Kapil Kumar Garg, Ghaziabad vs Assessee

PER I.C. SUDHIR: JUDICIAL MEMBER The assessee has questioned first appellate order on several grounds

running into five pages. The effective additions/disallowances with which

the assessee is aggrieved are (i) disallowance of Rs.2,65,195 on account of

purchases made from sister concern M/s. Hari Steel & Crane Services under

sec.40A(2) of the Income-tax Act, 1961 ( Ground No. 3); (ii) addition of

Rs.9,97,429 on account of proceeds by sale of jewellery( Ground No.4); (iii)

addition of Rs.2,10,000 received by way of sale of plot at 297-Loha Mandi

under sec. 68 of the Act( Ground No. 5); (iv) addition of Rs.2,85,000 on

account of advance given to Shourya Developers for purchasing of plots 2

(Ground No.6) ; (v) disallowance of Rs.22,500 (30% of Rs.75,000) on

account of expenditure claimed under the provisions of income house

property and further the taxing the rental income from plot under the head

'income from other sources( Ground No.7); (vi) disallowance of Rs.47,037

on account of car insurance( Ground No. 8); (vii) disallowance of Rs.37,550

(10% of Rs.3,75,498) on account of personal user of car( Ground No.9); &

(ix) charging of interest under sec. 234B and 234C of the Act( Ground

No.12).

2. Heard and considered the arguments advanced by the parties in view

of orders of the authorities below, material available on record and the

decisions relied upon.

3. Grievance No.3: The assessee deals in purchase and sale of M.S.

sheets and M.S. Structure . During the year, the assessee has purchased M.S.

Sheets etc. from its sister concern M/s. Hari Steels. The Assessing Officer

denied the claim on the basis that the assessee has not been able to adduce

any evidence that there was difference in market rate due to size or quality

etc. and has also not been able to prove or distinguish as to which bills

pertains to which gaze and also failed to prove that purchases made from

sister concern were at prevailing market rates. The Learned CIT(Appeals) 3

has upheld the addition made by the Assessing Officer in this regard at

Rs.2,65,195. The Assessing Officer has made this disallowance on account

of unreasonable value of purchases as per the provisions of sec.40A(2) of the

Income-tax Act, 1961.

3. In support of the related ground of the grievance, the Learned AR

submitted that while making and sustaining the disallowance, the authorities

below have failed to appreciate that there was no motive for inflation of its

purchases by Rs.2,55,195 as profit shown by M/s. Hari Steels for the

assessment year 2007-08 under consideration also falls into the tax @ 30%.

In support, he placed reliance on the decision of Hon'ble Supreme Court in

the case of CIT vs. Glaxo Smith Kline Asia (P) Ltd., (2010)- 236 CTR S.C.

113. He also referred page Nos. 21 to 34 and 25 to 37 of the paper book i.e.

the detailed chart of purchase and sale of iron and steel by the firm of the

assessee with others.

4. The Learned DR on the other hand placed reliance on the orders of the

authorities below with this contention that before them the assessee has

failed to furnish quality-wise details of iron and steel (M.S. Sheets) sold to

its sister concern to enable the Assessing Officer to examine the rate of those 4

goods prevailing in the market in comparison to the rates on which the goods

were sold to its sister concern.

5. Having gone through the decision of Hon'ble Supreme Court in the

case of CIT vs. Glaxo Smith Kline Asia (P) Ltd. (supra), we find that the

Hon'ble Supreme Court has been pleased to hold that while making

disallowance under sec. 40A(2) regarding payment to related concerns, the

authorities are ought to examine as to whether there is any loss of revenue in

any of the assessment years in question and to find out that the exercise is a

revenue neutral exercise then there no interference is called for. Respectfully

following this ratio of the decision, we set aside the matter to the file of the

Assessing Officer to decide it afresh after affording opportunity of being

heard to the assessee in view of the above cited decision of the Hon'ble

Supreme Court. The ground No.3 is thus allowed for statistical purposes.

6. The Assessing Officer made addition of Rs.9,97,429 on account of

proceeds by sale of jewellery. The Learned CIT(Appeals) has upheld the

same.

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7. In support of the ground, the Learned AR submitted that all the details

of jewellery were given to the Assessing Officer and the impugned addition

has been made by recording incorrect facts and findings without giving

adequate opportunity of hearing to the assessee and without considering the

submissions/evidences of the assessee. He submitted that the assessee had

sold jewelry weighing 1249.55 gms. out of which jewellery of 1198.77 gms.

was inherited by the assessee from his father and balance 96 gms. was

purchased by the assessee from time to time. The source of the same and

evidence regarding the sale was submitted before the Assessing Officer. The

Learned AR referred page Nos. 47 to 61 of the paper book which are copies

of the bills dated 26.3.1995 showing the purchase of jewellery by the father

of the assessee; bills showing the sale of jewellery by the assessee; statement

of Mr. Prince Goel of M/s. Shanti Swaroop Mahesh Chand to whom

jewellery was sold in which Mr. Goel admitted to have purchased the

jewelry from the assessee; statement of Mr. Nitin Goel of M/s. Shanti

Abhushan Bhandar who purchased jewelry from the assessee confirming the

fact of sale of jewellery by the assessee. The Learned CIT(Appeals) has

upheld the addition with this further observation that as per reply furnished

by the assessee for the assessment year 2006-07, assessee was not having

any further jewellery left by his father and, therefore, the assessee could not 6

have sold such non-existing jewellery. The Learned AR submitted that the

assessee could not reply the above facts observed by the authorities below,

correctly in the assessment proceedings of assessment year 2006-07, but the

fact of matter is that the assessee has sold the jewellery as evident from the

copies of the sales bills and statement of the purchasers. The Learned AR

submitted further that though the statements were recorded on oath and it is

not the case of the assessee that these purchasers did not state the truth in

their statement. He submitted that copies of sales bills are also evidence of

the sales made by the assessee. Availability of jewellery in the hands of the

father was established with the help of purchase bills of 1995 standing in the

name of his father.

8. The Learned DR on the other hand placed reliance on the orders

of the authorities below. M/s. Ankur Jewellers from whom the father of the

assessee claimed to have purchased the jewellery in the year 1995 was not

found on the given address. Source and creditworthiness of the father has

also not been established to justify the claimed sales.

9. Having gone through the orders of the authorities below, we find

that they have dealt with the issues in detail. There is no dispute that Mr. 7

Prince Goel and Mr. Nitin Goel of M/s. Shanti Abhushan Bhandar in their

statements recorded by the Assessing Officer have confirmed the claimed

sales of jewellery by the assessee to them but the assessee has failed to

furnish any satisfactory reply to the observations of the authorities below

that on 18.11.2001 i.e. during the course of assessment proceedings for the

assessment year 2006-07, assessee had claimed to have inherited 185 gms.

of jewellery only from his father but now the assessee is claiming to have

actually inherited 1198.77 gms. from his father. The assessee has not been

able to rebut the above observation of the authorities below by furnishing

any proof regarding inheritance of 1198.77 gms. of jewellery from his

father. In absence of such rebuttal by the assessee and keeping in view the

totality of facts and circumstances as well as preponderance of the

probabilities, we are of the view that the Learned CIT(Appeals) has rightly

upheld the addition. Ground No. (iv) is accordingly rejected.

Ground No.5

10. The Assessing Officer made addition of Rs.2,10,000 claimed to

have been received by way of sale of plot No. 297, Loha Mandi, under sec.

68 of the Act. The same has been upheld by the Learned CIT(Appeals). 8

10.1 In support of the ground, the Learned AR submitted that the

assessee had purchased the above said plot for Rs.1,80,000 on 18.1.2005

from one Shri Raj Kumar Kakkar and without getting it registered resold it

to one Shri Rikki Jain for Rs.2,10,000. He submitted that payment from Shri

Rikki Jain was received by account payee cheque. Since the plot was not

registered even in the name of Mr. Raj Kumar Kakkar and was allotted in

the name of Mr. Bishan Dayal by the UPSIDC, which throughout the

documentation remained the same. He submitted that the actual fact of the

matter is that the said amount of Rs.2,10,000 represented the sale proceeds.

He referred pages No.65, 66 and 74 of the paper book which are copies of

confirmation from Mr. Rikki Jain that he had purchased the said plot for

Rs.2,10,000 from the assessee through account payee cheque; and

confirmation from Shri Raj Kumar Kakkar confirming that the he had sold

this very plot to the assessee for Rs.1,80,000 and that the plot was standing

in the name of its original allottee i.e. Mr. Bishan Dayal.

11. The Learned DR on the other hand placed reliance on the orders

of the authorities below. He submitted that the assessee failed to establish

identity and creditworthiness of Mr. Vikki Jain, hence, genuineness of the

claimed transaction remained unproved.

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12. Considering the above submissions, we agree that there is

prevailing practice of transfer of such plot allotted by some government

authorities/department for some specific purpose without getting it

registered in the name of purchaser from the original allottee on the record

of such authorities/department but at the same time some agreement is

entered into between the seller and purchaser for such transaction. In

absence of such evidence, we are of the view that the authorities below have

rightly denied the genuineness of the claimed transaction. The ground No. 5

is accordingly rejected.

Ground No. 6:

13. The Assessing Officer made addition of the Rs.2,85,000 on

account of disallowance of claimed advance given to M/s. Shorya

Developers in the assessment year 2006-07 and received back from one Mr.

Prem Prakash partly in assessment year 2007-08 and partly in assessment

year 2008-09.

14. In support of the ground, the Learned AR submitted that the

assessee had given an advance of Rs.2,85,000 by account payee cheque to 10

M/s. Shorya Developers in assessment year 2006-07 which was received

back when the property was sold to Shri Prem Prakash. The Learned AR

referred page Nos. 75 to 84 of the paper book which are copies of extract of

S/B Account showing amount of Rs.2,85,000 was given on 30.11.2005 to

M/s. Shorya Developer, bank statement showing the payment of

Rs.2,85,000; confirmation from Shri Prem Prakash that he had made five

installments of payments aggregating to Rs.2,85,000 to the assessee from

various accounts; bank statement of the assessee to show the receipt of the

very amounts. The Learned AR submitted that the bank statement of the

assessee made available at page Nos. 83 and 84 is showing that Rs.34,000

Rs.40,000 and Rs.1,85,000 were credited in the bank account in the

assessment year 2008-09 and hence could not be added in the assessment

year 2007-08. He submitted further that PAN of Mr. Prem Prakash was also

furnished along with his confirmation.

15. The Learned DR on the other hand tried to justify the orders of

the authorities below in this regard.

16. Having gone through the orders of the authorities below, we find

that the genuineness of claimed refund of advance money for purchase of 11

land from Shorya Developers has been denied on the basis that the assessee

did not furnish any evidence with regard to the credit entries amounting to

Rs. 2,85,000. The Assessing Officer has denied the claimed refund without

examining the veracity of the documents filed by the assessee before it as

discussed above. We, thus in the interest of justice, set aside the matter back

to the file of the Assessing Officer to examine the correctness of the

documents filed by the assessee in this regard and decide the issue afresh

after affording opportunity of being heard to the assessee.

Ground Nos. 7 & 8:

17. During the course of hearing, the Learned AR did not press

these grounds. The same are accordingly rejected as withdrawn.

Ground No. 8:

18. The assessee has questioned disallowance of Rs.37,550

sustained by the Learned CIT(Appeals) out of the claimed interest on car

loan, vehicle running and maintenance and depreciation.

19. In support of the ground, the Learned AR submitted that the

disallowance in question has been upheld without any personal element of

use of car. The Learned DR on the other hand submitted that sufficient relief

has already been given by the Learned CIT(Appeals).

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20. Considering the above submission, we find that the Assessing

Officer had made disallowance on account of interest on car loan, vehicle

running and maintenance as well as deprecation claimed on car @ 25% of

the claim on the basis that the assessee had not furnished evidence with

regard to the exclusive use of car for business purposes. The Learned

CIT(Appeals) has reduced the disallowance by applying 10% of the claimed

amount of Rs.3,75,498 resulting into disallowance of Rs.37,550 only. We do

not find infirmity in the First Appellate Order as in absence of maintenance

of proper log book etc. the possibility of personal user of the car cannot be

totally ruled out. The ground No. 9 is accordingly rejected.

21. The remaining grounds are general and consequential in nature,

hence, do not need independent adjudication. These grounds also include the

charging of interest under sec. 234B and 234C of the Income-tax Act, 1961.

22. In result, the appeal is partly allowed.

Decision pronounced in the open court on 25 .03.2015

Sd/- Sd/-

( J.S. REDDY ) ( I.C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 25 /03/2015 Mohan Lal 13

Copy forwarded to:

1) Appellant

2) Respondent

3) CIT

4) CIT(Appeals)

5) DR:ITAT

ASSISTANT REGISTRAR

Date Draft dictated on computer 25.03.2015 Draft placed before author 25.03.2015 Draft proposed & placed before the second member

Draft discussed/approved by Second Member. 25.03.2015 Approved Draft comes to the Sr.PS/PS Kept for pronouncement on 25.03.2015 File sent to the Bench Clerk 25.03.2015 Date on which file goes to the AR Date on which file goes to the Head Clerk.

Date of dispatch of Order.