DCIT, V. M/s Magadh Manish Construction Pvt Ltd.,

ITA 122/PAT/2011

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7776 (ITAT-PATNA)
• Duration Of Justice: 5 year(s) 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 14-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K PAUL
• Assessee Lawyers: S IKESH JHA
• Section: 40A(3); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PATNA BENCH, PATNA BEFORE SHRI J.SUDHAKAR REDDY (AM) & SHRI SAND E EP GOSAIN (JM) I T A NO. 122 / PAT /20 1 1 ASSESSMENT YEAR S : 200 8 - 09 D CIT VS. M/S. MAGADH MANISHA CONSTRUCTION P. LTD. , CIRCLE - 2 , LIG - 299 , HANUMAN NAG AR, KANKARBAGH, PATNA. . PATNA . ( APPELLANT) (RESPONDENT) PAN - AAECM7670H DEPARTMENT BY : S HRI S . K. PAUL , DR . ASSESSEE BY : SHRI S IKESH JHA , A DV . DATE OF HEARING: - 03 /1 0 /201 7 DA TE OF PRONOUNCEMENT: - 6 TH / 1 0 /201 7 ORDER PER SANDEEP GOSAIN, JUDICIAL MEMBER: THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST THE ORDER OF THE CIT (A) - DHANBAD DATED - 26.09.2011 AND PERTAINS TO ASSESSMENT YEAR 2008 - 09. 2. THE EFFECTIVE ISSUE RAISED IN GROUND S OF APPEAL READ AS UNDER: 1. THAT THE LD. CIT(A) ERRED IN FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITI O N MADE BY THE AO ON ACCOUNT OF CASH PAYMENTS MADE BY THE ASSESSEE IN VIOLATIN OF THE PROVISIONS OF SECTION 40A(3) OF THE INCOME T AX ACT,1961. 3 . BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION. THE RETURN OF INCOME I TA NO. - 122 / PAT /20 1 1 2 FOR THE YEAR UNDER CONSIDERATION SHOWING TOTAL INCOME AT RS.2,31,543/ - WAS FILED BY THE ASSESSEE . THEREAFTER, THE CASE WAS SELECTED FOR SCRUTINY AND AFTER SERVING STATUTORY NOTICES AND SEEKING REPLY OF THE ASSESSEE , THE ORDER OF ASSESSMENT U/S 143(3) OF THE INCOME - T AX ACT, 1961 WAS PASSED BY THE AO DETERMINING THE TOTAL INCOME AT RS.71,28,620/ - ON 16 .12.2010 . THE ADDITIONS MADE BY THE AO WERE ON ACCOUNT OF DISALLOWANCE OF RS.68,67, 077/ - AS PER THE PROVISIONS OF S ECTION 40A(3) OF THE INCOME - TAX ACT. 4 . AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) AFTE R CONSIDERING THE CASE OF BOTH THE PARTIES HA D PARTLY ALLOWED T HE APPEAL FILED BY THE ASSESSEE AND RESTRICTED THE DISALLOWANCES TO RS.30,000/ - . 5 . AGGRIEVED BY THE ORDER OF LD.CIT(A), THE REVENUE IS IN APPEAL BEFORE US ON THE GROUND MENTIONED HEREINABOVE. 6. THE S OLIT ORY GROUND RAISED BY THE REVENUE BEFORE US IS AGAINST CHALLANGING THE ORDER OF LD. CIT(A) IN DELETING THE ADDITIONS MADE BY THE AO ON ACCOUNT OF CASH PAYMENTS MADE BY THE ASSESSEE IN VIOLATION OF THE PROVISIONS OF SECTION 40A(3) OF THE INCOME - TAX ACT,1961. 7 . WE HAVE HEARD THE COUNSEL S FOR BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS OF THE AUTHORITIES BELOW. I TA NO. - 122 / PAT /20 1 1 3 BEFORE DECID ING THE MERITS OF THE CASE, IT IS NECESSARY TO EVALUATE AND ANALYSE THE ORDERS PASSED BY THE LD. CIT(A) WHILE DEALING WITH THIS GROUND. THE LD. CIT(A) HAS DEALT WITH THIS GROUND IN PARA NOS. 3 TO 11 IN ITS ORDER. THE OPERATI VE PORTION OF THE ORDER OF LD. CIT(A) I S CONTAINED IN PARA NOS. 10 AND 11 WHICH IS REPRODUCED BELOW: I HAVE EXAMINED THE ABOVE ISSUE. REGARDING THE JCB PURCHASE, THE AO HAS NOT DOUBTED THE PURCHASE OF THE SAME HE HAS ONLY POINTED OUT THAT THE PAYMENT HAD NOT BEEN MADE AS ENUMERATED IN THE AGREEMENT. THE APPELLANT HAS SUBMITTED THAT DUE ENTRIES ARE THERE IN THE CASHBOOK AS AND WHEN PAYMENT HAS BEEN MADE. FURTHER, HE HAS REJECTED THE SUBMISSIONS OF THE APPELLLANT THAT THE VARIOUS PERSONS NAMED AS ABOVE ARE ITS SITE STAFF AND PAYMENT TO THEM IS BEING MADE FOR INCURRING VARIOUS EXPENSES AT THE SITES. WHEN ANY LUMP SUM AMOUNT HA S BEEN GIVEN TO THEM, IT DOES NOT MEAN THAT THE ENTIRE PAYMENT HAS BEEN MADE BY THEM TO ONE SINGLE PERSON IN ONE INSTALLMENT. THE SITES ARE SITUATED IN REMOTE AREAS AND THERE IS REQUREMENT OF CASH ALL THE TIME FOR INCURRING VARIOUS EXPENSES LIKE PROCUREMEN T OF DIFFERENT MATERIALS, LOADING, CARTAGE ETC. THEREFORE, THE SITE STAFF IS REQUIRED TO HAVE CASH WITH THEM FOR INCURRING VARIOUS EXPENSES FROM TIME TO TIME. STATEMENT OF EXPENSES INCURRED BY THEM FROM TIME TO TIME IS SUBMITTED ALONG WITH VOUCHERS. AS COU LD BE SEEN FROM THE ABOVE SUBMISSIONS OF THE APPELLANT, THERE IS NO INSTANCE OF ANY SINGLE PAYMENT EXCEEDING RS.20,000/ - EXCEPT ON ONE OCCASION ON 15.01.2008 WHEN SHRI SANJIV KUMAR SITE STAFF HAS MADE A PAYMENT OF RS.30,000/ - IN ONE INSTALLMENT. 11. ON AN APPRECIATION ON THE FACTS OF THE CASE, I FIND THAT THE EXPLANATION SUBMITTED BY THE APPELLANT WAS NOT ONLY PLAUSIBLE BUT ALSO LOGICAL. ENTRIES REGARDING PAYMENT OF CASH TO DIFFERENT PERSONS AS ABOVE IN THE CASH BOOK COULD ONLY HAVE BEEN A STARTING POINT O F INVESTIGATION. IT WAS NOT SUFFICIENT TO CONCLUDE ON THIS BASIS ITSELF THAT VIOLATION OF SECTION 40A(3) HAD TAKEN PLACE WITHOUT EXAMINING THE SUPPORTING DOCUMENTS AND VOUCHERS. IT WAS OBSERVED IN THE CASE REPORTED AT 87 ITR 395 OF CIT VS K. S. KANNAN KUNH I BY THE APEX COURT AT PAGE NUMBERS 398 AND 399 THAT THE AO CANNOT MAKE THE ADDITION WITHOUT EXAMINING THE MERITS OF THE EXPLANATION OFFERED BY THE ASSESSEE. EVEN OTHERWISE, AS OBSERVED ABOVE, I FIND THAT THE EXPLANATION IS NOT ONLY PLAUSIBLE BUT ALSO LOGI CAL AS WELL AS NECESSARY IN VIEW OF I TA NO. - 122 / PAT /20 1 1 4 REQUIREMENTS OF THE BUSINESS CONSIDERING THE FACT THAT SITES ARE SITUATED AT DIFFERENT PLACES UB REMOTE AREAS WHERE NO PERSON IS WILLING TO ACCEPT PAYMENTS BY CHEQUES. FURTHER, IT WAS SUBMITTED THAT MAXIMUM RECEIVERS OF PAYMENTS WERE ACTING AS AGENTS OF SELLERS/ SUPPLIERS WHO ACCEPTED CASH ONLY AT THE TIME OF DELIVERY. ACCORDINGLY, THE ADDITION MADE BY THE AO IS NOT ON SOULD FOOTING. HOWEVER, AS ADMITTED BY THE APPELLANT ITSELF, THERE IS ONE PAYMENT OF RS.30,000/ - ON 15.0 1.2008. THE APPELLANT HAS NOT SUBMITTED ANY EXPLANATION THAT THE SAME WAS COVERD BY EXCEPTIONAL CIRCUMSTANCES MENTIONED IN RULES 6DD. ACCORDINGLY, A DISALLOWANCE OF RS.30,000/ - IS CONFIRMED AND THE BALANCE DISALLOWANCE IS DELETED. 8 . AFTER HAVING GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND HAVING HEARD THE COUNSEL S FOR BOTH THE PARTIES AT LENGTH, WE FIND THAT LD. CIT(A) RIGHTLY CONCLUDED THAT WHEN LUMP - SUM AMOUNT HAS BEEN GIVEN BY THE ASSESSEE TO ITS FIELD STAFF, IT DOES NOT MEAN THAT THE ENTIR E PAYMENT HAS BEEN MADE BY THE ASSESSEE TO ONE SINGLE PERSON IN ONE INSTALLMENT. THE LD. CIT(A) HAS ALSO CONSIDERED AND TAKEN INTO CONSIDERATION THE FACTUAL POSTION THAT THE ASSESSEE IS IN BUSINESS OF CIVIL CONSTRUCTION AND THE CONSTRUCTION SITES ARE SITUA TED IN REMOTE AREAS AND THERE IS REQUIREMENT OF CASH ALL THE TIME FOR INCURRING VARIOUS EXPENSES TO ALLOW PROCUREMENT OF DIFFERENT MATERIALS , LOADING, CARTAGE ETC. THEREFORE, IN SUCH CIRCUMSTANCES SITE STAFF WAS REQUIRED TO HAVE CASH WITH THEM FOR INCURRIN G VARIOUS EXPENSES FROM TIME TO TIME. I TA NO. - 122 / PAT /20 1 1 5 9 . THE LD. CIT(A) WHILE RELYING UPON THE JUDGMENT OF THE HONBLE APEX COURT HAS ALSO RIGHTLY CONCLUDED THAT ENTRIES REGARDING PAYMENT OF CASH TO DIFFERENT PERSONS AS MENTIONED IN THE CASH BOOK COUL D HAVE BEEN ONLY A S TARTING POINT OF INVESTIGATION AND IT WAS NOT SUFFICIENT FOR THE AO TO CONCLUDE THAT ON THE BASIS OF THOSE ENTRIES ITSELF VIOLATION OF SECTION 40A(3) HAVE TAKEN PLACE WITHOUT EXAMINING T HE SUPPORTIVE DOCUMENTS AND VOUCHERS. 10. NO NEW FACTS, CIRCUMSTANCE S OR CONTRARY JUDGMENTS HAVE BEEN PRODUCED ON RECORD BEFORE US IN ORDER TO CONTROVERT OR REBUT THE FINDINGS SO RECORDED BY LD. CIT(A) . 10 . SO IN THESE CIRCUMSTANCE S , WE ARE UNABLE TO FIND ANY ILLEGALITY OR IRREGULARITY IN THE FINDINGS OF THE LD. CIT(A). WE THEREFORE, FIND THAT THERE ARE NO GROUND S TO INTERFRERE WITH THE FINDINGS OF THE LD. CIT(A) . HENCE, THE GROUND RAISED BY THE REVENUE IS DISMISSED AND THE ORDER PASSED BY THE LD.CIT(A) IS UPHLED. 11 . I N THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISM ISSED. O RDER IS PRONOUNCED IN THE OPEN COURT ON 6 TH OCTOBER , 201 7 . SD/ - SD/ - ( J. SUDHAKAR REDDY ) ( SANDEEP GOSAIN ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE OF ORDER: OCTOBER , 201 7 . S . S INH A (PS) I TA NO. - 122 / PAT /20 1 1 6 COPY OF THE ORDER FORWARDED TO : 1 . THE APPELLANT . 2. THE RESPONDENT.: 3. THE CIT(A) - PATNA 4. CIT , PATNA 5. INCOME TAX APPELLATE TRIBUNAL,PATNA 6. GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY