Tejumal Tulsiram Dadlani, L/h. Lalchand T. Dadlani, Nandurbar V. Income-tax Officer,

ITA 1662/PUN/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1076 (ITAT-PUNE)
• Duration Of Justice: 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 15-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 40A(3)

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC , PUNE , BEFORE MS. SUSHMA CHOWLA, JM . / ITA NO. 1 662 /PN/201 5 / ASSESSM ENT YEAR : 20 1 1 - 1 2 TEJUMAL TULASIRAM DADLANI L/H LALCHAND TEJUMAL, SHOP NO.3 - 4, UNDERGROUND, OPP. BUS STAND, NANDURBAR 425412 . / APPELLANT PAN: A AKPD2694R VS. THE INCOME TAX OFFICER , WARD 3 ( 4 ), DHULE . / RESPONDENT / APPELLANT BY : NONE / APPELLANT BY : NONE / RESPONDENT BY : SHRI P.L. KUREEL / DATE OF HEARING : 22 . 0 8 .201 6 / DATE OF PRONOUNCEMENT: 26 . 0 8 .201 6 / ORDER PER SUSHMA CHOWLA, J M : TH IS APPE AL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT (A) - 1 , NASHIK , DATED 06 . 1 0 .20 1 5 RELATING TO ASSESSMENT YEAR 20 1 1 - 1 2 AGAINST ORDER PASSED UNDER SECTION 1 4 3(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GR OUNDS OF APPEAL : - 1] THE ADDITION U/S 40A(3) OF THE INCOME TAX ACT, 1961 MADE AT RS.7,82,009/ - SHOULD BE DELETED FULLY AS THE ASSESSEE HAD FILED THE EVIDENCE IN SUPPORT OF THE FACT OF GENUINENESS OF THE TRANSACTIONS OF THE PURCHASES. ITA NO. 1 662 /PN/20 1 5 LATE SHRI TEJUMAL TULSIRAM DADLANI L/H SHRI LALCHAND TEJUMAL DADLANI 2 3. NOTICE FOR HEARING WAS ISSUED TO THE ASSESSEE ON 27.07.2016 TO APPEAR ON 22.08.2016. THE SAID NOTICE HAS BEEN RETURNED BACK BY THE POSTAL AUTHORITIES. THE ASSESSEE HAS NOT PROVIDED ANY ALTERNATE ADDRESS FOR COMMUNICATION AND IN THE ABSENCE OF THE SAME, THE ISSUE IN THE PRE SENT APPEAL IS ADJUDICATED AFTER HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE. 4. THE ONLY ISSUE ARISING IN THE PRESENT APPEAL IS AGAINST THE DISALLOWANCE MADE UNDER SECTION 40A(3) OF THE ACT AT RS. 7,82,009/ - . 5. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF RESELLER IN MOBILE AND ACCESSORIES UNDER THE NAME AND STYLE OF M/S. LUCKY MOBILE AT DSK COMPLEX, NANDURBAR. FOR THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD FURNISHED RETURN OF INCOME AT RS. 7,18,1 60/ - . THE CASE OF ASSESSEE WAS PICKED UP FOR SCRUTINY. THE ASSESSING OFFICER ON VERIFICATION OF TRADING ACCOUNT NOTED THAT THE ASSESSEE HAD MADE TOTAL PURCHASES OF RS.2.36 CRORES DURING THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER ON FURTHER VERI FICATION NOTED THAT THE ASSESSEE HAD MADE PURCHASES IN CASH FROM SINGLE PARTY M/S. DILIPKUMAR AND CO. TOTALING RS.7,82,009/ - . THE SAID PURCHASES WERE MADE IN THE MONTH OF APRIL, 2010 ON VARIOUS DATES AND EACH PAYMENT WAS LESS THAN RS.20,000/ - . THE ASSESS ING OFFICER INVOKED THE PROVISIONS OF SECTION 40A(3) OF THE ACT SINCE THE ASSESSEE HAD INCURRED EXPENDITURE IN RESPECT OF WHICH THE PAYMENTS OR AGGREGATE OF PAYMENTS MADE TO A PERSON IN A DAY, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON ANY BANK OR ACCOUNT PAYEE BANK DRAFT, EXCEEDING RS.20,000/ - . THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE WAS NOT ENTITLED TO THE DEDUCTION ON ACCOUNT OF SUCH EXPENDITURE. THE ASSESSEE WAS ASKED TO GIVE REASONS FOR MAKING THESE ITA NO. 1 662 /PN/20 1 5 LATE SHRI TEJUMAL TULSIRAM DADLANI L/H SHRI LALCHAND TEJUMAL DADLANI 3 PAYMENTS IN CASH. HOWEVER, NO EXPLANATION WAS FILED BY THE ASSESSEE AND CONSEQUENTLY, ADDITION TO THE EXTENT OF RS.7,82,009/ - WAS MADE. 6. BEFORE THE CIT(A), THE ASSESSEE EXPLAINED THAT BECAUSE OF CIRCU MSTANCES OF THE BUSINESS, THE GOODS HAD TO BE PURCHASED BEYOND BANKING HOURS AN D THE PAYMENTS FOR THE SAME HAD TO BE MADE IN CASH I.E. OTHERWISE THAN ACCOUNT PAYEE CHEQUE OR DEMAND DRAFT. THE ASSESSEE IN THIS REGARD SUBMITTED ITS AFFIDAVIT AND THE AFFIDAVIT OF SELLING DEALER IN WHICH IT EXPLAINED THE CIRCUMSTANCES UNDER WHICH THE CA SH PURCHASES WERE MADE. THE ASSESSEE ALSO FURNISHED THE COPIES OF PURCHASE BILLS AND ALSO THE PAN NUMBER OF SELLING DEALER. THE ASSESSEE CLAIMED THAT WHERE THE TRANSACTION ENTERED INTO WAS GENUINE ONE, LIBERAL VIEW SHOULD BE TAKEN AND NO DISALLOWANCE SHO ULD BE MADE UNDER SECTION 40A(3) OF THE ACT. THE CIT(A) REFERRED TO RULE 6DD OF INCOME TAX RULES, 1962 (THE RULES) AND OBSERVED THAT THE PAYMENTS MADE BY THE TAX RULES, 1962 (THE RULES) AND OBSERVED THAT THE PAYMENTS MADE BY THE ASSESSEE WERE NOT COVERED BY RULE 6DD OF THE RULES. FURTHER, HE HELD THAT THE ASSESSEE HAD FAI LED TO ESTABLISH THE COMPELLING CIRCUMSTANCES WHICH EXISTED FOR MAKING THE PAYMENTS IN CASH. THE CIT(A) NOTED THAT WHERE REGULAR PURCHASE OF GOODS WERE MADE FROM SAME PARTY AND ON A SINGLE DAY 3 - 4 BILLS WERE RAISED BELOW RS.20,000/ - , FOR WHICH CASH WAS PA ID AND SINCE IN NANDURBAR BANKING FACILITIES EXISTED, THERE WAS NO REQUIREMENT TO MAKE CASH PAYMENTS TO REGULAR SUPPLIER OF GOODS. THE ADDITION MADE BY THE ASSESSING OFFICER WAS THUS, UPHELD. 7. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 8. DESPITE SERVICE OF NOTICE, NONE APPEARED ON BEHALF OF ASSESSEE NOR ANY APPLICATION WAS MOVED FOR ADJOURNMENT. HOWEVER, I PROCEED TO DECIDE THE PRESENT APPEAL. THE ISSUE ARISING IN THE PRESENT APPEAL IS AGAINST INVOKING OF ITA NO. 1 662 /PN/20 1 5 LATE SHRI TEJUMAL TULSIRAM DADLANI L/H SHRI LALCHAND TEJUMAL DADLANI 4 PROVISIONS OF SECTION 40A(3) OF THE ACT. THE SAID SECTION REQUIRES ANY PERSON INCURRING ANY EXPENDITURE AND WHERE THE PAYMENT FOR SUCH EXPENDITURE OR AGGREGATE OF PAYMENTS MADE TO A PERSON IN A DAY, EXCEEDS RS.20,000/ - , THEN THE SAME SHOULD BE MADE BY WAY OF ACCOUNT PAYEE CHEQUE OR BANK DRAFT AND IN CASE THE SAID REQUIREMENT IS NOT COMPLIED WITH, THEN NO DEDUCTION IS TO BE ALLOWED IN RESPECT OF SUCH EXPENDITURE. THE PROVISIONS OF SECTION 40A(3 A ) OF THE ACT PROVIDES THAT WHERE ALLOWANCE HAS BEEN MADE IN THE ASSESSMENT FOR ANY YEAR IN RES PECT OF ANY LIABILITY INCURRED BY THE ASSESSEE FOR ANY EXPENDITURE AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR, THE ASSESSEE MAKES PAYMENT IN RESPECT THEREOF, EXCEEDING RS.20,000/ - , OTHERWISE THAN BY ACCOUNT PAYEE CHEQUE OR BANK DRAFT, THEN THE PAYMENT SO MA DE SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF BUSINESS OR PROFESSION AND WOULD BE CHARGEABLE TO TAX AS INCOME OF SUBSEQUENT YEAR. WHERE THE PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON IN A DAY EXCEEDS RS.20,000/ - , THE PROVISO THEREAFTER PROVIDES MADE TO A PERSON IN A DAY EXCEEDS RS.20,000/ - , THE PROVISO THEREAFTER PROVIDES THAT NO DISALLOWANCE SHALL BE MADE AND NO PAYMENT SHALL BE DEEMED TO BE THE PROFITS AND GAINS OF BUSINESS OR PROFESSION UNDER SUB - SECTION (3) AND / OR UNDER SUB - SECTION (3 A ) OF SECTION 40A OF THE ACT , WHERE THE PAYMENT OR AGGREGATE OF PAYMENTS MADE OTHERW ISE THAN ACCOUNT PAYEE CHEQUE OR ANY DRAFT EXCEEDS RS.20,000/ - , IN SUCH CASES AND UNDER SUCH CIRCUMSTANCES AS MAY BE PRESCRIBED, HAVING REGARD TO THE NATURE AND EXTENT OF BANKING FACILITIES AVAILABLE, CONSIDERATION OF BUSINESS EXIGENCY AND OTHER RELEVANT F ACTORS. IT MAY BE POINTED OUT THAT THE PROVISIONS OF SECTION 40A(3) AND (3 A ) OF THE ACT WERE SUBSTITUTED FOR EARLIER SUB - SECTION (3) BY THE FINANCE ACT, 2008 W.E.F. 01.04.2009 . IN VIEW OF AMENDED PROVISIONS OF THE ACT, WHICH ARE APPLICABLE TO THE INSTANT ASSESSMENT YEAR IN APPEAL BEFORE THE TRIBUNAL, THE PROVISO UNDER SECTION 40A(3A ) OF THE ACT IS TO BE READ AND UNDERSTOOD . AS PER THE PROVISO , IT IS PROVIDED THAT IN SUCH CASES AND UNDER SUCH CIRCUMSTANCES WHICH ARE ITA NO. 1 662 /PN/20 1 5 LATE SHRI TEJUMAL TULSIRAM DADLANI L/H SHRI LALCHAND TEJUMAL DADLANI 5 PRESCRIBED I.E. BY WAY OF RULE 6DD OF T HE RULES AND ALSO HAVING REGARD TO THE NATURE AND EXTENT OF BANKING FACILITIES AVAILABLE, CONSIDERATION OF BUSINESS EXIGENCY AND OTHER RELEVANT FACTORS, EXEMPTION IS PROVIDED TO A PERSON WHO HAS MADE CASH PAYMENTS IN RESPECT OF ANY EXPENDITURE TO A PERSON , EXCEEDING RS.20,000/ - IN A DAY, THEN NO SUCH DISALLOWANCE IS TO BE MADE UNDER SECTION 40A(3) OR 40A(3A) OF THE ACT. HENCE, THE CONSIDERATION OF BUSINESS EXIGENCY IS ONE OF THE ITEMS PRESCRIBED WHICH CAN PREVAIL UPON THE APPLICATION OF PROVISIONS OF SECTI ON 40A(3) OF THE ACT. 9. IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE CLAIMS THAT SINCE THE SAID GOODS WERE PURCHASED AFTER BANKING HOURS, HENCE, THE PAYMENT WAS MADE IN CASH AND NOT BY WAY OF CROSSED CHEQUE OR BANK DRAFT. ADMITTEDLY, THE ASSESSEE HAS MADE VARIOUS PAYMENTS IN FAVOUR OF THE SAID PARTY ON DIFFERENT DATES IN THE MONTH OF APRIL, 2010 WHICH ARE TABULATED BY THE ASSESSING OFFICER DATES IN THE MONTH OF APRIL, 2010 WHICH ARE TABULATED BY THE ASSESSING OFFICER AT PAGES 2 AND 3 OF THE ASSESSMENT ORDER, TOTALING RS.7,82,009/ - . HOWEVER, THE ASSESSEE HAS FURNISHED EVIDENCE BY WAY OF BILLS RAISED BY THE SAID PARTY, THE AFFIDAVITS OF ASSESSEE AND THE SAID PARTY AND ALSO HAS FURNISHED THE PAN NUMBER OF THE SAID PARTY ESTABLISHING THE GENUINENESS OF TRANSACTION OF CASH PURCHASES. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION H AD MADE TOTAL PURCHASES OF ABOUT RS.2.36 CRORES, OUT OF WHICH ONLY PURCHASES TO THE EXTENT OF RS.7,82,009/ - WERE MADE IN CASH. IN THE TOTALITY OF THE EVIDENCES FILED BY ASSESSEE AND ALSO THE EXPLANATION FILED BY THE ASSESSEE IN THIS REGARD BEFORE LOWER AU THORITIES , THERE IS MERIT IN THE PLEA OF ASSESSEE THAT BECAUSE OF BUSINESS NECESSITIES, THE CASH PAYMENTS WERE MADE. THE ASSESSEE HAS ALSO FILED EVIDENCE ESTABLISHING THE GENUINENESS OF TRANSACTION BY WAY OF CONFIRMATION FROM THE SAID PARTY FROM WHOM THE PURCHASES WERE MADE AND HAS ALSO FURNISHED PAN NUMBER OF THE SAID PARTY . IN VIEW OF PROVISO UNDER SECTION ITA NO. 1 662 /PN/20 1 5 LATE SHRI TEJUMAL TULSIRAM DADLANI L/H SHRI LALCHAND TEJUMAL DADLANI 6 40A(3) AND 40A(3A) OF THE ACT , THERE IS NO MERIT IN THE ORDER OF CIT(A) IN HOLDING THAT THE CASE OF ASSESSEE DOES NOT FALL WITHIN ANY OF THE CONDITIO NS LAID DOWN IN RULE 6DD OF THE RULES. IN ADDITION TO THE CONDITIONS PRESCRIBED IN RULE 6DD OF THE RULES, THE ACT BY WAY OF PROVISO FURTHER PROVIDES CERTAIN OTHER CONDITIONS, UNDER WHICH THE CASH PAYMENTS MADE BY THE ASSESSEE TO A PERSON EXCEEDING RS.20,0 00/ - CAN BE HELD TO BE ALLOWABLE AS EXPENDITURE I.E. PROVISIONS OF SECTION 40A(3) OF THE ACT ARE NOT APPLICABLE. APPLYING THE SAID PROVISIONS, THE ADDITION MADE AT RS.7,82,009/ - IS THUS, DELETED. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, ALL OWED. 1 0 . IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 26 TH DAY OF AUGUST , 201 6 . SD/ - (SUSHMA CHOWLA) / JUDICIAL MEMBER / PUNE ; DATED : 26 TH AUGUST , 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A) - 1 , NASHIK ; 4. / THE PR. CIT 1 , NASHIK ; 5. 6. , , , - / DR SMC , ITAT, PUNE; / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUN E