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Assistant Commissioner of Income Tax, Circle-2, Jaipur Versus M/s Khandaka Jain

2015 (11) TMI 1280 - ITAT JAIPUR

Trading addition - rejection of books U/s 145(3) - CIT(A) reducing the trading addition - Held that:- The assessee has shown G.P. rate @ 13.2% on total sale of ₹ 6.86 crores as against the G.P. rate @ 13% on sale of ₹ 6.82 crores in immediate preceding year. The assessee has maintained day to day stock register of gold and silver ornaments but not maintained the stock register for diamond jewellery, this constitutes 5.6% of total turnover. The assessee had not made any purchase from .....

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as been followed by the assessee consistently. The Coordinate Bench had already considered the identical facts and circumstances of the case in assessee’s own case in A.Y. 2006-07 and 2007-08 and dismissed the revenue’s appeal. - Decided against revenue.

disallowance of interest - CIT(A) deleted the addition - Held that:- The partners of the firm had sufficient interest free funds including profit earned during the year. Therefore, no notional interest disallowance can be made by the .....

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erest. The assessee paid interest to the close person covered U/s 40(A)(2)(b) of the Act @ 18% confirmed - Decided against revenue. - ITA No. 997/JP/2013 - Dated:- 1-10-2015 - Shri T. R. Meena, AM And Shri Laliet Kumar, JM For the Petitioner : Shri Raj Mehra (JCIT) For the Respondent : Shri Madhukar Garg (C.A.) ORDER Per T. R. Meena, A. M. This is an appeal filed by the revenue against the order dated 05/09/2013 of the learned C.I.T.(A)-I, Jaipur for A.Y. 2008-09. The effective grounds of appeal .....

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d in deleting the addition of ₹ 7,68,872/- made on account of excessive interest payment to the persons covered by Section 40(A)(2)(b), which was made after recording cogent reasons. 2. The first ground of the revenue s appeal is against reducing the trading addition of ₹ 5,60,827/- even after upholding the rejection of books U/s 145(3) of the Income Tax Act, 1961 (hereinafter referred as the Act). The assessee firm is engaged in the business of manufacturing and trading of gold and .....

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proper bills, only self made vouchers are available. PAN, address of such sellers is also not available. 2. Quantitative & qualitative stock of diamond & precious stones are not maintained. 3. Assessee following LIFO method which is not acceptable as per accounting standard. 4. Regarding stock register for gold, no bifurcation of finished and unfinished goods and cost thereon is mentioned. 5. Schedule of audit report says that assessee has not maintained vouchers of some of the expenditu .....

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r bills. No details of sellers, their address and PAN had been maintained on such vouchers. In absence of these basic primary details, these purchases remained unverifiable and unauthentic. The assessee had not been maintaining quantitative and qualitative details of diamonds and precious and semi precious stones. Considering the fact that quality of stones and diamonds makes huge variation in prices, no qualitative details leaves stock nothing but mere estimation. Moreover, the assessee was not .....

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In view of the above finding of the Assessing Officer, expenditure claimed by the assessee remained unverifiable. Accordingly he applied Section 145(3) of the Act and rejected the book result. He relied on the following case laws:- (i) Amiya Kumar Roy & Brothers Vs. CIT 206 ITR 306 (Cal.) (ii) Ram Chandra Singh Ramnik Lal Vs. CIT (Patna) 42 ITR 780. (iii) Ratan Lal Om Prakash 132 ITR 640. (iv) Ram Krishan Poongalia 184 CTR 448 (Raj.) (v) Navasivayam Chettiar (S.N.) Vs. CITY (1960) 38 ITR 579 .....

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cumstances of the case as mentioned above by the Assessing Officer, he applied G.P. rate @ 14% against the declared G.P. rate of 13.20%. Thus he made addition of ₹ 5,60,827/- in the income of the assessee. 3. 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:- The first to fourth grounds of appeal are against the trading addition of ₹ 5,60,827/- made by invoking the provisions .....

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isallowance is deleted on the basis of the said order of the Hon ble ITAT, Jaipur. The appellant succeeds on this ground. 4. Now revenue is in appeal before us. The ld DR vehemently supported the order of the Assessing Officer and reiterated the arguments made in his assessment order that the assessee had not maintained qualitative and quantitative details of stock. There was URD purchases for which no addressee, confirmation, PAN number have been furnished by the assessee during the course of a .....

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/JP/2009 for A.Y. 2006-07, ITA No. 375/JP/2010 for A.Y. 2007-08 & ITA No. 627/JP/2010 for A.Y. 2007-08 order dated 30/09/2010 has allowed the appeal by observing that, it is not necessary that rejection of books is made by the Assessing Officer, there must be some additions in the income of the assessee. 6. We have heard the rival contentions of both the parties and perused the material available on record. The assessee has shown G.P. rate @ 13.2% on total sale of ₹ 6.86 crores as agai .....

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purchased by them. The assessee has only finished goods, therefore, the assessee is not required to maintain stock register of unfinished stock. The assessee had followed LIFO method of closing stock since number of years and no addition had been made by the ld Assessing Officer in past on this ground and same has been followed by the assessee consistently. The Coordinate Bench had already considered the identical facts and circumstances of the case in assessee s own case in A.Y. 2006-07 and 200 .....

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g Officer gave reasonable opportunity of being heard on this issue, which has availed by the assessee. As per Assessing Officer, the assessee could not explain satisfactorily the reason that why it had not charged interest on the advances of ₹ 3 lacs after relying on various cases of Hon'ble High Court. He disallowed 12% interest on day to day basis and addition of ₹ 9 lacs was made, which was deleted by the ld CIT(A) that the addition has been made by the Assessing Officer in a .....

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ble with it. The opening capital of partner was ₹ 1,10,07,513/- and the closing capital was ₹ 2,11,28,032/-. As per terms and conditions of the partnership deed, interest has been paid to the partner Shri Sant Kumar Khandaka and Smt. Suman Agarwal on an amount of ₹ 10 lacs only and whatever amount available in excess of ₹ 10 lacs is interest free. During the year under consideration, the assessee firm had earned book profit at ₹ 33,64,115/- which is much more than t .....

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Assessing Officer in absence direct nexus between the interest bearing fund and interest free advances. Thus, we confirm the order of the ld CIT(A). 10. The third ground of the revenue s appeal is against deleting the addition of ₹ 7,68,872/- made on account of excessive interest payment to the persons covered U/s 40(A)(2)(b) of the Act. The ld Assessing Officer observed that the assessee had paid interest @ 18% to the persons specified U/s 40(A)(2)(b) of the Act, which is found excessive .....

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e against the addition of ₹ 7,68,872/- U/s 40(A)(2)(b). This ground of appeal are squarely covered in favour of the appellant by virtue of the order of Hon ble ITAT, Jaipur Bench, Jaipur in Appeal No. 426/JP/2009, ITA No. 375/JP/2010 and ITA No. 627/JP/2010 dated 30/09/2010 in the appellant s own case for A.Y. 2006-07 and 2007-08 wherein similar additions was deleted. There being no change in the material facts and the legal position. This disallowance is deleted on the basis of the said o .....

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x World 63 and in the case of Goverdhan Prasad Singhal Vs. ITO reported in XXXX Tax World 175 wherein the Hon ble ITAT has held that the interest rate of 18% to be reasonable in respect of assessment years 2004-05 and 2005-06. The similar additions were made in A.Y. 2006-07 by the Assessing Officer wherein the assessee had paid interest @ 18% to family members and the Assessing Officer disallowed interest in excess of 6.75% on which rate loan was taken from the bank. A disallowance of ₹ 7, .....

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e High Court that where lower authorities have allowed deduction in respect of disallowance made U/s 40(A)(2)(b) of the Act on the ground that in earlier years deduction has been allowed and in order to maintain consistency, no interference was required to be made in allowing deduction. The disallowance which was made U/s 40(A)(2)(b) of the Act which was deleted by the CIT(A) and ITAT was held to be justified. Therefore, he prayed to confirm the order of the ld CIT(A). 13. We have heard the riva .....

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