Firoz Nasir Saudagar, Pune V. Tax Recovery Officer - 3, Pune

ITA 1580/PUN/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4911 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 15-01-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 22-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Wrong claim
• Section: 40A(3)

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC , PUNE , BEFORE MS. SUSHMA CHOWLA, JM . / ITA NO. 1 580 /P U N/201 7 / ASSESS MENT YEAR : 20 1 3 - 1 4 FIROZ NAZIR SAUDAGAR 904, KASAB PETH, KAGDIPURA, WARD OFFICE ROAD, PUNE 4110 11 . / APPELLANT PAN: BXGPS6930M VS. THE TAX RECOVERY OFFICER - 3 , PUNE . / RESPONDENT / APPELLA NT BY : NONE / RESPONDENT BY : S HRI RAJESH GAWALI / DATE OF HEARING : 1 5 . 0 1 .201 9 / DATE OF PRONOUNCEMENT: 08 . 0 2 .201 9 / ORDER PER SUSHMA CHOWLA, J M : TH E APPEAL FILED BY ASSESSEE IS A GAINST THE ORDER OF CIT (A) - 4 , PUNE , DATED 27 . 0 3 .20 1 7 RELATING TO ASSESSMENT YEAR 20 1 3 - 1 4 AGAINST ORDER PASSED UNDER SECTION 14 3(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1) THE ASSESS ING OFFICER HA S IN FACT CONCLUDED, IT IS CLEAR THAT SHRI VINAYAK KALE HAS SOLD LIVE STOCK TO THE ASSESSEE MAY BE THROUGH AN INTERMEDIARY AND ALSO REC E IVED MONEY FROM HIM (POINT 13 OF ASSESSMENT ORDER) . AS THE ASSESSING OFFICER HAS NOT DISPUTED ITA NO. 1580 /P U N/20 1 7 FIROZ NAZIR SAUDAGAR 2 GENUINENESS TRANSACTION AND IDENTITY OF REC E IVER, THERE WAS NO QUESTION OF REFUTING ANY CONTENTION OF THE ASSESSING OFFICER AT THE APPELLATE STAGE AND TO SUBMIT ANY SPECIFIC EVIDENCE IN THIS REGARD. THE ASSESSING OFFICER HAS NOT CONSIDERED THE PURCHASES FROM SHRI VIN AYAK KALE AS BOGUS AND HAS MADE ADDITION FOR VIOLATION O F PROVISIONS OF SEC 40A(3) ONLY. THE PURCHASES FROM SHRI VINAYAK KALE WERE OF RS . 1104065 AND PAYMENT THROUGH THE BEARER CHEQUES WERE OF RS . 1080000. THE ASSESSING OFFICER HAS MADE ADDITION OF RS. 10800 00 AND NOT RS . 1104065 . I N VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES THE COMMISSIONER (APPEALS) IS NOT JU STIFIED IN CONFIRMING THE ADDITION OF RS . 1080000. (2) THE ASSESSEE HAS PURCHASED LIVE STOCK (BUFFALO E S) FROM WEEKLY MARKETS, TABELAS, FROM FARMERS, VI LLAGE PLACES DIRECTLY AND THROUGH AGENTS . PURC HASES WERE MADE FROM SHRI VINAYAK SURESH KALE THROUGH AGENT AND THER E FORE HE WAS NOT ABLE TO IDENTIFY THE ASSESSEE , THOUGH HE IDENTIFIES THE MIDDLEMEN WHO WAS THE AGENT OF ASSESSEE IN THE PURCHASES TRANSACTIO NS. THE PUR CHASES WERE GENUINE AND BONAFIDE. SHRI VINAYAK SURESH KALE IS IN THE TRADE OF LIVE STOCK AND HE SELLS HIS STOCK TO A LOT OF CUSTOMERS EVERY YEAR AND MANY OF THE S ALE S ARE THROUGH AGENTS. THE TRANSACTION RELATES TO F.Y. 2012 - 2013 AND HIS STATEME NT WAS RECORDED MUCH LATER F.Y.2015 - 2016. AS THE PURCHASES WERE MADE THROUGH AGENTS AND THE LONG TIME ELAPSED BETWEEN THE TRANSACTION AND THE DATE OF STATE MENT SHRI VIANYAK SURESH KALE WAS UNABLE TO IDENTIFY THE ASSESSEE THOUGH HE IDENTIFIES THE AGENT WHO WAS THE MIDDLEMEN LIVE STOCK (BUFFALO) TRADING LIKE THE OTHER AGRICULTURAL ACTIVITIES IS VERY UN - ORGANIZED SECTOR AND MANY TRANSACTION ARE DONE IN CASH. HOWEVER THE ASSESSEE HAS MADE PAYMENT THROUGH BEARER CHEQUE AND IT IS OBVIOUS THAT SHRI VINAYAK KALE H AS RECEIVED PAYMENTS FROM THE ASSESSEE BY BEARER CHEQUES AND IT IS AGAINST THE SALE. THE BEARER CHEQUE WERE ISSUED TO HIM AS A MATTER OF BUSINESS EXPEDIENCY IN THE SAME MANNER AS THE PAYMENTS WERE MADE TO OTHER 4 PERSONS VIZ. (1) SHRI IRFAN QURESH (II) GU LAM NABI RASHID QURESHI (III) SHRI SHAHNAWAZ RASHID QURESHI & (IV) SHRI MANOJ KUMAR AND HIS CASE ALSO FALLS IN THE EXCEPTIONS OF PROVISIONS OF SEC 6DD(E), 6DD(F), 6DD(G) AND 6DD(K). IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES THE COMMISSIONER (APPEALS) I S NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS.1080000. (3) FOLLOWING IS THE WORKING FOR THE PROFITABILITY RATIOS OF THE ASSESSEE FOR THE LAST THREE YEARS. WORKING FOR GROSS PROFIT AND NET PROFIT RATIOS FOR THE LAST THREE YEARS ON THE BASIS OF AUDITED FINANCIAL STATEMENTS OF FIROZ NAZIR SAUDAGAR. PARTICULARS A.Y.2011 - 2012 A.Y.2012 - 13 A.Y.2013 - 14 SALES GROSS PROFIT NET PROFIT G.P. RATIO N.P. RATIO 2.2E+07 527410 220374 2.39 1.00 19356475 595073 290347 3.07 1.50 32615334 661679 347739 2.03 1.07 ITA NO. 1580 /P U N/20 1 7 FIROZ NAZIR SAUDAGAR 3 THE ABOVE WORKING FOR GROSS PROFIT AND NET PROFIT RATIOS FOR THE ASSESSEE SHOWS A VARIATION OF HALF TO ONE PERCENT. THE GROSS PROFIT RATIO IS 1.04% LESS AND NET PROFIT RATIO 043% LESS IN THE A.Y. 2013 - 14 AS COMPARED TO A.Y. 2012 - 2013. IN VIE W OF THE ABOVE FIGURES AND RATIOS THE COMMISSIONER (APPEALS) IS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS.1080000. 3. DESPITE SERVICE OF NOTICE, NONE APPEARED ON BEHALF OF ASSESSEE NOR ANY APPLICATION WAS MOVED FOR ADJOURNMENT. HOWEVER, BECAUSE OF S MALLNESS OF THE ISSUE, APPEAL IS DECIDED EX - PARTE THE ASSESSEE AFTER HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE. 4. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL IS AGAINST DISALLOWANCE MADE UNDER SECTION 40A(3) OF THE ACT. 5. BRIEFL Y, IN THE FACTS OF THE CASE, THE ASSESSEE WAS ENGAGED IN TRADING OF BUFFALOES AND HAD MADE PURCHASES IN CASH OF 41 BUFFALOES FROM SHRI VINAYAK SURESH KALE TOTALING 11,04,065/ - . THE PAYMENTS WERE MADE THROUGH BEARER CHEQUES. FURTHER PURCHASES WERE ALSO MADE FROM SOME OTHER PARTIES . T HOUGH THE ASSESSING OFFICER DISALLOWED THE SAME BEING CASH PURCHASES UNDER SECTION 40A(3) OF THE ACT, BUT THE CIT(A) HAS RESTRICTED THE DISALLOWANCE ONLY IN RESPECT OF SHRI VINAYAK SURESH KALE. VIDE PARA 5.3.2 AT PAGE 9 OF APPELLATE ORDER, THE CIT(A) NOTES THAT THE SAID PARTY HAD APPEARED BEFORE THE ASSESSING OFFICER AND DEPOSED THAT HE DID NOT KNOW THE ASSESSEE AND THE ASSESSING OFFICER HAD ARRIVED AT THE CONCLUSION THAT THE SAID PAYMENTS IN BEARER CHEQUES MIGHT HAVE BEEN M ADE THROUGH INTERMEDIARY AND ULTIMATELY WERE RETURNED BACK TO THE ASSESSEE AND HENCE, THE CIT(A) FURTHER HOLDS THAT NO SUCH EVIDENCE WAS FILED SO AS TO ENSURE THAT THE SAID CLAIM WAS NOT A BOGUS CLAIM. THE SAID PURCHASES WERE HELD TO BE BOGUS EXPENDITURE BY THE CIT(A), AGAINST WHICH THE ASSESSEE IS IN APPEAL. ITA NO. 1580 /P U N/20 1 7 FIROZ NAZIR SAUDAGAR 4 6. FIRST OF ALL, IT MAY BE POINTED OUT THAT THE ASSESSEE IS A SMALL TRADER IN BUFFALOES I.E. HE IS DEALING IN LIVESTOCK AND HAD FURNISHED RETURN OF INCOME DECLARING TOTAL INCOME OF 3,58,320/ - . THE CASE OF ASSESSING OFFICER WAS THAT PURCHASES HAVE BEEN MADE IN CASH AND HENCE, PROVISIONS OF SECTION 40A(3) OF THE ACT WERE TO BE APPLIED. HOWEVER, RULE 6DD(E) OF THE INCOME TAX RULES, 1962 (IN SHORT THE RULES) CLEARLY LAYS DOWN THAT IN CASE PAYMENT IS MADE FOR PURCHASE OF LIVESTOCK IN CASH, THEN IT IS NOT TO BE HELD AS VIOLATION OF PROVISIONS OF SECTION 40A(3) OF THE ACT. SUCH PROPOSITION HAS BEEN APPLIED BY THE CIT(A) IN RESPECT OF PURCHASES MADE BY ASSESSEE FROM OTHER PARTIES, WHIC H WAS ALSO DISALLOWED BY THE ASSESSING OFFICER AND HE HAS DELETED THE ADDITION OF 23,50,000/ - . 7. NOW, COMING TO BALANCE EXPENDITURE OF 10,80,000/ - , CASE OF ASSESSEE WA S THAT HE HAD NOT MADE PURCHASES FROM SHRI VINAYAK KALE DIRECTLY BUT THROUGH A COMMISSION AGENT AND THE AMOUNTS WERE PAID THROUGH BEARER CHEQUES. THE AMOUNTS HAVE B EEN DEBITED TO IDBI BANK. IN SUCH CIRCUMSTANCES, PURCHASES CANNOT BE HELD TO BE BOGUS THOUGH THE STATEMENT OF SAID PERSON WAS RECORDED , BUT THE REASON FOR HOLDING IT TO BE BOGUS WA S THAT PAYMENTS IN BEAR ER CHEQUES MIGHT HAVE BEEN MADE. THE ASSESSING OFFI CER ACCEPTS THAT PAYMENTS IN BEARER CHEQUES MIGHT HAVE BEEN MADE THROUGH INTERMEDIARY BUT THEN, HE GOES ON TO HOLD THAT THE SAME WAS RETURNED BACK TO THE ASSESSEE. HOWEVER, NO SUCH EVIDENCE WAS BROUGHT ON RECORD EITHER BY THE ASSESSING OFFICER OR CIT(A) T HAT THE CASH HAS BEEN RETURNED BACK TO THE ASSESSEE. UNDER SUCH CIRCUMSTANCES, THERE IS NO MERIT IN THE ORDERS OF ITA NO. 1580 /P U N/20 1 7 FIROZ NAZIR SAUDAGAR 5 AUTHORITIES BELOW AND THE SAME ARE REVERSED AND ADDITION OF 10,80,000/ - IS THUS, DELETED. 8 . IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 8 TH DAY OF FEBR UARY , 201 9 . SD/ - (SUSHMA CHOWLA) / JUDICIAL MEMBER / PUNE ; DATED : 8 TH FEBR UARY , 201 9 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) - 4 , PUNE ; 4. THE PR. CIT - 3 , PUNE ; 5. 6. , , , - / DR SM C , ITAT, PUNE; / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE