PALIWAL JEWELLERS, Jaipur v. ACIT, Jaipur

ITA 83/JPR/2017 | 2013-2014
Pronouncement Date: 27-11-2017 | Result: Partly Allowed

Appeal Details

RSA Number 8323114 RSA 2017
Assessee PAN AANFP2974M
Bench Jaipur
Appeal Number ITA 83/JPR/2017
Duration Of Justice 10 month(s) 1 day(s)
Appellant PALIWAL JEWELLERS, Jaipur
Respondent ACIT, Jaipur
Appeal Type Income Tax Appeal
Pronouncement Date 27-11-2017
Appeal Filed By Assessee
Tags No record found
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 27-11-2017
Assessment Year 2013-2014
Appeal Filed On 25-01-2017
Judgment Text
VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCHE S JAIPUR JH FOT; IKWY JKO] U;KF;D LNL; OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO JM & SHRI VIKRAM SINGH YADAV AM VK;DJ VIHY LA-@ ITA NO. 83/JP/2017 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2013-14 M/S PALIWAR JEWELLERS B-360 HIMMAT NAGAR TONK ROAD JAIPUR CUKE VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-6 JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AANFP2974M VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI SHRAWAN KR. GUPTA (ADV.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI PRITHVIRAJ MEENA (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 23/05/2018 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 15/06/2018 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A) JAIPUR DATED 13.12.2016 PERTAINING TO ASSESSMENT YE AR 2013-14 WHEREIN THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: - 1. THAT ON FACTS AND LAW THE LD. CIT(A) HAS GROSSL Y ERRED IN CONFIRMING THE ORDER OF LD. AO THAT SURRENDERED VALUE OF STOCK WAS RS. 2 12 79 185/- WHILE AS PER APPELLANT THE VALUE OF S URRENDERED STOCK WAS RS. 1 61 94 434/-. THE VALUE OF SURRENDERED STOCK W AS VALUED BY THE LD. AO BY IGNORING THE DEPARTMENTAL VALUER REPORT FACT S ON RECORD AND WRONGLY ENHANCED THE VALUE BY RS. 50 48 751/-. THE ADDITION IN VALUE OF SURRENDERED STOCK IS AGAINST THE FACTS ON RECORD AND ADDITION DESERVES TO BE QUASHED. ITA NO. 83/JP/2017 M/S PALIWAL JEWELLERS JAIPUR VS ACIT JAIPUR 2 2. THAT ON FACTS AND LAW THE LD. CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE ORDER OF THE LD. AO THAT SURRENDERED STOCK VALUED RS. 1 61 94 434/- HAS NOT BEEN RECORDED IN REGULAR BOOK S OF ACCOUNTS HENCE THE SAME IS THE INCOME FROM OTHER SOURCES AND NOT THE INCOME FROM BUSINESS. HENCE REMUNERATION TO PARTNERS RS. 6 4 10 000/- IS NOT ALLOWABLE. THE SURRENDERED VALUE OF STOCK IS THE IN COME FROM BUSINESS AND REMUNERATION TO PARTNERS RS. 64 10 000/- IS ALL OWABLE AND WAS DISALLOWED WRONG AND ILLEGAL. 3. THAT ON FACTS AND LAW THE LD. CIT(A) HAS GROSSLY ERRED IN HOLDING THAT THE SURRENDERED STOCK WAS NOT IN THE NATURE OF BUSINESS INCOME. THE SURRENDERED STOCK HAS DIRECT NEXUS WITH APPELLA NT BUSINESS; AS SUCH THE SAID SURRENDERED STOCK IS THE BUSINESS INC OME OF THE APPELLANT. FURTHER ON SUCH SURRENDERED STOCK REMUNERATION TO P ARTNERS U/S 40B IS AN ALLOWABLE EXPENSES. 4. THAT THE ORDER OF THE LD. AO IS BAD-IN-LAW AND D ESERVES TO BE QUASHED. 2. THE MATTER WAS EARLIER HEARD AND DECIDED BY THE CO-ORDINATE BENCH VIDE ITS ORDER DATED 27.11.2017 WHEREIN THE FINDING S ARE CONTAINED AT PARA 10.2 OF ITS ORDER WHICH IS REPRODUCED AS UNDER:- WE HAVE HEARD RIVAL CONTENTIONS PERUSED THE MATER IAL ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO PAGE 53 OF THE PAPER BOOK ANNEXURE WHEREIN VARIOUS DETAILS OF GOLD AND DIAMON DS ORNAMENTS AND VALUATION THEREOF ARE MENTIONED. AFTER CONSIDERING THESE DETAILS WE FIND THAT THE DETAILS MENTIONED IN THE ANNEXURE REQUIRE VERIF ICATION WHETHER THE STOCK SURRENDERED WAS RESTRICTED TO GOLD OR DIAMOND AS CL AIMED BY THE ASSESSEE. WE THEREFORE SET ASIDE THE ORDER OF THE LD. CIT(A ) AND RESTORE THE FILE TO THE ITA NO. 83/JP/2017 M/S PALIWAL JEWELLERS JAIPUR VS ACIT JAIPUR 3 AO FOR DECISION AFRESH AFTER MAKING VERIFICATION OF THE STOCKS SURRENDERED. THE GROUNDS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 3. THEREAFTER THE ASSESSEE MOVED A MISC. APPLICATI ON WHEREIN IT WAS SUBMITTED THAT THERE ARE CERTAIN MISTAKE APPARENT F ROM THE RECORD AND THE SAME WAS DISPOSED OFF BY THE COORDINATE BENCH WITH THE FOLLOWING DIRECTIONS CONTAINED AT PARA 4 AND 5 OF ITS ORDER DATED 09.04. 2018 REPRODUCED AS UNDER: 4. REGARDING THE GROUND NO. 1 WE FIND THAT THE CO ORDINATE BENCH HAS CONSIDERED THE VARIOUS CONTENTIONS AND PLEADINGS OF THE LD. AR AND THEREAFTER VIDE PARA 10.2 OF ITS ORDER HAS RESTORED THE MATTE R TO THE FILE OF THE AO FOR THE PURPOSES OF VERIFICATION OF STOCK SURRENDERED W HETHER THE SAME WAS RESTRICTED TO GOLD AND DOESNT INCLUDE DIAMOND AND STONES. THEREFORE WE DO NOT FIND ANY MISTAKE WHICH IS RECTIFIABLE UNDER SEC TION 254(2). AT THE SAME TIME WE DEEM IT APPROPRIATE TO CLARIFY THE FINDING S OF THE COORDINATE BENCH AND THE SAME IS TO BE READ AS WE THEREFORE SET A SIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THE FILE TO THE AO FOR DECISION AFRESH AFTER MAKING VERIFICATION OF STOCK SURRENDERED AS TO WHETHER THE SAID SURRENDER WAS RESTRICTED TO GOLD ONLY AND DOESNT INCLUDE DIAMOND AND STONES INSTEAD OF WE THEREFORE SET ASIDE THE ORDER OF THE LD. CIT( A) AND RESTORE THE FILE TO THE AO FOR DECISION AFRESH AFTER MAKING VERIFICATION OF STOCKS SURRENDERED. 5. REGARDING GROUND NO. 2 AND 3 TAKEN BY THE ASSESS EE ON PERUSAL OF THE ORDER PASSED BY THE COORDINATE BENCH WE FIND THAT THESE GROUNDS HAVE SKIPPED THE ATTENTION AND THUS NOT BEEN DISPOSED OF F WHILE PRONOUNCING THE ORDER BY THE COORDINATE BENCH. ACCORDINGLY FOR THE LIMITED PURPOSES OF ADJUDICATING THE GROUNDS OF APPEAL NO. 2 AND 3 OF T HE ASSESSEES APPEAL THE ORDER PASSED BY THE COORDINATE BENCH IN ITA NO. 83/ JP/17 DATED 27.11.2017 IS HEREBY RECALLED AND THE REGISTRY IS DIRECTED TO FIX THE MATTER IN DUE COURSE. THE MISC. APPLICATION IS DISPOSED OFF WITH ABOVE DI RECTIONS. ITA NO. 83/JP/2017 M/S PALIWAL JEWELLERS JAIPUR VS ACIT JAIPUR 4 4. HENCE THE MATTER HAS COME UP BEFORE US FOR THE LIMITED PURPOSES OF ADJUDICATING GROUND NOS. 2 AND 3 OF THE ASSESSEES APPEAL WHICH WERE NOT ADJUDICATED BY THE CO-ORDINATE BENCH EARLIER. 5. IN GROUND NOS. 2 AND 3 THE ASSESSEE HAS EFFECTI VELY CHALLENGED THE ORDER OF THE LD. CIT(A) WHEREIN SHE HAS CONFIRMED T HE SURRENDER OF STOCK AS INCOME FROM OTHER SOURCES AND NOT IN THE NATURE OF BUSINESS INCOME. FURTHER THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF REM UNERATION TO PARTNERS U/S 40B WHICH HAS BEEN CALCULATED TAKING INTO ACCOUNT T HE SURRENDER VALUE OF THE STOCK AS ITS BUSINESS INCOME. 6. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSE SSEE FIRM IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF GOLD/D IAMOND JEWELLERY. A SURVEY U/S 133A OF THE I.T. ACT 1961 WAS CONDUCTED AT THE ASSESSEES PREMISES ON 06.11.2012 AND THE STATEMENT OF THE PAR TNER OF THE ASSESSEES FIRM SHRI KULBHUSHAN PALIWAL WAS RECORDED WHEREIN HE OFFERED THE VALUE OF EXCESS STOCK OF RS. 2 12 79 185/- FOR TAXATION. THE REAFTER THE ASSESSEE IN ITS RETURN OF INCOME HAD OFFERED AN AMOUNT OF RS. 1 61 94 434/- ON ACCOUNT OF EXCESS STOCK UNDER THE HEAD BUSINESS INCOME. THE AO HOWEVER BROUGHT TO TAX RS. 2 12 79 185/- AS ORIGINAL SURRENDERED AMOUN T DURING THE COURSE OF SURVEY AS INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. AS PER THE ASSESSING OFFICER THE EXCESS STOCK WAS NOT RECORDE D IN THE REGULAR BOOKS OF ACCOUNTS AND THE ASSESSEE THROUGH ITS PARTNER SHRI KULBHUSHAN PALIWAL HAS OFFERED THE VALUE OF SUCH EXCESS STOCK FOR TAXATION BY TREATING IT AS INVESTMENT FROM UNDISCLOSED INCOME WHICH ESTABLISHES THAT THE EXCESS STOCK REPRESENTED THE INVESTMENT OF THE ASSESSEE FIRM OUT OF UNDISCLO SED INCOME WHICH CANNOT BE TREATED AS INCOME FROM BUSINESS OR PROFESSION AND HAS TO BE TREATED AS INCOME FROM OTHER SOURCES. IN SUPPORT RELIANCE W AS PLACED ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN CASE OF SHRI F AKIR MOHD HAJI HASAN VS. CIT 247 ITR 290 (GUJ). FURTHER THE ASSESSING OFFIC ER WORKED OUT THE BOOK ITA NO. 83/JP/2017 M/S PALIWAL JEWELLERS JAIPUR VS ACIT JAIPUR 5 PROFITS FOR THE PURPOSES OF CALCULATION OF REMUNERA TION TO PARTNERS AT RS. 83 572/- AND THE ALLOWABLE REMUNERATION WAS COMPUTE D AT RS. 1 50 000/- AS AGAINST CLAIMED REMUNERATION OF RS. 65 60 000/- RES ULTING IN ADDITION OF RS. 64 10 000/- IN THE HANDS OF THE ASSESSEE FIRM. 7. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) AND SHE HAS SINCE CONFIRMED THE TREATMEN T OF THE INCOME SO SURRENDER BY THE ASSESSEE AS INCOME FROM OTHER SOU RCES AND THE DISALLOWANCE OF PARTNERS REMUNERATION WAS ALSO CON FIRMED. 8. DURING THE COURSE OF HEARING LD. AR SUBMITTED THAT ASSESSEE IS IN THE BUSINESS OF MANUFACTURING AND TRADING OF GOLD/DIAMO ND JEWELLERY AND THE EXCESS STOCK SO FOUND DURING THE COURSE OF SURVEY I S CLEARLY THE ASSESSEES BUSINESS STOCK AND IT HAS NO INDEPENDENT IDENTITY A ND IS INTEGRAL AND INSEPARABLE PART OF THE EXISTING STOCK. THEREFORE SUCH EXCESS STOCK FOUND DURING THE COURSE OF SURVEY HAS TO BE ASSESSED UNDE R THE HEAD BUSINESS INCOME AND NOT AS INCOME FROM OTHER SOURCES. IT WAS FURTHER SUBMITTED THAT THE MATTER IS SQUARELY COVERED BY THE DECISION OF THE HONBLE RAJASTHAN HIGH COURT IN CASE OF PR. CIT ALWAR VS. BAJARGAN TRADERS (D.B APPEAL NO. 258/2017 DATED 12.09.2017) WHEREIN THE HONBLE HIGH COURT HAS CONFIRMED THE VIEW OF THE TRIBUNAL WHICH IS REPRODUCED AS UNDER:- 2.11 HAVING SAID THAT THE NEXT ISSUE THAT ARISES FOR CONSIDERATION IS WHETHER THE AMOUNT SURRENDERED BY WAY OF INVESTMENT IN THE UNRECORDED STOCK OF RICE HAS TO BE BROUGHT TO TAX UNDER THE HEAD BUSINESS I NCOME OR INCOME FROM OTHER SOURCES. IN THE PRESENT CASE THE ASSESSEE I S DEALING IN SALE OF FOODGRAINS RICE AND OIL SEEDS AND THE EXCESS STOCK WHICH HAS BEEN FOUND DURING THE COURSE OF SURVEY IS STOCK OF RICE. THERE FORE THE INVESTMENT IN PROCUREMENT OF SUCH STOCK OF RICE IS CLEARLY IDENTI FIABLE AND RELATED TO THE REGULAR BUSINESS STOCK OF THE ASSESSEE. THE DECISIO N OF THE CO-ORDINATE BENCH ITA NO. 83/JP/2017 M/S PALIWAL JEWELLERS JAIPUR VS ACIT JAIPUR 6 IN CASE OF SHRI RAMNARAYAN BIRLA (SUPRA) SUPPORTS T HE CASE OF THE ASSESSEE IN THIS REGARD. THEREFORE THE INVESTMENT IN THE EXCES S STOCK HAS TO BE BROUGHT TO TAX UNDER THE HEAD BUSINESS INCOME AND NOT UND ER THE HEAD INCOME FROM OTHER SOURCES. IN THE RESULT GROUND NO. 1 OF THE ASSESSEE IS ALLOWED. 8. IT WAS FURTHER SUBMITTED THAT EVEN IF THE EXCESS STOCK IS ASSESSED AS INCOME FROM OTHER SOURCES THIS AMOUNT IS PART OF BOOK PROFITS AND THE REMUNERATION TO PARTNER CALCULATED BASED ON SUCH BO OK PROFIT IS ALLOWABLE. IN SUPPORT RELIANCE WAS PLACED ON THE COORDINATE BENC H DECISION IN CASE OF SP EQUIPMENT & SERVICES VS. ACIT 128 TTJ 68 (JP) WHEREIN IT WAS HELD AS UNDER (HEAD NOTES): FOR THE PURPOSE OF COMPUTING ALLOWABLE DEDUCTION U NDER S. 40(B) BOOK PROFIT HAS BEEN DEFINED UNDER EXPLN. 3 THERETO TO MEAN THE NET PROFIT AS SHOWN IN THE P&L A/C OF THE RELEVANT PREVIOUS YEAR COMPUTED IN THE MANNER LAID DOWN IN CHAPTER IV-D SUBJECT TO SPECIFIED ADJUSTMENTS-SE LECTION OF ANY HEAD OF INCOME MORE PARTICULARLY PROFITS AND GAINS OF BUS INESS OR PROFESSION IS NOWHERE REQUIRED OR ENVISAGED BY THE LEGISLATURE - THERE IS NO SUBSTANCE IN THE CONTENTION OF THE REVENUE THAT THE RECEIPTS CRE DITED TO P&L A/C SHOULD BE ASSESSED UNDER DIFFERENT HEADS OF INCOME AS CLASSIF IED UNDER S. 14- LEGISLATURE HAS NOT AUTHORIZED EXCLUSION OF SOME RE CEIPTS FROM P & L A/C EVEN THOUGH THEY ARE NON-BUSINESS RECEIPTS EXPLANATION 3 NOWHERE EMPOWERS THE AO TO GO BEHIND THE NET PROFIT SHOWN IN THE P&L A/C EXCEPT TO THE EXTENT OF ADJUSTMENTS PROVIDED THEREIN-SINCE THE BOOK PROF IT HAS BEEN DEFINED TO BE THE NET PROFIT SHOWN IN THE P &L A/C OF THE FIRM I T IS THE PROFIT WHICH THE PARTNERS HAVE AGREED TO SHARE AND THEREFORE SUCH N ET PROFIT HAS TO BE CONSIDERED AS BUSINESS INCOME AT LEAST FOR THE PURP OSE OF S. 40(B)- PROVISIONS OF S. 28(V) ALSO SUPPORT THIS VIEW-IF THE NATURE OF THE INCOME HAS BEEN DEEMED BY THE LEGISLATURE TO BE THE BUSINESS INCOME BY THE RECIPIENT THE SOURCE ALSO SHOULD BEAR THE SOME CHARACTER I.E. BUS INESS INCOME THEREFORE INTEREST INCOME IS NOT TO BE EXCLUDED FROM THE NET PROFIT DECLARED BY THE ITA NO. 83/JP/2017 M/S PALIWAL JEWELLERS JAIPUR VS ACIT JAIPUR 7 ASSESSEE FIRM FOR COMPUTING BOOK PROFIT FOR THE PUR POSE OF DETERMINING THE ALLOWABLE DEDUCTION OF REMUNERATION PAYABLE TO THE PARTNERS UNDER S. 40(B). 9. IN THE PRESENT CASE THE ASSESSEE IS IN THE BUSI NESS OF MANUFACTURING AND TRADING OF GOLD/DIAMOND JEWELLERY AND THE EXCES S STOCK SO FOUND DURING THE COURSE OF SURVEY IS OF GOLD AND DIAMOND JEWELLE RY. THEREFORE THE INVESTMENT IN PROCUREMENT OF SUCH STOCK OF GOLD AND DIAMOND JEWELLERY IS CLEARLY IDENTIFIABLE AND RELATED TO THE REGULAR BUS INESS STOCK OF THE ASSESSEE. THE INVESTMENT IN THE EXCESS STOCK HAS THEREFORE TO BE BROUGHT TO TAX UNDER THE HEAD BUSINESS INCOME AND NOT UNDER THE HEAD INCOME FROM OTHER SOURCES FOLLOWING THE DECISION OF THE HONBLE RAJ ASTHAN HIGH COURT IN CASE OF BAJARGAN TRADERS(SUPRA). FURTHER THE DECISION OF T HE COORDINATE BENCH IN CASE OF SP EQUIPMENT & SERVICES (SUPRA) SUPPORTS TH E CASE OF THE ASSESSEE WHERE THERE IS NO DISTINCTION IN BOOK PROFITS REGAR DING THE HEAD OF INCOME FOR THE PURPOSES OF COMPUTATION OF PARTNERS REMUNERATI ON. AT THE SAME TIME THE PROVISIONS OF SECTION 115BBE NEED TO BE EXAMINED IN THE INSTANT CASE. GIVEN THAT THE GROUND NO.1 OF THE ASSESSEES APPEAL REGAR DING THE QUANTUM OF THE EXCESS STOCK IS SET-ASIDE TO THE FILE OF THE AO TH ESE TWO GROUNDS ARE ALSO SET- ASIDE TO THE FILE OF THE AO FOR THE LIMITED PURPOSE S OF DETERMINING THE QUANTUM OF REMUNERATION ALLOWABLE U/S 40(B) OF THE ACT TAKING INTO CONSIDERATION THE PROVISIONS OF SECTION 115BBE OF T HE ACT. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 15/06/2018. SD/- SD/- FOT; IKWY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER ITA NO. 83/JP/2017 M/S PALIWAL JEWELLERS JAIPUR VS ACIT JAIPUR 8 JAIPUR DATED:- 15/06/2018 *GANESH KR VKNS'K DH IZFRFYFI VXZSF'KR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT - M/S PALIWAL JEWELLERS JAIPUR 2. IZR;FKHZ@ THE RESPONDENT - ACIT 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. 83/JP/2017) VKNS'KKUQLKJ@ BY ORDER LGK;D IATHDKJ@ ASSISTANT. REGISTRAR.