916 Epari Jeweller Pvt. Ltd, Bhubaneswar V. ACIT, Bhubaneswar

ITA 113/CTK/2012

• Counselvise Citation: 11322114 RSA 2012
• Duration Of Justice: 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 09-02-2012
• Court: TRIBUNAL
• Department Lawyers: S C MOHANTYDR
• Assessee Lawyers: K SHARMA
• Keywords: Unexplained investment; Principle of natural justice; Assessment record
• Section: 40A(3)

Judgement Text

IN THE INC O ME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : SHRI K.K.GUPTA, AM , AND SHRI K.S.S.PRASAD RAO, JM ITA NO. 113/CTK/2012 (ASSESSMENT YEAR 2007 - 08) 916 EPARI JEWELLER PVT. LTD., 78 JANPATH, KHARVELNAGAR, UNIT - 3, BHUBANESWQR 751 001, PAN: AAJCS 0037 P VERSUS ASST.COMMISSIONER OF INCOME - TAX, CIRCLE 1(1), BHUBANESWAR. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI K.SHARMA, AR FOR THE RESPONDENT SHRI S.C.MOHANTY,DR DATE OF HEARING : 22.05.2012 DATE OF PRONOUNCEME NT : 25.06.2012 ORDER SHRI K.S.S.PRASAD RAO, JM : THIS APPEAL IS FILED BY THE ASSESSEE HAVING BEEN AGGRIEVED BY THE ORDER OF THE COMMISSIONER OF INCOME - TAX (APPEALS) DT.8.11.2011 FOR THE ASSESSMENT YEAR 2007 - 08 IN THE CASE OF THE ASSESSEE. 2. THE ASSES SEE HAS RAISED THE FOLLOWING ISSUES IN ITS GROUNDS OF APPEAL. 1. FOR THAT, THE LD. CIT (A) WAS NOT JUSTIFIED IN UPHOLDING THE DISALLOWANCE OF 5,90,014 TOWARDS ADVERTISEMENT AND WORKS CONTRACT ON THE GROUNDS THAT THE AMOUNT HAS BEEN DEPOSITED BEFORE THE DUE DATE OF FILING OF RETURN, AND HENCE IS COVERED BY AMENDMENT TO SECTION 40 (A) (IA) WHICH SHALL APPLY RETROSPECTIVELY W.E.F. 01.04.2005 SINCE IT IS CURATIVE IN NATURE. 2. FOR THAT, THE LD. CIT (A) WAS NOT JUSTIFIED IN UPHOLDING THE DISALLOWANCE OF 2,95,831 TOWARDS THE ADVERTISEMENT CONTRACT AND WORKS CONTRACT ON THE GROUNDS THE AMOUNT HAS BEEN DEPOSITED BEFORE THE DUE DATE OF FILING OF RETURN , AND HENCE IS COVERED BY AMENDMENT TO SECTION 40 (A) (IA) WHICH SHALL APPLY RETROSPECTIVELY W.E.F. 01.04.2005 SINCE IT IS CURATIVE IN NATURE. 3. FOR THAT, THE LD. CIT (A) WAS NOT JUSTIFIED IN UPHOLDING DISALLOWANCE OF 1,00,000 AS 20% OF THE PAYMENT OF 5,00,000/ OF CASH PAYMENT ULS.40A(3), BECAUSE THE APPELLANT HAS PAID FOR THE PURCHASE OF GOLD JEWELLERY THROUGH REGULAR BANKING CHANNEL BY DEPOSITING THE SAME IN THE SELLERS BANK ACCOUNT THROUGH CORE BANKING SERVICES AND THE TRANSACTION HAS BEEN ESTABLISH ED BEYOND DOUBT THAT IT IS GENUINE, THEREFORE THE PAYMENT SHOULD BE ALLOWED. 4. FOR THAT, THE LD. CIT (A) WAS NOT JUSTIFIED IN UPHOLDING THE ADDITION OF 59,357 AS UNEXPLAINED INVESTMENT IN NEW SHOW ROOM, BECAUSE IT IS SIMPLY BASED ON THE CONJECTURES, SURMISES ITA NO.113/CTK/2012 2 AND SUSPICION OF THE LD. A.O., AND THE APPELLANT HAS FURNISHED ALL EVIDENCE ABOUT THE ACTUAL EXPENDITURE TOWARDS CIVIL WORK. 3. BOTH THE PARTIES W ERE HEARD REGARDING THE ISSUES RAISED IN THE APPEAL AND THEIR LEGAL IMPLICATIONS. 4. ON CAREFUL CONSIDERATION OF THE MATERIAL MADE AVAILABLE TO THE TRIBUNAL AND ANALYZING THE SAME IN THE LIGHT OF THE SUBMISSIONS OF BOTH THE PARTIES, THE UNDISPUTED FACTS RE LATING TO THE ISSUES ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF TRADING, MANUFACTURE AND SALE OF JEWEELLERY. IT STARTED BUSINESS IN GOLD JEWEELLERY IN THE FORM OF ITS FIRST SHOW ROOM AT CUTTACK BY STARTING THE BUSINESS ON 25.01.2007. THE ASSESSEE FILED ITS RETURN WHICH WAS TAKEN UP FOR SCRUTINY U/S.143(3). THE ASSESSEE HAS PRODUCED ALL THE MATERIALS AS REQUIRED BY THE ASSESSING OFFICER AND CONSIDERING THE SAME AND AFTER HEARING THE ASSESSEE, THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF 5,980,014 + 2,95,831 U/S.40(A)(IA) OF THE I.T.ACT,1961. FURTHER HE DISALLOWED A SUM OF 1,00,000 U/S.40A(3) AND ALSO ADDED A SUM OF 59,357 AS UNEXPLAINED INVESTMENT IN NEW SHOW ROOM. 5. AGGRIEVED BY THIS ASSESSMENT, THE ASSESSEE WENT IN APPEAL BEFORE T HE CIT(A). THE LEARNED CIT(A) AFTER HEARING THE ASSESSEE AND PERUSING THE MATERIAL AVAILABLE IN THE ASSESSMENT RECORD HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE HOWEVER UPHOLDING THE ADDITIONS APPEALED AGAINST BEFORE THE TRIBUNAL VIDE GROUNDS OF APPEAL FILED BY THE ASSESSEE. 6. DURING THE COURSE OF HEARING, THE LEARNED AR OF THE ASSESSEE HAS VEHEMENTLY ASSAILING THE DISALLOWANCE AND ADDITIONS MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED CIT(A) INTER ALIA CONTENDED THAT THIS BENCH OF THE T RIBUNAL PASSED AN ORDER IN THE CASE OF SANJAY KUMAR PRADHAN V. ASST.COMMISSIONER OF INCOME - TAX [ (2012) 14 ITR (TRIB) 150 (CUTTACK)] HAS HELD AS UNDER : ITA NO.113/CTK/2012 3 WE ARE INCLINED TO FIND THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE FOR THE ASSESSEE APPRO PRIATE FOR RAISING THE ALTERNATE SUBMISSIONS INSOFAR AS THE LEARNED COUNSEL FOR THE ASSESSEE HAS TRIED TO ANALYSE THE INTERPRETATION OF VARIOUS DECISIONS OF THE TRIBUNAL AND HIGH COURTS ITA NO.450/CTK/.2011 RELATING TO THE ISSUE REGARDING THE DUE DATE OF P AYMENT WHETHER HAS TO BE CONSIDERED IN ACCORDANCE WITH THE AMENDED PROVISIONS W.E.F. 1.4.2010 AND WHETHER THE DEDUCTION OF TAX ON PAYMENTS WITHOUT HAVING ENTERED INTO CONTRACTS HAVE BEEN SUBJECTED TO TDS WHICH HAS TO BE CONSIDERED FIRST FOR PROCEEDING FOR DISALLOWANCE U/S.40(A)(IA). IN VIEW OF OUR ABOVE DISCUSSIONS, WE HOLD THAT THE DISALLOWANCE OF 24,60,644 U/S.40(A)(IA) IN THE PRESENT CASE IS NOT JUSTIFIED AND AS SUCH WE DIRECT THE DELETION OF THE SAID DISALLOWANCE BY ALLOWING THE APPEAL OF THE ASSESSEE. ACCORDINGLY HE SOUGHT FOR DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AS CONFIR MED BY THE LEARNED CIT(A). WE FIND THAT IN VIEW OF THE ABOVE DECISION OF THIS TRIBUNAL IN THE CASE OF SANJAY KUMAR PRADHAN V. ASST.COMMISSIONER OF INCOME - TAX (SUPRA), THE PAYMENT OF TDS AMOUNT BY THE INSTANT ASSESSEE IS FOUND CORRECT AND THEREFORE, THE DIS ALLOWANCE MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED CIT(A) CANNOT BE SUSTAINED FOR LEGAL SCRUTINY AND AS SUCH, WE DIRECT DELETION OF THE DISALLOWANCE MADE IN THIS REGARD. 7. NOW COMING TO THE OTHER ISSUE OF DISALLOWANCE OF 1 LAKH U/S.40A(3) , IT WAS FOUND THAT THE ASSESSEE HAS PAID THE AMOUNT OF 5 LAKHS TO THE BANK ACCOUNT OF THE SELLER M/S.VIMALSON JEWELLERS, MUMBAI WHO HAD INSISTED FOR FIRST PAYING THE AMOUNT IN ORDER TO SEND THE BULLION GOLD NECESSARY FOR THE BUSINESS O F THE ASSESSEE. SO, THE ASSESSEE HAS IN COMPLIANCE TO THE SAID DEMAND OF THE SELLER HAS DEPOSITED THE SAID AMOUNT TO THE CREDIT OF THE SELLERS ACCOUNT IN CORE BANKING SYSTEM. THIS PURCHASE WEAS NOT DISPUTED BY THE ASSESSING OFFICER BUT TECHNICAL HE RAISED AN OBJECTION THAT THE PAYMENT BEING MADE BY THE ASSESSEE IN CASH IT IS HIT BY SECTION 40A(3) OF THE I.T.ACT FORGETTING FOR A MOMENT THAT THE ASSESSEE HAS NOT PAID ANY CASH TO THE SELLER BUT HE HAS MERELY DEPOSITED THE AMOUNT TO THE CREDIT OF THE SELLERS ACCOUNT ITA NO.113/CTK/2012 4 AS PER THE CORE BANKING SYSTEM AND AS PER THE DIRECTION OF THE SELLER. IN SUCH VIEW OF THE MATER, IN OUR CONSIDERED VIEW, THIS PAYMENT IS NOT COMING UNDER THE PURVIEW OF SECTION 40A(3). IN SIMILAR SUCH CIRCUMSTANCES IN THE CASE OF SRI RANUKESWARA R ICE MILLS V. INCOME - TAX OFFICER (2005) ITR (A.T.) 77 (BANGALORE), IT IS HELD THAT SUCH PAYMENT IS NOT IN VIOLATION OF THE PROVISIONS OF SECTION 40A(3) AND HENCE NO DISALLOWANCE IS CALLED FOR. THEREFORE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE I N THE LIGHT OF THE ABOVE DECISION OF THE TRIBUNAL, WE ARE OF THE CONSIDERED VIEW THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED CIT(A) U/S.40A(3) IN THE INSTANT CASE IS NOT JUSTIFIED AND AS SUCH, THE SAME IS DIRECTED TO BE DELETED. 8. AS REGARDS THE ADDIT IO N OF 55,357 AS UNEXPLAINED INVESTMENT IN NEW SHOW ROOM IT IS FOUND THAT THE ASSESSING OFFICER HAS BASED HIS FINDINGS ON THE ENQUIRY REPORT OF THE INSPECTOR OF INCOME - TAX WHO HAD REPORTED THAT THE EXPENDITURE OF 52,000 ON CIVIL WORKS IS ON THE LOWER SIDE. THE ASSESSEE HAS NEVER BEEN CONFRONTED WITH THIS ENQUIRY REPORT NOR THE ASSESSING OFFICER HAS RAISED THIS ISSUE DURING THE ASSESSMENT PROCEEDINGS. THEREFORE, IT WAS SUBMITTED BY THE LEARNED AR OF THE ASSESSEE THAT THE ASSESSEE HAVING ESTABLISHED THAT THE ASSES SEE HAD SPENT 11,13,568 TOWARDS MATERIAL 52,000 HAS BEEN THE EXPENDITURE ON LABOUR. THIS WORK WAS EXECUTED BY MR. SANJIB KUMAR ADIK WHO HAS GIVEN A BILL FOR LABOUR WORK. AS THE ASSESSING OFFICER HAS NOT RAISED ANY QUESTION ABOUT THIS BILL, THE ASSESSEE IS NOT ABLE TO PRODUCE THE SAID BILL TO THE ASSESSING OFFICER. BUT HE HAS SIMPLY RELIED ON THE ENQUIRY REPORT OF THE INSPECTOR OF INCOME - TAX FOR MAKING THE ADDITION IN QUESTION. THE ASSESSEE IS PLEADING THAT THE ENQUIRY REPORT OF THE INSPECTOR OF INCOME - TAX WAS NEVER CON FRONTED BY THE ASSESSING OFFICER TO THE ASSESSEE IN THE ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD NO OCCASION TO SUBSTANTIATE ITS ITA NO.113/CTK/2012 5 CLAIM BEFORE THE AO. UNDER THESE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT SINCE THE ASSESSEE IS CONTENDING THAT THE ASSESSING OFFICER HAS NOT GIVEN OPPORTUNITY TO THE ASSESSEE TO EXPLAIN IN THIS REGARD BUT HE ADDED THE AMOUNT IN QUESTION BASED ON ENQUIRY REPORT OF THE INSPECTOR OF INCOME - TAX, WE FIND IT JUST TO RESTORE THIS ISSUE TO THE FILE OF THE A SSESSING OFFICER FOR DE NOVO CONSIDERATION AND ADJUDICATION AND PASS NECESSARY CONSEQUENTIAL ORDER OF COURSE STRICTLY FOLLOWING THE PRINCIPLES OF NATURAL JUSTICE. ACCORDINGLY, THIS ISSUE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR DE NOVO CONSIDER ATION AS STATED ABOVE. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED PARTLY FOR STATISTICAL PURPOSES. SD/ - SD/ - (K.K.GUPTA) ACCOUNTANT MEMBER ( K.S.S.PRASAD RAO) JUDICIAL MEMBER DATE: 25. 06.2012 H.K.PADHEE, SENIOR PRIVATE SECRETARY. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: 916 EPARI JEWELLER PVT. LTD., 78 JANPATH, KHARVELNAGAR, UNIT - 3, BHUBANESWQR 751 001, PAN: AAJCS 0037 P 2. THE RESPONDENT: ASST.COMMISS IONER OF INCOME - TAX, CIRCLE 1(1), BHUBANESWAR. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY. ITA NO.113/CTK/2012 6 APPENDIX XVII SEAL TO BE AFFIXED ON THE ORDER SHEET BY THE SR. P.S./P.S. AFTER DICTATION IS GIVEN 1. DATE OF DICTATION 07.06.,2012 .. 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 1 8.06.2012 OTHER MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED B EFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.... 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S . 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER ................ 9. DATE OF DESPATCH OF THE ORDER ..