Hema Mohnot, CHENNAI V. AIT, CHENNAI

ITA 1730/CHNY/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6340 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 22-08-2017
• Assessment Year: 1984-1985
• Appeal Filed On: 08-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SAGADEVAN IRS
• Assessee Lawyers: D ANAND
• Keywords: Gift; Business income
• Section: 40A(3); 131; 144

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A (SMC) BENCH : CHENNAI . , [BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT M EMBER ] ./I.T.A. NO.1730/MDS/2016 / ASSESSMENT YEAR : 1984-1985 SMT. HEMA MOHNOT, NO.38, COLLEGE ROAD, NUNGAMBAKKAM, CHENNAI 600 006. [PAN AABPH 0858E] VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, NCC-3, CHENNAI. ( !' / APPELLANT) ( #$!' /RESPONDENT) / APPELLANT BY : SHRI. D. ANAND, ADVOCATE /RESPONDENT BY : SHRI. B. SAGADEVAN, IRS, CIT. /DATE OF HEARING : 23-08-2017 !' /DATE OF PRONOUNCEMENT : -08-2017 % / O R D E R THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST AN ORDER DATED 14.03.2016 OF THE COMMISSIONER OF INCOME-TAX (APPE ALS)-4, CHENNAI. 2. GROUNDS TAKEN BY THE ASSESSEE ARE REPRODUCED HEREUN DER:- 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME T AX (APPEALS)-4, IS WRONG, ILLEGAL AND IS OPPOSED TO LA W AND FACTS OF THE CASE. 2. THE LEARNED CLT(A)-4 ERRED IN TREATING THE GIFT REC EIVED BY THE APPELLANT AS NOT GENUINE AND ADDED THE SAME AS UNDI SCLOSED ITA NO.1730/MDS/2016. :- 2 -: INCOME OF THE APPELLANT. 3. THE LEARNED CLT(A)-4 ERRED IN CONFIRMING AN ADDITIO N OF RS.40,000/- AS UNDISCLOSED INCOME OF THE APPELLANT ON THE BASIS OF PRONOTES FOUND DURING THE COURSE OF SEARCH . THE APPELLANT HAD NEVER ADVANCED ANY SUMS TO THE SAID P ARTIES AND THE SAME HAS BEEN AFFIRMED BY THEM. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-4, MADURAI ERRED IN LAW IN DISALLOWING A SUM OF RS.17, 16,400/- BY INVOKING SECTION 40A(3) OF THE INCOME TAX ACT. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-4 ERRED IN LAW IN NOT CONSIDERING THE BUSINESS EXPEDIENCY A ND OTHER FACTORS BEFORE INVOKING SECTION 40A(3) OF THE INCOM E TAX ACT. 6. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-4 OUGHT TO HAVE SEEN THAT THE APPELLANT HAS DISCHARGED HIS PRIMARY ONUS BOTH DURING THE ASSESSMENT PROCEEDINGS AND FIR ST APPELLATE PROCEEDINGS TO DEMONSTRATE THE FACT THAT THE CASH PAYMENTS MADE BY THE APPELLANT FALL UNDER RULE 6DD( K). 7. THE LEARNED CIT(A)-4 ERRED IN LAW IN CONFIRMING AN ADDITION OF RS.1,50,OOO/- UNDER THE HEAD INFLATION OF PURCHASES . 8: THE LEARNED CITA) ERRED IN DISALLOWING AS SUM OF RS.86,287/- BEING THE COMMISSION PAID BY THE APPELLANT TO M/S.SINGVI INTERNATIONAL. 3. BEFORE ADVERTING TO THE GROUNDS RAISED BY THE ASSES SEE, IT WILL BE APT TO RECALL THE FACTS GIVING RISE TO THIS APPEAL. ASSESSEE WAS ENGAGED IN A BUSINESS OF PURCHASING AND SELLING POR TABLE GENERATORS. ORIGINAL ASSESSMENT WAS COMPLETED U/S. 144 OF THE I NCOME TAX ACT, 1961 (IN SHORT THE ACT). LD. ASSESSING OFFICER HAD PROCEEDED TO MAKE A BEST OF JUDGMENT ASSESSMENT SINCE ASSESSEE DID NO T COMPLY WITH THE VARIOUS NOTICES ISSUED BY HIM. IT IS NOTED THAT AS SESSMENT PROCEEDINGS WERE INITIATED ON THE ASSESSEE, PURSUANT TO A SEA RCH CONDUCTED AT HER ITA NO.1730/MDS/2016. :- 3 -: HUSBANDS PREMISES. HER HUSBAND SHRI. N.K.MOHNOT WAS A TAX PROFESSIONAL. ASSESSEE HAD MOVED IN APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AGAINST THE B EST OF JUDGMENT ASSESSMENT, BUT ASSESSEE DID NOT MEET WITH ANY SU CCESS. THEREAFTER ASSESSEE HAD MOVED IN FURTHER APPEAL BEFORE THIS TR IBUNAL AND THIS TRIBUNAL HAD SET ASIDE THE ASSESSMENT AND DIRECTED THE LD. ASSESSING OFFICER TO REDO THE ASSESSMENT AFTER CONSIDERING TH E INFORMATION FURNISHED BY THE ASSESSEE. ACCORDINGLY, FRESH ASSE SSMENT PROCEEDINGS WERE INITIATED BY THE LD. ASSESSING OFFICER. ASSES SEES HUSBAND WHO WAS A TAX PROFESSIONAL HAD APPEARED BEFORE THE LD. ASSESSING OFFICER AND GAVE CERTAIN EXPLANATIONS. THE ASSESSMENT WAS THEREAFTER COMPLETED INTER-ALIA MAKING ADDITIONS FOR CERTAIN G IFTS CLAIMED BY THE ASSESSEE, UNACCOUNTED ADVANCES, DISALLOWANCE U/S. 4 0A(3) OF THE ACT, ADDITION FOR INFLATION FOR PURCHASES AND DISALLOWAN CE OF A CLAIM OF COMMISSION. 4. NOW BEFORE VIDE GROUND NO.2 OF ITS APEPAL, ASSESSE E IS AGGRIEVED ON THE ADDITION OF GIFTS. GIFTS SHOWN BY THE ASSESSEE IN HER CAPITAL ACCOUNT WHICH WERE SUBJECT MATTER OF THE A DDITION WERE AS UNDER:- ITA NO.1730/MDS/2016. :- 4 -: SL.NO DATE PARTICULARS AMOUNT C 1 1.11.82 BY GIFT FROM 25,000 2 -DO- BY GIFT FROM 25,000 3 2.9.82 -DO- 5,000 4 1.5.83 SRI PRAKASHCHAND K. JAIN 10,000 5 1.5.83 KISHANMAL JAIN 10,000 6 3.5.83 SRI. MOHANLAL JAIN 10,000 7 3.53.83 M. JOSHILAL 10,000 8 6.8.93 M. SANTALCHAND 10,000 --------------- 1,00,000/- ---------------- LD. ASSESSING OFFICER HAD REQUIRED THE ASSESSEE TO FILE EVIDENCE FOR THE ABOVE GIFTS. IT SEEMS ASSESSEE FURNISHED DECLARATI ON OF GIFTS FOR THE PARTIES MENTIONED AT SL. NOS. 4 TO 8 ABOVE. LD. ASS ESSING OFFICER NOTED THAT THESE PARTIES WERE CLIENTS OF ASSESSEES HUSBA ND AND THE RETURNS OF INCOME WERE FILED BY THE SAID PARTIES ONLY AFTER THE DATE OF SEARCH IN HIS PREMISES. ASSESSEE WAS REQUIRED TO PRODUCE DON ORS. ASSESSEE WAS UNABLE TO DO SO. ADDITION WAS MADE BY THE LD. ASSESSING OFFICER CONSIDERING THE GIFTS AS UNDISCLOSED INCOME OF THE ASSESSEE. 5. ASSESSEE MOVED IN APPEAL BEFORE LD. COMMISSIONER OF INCOME TAX (APPEALS) BUT DID NOT MEET WITH ANY SUCC ESS. ITA NO.1730/MDS/2016. :- 5 -: 6. NOW BEFORE ME, LD. AUTHORISED REPRESENTATIVE SUBMIT TED THAT THE PARTIES HAD FILED DECLARATION OF GIFTS. JUST B ECAUSE RETURNS WERE FILED BY THE CONCERNED PARTIES AFTER THE DATE OF SE ARCH, AS PER THE LD. AUTHORISED REPRESENTATIVE THE GIFTS OUGHT NOT HAVE DISBELIEVED. 7. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE STRONG LY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 8. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND P ERUSED THE ORDERS OF THE AUTHORITIES BELOW. NO EVIDENCE WHATSO EVER WAS FILED BY THE ASSESSEE WITH RESPECT TO GIFTS, MENTIONED AT SL. NOS.1 TO 3 OF THE TABLE GIVEN AT PARA 4 ABOVE. EVEN FOR PARTIES AT SL. NOS.4 TO 8, EXCEPT FOR DECLARATION OF GIFTS, NOTHING ELSE WAS FILED BY THE ASSESSEE. GIFTS HAVING BEEN CLAIMED AS RECEIVED IN CASH, THERE WAS CONSIDERABLE ONUS ON THE ASSESSEE TO PROVE ITS GENUINENESS. ASSESSEE COULD NOT PRODUCE THE DONORS. THE DONORS WERE FOUND TO BE CLIENTS OF ASSESSEES HUSBAND. THERE WAS NO RELATION WHATSOEVER BETWEEN THE ASSESSEE AND THEM. IN SUCH CIRCUMSTANCES, I AM OF THE OPINI ON THAT LOWER AUTHORITIES WERE RIGHT IN DISBELIEVING THE CLAIM OF THE GIFTS AND THE ADDITION WAS RIGHTLY DONE. GROUND NO.2 OF THE ASSE SSEE IS DISMISSED. ITA NO.1730/MDS/2016. :- 6 -: 9. VIDE GROUND NO.3, GRIEVANCE RAISED BY THE ASSESSEE IS ON AN ADDITION OF C40,000/- BASED ON PROMISSORY NOTES. W HAT I FIND FROM THE ASSESSMENT ORDER IS THAT THE ACTUAL ADDITION WA S C38,500/- ONLY. LD. ASSESSING OFFICER, BASED ON A PROMISSORY NOTE E XECUTED BY ONE SHRI. J. MADANAGOPAL AND SHRI. T.M. MOHANAKRISHNAN CAME TO A CONCLUSION THAT ASSESSEE HAD GIVEN UNACCOUNTED ADV ANCES. BEFORE THE LD. ASSESSING OFFICER ASSESSEE HAD STATED THAT NO SUCH ADVANCES WERE PAID AND THE PROMISSORY NOTE AS SUCH COULD NOT BE C ONSIDERED AS AN EVIDENCE FOR GIVING ANY SUCH ADVANCE. SHRI. T.M. MOHANAKRISHNAN WAS THE FATHER OF SHRI. J. MADANAGOPAL. HOWEVER, L D. ASSESSING OFFICER HELD THAT PROMISSORY NOTE WAS A VALID DOCUMENTARY E VIDENCE FOR ADVANCE GIVEN BY THE ASSESSEE TO THE ABOVE PERSONS. HE MADE AN ADDITION OF C38,500/- COMPRISING OF PRINCIPAL OF C3 5,000/- AND INTEREST OF C3,500/-. 10. ASSESSEES APPEAL BEFORE LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT SUCCESSFUL. 11. NOW BEFORE ME, LD. AUTHORISED REPRESENTATIVE SUBMIT TED THAT AN ADDITION COULD NOT BE MADE BASED ON A PROMISSORY NOTE, WHEN THE CONCERNED PARTY HAD CONFIRMED, THAT HE HAD NOT RECE IVED ANY ADVANCE ITA NO.1730/MDS/2016. :- 7 -: FROM THE ASSESSEE. LD. COUNSEL ALSO PLACED ON RECO RD A CLARIFICATION DATED 24.11.1993 GIVEN BY SHRI. T.M. MOHANA KRISHNA N TO THE LD. ASSESSING OFFICER. 12. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE STRONG LY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 13. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND P ERUSED THE ORDERS OF THE AUTHORITIES BELOW. IT IS NOT DISPUTED THAT PROMISSORY NOTE FOR C35,000/- EXECUTED BY SHRI. J. MADANAGOPAL AND HIS FATHER SHRI. T.M. MOHANAKRISHNAN WERE FOUND AT THE TIME OF SEARC H OF THE PREMISES OF ASSESSEES HUSBAND. IT IS ALSO NOT DISPUTED THA T THE PROMISSORY NOTE WAS ISSUED IN FAVOUR OF THE ASSESSEE. WHAT WA S STATED BY THE SHRI T.M.MOHANA KRISHNAN IN HIS LETTER DATED 24.11. 1993 BEFORE THE LD. ASSESSING OFFICER IS REPRODUCED HEREUNDER:- SUB: CLARIFICATION REGARDING PRONOTE OF C35,000/- EXECUTED BY ME AND MY FATHER AND FOUND IN THE PREMISES OF SH RI. N.K. MOHNOT GROUP- REG. SHRI. N.K. MOHNOT IS MY BEST FRIEND. AS I WAS IN N EED OF SOME FINANCE TO DEVELOP MY BUSINESS, I REQUESTED SH RI. N.K. MOHNOT TO ARRANGE SOME FINANCE FOR ME. SINCE HE IS AN AUDITOR, AND MANY OF HIS CLIENTS ENGAGED IN FIANC BUSINESS, THIS REQUEST WAS MADE TO HIM. BUT UNFORTUNATELY THE DEAL NEVER STRUCK, SINCE HE COULD NOT ARRANGE THE FINANC E. I WAS T GET BACK MY PRONOTE FROM HIM, BUT AS ALREADY SATED THAT SINCE HE IS VERY CLOSE FRIEND OF ME, I HAVE NOT CAR ED TO COLLECTED THE PRONOTE FROM HIM. IN THE MEANWHILE, I HEARD THERE WAS A SEARCH IN HIS PREMISES BY YOUR OFFICIAL S AND MY ITA NO.1730/MDS/2016. :- 8 -: PROMOTES REFERRED ABOVE WAS SEIZED. AFTER SOME TIME FROM SEARCH HE WAS KIND ENOUGH TO RETURN MY PRONOTE HIMS ELF. I AM FURNISHING THIS CERTIFICATION AT HIS REQUEST, SINCE HE SAID THAT DEPARTMENT HAS TREATED THE SUM OF C35,000/- AN D INTEREST THEREON AS HIS INCOME. I ONCE AGAIN CLARIFY THAT I HAVE NOT BORROWED ANY M ONEY FROM SHRI. N.K. MOHNOT WHATSOEVER. I AM OF THE OPINION THAT WHEN CONCERNED PERSONS HAD DENIED RECEIPT OF ANY SUM, AN ADDITION COULD NOT HAVE BEEN MADE S OLELY ON THE BASIS OF PROMISSORY NOTE. SHRI. T.M.MOHANA KRISHNAN HAD DENIED RECEIPT OF ANY MONEY FROM THE ASSESSEE. THERE WAS NO ENTRY FOUND IN THE BOOKS OF THE ASSESSEE FOR HAVING ADVANCED ANY LOANS. IN MY OPINION THE ADDITION WAS NOT WARRANTED. SUCH ADDIT ION STANDS DELETED. GROUND NO.3 OF THE ASSESSEE STANDS ALLOWED. 14. VIDE GROUNDS 4 TO 6, ASSESSEE IS AGGRIEVED ON A DISALLOWANCE OF C17,16,400/- MADE U/S. 40A(3) OF TH E ACT. 15. AS MENTIONED BY ME, ASSESSEE WAS CARRYING ON A BUSI NESS OF TRADING GENERATORS. THE SAID BUSINESS WAS CARRIED O N THROUGH A PROPRIETARY CONCERN CALLED M/S. HINDUSTAN ELECTRONI CS. ASSESSEE HAD FILED PROFIT AND LOSS ACCOUNT OF THE SAID CONCER N. AS PER THE TRADING ACCOUNT, ASSESSEE HAD PURCHASED PORTABLE GENERATORS WORTH C22,50,622.94 DURING THE RELEVANT PREVIOUS YEAR AGA INST WHICH SALES OF ITA NO.1730/MDS/2016. :- 9 -: C25,67,100/- WERE SHOWN. AS PER THE ASSESSEE PURCH ASES OF GENERATORS WERE MADE FROM ONE M/S. EMKAY ENTERPRISE S WHICH WAS UNDER THE PROPRIETORSHIP OF ONE SHRI. V. NARASHIM D AS. ADDRESS GIVEN BY THE ASSESSEE WAS 28, GANGA NAGAR, MADRAS 600 024 WHICH WAS LATER CHANGED TO 8, GANGA NAGAR, MADRAS 600 024. LD. ASSESSING OFFICER MADE ENQUIRY WITH ABOVE PREMISES AND FOUND A PERSON NAMED SHRI. V. NARASHIM DAS AT 8, GANGA NAGA R, MADRAS-24 ONE SHRI. V. NARASHIM DAS AND SUMMONED HIM. HOWEVE R, SHRI. V. NARASHIM DAS DID NOT ENTER A PERSONAL APPEARANCE B UT FILED A LETTER ON 05.03.1994. IN THE SAID LETTER, SHRI. V. NARASH IM DAS GAVE HIS PA NUMBER AS GIR NO.71871-N/CITY CIRCLE VII(1), MADRAS . LD. ASSESSING OFFICER FOUND THAT THE SAID GIR DID NOT BELONG TO S HRI. V. NARASHIM DAS BUT TO ANOTHER PERSON. OUT OF THE TOTAL PURCHASES , THE PURCHASE CLAIMED TO HAVE BEEN EFFECTED FROM M/S. EMKAY ENTER PRISES CAME TO C17,16,402/-. LD. ASSESSING OFFICER ALSO FOUND THA T THE PAYMENTS WERE MADE OTHERWISE BY WAY OF CHEQUES/DEMAND DRAFT AND THERE WAS VIOLATION OF SEC.40A(3) OF THE ACT. WHEN THE A SSESSEE WAS PUT ON NOTICE OF THE ABOVE, ITS REPLY WAS AS UNDER:- AS REGARDS TO YOUR PROPOSED DISALLOWANCE UNDER SECTION 40A(3), THE ASSESSEE STRONGLY OBJECTS THE SAME, SINCE THE PURCHASE OF GENERATORS WERE IMPORTED ITEM S FOR WHICH IMMEDIATE PAYMENT WAS REQUIRED FOR THEIR SUBSEQUENT IMPORT, DUTY PAYMENTS ETC., IN THE CIRCUMSTANCE THOSE PAYMENTS WRE MADE THROUGH BEARER CHEQUES AT THE REQUEST OF M/S. EMKAY ENTERPRISES, ITA NO.1730/MDS/2016. :- 10 -: HENCE ASSESSEES CASE SQUARELY FALLS UNDER THE COND ITION LAID DOWN IN RULE 6DD AS THE PAYMENT UNDER THE CONDITIONS LAID DOWN IN RULE 6DD AS THE PAYMENT UND ER THE CROSSED CHEQUE OR DRAFT FEASIBLE OR WOULD HAVE CAUSED GENUINE DIFFICULTY TO THE PAYEE AND UNDUE HARDSHIP IN IMPORTING THE MATERIAL. LD. ASSESSING OFFICER WAS OF THE OPINION THAT ASSES SEE COULD NOT PRODUCE EVIDENCES TO SHOW HOW IT FELL WITHIN EXEMP TIONS GIVEN UNDER RULE 6DD OF THE INCOME TAX RULES, 1962. APPLYING S EC. 40A(3) OF THE ACT, HE MADE A DISALLOWANCE OF C17,16,400/- 16. ASSESSEES APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DID NOT MEET WITH ANY SUCCESS. 17. NOW BEFORE ME, LD AUTHORISED REPRESENTATIVE SUBMITT ED THAT ASSESSEE WAS FORCED TO MAKE PAYMENTS IN CASH DUE TO INSISTENCE OF THE SUPPLIER M/S. EMKAY ENTERPRISES. COPY OF A LET TER DATED 05.03.1994 ISSUED BY M/S. EMKAY ENTERPRISES WAS FI LED IN THIS REGARD. AS PER LD. AUTHORISED REPRESENTATIVE LD. ASSESSING OFFICER HAD ACCEPTED THE SALES OF GENERATOR MADE BY THE ASSESSEE. ACCORD ING TO HIM, SEIZED PAPERS ITSELF SHOWED THAT 420 GENERATORS COSTING C 20,93,096.94 WERE PURCHASED. THUS, ACCORDING TO HIM, DISALLOWANCE U/S . 40A(3) OF THE ACT ITA NO.1730/MDS/2016. :- 11 -: WAS NOT WARRANTED. SPECIFIC RELIANCE WAS PLACED ON RULE 6DD OF THE INCOME TAX RULES. 18. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE SUBMIT TED THAT THE ALLEGED SUPPLIER WAS NEVER PRODUCED BY THE ASSE SSEE BEFORE LD. ASSESSING OFFICER NOR ANY INVOICE SHOWING PURCHASES FURNISHED. FURTHER, ACCORDING TO HIM, PAYMENTS TO M/S. EMKAY E NTERPRISES WERE MADE NOT BY ACCOUNT PAYEE CHEQUES OR DEMAND DRAFTS AND SECTION 40A(3) OF THE ACT STOOD ATTRACTED. THUS, ACCORDING TO HIM, DISALLOWANCE MADE U/S. 40A(3) OF THE ACT WAS JUSTI FIED. 19. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. LD. ASSESSING OFFI CER AFTER GIVING A FINDING THAT ASSESSEE COULD NOT BE ESTABLISH THE ID ENTITY OF THE SELLER M/S. EMKAY ENTERPRISES, HAD RESORTED TO MAKE A DISA LLOWANCE U/S. 40A(3) OF THE ACT. LD. ASSESSING OFFICER HIMSELF H AD ACCEPTED AT PARA 24 OF HIS ORDER THAT PURCHASES WORTH C20,93,096.94 REPRESENTING COST OF 420 GENERATORS, WERE FOUND DURING THE SEARCH AT THE PREMISES OF ASSESSEES HUSBAND. HE HAD CONSIDERED THE PROFIT A ND LOSS ACCOUNT FILED BY THE ASSESSEE AND MADE AN ADDITION OF C1,5 0,000/- FOR THE EXCESS PURCHASE SHOWN IN THE PROFIT AND LOSS ACCOUN T. ONCE IT IS ADMITTED THAT ASSESSEE WAS TRADING IN GENERATORS P URCHASES COULD NOT HAVE BEEN TREATED AS NOT GENUINE. LETTER DATED 05. 03.1994 FILED BY ITA NO.1730/MDS/2016. :- 12 -: M/S. EMKAY ENTERPRISES BEFORE THE LD. ASSESSING OFF ICER, STATES AS UNDER:- REF: YOUR LETTER DATED 16/12/1/3/94 ALONGWITH SUMM ON U/S. 131 OF EVEN DATE IN CONNECTION WITH ASSESSMENT PROCEEDING OF MRS. HEMA MOHNOT, MADRAS -6. P.A. NO.47-053-PX-5462/A.Y.1984-85. KINDLY REFER TO THE ABOVE, IT IS TRUE THAT I HAD B USINESS TRANSACTION DURING THE FINANCIAL YEAR 1982-83 WITH M/S. HINDUSTAN ELECTRONICS OF WHICH MRS. HEMA MOHNOT IS PROPRIETIX. I FURNISH HEREWITH THE DETAILS CALLED FOR BY YOU PARAWISE:- 1. I HAVE SOLD PORTABLE GENERATORS (IMPORTED ) TO THEM. 2. YES, WE HAVE SOLD THE GENERATORS TO THEM DETAILS OF WHICH ARE AS UNDER:- SL.NO INVOICE NO DATE AMOUNT 1 001 11.01.1983 9,35,208.59 2 002 29.03.1983 99,729.20 3 003 29.03.1983 6,81,464.00 4 00 5 31.03.1983 7,526.00 5 VIDE DEBIT NOTE 31.03.1983 1,50,000.00 3. THE SALES HAS BEEN MADE ON MIXED BASIS CASH AS WELL AS CREDIT ALSO. 4. IT WAS A CONDITION PRECENT TO YOUR SUPPLY TO THEM T HAT PAYMENT HAS TO BE MADE ON CASH BASIS ONLY. AS WE RE QUIRED TO PAY THE CUSTOMS DUTY BY CASH ONLY. 5. ACCOUNT COPY OF M/S. HINDUSTAN ELECTRONICS AS APPEA RING IN MY BOOKS ARE ENCLOSED HEREWITH 6. OUT INCOME TAX ASSESSMENT PARTICULARS ARE AS UNDER: - GIR NO.71871-N/CITY CIRCLE VII(1)/MADRAS-34. KINDLY FIND THE ABOVE INFORMATION IN ORDER AND TAK E THE SAME AS PROPER COMPLIANCE TO YOUR SUMMON REFERRED ABOVE . ITA NO.1730/MDS/2016. :- 13 -: A READING OF THE ABOVE LETTER CLEARLY INDICATE ASSE SSEE HAD PURCHASED PORTABLE GENERATORS FROM M/S. EMKAY ENTERPRISES. TH AT APART, IT IS AN ADMITTED POSITION THAT SHRI. V. NARASHIM DAS, PROP RIETOR OF M/S. EMKAY ENTERPRISES WAS FOUND AT NO.8, GANGA NAGAR, MADRAS 600 024. THUS IN MY OPINION THE PURCHASES COULD NOT HAVE BEE N TREATED AS NOT GENUINE. COMING TO THE QUESTION OF APPLICATION OF PROVISION OF SEC. 40A(3) OF THE ACT, THE SAID SECTION AS IT STOOD AT THE RELEVANT POINT OF TIME READ AS UNDER:- WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESP ECT OF WHICH PAYMENT IS MADE, AFTER SUCH DATE (NOT BEING L ATER THAN THE 31ST DAY OF MARCH, 1969) AS MAY BE SPECIFI ED IN THIS BEHALF BY THE CENTRAL GOVERNMENT BY NOTIFICATI ON IN THE OFFICIAL GAZETTE, IN A SUM EXCEEDING TWO THOUSA ND FIVE HUNDRED RUPEES OTHERWISE THAN BY A CROSSED CHEQUE DRAWN ON A BANK OR BY A CROSSED BANK DRAFT, SUCH EXPENDITURE SHALL NOT BE ALLOWED AS A DEDUCTION. CLAIM OF THE LD. AUTHORISED REPRESENTATIVE IS THAT ASSESSEE FELL WITHIN SUB RULE (J) OF RULE 6DD AS IT STOOD AT RELEVANT PO INT OF TIME. THE SAID SUB RULE (J) IS REPRODUCED HEREUNDER:- (J) IN ANY OTHER CASE, WHERE THE ASSESSEE SATISFI ES THE INCOME-TAX OFFICER THAT THE PAYMENT COULD NOT BE MA DE BY A CROSSED CHEQUE DRAWN ON A BANK OR BY A CROSSED BANK DRAFT-- (1) DUE TO EXCEPTIONAL OR UNAVOIDABLE CIRCUMSTANCES , OR ITA NO.1730/MDS/2016. :- 14 -: (2) BECAUSE PAYMENT IN THE MANNER AFORESAID WAS NOT PRACTICABLE, OR WOULD HAVE CAUSED GENUINE DIFFICULT Y TO THE PAYEE, HAVING REGARD TO THE NATURE OF THE TRANSACTI ON AND THE NECESSITY FOR EXPEDITIOUS SETTLEMENT THEREOF, AND ALSO FURNISHES EVIDENCE TO THE SATISFACTION OF THE INCOME-TAX OFFICER AS TO THE GENUINENESS OF THE PAY MENT AND THE IDENTITY OF THE PAYEE. EXCEPTIONAL CIRCUMSTANCES SOUGHT TO BE CANVASSED B Y THE ASSESSEE IS THE ONE APPEARING AT PARA NO.4 OF THE LETTER DATED 05.03.1994 OF M/S. EMKAY ENTERPRISES REPRODUCED BY US ABOVE. IN MY OPI NION THE SAID PARA DOES INDICATE THAT SELLER HAD INSISTED ON CA SH PAYMENT. THUS EXEMPTION CLAUSE (J) OF RULE 6DD, IN MY OPINION WIL L APPLY IN ASSESSEES CASE, ESPECIALLY SINCE GENUINENESS OF TH E PAYMENT AND IDENTITY OF THE PAYEE ARE ESTABLISHED. I THEREFORE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES IN THIS REGARD AND DELET E THE ADDITION MADE U/S. 40A(3) OF THE ACT. GROUNDS 4 TO 6 OF THE ASSES SEE ARE ALLOWED. 20. VIDE GROUND NO.7, GRIEVANCE OF THE ASSESSEE IS ON A N ADDITION MADE FOR INFLATION OF PURCHASES. ADDITIO N OF C1,50,000/- WAS MADE BY LD. ASSESSING OFFICER, ON A DEBIT NOTE ISSUED BY M/S. EMKAY ENTERPRISES. AS PER ASSESSEE SUCH PAYMENTS WE RE MADE FOR SETTLING THE CUSTOM DUTY ON IMPORT OF GENERATORS. HOWEVER, NO EVIDENCE WHATSOEVER WERE FURNISHED TO THE LD. ASSE SSING OFFICER IN THIS REGARD. THE NATURE OF THE EXPENDITURE WAS NO T DEMONSTRATED ITA NO.1730/MDS/2016. :- 15 -: BEFORE THE LOWER AUTHORITIES. THEREFORE I AM OF TH E OPINION THAT SUCH DISALLOWANCE WAS RIGHTLY MADE. GROUND 7 OF THE ASS ESSEE STANDS DISMISSED. 21. VIDE GROUND 8, ASSESSEE IS AGGRIEVED ON DISALLOWAN CE OF A SUM OF C86,287/- BEING COMMISSION PAID TO M/S. SING HVI INTERNATIONAL. 22. LD. ASSESSING OFFICER MADE THE DISALLOWANCE FOR A REASON THAT GENERATORS SOLD BY THE ASSESSEE WHERE DIRECTLY DELIVERED TO ITS CUSTOMERS AND NO SERVICE WHATSOEVER WAS RENDERED BY M/S. SINGHVI INTERNATIONAL. LD. COMMISSIONER OF INCOME TAX (APPE ALS) HAD CONFIRMED THE DISALLOWANCE. 23. NOW BEFORE ME, LD. AUTHORISED REPRESENTATIVE HAS PR ODUCED A LETTER DATED 15.11.1992 OF M/S. SINGHVI INTERNAT IONAL. AS PER THIS LETTER ASSESSEE WAS LIABLE TO PAY 7.5% ON THE TOTAL SALES OF C11,50,500/-. EVEN IF I CONSIDER THE SAID LETTER T O BE A GENUINE ONE, THERE IS NO CO-RELATION DEMONSTRATED BETWEEN SALE AS PER BOOKS OF ACCOUNTS OF THE ASSESSEE AND THE SALE CLAIMED TO HA VE EFFECTED THROUGH M/S. SINGHVI INTERNATIONAL. IN MY OPINION, THE CLAIM WAS ITA NO.1730/MDS/2016. :- 16 -: RIGHTLY DISALLOWED. GROUND 8 OF THE ASSESSEE IS DIS MISSED. 24. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED ON MONDAY, THE 28TH DAY OF AUGUST OF 2017, AT CHENNAI. SD/- ( . ) (ABRAHAM P. GEORGE) / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED :28 TH AUGUST, 2017. KV &' ()*) / COPY TO: 1 . / APPELLANT 3. +,- / CIT(A) 5. )./ 0 / DR 2. / RESPONDENT 4. + / CIT 6. /12 / GF