Shri Puvvada Gopalakrishna, Machilipatnam V. THE ITO, WARD - 1, Machilipatnam

CO 66/VIZ/2013

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 2403 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 11 month(s) 13 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 06-09-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 14-12-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 23-09-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: M K SETHI
• Section: 40A(3); 143(3)

Judgement Text

ITA NO.100/VIZAG/2013 & CO 66/VIZAG/2013 PUVVADA GOPALA KRISHNA, MACHILIPATNAM 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM SMC BENCH, VISAKHAPATNAM . , BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER ./I.T.A.NO.100/VIZAG/2013 ( / ASSESSMENT YEAR: 2009-10) ITO, WARD - 1 , MACHILIPATNAM VS. PUVVADA GOPALAKRISHNA, MACHILIPATNAM [PAN: AOFPP3177E ] ( / APPELLANT) ( ! / RESPONDENT) C.O.66/VIZAG/2013 (ARISING OUT OF I.T.A.NO.100/VIZAG/2013) ( / ASSESSMENT YEAR: 2009-10) PUVVADA GOPALAKRISHNA, MACHILIPATNAM VS. ITO, WARD - 1, MACHILIPATNAM ( / APPELLANT) ( ! / RESPONDENT) / APPELLANT BY : SHRI M.K. SETHI, DR / RESPONDENT BY : SHRI G.V.N. HARI, AR / DATE OF HEARING : 17.06.2016 / DATE OF PRONOUNCEMENT : 06.09.2016 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF CIT(A), VIJAYAWADA DATED 21.12.2012 FOR THE ASSESSM ENT YEAR 2009-10. THE C.O. FILED BY THE ASSESSEE IS IN SUPPORT OF THE ORDER PASSED BY LD. CIT(A). ITA NO.100/VIZAG/2013 & CO 66/VIZAG/2013 PUVVADA GOPALA KRISHNA, MACHILIPATNAM 2 2. THE ASSESSEE IS IN THE BUSINESS OF RUNNING A DHA LL MILL IN THE NAME AND STYLE OF VIJAYA KRISHNA DHALL MILL AT MACHILIPA TNAM, FILED HIS RETURN OF INCOME BY DECLARING TOTAL INCOME OF ` 4,56,910/-. THE RETURN FILED BY THE ASSESSEE WAS INITIALLY PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS 'THE ACT'). LATER ON, AFTER FOLLOWING THE DUE PROCESS, ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE A.O. HAS OBSERVED WITH REGARD TO THE TRADE CREDITORS I.E. PURCHASE CREDITO RS, THE ASSESSEE PURCHASED DHALL FROM VARIOUS FARMERS AND ALSO FROM OTHER TRADERS. THE ACCOUNT COPIES FILED BY THE ASSESSEE WERE VERIFIED AND ALSO THE BILLS I.E. PURCHASE BILLS WERE VERIFIED. IT WAS FOUND THAT MO ST OF THE PAYMENTS MADE BY CASH AND THAT TOO ` 19,000/- IN ORDER TO AVOID ANY ADDITION U/S 40A(3) OF THE ACT. THE ACCOUNT COPIES FROM THE SUP PLIERS WERE ALSO OBTAINED, IN SOME OF THE CASES AND THEY ALSO MENTIO NED THE CASH RECEIPTS IN THEIR BOOKS OF ACCOUNTS. THE A.O. HAS DEPUTED THE INSPECTOR TO EXAMINE THE TRANSACTIONS IN THE CASE OF SIRI TRA DERS, VIJAYAWADA AND ALSO VIJAYAWADA DURGA TRADERS, VIJAYAWADA. THE INS PECTOR HAS VERIFIED THE ACCOUNT COPIES AND ALSO VERIFIED THE CASH BOOK OF THE PARTIES. IT WAS OBSERVED THAT ON THE SAME DAY, THERE WERE CASH RECE IPTS FROM OTHER PARTIES OTHER THAN THE ASSESSEE. WHEN THE A.O. HAS ASKED ABOUT THE SAME, THE A.R. OF THE ASSESSEE AGREED THAT THE PAYM ENT WILL BE MADE AT ITA NO.100/VIZAG/2013 & CO 66/VIZAG/2013 PUVVADA GOPALA KRISHNA, MACHILIPATNAM 3 A TIME, HOWEVER, IN ORDER TO AVOID LEVY OF TAX U/S 40A(3) OF THE ACT, THEY CONVENIENTLY TAKE THE BLANKET RECEIPTS FOR THE SAME AMOUNT DIVIDE BY ` 19,000/- AND AS AND WHEN CASH BALANCE WAS AVAILABLE , ONE PAYMENT WILL BE ENTERED. ON VERIFICATION OF SUCH ACCOUNT COPIES , THE CASH PAYMENT MADE WORKED OUT TO ` 31,49,149/- WHICH REQUIRE DISALLOWANCE U/S 40A(3) OF THE ACT AS UNDER: 1 SAI GANESH TRADERS 522000 2 VASAVI MINI DHALL MILL 348500 3 SIRI TRADERS 448900 4 SRINIVASA DHALL MILL 729896 5 SRI PARTHASARADHI DHALL MILL 152000 6 VENKATA SAI DURGA TRADERS 582453 7 SHAMUKHA TRADING CO. 75000 8 VENKATESWARA TRADERS 290400 TOTAL 31,49,149 ACCORDINGLY, THE A.O. HAS DISALLOWED AN AMOUNT OF ` 31,49,149/- AND THE SAME IS ADDED TO THE TOTAL INCOME OF THE AS SESSEE. 3. ON APPEAL BEFORE THE LD. CIT(A), IT WAS SUBMITTE D THAT SECTION 40A(3) HAS NO APPLICATION IN THE ASSESSEES CASE. THE LD. CIT(A) AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE, HE DIR ECTED THE A.O. TO DELETE THE ADDITION BY OBSERVING AS UNDER: 5. I HAVE SEEN THE SUBMISSIONS MADE BY THE AR, GONE THROUGH THE ASSESSMENT ORDER BESIDES PERUSING THE CASE LAWS RELIED UPON. I T IS SEEN FROM RECORDS THAT OUT OF THE TOTAL IMPUGNED CASH PAYMENTS OF RS. 31.50,149 ( THE CORRECT AMOUNT BEING RS. 31,49,149) PAYMENTS TO SRI PARDHASARADHI DALL MILL IN CASH AMOUNTING TO RS. 1,52,000, IS NOT PRESSED FOR AS THE APPELLANT HAS F AILED TO OBTAIN THE ACCOUNT COPY FROM THE SAID CREDITOR. IN AS MUCH AS THE OTHER PAY MENTS ARE CONCERNED, THE AR ITA NO.100/VIZAG/2013 & CO 66/VIZAG/2013 PUVVADA GOPALA KRISHNA, MACHILIPATNAM 4 WAS ABLE TO EXPLAIN THE SAME. IT MAY BE NOTED HERE T HAT THE PROVISIONS OF SECTION 40(A)(3) OF THE IT ACT ARE ATTRACTED WHEN THE PAYME NTS IN CASH ON EACH DAY EXCEEDS RS.20000 OR MORE. THE ASSESSING OFFICER EXA MINED THE ACCOUNT COPIES FILED BY THE APPELLANT FOR THE TRADE CREDITORS WITH THE B OOKS OF ACCOUNT OF THE APPELLANT AND SINCE THE RECEIPTS FOR THE PAYMENTS FROM THE TR ADE CREDITORS WERE SERIALLY NUMBERED THOUGH EFFECTED ON DIFFERENT DATES ADDED U /S.40(A)(3) OF IT ACT CONCLUDING THAT THESE PAYMENTS WERE PAID ON A SINGL E DAY. THE AR FOR THE APPELLANT PRODUCED THE ACCOUNT COPIES OF THE APPELLANT AS WEL L AS THE TRADE CREDITORS AND STATED THAT THE APPELLANT SHALL NOT BE TAXED FOR TH E SERIALLY NUMBERED RECEIPTS ISSUED BY THE TRADE CREDITORS LEAVING THE FACTS OF THE CAS E ASIDE, AS FOR THE NUMBERING MADE BY THE TRADE CREDITOR THE APPELLANT SHOULD NOT BE P UNISHED. IT IS ALSO A FACT THAT THE PAYMENT OF CASH OF RS. 19,000 ON EACH OCCASION WAS NOT RETORTED BY THE AO. EXCEPT CERTAIN TECHNICALITIES OF SERIAL NUMBERS. IN THIS C ONTEXT, IT IS WORTHWHILE TO RECALL THE DECISION OF THE CALCUTTA HIGH COURT DECISION IN THE CASE OF GIRDHARILAL GOENKA VS. CIT, REPORTED IN [1989] 179 ITR 122 (CAL.), WHEREIN , IT HAS BEEN HELD THAT THE AO SHOULD TAKE A PRACTICAL APPROACH TO PROBLEMS AND ST RIKE A BALANCE BETWEEN THE DIRECTION OF LAW AND HARDSHIP TO THE TAX PAYER. HE SHOULD NOT ENMESH HIMSELF IN TECHNICALITIES. AFTER ALL, THE OBJECT IS NOT TO DEP RIVE THE TAX PAYER OF THE DEDUCTION TO WHICH HE IS OTHERWISE ENTITLED TO CLAIM. IT MAY HOWE VER BE NOTED HERE THAT THE IDENTITY OF THE PAYEE IS ESTABLISHED, THE TRANSACTI ON IS NOT DENIED. THE BOOKS OF ACCOUNTS OF THE PAYER AND THE PAYEE TALLIED NO FRAU D WAS ESTABLISHED BY THE REVENUE, THUS ONCE THE REVENUE HAS MADE THE ADDITIO N ON TECHNICALITIES, THE SAME CANNOT BE SUSTAINED AND ACCORDINGLY, THE AO IS DIRE CTED TO DELETE THE SAME AS INDICATED ABOVE. 4. ON BEING AGGRIEVED, ASSESSEE CARRIED MATTER IN A PPEAL BEFORE THE TRIBUNAL. 5. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED T HAT THE ASSESSEE HAD PAID ONLY CASH PAYMENT OF ` 19,000/- IN A DAY, ALL THE TRANSACTIONS MADE BY THE ASSESSEE ARE GENUINE TRANSACTIONS AND R ECORDED IN THE BOOKS OF ACCOUNTS AND THEREFORE SECTION 40A(3) HAS NO APPLICATION AND HE STRONGLY SUPPORTED THE ORDER PASSED BY THE LD. C IT(A). 6. ON THE OTHER HAND, THE LD. D.R. HAS SUBMITTED TH AT THE LD. COUNSEL FOR THE ASSESSEE BEFORE THE A.O. HAS ACCEPT ED THE MODUS OPERANDI AND AGREED THAT ASSESSEE HAS PAID IN A DAY MORE THAN ` ITA NO.100/VIZAG/2013 & CO 66/VIZAG/2013 PUVVADA GOPALA KRISHNA, MACHILIPATNAM 5 19,000/- BUT BILL IS OBTAINED FOR ONLY ` 19,000/-, THAT TOO, BILLS ARE SERIALLY NUMBERED, WHICH INDICATES THAT ASSESSEE HA S PAID MORE THAN ` 19,000/-. 7. I HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. THE ASSESSEE IS IN THE BUSINESS OF RUNNING DHALL MILL. FOR THAT PURPOSE, HE HAS PURCHASE DHALL FROM VARIOUS PARTIES, SUCH AS FA RMERS AND OTHER TRADERS. THE A.O. AFTER VERIFYING THE ACCOUNT COPI ES AND PURCHASE BILLS, HE FOUND THAT MOST OF THE PAYMENTS ARE MADE BY THE ASSESSEE IN CASH OF ` 19,000/-. THE A.O. MADE FURTHER ENQUIRY AND OBTAI NED ACCOUNT COPIES AND IT IS FOUND THAT CASH RECEIPTS ARE MENTI ONED IN THEIR BOOKS OF ACCOUNTS. THE A.O. HAS DEPUTED THE INSPECTOR TO EX AMINE THE TRANSACTIONS IN CASE OF SIRI TRADERS, VIJAYAWADA AN D ALSO VIJAYA DURGA TRADERS, VIJAYAWADA. THE INSPECTOR HAS VERIFIED TH E ACCOUNT COPIES AND ALSO VERIFIED THE CASH BOOK OF THE PARTIES. IT WAS FOUND THAT THE PARTY WAS IN RECEIPT OF ANY OTHER CASH PAYMENT OTHER THAN THE ASSESSEE. FROM THE CASH BOOK, IT WAS OBSERVED THAT ON THE SAM E DAY, THERE WERE CASH RECEIPTS FROM THE OTHER PARTIES, OTHER THAN TH AT OF THE ASSESSEE. WHEN ASKED ABOUT THE SAME, THE AUTHORIZED REPRESENTA TIVE AGREED THAT THE PAYMENT WILL BE MADE AT A TIME, HOWEVER, IN ORD ER TO AVOID LEVY OF TAX U/S 40A(3) OF THE ACT, THEY CONVENIENTLY TOOK T HE BLANKET RECEIPT FOR ITA NO.100/VIZAG/2013 & CO 66/VIZAG/2013 PUVVADA GOPALA KRISHNA, MACHILIPATNAM 6 THE SAME AMOUNT DIVIDED BY ` 19,000/- AND AS AND WHEN CASH BALANCE WAS AVAILABLE, ONE PAYMENT WILL BE ENTERED. THE A. O. AFTER VERIFYING THE SAME, HE HAS FOUND THAT THE ASSESSEE HAS MADE 8 PAY MENTS, WHICH HAS CROSSED MORE THAN ` 20,000/-, TOTAL AMOUNTING TO ` 31,49,149/-. BEFORE THE A.O., THE AUTHORIZED REPRESENTATIVE HAS EXPLAIN ED THE MODUS OPERANDI OF THE ASSESSEE AND THE A.O. AFTER VERIFYI NG ALL THE DETAILS, HE HAS FOUND THAT THE ASSESSEE HAS PAID MORE THAN ` 20,000/- AMOUNTING TO A TOTAL OF ` 31,49,149/-. I FIND THAT THE A.O. BY FOLLOWING TH E PROVISIONS OF SECTION 40A(3) OF THE ACT BY CONSIDER ING THE ADMISSION MADE BY THE AUTHORIZED REPRESENTATIVE AND ALSO AFTE R VERIFYING THE RECORDS, ADDITION IS MADE. ON APPEAL, CIT(A) DELET ED THE ADDITION MADE BY A.O. BY OBSERVING THAT THE IDENTITY OF THE PARTI ES IS ESTABLISHED, THE TRANSACTION IS NOT DENIED, THE BOOKS OF ACCOUNTS OF THE PAYER AND PAYEE TALLIED AND NO FRAUD WAS ESTABLISHED BY THE REVENUE . THUS, REVENUE HAS MADE AN ADDITION ON TECHNICALITIES AND THE SAME CAN NOT BE SUSTAINED. I FIND IN THIS CASE, THE ASSESSEE HAS PAID MORE THAN ` 20,000/- IN A DAY AND OBTAINED THE RECEIPT ONLY FOR ` 19,000/-. THIS FACT IS ADMITTED BEFORE THE A.O. IT IS A CLEAR VIOLATION OF SECTION 40A(3) OF THE ACT. THE LD. CIT(A) WITHOUT CONSIDERING SECTION 40A(3) OF TH E ACT, SIMPLY DELETED THE ADDITION MADE BY THE A.O. I FIND THE ORDER PAS SED BY THE LD. CIT(A) IS CONTRARY TO THE PROVISIONS OF SECTION 40A(3) OF THE ACT. THEREFORE, ITA NO.100/VIZAG/2013 & CO 66/VIZAG/2013 PUVVADA GOPALA KRISHNA, MACHILIPATNAM 7 I REVERSE THE ORDER PASSED BY THE CIT(A) AND THE OR DER PASSED BY THE A.O. IS UPHELD. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S ALLOWED. 9. SO FAR AS C.O. FILED BY THE ASSESSEE IS CONCERNE D, IT IS ONLY SUPPORTING THE ORDER PASSED BY THE LD. CIT(A). IN VIEW OF MY ABOVE ORDER, IT BECOMES INFRUCTUOUS AND ACCORDINGLY DISMI SSED. HE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 6 TH SEPT16. SD/- ( . ) (V. DURGA RAO) /JUDICIAL MEMBER ! /VISAKHAPATNAM: % /DATED : 06.09.2016 VG/SPS '! (! /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE ITO, WARD-1, MACHILIPATNAM 2. / THE RESPONDENT PUVVADA GOPALAKRISHNA, PROP. VI JAYA KRISHNA DHALL MILL, D.NO.240, SULTANAGARAM, MACHILIPATNAM. 3. ) / THE CIT, VIJAYAWADA 4. ) ( ) / THE CIT(A), VIJAYAWADA 5. ! , , , , ! / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // /0 , (SR.PRIVATE SECRETARY) , , ! / ITAT, VISAKHAPATNAM