Asst. Comm. of Income-tax , Circle-2, Aurangabad V. Shri Nirmal Madangopal Dhoot, Aurangabad

ITA 1144/PUN/2011

• Counselvise Citation: [2012] 120 COUNSELVISE.COM (IT) 0029 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 09-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VIN
• Section: 40A(3); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 1144/PN/2011 (ASSTT. YEAR : 2 008-09) THE ACIT, CIR-2 JEEVAN SUMAN 2 ND FLOOR, LIC BUILDING, N-5, CIDCO, AURANGABAD 431 003. APPELLANT V. SHRI NIRMAL MADANGOPAL DHOOT, ANAND, STATION ROAD, PAGARIA COLONY, AURANGABAD. RESPONDENT PAN : ABIPD6841K C.O. NO. 97/PN/2011 (ARISING OUT OF ITA NO. 1144/PN/2011) (ASSTT. YEAR : 2008-09) SHRI NIRMAL MADANGOPAL DHOOT, CROSS OBJECTOR ANAND, STATION ROAD, PAGARIA COLONY, AURANGABAD PAN : ABIPD6841K V. THE ACIT, CIR-2 RESPONDENT JEEVAN SUMAN 2 ND FLOOR, LIC BUILDING, N-5, CIDCO, AURANGABAD 431 003 ASSESSEE BY : SHRI. M.K. KULKARNI RESPONDENT BY : SMT. VIN ITA MENON DATE OF HEARING : 13/12/ 12 DATE OF PRONOUNCEMENT : 28-12-12 O R D E R PER R.S. PADVEKAR, JM THIS REVENUE HAS FILED THIS APPEAL CHALLENGING TH E IMPUGNED ORDER OF THE LD CIT(A), AURANGABAD DATED 22.6.2011 FOR TH E A.Y. 2008-09. 2. THE REVENUE HAS TAKEN THE FOLLOWING EFFECTIVE GR OUND : 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS), A URANGABAD WAS CORRECT IN RELYING ON THE DECISION IN THE CASE OF SHRI RENUKESHWARA RICE MILLS VS. ITO (2005) 93 TTJ 912, ITAT, BANGALORE, ESPECIALLY WHEN THE FACTS ARE NOT SQUARE LY APPLICABLE TO ASSESSEES CASE. 2 ITANO.1144/PN/2011& C.O.97/PN/2011 SHRI NIRMAL MADANGOPAL DHOOT A.Y.2008-09 3. THE FACTS WHICH REVEAL FROM THE RECORD ARE AS UN DER. THE ASSESSEE IS ENGAGED IN DIFFERENT BUSINESSES NAMELY (1) SUP PLY OF INDUSTRIAL ITEMS UNDER THE NAME AND STYLE M/S. PACE INTERLINKS, ( 2) LABOUR CONTRACT WITH VIDEOCON GROUP ON COMMISSION BASIS UNDER THE NAME AND STYLE M/S. PUSHPAK SERVICES AND (3) RETAIL TRADING IN R EADYMADE GARMENTS OF THE REPUTED BRANDS UNDER THE NAME AND STYLE M/S. RAJASHREE VENTURES HAVING SHOWROOM IN AURANGABAD AND NASHIK. THE ASSE SSEE FILED THE RETURN OF INCOME FOR THE A.Y. 2008-09 DECLARING TOT AL INCOME OF RS. 25,01,850/-. THE ASSESSMENT OF THE ASSESSEE HAS BE EN COMPLETED U/S. 143(3) OF THE ACT. THE SOLITARY ISSUE IN DISPUTE BEFORE US IS IN RESPECT OF THE ADDITION MADE BY THE A.O OF RS.62,77,866/- FOR THE ALLEGED VIOLATION OF THE PROVISIONS OF SEC. 40A(3) WHICH WAS DELETED BY THE LD CIT(A). THE A.O. HAS OBSERVED THAT ON THE EXAMINATION OF THE DE TAILS OF THE PURCHASES, MORE PARTICULARLY FROM PROVOGUE INDIA L TD, IT WAS NOTICED THAT HE HAS INCURRED EXPENDITURE FOR PURCHASES IN RESPE CT OF WHICH PAYMENTS ARE MADE TO A PERSON IN A DAY, OTHERWISE BY AN ACCO UNT PAYEE CHEQUE OR BANK A/C. PAYEE DRAFT I.E. IN CASH WHICH EXCEEDED RS. 20,000/-. THE A.O HAS OBSERVED THAT CASH DEPOSITED BY THE ASSESS EE IN THE HDFC BANK A/C. NO. 8762310000027 OF PROVOGUE INDIA LTD. WAS M ORE THAN RS.20,000/-. THE A.O. HAS GIVEN THE DETAILS AS UND ER : (I) M/S. RAJSHREE VENTURES, AURANGABAD RS.26,52,10 5/- (II) M/S. RAJSHREE VENTURES, NASHIK RS .36,25,761/- TOTAL RS.62,77,866 /- 3.1 IN THE OPINION OF THE A.O, THE DIRECT PAYMENT I NTO THE BANK A/C. OF THE PARTY IS NOT COVERED IN ANY EXEMPTION PROVIDED IN RULE 6DD OF THE I.T. RULES. THE A.O SOUGHT EXPLANATION OF THE ASSE SSEE. THE ASSESSEE STATED THAT THE PAYMENTS TO PROVOGUE INDIA LTD. WE RE MADE THROUGH THE CHEQUES AS WELL AS IN CASH. THE CASH PAYMENTS WERE DIRECTLY DEPOSITED IN THE BANK A/C. OF THE COMPANY AND IT WA S NOT GIVEN TO THE SAID PARTY. THE ASSESSEE ALSO STATED THAT THE DIRE CT CASH PAYMENT INTO THE HDFC A/C. OF THE PROVOGUE INDIA LTD. WAS MADE A S PER THE COMMUNICATION FROM THE SAID COMPANY. THE SAID ARRA NGEMENT WAS MADE TO AVOID THE DELAY FOR CLEARING THE CHEQUES. THE A. O. MADE DISALLOWANCE OF RS. 62,77,866/- FOR THE ALLEGED VIOLATION OF PRO VISION OF SEC. 40A(3) OF THE ACT AND MADE ADDITION TO THE INCOME OF THE ASS ESSEE. THE LD CIT(A) 3 ITANO.1144/PN/2011& C.O.97/PN/2011 SHRI NIRMAL MADANGOPAL DHOOT A.Y.2008-09 DELETED THE SAID ADDITION. THE REASONINGS AND FIND INGS OF LD CIT(A) ARE AS UNDER : 5.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE, ORDER OF THE A.O., SUBMISSIONS OF THE APPELLANT AND RELEVANT EVIDENCE ON RECORD. ON THE PERUSAL OF THE SAME, IT IS NOTICED THAT THE A.O HAS CONTENTED THAT THE TRANSACTIONS OF CASH PAYMENT BY DEPOSIT IN THE BANK ACCOUNT OF THE PAYEE DO NOT FALL WITHIN THE PURVIEW OF UNAVOIDABLE OR E XCEPTIONAL CIRCUMSTANCES AND HAS RELIED ON NUMBER OF DECISION S OF THE HIGHER COURTS IN SUPPORT OF THE ABOVE CONTENTION. IN THIS REGARD, IT IS OBSERVED THAT BEFORE THE OMISSION OF CLAUSE (J) OF RULE 6DD BY IT (FOURTEENTH AMENDMENT) RULES, 1995 W.E.F. 25/7/1995, IT PROVIDE D THAT IF THE ASSESSEE SATISFIES THE AO THAT THE PAYMENT IS NOT M ADE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 40A(3) DUE TO UNAVO IDABLE OR EXCEPTIONAL CIRCUMSTANCES AND ALSO FURNISHES EVIDENCE AS TO TH E GENUINENESS OF THE PAYMENT AND IDENTITY OF THE PAYEE, THE PAYMENT IN Q UESTION IS NOT DISALLOWABLE. THE BENEFIT OF THE PROVISION OF CLAUS E (J) WAS AVAILABLE TO THE ASSESSEES UP TO A.Y. 1995-1996 AND THE SAME IS WIT HDRAWN FROM THE A.Y. 1996-1997 ONWARDS. THE DECISIONS RELIED ON BY THE AO RELATE TO ASSESSMENT YEARS PRIOR TO A.Y. 1996-1997 I.E. BEFOR E THE OMISSION OF CLAUSE (J) OF RULE 6DD OF INCOME TAX RULES, 1962. THE CONTENTION OF THE AO IS MISTAKEN CONSIDERING THAT THE CLAUSE (J) OF R ULE 6DD IS OMITTED W.E.F. 25/07/1995 AND IS NOT APPLICABLE TO THE CASE OF APPELLANT AS IT RELATES TO A.Y. 2008-2009. IN ORDER TO REBUT THE CO NTENTIONS OF THE AO, THE APPELLANT HAS RELIED ON NUMEROUS DECISIONS OF H ONBLE ITATS HIGH COURTS, HOWEVER THE SAME ARE NOT RELEVANT AS THESE RELATE TO ASSESSMENT YEARS PRIOR TO A.Y. 1996-1997. WITH REGARD TO THE ISSUE AS TO WHETHER THE CASH AMO UNT EXCEEDING RS. 20,000/- DEPOSITED IN THE BANK ACCOUNT OF THE P AYEE IS IN VIOLATION OF PROVISIONS OF SECTION 40A(3) OF THE ACT, IT IS OBSE RVED THAT THE PROVISIONS OF SECTION 40A(3) REQUIRE PAYMENT TO BE MADE EITHER BY CROSSED BANK CHEQUE OR A BANK DRAFT TO AVOID DISALLOWANCE UNDER THE SAME SECTION. THE EFFECT OF ISSUE OF CROSSED CHEQUE/DRAFT IS THAT PAY MENT IS ROUTED THROUGH BANKING CHANNELS SO AS TO TRACE THE ORIGIN AND CONC LUSION OF THE TRANSACTION. IN THE CASE OF THE APPELLANT, THE CAS H IS DEPOSITED IN THE BANK ACCOUNT OF THE PAYEE THEREBY ENSURING THAT THE PAYEE AND ONLY THE PAYEE RECEIVED THE PAYMENT AND ALSO THE ORIGIN AND CONCLUSION OF THE TRANSACTION IS TRACEABLE. THE PAYMENT OF SUM DIRE CTLY IN THE BANK ACCOUNT OF THE PAYEE FULFILLS THE CRITERIA FOR ENSU RING THE OBJECT OF INTRODUCTION OF PROVISION OF SECTION 40A(3). THIS IS NOT A DIRECT PAYMENT TO THE PAYEE BUT ONLY TO THE CREDIT OF ITS BANK ACC OUNT. THE ABOVE PROPOSITION IN LAW IS SUPPORTED BY THE DECISION OF HONBLE BANGALORE ITAT IN THE CASE OF SHRI RENUKESHWARA RICE MILLS VS. ITO (2005) 93 TTJ 912. THE HONBLE ITAT, BANGALORE HAS RELIED ON THE INTER PRETATION OF PROVISIONS OF SECTION 40A(3) AS PRONOUNCED BY THE HONBLE SUPR EME COURT IN THE CASE OF ATTAR SINGH GURMUKH SINGH VS. ITO (1991) 97 CTR (SC) 251. CONSIDERING THE ABOVE FACTS AND PARTICULARLY FOLLOW ING THE DECISION OF THE HONBLE ITAT, BANGALORE, THE AO IS DIRECTED TO DELE TE THE ADDITION OF RS.62,77,866/- U/S 40A(3) OF THE ACT. GROUND NO.1 I S ALLOWED. NOW THE REVENUE IS IN APPEAL BEFORE US. 4 ITANO.1144/PN/2011& C.O.97/PN/2011 SHRI NIRMAL MADANGOPAL DHOOT A.Y.2008-09 4. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTI ES AND PERUSED THE RECORD. IN THIS CASE, THE FACTS ARE NOT IN DISPUTE . THE ISSUE IN CONTROVERSY IS IN RESPECT OF PAYMENTS MADE TO ONE C OMPANY FROM WHICH, THE ASSESSEE USED TO PURCHASE THE BRANDED ITEMS. AS NOTED BY THE LD CIT(A), IT WAS AN ARRANGEMENT BETWEEN PROVOGUE INDI A LTD. AND ASSESSEE TO DIRECTLY DEPOSIT THE AMOUNT IN THE BANK A/C. OF THE SAID COMPANY. IT IS ALSO ADMITTED FACT THAT NOWHERE IT IS THE CASE OF THE A.O THAT THE ASSESSEE HAS PAID CASH DIRECTLY TO PROVOGUE INDIA L TD.. IN FACT, IN THE IDENTICAL SITUATION IN THE CASE OF SHRI RENUKESHWARA RICE MILLS V. ITO, 93 TTJ 912 (BANGALORE) , IT IS HELD THAT AS THE PAYMENTS HAVE DIRECTLY GONE TO THE ACCOUNT OF THE PARTY NO DISALLOWANCE CAN BE MADE BY INVOKING PROVISIONS OF SECTION 40A(3). THE PURPOSE OF INTRODUCING HARSH PROVISION LIKE SEC. 40A(3) IS TO SEE THAT THE TRANSACTIONS ARE IN THE M AIN STREAM OF THE ECONOMY OF THE NATION AND THERE SHOULD NOT BE SCOPE FOR AVOIDING THE LEGITIMATE TAX. NOWHERE IT IS THE CASE OF THE A.O T HAT THE TRANSACTIONS ARE NOT DISCLOSED BY EITHER OF THE PARTY. IN OUR OPINIO N, THE LD CIT(A) HAS RIGHTLY DELETED THE ADDITION AND NO INTERFERENCE IS CALLED FOR. IN THE RESULT, GROUND TAKEN BY THE REVENUE IS DISMISSED. 5. SO FAR AS CROSS OBJECTION FILED BY THE ASSESSEE IS CONCERNED, THE SAME IS ONLY SUPPORTING THE ORDER OF THE CIT(A). I N OUR OPINION, IT IS INFRUCTUOUS AS NO GRIEVANCE IS MADE OUT BY THE A.O. 6. IN THE RESULT BOTH, THE APPEAL AS WELL AS C.O., ARE DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 28 TH DECEMBER 2012. SD/- SD/- (G.S. PANNU) ACCOUNTANT MEMBER (R.S.PADVEKAR ) JUDICIAL MEMBER PUNE, DATED THE 28 TH DECEMBER, 2012 US/SATISH COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-, AURANGABAD 4. THE CIT(A)- AURANGABAD 5. THE D.R. B BENCH, PUNE 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, PUNE