ITO, Ward - 1, Raiganj, Uttar Dinajpur V. M/s. Nathmal Saraogi, Uttar Dinajpur

ITA 1332/KOL/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3169 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2013
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 12-10-2011
• Court: TRIBUNAL
• Department Lawyers: APURBA DAS SRDR
• Keywords: Bogus purchase
• Section: 40A(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI, PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER ITA NO. 1332 / KOL / 2011 ASSESSMENT YEAR :2008-09 INCOME TAX OFFICER WARD-1 RAIGANJ, KARNAJHORA, SBI BILDING, RAIGANJ, UTTAR DINAJPUR PIN. 733 130 V/S . M/S. NATHMAL SARAOGI, MOHANBATTI, P.O. RAIGANJ, UTTA DINAJPUR PIN. 733134 [ PAN NO.AACFN 6323 R ] / APPELLANT .. / RESPONDENT) /BY APPELLANT SHRI APURBA DAS, SR-DR /BY RESPONDENT NONE /DATE OF HEARING 25-06-2013 /DATE OF PRONOUNCEMENT 25-06-2013 / // / O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THIS APPEAL FILED BY REVENUE IS ARISING OUT OF ORD ER OF COMMISSIONER OF INCOME-TAX (APPEALS)-JALPAIGURI (CIT(A) FOR SH ORT) IN APPEAL NO. 07/RNG/CIT(A)/JAL/10-11DATED 14-07-2011. ASSESSMENT WAS FRAMED BY ITO, WARD-1, RAIGANJ U/S.143(3) OF THE INCOME-TAX A CT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 16-1 2-2010 FOR ASSESSMENT YEAR (AY) 2008-09. 2. AT THE TIME OF HEARING NONE APPEARED ON BEHALF O F ASSESSEE THOUGH NOTICE OF HEARING WAS ISSUED THROUGH REGISTERED POS T. THE ASSESSEE ITA NO.1332/KOL/2011 A.Y. 2008-09 ITO WD-1 RNG V. M/S. NATHMAL SARAOGI PAGE 2 NEITHER FILED ANY APPLICATION FOR ADJOURNMENT NOR A PPEARED. HENCE, WE DISPOSE OF THE APPEAL AFTER HEARING LD. SR-DR OF TH E REVENUE. 3. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGA INST THE ORDER OF CIT(A) DELETING THE DISALLOWANCE MADE BY ASSESSING OFFICER BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT. FOR THIS, REVENUE HAS RAISED FOLLOWING THREE GROUNDS:- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A), JALPAIGURI WAS JUSTIFIED IN LAW IN ALLOWING THE APPEAL OF THE ASSESSEE ON THE GROUND THAT THE AO ONLY DOUBTED THE ENTRIES RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE AND THAT HE FAILED TO ESTAB LISH THAT THE PAYMENTS WERE MADE IN CONTRAVENTION OF PROVISION OF SECTION 40A(3) OF THE ACT. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A), JALPAIGURI WAS JUSTIFIED IN DELETING THE EN TIRE ADDITION OF RS.39,55,844/- WITHOUT APPRECIATING THE FACT THAT T HE AO HA MADE THE ADDITION AFTER BEING SATISFIED THAT THE ASSESSEE HA D VIOLATED THE PROVISION OF SECTION 40A(3) OF THE I.T. ACT, 1961. 3. WHETHER THE LD. CIT(A),JALPAIGURI WAS JUSTIFIED IN IGNORING THE FACT THAT THE ASSESSEE COULD NOT OFFER PLAUSIBLE EXPLANATION FOR MAKING SUCH CASH PAYMENTS, BOTH AT THE ASSESSMENT AND THE APPELLATE SAGE. 4. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT ASSESSING O FFICER MADE THE DISALLOWANCE OF BOGUS PURCHASES BY INVOKING THE PRO VISIONS OF SECTION 40A(3) OF THE ACT. EVEN OTHERWISE, THE AO IN ITS AS SESSMENT ORDER IN PAGE-3 HAS RECORDED THE FACT THAT DURING THE FINANCIAL YEA R 2007-08 TOTAL AMOUNT OF RS.39,55,844/- ON DIFFERENT DATES HAVE BEEN SHOWN A S CREDITED IN THE NAME OF THAKURIA ENTERPRISE AND OUT OF THE PAYMENTS OF R S.32,59,894/- HAVE BEEN FOUND MADE BELOW RS.20,000/- ON ALMOST DAILY BASIS THROUGHOUT THE F.Y. THE FIRM HAD AN AVERAGE DAILY CASH BALANCE OF RS.20 LAKH AND APART FROM THIS, THE FIRM HAD MAINTAINED A C.C. ACCOUNT THROUG H WHICH HE COULD HAVE BEEN MADE THE PAYMENT. FINALLY, FOR MAKING DISALLOW ANCE AO HAS NOT MADE OUT THE CASE FOR DISALLOWANCE OF BOGUS PURCHASES BU T HAS INVOKED THE ITA NO.1332/KOL/2011 A.Y. 2008-09 ITO WD-1 RNG V. M/S. NATHMAL SARAOGI PAGE 3 PROVISIONS OF SECTION 40A(3) OF THE ACT EVEN BY STA TING THAT CASH PAYMENTS ARE BELOW OF RS.20,000/- EACH. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO DELETED THE DISALLOWANCE BY OBSE RVING AT PAGES 4 AND 5 OF HIS ORDER AS UNDER:- ORDER: I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF LD. A R AND ALSO PERUSED THE ASSESSMENT ORDER. IN THIS CASE, THE REQUISITION ISS UED U/S. 133(6) TO THE ALLEGED SUPPLIER RETURNED UNSERVED. BUT ON THAT BAS IS, THE LD. AO DID NOT CONCLUDE THAT THERE WAS NO EXISTENCE OF THE SUPPLIE R OR THE ASSESSEE DID NOT MAKE ANY PURCHASE FROM THEM. IN CASE OF A NON-E XISTENT SUPPLIER, THE AO SHOULD HAVE TREATED THE PURCHASE AS BOGUS. BUT H E DID NOT DO SO. HE HAD ONLY DOUBTED THE ENTRIES RECORDED IN THE BOOKS OF THE ASSESSEE. MAY BE, THERE WERE SOME COMPELLING FACTORS (AS EXPLAINE D BY THE AR) WHICH HAD FORCED THE ASSESSEE TO MAKE PAYMENTS IN CASH. BUT A PART FROM RAISING DOUBT ABOUT THE ENTRIES RECORDED IN THE BOOKS OF TH E ASSESSEE, THE LD. AO FAILED TO ESTABLISH THAT THE PAYMENTS WERE MADE IN CONTRAVENTION OF PROVISIONS OF SEC. 40A(3) OF THE ACT. HE COULD NOT BRING ANY MATERIAL CONTRARY TO THE RECORDS OF THE ASSESSEE. IN THE CAS E OF RAJMAHAL LAKHICHAND VS. ACIT (2002) 74 TTJ (PUNE) 429, THE ITAT HELD THAT PROVISIONS OF SEC. 40A(3) IS TO BE INVOKED ONLY WHE N THE DEPARTMENT HAS EVIDENCE WITH ITSELF THAT THE ASSESSEE HAD MADE THE PAYMENT EXCEEDING THE LIMITS PRESCRIBED. DISALLOWANCE CANNOT BE MADE MERE LY ON THE PRESUMPTION THAT THE ASSESSEE MY HAVE MADE PAYMENTS IN CASH AND THAT TOO EXCEEDING THE PRESCRIBED LIMIT. THE SIMILAR VIEW HAS BEEN TAK EN IN THE CASE OF G.G. DIAMOND INTERNATIONAL VS DCIT (2006) 104 TTJ (MUMBAI) 809. IN SAI CONSTRUCTION VS ITO (2009) 31 DTR 33, THE ITAT HELD THAT A DEEMING PROVISION, AS SEC. 40A(3), HAS TO BE STRICTLY CONST RUED, AND THE ONUS TO SHOW THAT THE NECESSARY AND REQUISITE CONDITIONS FO R THE APPLICATION OF THE SECTION SO THAT THE SAME IS ATTRACTED IN THE FACTS AND CIRCUMSTANCES OF THE GIVEN CASE, STAND MET IS ON THE REVENUE, WHICH SEEK S TO APPLY / INVOKE IT. NO DOUBT, THE PECULIAR FACTS ARE ONLY IN THE INTIMA TE KNOWLEDGE OF THE ASSESSEE, WHO FOR REASONS BEST KNOWN TO IT, OR PERH APS EVEN FOR APPARENT REASONS, CHOOSES NOT TO DIVULGE THE SAME. HOWEVER, THAT BY ITSELF WOULD NEITHER SATISFY THE MANDATE OF THE SECTION NOR ENTI TLE THE REVENUE TO PRESUME OR CONSIDER THE REQUIRED CONDITION AS HAVIN G BEEN SATISFIED OR PROVED. IN VIEW OF THE AFORESAID FACTS AND DECISIONS, THE A DDITION OF RS.39,55,844/- MADE BY THE AO CANNOT BE SUSTAINED. THE SAME IS DELETED . AGGRIEVED, NOW REVENUE CAME IN APPEAL BEFORE US. ITA NO.1332/KOL/2011 A.Y. 2008-09 ITO WD-1 RNG V. M/S. NATHMAL SARAOGI PAGE 4 5. WE FIND THAT IT IS NOT A CASE OF DISALLOWANCE U/ S.40A(3) OF THE ACT AS IS OBSERVED FROM OBSERVATION MADE BY ASSESSING OFFICER RE-PRODUCED ABOVE. WE FIND NO INFIRMITY IN THE ORDER OF CIT(A), HENCE, UPHOLD THE SAME. THIS GROUND OF REVENUES APPEAL IS DISMISSED. 4. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT. SD/- SD/- (PRAMOD.KUMAR) (MAHAVIR SI NGH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP !' #- 25/06/2013 + ,,- ,,- ,,- ,,- .- .- .- .- / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '0',1 2 / CONCERNED CIT 4. 2- / CIT (A) 5. -45 ,,,1, ,1 , / DR, ITAT, KOLKATA 6. 578 9: / GUARD FILE. BY ORDER/ , ;/< '= ,1 , +