Mr. Jamir Mondal, Kolkata V. ACIT, Circle - 53, Kolkata, Kolkata

ITA 128/KOL/2012

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8110 (ITAT-KOLKATA)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2012
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 24-01-2012
• Court: TRIBUNAL
• Department Lawyers: D K RAKSHIT J
• Assessee Lawyers: M BHATTACHARJEE
• Keywords: Business expenditure; Commercial expediency
• Section: 40A(3); 143(3); 37

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE , /AND , . . !' ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI C. D. RAO, AM ] # # # # / I.T.A NO. 128/KOL/2012 $% &' $% &' $% &' $% &'/ // / ASSESSMENT YEAR: 2008-09 MR. JAMIR MONDAL VS. ASSISTANT COMMISSIONER OF INCOME-TAX, (PAN: AKPPM7382L) CIRCLE-53, KOLKATA. ()* /APPELLANT ) (+,)*/ RESPONDENT ) DATE OF HEARING: 08.10.2012 DATE OF PRONOUNCEMENT: 08.10.2012 FOR THE APPELLANT: SHRI M. BHATTACHARJEE FOR THE RESPONDENT: SHRI D. K. RAKSHIT, JCIT(DR) !- / ORDER PER MAHAVIR SINGH, JM ( , , , , ) THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-XXXIII, KOLKATA IN APPEAL NO. 122/CIT(A)-XXXIII/KOL/CIR-53/KOL/08-09 DATED 17 .11.2011. ASSESSMENT WAS FRAMED BY ACIT, CIRCLE-53, KOLKATA U/S. 143(3) OF THE INCOME- TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2008-09 VIDE HIS ORD ER DATED 10.12.2010. 2. THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE IS AG AINST THE ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE MADE BY AO U/S. 40A(3) OF THE ACT FOR CASH PAYMENT REGARDING BUSINESS PURPOSES. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NO.1: 1. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) WAS NOT JUSTIFIED TO CONFIRM THE ADDITION A SUM OF RS.9,25,000.00 U/S. 40A(3) OF THE I. T. ACT, 1961. THE REASONS ADDUCED BY HIM AGAINST SUCH ADDITION ARE VAGUE AND ARBITRARY. 3. BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF LANDS. THE AO DURING THE COUR SE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE HAS MADE PAYMENTS TO VARIOUS PARTIES I N CASH IN REGTARD TO PURCHASE OF LAND IN EXCESS OF LIMITS PRESCRIBED AS PER THE PROVISIONS O F SECTION 40A(3) OF THE ACT. IT WAS CONTENDED BEFORE THE AO BY THE ASSESSEE THAT CASH WAS PAID AS PER DEMAND AND INSISTENCE OF THE VENDOR. HOWEVER, AO BEING NOT SATISFIED, MADE THE DISALLOWA NCE U/S. 40A(3) OF THE ACT. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO CONFIR MED THE DISALLOWANCE STATED THAT IN THE GIVEN FACTS OF THE CASE THE PROVISIONS OF SECTION 4 0A(3) OF THE ACT ARE APPLICABLE AND IN THIS CASE ASSESSEE HAS INCURRED EXPENDITURE IN RESPECT O F PURCHASE TRANSACTION MADE IN CASH 2 ITA 128/K/2012 MR. JAMIR MONDAL . A.Y. 08-09 EXCEEDING RS.20,000/- OTHERWISE THAN BY ACCOUNT PAY EE CHEQUE OR ACCOUNT PAYEE BANK DRAFT. ACCORDING TO HIM, WHERE AN ASSESSEE INCURRED ANY EX PENDITURE IN RESPECT OF WHICH PAYMENT IS MADE IN CASH EXCEEDING RS.20,000/- OTHERWISE THAN B Y AN ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF SUCH EXPENDITURE IN VIEW OF THE PROVISIONS OF SECTION 40A(3) OF THE ACT EXCEPT THE EXPENDITURE AS PROVIDED UNDER RULE 6DD OF THE I. T. RULES, 1962, (HEREINAFTER REFERRED TO AS THE RULES). AS REGARDS THE FACTS OF THE CASE THERE IS NO DISPUTE, AS NOTED BY CIT(A) AND HE ALSO CONSIDERED THE APPLICABILITY OF RULE 6DD OF THE RULES IN THE PRESENT CASE AND FINALLY STATED TH AT EVEN THE CASE LAW CITED PERTAINS TO PREAMENDMENT PERIOD I.E. THE AMENDMENT OF RULE 6DD OF THE RULES. ACCORDINGLY, HE CONFIRMED THE DISALLOWANCE MADE BY AO. AGGRIEVED, NOW ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. ADMITTEDLY, THE ASSESSEES NATURE OF BUSINESS WAS T RADING IN LAND. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE PURCHASED LAND TO THE TU NE OF RS.67,49,315/- FROM DIFFERENT PARTIES. THE ASSESSEE MADE PAYMENTS PARTLY BY CHEQUE AND PAR TLY IN CASH EXCEEDING RS.20,000/- FROM THE SIX PARTIES IN TOTAL AMOUNTING TO RS.9,25,000/- (DETAILS OF THESE PARTIES ARE NARRATED IN THE ASSESSMENT ORDER). LD. COUNSEL FOR THE ASSESSEE SH RI M. BHATTACHARJEE RELIED ON THE DECISION IN THE CASE OF S. A. BUILDERS LTD. VS. CIT (2007) 288 ITR 1 (SC). WHEREIN THE EXPRESSION COMMERCIAL EXPEDIENCY IS EXPLAINED THAT IT IS AN EX PRESSION OF WIDE IMPORT AND INCLUDES SUCH EXPENDITURE AS A PRUDENT BUSINESSMAN INCURS FOR THE PURPOSE OF BUSINESS. HE STATED THAT ONCE THERE IS A BUSINESS EXPEDIENCY THE EXPENDITURE SHOU LD HAVE BEEN ALLOWED. FURTHER, LD. COUNSEL FOR THE ASSESSEE STATED THAT THERE IS EXCEPTION PRO VIDED U/S. 40A(3) OF THE ACT AND AS PER RULE 6DD OF THE RULES IT TAKES CARES ONLY BANKING FACILI TY AND NO SPECIFIC RULES REMAINS ON STATUTE BOOK AFTER DELETION OF RULE 6DD(J) OF THE RULES SO AS TO TAKE CARE OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS. HE STATED THAT THE DECISIO N OF HONBLE SUPREME COURT IN THE CASE OF S. A. BUILDERS LTD. (SUPRA) SHOULD HAVE BEEN APPLIED H ERE. HE ALSO RELIED ON THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF SMT. HA RSHILA CHORDIA VS. ITO 298 ITR 349. WHEN THIS WAS POINTED OUT TO THE LD. COUNSEL THAT T HIS DECISION PERTAINS TO PREAMENDED PERIOD OF RULE 6DD OF THE RULES AND RULE 6DD IS EXHAUSTIVE IN EXCEPTIONS AND THERE ARE VARIOUS EXCEPTIONS ENUMERATED. LD. COUNSEL COULD NOT ANSWE R WHETHER THE ASSESSEES CASE FALLS UNDER ANY OF THE EXCEPTIONS AS PROVIDED UNDER RULE 6DD OF THE RULES. WE ON CAREFUL CONSIDERATION OF ASSESSEES FACTS AND ARGUMENTS ARE OF THE VIEW T HAT (AMENDED) RULE 6DD OF THE RULES CLEARLY LAYS DOWN THE CONDITIONS OR EXCEPTIONS UNDER WHICH THE RIGOR OF THE PROVISIONS OF SECTION 40A(3) OF THE ACT MAY BE RELAXED AND THERE IS NO DI SCRETION ON EITHER OF THE PARTIES TO EXTEND THE CONDITION OR RELAX THE CONDITION AT WILL. EVEN THE EXISTENCE, DEMAND OR NECESSITY OR 3 ITA 128/K/2012 MR. JAMIR MONDAL . A.Y. 08-09 BUSINESS EXPEDIENCY DOES NOT FALL UNDER THE PROVISI ONS OF RULE 6DD OF THE RULES. HENCE, IT CANNOT BE SAID THAT THE ASSESSEE HAS IMMUNITY FROM THE PROVISIONS OF SECTION 40A(3) OF THE ACT. SO, WE ARE OF THE VIEW THAT THE LOWER AUTHORITIES H AVE RIGHTLY INVOKED THE PROVISIONS OF SECTION 40A(3) OF THE ACT AND MADE THE DISALLOWANCE. WE C ONFIRM THE SAME. THIS ISSUE OF ASSESSEES APPEAL IS DISMISSED. 5. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AS REGARDS TO DISALLOWANCE OF 50% OF BUSINESS EXPENDITURE OF RS.80,150/- UNDER THE HEAD SUBSCRIPTION & DONATIONS. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NO.2: 2. THAT THE LD. CIT(A) WAS WRONG TO CONFIRM 50% DI SALLOWANCE OF THE BUSINESS EXPENDITURE AMOUNTING TO RS.80,150.00 UNDER THE HEA D SUBSCRIPTION & DONATION TO LOCAL CLUBS AND OTHERS. THE ABOVE EXPENSES WAS INCURRED WHOLLY AND EXCLUSIVELY FOR SMOOTH RUNNING OF THE BUSINESS. 6. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSEE HAS DEBITED A SUM OF RS.1 ,60,301 UNDER THE HEAD SUBSCRIPTION & DONATIONS. THE ASSESSEE BEFORE THE LOWER AUTHORIT IES AND EVEN NOW BEFORE US CONTENDED THAT THIS PAYMENT WAS MADE KEEPING IN VIEW THE SPECIFIC NATURE OF BUSINESS OF THE ASSESSEE, WHICH INVOLVES BUYING AND SELLING OF LAND WHICH IS SCATTE RED OVER VARIOUS AREAS AND, THEREFORE, IS DIFFERENT FROM OTHER STOCK IN TRADE WHICH CAN SAFEL Y BE STORED, ACCORDING TO ASSESSEE THE SAID PAYMENT WOULD CONSTITUTE NECESSARY EXPENDITURE U/S. 37 OF THE ACT. AS THE ASSESSEE HAS MADE THIS PAYMENT TO DIFFERENT PERSONS TO SAFEGUARD ITS BUSINESS ASSETS, THE PAYMENTS ARE ALLOWABLE. WE FIND THAT THE AO HAS DISALLOWED 50% OF THIS EXPE NDITURE I.E. AT RS.80,150/- AND ALLOWED 50%. THE AO MADE DISALLOWANCE ON AD-HOC BASIS WIT HOUT ANY REASONS. CIT(A) HAS ALSO CONFIRMED THE SAME. WE FIND THAT THIS EXPENDITURE IS REQUIRED KEEPING IN VIEW THE SPECIFIC NATURE OF THE BUSINESS OF ASSESSEE AND WE ALLOW THE SAME. THIS ISSUE OF ASSESSEES APPEAL IS ALLOWED. 7. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. 8. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- . . !' , (C. D. RAO) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( ' ' ' ') )) ) DATED : 8TH OCTOBER, 2012 ./ $01 2 JD.(SR.P.S.) 4 ITA 128/K/2012 MR. JAMIR MONDAL . A.Y. 08-09 !- 3 +4 5!4&6- COPY OF THE ORDER FORWARDED TO: 1 . )* / APPELLANT MR. JAMIR MONDAL, 74, PALLY MANGAL COL ONY, THAKURPUKUR, KOLKATA-700 063. 2 +,)* / RESPONDENT ACIT, CIRCLE-53, KOLKATA 3 . -$ ( )/ THE CIT(A), KOLKATA 4. 5. -$ / CIT KOLKATA 4<= +$ / DR, KOLKATA BENCHES, KOLKATA ,4 +/ TRUE COPY, !-$>/ BY ORDER, 1 /ASSTT. REGISTRAR .