The ACIT, Circle-1, JAMNAGAR V. Shri Murubhai Devshibhai Gagalia, JAMNAGAR

ITA 1017/RJT/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 2941 (ITAT-RAJKOT)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 23-12-2010
• Assessment Year: 2000-2001
• Appeal Filed On: 30-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AVINASH KUMAR
• Section: 40A(3); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI A.L. GEHLOT (AM) AND SHRI D.T. GARASIA (JM) I.T.A. NO. 1017/RJT/2010 (ASSESSMENT YEAR 2000-01) ACIT, CIR.1 VS SHRI MURUBHAI DEVSHIBHAI GAGALIA JAMNAGAR PROP MITTAL CONSTRUCTION SHIVAM SOCIETY, MAIN ROAD INDIRA MARG, JAMNABAR PAN : ACXPG8407A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AVINASH KUMAR RESPONDENT BY: SHRI KALPESH DOSHI O R D E R A.L. GEHLOT : THIS IS AN APPEAL FILED BY THE REVENU E AND IS DIRECTED AGAINST THE ORDER OF THE CIT(A), JAMNAGAR DATED 19-04-2010 FOR THE ASSES SMENT YEAR 2000-01. 2. THE ASSESSEE HAS RAISED AS MANY AS SEVEN GROUNDS . HOWEVER, EFFECTIVELY ALL THE GROUNDS PERTAINS TO TWO ADDITIONS, I.E. (I) RS. 6,44,015 MADE ON ACCOUNT OF NON- GENUINE CREDITOR; AND (II) RS.1,51,395 MADE ON ACCO UNT OF DISALLOWANCE U/S 40A(3) OF THE ACT. 3. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS SHOWN SOME CREDITORS IN THE BOOKS OF A CCOUNT. THE ASSESSING OFFICER ASKED THE ASSESSEE TO PRODUCE THOSE CREDITORS THOUG H THE ASSESSEE HAS FILED AFFIDAVIT AND CONFIRMATION AND OTHER MATERIALS. SINCE THE AS SESSEE DID NOT PRODUCE THOSE PERSONS, THE ASSESSING OFFICER MADE ADDITION OF OUT STANDING BALANCE OF THOSE PARTIES AMOUNTING TO RS.6,44,015. THE ASSESSING OFFICER FU RTHER NOTICED THAT THE ASSESSEE HAS PAID LABOUR CONTRACT PAYMENT DURING THE YEAR IN CAS H TO THOSE PARTIES. HE, THEREFORE, DISALLOWED 20% OF TOTAL CASH PAYMENT MADE DURING TH E YEAR U/S 40A(3) AT RS. 1,51,395. A TABLE IN THIS REGARD NOTED FROM ASSESSMENT ORDER PAGE 4 IS REPRODUCED BELOW: S.NO NAME OF THE PARTY VALUE OF THE WORK AMOUNT PAID AS PER BOOKS IN CASH UNGENUINE CREDITS AGAINST WHICH THE DISALLOWABLE UI/S 40A(3) ITA NO.1017/RJT/2010 2 PAYMENT HAVE ALREADY BEEN MADE IN CASH 1 JUIMA ALARAKHA HINGORA 55350 55350 -- 11070 2 3. MAMADBHAI ALARAKHA NARANBHAI RANAMIBHAI 261525 -- 191400 -- 70125 52305 -- 4 HASAN ALLARAKHA 364500 270452 94048 72900 5. SONARAM RANIDAN RAV 75600 -- 75600 15120 6. RAMBHAI RANMALBHAI -- -- -- -- 7. MALDE DADUBHAI GAGALIA -- -- -- -- 8. KANJI ALAAHIR 34600 281500 64500 -- 9. BABABHAI HASANBHAI 394155 149404 244751 -- 10 RAVI CONSTRUCTION 73600 -- 73600 -- 11. ABU KASAM 100000 78609 21391 -- TOTAL 644015 151395 4. THE CIT(A) DELETED BOTH THE ADDITIONS OBSERVING AS UNDER:- 5. I HAVE CAREFULLY CONSIDERED THE ISSUE, IT IS SE EN THAT THE ASSESSING OFFICER HAS MADE AN ADDITION OF RS.644015 BY TREATI NG THE SUNDRY CREDITORS AS OFFICER HAS MADE AN ADDITION OF RS.644 015 BY TREATING THE SUNDRY CREDITORS AS NON GENUINE AS TABULATED HEREU NDER. SR.NO NAME VALUE OF WORK DONE DURING THE YEAR AMOUNT PAID AS PER BOOKS OUTSTANDING TREATED AS NON GENUINE 1 MAMAD ALLARAKHA 261525 191400 70,125 2 HANSAN ALLARAKHA 364500 270452 94048 3 SONARAM RANIDAN 75600 0 75600 4 KANJI ALA AHIR 346000 281500 64500 5 BABABHAI HASANBHAI 394155 149404 244751 6 RAVI CONSTRUCTION 73600 0 73600 7 ABU KASAM 100000 78609 21391 TOTAL 644015 IT IS SEEN THAT THE ASSESSING OFFICER HAS WORKED OU T DIFFERENCE BETWEEN THE AMOUNT OF CONTRACT WORK DONE DURING THE YEAR AN D AMOUNT PAID TO THEM IN THE YEAR. THE ASSESSING OFFICER HAS ASSUME D THAT THE AMOUNT WHICH REMAINED OUTSTANDING WAS PAID IN CASH OUTSIDE BOOKS OF ACCOUNTS AND MADE THE ADDITION. THE AR OF THE APPELLANT SUB MITTED THAT THE ITA NO.1017/RJT/2010 3 ASSESSING OFFICER HAS IGNORED THE OPENING BALANCE A ND APPORTIONED THE AMOUNT PAID DURING THE YEAR AGAINST WORK DONE DURIN G THE YEAR. THESE ARE ALL RUNNING ACCOUNT AND IT IS USUAL TO HAVE OUT STANDING IN THE ACCOUNT AS PER BUSINESS PRACTICE, AS AND WHEN PAYMENTS WERE RECEIVED FROM GOVERNMENT AGENCIES FROM WHOM APPELLANT WORKS, PAYM ENTS WERE MADE TO CREDITORS. THE CONFIRMATIONS F ALL CREDITORS IN DICATING ALL DETAILS AND CONFIRMING OUTSTANDING WERE FILED ON RECORD BEFORE ME AS WELL AS BEFORE ASSESSING OFFICER. CONSIDERING FACTS OF THE CASE A ND DOCUMENTS ON RECORD, I AM OF OPINION THAT THE ADDITION OF RS.644 015 CANNOT BE MADE BY TREATING THE SUNDRY CREDITORS NON-GENUINE ON THE AS SUMPTION THAT THEY MIGHT HAVE BEEN PAID IN CASH OUTSIDE THE BOOKS OF A CCOUNTS. ESPECIALLY ON THE UNIQUE WORKING AND ASSUMPTION THAT AMOUNT PA ID DURING THE YEAR IS TOWARDS WORK DONE DURING THE YEAR THEREBY IGNORI NG THE OPENING BALANCE AND CONTINUITY OF ACCOUNT AND ALSO CONFIRMA TIONS FILED BY CREDITORS. THERE IS NO EVIDENCE OR INDICATION THAT THE OUTSTANDING IN THE ACCOUNT OF CREDITORS IS NOT GENUINE LIABILITY OF TH E APPELLANT. HENCE ADDITION OF RS.6440-15 IS HEREBY DELETED AND THIS G ROUND OF APPEAL IS ALLOWED. 9. I HAVE CAREFULLY CONSIDERED THE ISSUE, IT IS SE EN ASSDESSING OFFICER HAS MADE DISALLOWANCE U/S 40A(3) ON AMOUNT PAID AS PER BOOKS OF ACCOUNTS AS WELL AS AMOUNT TREATED PAID OUTSIDE BOO KS OF ACCOUNTS. I HAVE GONE THROUGH THE RECORDS AND LEDGER ACCOUNT OF SUNDRY CREDITORS. IT IS SEEN ALL PAYMENTS WERE BELOW RS.20000 ON EACH OC CASION AND THERE IS NO VIOLATION OF SECTION 40A(3) OF PAYMENTS MADE AS PER BOOKS OF ACCOUNTS, WITH REGARDS TO PAYMENT OUTSIDE BOOKS OF ACCOUNTS, THE SAME IS CONSIDERED AS GENUINE OUTSTANDING BY THIS ORDER. OTHERWISE ALSO WHEN ENTIRE AMOUNT WAS TREATED AS INCOME THERE WAS NO JU STIFICATION IN MAKING FURTHER DISALLOWANCE U/S 40A(3) ON SAME AMOUNT. HE NCE ADDITION OF RS.151395 IS HEREBY DELETED. THIS GROUND OF APPEAL IS ALLOWED. 5. THE LD.DR SUBMITTED THAT THE ASSESSING OFFICER W ANTED TO EXAMINE THOSE CREDITORS BUT THE ASSESSEE HAS FAILED TO PRODUCE THEM. THERE FORE, ADDITIONS MAY BE SUSTAINED. THE LD.AR, ON THE OTHER HAND, RELIED UPON THE ORDER OF CIT(A) AND SUBMITTED THAT THE ASSESSEE HAS FURNISHED AFFIDAVIT, CONFIRMATION AND OTHER MATERIAL IN SUPPORT OF THE CLAIM. IT IS ALSO THE SUBMISSION OF THE LD.AR THAT THE PAY MENTS MADE TO THOSE PARTIES WERE LESS THAN RS.20,000 AT A TIME. HE RELIED UPON THE DECIS ION OF ITAT IN THE CASE OF SHANTI RAM MEHATA VS ACIT 119 ITD 62 (KOL)(TM) WHEREIN IT HAS BEEN HELD THAT DISALLOWANCE U/S 40A(3) IS APPLICABLE FOR EACH PAYMENT AND NOT FOR T HE AGGREGATE OF THE VARIOUS PAYMENTS MADE TO SAME PARTY DURING ONE DAY. THE LD.AR FURTH ER SUBMITTED THAT THE ASSESSING OFFICER HAS ACCEPTED GENUINE WORK DONE BY THOSE PAR TIES AND RELATED EXPENSES HAVE BEEN FULLY ALLOWED. THE ASSESSING OFFICER SIMPLY D OUBTED THE GENUINENESS OF THE TRANSACTION ONLY IN RESPECT OF THE CLOSING BALANCE. THE LD.AR DEMONSTRATED BY REFERRING TO PAGES 25 TO 29 OF THE PAPER BOOK THAT EACH PAYME NT WAS LESS THAN RS.20,000. ITA NO.1017/RJT/2010 4 6. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES, RECORD PERUSED. WE FIND THAT THE ASSESSING OFFICER SIMPLY MADE THE ADD ITION OF THE CLOSING BALANCE OF THOSE PARTIES ONLY ON THE GROUND THAT THOUGH THE ASSESSEE HAS FILED AFFIDAVIT AND SUPPORTING CONFIRMATION, COPIES OF ACCOUNT AND OTHER MATERIALS , WHICH ARE ON RECORD BUT NOT PRODUCED THE PARTIES. WE ALSO FIND THAT EACH PAYME NT MADE TO THOSE PARTIES WERE BELOW RS.20,000. THE ASSESSING OFFICER HAS DOUBTED THE G ENUINENESS OF THE TRANSACTION ONLY IN RESPECT OF CLOSING BALANCE OF THOSE PARTIES, IN OTHER WORDS, FROM THE SAME TRANSACTION THE ASSESSING OFFICER HIMSELF ACCEPTED THE GENUINEN ESS OF THE TRANSACTION IN PART AND ONLY IN RESPECT OF CLOSING BALANCE TREATED IT AS NO N GENUINE. SUCH PARTIALITY OF THE VIEW OF THE ASSESSING OFFICER IS NOT SUSTAINABLE IN LAW. T HE ASSESSING OFFICER HAS AMPLE POWER TO EXAMINE ANY PERSON IF IT IS FOUND THAT HIS EXAMINAT ION IS NECESSARY IN ACCORDANCE WITH LAW AND THE ASSESSEE HAS GIVEN COMPLETE DETAILS OF THOSE PERSONS AND ASSESSING OFFICER FAILED TO EXERCISE POWER U/S 131 OF THE ACT AND TH E ASSESSEEE CANNOT BE BLAMED FOR HIS FAILURE. THE PAYMENT MADE TO ABOVE PARTIES THOUGH IN CASH BUT EACH PAYMENT IS BELOW RS.20,000. THIS FACT IS DEMONSTRATED BY THE LD.AR FROM THE COPIES OF ACCOUNT PLACED IN THE PAPER BOOK. IN THE LIGHT OF ABOVE DISCUSSED WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31-12-2010. SD/- SD/- (D.T. GARASIA) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER RAJKOT, DT : 31 ST DECEMBER, 2010 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A), JAMNAGAR 4. THE CIT, JAMNAGAR 5. THE DR (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, RAJKOT ITA NO.1017/RJT/2010 5