SHRI PRAVEEN DUTT SHARMA, BEAWAR V. ITO, BEAWAR

ITA 1031/JPR/2011

• Counselvise Citation: 103123114 RSA 2011
• Duration Of Justice: 3 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 29-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEENA JEEPH JCIT DHK
• Assessee Lawyers: B M VYAS
• Keywords: Bonafide belief
• Section: 40A(3)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH VH-VKJ-EHUK] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM VK;DJ VIHY LA-@ ITA NO. 1031/JP/2011 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 SHRI PRAVEEN DUTT SHARMA M/S. MAMTA TRANSPORT CO. AJMER ROAD, BEAWAR CUKE VS. THE ITO WARD - 1 BEAWAR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AEEPS 0989 Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MAHENDRA GARGIEYA, ADVOCATE AND SHRI B.M. VYAS, CA JKTLO DH VKSJ LS@ REVENUE BY : SMT. NEENA JEEPH, JCIT . LQUOKBZ DH RKJH[K@ DATE OF HEARING : 05/01/2015 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 27/02/2015 VKNS'K@ ORDER PER R.P. TOLANI, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINS T THE ORDER OF THE LD. CIT(A), AJMER DATED 07-10-2011 FOR THE ASSESSMENT YEAR 2008-09 CHALLENGING THE ADDITION OF RS. 11.17 LACS U/S 40A( 3) OF THE ACT. 2.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A TRANSPORTER FOR M/S. GUJARAT AMBUJA CEMENT LTD. DURING THE COURSE OF ASS ESSMENT PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE HAS MAD E PAYMENT TO OTHER TRANSPORTERS WHICH IN HIS VIEW WERE SUB-CONTRACTORS . THE ASSESSEE MADE ITA NO. 1031//JP/2011 SHRI PRAVEEN DUTT SHARMA VS. ITO, WARD- 1, BEAWAR . . 2 CASH PAYMENTS EXCEEDING RS. 20,000/-, THEREFORE, TH E ADDITION WAS DISALLOWED BY THE AO RECOURSING TO SECTION 40A(3). 2.2 AGGRIEVED, THE ASSESSEE PREFERRED FIRST APPEAL WHEREIN IT WAS CONTENDED THAT THE ASSESSEE DID NOT HAVE ADEQUATE N UMBER OF TRUCKS TO FULFILL ITS OBLIGATION OF TRANSPORTING THE GOODS OF M/S. GUJARAT AMBUJA CEMENT LTD. CONSEQUENTLY IT HAD TO SUBLET THE WORK OF TRANSPORTATION OF GOODS TO DIFFERENT TRUCK OWNERS FOR COMPLETING THIS WORK ON CONTRACT ON TRIP WISE BASIS. THE ASSESSEE QUA SUCH SUB CONTRACT RECEIVED ONLY COMMISSION AND WORKED AS A CONDUIT TO PASS ON THE T RANSPORTATION PAYMENTS TO SUBCONTRACTORS IN CONSIDERATION OF THE COMMISSION. THE EXPENDITURE IN QUESTION WAS NOT INCURRED BY THE ASS ESSEE BUT THE SAME WAS INCURRED BY M/S. GUJARAT AMBUJA CEMENT LTD. REL IANCE IS PLACED IN THE CASES OF CIT VS. BALAJI ENGINEERING & CONSTRUCT ION WORKS (2010), 323 ITR 351 (KAR.) AND KEDAR NATH MANUFACTURING CO. LTD. VS. CIT (1971)82 ITR 363 (SC). HOWEVER, THE LD. CIT(A) UPHE LD THE DISALLOWANCE BY FOLLOWING OBSERVATIONS. 3.3 ARGUMENT OF THE APPELLANT HAS BEEN CAREFULLY CONSIDERED. FROM THE PERUSAL OF RECORDS, IT IS FOUN D THAT APPELLANT HAS TAKEN CONTRADICTORY STAND BEFORE AO. ON ONE HAND HE HAS ARGUED BEFORE AO THAT PAYMENT WAS MADE BY HIM TO VARIOUS SUB-CONTRACTORS (DIFFERENT TRUCK OWN ERS WHO ACTUALLY TRANSPORTED THE GOODS) AND ON THE OTHER HA ND IN RESPONSE TO QUERY OF AO, HE REPLIED VIDE HIS LETTER DATED 27- 12-2010 THAT PAYMENTS WERE MADE TO DIFFERENT TRUCK OWNERS WHO WERE PERSONS OF SMALL MEANS AND NOT HAVING BANK ACCOUNTS IN BEAWAR, THEREFORE, PAYMENT WAS MADE TO THEM IN ITA NO. 1031//JP/2011 SHRI PRAVEEN DUTT SHARMA VS. ITO, WARD- 1, BEAWAR . . 3 CASH. THUS CLAIM OF THE APPELLANT THAT PAYMENT WAS MADE BY HIM TO SUB-CONTRACTORS IS NOT ACCEPTABLE. AT THE SA ME TIME NO EXCEPTIONAL CIRCUMSTANCES HAVE BEEN EXPLAINED BY HI M EITHER BEFORE AO OR THE UNDERSIGNED WHICH REQUIREMENT PAYM ENT TO BE MADE IN CASH. IN VIEW OF THESE FACTS, AO IS JUST IFIED IN MAKING A DISALLOWANCE OF RS. 11,17,000/- U/S 40A(3) . THE RELIANCE PLACED BY AO ON THE DECISIONS OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF KEJRIWAL I RON STORES (167 ITR 12) AND NAHGILAL VS. CIT (167 IR 139) IS A LSO IN ORDER. IN BOTH THESE CASES, IT WAS HELD BY HON'BLE HIGH COURT THAT DISALLOWANCE U/S 40A(3) INCLUDES PAYMENT MADE FOR PURCHASES ALSO. THUS ARGUMENT OF THE APPELLANT THAT ADVANCE PAID BY HIM TO THE TRUCK OWNERS IS NOT COVE RED U/S 40A(3) IS ALSO NOT JUSTIFIED. I THEREFORE, HOLD THA T DISALLOWANCE OF RS. 11,17,000/- HAS BEEN RIGHTLY MA DE BY AO AND THE SAME IS CONFIRMED. GROUND NO. 1 TO 4 OF THE APPEAL ARE THUS DISMISSED. 2.3 AGGRIEVED, THE ASSESSEE IS BEFORE US AGAINST OR DER OF THE FIRST APPELLATE CONTENDING THAT THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE HAD BEEN TAKING CONTRADICTORY STAND. BESID ES, IT HAD BEEN ALLEGED THAT THE ASSESSEE HAS NOT PLEADED ANY EXCEPTIONAL C IRCUMSTANCES EITHER BEFORE THE AO OR BEFORE LD. CIT(A). THIS FINDING IS NOT CORRECT INASMUCH AS THE EXCEPTIONAL CIRCUMSTANCES WERE PLEADED WHICH IS EVIDENT FROM THE WRITTEN SUBMISSION FILED BEFORE THE LOWER AUTHORITI ES AND ARE PART OF THE RECORD. IT IS PLEADED THAT THE ASSESSEE HAS EXPLAIN ED THE CIRCUMSTANCES THAT IN THE ABSENCE OF HAVING SUFFICIENT NUMBERS OF TRUC KS, THE ASSESSEE HAD TO SUBLET THE WORK TO THE SUBCONTRACTORS. HENCE, IN TH E COURSE THEREOF, ANY AVAILABLE TRANSPORTER WAS GIVEN THE REQUIRED WORK OF TRANSPORTATION AND THE ASSESSEE WAS ELIGIBLE TO AGREED AMOUNT OF COMMI SSION. THE AVAILABLE ITA NO. 1031//JP/2011 SHRI PRAVEEN DUTT SHARMA VS. ITO, WARD- 1, BEAWAR . . 4 TRANSPORTERS ALWAYS INSISTED FOR CASH PAYMENT AND T HEY DO NOT AGREE FOR SUBCONTRACT ON CREDIT BASIS. THUS THE HARDSHIPS OF EXCEPTIONAL CIRCUMSTANCES FOR CARRYING ON TRANSPORTATION BUSINE SS AND AVOID BREACH OF CONTRACT WITH GUJRAT AMBUJA WERE DULY EXPLAINED TO THE LOWER AUTHORITIES WHICH HAVE BEEN GLOSSED OVER. RELIANCE IS PLACED IN THE CASE OF CIT VS. BALAJI ENGINEERING AND CONSTRUCTION WORKS (SUPRA) I N WHICH CASH PAYMENT MADE TO SUBCONTRACTORS IS HELD TO BE NOT LI ABLE FOR DISALLOWANCE U/S 40A(3), BESIDES THE EXCEPTIONAL CIRCUMSTANCES H AVE BEEN DULY PLEADED, WHICH HAVE NOT BEEN CONSIDERED BY LOWER AU THORITIES. FURTHER RELIANCE IS PLACED IN THE CASE OF G.A. ROAD CARRIER S VS. ITO (2011) 44 SOT 145 (TRIB. HYD). THE LD. COUNSEL FOR THE ASSESS EE PLACED RELIANCE IN THE CASE OF KEDAR NATH MANUFACTURING CO. LTD. VS. C IT (SUPRA) FOR THE PROPOSITION THAT ENTRIES IN THE BOOKS OF ACCOUNT AR E NOT DECISIVE IN DETERMINING THE REAL CHARACTER OF TRANSACTION AND T HE SAME SHOULD BE ASCERTAINED ON THE BASIS OF REALITIES. 2.4 THE LD. DR RELIED ON THE ORDERS OF THE LOWER AU THORITIES. 2.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND MERIT IN THE CONTENTIO NS OF THE LD. COUNSEL FOR THE ASSESSEE. THE FINDINGS OF THE LOWER AUTHORI TIES THAT THE ASSESSEE DID NOT PLEAD ANY EXCEPTIONAL CIRCUMSTANCES ARE NOT SUP PORTED BY RECORD WHICH INDICATES THAT THE ASSESSEE PLEADED THE BUSIN ESS COMPULSION AND ITA NO. 1031//JP/2011 SHRI PRAVEEN DUTT SHARMA VS. ITO, WARD- 1, BEAWAR . . 5 EXISTENCE OF EXCEPTIONAL CIRCUMSTANCES FOR MAKING T HE IMPUGNED CASH PAYMENTS. THE ASSESSEE CAN ALSO BE HELD TO HAVE LAB ORED UNDER A BONAFIDE BELIEF THAT IT WAS ENTITLED TO ONLY COMMIS SION IN THIS BEHALF AND RELEVANT TRANSPORTATION WORK HAD BEEN DONE BY SUBCO NTRACTORS. THUS, IN VIEW OF THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. BALAJI ENGINEERING AND CONSTRUCTION WORKS ( SUPRA), THE CASH PAYMENT SHOULD BE MADE. HENCE, IN VIEW OF THE ABOV E FACTS AND CIRCUMSTANCES OF THE CASE, WE DELETE THE ADDITION M ADE BY THE AO U/S 40A(3) OF THE ACT AND THE APPEAL OF THE ASSESSEE IS ALLOWED. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED ORDER PRONOUNCED IN THE OPEN COURT ON 27 /02/ 2015. SD/- SD/- VH-VKJ-EHUK VKJ-IH-RKSYKUH (T.R. MEENA) (R.P.TOLANI) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 27 TH FEB, 2015 *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI PRAVEEN DUTT SHARMA, BEAWAR 2. IZR;FKHZ@ THE RESPONDENT- THE ITO, WARD- 1, BEAWAR 3. VK;DJ VK;QDRVIHY ) @ CIT(A), JAIPUR 3. VK;DJ VK;QDR@ CIT, JAIPUR 4. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 5. XKMZ QKBZY@ GUARD FILE (ITA NO.1031/JP/2011) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR