ITO, Kaithal V. Ramesh Chand HUF, Kaithal

ITA 1454/CHANDI/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51561 (ITAT-CHANDIGARH)
• Duration Of Justice: 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 03-11-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 28-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAI SHREE SHARMA
• Assessee Lawyers: S K MUKHI; JYOTI
• Keywords: Unexplained investment; Onus to prove
• Section: 40A(3); 133A; 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 1454/CHD/2010 ASSESSMENT YEAR: 2007-08 ITO, WARD 4, V SHRI RAMESH CHAND, HUF, KAITHAL. PROP. M/S RAM NATH RAJESH KUMAR GRAIN MARKET, KAITHAL. PAN: AAKHR-7619L & CO NO.9/CHD/2011 IN ITA NO.1454/CHD/2010 SHRI RAMESH CHAND, HUF V ITO, WARD-4, PROP. M/S RAM NATH RAJESH KUMAR, KAITHAL. GRAIN MARKET, KAITHAL. (APPELLANT) (RESPONDENT) DEPARTMENT BY: SMT. JAISHREE SHARMA ASSESSEE BY : SHRI S.K.MUKHI & MS. J YOTI DATE OF HEARING : 03.11.2011 DATE OF PRONOUNCEMENT : 14.11.2011 ORDER PER MEHAR SINGH, AM THE PRESENT APPEAL FILED BY THE REVENUE AND THE CRO SS OBJECTION FILED BY THE ASSESSEE ARE AGAINST THE ORD ER DATED 04.10.2010 PASSED BY THE LD. CIT(A) U/S 250(6) OF T HE INCOME- TAX ACT,1961 (IN SHORT 'THE ACT'). 2 2. IN THE APPEAL, THE REVENUE HAS RAISED THE FOLLOW ING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS.39,00,000/- ON ACCOUNT OF UNEXPLAINED INVESTMENT IN THE EXCESS STOCK OF WHEAT FOUND IGNORING THE FAC T THAT THE ASSESSEE HAD DECLARED VOLUNTARILY THE ADDITIONAL INCOME OF RS.39,00,000/- TO COVER-UP THE DISCREPANCIES OF THE WHEAT A/C DURING SURVEY U/S 13 3A OF THE IT ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION O F 63,000/- MADE FOR LOW WITHDRAWALS FOR HOUSEHOLD EXPENSES. 3. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD OR IS DISPOSED OF. 3. THE FACTS ARE THAT THE APPELLANT IS ENGAGED IN T HE TRADING OF BARDANA, JUTE YARN AND FOODGRAINS UNDER THE NAME AND STYLE OF M/S RAM NATH RAJESH KUMAR, KAITHAL. A SURVEY ACT ION U/S 133A OF THE INCOME-TAX ACT WAS CARRIED OUT AT THE B USINESS PREMISES OF THE APPELLANT ON 26.03.2007. THE APPEL LANT, DECLARED ADDITIONAL INCOME OF RS.39 LACS TO COVER U P THE DISCREPANCIES IN THE WHEAT ACCOUNT AND RS.1 LAKH ON ACCOUNT OF EXCESS CASH FOUND DURING SURVEY. THE APPELLANT ALSO DEPOSITED ADVANCE TAX AMOUNTING TO RS.13 LACS ON TH E ADDITIONAL INCOME DECLARED DURING THE SURVEY. HE, H OWEVER, DID NOT DISCLOSE THIS ADDITIONAL INCOME OF RS.40 LACS I N THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION I.E. A.Y . 2007-08. THE REASON THEREOF WAS STATED THAT THERE WAS NO DIS CREPANCY IN 3 THE WHEAT ACCOUNT. THE PLEA OF THE APPELLANT WAS, H OWEVER NOT FOUND TENABLE BY THE AO, IN VIEW OF THE FACT THAT T HE APPELLANT CLEARLY ADMITTED DISCREPANCIES IN THE WHEAT ACCOUNT AND EXCESS CASH OF RS. 1 LAKH AND SURRENDERED THE SAME AS HIS ADDITIONAL INCOME DURING SURVEY. 4. THE LD. 'DR' REFERRED TO PARA 2.1 OF THE APPELLA TE ORDER PASSED BY THE FIRST APPELLATE AUTHORITY WHEREIN FAC TUAL POSITION OF THE CASE HAS BEEN INDICATED. HE ALSO DREW OUR A TTENTION TO PARA 2.07 WHEREIN THE CIT(A) HAS DELETED THE IMPUGN ED ADDITION AFTER RECORDING HIS FINDING. LD. 'AR', ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE LD. CIT(A) BY REF ERRING TO THE FOLLOWING DECISIONS : I) SANJEEV KUMAR PANDHI V CIT-I, JALANDHAR (2006) 3 1 IT REP 351 (P&H) II) ITO V VIJAY KUMAR KESAR (2010) 231 CTR (CHHATTISGARH) 165 III) SATISH BUILDERS V ACIT (2009) 39 IT REPS 426 ( ITAT DELHI) 5. WE HAVE CAREFULLY PERUSED THE FACTS OF THE CASE, RIVAL SUBMISSIONS AND THE RELEVANT RECORD BROUGHT ON RECO RD. THE AO NOTED IN PARA 2.2 OF HIS ORDER THAT AN INSPECTIO N OF THE BUSINESS PREMISES OF THE APPELLANT WAS CARRIED OUT BY A TEAM OF MARKET COMMITTEE OFFICERS, KAITHAL ON 03.05.2006 WHEN UNACCOUNTED WHEAT WEIGHING 4710.71 QUINTALS WAS FOU ND AND IT WAS DETECTED THAT MARKET FEE AND HRDF WAS NOT PA ID ON THAT STOCK. IN VIEW OF THESE FACTS, THE ASSESSEE WAS ASK ED TO EXPLAIN AND TO SHOW CAUSE THAT WHY THE INVESTMENT IN EXCESS STOCK BE NOT TREATED AS UNEXPLAINED INVESTMENT. THE ASSESSEE IN ITS REPLY FILED ON 23.12.2009 BEFORE THE AO STATED THAT NO 4 UNACCOUNTED STOCK OF WHEAT WAS DETECTED BY THE MARK ET COMMITTEE OFFICERS. THERE WAS A DIFFERENCE OF OPIN ION BETWEEN THE ASSESSEE AND THE OFFICER OF THE MARKET COMMITTE E ABOUT THE LEVY OF THE MARKET FEE. THE AO, HOWEVER, INSISTED THAT UNEXPLAINED STOCK OF WHEAT WAS FOUND BY THE MARKET COMMITTEE OFFICERS DURING INSPECTION AND HENCE LEVI ED COMPOUNDING FEE AND PENALTY ETC. THE AO HELD THAT A SSESSEE WAS HAVING EXCESS STOCK OF WHEAT AMOUNTING TO RS.38 ,86,335/- WHICH WAS DETECTED BY THE MARKET COMMITTEE OFFICERS IN THEIR INSPECTION AND HENCE DECLARATION THEREOF MADE BY TH E APPELLANT WAS CORRECT AND ADDED THE SAME TO THE INC OME. THE AO MADE THE IMPUGNED ADDITION OF RS.39,00,000/- BY PLACING SOLE RELIANCE ON THE SURRENDER LETTER MADE BY THE A SSESSEE. THE ASSESSEE HAS EXPLAINED THAT THE INSPECTION COND UCTED BY THE OFFICIALS OF THE MARKET COMMITTEE HAD DIFFERENT VIEW POINT REGARDING LEVY OF MARKET FEE AND NO EXCESS STOCK OF WHEAT WAS DETECTED BY THEM. 6. LD. 'AR' DREW OUR ATTENTION TO THE SUBMISSION MA DE BY HIM BEFORE THE CIT(A) AND CONTENDED THAT A MERE SUR RENDER LETTER WHICH WAS DULY EXPLAINED LATER ON IN THE COU RSE OF APPELLATE PROCEEDINGS, CANNOT BE MADE THE FOUNDATIO N OF MAKING ADDITION WITHOUT BRINGING ANY CREDIBLE AND C OGENT EVIDENCE ON RECORD. THIS IS A SETTLED POSITION OF LAW THAT ANY ADDITION MADE BY THE AO SHOULD BE BASED ON RELEVANT AND MATERIAL EVIDENCES AND NOT ON THE BASIS OF INFERENC ES AND SURMISES. IN THE PRESENT CASE, THE AO HAS FAILED T O BRING ON RECORD ANY MATERIAL TO SUPPORT HIS CONCLUSIONS. 5 7. THE FINDINGS OF THE CIT(A) BASED ON APPRECIATION OF THE SUBMISSIONS FILED BY THE ASSESSEE BEFORE HIM ARE RE PRODUCED HEREUNDER : THE ISSUE IS CONSIDERED. TO SUMMARIZE THE FACTS, A SURVEY U/S 133A WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE APPELLANT. DURING SURVEY, ON EXAMINATION OF STOCK REGISTER OF WHEAT, IT WAS NOTE D THAT THERE WAS AN INSPECTION BY THE OFFICERS OF THE MARKET COMMITTEE AT THE BUSINESS PREMISES OF THE APPELLANT ON 3.5.2006 IN WHICH UNEXPLAINED STOCK OF WHEAT WAS CLAIMED TO BE DETECTED. THE APPELLANT, HOWEVER, CLAIMED THAT NO UNEXPLAINED STOCK OF WHEAT WAS DETECTED BUT THE ISSUE WAS THAT THE OFFICERS OF THE MARKET COMMITTEE WAS OF THE VIEW THAT THE MARKET FE E WAS LEVIABLE ON THE WHEAT PURCHASED FROM DELHI, WHEREAS IT WAS OF THE OPINION THAT NO MARKET FEE WA S LEVIABLE ON THIS WHEAT BEING THE SAME WAS PURCHASED OUT OF THE STATE. THE PLEA WAS, HOWEVER, REJECTED B Y THE MARKET COMMITTEE OFFICIALS AND THEY HELD THAT THE MARKET FEE WOULD BE LEVIABLE ON THAT WHEAT ALSO. SO , TO CLOSE THE MATTER, THE MARKET FEE AND THE PENALTY ET C. LEVIED WAS PAID. IT IS FURTHER NOTED THAT THE SAID WHEAT WAS SHOWN TO BE SOLD SUBSEQUENTLY AND PART PAYMENT OF PURCHASES WAS MADE OUT OF THE SALE PROCEEDS. THE APPELLANT HAS ALSO CLAIMED PAYMENT OF FREIGHT FOR TRANSPORT OF WHEAT FROM DELHI TO KAITHAL AND KAITHA L TO DELHI. THESE FACTS HAVE BEEN ADMITTED BY THE AO IN THE ASSESSMENT ORDER. IN VIEW OF THESE FACTS, IT IS HE LD THAT THE AO FAILED TO ESTABLISH THAT THE SAID WHEAT WAS UNEXPLAINED OR THERE WAS ANY DISCREPANCY IN THE WHE AT ACCOUNT. THE AO PLACED RELIANCE ONLY ON THE DECLARA TION OF ADDITIONAL INCOME ON THIS ACCOUNT BY THE APPELLA NT DURING SURVEY. SINCE THE APPELLANT HAS BEEN ABLE TO EXPLAIN THAT THERE WAS NO UNEXPLAINED STOCK OF WHEA T, NO ADDITION WAS CALLED FOR ON THIS ACCOUNT AND HENC E THE ADDITION MADE BY THE AO IS HEREBY DELETED. 6 8. THE CIT(A), AFTER APPRECIATION OF THE FACTUAL MA TRIX OF THE CASE AND EXPLANATION FILED BY THE ASSESSEE DELETED THE IMPUGNED ADDITION. 9. IN VIEW OF THE LEGAL AND FACTUAL DISCUSSION, WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE LD. CIT(A) AND HENCE, THE SAME ARE UPHELD. 10. THE REVENUE RAISED ANOTHER GROUND WHEREIN DELET ION OF ADDITION OF RS.60,000/- MADE ON ACCOUNT OF LOW WITH DRAWAL FOR HOUSEHOLD EXPENSES HAS BEEN CHALLENGED. THE LD. CI T(A) DELETED THE IMPUGNED ADDITION BY RECORDING HIS FIND INGS IN PARA 8.03 AT PAGE 25 OF HIS APPELLATE ORDER, WHICH IS REPRODUCED HEREUNDER : THE ISSUE IS CONSIDERED. THE AO MADE AN ADDITION OF RS.63,000/- ON ACCOUNT OF INADEQUATE HOUSEHOLD WITHDRAWALS FOR MEETING OUT VARIOUS HOUSEHOLD AND PERSONAL EXPENSES. THE APPELLANT CHALLENGED THIS ADDITION ON THE GROUND THAT ADDITION ON THIS ACCOUN T COULD ONLY BE MADE IN THE INDIVIDUAL CAPACITY AND N OT IN THE HANDS OF ASSESSEE HUF. THE PLEA OF THE APPELLANT IS TENABLE AND HENCE ADDITION MADE BY THE AO ON THIS ACCOUNT IS HEREBY DELETED. 11. HAVING CONSIDERED THE FACTUAL MATRIX OF THE CAS E, WE ARE OF THE CONSIDERED OPINION THAT NO ADDITION ON ACCOU NT OF LOW HOUSEHOLD WITHDRAWAL CAN BE MADE MERELY ON ESTIMATE BASIS WITHOUT BRINGING RELEVANT MATERIAL ON RECORD. THE AO HAS FAILED TO BRING ON RECORD ANY INTIMATION OF EXPENSE S WHICH REMAINED UNACCOUNTED ON THE PART OF THE ASSESSEE OR THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO JUSTIFY H IS CONCLUSIONS FOR MAKING ADDITION. FURTHER, THE FINDI NGS OF THE 7 CIT(A) ARE CATEGORICAL AS FAR AS MAKING ADDITION IN THE PROPER STATUS. IN VIEW OF THIS, THE ABOVE FINDINGS OF THE CIT(A) ARE UPHELD. 12. IN VIEW OF THE ABOVE DISCUSSIONS, THE APPEAL OF THE REVENUE IS DISMISSED. 13. IN CROSS OBJECTION, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. (A) THAT THE LD. CIT(A) IS NOT JUSTIFIED IN CONCURRING WITH LD. AO IN CONFIRMING ADDITION OF RS.1,00,000/- ON ACCOUNT OF CASH IN HAND WITHOUT APPRECIATING THE FACTS, CIRCUMSTANCES, EXPLANATIONS AND EVIDENCES FILED THEREOF. (B) THAT WITHOUT PREJUDICE TO ABOVE, THE APPELLANT DISPUTES THE QUANTUM OF ADDITION AS EXCESSIVE. 2. (A) THAT THE LD. CIT(A) IS NOT JUSTIFIED IN CONCURRING WITH LD. AO IN CONFIRMING THE DISALLOWANCE OF RS.6,16,150/- BY APPLYING THE PROVISIONS OF SECTION 40A(3) OF THE INCOME-TAX ACT,1961 WITHOUT APPRECIATING THE FACTS, CIRCUMSTANCES, EXPLANATIONS AND EVIDENCES FILED THEREOF. (B) THAT WITHOUT PREJUDICE TO ABOVE THE APPELLANT DISPUTES THE QUANTUM OF ADDITION AS EXCESSIVE. 3. (A) THAT THE LD. CIT(A) IS NOT JUSTIFIED IN CONCURRING WITH LD. AO IN CONFIRMING THE DISALLOWANCE OF RS.75,000/- ON ACCOUNT OF FREIGHT EXPENSES WITHOUT APPRECIATING THE FACTS, CIRCUMSTANCES, EXPLANATIONS AND EVIDENCES FILED THEREOF. 8 (B) THAT WITHOUT PREJUDICE TO ABOVE, THE APPELLANT DISPUTES THE QUANTUM OF ADDITION AS EXCESSIVE. 4. (A) THAT THE LD. CIT(A) IS NOT JUSTIFIED IN CONCURRING WITH LD. AO IN CONFIRMING THE ADDITION OF RS.19,867/- ON ACCOUNT OF INTEREST ON ADVANCE TO M/S PREET SERVICE STATION FOR THE PURCHASE OF PETROL PUMP WITHOUT APPRECIATING THE FACTS, CIRCUMSTANCES, EXPLANATIONS AND EVIDENCES FILED THEREOF. (B) THAT WITHOUT PREJUDICE TO ABOVE, THE APPELLANT DISPUTES THE QUANTUM OF ADDITION AND ALSO THE RATE OF INTEREST SO CHARGED AS EXCESSIVE. 5. (A) THAT THE LD. CIT(A) IS NOT JUSTIFIED IN PARTIALLY CONFIRMING THE DISALLOWANCE OF INTEREST BY APPLYING RATE OF INTEREST AT 15% AS AGAINST 18.25% ACTUALLY PAID ON ACCOUNT OF INTEREST ON OLD LOAN RECEIVED FROM SMT.SHAKUNTALA DEVI MOTHER OF KARTA OF HUF/APPELLANT WITHOUT APPRECIATING THE FACTS, CIRCUMSTANCES, EXPLANATIONS AND EVIDENCES FILED THEREOF. (B) THAT WITHOUT PREJUDICE TO ABOVE, THE APPELLANT DISPUTES THE PARTIAL DISALLOWANCE OF INTEREST OF RS.18,002/- SO CHARGED AS EXCESSIVE. 6. THAT THE APPELLANT CARVES LEAVE TO ADDITION, AMEND OR DELETE ANY OF THE GROUNDS OF APPEAL ON OR BEFORE THE DISPOSAL OF THE PRESENT CROSS APPEAL. 14. IN THE CROSS OBJECTION, THE FIRST GROUND AS RAI SED IN THE FORM OF GROUND NO. 1(A), THE ASSESSEE HAS CONTENDED THAT THE CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS.1,00,000/- ON ACCOUNT OF CASH IN HAND. 9 15. WE HAVE CAREFULLY PERUSED THE RELEVANT FACTS OF THE CASE, RIVAL SUBMISSIONS AND THE RELEVANT RECORD. THE AO MADE THE ADDITION OF RS.1,00,000/- FOUND AS EXCESS CASH AT T HE TIME OF SURVEY OPERATIONS. THE ASSESSEE FAILED TO FILE ANY PLAUSIBLE EXPLANATION FOR SUCH EXCESS AVAILABILITY OF CASH. THE AO MADE THE ABOVE ADDITION ACCORDINGLY AND LD. CIT(A) UPHEL D THE ADDITION. THE ASSESSEE HAS VOLUNTARILY SURRENDERED THE IMPUGNED EXCESS CASH OF RS. 1 LAC AND PAID THE TAX THEREON. NO PLAUSIBLE EXPLANATION WAS FILED BY THE ASSESSEE. HOWEVER, SUBSEQUENTLY, A CONCOCTED VERSION WAS FLOATED BY TH E ASSESSEE WHICH HAS BEEN DULY AND VALIDLY REJECTED BY THE CIT (A). THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT TH E AO HAD VALIDLY MADE THE ADDITION WHICH WAS UPHELD BY THE C IT(A). IN THIS CONTEXT, THE FINDINGS OF THE CIT(A) AS CONTAIN ED IN PARA 3.06 ARE REPRODUCED HEREUNDER: IN VIEW OF THE STATEMENT OF THE APPELLANT RECORDED DURING SURVEY, IT IS NOTED THAT CASH OF RS.1,06,400 /- WAS FOUND AS AGAINST THE CASH AS PER CASH BOOK OF RS.7913/-. THIS FACT WAS CONFRONTED TO THE APPELLAN T AND HE WAS REQUESTED TO CLARIFY THE POSITION. THE APPELLANT DECLARED EXCESS CASH OF RS.1 LAKH AS AN ADDITIONAL INCOME. THE SAME WAS, HOWEVER, NOT TAKEN IN THE RETURN OF INCOME. DURING THE ASSESSMENT PROCEEDINGS THE APPELLANT CAME OUT WITH A NEW STORY THAT THE EXCESS CASH WAS DUE TO THE ADVANCE RECEIVE D FROM ONE SHRI HARISH KUMAR AS A RESULT OF AGREEMENT OF SALE OF ITS MARUTI CAR. THE DEAL WAS NOT MATERIALIZ ED AND THE AMOUNT WAS CLAIMED TO BE RETURNED TO THAT FELLOW. THE SAID ADVANCE WAS CLAIMED TO BE RECEIVED IN THE MORNING ON THE DATE OF SURVEY. IT IS DIFFICULT TO APPRECIATE THAT WHEN THE SAID AMOUNT WAS RECEIVED I N THE MORNING OF THE DATE OF SURVEY ITSELF, THE APPEL LANT 10 SHOULD HAVE BEEN ABLE TO TELL THIS FACT DURING THE SURVEY, INSTEAD OF DECLARING THE SAME AS HIS ADDITI ONAL INCOME. APPARENTLY, THE ENTIRE STORY IS COOKED UP J UST TO WRIGGLE OUT FROM THIS POSITION, WHICH IS ALSO ENDOR SED BY THE FACT THAT THE SAID PERSON COULD NOT ESTABLIS H THE AVAILABILITY OF CASH OF RS.1 LAKH WITH HIM ON THAT DATE. THE APPELLANT HAS NOT BEEN ABLE TO REBUT THESE FACT S IN HIS SUBMISSIONS AND COUNTER COMMENTS, IN VIEW OF THESE FACTS, CASE LAW RELIED UPON BY THE APPELLANT IS OF NO HELP AND HENCE ADDITION MADE BY THE AO ON THIS ACCOUNT IS HEREBY CONFIRMED. 16. IN VIEW OF THE ABOVE DISCUSSION, GROUND NO.1 RA ISED IN THE CROSS OBJECTION STANDS DISMISSED. 17. IN GROUND NO.2 AS RAISED IN THE CROSS OBJECTION IT WAS STATED BY THE ASSESSEE THAT THE CIT(A) WAS NOT JUST IFIED IN CONFIRMING THE DISALLOWANCE OF RS.6,16,150/- U/S 40 A(3) OF THE ACT. 18. THE AO MADE AN ADDITION OF RS.6,16,150/- U/S 40 A(3) OF THE ACT AS THE PAYMENT WAS MADE IN VIOLATION OF THE SAID PROVISION. THE AO HAS REJECTED THE SPECIOUS EXPLAN ATION FILED BY THE ASSESSEE. IT WOULD BE PERTINENT TO REPRODUC E THE FINDINGS OF THE CIT(A) IN THE MATTER : 4.5 THE ISSUE IS CONSIDERED. THE APPELLANT CLAIMED TO HAVE PURCHASED WHEAT OF RS.3925680/- FROM M/S SHRI SAI BABA RICE TRADERS, NAYA BAZAAR, DELHI ON 17.4.2006. THE PAYMENT WAS CLAIMED TO BE MADE OF RS.844934/- THROUGH ACCOUNT PAYEE CHEQUE DATED 7.3.2007 OF SBOP KAITHAL. FOR REMAINING PAYMENT OF RS.3080746/- WAS EXPLAINED THAT WHEAT WAS SOLD THROUGH CONSIGNEE M/S SHRI GANESH TRADING CO., NAYA BAZAAR DELHI AND THE PARTY WAS ASKED TO PAY 11 THE SALE CONSIDERATION OF WHEAT TO M/S SHRI SAI BAB A RICE TRADERS ON THEIR BEHALF. THE AO ASKED THE ASSESSEE TO GIVE EVIDENCE THAT THE ABOVE PAYMENT WAS MADE BY ACCOUNT PAYEE CHEQUES BUT THE ASSESSEE FAILED TO FILE ANY EVIDENCE. IN ORDER TO V ERIFY THE CLAIM OF PAYMENT OF RS.844934/- THROUGH ACCOUNT PAYEE CHEQUE, A COPY OF THE SAID CHEQUE WAS OBTAINED FROM SBOP KAITHAL. IT WAS GATHERED THAT TH E SAID CHEQUE WAS CREDITED IN THE ACCOUNT OF THE PART Y MAINTAINED WITH HDFC BANK CHANDNI CHOWK DELHI. THE AO COLLECTED A COPY OF THE SAID BANK ACCOUNT FR OM THE HDFC BANK WHEREIN THE AMOUNT OF RS.844934/- WAS FOUND CREDITED BUT PAYMENT OF RS.3080746/- ALLEGEDLY MADE BY A/C PAYEE CHEQUE BY M/S SHREE GANESH TRADING OF DELHI WAS NOT FOUND CREDITED IN THAT ACCOUNT. THESE FACTS WERE CONFRONTED TO THE ASSESSEE BY THE AO PER NOTICE DATED 11.12.2009 AND IT WAS SHOW CAUSED AS TO WHY 20% OF THE ABOVE PAYMENT SHOULD NOT BE DISALLOWED U/S 40A(3) OF THE ACT. THE ASSESSEE IN HIS REPLY DATED 17.12.2009 REITERATED THE SUBMISSIONS ALREADY MADE BUT NO EVIDENCE WAS FILED IN SUPPORT OF THIS CLAIM. THE AO THEREFORE HELD THAT PAYMENT OF RS.3080746/- WAS MADE BY THE ASSESSEE OTHERWISE THAN BY ACCOUNT PAYEE CHEQUE IN VIOLATION OF PROVISIONS OF SECTION 40A(3) AND DISALLOWED 20% OF THIS PAYMENT RESULTING IN AN ADDITION OF RS.6,16,150/- ON THIS ACCOUNT. 4.6 THE APPELLANT STATED THAT THE SALE CONSIDERATIO N OF WHEAT WAS DIVERTED TO MAKE PAYMENT OF PURCHASE OF WHEAT TO AVOID THE DELAY. THE APPELLANT ALSO CLAIMED THAT IT WAS LIABLE TO PAY INTEREST TO SELLE R, IF THE PAYMENT WAS CLEARED AFTER MANY DAYS. THE APPELLANT FURTHER REFERRED TO THE PROVISO OF SECTIO N 40A(3) AND CLAIMED THAT ITS CASE IS SQUARELY COVERE D BY THE EXCEPTION LAID DOWN IN SECTION 40A(3) IN THE FORM OF CONSIDERATION OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS. THE APPELLANT ALSO STATED THAT 12 THE PAYMENTS ARE ALSO COVERED BY THE EXCEPTION LAID DOWN UNDER CLAUSE (I) OF RULE 6DD WHICH IS AS UNDER , WHERE THE PAYMENT IS MADE BY ANY PERSON TO HIS AGENT WHO IS REQUIRED TO MAKE PAYMENT IN CASH FOR GOODS OR SERVICES ON BEHALF OF SUCH PERSON. 4.7 THE SUBMISSIONS OF THE APPELLANT ARE ITSELF CONTRADICTORY. ON ONE HAND IT IS CLAIMED THAT THE ENTIRE PAYMENT OF PURCHASE OF WHEAT WAS MADE THROUGH ACCOUNT PAYEE CHEQUES BUT ON THE OTHER, CLAIMED THAT PAYMENT MADE ARE COVERED BY THE EXCEPTION LAID DOWN UNDER CLAUSE (I) OF RULE 6DD. A S DISCUSSED ABOVE THAT DURING ASSESSMENT PROCEEDINGS, THE AO ASKED THE APPELLANT TO ESTABLISH THAT THE PAYMENT FOR PURCHASE OF WHEAT WAS MADE THROUGH ACCOUNT PAYEE CHEQUES. INSPITE OF THE SPECIFIC QUER RY OF THE AO, NO EVIDENCE WAS BROUGHT ON RECORD IN SUPPORT OF ITS CLAIM THAT THE PAYMENT WAS MADE THROUGH ACCOUNT PAYEE CHEQUES. THE AO GOT THE COPY OF THE BANK STATEMENT OF THE BANK ACCOUNT OF THE SELLER WHEREIN THE AMOUNT OF RS.844934/- WAS FOUND CREDITED BUT NOT THE REMAINING AMOUNT OF RS.3080746/-. THE APPELLANT FILED A COPY OF ITS ACCOUNTS IN THE BOOKS OF THE SAID SELLER AND PURCHA SER OF WHEAT AND HENCE THERE SHOULD NOT BE ANY PROBLEM TO FILE EVIDENCE SUCH AS COPY OF BANK STATEMENT OF THE BANK ACCOUNT WHEREIN THE SAID PAYMENT WAS CREDITED OR A CERTIFICATE FROM THE BANK. 4.08 THE APPELLANT FURTHER MADE AN ATTEMPT TO CLAIM THAT PAYMENTS ARE COVERED BY THE EXCEPTION LAID DOW N IN CLAUSE (I) OF RULE 6DD. AT THE OUTSET, IT AMOUNT S TO ADMISSION THAT THE PAYMENT WAS NOT MADE THROUGH ACCOUNT PAYEE CHEQUES. FURTHER, THIS PLEA OF THE APPELLANT IS DIFFICULT TO APPRECIATE THAT HOW THE PAYMENTS MADE IN CASH IS COVERED IN EXCEPTION, CLAUSE IN VIEW OF THE FACTS OF THE CASE. THE WHEAT WAS CLAIMED TO BE PURCHASED ON 17.4.06. PAYMENT OF 13 RS.3080746/- CLAIMED TO BE MADE IN INSTALMENTS FROM 3.10.06 TO 11.12.06, REFER PARA 5 OF THE ASSESSMENT ORDER AND BALANCE PAYMENT OF RS.844934/- WAS MADE BY CHEQUE DATED 7.3.07 THUS THERE CANNOT BE SAID TO BE ANY URGENCY OR ANY BUSINESS EXPEDIENCY JUSTIFYIN G THE PAYMENT MADE IN CASH AND HENCE THE SAME AS SUCH DOES NOT COVER IN EXCEPTION CLAUSE (I) OF THE RULE 6DD AS IS CLAIMED BY THE APPELLANT. OTHERWISE ALSO AN INTERPRETATION WHICH MAKES THE PROVISIONS OF LAW REDUNDANT IS NOT PERMISSIBLE IN LAW. IN VIEW OF TH E FACTUAL AND LEGAL POSITION DISCUSSED ABOVE, THE CAS E LAW RELIED UPON BY THE APPELLANT IS OF NO HELP AND HENCE DISALLOWANCE U/S 40A(3) MADE BY THE AO IS HEREBY CONFIRMED. 19. WE HAVE CAREFULLY PERUSED THE FINDINGS OF THE C IT(A) AND FOUND THAT THE SAME ARE FOUNDED ON PROPER APPRECIAT ION OF THE RELEVANT STATUTORY PROVISIONS AND FACTS OF THE CASE . THE MODUS-OPERANDI, DEMONSTRATED BY THE ASSESSEE IN MAK ING THE PAYMENT IS NOT RELIABLE HENCE VALIDLY REJECTED BY T HE LOWER AUTHORITIES. WE DO NOT FIND ANY INFIRMITY IN THE F INDINGS OF THE CIT(A), HENCE THE SAME ARE UPHELD. 20. IN GROUND NO.3, THE ASSESSEE POINTED OUT THAT C IT(A) WAS NOT JUSTIFIED IN CONCURRING WITH THE AO IN CONFIRMI NG THE DISALLOWANCE OF RS.75,000/- ON ACCOUNT OF FREIGHT E XPENSES. THE FINDINGS OF THE LD. AO CLEARLY REVEAL THAT FREI GHT EXPENSES CLAIMED BY THE ASSESSEE WERE BOGUS. THE CIT(A), AFT ER EXAMINING THE ISSUE, UPHELD THE ADDITION OF RS.75,0 00/- MADE BY THE AO. THE FINDINGS OF THE CIT(A) ARE REPRODUC ED IN PARA 5.05 TO 5.07 OF THE ORDER, WHICH IS REPRODUCED AS U NDER: 5.05 THE ISSUE IS EXAMINED. THE APPELLANT CLAIMED THAT WHEAT WEIGHING 4710.78 QTLS. WERE PURCHASED 14 FROM DELHI AND CLAIMED TO HAVE SOLD THE SAME IN DEL HI. THE APPELLANT AS SUCH WOULD HAVE TRANSPORTED WHEAT FROM DELHI TO KAITHAL AND KAITHAL TO DELHI. GRS OF BRINGING THE WHEAT FROM DELHI TO KAITHAL WERE FOUND AND IMPOUNDED DURING SURVEY. FOR VERIFICATION OF CL AIM, A LETTER WAS SENT TO THE SAID TRANSPORT COMPANY AT THE ADDRESS MENTIONED IN THE GRS BUT THE REGISTERED LET TER WAS RECEIVED BACK WITH THE REMARK OF THE POSTAL AUTHORITY THAT THERE WAS NO SUCH NUMBER IN THE TRANSPORT CENTER. THE AO FURTHER NOTED THAT SOME OF THE GRS WERE EVEN UNSIGNED. THESE FACTS WERE CONFRONTED TO THE ASSESSEE BY THE AO PER ORDER WHEAT ENTRY DAT ED 17.12.2009 AND WAS ASKED TO EXPLAIN THE POSITION. N O REPLY, WHATSOEVER WAS FILED BY THE ASSESSEE. THE CO PY OF GRS UNDER WHICH THE WHEAT WAS DISPATCHED TO DELH I FOR SALE AND ON THE BASIS OF WHICH FREIGHT EXPENSES WAS CLAIMED, WERE NOT PRODUCED. THE AO FURTHER NOTE D IN PARA 6.3 OF HIS ORDER THAT ON VERIFICATION OF FA CTS FROM THE TRANSPORT AUTHORITY THERE WAS WIDE GAP BETWEEN THE WHEAT CLAIMED TO BE LOADED IN A TRUCK A ND THE CAPACITY OF THAT TRUCK AS PER DETAILS REPRODUCE D BELOW : TRUCK NO. INWARD WHEAT CLAIMED LOADING CAPACITY AS OUTWARD TO BE LOADED PER RTA (IN QTLS.) HR 65-1275 INWARD 268 96 HR 64-0706 OUTWARD 301 250 HR 56-0817 INWARD 260 68 HR 56-172 OUTWARD 260.45 162 HR 56 427 OUTWARD 251.30 162 HR 56 GA- OUTWARD 219.40 NUMBER NOT YET 3967 ALLOTTED 5.06 THE ASSESSEE COULD NOT EXPLAIN THE POSITION BUT SUBMITTED BEFORE THE AO THAT DESPITE ALL ODDS, IT I S NOT DISPUTED THAT THE WHEAT WAS BROUGHT AND WAS THEN SENT TO DELHI WHICH WAS NOT POSSIBLE WITHOUT PAYMEN T OF FREIGHT. IN VIEW OF THESE FACTS, THE AO MADE AN ADHOC DISALLOWANCE OF RS.75000/- OUT OF THE TOTAL C LAIM OF FREIGHT EXPENSES OF RS.253407. 15 5.07 IN THE WRITTEN SUBMISSIONS, THE APPELLANT INSTEAD OF ESTABLISHING THE GENUINENESS OF FREIGHT EXPENSES, TO ADDRESS/REBUT THE FINDINGS OF THE AO MADE IN THE ASSESSMENT ORDER WITH THE HELP OF INDEPENDENT DOCUMENTARY EVIDENCE, SUBMITTED THAT INSPITE OF THEIR REQUEST, THE AO DID NOT MAKE ANY ENQUIRIES REGARDING FREIGHT RATE FROM THE LOCAL TRANSPORTER. THE PLEA OF THE APPELLANT IS IRRELEVAN T AND IS NOT TENABLE. ONUS IS ON THE APPELLANT TO ESTABLI SH ITS CLAIM IN WHICH IT FAILED AND HENCE ADHOC DISALLOWAN CE OUT OF FREIGHT EXPENSES MADE BY THE AO IS HEREBY CONFIRMED. 21. WE HAVE CAREFULLY PERUSED THE FINDINGS OF THE A O AND THE CIT(A). THE ASSESSEE HAD MADE A CLAIM OF FREIGHT E XPENSES AND HENCE THE ONUS TO PROVE THE ADMISSIBILITY AS WELL A S GENUINENESS OF SUCH EXPENSES LIES ON THE ASSESSEE. IN THIS CASE, BY BRINGING RELEVANT MATERIAL ON RECORD, IT H AS BEEN DEMONSTRATED THAT SUCH EXPENSES WERE CLAIMED BY THE ASSESSEE WITHOUT BRINGING ANY EVIDENCE ON RECORD. CONSEQUEN TLY, UNDER SUCH PECULIAR FACT-SITUATION OF THE CASE, NO INTERF ERENCE IN THE FINDINGS OF THE CIT(A) IS CALLED FOR. HENCE, THIS G ROUND IS ALSO DISMISSED. 22. IN GROUND NO.4, THE ASSESSEE CONTENDED THAT CIT (A) ERRED IN CONFIRMING THE ADDITION OF RS.19,867/- ON ACCOUN T OF INTEREST ON ADVANCE TO M/S PREET SERVICE STATION FO R THE PURCHASE OF PETROL PUMP WITHOUT APPRECIATING THE FA CTS OF THE CASE. THE FINDINGS OF THE CIT(A) IN THE MATTER, AS CONTAINED IN PARA 6.05 ARE REPRODUCED HEREUNDER: 6.5 THE ISSUE IS EXAMINED. DURING THE ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THERE WAS A DEBIT 16 BALANCE OF RS.6 LAKH IN THE NAME OF M/S PREET SERVI CE STATION KAITHA. ON FURTHER EXAMINATION, IT WAS NOTE D THAT ADVANCE OF RS.5 LAKH WAS MADE TO THE PARTY ON 15.12.2006 AND RS.1 LAKH ON 19.1.2007 WHICH REMAINED OUTSTANDING UPTO 31.3.2007. THE ASSESSEE WAS ASKED TO STATE THE PURPOSE OF ADVANCE AND TO EXPLAIN THE REASONS FOR NOT CHARGING THE INTEREST O N THESE ADVANCES, SPECIFICALLY WHEN IT PAID INTEREST TO THE BANK AND OTHER PARTIES FROM WHOM THE LOANS WERE TAKEN. THE ASSESSEE SUBMITTED THAT THE ADVANCE WAS MADE FOR PURCHASING THE PUMP BUT DUE TO DIFFERENCES , THE DEAL WAS NOT MATURED. THE AO NOTED THAT THE ASSESSEE'S FIRM DOES NOT DEAL IN PETROL AND DIESEL AND HAS NO TRADE RELATION WITH THAT PARTY AND HENCE THE ADVANCE CANNOT BE SAID FOR BUSINESS PURPOSES OR FOR EXPEDIENCY OF BUSINESS. THE AO, THEREFORE WORKED OU T INTEREST @ 12% ON THIS ADVANCE WHICH WAS DISALLOWED OUT OF CLAIM OF INTEREST MADE BY THE ASSESSEE BEING THE SAID ADVANCE WAS NOT FOR BUSINESS PURPOSES. THE AO PLACED RELIANCE ON THE DECISION OF THE HON'BLE PUNJ AB & HARYANA HIGH COURT IN THE CASE OF CIT V ABHISHEK INDUSTRIES 286 ITR 1 (P&H). 23. THE AO NOTED THAT THERE WAS DEBIT BALANCE OF RS .6 LACS IN THE NAME OF M/S PREET SERVICE STATION, KAITHAL. IT WAS FOUND ON FURTHER EXAMINATION OF THE ISSUE THAT AN A DVANCE OF RS.5 LACS WAS MADE ON 15.12.2006 OF RS.1 LAC ON 19. 01.2007 WHICH WAS OUTSTANDING UPTO 31.3.2007. THE AO, AFTE R CONSIDERING THE EXPLANATION SUBMITTED BY THE ASSESS EE, MADE IMPUGNED ADDITION BY FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V ABHI SHEK INDUSTRIES 286 ITR 1. LD. CIT(A) UPHELD THE FINDIN GS OF THE AO. 17 24. WE HAVE CAREFULLY PERUSED THE FACTS OF THE CASE AND FOUND THAT THE ASSESSEE HAS FAILED TO JUSTIFY THE ADVANCE MADE TO THE SAID PARTY WITHOUT INTEREST, THOUGH HE WAS PAYING I NTEREST ON THE LOANS TAKEN BY HIM. THE ASSESSEE HAS ALSO FAILE D TO DEMONSTRATE ANY BUSINESS EXPEDIENCY IN THE MATTER. THUS, HAVING REGARD TO THE FACT-SITUATION OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT THERE IS NO GROUND FOR MAKI NG ANY INTERFERENCE IN THE FINDINGS OF THE LD. CIT(A) AND THE SAME ARE UPHELD. 25. IN GROUND NO.5, THE ASSESSEE CONTENDED THAT CIT (A) IS NOT JUSTIFIED IN PARTIALLY CONFIRMING DISALLOWANCE OF INTEREST BY APPLYING RATE OF INTEREST AT 15% AS AGAINST 18.25% ACTUALLY PAID ON ACCOUNT OF INTEREST ON OLD LOAN RECEIVED FR OM SMT.SHAKUNTALA DEVI, MOTHER OF KARTA, HUF WITHOUT APPRECIATING THE FACTS OF THE CASE. THE FINDINGS O F THE LD. CIT(A) ARE REPRODUCED HEREUNDER : 7.05 THE ISSUE IS EXAMINED. THE APPELLANT PAID INTEREST @ 18.25% ON THE CREDIT BALANCE OF SMT.SHAKUNTALA DEVI, WHO IS THE MOTHER OF KARTA OF THE HUF AND AS SUCH IS A SPECIFIED PERSON WITHIN THE MEANING OF SECTION 40A(2)(B). SINCE THE RATE OF INT EREST WAS HIGHER THAN THE PREVALENT MARKET RATE OF INTERE ST, THE AO PROPOSED TO DISALLOW THE EXCESS INTEREST PAI D. THE ASSESSEE SUBMITTED THAT THE LOAN WAS TAKEN ON LONG TERM BASIS WITHOUT GIVING ANY SECURITY. THE PL EA OF THE ASSESSEE WAS REJECTED BY THE AO SINCE LOAN WAS AVAILABLE IN THE MARKET AT LOWER RATE I.E. 15% AND DISALLOWED THE INTEREST PAID IN EXCESS OF THIS RATE OF INTEREST. IN THE WRITTEN SUBMISSIONS THE APPELLANT SUBMITTED THAT THE PREVALENT MARKET RATE OF INTERES T WAS 19.8% IN THE RELEVANT YEAR BUT WITHOUT BRINGING 18 ANY EVIDENCE IN SUPPORT OF THIS CLAIM ON RECORD. TH E PLEA OF THE APPELLANT IS, THEREFORE, NOT TENABLE. DISALLOWANCE OUT OF INTEREST MADE BY THE AO IS, THEREFORE CONFIRMED. 26. A PERUSAL OF THE FACTS OF THE CASE, IT IS EVIDE NT THAT THE AO DISALLOWED THE IMPUGNED INTEREST WITHIN THE MEAN ING OF SECTION 40A(2)(B) OF THE ACT. THE AO CONSIDERED TH E RATE OF INTEREST AS HIGHER IN COMPARISON TO PREVAILING MARK ET RATE OF INTEREST AT THAT TIME. THE ASSESSEE FAILED TO FILE ANY PLAUSIBLE EXPLANATION BEFORE THE AO AS WELL AS BEFORE THE CIT (A). IN VIEW OF THIS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) AND HENCE, THE SAME ARE UPHELD. 27. IN THE RESULT, THE APPEAL OF THE REVENUE AS WEL L AS CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH NOV. 2011. SD/- SD/- (H.L.KARWA) (MEHAR SINGH) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 14 TH NOV.,2011. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT ,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH