Arambagh Foreign Liquor Off Shop, Hooghly V. ITO, WD-2(4), HOOGHLY, Hooghly

ITA 1246/KOL/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4969 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2016
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 01-10-2015
• Court: TRIBUNAL
• Keywords: Assessment record
• Section: 40A(3)

Judgement Text

I.T.A. NO. 1246/KOL./2015 ASSESSMENT YEAR: 2007-2008 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA SMC BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER I.T.A. NO. 1246/KOL/ 2015 ASSESSMENT YEAR: 2007-2008 ARAMBAGH FOREIGN LIQUOR OFF SHOP,.................. .................APPELLANT NUTAN BAZAR, P.O. & P.S. ARAMBAGH, HOOGHLY-712 601 [PAN : AACCA 2901 P] -VS.- INCOME TAX OFFICER,................................ .............................RESPONDENT WARD-2(4), HOOGHLY, AAYAKAR BHAWAN, G,T. ROAD, KHADINA MORE, P.O. & P.S. CHINSURAH, DIST. HOOGHLY-712 101 APPEARANCES BY: SHRI SOMNATH GHOSH, ADVOCATE, FOR THE ASSESSEE SHRI AMITABH CHOWDHURY, JCIT, SR. D.R., FOR THE DEP ARTMENT DATE OF CONCLUDING THE HEARING : FEBRUARY 17, 2016 DATE OF PRONOUNCING THE ORDER : MARCH 02, 2016 O R D E R THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-6, KOLKATA DATED 22.07.2015, FOR THE ASSESSMENT YEAR 2007-08 AND THE SOLITARY IS SUE ARISING OUT OF THE SAME RELATES TO THE DISALLOWANCE OF RS.9,18,344/- M ADE BY THE ASSESSING OFFICER UNDER SECTION 40A(3) AND CONFIRMED BY THE L D. CIT(APPEALS). 2. THE ASSESSEE IN THE PRESENT CASE IS AN AOP, WHIC H IS ENGAGED IN FOREIGN LIQUOR BUSINESS. THE RETURN OF INCOME FOR T HE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 31.10.2007 DECLARI NG TOTAL INCOME OF RS.4,86,650/-. DURING THE COURSE OF ASSESSMENT PROC EEDINGS, IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS MADE VARIOUS PAYMENTS IN CASH EXCEEDING RS.20,000/- ON DIFFERENT DATES AGAINST THE I.T.A. NO. 1246/KOL./2015 ASSESSMENT YEAR: 2007-2008 PAGE 2 OF 5 PURCHASE OF FOREIGN LIQUOR FROM DIFFERENT PARTIES A GGREGATING TO RS.45,11,720/-. SINCE THE SAID PAYMENTS, ACCORDING TO THE ASSESSING OFFICER, WERE MADE IN VIOLATION OF SECTION 40A(3) A ND THERE WAS NO SATISFACTORY EXPLANATION OFFERED BY THE ASSESSEE IN THIS REGARD, A DISALLOWANCE OF RS.9,02,344/- BEING 20% OF THE AGGR EGATE PAYMENT WAS MADE BY THE ASSESSING OFFICER UNDER SECTION 40A(3) OF THE ACT. 3. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER U NDER SECTION 40A(3) WAS CHALLENGED BY THE ASESSEE IN AN APPEAL F ILED BEFORE THE LD. CIT(APPEALS). DURING THE COURSE OF APPELLATE PROCEE DINGS BEFORE THE LD. CIT(APPEALS), TWO CONTENTIONS WERE RAISED ON BEHALF OF THE ASSESSEE WHILE CHALLENGING THE DISALLOWANCE MADE BY THE ASSE SSING OFFICER UNDER SECTION 40A(3). FIRSTLY, IT WAS CONTENTED THAT THE PAYMENTS IN QUESTION MADE BY THE ASSESSEE WERE ON ACCOUNT OF GENUINE BUS INESS EXPENDITURE AND, THEREFORE, DISALLOWANCE UNDER SECTION 40A(3) W AS NOT JUSTIFIED. THIS CONTENTION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE BY THE CIT(APPEALS) FOR THE DETAILED REASONS GIVEN IN HIS IMPUGNED ORDE R. THE SECOND CONTENTION RAISED BY THE ASSESSEE WAS THAT NONE OF THE PAYMENTS IN QUESTION EXCEEDED RS.20,000/- ON ANY SINGLE OCCASIO N AND, THEREFORE, THE PROVISIONS OF SECTION 40A(3) WERE NOT APPLICABLE. I N THIS REGARD, THE LD. CIT(APPEALS) ACCEPTED THE FACTUAL POSITION THAT NON E OF THE PAYMENTS INDIVIDUALLY EXCEEDED RS.20,000/-. HE, HOWEVER, STI LL CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SE CTION 40A(3) FOR THE FOLLOWING REASONS GIVEN IN HIS IMPUGNED ORDER:- AS REGARDS THE FIRST ARGUMENT, IT IS TO BE STATED THAT THE FACT THAT INDIVIDUAL PAYMENTS DID NOT EXCEED RS. 20000/- ON ANY OCCASION IS SELF SERVING. THE APPELLANT HAS NOT JUS TIFIED IN RESPECT OF PAYMENTS TO ANY SUPPLIER/CREDITOR AS TO WHY MORE THAN ONE PAYMENT HAD TO BE MADE TO THE SUPPLIER/CRE DITOR OR THE PERSON DEPUTED BY HIM FOR COLLECTION OF THE RELEVAN T RECEIVABLES, IN A SINGLE DAY. THE APPELLANT MIGHT HAVE RECORDED MORE THAN ONE CASH PAYMENT ON THE SAME DATE TO A SUPPLIER IN ITS BOOKS OF ACCOUNT BUT SUCH A PRACTICE IS UNUSUAL, TO SAY THE LEAST. IN RESPECT OF SUCH PAYMENTS, THE ONUS IS ON THE APPELL ANT TO JUSTIFY WITH FULL FACTS AND EVIDENCE AS TO WHAT WERE THE FA CTORS COMPELLING THE MULTIPLE PAYMENT IN A SINGLE DAY. TH E ONUS BECOMES EVEN HEAVIER WHEN IT IS NOTED THAT THE APPE LLANT HAS HABITUALLY MADE SUCH BROKEN/MULTIPLE PAYMENTS IN A SINGLE DATE I.T.A. NO. 1246/KOL./2015 ASSESSMENT YEAR: 2007-2008 PAGE 3 OF 5 AGAINST THE SAME BILL OR SAME RECEIVABLE OUTSTANDIN G FOR SEVERAL DATES PRIOR TO THE PAYMENT. THIS PATTERN IS EVIDENT FROM THE COPY OF THE CASH BOOK AVAILABLE IN THE ASSESSMENT RECORD , WHICH I HAVE CAREFULLY EXAMINED. THE CLAIM THAT THE PAYMENTS WER E MADE ON MULTIPLE OCCASIONS ON DIFFERENT DATES BECOMES VERY DIFFICULT TO ACCEPT ALSO IN LIGHT OF THE FACT THAT THE SUPPLIERS ARE MOSTLY FROM PLACES OUTSIDE KOLKATA. A CASE IN POINT IS PURCHASE S WORTH RS.13,96,997/- MADE FROM M/S UNITED ENTERPRISES DUR ING THE RELEVANT PREVIOUS YEAR TO WHOM PAYMENTS AGGREGATING RS.14,19,105/- WERE MADE DURING THE YEAR. THE ADDRE SS OF THIS SUPPLIER IS 'BURNPUR ROAD, DOLLY LODGE, ASANSOL-4'. THE PAYMENTS WERE MADE IN CASH AND ON VARIOUS DATES, PA YMENTS IN THE AGGREGATE EXCEEDING RS.20000/- WERE MADE ON MUL TIPLE OCCASIONS BUT ON EACH OCCASION, THE PAYMENT WAS LES S THAN RS.20000/-. FOR EXAMPLE ON, 07.04.2006, CASH PAYMEN TS OF RS.18900/- , RS.18500, RS.15000/- AND RS.7600/- (TO TAL RS.60000/-) WERE MADE. THESE PAYMENTS WERE MADE AGA INST OPENING BALANCE OF RS.3,71,840/-. ANY PRUDENT PERSO N WILL FIND THIS PATTERN OF PAYMENTS TO A PERSON BASED OUTSIDE KOLKATA AGAINST OUTSTANDING PAYABLES IMPOSSIBLE TO UNDERSTA ND. WHAT PROMPTED THE APPELLANT TO PAY AN AMOUNT OF RS.60000 /- IN FOUR DIFFERENT PARTS ON THE SAME DATE, PRESUMABLY TO THE PERSON DEPUTED BY THE SUPPLIER TO KOLKATA IS KNOWN ONLY TO THE APPELLANT, ASSUMING (BUT NOT ADMITTING) THAT THE AP PELLANT'S CLAIM IS CORRECT. THE CASE BECOMES EVEN MORE INTRIG UING WHEN IT IS OBSERVED THAT THE APPELLANT HAS MADE SIMILAR PAY MENTS IN PARTS ON VARIOUS OTHER DATES AS WELL AGAINST SUBSTA NTIAL OUTSTANDING PAYMENTS IN RESPECT OF LARGE PURCHASE B ILLS ISSUED ON EARLIER DATES. FOR EXAMPLE, TOTAL CASH PAYMENT O F RS. 50000/- WAS MADE IN THREE DIFFERENT PARTS OF RS.17500/-, RS .18000/- AND RS.14500/- ON 22.05.2006. IN ABSENCE OF ANY LOGICAL EXPLANATION FOR SUCH MULTIPLE CASH PAYMENTS ON THE SAME DATE, T HE INESCAPABLE CONCLUSION IS THAT THE APPELLANT HAS RE CORDED SUCH MULTIPLE ENTRIES IN THE CASH BOOK ONLY TO ESCAPE TH E REGOURS OF THE PROVISIONS OF SECTION 40A(3) OF THE ACT. HENCE, THE EXPLANATION OF THE APPELLANT THAT NO SINGLE CASH PA YMENT EXCEEDED RS.20,000/- IS REJECTED. 4. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER U NDER SECTION 40A(3) THUS WAS CONFIRMED BY THE LD. CIT(APPEALS). AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE ASSESSEE HAS PRE FERRED THIS APPEAL BEFORE THE TRIBUNAL. 5. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS SUBMITTED ON BEHALF OF THE ASSESSEE BEFORE THE LD. CIT(APPEALS) AS WELL AS BEF ORE ME, NONE OF THE INDIVIDUAL PAYMENTS MADE IN CASH EXCEEDED RS.20,000 /- ON ANY SINGLE I.T.A. NO. 1246/KOL./2015 ASSESSMENT YEAR: 2007-2008 PAGE 4 OF 5 OCCASION AND THIS POSITION CLEARLY EVIDENT FROM THE CASH BOOK OF THE ASSESSEE (COPY FILED IN THE PAPER BOOK) HAS NOT BE EN DISPUTED EITHER BY THE LD. CIT(APPEALS) IN HIS IMPUGNED ORDER OR BY TH E LD. D.R. AT THE TIME OF HEARING BEFORE ME. AS HELD BY THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS.- ASHOK IRON & STEEL ROLLING MILLS REPORTED IN 320 ITR 101 (ALL.), WHERE THE ASSESSEE HAD MADE SEVERAL PAYMENT S TO THE SAME PERSON ON THE SAME DAY, WHICH IN AGGREGATE EXCEEDED THE LI MIT SPECIFIED IN SECTION 40A(3) BUT NO SINGLE PAYMENT WAS MORE THAN SUCH SPECIFIED LIMIT, THE DISALLOWANCE UNDER SECTION 40A(3) WAS NOT JUSTI FIED. IN THE CASE OF CIT, PATIALA VS.- BAL KRISHAN JAGDISH CHAND REPORT ED IN 164 TAXMAN 459, IT WAS HELD BY THE HONBLE PUNJAB & HARYANA HIGH CO URT THAT VARIOUS CASH PAYMENTS MADE TO ONE PARTY ON ONE DAY ARE NOT TO BE CLUBBED AND TREATED AS ONE CASH PAYMENT FOR THE PURPOSE OF MAKING DISAL LOWANCE UNDER SECTION 40A(3) AND SUCH TOTAL CASH PAYMENT EXCEEDIN G PRESCRIBED LIMIT IN A DAY TO ONE PARTY CANNOT BE HELD TO BE VIOLATED OF SECTION 40A(3). IN THIS REGARD, THE LD. D.R. HAS RELIED ON THE AMENDMENT MA DE TO SECTION 40A(3) WHEREBY EVEN THE AGGREGATE OF PAYMENTS TO A SINGLE PARTY IN A SINGLE DAY EXCEEDING RS.20,000/- HAVE BEEN BROUGHT UNDER THE A MBIT OF SECTION 40A(3). HOWEVER, AS POINTED OUT BY THE LD. COUNSEL FOR THE ASSESSEE, THE SAID AMENDMENT BROUGHT OUT IN SECTION 40A(3) W.E.F. 1 ST APRIL, 2009 IS HELD TO BE APPLICABLE W.E.F. ASSESSMENT YEAR 2009-1 0 BY THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S. TIRUPATI CONSTRUCTION VS.- ITO DECIDED VIDE ITS ORDER DATED 15.10.2015 PASSED IN I TA NO. 372/KOL/2013. KEEPING IN VIEW THE SAID DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF TIRUPATI CONS TRUCTION (SUPRA) AS WELL AS THE DECISION OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF ASHOK IRON & STEEL ROLLING MILLS (SUPRA) AND THAT OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF BAL KRISHNAN JAGD ISH CHAND (SUPRA), I HOLD THAT NONE OF THE PAYMENTS IN QUESTION MADE BY THE ASSESSEE IN CASH HAVING NOT EXCEEDED THE SPECIFIED LIMIT OF RS.20,00 0/- ON A SINGLE OCCASION, THE SAME CANNOT BE DISALLOWED UNDER SECTI ON 40A(3). I, ACCORDINGLY, DELETE THE DISALLOWANCE MADE BY THE AS SESSING OFFICER UNDER I.T.A. NO. 1246/KOL./2015 ASSESSMENT YEAR: 2007-2008 PAGE 5 OF 5 SECTION 40A(3) AND CONFIRMED BY THE LD. CIT(APPEALS ) AND ALLOW THIS APPEAL OF THE ASSESSEE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON MARCH 02, 20 16. SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER KOLKATA, THE 2 ND DAY OF MARCH, 2016 COPIES TO : (1) ARAMBAGH FOREIGN LIQUOR OFF SHOP, C/O. S.N. GHOSH & ASSOCIATES, ADVOCATES, SEVEN BROTHERS LODGE, P.O. BUROSHIBTALA, P.S. CHINSURAH, DIST. HOOGHLY-712 105 (2) INCOME TAX OFFICER, WARD-2(4), HOOGHLY, AAYAKAR BHAWAN, G,T. ROAD, KHADINA MORE, P.O. & P.S. CHINSURAH, DIST. HOOGHLY-712 101 (3) COMMISSIONER OF INCOME-TAX (APPEALS)-6, KOLKAT A (4) COMMISSIONER OF INCOME TAX, KOLKATA (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.