SHRI SANDEEP JAIN, Jaipur v. ITO, Jaipur

ITA 529/JPR/2011 | 2006-2007
Pronouncement Date: 21-10-2016 | Result: Partly Allowed

Appeal Details

RSA Number 52923114 RSA 2011
Assessee PAN ADPPJ8919Q
Bench Jaipur
Appeal Number ITA 529/JPR/2011
Duration Of Justice 5 year(s) 4 month(s) 20 day(s)
Appellant SHRI SANDEEP JAIN, Jaipur
Respondent ITO, Jaipur
Appeal Type Income Tax Appeal
Pronouncement Date 21-10-2016
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 21-10-2016
Assessment Year 2006-2007
Appeal Filed On 31-05-2011
Judgment Text
VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCHES JAIPUR JH HKKXPAN] YS[KK LNL; OA JH YFYR DQEKJ] U;KF;D LN L; DS LE{K BEFORE: SHRI BHAGCHAND AM & SHRI LALIET KUMAR JM VK;DJ VIHY LA-@ ITA NO. 529/JP/2011 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2006-07 SANDEEP JAIN KOTAHWALA BUILDING TRIPOLIYA BAZAR JAIPUR. CUKE VS. INCOME TAX OFFICER WARD 1(3) JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ADPPJ 8919 Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 492/JP/2011 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2006-07 INCOME TAX OFFICER WARD 1(3) JAIPUR. CUKE VS. SANDEEP JAIN PROP.- M/S SANDEEP JEWELLERS KOTAHWALA MARKET TRIPOLIYA BAZAR JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ADPPJ 8919 Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MAHENDRA GARGIEYA (ADV) JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.A. VERMA (ADDL.CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 24/08/2016 MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 21/10/2016 VKNS'K@ ORDER PER: LALIET KUMAR J.M. THESE ARE THE CROSS APPEALS ONE BY THE ASSESSEE AN D ANOTHER BY THE REVENUE ARISE AGAINST THE ORDER DATED 14/02/201 1 PASSED BY THE LD ITA 529 & 492/JP/2011_ SANDEEP JAIN VS ITO 2 CIT(A)-I JAIPUR FOR THE A.Y. 2006-07 WHEREIN THE EF FECTIVE GROUNDS OF ASSESSEE AS WELL AS REVENUES APPEALS ARE REPRODUCED AS UNDER:- GROUNDS OF ASSESSEES APPEAL:- 1. THE IMPUGNED ADDITIONS AND DISALLOWANCES MADE IN THE ORDER U/S 143(3) OF THE ACT DATED 31.12.2008 AR E BAD IN LAW AND ON FACTS OF THE CASE FOR WANT OF JURISDICTION AND VARIOUS OTHER REASONS AND HENCE TH E SAME KINDLY BE DELETED. 2. RS. 45 00 000/-:- THE LD. CIT(A) ERRED IN LAW AS WE LL AS ON THE FACTS OF THE CASE IN MAKING ADDITION U/S 69 OF THE ACT AS UNDISCLOSED INCOME ALLEGING THE PURCHASES MADE OUT OF THE UNDISCLOSED SOURCES. THE ADDITION SO MADE AND CONFIRMED BY THE LD. CIT(A) BEING CONTRARY TO THE PROVISIONS OF LAW AND FACTS HENCE THE ENTIRE ADDITION KINDLY BE DELETED. 3. RS. 2 30 658/-:- THE LD. CIT(A) ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE IN CONFIRMING THE ESTIMATI ON OF THE SALE AT A HIGHER FIGURE AND THUS THEREBY CONFIRMING THE TRADING ADDITION. THE TRADING ADDITIO N SO MADE AND CONFIRMED BEING CONTRARY TO THE PROVISIONS OF LAW AND FACTS KINDLY BE DELETED. 4. RS. 33 479/-: THE LD. CIT(A) ERRED IN LAW AS WELL A S ON THE FACTS OF THE CASE IN PARTLY CONFIRMING THE DISALLOWANCE OF THE FOLLOWING EXPENSES: S. NO. HEAD OF EXPENSES EXPENSES CLAIMED ADDITION BY THE AO UPTO 10% SUSTAINED BY THE LD. CIT(A) 4.1 TELEP HONE EXPENSES RS. 88 643/ - (1/5 TH ) RS. 17 728/- RS. 8 864/ - 4.2 SHOP EXPENSES RS. 1 24 558/ - (1/5 TH ) RS. 24 912/- RS. 12 455/ - 4.3 CONVEYANCE EXP. DEP. ON (RS. 1 21 600 + RS. 1 53 540 + (20%) RS. 62 205/- RS . 12 160/ - ITA 529 & 492/JP/2011_ SANDEEP JAIN VS ITO 3 CAR INSURANCE ON CAR 35 883) I.E. RS. 1 21 600 TOTAL RS.1 04 845 RS.33 479/ - THE DISALLOWANCE SO MADE AND PARTLY CONFIRMED BY THE LD. CIT(A) BEING TOTALLY CONTRARY TO THE PROVISIONS OF LAW AND FACTS OF THE CASE KINDLY BE DELETED IN FULL . 5. THE AO FURTHER ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE IN CHARGING INTEREST U/S 234B OF THE ACT. THE APPELLANT TOTALLY DENIES ITS LIABILITY OF CHARGING ANY SUCH INTEREST. THE INTEREST SO CHARGED BEING CONTRA RY TO THE PROVISIONS OF LAW AND FACTS KINDLY BE DELETE D IN FULL. 6. THE APPELLANT PRAYS YOUR HONOUR INDULGENCES TO AD D AMEND OR ALTER OF OR ANY OF THE GROUNDS OF THE APPE AL ON OR BEFORE THE DATE OF HEARING. GROUNDS OF REVENUES APPEAL:- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW:- (I) THE LD. CIT(A) IS JUSTIFIED IN DELETING THE ADD ITION OF RS. 18 71 435/- MADE BY THE A.O. ON ACCOUNT OF U/S 40A(3). (II) THE LD. CIT(A) IS JUSTIFIED IN DELETING THE AD DITION OF RS. 55 60 614/- MADE BY THE A.O. ON ACCOUNT OF FUTURE TRADING LOSS. (III) THE ORDER IS PERVERSE AS IT IS CONTRARY TO THE EVIDENCE ON RECORD. FIRST WE TAKE ASSESSEES APPEAL 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE DE RIVED INCOME FROM MANUFACTURING AND TRADING OF GOLD AND SILVER ORNAME NTS IN THE NAME AND ITA 529 & 492/JP/2011_ SANDEEP JAIN VS ITO 4 STYLE OF M/S SANDEEP JEWELLERS JAIPUR. THE ASSESSEE FILED RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 31/10/20 06 DECLARING TOTAL INCOME OF RS. 2 21 630/-. GROUND NO. 1 OF THE APPEA L IS GENERAL IN NATURE AND NOT REQUIRED ANY ADJUDICATION. 2.1 THE 2 ND GROUND OF THE APPEAL IS AGAINST CONFIRMING THE ADD ITION OF RS. 45 00 000/- ON ACCOUNT OF UNDISCLOSED SOURCES. DURING SCRUTINY PROCEEDINGS OF BOOKS OF ACCOUNT OF THE ASSESSEE TH E AO OBSERVED THAT 6 BILLS OF DIFFERENT PARTIES TOTALING TO RS.97 73 478 /- WERE NOT RECORDED IN THE BOOKS OF ACCOUNTS. THE ASSESSING OFFICER OBSERV ED THAT FOR THESE PURCHASES PAYMENTS WERE MADE IN CASH WHICH WAS NOT REC ORDED IN THE BOOKS OF ACCOUNTS AND THEREFORE TO THAT EXTENT CA SH PAID WAS CONSIDERED AS INCOME FROM UNDISCLOSED SOURCES. THE ASSESSING OFFICER HOWEVER HAS CONSIDERED ONLY PEAK OF THESE TRANSACTI ONS AND ACCORDINGLY AN ADDITION OF RS. 45 LACS WERE MADE U/ S 69 OF THE INCOME TAX ACT 1961 (IN SHORT THE ACT). MOST OF THESE PURC HASES MADE ARE SHOWN FROM M/S NAMAN GOLD CORP. THESE BILLS WERE FOUN D IN FILE IMPOUNDED BY THE DDIT(INV.). TILL THE FIXED DATE OF HEARING NO EXPLANATION WAS OFFERED AND ONLY ON THE NEXT DATE I. E. 29.12.08 AN AFFIDAVIT WAS FILED ON BEHALF OF M/S NAMAN GOLD CORP . STATING THAT NEITHER ANY GOODS WERE SUPPLIED NOR ANY PAYMENT WAS RECEIVED BY THE ITA 529 & 492/JP/2011_ SANDEEP JAIN VS ITO 5 PERSON FOR M/S NAMAN GOLD CORP. THE AFFIDAVIT WAS SIG NED BY ONE SHRI NAMAN WHOSE POSITION IN THE CONCERN WAS NOT KNOWN. TH E SIGNATURE DID NOT TALLY WITH THE SIGNATURE ON CONFIRMATION OF COPY OF ACCOUNT. VERIFICATION OF THE PERSON WAS NOT DONE. THESE DETAIL S WERE PRODUCED BEFORE THE DDIT(INV.) BY THE APPELLANT 2 YEARS BA CK. NO FURTHER OPPORTUNITY WAS GIVEN AS BY THE GIVEN DATE ON 30.12. 08 THE PERSON WHO HAS PUT SIGNATURE ON THE AFFIDAVIT COULD NOT BE PRO DUCED. THE APPELLANT SHRI SANDEEP JAIN HAS ADMITTED BEFORE THE DDIT(INV) IN HIS STATEMENT RECORDED U/S 131 THAT M/S SANDEEP JEWELLERS WAS INDUL GING INTO PURCHASES AND SALES OUTSIDE BOOKS OF ACCOUNTS. 3. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) W HO HAD UPHELD THE ORDER OF THE ASSESSING OFFICER BY OBSERVING AS UNDE R:- CONTENTION OF THE AR IS CONSIDERED. THE EXPLANATION OFFERED BY THE AR THAT IN HIS LINE OF TRADE BILLS ARE ISSUED AFTER TELEPHONIC TALK BUT THE ENTRIES ARE MADE ON R ECEIPTS OF GOODS ONLY CANNOT BE ACCEPTED AS VALID EXPLANATION TO THE NON RECORDING OF BILLS IMPOUNDED BY THE DDIT(INV.). REPLY TO THE SHOW CAUSE NOTICE ISSUED BY THE AO COULD NOT BE GIVEN WITHIN TIME ALLOWED AND THEREFORE ANY EXPLANA TION AT A LATER STAGE MAY ONLY BE CONSIDERED AS AN AFTER THOUGHT ONLY. FURTHER AFFIDAVIT FILED ON BEHALF OF M/S NAM AN GOLD CORP. IS OF NO VALUE AS THE APPELLANT FAILED TO EST ABLISH THE ITA 529 & 492/JP/2011_ SANDEEP JAIN VS ITO 6 IDENTITY OF THE PERSON ON WHOSE BEHALF THE AFFIDAVIT WAS FILED. IN WHAT CAPACITY THAT PERSON HAS SIGNED THE CERTIFICATE IS ALSO NOT KNOWN. NO PARTNER OF M/S NAM AN GOLD CORP. COULD BE PRESENTED BEFORE THE AO TO VERI FY THE CONTENTS OF AFFIDAVIT. AS THE APPELLANT FAILED TO P RODUCE ANY PERSON ON BEHALF OF M/S NAMAN GOLD CORP. AND NO DOCUMENTARY EVIDENCE IN SUPPORT OF HIS CLAIM COULD BE FILED THE PURCHASES FROM M/S NAMAN GOLD CORP. REMA INED UNVERIFIABLE. AFTER IMPOUNDING THE PURCHASE BILLS B Y THE DDIT(INV) THE APPELLANT GOT TIME OF 2 !4 YEARS BUT N O EXPLANATION WAS OFFERED. THE FACT OF ADMISSION BY SH. SANDEEP JAIN IN HIS STATEMENT U/S 131 RECORDED BEFO RE THE DDIT(INV) ACCEPTING HIS INDULGENCE IN MAKING PURCHAS E AND SALES OUTSIDE THE BOOKS IN HIS CASE OF M/S SAND EEP JEWELLERS CANNOT BE IGNORED. THE ADDITION OF PEAK AMO UNT OF RS.45 LACS WHICH IS BILL DATED 22.2.06 IS THERE FORE CONFIRMED AS UNDISCLOSED INCOME U/S 69. THE 1 ST GROUND OF APPEAL IS THUS DECIDED AGAINST THE APPELLANT. 4. NOW THE ASSESSEE IS IN APPEAL BEFORE US. THE LD. A R OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSING OFFICER H AS WRONGLY RELIED UPON THE STATEMENT RECORDED U/S 131 OF THE ACT BY T HE DDIT (INV) DURING THE ENQUIRY AND HAS FURTHER WRONGLY RELIED UP ON THE BILLS CONTAINING THE IMPOUNDED FILES. IT WAS SUBMITTED BY HIM THAT THE ASSESSING OFFICER HAS NOT PROVIDED THE COPY OF THE STATEMENT NOR HAS ITA 529 & 492/JP/2011_ SANDEEP JAIN VS ITO 7 REPRODUCED THE STATEMENT IN THE ASSESSMENT ORDER ON THE BASIS OF WHICH IT WAS CONCLUDED BY HIM THAT THE ASSESSEE HAS ADMITTED THAT HE WAS MAKING SALE AND PURCHASE OUTSIDE THE REGULAR BOO KS OF ACCOUNT. THE LD AR HAS ALSO SUBMITTED THAT FOR THE FIRST TIME T HE ASSESSING OFFICER HAS CALLED UPON THE ASSESSEE TO FILE THE REPLY IN RESPE CT OF THESE BILLS MENTIONED IN THE ASSESSMENT ORDER. HOWEVER THE ASSE SSEE HAS CATEGORICALLY REPLIED VIDE HIS LETTER DATED 22/12/2 008 WHEREIN IT WAS SUBMITTED AS UNDER:- 1. AS REGARDS NAMAN GOLD CORPORATION AND M/S NAMAN BUL LION CORP. IT IS SUBMITTED THAT NEITHER GOODS WERE' RECE IVED BY THE ASSESSEE NOR PAYMENTS WERE MADE TO THE PARTIES. NEI THER THE PARTIES HAVE ENTERED SUCH BILLS IN THEIR BOOKS OF AC COUNTS NOR HAS ASSESSEE ENTERED ANY BILL IN THE BOOKS OF ACCOUNTS. THE ACCOUNTS OF BOTH THE PARTIES ARE TALLIED. THIS SHOWS THAT ON LY BILLS WERE ISSUED BUT GOODS WERE NOT DELIVERED THEREFORE THER E WAS NO QUESTION OF MAKING ENTRY IN BOOKS OF ACCOUNTS. 2. AS REGARDS MRP JEWELLERS DELHI THE PROVISIONAL BILLS WAS SENT IN ROUND FIGURE BUT GOODS WERE NEITHER RECEIVED NOR PA YMENT WAS MADE. THEREFORE NO ENTRY WAS MADE IN THE BOOKS OF AC COUNTS. 3. AS REGARDS TRADITION JEWELLERS IT IS SUBMITTED T HAT GOODS WERE SOLD BY THE PARTY TO SHRI AJIT SINGH KNOWN TO THE ASSESS EE. SHRI AJIT SINGH HAS NOT PAID THE AMOUNT AND IN SUCH CIRCUMSTA NCES M/'S TRADITION JEWELLERS ISSUED BILL IN THE NAME OF THE ASSESSEE. THERE ITA 529 & 492/JP/2011_ SANDEEP JAIN VS ITO 8 WAS NO QUESTION OF ENTERING SUCH BILL IN THE BOOKS OF THE ASSESSEE AS NO PURCHASES WERE MADE BY THE ASSESSEE. 4. AS REGARDS MDR JEWELLERS THERE WAS A CLERICAL ER ROR ONLY. THE LD AR HAS FURTHER SUBMITTED THAT M/S NAMAN GOLD CORPORATION HAS FILED A LETTER ALONGWITH THE AFFIDAVIT STATING THERE IN THAT THE BILLS DATED 04/1/2006 22/02/2006 AND 30/03/2006 WERE ISSUED IN ANTICIPATION OF DELIVERY BUT NEITHER THE GOODS COULD BE SUPPLIED NO R THE PAYMENTS WERE RECEIVED BY THEM. IT WAS FURTHER SUBMITTED THAT THE ASSESSING OFFICER ONCE HAD THE INFORMATION ABOUT THE NAME ADDRESS O F M/S NAMAN GOLD CORPORATION THEN IT IS THE DUTY OF THE ASSESSING O FFICER TO CONDUCT FURTHER INVESTIGATION OR ENQUIRY U/S 131(6) OF THE ACT. THE ASSESSING OFFICER HAS ONLY DONE THE ENQUIRY IN RESPECT OF TRAD ITION JEWELS WHICH HAS CONFERRED THAT THE AMOUNT OF RS. 4 16 301/- WHI CH WAS NOT REFLECTED IN THE ACCOUNTS OF THE SAID COMPANY. NO O THER ENQUIRY WERE CONDUCTED BY THE ASSESSING OFFICER BY ISSUING THE N OTICES U/S 131 AS HAS BEEN DONE IN THE CASE OF M/S TRADITION JEWELS AN D THE ASSESSING OFFICER. IN RESPECT OF THE OTHER FIRMS THE ACCOUNT S APPEARS TO BE SQUARED UP DUE TO THE REASON THAT THE AMOUNT OF PU RCHASE WAS MADE IN CASH. IT WAS SUBMITTED THAT ALL OF THE BASIS THE AS SESSING OFFICER HAS MADE THESE OBSERVATIONS IN THE ASSESSMENT ORDER IS NOT REFLECTED AS NO ENQUIRY WERE CONDUCTED U/S 131(6) OF THE ACT FROM TH E SAID COMPANIES ITA 529 & 492/JP/2011_ SANDEEP JAIN VS ITO 9 NAMELY M/S NAMAN GOLD CORPORATION AND MRP JEWELLERS DELHI. IT WAS SUBMITTED THAT THERE WAS NO CORROBORATIVE EVIDENCE F OUND DURING THE COURSE OF ASSESSMENT PROCEEDINGS WHICH RELATES THE ALLEGED PURCHASE OF BILL WITH THE PHYSICAL STOCK OF THE ASSESSEE POSSESS ION. IT WAS SUBMITTED THAT MERE POSSESSION OF BILL WITHOUT ANY CORRESPONDI NG AND CORROBORATIVE EVIDENCE DOES NOT MAKE OUT A CASE OF ADDITION U/S 69 OF THE ACT. IT WAS SUBMITTED THAT THE ASSESSING OFFICER HAS MADE NO EN QUIRY FROM M/S NAMAN GOLD CORPORATION. HOWEVER IT WAS SUBMITTED THA T IF THE ASSESSING OFFICER PRESUMED THAT UNRECORDED SALE OF THE ASSESSEE THEN THERE WAS UNRECORDED SALE OF THE SAID COMPANY WOULD B E THERE. SINCE NOTHING HAS BEEN INFERRED ABOUT UNRECORDED SALE OF M/S NAMAN GOLD CORPORATION THEREFORE IT WILL BE WRONG ON THE PART OF THE ASSESSING OFFICER TO INFER THAT THERE WAS UNRECORDED PURCHASES BY THE ASSESSEE. IT WAS FURTHER THAT THE ASSESSING OFFICER IS REQUIRED T O INDEPENDENTLY APPLY HIS MIND TO THE CASE AND SHOULD NOT BLINDLY RELIED UPON THE STATEMENT ALLEGEDLY RECORDED DURING THE ENQUIRY PROCEEDINGS C ONDUCTED BY THE DDIT (INV)-2 JAIPUR ON THE BASIS OF THE IMPOUNDED B ILLS. 5. AT THE OUTSET THE LD. DR HAS VEHEMENTLY SUPPORT ED THE ORDER OF THE LD. CIT(A) AND HAS FURTHER SUBMITTED THAT THE AD MISSION OF THE ASSESSEE DURING THE COURSE OF ENQUIRY BEFORE THE DD IT (INV.)-2 JAIPUR IS ITA 529 & 492/JP/2011_ SANDEEP JAIN VS ITO 10 A SELF SUFFICIENT EVIDENCE AND DO NOT REQUIRE ANY F URTHER CORROBORATION. IT WAS FURTHER SUBMITTED THAT THE STATEMENT WAS RECORDED BY THE DDIT ON 29/06/2006 DURING THE COURSE OF ENQUIRY AND THE AFF IDAVIT WAS FILED BY THE ASSESSEE OF M/S NAMAN GOLD CORPORATION ON 29/12 /2008. NO REFLECTION WAS MADE FROM 29/06/2006 TO 29/12/2008 IN RESPECT OF THE STATEMENT MADE BEFORE THE DDIT AND THE BILLS IMPOUND ED BY THE DDIT. IT WAS SUBMITTED THAT THE ORDER PASSED BY THE AUTHOR ITIES BELOW IS REQUIRED TO BE CONFIRMED. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN OU R VIEW THE CONTENTION OF THE ASSESSEE THAT NO ADDITION CAN BE MADE ON THE BASIS OF THE ORAL STATEMENT RECORDED BY THE DDIT DURING ENQUIRY IS DEV OID OF ANY MERIT AS IN INDIAN EVIDENCE ACT 1872 DOES NOT APPLY TO THE ASSESSMENT PROCEEDINGS AS HELD BY THE HONBLE CONSTITUTIONAL B ENCH IN THE CASE OF DHAKESHWARI COTTON MILLS LTD. VS. CIT (1954) 26 ITR 77 5. FURTHER IT WAS ALSO THE CASE BEFORE US THAT THE ADDITIONS WERE MADE NOT ON THE BASIS OF MERELY A STATEMENT BUT ALSO BILLS PRODUCED BY THE A SSESSEE HIMSELF DURING THE ENQUIRY PROCEEDINGS BEFORE THE DDIT. IN O UR VIEW THE AUTHORITIES BELOW HAVE RIGHTLY APPRECIATED THE FACT S OF THE CASE AND HAVE APPLIED THE CORRECT LAW WHILE CONCLUDING THAT THE INV ESTMENTS WERE MADE ITA 529 & 492/JP/2011_ SANDEEP JAIN VS ITO 11 OUTSIDE THE BOOK FOR THE AMOUNT OF RS. 45.00 LACS. THE ADMISSION OF THE ASSESSEE IS THE BEST EVIDENCE AND THE ASSESSEE CANN OT WRIGGLE OUT OF IT. MOREOVER THE CONTENTION OF THE ASSESSEE THAT THE C OPY OF THE STATEMENT WAS NOT PROVIDED TO HIM IN OUR VIEW IS FAR FROM TRUT H AS IS CLEAR FROM THE COMMUNICATION OF THE ASSESSEE HIMSELF WHEREIN IN ONE OF THE LETTER AT PAGE 9 OF THE PAPER BOOK DATED 28/12/2015 THE ASSE SSEE HAS SUBMITTED AS UNDER:- DURING THE COURSE OF ENQUIRY BEFORE DDIT JAIPUR TH E STATEMENTS ABOUT PARTNERSHIP WERE GIVEN UNDER THE IM PRESSION FOR BANK FINANCE THE SAME WERE TECHNICALLY INCORREC T BY BOTH THE PERSONS. THE READING OF THE ABOVE SAID PARAGRAPH CLEARLY SHOWS THAT THE ASSESSEE WAS AWARE OF THE STATEMENT AND THE CONTENTS THEREOF R ECORDED DURING THE ENQUIRY BEFORE THE DDIT JAIPUR. IN VIEW THEREOF THE ASSESSEE IN OUR VIEW HAS MADE THE INVESTMENT OUTSIDE THE BOOKS OF ACCOUNT AND THEREFORE THE APPEAL OF THE ASSESSEE ON THIS GROUND IS DISMISSED AND THE ORDER PASSED BY THE ASSESSING OFFICER AND LD. CIT(A) ARE CONFIRMED. 7. THE 3 RD GROUND OF THE APPEAL IS AGAINST CONFIRMING THE EST IMATION OF THE SALE AT A HIGHER FIGURE AND MADE TRADING ADD ITION. THE LD ASSESSING OFFICER OBSERVED THAT THE APPELLANT WAS FO UND WITH UNRECORDED PURCHASES. THE APPELLANT WAS NOT MAINTAINING ANY STOC K REGISTER AND ITA 529 & 492/JP/2011_ SANDEEP JAIN VS ITO 12 HUGE CASH PAYMENT HAS BEEN MADE AND THEREFORE AO INVOKED PROVISIONS OF SECTION 145(3) AND REJECTED BOOKS OF ACCOUNTS. DURING THE YEAR UNDER APPEAL ON TURNOVER OF RS.2909849898/- TH E GP DECLARED IS 0.30% AND NET PROFIT RATE COMES TO 0.01%. THE AO AF TER REJECTING BOOKS OF ACCOUNTS HAS ESTIMATED SALES AT RS.300 CRORES TH OUGH THE GP. RATE WAS ACCEPTED. THIS HAS RESULTED INTO TRADING ADDITION OF RS.2 30 658/-. 8. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) W HO HAD UPHELD THE ORDER OF THE ASSESSING OFFICER BY OBSERVING AS UNDE R:- CONTENTION OF THE AR IS CONSIDERED. NON MAINTENANC E OF STOCK REGISTER COUPLED WITH HUGE CASH PAYMENTS AND U N- VERIFIABLE PURCHASES ARE SUFFICIENT DEFECTS TO REJE CT THE BOOKS OF ACCOUNTS. ESTIMATION OF SALES AT A HIGHER FIGURE IN THE LIGHT OF UNRECORDED PURCHASES FOUND IS HEREBY CONFIRMED. THE TRADING ADDITION OF RS.230658/- BEING REASONABLE IS CONFIRMED. THE 2 ND GROUND OF APPEAL IS DECIDED AGAINST THE APPELLANT. 9. NOW THE ASSESSEE IS IN APPEAL BEFORE US. THE LD. A R OF THE ASSESSEE HAS REITERATED THE ARGUMENTS MADE BEFORE T HE LD. CIT(A) AND HAS FURTHER SUBMITTED THAT THE LAW U/S 145 STOOD AME NDED BY THE FINANCE ACT 1999-00 W.E.F. A.Y.00-01. THE AMENDED LAW U/S 145(3) PROVIDED THREE BASIS TO INVOKE THE SAME VIZ (I) WH ERE THE AO (HERE CIT ITA 529 & 492/JP/2011_ SANDEEP JAIN VS ITO 13 (A)) IS NOT SATISFIED ABOUT THE CORRECTNESS/COMPLET ENESS OF THE ACCOUNTS (II) WHERE THE METHOD OF ACCOUNTING PROVIDED IN SUB SEC. (1) IS NOT FOLLOWED OR (III) THE ACCOUNTING STANDARDS AS NOTIFI ED U/S 145(2) HAVE NOT BEEN FOLLOWED BY THE ASSESSEE. IT IS NOT DISPUTED TH AT THE ASSESSEE HAS MAINTAINED ALL THE BOOKS OF ACCOUNT CONSISTING OF C ASH BOOK LEDGER BANK BOOK JOURNAL BILLS/VOUCHERS SALES AND PURCH ASE REGISTERS ETC. THE ENTIRE SALES AND PURCHASE ARE FULLY VOUCHED. THE ACC OUNTS ARE AUDITED U/S 44AB OF THE ACT HOWEVER THERE APPEARS NO ADVER SE REMARK IN THE AUDIT REPORT. FURTHER ALL THE BOOKS OF ACCOUNTS WERE DULY PRODUCED BEFORE THE AO AS ADMITTED BY HIM AT PAGE 2 PARA 1 O F HIS ORDER THE ASSESSEE DID MAINTAIN STOCK REGISTER SHOWING ALL THE QUANTITATIVE DETAILS OF PURCHASE AND SALES ON DAY TO DAY BASIS AND THE S AME WERE ALSO PRODUCED BEFORE THE AO. KINDLY REFER LETTER DATED 2 2.12.08. NO SPECIFIC DEFECT HAS BEEN POINTED OUT. MINOR IRREGULARITIES EVEN ASSUMING WERE THERE CANNOT BE MADE A BASIS OF THE REJECTION OF T HE BOOKS OF ACCOUNTS OR OF TRADING ADDITION. KINDLY REFER PADAMPATH RAMG OPAL 76 ITR 719 (SC). THUS THERE WAS NO VALID BASIS AT ALL TO APPLY SEC.145 IN THIS CASE. HENCE THE SAME MAY PLEASE BE QUASHED AND THE ENTIR E TRADING ADDITION BE DELETED HERE ITSELF. ITA 529 & 492/JP/2011_ SANDEEP JAIN VS ITO 14 10. AT THE OUTSET THE LD. DR HAS VEHEMENTLY SUPPOR TED THE ORDER OF THE LD. CIT(A). 11. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IT WAS CONTENDED BY THE LD AR OF THE ASSESSEE THAT THE TRADING ADDITION OF RS. 2 30 658/- WERE MADE ON ASSUMPTION BASIS. IT WAS CONTENDED THAT THE ASSESSEE HAS NOT MADE ANY PURCHASE AND SALE OUTSIDE THE BOOKS OF ACC OUNT THEREFORE IT WAS SUBMITTED THAT THE ADDITION IS REQUIRED TO BE DE LETED. WE HAVE GONE THROUGH THE RECORDS IN OUR VIEW BOTH THE AUTHORITI ES BELOW WERE RIGHT IN MAKING THE ADDITION OF RS. 2 30 658/-. THE ASSESS ING OFFICER WAS NOT SATISFIED WITH THE CORRECTNESS AND COMPLETENESS OF T HE BOOKS OF ACCOUNT AND HAS THEREFORE INVOKED THE PROVISIONS OF SECTIO N 145(3) OF THE ACT AND THE ADDITION OF RS. 2 30 658/- WAS MADE TAKING T HE GP @ 0.30%. IN OUR VIEW THERE IS NO DISCREPANCY OR ERROR IN THE SA ID FINDING AND ACCORDINGLY THE GROUND OF APPEAL IS DISMISSED. 12. THE 4 TH GROUND OF THE ASSESSEES APPEAL IS AGAINST VARIOUS EXPENSES I.E. TELEPHONE EXPENSES SHOP EXPENSES CO NVEYANCE EXPENSE DEP. ON CAR AND INSURANCE ON CAR. THE ASSESSING OFFI CER OBSERVED THAT THE DISALLOWANCE OF RS. 17728/- WAS MADE OUT OF TELEP HONE EXPENSES OF RS.88643/-. DISALLOWANCE OF RS.24912/- WAS MADE OUT OF SHOP EXPENSES ITA 529 & 492/JP/2011_ SANDEEP JAIN VS ITO 15 OF RS.124558/-. DISALLOWANCE OF RS.62205/- WAS MADE O UT OF CONVEYANCE EXPENSES OF RS. 121600/- DEPRECIATION O N CAR OF RS. 153540/- AND INSURANCE ON CAR OF RS.35883/-. DISALL OWANCES WERE MADE ON ACCOUNT OF PROBABLE PERSONAL USE OR EXPENSES NOT FULLY VERIFIABLE. THE LD. CIT(A) HAS RESTRICTED THE DISALLOWANCES @ 10% BY OBSERVING THAT AFTER CONSIDERING SUBMISSION OF THE AR THE AO IS DIRECTED TO RESTRICT THE DISALLOWANCES TO 10% OF THE EXPENSES CLAIMED. AS A RESULT DISALLOWANCE OUT OF TELEPHONE EXPENSES IS REDUCED TO RS.8864/- SHOP EXPENSES TO RS.12455/- AND CONVEYANCE EXPENSES TO R S.12160/-. 13. NOW THE ASSESSEE IS IN APPEAL BEFORE US. THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE DISALLOWANCES HAVE B EEN MADE ON AD HOC BASIS SIMPLY ON MERE SUSPICION. NO SPECIFIC IN STANCE HAS BEEN GIVEN .IT IS SETTLED THAT A BUSINESSMAN IS THE BEST JUDGE TO TAKE CARE OF ITS OWN INTEREST & TO TAKE DECISIONS AND THE AO IS NOT SUPP OSED TO INTERVENE THEREIN NOR HE CAN REPLACE THE ASSESSEE. HE RELIED ON THE DECISION IN THE CASE OF T.T.PVT. LTD. V/S ITO (1980) 121 ITR 551 (KAR) CIT V/S UDHOJI SHRIKRISHNADAS (1983) 139 ITR 827 (MP) JK WOOLEN MA NUFACTURERS 72 ITR 612 (SC). THE AO HAS NOT AT ALL PROVIDED ANY BASI S. THE VEHICLES WERE USED EXCLUSIVELY FOR BUSINESSES PURPOSE. HENCE THE DISALLOWANCE BE DELETED IN FULL. ITA 529 & 492/JP/2011_ SANDEEP JAIN VS ITO 16 14. AT THE OUTSET THE LD. DR HAS VEHEMENTLY SUPPOR TED THE ORDER OF THE LD. CIT(A). 15. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN OU R VIEW THE LD. CIT(A) HAS ONLY SUSTAINED THE ADDITION OF RS. 33 479/- ON PRO-RATA BASIS I.E. RESTRICTING UP TO 10%. IN OUR VIEW ONCE THE BOOKS O F ACCOUNT HAVE NOT BEEN PROPERLY MAINTAINED BY THE ASSESSEE AND WERE RE JECTED BY THE ASSESSING OFFICER THEREFORE A LUMP SUM DISALLOWANC ES MADE BY THE LD. CIT(A) WAS IN ACCORDANCE WITH LAW AND ACCORDINGLY THIS GROUND OF APPEAL IS DISMISSED. 16. NOW WE TAKE REVENUES APPEAL 17. THE 1 ST GROUND OF THE REVENUES APPEAL IS AGAINST DELETION OF ADDITION OF RS. 18 71 435/- MADE BY THE ASSESSING O FFICER U/S 40A(3) OF THE ACT. THE ASSESSING OFFICER OBSERVED THAT WHILE DI SCUSSING THE GROUND NO. 1 OF THE ASSESSEES APPEAL IT WAS ESTABLISHED T HAT PURCHASES OF RS.9773478/- WERE UNRECORDED PURCHASES. FROM THE CON FIRMATIONS FILED IT WAS FOUND THAT EXCEPT IN THE BOOKS OF ACCOUNTS OF M/S TRADITION JEWELLS THESE PURCHASES WERE NOT REFLECTING IN THEIR ACCOUNTS. IN THE BOOKS OF ACCOUNTS M/S TRADITION JEWELLS PURCHASES OF RS.416301/- WERE ITA 529 & 492/JP/2011_ SANDEEP JAIN VS ITO 17 REFLECTED AS CREDIT SALES. AS THE PURCHASES MADE WER E MORE THAN RS.20000/- IN CASH IN EACH CASE THE AO INVOKED PRO VISIONS OF SECTION 145(3) AND MADE DISALLOWANCE @ 20% OF SUCH CASH PURCH ASES OF RS.9357177/- (RS.9773478-RS.416301/-). THIS HAS RESU LTED INTO AN ADDITION OF RS.1871435/- U/S 40A(3). 18. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING O FFICER THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WH O HAD DELETED THE ADDITION MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER:- ON THE BASIS OF CERTAIN BILLS THE AO INFERRED THAT THE APPELLANT HAS MADE CERTAIN PURCHASES WHICH WERE NOT FOUND RECOR DED IN THE BOOKS OF ACCOUNTS. THESE PURCHASES WERE THEREFOR E ADDED BY THE AO. HOWEVER THERE IS NO EVIDENCE ON RECORD TO ESTABLISH THAT THESE PURCHASES WERE MADE IN CASH. THE PROVISION S OF SECTION 40A(3) WILL NOT COME INTO PICTURE UNLESS IT IS CONCLUSIVELY ESTABLISHED THAT THE PURCHASES WERE MAD E AND PAYMENTS WERE MADE IN CASH OR OTHERWISE THEN BY ACCO UNT PAYEE CHEQUES OR DRAFT. IN THE PRESENT CASE THE PR OVISIONS OF SECTION 40A(3) DO NOT GET ATTRACTED. FOR THIS RELIA NCE IS PLACED ON THE DECISION OF DELHI HIGH COURT IN THE CASE OF CIT VS. ANAND SWAROOP KHANDELWAL (2009) 177 TAXMAN 450 (DEL). THE AO THEREFORE IS DIRECTED TO DELETE THE ADDITION O F RS.1871435/-. ITA 529 & 492/JP/2011_ SANDEEP JAIN VS ITO 18 19. NOW THE REVENUE IS IN APPEAL BEFORE US. THE LD. D R HAS SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 20. AT THE OUTSET THE LD AR OF THE ASSESSEE HAS RE ITERATED THE ARGUMENTS MADE BEFORE THE LD. CIT(A) AND HAS FURTHER SUBMITTED THAT FIRSTLY THE AO HAS ALREADY MADE SEPARATE ADDITION U/S 69 ON ACCOUNT OF UNRECORDED PURCHASES AND ALSO MADE A SEPARATE TRADI NG ADDITION AFTER REJECTING OF BOOKS OF ACCOUNT WHICH HAS RESULTED IN TO MULTI ADDITIONS. IN THESE CIRCUMSTANCES A SEPARATE DISALLOWANCE WAS UNFA IR AND ALSO WAS NOT LEGALLY PERMISSIBLE. THE LAW IS WELL SETTLED THAT WHERE ACCOUNTS HAVE BEEN REJECTED NO DISALLOWANCE U/S 40A(3) CAN BE MADE AND THERE IS A SERIES OF DECISIONS ON THIS ASPECT INCLUDING DECIS IONS BY THIS HONBLE BENCH AS WELL WHICH IS TAKING A CONSISTENT VIEW IN FA VOUR OF THE ASSESSEE. IN THIS REGARD HE RELIED ON THE DECISION IN THE CASE OF ITO VS. NARDEV KUMAR GUPTA (2013) 142 ITD 0303 (JP) (DPB 1-4 ) WHEREIN IT WAS HELD THAT WHEN ASSESSEE INCOME WAS ASSESSED BY E STIMATING PROFIT AFTER REJECTION OF BOOKS OF ACCOUNTS NO DISALLOWANC E CAN BE MADE SEPARATELY U/S 40A(3). HE ALSO RELIED ON THE FOLLO WING DECISIONS: CIT VS BANWARI LAL BANSHIDHAR (1998) 229 ITR 229 232 (ALL.) CIT VS. G.K. CONTRACTOR (2009) 19 DTR 305 (RAJ.) INDWELL CONSTRUC TIONS V CIT (1998) 232 ITR 776 (AP) MADDI SUDARSANAM OIL MILLS CO. V/S CIT (1959) 37 ITR ITA 529 & 492/JP/2011_ SANDEEP JAIN VS ITO 19 369 (AP) ECI ENGINEERING & CONSTRUCTION CO. LTD IN ITA NO. 2048/HYD/2011 SAMURAI TECHNO TRADING CO. (P) LTD. V/ S CIT (2010) 37 DTR 386 (KER). ITO V/S KENARAM SAHA & SUBHASH SAHA (2008) 116 TTJ 289 (KOL) (SB). HE HAS FURTHER SUBMITTED THAT IN AN Y CASE ON MERITS THE LD. CIT(A) HAS RIGHTLY SAID THAT THERE WAS NO EVIDENC E OF MAKING CASH PAYMENT. THE LD. AO HAS MERELY PRESUMED THE FACTS. UNLESS THE ASSESSEE IS ACTUALLY FOUND TO HAVE MADE CASH PURCHA SES NO DISALLOWANCE CAN BE MADE. HE RELIED ON THE DECISION IN THE CASE OF CIT VS. ANAND SWAROOP KHANDELWAL (2009) 177 TAXMAN 450/ 13 DTR 218 ( DEL) . THERE APART EVEN ASSUMING FOR A MOMENT THOUGH NOT ADMITT ED SOME CASH PAYMENT WAS MADE IT HAS TO BE ACCEPTED THAT IN TYPE AND NATURE OF TRANSACTIONS WHICH ARE UNRECORDED MAKING OF PAYMEN T IN CASH IS AN INHERENTLY UNAVOIDABLE REQUIREMENT BY THE PARTIES. HENCE THE LD. CIT(A) RIGHTLY DELETED THE ENTIRE DISALLOWANCE SO MADE. 21. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE AS SESSING OFFICER HAS PRESUMED THAT THE PURCHASES WERE MADE IN CASH AMOUNT ING TO RS. 93 57 177/- WITHOUT ANY EVIDENCE. THE LD. CIT(A) HAD E XAMINED THIS ISSUE AND FOUND THAT OUT OF RS. 97 73 448/- THE PU RCHASES WERE VERIFIED WITH REGARD TO M/S TRADITIONS JEWELLERS FOR THE AMOUN T OF RS. 4 16 301/-. ITA 529 & 492/JP/2011_ SANDEEP JAIN VS ITO 20 HOWEVER FOR THE REMAINING AMOUNT (PURCHASES MADE FR OM M/S NAMAN GOLD CORP.) THE DISALLOWANCES @ 20% WERE MADE U/S 40A (3) OF THE ACT. WE HAVE ALREADY DECIDED GROUND NO. 1 IN THE ASSESSE ES APPEAL. WHILE DECIDING THE ISSUE OF ADDITION OF RS. 45 00 000/- M ADE U/S 69 OF THE ACT THE PURCHASES MADE OUT ON UNDISCLOSED SOURCES WERE C ONFIRMED . ONCE WE HAVE HELD THAT THE PURCHASES WERE MADE OUT OF UNDI SCLOSED SOURCES AND WE HAVE CONFIRMED THAT THE PURCHASES WERE MADE AND THERE IS NO ENTRY IN THE RECORDS OF THE ASSESSEE TO SHOW THAT TH E PURCHASES WERE MADE BY ANY MODE OTHER THAN THE CASH THEREFORE TH E NECESSARY CONCLUSION WOULD BE PURCHASES OF RS. 45 00 000/- WER E MADE OUT OF UNDISCLOSED SOURCES IN CASH . SINCE WE HAVE HELD THA T THE PURCHASES WERE MADE OUT OF UNDISCLOSED SOURCES AS A CONSEQUEN CE TO THAT THEREFORE THE ADDITIONS ARE REQUIRED TO BE CONFIRM ED U/S 40A(3) OF THE ACT ON THE AMOUNT CONFIRMED BY US U/S 69 OF THE ACT . SINCE WE HAVE HELD AND DECIDED THE ADDITION OF RS. 45 00 000/- U/ S 69 OF THE ACT THEREFORE 20% OF THE SAID AMOUNT IS REQUIRED TO BE ADDED IN VIEW OF SECTION 40A(3) OF THE ACT AND ACCORDINGLY THIS GRO UND OF THE REVENUE IS PARTLY ALLOWED RESTRICTING TO THE ADDITION ONLY @ 20% ON RS. 45 00 000/-. 21.1 THE JUDGMENT RELIED UPON BY THE ASSESSEE IN RES PECT OF ITO VS. NARDEV KUMAR GUPTA AND CIT VS. ANAND SWAROOP KHANDELWA L (SUPRA) IN ITA 529 & 492/JP/2011_ SANDEEP JAIN VS ITO 21 OUR VIEW ARE NOT APPLICABLE TO THE FACTS AND CIRCUM STANCES OF THE PRESENT CASE. THE ORDER OF THE TRIBUNAL IN RESPECT OF ITO VS NARDEV KUMAR GUPTA (SUPRA) WAS IN RESPECT OF FACT THAT NO A DDITION CAN BE MADE AFTER ESTIMATING THE INCOME OF THE ASSESSEE I N OUR VIEW THAT JUDGMENT WAS ON ITS OWN FACT AND WE HAVE THE OCCASION TO EXAMINE THE JUDGMENT OF THE TRIBUNAL IN THE CASE OF CHAUDHARY BR OTHERS IN ITA NO. 1177/JP/2010 AND ALSO OF HONBLE HIGH COURT IN THE CASE OF G.K. CONTRACTORS (SUPRA) AND ALSO OF HONBLE GUJARAT H IGH COURT IN THE CASE OF CIT VS. HYNOUP FOOD AND OIL IND. (P) LTD. 290 ITR 702. SECTION 40A(3) DEALS WITH THE SITUATION WHERE THE ASSESSEE IN CURS ANY EXPENDITURE IN RESPECT OF WHICH THE PAYMENT IS MADE EXCEEDING RS. 20 000/-. IN THE PRESENT CASE WE HAVE ALREADY HELD THAT THE ASSESSEE HAS MADE INVESTMENTS OUTSIDE THE BOOKS OF ACCOUNT O F SUM OF RS. 45 00 000/- THEREFORE THE JUDGMENT CITED BY THE A SSESSEE IS NOT APPLICABLE. SIMILARLY THE JUDGMENT OF HONBLE DELH I HIGH COURT IN THE CASE OF CIT VS. ANAND SWAROOP KHANDELWAL (SUPRA) IS A LSO NOT APPLICABLE AS THE SAID JUDGMENT WAS ON ITS OWN FACTS AND THE FAC TS OF THE PRESENT CASE ARE ENTIRELY DIFFERENT THAN THE FACTS OF THE S AID CASE. IN THE CASE OF CIT VS. ANAND SWAROOP KHANDELWAL (SUPRA) THE TRIBUNAL HAS CONCLUSIVELY HELD THAT THE ASSESSING OFFICER COULD NOT PLACE ANY MATERIAL ITA 529 & 492/JP/2011_ SANDEEP JAIN VS ITO 22 ON RECORD TO SHOW THAT THE DOCUMENTS SO SEIZED REP RESENTED THE PURCHASED MADE BY THE ASSESSEE IN CASH IN THE PRES ENT CASE AS RECORDED BY US EARLIER WHILE ADJUDICATING GROUND NO. 1 OF ASSESSEES APPEAL WE HAVE FOUND THAT THE ASSESSEE HAD PRODUCED BILLS OF NAMAN GOLD CORP. AND THOSE BILLS WERE NOT VERIFIABLE AND T HEREFORE THE ADDITIONS WERE MADE. THE FACTS OF BOTH THE CASES ARE DIFFERENT THEREFORE WE HAVE NO HESITATION TO ALLOW GROUND OF R EVENUE ON THIS GROUND. ACCORDINGLY THIS GROUND OF REVENUE IS ALLO WED. 22. THE 2 ND GROUND OF THE REVENUES APPEAL IS AGAINST DELETION OF ADDITION OF RS. 55 60 614/- MADE BY THE ASSESSING O FFICER ON ACCOUNT OF FUTURE TRADING LOSS. THE ASSESSING OFFICER OBSERVED THAT THE APPELLANT HAS DEBITED RS.5560614/- TOWARDS FUTURE TRADING LOSS . AS THE AO FOUND THAT THE COMMODITY WAS NOT IN THE POSSESSION OF ASSE SSEE ON THE DATE OF ENTERING INTO COMMODITY TRANSACTIONS AND THEREFORE THE APPELLANT WAS NOT FOUND FULFILLING THE BASIC REQUIREMENT OF CLAIM ING HEDGING LOSS. THE APPELLANT HAS SHOWN FUTURE TRADING LOSS FROM M/S MO TI COMMODITY FUTURES PVT. LTD. THE APPELLANT WAS ASKED TO GIVE DE TAILS OF NAME OF COMMODITY EXCHANGE/SECURITY EXCHANGE REQUISITION S LIPS/VOUCHERS AND CONTRACT NOTE OF FUTURE TRADING ALONGWITH DOCUMENTAR Y EVIDENCE. THE AR SHOWED HIS INABILITY AND ADMITTED THAT THE APPELLANT HAS NOT MAINTAINED ITA 529 & 492/JP/2011_ SANDEEP JAIN VS ITO 23 CONTRACT NOTE VOUCHERS OR ANY SEPARATE ACCOUNT WITH M/S MOTI COMMODITY FUTURES PVT. LTD. AS THE APPELLANT AS WELL AS M/S MOTI COMMODITY FUTURES PVT. LTD. FAILED TO PRODUCE ANY D OCUMENTARY EVIDENCE IN SUPPORT OF LOSS THE LOSS CLAIMED WAS TR EATED AS SPECULATION LOSS AND AN AMOUNT OF RS.55.60 LACS CLAIMED AS LOSS ON FUTURE TRADING WAS DISALLOWED RESULTED INTO AN ADDITION OF RS.55606 14/-. DURING THE HEARING OF APPEAL THE AR FILED DETAILS OF PURCHASES AND SALES OF SELF AS WELL AS THROUGH MCX. COPY OF TRADE CONFIRMATION IN T HE BOOKS OF M/S MOTI COMMODITY FUTURES PVT. LTD. WAS ALSO FILED. SIM ILAR STATEMENT OF ACCOUNT IN THE BOOKS OF M/S MOTI COMMODITY FUTURES PVT. LTD. WAS FILED ALONGWITH WRITTEN SUBMISSION. COPIES OF DAILY BILLS OF M/S MOTI COMMODITY FUTURES PVT. LTD. WERE ALSO FILED. AS THES E EVIDENCES WERE FILED FIRST TIME AND NOT FILED BEFORE THE AO A REM AND REPORT WAS CALLED FOR FROM THE AO. 23. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING O FFICER THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) WH O HAD DELETED THE ADDITION MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER:- CONTENTION OF THE AR IS CONSIDERED. LOSS CLAIMED O N ACCOUNT OF FUTURE TRADING WAS DISALLOWED BY THE AO MAINLY ON ACCOUNT OF NOT FURNISHING COMPLETE DETAILS OF THE TRANSACTI ONS INCLUDING CONTRACT NOTES. THE REQUIRED DETAILS WERE FURNISHED D URING THE ITA 529 & 492/JP/2011_ SANDEEP JAIN VS ITO 24 APPELLATE PROCEEDINGS AND THE SAME WERE FORWARDED TO THE AO FOR HIS REMAND REPORT. THUS THE REQUIRED DETAILS HA VE BEEN FURNISHED. THE TRANSACTION WAS ENTERED INTO WITH M/S MOTI COMMODITY FUTURES PVT. LTD. THIS COMPANY IS MEMBER O F MULTI COMMODITY EXCHANGE OF INDIA LTD. THE COPIES OF CONTR ACT NOTES ARE FILED. THE AO HAS CONSIDERED THE TRANSACTION AS SPECULATIVE MAINLY ON THE GROUND THAT THE APPELLANT WAS NOT IN P OSSESSION OF THE COMMODITY ON THE DATE OF TRANSACTION. THE AR HAS EXPLAINED THAT ON THE DATE OF FORWARDING BOOKING OF SALES THE APPELLANT HAD SUFFICIENT QUANTITY OF STOCK. IN FACT THE STOCK HELD ON THE DATES OF TRANSACTIONS WAS MUCH MORE THAN THE SALES MADE IN FORWARD TRANSACTIONS. THE BOARDS CIRCU LAR ON THIS ISSUE IS VERY CLEAR WHEREIN LOSSES ARISEN AS A RESU LT OF BONAFIDE FORWARD SALES MADE TO SAFEGUARD AGAINST FUTURE RISK HAS NOT BEEN CONSIDERED AS SPECULATION LOSS. THE APPELLANT S CASE IS COVERED BY CLAUSE (A) OF SECTION 43(5) AND THEREFO RE DOES NOT FALL IN THE NATURE OF SPECULATIVE TRANSACTION. AS T HE TRANSACTIONS ARE FULLY EXPLAINED IN VIEW OF THE CASE LAWS RELIED UPON BY THE AR AND THE BOARDS CIRCULAR THE AO IS DIRECTED TO ACCEPT THE LOSSES CLAIMED AS BUSINESS LOSS AND NOT SPECULATIVE LOSS. THE ADDITION MADE BY THE AO IS THEREFORE DELETED. THE GROUND OF APPEAL IS THUS DECIDED IN FAVOUR OF THE APPELLANT. 24. NOW THE REVENUE IS IN APPEAL BEFORE US. THE LD. D R HAS SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND ALSO RELIED UPON THE JUDGMENT IN THE CASE OF ARASKA DIAMOND PVT. LTD. VS. ACIT (2014 ) 52 TAXMANN.COM 238. ITA 529 & 492/JP/2011_ SANDEEP JAIN VS ITO 25 25. AT THE OUTSET THE LD AR OF THE ASSESSEE HAS RE ITERATED THE ARGUMENTS MADE BEFORE THE LD. CIT(A) AND HAS FURTHER SUBMITTED THAT WE ALSO RELY UPON A DETAILED LETTER DATED 23.02.201 1 (PB 4-8) SUBMITTED TO THE AO DURING THE REMAND PROCEEDINGS SUBMITTING ALL THE SUPPORTING EVIDENCES(PB 12-51) & DETAILS AS MENTIONED THEREIN SUCH AS DETAILS OF PURCHASES AND SALES OF SELF AS WELL AS THROUGH MCX COPY OF TRADE CONFIRMATION IN THE BOOKS OF M/S MOTI COMMODITY WAS ALSO FILED. COPIES OF CONTRACT NOTES AND COMPLETE STOCK REGISTER WERE A LSO PRODUCED FOR VERIFICATION. HE RELIED ON SECTION 43(5) OF THE ACT . IT WAS SUBMITTED THAT THE APPELLANT IS ENGAGED IN THE SALE AND PURCHASE O F GOLD AND ON THE SALE BOOKED PROFIT OF RS.64 97 395/- HOWEVER WITH A VIEW TO SAFEGUARD ITSELF FROM THE POSSIBLE LOSSES WHICH THE ASSESSEE MIGHT INCUR BECAUSE OF THE PRICE FLUCTUATIONS THE ASSESSEE ENTERED INT O DERIVATIVE TRANSACTIONS WITH ONE M/S MOTI COMMODITY FUTURE PVT. LTD. WHO IS A MEMBER OF MULTI COMMODITY EXCHANGE OF INDIA LTD (MC X). THESE TRANSACTIONS WERE IN THE NATURE OF HEDGING TRANSACTI ONS HOWEVER THE SAME RESULTED INTO LOSS RS.56 35 302/-. HAD THE ASS ESSEE DID NOT ENTER INTO THESE TRANSACTIONS THE ASSESSEE WOULD HAVE SUF FERED HUGE LOSSES BECAUSE OF THE RATE FLUCTUATION. THE PROVISIONS CONT AINED U/S 43(5)(A) ITSELF CONTEMPLATES SUCH SITUATION AND PROVIDES THA T ANY LOSSES INCURRED ITA 529 & 492/JP/2011_ SANDEEP JAIN VS ITO 26 WITH A VIEW TO SAFEGUARD AGAINST LOSS THROUGH FUTURE PRICE FLUCTUATION NOT TO BE TREATED AS SPECULATIVE TRANSACTIONS. THE A SSESSEE ENTERED INTO TRANSACTIONS THROUGH M/S MOTI COMMODITY FUTURE PVT. LTD. WHO IS A MEMBER OF MULTI COMMODITY EXCHANGE OF INDIA LTD. ON THESE TRANSACTIONS SERVICE TAX WAS ALSO PAID. IT MAY ALSO BE NOTED THAT ALL THE TRANSACTIONS WITH M/S MOTI COMMODITY FUTURE PVT. LTD . IN THEIR RUNNING ACCOUNT WITH THE ASSESSEE ARE THROUGH ACCOUNT PAYEE CHEQUES ON VARIOUS DATES DURING THE YEAR. AS REGARDS THE ALLE GATION OF THE AO THAT AR SHOWED HIS INABILITY AND ADMITTED THAT THE ASSESS EE HAS NOT MAINTAINED CONTRACT NOTE ETC SUFFICE TO SAY THAT I N ANY CASE ALL THE REQUISITE DETAILS WERE ADMITTEDLY FILED BEFORE THE C IT(A) WHICH WAS DULY FORWARDED BY HIM TO THE AO FOR HIS COUNTER COMMENTS THE LD. CIT(A) ALSO CALLED FOR A REMAND REPORT FROM THE AO (KINDLY REFER CIT(A) PG. 4). HOWEVER FROM THE ORDER OF THE CIT(A) IT IS APPARENT THAT THE AO COULD NOT DISPROVE THE FACTS AND MATERIAL BROUGHT ON RECO RD IN ANY MANNER WHATSOEVER. THEREFORE THE VERY BASIS OF MAKING THE D ISALLOWANCE FOR WANT OF THE DETAIL REMAINING NO MORE THERE WAS NO J USTIFICATION TO CONTINUE THE SAME AND HENCE CIT(A) RIGHTLY DELETED THE SAME. HE RELIED UPON THE FOLLOWING CASE LAWS:- 1. KIRTILAL JAISINGHLAL & CO. V/S CIT (1981) 121 I TR 279 (BOM). ITA 529 & 492/JP/2011_ SANDEEP JAIN VS ITO 27 2. M.P.SUGAR MILLS PVT. LTD. V/S ACIT (1984) 148 ITR 203 (ALL) 3. CIT V/S HOTZ HOTEL LTD. (2003) 260 ITR 132 (DEL). 26. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. AT TH IS STAGE THE ASSESSEE HAS ALSO FILED PAPER BOOK CONTAINING THE DETAILS OF THE CONTRACT NOT AND THE OTHER DOCUMENTS SHOWING THE DETAILS OF THE TRANS ACTIONS BETWEEN THE ASSESSEE AND M/S MOTI COMMODITY FUTURES PVT. LT D. THE SAID M/S MOTI COMMODITY FUTURES PVT. LTD. IS MEMBER OF MULTI COMMODITY EXCHANGE OF INDIA LTD.. THE ASSESSEE HAS SUFFICIENT STOCK IN BOOKS OF ACCOUNT AND THEREFORE IN OUR VIEW THE LD. CIT(A) WAS RIGHT IN CONCLUDING THAT THE TRANSACTIONS WERE NOT SPECULATIV E IN NATURE. MOREOVER IF WE LOOK INTO THE DOCUMENTS AND THE CIRC ULAR RELIED UPON BY THE LD CIT(A) THEN IT IS CLEAR THAT THE TRANSACTION S WERE NOT SPECULATIVE IN NATURE AND THE LD. CIT(A) WAS RIGHT IN DELETING TH E ADDITION MADE BY THE ASSESSING OFFICER. ACCORDINGLY WE UPHOLD THE OR DER PASSED BY THE LD. CIT(A). THE JUDGMENT RELIED UPON BY THE REVENUE ARE N OT APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CASE. THE DEFINIT ION OF SPECULATIVE TRANSACTION AS MENTIONED IN SECTION 43(5)(A) OF THE ACT IF APPLIED THE PRESENT SET OF FACTS CLEARLY AND IRRESISTIBLY COME TO THE CONCLUSION THAT THE TRANSACTIONS WERE ENTERED INTO BY THE ASSESSEE WI TH A VIEW TO ITA 529 & 492/JP/2011_ SANDEEP JAIN VS ITO 28 SAFEGUARD THE FUTURE LOSS/PRICE FLUCTUATION. ACCORD INGLY THIS ISSUE IS DECIDED AGAINST THE REVENUE AND IN FAVOUR OF THE AS SESSEE. 27. IN THE RESULT THE APPEAL OF THE ASSESSEE AS WEL L AS THE APPEAL OF THE REVENUE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21/10/2016. SD/- SD/- HKKXPAN YFYR DQEKJ (BHAGCHAND) (LALIET KUMAR) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 21 ST OCTOBER 2016 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SHRI SANDEEP JAIN JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE ITO WARD 1(3) JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR ITAT JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 529 & 492/JP/2011) VKNS'KKUQLKJ @ BY ORDER LGK;D IATHDKJ @ ASST. REGISTRAR