Appeal Details
Counselvise Citation
[2019] 117 COUNSELVISE.COM (IT) 3022 (ITAT-NAGPUR)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
8 year(s) 4 month(s) 14 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
16-04-2019
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
DB
Assessment Year
misc
Appeal Filed On
02-12-2010
Judgement Text
, - IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR , BENCH , ( E - COURT), MUMBAI , BEFORE SHRI R.K.GUPTA , J M & SHRI D.KARUNA KAR RAO , A M ITA NO. 1 77 / N AG / 20 10 ( ASSESSMENT YEAR : 200 6 - 20 0 7 ) KHURANA ROAD LINES, A - 1, ANMO L APARTMENT, MECOSABAGH, NAGPUR (MAHARASHTRA ) - 440 013 VS. ITO WARD 8(1), MECL BUILDING, SEMINERY HILLS, OPPOSITE CGO COMPLEX, NAGP UR (MAHARASHTRA) - 06 PAN/GIR NO. : A A BFK 4095 I ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : SHRI M.MANI /REVENUE BY : DR. MILI ND B H USARI DATE OF HEARING : 1 3 TH DEC ., 2012 DATE OF PRONOUNCEMENT : 9 TH JAN . ,201 3 O R D E R P ER SHRI R.K.G UPTA, JM : TH E ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE ITAT NAGPUR BENCH, NAGPUR, AGAINST THE ORDER DATED 20 - 9 - 2010 OF LEANED CIT(A) - II , NAGPUR (MAHARASHTRA) RELA TING TO THE ASSESSMENT YEAR 200 6 - 0 7 , WHICH HAS BEEN HEARD THROUGH E - COURT, MUMBAI. 2 . THE ASSESSEE IS OBJECTING THE CONFIRMATION OF ADDITION OF RS. 17,34,625/ - UNDER SECTION 40A(3) . 3 . THE ASSESSMENT IN THIS CASE WAS COMPLETED UNDER SECTION 143(3) OF THE ACT AT AN INCOME OF RS. 2,17,21,490/ - AGAINST RETURN ITA NO. 177 /20 10 2 INCOME OF RS. 3,90,370/ - . DURING THE ASSESSMENT PROCEEDING, THE AO NOTED THAT THE ASSESSEE HAS SHOWN OUTGOING EXPENSES OF RS. 1,34,93,54,153/ - INCURRED B Y THE ASSESSEE TOWARDS VEHICLE RUNNING EXPENSES, TYRE TUBE EXPENSES, PRINTING AND STATIONERY, RENT RATE AND TAXES, TELEPHONE & MOBILE ETC. ETC. THE AO DISALLOWED 15% OF TOTAL EXPENSES, WHICH RESULTED AN ADDITION OF RS. 2,09,03,120/ - . 4 . BEING AGGRIEVED WI TH THE ORDER OF THE AO, ASSESSEE PREFERRED AN APPEAL BEFORE THE LEARNED CIT(A) . D ETAIL SUBMISSIO NS WERE FILED BEFORE THE CIT(A). IT WAS EXPLAINED THAT THERE IS NO MATERIAL DIFFERENCE IN THE FACTS OF THE YEAR UNDER CONSIDERATION AS COMPARED TO EARLIER YEAR . NO ADDITION IN EARLIER YEAR HAS BEEN MADE ON THE SAME FACTS. COPY OF THE ASSESSMENT ORDERS FOR EARLIER TWO YEARS WERE ALSO FILED. COMPARATIVE STATEMENT OF OPERATING EXPENSES AND RECEIPTS WERE ALSO FILED. IT WAS FURTHER EXPLAINED THAT THE MAIN REASON FOR INCREASING IN THE OPERATING COST WAS DUE TO INCREASE IN THE DIESEL PRICE EFFECTIVE FROM 21 - 6 - 2005 FROM RS. 32/ - TO RS. 34/ - PER LITRE. IT WAS SUBMITTED THAT AN ADDITION OF RS. 2 LAKHS WERE MADE ONLY IN EARLIER YEAR. THE MATTER WAS REMANDED TO THE AO TO FILE H IS REMAND REPORT AFTER ALLOWING OPPORTUNITY TO ASSESSEE. THE AO VERIFIED THE AUDITED BOOKS OF ACCOUNTS BY TEST CHECKING ON RANDOM BASIS. THE AO IN HIS REMAND REPORT STATED THAT THE ASSESSEE MADE PAYMENT OF RS. 86,73,126/ - TO M/S KHURANA PETROLEUM, DHOREGAON IN CONTRAVENTION OF SECTION 40A(3) OF THE ACT , THEREFORE, 20% OF SUCH PAYMENTS ARE DISALLOWABLE, HOWEVER, IN RESPECT OF OTHER EXPENSES, THE AO SUBMITTED THAT BILLS, VOUCHERS, MONTHLY PAYMENT ITA NO. 177 /20 10 3 SHEET ETC., WERE VERIFIED ON TEST CHECK BASIS . THE ASSESSEE FIL ED DETAILED REPLY IN RESPONSE TO THE REMAND REPORT, WHICH IS INCORPORATED IN THE ORDER OF LEARNED CIT(A) IN PARA 3.4 & 3.5. AFTER CONSIDERING THE SUBMISSION AND PERUSING THE OTHER MATERIAL ON RECORD, LEARNED CIT(A) FOUND THAT THE ASSESSEE HAS VIOLATED THE PROVISION OF SECTION 40A(3) IN MAKING CASH PAYMENT TO A PROPRIETOR CONCERN OF ONE OF THE PARTNER, THEREFORE, IN HIS VIEW ALSO ADDITION @20% SUGGESTED BY THE AO IS TO BE MADE. ACCORDINGLY, HE MADE AN ADDITION OF RS. 17,34,625/ - IN VIEW OF THE PROVIS I ON OF SE CTION 40A(3) AND THE REMAINING ADDITION WAS DELETED BY THE CIT(A) . AGAINST SUSTENANCE OF ADDITION, THE ASSESSEE IS IN APPEAL HERE BEFORE THE TRIBUNAL. 5 . THE CONTENTIONS RAISED BEFORE THE LEARNED CIT(A) WERE REITERATED BY THE LEARNED AR HERE BEFORE THE T RIBUNAL . IT WAS SUBMITTED BY THE LEARNED AR THAT IN FACT, ONE OF THE PARTNER HAD ACCOUNT IN AURANGABAD AND JUST TO FACILITATE, THE PAYMENTS WERE MADE TO THE PARTNER WHICH WAS CREDITED IN HIS ACCOUNT AND FROM HIS BANK ACCOUNT THE PAYMENTS WERE MADE TO M/S K HURANA PETROLEUM, DHOREGAON. THEREFORE, THERE IS NO VIOLATION OF PROVISION OF SECTION 40A(3) AS THE PAYMENT HAS BEEN MADE THROUGH PARTNER. IT WAS FURTHER SUBMITTED THAT THE PARTNER IS THE AGENT OF THE FIRM AND, THEREFORE, THE PAYMENT MADE TO AN AGENT CANNO T BE TREATED THE PAYMENT IN VIOLATION OF SECTION 40A(3). IT WAS ALSO SUBMITTED THAT THE PAYMENTS ARE MADE TO PARTNER IS BONAFIDE AND, THEREFORE, THERE IS REASONABLE CAUSE FOR MAKING PAYMENTS IN CASH. IT WAS ALSO SUBMITTED THAT THE CASE OF THE ASSESSEE ITA NO. 177 /20 10 4 IS A LSO COVERED BY THE RULE 6DD(K), THEREFORE, FOR THIS REASON ALSO, THE PROVISIONS OF SECTION 40A(3) ARE NOT ATTRACTED. 6 . ON THE OTHER HAND, LEARNED DR STATED THAT THOUGH THE DEPARTMENT HAS NOT FILED APPEAL AGAINST THE ORDER OF THE LEARNED CIT(A) BUT LEAR NED CIT(A) CONFIRMED THE ADDITION UNDER SECTION 40A(3) , WHICH IS JUSTIFIED. IT WAS SUGGESTED BY LEARNED DR THAT IN FACT, LEARNED CIT(A ) SHOULD HAVE DECIDED THE ISSUE IN RESPECT OF ADDITION MADE @15% OF THE TOTAL EXPENSES CLAIMED BY THE ASSESSEE, HOWEVER, S INCE, HE HAS MADE ADDITION BY ASCERTAINING THE FACTUAL ASPECT THAT CERTAIN CASH PAYMENT HAS BEEN MADE TO M/S KHURANA PETROLEUM, FROM WHOM THE MATERIAL HAS BEEN PURCHASED BY THE ASSESSEE, THEREFORE, PROVISION OF SECTION 40A(3) WAS ATTRACTED. REGARDING THE A RGUMENT OF LEARNED AR, IT WAS SUBMITTED THAT THESE SUBMISSIONS WERE NOT BEFORE THE AO AND, THEREFORE, IT WAS NOT VERIFIED THAT THE PAYMENT WAS MADE TO THE PARTNER OR PAYMENT WAS MADE IN THE CAPACITY OF THE AGENT BY THE FIRM. HENCE, THIS ASPECT NEEDS VERIF ICATION. ACCORDINGLY, IT WAS SUGGESTED THAT TO VERIFY THIS ASPECT, MATTER CAN BE SENT BACK TO THE FILE OF THE AO. 7 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND CONSIDERED THEM CAREFULLY. AFTER EXAMINING THE ORDER OF THE AO, CIT(A) AND THE SUBMISSIONS OF THE COUNSEL AS WELL AS LEARNED DR, WE ARE OF THE VIEW THAT THE MATTER SHOULD GO BACK TO THE FILE OF THE AO TO EXAMINE THE CASE AFRESH. IT IS A MATTER OF FACT THAT THE AO HAS NOT MADE ANY DISALLOWANCE UNDER SECTION 40A(3) AS HE DISALLOWED 15% OF TOTAL EXPENSES CLAIMED. ITA NO. 177 /20 10 5 DETAILED SUBMISSIONS WERE FILED BEFORE THE CIT(A), WHICH WAS SENT TO THE AO FOR HIS COMMENT. IN HIS COMMENT, THE AO HAS STATED THAT ALL THE DETAILS IN RESPECT TO VARIOUS EXPENSES HAVE BEEN CHECKED ON TEST CHECK AND FOUND THAT NO ADDITION IS WARRAN TED, HOWEVER, THE ASSESSEE HAD PAID CERTAIN CASH PAYMENTS TO M/S KHURANA PETROLEUM, WHICH IS A PROPRIETORSHIP CONCERN OF ONE OF THE PARTNER, THEREFORE, IN VIEW OF THE PROVISION OF SECTION 40A(3), 20% DISALLOWANCE SHOULD BE MADE. THEREAFTER LEARNED CIT(A) A FTER EXAMINING THE FACTS OF THE CASE AND CONSIDERING THE SUBMISSIONS OF THE ASSESSEE FOUND THAT PROVISION OF SECTION 40A(3) ARE ATTRACTED. ACCORDINGLY, HE SUSTAINED ADDITION OF RS. 17,34,265/ - IN VIEW OF THE PROVISION OF SECTION 40A(3) AND THE REMAINING ADD ITION WAS DELETED BY THE CIT(A). L EARNED COUNSELS MAIN OBJECTION IS THAT THE PAYMENT IS NOT MAD E TO M/S KHURANA PETROLEUM BUT TO A PARTNER AND PAYMENT TO PARTNER DOES NOT COME UNDER THE CLUTCHES OF SECTION 40A(3). LEARNED COUNSEL HAS ALSO STATED THAT SINC E THE PARTNER IS AN AGENT OF THE FIRM, THEREFORE, FOR THIS REASON ALSO, NO DISALLOWANCE CAN BE MADE UNDER SECTION 40A(3) AS THE AGENT OF A FIRM COMES UNDER THE EXCEPTION CLAUSE OF RULE 6DD(K) . THESE TWO ASPECTS, IN OUR CONSIDERED VIEW, NEEDS TO BE EXAMINED . IF THE PAYMENTS MADE TO THE PARTNER AND PARTNER MAKES FURTHER PAYMENTS THEN IT IS A DIFFERENT CASE. THEREFORE, THE AO WILL EXAMINE AS TO WHETHER THE PAYMENTS WERE MADE TO PARTNER OR TO M/S KHURANA PETROLEUM DIRECTLY. IF IT IS ESTABLISHED THAT PAYMENTS WE RE MADE TO PARTNER THEN OF COURSE, IN OUR CONSIDERED VIEW, ADDITION CANNOT BE MADE UNDER SECTION 40A(3). ITA NO. 177 /20 10 6 FURTHER IF IT IS ESTABLISHES THAT PARTNERS IS AN AGENT OF THE FIRM AND PAYMENT HAS BEEN MADE TO THE AGENT THEN ALSO IN VIEW OF THE RULE 6DD(K), ADDITIO N SHOULD NOT BE MADE, HOWEVER, THESE ASPECTS HAVE TO BE EXAMINED AFRESH AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LEARNED CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE AO TO RE - EXA MINE THIS ASPECT AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 8 . RESULTANTLY , APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCE D IN THE OPEN COURT ON THIS 9 TH DAY OF JAN . 201 3 . 201 3 SD/ - SD/ - ( ) ( D.KARUNAKAR RAO ) ( ) ( R.K.GUPTA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 09 / 01 / 201 3 . /PKM , PS COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) , MUMBAI / NAGPUR . 4. / CIT 5. / DR, ITAT, MUMBAI / NAGPUR . 6. GUARD FILE. //TRUE COPY// / BY ORDER, ( DY./ASSTT. REGISTRAR) / ITAT, MUMBAI
