Govind Deorao Patil, Nanded V. Income tax Officer,

ITA 127/PUN/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2517 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 08-05-2018
• Assessment Year: 2009-2010
• Appeal Filed On: 19-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: HARI KRISHAN
• Keywords: Opportunity of being heard
• Section: 69C; 40A(3); 143(3); 131

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI , AM . / ITA NO. 1 27 /P U N/201 7 / ASSESSMENT YEAR : 20 09 - 10 SHRI GOVIND DEORAO PATIL, PROPRIETOR PATIL TRANSPORT COMPANY, MAIN ROAD BHOKAR, DIST. NANDED. . / APPELLANT PAN: AOAPP6793D VS. THE INCOME TAX OFFICER, WARD - 4, NANDED . / RESPONDENT / APPELLANT BY : S HRI HARIKRISHAN / RESPONDENT BY : SHRI YOGESH KAMAT / DATE OF HEARING : 1 4 . 0 8 .201 8 / DATE OF PRONOUNCEMEN T: 23 . 0 8 .201 8 / ORDER PER SUSHMA CHOWLA, J M : THE APPEAL FILED BY ASSESSEE IS AGAINST ORDER OF CIT (A) - 1 , AURANGABAD , DATED 2 7 . 1 0 .201 6 RELATING TO ASSESSMENT YEAR 2009 - 10 AGAINST ORDER PASSED UNDER SECTION 143(3) R.W.S. 263 OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - ITA NO. 1 27 /P U N/201 7 SHRI GOVIND DEORAO PATIL 2 THE FOLLOWING GROUNDS OF APPEAL ARE TAKEN INDEPENDENTLY AND WITHOUT PREJUDICE TO ONE ANOTHER. 1 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF RS.31,57,523/ - MADE BY THE ASSESSING OFFICER. 2 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN MAINTAINING THE DISALLOWANCE OF RS.31,57,523/ - MADE BY TH E ASSESSING OFFICER U/S 40A(3) OF THE INCOME TAX ACT BY OBSERVING THAT 'THE ADDITION OF RS.31,57,523/ - MADE BY THE ASSESSING OFFICER IS CONFIRMED U/S 69C OF THE INCOME TAX ACT', THE LEARNED C1T(A) HAS FAILED TO GIVE ANY SHOW CAUSE NOTICE TO THE ASSESSEE I NDICATING HIS INTENTION TO MAINTAIN THE DISALLOWANCE, BY RESORTING TO PROVISIONS OF SECTION 69C OF THE INCOME TAX ACT, WHEREAS THE ASSESSING OFFICER HAS MADE THE DISALLOWANCE U/S 40A(3) OF THE ACT. 3 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN NOT APPRECIATING THAT THE ASSESSING OFFICER HAS MADE THE DISALLOWANCE OF RS.31,57,523/ - BY RELYING UPON THE STATEMENTS, OF THE TRUCK OPERATORS NAMELY SHRI MOHD. SHAHABUDDIN KHWAJA, SHRI MARUTI R. BILLEWAD, SMT. JYOTSNA S. POKALWAR, SHRI SHRIRAM N. POKALWAR AND SHRI DIGAMBER R. FEDEWAD, RECORDED U/S 131 OF THE INCOME TAX ACT WITHOUT CONFRONTING THE SAID STATEMENTS TO THE ASSESSEE AND WITHOUT GRANTING AN OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE THESE TRUCK OPERATORS. THE ASSESSMENT ORDER THEREFORE IS A NULLITY. 3. THE PRESENT APPEAL HAS BEEN FILED AFTER DELAY OF THREE DAYS. THE ASSESSEE HAS FILED AN APPLICATION FOR CONDONATION OF DELAY. IN VIEW OF THE REASONS MENTIONED THEREIN, WE CONDONE THE DELAY OF THREE DAYS AND PROCEED TO DECIDE THE PRESENT APPEAL AFTER HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE. 4. THE ISSUE RAISED IN THE PRESENT APPEAL IS AGAINST THE ORDER OF CIT(A) IN MAKING DISALLOWANCE UNDER SECTION 69C OF THE ACT, WHEREIN THE ASSESSIN G OFFICER HAD MADE DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT. 5. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE IS A PROPRIETOR AND HAD MADE PAYMENTS TO TRUCK OWNERS AND IN THE ORIGINAL ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE ACT, THE ASSE SSING OFFICER HELD THE SAID PAYMENTS NOT TO BE ALLOWABLE IN THE HANDS OF ASSESSEE ON ACCOUNT OF VIOLATION OF ITA NO. 1 27 /P U N/201 7 SHRI GOVIND DEORAO PATIL 3 PROVISIONS OF SECTION 40 ( A ) (IA) OF THE ACT. AFTER ASSESSMENT ORDER WAS PASSED, THE COMMISSIONER INITIATED PROCEEDINGS UNDER SECTION 263 OF THE ACT . HE WAS OF THE VIEW THAT THE ORDER PASSED BY ASSESSING OFFICER WAS BOTH ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AS THE AFORESAID PAYMENTS TO TRUCK OWNERS WERE TO BE DISALLOWED UNDER SECTION 40A(3) OF THE ACT. THE RELEVANT FINDINGS OF THE CO MMISSIONER ARE AT PARAS 2 TO 4 OF ITS ORDER . 6. CONSEQUENT TO THE ORDER PASSED BY THE COMMISSIONER UNDER SECTION 263 OF THE ACT, THE ASSESSING OFFICER TOOK UP THE ASSESSMENT PROCEEDINGS AND PASSED ORDER UNDER SECTION 143(3) R.W.S. 263 OF THE ACT AND MADE DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT AT 31,57,523/ - . 7. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A), WHO VIDE PARA 5.1 AT PAGE 7 HOLDS THAT IN THE FACTS AND CIRCUMSTANCES OF THIS CASE, NO DISALLOWANCE IS TO BE MADE UNDER SECTION 40A(3) OF THE ACT. HOWEVER, HE FURTHER GOES ON TO SAY THAT THE ASSESSEE HAS FAILED TO EXPLAIN THE SOURCE OF SAID PAYMENT AND HENCE, THE AMOUNT IS DISALLOWABLE UNDER SECTION 69C OF THE ACT. 8. THE ASSESSEE IS IN APPEAL AGAINST AFORESAID FINDING OF THE CIT(A). 9. ON PERUSAL OF RECORD AND AFTER GOING THROUGH THE ORDER PASSED UNDER SECTION 263 OF THE ACT, WE FIND THAT THE PROCEEDINGS IN THE CASE WERE INITIATED BY THE COMMISSIONER WITH SPECIFIC DIRECTIONS TO THE ASSESSING OFFICER TO CONSIDER THE PAYMENTS TO TRUCK OWNERS AND DISALLOW THE SAME UNDER SECTION 40A(3) OF THE ACT. THE FINDINGS OF THE COMMISSIONER WERE AS UNDER: - 3 . 1 . 2 IN THE INSTANT CASE, THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE FROM THE PAYMENTS MADE TO TRUCK OWNERS I.E. SUB - CONTRACTORS, THE AO HAS DIS ALLOWED THE SAID EXPENSES U/S. 194 - C R.W.S.40(A)(IA) OF THE ACT, WHICH IS SUBJECT MATTER OF APPEAL BEFORE THE CIT(A), AURANGABAD. THE SAID DISALLOWANCE ITA NO. 1 27 /P U N/201 7 SHRI GOVIND DEORAO PATIL 4 U/S. 40A(IA) IS TECHNICAL AS WELL AS PENAL IN NATURE, WHICH ALLOWS THE PERSONS TO DEDUCT TAX AT SOURCE F ROM THE PAYMENTS MADE AT ANY TIME IN FUTURE I.E IN ANY F. Y. RELEVANT TO A. Y. AND THEN SAID EXPENDITURE IS ALLOWABLE IN THE YEAR IN WHICH TAX HAS BEEN DEDUCTED AND PAID, WHEREAS, THE PROVISIONS OF SEC. 40A(3) OF THE ACT DEALS WITH CASH PAYMENTS EXCEEDING RS.20,000/ - IN A DAY. THE SAID DISALLOWANCE CANNOT BE CLAIMED IN FUTURE ASSESSMENT YEARS. IN THE CASE OF GHOSH & CHAKRABORTY TRANSPORT VS. I TO, WARD - 2(1), ASANSOL, REPORTED IN 34 TAXMANN 35 [2013], IT HAS BEEN HELD BY HON'BLE KOLKATA TRIBUNAL THAT THE ADD ITION CANNOT BE MADE SIMULTANEOUSLY ON SAME AMOUNT BY APPLYING PROVISIONS OF SEC. 40A(3) AS WELL AS SEC. 40(A)(IA) OF THE ACT AND HAD SET - ASIDE THIS ISSUE TO THE FILE OF AO TO DECIDE AFRESH AFTER GIVING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE RATI O OF THE ABOVE CITED CASE IS SQUARELY APPLICABLE IN THE CASE OF ASSESSEE, AS THE HON'BLE TRIBUNAL HAS NOT OBJECTED FOR APPLYING BOTH THE SECTIONS SIMULTANEOUSLY, BUT TAKEN OBJECTION FOR MAKING ADDITION SIMULTANEOUSLY ON THE SAME AMOUNT BY APPLYING PROVISIO NS OF SEC.40A(3) AS WELL AS SECTION 40(A)(IA). IN THE INSTANT CASE, THE DISALLOWANCE U/S. 40A(IA) HAS BEEN DISPUTED IN APPEAL BEFORE THE CIT( APPEALS) AND THE DECISION OF CIT(A)'S IS AWAITED. SO, IF THE CIT(A) DELETES THE DISALLOWANCE U/S.40(A)(IA) MADE BY THE AO, THE ISSUE OF DISALLOWANCE U/S. 40A(3) WILL BE OPERAT I VE . HOWEVER, IF THE CIT(A) CONFIRMS THE ADDITION MADE U/S. 40(A)(IA), THIS ISSUE WILL BE NON - OPERATIVE. IN THE INTEREST OF REVENUE, IT IS ESSENTIAL TO KEEP THIS ISSUE ALIVE TO VERIFY THE VIOLATI ON BY THE ASSESSEE PROVISIONS OF SECTI O N 40 A (3) AND MAKE ADDITIONS ON PROTECTIVE BASIS, IF NECESSARY. THEREFORE, THE SUBM ISSION OF THE ASSESSEE THAT DISALLOWANCE U/S. 40A(3) WILL TANTAMOUNT TO DOUBLE TAXATION IS ACCEPTABLE TO THE EXTENT DETAILED ABOVE. N OW, THE ASSESSEE HAS PRODUCED BOOKS OF ACCOUNT BEFORE THE UNDERSIGNED BY STATING THAT NONE OF THE EXPENSES INCURRED BY HIM IN CASH IS HIT BY THE PROVISIONS OF SECTION 40A (3) THE I. T. ACT, 1961. THE AO IS DIRECTED TO VERIFY THE CASH BOOK TO ASCERTAIN THE CASH PAYMENTS FOR TRANSPORTATION EXPENSES MADE BY THE ASSESSEE IN VIOLATION OF PROVISIONS OF SEC. 40A (3) ALONG WITH DOCUMENTARY EVIDENCE. IN THIS REGARD, THE AO IS ALS O DIRECTED TO EXAMINE CONCERNED PERSONS ALONG WITH DOCUMENTARY EVIDENCE IN ORDER TO VER I FY ANY VIOLATION OF THE PROVISIONS OF SEC.40A(3) OF THE ACT, ON THE PART OF ASSESSEE WHILE MAKING PAYMENTS OF HIRE CHARGES TO THEM. IN EXERCISE OF THE POWERS CONFERRED UPON ME BY THE PROVISIONS OF SECTION 263 OF THE I.T. ACT, 1961, I AM OF THE CONSIDERED OPINION THAT IT WOULD BE FAIR AND JUST, IF THE MATTER IS RESTORED BACK TO THE A.O, FOR RECONSIDERATION OF THE ABOVE ISSUE. 10. IT IS NOT A CASE WHERE THE ISSUE WAS SET ASIDE TO THE FILE OF ASSESSING OFFICER TO COME TO A FINDING WITH REGARD TO PAYMENTS B UT A CLEAR - CUT FINDING WAS GIVEN THAT IN CASE NO DISALLOWANCE WAS UPHELD UNDER SECTION 40 ( A ) (IA) OF THE ACT WHICH WAS MADE IN THE ORIGINAL ASSESSMENT ORDER, THEN THE DISALLOWANCE IS WARRANTED UNDER SECTION 40A(3) OF THE ACT. THE COMMISSIONER HAS GIVEN SPE CIFIC DIRECTIONS ON THE ISSUE, WHICH ARE REPRODUCED BY US IN THE PARA HEREINABOVE. THE ASSESSING OFFICER WAS DIRECTED TO EXAMINE THE CONCERNED PERSONS IN ORDER TO VERIFY ANY VIOLATION OF THE PROVISIONS OF SECTION 40A(3) OF THE ACT ON THE PART OF ASSESSEE WHILE MAKING PAYME NTS FOR HIRE CHARGES TO THE CONCERN ED PERSONS. THE ASSESSING OFFICER IN LINE THEREOF, WHILE PASSING ITA NO. 1 27 /P U N/201 7 SHRI GOVIND DEORAO PATIL 5 ASSESSMENT ORDER UNDER SECTION 143(3) R.W.S. 263 OF THE ACT HAD MADE AFORESAID DISALLOWANCE UNDER SECTION 40A(3) OF THE ACT. 11. THE C IT(A) HOLDS THAT NO DISALLOWANCE IS WARRANTED UNDER SECTION 40A(3) OF THE ACT BUT HE FURTHER GOES ON TO ADD THAT SINCE THE ASSESSEE HAS FAILED TO EXPLAIN THE SOURCES OF SAID EXPENDITURE, ADDITION OF 31,57,523/ - WAS CONFIRMED UNDER SECTION 69C OF THE ACT. THE PRESENT PROCEEDINGS WERE INITIATED AGAINST THE ASSESSEE CONSEQUENT TO EXERCISE OF JURISDICTION BY THE COMMISSIONER UNDER SECTION 263 OF THE ACT. IT MAY BE PUT ON RECORD THAT EARLIER ISSUE WHETHER THERE IS ANY VIOLATION OF SECTION 40 ( A ) (IA) OF THE AC T HAS BEEN DECIDED IN FAVOUR OF ASSESSEE ; HENCE THE ASSESSING OFFICER TOOK UP PROCEEDINGS FOR DECIDING THE ISSUE OF VIOLATION OF PROVISIONS OF SECTION 40A(3) OF THE ACT AND THE SAME WAS DECIDED AGAINST THE ASSESSEE. THE CIT(A) HAS DECIDED THE SAID ISSUE I N FAVOUR OF ASSESSEE BUT THE ORDER OF CIT(A) IN MAKING DISALLOWANCE UNDER SECTION 69C OF THE ACT IS NOT WARRANTED. IN THE PRESENT CASE, SINCE THE ISSUE WAS LIMITED TO VIOLATION OF PROVISIONS OF SECTION 40A(3) OF THE ACT AND HENCE, WE FIND NO MERIT IN THE ORDER OF CIT(A). REVERSING THE SECOND PART OF FINDING OF THE CIT(A), WE ALLOW THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE. 12 . IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 23 RD DAY OF AUGUST , 201 8 . SD/ - SD/ - (ANIL CHATURVEDI) (SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 23 RD AUGUST , 201 8 . GCVSR ITA NO. 1 27 /P U N/201 7 SHRI GOVIND DEORAO PATIL 6 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) - 1 , AURANGABAD ; 4. THE PR. CIT - 1 , AURANGABAD ; 5. 6. , , , - / DR SMC , ITAT, PUNE; / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE