KAILASH KANHAIYALAL GIDWANI,,SANGLI vs. ASSISTANT COMMISSIONER OF INCOME-TAX,,

आदेश / ORDER PER R.S.SYAL, VP :

3 Kailash K. Gidwani and Sunil K. Gidwani was dealing with the taxability of Rs.13,12,990/-, being, gross profit from Turmeric trading and canvassing a view about the non-genuineness of the Turmeric trading activity, the assessee submitted that Mahalaxmi Marketing, Sangli with its proprietor Mr. Bharat Jaypal Nilakhe (in short ‘Bharat Nilakhe’) was involved in the business of purchase and sale of Turmeric on behalf of the assessee. The AO observed that there were numerous entries of cash deposits in the bank account of Sh. Bharat Nilakhe. He recorded the statement of Sh. Bharat Nilakhe u/s.131 of the Act, who admitted that he was engaged in the trading of Turmeric on commission basis by explaining that he purchased goods from farmers and then sold to various traders on behalf of the assessee. After deducting commission at 1%, he paid the profit to the assessee. It was further explained that the huge amounts of cash deposits in his bank account represented advance receipts from traders and difference in sale and purchase bills. The AO observed that Sh. Bharat Nilakhe paid Rs.17,67,880/- to the assessee by means of some cheques against which cash was deposited prior to such issuance of cheques. The AO opined that the amount of Rs.17,67,880/- was nothing but the 4 Kailash K. Gidwani and Sunil K. Gidwani assessee’s income u/s.68 of the Act. He, therefore, made separate addition of Rs.17,67,880/-. The ld. CIT(A) confirmed these two additions.

Thereafter, there is deduction towards Commission and Hamali with the gross profit coming to Rs.12,60,590/-. Then, the assessee claimed deduction towards Indirect expenses, namely, Petrol, Professional fees and Vehicle expenses etc. and ultimately came out with a figure of net profit of Rs.8,40,123/- This amount of Rs.8.40 lakh was offered by the assessee for taxation. The assessee’s case is that such income was mainly earned from purchase and sale of turmeric, being, the business activity carried on through Sh. Bharat Nilakhe, who was making purchases and sales on behalf of the assessee and paying the net profit to the assessee. In support of the transactions, the assessee furnished all the purchase and sale bills of turmeric. The AO rejected the contention on the ground that the assessee could not furnish L.R. Receipt

5 Kailash K. Gidwani and Sunil K. Gidwani Numbers, Freight/Transport receipts etc. The assessee elaborated the above modus operandi of his business, which was also supported by Sh. Bharat Nilakhe in his statement recorded by the AO u/s.131 of the Act corroborating that he was making purchase and sale transactions of Turmeric on behalf of the assessee and was remitting net amount after deducting his commission at 1%. The AO repelled the statement given by Sh. Bharat Nilakhe without assigning any justifiable reason. During the course of hearing before the Tribunal on an earlier occasion, the ld. AR submitted that Sh.

Bharat Nilakhe carried out similar business activity of purchase and sale of Turmeric for various traders at Sangli, running into more than 100. The ld. DR was directed to call for a status report from the concerned AOs about the treatment of such turmeric business in the hands of such more than 100 traders who carried on the business in similar fashion through Sh. Bharat Nilkahe. A report dated 15-11-2021 has been filed on behalf of the Revenue in which it has been admitted that the assessments of about 100 assessees were reopened by various Assessing Officers at Sangli on account of their trading transactions with Sh. Bharat Nilakhe, which have been 6 Kailash K. Gidwani and Sunil K. Gidwani completed by the respective AOs “without making any addition to the returned income”. It has further been stated that all of them substantiated their cases with relevant evidence, which the assessee could not. I am unable to appreciate the view point of the AO in making addition of the gross commission in the hands of the assessee alone on the ground that the transactions with Sh. Bharat Nilakhe were not genuine, when similar transactions undertaken by him with around 100 traders situated at Sangli were accepted by the respective AOs as genuine. Once the transactions relating to Turmeric trading activity were fully disclosed by the assessee with the corresponding Profit of Rs.8.40 lakh, I am unable to comprehend the view point of the AO that the entire gross commission of Rs.13,12,990/- was chargeable to tax. Here is a case in which the assessee suo motu offered income from Turmeric trading activity at Rs.8.40 lakh. The AO has not only taxed this income but also made an addition of Rs.13.12 lakh on account of gross commission income from Sh. Bharat Nilakhe. He went a step further by also adding a sum of Rs.17.67 lakh, when received from Sh. Bharat Nilakhe on account of profit from sale and purchase of turmeric, which 7 Kailash K. Gidwani and Sunil K. Gidwani also included a sum of Rs.4,54,800/- in the name of Sh.

Kailash Gidwani HUF account. In view of the fact that the transactions of the assessee concerning purchase and sale of Turmeric were genuinely conducted through Sh. Bharat Nilakhe, in the same way in which he did with other more than 100 traders in Sangli, genuineness of all of which has been accepted by the Department, I am of the considered opinion that there is no logic in making or sustaining the additions of Rs.13.12 lakh and Rs.17.67 lakh in the hands of the assessee, which are just off shoot of such a trading activity. These additions are directed to be deleted.

ITA No.326/PUN/2017 – Sunil K. Gidwani :

9 Kailash K. Gidwani and Sunil K. Gidwani the assessee declared total income of Rs.12,08,340/-, mainly derived from Turmeric trading. The AO made additions towards the gross amount of commission as income from undisclosed sources u/s.68 of the Act and also the amount received from Sh. Bharat Nilakhe in the same way as he did in the case of Sh. Kailash K. Gidwani. The ld. CIT(A) partly sustained the same.