P.Senthil Kumar, CHENNAI V. ITO, CHENNAI

ITA 1222/CHNY/2016

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 4005 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 17-10-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 05-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Assessee Lawyers: T VASUDEVAN
• Keywords: Cost of acquisition; Reasonable cause; Reason to believe
• Section: 40A(3); 143(3); 142(1); 14A; 131

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , !.. # $%, ' () BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER ./ ITA NOS.1222 & 1223/MDS/2016 + ,+ / ASSESSMENT YEAR : 2011-12 SHRI P. SENTHIL KUMAR, P-2, HIG, ADYAR APARTMENTS, CIRCULAR ROAD, KOTTUR GARDENS, KOTTURPURAM, CHENNAI - 600 085. PAN : ABBPS 1019 H V. THE INCOME TAX OFFICER, BUSINESS WARD XV(3), CHENNAI. (.// APPELLANT) (01.// RESPONDENT) ./ 2 3 / APPELLANT BY : SHRI T. VASUDEVAN, ADVOCATE 01./ 2 3 / RESPONDENT BY : SHRI SUPRIYO PAL, JCIT # 2 4' / DATE OF HEARING : 19.10.2016 56, 2 4' / DATE OF PRONOUNCEMENT : 23.11.2016 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: BOTH THE APPEALS OF THE ASSESSEE ARE DIRECTED AG AINST THE RESPECTIVE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) -4, CHENNAI, DATED 10.02.2016, FOR THE ASSESSMENT YEAR 2011-12. WHILE I.T.A. NO.1222/MDS/2016 IS DIRECTED AGAINST T HE ORDER OF THE CIT(APPEALS) CONFIRMING THE PENALTY LEVIED BY THE A SSESSING OFFICER 2 I.T.A. NOS.1222 & 1223/MDS/16 UNDER SECTION 271B OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'), I.T.A. NO.1223/MDS/2016 IS DIRECTED AGAINST THE ORD ER OF THE CIT(APPEALS) AGAINST THE QUANTUM ADDITION. LET US FIRST TAKE I.T.A. NO.1223/MDS/2016 2. SHRI T. VASUDEVAN, THE LD.COUNSEL FOR THE ASSESS EE, SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE BUSIN ESS OF EXPORT OF GRANITES. IN FACT, THE ASSESSEE IS DOING THE BUSIN ESS AS A PROPRIETORSHIP CONCERN IN THE NAME AND STYLE OF SRI MEENAKSHI GRANITES. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE CLAIMED BEFORE THE ASSESSING OFFICER THAT HE EXPORT ED 1996 CU.M. OF GRANITE BLOCKS FOR A TOTAL CONSIDERATION OF ` 8,56,06,950/-. THE ASSESSEE FURTHER CLAIMED THAT THE COST OF THE GRANI TES EXPORTED IS ` 7,15,63,966/-. THE ASSESSEE FURTHER CLAIMED THAT T HE GRANITES WERE PURCHASED FOR EXPORT FROM M/S SUPREME GRANITES AND EXPORTS, M/S TIRUPATHI ENTERPRISES, M/S RAJHAM IMPEX, M/S SH RI BAKIA TRADING AGENCY, M/S GRANITE EXPORTS (P.) LTD., M/S MARUTHI EXPORTS, M/S MADHUCON GRANITES LTD., M/S GURU BHAGAVAN EXPOR TS, M/S MURUGAN ENTERPRISES, M/S HARIHARAA ENTERPRISES AND M/S SHRI ANUSHA ENTERPRISES. THE EXPORT OF GRANITES TO THE EXTENT OF 1996 CU.M. IS NOT IN DISPUTE. WHAT IS DISPUTED BY THE A SSESSING OFFICER IS 3 I.T.A. NOS.1222 & 1223/MDS/16 PURCHASE OF GRANITES FROM M/S RAJHAM IMPEX AND M/S SHRI BAKIA TRADING AGENCY. ACCORDING TO THE LD. COUNSEL, THE ASSESSING OFFICER DOUBTED THE PURCHASE FROM M/S RAJHAM IMPEX AND M/S SHRI BAKIA TRADING AGENCY ON THE GROUND THAT THE CREDIT WAS OUTSTANDING FOR LONGER DURATION. MOREOVER, THE VENDOR RAISED A SINGLE BILL FOR SALE OF GRANITES TO THE ASSESSEE. 3. REFERRING TO THE ASSESSMENT ORDER, THE LD.COUNSE L FOR THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSING OFFIC ER MADE ENQUIRIES THROUGH HIS COUNTERPART AT MADURAI AND TR ICHY. THE ASSESSING OFFICER FOUND THAT M/S RAJHAM IMPEX AND M /S SHRI BAKIA TRADING AGENCY ARE NOT IN EXISTENCE. ACCORDING TO THE LD. COUNSEL, WHEN THIS WAS PUT BEFORE THE ASSESSEE DURING EXAMIN ATION UNDER SECTION 131 OF THE INCOME-TAX ACT, 1961 (IN SHORT ' THE ACT'), THE ASSESSEE EXPLAINED THAT M/S RAJHAM IMPEX AND M/S SH RI BAKIA TRADING AGENCY ARE VERY MUCH IN EXISTENCE. THE ASS ESSEE HAS ALSO PRODUCED COPIES OF SALES TAX REGISTRATION AND BILL FOR TRANSPORTATION OF GRANITES BEFORE THE OFFICER WHO E XAMINED HIM UNDER SECTION 131 OF THE ACT. THE ASSESSING OFFICE R, ACCORDING TO THE LD. COUNSEL, IGNORED THE MATERIAL FILED BY THE ASSESSEE AND SIMPLY PROCEEDED TO DISALLOW THE CLAIM OF THE ASSES SEE ON THE 4 I.T.A. NOS.1222 & 1223/MDS/16 GROUND THAT M/S RAJHAM IMPEX AND M/S SHRI BAKIA TRA DING AGENCY ARE NOT IN EXISTENCE. 4. REFERRING TO THE ORDER OF THE ASSESSMENT, MORE P ARTICULARLY PARA 13, THE LD.COUNSEL SUBMITTED THAT THE ASSESSIN G OFFICER ACCEPTED THAT THE ASSESSEE HAS EXPORTED GRANITES. UNLESS AND UNTIL THE ASSESSEE PURCHASED GRANITES, EITHER FROM M/S RA JHAM IMPEX OR M/S SHRI BAKIA TRADING AGENCY OR FROM SOMEBODY ELSE , THE ASSESSEE COULD NOT HAVE EXPORTED 1996 CU.M. OF GRAN ITE BLOCKS. THEREFORE, ACCORDING TO THE LD. COUNSEL, WHEN THE A SSESSING OFFICER HIMSELF ACCEPTED THE EXPORT OF GRANITES, HE HAS NO REASON TO DOUBT THE PURCHASES. THE ASSESSING OFFICER SIMPLY DISBEL IEVING THE CASE OF THE ASSESSEE ON THE GROUND THAT BILLS WERE OUTST ANDING FOR LONGER TIME AND THE SUPPLIER HAS RAISED A SINGLE BILL. AC CORDING TO THE LD. COUNSEL, IT IS CUSTOMARY IN THIS LINE OF BUSINESS, TO SELL THE GRANITES ON CREDIT FOR LONGER TIME. IT IS ALSO CUSTOMARY TO RAISE SINGLE BILL WHEN THE ASSESSEE PURCHASED LARGE QUANTITY OF GRANI TES FOR EXPORT. REFERRING TO THE PAPER-BOOK FILED BY THE ASSESSEE, THE LD.COUNSEL SUBMITTED THAT THIS BILL DISCLOSES THE ADDRESS OF M /S RAJHAM IMPEX AND M/S SHRI BAKIA TRADING AGENCY WITH THE SALES TA X REGISTRATION, ETC. THE ASSESSEE HAS ALSO FILED COPIES OF THE SHI PPING BILL FOR 5 I.T.A. NOS.1222 & 1223/MDS/16 EXPORT BEFORE THE ASSESSING OFFICER AND THE COPIES OF THE SAME ARE AVAILABLE AT PAGES 4 AND 5 OF THE PAPER-BOOK. M/S SHRI BAKIA TRADING AGENCY CONFIRMED THE OUTSTANDING AMOUNT AS ON 31.03.2012. A COPY OF THIS CONFIRMATION LETTER IS AVAILABLE AT PAGE 6 OF THE PAPER-BOOK. 5. REFERRING TO PAGE 11 OF THE PAPER-BOOK, THE LD.C OUNSEL FOR THE ASSESSEE SUBMITTED THAT THESE ARE ALL DETAILS O F SALES TAX REGISTRATION BY SHRI BAKIA TRADING AGENCY. IT CONT AINS THE PAN AND OTHER DETAILS. A COPY OF THE BANK STATEMENT AVAILA BLE AT PAGES 9 AND 10 OF THE PAPER-BOOK SHOWS THAT THE PAYMENTS WE RE MADE THROUGH BANKING CHANNELS. REFERRING TO PAGE 17 OF THE PAPER-BOOK, THE LD.COUNSEL SUBMITTED THAT THE M/S RAJHAM IMPEX HAS CONFIRMED THE OUTSTANDING AMOUNT AS ON 31.03.2011. THE SALES TAX REGISTRATION DETAILS OF RAJHAM IMPEX ARE AVAILABLE AT PAGE 20 OF THE PAPER-BOOK. ACCORDING TO THE LD. COUNSEL, THESE DE TAILS WERE FILED BY THE ASSESSEE BEFORE THE INCOME-TAX AUTHORITIES D URING EXAMINATION UNDER SECTION 131 OF THE ACT. THE ASSE SSING OFFICER CONVENIENTLY OMITTED THIS AND PLACED HIS RELIANCE O N THE REPORT SAID TO BE FILED BY HIS COUNTERPART AT MADURAI AND TRICH Y. 6 I.T.A. NOS.1222 & 1223/MDS/16 6. REFERRING TO PARA 18 OF THE ASSESSMENT ORDER, TH E LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFIC ER HIMSELF FOUND THAT THE ASSESSEE HAS PAID CASH TO THOSE PARTIES IN CLUDING M/S RAJHAM IMPEX AND M/S SHRI BAKIA TRADING AGENCY AND DISALLOWED THE CLAIM OF THE ASSESSEE UNDER SECTION 40A(3) OF T HE ACT. THIS CONTRADICTORY STAND OF THE ASSESSING OFFICER THAT T HE ASSESSEE HAS PAID CASH TO M/S RAJHAM IMPEX AND M/S SHRI BAKIA TR ADING AGENCY SHOWS THAT THE ASSESSING OFFICER HIMSELF ADMITS THA T THE TRANSACTION WAS GENUINE AND THE ASSESSEE HAS PURCHASED GRANITES FROM THESE TWO ENTITIES. REFERRING TO THE COPIES OF THE STATE MENT RECORDED FROM ASSESSEE UNDER SECTION 131 OF THE ACT, A COPY OF TH IS IS AVAILABLE AT ANNEXURE TO THE ASSESSMENT ORDER, THE LD.COUNSEL SU BMITTED THAT WHEN THE VENDORS M/S RAJHAM IMPEX AND M/S SHRI BAKI A TRADING AGENCY INSISTED FOR CASH PAYMENT, THE SAME WAS WITH DRAWN FROM BANK AND PAID TO THEM DIRECTLY. REFERRING TO RULE 6DD OF INCOME- TAX RULES, 1962, THE LD.COUNSEL SUBMITTED THAT WHEN THE VENDORS INSISTED FOR PAYMENT OF CASH, ADMITTEDLY THE PROVIS IONS OF SECTION 14A IS NOT APPLICABLE AT ALL. IN FACT, THE ASSESSE E HAS ISSUED SELF CHEQUE, WHICH WAS USED FOR WITHDRAWING THE MONEY FO R CASH PAYMENT. ACCORDING TO THE LD. COUNSEL, THESE FACTS WERE NOT CONSIDERED BY THE ASSESSING OFFICER OR THE CIT(APPE ALS) DURING THE 7 I.T.A. NOS.1222 & 1223/MDS/16 COURSE OF ASSESSMENT PROCEEDING AND APPELLATE PROCE EDING EVEN THOUGH THE SAME WERE AVAILABLE WITH THEM. THE LD.C OUNSEL PLACED HIS RELIANCE ON THE JUDGMENT OF GUJARAT HIGH COURT IN CIT V. NANGALIA FABRICS PVT. LTD. 2013 (8) TMI 80, COPY OF WHICH IS FILED BY THE ASSESSEE. 7. ON THE CONTRARY, SHRI SUPRIYO PAL, THE LD. DEPAR TMENTAL REPRESENTATIVE, SUBMITTED THAT IT IS NOT IN DISPUTE THAT THE ASSESSEE EXPORTED 1996 CU.M. OF GRANITE BLOCKS. THE ASSESSI NG OFFICER, AS RIGHTLY SUBMITTED BY THE LD.COUNSEL FOR THE ASSESSE E, ADMITTED IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS EXPORTED. T HE DISPUTE IS WITH REGARD TO PURCHASE OF GRANITES FROM M/S RAJHAM IMPEX AND M/S SHRI BAKIA TRADING AGENCY. IN FACT, THE ASSESSING OFFICER MADE ENQUIRIES THROUGH HIS COUNTERPARTS AT MADURAI AND T RICHY. THEY HAVE REPORTED THAT THERE IS NO SUCH BUSINESS ENTITY IN THE GIVEN ADDRESS. THE COPY OF THE REPORT FILED BY THE ASSIS TANT DIRECTOR OF INCOME TAX (INV.), MADURAI IS ANNEXED AS ANNEXURE-F TO THE ASSESSMENT ORDER. THEREFORE, THE ASSESSING OFFICER FOUND THAT M/S RAJHAM IMPEX AND M/S SHRI BAKIA TRADING AGENCY ARE NOT IN EXISTENCE. HENCE, ACCORDING TO THE LD. D.R., THE A SSESSEE COULD NOT HAVE PURCHASED GRANITES FROM THESE TWO BUSINESS ENTITIES. THE 8 I.T.A. NOS.1222 & 1223/MDS/16 ASSESSING OFFICER HAS ALSO FOUND THAT SUCH A HUGE A MOUNT EXCEEDING MORE THAN ` 1 CRORE COULD NOT HAVE BEEN OUTSTANDING FOR SUCH A LONGER TIME, THEREFORE, THE TRANSACTION WAS NOT GENUINE. EVEN THOUGH THE ASSESSEE HAS FILED CONFIRMATION LET TER FROM RESPECTIVE BUSINESS ENTITIES, THE ASSESSING OFFICER FOUND THAT THERE CANNOT BE ANY SUCH PRACTICE IN THE BUSINESS TO ALLO W OUTSTANDING AMOUNT REMAIN FOR SUCH A LONGER PERIOD. MOREOVER, SINGLE BILLS WERE RAISED FOR SUCH A HUGE AMOUNT. THESE FACTS, ACCORD ING TO THE LD. D.R., CREATED DOUBT TO THE ASSESSING OFFICER THAT T HE ASSESSEE WOULD NOT HAVE PURCHASED GRANITES FROM THESE TWO BU SINESS ENTITIES. FURTHERMORE, THE ASSESSEE CLAIMED THAT T HE PAYMENTS WERE PAID INITIALLY BY CASH, THEREFORE, THE PROVISI ONS OF SECTION 40A(3) OF THE ACT WOULD COME INTO OPERATION. HENCE , ACCORDING TO THE LD. D.R., THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE NOT ONLY DOUBTING THE TRANSACTION BUT ALSO UNDER SECTION 40A(3) OF THE ACT. 8. REFERRING TO THE ORDER OF THE CIT(APPEALS), THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE DISP UTE WAS WHETHER THE COST OF PURCHASE WAS BORNE BY THE ASSES SEE OR NOT. THE MATERIAL AVAILABLE ON RECORD DOES NOT SUPPORT P URCHASE OF 9 I.T.A. NOS.1222 & 1223/MDS/16 GRANITES FROM M/S RAJHAM IMPEX AND M/S SHRI BAKIA T RADING AGENCY. THE BILLS RAISED BY THE ASSESSEE ARE BOGUS . SINCE THE ASSESSEE HAS PURCHASED GRANITES FOR EXPORT THROUGH BOGUS ENTITIES, THE ASSESSING OFFICER FOUND THAT THE PROVISIONS OF SECTION 40A(3) OF THE ACT IS ALSO APPLICABLE FOR DISALLOWING THE PAYM ENT FOR PURCHASE OF GRANITES. THEREFORE, ACCORDING TO THE LD. D.R., THE CIT(APPEALS) HAS RIGHTLY CONFIRMED THE ADDITION MADE BY THE ASSE SSING OFFICER. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE IS ADMITTEDLY ENGAGED IN THE BUSINESS OF EXPORT OF GRA NITES. THE EXPORT OF GRANITES TO THE EXTENT OF 1996 CU.M. IS N OT IN DISPUTE. THE ASSESSING OFFICER IS DISPUTING THE PURCHASE OF GRAN ITES FROM TWO BUSINESS ENTITIES, NAMELY, M/S RAJHAM IMPEX AND M/S SHRI BAKIA TRADING AGENCY. ON THE BASIS OF THE ENQUIRIES COND UCTED AT MADURAI AND TRICHY, THE REVENUE AUTHORITIES EXAMINE D THE ASSESSEE UNDER SECTION 131 OF THE ACT. THE COPIES OF THE STATEMENT RECORDED FROM THE ASSESSEE UNDER SECTION 131 OF THE ACT FORMS PART OF ASSESSMENT ORDER AS ANNEXURE-J. IN R ESPONSE TO QUESTION NO.14, THE ASSESSEE EXPLAINED THAT M/S RAJ HAM IMPEX AND M/S SHRI BAKIA TRADING AGENCY WERE VERY MUCH EX ISTING AT THE 10 I.T.A. NOS.1222 & 1223/MDS/16 TIME OF PURCHASE OF GRANITES. TO PROVE THE EXISTEN CE, THE ASSESSEE HAS FILED COPIES OF REGISTRATION OF SALES TAX AND B ILLS ISSUED BY THEM INCLUDING THE CONFIRMATION LETTERS. FOR THE PURPOS E OF CONVENIENCE, WE ARE REPRODUCING THE QUESTION ASKED TO THE ASSESS EE AS QUESTION NO.14 UNDER SECTION 131 OF THE ACT AND THE ANSWER G IVEN BY THE ASSESSEE, AS UNDER:- Q.14 IN RESPECT OF YOUR CL AIM OF HAVING PURCHASED GRANITE FROM M/S RAJHAM IMPEX AND M/S SHRI BAKIA TRADING AGENCY, A S PER THE RESULT OF ENQUIRY UNDERTAKEN BY THE INCOME TAX INVESTIGATION UNITS AT THIRUCHIRAPALLI AND MADURAI, IT APPEARS THAT THE PURCHASES ARE NOT GENUINE. I AM N OW SHOWING YOU THE REPORTS AND THE EVIDENCE BASED ON W HICH THIS FACT WAS DRAWN. FURTHER AT THE FIRST STAGE YO U COULD NOT PRODUCE THE BILLS OR ANY OTHER PROOF OF TRANSPOR TATION. THE BILLS ISSUED BY THEM DOES NOT POSSESS ANY OF TH E QUALITIES THAT A BILL THROUGH WHICH SUCH HIGH MAGNI TUDE TRANSACTION PASSES THROUGH HAS TO POSSESS. IT IS A LSO INTRIGUING TO NOTE THAT IN THIS LINE OF TRADE, IF T HE BILLS ARE GENUINE, NO PERSON CAN AFFORD TO EXTEND THE CREDIT F OR SETTLEMENT OF LARGE SUM AND THAT TOO FOR SUCH LONGE R PERIOD. FINALLY TO CAP IT ALL, THE ALLEGED PAYMENT S TO THESE TWO SUPPLIES AS RECORDED IN THE BOOKS IS NOT MADE T HROUGH BANKING CHANNELS. THOUGH THE LEDGER FOLIO EXHIBITS THEM TO BE CHEQUE PAYMENTS, THE BANKERS HAVE CERTIFIED T HAT THESE CHEQUES WERE SELF DRAWN BY THE ISSUER. TO SUMMARISE, NOT A SINGLE PIECE OF EVIDENCE, NOR A SI NGLE FEATURE IN THE TRANSACTION EXHIBITS TRUTH AND SUPPOR TS YOUR CLAIM OF GENUINENESS. AT LEAST ANY LATER DAY PAYMENT SHOULD HAVE REACHED THE BANK ACCOUNT OF THESE TWO SUPPLIERS OF GRANITE. INTERESTINGLY ALL GENUINE TR ANSACTIONS ARE CARRIED OUT IN A NORMAL MANNER. PAYMENTS TO TH EM ARE SYSTEMATIC, THROUGH BANKING CHANNELS, THE IDENTITIE S ARE KNOWN OR AT LEAST CLEAR, ABNORMAL BALANCES ARE NOT 11 I.T.A. NOS.1222 & 1223/MDS/16 OUTSTANDING TO THEM AT THE CLOSE OF THE YEAR, THE BILLS ARE DESCRIPTIVE, SMALLER QUANTITIES AND ITEM WISE, AND POSSESS ALL THE ESSENTIAL QUALITIES THEY OUGHT TO POSSESS. UNDER THE CIRCUMSTANCES I HAVE EVERY REASON TO BELIEVE TH AT THE EXPENDITURE TOWARDS THE PURCHASE COST OF THE GOODS SUPPOSED TO HAVE BEEN PURCHASED FROM THESE TWO ALLE GED SUPPLIERS IS NON-EXISTENT AND TO SUCH EXTENT THE TAXAB LE INCOME SHOULD GET INCREASED. CLARIFY WITH SUPPORTI NG FACTS AND DOCUMENTS. ANSWER I HAVE GONE THROUGH THIS QUESTION CAREFULLY AND EVI DENCES FOR NON-EXISTENCE OF M/S RAJHAM IMPEX IN MADURAI AND M/S SHRI BAKIA TRADING AGENCY IN THIRUCHIRAPALLI HAS BEEN SHOWN TO ME NOW. I WOULD LIKE TO STATE THAT M/S RA JHAM IMPEX AND M/S SHRI BAKIA TRADING AGENCY WERE IN EXISTENCE AT THE TIME OF OUR TRANSACTION. TO PROVE THIS I AM SUBMITTING THE SALES TAX REGISTRATION PAPERS OF T HE ABOVE SAID TWO CONCERNS WITH THE SAME ADDRESSES AS MENTIONED IN THE BILLS ISSUED BY YOU. WITH REGARD TO TRANSPORT BILLS, MY AUDITOR WAS NOT AWARE THAT WE H AD INCURRED TRANSPORTATION CHARGES FOR EXPORTING THE GRANITES RECEIVED FROM M/S RAJHAM IMPEX AND M/S SHRI BAKIA TRADING AGENCY. HENCE, IN RESPONSE TO THE SPE CIFIC QUERY RAISED VIDE SL.NO.3 IN 142(1) NOTICE DATED 13.01.201 4 REGARDING THE TRANSPORT CHARGES, MY AUDITOR IN HIS REPLY DATED 28.01.2014 MISTAKENLY HAS STATED THAT THE TRANSPORT CHARGES ARE NOT APPLICABLE SINCE IT IS IN CLUDED IN PURCHASE COST. NOW I WOULD LIKE TO SUBMIT THE COPI ES OF TWO BILLS AS PROOF FOR THE TRANSPORTATION CHARGES P AID TO M/S SEKHAR TRANSPORT, ONGOLE AMOUNTING TO ` 6,45,417/- . FURTHER I AM ALSO SUBMITTING A BILL COPY RECEIVED F ROM M/S TRIAR LOGISTICS, BANGALORE FOR THE SHIPPING CHARGES INCURRED TO THE TUNE OF ` 8,30,516/- TOWARDS UPLOADING THE CONSIGNMENT. WITH REGARD TO THE CREDIT FACILITY, I T IS THE COMMON BUSINESS PRACTICE IN THIS TRADE. SINCE WE B UY THE OLD STOCKS UNDER SPECIFIC CONDITIONS THE CREDIT FAC ILITY IS EXTENDED. HENCE, THERE IS HUGE OUTSTANDING. THIS W AS THE ONLY PURCHASE MADE BY US ON OLD STOCK (STOCK MATERI AL). PAYMENTS TO THE ABOVE MENTIONED SUPPLIERS WERE MADE 12 I.T.A. NOS.1222 & 1223/MDS/16 BY CASH SINCE THEY INSISTED ONLY CASH. SO, I HAVE DRAWN THE CASH BY ISSUING SELF CHEQUES AND FOR THESE PAYM ENTS CONFIRMATION LETTER FROM THESE PARTIES IS SUBMITTED NOW FOR YOUR PERUSAL. AND I PRAY YOU THAT THE EVIDENCE S NOW SHOWN MAY BE CONSIDERED WHILE COMPUTING THE TAXABLE INCOME. 10. THE ASSESSEE HAS ALSO FILED THE COPIES OF THE S ALES TAX REGISTRATION DETAILS BEFORE THIS TRIBUNAL. THE COP Y OF SALES TAX REGISTRATION IS AVAILABLE AT PAGE 11 OF THE PAPER-B OOK. THE TIN NUMBER AVAILABLE IN THE SALES TAX REGISTRATION TALL IES WITH TIN NUMBER REFERRED IN THE BILL ISSUED BY THE M/S SHRI BAKIA TRADING AGENCY IN FAVOUR OF THE ASSESSEES PROPRIETORSHIP C ONCERN. THE CST NUMBER ALSO TALLIES WITH SALES TAX REGISTRATION . WHEN THESE DETAILS WERE FILED BY THE ASSESSEE BEFORE THE INCOM E-TAX AUTHORITIES, IT IS NOT KNOWN WHY THE ASSESSING OFFICER HAS COME TO A CONCLUSION THAT SHRI BAKIA TRADING AGENCY IS NOT EXISTING, ONL Y ON THE BASIS OF THE REPORT FILED BY HIS COUNTERPART AT TRICHY. THE SALES TAX REGISTRATION DETAILS CONTAIN THE NAME OF THE PROPRI ETOR OF SHRI BAKIA TRADING AGENCY AND HIS RESIDENTIAL ADDRESS. WHEN S UCH IS THE CASE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION TH AT THE ASSESSING OFFICER IS NOT JUSTIFIED IN COMING TO THE CONCLUSIO N THAT SHRI BAKIA TRADING AGENCY IS NOT IN EXISTENCE. 13 I.T.A. NOS.1222 & 1223/MDS/16 11. MOREOVER, THERE ARE GENUINE TRANSACTIONS BETWEE N THE ASSESSEE AND SHRI BAKIA TRADING AGENCY. FUNDS WERE TRANSFERRED FROM THE ASSESSEES BANK ACCOUNT TO THE BANK ACCOUN T OF SHRI BAKIA TRADING AGENCY. UNLESS SHRI BAKIA TRADING AGENCY I S IN EXISTENCE, SUCH A BANKING TRANSACTION WOULD NOT HAVE HAPPENED. MOREOVER, THE SALES TAX REGISTRATION AUTHORITIES WO ULD NOT HAVE REGISTERED SUCH A BUSINESS ENTITY. THEREFORE, THE REPORT OF THE COUNTERPART OF THE ASSESSING OFFICER AT TRICHY ON P ERSONAL INSPECTION HAS NOT DISCLOSED THE CORRECT FACT ON TH E GROUND LEVEL. DURING THE COURSE OF INSPECTION BY THE INSPECTOR, T HE ENTITY MAY NOT BE THERE. THAT DOES NOT MEAN THAT THERE WAS NO SUC H ENTITY. THE ENQUIRIES WERE APPARENTLY CONDUCTED IN THE MONTH OF APRIL, 2014. THE ASSESSEE DID BUSINESS DURING THE FINANCIAL YEAR 2010-11. THEREFORE, AFTER A GAP OF FOUR YEARS, THE PROPRIETO R OF SHRI BAKIA TRADING AGENCY MIGHT HAVE CLOSED HIS BUSINESS. THI S TRIBUNAL IS OF THE CONSIDERED OPINION THAT IN VIEW OF OVERWHELMING EVIDENCE AVAILABLE ON RECORD, THE ASSESSING OFFICER IS NOT J USTIFIED IN COMING TO A CONCLUSION THAT SHRI BAKIA TRADING AGENCY IS N OT IN EXISTENCE MERELY ON THE BASIS OF SO-CALLED INSPECTION REPORT SAID TO BE FILED BY THE INSPECTOR OF INCOME TAX. THIS TRIBUNAL IS OF T HE CONSIDERED OPINION THAT THE MATERIAL AVAILABLE ON RECORD CLEAR LY ESTABLISHES THE 14 I.T.A. NOS.1222 & 1223/MDS/16 EXISTENCE OF SHRI BAKIA TRADING AGENCY AND THE BILL S PRODUCED BY THE ASSESSEE DISCLOSES THE TIN NUMBER AND CST NUMBE R. IT DOES NOT LACK ANY DETAILS WHICH ARE REQUIRED TO BE DISCL OSED. THEREFORE, MERELY BECAUSE ONE SINGLE BILL WAS RAISED AND THE A MOUNT WAS OUTSTANDING FOR LONGER TIME THAT CANNOT BE A REASON TO DOUBT THE TRANSACTION. THERE MAY BE VARIOUS REASONS FOR THE BUSINESSMAN TO KEEP THE OUTSTANDING AMOUNT FOR A LONGER PERIOD. I T IS THE MATTER BETWEEN TWO BUSINESSMEN TO SETTLE THE OUTSTANDING A MOUNT IN A MANNER KNOWN TO LAW OR ACCORDING TO THEIR PERSONAL UNDERSTANDING. SUCH AN EVENT CANNOT BE A REASON TO DOUBT THE TRANS ACTION AT ALL. 12. NOW COMING TO M/S RAJHAM IMPEX, THE ASSESSEE HA S FILED THE COPIES OF SALES TAX REGISTRATION BEFORE THE REV ENUE AUTHORITIES DURING EXAMINATION UNDER SECTION 131 OF THE ACT. T HE ASSESSEE HAS FILED THE COPIES OF THE SAME AT PAGE 20 OF THE PAPER-BOOK. THIS CONTAINS THE TIN NUMBER, CST NUMBER AND PERMANENT A DDRESS OF THE PROPRIETOR OF RAJHAM IMPEX. THE BILL RAISED BY M/S RAJHAM IMPEX ALSO TALLIES WITH THE TIN NUMBER CST NUMBER G IVEN BY THE SALES TAX REGISTRATION DEPARTMENT. IN THOSE CIRCUM STANCES, AS OBSERVED EARLIER, MERELY BECAUSE ONE SINGLE BILL WA S RAISED AND THE AMOUNT KEPT OUTSTANDING FOR LONGER PERIOD, IT CANNO T BE A REASON TO 15 I.T.A. NOS.1222 & 1223/MDS/16 DOUBT THE GENUINENESS OF TRANSACTION. THIS TRIBUNA L IS OF THE CONSIDERED OPINION THAT THE MATERIAL AVAILABLE ON R ECORD, NAMELY, DETAILS OF SALES TAX REGISTRATION AND CONFIRMATION LETTER FILED BY THE RESPECTIVE PARTIES, ESTABLISHES THE EXISTENCE OF M/ S RAJHAM IMPEX AND THE BILLS RAISED BY M/S RAJHAM IMPEX AND THE CO NFIRMATION LETTER CLEARLY SHOW THAT THE ASSESSEE HAS PURCHASED GRANIT ES FROM M/S RAJHAM IMPEX. THEREFORE, THE ASSESSING OFFICER IS NOT JUSTIFIED IN COMING TO CONCLUSION THAT M/S RAJHAM IMPEX IS NOT I N EXISTENCE. 13. NOW COMING TO THE DISALLOWANCE MADE BY THE ASSE SSING OFFICER UNDER SECTION 40A(3) OF THE ACT, AS RIGHTLY SUBMITTED BY THE LD.COUNSEL FOR THE ASSESSEE, THE ASSESSING OFFICER IN FACT CONTRADICTING HIMSELF BY MAKING A DISALLOWANCE UNDE R SECTION 40A(3) OF THE ACT. IT IS NOT KNOWN, WHEN THE ASSES SING OFFICER CLAIMS THAT M/S RAJHAM IMPEX AND M/S SHRI BAKIA TRA DING AGENCY ARE NOT IN EXISTENCE, HOW THE ASSESSEE COULD MAKE P AYMENT IN CASH. THE VERY FACT THAT THE ASSESSING OFFICER ACC EPTED THAT THE PAYMENT WAS MADE IN CASH SHOWS THAT THE TWO ENTITIE S ARE VERY MUCH IN EXISTENCE. FROM THE COPY OF THE LETTER ADD RESSED TO THE ASSESSING OFFICER, WHICH IS AVAILABLE AT PAGES 26 A ND 27 OF THE PAPER-BOOK, IT APPEARS THAT M/S RAJHAM IMPEX AND SH RI BAKIA 16 I.T.A. NOS.1222 & 1223/MDS/16 TRADING AGENCY ACTED AS AGENTS FOR PROCURING GRANIT ES FROM VARIOUS QUARRY OWNERS. DURING THE EXAMINATION UNDER SECTIO N 131 OF THE ACT, THE ASSESSEE CLARIFIED THAT HE ISSUED SELF CHE QUES AS INSISTED BY THE VENDORS, WHICH WAS USED IN WITHDRAWAL OF CAS H. THE STATEMENT RECORDED FROM THE ASSESSEE, WHICH WAS REP RODUCED IN THE EARLIER PART OF THIS ORDER, SHOWS THAT THE VEND ORS INSISTED FOR CASH PAYMENT. 14. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS O F RULE 6DD OF THE INCOME-TAX RULES, 1962 WHICH CATEGORICALLY S AYS THAT PAYMENT WAS MADE BY ANY PERSON TO HIS AGENT, WHO IS REQUIRED TO MAKE PAYMENT IN CASH FOR GOODS OR SERVICES ON BEHAL F OF SUCH PERSON, THE PROVISIONS OF SECTION 40A(3) OF THE ACT IS NOT APPLICABLE. IN THIS CASE, THE ASSESSEE CLAIMS THAT M/S RAJHAM I MPEX AND M/S SHRI BAKIA TRADING AGENCY ACTED AS AGENTS FOR PROCU RING GRANITES ON BEHALF OF THE ASSESSEE FROM QUARRY OWNERS. SINC E THE VENDORS INSISTED FOR CASH PAYMENT, THE ASSESSEE HAS TO NECE SSARILY MAKE CASH PAYMENT TO M/S RAJHAM IMPEX AND M/S SHRI BAKIA TRADING AGENCY SO AS TO ENABLE THEM TO MAKE PAYMENT IN CASH TO THE QUARRY OWNERS. THESE FACTS WERE NOT IN DISPUTE. THEREFOR E, IN VIEW OF RULE 6DD(K) OF INCOME-TAX RULES, 1962, THERE CANNOT BE A NY 17 I.T.A. NOS.1222 & 1223/MDS/16 DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT. IN V IEW OF THE ABOVE DISCUSSION, THIS TRIBUNAL IS UNABLE TO UPHOLD THE O RDERS OF THE LOWER AUTHORITIES, ACCORDINGLY THE SAME ARE SET ASIDE. T HE ADDITION MADE BY THE ASSESSING OFFICER IS DELETED. 15. NOW COMING TO I.T.A. NO.1222/MDS/2016, THE ASSE SSING OFFICER LEVIED PENALTY UNDER SECTION 271B OF THE AC T. ADMITTEDLY, THERE WAS A DELAY IN GETTING THE AUDIT REPORT. HOW EVER, THE ASSESSEE FILED THE AUDIT REPORT ALONG WITH THE RETU RN OF INCOME ON 13.07.2012. FROM THE ORDER OF THE ASSESSING OFFICE R IT APPEARS THAT THE ASSESSEE EXPLAINED BEFORE THE ASSESSING OFFICER THAT HIS FATHER WAS NOT WELL AND HE ULTIMATELY DIED IN OCTOBER, 201 0. THEREAFTER HIS MOTHER WAS BEDRIDDEN AND PASSED AWAY IN SEPTEMBER, 2011. DUE TO DEMISE OF HIS FATHER AND MOTHER, THERE WAS FAMIL Y DISPUTE AMONG THE FAMILY MEMBERS, THEREFORE, HE COULD NOT CONCENT RATE IN THE BUSINESS. HENCE, THE ACCOUNTS COULD NOT BE FINALIZ ED. THIS EXPLANATION OF THE ASSESSEE IS NOT CONTROVERTED BY THE DEPARTMENT. WHEN THE ASSESSEES FATHER WAS NOT WELL AND HE DIED IN OCTOBER, 2010, SUBSEQUENTLY HIS MOTHER ALSO DIED IN SEPTEMBE R, 2011, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THERE WA S REASONABLE CAUSE ON THE PART OF THE ASSESSEE IN NOT GETTING TH E AUDIT REPORT 18 I.T.A. NOS.1222 & 1223/MDS/16 WITHIN THE DUE DATE. ULTIMATELY, THE ASSESSEE GOT THE AUDIT REPORT ON 13.07.2012 AND THE RETURN OF INCOME WAS FILED ON 13 .07.2012 ALONG WITH AUDIT REPORT. THE ASSESSMENT WAS COMPLETED UN DER SECTION 143(3) OF THE ACT ONLY ON 30.03.2014. THEREFORE, I T IS AN ADMITTED FACT THAT THE ASSESSEE FILED THE AUDIT REPORT BEFOR E COMPLETION OF THE ASSESSMENT. 16. THE OBJECT OF FILING AUDIT REPORT IS ONLY TO AS SIST THE ASSESSING OFFICER TO DETERMINE THE CORRECT TAXABLE INCOME. S INCE THE ASSESSEE HAS FILED RETURN OF INCOME ALONG WITH THE AUDIT REPORT, THE PURPOSE OF STATUTORY REQUIREMENT IS COMPLIED WITH. THE DELAY IN FILING THE AUDIT REPORT DID NOT HAMPER THE ASSESSME NT PROCEEDING IN ANY WAY. THEREFORE, THIS TRIBUNAL IS OF THE CONSID ERED OPINION THAT THERE IS NO JUSTIFICATION IN LEVYING PENALTY UNDER SECTION 271B OF THE ACT. THEREFORE, THIS TRIBUNAL IS UNABLE TO UPHOLD THE ORDERS OF THE LOWER AUTHORITIES, ACCORDINGLY, THE SAME ARE SET AS IDE AND THE PENALTY LEVIED UNDER SECTION 271B OF THE ACT IS DEL ETED. 17. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. 19 I.T.A. NOS.1222 & 1223/MDS/16 ORDER PRONOUNCED ON 23 RD NOVEMBER, 2016 AT CHENNAI. SD/- SD/- ( ! . . # $% ) ( . . . ) (D.S. SUNDER SINGH) (N.R.S. GANESAN) ' / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 8 /DATED, THE 23 RD NOVEMBER, 2016. KRI. 2 04$9 :9,4 /COPY TO: 1. ./ /APPELLANT 2. 01./ /RESPONDENT 3. # ;4 () /CIT(A) 4. # ;4 /CIT, 5. 9< 04 /DR 6. !+ = /GF.