Gem Plaza, Jaipur vs Department Of Income Tax

Jh vkj-ih-rksykuh] U;kf;d lnL; ,oa Jh Vh-vkj-ehuk] ys[kk lnL; ds le{k BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM

vk;dj vihy la-@ITA No. 274/JP/2013 fu/kZkj.k o"kZ@Assessment Year : 2008-09

Dy. Commissioner of cuke M/s Gem Plaza, Income Tax, Vs. Khaitan Bhawan, M.I. Road, Circle-2, Jaipur. Jaipur.

LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AACFG 3643 H vihykFkhZ@Appellant izR;FkhZ@Respondent

jktLo dh vksj ls@ Revenue by : Shri Raj Mehra (JCIT) fu/kZkfjrh dh vksj ls@ Assessee by : Shri Madhukar Garg (CA)

lquokbZ dh rkjh[k@ Date of Hearing : 13/07/2015 mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 17/07/2015

vkns'k@ ORDER

PER: T.R. MEENA, A.M.

This is an appeal filed by the revenue against the order dated

10/12/2012 passed by the learned CIT (A)-I, Jaipur for A.Y. 2008-09.

The effective grounds of appeal are as under:-

"Whether on the facts and in the circumstances of the case and in law the ld. CIT(A) was justified in:-

2 ITA 274/JP/2013_ DCIT Vs. Gem Plaza

"1 deleting the addition made by the A.O. on account of unverifiable purchases from the party who was engaged in providing bogus bills.

2. deleting the addition made by the A.O. u/s 40(a)(ia) on account of non deduction of TDS on credit card commission."

2. First ground of appeal is against deleting the addition made by

the Assessing Officer on account of unverifiable purchases. The ld

Assessing Officer observed that the assessee firm is engaged in

business of trading and export of gems, jewellery and handicrafts.

The assessee filed its return of income on 22/09/2008 declaring total

income of Rs. 34,38,520/-. The case was scrutinized U/s 143(3) of

the Income Tax Act, 1961 (hereinafter referred as the Act). The ld

Assessing Officer further observed that during the assessment

proceedings, the assessee was asked to furnish day to day details of

all types of stock in terms of opening, purchases and closing

alongwith their quality categorization, if any and values, but he failed

because he was not maintaining stock register. On examination of

purchase details, it was found that the assessee had shown purchase

from the following party:

S. No. Name Amount 1. M/s Aditya Gems 1,80,092/- 3 ITA 274/JP/2013_ DCIT Vs. Gem Plaza

It is further observed that during the inquiry conducted by the

department, proprietor of M/s Aditya Gems namely Shri Pradeep

Kumar Jain could not establish the genuineness of transaction done

by him. His statement was also recorded, which has been reproduced

on page Nos. 4 and 5 of the assessment order. From perusal of the

statement, it was clear that proprietor of the above said concern had

failed to prove the genuineness of his business. He relied on the

various case laws i.e.:

(a) M/s Indian Woolen Carpet Factory Vs. ITAT & Ors.

(2002) 178 CTR 420 (Raj) and M.P. High Court in the case of VISP (P) Ltd. Vs. CIT 186 CTR 718 (MP)

(b) CIT Vs. Precision Finance P Ltd. 208 ITR 465 (Cal).

(c) CIT Vs. Golcha Prop Pvt. Ltd. 227 ITR 391 (Raj) (d) CIT Vs. La Medica 250 ITR 575 (Del).

He also relied on the other case laws, which is reproduced on page

No. 10 of the assessment order. The ld Assessing Officer observed

that from the above case laws and discussion, it is crystal clear that

the primary onus is on the assessee to establish the genuineness of

the purchases claimed by it. Payment of account payee cheque is not

sacrosanct. The learned Assessing Officer after considering the

assessee's reply and relying upon the decision in the case of

Kachwala Gems Vs. JCIT 288 ITR 10 (SC), ACIT Vs. Shrikishan 4 ITA 274/JP/2013_ DCIT Vs. Gem Plaza

Malpani 32 Taxworld 122 (Jpr Trib) and ACIT Vs. Sh. Sindhuja Foods

Pvt. Ltd. 35 Taxworld 67 (JU Trib), he rejected the book result U/s

145(3) of the Act and after following the decision in the case of M/s

Vijay Proteins Ltd. Vs. ACIT 58 ITD 426 (Ahd.), he disallowed 25% of

unverifiable purchases of Rs. 1,80,092/- and made addition of Rs.

45,023/- to the income of the assessee.

3. Being aggrieved by the order of the learned Assessing

Officer, the assessee carried the matter before the learned CIT(A),

who had deleted the addition by observing as under:-

"I have considered the facts of the case and the submissions made. The appellant submitted confirmations of M/s Aditya Gems with his complete address, PAN numbers. Thus the appellant has discharged its burden to prove the purchases. There is no evidence with the A.O. that the cheques deposited in the party's accounts were withdrawn in cash and cash has come back to the appellant. Under similar circumstances, the Hon'ble ITAT, Jaipur Bench in a large number of cases has deleted the addition. The past history of the assessee takes preference over a comparable case wherein the assessee is maintaining books of accounts in same pattern which has been already accepted by revenue in previous years.

5 ITA 274/JP/2013_ DCIT Vs. Gem Plaza

Moreover, Gross Profit percentage is also better in current year as compared to previous year. The trading addition made by the A.O., therefore, deserves to be deleted. The grounds of the appeal are decided in favour of the appellant."

4. Now the revenue is in appeal before us. The Ld. DR supported

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

supported the order of the ld CIT(A).

5. We have heard the rival contentions of both the parties and

perused the material available on the record. Similar line of cases,

this Bench has decided in the case of Shri Anuj Kumar Varshney Vs.

I.T.O. and other cases in ITA No. 187/JP/2012 order dated

22/10/2014 wherein 15% disallowances has been held reasonable on

considering the detail discussion on facts and legal position on

unverifiable purchases/bogus purchases. Therefore, we also apply

15% disallowances on unverifiable purchases in this case also.

Accordingly, we confirm addition of Rs. 27,013/- on total

bogus/unverifiable purchase of Rs. 1,80,092/-. This ground of

revenue is partly allowed.

6 ITA 274/JP/2013_ DCIT Vs. Gem Plaza

6. The second ground of appeal is against deleting the addition

made by the Assessing Officer U/s 40(a)(ia) of the Act. The ld

Assessing Officer observed that the assessee had paid credit card

commission of Rs. 9,38,010/-. The assessee had not deducted

commission on payment of credit card service charges. These

charges appeared to be commission in respect of credit card.

Accordingly, he applied Section 40(a)(ia) of the Act on it. The

Assessing Officer gave reasonable opportunity of being heard and

after considering the assessee's reply, it has been held that the credit

card service charges are actually commission payment. He thereafter

analysed the whole process of credit card facility used by the

assessee with swapping machine. The bank has made a contract with

the merchant informally referred to as a merchant account. Under the

contract, the acquiring bank exchanges funds with issuing banks on

behalf of the merchant, and pays the merchant for the net balance of

their daily payment card activity, gross sales, minus reversals and

acquirer fees. This dealing is not on a principal to principal basis. The

bank has been acting as an agent to the assessee and payment made

to it are clearly covered under explanation of Section 194H. He

further reproduced TDS circular No. 619 dated 04/12/1991. He relied 7 ITA 274/JP/2013_ DCIT Vs. Gem Plaza

on the decision of Hon'ble Delhi High Court in the case of CIT Vs.

Singapore Airlines Ltd. & Other Airlines, 213 Taxation 441, Canara

Bank Vs. ITO 305 ITR (AT) 189 and Ultra Entertainment Solutions

Ltd. Vs. ITO 17 SOT 249 ( Mum ITAT), therefore, he disallowed Rs.

9,38,010/- U/s 40(a)(ia) of the Act.

7. Being aggrieved by the order of the Assessing Officer, the

assessee carried the matter before the ld CIT(A), who had allowed

the appeal by observing as under:-

"I have considered the facts of the case and the submissions made. On going through the nature of transactions, I find considerable merit in the contention of the appellant that credit card service charges paid to the bank cannot be considered as falling within the purview of Section 194H. Even though the definition of the term "commission or brokerage" used in the said section is an inclusive definition, it is clear that the liability to make TDS under the said section arises only when a person acts on behalf of another person. In case of service charges retained by the bank, it cannot be said that the bank acts on behalf of the assessee. The sale made on the basis of a credit card is clearly a transaction of the merchant establishment and the bank only facilitates the electronic payment, for a certain charge. The commission retained by the bank is in nature of normal bank charges and not in the nature of

8 ITA 274/JP/2013_ DCIT Vs. Gem Plaza

commission/brokerage for acting on behalf of the merchant establishment. On the basis of various above quoted decisions and decision passed by the Hon'ble ITAT Jaipur Bench in the case of Gem Paradise Vs. ACIT, Range-2. In my view there was no requirement for making TDS on the 'commission retained by the bank. The disallowance of Rs. 9,93,010/- made by the A.O. therefore deserves to be deleted. This ground of appeal is decided in favour of the appellant."

8. Now the revenue is in appeal before us. The ld DR vehemently

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

argued that this issue is covered by the Hon'ble ITAT, Jaipur Bench

decision in the case of Gem Paradise Vs. ACIT in ITA No.

746/JP/2011 order dated 02/2/2012.

9. We have heard the rival contentions of both the parties and

perused the material available on the record. As per facility availed by

the assessee through credit card, it resulted that bank had made

available the fund against the sale after reducing certain percentage

of his financial charges, which is not covered as a commission

envisaged in Section 194H of the Act. As already decided by the

Coordinate Bench in the case of Gem Paradise Vs. ACIT (supra). By

respectfully following the decision of the Coordinate Bench, we are of

the considered view that TDS is not liable on financial transfer rooted 9 ITA 274/JP/2013_ DCIT Vs. Gem Plaza

through credit card facility on which bank has charged certain

amount to facilitate the services. Accordingly, we confirm the order of

the ld CIT(A) on this ground.

10. In the result, the revenue's appeal is partly allowed.

Order pronounced in the open court on 17/07/2015.

Sd/- Sd/- ¼vkj-ih-rksykuh½ ¼Vh-vkj-ehuk½ (R.P.Tolani) (T.R. Meena) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member

Tk;iqj@Jaipur fnukad@Dated:- 17th July, 2015

*Ranjan

vkns'k dh izfrfyfi vxzsf'kr@Copy of the order forwarded to:

1. vihykFkhZ@The Appellant- The DCIT, Circle-2, Jaipur

2. izR;FkhZ@ The Respondent- M/s Gem Plaza, Jaipur.

3. vk;dj vk;qDr@ CIT

4. vk;dj vk;qDr¼vihy½@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. 274/JP/2013)

vkns'kkuqlkj@ By order,

lgk;d iathdkj@Asst. Registrar