M/s Maruthi Traders, Chitradurga V. CIT, Davangere

ITA 1159/BANG/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0440 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 04-05-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 17-08-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: C RAMESH
• Keywords: Reasonable cause
• Section: 40A(3); 263

Judgement Text

ITA.1159/BANG/2015 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'A', BANGALORE BEFORE SHRI. SUNIL KUMAR YADAVA, JUDICIAL MEMBE R AND SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER I.T.A NO.1159/BANG/2015 (ASSESSMENT YEAR : 2009-10) M/S. MARUTHI TRADERS, MAIN ROAD, BELAGUR, HOSADURGA TALUK, CHITRADURGA .. APPELLANT PAN : AAEFM4207H V. COMMISSIONER OF INCOME-TAX, DAVANGERE .. RESPONDENT ASSESSEE BY : SHRI. C. RAMESH, CA REVENUE BY : SHRI. BINOD KUMAR SINGH, CIT-DR-I HEARD ON : 04.05.2016 PRONOUNCED ON : 06.05.2016 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : THROUGH THIS APPEAL, ASSESSEE ASSAILS AN ORDER U/S .263 OF THE INCOME- TAX ACT, 1961 (THE ACT IN SHORT), PASSED BY PR. C IT, DAVANGERE, FOR A. Y. 2009-10. APPEAL HAS BEEN FILED WITH A DELAY OF 77 DAYS. CONDONATION ITA.1159/BANG/2015 PAGE - 2 PETITION HAS BEEN FILED. REASONABLE CAUSE SHOWN AN D HENCE DELAY IS CONDONED AND APPEAL ADMITTED. 02. FACTS APROPOS ARE THAT ASSESSEE A WHOLESALE TRA DER IN COCONUTS WAS SUBJECTED TO A SURVEY U/S.133A OF THE ACT ON 17.03. 2009. ON 30.09.2009 ASSESSEE FILED A RETURN FOR THE IMPUGNED ASSESSMENT YEAR DECLARING INCOME OF RS.68,480/-. DURING THE COURSE OF THE ASSESSMEN T PROCEEDINGS AO PUT THE ASSESSEE ON NOTICE AS TO WHY THE EXCESS STOCK O F RS.5,39,116/- AGREED BY IT IN THE SURVEY, AND UNACCOUNTED DEBTORS OF RS. 1,95,00,600/- DECLARED AS ADDITIONAL INCOME AT THE TIME OF SURVEY WAS NOT FINDING A PLACE IN THE RETURN FILED. ASSESSEE THEREUPON POINTED OUT TO TH E AO THAT HE HAD RETRACTED THE OFFER OF EXCESS STOCK AND ADDITIONAL INCOME THROUGH ITS LETTER DT.13.05.2009. HOWEVER THE AO DID NOT ACCEPT THIS PLEA AND MADE THE FOLLOWING ADDITIONS IN THE ASSESSMENT : (I) STOCK DIFFERENCE OF RS. 5,39,116/- (II) UNACCOUNTED DEBTORS RS.1,45,00,600/- (III) DE-HUSKING CHARGES RS. 8,10,113/- (IV) DIFFERENCE IN PURCHASE ACCOUNT RS. 14,22,87 2/- (V) U/S 40A(3) OF THE ACT RS.1,37,08,237/- ITA.1159/BANG/2015 PAGE - 3 03. ASSESSEES APPEAL BEFORE CIT (A) WAS NOT SUCCES SFUL. ASSESSEE THEREAFTER MOVED THIS TRIBUNAL AND THIS TRIBUNAL, A FTER ASSIMILATING THE FACTS, REACHED THE FOLLOWING FINDINGS IN ITA NO.149 8/BANG/2012, DT.03.05.2013 : 6.3. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS, PERUSED THE RELEVANT CASE RECORDS AND ALSO THE VOLUMINOUS P APER BOOKS FURNISHED BY THE LEARNED AR DURING THE COURSE OF HE ARING TO STRENGTHEN HIS CONTENTIONS. 6.3.1. FOR INSTANCE, WHILE DEALING WITH THE ISSUE O F UN-ACCOUNTED DEBTORS, THE AO HAD SPECIFICALLY STATED THAT THE A SSESSEE FIRM WAS AVOIDING ACCOUNTING OF CASH SALES AS PER LIST P REPARED BY THE SURVEY TEAM AT THE TIME OF SURVEY PROCEEDINGS IN TH E ASSESSEES BUSINESS PREMISES AND THE SAME IS CERTIFIED BY THE ASSESSEE AND THE COPY OF THE SAME IS WITH THE ASSESSEE.. [REFE R: PAGE 5 OF THE ASST. ORDER]. HOWEVER, WHEN THE RIVAL PARTIES W ERE REQUIRED TO FURNISH A COPY OF THE SAID LIST PURPORTED TO HAV E BEEN PREPARED BY THE SURVEY TEAM FOR THE PERUSAL OF THIS BENCH, T HE SAME HAS NOT BEEN PRODUCED BY EITHER PARTY. FURTHER, THE ASSESSE E HAD VOUCHED THAT IT HAD NOT BEEN PROVIDED WITH ANY MATE RIAL EVIDENCE AS ALLEGED BY THE AO TO THE EFFECT THAT SUFFICIENT OPPORTUNITY WAS GIVEN TO CLARIFY OR RECONCILE THE SAID TRANSACTION (SOURCE: PAGE 6 OF THE ASST. ORDER) DE-HUSKING CHARGES: ACCORDING TO THE AO, THE ASSESSEE VIDE ITS LETTER D ATED 23.11.2011 HAS STATED THAT THE COCONUTS WERE PURCH ASED AFTER DE-HUSKING AT THE PURCHASE POINT AND THAT THE HUSK HAS NOT BEEN RETAINED. THE PURCHASE AND SALE OF COCONUT HAS ONLY BEEN ACCOUNTED AND PURCHASE OR SALE OF HUSK IS NOT ACCOU NTED. THEREFORE, IT IS TO BE HELD THAT THE DE-HUSKING CHA RGES CLAIMED IS NOT ALLOWABLE. IN THIS CONNECTION, THE PROPOSAL LET TERS ALSO ISSUED TO THE ASSESSEE TO RECONCILE THE SAME BUT HE WAS NO T ABLE TO PROVE, HENCE THE SAME IS ADDED BACK HOWEVER, THIS CLAIM OF ITA.1159/BANG/2015 PAGE - 4 THE AO HAS BEEN CONTESTED BY THE ASSESSEE THAT THE ENTIRE EXPENDITURE IS FULLY VOUCHED AND HAS BEEN AUDITED U NDER SECTION 44AB OF THE ACT. THESE EXPENSES WERE PART OF BOOKS MAINTAINED IN THE NORMAL COURSE OF ITS BUSINESS. THESE BOOKS W ERE ALSO EXAMINED DURING THE SURVEY AND IMPOUNDED. THE DATA IN THE ACCOUNTS WAS AVAILABLE EVEN AT THE TIME OF SURVEY. 6.3.2. WE OBSERVE THAT THE ABOVE ASSERTION OF THE A SSESSEE HAS NOT BEEN EXAMINED BY THE AO WHILE DECIDING THE ISSUE DIFFERENCE IN PURCHASE ACCOUNT: IT WAS THE STAND OF THE AO THAT SINCE THE ASSESSEE WAS UNABLE TO RECONCILE THE SAME, THE ADDITION WAS RESORTED TO. THIS FACT HAS BEEN DENIED BY THE ASSESSEE THAT THE PURCHASES WHICH WERE DECLARED TO THE COMMERCIAL-TAX AUTHORITI ES WAS THE SAME AMOUNT DEBITED TO P & L ACCOUNT FOR WHICH THE ASSESSEE HAD PRODUCED THE AUDIT REPORT UNDER KVAT IN FORM NO .240 BEFORE THE AO. HOWEVER, THERE WAS NO MENTION IN THE ASSESSMENT ORDER AS TO WHETHER THE AO HAD OCCASION TO PERUSE T HE EVIDENCE ALLEGEDLY CLAIMED TO HAVE BEEN PRODUCED BY THE ASSE SSEE. INSTEAD, THE AO STATED THAT THE ADDITION WAS MADE A S THE ASSESSEE HAD FAILED TO RECONCILE THE SAME ETC., DISALLOWANCE U/S 40A(3): ON THE BASIS OF THE ENQUIRIES CONDUCTED IN RESPECT OF THE NAMES AND ADDRESSES OF THE AGRICULTURISTS WITH WHOM THE A SSESSEE ALLEGED TO HAVE PURCHASED COCONUTS AS PER THE PURCH ASE BILLS RAISED, THE AO FOUND THAT NONE OF THE PARTICULARS W ERE AVAILABLE AT THE ADDRESSES MENTIONED IN THE SAID BILLS. ACCOR DINGLY, THE AO HAD REJECTED 357 VOUCHERS ON THE GROUND THAT THE PA YMENTS EXCEEDED RS.20,000/-. COUNTERING THIS, IT WAS SUBMI TTED BY THE ASSESSEE THAT THOSE 357 BILLS WERE EACH DAY ROUTE-W ISE BILLS. EACH BILL HAS A TRIP-SHEET CONTAINING 3 TO 4 TRANSACTION S. EACH OF THEM WERE LESS THAN RS.20,000/- AND, THUS, IT WAS ARGUED , THE PROVISIONS OF S. 40A(3) HAVE NO ROLE TO PLAY. MOREO VER, IT WAS SUBMITTED, ALL THE BILLS HAVE BEEN IMPOUNDED AND AR E STILL LYING WITH THE DEPARTMENT. IT WAS, FURTHER, SUBMITTED THA T THE COCONUTS ITA.1159/BANG/2015 PAGE - 5 WERE PURCHASED FROM THE AGRICULTURISTS AND, THUS, T HE ASSESSEE WAS ENTITLED TO CLAIM EXEMPTION UNDER RULE 6DD OF T HE I.T. RULES. IN VIEW OF THE ABOVE, IT WAS PLEADED THAT THE ASSES SEES CASE FALLS WITHIN THE PURVIEW OF RULE 6DD OF I.T. RULES. 6.3.3. TAKING INTO ACCOUNT ALL THE FACTS AND CIRCUM STANCES OF THE ISSUES AND ALSO OF THE FACT THAT THE ISSUES HAVE NO T BEEN DEALT WITH IN A PROPER MANNER BY THE AUTHORITIES BELOW, WE ARE OF THE CONSIDERED VIEW THAT THE MATTER SHOULD BE RESTORED ON THE FILE OF THE AO WITH A SPECIFIC DIRECTION TO LOOK THE ISSUES AFRESH AND TO TAKE APPROPRIATE ACTION IN ACCORDANCE WITH THE PROV ISIONS OF THE ACT AS WELL AS I.T. RULES, AFTER AFFORDING A REASON ABLE OPPORTUNITY TO THE ASSESSEE OF BEING HEARD. IT IS O RDERED ACCORDINGLY. 04. AO ON 22 ND MAY 2013 PASSED AN ORDER GIVING EFFECT TO THE ABOV E REFERRED TRIBUNAL ORDER. PERTINENT PART OF THE SAI D ORDER READ AS UNDER : 05. ON 23.03.2015, CIT ISSUED A SHOW CAUSE NOTICE T O THE ASSESSEE PROPOSING TO INVOKE THE POWERS VESTED ON HIM U/S.26 3 OF THE ACT. AS PER THE CIT, THE AO HAD PASSED THE ORDER PURSUANT TO TR IBUNAL DIRECTIONS WITHOUT VERIFYING THE ISSUES IN THE MANNER DIRECTED BY THE TRIBUNAL, THEREBY RENDERING SUCH ORDER ERRONEOUS AND PREJUDICIAL TO T HE INTERESTS OF THE REVENUE. IN ITS REPLY ASSESSEE STATED THAT THE ISS UES DIRECTED BY THE TRIBUNAL FOR FRESH CONSIDERATION WERE DULY CONSIDER ED BY THE AO BEFORE PASSING THE ORDER. AS PER THE ASSESSEE THERE EXIST ED NO CIRCUMSTANCES ITA.1159/BANG/2015 PAGE - 6 WARRANTING INVOCATION OF SECTION 263 OF THE ACT. H OWEVER THE LD. CIT WAS NOT IMPRESSED. ACCORDING TO HIM THE AO HAD NOT COM PLIED WITH THE ORDER OF THE TRIBUNAL AND HENCE THE GIVING EFFECT ORDER P ASSED WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 06. NOW BEFORE US, LD. AR STRONGLY ASSAILING THE OR DER OF THE CIT SUBMITTED THAT THERE WERE NO CORROBORATIVE EVIDENCE WITH THE AO SUPPORTING THE STATEMENT RECORDED DURING THE SURVEY . AS PER THE LD. AR, AO RECOGNISED THIS ASPECT AND ALSO APPRECIATED ASSE SSEES SUBMISSION, WHILE PASSING THE GIVING EFFECT ORDER. THUS AS PER THE LD. AR, THE AO HAVING APPLIED HIS MIND, THE ORDER COULD NOT BE TRE ATED AS ERRONEOUS OR PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 07. PER CONTRA, LD. DR SUPPORTED THE ORDER OF THE C IT. 08. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. ORDER GIVING EFFECT TO THE TRIBUNAL DIRECTIONS HAVE BEEN REPRODUCED AT PARA FOUR ABOVE. DIRECTION OF THE TRIBUNAL TO THE AO WAS TO EXAMINE EACH AND EVERY ISSUE STARTING FROM UNACCOUNTED DEBTORS TO DISALLOW ANCE MADE U/S.40A(3) OF THE ACT AND TO TAKE APPROPRIATE ACTION AS PER TH E ACT. ENTIRE MATTER WAS RESTORED. IT WAS THE BOUNDEN DUTY OF THE AO TO MAK E A VERIFICATION OF EACH ITA.1159/BANG/2015 PAGE - 7 ISSUE AFTER EXAMINING THE SUPPORTING RECORDS PRODUC ED BY THE ASSESSEE FOR DISLODGING THE ADMISSION MADE DURING THE SURVEY. T HE ORDER PASSED BY THE AO SHOW THAT THERE WAS NO APPLICATION OF MIND. NO DETAILS WERE CALLED FROM THE ASSESSEE, NOR ANY EXAMINED. A CRYPTIC ORD ER AS SUCH MAY NOT BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. HOWEVER A CRYPTIC ORDER COUPLED WITH ABSENCE OF ENQUIRY, OR A N ORDER PASSED WITHOUT ENQUIRIES THAT A PRUDENT MAN WOULD HAVE DONE UNDER THE GIVEN CIRCUMSTANCES WILL DEFINITELY RENDER SUCH ORDER ONE WHICH IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. WE AR E THEREFORE OF THE OPINION THAT CIT WAS JUSTIFIED IN INVOKING THE JURISDICTION VESTED ON HIM U/S.263 OF THE ACT. THERE IS NO REASON FOR INTERFERENCE. 09. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 6TH DAY OF MA Y, 2016. SD/- SD/- (SUNIL KUMAR YADAV) (ABRAHAM P GEORG E) JUDICIAL MEMBER ACCOUNTA NT MEMBER MCN* ITA.1159/BANG/2015 PAGE - 8 COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR