ITO, WD-2(2), Siliguri, Siliguri V. M/s Ratan Paul, Siliguri

ITA 1134/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1800 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2017
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 27-04-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 22-05-2014
• Court: TRIBUNAL
• Department Lawyers: S BISWAS
• Section: 40A(3); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM & SHRI WASE EM AHMED, AM ] I.T.A NO. 1134/KOL/20 14 ASSESSMENT YEAR : 2010-1 1 I.T.O., WARD-2(2) -VS.- M/S. RATAN PAU L SILIGURI SILIGURI [PAN : AAGFR 7457 J] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI S.BISWAS, JCI T. SR.DR FOR THE RESPONDENT : SHRI SUNIL SURANA, CA DATE OF HEARING : 27.04.2017. DATE OF PRONOUNCEMENT : 03.05.2017. ORDER PER N.V.VASUDEVAN, JM THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 27.03.2014 OF CIT(A), JALPAIGURI RELATING TO AY 2010-11. 2. GROUNDS OF APPEAL RAISED BY THE REVENUE READ AS FOLLOWS :- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A), JALPAIGURI, WAS JUSTIFIED IN CONCLUDING THAT 'THE P URCHASES BY THE ASSESSEE ARE COVERED UNDER THE 'BUSINESS EXPEDIENCY' .. .' DESPI TE THE FACT THAT THE ASSESSING OFFICER, AFTER CONSIDERING THE FACTS AND CIRCUMSTAN CES OF THE CASE, HAD ALREADY ESTABLISHED THE FACT THAT THE CASE OF THE ASSESEE D OES NOT FALL WITHIN ANY OF THE EXCEPTIONS PROVIDED UNDER RULE 6DD. 2. THAT THE LD. CIT(A), JALPAIGURI, HAS ERRED IN FA CT, IN CONCLUDING THAT THE ASSESSEE'S CASH PAYMENTS ARE COVERED UNDER 'BUSINES S EXPEDIENCY' ON THE GROUND THAT THE ASSESSEE'S LOAN ACCOUNTS HAD BECOME NPA, W HILE TOTALLY DISREGARDING THE FACT THAT THE ASSESSEE'S CURRENT BANK ACCOUNT WAS F ULLY FUNCTIONAL THROUGHOUT THE YEAR UNDER SCRUTINY. 3. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER THE GROUNDS OF APPEAL, IF ANY. 2 ITA NO.1134/KOL/2014 M/S. RATAN PAUL A.YR.2010-11 2 3. THE ASSESSEE IS A PARTNERSHIP FIRM. IT IS ENG AGED IN THE BUSINESS OF TRADING IN POULTRY FEED. IN THE COURSE OF ASSESSMENT PROCEEDIN GS U/S 143(3) OF THE INCOME TAX ACT, 1961 (ACT) THE AO NOTICED THAT THE ASSESSEE HAD MAD E A PAYMENT OF RS.61,50,744/- TO M/S. SAMRAT FEED MILLS TOWARDS PURCHASE OF POULTRY FEED. UNDER THE PROVISION OF SECTION 40A(3) OF THE ACT, WHERE THE ASSESSEE INCUR S AN EXPENDITURE IN RESPECT OF WHICH PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON I N A DAY, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAY EE BANK DRAFT, EXCEEDS RS.20,000/- NO DEDUCTION SHALL BE ALLOWED IN RESPEC T OF SUCH EXPENDITURE. THE MANDATE OF SECTION 40A(3) OF THE ACT IS THAT FOR ANY EXPEND ITURE PAYMENT SHOULD NOT BE MADE BY CASH WHERE THE PAYMENT EXCEEDS A SUM OF RS.20,000/- . SINCE THE ASSESSEE HAD PAID IN CASH FOR PURCHASE OF POULTRY FEED A SUM EXCEEDING R S.20,000/-, THE AO DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF A SUM OF RS. 61,50,744/- AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 4. RULE 6DD OF THE IT RULES GIVE A LIST OF CASES AND CIRCUMSTANCES IN WHICH A PAYMENT OR AGGREGATE OF PAYMENTS IN A DAY, CAN BE MADE OTHE RWISE THAN BY AN ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT I.E. IN CASH EVE N BEYOND THE LIMIT OF RS.20,000/-.. THE PLEA OF THE ASSESSEE BEFORE THE REVENUE AUTHORI TIES WAS THAT M/S. SAMRAT FEED MILLS FROM WHOM THE ASSESSEE PURCHASED POULTRY FEED INSIS TED ON PAYMENT BY THE ASSESSEE IN CASH BECAUSE THE ASSESSEE HAD HUGE DEBTS. THE PLEA OF THE ASSESSEE WAS THAT SINCE THE PAYMENT IN CASH WAS MADE DUE TO THE AFORESAID CIRCUMSTANCES , KEEPING IN MIND CONSIDERATIONS OF BUSINESS EXPEDIENCY, NO DISALLOW ANCE U/S 40A(3) OF THE ACT SHOULD BE MADE. THIS ARGUMENT FOUND FAVOUR WITH CIT(A) AND CI T(A) HELD THAT THE PAYMENT IN QUESTION WAS MADE OWING TO BUSINESS EXIGENCIES BY C ASH AND THEREFORE NO DISALLOWANCE U/S 40A(3) OF THE ACT OUGHT TO HAVE BEEN MADE BY TH E AO. 5. AGGRIEVED BY THE ORDER OF CIT(A) THE REVENUE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 3 ITA NO.1134/KOL/2014 M/S. RATAN PAUL A.YR.2010-11 3 6. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LD. DR SUBMITTED THAT BUSINESS EXIGENCY AS A GROUND FOR NOT MAKING DISALLOWANCE U/S 40A(3) OF THE ACT IS NOT A GROUND SET OUT IN ANY OF THE SUB-RULES OF RULE 6DD OF THE IT RULES AN D CIT(A) FELL INTO AN ERROR IN DELETING THE ADDITION MADE BY THE AO. THE LD. COUNS EL FOR THE ASSESSEE, ON THE OTHER HAND, BROUGHT TO OUR NOTICE THAT THE KOLKATA BENCH OF ITAT C BENCH IN THE CASE OF RAMPADA PANDA VS ITO IN ITA NO.67/KOL/2013 FOR A.Y. 2008-09 VIDE ORDER DATED 07.10.2015 HAD DEALT WITH A SIMILAR CASE OF AN ASSE SSEE ENGAGED IN TRADING OF POULTRY FEED MAKING PURCHASE OF POULTRY FEED BY MAKING PAYMENT OF CASH. THE AO IN THAT CASE BY INVOKING THE PROVISION OF SECTION 40A(3) OF THE ACT DISALLOWED THE PAYMENT MADE IN CASH BY INVOKING THE PROVISION OF SECTION 40A(3) OF THE ACT. THE DISALLOWANCE WAS ULTIMATELY CONSIDERED BY THE TRIBUNAL AND THE TRIBU NAL HELD THAT THE PAYMENT FOR PURCHASE OF POULTRY FEED FALLS WITHIN EXCEPTIONAL C ASE PROVIDED IN RULE 6DD(E) OF THE IT RULES. THE FOLLOWING WERE THE RELEVANT OBSERVATIONS OF THE TRIBUNAL: 3.3.1. WE ARE NOT IN AGREEMENT WITH THE ARGUMENT OF THE LEARNED AR THAT THE PAYMENT IS MADE TO AN AGENT AND THAT THE RELATIONSH IP OF THE ASSESSEE WITH THIS SUPPLIER IS ONE OF PRINCIPAL AND AGENT AND AS SUCH, THE ASSESSEES CASE FALLS UNDER THE EXCEPTION PROVIDED IN RULE 6DD(K) OF IT RULES. HOWEVER, WE ARE IN AGREEMENT WITH THE ARGUMENTS OF THE LEARNED AR THAT THE PURCH ASE OF POULTRY FEEDS FALLS UNDER THE EXCEPTIONS CLAUSE PROVIDED IN RULE 6DD(E) OF TH E INCOME TAX RULES, 1962. FOR THE SAKE OF CONVENIENCE, THE RELEVANT RULE IS REPRO DUCED HERE IN BELOW :- 6DD(E) WHERE THE PAYMENT IS MADE FOR THE PURCHASE O F (I) AGRICULTURAL OR FOREST PRODUCE; OR (II) THE PRODUCE OF ANIMAL HUSBANDRY (INCLUDING LIVESTOC K, MEAT, HIDES AND SKINS) OR DAIRY OR POULTRY FARMING; .TO THE CULTIVATOR, GROWER OR PRODUCE R OF SUCH ARTICLES, PRODUCE OR PRODUCTS. 7. HE ALSO MADE SUBMISSIONS WITH REGARD TO ABSEN CE OF BANKING FACILITY AT FULBARI-I GRAM PANCHAYAT WHERE M/S. SAMRAT FEED MILLS FROM WH OM THE ASSESSEE HAD MADE PURCHASE OF POULTRY FEED WAS LOCATED. IN THIS REGAR D THE LD. COUNSEL ALSO FILED COPY OF FULBARI-I GRAM PANCHAYAT CERTIFYING THAT FACTORY OF M/S. SAMRAT FEED MILLS IS SITUATED WITHIN THE GRAM PANCHAYAT OF FULBARI-I AND THAT TH ERE IS NO BANKING FACILITY IN FULBARI-I. 4 ITA NO.1134/KOL/2014 M/S. RATAN PAUL A.YR.2010-11 4 THE LD. COUNSEL THEREFORE SOUGHT TO MAKE OUT A CASE OF EXCEPTION FOR MAKING CASH PAYMENT AS LAID DOWN IN RULE 6DD(G) OF THE RULES. 8. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE A RE OF THE VIEW THAT ORDER OF CIT(A) DELETING THE ADDITION MADE BY THE AO HAS TO BE UPHE LD ON THE BASIS OF THE DECISION RENDERED BY ITAT IN THE CASE OF RAMA PADA (SUPRA). THE FACTS OF THE ASSESSEES CASE AND IN THE CASE OF RAMA PADA ARE IDENTICAL AND THEREFOR E THE RULING OF THE TRIBUNAL IN THE AFORESAID DECISION THAT PAYMENT BY CASH FOR PURCHAS E OF POULTRY FEEDS WOULD FALL WITHIN THE EXCEPTION LAID DOWN IN RULE 6DD(E) OF THE IT RU LES WOULD BE APPLICABLE TO THE PRESENT CASE ALSO. RESPECTFULLY FOLLOWING THE AFORE SAID DECISION WE UPHOLD THE ORDER OF CIT(A). IN VIEW OF THE ABOVE CONCLUSION WE DO NOT W ISH TO DEAL WITH THE OTHER CONTENTIONS PUT FORTH BY THE LD. COUNSEL FOR THE AS SESSEE BEFORE US. 9. IN THE RESULT THE APPEAL BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN THE COURT ON 03.05.2017. SD/- SD/- [WASEEM AHMED] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 03.05.2017. [RG PS] COPY OF THE ORDER FORWARDED TO: 1.M/S. RATAN PAUL, CHAMPASARI MOREK, SILIGURI 2. I.T.O., WARD-2(2), SILIGURI. 3. CIT(A)-JALPAIGURI 4. CIT- JALPAIGURI 5..CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSTT.REGISTRAR, ITAT, KOLKATA BENCHES 5 ITA NO.1134/KOL/2014 M/S. RATAN PAUL A.YR.2010-11 5