ITO, Wd-12(3), Kolkata, Kolkata V. AAparna Agency Ltd., Kolkata

ITA 1316/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1658 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 01-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 09-06-2014
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Additional evidence; Corroborative evidences
• Section: 40A(3); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH, KOLKATA (BENCH A) BEFORE SHRI N. V. VASUDEVAN, JUDICIAL MEMBER AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER I.T.A. NO.1316/KOL/2014 ASSESSMENT YEAR 2010-11 ORDER PER M. BALAGANESH, AM THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A) XII, KOLKATA VIDE APPEAL NO. 224/XII(3)/12-13 DATED 26.03.2013. ASSESSMENT WAS FRAMED BY CIT (A), U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR AY 2010-11 VIDE HIS ORDER DATED 28.3.2014. I.T.O, WARD 12(3), KOLKATA -VS- AAPARNA AGENCY LTD. [PAN : AACCA1096K] (APPELLANT) (RESPONDENT) FOR THE APPELLANT SRI SALLONG YADEN, ADDL. CIT FOR THE RESPONDENT SRI B. K. SINGH, ADVOCATE DATE OF HEARING 01.06.2017 DATE OF PRONOUNCEMENT 02.06.2017 2 I.T.A. NO.1316/KOL/2014 ASSESSMENT YEAR 2010-11 AAPARNA AGENCY LTD. 2. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER LEARNED CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE MADE U/S 40A(3) OF THE ACT IN THE SUM OF RS.51,46,550/- IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESSEE IS A COMPANY ENGAGED IN TRADING AND ALSO ACTING AS CLEARING AND FORWARDING AGENTS. THE ASSESSEE PRODUCED THE BOOKS OF ACCOUNTS TOGETHER WITH BILLS AND VOUCHERS AND THE SAME WERE TEST CHECKED BY THE LD. A.O IN THE ASSESSMENT PROCEEDINGS. FROM THE PERUSAL OF THE SAME, THE LD. A.O CAME TO A CONCLUSION THAT ASSESSEE HAD SHOWN SALES RETURNS TO THE TUNE OF RS.5146550/- AND THE SAME WAS IN REFLECTED IN THE BOOKS OF ACCOUNTS ON A SINGLE DAY I.E ON 31.03.2010 BY THE ASSESSEE. THE LD. A.O ALSO FOUND THAT THE BREAK UP OF THE AFORESAID AMOUNT REPRESENTS CREDIT NOTES ISSUED BY THE PARTIES ON VARIOUS DATES FOR VARIOUS AMOUNTS. THESE AMOUNTS WERE TREATED BY THE LD. A.O AS PAYMENTS MADE IN CASH IN EXCESS OF RS.20,000/- IN VIOLATION OF PROVISIONS OF SECTION 40A(3) OF THE ACT AND ACCORDINGLY DISALLOWED THE SAME IN THE ASSESSMENT. THE LD. CIT(A) DELETED THE SAME ON THE GROUND THAT THE SALES RETURNS CANNOT BE CONSTRUED AS EXPENDITURE AS ULTIMATELY THE ASSESSEE HAD REDUCED THE SALES RETURNS FROM ITS TOTAL SALES. ONCE THE SAME DOES NOT TAKE THE CHARACTER OF ANY EXPENDITURE, HE HELD THAT IT IS OUTSIDE THE PURVIEW OF PROVISIONS OF SECTION 40A(3) OF THE ACT. AGGRIEVED THE REVENUE IS AN APPEAL BEFORE US ON THE FOLLOWING GROUNDS: 1. THAT IS THE FACTS AND IN LAW OF THE CASE THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.51,46,550/- MADE BY THE A.O U/S 40A(3). 4. THE LD. DR VEHEMENTLY RELIED ON THE ORDER OF THE LD. A.O. IN RESPONSE TO THIS, THE LD. AR VEHEMENTLY RELIED ON THE ORDER OF THE LD. CIT(A). 3 I.T.A. NO.1316/KOL/2014 ASSESSMENT YEAR 2010-11 AAPARNA AGENCY LTD. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE LD. CIT(A) HAD DELETED THE DISALLOWANCE BY MAKING THE FOLLOWING OBSERVATIONS: 5.1.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT ALONG WITH THE SUPPORTING EVIDENCES FURNISHED, PERUSED THE FACTS OF THE CASE INCLUDING THE OBSERVATION/FINDING OF THE AO IN THE ASSESSMENT ORDER AND THE OTHER MATERIALS BROUGHT ON RECORD. I FIND FORCE IN THE CONTENTION OF THE APPELLANT. IT IS NOTED THAT IN THE INSTANT CASE, THE APPELLANT IN ORDER TO OVOID IN PASSING MULTIPLE ENTRIES, HAD PASSED SHORT CUT ENTRIES IN RESPECT OF SALES RETURN AND THE SAID ENTRIES PASSED BY APPELLANT LEAD TO THE SAME IMPACT IN ACCOUNTS. IT IS FURTHER NOTED THAT AS PER THE PROVISION OF SEC. 40A(3), WHERE AN ASSESSEE INCURS ANY EXPENDITURE IN RESPECT OF WHICH A PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON IN O DAY, OTHERWISE THAN BY ON ACCOUNT PAYEE CHEQUE DRAWN ON O BANK OR ACCOUNT PAYEE BANK DRAFT, EXCEEDS TWENTY THOUSAND RUPEES, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF SUCH EXPENDITURE. HOWEVER, IN THE INSTANT CASE, THE APPELLANT DID NOT INCUR ANY EXPENDITURE, AS SUCH, THERE IS NO QUESTION OF VIOLATION OF THE PROVISION OF SEC. 40A(3). HERE, THE APPELLANT HAD ONLY PASSED ENTRIES ON ACCOUNT OF SALES RETURN AND THE SALES RETURN IS NOT AN ITEM OF EXPENDITURE, HENCE THE SAME IS OUTSIDE THE PURVIEW OF THE PROVISION OF SEC.40A(3). FURTHER, THE A.O HAS OBSERVED IN THE ASSESSMENT ORDER THAT ANOTHER GROUP CONCERN M/S. APARNA DISTRIBUTORS (P) LID. HAS SHOWN SOLES ADJUSTMENT O/C FIGURES UNDER THE HEAD CREDITORS FOR EXPENSES' IN ITS BALANCE- SHEET, WHICH IS CONTRARY TO THE STAND TOKEN IN THE INSTANT CASE. LN MY OPINION, EVEN ASSUMING THAT IN THE GROUP CONCERN'S CASE THE SALES ADJUSTMENT FIGURES PERTAIN TO SALES RETURN, MERELY BECAUSE A GROUP COMPANY HAS SHOWN THE SAID ITEM IN THE BALANCE-SHEET UNDER THE NOMENCLATURE OF 'CREDITORS FOR EXPENSES', THE SALES RETURN FIGURE DOES BECOME AN ITEM OF EXPENDITURE. IN MY VIEW WHAT IS TO BE SEEN IS THE SUM AND SUBSTANCE OF THE MATTER AND NOT MERELY THE NOMENCLATURE. IN THE LIGHT OF THE ABOVE DISCUSSION AND OBSERVATION, AFTER PERUSING THE ENTIRE FACTS OF THE CASE INCLUDING THE IMPUGNED ASSESSMENT ORDER AND 4 I.T.A. NO.1316/KOL/2014 ASSESSMENT YEAR 2010-11 AAPARNA AGENCY LTD. MATERIAL ON RECORD, IT IS HELD THAT THE ACTION OF THE A.O. IN MAKING THE DISALLOWANCE OF RS.51.46,550/- BY INVOKING THE PROVISIONS OF SEC. 40A(3) WAS NOT JUSTIFIED IN THE EYE OF LAW AND THUS THE DISALLOWANCE SO MADE IS DIRECTED TO BE DELETED. HENCE, THIS GROUND OF APPEAL OF THE APPELLANT IS ALLOWED. 6. WE FIND THAT THE LD. CIT(A) HAD GIVEN A CATEGORICAL FINDING THAT SALES RETURNS DOES NOT CONSTITUTE INCURRENCE OF ANY EXPENDITURE AND HENCE IT IS OUTSIDE THE PURVIEW OF PROVISIONS OF SECTION 40A(3) OF THE ACT. IT IS NOT IN DISPUTE THAT THE SUBJECT MENTIONED SUM OF RS.51,46,550 REPRESENTS ONLY SALES RETURNS. HENCE WE CONCUR WITH THE FINDINGS OF THE LD. CIT(A) THAT THE SALES RETURNS DOES NOT CONSTITUTE EXPENDITURE AND THEREBY WE HOLD THAT THE LD. A.O ERRED IN INVOKING THE PROVISIONS OF SECTION 40A(3) FOR THE SAME. ACCORDINGLY, THE GROUND NO.1 RAISED BY THE REVENUE IS DISMISSED. 7. THE SECOND GROUND RAISED BY REVENUE IS IN VIOLATION OF RULE 46A OF THE IT RULES WITHOUT AFFORDING ANY OPPORTUNITY OF BEING HEARD TO THE LD. A.O. DURING THE COURSE OF HEARING, THE LD. DR STATED THAT THE LETTER DATED 12.02.2013 WHICH HAS BEEN REPRODUCED IN THE LD. CIT(A) ORDER WAS NOT PLACED BEFORE THE LD. A.O., WHICH IN HIS OPINION CONSTITUTED ADDITIONAL EVIDENCE, FOR WHICH REMAND REPORT OUGHT TO HAVE BEEN CALLED FOR FROM THE ASSESSING OFFICER BY THE LD. CIT(A). FROM THE PERUSAL OF THE ASSESSMENT ORDER, WE FIND THAT THIS LETTER DATED 12.02.2013 HAD BEEN DULY DISCUSSED BY THE LD. A.O AND HENCE WE CONCLUDE THAT THERE IS NO ADDITIONAL EVIDENCE FILED BY THE ASSESSEE BEFORE THE LD. CIT(A) AND HENCE THERE IS NO VIOLATION OF PROVISIONS OF RULE 46A THEREON. ACCORDINGLY, WE DO NOT FIND ANY MERIT IN THE GROUND NO.2 RAISED BY THE REVENUE. 5 I.T.A. NO.1316/KOL/2014 ASSESSMENT YEAR 2010-11 AAPARNA AGENCY LTD. ACCORDINGLY, THE SAME IS DISMISSED. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 02.06.2017. SD/- SD/- [N. V. VASUDEVAN] [M. BALAGANESH] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 02.06.2017 {RS SPS} COPY OF THE ORDER FORWARDED TO: 1. APPELLANT/REVENUE I.T.O, WARD -12(3), KOLKATA. 2. ASSESSEE/RESPONDENT- AAPARNA AGENCY LTD., 82A, S.N. PANDIT STREET, KOLKATA -700 020. 3. CIT(A)- KOLKATA 4. CIT , KOLKATA 5. CIT(DR), KOLKATA BENCHES, KOLKATA TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY HEAD OF OFFICE, DDO, KOLKATA BENCHES, KOLKATA.