Case Law Details

Case Name : Shri Jeevan Kumar Agarwal vs. ACIT (ITAT Lucknow)
Appeal Number : Income tax (Appeal) nos. 346 -348 & 535 of 2013
Date of Judgement/Order : 20/11/2015
Related Assessment Year :
Courts : All ITAT (4418) ITAT Lucknow (70)

Brief of the Case

ITAT Lucknow held In the case of Shri Jeevan Kumar Agarwal vs. ACIT that there is no specific provision in the Act requiring the assessment made under section 153A to be after issue of notice under section 143(2). In the case of Ashok Chaddha vs. CIT [2011] 337 ITR 399, Hon’ble Delhi High Court held that a specific notice was required to be issued under Clause (a) of sub-section (1) of Section 153A calling upon the persons searched or requisitioned to file return. That being so, no further notice under Section 143(2) could be contemplated for assessment under Section 153A. No specific notice was required under section 143(2) when the notice in the present case as required under Section 153 (A) (1) (a) was already given.

Facts of the Case

I.T.A. No.346/Lkw/2013

 Non service of notice u/s 143 (2)

The assessee submitted that return of income filed earlier be treated to be the return filed in compliance of notice u/s 153A. But after his submission, no notice u/s 143(2) was served on the assessee which is required to be served on the assessee and accordingly the assessment order dated 31/12/2008 was void abinitio.

I.T.A. No.535/Lkw/2013

 Addition on account of cash payment

 Revenue raised this ground that the CIT (A) has erred in law and on facts in deleting the addition of Rs.7,25,000/- out of Rs.13,50,000/- on account of cash payment by admitting the additional evidence produced before him during the course of appellate proceedings in violation of Rule 46A of the IT Rule 1962 and without affording any opportunity to the AO or calling for a remand report.

Contention of the Assessee

I.T.A. No.346/Lkw/2013

 Non service of notice u/s 143 (2)

 The ld counsel of the assessee submitted that Para 8 to 18 of the synopsis, submitted by Learned A. R. of the assessee, are relevant for this issue and same should be considered. In these Para of synopsis, reliance has been placed on the judgment of Hon’ble Allahabad High Court rendered in the case of CIT vs. Rajeev Sharma [2011] 336 ITR 678 and it is also noted that the judgment of Hon’ble Delhi High Court in the case of Ashok Chaddha vs. CIT [2011] 337 ITR 399 is against the assessee but by this very Bench of the Tribunal in a case, argued by the same A.R., it was held that the judgment of Hon’ble Delhi High Court in the case of Ashok Chaddha is to be followed because it is in the context of section 153A whereas the judgment of Hon’ble Allahabad High Court rendered in the case of Rajeev Sharma is in the context of assessment u/s 147 of the Act. Then why not the same view should be taken in the present case also. In reply, Learned A. R. of the assessee had nothing to say.

Addition u/s 68

The ld counsel of the assessee submitted that apart from making addition of Rs.20,00,000/- in respect of loan received by the assessee u/s 68 of the Act, the Assessing Officer in the assessment order has also noted that the same amount was given by the assessee on loan to Jeevan Kumar Vinod Kumar of Rs. 20 Lacs and no interest income was shown by the assessee. The A.O. held that interest chargeable on this loan is Rs. 2.40 Lacs and the same is taxable. Thereafter, he held that against interest income of Rs. 2.40 Lacs, deduction on account of interest paid by the assessee and capitalized Rs. 156,942/- is allowable and after allowing deduction for the same, he made addition of the net amount of Rs. 83,058/-.

He further submitted that although it is held by learned CIT (A) that notional interest of Rs. 2.40 Lacs brought to tax by the A.O. was not justified and he deleted the same and as a consequence, the interest paid on this loan Rs. 156,942/- stands capitalized as no deduction for it was claimed by the assessee but still the fact remains that as per the A.O., deduction of this interest expenditure on this loan of Rs. 20 Lacs was accepted by the A.O. as allowable and therefore, he cannot say that this loan is unexplained and make addition thereof u/s 69.

Addition on account of low withdrawal for household expenses

 The ld counsel of the assessee submitted that the Assessing Officer has held in the assessment order that for a family of 7 members, house hold withdrawal shown by the assessee and his family of Rs.340,500/- is not sufficient. As per Assessing Officer, such house hold withdrawal should be Rs.4 lacs but no separate addition was made by him on this basis that addition on account of suppressed income from Gopalaya is made and therefore, no separate addition is made for low house hold withdrawals. Since the CIT (A) has deleted the addition made by Assessing Officer on account of Gopalaya of Rs. 480,000/-, CIT (A) has held that an addition of Rs.15,000/- on account of low house hold withdrawals will meet the ends of justice. He submitted that there is no basis indicated by CIT (A) for upholding the addition of Rs.15,000/- and therefore, the same should be deleted.

Contention of the Revenue

I.T.A. No.346/Lkw/2013

Non service of notice u/s 143 (2)

The ld counsel of the revenue submitted that the judgment of Hon’ble Delhi High Court in the case of Ashok Chaddha should be followed in preference to the judgment of Hon’ble Allahabad High Court in the case of Rajeev Sharma because the judgment of Hon’ble Delhi High Court is in the context of section 153A whereas the judgment of Hon’ble Allahabad High Court is in the context of section 147.

Held by CIT (A)

ITA No.663/LKW/2013

 Addition u/s 40A (3)

The CIT (A) has examined the detailed submissions and has deleted the addition with respect to payment of Rs.1.00 lakh made to IBBAN Trading Co. The CIT (A) has held that since this payments were made to IBBAN Trading Co. on Sunday being a Bank holiday, it would not be covered by the provision of Section 40A(3) as a same is excluded as per Rule 6DD(j). With regard to payment of Rs.1,57,650/- made to Unique Trader, no evidence was brought forward before the CIT(A) and in the absence of the same the addition of Rs.1,57,650/- was confirmed by the CIT(A).

So far as the transaction of Shah Traders are concerned, the AO has added a sum of Rs.34,35,285/- being cash payment of purchase of raw hide. In this regard, the CIT (A) has noted that the payment of Rs.12,25,130/- were made on different dates on Sunday and being a bank holiday a provision of Section 40A(3) cannot be invoked as a same stand excluded as per Rule 6DD(j) of the Income Tax Rules. With respect to remaining payment of Rs.22,10,155/-, the CIT(A) was of the view that since payments were not made to the producers of animal husbandry livestock hides and skins, the provision of saving clause (e) of Rules 6DD cannot be invoked and accordingly he confirmed the addition of Rs.22,10,155/-.

Addition on account sale to associate enterprise

The CIT (A) reexamined the scheme of the assessee in the light of the detailed explanation and was of the view whatever little difference in prices are there it has to be seen in the light of quantum of sale. The sale to M/s Popular was of very small quantity and that too single quality, whereas the sale to Treadstone is of much bigger quantity and also of varying qualities. Therefore one cannot compare to average rate of sale made to Treadstone with that of M/s Popular where only one quality in small lot was sold.

Addition on account of excess consumption of chemicals

The CIT (A) reexamined the claim of the assessee, in the light of replies and various evidence and the CIT(A) was of the view that the institute has categorically stated that the consumption of chemical in respect of samples given vary from Rs.30/- to 50/- per Kg. of the raw hides whereas consumption of chemicals per square ft. of finished leather would vary to Rs.35/- to Rs.60/-. The CIT(A) accordingly restore the matter to the AO with a direction to determine the average cost of consumption of chemicals/ per sq. ft/kg of finished leather/raw hide and if such chemical consumption is within the outer norms as given by the institute, no addition would be required to be made on account for consumption of chemicals.

Held by ITAT

 I.T.A. No.346/Lkw/2013

 Non service of notice u/s 143 (2)

We find that the judgment of Hon’ble Allahabad High Court in the case of Rajeev Sharma (supra) is in the context of assessment u/s 147 whereas the judgment of Hon’ble Delhi High Court in the case of Ashok Chaddha [2011] 337 ITR 399 is in the context of assessment u/s 153A and in this judgment, it was held that the requirement of issue and service of notice u/s 143(2) is not applicable in the assessment made in compliance to notice u/s 153A. We also find that in the case of Rajeev Sharma [2011] 336 ITR 678, the decision of Hon’ble Allahabad High Court is in favour of the assessee but the same is in the context of section 147.

No other judgment has been brought to our notice by Learned A. R. of the assessee which is in the favour of the assessee and is in the context of assessment u/s 153A of the Act. Therefore, in the present case also, we follow the judgment of Hon’ble Delhi High Court and decide the issue against the assessee.

  Addition u/s 68

We find force in the submissions of the learned AR of the assessee. This is undisputed fact that as per the assessment order, it is held by the A.O. that deduction of Rs. 156,942/- being interest on this very loan of Rs. 20 Lacs is allowable and he made addition of only Rs. 83,058/- after reducing this amount from the amount of Rs. 2.40 Lacs brought to tax by him as notional interest on loan given by the assessee of Rs. 20 Lacs.

We are aware that it is held by CIT (A) that this notional interest of Rs. 2.40 Lacs cannot be brought to tax but this is immaterial because if the assessee actually received interest on this loan given by the assessee at any point of time, the same can be taxed only after reducing deduction allowed by the A.O. himself on account of interest paid by the assessee on this very loan. Having allowed deduction on account of interest on this very loan of Rs. 20 Lacs, the A.O. cannot say that the loan is unexplained and add the same u/s 68 because the A.O. cannot blow hot and cold together. We, therefore, delete this addition.

Addition on account of low withdrawal for household expenses

We find that the assessee has shown house hold withdrawal of Rs.340,500/-. The same was estimated by Assessing Officer at Rs. 4 lac but CIT (A) has although agreed with the estimate of the A.O. about household expenses of Rs. 4 Lacs, but he confirmed the addition of only Rs.15,000/- by saying that the family has many earning members. But neither the Assessing Officer nor the CIT (A) has given any basis for holding that the house hold withdrawal shown by the assessee is not sufficient. Hence, we delete this addition of Rs.15,000/-. This ground is allowed.

I.T.A. No.535/Lkw/2013

 Addition on account of cash payment

We find that , it is held by CIT (A) that as per the details submitted, payment of Rs.7.25 lac has apparently been made by cheque by Smt. Laxmi Agarwal (vide cheque dated 14/07/2005). The CIT(A) held that the Assessing Officer may verify the same and after verification, delete the addition of Rs.7.25 lacs. The objection of Learned D. R. of the Revenue was that it amounts to set aside, which is not within the power of CIT (A).

We find force in the submissions of Learned D. R. of the Revenue that CIT(A) should not have given such direction to Assessing Officer for making verification and deleting the addition and instead of this, he should have obtained remand report and should have decided the issue. But considering this fact that already more than 2½ years have passed after the date of order of CIT(A) being 05/03/2013, no useful purpose will be served by obtaining remand report from the Assessing Officer by Tribunal or restoring the matter back to CIT(A) for fresh decision after obtaining remand report from the Assessing Officer and therefore, under these facts, we hold that the Assessing Officer should verify this contention of the assessee that this payment has apparently been made by cheque by Smt. Laxmi Agarwal vide cheque dated 14/07/2005 and if this contention is found correct then this addition should be deleted. Accordingly, ground No. 3 stands disposed of.

Accordingly appeal of the assessee partly allowed and appeal of the revenue dismissed.

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