The ITO, 2(3), v. Shri Rajkumar Khandelwal,

ITA 718/IND/2007 | 2002-2003
Pronouncement Date: 06-04-2010 | Result: Partly Allowed

Appeal Details

RSA Number 71822714 RSA 2007
Bench Indore
Appeal Number ITA 718/IND/2007
Duration Of Justice 2 year(s) 4 month(s) 13 day(s)
Appellant The ITO, 2(3),
Respondent Shri Rajkumar Khandelwal,
Appeal Type Income Tax Appeal
Pronouncement Date 06-04-2010
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 06-04-2010
Date Of Final Hearing 05-04-2010
Next Hearing Date 05-04-2010
Assessment Year 2002-2003
Appeal Filed On 23-11-2007
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI V.K. GUPTA ACCOUNTANT MEMBER ITA NO. 718/IND/07 A.YS. 2002-03 INCOME TAX OFFICER 2(3) BHOPAL APPELLANT VS RAJKUMAR KHANDELWAL SEHORE PAN AHAPK-2755R RESPONDENT APPELLANT BY : SMT. APARNA KARAN SR. DR RESPONDENT BY : SHRI S.S. DESHPANDE CA O R D E R PER JOGINDER SINGH JM THIS APPEAL IS BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(A) DATED 3.9.2007 WHEREIN FOLLOWING GROUNDS HAV E BEEN RAISED :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN 1. DELETING THE ADDITION OF RS. 7 60 924/- MADE ON ACCOUNT OF UNDISCLOSED PURCHASES OF TWO WHEELERS. 2. DELETING THE ADDITION OF RS.2 53 762/- ON ACCOUN T OF UNDISCLOSED PURCHASE OF TYRES. 2 3. DELETING THE DISALLOWANCE OF RS.6 47 790/- U/S 4 0A(3) OF THE IT ACT BY THE ASSESSING OFFICER 4. DELETING THE DISALLOWANCE OF EXPENSES OF RS.90 3 45/- BY THE ASSESSING OFFICER 2. DURING HEARING OF THIS APPEAL WE HAVE HEARD SMT . APARNA KARAN LEARNED SR. DR AND SHRI S.S. DESHPANDE LD. COUNSEL FOR THE ASSESSEE. ON THE FIRST GROUND FOR DELETING THE ADDITION OF RS .7 60 924/- MADE ON ACCOUNT OF UNDISCLOSED PURCHASES OF TWO WHEELERS I T WAS SUBMITTED BY THE LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE THAT BOOKS OF ACCOUNTS WERE NOT PRODUCED BY THE ASSESSEE THEREFORE THE A SSESSING OFFICER HAD NO OPTION BUT TO MAKE THE IMPUGNED ADDITION. I T WAS EXPLAINED THAT THE LEARNED ASSESSING OFFICER HAS GIVEN A CLEAR FIN DING TO THE EFFECT THAT INSPITE OF SEVERAL OPPORTUNITIES THE ASSESSEE DELI BERATELY AVOIDED TO PRODUCE THE BOOKS OF ACCOUNTS. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSE E STRONGLY DEFENDED THE IMPUGNED ORDER BY CONTENDING THAT WRIT TEN SUBMISSIONS DATED 24.1.2005 WERE DULY FURNISHED ALONG WITH LIST OF PURCHASES OF TYRES AND TUBES OF VARIOUS COMPANIES WHEREIN THE DATES A MOUNT AND BILL NUMBERS WERE MENTIONED. IT WAS ALSO CLAIMED THAT T HE COMPUTERIZED LEDGER WAS DULY PRODUCED BEFORE THE ASSESSING OFFIC ER FOR WHICH OUR ATTENTION WAS INVITED TO PAGE 7 OF THE PAPER BOOK. A STRONG PLEA WAS RAISED THAT THE ASSESSEE WAS NOT DEALING IN SUZUKI MOTOR-CYCLES AND SANGHI MOTORS IS DEALING IN BAJAJ TWO WHEELERS. OUR ATTENTION WAS FURTHER 3 INVITED TO PAGES 9 TO 12 OF THE PAPER BOOK BY FURTH ER MENTIONING THAT THE ASSESSMENTS MADE UNDER THE SALES TAX ACT WERE VERY MUCH ACCEPTED BY THE DEPARTMENT AND THE ASSESSEE IS ONLY A BOOKIN G AGENT. IT WAS CLAIMED THAT THE AMOUNTS WERE COLLECTED FROM THE CU STOMERS AND WERE PAID TO M/S SANGHI AUTMOBILES AS THE ASSESSEE IS ME RELY AGENT FOR SANGHI AUTOMOBILES. THE CRUX OF ARGUMENTS IS THAT T HE ASSESSEE IS MERELY A BOOKING AGENT ON CASH AND CARRY BASIS THE REFORE NO ADDITION COULD HAVE BEEN MADE AND FURTHER ONLY PROFIT ON PER CENTAGE BASIS CAN BE TAKEN FOR WHICH RELIANCE WAS PLACED UPON THE DEC ISION IN THE CASE OF CIT V. BALCHAND AJITKUMAR (263 ITR 610) (M.P.) 3. WE HAVE CONSIDERED THE ARGUMENTS ADVANCED BY THE LEARNED RESPECTIVE COUNSELS AND ALSO PERUSED THE MATERIAL A VAILABLE ON FILE. BRIEF FACTS ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSIN ESS OF TYRES TUBES AND TWO WHEELERS AND WAS FILING THE RETURNS REGULAR LY. THE ASSESSEE DULY MAINTAINED NECESSARY BOOKS OF ACCOUNTS AND THE NECESSARY RECORD WAS FILED ALONG WITH THE RETURNS WITH THE AUDIT REP ORT AS REQUIRED U/S 44AB OF THE ACT. WE HAVE ALSO FOUND THAT THE ASSESS EE FURNISHED THE BILLS VOUCHERS BANK STATEMENTS COMPUTERIZED LEDG ER DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSEE WAS WORKING AS AGENT FOR SANGHI AUTOMOBILES BHOPAL AS THE BAJAJ COMPANY DI D NOT GIVE THE DEALERSHIP TO THE ASSESSEE. DURING THE PERIOD FROM 20.7.2001 TO 31.10.2001 THE ASSESSEE WAS NOT HAVING THE NECESSAR Y TRADE CERTIFICATE 4 FOR THE SALE OF TWO WHEELERS OF BAJAJ MOTOR CYCLES THEREFORE THE ASSESSEE WAS WORKING AS AN AGENT OF SANGHI AUTOMOBI LES UPTO 31.10.2001. VARIOUS CUSTOMERS TOOK THE DELIVERY OF VEHICLES AND GOT THE COPY OF ORIGINAL SALE LETTERS IN THEIR NAMES DULY I SSUED BY SANGHI AUTOMOBILES AND THESE DOCUMENTS WERE PRODUCED BY TH E CUSTOMERS BEFORE THE RTO FOR REGISTRATION OF VEHICLES. M/S SA NGHI AUTOMOBILES DEBITED THE ACCOUNT OF THE ASSESSEE AS THE ASSESSEE WAS COLLECTING MONEY FROM CUSTOMERS AGAINST THE SALE OF VEHICLES M ADE BY SANGHI AUTOMOBILES. AS AND WHEN THE ASSESSEE COLLECTED MON EY FROM CUSTOMERS IT USED TO SEND THE SAME TO M/S SANGHI A UTOMOBILES AND IN TURN M/S SANGHI AUTOMOBILES GAVE THE CREDIT OF SUCH COLLECTIONS IN THE ACCOUNTS OF THE ASSESSEE. IN VIEW OF THESE FACTS THE PRESUMPTION OF THE ASSESSING OFFICER THAT THE ASSESSEE CONCEALED THE P URCHASE TO THE TUNE OF RS.7 60 924/- IS CONTRARY TO FACTS RATHER THE ASSESSEE COLLECTED THE MONEY FROM THE CUSTOMERS AND SENT TO M/S SANGHI AUT OMOBILES AND GOT THE VEHICLES FOR CUSTOMERS. AS FAR AS THE CONTENTI ON OF THE LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE THAT THE BOOKS O F ACCOUNTS WERE NOT FURNISHED BY THE ASSESSEE IS ALSO NOT SUBSTANTI ATED WITH ANY EVIDENCE AS IN THE ASSESSMENT ORDER ITSELF (PAGE 2) THE ASSESSING OFFICER HAS MENTIONED THAT WRITTEN SUBMISSIONS DATE D 24.1.2005 WERE FILED BY THE ASSESSEE ALONGWITH THE LIST OF PURCHAS ES OF TYRES AND TUBES OF VARIOUS COMPANIES DATES AMOUNTS AND BILL NUMBE RS. EVEN IN PARA 2 5 (PAGE 2) IT HAS BEEN MENTIONED ON 17.03.05 HE ATT ENDED PRODUCED ONLY A COMPUTERIZED LEDGER.. IN PARA 3 (PAGE 2) IT HAS BEEN MENTIONED AS UNDER :- HE STATED THAT ASSESSEE USED TO SEND CUSTOMERS TO M/S SANGHI AUTOMOBILES AT BHOPAL TO TAKE DELIVERY O F TWO WHEELERS AND THE ASSESSEE USED TO COLLECT OF THE SAME. AT SOME INTERVAL OF TIME HE USED TO REM IT MONEY TO M/S SANGHI AUTOMOBILES. THE LD ASSESSING OFFICER IN PARA 4 (PAGE 2) HIMSELF HAS MENTIONED AS UNDER :- IN THIS RESPECT IT WOULD NOT BE OUT OF PLACE TO M ENTION HERE THAT M/S SANGHI AUTOMOBILES BHOPAL IS A DEALER OF BAJA J COMPANIES OF TWO WHEELERS AND IT HAD APPOINTED THE ASSESSEE AS ITS SUB- DEALER. THE ENTIRE PROCEEDINGS ARE ACCOMPLISHED WI TH THE APPROVAL OF BAJAJ COMPANY AFTER ALL THE FORMALITIES OF APPOINTING SUB-DEALER ARE FULFILLED. AMONG THESE FORMALITIES THE NOC FROM REGISTRATION AUTHORITIES ARE ALSO REQUIRED AS FAR AS THE CONTENTION OF THE LEARNED SENIOR DEPA RTMENTAL REPRESENTATIVE THAT A WELL REASONED ORDER HAS NOT B EEN PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND IT HAS BEEN SUMMED UP IN FEW LINES IT CAN BE SAID THAT ADMITTE DLY IT MAY NOT BE A DETAILED ORDER BUT ALL FACTS HAVE BEEN DULY MENTION ED AND CONSIDERED BY HIM. EVEN IN THE SUMMED UP PORTION IT HAS BEEN DUL Y MENTIONED THAT THE ASSESSMENT ORDER AND ALSO THE MATERIAL SUBMITTED BY THE ASSESSEE ALONGWITH THE ARGUMENTS ADVANCED HAVE BEEN DULY CON SIDERED. HOWEVER THE REVENUE HAS NOT CONTROVERTED THE CLAIM OF THE ASSESSEE WITH MATERIAL EVIDENCE THEREFORE FROM EVERY ANGLE THE ASSESSEE IS 6 HAVING A STRONG CASE IN ITS FAVOUR BECAUSE UNDER TH E AFOREMENTIONED FACTS FIRSTLY NO ADDITION IS REQUIRED AND SECONDLY ONLY THE NET PROFIT IF ANY CAN BE CONSIDERED FOR TAXATION PURPOSES. OUR VIEW F INDS SUPPORT FROM THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COU RT IN THE CASE OF CIT V. BALCHAND AJITKUMAR (263 ITR 610) (M.P.) AND CIT V. PRESIDENT INDUSTRIES; 258 ITR 654 (GUJ) WHICH WAS EVEN FOLLO WED BY THE HONBLE JURISDICTIONAL HIGH COURT IN REACHING TO A PARTICUL AR CONCLUSION. SECTION 69A DEALS WITH UNEXPLAINED MONEYS OF WHICH THE ASSE SSEE IS FOUND TO BE THE OWNER. THE MATERIAL DIFFERENCE BETWEEN SECTI ON 68 AND 69A IS THAT SECTION 68 DOES NOT REQUIRE THAT THE AMOUNT IS TO BE OWNED BY THE ASSESSEE. IT ONLY DEALS WITH ANY AMOUNT SHOWN IN T HE BOOKS OF ACCOUNTS OF THE ASSESSEE WHEREAS SECTION 69A DEALS WITH MONE Y ETC. OWNED BY THE ASSESSEE AND FOUND IN HIS POSSESSION. THEREFOR E OWNERSHIP IS ONE OF THE CONSIDERATIONS WHEN THE MATTER COMES U/S 69A OF THE ACT. MERE POSSESSION WILL NOT SUFFICE. THIS PROPOSITION IS S UPPORTED BY THE DECISION IN DURGA KAMAL RICE MILLS V. CIT; 130 TAXMAN 553 (C AL) AND CIT V. KTMS MOHAMOOD; 228 ITR 113 (MAD). THE WORD INCOME USED IN SECTION 69A HAS A WIDE MEANING. IN THE PRESENT APP EAL THE ASSESSEE MERELY ACTED AS SUB-AGENT OF M/S SANGHI AUTOMOBILES THEREFORE THERE IS NO INFIRMITY IN THE IMPUGNED ORDER CONSEQUENTLY THIS GROUND OF THE REVENUE IS HAVING NO MERIT THEREFORE DISMISSED. 7 THIS WILL ALSO COVER GROUND NO. 3 (SUPRA) I.E. DISA LLOWANCE OF RS.6 47 790/- MADE U/S 40A(3) OF THE ACT AS THERE W AS AN AGREEMENT DATED 15.1.2001 BETWEEN THE MAIN DEALER I.E. SANGHI AUTOMOBILES AND THE ASSESSEE CLARIFYING THE TERMS AND CONDITIONS OF SALE IN WHICH ONE OF THE CONDITIONS WAS VEHICLE SHOULD BE SOLD ONLY ON CASH AND CARRY BASIS. EVEN OTHERWISE THE PROVISIONS OF SECTION 40A(3) ARE APPLICABLE IN THE MATTER OF EXPENDITURE AND NOT IN THE MATTER OF SALE AND PURCHASE THEREFORE IT CAN BE SAID THAT THE PROVISION WAS WR ONGLY INVOKED AGAINST THE ASSESSEE AS THE ASSESSEE MERELY WORKED AS A SUB -AGENT AND THE WHOLE MONEY COLLECTED FROM THE CUSTOMERS WAS DULY D EPOSITED WITH THE MAIN AGENT THEREFORE BOTH THESE GROUNDS OF THE RE VENUE ARE DISMISSED. 4. THE NEXT GROUND I.E. GROUND NO. 2 PERTAINS TO DE LETING THE ADDITION OF RS.2 53 762/- ON ACCOUNT OF UNDISCLOSED PURCHASE OF TYRES. THE CRUX OF ARGUMENTS ON BEHALF OF THE REVENUE IS THAT THE W HOLE ADDITION HAS BEEN DISPOSED OF IN THE IMPUGNED ORDER IN THREE LIN ES THEREFORE THE ORDER IS NOT SPEAKING ONE. THE ASSESSMENT ORDER WAS SUPPORTED. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE STRONG LY DEFENDED THE IMPUGNED ORDER BY CONTENDING THAT THE WRITTEN SUBMI SSIONS NECESSARY EVIDENCE ARGUMENTS ADVANCED BY THE ASSESSEE AND TH E FACTS WERE DULY CONSIDERED AT PAGES 4 AND 5 OF THE IMPUGNED ORDER A ND IN THE CONCLUDING PARA ONLY THE GIST HAS BEEN MENTIONED. 8 5. WE HAVE PERUSED THE RECORD AND WITHOUT PROCEEDIN G FURTHER WE ARE REPRODUCING HEREUNDER THE PART OF SUBMISSIONS O F THE ASSESSEE PREFERRED BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) :- AT THE VERY OUTSET THE AR HAS POINTED OUT THAT TH E ACCOUNTANT OF THE APPELLANT WAS PREPARING THE DETAI LS OF PURCHASE OF TYRES PARTYWISE FOR THE PURPOSE OF S ALES TAX ASSESSMENT WHICH WAS UNDER PREPARATION. AROUND THE SAME TIME AS THE ASSESSMENT PROCEEDINGS FOR TH E ASSESSMENT YEAR 2002-03 WERE ALSO IN PROGRESS THE SAME LIST OF PARTY WISE PURCHASE OF TYRES WHICH WAS NOT COMPLETELY PREPARED WAS SUBMITTED TO THE A.O. WITH A REQUEST THAT THE COMPLETE LIST OF P;ARTY WISE PURCH ASES ALONG WITH OTHER DETAILS WOULD BE SUBMITTED IN THE NEXT HEARING. W ITHOUT OUT HAVING ANY REGARD TO THOSE SUBMISSIONS AS PER THE AR THE AO HAS MADE THE ADDITION OF RS.2 53 762/- TOWARDS CONCEALED PURCHAS ES OF TYRES. IT IS PERTINENT TO NOTE HERE THAT THE LIS T OF PARTY WISE PURCHASES WHICH IS WITH THE AO WAS NOT A COMPLETE ONE. HENCE WHEN COMPARED TO THE ENTIRE LIST OF PURCHASES IT IS BOUND TO HAVE OMISSIONS A S THE LIST WITH THE AO WAS NOT A COMPLETE ONE. HENCE THE AO HAS ADDED THE DIFFERENCE OF RS.2 53 762/- TOWARD S CONCEALED PURCHASES OF TYRES BY THE AO WHILE FINALIZING THE ASSESSMENT PROCEEDINGS. THE RECONCILIATION IS MADE BY THE AO AS BELOW 5. WE HAVE FOUND THAT THE LEARNED COMMISSIO NER OF INCOME TAX (APPEALS) AT PAGE 4 (PARA 3) ONWARDS HAS CONSIDERED THE ISSUE IN DETAIL INCLUDING THE ALLEGED PURCHASES FROM VIKRANT TYRES. THE ASSESSEE HAS CREDITED RS.2 56 755/- TOWARDS CREDIT NOTES AND THE DAMAGED GOODS RETURNED TO THE COMPANY AMOUNTING TO RS.23 891/-. T HE AMOUNT OF RS. 81 883/- WAS TRANSFERRED TO JK TYRES ACCOUNT AN D THE DAMAGED GOODS RETURNED AND THE CONSEQUENT TRANSFER ENTRY TO JK TYRES WAS NOT 9 CONSIDERED WHICH LED TO CONFUSION IN THE MIND OF TH E ASSESSING OFFICER. AS PER THE BOOKS OF ACCOUNTS THE NET PURCHASES ARE OF RS.11 01 046/- AGAINST THE GROSS PURCHASES OF RS.13 57 801/- CONS EQUENTLY THERE IS NO INFIRMITY IN THE IMPUGNED ORDER THEREFORE THIS GR OUND OF THE REVENUE IS ALSO DISMISSED. 6. THE LAST GROUND PERTAINS TO DELETING THE D ISALLOWANCE OF EXPENSES OF RS.90 345/. AS PER THE REVENUE THE BANK INTERE ST AND DEPRECIATION OTHER EXPENSES AMOUNTING TO RS.3 61 381/- AND ALSO THE BOOKS AND DETAILS WERE NOT PRODUCED BY THE ASSESSEE THEREFOR E THE 1/4 TH OF SUCH EXPENDITURE WAS RIGHTLY DISALLOWED BY THE ASSESSING OFFICER. HOWEVER THE LD. COUNSEL FOR THE ASSESSEE STRONGLY DEFENDED THE IMPUGNED ORDER BY CONTENDING THAT THESE ARE MOSTLY ON ACCOUNT OF T RAVELLING EXPENSES STATIONARY AND PRINTING ELECTRICITY EXPENSES ETC. AND THE PERSONAL ELEMENT IS NEGLIGIBLE. 7. ON PERUSAL OF RECORD AND AFTER HEARING THE RIVAL SUBMISSIONS WE HAVE FOUND THAT THERE IS A FINDING THAT THE RELEVAN T BILLS/VOUCHERS IN RESPECT OF CLAIMED EXPENSES WERE NOT FURNISHED BY T HE ASSESSEE THEREFORE TO PLUG THE POSSIBLE LEAKAGES 1/4 TH OF SUCH EXPENSES WAS DISALLOWED. HOWEVER THERE IS A FINDING IN THE IMP UGNED ORDER THAT THE CLAIMED BANK INTEREST WAS FOUND VERIFIABLE FROM THE INFORMATION ON RECORD. OUT OF THE CLAIMED EXPENSES OF RS.3 61 381/ - ONLY 1/4 TH I.E. RS.90 345/- WERE HELD TO BE EXPENSES OF INADMISSIBL E NATURE. ONE FACT 10 IS OOZING OUT THAT A LUMP SUM DISALLOWANCE HAS BEEN MADE ON ADHOC BASIS. ON APPEAL THE LEARNED COMMISSIONER OF INCOM E TAX (APPEALS) DELETED THE ADDITION. KEEPING IN VIEW THE FACTS AND THE CONCLUSION MENTIONED IN THE ASSESSMENT ORDER/IMPUGNED ORDER AN D ALSO TO PUT AN END TO THE LITIGATION THE AMOUNT OF RS. 10 000/- I S SUSTAINED OUT OF RS.90 345/- DELETED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) CONSEQUENTLY THIS GROUND OF THE REVENU E IS PARTLY ALLOWED. FINALLY APPEAL OF THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 6TH APRI L 2010. SD SD (V.K. GUPTA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER APRIL 6TH 2010 COPY TO: APPELLANT RESPONDENT CIT CIT(A) DR G UARD FILE *DBN/ 11