Syed Ahmed Mohinuddin Quadri, Hyderabad V. Income Tax Officer, Hyderabad

ITA 1366/HYD/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 98391 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 23-07-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 15-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: S RAMA RAO
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 1366/HYD/2013 ASSESSMENT YEAR: 2007-08 SYED AHMED MOHINUDDIN QUADRI, HYDERABAD. PAN AAAPQ 9946R VS. INCOME TAX OFFICER, WARD 6(1), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI S. RAMA RAO REVENUE BY : SHRI RAJAT MITRA DATE OF HEARING 23-07-2015 DATE OF PRONOUNCEMENT 12-08-2015 O R D E R PER SAKTIJIT DEY, J.M.: THIS APPEAL OF ASSESSEE IS DIRECTED AGAINST THE OR DER DATED 17/12/2010 OF LD. CIT(A)-IV, HYDERABAD FOR THE AY 2 007-08. 2. THERE IS A DELAY OF 119 DAYS IN FILING THE APPEA L. ASSESSEE HAS FILED A PETITION BEING SUPPORTED BY AN AFFIDAVIT EX PLAINING THE CAUSE OF DELAY AND SEEKING CONDONATION OF THE SAME. AFTER CO NSIDERING THE SUBMISSION OF LD. AR AND BEING SATISFIED WITH THE S UFFICIENCY OF REASONS SHOWN FOR DELAY, WE ARE INCLINED TO CONDONE THE DELAY OF 119 DAYS AND ADMIT THE APPEAL FOR HEARING ON MERIT. 3. THE SOLE GRIEVANCE OF ASSESSEE IS AGAINST DISALL OWANCE OF AN AMOUNT OF RS. 12,62,400 U/S 40A(3) OF THE ACT. 2 ITA NO. 1366 /HYD/2013 SYED AHMED MOHINUDDIN QUADRI 4. BRIEFLY THE FACTS ARE, ASSESSEE AN INDIVIDUAL IS CARRYING ON BUSINESS OF SIGN BOARDS, PAINTING, ETC. THROUGH HIS PROPRIETARY CONCERN IN THE NAME AND STYLE OF WONDER SIGN ARTS CENTRE. F OR THE AY UNDER CONSIDERATION, ASSESSEE FILED HIS RETURN OF INCOME ON 31/10/07 DECLARING TOTAL INCOME OF RS. 5,10,170. AS OBSERVED BY AO, THOUGH, ASSESSEE WAS CALLED UPON TO PRODUCE HIS BOOKS OF AC COUNT, BUT, ASSESSEE WITHOUT PRODUCING THE SAME IN STEAD FILED A COPY OF COMPLAINT MADE BEFORE POLICE STATION INTIMATING THA T BOOKS OF ACCOUNT AND VOUCHERS FOR AYS 2002-03 TO 2006-07 GOT DAMAGED DUE TO RAIN. IN ABSENCE OF BOOKS OF ACCOUNT, AO CALLED UPON ASSESSE E TO PRODUCE BANK ACCOUNT STATEMENT AND DETAILS OF SUNDRY CREDIT ORS AS ON 31/03/07. ON VERIFYING THE BANK ACCOUNT STATEMENT, AO FOUND THAT ASSESSEE HAD ISSUED CHEQUES TO VARIOUS PERSONS. AS MOST OF THE PAYMENTS APPEARING IN THE BANK ACCOUNT WERE FOUND TO BE OF SUNDRY CREDITORS, ENQUIRY WAS MADE BY AO WITH THE BANK AUT HORITIES. FROM THE INFORMATION SUBMITTED BY BANK, IT WAS FOUND THA T IN MOST OF THE CASES ASSESSEE HAD ISSUED BEARER CHEQUES TO THE SUN DRY CREDITORS ON VARIOUS DATES AND THE SAME WAS PAID BY BANK IN CASH . AGGREGATE OF SUCH TRANSACTIONS WORKED OUT TO RS. 63,12,000. SINC E THE PAYMENTS IN EACH OF SUCH CASES EXCEEDED RS. 20,000 AND SINCE SU CH TRANSACTION WAS IN CASH, AO INVOKING THE PROVISIONS OF SECTION 40A(3) DISALLOWED 20% AMOUNTING TO RS. 12,62,400 OUT OF TOTAL CASH PA YMENTS OF RS. 63,12,000. BEING AGGRIEVED OF SUCH DISALLOWANCE, AS SESSEE CHALLENGED THE SAME IN APPEAL BEFORE LD. CIT(A). 5. BEFORE LD. CIT(A), ASSESSEE CONTENDED THAT CASH WITHDRAWALS WERE NOT FOR PAYMENT TO SUNDRY CREDITORS, BUT, HAVE BEEN WITHDRAWN BY HIS OWN EMPLOYEES THROUGH BEARER CHEQUES FOR MEE TING DAY TO DAY EXPENDITURE OF OUTSIDE JOB WORK, DAILY LABOUR CHARG ES AND OTHER MISCELLANEOUS EXPENSES. IN SUPPORT OF SUCH CONTENTI ON, ASSESSEE ALSO FURNISHED RECONCILIATION STATEMENT AS UNDER: I. WITHDRAWAL BY EMPLOYEES (STILL IN EMPLOYMENT) RS. 34,90,000 3 ITA NO. 1366 /HYD/2013 SYED AHMED MOHINUDDIN QUADRI II. WITHDRAWAL BY EMPLOYEES (NO LONGER EMPLOYED) R S. 15,30,000 III. PAYMENTS TO CONTRACTOR, JOB WORK ETC. RS . 12,92,000 6. LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE AND VERIFYING THE MATERIALS ON RECORD, OBSERVED THAT AD MITTEDLY ASSESSEE HAS MADE PAYMENT OF RS. 12,92,000 TO SUNDRY CREDITO RS FOR EXPENSES DEBITED TO P&L A/C, OTHER THAN BY WAY OF ACCOUNT P AYEE CHEQUE THEREBY VIOLATING PROVISIONS OF SECTION 40A(3). SHE , THEREFORE, HELD THAT DISALLOWANCE U/S 40A(3) ON SUCH PAYMENTS IS PR OPER. AS FAR AS THE BALANCE WITHDRAWALS OF RS. 50,20,000 IS CONCERN ED, LD. CIT(A) AFTER VERIFYING THE DETAILS OBSERVED THAT ASSESSEE HAS LARGE WITHDRAWALS ON ONE SINGLE DAY, WHICH CANNOT BE CONS IDERED TO BE FOR MEETING DAY TO DAY EXPENSES. LD. CIT(A) OPINED THA T AS ASSESSEE HAS FAILED TO ESTABLISH THAT THE PAYMENTS ARE COMIN G WITHIN THE EXCEPTION PROVIDED UNDER RULE 6DD, DISALLOWANCE U/S 40A(3) IS PROPER. ACCORDINGLY, LD. CIT(A) DISMISSED ASSESSEE S APPEAL. 7. LD. AR REITERATING THE SUBMISSIONS MADE BEFORE D EPARTMENTAL AUTHORITIES SUBMITTED, ASSESSEE HAS ACTUALLY ISSUED BEARER CHEQUES TO HIS OWN EMPLOYEES FOR WITHDRAWAL OF CASH FOR HIS DAY TO DAY EXPENSES OF HIS OWN BUSINESS AND NOT FOR PAYMENT TO SUNDRY CREDITORS. LD. AR REFERRING TO THE BANK STATEMENT S UBMITTED, NAMES APPEARING IN THE BANK STATEMENT ARE HIS EMPLOYEES A ND HE SUBMITTED EACH OF THE WITHDRAWAL CAN BE LINKED TO SUCH EMPLOY EES, WHICH WILL PROVE ASSESSEES CONTENTION THAT THESE WITHDRAWALS ARE NOT FOR PAYMENTS AS ENVISAGED U/S 40A(3). HE, THEREFORE, SU BMITTED, AS AO HAS NOT PROPERLY VERIFIED THE BANK ACCOUNT, ASSESSE E MAY BE GIVEN ONE MORE OPPORTUNITY TO ESTABLISH ITS CASE BEFORE A O. 8. LD. DR, ON THE OTHER HAND, SUBMITTED, AS ASSESSE E HAS FAILED TO PRODUCE HIS BOOKS OF ACCOUNT AND ANY OTHER DETAILS TO SUBSTANTIATE HIS CLAIM THAT WITHDRAWALS MADE FROM THE BANK ACCOUNT T HROUGH BEARER CHEQUES WERE NOT IN THE NATURE OF PAYMENT ENVISAGED U/S 40A(3), THERE IS NO OTHER OPTION FOR AO, BUT, TO MAKE DISAL LOWANCE U/S 40A(3). 4 ITA NO. 1366 /HYD/2013 SYED AHMED MOHINUDDIN QUADRI HOWEVER, LD. DR SUBMITTED, ASSESSEE MAY BE GIVEN O NE MORE OPPORTUNITY TO ESTABLISH HIS CASE. 9. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE MATERIALS ON RECORD. ADMITTEDLY, ASSESSEE HAS N OT PRODUCED ITS BOOKS OF ACCOUNT EITHER BEFORE AO OR BEFORE LD. CIT (A). HE IS NOT EVEN IN A POSITION TO DO SO NOW. THEREFORE, ONLY EVIDENC E ON WHICH ASSESSEE RELIES TO PROVE HIS CASE IS BANK STATEMENT . IT IS THE CONTENTION OF LD. AR BEFORE US THAT NAMES APPEARING AGAINST EACH OF THE WITHDRAWALS ARE HIS OWN EMPLOYEES AND GIVEN AN OPPORTUNITY, HE WILL PROVE THE SAME. CONSIDERING THE AFORESAID SUBM ISSIONS OF ASSESSEE, WE ARE INCLINED TO GIVE ONE MORE OPPORTUN ITY TO ASSESSEE TO PROVE HIS CASE BEFORE AO. ACCORDINGLY, WE SET AS IDE THE IMPUGNED ORDER OF LD. CIT(A) AND REMIT THE MATTER BACK TO TH E FILE OF AO FOR DECIDING AFRESH AFTER GIVING DUE OPPORTUNITY OF BEI NG HEARD TO ASSESSEE. 10. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN ON 12 TH AUGUST, 2015. SD/- SD/- (B. RAMAKOTAIAH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 12 TH AUGUST, 2015 KV 5 ITA NO. 1366 /HYD/2013 SYED AHMED MOHINUDDIN QUADRI COPY TO:- 1) SYED AHMED MOHINUDDIN QUADRI, C/O SRI S. RAMA RAO, ADVOCATE, FLAT NO. 102, SHRIYAS ELEGANCE, H. NO. 3-6-643 , ST. NO. 9, HIMAYAT NAGAR, HYDERABAD 500 029 2) ITO, WARD 6(1), HYDERABAD 3) CIT(A)-IV, HYDERABAD 4) CIT-III, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.