ITO, JAIPUR vs. RAJESH KUMAR GUPTA, ALWAR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR Jh Hkkxpan] ys[kk lnL;] ds le{k BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER vk;dj vihy la-@ITA No. 1138/JP/2016 fu/kZkj.k o"kZ@Assessment Year : 2011-12 cuke Income Tax Officer, Rajesh Kumar Gupta, Vs. Ward-1(4), Prop.- M/s Hundiwala Alwar. Jewellers, Gol Market, Rajgarh, Alwar. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ABTPG 9506 F vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Tarun Mittal & Shri Manish Agarwal (CA) jktLo dh vksj ls@ Revenue by : Shri Raj Mehra lquokbZ dh rkjh[k@ Date of Hearing : 27/02/2017 mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 27/02/2017 vkns'k@ ORDER

PER: BHAGCHAND, A.M. This is an appeal filed by the revenue against the order dated 27/10/2016 passed by the ld. CIT(A), Alwar for the A.Y. 2011-12. The only issue involved in this appeal is against deleting the addition of Rs. 40,90,805/- on account of purchases made in contravention of provisions of

ITA 1138/JP/2016_ 2 ITO Vs Rajesh Kumar Gupta

Section 40A(3) of the Income Tax Act, 1961 (hereinafter referred as the

Act).

and derived income from sale and purchase of gold and silver jewellery.

The return of income of the year under consideration was filed on

31/07/2010 declaring total income of Rs. 2,96,630/-. The Assessing Officer

observed that the assessee had purchased in cash gold and silver for Rs.

40,90,805/- in the assessment year 2010-11. On being asked from the

assessee, he filed explanation, which was not accepted by the Assessing

Officer and thus addition of Rs. 40,90,805/- was made.

deleted the addition by holding as under:-

“5.3.2 I have considered the above mentioned facts of the case. It is important to note that the Assessee had filed its return of income in Form 4S which is applicable for income covered under section 44AD of the Act. The return was accepted and processed under section 143(1) of the Act. Even during reassessment proceedings under section 147/148 of the Act, this fact was never put into any doubt. The accepted turnover of the assessee is covered under section 44AD of the Act. Now the only bone of contention is whether the section 40A(3) would be applicable when the income

ITA 1138/JP/2016_ 3 ITO Vs Rajesh Kumar Gupta

declared is covered under the provisions of section 44AD of the Act? It would be worthwhile to reproduce provision of section 44AD of the Act; 44AD (1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head Profits and gains of business or profession. A plain reading of the section itself says that section 28 to section 43C of the I T Act that includes section 40A(3) is not applicable when the income is computed under section 44AD of the Act. The A.O has not concluded in the assessment order that the assessee is not eligible for section 44AD or the business undertaken by the assessee is not the eligible business under section 44AD of the Act. Since, the appellant is fulfilling all the necessary conditions under section 44AD of the Act, the benefit of section 44AD cannot be denied to the Assessee. Even during the course of survey operation under section 133 A of the Act, no additional sale/purchase were noticed and the gross receipts of Rs.47,48,300/- declared in the return of income was not disputed.

ITA 1138/JP/2016_ 4 ITO Vs Rajesh Kumar Gupta

It would be worthwhile to mention here that in the assessee own case for preceding years, on the similar issue (when the assessee declared the income under section 44AF of the Act, which is no longer available in the statute from A.Y 2011-12 as the core provision has been subsumed in section 44AD of the Act), the A.O had disallowed the expenses incurred in violation of section 40 A (3) of the Act. Hon’ble IT AT, Jaipur Bench had pronounced as under; “2.7 I have heard the rival contentions and perused the materials available on record. Respectfully following the decision of IT AT Ahmedabad Bench in the case of Gopalsingh R Rajpurohil v/s ACIT, (supra), I hold that once the assessee has filed his return u/s 44AF, no further disallowance can be made u/s 40(3) of the Act. It is noteworthy that in this case no trading irregularity was found and addition has been sustained only on technical issue of section 40A(3) of the Act. The presumptive system of tax u/s 44AF starts with non-obstante clause and overrides other provisions. In view thereof, there is no justification in making the addition which is deleted. Since the addition is deleted on merits, there is no need to go into alternative ground. Thus the appeal of the assessee is allowed. ” Thus in view of the factual matrix of the case and provisions of the Act and also taking into account Hon’ble ITAT, Jaipur Bench decision in the appellant’s own case on similar issue, the addition of Rs. 40,90,805/- on account of violation of section 40A(3) of the Act is deleted. Accordingly, appellant’s ground of appeal on the issue is allowed.

ITA 1138/JP/2016_ 5 ITO Vs Rajesh Kumar Gupta

supported the order of the Assessing Officer. At the outset, the ld AR of the

assessee has submitted that the similar issue was decided by the Hon’ble

ITAT (SMC) Jaipur Bench in assessee’s own case for the assessment year

2006-07 and 2007-08 vide its orders dated 12/04/2015 and 20/10/2016

passed in ITA Nos. 734/JP/2015 and 542/JP/2016 in favour of the

assessee. Therefore, he prayed to allow the appeal of the assessee.

the material available on the record. From perusal of records, it transpires

that the issue under consideration has already been decided by the

Coordinate Bench of the ITAT in assessee’s own case vide its orders dated

12/04/2015 and 20/10/2016 passed in ITA Nos. 734/JP/2015 and

542/JP/2016 for the assessment years 2006-07 and 2007-08. The relevant

portion of the order passed in ITA No. 734/JP/2015 is as under:-

“2.4 The ld. Counsel for the assessee assails the addition and the ld. counsel for the assessee filed the written submission in which the sums and substances raises following pleas. (i) According to Section 44AF, the assessee was to be assessed on presumptive basis i.e. @ 5% net profit and no further addition can be made. In this regard nothing is wrong in the trading activities and there has been found a technical issue of Section 40A(3) of the Act. (ii) Section 44AF begins with a non-obstante clause and specifically bars the application of provisions of Section 28 to 43C which includes Section 40A(3) as well. Therefore, it is clear that

ITA 1138/JP/2016_ 6 ITO Vs Rajesh Kumar Gupta when the has declared his income u/s 40A(3) of the Act, no further disallowance u/s 40A(3) can be made, (iii) The ld. AR relied on the case of ITAT Ahemdabad Bench in the case of Gopalsingh R Rajpurohit vs. ACIT, 94 TTJ 865 wherein it has been held that once the return is filed u/s 44AF no further disallowance could be made u/s 40A(3) of the I.T. Act 2.5 Adverting to alternative ground, the ld. Counsel for the assessee contends that since all the parties from whom the purchases were made were residing in villages and having no banking facilities because of which they had insisted the assessee for making payment in cash towards the sale of their personal ornaments to the assessee and thus it is clear the case of the assessee is clearly covered by Rule 6DD(g) of the Income-tax Rules, 1962 inasmuch as the exceptional circumstances specified thereunder existed in the case of assessee and that being so, no addition u/s 40A(3) of the Act could have been made. Reliance is placed by the ld. AR of the assessee as under:- (i) PACL India Ltd. vs. ACIT , 38 DTR 1 (Jaipur ) (ii) CIT vs. Interseas, 40 DTR 143 (Ker.) (iii) Shree Salasar Overseas v DCIT 107 DTR 225 (Jaipur) 2.6 The ld. DR is heard. 2.7 I have heard the rival contentions and perused the materials available on record. Respectfully following the decision of ITAT Ahemdabad Bench in the case of Gopalsingh R Rajpurohit vs. ACIT, (supra), I hold that once the assessee has filed his return u/s 44AF, no further disallowance can be made u/s 40A(3) of the Act. It is noteworthy that in this case no trading irregularity was found and addition has been sustained only on technical issue of Section 40A(3) of the Act. The presumptive system of tax u/s 44AF starts with non- obstante clause and overrides other provisions. In view thereof, there

ITA 1138/JP/2016_ 7 ITO Vs Rajesh Kumar Gupta is no justification in making the addition which is deleted. Since the addition is deleted on merits, there is no need to go into alternative ground. Thus the appeal of the assessee is allowed.” Since the issue under consideration is covered in favour of the assessee by

the order of the ITAT, Jaipur Bench in assessee’s own case, therefore, I

concur with the order of the ld. CIT(A), who deleted the addition made by

the Assessing Officer. Accordingly, the appeal of the revenue is dismissed.

Order pronounced in the open court on 27/02/2017.

Sd/- ¼Hkkxpan½ (BHAGCHAND) ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 27th February, 2017 *Ranjan आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- The ITO, Ward-1(4), Alwar. 1. izR;FkhZ@ The Respondent- Shri Rajesh Kumar Gupta, Alwar. 2. vk;dj vk;qDr@ CIT 3. vk;dj vk;qDr¼vihy½@The CIT(A) 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No. 1138/JP/2016) 6. vkns'kkuqlkj@ By order,

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