ITO, Phulbani Ward, Phulbani V. P. Braja Kishore Patro, Ganjam

ITA 179/CTK/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6266 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 25-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: D K SHETH
• Keywords: Gift
• Section: 40A(3); 143(3); 133A

Judgement Text

P A G E 1 | 8 IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE SHRI CHANDRA MOHAN GARG , JUDICIAL MEMBER AND LAXMI PRASAD SAHU, ACCOUNTANT MEMBER ITA NO . 179 /CTK/201 8 ASSESSMENT YEAR : 2012 - 2013 ITO, PHULBANI WARD, PHULBANI VS. P. BRAJA KISHORE PATRO, PROP. PATRO JEWEL HOUSE, MAIN ROAD, BHANJANAGAR, GANJAM PAN/GIR NO. AECPP 3139 F (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI D.K.SHETH , AR REVENUE BY : SHRI SUBHENDU DUTTA, DR DATE OF HEARING : 1 4 / 0 6 / 201 9 DATE OF PRONOUNCEMENT : 1 4 / 0 6 / 201 9 O R D E R PER C.M.GARG, JM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A) - 1, BHUBANESWAR DATED 28.3.2018 FOR THE ASSESSMENT YEAR 2012 - 13. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE LD. CIT(A) IS ERRONEOUS ON FACTS AND IN LAW. 2. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) IS NOT JUSTIFIED IN DELETING THE ADDITION OF RS. 64,92,823/ - MADE BY THE A.O TOWARDS DISALLOWANCE U/S. 40A(3) OF THE I T. ACT, 1961. ITA NO.179/CTK/2018 ASSESSMENT YEAR : 2012 - 2013 P A G E 2 | 8 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) IS NOT JUSTIFIED IN DELETING THE ADDITION OF RS. 8,74,960/ - MADE BY THE A.O TOWARDS 'UNACCOUNTED SALES'. 4. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) IS NOT JUSTIFIED IN DELETING THE ADDITION OF RS. 3,00,000/ - MADE BY THE A.O. TOWARDS 'UNEXPLAINED CASH GIFT RECEIVED FROM SPOUSE. 3. GROUND NO.1 IS GENERAL IN NATURE AND HENCE, RE QUIRES NO SEPARATION ADJUDICATION BY US. 2. APROPOS GROUND NO.2 OF APPEAL, THE FACTS ARE THAT ON VERIFICATION OF THE COPIES OF PURCHASE BILLS , THE AO NOTICED THAT THE ASSESSEE HAS MADE CASH PURCHASES TOTALING RS.64,92,823/ - . THE ASSESSING OFFICER REQUIRE D THE ASSESSEE TO SHOW CAUSE AS TO WHY THE ABOVE CASH PURCHASE SHOULD NOT BE DISALLOWED U/S.40A(3) OF THE ACT. THE ASSESSEE SUBMITTED THAT NO PAYMENTS WERE MADE TO ANY PERSON/SELLER IN CONTRAVENTION OF THE PROVISIONS OF SECTION 40A(3). HOWEVER, THE AO REJE CTED TH E EXPLANATION OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE DID NOT PRODUCE ANY DOCUMENTARY EVIDENCE TO PROVE HIS ASSERTION. THE AO ALSO OBSERVED THAT SINCE THE ASSESSEE HAD NOT MAINTAINED ANY CASH BOOK OR LEDGER OR BANK STATEMENTS, IT WAS NOT POS SIBLE TO VERIFY THE PAYMENTS AGAINST PURCHASES. HENCE, THE AO MADE A DISALLOWANCE OF RS.64,92,823/ - U/S.40A(3). 3. BEFORE THE CIT(A), IN THE WRITTEN SUBMISSION, IT WAS, INTER ALIA, SUBMITTED THAT THE DISALLOWANCE MADE BY THE AO BASED ON THE PURCHASE BILLS AND WITHOUT EXAMINING THE PARTY LEDGER FROM WHICH IT WOULD BE CLEAR THAT THE ASSESSEE HAD NOT MADE ANY PAYMENT EXCEEDING RS.20,000/ - IN CASH WARRANTING DISALLOWANCE U/S.40A(3) OF THE ACT AND THE ASSESSEE HAD ITA NO.179/CTK/2018 ASSESSMENT YEAR : 2012 - 2013 P A G E 3 | 8 MAINTAINED BOOKS OF ACCOUNT. IT WAS IN THIS BAC KDROP THAT THE CIT(A) CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFICER. THE ASSESSING OFFICER SUBMITTED THREE REMAND REPORTS AND THE FINAL REPORT IS REPRODUCED HEREUNDER: 'IN CONTINUATION TO MY EARLIER REPORT VIDE NO.ITO /PLB/250(4)/2017 - 18/413 DATED 3RD AUGUST 2017 AND ITO/PLB/250(4)/2017 - 18/906 DATED 27 - 09 - 2017, I AM SUBMITTING THE FURTHER REPORT U/S. 250(4) OF THE L.T. ACT, 1961 AS DESIRED BY YOUR HONOUR IN THE CASE OF SRI P. BRAJA KISHORE PATIO HAVING PAN: AECPP3139F F OR THE A.Y. 2012 - 13 IN ITA NO. 0025/2015 - 16 FOR YOUR KIND PERUSAL. IN THIS CASE A SURVEY OPERATION U/S. 133A OF THE L.T. ACT, 1961 WAS CONDUCTED ON 23 - 03 - 2012 AND DURING THE COURSE OF SURVEY OPERATION PURCHASE INVOICES WERE FOUND IN THE BUSINESS PREMISES OF THE ASSESSEE AND ON VERIFICATION OF COPIES OF PURCHASE INVOICES OF GOLD AND SILVER ORNAMENTS AND ALSO THE BILL BOOKS PRODUCED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS FOUND THAT THE ASSESSEE HAD MADE CASH PURCHASES EXCEEDING RS. 20,000/ - WHIC H THE ASSESSEE WAS CONFRONTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS BUT THE ASSESSEE COULD NOT PROVED WITH DOCUMENTARY EVIDENCES. IT WAS THE RESPONSIBILITY OF THE ASSESSEE TO PROVE WITH DOCUMENTARY EVIDENCES THAT PAYMENTS WERE MADE BY ACCOUNT PAYEE C HEQUE DRAWN ON BANKS OR ACCOUNT PAYEE BANK DRAFTS. FURTHER THE ASSESSEE HAS NOT PRODUCED ANY CASH BOOK OR BANK BOOK DURING THE COURSE OF ASSESSMENT PROCEEDINGS FROM WHICH THE PAYMENTS COULD HAVE BEEN VERIFIED. HENCE THE DISALLOWANCE OF RS. 64,92,823/ - U/S. 40A(3) HAS BEEN MADE AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. NOW AS DIRECTED I HAVE WRITTEN A LETTER REQUESTING TO THE ASSESSEE TO PRODUCE THE CASH BOOK, LEDGER AND ALL OTHER DOCUMENTS TO VERIFY ASSESSEE'S THAT HE HAS NOT VIOLATED THE PROVISIONS OF SECTION U/S.40A(3) OF L.T. ACT, 1961. THE CASE WAS FIXED FOR COMPLIA NCE ON 08 - 12 - 2017 BUT THE A/R OF THE ASSESSEE, SRI J.T. PRUSTY, ADVOCATE APPEARED ON 11 - 12 - 2017 AND PRODUCED CASH BOOK, PURCHASES REGISTER, SALE'S REGISTER, STOCK REGISTER, GENERAL LEDGER, PARTY LEDGER ETC. THE SAME ARE VERIFIED AND FOUND THAT NO CASH PURC HASES WERE MADE MORE THAN RS.20,000/ - . BUT IT IS CONTRADICTORY TO THE FACTS FOUND IN THE BOOKS OF ACCOUNTS PRODUCED BY THE ASSESSEE BEFORE ME DURING THE COURSE OF REMAND PROCEEDINGS WHEREIN THE ASSESSEE'S PURCHASES WERE NOT MORE ITA NO.179/CTK/2018 ASSESSMENT YEAR : 2012 - 2013 P A G E 4 | 8 THAN RS. 20,000/ - DURING T HE FINANCIAL YEAR UNDER CONSIDERATION AND ASSESSEE'S BOOKS OF ACCOUNTS LIKE PURCHASE REGISTER, PURCHASE INVOICES ETC. PRODUCED AND VERIFIED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THE MATERIALS LIKE PURCHASE REGISTER, PURCHASE INVOICES ETC. IMPOUND ED DURING THE COURSE OF SURVEY U/S. 133A OF L.T. ACT, 1961 ON 23 - 03 - 2012, WHERE THE ASSESSEE HAD MADE CASH PURCHASES MORE THAN RS. 20,000/ - ON THE BASIS OF WHICH THE A.O. HAD COMPLETED THE ASSESSMENT U/S. 143(3) BY DISALLOWING THE EXPENSES TOWARDS PURCHASE S U/S: 40A(3) OF L.T. ACT, 1961 WHICH WAS DISCUSSED IN, DETAILS IN THE BODY OF THE ASSESSMENT ORDER. TH US, THIS IS NOTHING BUT AFTER THOUGHT OF THE ASSESSEE TO AVOID ADDITION U/S. 40A(3) AND PREPARED THE BOOKS OF ACCOUNTS ACCORDINGLY. UNDER THE ABOVE CIR CUMSTANCES, THE CIT(A) CONSIDER THE APPEAL FILED BY THE ASSESSEE ON THE BASIS OF MERIT OF THE CASE. 4. THE REMAND REPORT WAS FURNISHED TO THE ASSESSEE TO FILE THE REJOINDER. IN RESPONSE TO THE REMAND REPORT, THE ASSESSEE, INTER ALIA, SUBMITTED THAT THE ASSESSING OFFICER HAS DULY VERIFIED THE ENTRIES IN THE CASH BOOK AND HAS BEEN SATISFIED THAT NO CASH PAYMENTS WERE MADE IN EXCESS OF RS.20,000/ - . 5. AFTER CONSIDERING THE REMAND REPORT AND THE REPLY OF THE ASSESSEE, THE CIT(A), RELYING ON VARIOUS JUDICIAL PRONOUNCEMENTS ON THIS, DELETED THE ADDITION, INTER ALIA, BY OBSERVING AS UNDER: 3.6 I HAVE CONSIDERED THE FACTS OF THE CASE AND THE MATERIALS ON RECORD. THOUGH IN THE COURSE OF ASSESSMENT PROCEEDING THE ASSESSEE HAD NOT PRODUCED THE BOOKS OF ACCOUNT TO PROVE HIS CONTENTION THAT THERE WERE NO PAYMENTS ATTRACTING THE PROVISIONS OF SECTION 40A(3), IN THE COURSE OF REMAND PROCEEDING, THE ASSESSEE HAS BEEN ABLE TO PRODUCE CASH BOOK, LEDGER, PURCHASE REGISTER, SALE REGISTER, STOCK REGISTER, GENERAL LEDGER, PARTY LEDGER AND ALL OTHER DOCUMENTS IN SUPPORT OF HIS CONTENTION. ON EXAMINATION OF THE SAME, THE AO HAS FOUND THAT NO CASH PAYMENTS WERE MADE DURING THE RELEVANT PREVIOUS YEAR IN EXCESS OF RS.20,000/ - PER DAY CALLING FOR ITA NO.179/CTK/2018 ASSESSMENT YEAR : 2012 - 2013 P A G E 5 | 8 DISALLOWANCE U/S.40A(3). OF COURSE, THE AO'S OBJECTION IS THAT THESE BOOKS OF ACCOUNT HAVING NOT BEEN PRODUCED AT THE TIME OF ASSESSMENT PROCEEDING MIGHT BE BELIEVED TO HAVE BEEN PREPARED SUBSEQUENTLY AND, THEREFORE, THE SAME SHOULD BE CONSIDERED TO BE AN AFTERTHOUGHT. IT IS TRUE THAT THE BOOKS OF ACCOUNT PRODUCED DURING THE REMAND PROCEEDING BEFORE THE AO WERE NOT PRODUCED A T THE TIME OF ASSESSMENT. THE ASSESSEE'S CONTENTION IN THIS RESPECT IS THAT THE AO HAD NOT GIVEN ADEQUATE OPPORTUNITY TO PRODUCE THE BOOKS OF ACCOUNT AT THE TIME OF ASSESSMENT. THE FACT REMAINS THAT THE ASSESSEE HAS MAINTAINED BOOKS OF ACCOUNT WHICH HAVE B EEN PRODUCED AT THE TIME OF REMAND PROCEEDING AND THE AO HAS NOT BEEN ABLE TO FIND OUT ANY FLAW OR DEFECT IN THE SAME. EVEN OTHERWISE THE AO HAS MADE VERIFICATIONS DIRECTLY WITH SOME OF THE SELLERS WHO HAVE CONFIRMED TO HAVE RECEIVED CASH PAYMENTS NOT IN E XCESS OF RS.20,000/ - PER DAY. I DO NOT FIND ANY CONVINCING REASON TO BRUSH ASIDE AND IGNORE THE BOOKS OF ACCOUNT PRODUCED IN THE COURSE OF REMAND PROCEEDING ON THE SUSPICION THAT THE SAME MIGHT HAVE BEEN PREPARED LATER. MOREOVER, THE AO HAS NOT FOUND OUT ANY PURCHASES AS NOT GENUINE. ALL THE PURCHASES AGAINST WHICH THE PAYMENTS WERE MADE IN CASH ARE FOUND TO BE GENUINE. AS PER BOOKS OF ACCOUNT PRODUCED BEFORE THE AO, THERE IS NOT A SINGLE CASH PAYMENT IN EXCESS OF RS.20,000/ - PER DAY. 6. LD D.R. RELIED ON THE ORDER OF THE ASSESSING OFFICER WHEREAS LD A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF THE CIT(A). 7 . ON CONSIDERATION OF THE RIVAL SUBMISSIONS AND PERUSING THE MATERIALS AVAILABLE ON THE RECORD OF THE TRIBUNAL AND ALSO THE IMPUGNED ORDE R, WE FIND THAT LD D.R. COULD NOT CONTROVERT THE FINDINGS OF THE CIT(A) TO THE EFFECT THAT AS PER THE BOOKS OF ACCOUNT PRODUCED BEFORE THE AO AT THE TIME OF REMAND REPORT, NOT A SINGLE PAYMENT IN CASH EXCESS OF RS.20,000/ - PER DAY IS FOUND TO HAVE BEEN MA DE AGAINST PURCHASES. THEREFORE, WE FIND NO GOOD REASON TO INTERFERE WITH THE ORDER OF THE CIT(A), WHICH IS HEREBY CONFIRMED THE GROUND NO.2 OF APPEAL IS DISMISSED. ITA NO.179/CTK/2018 ASSESSMENT YEAR : 2012 - 2013 P A G E 6 | 8 8. GROUND NO.3 RELATES TO ADDITION OF RS.8,74,960/ - . THE ASSESSING OFFICER NOTICED THAT D URING THE COURSE OF SURVEY OPERATION, AN AMOUNT OF RS.8,74,960/ - WAS FOUND IN THE BUSINESS PREMISES OF THE ASSESSEE. THE ASSESSEE SUBMITTED THAT THE CASH FOUND AT THE BUSINESS PREMISES REPRESENTED THE SALE PROCEEDS OF HIS BUSINESS. THE ASSESSING OFFICER DISBELIEVED THE CONTENTION OF THE ASSESSEE AND TREATED THE ENTIRE CASH FOUND AT THE TIME OF SURVEY AS UNACCOUNTED SALES AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 9. ON APPEAL, THE CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER: 4.2 I HAVE CO NSIDERED THE MATTER WITH REFERENCE TO THE FACTS ON RECORD. LOOKING AT THE TURNOVER OF THE ASSESSEE, IT IS QUITE REASONABLE TO PRESUME THAT THE CASH FOUND AT THE TIME OF SURVEY WOULD HAVE COME FROM THE DISCLOSED SALES. THE ASSESSEE HAS PRODUCED THE CASH BOO K, SALES REGISTER AND SALE BILLS IN SUPPORT OF HIS CONTENTION THAT THE CASH IN QUESTION CANNOT BE TREATED AS PROCEEDS FROM UNACCOUNTED SALES. THE AO HAS ALSO NOT FOUND OUT ANY EVIDENCE TO SHOW THAT THE ASSESSEE WAS INVOLVED IN SALES OUTSIDE BOOKS OF ACCOUN T AND THE CASH FOUND AT THE TIME OF SURVEY WAS GENERATED FROM OUT OF SUCH UNACCOUNTED SALES. ON THE FACTS OF THE CASE, IT IS APPARENT THAT THERE IS NO. BASIS FOR THE AO TO TREAT THE CASH OF RS.8,74,960/ - AS UNACCOUNTED SALES. IN VIEW OF THIS, THE ADDITION OF RS.8,74,960/ - IS DELETED. 10. BEFORE US, LD D.R. COULD NOT CONTROVERT THE ABOVE FINDINGS OF THE CIT(A) THAT THE AO HAS ALSO NOT FOUND OUT ANY EVIDENCE TO SHOW THAT THE ASSESSEE WAS INVOLVED IN SALES OUTSIDE BOOKS OF ACCOUNT AND THE CASH FOUND AT THE TIME OF SURVEY WAS GENERATED FROM OUT OF SUCH UNA CCOUNTED SALES. HENCE, WE DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDER OF ITA NO.179/CTK/2018 ASSESSMENT YEAR : 2012 - 2013 P A G E 7 | 8 THE CIT(A), WHICH IS HEREBY UPHELD AND GROUND NO.3 OF THE REVENUE IS DISMISSED. 11. APROPOS GROUND NO.3 OF APPEAL, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS RE CEIVED GIFTS OF RS.3,00,000/ - FROM HIS WIFE SMT. P. SANDHYARANI PATRO. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO FURNISH THE DOCUMENTARY PROOF REGARDING THE GIFTS RECEIVED BY HIM. THE ASSESSEE FILED COPIES OF INCOME TAX RETURN OF HIS WIFE FOR THE A SSESSMENT YEARS 2010 - 11, 2011 - 12, 2012 - 13 ALONGWITH STATEMENT OF TOTAL INCOME, CAPITAL ACCOUNT BALANCE SHEET AND A LETTER FROM THE WIFE OF THE ASSESSEE CONFIRMING THE GIFTS MADE TO HER HUSBAND, THE ASSESSEE . THE EXPLANATION OF THE ASSESSEE DID NOT FIND FA VOUR BY THE AO AND TAKING INTO ACCOUNT THE RATIO OF DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. P. MOHANAKALA, 291 ITR 278 (SC), THE AMOUNT OF RS.3,00,000/ - TOWARDS GIFT FROM THE ASSESSEE WAS ADDED TO THE INCOME OF THE ASSESSEE. 12. ON APP EAL, THE CIT(A) DELETED THE ADDITION MAINLY ON THE GROUND THAT THE WIFE OF THE ASSESSEE IS ASSESSED TO TAX AND GIFT GIVEN TO HER HUSBAND IS REFLECTED IN HER CAPITAL ACCOUNT ENCLOSED WITH RETURN OF INCOME. 13. HAVING HEARD THE RIVAL SUBMISSIONS, WE FIND THAT THE WIFE OF THE ASSESSEE IS ASSESSED TO TAX AND THE GIFT GIVEN TO HER HUSBAND IS REFLECTED IN THE CAPITAL ACCOUNT ENCLOSED WITH THE RETURN OF INCOME. THIS FACT IS NOT CONTROVERTED BY LD D.R. HENCE, WE AFFIR M THE ORDER OF THE CIT(A) AND REJECT THE GROUND OF APPEAL OF THE REVENUE. ITA NO.179/CTK/2018 ASSESSMENT YEAR : 2012 - 2013 P A G E 8 | 8 14. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON 1 4 / 0 6 /201 9 . S D/ - SD/ - (LAXMI PRASAD SAHU) ( CHANDRA MOHAN GARG ) ACCOUNTANT MEMBER JUDICIALMEMBER CUTTACK; DATED 14 / 0 6 /20 9 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER SR . PVT. S ECRETARY ITAT, CUTTACK DATE INITIAL 1. DRAFT DICTATED ON 14.6.19 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 14.6.19 (DICTATION PAD HAS BEEN ENCLOSED ALONG WITH ORIGINAL FILE) SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/P S 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE OS 9. DATE ON WHICH FILE GOES TO THE SPS 10. DATE OF DISPATCH OF ORDER. 1. THE APPELLANT : ITO, PHULBANI WARD, PHULBANI 2. THE RESPONDENT. P. BRAJA KISHORE PATRO, PROP. PATRO JEWEL HOUSE, MAIN ROAD, BHANJANAGAR, GANJAM 3. THE CIT(A) - 1 , BHUBANESWAR 4. PR.CIT - 1 , BHUBANESWAR 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//