Sri.B.K. Chikkaveerappa, Periyapatna V. ITO, Mysore

ITA 113/BANG/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95213 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-09-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 06-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P K SRIHARI
• Assessee Lawyers: NARENDRA SHARMA
• Section: 40A(3); 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRI BUNAL BANGALORE BENCH B, BANGALORE BEFORE SMT. ASHA VIJAYARAGHAVAN, JM (SMC) ITA NO.113(B)/2015 (ASSESSMENT YEAR : 2008-09) SHRI B.K.CHIKKAVEERAPPA, PROP: B.K.FERTILIZERS STORES, NO.280/1, K.R.NAGAR ROAD, BETTADAPURA, PERIYAPATNA PAN NO.AFKPC0294D APPELLANT VS THE INCOME-TAX OFFICER, WARD-1(3), MYSORE RESPONDENT ASSESSEE BY : SHRI NARENDRA SHARMA, ADVOCATE REVENUE BY : DR. P.K.SRIHARI, ADDL.CIT DATE OF HEARING : 20-08-2015 DATE OF PRONOUNCEMENT : 26-08 -2015 O R D E R PER SMT ASHA VIJAYARAGHAVAN, JM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF CIT(A), MYSORE, DATED 17-10-2014 FOR THE ASSESSMENT YEAR 20 08-09. 2. THE ISSUE IN THIS APPEAL IS REGARDING DISALLOWAN CE U/S 40A(3) OF THE IT ACT, 1961. THE AO IN HIS ASSESSMENT ORDER, HELD AS FOLLOWS; ITA NO.113(BANG)2015 2 2. ON PERUSAL OF LEDGER ACCOUNTS, ASSESSEE HAD SHO WN CASH PAYMENTS TO FOLLOWING PARTY VIZ. SRI SOMESWARA FERTILIZERS & CHEMICALS, SOMANAHALLI INDUSTRIAL ARE A, MADDUR FOR PURCHASE OF FERTILIZERS, BUT ON EACH OCC ASION CASH PAYMENT SHOWN IN THE BOOKS WERE LESS THAN RS.20,000 /-. THE ASSESSEE WAS ASKED TO PRODUCE EITHER CASH RECEI PT OF SAID CONCERN FOR HAVING RECEIVED CASH LESS THAN RS .20,000/- AS DEPICTED IN ASSESSEES BOOKS OR TO PRODUCE LEDGE R ACCOUNTS OF SAID PARTIES AND PRODUCE LEDGER EXTRACT OF ABOVE CONCERN AS APPEARING IN BOOKS OF ASSESSEE, WHICH IS DULY CERTIFIED BY SRI SOMESHWARA FERTILIZERS & CHEMICALS . IN ORDER TO VERIFY THE GENUINENESS OF THE LEDGER ACCOU NT PRODUCED SUMMONS WAS ISSUED TO SRI SOMESHWARA FERTILIZERS & CHEMICALS ON 26-07-20010 TO PRODUCE T HEIR CASH BOOK AND LEDGER. SINCE THERE WAS NO RESPONSE TO SUMMONS, A LETTER WAS ALSO ISSUED TO SAID COMPANY O N 23.09.2010 TO COMPLY BY 01.10.2010. THERE WAS NO COMPLIANCE TO THIS LETTER ALSO. 2.1 SURVEY ACTION U/S 133A WAS CONDUCTED BY ACIT, CIRLE-2(1), MYSORE IN THE CASE OF SRI SOMESHWARA FE RTILIZERS & CHEMICALS ON 08-10-2010 DURING THE COURSE OF WHIC H BOOKS OF ACCOUNTS MAINTAINED BY THE SAID PARTY WAS IMPOUNDED FROM WHICH LEDGER ACCOUNT OF ASSESSEE AS APPEARING IN THE SAID BOOKS WAS EXTRACTED. AS COUL D BE SEEN FROM SAID LEDGER, ASSESSEE HAD MADE CASH PAYME NT ABOVE RS.20,000/- ON EACH OCCASION AND AS PER LEDGE R EXTRACT, THE COMPANY HAS ALSO ISSUED CASH RECEIPTS. FURTHER, IT IS SHOWN THAT A CHEQUE OF RS.50,000/- W AS SHOWN AS RECEIVED FROM ASSESSEE ON 31-03-2008 BUT N OT ITA NO.113(BANG)2015 3 CLEARED. THUS, THE LEDGER EXTRACT OF SAID COMPANY A S PER BOOKS OF ACCOUNTS MAINTAINED BY ASSESSEE WAS TOTALL Y DIFFERENT FROM LEDGER MAINTAINED BY SRI SOMESHWARA FERTILIZERS & CHEMICALS FOUND DURING THE COURSE OF SURVEY. AS PER LEDGER EXTRACT PRODUCED BY ASSESSEE ON EACH OCCASION CASH PAYMENT MADE IS LESS THAN RS.20,000/- AND THERE IS NO ENTRY REGARDING PAYMENT OF CHEQUE BUT, AS PER LEDGER OBTAINED FROM COMPANY DURING THE SURVEY, CAS H PAYMENTS MADE EXCEEDED RS.20,000/-AND ALSO A CHEQUE OF RS.50,000/- WAS STATED TO BE RECEIVED BY THE COMPAN Y. IT WAS ARGUED BY THE ASSESSEE BEFORE THE AO THAT HE MADE CASH PAYMENT TO SALES REPRESENTATIVES OF THE SAID CONCER N ON THE DATES SHOWN IN HIS BOOKS BUT THE ENTRIES ARE MADE IN THEIR BOOKS O N THE DATE ON WHICH SALES REPRESENTATIVES HANDED OVER CASH TO THEM. IT IS ALSO CONTENDED THAT THE ENTRIES IN THEIR BOOKS ARE TRUE AND CORRECT. T HE ASSESSEE PRODUCED THE ACCOUNT COPY OF SRI SOMESHWARA FERTILIZERS & CHEMIC ALS AS APPEARING IN THE ASSESSEES BOOKS AND CERTIFIED BY SRI SOMESHWAR A FERTILIZERS & CHEMICALS LTD., ON 05-07-2010 WHICH IS BEFORE THE D ATE OF SURVEY ON 08-10- 2010. THE AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSE E FOR THE FOLLOWING REASONS; - ANY BUSINESS MAN WOULD OBTAIN RECEIPTS FOR ANY PAYMENTS IN CASH FROM THE SUPPLIER AS AND WHEN IT I S PAID. ITA NO.113(BANG)2015 4 - AS PER THE BOOKS OF SRI SOMESHWARA FERTILIZERS & CHEMICALS FOUND AT THE TIME OF SURVEY IT WAS EVIDEN T THAT THE SAID COMPANY WAS ISSUING CASH RECEIPTS WHI CH THE ASSESSEE NEVER PRODUCED DURING ASSESSMENT PROCEEDINGS BEFORE THE AO. - THE ASSESSEE COULD NOT PRODUCE ANY RECEIPTS ISSUED BY THE COMPANY OR BY THEIR REPRESENTATIVES FOR HAVI NG RECEIVED LEE THAN RS.20,000/- ACCORDINGLY, RELYING ON THE DECISION OF THE H ONBLE SUPREME COURT IN THE CASE OF ATTAR SINGH GURMUKH SI NGH 191 ITR 667 AND BOARDS CIRCULAR NO.717 DATED 14-08 - 1995, IT IS OBSERVED BY THE AO THAT THE ASSESSEE IS NOT FALLING UNDER RULE 6DD SINCE THE RULE 6DD(J) WHICH PROVIDED FOR EXCLUSION OF PAYMENTS MADE IN EXCEPTIO NAL CIRCUMSTANCES WHEN GENUINENESS IS PROVED, HAS BEEN DELETED W.E.F.1996. THE CBDTS CIRCULAR CITED SUPRA , EXPLAINS THE REASONING FOR DELETION OF RULE 6DD(J). WITH THESE OBSERVATIONS THE AO MADE THE ADDITION OF RS.3,04,100/- BY DISALLOWING THIS AMOUNT U/S 40A(3) . 3. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). 4. ON APPEAL BEFORE THE CIT(A), IT WAS ARGUED BY T HE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE HAD ESTABLISHED IDENTITY OF THE PAYER AND PAYEE, GENUINENESS OF THE PAYMENT AND AVAILABILITY OF CASH BALANCE IN THE BOOKS OF ACCOUNTS AND ALSO SUBMITTED THAT THE FACTU M OF BUSINESS EXPEDIENCY SHOULD ALSO BE CONSIDERED. THE CIT(A) H ELD THAT WHAT CAN BE ITA NO.113(BANG)2015 5 EXCLUDED IS ONLY THAT WHICH ARE ENUMERATED IN RULE 6DD. FURTHER, THE CIT(A) OBSERVED THAT FROM THE FACTS OF THE CASE, TH E ASEESSEE CASE IS DISTINGUISHABLE IN AS MUCH AS THE ASSESSEE HAS CLEA RLY TRIED TO AVOID THE RIGOROUS OF SEC.40A(3) BY SPLITTING THE PAYMENTS BE CAUSE ON EACH DAY OF THE PAYMENTS THE ASSESSEE DID HAVE SUFFICIENT CASH BALA NCE AND THIS IS ADMITTED BY THE ASSESSEE ALSO AND THE EVIDENCES CLE ARLY SHOW THAT THE RECIPIENT HAS RECEIVED MORE THAN RS.20,000/- ON EAC H OCCASION AND ISSUED CASH RECEIPTS AS SUCH. ACCORDING TO CIT(A), THIS H AS SURFACED ON ACCOUNT OF SURVEY IN THE CASE OF THE RECIPIENT, BUT FOR WHICH THE ASSESSEE COULD HAVE SAILED THROUGH WITH THE ENTRIES. THE CIT(A) FURTHE R NOTED THAT THE ASSESSEE PRODUCED THE LEDGER COPY OF THE RECIPIENT SIGNED BY THEM BUT THAT WAS BEFORE THE DATE OF SURVEY AND THE ASSESSEE DID NOT FILE THE ACCOUNT COPY AS APPEARING IN THE RECIPIENTS BOOKS. THE CIT(A) POI NTED OUT THAT THE ASSESSEE ALSO FAILED TO PRODUCE THE RECEIPTS ISSUED BY THE RECIPIENTS WHICH WERE FOUND AT THE TIME OF SURVEY AND THE WHOLE ISSU E CAME UP ONLY ON ACCOUNT OF SURVEY IN THE CASE OF THE RECIPIENT AND HENCE, HE WAS OF THE VIEW THAT THE ASSESSEES CASE IS CLEARLY COVERED U/S 40A (3) AND ACCORDINGLY, THE ADDITION WAS CONFIRMED. 5. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. ITA NO.113(BANG)2015 6 6. THE ASSESSEE HAS FILED AT PAGE-6 & 7 OF THE PAP ER BOOK, THE OPENING CASH BALANCE, AS PER CASH BOOK AND THE PAYM ENTS MADE TO M/S SOMESHWARA FERTILIZERS & CHEMICALS WHICH ARE TABULA TED AS UNDER; DATE OPENING CASH BALANCE RS. AMOUNT PAID RS. 21/08/2007 478600 19500 23/08/2007 414405 19500 30/08/2007 495555 13050 05/02/2007 254922 19500 06/02/2008 235422 19000 07/02/2008 222047 19000 09/08/2008 208922 19000 11/02/2008 195402 19000 12/02/2008 176402 19500 04/03/2008 229782 10000 14/03/2008 283077 19500 15/03/2008 263577 19000 16/03/2008 249253 19500 17/03/2008 231673 19000 19/03/2008 216442 19500 20/03/2008 216557 18500 24/03/2008 214071 12650 RELYING ON THE ABOVE, HE ARGUED THAT NONE OF THE PA YMENTS WERE EXCEEDING RS.20,000/-. THE ASSESSEE HAS ALSO FILED THE LEDGE R EXTRACT OF M/S SOMESHWARA FERTILIZERS & CHEMICALS LTD., THE LEARN ED COUNSEL FOR THE ASSESSEE FURTHER ARGUED THAT THE AO AND THE CIT(A) WERE NOT JUSTIFIED IN ITA NO.113(BANG)2015 7 REJECTING THE BOOKS OF ASSESSEE U/S 143(3)OF THE AC T, ON THE PRESUMPTION THAT THE ENTRIES IN THE BOOKS OF ASSESSEE ARE NOT M ATCHING WITH THE LEDGER EXTRACT OF THE SAID COMPANY I.E M/S SOMESHWARA FERT ILIZERS & CHEMICALS LTD., THE LEARNED COUNSEL FOR THE ASSESSEE ARGUED THAT THE LEDGER EXTRACT OF M/S SOMESHWARA FERTILIZERRS & CHEMICALS LTD., IS TO BE IGNORED AS NOT SACROSANCT. UNDER THESE CIRCUMSTANCES, WHEN THERE IS LACK OF CLARITY THE ENTRIES IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE WE RE NOT MATCHING WITH THE ENTRIES MAINTAINED BY M/S SOMESHWARA FERTILIZERS & CHEMICALS LTD. WE SET ASIDE THE ISSUE TO THE ASSESSING OFFICER TO TAKE AP PROPRIATE STEPS SUCH AS ISSUE OF SUMMONS TO M/S SOMESHWARA FERTILIZERS & CH EMICALS FOR CLARIFYING THIS MISMATCH AND THEREAFTER GIVING A RE ASONABLE OPPORTUNITY TO THE ASSESSEE TO DECIDE THE ISSUE IN ACCORDANCE WITH LAW. 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE 26 TH AUGUST, 2015. SD/- (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER D A T E D : 26-08-2015 PLACE: BANGALORE AM* COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A) BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER AR, ITAT, BANGALORE