under :

“(4) The Appellate Tribunal or Court, hearing such appeal or reference, shall have regard to the orders, instructions or directions issued under sub-section (1) and the circumstances under which such appeal or application for reference was filed or not filed in respect of any case.”

(a) Where the Constitutional validity of the provisions of an Act or Rule is under challenge, or

(b) Where Board’s order, Notification, Instruction or Circular has been held to be illegal or ultra fires, or

(c) Where Revenue Audit objection in the case has been accepted by the Department, or

(d) Where the addition relates to undisclosed foreign assets/ bank accounts.

references to High Courts and SLPs/ appeals before Supreme Court below the monetary limit of Rs. 50 lakhs and Rs. 1 Crore respectively should be pursued for dismissal as withdrawn/ not pressed. References before High Court and SLPs/ appeals below these limits may not be considered henceforth. 13. This Circular will apply to SLPs/ appeals/ cross objections/ references to be filed henceforth in SC/HCs/Tribunal and it shall also apply retrospectively to pending SLPs/ appeals/ cross objections/references. Pending appeals below the specified tax limits in pare 3 above may be withdrawn/ not pressed. 14. The above may be brought to the notice of all concerned. 15. This issues under Section 268A of the Income-tax Act 1961.” 7. From Clause 12 & 13 of the above said circular it is clear that these instructions are applicable to the pending appeals also and as per clause 13, there is clear cut instruction to the department to withdraw or not to press the appeals filed before the ITAT wherein tax effect is less than Rs.20,00,000/-. These instructions are operative retrospectively to the pending appeals.

The Ld. Pr. CIT was not competent to authorize 1) filing of 2nd appeal before ITAT as the tax effect involved is less than 20 lakhs.

2) On the facts and in the circumstances of the case the Ld. CIT(A) has erred in sustaining addition of Rs. 2,50,000/- in the trading results without

adequate justification and in total disregard to the fact that there was not a single amount of purchase or sale of goods which remained unrecorded.

The Assessing Officer added 25% of the aforesaid purchases amounting to

Rs. 21,29,732/- in the income of the assessee.

submitted that the Assessing Officer was not justified in making the addition

of Rs. 21,29,732/- as the material purchased from two parties was recorded in

the purchase register and purchase bills were filed before the Assessing

Officer. The assessee also furnished copies of the bills, copies of ledger

account and confirmations of accounts of the concerned parties before the Ld.

CIT(A) and submitted that the payments were made by account payee cheques

and that the details such as cheque numbers and dates had been given to the

Assessing Officer.

observed that he had called for and carefully perused the assessment record

and found that documents as mentioned by the assessee relating to the

purchases made from M/s Bhoomi Sales Corporation and M/s Saj Enterprises

were filed during the course of assessment proceedings also, as such the

assessee discharged the primary onus cast upon him to establish the

genuineness of the purchases which were sufficient to establish that the

purchases / transactions done were genuine. He also observed that the

Assessing Officer accepted the sales as genuine and when the sales had been

accepted as genuine then how he could have held the corresponding purchases

as bogus. He also observed that the payments were made through banking

channels by cheque and it was not the case that the assessee did not maintain the stock register or quantitative details. The Ld. CIT(A), however, sustained the addition of Rs. 2,50,000/- by observing as under;_

“In the instant case, it may be noted that purchases are made to inflate the purchases prices and to save the taxes on such purchases, thus to cover that hidden income, a reasonable disallowance is required to be made in the light of judicial decisions discussed above. In the present case, in my considered opinion, a disallowance of Rs.2,50,000/- would be reasonable to cover up hidden profit in these purchases. The AO is directed to make addition of Rs.2,50,000/- instead of Rs.21,29,732/-. The appellant partly succeeds on this ground.”

level of the Assessing Officer who had not found any hidden profit,

therefore, the additions sustained by the Ld. CIT(A) at Rs. 2,50,000/- was not

justified.

assessment order passed by the Assessing Officer and reiterated the

observations made therein. It was further submitted that an information was

received form VAT Department, Mumbai that the assessee had made

purchases from the parties who were only entry providers and Assessing

Officer found that the assessee had shown purchases from M/s Bhoomi

Sales Corporation and M/s Saj Enterprises who provided the accommodation

entries only without making actual sales or delivery of goods. It was

contended that the assessee could not produce the above parties so, the

Assessing Officer made the addition @ 25% of the bogus purchases,

therefore, the additions sustained by the Ld. CIT(A) was fully justified. It

was further submitted that the Mumbai Bench of the Tribunal in the case of

‘Ratnagiri Stainless (P) Ltd Vs. ITO reported at (2017) 164 ITD 136 upheld

the gross profit of Rs. 12.5% as against 4.3% declared by the assessee i.e.

around three times of the bogus purchases while in the case of assessee the

GP declared was at 3.01%. Therefore, no further relief is to be granted to the

assessee.

material available on record. In the present case, it is noticed that the

Assessing Officer applied net profit rate of 25% on the purchases of Rs.

85,19,926/-. The Ld. CIT(A) sustained the addition of Rs. 2.50 lacs out of the addition of Rs. 21,29,732/- made by the Assessing Officer. In the instant

case, it is also noticed that the Ld. CIT(A) clearly stated in the impugned

order at page No. 9 that all the details and evidences were filed before the

Assessing Officer but those were not considered. He also mentioned at page

No. 8 of the impugned order that he had called and carefully perused the

assessment record and found that the documents in the form of copies of

bills, copies of ledger and confirmation of accounts received from M/s

Bhoomi Sales Corporation and M/s Saj Enterprises were filed during the

course of assessment proceedings. The Ld. CIT(A) mentioned that the

assessee by filing various details of evidences in respect of purchases from

the aforesaid parties, had discharged the primary onus cast upon him to

establish the genuineness of the purchases. He also mentioned that the

Assessing Officer accepted the sales as genuine and that when the sales had

been considered as genuine then how could Assessing Officer doubt the

corresponding purchases without establishing the same as bogus. In the

present case, the assessee also maintained the stock register and the payments

were made by cheques though banking channels. therefore, the addition

sustained by the Ld. CIT(A) amounting to Rs. 2.50 lacs to cover up the

hidden profit in the purchases was not justified particularly when nothing

was brought on record to substantiate that the purchase were made to inflate

the purchase price. In view of the aforesaid discussion, the additions

sustained by the Ld. CIT(A) is deleted.

(Order Pronounced in the Court on 06.05.2019)

Sd/- (N.K. SAINI) Vice President Dated : 06. 05.2019 “आर.के.” आदेशक���त�ल�पअ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकरआयु�त/ CIT 4. आयकरआयु�त (अपील)/ The CIT(A) 5. �वभागीय��त�न�ध, आयकरअपील!यआ�धकरण, च$डीगढ़/ DR, ITAT, Jodhpur 6. गाड'फाईल/ Guard File

आदेशानुसार/ By order सहायकपंजीकार/ Assistant Registrar