Sh.G.K.Hotels (P) Ltd, Chandigarh V. The Income Tax Officer, Chandigarh

ITA 1406/CHANDI/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5068 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 19-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Opportunity of being heard
• Section: 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES: SMC, CHANDIGARH BEFORE MS. DIVA SINGH, JUDICIAL MEMBER ITA NO.1406/CHD/2016 (ASSESSMENT YEAR-2011-12) SH.G.K. HOTELS (P) LTD., SCO 353-356, SECTOR- 35A, CHANDIGARH. PAN-AABCG5427F ( APPELLANT) VS INCOME TAX OFFICER, WARD 4(4), CHANDIGARH (RESPONDENT) ASSESSEE BY SHRI PARIKSHIT AGGARWAL REVENUE BY SHRI MANJIT SINGH, SR.DR DATE OF HEARING 17.05.2017 DATE OF PRONOUNCEMENT 12.07.2017 ORDER THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE ASS AILING THE CORRECTNESS OF THE ORDER DATED 25.10.2016 OF CIT(APPEALS) -2, GURGAON PERTAINING TO 2011-12 ASSESSMENT YEAR ON THE FOLLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE WORTHY CIT(A) IN APPEAL NO. 581/2013-14 DATED 25.10.2016 HAS ERRE D IN PASSING THAT ORDER IN CONTRAVENTION OF THE PROVISIONS OF SECTION 250(6) O F THE INCOME TAX ACT, 1961. 2. THAT ON THE FACTS, LEGAL POSITION AND CIRCUMSTAN CES OF THE CASE, THE WORTHY CIT(A) WAS NOT JUSTIFIED IN CONFIRMING ACTION OF LD . AO, WHEREIN HE ERRONEOUSLY MADE ADDITION OF RS.19,65,053/- BY MAKING DISALLOWA NCE U/S 40A(3) OF THE ACT EVEN WHEN THE SAID DISALLOWANCE WAS NOT WARRANTED. 3. THAT THE APPELLANT CRAVES LEAVE FOR ANY ADDITION , DELETION OR AMENDMENT IN THE GROUNDS OF APPEAL ON OR BEFORE THE DISPOSAL OF THE SAME. 2. THE LD. A.R. SUBMITTED THAT GROUND NO.1 IS A GENERAL GROUND AND THE GRIEVANCE OF THE ASSESSEE IS POSED IN GROUND NO.2. REFERRING TO THE SAID GROUND, IT WAS SUBMITTED THAT THE ASSESSING OFFICER RE LYING UPON THE LEDGER ACCOUNT OF THE ASSESSEE MADE A DISALLOWANCE U/S 4 0A(3) OF THE INCOME TAX ACT, 1961 WHICH WAS SUSTAINED IN APPEAL BY TH E CIT (APPEALS) IN RESPECT OF PURCHASES OF FRESH VEGETABLE, ETC. AND MEAT FROM THREE UNIDENTIFIED PARTIES AND CAME TO THE CONCLUSION THAT THE C ASH PAYMENTS EXCEEDING RS. 20,000/- IS CONTRARY TO THE STATUTORY PROVISIONS. 2.1 REFERRING TO THE TABLE EXTRACTED IN PARA 3, PAGES 2 A ND 3 OF THE ASSESSMENT ORDER, IT WAS SUBMITTED THAT IT WOULD SHOW TH AT THE PAYMENTS TO M/S PUNJAB FRESH MEAT SHOP, M/S S.VEGETABLES AND M/ S SUKH SARB & CO. WERE MADE IN THE MONTHS OF MAY 2010 TO FEBRUARY 20 11; IN THE CASE 2 OF M/S PUNJAB FRESH MEAT SHOP APRIL, 2010 TO 21.3.2011 A ND TO M/S SUKH SARB & CO. EVERY MONTH. SIMILARLY FOR VARIOUS PURC HASES OF VEGETABLES THE PAYMENTS HAVE BEEN MADE IN THE MONTH O F APRIL, 2010 TO MARCH, 2011. IT WAS SUBMITTED THAT THE PAYMENTS REFLECTE D THERE ARE THE SUM TOTAL OF THE EARLIER MONTHS PAYMENTS. THE PAYMENT S REFLECTED IN THE CHART, IT WAS SUBMITTED ARE INFACT DAILY PAYMENT MADE FOR DAILY PURCHASES AND IN THE LEDGER ACCOUNT CONSOLIDATED AMOUNTS ARE MENT IONED. IT WAS HIS SUBMISSION THAT NO PAYMENTS AT ANY POINT OF TIME IS MA DE FOR AN AMOUNT BEYOND RS.20,000/-. ACCORDINGLY, RELYING UPON TH E DECISION OF THE HON'BLE HIGH COURT IN THE CASE OF GURDAS GARG VS. C IT IN ITA NO.413 OF 2014 DATED 16.7.2015, IT WAS SUBMITTED THAT ONCE THE I DENTITY OF THE PAYEE IS NOT IN DOUBT AND THE EVIDENCE IN SUPPORT THEREOF IS PRODUC ED AND THE GENUINENESS IS ACCEPTED, THEN THE CLAIM DESERVES TO BE ALLOWED AS THE CIRCUMSTANCES SET OUT IN RULE 6DD(J) OF THE INCOME TAX RULES, 1962 IT IS WELL ACCEPTED ARE NOT EXHAUSTIVE AND ARE MERELY ILLUSTRATIVE. 2.1 IT WAS FURTHER CLARIFIED BY THE LD. A.R. IN RESPONSE TO A QUERY THAT THE ASSESSEE HAS BEEN IN THIS LINE OF BUSINESS FOR THE LAST 10-15 YEARS AND HAS ALWAYS BEEN MAKING PURCHASES THROUGH IMPREST ACCO UNT GIVEN TO THE STORE MANAGER WHO MAINTAINS A SEPARATE CASH LEDGER FROM WHERE EVERY DAY CASH PAYMENTS ARE MADE TO THE SUPPLIERS AND AT TH E END OF EACH MONTH A CONSOLIDATED ENTRY IS POSTED IN THE RESPECTIVE A CCOUNTS. THIS FACT, IT WAS SUBMITTED, MAY BE VERIFIED IF NEED BE. ACCORDINGLY, A PRAYER FOR REMAND WAS MADE FOR VERIFICATION ON FACTS IN TERMS OF THE SETTLED PRINCIP LE. 3. THE LD. SR. DR, ON THE OTHER HAND, INVITING ATTENTION TO THE ASSESSMENT ORDER SUBMITTED THAT NO VERIFICATION OF FACTS IS NECESSARY AS THE AMOUNTS ADMITTEDLY WERE BEYOND RS.20,000/-. IT WAS FURTHER SUBMITTED THAT IT IS NOT THE CLAIM OF THE ASSESSEE THAT IT WAS THE CONDITION OF THE SELLER THAT HE BE PAID IN CASH. IT WAS ALSO SUBMITT ED THAT IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE HAS NOT INVOKED RULE 6DD(J) AND THE ADDITION HAS CORRECTLY BEEN SUSTAINED BY THE CIT (A PPEALS). SPECIFIC ATTENTION WAS INVITED TO PARA 4.2 OF THE IMPUGNED ORDER W HEREIN THE CIT(A) HAS HELD THAT THE CONTENTION OF THE ASSESSEE IS DEVOID O F MERITS BECAUSE THE BOOKS OF ACCOUNT CONTAINS SINGLE ENTRY OF CASH P AYMENT IN EXCESS OF RS.20,000/- WHICH IS VIOLATION OF SECTION 40A(3) . 4. I HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATER IAL AVAILABLE ON RECORD. IT IS SEEN THAT THE ASSESSING OFFICER IN VIEW O F THE FOLLOWING PAYMENTS MADE TO THREE PARTIES NAMELY M/S PUNJAB FRE SH MEAT SHOP, 3 M/S S.VEGETABLES AND M/S SUKH SARB & CO. HELD THAT THE PAYMENTS WERE IN EXCESS OF THE PRESCRIBED LIMITATION U/S 40A(3) ON A SINGLE DAY, HENCE THE PROVISIONS WERE HELD TO BE VIOLATED :- S.NO. NAME OF THE PARTY TO WHOM PAYMENT WAS MADE DATE OF EXPENDITURE /PAYMENT AMOUNT OF EXPENDITURE/ PAYMENT 1 M/S PUNJAB FRESH MEAT SHOP -- -- 2 -DO- 31841/- 19-05-2010 3 -DO- 47172 18-06-2010 4 -DO- 29302/- 21-07-2010 5 -DO- 49483/- 18-08-2010 6 -DO- 29032/- 22-09-2010 7 -DO- 30514/- 20-10-2010 8 -DO- 46836/- 19-11-2010 9 -DO- 36329/- 18-12-2010 10 -DO- 33822/- 19-01-2011 11 -DO- 83825/- 21-02-2011 12 M/S S VEGETABLES 35994/- 21-04-2010 13 -DO- 33094/- 19-05-2010 14 -DO- 422876/- 18-06-2010 15 -DO- 42876/- 21-07-2010 16 -DO- 62805/- 18-08-2010 17 -DO- 65089/- 22-09-2010 18 -DO- 54478/- 20-10-2010 19 -DO- 71809/- 19-11-2010 20 -DO- 66973/- 18-12-2010 21 -DO- 72266/- 19-01-2011 22 -DO- 83062/- 21-02-2011 23 -DO- 44965/- 21-03-2011 24 M/S SUKH SARB & CO. 28800/- 21-04-2010 25 -DO- 26513/- 19-05-2010 26 -DO- 29220/- 18-08-2010 27 -DO- 29204/- 21-07-2010 28 -DO- 26689/- 18-08-2010 29 -DO- 29430/- 22-09-2010 30 -DO- 27520/- 20-10-2010 31 -DO- 40741/- 19-11-2010 32 -DO- 30988/- 18-12-2010 33 -DO- 37785/- 19-01-2011 34 -DO- 35413/- 21-02-2011 35 -DO- 32761/- 21-03-2011 36 -DO- 27896/- 21-04-2010 37 -DO- 34714/- 19-05-2010 38 -DO- 38076/- 18-06-2010 39 -DO- 43645/- 21-07-2010 40 -DO- 41929/- 18-08-2010 41 -DO- 34952/- 22-09-2010 42 -DO- 36572/- 20-10-2010 43 -DO- 34101/- 19-11-2010 44 -DO- 41370/- 18-12-2010 45 -DO- 65701/- 19-01-2011 46 -DO- 61105/- 21-02-2011 47 -DO- 35485/- 21-03-2011 TOTAL 1965053/- 4.1. A PERUSAL OF THE ARGUMENTS ADVANCED BY THE ASSESSE E AS FOUND RECORDED IN PARA 2.3 SHOWS THAT THE COUNSEL ON BEHALF O F THE ASSESSEE STATED THAT PROVISIONS OF SECTION DOES NOT APPLY IN THIS C ASE AS THE EACH BILLS RAISED BY THE PARTY IS LESS THAN RS.20,000 . IT IS FURTHER SEEN THAT THE CIT 4 (APPEALS) IN PARA 4.1 HAS REPRODUCED THE ASSESSEES CONT ENTION WHICH SHOWS THAT THE ASSESSEE ARGUED THAT THE ASSESSEE IS RUNNING A HOTEL AND FOR PURCHASE OF FOOD ITEMS IMPREST ACCOUNT HAS BEEN GIVEN TO STORE MANAGER WHO IS MAINTAINING SEPARATE CASH LEDGER FROM WHERE R EGULARLY CASH PAYMENT WAS BEING MADE TO THE SUPPLIERS AND AT THE END OF EACH MONTH A CONSOLIDATED ENTRY IS POSTED IN THE RESPECTIVE ACCO UNTS, THEREFORE PROVISIONS OF SECTION 40A(3) ARE NOT APPLICABLE . ACCORDINGLY, I FIND THAT AS FAR AS M/S PUNJAB FRESH MEAT SHOP AND M/S S VEGETABLES ARE CONC ERNED, SINGLE PAYMENT PER MONTH HAS BEEN MADE WHICH IS STATED TO BE A SUM TOTAL OF THE DAILY PAYMENTS MADE BY THE STORE MANAGER AS PER IMPREST ACCOUNT FOR PURCHASE OF FRUITS, VEGETABLES AND RAW MEAT ETC. THE LD. A R HAS STATED THAT THE DOCUMENTARY EVIDENCE BY WAY OF A SEPARATE CA SH LEDGER BEING MAINTAINED IS AVAILABLE FOR VERIFICATION. ACCORDINGLY, TO THIS EXT ENT SUBJECT TO VERIFICATION, THE CLAIM APPEARS TO BE ALLOWABLE. THE ISSUE QUA THESE TWO CONCERNS IS RESTORED BACK FOR THE LIMITED PURPOSES OF VER IFICATION OF THE ABOVESTATED CLAIM. HOWEVER, AS FAR AS M/S SUKH SARB & CO . IS CONCERNED, IT IS SEEN THAT THERE ARE, IN MOST OF THE MONTHS, TWO SE PARATE PAYMENTS MADE. THUS, IT NEEDS TO BE ADDRESSED AS TO WHY TWO SE PARATE PAYMENTS ALLEGEDLY AGAIN FOR CASH PURCHASES WERE MADE MONTHLY. T HE APPEAL WAS FIXED FOR CLARIFICATION AND THE LD. AR IN CLARIFICATION HAS STATED THAT THEY MAY BE FOR MEAT, POULTRY ETC. AND FRUITS AND VEGETABLES ET C. SEPARATELY, HOWEVER, THE FACT NEEDS TO BE DEMONSTRATED AND VERIFIED. ACCORDINGLY, THE IMPUGNED ORDER IS SET ASIDE WITH THE AFORESAID DIRECTIONS B ACK TO THE FILE OF THE ASSESSING OFFICER TO VERIFY THE FACTS AND DECIDE THE IS SUE BY A SPEAKING ORDER IN ACCORDANCE WITH LAW AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH JULY, 2017. SD/- (DIVA SINGH) JUDICIAL MEMBER *RATI/POONAM* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH