Smart Mobiles, Hyderabad V. Ncome Tax Officer, Ward-5(3), Hyderabad

ITA 152/Hyd/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3804 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 19-04-2021
• Assessment Year: 2014-2015
• Appeal Filed On: 22-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROHIT MUJUMDARDR
• Assessee Lawyers: NALIN SHAH
• Keywords: Principle of natural justice
• Section: 40A(3); 143(3); 201; 22

Judgement Text

ITA NO 152 OF 2018 SMART MOBILES HYDERABAD PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD (THROUGH VIDEO CONFERENCING) BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NO.152/HYD/2018 ASSESSMENT YEAR: 2014-15 SMART MOBILES HYDERABAD PAN:ABUFS7706A VS. INCOME TAX OFFICER WARD 5(3) HYDERABAD (APPELLANT) (RESPONDENT) ASSESSEE BY: SRI NALIN SHAH REVENUE BY : SRI ROHIT MUJUMDAR,DR DATE OF HEARING: 19/04/2021 DATE OF PRONOUNCEMENT: 07/06/2021 ORDER PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2014-15 AGAIN ST THE ORDER OF THE CIT (A)-4, HYDERABAD, DATED 22.12. 2017. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI RM, ENGAGED IN THE BUSINESS OF WHOLESALE AND RETAIL BUS INESS OF MOBILES, FILED ITS RETURN OF INCOME FOR THE A.Y 201 4-15 ON 21.11.2014 ADMITTING AN INCOME OF RS.1,92,190/-. DU RING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT PURSUA NT TO SELECTION OF ASSESSEES RETURN OF INCOME FOR SCRUTI NY UNDER CASS, THE ASSESSING OFFICER CALLED FOR VARIOUS DETAILS AN D THE ASSESSEE FILED ALL THE RELEVANT DETAILS. FROM THE BOOKS OF A CCOUNT OF THE ASSESSEE, THE ASSESSING OFFICER FOUND THAT THE ASSE SSEE HAS MADE CERTAIN CASH PAYMENTS TOWARDS PURCHASE OF GOODS AMO UNTING TO RS.11,78,000/- FROM WALMART INDIA (P) LTD. THE ASSE SSEE WAS ITA NO 152 OF 2018 SMART MOBILES HYDERABAD PAGE 2 OF 5 THEREFORE, ASKED AS TO WHY THE SAID EXPENDITURE INC URRED IN CASH TOWARDS PURCHASE OF GOODS WORTH RS.11,78,000/- SHOU LD NOT TO BE DISALLOWED UNDER THE PROVISIONS OF SECTION 40A(3) O F THE I.T. ACT. THE ASSESSEE SUBMITTED ITS REPLY ON 25.11.2015. HOW EVER, THE SUBMISSIONS OF THE ASSESSEE WERE NOT ACCEPTED BY TH E ASSESSING OFFICER, AND THE A.O INVOKED THE PROVISIONS OF SECT ION 40A(3) AND ACCORDINGLY DISALLOWED THE SUM OF RS.11,78,000/- AN D BROUGHT IT TO TAX. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEF ORE THE CIT (A) WHO CONFIRMED THE ORDER OF THE ASSESSING OFFICER AN D THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL BY RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE LEARNED CIT(A) IS AGAINST THE PRINCIPLE OF NATURAL JUSTICE AND BAD IN LAW. 2. THE LEARNED CIT (A) OUGHT TO HAVE ALLOWED THE CA SH PAYMENTS MADE TOWARDS PURCHASES. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN SUSTAINING THE ADDITION MADE BY THE ASSESSING OFFICER U/S 40A(3). 4. THE LEARNED CIT (A) OUGHT TO HAVE CONSIDERED THE GENUINENESS OF TRANSACTIONS BETWEEN BOTH PARTIES; PAYER AND PAYEE. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE CONSIDERED THE SUBMISSIONS MADE BY TH E ASSESSEE. 6. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F HEARING. 3. THE LEARNED COUNSEL FOR THE ASSESSEE, SRI NALIN SHAH, SUBMITTED THAT THE ASSESSEE WAS A MEMBER OF WALMART INDIA (P) LTD, WHICH IS A CASH AND CARRY WHOLESALE STORE, AND DOES NOT SELL DIRECTLY TO END USERS (I.E., BUSINESS TO CUSTOMERS) . IT IS ALSO SUBMITTED THAT WALMART INDIA (P) LTD DELIVERS THE G OODS ONLY AFTER REALIZATION OF THE CHEQUES OR DDS WHICH USUALLY TAK E 3 TO 4 WORKING DAYS. SINCE THE MOBILE MARKET IS HIGHLY FL UCTUATING AND RATES ALTER ON DAILY BASIS, 3 TO 4 DAYS FOR CHEQUE/ DD CLEARANCE ITA NO 152 OF 2018 SMART MOBILES HYDERABAD PAGE 3 OF 5 WILL BE TOO LONG A PERIOD AND BY THEN, THE BUSINESS OPPORTUNITY WILL BE LOST. THEREFORE, THE ASSESSEE HAD NO OPTIO N BUT TO BUY THE GOODS BY MAKING THE PAYMENTS EITHER BY CREDIT CARDS OR THROUGH CASH OR NET. IT WAS SUBMITTED THAT THE ASSESSEE HAS PURCHASED THE GOODS IN BULK AND MADE PAYMENTS PARTLY THROUGH CRED IT CARD OF THE PARTNER SRI KAMLESH R GANDHI AND THE BALANCE PA YMENT WAS MADE IN CASH DUE TO COMPULSION. IT WAS ALSO SUBMITT ED THAT THE ASSESSEE HAS MADE TOTAL PURCHASES OF RS.24,35,960/- FOR WHICH THE ASSESSEE HAS PAID RS.12,57,160/- BY WAY OF A MO DE OTHER THAN CASH AND RS.11.78 LAKHS WAS PAID IN CASH. IT I S ALSO SUBMITTED THAT ALL THESE CASH PURCHASES/PAYMENTS WE RE MADE ON SATURDAYS I.E., 15 TH MARCH, 22 ND MARCH AND 29 TH MARCH, 2014, AFTER BANKING HOURS. IT IS ALSO SUBMITTED THAT THE MAIN OBJECT OF SECTION 40A(3) IS TO REGULATE THE FINANCIAL TRANSAC TIONS AND TO PREVENT THE USE OF UNACCOUNTED MONEY OR REDUCE THE CHANCES OF USE OF BLACK MONEY FOR BUSINESS TRANSACTIONS. BUT I N THE CASE OF THE ASSESSEE, THE CASH PAYMENTS WERE MADE FOR GENUI NE PURCHASES FROM THE GENUINE MULTINATIONAL COMPANY. H E, THEREFORE, PRAYED THAT THE ADDITIONS MADE U/S 40A(3 ) BE DELETED. THE ASSESSEE ALSO PLACED RELIANCE UPON THE FOLLOWIN G DECISIONS IN SUPPORT OF HIS CONTENTIONS: I) THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS CHAUDHARY & CO REPORTED IN 129 CTR 010L (1996) (217 ITR 431)(ALL.). II) THE HON'BLE MADHYA PRADESH HIGH COURT (INDORE B ENCH) IN THE CASE OF CIT VS SATYAM GINNING, PRESSING & OI L MILLS REPORTED IN 130 CTR 0580. III) THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF GOENKA AGENCIES VS CIT REPORTED IN 184 CTR 0104 (2003) 263 ITR 145 (CAL.) . 4. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO DREW O UR ATTENTION TO THE LEDGER A/C OF THE WALMART INDIA (P ) LTD AND THE ITA NO 152 OF 2018 SMART MOBILES HYDERABAD PAGE 4 OF 5 INVOICES OF WALMART INDIA TO DEMONSTRATE THAT THE P URCHASES WERE MADE ON SATURDAYS AFTER BANKING HOURS. 5. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER SHOULD B E CONFIRMED. 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THERE IS NO DISPUTE THAT TH E ASSESSEE HAS MADE CERTAIN PAYMENTS EXCEEDING RS.20,000/- IN CASH AND THEREFORE, THE PROVISIONS OF SECTION 40(A)(3) WOULD GET ATTRACTED PROVIDED THE TRANSACTION FALL UNDER RULE 6DD OF IT RULES. THE EXPLANATION GIVEN BY THE ASSESSEE WAS THAT ALL THE PURCHASES WERE MADE ON SATURDAYS AND THAT TOO AFTER BANKING HOURS. THIS CONTENTION HAS NOT BEEN VERIFIED BY THE ASSESSING O FFICER. THIS CONTENTION OF THE ASSESSEE FALLS UNDER CLAUSE (J) O F RULE 6DD. THEREFORE, THE ASSESSING OFFICER IS DIRECTED TO VER IFY THE SAME DENOVO. NEEDLESS TO MENTION THAT THE ASSESSEE SHOUL D BE GIVEN A FAIR OPPORTUNITY OF HEARING. 7. IN THE RESULT, ASSESSEES APPEAL IS TREATED AS A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH JUNE, 2021. SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 7 TH JUNE, 2021. VINODAN/SPS ITA NO 152 OF 2018 SMART MOBILES HYDERABAD PAGE 5 OF 5 COPY TO: S.NO ADDRESS ES 1 SMART MOBILES C/O GOKHALE & CO. C.A, 3 - 6 - 322, 4 TH FLOOR, 403 MAHAVIR HOUSE, BASHEERBAGH, HYDERABAD 500029 2 INCOME TAX OFFICER WARD 5(3) HYDERABAD 3 CIT (A)-4, HYDERABAD 4 PR. CIT - 4, HYDERABAD 5 DR, ITAT HYDERAB AD BEN CHES 6 GUARD FILE BY ORDER