M/S. Kumar Bazar pachwai & Country Spirit Shop, Raniganj V. ITO, Ward-3(1), Asansol, Asansol

ITA 178/KOL/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4510 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Next Hearing Date: 19-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 16-02-2015
• Court: TRIBUNAL
• Section: 40A(3)

Judgement Text

1 ITA NO.178/KOL/2015 KUMAR BAZAR PACHWAI & COUNTRY SPIRIT SHOP, AY 2010- 11 , D , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: KOL KATA () BEFORE .., /AND . ' # $% % , ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A. NO. 178/KOL/2015 ASSESSMENT YEAR: 2010-11 M/S. KUMAR BAZAR PACHWAI & COUNTRY SPIRIT SHOP (PAN: AAGFK3028C) VS. INCOME-TAX OFFICER, WD-3(1), ASANSOL APPELLANT RESPONDENT DATE OF HEARING 19.06.2017 DATE OF PRONOUNCEMENT 23.08.2017 FOR THE APPELLANT SHRI UDAYAN DASGUPTA, AR FOR THE RESPONDENT SHRI NICHOLAS MURMU, JCIT ORDER PER SHRI A.T.VARKEY, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A), ASANSOL DATED 11.12.2014 FOR AY 2010-11. 2. THE SOLE ISSUE RAISED BY THE ASSESSEE RELATES TO THE DISALLOWANCE OF RS.36,98,669/- MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) U/S. 40A(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PARTNERSHIP FIRM, WHICH IS ENGAGED IN THE BUSINESS OF TRADING IN COUNTRY LIQUO R AND PACHWAI. RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR WAS ELECTRONICALLY FILED O N 01.03.2011 DISCLOSING TOTAL INCOME OF RS.6,375/-. DURING THE COURSE OF ASSESSMENT PROCEE DINGS THE AO NOTICED THAT THE ASSESSEE FIRM HAD MADE TOTAL PURCHASES OF RS. 36,98,669/- AG AINST WHICH THE PAYMENTS WERE MADE BY WAY OF CASH IN THE SUMS EXCEEDING RS.20,000/- TO TH E CREDIT OF ASANSOL BOTTLING PACKAGE & COMPANY LTD. AND M/S. IFB AGRO INDUSTRIES LTD. ACC ORDING TO THE AO, THE SAID PAYMENTS WERE MADE BY THE ASSESSEE IN CONTRAVENTION OF SECTI ON 40A(3) OF THE ACT AND SINCE THE ASSESSEE COULD NOT EXPLAIN ANY EXCEPTIONAL CIRCUMST ANCES AS SPECIFIED UNDER RULE 6DD OF 2 ITA NO.178/KOL/2015 KUMAR BAZAR PACHWAI & COUNTRY SPIRIT SHOP, AY 2010- 11 INCOME TAX RULES, 1962 FOR MAKING SUCH PAYMENTS, HE MADE A DISALLOWANCE OF RS.36,98,669/- U/S. 40A(3) OF THE ACT. AGGRIEVED B Y THE SAID ORDER, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A), WHO PROCEEDED TO CONF IRM THE DISALLOWANCE MADE BY THE AO U/S. 40A(3) OF THE ACT. AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE HA PREFERRED THIS APPEAL BEFORE US. 4. AT THE TIME OF HEARING, LD. COUNSEL FOR THE ASSE SSEE SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE C OORDINATE BENCH DECISION IN ASSESSEES OWN CASE IN ITA NO. 201/KOL/2014 FOR AY 2008-09 VID E ORDER DATED 04.10.2016. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSEE HAS FILED ITS RETUR N OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR ELECTRONICALLY ON 01.03.2011 DISCLOSING TOTAL INCOME OF RS.6,375/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE A SSESSEE FIRM HAD MADE TOTAL PURCHASES OF RS. 36,98,669/- AGAINST WHICH THE PAYMENTS WERE MADE BY WAY OF CASH IN THE SUMS EXCEEDING RS.20,000/- TO THE CREDIT OF ASANSOL BOTT LING PACKAGE & COMPANY LTD. AND M/S. IFB AGRO INDUSTRIES LTD. ACCORDING TO THE AO, THE SAID PAYMENTS WERE MADE BY THE ASSESSEE IN CONTRAVENTION OF SECTION 40A(3) OF THE ACT AND SINCE THE ASSESSEE COULD NOT EXPLAIN ANY EXCEPTIONAL CIRCUMSTANCES AS SPECIFIED UNDER RULE 6DD OF INCOME TAX RULES, 1962 FOR MAKING SUCH PAYMENTS, HE MADE A DISALLOWAN CE OF RS.36,98,669/- U/S. 40A(3) OF THE ACT. WE FIND THAT THE ISSUE INVOLVED IN THIS A PPEAL OF THE ASSESSEE RELATING TO DISALLOWANCE U/S. 40A(3) OF THE ACT IS SQUARELY COV ERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 201/KOL/2014 FOR AY 2008-09 VIDE ORDER DATED 04.10.2016, WHEREIN THE TRIBUNAL H AS HELD AS UNDER: 4. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERV ED THAT THE ISSUE INVOLVED IN THIS APPEAL OF THE ASSESSEE RELATING TO THE DISA LLOWANCE UNDER SECTION 40A(3) IS SQUARELY COVERED IN FAVOUR OF THE ASSESSE E BY THE VARIOUS DECISIONS OF THIS TRIBUNAL. IN ONE OF SUCH CASES, NAMELY M/S. AMRAI PACHWAI & C.S. SHOP DECIDED BY THE TRIBUNAL VIDE ITS ORDER DATED 1 5.01.2014 PASSED IN ITA NO. 1251/KOL/2011, PAYMENTS WERE MADE BY THE ASSESS EE AGAINST PURCHASES MADE FROM THE SAME PARTY, NAMELY M/S. ASANSOL BOTTL ING & PACKING CO. PVT. LIMITED BY DEPOSITING THE CASH DIRECTLY IN THE BAN K ACCOUNT OF THE SAID SUPPLIER IN THE SUMS EXCEEDING RS.20,000/- AND THE DISALLOWANCE MADE FOR THE SAME UNDER SECTION 40A(3) WAS DELETED BY THE TR IBUNAL FOR THE FOLLOWING REASONS GIVEN IN PARAGRAPHS NO. 21 & 22 OF ITS ORDE R:- 3 ITA NO.178/KOL/2015 KUMAR BAZAR PACHWAI & COUNTRY SPIRIT SHOP, AY 2010- 11 21. WE FIND THAT M/S. ASANSOL BOTTLING & PACKAGING CO. PVT. LTD. IS A BOTTLING PLANT CUM WAREHOUSE UNDER RULE 2(VII) OF T HE WEST BENGAL EXCISE RULES, 2005 WITH PRIVILEGE GRANTED U/S 22 OF THE BE NGAL EXCISE ACT, 1909. AT THIS JUNCTURE, IT WOULD BE RELEVANT TO GO INTO THE DEFINITION OF WAREHOUSE AS PROVIDED UNDER THE STATE EXCISE RULES, 2005, AS BEL OW:- WAREHOUSE, UNDER RULE 2(VII) OF THE W.B. EXCISE RULES, 2005, MEANS THE WAREHOUSE FOR SUPPLY OF COUNTRY SPIRIT TO RETAIL VE NDORS, ESTABLISHED AT CONVENIENT PLACES BY THE COMMISSIONER AT THE EXPENS E OF THE STATE GOVERNMENT, OR AT THE EXPENSE OF A PERSON TO WHOM T HE EXCLUSIVE PRIVILEGE OF SUPPLYING OR SELLING COUNTRY SPIRIT BY WHOLESALE HA S BEEN GRANTED UNDER SECTION 22 OF THE ACT, OR OF A LICENSED WHOLESALE V ENDOR OF COUNTRY SPIRIT. THE ABOVE DEFINITION MAKES IT CLEAR THAT THE 'WAREH OUSE' REFERRED TO UNDER THE STATE EXCISE RULES IS UNDER THE DIRECT CONTROL AND AUTHORITY OF THE COMMISSIONER OF STATE EXCISE BECAUSE IT IS ESTABLIS HED BY THE COMMISSIONER OF STATE EXCISE AND AS SUCH IS A STATE GOVERNMENT E STABLISHMENT. IT IS ALSO PERTINENT TO NOTE THAT THE EXPENDITURE IN RELATION TO SUCH WAREHOUSE IS BORNE BY THE STATE GOVERNMENT OR BY THE LICENSEE TO WHOM THE EXCLUSIVE PRIVILEGE IS GRANTED U/S 22 OF THE BENGAL EXCISE ACT, 1909. HENC E THERE COULD BE NO DOUBT THAT THE WAREHOUSE IS ESTABLISHED BY THE STATE EXCI SE COMMISSIONER. HENCE IT COULD BE SAFELY CONCLUDED THAT THE WAREHOUSE SO EST ABLISHED BY THE STATE EXCISE COMMISSIONER IS A STATE GOVERNMENT ESTABLISH MENT. IT WOULD ALSO BE PERTINENT TO NOTE THAT THE SAID WAREHOUSE HAS BEEN SPECIFICALLY ESTABLISHED FOR SUPPLY OF COUNTRY SPIRIT TO RETAIL VENDORS (ASS ESSEE HEREIN) ONLY AND NOT TO ANYBODY ELSE. IT WOULD BE PERTINENT TO LOOK INTO THE DEFINITION O F 'WHOLESALE LICENSEE' AS PER RULE 2(VIII) OF THE EXCISE RULES 2005 AS BELOW. - RULE 2(VIII) - 'WHOLESALE LICENSEE' MEANS THE WHOLE SALE VENDOR OF COUNTRY SPIRIT TO WHOM LICENCE HAS BEEN GRANTED IN WEST BEN GAL EXCISE FORM NO. 26. IT WOULD BE PERTINENT TO LOOK INTO SECTION 22 OF TH E BENGAL EXCISE ACT. 1909 AT THIS JUNCTURE AS BELOW:- SECTION 22 - GRANT OF EXCLUSIVE PRIVILEGE OF MANUFA CTURE AND SALE OF COUNTRY LIQUOR OR INTOXICATING DRUGS - (1) THE STATE GOVERNMENT MAY GRANT TO ANY PERSON, O N SUCH CONDITIONS AND FOR SUCH PERIOD AS IT MAY THINK FIT, THE EXCLUSIVE PRIVILEGE - (A) OF MANUFACTURING, OR SUPPLYING BY WHOLESALE, OR (B) OF MANUFACTURING, AND SUPPLYING BY WHOLESALE, O R (C) OF SELLING, BY WHOLESALE OR RETAIL. OR (D) OF MANUFACTURING OR SUPPLYING BY WHOLESALE AND SELLING RETAIL, OR (E) OF MANUFACTURING AND SUPPLYING BY WHOLESALE AND SELLING RETAIL, ANY COUNTRY LIQUOR OR INTOXICATING DRUG WITHIN ANY SPECIFIED LOCAL AREA: PROVIDED THAT PUBLIC NOTICE SHALL BE GIVEN TO THE I NTENTION TO GRANT ANY SUCH EXCLUSIVE PRIVILEGE. AND THAT ANY OBJECTIONS MADE B Y ANY PERSON RESIDING WITHIN THE AREA AFFECTED SHALL BE CONSIDERED BEFORE AN EXCLUSIVE PRIVILEGE IS GRANTED. 4 ITA NO.178/KOL/2015 KUMAR BAZAR PACHWAI & COUNTRY SPIRIT SHOP, AY 2010- 11 (2) NO GRANTEE OF ANY PRIVILEGE UNDER SUB-SECTION ( 1) SHALL EXERCISE THE SAME UNLESS OR UNTIL HE HAS RECEIVED A LICENSE IN THAT B EHALF FROM THE COLLECTOR OR THE EXCISE COMMISSIONER. HENCE IT COULD BE SAFELY CONCLUDED THAT M/S. ASANSO L BOTTLING & PACKAGING CO. PVT LTD (BOTTLING PLANT) IS A WAREHOUSE WITHIN THE MEANING OF RULE 2(VII) OF THE EXCISE RULES 2005 AND SAID WAREHOUSE IS A ST ATE GOVERNMENT ESTABLISHMENT, ESTABLISHED AND CONTROLLED BY THE EX CISE COMMISSIONER. IT WOULD BE RELEVANT TO REPRODUCE RULE 6DD(B) OF THE I T RULES AT THIS JUNCTURE;- (B) WHERE THE PAYMENT IS MADE TO THE GOVERNMENT AND , UNDER THE RULES FRAMED BY IT, SUCH PAYMENT IS REQUIRED TO BE MADE I N LEGAL TENDER. IN THE INSTANT CASE, THE ASSESSEE (RETAIL VENDOR) H AD MADE CASH PAYMENTS FOR PURCHASE OF COUNTRY SPIRIT BY DEPOSITING CASH DIREC TLY INTO THE BANK ACCOUNT OF M/S ABPL AS PER RULE 6(2) OF THE EXCISE RULES 20 05 , IT HAS TO BE CONSTRUED AS PAYMENT MADE TO THE STATE GOVERNMENT A UTHORITY AND ACCORDINGLY FALLS UNDER THE EXCEPTION PROVIDED IN R ULE 6DD(B) OF THE IT RULES. 22. IT IS NOT IN DISPUTE THAT M/S ASANSOL BOTTLING & PACKAGING CO. PVT LTD HAVE BEEN GRANTED LICENCE TO ACT AS A WHOLESALER FO R SUPPLY OF COUNTRY LIQUOR TO THE RETAIL VENDOR AS PER THE REGULATIONS OF THE EXCISE DEPARTMENT, GOVERNMENT OF WEST BENGAL. AT THE COST OF REPETITIO N, WE WOULD LIKE TO STATE THAT THE SAID REGULATION MANDATED THE PAYMENTS TO B E MADE DIRECTLY INTO THE BANK ACCOUNT OF THE SAID WHOLESALE LICENSEE BY THE RETAIL VENDOR (I.E ASSESSEE HEREIN) FOR STRICT AND EFFECTIVE REGULATION OF THE COUNTRY LIQUOR AND FOR PREVENTION OF SPURIOUS STOCKS AND BLACK MARKETING T RANSACTIONS FROM THE SAME. HENCE IT COULD BE SAFELY CONCLUDED THAT THE S AID WHOLESALE LICENSEE HAD ACTED AT THE INSTANCE OF THE STATE GOVERNMENT. ONCE THIS IS SO, THEN THE SAID WHOLESALE LICENSEE COULD BE CONSTRUED AS AN AG ENT OF THE STATE GOVERNMENT. FOR THE SAKE OF CONVENIENCE, THE RELEVA NT RULE IS REPRODUCED HEREUNDER:- RULE 6DD(K) - WHERE THE PAYMENT IS MADE BY ANY PERS ON TO HIS AGENT WHO IS REQUIRED TO MAKE PAYMENT IN CASH FOR GOODS OR SERVI CES ON BEHALF OF SUCH PERSON. THE PAYMENT MADE BY THE ASSESSEE RETAIL VENDOR TO T HE PRINCIPAL, GOVERNMENT OF WEST BENGAL THROUGH ITS WHOLESALE AGE NT. THE RELATIONSHIP BETWEEN THE ASSESSEE (AUTHORIZED RETAILER) AND GOVE RNMENT OF WEST BENGAL (THE SUPPLIER) ACTING UNDER WEST BENGAL EXCISE RULE S THROUGH ITS AUTHORISED WHOLESALER LICENSEE (AGENT), BOTH DEFACTO AND DEJUR E, IS ONE OF 'PRINCIPAL' AND 'AGENT'. WE HOLD THAT THE ASSESSEE RETAIL VENDO R HAD MADE PAYMENT TO THE SAID AGENT (WHOLESALE LICENSEE) WOULD FALL UNDER TH E EXCEPTION PROVIDED IN RULE 6DD(K) OF THE RULES. 5. AS THE ISSUE INVOLVED IN THE PRESENT APPEAL AS W ELL AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO THE CASE OF M /S. AMRAI PACHWAI & C.S. SHOP (SUPRA), I RESPECTFULLY FOLLOW THE DECISION RE NDERED BY THE COORDINATE BENCH OF THIS TRIBUNAL IN THE SAID CASE AND DELETE THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT( APPEALS) UNDER SECTION 40A(3) OF THE ACT. 5 ITA NO.178/KOL/2015 KUMAR BAZAR PACHWAI & COUNTRY SPIRIT SHOP, AY 2010- 11 6. AS THE ISSUE INVOLVED IN THE PRESENT APPEAL AS W ELL AS THE MATERIAL FACTS ARE SIMILAR TO THE CASE CITED SUPRA AND IN VIEW OF NO C ONTROVERTING MATERIAL HAS BEEN BROUGHT ON RECORD BY THE REVENUE, WE RESPECTFULLY F OLLOWING THE DECISION OF THE TRIBUNAL CITED SUPRA DELETE THE DISALLOWANCE MADE B Y THE AO AND CONFIRMED BY THE LD. CIT(A) U/S. 40A(3) OF THE ACT. APPEAL OF ASSES SEE IS ALLOWED. 7. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 23.08.201 7 SD/- SD/- (DR. A. L. SAINI) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 23RD AUGUST, 2017 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT M/S. KUMAR BAZAR PACHWAI & COUNTRY SPIR IT SHOP, KUMAR BAZAR, B. C. ROAD, RANIGNJ-713347 2 RESPONDENT ITO, WARD-3(1), ASANSOL. 3 . THE CIT(A), ASANSOL 4. 5. CIT , ASANSOL DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, SR. PVT. SECRETARY